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Mr. Bo¢ian said no. He noted there were discussions about this when the loan was initially a grant. Staff anticipates a loan agreement between the City and the owner of the project that defines when the loan will be repaid. The terms being discussed are for annual payments, which is unlike some projects in the City where the payments are deferred for a number of years. Ms. Hosterman believed the maximum principal mount of the bond issuance was $20 million dollars, but the mount actually utilized was only $13.5 million dollars. Mr. Bocian informed her that the maximum principal mount was over $13 million. Staffhad received several numbers for this particular project because of concerns that were raised in having enough revenue from a project to support a certain amount of debt. Ms. Ayala was concerned about questions asked by the public regarding the bond for the golf course. She feels extremely secure with the position the City is in, including the golf course. She acknowledged staff for ensuring that the City does not overstep its bounds. She pointed out that the tax credits are at the State level, and believed there was a tax reform act mentioned somewhere in the staff report. As part of the tax reform act, she believed a law existed that declared the State could only bond to a certain limit. Mr. Bocian reported there is a limit on the bonding capacity for the State. He was not certain of the amount and deferred to Mr. Thimmig. Paul Thimmig, Quint, Thimmig LLP, bond counsel, reported the federal government passed a law 10 years ago that limited the amount of tax-exempt bonds a state could issue for multifamily housing projects. The limit was one billion dollars for California. There is a competitive process for projects to receive a share of the tax- exempt bonding capacity. It competed with other projects in the State. There are three different rounds of allocation, and is a fairly involved process. Ms. Ayala believed the idea was to keep the bonds at a certain dollar amount. Mr. Thimmig pointed out that the federal government loses money every time tax-exempt bonds are sold because the interest is tax exempt and the investors who purchase the bonds do not report this information on their federal tax returns. The federal government wanted to place a limit on the amount of bonds issued, which is measured by the population of each state and how much bonding is available for these types of projects. There is also a state mechanism, which defines how bonds are allocated to individual projects within the State. Mr. Campbell asked about the current market for bonds and wondered if the City should be concerned if the bonds were not sold? Mr. Thimmig reported that the bonds would be variable rate bonds. The interest rate would be less than one percent, although the project has to pay for credit Pleasanton City Council 9 11/4/03 Minutes