From Naval Base to Housing Space

$18,535,000
Community Improvement Commission of the City of Alameda
Revenue Bonds
$19,860,000
Community Improvement Commission of the City of Alameda
Revenue Bonds

When the Alameda Point Naval Air Station was decommissioned nearly a decade ago, it took great vision to see a new community rising from site of the old base. Today, Bayport, a highly successful residential development with 300 homes, occupies a portion of that site. When completed in 2008, the development will include nearly 600 residential units, a new K-8 public school and a public park.

In 2000, however, Alameda's Community Improvement Commission faced numerous challenges to redeveloping the base. An initial agreement raised private inurnment concerns that prevented selling bonds, issued to finance the project, as tax-exempt securities. At the same time, the commission expected these tax issues to be resolved as the development proceeded and provide access to low cost, tax-exempt debt in the future.

The challenge was to develop a financing structure as taxable debt that could be converted to tax-exempt debt sometime in the future – and to do it without subjecting the agency to any interest rate risk. De La Rosa & Co. worked with Alameda, the city's financial advisor and its legal team to craft an innovative plan using taxable variable rate bonds, callable at any time without penalty. To address bond insurer concerns with a fluctuating stream of interest rate payments, an interest rate swap was added to create a "synthetic" fixed rate obligation.

Roughly 18 months into the project, the city received an opinion from Bond Counsel that the tax considerations were now satisfied, paving the way for a tax-exempt refinancing of the debt. The new bonds, also underwritten by De La Rosa & Co., allowed the commission to lock in nearly $1.2 million of present value savings (or 7.74% of the par value of the prior bonds).

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