According to face to face and E-Mail discussions with Tim Surridge, it is his intent to issue bonds secured by the school district in the amount of around $20 million, the interest on which will be paid from the district's portion of the rental income from the Fairfield apartments.
According to the official Fairfield proposal, rent receipts to the district are "First year ground rent - four hundred thousand dollars ($400,000) for the first calendar year following the lease commencement date."
"Construction period base annual ground rent—seven hundred thousand dollars ($700,000) per year... continuing until the project reaches a physical occupancy of 93%."
Have you checked recently to see how many non-government subsidized apartments are operating at a 93% occupancy?
America First Tax Exempt Investors, a premier company specializing in investing in tax exempt revenue bonds for apartment projects backed by federal government agencies, recently closed a deal in the amount of $23.1 million at a market interest rate of 7.7%. In the past they have closed similar deals for as low as 6%.
Now let's compare that with Peralta. Assuming the around $20 million of bonds are sold at a comparable interest rate of 7.7%, which is probably low given the district's unfunded pension liability, the annual amounts are as follows:
Year Fairfield Rent Bond Interest Shortfall to be made up by District
1 $400,000 $1,540,000 $1,140,000
2-99 $700,000 $1,540,000 $ 840,000
Just to break even, the district would need an interest rate of 2.85%, and 30 year federal government Treasuries are yielding 3.48%. In addition, if the project loses its tax exempt status, as government officials say is likely due to the commercial nature of the project and the duration of the lease, the Proposal states, "The landlord (school district) shall be responsible for the payment of all real property taxes assessed to the underlying property during the term of the ground lease." This could be another $300, 000 to $400,000 dollars.
The numbers are clear and chilling. Look at the proposal yourself. Compare interest rates in the marketplace today. The Fairfield, Peralta project is a financial disaster which will prey on the funds meant to go to our children's education no matter what Tim Surridge promises. State Treasurer Bill Lockyear has stated, that school board members are to be held "personally responsible" for making poor decisions on bond issues which adversely impact the financial well being of their districts. I trust you don't want to join the elite few that qualify for that distinction and may suffer its personal consequences. The only responsible vote is to reject the lease to Fairfield and scrap the entire project.