Berkeley City Council Special Meeting - May 20, 2025

This special meeting of the Berkeley City Council convened at 4:30 PM on Tuesday, May 20, 2025, in the School District Board Room and via teleconference. The Council considered two financing items: authorizing up to $11 million in lease revenue notes for the Fire Administration and Training Project, and issuing $35 million in general obligation bonds for Measure O affordable housing. The meeting also included a required training on federal securities laws for municipal bond issuance. No public comments were received on either item. All actions were approved unanimously.

Discussion Items

Federal Securities Law Training

• Bond counsel Chris Lynch (Jones Hall) delivered a training on federal securities law requirements for municipal bond issuers, as required by the city's disclosure policies. Key points included:
  • The city is subject to anti-fraud provisions under the Securities Act of 1933 and Securities Exchange Act of 1934 when issuing bonds and making continuing disclosures.
  • Material facts (those a reasonable investor would consider) must be fully disclosed in official statements, annual reports, and even on the city's website if intended to reach investors.
  • The SEC's Orange County (1994) and San Diego enforcement actions were cited as examples where elected officials faced personal liability for inadequate disclosure.
  • Staff and elected officials must take reasonable steps to ensure all material facts (e.g., pension liabilities, structural budget imbalances, reserves) are included.
  • The city's Disclosure Working Group, chaired by the Finance Director, reviews official statements before council approval.

Item 1: Lease Revenue Notes for Fire Administration and Training Project

• Finance Director Henry Oyekanmi presented the request to issue up to $11 million in federally taxable Lease Revenue Notes through the Berkeley Joint Powers Financing Authority.
• The total project cost is estimated at $15–17 million; the city has already saved $7.5 million toward it. The notes would cover the remaining balance.
• The notes are interest-only for 4 years, with a lump-sum principal payment due in 2029. Repayment would come from the general fund via lease payments.
• Initially, fire stations 2 and 5 were proposed as collateral because they are unencumbered and have sufficient value (approximately $15 million). However, staff is reviewing other city facilities and the resolution allows swapping properties.
• Councilmember Tregub asked about repayment risk; bond counsel confirmed the city intends to refinance with tax-exempt bonds upon exercising a purchase option on the property within approximately 3–4 years. The city manager stated resources are committed to cover both the notes and the property purchase.

Item 2: $35 Million General Obligation Bonds for Measure O – Affordable Housing

• This is the third tranche of the $135 million Measure O affordable housing bond approved by voters. After this issuance, approximately $22 million remains for a fourth tranche.
• The $35 million will fund five projects: People's Park supportive housing, Ashby BART development, North Berkeley BART development, St. Paul Terrace, and Ephesian Legacy Court.
• The bonds are taxable (rather than tax-exempt) because affordable housing projects often take longer than 3–5 years to spend proceeds, which would violate tax-exempt spend-down rules.
• Interest rates are currently estimated at 4–5%, though the market remains volatile. The city uses a competitive bid process rather than negotiated sale.
• Staff outlined a five-year borrowing plan to spread out issuances and manage taxpayer costs.
• Councilmember Tregub noted that the Measure O Oversight Committee was dissolved after making final recommendations, so the fourth tranche ($22 million) has been allocated by staff recommendation: $2 million for North Berkeley BART and $20 million for Ashby BART.

Key Outcomes

• Item 1 – Lease Revenue Notes: Council voted unanimously (7–0; Councilmembers Kesarwani, Bartlett, and Blackaby absent) to adopt Resolution No. [not provided] authorizing the issuance and sale of up to $11 million in federally taxable Lease Revenue Notes for the Fire Administration and Training Project. The public hearing was closed by a unanimous vote. (Roll call: Kesarwani absent, Taplin yes, Bartlett absent, Tregub yes, Blackaby absent, Lunaparra yes, Humbert yes, Mayor Ishii yes.)
• Item 2 – Measure O Bonds: Council voted unanimously (same roll) to adopt Resolution No. [not provided] authorizing the issuance and sale of $35 million in general obligation bonds for affordable housing under Measure O.
• The meeting adjourned at approximately 5:00 PM.