ANAHEIM, Calif. (March 23, 2021) — Anaheim plans to issue bonds to close budget deficits caused by the coronavirus economic downturn.
Anaheim’s City Council, in its role as the city’s Public Financing Authority, on Tuesday authorized borrowing up to $210 million.
Bonds are expected to be issued in May or June.
Borrowing $210 would bring proceeds of $185 million after costs. The city could end up borrowing less, or $162 million for proceeds of $140 million.
How much is borrowed depends on receiving $107.6 million in federal assistance as expected, as well as seeing the planned reopening of the theme parks of the Disneyland Resort, set for April 30.
The 30-year bonds, backed and secured by city fire stations, libraries and other buildings, are projected to be at an annual interest rate of 3.6 percent.
Borrowing $210 million would carry yearly debt service cost of $12.3 million. Borrowing $162 million would carry yearly debt service of $9.5 million.
Proceeds from borrowing would help cover shortfalls for the current fiscal year and next two fiscal years through June 2023.
The pandemic closure of Anaheim’s theme parks, the Anaheim Convention Center and sports and entertainment venues has driven the city’s current fiscal year deficit of $108.5 million.
Borrowing is set to be combined with federal assistance and revenue from the gradual return of Anaheim’s visitor economy to close deficits.
Under the federal American Rescue Plan Act, signed into law on March 11, Anaheim is set to receive two payments of $53.8 million each, one in May and the second in spring 2022.
The federal assistance covers about half of Anaheim’s deficit for the 12 months through June 2021 and about 87 percent of a projected deficit of $61.5 million for fiscal year 2021-2022, which begins in July 2021.
Economic recovery and the gradual return of hotel and other visitor revenue are variables for deficits.
The theme parks of the Disneyland Resort, which normally bring more than 25 million annual visitors to Anaheim, are expected to gradually reopen starting April 30.
If current trends continue, the parks could open at 25 percent capacity if Orange County reaches orange Tier 3 under California’s colored, four-tier reopening system.
Orange County is currently in red Tier 2, which allows theme parks to reopen at 15 percent capacity as of April 1. The county is projected to advance to orange Tier 3 in early April.
Anaheim is also awaiting state guidelines for the reopening of the Anaheim Convention Center and Honda Center. Both have been closed to either events or fans since March 2020.
Before turning to borrowing, the city cut nearly $20 million in spending through labor and operational savings. Here’s a breakdown:
- Labor savings: $10.9 million from a hiring freeze, early retirement of about 90 employees
- Spending cuts: $4.5 million from freeze on all but essential spending
- Operational savings: $3.1 million in deferred fleet vehicle purchases, $500,000 on deferred tree trimming
Cutting further to close deficits was not recommended, as it would severely impact public safety and community services for residents, neighborhoods and businesses, beyond what the city saw during the Great Recession.