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AGENDA ITEM - 3C -ADEN HILLS MEMORANDUM DATE: August 11, 2025 TO: Honorable Mayor and City Councilmembers Jessica Jagoe, City Administrator FROM: Joua Yang, Finance Director SUBJECT: Conduit Bond Debt Financing Budgeted Amount: Actual Amount: Funding Source: N/A N/A N/A Council Should Consider Provide feedback and direction to staff on Conduit Bond Debt Financing. Background A conduit bond is when a private entity wants to undertake a project and is seeking to finance it with tax-exempt bonds. Given that private entities cannot issue tax-exempt bonds directly, they typically will work with government entities to act as a conduit issuer or serve as a pass -through of that debt. This would mean the City would issue the bonds on behalf of the private entity, and the bond proceeds would be loaned to that entity. There is no financial obligation for the City and offers several benefits: • The private entity is solely responsible for repaying back the bonds, the issuance costs, and any out-of-pocket expenses (i.e. legal fees, bond counsel fees, financial advisor fees), not the City. • There is no impact to the City's credit rating or general obligation bonding capacity. • The City would receive an annual conduit fee equal to .125% of the outstanding principal balance of the bonds. • This is a way for the City to issue tax-exempt bonds that benefit a project that serves a public purpose. The City has issued conduit debt in the past, with the most recent conduit debt issued in 2015 for Presbyterian Homes. Attachment A is the City's policy on Private Activity Revenue Bond Financing, which was adopted back in September of 2009. The policy discusses the City's guidelines and application process. The City was recently approached by a private entity on our interest and capacity for the issuance of conduit debt financing. Staff is bringing this item before the Council for informational Page 1 of 2