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SMART rail agency converts bonds to fixed interest rates

Construction bonds sold by the Sonoma-Marin Area Rail Transit District, which will pay for more than half of the cost to build the system, are being converted to fixed interest rates.

The rail agency initially sold $190 million in bonds at a variable interest rate of about 1 percent. The money was put in escrow during an unsuccessful bid by SMART opponents to qualify a measure for the November ballot to repeal the quarter-cent sales tax that funds much of the district.

The rail agency is now free to use money from the bonds, which will be converted to a fixed rate of between 4.3 and 4.5 percent through their maturity in 2029.

The yield is expected to be $171 million after expenses.

The SMART board approved the conversion on Wednesday at its meeting in Santa Rosa.

"For planning purposes, it is advisable to fix the interest rate so you know the cost structure going forward," said Sarah Hollenbeck, senior managing consultant with Public Financial Management Inc., the firm handling the bond sale.

The bond sale provides almost half of the $360 million needed by SMART to build the first segment of the rail line. The remaining money for the segment would come from local, state and federal funds.

SMART is planning to build the initial line from Guerneville Road in Santa Rosa to downtown San Rafael, with service to begin in late 2015 or early 2016.

The line is 38.5 miles, which is shorter than the 70-mile line that was proposed to run from Cloverdale to Larkspur. It will be extended as more money becomes available.


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