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California’s San Jose Plans to Restructure $550 Million in Debt

San Jose, California, the 10th-largest U.S. city by population, plans to restructure as much as $550 million in airport debt this year as it weighs whether to declare a state of fiscal emergency, municipal officials said.

The City Council will consider refinancing as much as $300 million in short-term notes on June 21, Arn Andrews, the Finance Department’s treasury manager, said today in an interview. The refunding isn’t tied to the fiscal situation, he said.

“We have short-term commercial notes outstanding and so we’ll pay part of that off with the long-term financing,” Scott Johnson, the finance director, said in the City Hall interview with Andrews.

San Jose Mayor Chuck Reed has proposed declaring a state of fiscal emergency for the city as retiree costs are projected to increase $216 million by fiscal 2016. The city, with retirement payments of about $186 million this year, has $1.43 billion in estimated unfunded pension liabilities. The council is also slated to consider the emergency declaration on June 21.

The city, California’s third-biggest after Los Angeles and San Diego, has projected pension costs will account for about $57 million of a $115 million budget gap in fiscal 2012, which begins in July.

Another note refinancing, of about $250 million for an airport rental-car center, will take place later this year, Andrews said.

“These airport refundings are part of a long-term strategy for financing the airport’s capital projects,” Andrews said later by telephone.

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