Politics & Government

Hercules Gets More Time to Settle Ambac Lawsuit Out of Court

The city and its bond insurer move court dates and continue negotiations.

The city and bond insurer Ambac Assurance Corp. will continue to try to settle a out of court, pushing back their Feb. 21 court date to later in the month, City Manager Steve Duran announced in his .

“That hearing has been postponed by mutual consent of the parties to allow more time to negotiate a settlement,” Duran said. The hearing was moved to Feb. 28, but both the city and Ambac have agreed to ask the court to delay the hearing until Mar. 6, Duran said.

Ambac insures $117 million in bonds issued by the Hercules Redevelopment Agency. It filed a complaint against Hercules with the Contra Costa County Superior Court at the end of January, when it became clear the city would not pay the $2.4 million it owed in debt interest on Feb. 1.  The bond insurer footed the bill for the city, and bondholders were paid.

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At an initial hearing on Jan. 31, Ambac asked the court to force Hercules to immediately pay $4.1 million, the lump of tax increment money the redevelopment agency received in December, to bond trustee, Bank of New York Mellon Trust Co. Ambac argued that the December funds legally should have been used to service bond debt, but that didn't happen. Court Commissioner Judith A. Sanders denied Ambac’s request and rescheduled a hearing instead.

“The basic problem is that the agency has no money and its fund balance is negative, even with the approximately $4.1 million in tax increment income received in December,” Duran said. “The city’s pooled cash can simply no longer afford to subsidize the Redevelopment Agency. To do so at is juncture would leave the city’s general fund balance insufficient to continue operations,” Duran said.

Find out what's happening in Pinole-Herculeswith free, real-time updates from Patch.


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