Notes from tonight’s City Council meeting.
Renaissance Square purchase: It is a lease-financing, traditional in that it’s a revenue bond. Portion of the bonds will be issued under the Recovery Zone stimulus legislation, which needs to be approved tonight as well. 45% of the interest expense will be reimbursed by the Federal government. Same basic structure as CEDIT bond, with the aforementioned difference. Taxable bonds are allowed to be issued.
The idea is to stimulate interest by bond holders into taxable bonds. This project would use almost all the allocation, so further bonding probably won’t happen. Tax exempt and taxable bonds will be issued, no difference in doing this financially than issuing all the same. Net result is City gets lower interest rate. The bonds are issued to two different markets, two types of investors. $8.8 million, little more than half, will be issued as taxable, which is about $44,000 less than the limit.
Tom Smith is asking if there is a $4 million increase over what the Council was originally told. The answer – we set things up long before they happen. We set the most flexible parameters possible. This covers for market unknowns and fluctuations. Start with high lease payment at first, then can go down as market parameters becomes known.
Tom – will there be more than 1 mortgage bond? Doesn’t have that kind of significant. It seems if we do approve this, we are approving a higher cost than we were told.
Councilman Mitch Harper: His understanding was could be used for creation of jobs. Which jobs are possible? Answer – this is another type of bonds, the ones you are referring to are different. These can only be used for governmental purposes. Mitch – cap for facility bond? Answer – Recovery Facility bonds, $13,267,000 allocation. What was the intention? increased productivity or facility? Answer – weren’t any particular restrictions for governmental purposes. Does talk about public infrastructure as well as buildings.
Councilman Tim Pape: are we going to get $18 million? Bond will be sold at base amount of the principle. Issuance costs. Amount currently in lease cannot be exceeded. Anticipating $17.3 million. Interest rates are currently lower. There is capitalized interested costs included.
Explain the gap between cost of $14 m and $18 m:
$1.5 million set aside for debt service reserve fund – a requirement used as payment in the last year. Can only be paid when building is ready for use. $2.3 million set aside for lease payments. Underwriters discount set aside. We are advancing ourselves some money which will cover having to borrow it from somewhere else to pay debt reserve and then pay the payments until building is ready. Both are requirements.
Councilman John Shoaff: projected interest cost over 20 years: $10.8 million.
Councilwoman Liz Brown: Municipal Building Corp. holds title and enters into lease with the City. Allows them to be deemed revenue bonds rather than general obligation bonds. Makes it better for the City in the long run not to have it on the books. Since the City will not own the building for 20 years, only leasing, the building corp is the landlord. Will expenses encountered come to the City Council. The lease will provide that the expenses will fall to the City. Where will the reimbursed dollars go? To the trustee and held in trust to make scheduled interest and principle payments.
Councilman Tom Didier: Initiated it was $14 million, why didn’t we say it was $18 to begin with? Doesn’t feel it was up front. Answer – I work with government entities all over the state – this is not unusual with what happens. If we were to be more specific about amounts, then when something comes up, have to start over. The $18 m is the highest amount we could end up paying more. They want to be able to set an amount that is a maximum parameter that will allow flexibility. The amount needed for the project hasn’t been changed.
Councilman Harper: Does City get benefit of money held in reserved? City has control over who invests money and how. There is a very limited amount of time when it could realize an increase in worth.
Councilwoman Goldner: the $2.3 million cited before includes both. How would joint-ownership be beneficial. Can holding corp change anything? Not without consent of bondholders. Not sure how joint ownership will be put together. Can the City sublease space? Yes they can.
Councilman Pape: We are paying $14 million. The 18$ million includes costs associated with bond.
Councilwoman Liz Brown: sounds like this will preclude co-ownership by the County. The options presented by the Working Group was not included. Current plan allows for sub-leases. Costs for other proposals considerably higher, does it include these additional costs suggested by the Working Group? Under this financing, co-ownership with the County is off the table.
Councilman Shoaff, there are substantial costs associated with a bond this size. Â $500,000 of other fees, bond insurance ($210,000) if market proves it’s cost effective, issuance costs, underwriter’s discount – what the underwriter receives for issuing bonds – about 1%.
Councilman Smith: Municipal Bond Corp. is Â existing. Â Owns and leases fire stations, various sundry public buildings, maintained by statute and is authorized as non-profit organization. Â Acts as a holding company. Â Purpose toÂ facilitateÂ these types of purchases. Â Does have a board of directors, subject to public open door laws. Â President is John Grant. Â “Lot of uncertainty about this building and what it will be used for.”
Councilman Pape – it’s factually innacurate to say the Administration said this is the only place it could go (said by Tom Smith). Â What they said was we need to do something about the FWPD space. Â Presented this proposal. Â There’s no misinformation, nothing has changed. Â There’s a very clear Council record of what’s been said.
Roll Call vote, yes: Â Bender, Brown, Goldner, Hines, Pape
No vote: Â Didier, Harper, Shoaff, Smith
Councilman Didier: Â “I am uncomfortable with this.” Â The finance aspect of it.
Councilman Shoaff: There is a loss to the downtown of this building. Â Feels the City was allowed to be pressured.
Final vote: 5-4, passes.
John Urbahns, Community Development Director: This is the designation needed for the funding you just passed.
Councilwoman Brown – does it hurt us going forward financially or with bonds? Â No. Â gives us most flexibility.
Councilman Harper – While there are limits to tax credits available, no limits to life of it. Â May be a way of the federal government trying to assert more control? Â Very brief window, next year when the bonds Â will be issued. Â Once they’re sold, end of next year, it ends unless program is continued. Â Would you entertain a sunset clause? Â Yes, but would like to run it by the City Attorney.
Councilman Hines: Any projects on the horizon? Â One developer that has come forward. Â There is clearly an end date – end off next year. Â Not a sunset clause in the legislation. Â As bond counsel – would advise you to avoid those types of modification to the legislation.
Councilman Shoaff: sounds like if Renaissance Square fell through, could be used for something else.
Councilman Harper: this is closely modeled on the legislation. Â There was no model for legislation.
Roll Call vote
Yes – Bender, Brown, Didier, Goldner, Hines, Pape and Shoaff
No – Harper and Smith.
Smith – put all that money into one building, rather than spreading it out into the larger City.
Chad Tinkel, City Forester – removal levels are low. Â 84 trees replaced from the Ice Storm. Â 340 trees approved out of application process. Â 395 trees in different parks being planted. Â 460 for canopy coverage. Â 1 tree per 40 linear feet on the developer program. Â Very low mortality rate for this year.
Marty – is there a warranty on the trees? Â We buy at wholesale price, so there is not.
John – Street trees on row – 56,300 trees. Â Parks – about 80,000 trees. Â What would the normal mortality rate be? Â They plant more than they expect to loose. Â CEDIT dollars from Council will be coming to an end. Â Exploring several options to make up the difference.
Mitch – is the number indicated as removed low? Â Yes, as we get to them, we’ll be doing inventory updates. Â Trees that were removed by owners because of ice storm damage. Â Greater selection of trees allowed. Â Still too early to tell if treatment for emerald ashÂ borerÂ will be successful.
Liz – end of four year contract, will be let for bid next year? Â yes
G-09-06-14 (As Amended)
Greg Purcell, Deputy Mayor. Â Exempts public works or parks commissioner boards from coming to City Council. Â Does provide for exclusion of economic development items. Â Exclusion will be used rarely and only on economic development contracts.
The reporting time frame has been set at quarterly now.
Liz – now limited the disclosure to quarterly and clarified them.
Tim is asking about if the Economic Alliance would be included in “the City”. Â Can the City say they’re hiring gambling lobbyists as “economic development”?
Liz – except for the dates, the information hasn’t changed since June. Â I have assurances that things like lobbyists and gambling will not be hidden by this Administration. Â I can’t imagine doing any more to craft this than I have done. Â The dates makes the Administration aware of when they will need to disclose, allowing them to plan for that eventuality.
Mitch Harper – somewhat worried about shield of three months. Â Frankly best possible is divulging everything the city spends, including doing it on a daily basis.
Karen Goldner – I do think this is a good compromise. Â Alliance is a fee for service contract. Â That is a difference. Â The Alliance is independent from the City.
John Shoaff – Council Attorney Bonahoom agrees with Pape’s point about gambling and consultants. Â In its strict reading, could allow this to happen. Â Legislation should be based on entities, not personalities.
two voted against amendments, final vote however, 9-0 vote. Â passes.
That’s the end of this post.