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HomeMy WebLinkAboutCCM-07-22-81 Special MINUTES OF THE SPECIAL MEETING OF CITY COUNCIL JULY 22, 1981 The special meeting of the City Council was called to order by Mayor Reiman at 8:21 P.M. on July 22, 1981. Council members Garretson, McMullen, Fleming, Johnson, Walker, Shepherd and Kerr were present. Mike Howard, City Attorney and Utilities Accountant Mary Ann Sheeks were also in attendance. Don McCullough of McCullough and Associates presented the Council with a letter as to the feasibility of short term financing on the bond issue. Mr. McCullough stated that after research and phone work he didn't think it was feasible to do interim financing for the bond issue.(see letter attached) Mr. McCullough recommended that an amendment be made on the bond ordinance which would allow the advance on a refund on the bond issue. Discussion ensued. Mr. Garretson made a motion on Ordinance S-39, page 22, following the completion of Section 15, that the proposed amendment submitted by Mr. McCullough called Section 16 be inserted and that what is labeled Section 16 be changed to Section 17. Motion seconded by Mr. Walker and passed unanimously. Mr. Garretson called for the question. Ordinance S- 39 passed unanimously. Mrs. Kerr stated she was voting yes but she wanted the records to reflect there was no other choice but to vote yes. Mr. McCulloug stated a public hearing should be held on August 10th concerning the bond issue. Mr. Garretson moved to table Ordinance S-40 until the date stated above for the public hearing. Motion seconded by Mrs. Kerr and passed unanimously. Mr. Garretson suggested that the Clerk-Treasurer prepare an ordinance for the next meeting, if possible, authorizing the Clerk-Treasurer to dispose of audio tapes of these meetings after 24 months. There being no further business to come before the meeting, the same was duly adjourned at 8:45 P.M. APPROVED: ATTEST: Prepared by: McCullough ~ Associates John S. Pearce Dottie Hancock With Information added by Dottie Smith and Mike Howard July 22, 1981 MUNICIPAL SEWAGE WORKS Carmel, Indiana Feasibility of Short-term Financing *1. Short-term financing probably is legal, as per requirements of George Gavit and John Pearce. *2. If length is more than one year, competitive bids must be taken. *3. If length is less than one year, a negotiated bid is permissible at a rate of 65 to 70 percent of prime rate or 13-15 percent. *4. Short-term financing in anticipation of the issuance of bonds assumes that interest rates will come down. If they do not, then you end up paying a higher interest rate than if perma nently financed to begin with. My opinion and concensus of bond dealers is that interest rates are not going to come down in the next year except day to day fluctuations. Economists are split on future interest rates, but those most pessimistic, notably Henry Kaufman of Salomon Brothers, have not been wrong yet in their projections. *5. Recommendation: Proceed with sale of bond issue, and if interest rates fall significantly in future, advance refund the bond issue. This will require an amendment to the bond issue Wednesday night. 6. Loan limits to the City of Carmel are $512,000.00 at one local bank with which the City frequently does business. Approximately $330,000.00 of such loan limits have now been used. Thus many local banks would need participation from other banks in an effort to lend money to the extent of $1,450,000.00. A certain amount of time would, of course, have to be expended to secure such a package and there are certain time limits on the project, such as Federal Grants, etc. 7. Four local banks were notified and all indicated the situation was consistent with Item l~6 above. There is not a great demand for a tax free income currently in view of the current banking situation. Such matters as the proposed short-term or interim financing have to undergo a procedure such as in bond issues with many of the same requirements. *These items were prepared by McCullough & Associates with the approval of ot~er com~ittee members. 'AA 8. As indicated previously, to secure these funds would take a certain amount of time and such period could be short or it could be indefinite. Many times such items as this would be handled as commercial paper because of loan limits, local requirements, etc.; such commercial paper would have to be sold to other participating banks. There are no guarantees of such a sale taking place. 9. Notwithstanding Item #l above, the Indiana Board of Accounts at this point in time will not definitely approve such an interim short-term financing arrangement. Item #l above is a probability but not a certainty based upon bond requirements and state statutes and local ordinances. Notwithstanding the probable correctness of Item #l to a large extent the Indiana Board of Accounts will prevail in their views as to what course of action a municipality can take. 10. Because interest rates are currently fluid, to say the least, a fixation of sewage rates would be difficult if short-term financing were in fact effected. A definite pay-back schedule is an accounting necessity when fixing rates. While such is in the field of expertise of McCullough & Associates, legally it could be presumed that the rates would have to be high enough to anticipate fluctuations in the interest rates of short-term financing when renewals of short-term financing would be necessitated. 11. The possible rate of savings, if any, is on a short-term basis and even on a shoArt-term interim basis if the interest rates do not eventually come down, it is not great. During the short-term or interim a definite rate would be guaranteed, of course, only for a relatively short period of time. 12. An amendment to the proposed Ordinance is available tonight to make advanced refunding procedure in anticipation of interest rates falling more accessible and more easily defined. 13. Certain forms from certain state institutions (relative to interim financing) were furnished to committee members and one item therein requires the guaranteeing of tax exempt status to the lendors by the City. The tax exempt status is based upon current IRS regulations which effectually state that loans to governmental bodies are tax free as are municipal securities. While such is not imminent, any change of such regulation(s), while probably not retroactive, could be construed as then currently effective to any renewals of the short-term obligation. The committee cannot recommend that the City be placed into the situation of where it would be required to guarantee tax free status to eventual lendors. - 3 - 14. The success ratio in relation to institutions engaged in such practice cannot be guaranteed by tl~e committee. The pay-back schedule, i.e. debt service on bond issues, is ascertainable. 15. Indiana Association of Cities and Towns indicates that the only overt way for municipalities to borrow mol~ey is via a bond issue and that no legal procedure for interim financing prior to a bond issue is in existence. 16. The concensus of bond people are that rates are not going to be lower except as pursuant to day to day fluctuations. Bond dealers and economists are somewhat split on this as per Mr. McCullough ' s investigation . The banks which John Pearce and Dottie Hancock communicated with are not optimistic about lower interest rates to the extent which we desire to anticipate. The bond dealer with whom Mike Howard communicated with concurs with this view. A As indicated on page l, the asterisk indicates those items pre pared almost solely by McCullough & Associates and committee members Hancock and Pearce concur with such opinions. The information for Items 6, 7 and 8 was gathered by Hancock and Pearce and McCullough generally concurs. The in~ormation for Item 9 was secured by Hancock. The information for Items 10 and 11 were the concensus of Hancock, McCullough, Pearce and Howard. Item 12 is offered as an alternative which does not effect the legality of the existing proposed Ordinance as per the concensus of McCullough, Pearce and George Gavit. The opinion expressed in Item 13 is based upon a concensus of ~cCullough and Pearce. T~e questions raised in Item 14 are based upon conversations with George Gavit by John Pearce and Don McCullough and conversations which Mike Howard had with other sources. Item 15 is the input of Dottie Smith based upon the conversation which she had with the Indiana Association of Cities and Towns. Item 16 is based upon sources available to Don McCullough and Michael Howard and such have been confirmed generally by John Pearce and Dottie Hancock. As to interim or short-term financing, the committee attempted to act as expediently as possible and will provide more definite sources than set out hereinabove upon individual requests by Council members. Hancock, McCullough and Pearce met in the office of the Clerk-Treasurer on the afternoon of Tuesday, July 21, 1981. Such was a lengthy meeting. Numerous phone conversations and discussions have occurred between Hancock, Smith, McCullough, Howard and Pearce since the most recent Council Meeting. The terms of short-term interim financing may vary in individual cases, such being negotiable between the prospective lendors and the City of Carmel. The conclusions of such negotiations would certainly have to be indefinite at this point in time. The physical preparation of this report was done by John S. Pearce at the direction of Dottie Hancock and Don McCullough and such is the concensus of the named Committee. Respectfully submitted, DON McCULLOUGH DOROTHY J. HANCOCK JOHN S. PEARCE CORRECTED Prepared by: McCULLOUGH & ASSOCIATES July 6, 1981 MUNICIPAL SEWAGE WORKS Carmel, Indiana Timetable for Issuance of Sewage Works Revenue Bonds Date Time Step 7/13/81 7:30 P.M. Special Council meeting: discuss in general the project, rates and revenue bonds and needed Council action 7/20/81 7:30 P.M. a) Regular Council meeting: introduction, suspension of rules and final passage of bon~ o~ nance A b) introducti on of rate and use ordinance 7/22/81 7:30 P.M.A SpeciAal Council meeting; if needed for final passa.ge of bond ordinance 7/23/81 a) F ublication of notice of intent to construct and issue revenue bonds (start of 30-day period during which remonstrances can be filed) b) publication of notice of public hearing on new sewer charges 7/30/81 Second publication o~ notice of public hearing on new sewer charges 8/10/81 7:30 P.M. Special Council meeting: a) Public Hearing on new sewer charges b) Final passage of rate and use ordinance 8/13/81 First publication of bond sale notice 8/20/81 Second publication of bond sale notice 8/22/81 Expiration of remonstrance period 8/27/81 11:00 A.M. Bond Sale 9/25/81(est.) N/A Bo nd delivery, deposit bond proceeds and commence construction