The Council will hold a public hearing to accept input on issuance of bonds to fund the water treatment plant and various water distributions projects and various storm water projects, including the Harrison Boulevard project.
Sewer and Water Revenue Bonds-Water Treatment Plant
Bond Parameters Resolution 2013-19 set the parameters for funding the2013 Series Bonds. The parameters for the bonds are as follows:
The Parameters Resolution set a cap on the amount, interest rate and term. However, LYRB estimates that actual bond amounts and interest rate will be much lower. The Administrative Transmittal set forth the Administration’s original recommendation. It set the actual approximate amounts as follows:
- Not to Exceed Amount: $15,500,000
- Not to Exceed Interest Rate: 6%
- Not to Exceed Term: 35 years
- Not to Exceed Discount: 3%
Approximate Issuance Costs: $360,000
- Actual Approximate Amount: $13,700,000
- Actual Approximate Interest Rate: 4.7%
- Actual Term: 30 years
Repayment of the debt service of $850,000 annually would come from the water utility.
At the Council’s request, the Administration provided other options for the Council’s consideration as follows:
Storm Sewer Revenue Bonds – Harrison Boulevard Project
Click to enlarge image
Bond Parameters Resolution 2013-20 set the parameters for funding the 2013 Series Bonds. The parameters for the bonds are as follows:
The Parameters Resolution set a cap on the amount, interest rate and term. However, LYRB estimates that actual bond amounts and interest rate will be much lower. The Administrative Transmittal indicates that actual bond issue will be as follows:
- Not to Exceed Amount: $5,500,000
- Not to Exceed Interest Rate: 6%
- Not to Exceed Term: 25 years
- Not to Exceed Discount: 3%
Repayment of the debt service, which will be approximately $340,000 annually, will come from the sewer utility.
- Actual Approximate Amount: $4,700,000
- Actual Approximate Interest Rate: 4.12%
- Actual Term: 20 years
- Approximate Issuance Costs: $180,000
With something like $28 million in city Water and Sewer funds drawing a measly 1% interest, will the City Council nevertheless simply rubber-stamp the Mayor's "Borrow to the Max" approach? Or will the City Council, during the 2013 Municipal Election season, avoid the ire of the lumpentaxpayers, tap into the Mayor's ridiculously bloated $28 million "slush fund," and instead adopt a more fiscally-manageable "common sense" approach?
We guess we'll find out tonight, eh, folks?
Update 8/20/13 5:49 p.m.: Eureka, WCF readers. Dan S. has just now logged into Weber County Forum, and is now live-blogging from the City Council Chambers. Click "comments" to read Dan's real-time posts!
51 comments:
Rudi, there's something wrong with the table you posted: The leading 1s got dropped from the bond amount in options 1, 2, and 5, so it looks like $3.8 million when it should be $13.8 million.
And while I'm commenting, I'll mention another problem with this table, even in its original form: It assumes only 4.1% interest for ALL options--despite the fact that interest rates are now closer to 4.7% for a 30-year bond. So it under-states the interest and payments on options 1, 3, and 5. (For a 20-year bond, 4.1% is apparently still about right.)
Wait until Bondzilla gets ahold of this down the road....we are so screwed if they pass this.
Thanx for the heads-up, Dan. Suffice it to say, '"I'm workin' on it."
I'm now at the pre-meeting study session, and Asst. City Attorney Stratford is presenting some "additional information" about utility fund finances. Apparently there is some unspent money from the 2008 bond and interest that it earned that hadn't been previously reported to the council. Interest is about $1.5 million, split between water fund ($1.2 million) and sewer fund ($0.3 million).
To spend this money, the administration is proposing some new, previously unplanned pipe replacement projects. So Stratford says that even though they've got ANOTHER $1.2 million in cash sitting around, the administration is still proposing that the new bond be for the full amount previously proposed.
All council members are here except Wicks. Consultant Laura Lewis has just arrived. Administration is out in force.
In response to a question from Gochnour, Stratford goes into spin mode: Bond for more if you want more flexibility. He also concedes that a lower bond amount or shorter payment period would result in less interest being paid, and that these are "perceived" advantages.
Stratford: If you pay for some projects with cash instead of bonding, your cash on hand would drop too close to the "180-day limit". This is terrifying! Be very very afraid!
Councilmember Wicks has just arrived, so the full council is now present.
We're now in the council chambers for the regular meeting, and the council is hearing about plans for this year's Christmas Village.
Janene Eller-Smith apologized for the omitted 1s during the study session. So it definitely wasn't your fault, Rudi!
What's one integer more or less on the left side of the column anyway, right? [wink]
Christmas Village business is finished. Now on to the administration's presentation on the water and sewer bonds. Stratford is at the podium saying that we really need this bond. "These projects cannot be completed with the available cash on hand." (He'd be correct if all bills had to be paid today, but not when you take into account that the bills won't come due for nearly two years.)
Stratford: There are more projects than we have money. So what's the principle that determines when we bond and when we don't? Answer: We decided in 2008 that for big projects that affect large portions of the population, we would bond [apparently no matter how much cash we have sitting around]. For individual neighborhood projects, we'll pay cash [even though that hasn't been done in recent years].
Oops! Looks like the Council has already exceeded it's level of competence!
Stratford: Next week the council will get a complete report on the status on the 2008 bond [about time!]. There's about $800,000 still unspent from that bond (though it may already be committed--this isn't clear). And there's interest on the funds, $1.5 million as he said during the study session.
Stratford also blows some smoke about how the utility funds are independent of the rest of the city's finances [not mentioning the fact that the city transfers millions of dollars each year from these funds into the general fund]. He also reiterates that no further rate increases are anticipated, beyond what was approved last year.
Wicks: Weren't rates set assuming 4.1% interest rate on new bonds?
Stratford: Yes. Interest rates can vary but this could be balanced by other uncertainties in projections due to inflation and such. "The system ... will have to adjust. I don't think it's significant."
Wicks presses him: It's millions of dollars difference.
Stratford: But if you bond for less, you have to wait 20 years before you get any benefit. Meanwhile, costs of projects will have increased. What the water department cares about is how many projects get done in 30 years...
Stratford says there's a need for a pipe replacement along Monroe Blvd. on north side of city. $1 million project. Claims there wasn't enough money for the project "allocated in CIP account". [Yeah, but that's just because the council hadn't allocated it yet! There's over $10 million in the water fund that's not allocated to anything.]
Stratford now goes on to discuss the storm drain fund. What happens after all planned capital projects are finished in about five years? Answer: There's a further study underway to look for more ways to spend money at that point, specifically on storm drain system elements that may need replacement (not merely capacity increases).
Now finance manager Laurie Johnson steps up to the podium, says she'll clarify some of the numbers the council has seen. She's trying to make the council think there's less cash available than there is, by focusing on inaccurate projections for the current fiscal year, rather than the known (though still unaudited) data from the fiscal year that just ended.
Wicks challenges Johnson on the assumption of 4.1% interest regardless of the time period of the bond. Johnson admits that interest will be higher on a 30-year bond. Her only excuse seems to be that we can't predict the interest rate exactly anyway.
Johnson: "There's a healthy fund balance right now."
Wicks reiterates that the comparison of options is unfair if it doesn't take the differing interest rates into account.
Consultant Laura Lewis steps up to the podium to discuss interest rates. She's calling them all by their first names. Getting into a whole lot of financial jargon for no particularly good reason. As of today, she estimates 4.42% interest for a 20-year bond, 4.70% interest for a 30-year bond. So she's saying the difference is considerably less than was estimated in the council packet (where they claimed 4.12% for a 20-year bond).
Lewis: Among the options before you (20 or 30 year bond for just the filter plant or that plus another $1.8 million), there isn't a right or wrong choice. It's better to have more cash on hand, but you need to find the right balance. Bonding for only 5 years, or for 40 years, would worry me.
Time for public comments. So far three speakers, including myself, have spoken in favor of less bonding or none at all, spending the cash on hand. One canyon resident has just spoken about the need for reliable water in Ogden Canyon. That's all the speakers on the water bond.
Chair Blair invites the administration to rebut the public comments.
Mark Johnson offers some rebuttals to details of certain comments. Since I wasn't quick enough to transcribe the comments, I'll skip the rebuttals too. In general, he says that if we could all see what poor condition the system is in, we'd understand why the administration has made the recommendation it has. So be very very afraid!
Stratford knocks down a straw man, saying we can't put off the filter plant replacement.
Wicks reads a quote from Laura Lewis from last year, when Lewis said if the city ended up with more money than anticipated at this point, we could then bond for less.
Gochnour makes a motion to endorse Option 5. Van Hooser seconds the motion. This is to "give direction" to the people who actually offer the bonds for sale. Wicks votes against, all others in favor. Option 5 is for a 25-year bond for the full amount, $13 million plus.
Wicks explains that she would have supported a bond for the treatment plant, for 20 years, but that there's enough cash for the rest, etc.
Garner says he's worried about the eventual replacement of the other Ogden Canyon water line (the slightly newer one, not the older one that was just replaced). So the administration's scare tactics worked on him.
Van Hooser makes a general statement, no specifics.
Hyer says he's afraid of losing water service so he voted for the bond.
Stephens also speaks in broad terms about the importance of water infrastructure.
Typical Stephens: "Fiscal responsibility is paramount."
Blair: "Water affects everyone."
On to the storm sewer bonds. I was the only member of the public who spoke, urging the council to wait until they have more information on the storm sewer financial situation (which I can explain later).
Ignoring my comment, Gochnour makes a motion to go ahead and endorse the bond as proposed. Van Hooser again seconds. And again the vote is 6-1 with Wicks opposed.
what a bunch of cowards....we best keep an eye on that cash fund, cause it 'taint going to water or sewer...befoe you know it the saying will be "we have too much money in the reserve fund and we have to move it to the general fund"...mark my words.
this is the worst fiscal responsibility they could have done....cowards, every one 'cept Amy.
Wicks again explains her no vote: "It's ridiculous to adopt this without a plan..." Garner: "Mr. Schroeder brings up some good points" but we're just setting the bond parameters; we don't yet know the condition of the system.
Wicks: So will we have that information (about condition of the system) before it goes to the pricing committee?
There's some procedural confusion after Garner's remark, regarding whether the council can still back out of this and whether they'll have any more information before them when they need to make the final decision.
To be clear: Nothing is actually set in stone yet, because the bonding process involves some back and forth between the borrower and investors, and that hasn't happened yet so the council doesn't have the final parameters for their approval. However, this appears to have been the last chance for the council to have any input into the process. When it comes before them for final approval, I think all they get to say is yes or no.
(Well, maybe that wasn't so clear, but it's the best I can do based on my incomplete understanding of the bonding process.)
That's all on the utility bonds for tonight. They're now going on to approve the airport art funding... and I'm going to head home. Thanks for tuning in!
maybe the bond market might make up their minds for them soon enough...Uncle Benny is trapped and Bonzilla wants his arse.
many thanks Dan!!!
THANK! YOU! DAN! It's been a real eye-opener.
Well, I've stuck around a little longer. Three speakers addressed the new development along Polk and Laurel where the trees were unexpectedly cut down. One concern was the bright lights, and I suggested that the lights be put on motion detectors.
I also said that now that they've endorsed the full bond amount, I hope they will find projects to pay down the cash balances rather than letting cash continue to accumulate.
James Humphries then echoed my comment, saying it's not responsible to allow large amounts of cash to sit in bank accounts earning less interest than the inflation rate.
Now a gentleman is speaking about a variety of issues affecting Mt. Ogden Park. Trash, alcohol, illegal parking, not enough fees being charged to get people to be responsible.
Bravo, Dan and James!
By the way, Mayor Caldwell did not attend this meeting.
Head planner Greg Montgomery gets up to respond to the issues with the senior housing development at Polk and Laurel. What went wrong? "We need to be more proactive and say this is how you will do it," not leave the parameters of a development vague. The Planning Commission would like to see a new ordinance to protect trees throughout the city. For the present situation, they required developer to double the number of new trees and to plant some 6.5-inch caliper trees. If any trees die, they must be replaced at the developer's cost. There is a requirement that light not be visible beyond the property; "we'll be taking a look at that." The certificate of occupancy has not yet been issued; still waiting for a fire inspection.
Let me take a wild guess, Dan. That gentleman of whom you refer may go by the name of "Dave," right? ;-)
Sorry--don't remember his name. But Channel 17 is here videotaping!
He was supposedly responding to a comment by David Smith, who spoke after me. But I never heard Smith suggest that the filter plant be delayed. Typical tactic of the administration, misrepresenting the other side's position.
Smith did suggest that there's enough cash to pay for the filter plant without bonding. I actually agree with him, given that by the time all the bills come due, still more cash will have come in. Yes, that would pretty much deplete the water fund's cash balance, but if an emergency should come up, the water fund could always borrow a few million from the sewer fund.
Further comments from council and administration: Many thanks to Ogden's firefighters, and the cops are doing all they can to catch the arsonist(s).
Given that Pineview wants people to cut watering by 50%, the city is not citing anyone for having brown lawns this year.
Wicks suggests better publicizing other options for citizens besides lawn grass.
Adjourned! And now I really am going home!
By the way, the speakers mentioned here were during the general "public comments" at the end of the meeting. So I actually got to speak three times: one each during the official public hearings on the water and storm drain bonds, and once during the public comments at the end.
Mr. Humphries had actually spoken earlier in favor of the water bond, saying (if I understood him correctly) that it's not that large in comparison to the cost of all the capital projects in the long-term plan. Sorry I missed his comment during my earlier live-blogging.
Further explanation: Last year the city completed a study of the capacity needs of the storm drain system, and the result was several planned capacity improvement projects over the next five years. But that study didn't address the condition of the system, that is, whether there are storm sewer components that will soon need to be replaced. Apparently there's a study of that going on right now, and results will be available soon. The administration has insinuated that at that point, they'll be proposing ways to keep spending storm drain revenue after the five years are up. Otherwise, if you take the current plan literally, it looks like cash will begin accumulating in the storm drain fund starting five years from now, and quickly reach embarrassing levels. My proposal was simply that the council hold off on any bonding decision until after they've seen the results of the pending study of the condition of the system.
In light of the spinelessness of Council members who campaigned, as I recall, on their intention to be strong independent reviewers of Administration proposals, my concerns about electing new Council members whose campaigns are financially beholden to the Mayor is growing.....
Re: "By the way, Mayor Caldwell did not attend this meeting."
So, TenSpeed didn't show again. Maybe we should just beging addressing Mr. Johnson as "Mayor Johnson" and be done with it.....
Council candidate Stephen Thompson attended the meeting, but did not speak. If other non-incumbent candidates were there, I didn't notice them.
Update: Please take note that I've now edited the original image, to correct Ms. Eller-Smith's original errors.
No doubt Council Challenger Thompson was taking particularly careful notes, LOL.
Post a Comment