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12/14/2010 City CouncilEDMONDS CITY COUNCIL APPROVED MINUTES The Edmonds City Council meeting was called to order at 5:01 p.m. by Mayor Cooper in the Council Chambers, 250 5`" Avenue North, Edmonds. The meeting was opened with the flag salute. ELECTED OFFICIALS PRESENT Mike Cooper, Mayor Steve Bernheim, Council President Michael Plunkett, Councilmember Lora Petso, Councilmember Adrienne Fraley- Monillas, Councilmember Strom Peterson, Councilmember Diane Buckshnis, Councilmember ALSO PRESENT Peter Gibson, Student Representative ELECTED OFFICIALS ABSENT D. J. Wilson, Councilmember 1. APPROVAL OF AGENDA STAFF PRESENT Gerry Gannon, Assistant Police Chief Stephen Clifton, Community Services/Economic Development Director Phil Williams, Public Works Director Lorenzo Hines, Finance Director Carl Nelson, CIO Frances Chapin, Cultural Services Manager Sandy Chase, City Clerk Jana Spellman, Senior Executive Council Asst. Jeannie Dines, Recorder Councilmember Plunkett noted there was no information in the packet from the consultants, the Finance Department, Council President Bernheim or Councilmember Petso on Agenda Item 3, and he concluded the Council was not prepared to discuss this item. COUNCILMEMBER PLUNKETT MOVED, SECONDED BY COUNCILMEMBER BUCKSHNIS, TO AMEND THE AGENDA AND REMOVE ITEM 3 FROM THE AGENDA. Council President Bernheim expressed his willingness to hear the presentation and ask questions. He acknowledged there was no recommendation/analysis by the Finance Director or Mayor. The intent of this item was to determine if there was any flexibly in the bonds. He noted last year Community Transit approved refinancing of bonds that resulted in a small savings. He recalled Mayor Cooper's budget message referenced researching whether any savings could be realized by refinancing bonds. He referred to bond payments from the parks acquisition fund and whether those payments could be transferred. Councilmember Petso recommended the Council listen to the bond advisors' presentation. If Councilmember Plunkett was not ready after the presentation to take action tonight, further action could be delayed. Mayor Cooper explained the purpose of this agenda item was to begin the education process. He did not anticipate any action would occur tonight. Edmonds City Council Approved Minutes December 14, 2010 Page 1 Councilmember Plunkett acknowledged that some people have some information; he concurred with Mayor Cooper's suggestion to begin the education process. He expressed concern that there was no information regarding the agenda item in the Council packet. Councilmember Fraley- Monillas expressed interest in listening to the bond advisors' presentation to begin the education process and improve her understanding with regard to the City's bonds. She did not intend to make any decision tonight. Councilmember Buckshnis also supported hearing from the bond advisors. MOTION FAILED (1 -5), COUNCILMEMBER PLUNKETT VOTING YES. COUNCILMEMBER PETSO MOVED, SECONDED BY COUNCILMEMBER PLUNKETT, TO APPROVE THE AGENDA IN CONTENT AND ORDER. MOTION CARRIED (5 -1), COUNCILMEMBER PLUNKETT VOTING NO. 2. CONSENT AGENDA ITEMS COUNCILMEMBER PETERSON MOVED, SECONDED BY COUNCIL PRESIDENT BERNHEIM, TO APPROVE THE CONSENT AGENDA. MOTION CARRIED UNANIMOUSLY. The agenda items approved are as follows: A. ROLL CALL B. APPROVAL OF CITY COUNCIL MEETING MINUTES OF DECEMBER 7, 2010. C. APPROVAL OF CLAIM CHECKS #122665 THROUGH #122846 DATED DECEMBER 9, 2010 FOR $612,480.88. 3. DISCUSSION WITH BOND ADVISORS, A. DASHEN & ASSOCIATES. Finance Director Lorenzo Hines introduced Alan Dashen and Scott Bauer, A. Dashen & Associates, who will provide an overview of the City's bond holdings and recommendations regarding refunding. He advised a FAQ response was sent to Councilmembers regarding certain bonds. This overview will not necessarily provide information regarding moving funds from REET 1 to REST 2. He will forward the Council a letter from bond counsel regarding that matter. He advised the PowerPoint presentation was received today and was not included in the Council packet. Mr. Dashen explained the intent of this item was as an update regarding the bond market and a review of the City's outstanding debt. He advised some of the City's debt could be refinanced to realize savings. No action is requested of the Council tonight. Mr. Dashen explained the City last sold bonds in March 2007. The market collapsed in Fall 2008 but has since recovered. He provided a graph of the 20 -year Bond GO Index and 30 -year Treasury Bond interest rate trends. He reviewed the City's current bond ratings according to Moody's: • Aa2 for UTGO (voted) • Aa3 for LTGO /revenue bonds. Mr. Bauer reviewed the City's debt capacity: Assessed valuation for 2011 Tax Collections 1 $6,436,673,659 Edmonds City Council Approved Minutes December 14, 2010 Page 2 LTGO Debt Capacity — Non -Voted (1.5% of assessed valuation) NO 96,550,105 Less current outstanding LTGO bonds Dated Date 15,935,000 Remaining capacity (non - voted) December 1, 2016 80,615,105 Total General Obligation Debt Capacity — Voted and Non -Voted (2.5%) of assessed valuation December 1, 2013 $160,916,841 Less outstanding UTGO 4,990,000 Less outstanding LTGO 15,935,000 Total voted and non -voted debt 20,925,000 Remaining Capacity (voted and non - voted) $139,991,841 Mr. Bauer summarized the City has a comfortable margin on its debt capacity. Councilmember Plunkett asked whether comfortable referred to the total dollar amount or the City's ability to repay the bonds. Mr. Dashen explained the debt capacity limit is a state law regarding the amount of debt the City can issue. Comfortable refers to the amount of debt capacity. Mr. Bauer reviewed the City's one outstanding UTGO bond: Refunding Candidate? $7,000,000 UTGO Refunding Bonds, 2003 NO Par Amount Outstanding $4,990,000 Dated Date July 1, 2003 Final Maturity December 1, 2016 Interest Rates 3.125% -3.50% Call Date December 1, 2013 Insured By Ambac Purpose: Refund $6,115,000 of UTGO 1996 Mr. Bauer explained this was an advanced refunding of a 1996 voted issue and cannot be refunded until the call date (December 1, 2013). He explained advanced refunding is a federal tax term that means refinancing bonds 90 days or more prior to their call date. Federal tax laws allow only one advance refunding per issue. Mr. Bauer reviewed the City's LTGO bonds: Refunding Candidate? $5,230,000 LTGO Bonds, 2007 NO Par Amount Outstanding $4,510,000 Dated Date March 15, 2007 Final Maturity December 1, 2026 Interest Rates 3.65 % - 3.95% Call Date December 1, 2016 Insured By CIFG Purpose: Repay and redeem the W &S BAN and LTGO BAN, HVAC improvements and the Anderson Center seismic project Refunding Candidate? $7,015,000 LTGO Bonds, 2002 Par Amount Outstanding $6,155,000 Dated Date November 1, 2002 Edmonds City Council Approved Minutes December 14, 2010 Page 3 NO Final Maturity December 1, 2026 Interest Rates 3.75 % - 4.90% Call Date December 1, 2012 Insured By Ambac Purpose: Repay the City's outstanding LTGO BAN and to acquire and renovate a performing arts theater and gymnasium Refunding Candidate? $3,045,000 LTGO Bonds, 2001 YES Par Amount Outstanding $1,980,000 Dated Date September 1, 2001 Final Maturity December 1, 2021 Interest Rates 4.25 % - 4.90% Call Date December 1, 2011 Insured By FSA Purpose: Improvements to Frances Anderson recreation center, replace library roof, fund a sewer meter rehab project and make street improvements Refunding Candidate? $2,260,000 LTGO Bonds, 2001 Series B YES Par Amount Outstanding $1,495,000 Dated Date December 15, 2001 Final Maturity December 1, 2021 Interest Rates 4.80 % - 5.45% Call Date December 1, 2011 Insured By FSA Purpose: Acquire 4.9 acres of park land Refunding Candidate? $4,480,000 LTGO Refunding Bonds, 1998 YES Par Amount Outstanding $1,795,000 Dated Date December 1, 1998 Final Maturity December 1, 2014 Interest Rates 4.25 % - 4.40% Call Date December 1, 2008 Insured By MBIA Purpose: Advance refund $1,075,000 of LTGO 1993 and advance refund $2,985,000 of LTGO 1995 He explained the last bond shown above could be refunded because it was past the call date. The next two bonds from the bottom, 2001 and 2001 Series B bonds, were also good refunding candidates although their call date was late 2011. He noted advance refundings are sensitive to interest rate fluctuations because funds are placed in escrow for a longer period. He anticipated fairly good savings if those bonds were refunded. The call dates for the two bonds at the top of the list are much further out and would not provide any savings to the City at this time. Mr. Dashen reviewed a chart illustrating the amount of debt represented by each bond issue, noting in 2 -3 years, the City's debt amount decreases substantially. He noted refunding was similar to refinancing a house; the funds could be borrowed at a lower rate to pay the bonds off and provide savings to the City. Edmonds City Council Approved Minutes December 14, 2010 Page 4 For Councilmember Petso, Mr. Bauer confirmed the LTGO 1998 bonds were for City Hall acquisition. Councilmember Petso asked about the par amount withstanding on that bond. Mr. Bauer advised the amount shown was following the December 2010 payment. He offered to confirm the amount with staff. Mayor Cooper asked about the date for refunding for the 2001 and 2001B bonds as their call dates were not until December 2011. Mr. Bauer suggested considering the savings with a sale date of March 1 using current market rates. He recommended monitoring those closely to ensure fluctuation in rates did not erode the savings. Mr. Bauer explained when insurers were available, the City paid a premium to the insurer who guaranteed payment on the bond and the City received the insurer's rating which at that time were all rated AAA which lowered the debt service payment. Since the 2008 downturn, the AAA insurers are no longer around and most insurers' rates are no better than the City's rating. Mr. Bauer also reviewed Outstanding Bonds — Water and Sewer Revenue: Refunding Candidate? $7,875,000 Water & Sewer Improvement an d Refunding Bonds, 2003 NO Par Amount Outstanding $2,045,000 Dated Date April 1, 2003 Final Maturity December 1, 2022 Interest Rates 3.25%- 4.45% Call Date December 1, 2012 Insured By FSA Purpose: Water main replacement, repairs and renovations to sewer lift stations, storm drainage improvements and other utility related projects. Current refund the W &S Rev. Ref. Bonds Refunding Candidate? $2,420,000 Water & Sewer Refunding Bonds, 1998 YES Par Amount Outstanding $825,000 Dated Date March 1, 1998 Final Maturity December 1, 2013 Interest Rates 4.5 %- 4.85% Call Date December 2007 Insured By FSA Purpose: Advance refund $2,180,000 of the City's W &S Bonds, 1993 (maturities 2003 -2013) Mr. Bauer reviewed a summary of refunding savings: Bond Annual Average Savings Present Value Savings Savings % LTGO 1998 $20,389 $73,131 4.07% LTGO 2001B 12,051 109,855 7.90% W &S 1998 11,599 34,424 4.18% LTGO 2001 10,356 95,692 5.21% W &S 2003 (2,661) (22,191) (1.24 %) LTGO 2002 (9,057) (100,469 (1.74 %) LTGO 2007 (32,599) (384,901) (12.34 %) Edmonds City Council Approved Minutes December 14, 2010 Page 5 Mr. Bauer advised the State's policy is they do not advance refund any bonds with a savings of below 5 %. Mr. Dashen advised the savings in the above table were net of all transaction costs. Councilmember Buckshnis inquired about rates for a voted bond /levy issue next November. Mr. Dashen answered rates were currently about 4.75 %. Councilmember Petso asked whether the figures assumed a new bond issued at the new rate for 20 years, 30 years or just for the remaining term of the bond. Mr. Bauer answered the term would not be extended. Councilmember Petso asked whether the savings could be realized if the term were extended in order to reduce the payment amount. Mr. Bauer answered if the term were extended, the savings would be reduced. Mr. Dashen explained the most common reason for extending /restructuring debt is to save money in the General Fund. He viewed that as dangerous long term but it could be okay one time. He urged the Council to think seriously before extending the term. Councilmember Petso explained REET funds can only be used for certain purposes. Those funds are currently paying the debt service on the LTGO 1998. The annual debt service is approximately $700,000 and REET revenue is only $600,000 annually which may require a subsidy from the General Fund. Because this is nearly the only revenue source for park acquisition, until this situation is rectified, the City is unable to purchase any park land. She anticipated refunding or paying off those bonds would be beneficial to reduce the annual debt service payment. She was interested in possibly providing funds for park acquisition and avoiding a General Fund subsidy. Mr. Dashen commented their presentation was with regard to borrowing money to repay bonds. If the City had cash in the bank, the bonds also could be paid off. Most cities did not have cash in the bank these days. Council President Bernheim commented Edmonds did have cash in the bank and the Council has been discussing whether it would be wise to use funds generated from the sale of assets to pay off the LTGO 1998 obligation so that so that the REET Fund could be replenished from REET revenue for use for future park acquisition. Council President Bernheim was not interested in extending the term of the bonds. Mr. Dashen advised whether to pay off bonds was a policy question for the Council; they could provide several options for the Council to consider. He noted the LTGO 1998 interest rate was 4.25 %; the amount the City was earning in the State pool was considerably less. If the bonds were due in one year, he would recommend paying them off; however, final maturity for the LTGO 1998 is in four years. Mr. Dashen summarized the City has $5 -6 million in potentially refundable bonds. Rates are low although rates may go down slightly in the next year. He concluded refunding will not make or break Edmonds; it is good financial housekeeping. He suggested combining the Water & Sewer 1998 issue with the LTGO refundings. Next steps include making a decision to proceed which leads to preparation of financing documents, etc. Councilmember Petso referred to the LTGO 1998 bonds, observing there were two components, 1993 . and 1995. She asked what those amounts were for. Mr. Hines advised the $2.9 million was the purchase of City Hall. Mr. Bauer advised the $1.075 million was for the Public Works building. Councilmember Peterson referred to the refunding savings, recalling the State recommends at least a 5% savings. Mr. Dashen advised for advance refunding, the State recommends saving of 5% of the par amount. In Oregon, the State law is 3 %. For a current refunding, he would recommend a lower threshold. Mr. Bauer advised according to the refunding savings summary, the bonds that meet the 5% threshold are the LTGO 2001B and LTGO 2001 issues. Mayor Cooper summarized Mr. Dashen and Mr. Bauer suggested the City consider refinancing the LTGO 1998, LTGO 2001B, W &S 1998 and LTGO 2001 that illustrate savings on the savings summary list. For Edmonds City Council Approved Minutes December 14, 2010 Page 6 Mayor Cooper, Mr. Dashen explained they would monitor the savings to ensure refinancing the debt would save money. Councilmember Petso expressed interest in refunding three of the four bonds Mr. Dashen and Mr. Bauer recommended. She was also interested in researching the following options for the LTGO 1998 bonds: 1. Pay off using the available $1.3 million 2. Extend payments 20 years in a refinancing scenario 3. Refund similar to the other three Councilmember Petso asked how much it would cost to have those options researched. Mr. Dashen advised it would not cost anything to research those options. Councilmember Fraley - Monillas requested they also provide the total cost of extending payments for 20 years. 4. COUNCIL APPOINTMENTS TO THE CITIZENS' TREE BOARD The Council made the following appointments to the Citizen's Tree Board: Candidate Appointing Councilmember Barbara Tipton Councilmember Fraley - Monillas Sandy Seligmiller Councilmember Petso Anna Marie Heckman Councilmember Buckshnis Laura Spehar Councilmember Peterson Joan Bloom Councilmember Plunkett Dawna Lahti Council President Bernheim Mayor Cooper advised Councilmember Wilson's appointment and an alternate would be selected from the remaining candidates, John Botton, Holly Merrick and Walter Thompson. 5. DISCUSSION AND POTENTIAL ACTION ON A PROPOSED RESOLUTION CREATING A PLANNING COMMITTEE TO CONSIDER A REGIONAL FIRE AUTHORITY Mayor Cooper suggested deferring this item to a January meeting as Councilmember Wilson was not present to make the presentation. The Council agreed. 6. EXECUTIVE SESSION REGARDING POTENTIAL LITIGATION At 5:52 p.m., Mayor Cooper announced that the City Council would meet in executive session regarding potential litigation. He stated that the executive session was scheduled to last approximately 60 minutes and would be held in the Jury Meeting Room, located in the Public Safety Complex. No action was anticipated to occur as a result of meeting in executive session. Elected officials present at the executive session were: Mayor Cooper, and Councilmembers Bernheim, Plunkett, Fraley - Monillas, Buckshnis, Peterson, and Petso. Others present were City Attorney Scott Snyder; Grant Weed, Attorney, Weed Graafstra & Benson; and City Clerk Sandy Chase. The executive session concluded at 6:58 p.m. 7. ADJOURN The City Council adjourned to Council Committee meetings at the conclusion of the executive session Edmonds City Council Approved Minutes December 14, 2010 Page 7