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.
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December 14, 2010
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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
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December 14, 2010
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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
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December 14, 2010
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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.
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December 14, 2010
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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 %)
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December 14, 2010
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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
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December 14, 2010
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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
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December 14, 2010
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