Financing plan of the city’s ‘workshops’ for the town hall, targeted projects | News

The Rockport City Council, during its workshop on Wednesday, Jan. 19, spent about two hours discussing the financing plan to issue general bond redemption bonds (approximately $16,665,000) to repay general bond redemption bonds. Series 2012 General Obligation and Series 2020 Tax Notes; issue new tax notes (approximately $8.1 million) to fund the balance required to fund the City Hall project; and issue bond certificates totaling $3.5 million to fund street and drainage projects.

The financing plan was approved at the regular council meeting on January 11, but several council members asked the workshop to review the details of the plan.

Councilor Brad Brundrett, at the Jan. 11 meeting, asked about funds remaining from previous debt issuances.

Between the Jan. 11 meeting and Wednesday’s workshop, City staff worked to determine the amount of unpaid proceeds from previous debt issuances.

What they discovered is that the city has nearly $4.5 million to spend from the remaining funds.

These funds, however, can only be used in specific areas.

The total circulating products available and the area(s) they can be spent on are:

• $2,500,920: streets, drainage or utilities

• $1,087,324: streets, drainage or parks

• $423,374 – (Utility Systems) – Water, Wastewater or Gas

• $77,205 – (Utility Systems) – Water and Wastewater Specific

• $405,464 – Specific park system, including water parks

This new information was presented by Acting City Manager Richard Morton Jr. at the start of the workshop, after hearing from several residents in the “Citizens to Hear” portion of the agenda.

“There’s about $3.5 million available for street and drainage projects,” Morton said. “None of this can be spent on the City Hall project.”

Chief Financial Officer Katie Griffin said that by investigating past bond issues and repaying, she discovered the remaining $2.5 million from an original 2005 bond issue for streets, drainage and utility systems.

“I was surprised to see so many,” she said.

Mayor Pat Rios noted that about $3.6 million of the $4.5 million dates back to 2005.

Griffin explained that the information was not transferred properly when redeeming the 2005 bonds.

“The processes (which are now in place) weren’t in place then,” Griffin said. “I didn’t know (when I came on board in May 2018) that there was a 2005 bond, due to a refinance.”

On Thursday, Griffin said she always knew the money was there, but believed the remaining funds were committed.

Mayor Pro-tem JD Villa asks if all the figures presented are verified.

“It’s been checked twice,” Griffin said.

“I apologize for not knowing this during the budget process. It would certainly have made our life easier.

Morton noted that the discovery of the unspent funds does not change what the City is trying to do in terms of paying off some of its current debt, issuing tax notes and possible bond certificates ( CO).

What the discovery of the funds (now known not to be committed to specific projects) means is that the COs in the funding plan ($3.5 million) for the streets and drainage projects might not not have to be issued since approximately $3.5 million of current uncommitted funds can be used for streets and drainage.

Griffin also said Thursday that the funds have always been there and that tying those funds to certain projects is not the auditor’s job.

“(One of) the auditor’s jobs is to find the missing money (and there is no missing money),” she said.

City staff will now compile a list of projects that can be financed with the remaining funds from previous bond issues.

The City’s financial advisor, Bob Henderson of RBC Capital Markets, who has served the City in this capacity for more than 30 years, then explained the financing plan in more detail.

He spoke about the importance of the City maintaining a stable I&S (debt) tax rate, which was fueled by House Bill 2.

“If I&S rates go down, we have to jump through hoops to raise them again,” Henderson said.

He noted that the discovery of the remaining $3.5 million from previous bond issues should not be taken as a reason to cut the I&S rate.

“The city should maintain the same I&S rate and just shorten the maturity (of the debt),” Henderson said.

By doing so, the City will be better able to meet capital needs in the future.

“You can structure that debt to reduce the I&S tax rate, but I wouldn’t recommend that,” Henderson said.

He recommended refinancing the City’s debt to pay off “X” years later, by which time the City will have additional capacity to fund future projects.

Morton said the board can consider using the “found” money, and still issue the COs, and still not raise the I&S rate.

Henderson also noted that as long as it is economically feasible to repay the 2012 series general obligation repayment obligations, the City should do so. If at the time of reimbursement it was not to the advantage of the City, he would not do it.

Regarding the 2020 Series Tax Notes, Henderson noted that they were always intended to be redeemed with a 15-year maturity; hence the early redemption date (February 15).

(Note: The 2020 tax notes for City Hall were due to expire after 10 years, with the call date of Feb. 15. When they were issued, Henderson told the council that the plan was to pay off the tax notes and extend the due date.)

Morton noted that the $3.5 million CO amount in the funding plan came about when City staff saw an opportunity to fund many projects and not raise the I&S tax rate.

Griffin noted that funds for vehicles have gone from about $1.1 million to about $1.9 million (since budget approval) because a Vector truck (about $300,000) “is failed” and that a number of units due for replacement in subsequent years “did not make it”. I will not arrive there “.

She noted that the City’s vehicle fleet is old and the City spends approximately $500,000 a year on maintenance.

Griffin also said the city’s vehicle replacement fund isn’t where it should be because the budget didn’t provide money to replenish that fund for two years after Hurricane Harvey.

“After that (funding plan), we will go back to funding our fleet with cash,” she said.

Councilwoman Andrea Hattman asked if the money issued in the fundraising plan is not spent, will the city be able to fund other things with it?

Morton said the full amount of the plan should be approved for mayor’s office (additional tax notes).

“Even though we can save $1 million through value engineering, we don’t want to be limited to spending just on City Hall. You don’t want to be so specific (about how the money can be spent),” Morton said.

Bond’s lawyer, Tom Spurgeon, of McCall, Parkhurst and Horton, said the refunded tax tickets will not have specific amounts earmarked for City Hall.

“Anything left could be used for streets, drainage, etc.,” he said. “You want the flexibility in the future to spend the remaining funds on more (than specific things).”

Rios noted that the city still has not received FEMA approval for the city hall bid. FEMA requires a minimum of three bids and the City received only two.

(Note: Aransas County is in the same situation with the new courthouse.)

Director of Public Works and Development Services Mike Donoho noted that Teal Construction has the option to maintain its bid price past the 60-day limit or request to rebid.

“We’re lobbying at the state level (for FEMA approval),” he said.

Jackson asked why there was a combination of Tax Notes and COs in the finance plan.

Spurgeon said this because of the way they are issued (i.e. – maturity durations).

Henderson noted that some of the items to be financed through bond issuance, such as vehicles, will have a much shorter maturity date.

Depending on the direction the board takes, the timing of adoption of the financing plan will vary.

Henderson said each of the shows had different timelines.

Brundrett asked if the new money via COs is needed since funds from previous bond issues were discovered.

Henderson said whatever the council decides to do, he would restructure maturities to keep the I&S rate stable and set a call date to ensure the city’s ability to issue additional debt (in the future if necessary).

At its next meeting, the board is expected to review specific projects that can be funded by the financing plan, as well as make a decision on the various repayment mechanisms and new debt.

Patrick Kane said he couldn’t believe the City was offering to take on new debt again and said he had little faith in the City’s ability to plan for our future.

Kristie Rutledge said she requested specific information from the city and was blocked.

“I don’t see anything in the funding plan to tackle infrastructure,” she said. “Back to transparency. Getting rid of Carruth did nothing for transparency.

Rutledge also said the city budget was screwed.

“I’m saying you all have questions that need to be answered,” she said.

She said the city must first take care of its citizens by addressing infrastructure needs, including improving the sewage treatment plant and the natural gas system.

Rutledge also noted that “we” told you the town hall was going to be more expensive than originally anticipated.

Adelaide Marlatt thanked Henderson for the work he has done for the city, but said the most pertinent question was left unanswered.

“What kind of interest rate will we get? ” she asked.

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