11/19/1996 Meeting Minutes - Laserfiche WebLink

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Council Minutes of 11/19/96 in the past. Typically, we have always sold our bonds at par (face value). That results in an interest rate schedule which has lower rates for the earlier portion of the bond life and higher rates at the end. We restructured that for this bond issue by breaking it down into three sections. The first third was sold at par and the interest rate ranged from 3.7% to 5.05%. The second part, or middle section, was sold at a premium, with the high rate for this group at 6.2%. The third portion was sold at a discount, which meant that we could put a lower interest rate on it and still achieve the same yield that the market wanted. The interest rate on that group was 5.0% to 5.5%, giving us the average rate of 5.49%. Because we put the higher interest rates on a shorter segment of the bond issue in the middle, it reduced our overall interest cost for the issue by approximately $800,000. As was previously stated, the lower interest rate and the selling of the bonds later than had been anticipated resulted in a reduction of the debt service for 1997 by $325,000. 5) With regard to the city's downgraded bond rating, Mr. Burns said that we have taken steps to improve the rating. He quoted Angela Conley from Moody's who did the city's rating, "....the failure of management to address very significant capital needs within budgetary constraints causing a substantial deteriorated financial position. However, I do want to note that action has been taken to restore fiscal stability; and we are looking at management to continue in this vein." Mr. Burns felt this meant that Moody's did not feel the city should have used money that was "in the bank" to front-end or provide the funds needed to do the engineering and architectural drawings for capital projects. However, before a note issue can be done and the specs prepared for a job, the engineering must be completed. The city used the money it had in the bank to do this. In addition, the safety forces were brought up to proper staffing levels. He told Ms. Conley that the purpose of a city is the safety, health and welfare of its citizens. They pay us taxes so that we can provide paramedic, fire and police protection and so that we can provide streets and sewers that work. That is what we did, and we got slapped on the wrist for it. Mr. Burns feels that there was nothing in Ms. Conley's statement that would justify a downgrade of two steps. The report also states, ".... moderate debt levels with minimal future borrowings to come." If they believe the city is at minimum debt levels, again, there is nothing in that statement that says the city should be downgraded two steps. What Moody's report did not address was that the city has put into place dedicated revenue sources that will pay the debt service on better than 60% of this bond issue. Some of these revenue sources are EMS fees, income tax, increased sewer rates and a golf course that is "paying its own way." There is absolutely nothing in the report to justify the downgraded rating. It should also be noted that the status of our audit. was of no concern to anyone today when the bonds were sold. The prospective buyers did not have a problem with the City of North Olmsted and where we are. They thought it was a good issue--people were fighting to buy the paper. 6) In response to an inquiry by Mr. Lind and Mr. Limpert, Mr. Burns stated that the financial statements to Council will be brought up to date probably by December 15. Mr. Lind, Chairperson of the Finance Committee, reported on two committee meetings: 1) The Finance Committee met on October 23 . Present were committee members McKay, Musial, Lind; Council Members Limpert, Nashar, Saringer; Service Director Bohlmann. The following items were discussed: 5 ~,