04/19/2005 Meeting Minutes - Laserfiche WebLink

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Council Minutes of 4/19/2005 Don Pangrac, 23470 Sharon Drive, asked if the city was borrowing $6.5 million. Finance Director said it was $3.3 million of new money. Mr. Pangrac asked what the interest rate would be, how long would the borrowing be for, what is the total cost to the city for the borrowing, what has to be done to get us out of the borrow-spend payback cycle. Finance Director said we just sold our renewal notes that we paid down. We had 3.03% on most of the notes and 3.23% on one series. That is the short-term rate. It is a one-year term, they are bond anticipation notes. She has been attempting to pay down an amount equal to the average useful life of that series of notes so that the principal amount is getting reduced every year. When they go out to bonds, we will know the true cost because long- term rates are different than short-term rates. It depends on the timing of the market. Right now, the long-term rates are relatively good, but the short-term rates are rising quickly. To get out of the borrow-spend cycle, we need additional revenue sources to help earmark monies for streets and capital improvements. Some municipalities years ago wisely started capital improvement replacement funds. For example, when they bought a fire truck, they decided what the cost was going to be in 10 years for replacement, and they funded the depreciation every year and put monies into the funds. In that way, the money is there years down the road when the new fire truck is needed. With streets, we get monies on the gas tax, etc. A portion of that does go for street repair material and some of it pays for the wages for road maintenance. If we could get those funds back into the General Fund, then we would have over a million dollars a year to pay for streets. The permanent improvements street and storm levy, which is 15% of the municipal income tax, was earmarked to pay for street and storm improvements. However, all of that was pledged in 1996. All of the monies going into it, until maybe a year and a half ago, barely covered, and some year didn't cover, the amount of debt for the payment of principal and interest on those. Finally, the income tax is growing enough that there is a little more in there that could start to be utilized to do street repair programs rather than borrowing. It is probably on a hundred thousand dollars a year. There are a lot of projects with the county far next year, and we are looking at those funds to help us pay our contribution rather than borrowing. Mr. Pangrac asked how much the city is paying in interest on the borrowing we have. Mrs. Copfer said she did have the exact number in front of her, but it is a very sizable portion. Mr. Pangrac said, if we didn't have the borrowing, we could have all the money we are paying out in interest we could use for capital projects. He makes a recommendation that the city take that money and put it away and not use it and let the interest on it help pay the interest on the borrowing we have to get out of this borrow-spend payback cycle. Councilman Gareau said Council has talked about changing the way we do streets. We have tried to do concrete in three different ways. A lot of the debt has to do with street repair. The slab repair program was not as successful as we had hoped. But if we do not borrow to fix the streets, they only get worse. These borrowings were done a long time ago. The cost of government goes up every year. The money from the sale of the library is in a fund earmarked for future capital improvement that type of thinking is out there. The options of raising taxes, assessing residents to fix streets or adjusting the tax credit are not options that anybody would be in favor of. So the city has had to borrow funds. Mr. Pangrac said Ohio is one of the top five taxed states and it makes it unappealing to live in this state. Mayor O'Grady said Mr. Pangrac's comments are well taken. If we could get rid of that debt, we could take the money we are paying on the debt and apply into the roads and 11