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City Council Meeting Minutes

November 30, 2011

 

CALL TO ORDER:  City Council continued its November 22, 2011 meeting on November 30, 2011 at 4:38 p.m. in Council Chambers, 1 Marketway West, 3rd Floor, York, PA, to consider adoption of Bill No.'s 39 and 40 regarding bond issues, with the following Council members present: Renee S. Nelson, Henry Hay Nixon, Toni Smith, Carol Hill-Evans, Vice President, and Genevieve H. Ray, President, with President Ray presiding. 
 
Members of the Administration in attendance included: Michael O’Rourke, Business Administrator.
 
Also present: Brad Remig, Public Financial Management, Attorney Steve Hovis, Bond Counsel, Stock & Leader, and Greg Brunner, representing M&T Bank, underwriter.
 
Members of York City Council staff in attendance included:  Dianna L. Thompson, City Clerk.
 
PRESENTATIONS
 
Brad Remig, Managing Director, Public Financial Management, explained that these bonds cover two issues: (1) Interim financing in the amount of $5,000,000 associated with the old City Hall renovation project; and (2) a $12,395,000 and a $2,420,000 bond for refinancing purposes and to fund projects association with the new City Hall (101 S. George St.), the community centers project, NWT acquisition and sewer line projects, Sewer Authority (Poor House Run) project, and the Guaranteed Energy Savings Project. He then outlined each project to be funded as listed below. He said the ice arena, parking system acquisition, and Market St. 2-way projects have been removed per the request of Council. Mr. Remig explained that the insurer has not offered a policy, which means no credit enhancement. Therefore, we will do a stand-alone issue. As such, the interest rate and commission has increased.
 
Projects to be funded:
Project 1: New City Hall (101 S. George St.)
Project 2: Improvements to New City Hall moving (101 S. George St.)
Project 3: Improvements to City Hall (Funded by Interim Financing)
Project 4: Community Centers
Project 5: Sewer Authority Project (Poor House Run)
Project 6: Northwest Triangle Final Acquisition
Project 7: Northwest Triangle Sewer Line
Project 8: City of York General Authority (Fulton Bank Loan to buy back parking system & Payoff Peoples Bank) (Removed)
Project 9: Market Street Two-Way (Removed)
Project 10: Guaranteed Energy Savings Program
Project 11: York City Ice Arena (Refinancing) (Removed)
 
Vice President Hill-Evans asked if we added projects, thereby increasing the borrowing, would that change the insurance situation. Mr. Remig said it would not. Vice President Hill-Evans said this means we will have to try to sell these bonds with no insurance. Mr. Remig said that is correct. He further stated that M&T Securities will do their best to sell these bonds and they have presented a bond interest proposal. He said the bond amount for projects 1-7 and 10 is $13,465,000. However, Mr. Remig went on to say, they decided to revise the maximum parameters schedule interest rate to 10% for DCED purposes. The main reason for that he said is 3-fold: (1) there is possibly a taxable component of the deal related to the energy savings project (in which the City would receive a sizable tax credit subsidy) and we could run into a potential buyer that may want a "higher" coupon on their investment and pay a premium price for it, so we want to preserve flexibility to appeal to a larger investor base, (2) this rate is for DCED purposes only, and since we are on a tight time-frame, we want to make sure we don't set forth any parameters that could trip DCED approvals, and (3) to be consistent with the max rate in the Fulton interim financing loan to be repaid with RACP grant money.
 
Councilwoman Nelson asked if we needed to make a decision tonight. Mr. Remig said the going interest rate for a credit rating of BBB negative with a negative outlook is at 7.5%. So if we were to stagnate this issue, we couldn't promise what the market will offer down the road.
 
Attorney Hovis added that this needs to be resolved by the end of the year to meet DCED's requirements so a decision needs to be made as soon as possible on how to proceed with financing.
 
Mr. Remig added that we hope to close between Christmas and New Year's Eve on these bonds.
 
Attorney Hovis said the Guaranteed Energy Savings (GESA) project is basically the only project being added to the mix.
 
Business Administrator O'Rourke said he has been in touch with Johnson Controls about the GESA project to see if there were other options to pursue. The current project will upgrade our facilities to help conserve energy, which will in turn save money. He noted that Johnson Controls still must guarantee the savings they offered, which should help cover the costs of the borrowing.
 
President Ray asked if a taxable bond is the better option. Mr. Remig said it is and briefly explained the difference between a taxable and non-taxable bond. He said that taxable bonds are preferred but it's hard to determine at this point because we have not yet released a disclosure. He assured Council that they are working to make this better.
 
Councilwoman Nelson said she feels everything has changed and she's uncomfortable with her decision. She said she would have reconsidered some of her original recommendations in light of recent findings that the city cannot implement the streetlight fee. (In an email dated November 29, 2011, Administrator O'Rourke reported that the Solicitors Office opined that we are not authorized to initiate a street light fee. That means we have $625,000 of street light electricity that is not funded in the proposed Budget.)
 
President Ray said she continues to support the recommendations Council made but feels they are up against the wall at this point.
 
Councilwoman Smith asked where the proposed tax increase now stands.
 
Administrator O'Rourke replied that with the $625,000 streetlight fee shortfall, $800,000 budgeted as debt service assistance from the Parking System, and the fact that we are not refinancing the Ice Arena and will need approximately an additional $430,000 for Ice Arena debt service, the total amount that we are potentially short right now is $1,855,000. He said to raise this through taxes would require 2 mills in addition to the currently proposed tax increase.
 
Discussion ensued on putting the ice arena back into the bond but Council felt the borrowing versus savings wasn't significant and declined to consider the option.
 
Attorney Hovis outlined the changes made to Bill No.'s 39 and 40 which have pretty much been discussed but basically changes the bond amount, incorporates M&T Bank as the underwriter, removes projects previously noted, increased parameters, disclosure mechanisms and insurance options. He briefly touched on the provisions of the bond and said he would continue to work with Administrator O'Rourke on the disclosure and other issues. Mr. Hovis promised to keep the city abreast of all dealings.
 
President Ray asked what will happen if no one buys the bonds. Mr. Remig responded that they are confident that the bonds will be sold. He said there is an arena of investors willing to buy BBB rated bonds and there is a market for these bonds.
 
Mr. Brunner said M&T appreciates the opportunity to offer this service to the City of York and they see an interest in the market. He stated that they will look at the taxable option and will do their best to make this work in the best interest of the city.
 
Michael Helfrich, resident, agreed with Councilwoman Nelson that the numbers have changed. He provided Council with his calculations and feels we will be adding 50% more debt. He did say he supports Council's decision to cut the projects that were cut.
 
Franklin Williams, resident, said he feels we may or may not save on the GESA project. Administrator O'Rourke responded that no matter what, we will save money through energy conservation but it may not be what we originally projected to cover the initial expense.
 
There being no further discussion, Council moved to consider adoption of Bill No.'s 39 and 40.
 
FINAL PASSAGE OF BILLS
 
Final Passage of Bill No. 39, Ordinance No. 38, Session 2011, (View) A Bill authorizing the incurrence of non-electoral debt by the issuance of a General Obligation Bond, Series A of 2011, in the principal amount not to exceed $5,000,000 for the purpose of financing (1) various capital projects of the city, (2) the current refunding of the city's General Obligation Note, Series B of 2010, and (3) paying all costs and expenses of issuance of the Series A bond, which was introduced at Council's November 15, 2011 meeting, with a Special Meeting held on November 22, 2011, came up for final passage. On motion of Nixon, seconded by Nelson, Bill No. 39, Ordinance No. 38, as amended, passed by the following vote: Yeas – Nelson, Hill-Evans, Nixon, Smith, Ray – 5; Nays – 0.
 
Final Passage of Bill No. 40, Ordinance No. 39, Session 2011, (View) A Bill authorizing the incurrence of non-electoral debt by the issuance of: (A) General Obligation Bonds, Series of 2011, in an aggregate principal amount not to exceed $12,395,000 for the purpose of (1) financing various capital projects of the city, (2) currently refunding the city's General Obligation Note, Series A of 2012, and (3) paying costs and expenses of issuance of the 2011 bonds and a portion of the costs and expenses of issuance of the Series B bonds; and (B) General Obligation Bonds, Series B of 2011, in an aggregate principal amount not to exceed $2,420,000 for the purpose of (1) financing various capital projects of the city; and (2) paying a portion of the costs and expenses of issuance of the 2011 B Bonds, which was introduced at Council's November 15, 2011 meeting, with a Special Meeting held on November 22, 2011, came up for final passage. On motion of Nixon, seconded by Hill-Evans, Bill No. 40, Ordinance No. 39, as amended, passed by the following vote: Yeas – Nelson, Hill-Evans, Nixon, Smith, Ray – 5; Nays – 0.
 

ADJOURNMENT: There being no further discussion, the November 30, 2011 continuation meeting (continued from November 22, 2011) adjourned at 5:53 p.m.