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HomeMy Public PortalAbout2011_tcwsmin0711Council Work Session July 11, 2011 Council Chambers, 25 West Market Street, 7:30 p.m. Mayor Kristen Umstattd presiding. Council Members Present: David S. Butler, Thomas S. Dunn, II, Katie Sheldon Hammler, Ken Reid, and Mayor Kristen Umstattd. Council Members Absent: Vice Mayor Wright, Council Member Martinez. Council Member Dunn arrived at 7:37 p.m. Staff Present: Town Manager John Wells, Town Attorney Jeanette Irby, Director of Engineering and Public Works Tom Mason, Director of Plan Review Bill Ackman, Director of Finance Norm Butts, Economic Development Manager Marantha Edwards, Deputy Director of Capital Projects Renee Lafollette, Capital Projects Project Manager Tom Brandon, and Clerk of Council Lee Ann Green AGENDA ITEMS 1. Work Session Items for Discussion a. Bond Sale Resolution Norm Butts: Tomorrow evening, you will be asked to hold a public hearing and take action on the bond resolution authorizing the sale of bonds to complete the capital improvements program that you adopted with the budget in March. This will be the final process, if you will, in a rather lengthy and comprehensive discussion with Council starting back in, I believe, it was October where we talked about... had David Rose in from Davenport, and we talked about issues related to the Utility Fund and some of the suggestions made at that time to restructure some of the debt in the utility fund along with some new money. In February, in conjunction with our discussion... the beginning of the discussion on the operating budget, Davenport came back in to talk about the general fund and some of the issues that face there with respect to sustainability over a multi -year period with the general fund and as a result of action you took with the adoption of the budget, not only the operating budget, but the CIP, we did certain things such as reduce staff to program in some savings in the base of the operating budget and the second part was the consideration of a bond issue that would not only bring in some new money for continuation of the CIP projects but also to refund and restructure some debt to give us some breathing room as we go forward. Primarily, because I think we all know that the downturn in the economy has been more prolonged than we had hoped and this will give us some opportunity to stretch out some of our debt service payments while at the same time not lengthening the term of the bonds, but giving us some breathing room. You have also indicated a willingness, as Council to the extent that you could to consider some increases in the real estate tax rate in the out years starting in, I think it was, 2015 -2016 and 2017. Rather than to program those rates in at the present time during the downturn. I think everyone felt it would be better to take a long term look at our financial picture. We did that and so we are here this evening to look at issues related to the bond resolution and I 1 1 i a g e Council Work Session July 11, 2011 thought that I would... in reading my memorandum to you that is included in your packet, I thought it might be easier as we went through this if we could kind of summarize what it is we are doing. First of all, there is a mistake in the memorandum. I apologize for that. It says $67.6 million but the CIP actually was $63.6, so it's actually four million in our favor and it's correct on the handout I just gave you but in the memorandum, it was incorrect. So, what we are looking at with respect to the bond issue, we are starting on line 1, we are looking at $63.6 in the six year capital improvements program, roughly $50.5 million in the general purpose area... general fund area and $13.1 million in the utilities fund. Now, all that we had indicated at the time you adopted the CIP that we would need bonds of about $16.8 million on the general fund side that's about 33 about a third of the total cost of those CIP projects being paid for by bonds. In the utility fund, of the $13.1 million, about 7.2 million in bond funds, maintaining our 55/45 split in bonds and cash. For total bonds needed of the $63.6 million CIP, total bonds needed of just over $24 million. We decided it would be appropriate to break the bonds needed into two phases, two parts. This current issue, we are asking for a total of somewhere around $13.3 to $13.8 million in new money, $8.8 million in general fund and roughly $4.4 in the utilities fund. The reason these numbers don't add up nicely because you have cost of issuance issues in there and perhaps some premium or discounting. It is difficult at this point, before a bond sale to know exactly what it is going to be, so you are asked to authorize up to $13.8 million in new money. We believe we will only need $13.2 million for the projects. Obviously, we won't issue bonds beyond what we need to take care of not only the projects, but the cost of issuance. The remaining, we figure an 18 -24 months, maybe longer... we come back with the residual on that, which will be about $10.8 million. At the same time, we are asking for $13.8 million in new money, we are also suggesting that we restructure approximately $17.8 million of previously issued bonds in both the general fund and the utilities fund. Some of those will be refunded because of interest rate movements. Others will be refunded to give us some breathing room with... not only on the utilities side, but the general fund side as well. The bond resolution that you have before you for action tomorrow evening is a standard bond issue. I think everyone at the table here has seen it at least twice, maybe more. No surprises there. The only thing is this will be a bond issue that will be a negotiated sale, as opposed to a really competitive sale. The reason for that is we are refunding and restructuring some bonds and that doesn't lend itself to a straight competitive sale. With that, I will be happy to answer any questions you might have. Reid: Does this emanate from our discussion in 2009, when we were talking about lower cost of interest and where we had to get in on some things because of the nature of the markets? 2IPage Council Work Session July 11, 2011 Butts: Well, in 2009, the last bond issue we did...we did some Build America bonds, if you recall that. Some bank qualified bonds.. the market is still very favorable. Interest rates are still... Reid: So what we are doing mostly is refinancing? Butts: Well, of the roughly $30 million dollars, $13 million is roughly new money and $17 -18 million in refunding /restructuring. So, the majority of the bonds will be for refunding and restructuring. Reid: So, how much money will we be saving either on interest or whatever in the utility fund versus the general fund? Butts: Obviously, it's difficult to tell at this point because we haven't issued the bonds, but I am not sure that savings in interest per se is what we are looking for. Restructuring... what we are doing is moving some debt out and we are reducing our debt service costs in the first three or four years of the six year plan and then gradually ramping it up in 2017. Reid: The thing I am really interested in is saving in the utility fund. I would love to know.... Wells: We can go back to the pro formas that we did for both the general fund and the utility fund. Essentially this program that we have laid out implements what the Council has authorized as part of your long term fiscal strategy, so there is really no news tonight. We are not doing anything different than what the Council has already seen and talked about. We have factored in the projected savings and I say projected, at this point, into both your tax rate and your overall numbers on your utility fund. I can go back and give you what... Reid: But I think we learned during the URAC discussion... what percentage, Dave... I don't want to put you on the spot, Dave, but what percentage of the utility bill is for paying debt? Do you remember what that was? Butler: I don't know, but it has been... no, I don't remember. Reid: The general fund, I am cool with. It's the utility fund. I would like to see what kind of savings we are looking at. I think that would be important to know. That's all. Wells: We can have that. Again, just to note that the refinancing were part of the plan as part of the adoption of the budget. So, the savings... I don't want anybody to think that there are additional savings beyond what is programmed. 31Page Council Work Session issues. Wells: The six million.... July 11, 2011 Reid: But the utility fund... this six or seven million dollars. Is this for new projects? Or is this mostly refi? Reid: Well, it's seven million actually. The new issues... the two Wells: You have capital projects, Norm will get the exact numbers for you in a moment. Wells: I am talking about the utility fund now. While we are waiting, I have an interesting statistic that I got from the Dulles Greenway the other day. Seventy percent of your tolls are to pay off debt. Seventy percent of what people are paying on the Greenway right now is to pay off basically junk bond rated debt. They were downgraded. That's quite exorbitant. I'm sure that's not our case in Leesburg for our utility fund, but... Butts: For the utility fund over the six year period of the CIP, we were looking at $13.3 million in projects and of that amount, we would be borrowing 7.2 million of the 13, that's roughly 55 We have had a goal over the years of trying to... with utility projects, use 45% of our cash balance for the project and 55% bonds for a project. So, of 13.1 million that we need for the six year period for utilities, 7.2 million is with bonds. Reid: Okay, but is that refinanced bonds? Does that get a lower rate or restructured? Butts: I don't know the percentage off the top of my head. Reid: I'd kind of be interested in that, John. If we can get that tomorrow? Yeah, I mean general fund, I mean if you want to provide that for the general fund... you know, but the utility fund is what concerns me so thanks a lot. Hammler: Well, it would be great to start with some good news and just a quick review of the bond rating team... given it ties into this. Wells: We don't have our ratings back yet. We are hoping to get those, literally any day. The deadline we have worked on with the rating agencies would be Thursday... I believe the 14 is when we had asked for a final rating. We may get....(missing audio due to electrical storm) Hammler: Can I jump in, we had talked about what I think is the real important point, but knowing that you all wanted these meetings for me as a 41Page Council Work Session July 11, 2011 Council Member was extraordinarily important. Certainly, if you look at the private sector, it is critical. Madam Mayor, you have a rock solid background where you went to school. All those things make a difference. Wells: One of the things we have talked about doing to bring everybody up to speed after we get past the ratings and the sale and probably the next couple of council meetings, Norm and I have talked about actually suggesting part of a work session where we go through the rating package in detail and give everybody the benefit of the detail without actually taking the tour that we went on, again, in a more abbreviated way so it doesn't take your entire day. I think everybody would benefit from hearing that same message and we would certainly make accommodation for that as your schedules permit, but I think its valuable for all understanding that same message. Dunn: Just one quick thing, when you said new money, it's not really new money (inaudible). Wells: that's correct. It's part of your now adopted budget for this fiscal year and your CIP. Yes. Butts: When we are talking about new money, we are essentially talking about the difference between refunding, which is not new money and new money for ongoing projects that have been previously approved. Wells: There is nothing new on these pages that hasn't been approved by Council, so not new in that sense. b. Creation of a Board of Advisors for the Mason Enterprise Center Wells: Just a quick note, we didn't have an opportunity to go into a whole lot of detail when the memorandum of agreement with the county was before you, but embedded within that was a governing structure, if you will, for the Mason Enterprise Center and there are some positions and appointments that need to be established, appointments that need to be made and tonight's plan was to lay that out for you. There does not need to be any vote on appointments tomorrow evening. What we would look for would be to establish the structure, which has been laid out, been reviewed by the EDC and then appointments would come at your next... potentially at your following meetings. Marantha Edwards: The only thing I would add to that is the EDC meets this week. Normally, they meet the first Wednesday of the month, but they are actually meeting this Wednesday evening and it is on their agenda to discuss making a recommendation to bring to you call July 25t Hammler: Okay, so they are going to bring us their recommendations. 5I Pd Council Work Session Reid: (inaudible). July 11, 2011 Edwards: That they will take forward to the Board of Supervisors. Wells: So this is kind of a... we are not breaking exactly any new ground this evening. This is really implementation steps... whether it is the budget or now the Mason Enterprise Center, we are still on schedule for a September 1 opening and these are now the mechanical steps to get us to a governing structure, appointments and ready to open. Edwards: And the next steps certainly involve the regional service director for actually run the center. Mayor: Mason will be selecting that individual? Edwards: Yes. Mayor: And that's Keith's decision? Edwards: Yes. Reid: But we have to name two? Edwards: The EDC will be making recommendations at your second July meeting. Reid: John Bischoff suggested to me verbally that they are going to have an application process. Wells: One thing I might want to note is there could be more people with interest than initial appointments that the Council and the Board can make. There are, I think it is, two seats... Marantha, that the Board of Advisors themselves can fill. So if there are some folks... maybe if we end up with more really good candidates than spots at the Council level, there are still opportunities for the Board of Advisors in total to pick, I think it's two spots. Edwards: There are two from the chamber and two at large. Reid: These two folks that the County EDC appointed, they are not members of the county EDC already, are they? I think we should go ahead as well because I am concerned about this (inaudible) business. Edwards: (Inaudible). Reid: If John is interested, we should at least put it out to the community first to see if there are any folks who are interested before.... 61 Pa Council Work Session July 11, 2011 Wells: We haven't advertised wanting to get recommendations first. If that is the direction that Council would like. Hammier: (Inaudible). Wells: I think they were initially looking to have the appointments from the EDC itself. Edwards: That was what they were anticipating. Wells: If you all would like to send them a message in a different direction, we can certainly do that. Hammler: I think that's a great idea considering (inaudible). Wells: The MOU or the MOA did define initially the two spots from the Council as being EDC representatives, so we would need to go back and amend. Hammler: Just an important point for me is even if (inaudible). Thank you Ken for substituting for me at the last meeting. I will (inaudible).... so we need to have a woman entrepreneur represented as well. I would like to recommend Debbie Newberg whether she is an at large because she lives in Purcellville. She was a business owner of (inaudible) which is based in Leesburg which has been sold because she has been so successful. To me, it's important to have women...(inaudible). Reid: That's a very good idea, Katie. Hammler: (inaudible) she lives in Purcellville but she has owned A- Tek here, but she sold it. She can be an at -large member. Reid: Well, John apparently was involved with starting an internet incubator back in the late 90s. Edwards: John (inaudible). Reid: Yeah, there was apparently AOL and Worldcomm at the time were apparently putting money into an internet incubator in Loudoun County and then Worldcomm went into it's woes and that was the end of it. I don't know if we should be directing from the top down as to who the EDC wants....he told me (inaudible), but he hasn't applied or anything, so I don't want to Butler: (Inaudible). 711'ag Council Work Session July 11, 2011 Mayor: You might want to mention items that came up for discussion tonight including Katie's proposal, which I think is an excellent one and Ken is very... (remainder of meeting tape unavailable due to electrical storm). 2. Additions to Future Council Meetings 3. Closed Session On a motion by Mayor Umstattd, seconded by Council Member Reid, the following was moved: Pursuant to Section 2.2- 3711(A) (3) and (7) of the Code of Virginia, I move that the Leesburg Town Council convene in a closed meeting for the purpose of receiving information and discussion regarding: (a) Oaklawn (b) Linden Hill (c) Leegate The motion was approved by the following vote: Aye: Butler, Dunn, Hammler, Reid, and Mayor Umstattd Nay: None Vote: 5 -0 -2 (Martinez /Wright absent) The Council convened in Closed Session at 8:30 p.m. The Council reconvened in Open Session at 9:15 p.m. On a motion by Mayor Umstattd, seconded by Council Member Reid, the following was moved: In accordance with Section 2.2 -3712 of the Code of Virginia, I move that Council certify that to the best of each member's knowledge, only public business matters lawfully exempted from open meeting requirements under the Virginia Freedom of Information Act and such public business matters as were identified in the motion by which the closed meeting was convened were heard, discussed or considered in the meeting by Council. The motion was approved by the following vote: Aye: Butler, Dunn, Hammler, Reid, and Mayor Umstattd Nay: None Vote: 5 -0 -2 (Martinez /Wright absent) 81P age Council Work Session 4. Adjournment On the motion of Council Member seconded by Council Member the meeting was adjourned at 9:15 p.m. Clerk of Co 2011 tcwsmin0711 July 11, 2011 91Page