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
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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?
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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.
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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
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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.
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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....
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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).
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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)
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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
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