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Home My WebLink About1985-0730 SPECIALMinutes of the Special Council Meeting Ashland City Council July 30, 1985 The meeting came to order at 7:05 p.m. on the above date in the Council Chambers of the Civic Center. Present were Mayor Medaris, Councillors Elerath, Bennett, Ack]in and Laws. Reid and Smith were absent. Director of Finance Nelson reviewed the possible savings by issuing advance refunding bonds. He said the process is more complex than issuing simple revenue or general obligation bonds, and are usually issued to take advan- tage of favorable changes in the bond market which have occurred subsequent to the original issue. Nelson said affer a recent review of the City's bonded debt obligations, there is a good chance that savings can be attained by advance refunding of the remaining outstanding bonds from the $1,695,000 Water Bond issue of October ], ]982. He reported that potentially, after deducting all bonding costs, the net savings could approach $70,000 on a present value basis, or $]10,000 in real dollars. Nelson cautioned that there is a strong possibility that as part of Con- gress' deficit reduction program, advance refunding issues after the end of 1985 will either be unlawful, or they might no longer be tax-Free in- vestments. He noted also that interest rates could soar back to the heights they were in ]980. Nelson said he feels the City should vigorously pursue this option while there is still time. Jim Breithaupt and Bob Moore, representatives of the City's financial con- sultants, Moore, Breithaupt & Associates, were introduced. Bob Moore spoke saying the bonds should generate substantial savings in Ashland's debt service. He said net savings during the next 17 years could be from $72,000 and as much as $130,000. He explained that the bond issue is subject to Federal regulations and the State Treasury Department must approve it. He said the new bonds would be issued at a lower rate of interest compared to the 1982 issue, and the difference between the two interest rates would be the source of the savings. Mr. Moore said it is a feasible plan. He said the ]982 bonds cannot be redeemed until October 1992r therefore, the refunding bonds would be in- vested in U.S. Treasury obligations and would meet the scheduled bond pay- ments until 1992. At that time, the outstanding bonds would be paid off. He noted that if the market changes dramatically before the bonds are issued, the City can stop the bond process without cost to the City. Almquist questioned possible conflict of Charter and State guidelines re- garding the amount of bonded indebtedness the City can authorize. Br~ithaupt reported that other cities have done this and have had no prob- lems. On question of yearly savings from E]erath, a brief discussion followed on estimated total/yearly/monthly savings. Special Council Meeting Minutes July 30, 1985 Page 2 Concerning question of City costs, Salter said he has been assured that if there was no sale, there would be no fees other than newspaper advertize- ment costs and some staff time. Moore discussed briefly the rating of the present bonds and possible rat- ing of the new issue when sold. Jack Nicholson, 1575 Greenmeadows Way, spoke from the audience saying con- cerning the sale of Veterans Bonds, the Wall Street Journal indicates interest rates going up. He questioned State criteria in advance refund-- ing bonds and advance ruling on the tax exempt status. Nelson answered by saying that the City's last bond issue marketed at a better rate than State VeLeran Bonds and that the State Treasurer does review. Don Rist, 310 Bridge, asked the status of funds not used for reservoir and remaining from the ]982 bond issue. Nelson reported there was previ- ous approval by the Council to use funds on other water projects. A Resolution authorizing submission of an advance refunding plan to the State Treasury was read. Acklin moved for approval, contingent upon City Attorney determining that a vote of the people is not required; Elerath seconded. On roll call vote, all AYES. Meeting adjourned to study session at 7:50 p.m. Nan E. Franklin City Recorder L. Gordon Medaris Mayor NEF/sa