DEBT MANAGEMENT COMMISSION

Transcription

1 DEBT MANAGEMENT COMMISSION CLIFFORD EKLUND JON KARR STEVE GUITAR CHARLIE MYERS ROBERT F. SCHMIDTLEIN PAUL STEVENS LYNNE VOLPI STATE OF NEVADA, ) COUNTY OF ELKO. ) ss. February 25, 2014 The Debt Management Commission met in a regular session on February 25, 2014, at 10:00 a.m., in Suite 102 of the Nannini Building, at 540 Court Street, Elko, Nevada. There were present: Debt Management Member Cliff Eklund Debt Management Member Jon Karr Debt Management Member Steve Guitar Debt Management Member Charlie Myers ABSENT Debt Management Member Robert Schmidtlein Debt Management Member Paul Stevens ABSENT Debt Management Member Lynne Volpi Others Present: Deputy County Clerk Marilyn Tipton Deputy County Clerk Michele Merkley Elko County School District Jeff Zander Elko Police Chief Ben Reed Sherman & Howard Kendra Follett Zions Bank-Public Finance Andrew Artusa Mike Lattin City of Elko Manager Curtis Calder City of Elko Adm. Service Dir. Dawn Stout Nory Greer John Carpenter City of West Wendover Michelle Giovo --- CALL TO ORDER: Chairman Stevens called the meeting to order at 10:11 a.m. PAGE 1

2 Board Member Cliff Eklund had called and he would be arriving late. 10:12:06 AM I. COMMENTS BY THE GENERAL PUBLIC: John Carpenter read his written statement into the record: As I understand the NRS in regard to the function of the Debt Management Commission you cannot reject the City of Elko s request to sell ad valorem bonds. The reason it cannot be rejected is because they are in affect not raising their ad valorem tax rate. However, I have great concern as to the means they are using to not raise their ad valorem rate. At the present time they are using seven cents of ad valorem tax and gas tax monies to pay off the 2010 Idaho Street Project Bond. Their proposal to pay off the Police Facility Bond is to use five cents of the seven cents currently used to pay off the Idaho Street Project and increase the gas tax monies to relieve the amount of ad valorem used to pay off Idaho Street Debt. In affect what they are doing is using the gas tax monies to pay for the Police facilities. The reason they have extra gas tax monies is because the County Commissioners increased the gas tax by 2 ½ cents. During the discussion of the proposal to raise the gas tax the City officials and the Mayor all testified of the great need the City had for increased revenue to go toward street projects. I believe for the City to use this money to pay for a debt to build a Police facility is breaking the commitment to the County Commissioners and most importantly to the citizens who are paying gas taxes and believe it is going to repair our streets. The Police facility does not have to cost as much as the City wants to spend. The site selection I believe to be a huge mistake. The site chosen on Silver Street is going to cost the taxpayers at least $750, and probably closer to One Million. There is a perfect site at the Airport just north of the terminal building. The site already belongs to the City, the infrastructure cost are a great deal less. Why should the taxpayers be required to purchase property when there is already city property available for the Police facility. Other expenses for the Police facility can be trimmed which will make their $3,000, bond proposal unnecessary. I do not want to take up more of your time as the rest of my proposal will be presented at the required public hearing on this bond issue unless a majority of the City Council agrees to reconsider the project and save taxpayers at least $1,500, to $2,000, Thank you for your time and consideration and I would be happy to try to answer any questions. John Carpenter Commissioner Myers stated Mr. Carpenter was correct. He believed in the issue for the Debt Management, this information was not available in the packet, because they were not raising taxes and everything was straight across. Commissioner Myers agreed with Mr. Carpenter that the City of Elko made a commitment to the County Commission that they wanted to raise the gas tax because they did not feel they had sufficient money to do street projects. He stated if in fact what was in Mr. Carpenter s letter was correct, that two and one-half cents that the Commission approved, will not be used on street maintenance and only will PAGE 2

3 be used for Idaho Street. He stated did not know if that was a consideration that this Board could take up at this time. 10:16:48 AM Commissioner member Cliff Eklund arrived. John Carpenter felt that the five cents ad valorem raises over $200,000. He noted that if they go for a twenty year bond that was over $4 million dollars of pot holes that would not get repaired. Kristin McQueary asked if anyone had any comments upon the major agenda item. She advised them to make those comments during the agenda item. She noted public comment was for items to be placed upon future agendas and if they do speak please come to the microphone and state your name for the record. She stated it was difficult for the microphone to pick up sounds from the audience. 10:17:52 AM II. APPROVAL OF MINUTES: Approval of preceding minutes dated August 20, MOTION: Commissioner Myers moved to approve the meeting minutes for August 20, Commissioner Eklund seconded the motion. The motion passed unanimously vote. 10:18:05 AM III. ELECTION OF OFFICERS: Selection of Chairman and Vice-Chairman. MOTION: Commissioner Myers moved to nominate Paul Stevens to remain as the Chairman. Commissioner Eklund seconded the motion. The motion passed unanimously. MOTION: Commissioner Myers moved to nominate Jon Karr as Vice- Chairman. Commissioner Myers noted he and Commissioner Eklund were appointed officials to the Board and the remaining Board members were elected by their districts. Commissioner Eklund seconded the motion. The motion passed unanimously. Commissioner Eklund apologized for being late he had the meeting was scheduled for tomorrow on his calendar. 10:19:29 AM IV. CITY OF ELKO RESOLUTION DMC GENERAL OBLIGATION BOND: Consideration and approval of Resolution DMC concerning the submission to the Elko County Debt Management Commission of a proposal by the City of Elko, Nevada, to issue general obligation (limited tax) public safety bonds PAGE 3

4 (additionally secured by pledged revenues) in the maximum principal amount of $3,000,000; and approving certain details in connection therewith. Commissioner Myers disclosed that his wife was an employee of Nevada State Bank as the Market Manager in Northeastern Nevada. He stated although she does not work directly for Zions they are the subsidiary that owns the bank. He noted that she does not work for the bonding department in any way, shape, or form. He stated that would have no bearing on his vote. Andrew Artusa, Zions Bank Public Finance, stated he was the financial advisor for the City of Elko. He prepared the financial information that was placed before them today in consideration of the proposal for the City of Elko to issue $3 million dollars in general obligation bonds backed by consolidated tax revenues. Andrew Artusa stated on page one of the packet there was a summary of the findings that this Commission has to make in order to consider a proposal and approve a proposal. He noted the first requirement was that the City of Elko prepare a Debt Management Policy and a Capital Improvement Plan and include the project in that plan. He stated the City of Elko has filed both of those documents with the Debt Management Clerk and Department of Taxation. He stated the next finding under the NRS was the statutory debt limit which was based upon a percentage of the assessed value for the City. Andrew Artusa stated the City was nowhere near that outstanding debt limit. He stated on pages four and five were the details of the outstanding debt and how close they were to the limit with the proposed bond. He stated they never want to be at that level; they have $115 million dollars of additional debt they could take on. He stated their existing debt, while it was general obligation debt, was backed by other revenue streams. He noted the sewer bonds were backed by the sewer enterprise fund, the recreation bonds were backed by the room tax, the airport was backed by airport revenues and the street bonds were backed by consolidated tax. Andrew Artusa stated the reason they put the general obligation pledge on a bond issue was because they got the best interest rate in the market so investors have the security of knowing they have a revenue stream behind it and also the tax rate in case that revenue stream falls short. He stated the goal of this Commission was to make sure that those projections on revenue stream were correct so that the general obligation tax rate for all the overlapping entities in Elko County did not get impacted by potential problems with those revenues. Andrew Artusa stated the outstanding debt limit had been satisfied. He stated on page eight they have a sufficiency study that shows that the consolidated tax revenues were sufficient assuming zero percent growth. He stated they were assuming a decline in consolidated tax revenues in 2014 and little growth thereafter. Andrew Artusa stated under Nevada Law they can only pledge 15% of consolidated tax to a bond issue and so that was what they saw in this particular column. Chairman Stevens inquired what the percentage was and if that was the maximum. PAGE 4

5 Andrew Artusa stated fifteen percent and that was the maximum. Chairman Stevens inquired if 15% was for all bonds or just the one bond. Andrew Artusa replied for all bonds that were backed by that revenue stream. He stated there were existing bonds that were backed by consolidated revenues, the 2002 Recreation Bonds and the proposed debt included here. The 20 year bond issue was at 5% interest rate. He stated they put in a higher interest rate because it takes about four to six month to get the bonds issued and they did not know what the interest rates would be at the time that they actually sell. He stated they wanted to keep that rate high enough to have flexibility. Andrew Artusa stated if they were to issues these bonds today the rate would be closer to four percent. He stated even with the higher interest rate, they were still showing coverage. He stated their revenues were almost double of what their debt service would be including their existing debt and the proposed debt. He stated they have attempted to be conservative by the higher interest rate and assumption of no growth in the revenue stream. Andrew Artusa stated because this proposal was not anticipating ever using the general obligation property tax rate, it will not have an effect on other overlapping governments here in Elko County so that would be Elko County, the School District, and the State of Nevada. He stated none of those entities at this time were anticipating having to bring proposals before you that would require them to use the tax rate and this proposal was not using the tax rate. Andrew Artusa stated essentially all of the requirements of this Commission have been met by this proposal. Chairman Stevens stated with regards to consolidated tax, when that tax was collected, did it go to the general fund or was there a special fund. Andrew Artusa stated it was general fund revenue. He stated consolidated tax and the property tax was the two major fund sources for the general fund. He stated that was why under Nevada law you can only pledge 15% of it because you would use that for essential city purposes as well. Chairman Stevens stated on page 8 of the proposal that they showed a decrease of 6.09% growth and they carried down $1,904,730 under the 15% of consolidated tax revenues column. Chairman Stevens stated it showed existing debt service was $745,000, which left a $1.2 million dollars within the 15% of the consolidated tax revenues. Andrew Artusa stated that was correct and this proposal would only use $200,000 to $300,000. Chairman Stevens noted they only want $3 million dollars so he inquired why they did not take a short term note for three years and pay it off. Andrew Artusa stated these bonds will essentially be callable in ten years so they could pay off early if they had additional revenues. He stated the City was trying to fit this particular financing into their revenue stream. He commented the City was pledging to bond holders consolidated tax that was within the cities financial. He PAGE 5

6 stated they want to come within a payment. Andrew Artusa stated they probably will not issue twenty year bonds and issue something shorter. He stated because they were using 5.5% interest rate, as the rate goes down, the term of the bonds would be shortened to fit within their revenue stream and they will also be allowed the ability to pay them off if they have excess revenues. Chairman Stevens stated there was a feeling in the County about bonding and one entity does not bond because they did not want to pay the interest. He wondered why the city did not think of that and inquired if that was discussed. Andrew Artusa stated the project cost was approximately $6.3 million so they would be using cash for a portion of it. He stated what this allows them to do was to get it done more quickly and they don t have a prolonged construction period to lower the cost. He stated they did not have all the money up front so they chose to bond so as not to burden the City s financial situation with a payment that they could not afford in the future. Chairman Stevens stated in their packet that the City stated they anticipate having a $3 million dollar reserve for this project. He inquired if they actually had the $3 million dollars. Andrew Artusa stated they actually had about $3.3 million dollars out of existing funds that they have accumulated over time to put toward the project. Commissioner Eklund stated he was at the City Council meeting when this was being discussed. He stated there was concern regarding the certainty of the debt and if $3 million dollars was sufficient. He noted one councilman stated they did not have the nuts and bolts of the project put together yet. Commissioner Eklund stated there was discussion about fifteen years instead of twenty or thirty years. He inquired if those figures had come together more since the City Council meeting. He stated the comment was made that if it wasn t then they would have to start over again. Andrew Artusa stated from the most recent information he had, the estimate was $6.3 million, and they were confident that was the number they would go with. Andrew Artusa stated if the project came in lower, then they could issue fewer bonds. He stated if the project came in higher; the City would have to come up with additional cash to cover that shortfall. Curtis Calder, Elko City Manager, stated they did provide the City Council with the revised estimate, opinion and probable cost. It was at $6.3 million dollars and that amount not only includes the land acquisition which was $350,000 but also budgets an additional $250,000 for improvements on Silver Street that were not the developer s requirement. He stated they believe through value engineering as they finalize their design, those construction costs would get smaller than bigger. He stated they believe the $3 million dollars was more than sufficient at this point in time. Chairman Stevens stated in the Resolution that was submitted the bonds were PAGE 6

7 to mature not more than 30 years. He inquired if they could do the ten years by that definition. Andrew Artusa stated they could do anything less than 30 years. Under Nevada law, you can go up to 30 years but they were being consistent. He stated they would not go beyond 20 years. He stated they have a payment stream so they could shorten the term accordingly. Commissioner Myers inquired if a 10 year bond was difficult to sell. Andrew Artusa replied no. He stated typically the shorter the term it was easier because investors look to the amount maturing in any given year to be as high as possible. He stated they want the maturities to be as high as $100,000 to attract institutional investors and big firms. He noted the more investors they had, the more lower the interest rate you end up getting. He stated they want to keep the term as short as possible to manage it within their payment stream. Commissioner Myers stated he was at one of the City Council meetings and Curtis had made the statement that at this time the City could not afford a $165,000 payment. He noted they had two options of one that was over $200,000 and one was $300,000 so there was some concern that the shorter term payment would be higher and they did not want to commit that kind of money. Curtis Calder, Elko City Manager, stated when they looked at the 10 year financing which was an interim type bank loan the required payment was $360,000 and the 20 year payment was less which fit into their cash flow, their revenue stream. He stated that was why they were advising the twenty year bond rather than the 10 year bond. Curtis Calder stated as this project was further refined and they know what their costs will be, when the bids come in and if they can bond less than 20 years, they would certainly do that. Commissioner Eklund understood, at that Council Meeting, that they would go out for 20 to 30 years and their intention was to pay that bond off much quicker if possible. Andrew Artusa stated they have put a call feature on the bond issue which allows them to prepay the bond earlier with no penalty. He stated if they have access to revenues they could pay the bond off earlier; they were not committed to a 20 year term. Andrew Artusa believed the combination of the lower interest rate would make it a lower term than what was suggested in the packet. Commissioner Myers stated John Carpenter s comments were right on time. He did not believe, based upon the Debt Management Commission s requirements, John Carpenter s comments play in this Board making a decision. He agreed with Mr. Carpenter s comments because he was at the Commission meeting when the City of Elko asked them to take up the gas tax to be able to improve the maintenance status of the streets in Elko. He was worried, as anyone else, that they may not be able to fulfill that commitment. Commissioner Myers stated the Debt Management Commission could not take that into consideration today. PAGE 7

8 Commissioner Eklund understood the location was not set in stone for that project. Curtis Calder stated the City Council had selected a location but a purchase agreement had not been brought back to the Council for approval. He stated they were still in due diligence status and there were some issues with that property that need to be resolved before they can bring the purchase agreement to the council. He stated once the Council purchases the property that would be the site. Curtis Calder stated the financing could be applied to any site so if there was an alternate site selected this exercise would be applied to the other location. MOTION: Commissioner Karr moved to approve Resolution DMC the proposal by the City of Elko, Nevada, in the maximum principal amount of $3,000,000. Commissioner Guitar seconded the motion. Commissioners Karr, Guitar, Eklund, Myers and Stevens voted aye. Commissioners Schmidtlein and Volpi were absent. The motion passed unanimously. Chairman Myers stated he voted in favor of this because statutory that was what they were required to do because there was no tax increase. He stated even though he was against the bond he had to vote in favor because this was what this Board s charge was. Kristin McQueary inquired if Commissioner Eklund voted. Commissioner Eklund replied yes. 10:38:14 AM: V. COMMISSIONERS AND STAFF COMMENTS: No comments were submitted 10:38:30 AM VI. COMMENTS BY THE GENERAL PUBLIC: No public comments were submitted. 10:38:48 AM VII. ADJOURNMENT: MOTION: Commissioner Myers moved to adjourn the meeting. Commissioner Karr seconded the motion. The motion passed unanimously. There being no other business to come before the Board, the meeting was adjourned at 10:38 a.m. APPROVED ATTEST: MARILYN TIPTON, Deputy Clerk PAGE 8 PAUL STEVENS, Chair