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Borrowing questions loom for council



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April 06, 2011 | 08:46 AM
The borrowing and bonding of more than $3 million to pay for capital projects, including a new fire truck, is expected to be on Monday night's City Council agenda.

However, the details of how the borrowing and bonding will occur and whether it will be approved remain in question.

During the past two months, the City Council has approved the intention of borrowing up to $875,000 to buy a new aerial platform fire truck, which will replace the current 1988 ladder vehicle. During previous council meetings, aldermen also approved borrowing about $2.2 million for road repairs and equipment needs for the fire, police and public works departments. That makes the total more than $3 million for capital improvements that must be used during the next three years.

The approval of the fire truck was successful when Mayor Jim Connors broke a 4-4 tie on the issue. Most of the other borrowing plans were approved on a 6-2 vote. In order for the actual borrowing or bonding to occur, a three-quarters majority vote is necessary, meaning six positive votes are required. The meeting Monday also marks the final one for the current council.

On Monday night following the city's Committee of the Whole meeting, Connors and City Administrator Dennis Jordan said the items will be on the agenda. It's just hasn't been determined how, yet.

During the public comments portion of the meeting, resident Terry O'Neill voiced concerns about the legalities of the borrowing for certain items. He cited state statutes dealing with municipal borrowing and bonds. He said the city will be "violating the statutes" with its borrowing.

He asked why the statutes "don't apply" to the city of Lake Geneva. O'Neill also asked why a borrowing referendum was not presented to voters.

According to state statute 67.045, which O'Neill cited, regarding debt issuance conditions, the "governing body of a county may not issue bonds" or "promissory notes" unless "one or more of the following apply." The list includes a referendum, the debt is issued to fund or refund outstanding municipal obligations and that a three-fourths vote on a resolution to issue the debt is required.

But, Connors said after the meeting the statute appears to apply to county government, not city government. He also said the city has not officially borrowed any money.

"We're looking at all that," Connors said. "We are going to make sure we dot our 'i's' and cross our 't's.' We are going to make sure everything is by the book. We haven't borrowed anything yet, so there is not a problem."

According to statute 67.04, "any municipality may borrow money and issue bonds to finance any project undertaken for a public purpose," which is defined as meaning "the performance of any power or duty of the issuing municipality."

In statute 67.05, there is a lengthy list of items in which bonding can be used by a city or a village. It states "no city or village may issue bonds for any purposes other than" and the list includes street improvements and fire protection apparatus among many other items.

Jordan said there may have to be some adjustments made because some items included in the city's total $3.3 million capital projects list can't be bonded for, but the city can borrow straight from a bank for those items. Municipal bonds usually have lower interest rates than borrowing from a bank or financial institution.

He said he will probably have to separate some of the items on the list into those that can be paid for using municipal bonds and those that must be borrowed.

On Tuesday morning, City Clerk Jeremy Reale said the item officially is not on the agenda yet, which is still being put together. But he expects to know soon how city officials will be handling the bonding and borrowing.

"I know they are working on it," Reale said.

City Attorney Dan Draper and Jordan were out of the office Tuesday at the Geneva Ridge Joint Venture vs. city of Lake Geneva mediation hearing. They were unable to comment further on the borrowing and bonding, including whether the fire truck bonding would be a separate approval.

Fire truck questions

The city has until April 15 to sign a contract to pay for the new aerial ladder truck, according to Fire Chief Brent Connelly. The truck the city intended to buy was sold, but one more identical model is available and Connelly said it is being held until next Friday.

"I'm cautiously optimistic," Connelly said about the approval of the bonding for the truck.

But, he said the previous meeting, in which the truck approval was on a 5-4 vote does "concern" him, knowing the bonding requires six council votes.

During previous meetings, Jordan has said that in the late 1990s, the city owed $16 million and today, the city owes $4.3 million. Jordan said the city has planned it so as one of the bond payments ends, another is added, so the amount of payment doesn't change, thus requiring no new tax money to be spent to pay off the debt. Currently, the city pays about $900,000 per year on its debt. An additional $100,000 was added for the anticipated bonding of around $3.2 million for the capital projects during the next three years.

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