City borrows $2.98 million
|After the City Council approved borrowing $.298 million, it is expected to purchase this aerial ladder fire truck that was on display at the Fire Department in March. |
June 15, 2011 | 11:37 AMThe decision has been made — the city will borrow $2.98 million to fund capital projects over the next three years.
After months of discussion about whether to borrow to pay for a new aerial ladder truck, road repairs, public works vehicles and various police items, the council voted 5-3 Monday night to borrow the money at an interest rate of 2.425 percent.
City Administrator Dennis Jordan said the city should receive the money by early July, when it will be placed in a capital improvement fund. During the next three years, the money will be used for items including an $875,000 fire truck, plow vehicles, computers, storm sirens and to repair alleys and streets throughout the city.
In April, city officials talked about hoping for an interest rate of 3.27 percent or lower, but Monday they received good news from Joe Murray, vice president of Springsted, the independent public sector financial advising firm that is handling the bonding process.
Murray said Monday night the city's interest was lower than expected because Moody's Investors Services upgraded the city's bond rating from Aa3 to an Aa2.
According to a two-page document included in the agenda packet, Moody's summarized the rating rationale.
"The assignment of and upgrade to the Aa2 rating reflects the city's moderately-sized tax base with a steady pace of growth, well-managed financial position supported by conservative budget practices, and affordable debt profile."
It also states the city's strengths are "satisfactory reserve levels," the fact that it is a "favorably located tourist destination near three major metropolitan areas" and "lack of reliance on state aid."
"They said growth in fund balance shows a strong financial footing," Murray said. "They applauded you for building that balance."
According to Moody's, "in fiscal year 2010, the city's general fund balance increased to $2.4 million, or 30.4 percent of general fund revenues" and it goes on to state the balance is expected to increase to $2.5 million at the end of this year. Several other numbers were cited as reasons for the upgrade.
But, Alderman Terry O'Neill read a statement during the meeting questioning some of the information the city provided regarding the finances. He said one of the questions asks if there is imminent or pending litigation that might impact the city's finances. O'Neill said the city answered no and that, he said, is "false."
O'Neill cited the $150 million in lawsuits currently pending with the developers of Mirbeau of Geneva Lake and Geneva Ridge Joint Venture.
"If we lose these, the city could go bankrupt," he said.
O'Neill said he feels because of that claim it's "as though they (Moody's) were deceived" and the city's rating is "based on false and misrepresented statements."
"Moody's excellent financial rating of Lake Geneva is based on a false understanding of the city's financial status and if you approve this resolution (borrowing) you are liable for misrepresenting the city's financial status and misleading Moody's," he said.
He also suggested the city has borrowed and cut services to increase its fund balance.
"The city officials did not explain how this general fund facade was accomplished," he said. "It was accomplished by co-mingling and transferring city funds into the general fund, not funding future liabilities and when possible transferring expenses to the TIF district and deferring capital projects."
But, Jordan fought back at O'Neill and said he "resented the assumption" that he would provide misinformation to Moody's and stated "every bit" of what was given was "accurate."
"We may know more than you," Jordan said to O'Neill. "Most of the things you said were erroneous. I don't know where you get your information. I really wish you would come and talk to us."
O'Neill questioned the lawsuit statement again. Jordan responded.
"I don't believe any of these decisions will go over the insurance coverage," Jordan said. "Maybe you should wait until the closed session to find out more."
City Clerk Jeremy Reale said Tuesday, he and Jordan filled out the paperwork that was sent to the bond bidders. There were a number of questions, including the one that asked about imminent or pending litigation. He confirmed what Jordan said, stating that "to the best of our knowledge, we don't anticipate that (litigation) as a cost that would impact the taxpayers."
Following some additional discussion, aldermen Todd Krause, Tom Hartz, Bill Mott, Ellyn Kehoe and Alan Kupsik voted in favor of the bonding. Aldermen Frank Marsala, Arleen Krohn and O'Neill voted against. Both Marsala and Krohn voiced concern about the inclusion of the fire truck borrowing in the total. Both said they did not believe a new fire truck was necessary.
Months ago, city officials talked about municipal bonding. But, some of the projects the city wanted to borrow for did not fall into the statutory requirements for bonding. Promissory notes and bonding have different processes that must be followed, Murray said in April.
Everything on the project list meets the statutory requirements. He also said the note will "wrap around" the city's current debt, which will be paid off in 2015. The city last borrowed money in 2005. That also was a promissory note and was used to refinance some of the city's older debt. In 2003, the city also borrowed by way of a promissory note, Jordan said in April.
The city included $100,000 for the borrowing in its 2011 budget and the larger principal payments won't occur until 2017, after the city's other debt is paid off. Jordan has said during previous meetings this new debt will basically replace the 2005 borrowing as the current debt payments will continue to be the same in future city budgets.