Additional City Debt Camouflaged as Housekeeping?

The second agenda item on Resolution No:2010-07 for the City Council Special Meeting held on October 25th, 2010, at 6:00 PM was very vague.  Some of the wording goes like this, "reimbursement of certain costs related to a spray field."  Was this intentional to keep the public guessing allowing minimal time ahead of the meeting for the public to get their questions prepared to be asked during the meeting?  It sure looks suspicious.

This Resolution was not provided in writing to the public during the meeting.  After the meeting I was able to pull up the Resolution No: 2010-07  on Polk City's web site.  Section 1. of this resolution states, "The portion of the Debt Obligations to be utilized for such reimbursement is not expected to exceed $275,000 aggregate principal amount."  This statement in itself is ambiguous and does not clearly define any limit to the General Fund reimbursement.  In addition, one would think that the definition of REIMBURSEMENT only qualifies unless the city transfers money from the Sewer Fund to repay the General Fund, for this Sewer Fund expenditure.  Why is it necessary to re-borrow the $348,000 already paid to the county at ANY interest rate?  Unless, the city is so financially unstable to even have made this payment in the first place.

By the wording in this Resolution it creates somewhat of a "line of credit" situation to transfer any amount, at any time, to the General Fund as the money is needed from the total amount borrowed.  A true line of credit does not charge interest until the money is actually taken out and used. In this situation, the total amount of the loan is being charged interest from day one, unlike a true "line of credit."  By this YES vote on Monday night, the council granted permission to the City Manager to seek financing for a loan of an undetermined amount, possibly millions of dollars, and only attempts to indicate the purpose for a small portion of the total amount of the loan.  By mentioning the $275,000, this creates somewhat of a distraction to what the actual total amount of the loan will truly be.  This sounds like a misleading creative spin of deception contributed by Mr. Tom Cloud at a rate of $200 per hour.  The ONLY thing that is CRYSTAL CLEAR is that the city is in deep financial distress and is looking to add to the existing $10.4 Million debt.

During discussions even the hint of the use of the word, "LOAN," was treated as if it was a dirty word. The preferred word was, "HOUSEKEEPING."  The theory behind this logic was that if the $1 Million debt to the county on the Mt. Olive Utility system, which currently has terms of 10 years at 11%, was able to be refinanced through another lender for a longer 20 year term at a lower rate, possibly 4%, then the city could pay off the loan to the county and save some money on interest, as well as lower the payments to make the debt easier to swallow.  At face value, this statement is correct.  But what is ACTUALLY being requested is not as simple as comparing apples to apples like in this scenerio Ms. Block is trying to lead the public and council to believe.  If they are attempting to borrow more money than is needed for this loan on the Mt. Olive Spray Field just because, "it is such a great deal," this would off-set any possible savings to the city on the loan.  Is this a way to put a positive spin on increasing the city debt?  This greed and borrowing more than what is needed, and what can be backed up with collateral, is what caused the downfall of the housing market and the current foreclosure crisis.  The city is heading in the same direction by considering this loan.

No specifics were ever really nailed down of how this money was to be spent, nor was there a set amount that was being requested as the discussions went round and round among the Council members.  Councilman Kimsey looked to the Interim City Attorney, Mr. Tom Cloud, for clarification on the issue.  Mr. Cloud's reply was basicialy that this is typical procedure and it has been done in other cities he has represented.  Just because Mr. Cloud stated this was done in other cities, doesn't make it ethically correct or financially sound.  Additional funds for day-to-day operations and future unapproved projects should not be included in this new loan.  Because "it is such a great deal' Ms. Block was implying the city should borrow additional money for other expenses that might come up in the near future, such as additional land and work needed to expand the TEMPORARY Cardinal Hill WWT Plant.  Could it be possible they were also considering covering the $531,000 due to the county for the back impact fees while they were at it, although this figure conveniently did not come up in the discussion between council members.

Looking at this possible new loan amount, the figure they are looking at is closer to $1.5 or $2 Million dollars!!  HOW IS THIS SAVING THE CITY MONEY??  How can this possibly help the city except by masking the true financial state of affairs if the state eventually does step in and force the city to open up its books.  It will appear that there is more operating capital in the accounts than what should truly be there, giving the false impression that everything with the city's finances are hunky dory!!  In actuality, the money there is all borrowed money!!  Before the public was allowed to ask any questions on the issue, it went to a vote and was approved.  Surprise, surprise!

Why was there no mention of this VERY IMPORTANT MEETING by the biased reporting done by the Ledger Reporter, Mr. Kevin Bouffard?  Could it be that City Officials did not want this to be disclosed to the public who did not attend the meeting, or County Officials?  Or, was this issue too confusing to Mr. Bouffard where he did not even feel comfortable writing an article on it?