Hello, Kevin.
Ms. Lawson is not considering the interest on the additional monies above and beyond the $10 M, i.e. the $269,000 for insurance on the bond. This too, will be financed over the term of the loan, so this will be subject to finance charges and is not limited to the lower figures quoted in Ms. Lawson’s response below. If this additional money was not going to also be financed, there would be no reason for having to make the most recent increase from $10 M to the $10.5 M in the principle amount of the bond. Tom Cloud stated himself in the special city council meeting held on July 27th, that the increase in the bond principle amount was due to this fact.
In addition to the 2 options Ms. Lawson is presenting in her email below, there are other options that are not being considered.
The city has not seriously considered taking up the very generous offer from the Polk County officials to take back the Mt. Olive Utility system. This offer has been made by the county and rejected by city officials on more than one occasion, and may still be on the table. This will reduce the city’s required utility improvement expenses there. Not to mention, if this utility asset is returned to the county, the county will likely renegotiate the remaining debt on this purchase, currently financed at 11%, resulting in a much more favorable deal for the city, if the county doesn’t forgive this debt entirely.
The way the city has been operating since the new administration has taken over, there have been claims of reducing operating expenses. This does not appear to be the case when all is said and done, due to the fact that the overall debt of the city increased when the most recent audit came out. Although, several major expenses were cut in police services and administrative headcount, additional expenses incurred from numerous studies, outsourcing, and hiring experts has appeared to not only have canceled out any savings, but has actually increased overall expenses.
In this tough economy, Polk City is not the only municipality to feel the financial pinch. It has forced many small and large municipalities to file for bankruptcy and consider negotiating a solution with county and possibly other local municipality governments to work out the most favorable solution to resolve their debt crisis. This will require officials to swallow their pride, but in the long run is the only reasonable solution. Dissolution of Polk City may be a result of this bankruptcy process, but the future of this area would be much worse off if the debt is increased to the proposed levels of nearly $27 M and property values will continue to plummet at a much faster rate than they are already. Standard & Poor’s rating of the US Federal Government’s debt was recent down-graded to an AA+ rating after raising the debt ceiling this week. This rating has never been decreased below AAA until now. This rate decrease will have unprecedented negative impact on all U.S. debt including municipalities’ bonds, credit card debt, etc. Increasing Polk City’s debt ceiling is not the best solution.
The Cardinal Hill plant situation may be better solved by working together with the county to come up with a short term solution and combine resources to come up with a more cost efficient long term solution. The Polk City tax base is too small to effectively support a full blown water and sewer utility without substantial expenses being passed on to the residents, who are already overburdened.
If the city is willing to allow the county to take back Mt. Olive Utilities, the county may be open to negotiations regarding the outstanding $531,000 for the back impact fees. Based on financial information as of 7/29/2011, the city has an approximate $820,963.21 combined balance in its accounts. This balance does reflect the revenue of recently deposited utility revenues for July. These account balances can be viewed in a report which I have attached.
-------Original Message------- From: Bouffard, Kevin Date: 8/5/2011 4:49:23 PM Subject: FW: Polk City's Answers to Questions about $10.5 M Bond Ms. Shifflett, I am going to write about the exchange below, and I invite you to comment about Pam Lawson’s response or anything else in this exchange or the bond issue. Please respond by 3 p.m. Sunday. Thanks. Regards, Kevin Bouffard The Ledger Office: 863-422-6800 Fax: 863-422-2107 Cell: 863-797-5676 "The job of the newspaper is to comfort the afflicted and afflict the comfortable." -- Finley Peter Dunne, 1876-1936, syndicated columnist under the pen name "Mr. Dooley." From: Pamela Lawson [mailto:Pamela.Lawson@mypolkcity.org] Sent: Thursday, August 04, 2011 4:26 PM To: Bouffard, Kevin Cc: Matt Brock Subject: RE: Polk City's Answers to Questions about $10.5 M Bond Kevin, Here are the facts. Option 1. Existing debt for FY12 forward, no new bond (P&I through life of loan) is $14,749.500.23. Annual debt service payment $820,946.02 for FY 12. Option 2. New bond, at $10,000,000 at 5.25% (estimated at this point because we still do not have exact figures), FY12 debt forward totals $26,334,180.19 (P&I through life of loan). Annual debt service for FY 12 is estimated $894,352.07. It is important to note that the principle was originally estimated to be as low as $9,750,000 at 5.25%, and was increased to the figure of $10,000,000, or more is because of the requirement for bond insurance of approximately $269,000.
Conclusion: Additional debt would have to be incurred and added to option number 1 to fund these required projects if option 2, new bond, was not incurred. Debt total in Option 1 fails to recognize that. Pamela Lawson, Finance Director City of Polk City 123 Broadway Blvd SE Polk City, FL 33868 (863)984-1375 x 246 From: Bouffard, Kevin [mailto:kevin.bouffard@theledger.com] Sent: Thursday, August 04, 2011 3:08 PM To: Pamela Lawson Cc: Matt Brock Subject: FW: Polk City's Answers to Questions about $10.5 M Bond Ms. Lawson, Do you differ from the figures cited in this post, presumably by Lisa Shifflett? I guess the bottom line is whether the bond debt and non-bond debt annual payments add up to $920,528 or to $702,000, as you mentioned in the meeting. **** Adding these 3 remaining annual payments totaling $218,528 to the new $10.5 M bond debt annual payment of roughly $702,000, will bring the annual debt payment to roughly $920,528. According to Pam Lawson and Attorney Tom Cloud in the meeting on July 27th, the current debt payment per year is $821,000. If my calculations are correct, buy adding this new debt to the remaining 3 debt items not being refinanced, the city's annual payment will INCREASE BY $99,528 PER YEAR. The whole reason the city has been trying to push this refinance was to LOWER the annual debt payments to allow the city to "save" money. If the annual payment is that much higher, how is the city saving any money anywhere? Why are they increasing the debt by nearly 3 fold and burdening the current residents and the next generation? They keep blaming the previous administration for the financial mess the city is in, but this one bond move will make the previous debt mess look like child's play. WHAT ARE THEY THINKING?!?!?! ****** Regards, Kevin Bouffard The Ledger Office: 863-422-6800 Fax: 863-422-2107 Cell: 863-797-5676 "The job of the newspaper is to comfort the afflicted and afflict the comfortable." -- Finley Peter Dunne, 1876-1936, syndicated columnist under the pen name "Mr. Dooley." |
I surely hope that Kevin is unbiased on writing this.
ReplyDeleteMike Gilliland