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HomeMy WebLinkAbout1993-03-09 MinutesMINUTES OF A MEETING OF THE CITY COUNCIL A special meeting of the Fayetteville City Council was held on Tuesday, March 9, 1993, at 5:00 p.m. in the Room 326 of the City Administration Building, 113 W. Mountain, Fayetteville, Arkansas. PRESENT: Mayor Fred Hanna; Aldermen Fred Vorsanger, Len Edens, Joan Chapman, Heather Daniel, Stephen Miller, Kit Williams, Conrad Odom, and Woody Bassett; City Attorney Jerry Rose; City Clerk Sherry Thomas; City Treasurer Glyndon Bunton; Administrative Services Director Ben Mayes; Public Works Director Kevin Crosson; Planning Management Director Alett Little; members of Staff, press, and audience. CALL TO ORDER Mayor Hanna called the meeting to order with eight aldermen present. SALES.. TAX Mayor Hanna stated the purpose of this meeting is to discuss the Arkansas. Supreme Court's decision not to rehear the sales tax lawsuit. City Attorney Jerry Rose has drafted two ordinances for the Council's consideration. City Attorney Rose stated the first ordinance sets forth and provides for the levy of a 1% sales tax. It is a standard ordinance calling for the imposition of the tax. The second ordinance calls for a special election and directs the Washington County Election Commission to perform the necessary functions for an April 27, 1993 election. The ballot willm-be comprised of two questions --for and against adopting a 1% sales tax to expire on June 30, 2003. The ordinances are as noncontroversial as possible. They track the state recommended ordinances as set forth by the Municipal League. They also track the Springdale ordinances they used with their recent tax election. If these ordinances are declared to be illegal, virtually every city in the state of Arkansas will be having problems. Rose stated he did not recommend the Council making any changes in these ordinances. • Mayor Hanna stated the Council passed a resolution about a month ago stating they would be bringing forth to the citizens the continuation of the sales tax question.; He7stressed that this is not a new tax, rather will be a re -vote on an existing tax. The original tax was voted 'for in 1982 and 're -voted for in 1988. The 1988 ballot is what got the City into trouble when it stated some of the money would be designated for the schools. Mayor Hanna stated the City will not be able to give money to the schools, and the 3.8 mills the City currently collects from property tax amounts to about $1,050,000. He plans to ask the Council to approve rescinding the millage if'the."sales tax passes. This would enable the schools to hold an election and ask the citizens to rededicate March 9, 1993 the millage to the schools to complete the construction projects the voters approved in 1988. Mayor Hanna stated this will have to be left up to the school board. Mayor Hanna suggested leaving the ordinances on first reading at this meeting and bring them back to the Council at the regular March 23 meeting. If the ordinances are adopted at the March 23 meeting, this will allow 5 weeks before the election. The election needs to be held as quickly as possible so the schools will have a chance to act on the millage. Mayor Hanna stated he plans to present a resolution for the Council's consideration regarding the uses of the sales tax and the proposal regarding the millage. City Attorney Jerry Rose read the ordinance providing for the levy of a 1% sales tax ending June 30, 2003. Alderman Miller stated the 1988 tax was to cover a 20 year bond issue, and the proposed sales tax will be for a period of only 10 years. Mayor Hanna stated with the continuation of the sales tax, the City plans to complete the capital improvement projects for the City on a pay-as-you-go basis. Winston Simpson, Fayetteville Superintendent of Schools, stated he was pleased with the City offering to rescind their millage collection. He urged the City Council to pursue that course of action. The school board will do everything they can to encourage the election to approve the 1% sales tax for the City. This arrangement would enable both the City and the schools to complete their projects that,:have been previously approved by the voters. He stated it was important for the school board that the City move ahead with all reasonable speed so that the school board can put the millage question- before the voters.i. He feels if the millage question is approved, the schools will be at about the same place they would' have been with the bonds which will enable them to see the original ideas approved in 1988 succeed. City Attorney Jerry Rose read the ordinance setting a date for a special election. Rose stated the proposed resolution will provide for the spending of the sales tax money on an annual basis. The current proposal is for 75% of the sales tax to be earmarked for capital improvements projects. The remaining 25% will be for General Fund operating expenses. If there'is.an:excess`in the 25% for General Fund, the money can be transferred to the'CIP projects. However, no money can be transferred from.the CIP projects to any other area. • r • -March 9, 1993 Mayor Hanna stated the proposal to give up the millage will decrease the General Fund revenues by about $1,000,000 which will be replaced by the 25% allocation from the sales tax. The resolution will be one of the first ways to impress upon the public this money will be used for the CIP projects they voted on earlier. Alderman Bassett asked what are the annual sales tax revenues. Ben Mayes stated the City collected approximately $6 million in 1992. Alderman Chapman stated the Chamber of Commerce reported retail sales were up 9.2% in Fayetteville for 1992. Alderman Vorsanger stated his concern regarding rescinding the 3.8 mills that are essential for the general operating fund for this City. The Board of Directors increased the millage from 2.1 to the current 3.8 and can increase to 5.0 mills without the vote of the people. The increase was to cover the cost of additional police officers and fire fighters. He is concerned the City will be giving away or rescinding operating funds and replacing with a 1% sales tax. He has no problem with that, but he has a problem with what will happen in 10 years when the sales tax ends. There will then be a problem with sufficient operating funds. He wants to make sure the public knows in advance that there is a strong possibility that the citizens will not increase the millage for the schools and save themselves about $1 million in taxes each year. Alderman Vorsanger stated things do no always turn out the way we expect them. This City Council can re -invoke the millage at any time. He is glad that possibility exists. Mayor Hanna stated the citizens' duty is to elect council members and a mayor they can trust. Alderman Miller stated 25% of the $6 million is about $1.5 million. That is about equal to the annual interest figure that would have had to be paid on the bond issue. In essence, the City will be saving about $1.5 million each year. Mayor Hanna stated when the sales tax was passed originally, there were no allowances made for administrative costs in spending the $33 million. The 25% of the proposed tax will cover the current general operating expenditures plus the administrative costs for the capital projects. Alderman Edens stated he liked the fence the Council was building in that funds can be transferred from the General Fund to the capital projects but not the other way around. He asked when the new tax would start being collected. City Attorney Rose stated June 1, 1993 would be a realistic date. March 9, 1993 Alderman Edens stated after that date, the City Council would have to get together and dissolve the millage collection effective January 1, 1994. Alderman Bassett stated he felt it is mandatory that the City maintain creditability. He stated the City does not want any misunderstandings in the public. He felt it is critical that the City make a case to the public to support this sales tax. He stated the tax was originally passed in 1982, and that money has been put to good use in the past. Bassett stated there is an explosion of growth in this town, and everyone is aware of it. He stated something good came from the moratorium of last week --the discussion about the much needed improvements to the City's infrastructure in order to keep up with growth. Bassett stated it is imperative to get this sales tax passed and get on with the much needed projects. He stated he feels the citizens of this town are in tune with the needsof the City and the schools. He concurs with the 75-25 split of the tax money between capital projects and general operating funds. However, he does want to squeeze every cent from the 25% and transfer as much as possible to capital projects. He stated he was confident the citizens would support this. effort. Alderman Miller asked when the City would be settling up with Arvest. City Attorney Rose stated he had hoped to bring several options before the Council for settling with Arvest. However, it looks like the decision has been taken out of the City's hands. Capital Guaranty Insurance Company has the right in case of a default to act in the capacity of the stockholders and call all of the bonds due and payable. They have made such a declaration. Arvest, the trustee, will use the proceeds they have been holding to pay off the bond issue. Capital Guaranty has asked Arvest to pay off the bondholders as quickly' as possible.. :The pay off will include principle and interest, accrued to theactual pay off .date. The bondholders will not 4lbse anything that is due them. The only thing they will lose is the option to'keep their investments for the 20 year period for•which they initially purchased the bonds., i$ City Attorney Rose stated he had hoped there might be some way to do thiswithout the'.eventof.a default., This is a bad thing for the City. .The state of Mississippi defaulted in the late 1700's or early 1800's, and to....this day, Great Britain does not deal with Mississippi. However, this , default is just the natural consequences of what- has happened; ...they are the unfortunate consequences .of the lawsuit. He does not know why Capital Guarantee chose to handle the bonds in•this.manner. It is probably an economic decision on their part. - Alderman Vorsanger ,statedhe had received two phone calls from concerned bondholders._ When he informed them there were sufficient March 9, 1993 funds to pay off the bonds, and they would be getting their money plus interest, they were comforted. He hopes the City will leave no stone unturned at this point to look into the possibility of getting a return of unused insurance premium from Capital Guarantee since the City paid over $500,000 for a 20 year insurance policy that will now not be needed. City Attorney Rose stated he will continue and is currently looking into every avenue. He will try to bring every legal alternative to the Council. He would be more hopeful about a refund to the City if the events of default had not been caused by error on the part of the City in the 1988 election. Mayor Hanna asked if Capital Guarantee had received a bond opinion before insuring the bond issue. City Attorney Rose stated they had received a legal opinion, but not a bond opinion. Mayor Hanna pointed out that the State of Mississippi never repaid their defaulted loan to England, and the City of Fayetteville will be making payment in full for the bonds. He stated he is hopeful that if the City did need a small bond issue for something, the bonds could be sold within the state and hopefully not affect the City's credit standing too greatly. City Attorney Rose stated this default situation is extremely rare. Moody's and Standard & Poor's can give you right off the bat the names of the places where it has happened. Alderman Chapman stated default is serious. However, the City will be making payment in full to the bondholders. She stated Mayor Hanna had stated in his State of the City Address that it does no good to point the finger of blame. Neither can you say the Supreme Court was just wrong. She felt there was an explanation, without blaming anyone, due to the citizens about how we found ourselves in this very difficult position. The City is continuing to grow and will need money to maintain and update the infrastructure. She stated she was confident the citizens would vote in favor of the sales tax. Alderman Chapman stated the errors made during the 1988 election were simply "ballot blunder" and there was no corruption, conspiracy, or meanness intended. However, the ballot and election was done against the advice of two attorney general opinions and three attorneys specializing in bonds. She stated this Council cannot be held responsible for the mistakes made before they came into office. ADJOURNMENT The meeting adjourned at 5:49 p.m.