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HomeMy WebLinkAbout1995-08-29 Minutes363 MINUTES OF A MEETING OF THE CITY COUNCIL A special meeting of the Fayetteville City Council was held on Tuesday, August 29, 1995, at 4:30 p.m. in the Room 326 of the City Administration Building, 113 W. Mountain, Fayetteville, Arkansas. PRESENT: Mayor Fred Hanna; Aldermen Steve Parker, Jimmy Hill, Len Schaper, Heather Daniel, Stephen Miller, Kit Williams, Cyrus Young, Woody Bassett, City Attorney Jerry Rose, City Clerk/Treasurer Traci Paul; members of staff, press, and audience. CALL TO ORDER Mayor Hanna called the meeting to order with eight aldermen present. CONTINUING EDUCATION CENTER REVENUE BONDS, SERIES 1979 REFUNDING Mayor Hanna introduced consideration of an ordinance providing for the issuance of Hotel and Restaurant Gross Receipts Tax Refunding bonds, Series 1995 and asked City Attorney Jerry Rose to explain the ordinance. City Attorney Rose introduced the City's bond counsel attorney Anne Parker of the Mitchell law firm of Little Rock to the Council. City Attorney Rose read the ordinance for the first time. In answer to a question from Alderman Williams, Administrative Services Director Ben Mayes explained that passing the proposed ordinance would create a $1.3 million savings in cash flow and a net present value savings of $324,000 for the Advertising & Promotion Commission. Alderman Williams stated the savings would be $324,000 now, but over the life of the bonds it would be $1.3 million. Mayes agreed. Alderman Williams asked if there are any expenses other than $63,000 for the cost of issuance and underwriter's discount. Mayes stated there are not. Mayor Hanna stated that approving the ordinance would save on the interest rate. The Advertising & Promotion Commission is discussing the possiblity of building a town center/exhibition hall. Passing the proposed ordinance could free up some money to sell additional bonds up to $2.3 million. David Hausam with the Llama Company stated, in regard to the new issue, if you extend the life of the bonds out to a 20 year maturity, $3.1 million in construction funds could be generated for a town center based on the new annual debt service schedule. For each additional $100,000 in annual debt service an additional $1 million in bonds could be issued. ` 364 August 29, 1995 Alderman Daniel expressed .her support for a town center. In answer to a question from Alderman Parker., Anne Parker explained that as -bond counsel for the City her obligation is to prepare the documentation for the issue to assure that the bonds are validly issued and are legal obligations of the City and that the interest on the bonds is:tax exempt for federal income tax purposes. Anne Parker commended City staff, Llama Company., and the underwriter's Counsel, David Menz of the Williams and Anderson law firm, for the work done on the project. Parker stated -that everything that needed to be done on th'e project has been accomplished and there seems to be no reason ndt'to approve therefunding of,.the bonds. If there were anything ,'wrong with the bond issue, the recommendation to approve'it would not be before the Council. Anne Parker explained that she could not deliver her law firm's opinion unless she was sure that everything required had been done in compliance with State and`Federal law as well as the ordinances of the City. In response to another questionfrom Alderman Parker, Anne Parker stated from a legal, financial and: technical standpoint, it 'is recommended that the Council adopt the proposed ordinance; Alderman Parker asked, referring to:the process being taken•on4the proposed -refinancing, if Ms. Parker had any other suggestions on a more. advantageous way to handle the project. . Ms: Parker stated she had- no suggestions. City Staff and the underwriters have come to the conclusion that this is the 'best - thing to do from the financial standpoint of the City. Mayor Hanna stated the Advertising & Promotion Commission met earlier in the day and voted to recommend the proposal to the City Council. This project is'comparabie to refinancing a home to take advantage of lower interest rates. -.The Advertising & Promotion Commission has put out an RFQ fat the -design and' financial feasibility ofa town center Several architectural firms are preparing proposals in response to the RFQ addressing the use of a town center. The proposals"will besubmitted to the Advertising & Promotion Commission for consideration. The Commission will decide if they can afford to take:the 'money out of A -& P- funds •for the requested work. An approved proposal .will be forwarded to the City Council:'. Mayor Hanna explained that`State Tourism Turnback :funds are available o help finance the retirement of the bonds. If the bonds were retired now, the turnback funds would stop. 2 365 August 29, 1995 Alderman Schaper pointed out that the outstanding principal on the bonds is $3,165,000 and the new bonds being issued is $2,675,000. In answer to a question from Alderman Schaper regarding the remainder, Mayes stated the City is taking advantage of the fact that there is money in the existing debt service reserve fund beyond current legal requirements. The new laws require only 10% of the total issue to be put into the debt service reserve. The new debt service reserve will be $267,500. The excess there now will help reduce the amount of bonds we have to issue. Mayes stated the issue is being done to take advantage of the savings in cash flow and the net present value savings. The town center/exhibit hall is a separate issue. The flexibility is being created so that if needed in the future, additional bonds can be issued. In answer to a question from Alderman Schaper regarding refunding funds on hand of $705,000, Mayes stated the money we are currently holding is approximately $970,000. An amount of $267,500 must be put back in debt service reserves. The difference is $705,000 which would be on hand in cash. Rose listed the following parties as the players involved in the bond issue refinancing: Bond Counsel - Anne Parker and her law firm represent the City of Fayetteville. They warrant that what the City is entering into is a legal arrangement. • Underwriter - The Llama Company purchases and markets the • bonds. City Staff - The financial staff represents the City and reviews all figures that Llama provides with the advice of legal counsel. They make sure that the figures are beneficial to the City. • Bond Trustee - The Bank of Oklahoma represents the bondholders. • Underwriter's Counsel - They advise the underwriters. • City Attorney - Jerry Rose warrants that the City Council has performed a legal act and that they were -capable of doing what has been reported. Rose stated the bond issue is the Advertising & Promotion Commission's bond issue. It is not a general obligation of the City of Fayetteville. It is funded by very specific funding sources. 366 August 29, 1995 Alderman Young asked why the request is being -.submitted to the.City Council. Ms. Parker explained that this is a City of Fayetteville.bond issue but it is secured specifically ,by three revenue streams.- rMs. Parker stated the major revenue stream,is the hotel and restaurant -: gross receipt tax. .The use bf those funds is strictly under the ° control of the Advertising ;& Promotion Commission. Although. the City issues the bonds, the Commission has. to authorize the pledgei - of the funds. Just to make sure all legalities are covered; the - pledge is authorized by the Commission and then entered-into.by,.the City. The other two sources: of funds are lease payments -from. the' p University of Arkansas for the. Continuing Education Center'and the\,.; State turnback funds. In answer to a question from Alderman Schaper, Mayes stated the bonds are non -rated. Alderman. Young expressed concern about the bond issuance being considered at a _special meeting: Also, Alderman'Young expressed concern about the lack of public. knowledge about the town center. Young stated more information about the town center, its uses, and its supporters needs to be presented to the citizens of Fayetteville. Alderman Young asked if there will be a requirement for a vote in order to issue new. bonds. Mayor Hanna explained that the special meeting was called.because of the timing of the bonds. He stated the bonds .do not have anything to do with the new town center idea. University of Arkansas students, as a project, suggested a parking deck with a convention center on top be constructed in downtown Fayetteville. A convention center was recently built in Springdale. The idea of a town center. has been considered as an.alternative. The public will be informed. The Advertising°& Promotion Commission has to come up with drawings, cost figures, and conclude if it can even be done,,If the Commission decides to go forward with the project, it will .be forwarded to the Councilfor discussion in a public • setting,. In answer to a question from Alderman Young, Mayor Hanna stated one of .the uses would be .an extension of the... Continuing Education Center.. The Continuing Education Center is losing business because they :do not have any exhibit,space. Some other uses might be dances and banquets.- It could -be rented:out. Alderman:Williams stated the bend issue has nothing to-do.with the town center. Alderman.Young .stated the Advertising & Promotion. Commission 'has the. authority to issue.bonds for a 'convention center. 367 August 29, 1995 Ms. Parker explained that in drawing up the bond documents, the City requested that authority for issuing additional bonds that would also be secured by the same hotel and restaurant taxes be included. She stated the additional bonds would have to go through the same procedure as any other new bond issue for new construction. Under the current law, it would require the approval of the Advertising & Promotion Commission, another bond ordinance by the City, and an election of the people to pledge the hotel and restaurant taxes for a new center. Refinancing does not require an election. In answer to a question from Alderman Parker, Ms. Parker stated the 1979 bonds can only be called on two days out of the year, April 1 and October 1. We could not wait until the next regular Council meeting because 30 days notice could not be given to the bondholders that their bonds are being redeemed. The last Council meeting on August 15 was not appropriate because they were not ready to market the bonds and set the interest rate. Alderman Young asked if Ms. Parker included in her opinion that it would require a vote of the people to issue more bonds. Ms. Parker stated it is not a part of the opinion for the issue because there has not been a suggestion of issuing more bonds. Ms. Parker explained it would be her advice to the City to hold a special election to issue more bonds. City Attorney Rose agreed with Ms. Parker's advice. Alderman Bassett expressed his disapproval of the concept of a convention center that was discussed two years ago. Alderman Bassett stated the latest concept is a good one for Fayetteville. It is still in the planning stages and no decisions have been made. Anything that the Advertising & Promotion Commission decides to do about a proposed town center will be forwarded to the City Council for approval. • Alderman Miller explained that he understood the issue to be that the City is refinancing the bonds at a lower interest rate to save money. Mayes and Alderman Bassett agreed. Alderman Young stated that if there was not a requirement for a vote of the people for a new bond issue then the Council would be voting on bonds for a new convention center. Marilyn Johnson of the Chamber of Commerce stated there is no hidden agenda. The reason information about a town center has not been submitted to the Council or the public is because there is no information. The request for qualifications sent out is a request for an architectural firm who will do a preliminary design and give the financial feasibility of what can be housed in the exhibit hall, what types of meetings can be held, and operating costs. There will be public meetings so that the citizens can give input • 368 August 29.,..1995 on whatrthey..want in the town center. •Fayetteville is..,losing.the business of people,whbrequire exhibit. space with their meetings. The town center will, compliment the existing. facilities. Thereois a list ofthe business :Fayetteville has. lost over the past.year available at the Chamber of Commerce. Williams,r_seconded by Miller, made a motion to suspend the rules an&place the -ordinance onits second reading. Upon roll call, the motion passed by a vote of 8 to 0. The City Attorney read the ordinance for the second time. Schaper, seconded by Daniel, made a motionto suspend the rules and place the ordinance on its third and final reading. -Upon' roll call, the motion passed by.a vote of.8 to 0. -.The-City Attorney read the ordinance for the third time. Upon roll call, the ordinance passed -by -a vote of 8 to 0. NE Upon roll call, an emergency clause:passed by a vote of 8 t 0. ORDINANCE<3920 APPEARS q�-. Alderman Daniel stated October:. 1 date . in the October 2. Ms. Parker ADJOURNMENT ON PAGE OF ORDINANCE BOOR • October 1.is on.a Sunday and asked if the ordinance would be .forwarded -to Monday, stated yes. .The meeting.. adjourned at. .5:25 p.m. •