PICKERINGTON CITY COUNCIL
TUESDAY,
FEBRUARY 7, 2006
CITY HALL, 100 LOCKVILLE ROAD
COUNCIL WORK SESSION
OPEN DISCUSSION REGARDING LONG TERM FINANCES AND
DEBT STRUCTURE
6:30 P.M.
1. ROLL CALL. Mr. Wisniewski called the work session to order at 6:30 P.M., with Mr. Fix, Mr. Smith, Mr. Hackworth, Mrs. Hammond, Mr. Sabatino, and Mr. Wisniewski present. Mrs. Riggs and Mayor Shaver were absent. Others present were: Judy Gilleland, Lynda Yartin, Linda Fersch, Ed Drobina, Chris Schornack, Sean Casey, Dennis Schwallie, Bob Cramer, and others.
2. Review and discussion regarding Long Term Finances and Debt Structure. Ms Gilleland introduced Dennis Schwallie, our Bond Counsel, and Bob Cramer, our Financial Advisor. Mrs. Fersch stated she had provided a packet to all Council members that included our Debt Schedule Summary, a Detailed Debt Schedule, the City’s Debt Policy, and a copy of a memo from Mr. Cramer dated August 20, 2005, reviewing the City’s debt position.
Mr. Cramer reviewed the various types of debt, such as, general obligation, revenue bond, notes, etc. He stated general obligation debt has the lowest interest rates and the most favorable terms. He stated short-term debt is generally in notes and long-term debt would be bonds. Mr. Schwallie stated Ohio has a very conservative set of laws that apply to political subdivisions when they borrow money. He stated our State Constitution says that you cannot incur debt without putting a tax in place to put it back, even if you expect to have some other revenue source to pay it. He further stated with regard to unvoted borrowings, the taxes that are pledged are a share of the City’s inside millage, the ten mills that are allowed to be levied without vote. He stated that ten mills is divided among the County, the Township, the School District, and the City. Mr. Schwallie stated, except for very narrow exceptions, the City is not permitted to borrow for operating costs.
Mr. Cramer stated Mrs. Fersch took the City’s financials to Moody’s rating service, and the higher your rating typically the lower your interest rates because you are a better risk. He stated the City got the highest rating that is issued by Moody’s for short-term debt.
Mr. Smith clarified that “servicing the debt” includes paying interest only, paying interest and principal, or both. Mr. Schwallie stated state statutes govern how long you can not pay principal. Mr. Smith further stated he was surprised at how much debt you can actually incur, and how much we can yet incur, and still be within what the law allows. Mr. Cramer stated if the City went out and incurred 13 million in debt, they could not service it; so it is really a question of your ability to pay.
Mr. Wisniewski stated as far as the ability of a municipality to tax, is that strictly an income tax or does it deal with property taxes or a combination of all. Mr. Schwallie stated when the State constitution talks about tax, it is talking about property tax.
Mr. Fix stated in 2006 we are not projecting to pay down any of the principal on several of our notes, and he did not know if that was a cause for concern. He stated his question was if this was smart. Mr. Cramer stated this is not out of the norm and Moody’s looks at your year-end cash balance and they would like to see approximately one-third of your general operating fund in the form of working capital. He continued we worked toward that goal last year, so we would not jeopardize your rating.
Mr. Wisniewski clarified that when we were talking about the water and sewer funds being self-sufficient we were strictly talking about the principal plus interest being paid off strictly from capacity fees. Ms Gilleland stated the capacity fees and user fees should cover the debt and the daily operating costs. Mr. Wisniewski stated he would like to know out of whack we are on these funds, and Ms Gilleland stated we were working on getting that information for the Utility Fees Review Committee and she would provide it to Council as well.
Mr. Sabatino stated if we forgot about the capacity fees and dealt only with the user fees, how much of an operational deficit exists, either in percentages or dollars. Ms Gilleland stated this was the information we were working on getting together for the Utility Fees Review Committee that she would provide to Council as well. Mr. Schwallie stated he would be happy to answer any questions Council may have at any time.
3. ADJOURNMENT: There being nothing further, the work session closed at 7:20 P.M., February 7, 2006.
RESPECTFULLY SUBMITTED:
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ATTEST:
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