Can the flames thus engendered be doused with iced tea flavored Kool Aid? Will councilmen Jeff Gahan and Pat McLaughlin, the latter possessing the only known copy of the city's financial report, continue to excel in political spelunking?
Must the NAACP wait to protest a council meeting until after Jack Messer formally becomes a Republican? Is uncouncilman Price filling his rental properties with air mattresses and cans of pork and beans, and announcing a spring gala sale on room and board?
Is the Open Air Museum really this entertaining, or are we just that bored?
Business still to be decided for New Albany council; Council to take final vote on $7.4 million sewer loan Tuesday night, by Daniel Suddeath (Tribune)
The final piece of a sewer-rate increase puzzle will be vetted by the New Albany City Council today.
At 5 p.m., the council will convene to take a final ballot on a loan ordinance that would allow the sewer utility to accept a $7.4 million state loan. The second reading of the measure passed 5-4.
The third reading was delayed so sewer attorney Greg Fifer could finalize the rate structure and other details of the loan.
Open question
ReplyDeleteWill the 7.4 million principle accrue interest from day one?
or
Will interest only accrue on the amount borrowed?
My impression the last meeting I attended was the latter: Only as borrowed.
ReplyDeleteAt yesterday's meeting the point, of what will be the total interest on the loan, was brought up again, this time by Mr. Gahan.
ReplyDeleteThe previous times where by Mr. Caesar and Coffey at separate occasions.
Mr. Brinkworth and a rep for Ice Miller both stated that the interest that will accrue over the term of the loan will be 2.3 million.
The point was made yesterday that not all of the money will come to New Albany at once but appropriations will need to be made for the money through the council.
I think this was said to reinsure individuals that money would not be wasted or spent on other things, who those individuals are I don't know just my thought. I don't think the point was made to address interest. And to be clear, I was told or heard, that interest would not start to accumulate a year after but will still accrue 2.3 million.
The reason I'm asking is because I'm not for sure. Still today the public has not been given a report, in paper, about any of the details.
I am under the impression that the loan will start accruing interest even if we don't use the money.
One reason I think this is because Mr. Gondor asked if there was any penalties to pay off the loan early. The rep from Ice Miller said, "Yes most bonds have a 10yr prepayment penalty".
So no matter what by approving the loan it will cost rate payers an additional million over 10 yrs and 2.3 million over 20 yrs.
No argument here. I don't know, either.
ReplyDeleteAt a previous public meeting, I think it was three meetings ago, Mr. Coffey asked the lady from Ice Miller how much the city would save on the re-amortization on the old debt.
ReplyDeleteShe said that not all the old dept was going to be re-amortized only a small portion. She then said that we would save 95,000. Mr. Coffey then asked how much was her company going to be paid for there services. Her answer was 85,000. Then he asked what were going to be the cities fees? Her answer was 20,000 plus.
When this point was made I remember audience members laughing because quick math indicates that the savings for re-amortizing will be a net lose compared to the overall cost of the deal.
Proponents of the deal, like Mr. Zurschmiede, said that borrowing 7.4 at 2.6% was a good deal in comparison to 3% rate of inflation.
Mr. Zurschmiede to that time made the only logical point as to why the city would be better off borrowing the money.
I have never done the math but I think the savings with regards to inflation and rate is not that significant, to warrant the loan, that will cost 2.3 million in interest, plus admin fees, plus the added risk of debt service, which is the reason for half of the rate increase and the possibility of insolvency.
At yesterday's meeting Mr. Gahan brought up the point that the city didn't need the loan. Some of his arguments were the same as mine from the previous post.
ReplyDeleteHe said that essentially the rate increase is 43%, not taking into account compounding. Current sewer revenues are 9.5 million. A rate increase of 43% would bring in an additional 4,085,000.
It has been stated, by the sewer board, the reason for the initial rate increase is to cover 2.7 million in revenue short fall.
If we subtract the 2.7 from the 4 million we would be left with 1,385,000 additional dollars.
As of now this money will be going to debt service on the new loan for 20 yrs.
Here is Mr. Gahan's point. Why not just use the new revenue to fund the projects directly and not mess with the loan?
This is where a new point was made by Mr. Zurschmiede yesterday.
We should use the new loan to pay off old debt that is at a higher rate.
When Kevin made this point is when Mr. Gondor asked the rep from Ice Miller if there are any prepayment penalties. She said most bond obligations had a 10 yrs limit.
I think that Mr. Z makes another good point here but no figures were made public on what the difference of the rates that Mr. Z was referring to, or if any are still under their 10 yr pre-payment penalty.
It is my understanding the muni-bonds yield a very low interest, no more then 3-4%. New Albany rate might be higher now because of our junk status, like Greece.
Is this the plan? Are we getting the loan to pay of older debt to save the difference in interest?
Here is the kicker, if we just raised the rates, without the loan, the sewer utility would have the additional 1.3 million to do the 7.2 million CAP projects. At this rate the projects could be completed in 5 1/2 yrs. After the completion of the projects the money could then be used to free up the 500,000 in EDIT for other projects plus the remaining could be used to pay off principle on the old debt service.
New Albany rates payers might have been able to save a lot of money if other option would have been explored by the Mayor’s administration.
This scenario doesn't include if Ice Miller was told to ask the SRF if they would be willing to re-amortize the debt without the loan. Which Mr. Skomp stated at the previous meeting that he had not but didn't think SRF would. He also didn't think SRF would be willing to do what they have done already. I think as a professional you should pursue all options and just not assume what the answer would be and as mayor you should demand the people representing you to do this.
This scenario doesn’t take into account additional revenue sources like EDIT, Rainday, TIF, or CDBG that could be used to accelerated the CAP projects and paying down principle.