Min 04/22/1986 233
Wichita Falls, Texas
Memorial Auditorium Building
April 22, 1986
Items 1 & 2
The City Council of the City of Wichita Falls, Texas, met in called session
on the above date in the Council Room of the Memorial Auditorium Building
at 8:30 o'clock A.M. , with the following members present.
Charles Harper Mayor
Sandy Goff
Charles Thomas
Lindsey Walker Councilmen
Ruth Ann Allred
Ronald Buffum
Don Kirkham
James Berzina City Manager
H. P. Hodge, Jr. City Attorney
Wilma J. Thomas City Clerk
Fred L. Werner Chief Accounting Officer
The invocation was given by Councilman Thomas.
Charles Harper, Mayor, read from a poem noting that some say a word is
dead when it is said, but others say it just begins to live that day.
item 3
Charles Harper, Mayor, noted that the meeting was called for discussion
and consideration of refunding bonds.
Murphy Davis, of Herbert R. Smith, Inc. , stated that interest rates have
dropped to a 1977 low. He feels it is in the interest of the city to do a
refunding at this time. In the Holliday Creek refunding issue, they were
able to do so without a tax increase. We are now looking at the lower seven' s
for a refunding, or any kind of new bonds. The water and sewer debt is out-
standing; also, the general obligation debt, both of which are above eight
percent. He believes the average cost of general obligation is 8.8 percent,
and the average cost for water and sewer is 10.2 percent. Mr. Davis stated
that implementation of House Resolution 3838 will not take effect until
September 1 , 1986, at the earliest. This bill will have severe limitation
to any type of restructuring. On refunding, bonds are issued, sold, and the
proceeds are used to purchase United States government securities in the exact
amount to pay off all the outstanding indebtednes of the city.
Major impacts which will occur were discussed by Mr. Davis on both general
obligation and revenue refunding. He stated that rating services can be
combined. Underwriting fees don' t change that much. A one-time issuance
of the two issues would cut the cost of the issuance substantially. If these
proposals make sense to the Council , he would come back with a complete proposal .
Councilman Thomas stated that other cities have this same idea, and it
is important to get in because only a certain amount of money will be available.
He asked Mr. Davis if doing this quickly is important? Mr. Davis stated that
all of this is conjecture. Those that did refundings last year are looking
at interest rates just like we are. They are also looking at the projected
implementation date of September 1 , 1986. There could be a substantial number
coming in in July or August, and that could cause interest rates to go up.
Late June would be the earliest we could have the bond sale if it is adopted
this morning.
Councilman Walker stated that we talk about the number of years we can
retire the outstanding bonds. How many years are we talking about? Mr. Davis
stated that on the general obligation bonds it is set up to be retired by
2001 . There is an option to call these bonds in 1995. This is the earliest
date we could call them. The refunding would be an extension of that until
2006. Councilman Walker asked if we would be borrowing two million dollars
more than the existing debt? Mr. Davis agreed, stated that the exact amount
234
of treasuries are purchased to pay off the old bonds. Councilman Walker noted
that $1 ,500,000 new money will be realized from the amount needed this fall .
Mr. Davis stated that we will be able to save enough that will just about
offset the new money of one and one-half million dollars. It would not be
necessary to have a rate increase because of the debt service.
Mr. Davis explained that arbitrage and non-arbitrage laws have to do
with taking a basic interest rate. We do not have to pay federal income tax
to the Internal Revenue Service. We are exempt. If you borrow money for
seven percent, we could not invest money in treasury securities at eight percent.
This difference in rates is called arbitrage. We don' t abuse the privilege
of borrowing tax exempt, and going to the government and not paying taxes
or rate differences.
Councilman Kirkham confirmed that he would bring back something which
is basically the same, but with current rates. (These numbers were done two
weeks ago. ) We don't know what the market will be when we actually bring
the bonds. He confirmed that Mr. Davis is looking for direction, with basically
these numbers. If he is given that direction today, he could have it ready
by June? Mr. Davis agreed, stating that they would be given a time schedule
between now and June. He will keep the Council apprised of any changes that
may take place.
Councilman Buffum confirmed that the Council has the option of not selling
them at that time if the market has changed. Mr. Davis stated that if the
rates are basically the same, they would be counting on the Council to follow
up on it at that time. Councilman Buffum noted the importance of timeliness
at this time. He also asked if we had already initiated this action, would
we be allowed to continue and follow through? Mr. Davis stated that delivery
on the bonds would have to be taken before September 1 , 1986. To be safe
from a market and legal standpoint, monies should be in hand on or before
August 31 , 1986.
Charles Harper, Mayor, noted that one cent of the tax rate is approximately
$200,000.
Moved by Councilman Thomas that the financial advisor be instructed to
look at re-issuing general obligation and water and sewer revenue bonds, and
do it at the same time to save money.
Motion seconded by Councilman Allred.
George Bonnett stated that we currently have underway the engineering
for the renovation of the 1925 Imhoff tank. We hope to go to bid in an October
time frame. Regarding water and sewer rates, they have a memo to the Council ,
which will generally be a look at the methodology of the way we charge our
large customers. Councilman Walker thought that we should have had the
information in March. Mr. Bonnett stated that it was given to the Council
in March. The City Manager thought there were other memos with it.
Fred Werner noted that Mr. Davis has covered the subject very adequately.
The motion was carried by the following vote.
Ayes: Charles Harper, Mayor, Councilmen Goff, Thomas, Walker, Allred,
Buffum, and Kirkham
Nays: None
Item 4
The City Council recessed into executive session at 9:30 A.M. , according
to Article 6252-17, Section 2, Paragraphs (e) and (g) of the Revised Civil
Statutes. The meeting reconvened at 11 :20 A.M. , and immediately adjourned.
PASSED AND APPROVED this � day of _ ,� �7�,� 1986.
Charles Harper, Ma or
ATTEST:
Wilma J4Thom , CMC, City Clerk