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Here’s The Scoop …The Lauderdale-By-The-Sea May 10, 2011 Commission Roundtable Meeting … Want Interest With That Debt? …#3 …

OUR PARKING SYSTEM DEBT  (aka  Bougainvilla parking lot loan) …….TO KEEP IT OR NOT TO KEEP IT …. THAT IS THE QUESTION ….TO USE IT FOR FUTURE CAPITAL IMPROVEMENT PROJECTS  …. THE REAL QUESTION IS …..WOULD YOU BORROW MONEY AT 4% AND INVEST IT AT LESS THAN 1%?….

Dear Readers … Before I get to the verbatim discussion on item 3f Parking System Debt (5/10/2011) let me remind you as you read the remarks from your elected officials that three of them ….Mayor Minnet, Commissioner Vincent and Commissioner Clottey are on record just a few items before  (3aii) for not wanting referendum items on the January ballot asking us to believe them that the big ticket items such as Town Hall/El Prado (to become a grassed square)/parking garages and undergrounding downtown or the whole of El Mar Drive are 5-10 years away despite the incredible amount of time and money spent in the last year with no groundbreaking for drainage problems seen anywhere in town that says otherwise…despite the fact that that was the top priority this fiscal year….The UM Design Charette on Sat. morning to be followed by five days of a design “team” inside Jarvis Hall culminating with a Town Commission-Design Team Review on Thur. May 26, 2011 at 6pm touts the following in the press release…’The charrette is being held with professional architects and designers from the University of Miami’s School of Architecture to help the Town design a fresh look for State Road A1A, Commercial Boulevard, Town Hall and El Prado. Jarvis Hall, 4501 Ocean Drive (adjacent to Town Hall), is located on the west side of State Road A1A about three blocks north of Commercial Boulevard. The charrette is a collaborative session where UM designers will work with Town residents and business owners to develop new designs for Lauderdale-By-The-Sea to encourage future economic development.”…. RMA is now doing a $19,900 plan to further spell out the year- to- year plans and Planner Cecelia Ward is continuing on with her role as well… The above along with the comments made below by these three and the Town Manager and her acting Finance Director on why we should keep the parking debt (approx. $5,000 a month interest/$112,000 pre-pay fee/ ends in 2020) should make voters sit up and take notice …It’s for future capital improvement projects they want to do …This parking debt item will also explain why this writer is asking for a change on the dais once again next January…The verbatim content below is startling…dumbfounding and downright humorous with what comes out of the some of the Commissioner’s mouths as they digress on the topic… Read it for yourself, go online and watch the video on the Town’s website and then keep reading and watching before you cast your vote in 2012 in order to decide just how and just who decides how your money is to be spent…

3f. Parking System Debt

The Mayor began by saying that it was Commissioner Vincent who had requested this be put on for roundtable discussion ..The Town Manager could be heard to say “it was?”…and Comm. Vincent responded “I don’t believe so”…The Mayor said “I believe we did discuss that. I don’t know if anyone has any questions or concerns about that as far as the parking?”…Commissioner Vincent could be heard to say “no.”… after a lag time..Comm. Sasser sat forward and said “I do. I think it should be paid off!”… The Mayor reluctantly replied “Ok, I’m not in favor of paying it off, its;”…Comm Vincent interjecting said “I’m not at this point.”…Mayor Minnet continuing her sentence said “self, it’s a self funded fund and it’s not something I would be in favor of, of paying it off.”..

BC- Remember these statements as read on…

Comm. Sasser ” And, I mean I cannot fathom how we can say it’s self funding when in fact we could actually spend more money pulling out of the parking fund putting back into the general fund. It’s just moving finances from one side to the other. We’re spending money on interest every single year and we have the money to pay it off and so why pay interest? And the argument that it’s hard to get a loan doesn’t hold water with me. If it were my finances and there was a loan out there and I had the money to pay it off I’d pay it off simply to not have to pay the interest. It seems 101 to me and when we say things like well you know the parking pays for it well that’s the parking pays for the debt service on that. But if we can take the parking revenues and not have to pay the debt service on it, it seems intuitive to me. So, I am for paying off the loan or at least looking into it more. I think we have to get some answers regarding the termination fees. I think that’s important and to pay off debt seems to make sense.

Comm. Vincent “I have to agree with Commissioner Sasser, Scot on that. Well put! I think the problem that I’m trying to get wrapped around with this is it’s a 3.95 compounded monthly interest rate , fairly low.” (In the backup Finance Dir. Haag states the rate is way above market at this point in time) “We do the 112,000 plus other incidental fees let’s call it 120,000 dollars pre payment penalty. My concerns with all what we’re looking to do in this town I don’t want to go out to get another loan in a year or year and a half. Now if we choose to do that and start up a new loan when we’re all just gonna be paying it down and borrowing it back. That’s my concern. So, I think we still have ample time to really digest this and look through it. I agree with Scot, you know see if we need to do this. You know the backup in here’s pretty clear, pretty concise um, I don’t think there’s a need to expedite paying this down until we really look at you know the cash on hand, what we’re doing, what we plan on doing once we get all the reports back from University of Miami and this and that. What projects are gonna move forward um, and you know paying down this loan and then having to go back and re-borrow it and that’s just really my concern right now going through the semantics.”

BC- The backup explained the situation on the parking loan…The cash on hand was summarized long ago…we are flush… Comm. Vincent is all over the place and besides interjecting constantly throughout this meeting …he constantly needs to “digest” the information already served up as well as being on the bandwagon for the ever present projects the Comm. would like the funds for …”…

Comm. Clottey “I agree with Scot that I personally would like to see it paid down but we do live in a very hurricane prone area and we have alot of projects that we would like to use to improve things in our town. We need new storm sewers in many parts of town. What happens if something breaks and we have to have it really fixed and it costs almost a million dollars? Those are the concerns that I have and I think we need to look carefully at our options before we pay this off.”

BC- as previously posted…we have an emergency fund for hurricanes…The storm sewers have been idle while this redevelopment exercise has gone full throttle…and as for a million if something breaks..we’ve got it…As for the rest of it …again it’s all there …

Vice Mayor Dodd said he had a question for Mr.Haag and while Mr Haag was making his way to the podium Comm. Clottey said the following ” Let me just say this is the only loan that we have it isn’t like we have alot of the.”.. The Mayor visibly eager to attach onto Comm. Clottey’s statement said “This is the only debt that the Town does have”…

VM Dodd ” The money that we would use to pay off the loan, are we currently getting a better rate of return where this is invested or are we effectively going backwards?”

Mr. Haag ” The current rate of return on our investments is not anywhere approaching the 3.95 (%)

VM Dodd ” So we are basically going backwards. That we’ve go a loan of money and the interest on that isn’t covered by the other money that we have that we’ve got invested.”

Comm. Sasser ” One’s an expense and one’s a revenue item.”

VM Dodd ” Looking at your personal finances (asking Haag) what would you do if it was your money if you had x dollars here and you’ve got a loan outstanding would you personaly pay off that loan in order to free up that interest?”

Mr. Haag ” Vice Mayor, I think the question here and maybe I wasn’t very good at kinda getting to the point, was the concern I think, is one for overall liquidity in terms of to pay off the loan. This and I heard a comment earlier I agree with all of you but none of you (Comm. Sasser made a comment close to that while discussing the referendums) but actually, I think I agree with pretty much what everyone has said. Kinda what it boils down to”… The Town Manager chimed in “You’re elected!”… They all laughed… Mr Haag continued “The issue is more so one of overall liquidity. The bottom line is what this will do will substantially reduce by 50% our general fund reserves.”

The TM corrected him “Our un-designated general funds.”

Doug Haag “I’m sorry yes, thank you. So the question becomes, depending on what the Town , what you want to do down the road as far as capital projects and what funds those are required that type of thing. It might behoove us, I think somebody mentioned this, to continue to evaluate this especially during the budget process and see how things kinda shake out in terms of those capital projects and what our cash requirements are gonna be for those things. Um, so we don’t have a year or two from now go back out and get another loan.”

Vice Mayor Dodd ” Well can I ask you what’s wrong with that in terms of principal. Because if that loan that we currently have is incurring pre- payment penalties isn’t it better to go to the bank and negotiate those pre-payment penalties and pay off that loan?

Comm. Vincent interjecting “No guarantees. ”

The Vice Mayor continued ” and if you decide you need a loan down the road thay you go out and get the best that you can at that stage because that would seem to me to be the more prudent way of handling one’s finances.”

The Town Manager said “Well the issue is you don’t know what the interest rates” …Comm. Vincent interjecting “don’t know what the rates are gonna be.”…TM continuing on ” and that’s anybody’s guess whether the rates are gonna go up or not.”

Comm. Vincent ” There’s no guarantee we’re gonna get these pre-payment penalty payments off either. I mean you know there’s alot of um, variables here that are unknown.”

Comm. Sasser ” Point of information and Stu I know it’s your question but I just want to make sure that everybody at home understands that when we say we’re gonna take that down by half we’re talking about really one piece of , we have alot more money in the general fund. I mean we’ve got what 5 million there, we’ve got a least 4 million in the capital fund. I mean it’s not like we don’t have money out there. It’s not like you know we’re gonna take away half of everything. I just wanted , I think it’s still valid don’t get me wrong. I just don’t want everybody to think we only 2 million dollars out there and payin a million of it’s gonna take it down.”

Mayor Minnet “I think it’s important, go ahead Stuart you still have the floor” after she realized he had not yielded…

VM Dodd ” That’s quite alright, I was just wondering when I was gonna get it back.”…Laughter erupted from all…The Mayor chimed back “There you go!”..

VM Dodd ” I’m sorry I’m not a financial whiz here but I still, the way I run my finances in my home and I’m trying to look at whether this is applicable to the way the Town should be running its finances that we ended up with a rather large pre-penalty payment on a previous loan (the last loan paid off another Colon- Baldwin- Parker led acquisition) and I don’t want to get into that same situation. I believe that this Town is financially very strong and that we should go to SunTrust and negotiate that down and say look if you want our business then you’re gonna have to play our game because we’ve got some cash here that we want to either restructure it, refinance it , whatever if we decide we need that loan. I am leaning alot more towards Commissioner Sasser and Commissioner Vincent’s idea that we should probably look at paying off that loan and decide what money we need and then go and get that money out at the correct rate of interest.”

Comm. Vincent interjected ” No, I, that’s not what I said Vice Mayor. I was in total disagreement of Scot’s , I don’t want to pay it down. I don’t want to have to go out and re-borrow it in 6 months to a year after paying 118,000 dollars in pre-payment penalties. No I don’t want to do that. So I just wanted to stand corrected.”….Commissioner Sasser could be seen and heard seated between Comm. Vincent and the VM to say “What?” …Right he was …just scroll up to Comm. Vincent’s first comments where he states 2 times he agrees with Comm. Sasser…

Mayor Minnet “Alright it sounds like there is some consensus here to at least find out what it is that this pre-payment would be . To see if SunTrust would negotiate something um, on, on this loan. Um., you heard from me. I made it very simple. Again, this is a you know, we’re currently raising our parking fee structures to ensure that adequate payments are going to be made to pay off this debt. Um, it truly, it would be great to pay off the debt um, let’s get all the information together so that we could make a judgment to see if number one it is feasible for this town to do it . As Commissioner Clottey said we do not want to um, eat into our reserves. Ah, we have to look at the capital improvement budgets. So let’s have staff look into exactly what the amount the pre-penalty would be. Ask them to talk to SunTrust. See what SunTrust says and let’s see where we’re at!” Let’s get the numbers.”

BC- the backup provided the numbers…The TM made it clear at the Commission meeting the time to negotiate on the pre-payment was when the Commission knew what they were going to do …in other words when we were ready to got toe-to-toe …

TM Hoffmann ” Well we’ve asked SunTrust .They have not responded yet. Um, we can do that. The issue though you, it’s not so much the pre-payment penalty is the other more philosophical issue of do you hold on to the money you have in order to do some of these projects or do you wait and see whether you’re gonna refinance later?”

BC- again the backup …

“$1,396,965.27 Principal
112,223 Pre-payment fee
4904.90 Interest
$1,514,094.07 Total’

The amount is miniscule in terms of what needs to be done in the future of this town before the big ticket Master Plan redevelopment items …Just the drainage will be between 12-17 million …The sewers in the south …millions …The interest on this debt if carried until 2020 about what we are paying for the consultants etc… again borrow 4% to save less than 1% …That’s what happened when this Administration moved $3 million into low earning for over a year as was done over the past months rather than come to the Commission to pay off a higher interest loan at a percentage rate well over market at the present time according to the Finance Director…

Mayor Minnet ” Alright we’ve got budget time coming up. That’s a major concern during budget time because if we decide to pay off that debt that will reduce the amount of available funds that we have for capital improvement projects and that’s really where the decision will lie.”

BC- and that’s why I want referendums…No capital improvement projects were done in the current budget year so we have monies …lots of it as Comm. Sasser stated…

Comm. Sasser ” And how many months away is budget?”…The Mayor interjected “Now!”…Comm. Sasser continued “It’s just a couple of months away right? So what’s the interest per month Doug? Is it 4,904 dollars somewhere around in there?”… Mr Haag replied that was pretty close to which Comm. Sasser said he was ok with waiting until then to make the decision…

Mayor Minnet ” I think it’s close enough time. Look where we’re at, look at our capital improvement budget improvement program. See where we’re at to see maybe we just pay off half of it. Maybe ther’s not a pre-payment penalty. Is there a pre-payment penalty? Is there a pre-payment penalty for paying it all off? What about only paying 49% of the loan?”

TM Hoffmann ” Well I actually think that’s part of the negotiation process that we’ll have with them once we decide what you want to do.”

BC- That did not stop the Mayor…she was on a roll…a 180 degree roll from her first comments to keep this “self funding ” loan…

Mayor Minnet”You may be able to , to um, reduce just the amount of the loan itself for half like I said 49% of it before you trigger a pre-payment penalty and that would be something you could look at through the contract. I don’t know.”

Comm. Sasser ” Yeah, I think all those options are imprtant, yeah.”

Mayor Minnet” So let’s look at that during budget time. Not get caught up in this process. It was an issue that was brought up. We have, we’re discussing it and um, let’s move forward. So Connie you’re gonna come back with the exact information. You’re gonna continue getting information from SunTrust so that when we”

TM Hoffmann” Well Mayor, I really recommend that we, we’ll talk to SunTrust but I think our real negotiating strength is once we decide what we want to do.”

Mayor ” Alright the, I would still continue to talk to SunTrust.”

TM” We will.”

Mayor Minnet ” and also ask the question that I just asked about what triggers the pre-payment . Is it what, what substantial amount triggers the pre-payment penalty. We may be able to just reduce the loan by what I said 49% which is a considerable amount and still continue to fund what we would like to do in the capital improvement budget but then also reduce our debt on the other side which reduces the interest payment interest amounts. So let’s get that information.”

BC- YIKES!…

Comm. Clottey ” I have a question I’d like to ask Doug (Haag). Ah, in your opinion does pre-paying this or keeping it on the books , what effect would each of these alternatives have on our credit rating or our bond rating/” The TM replied “We have no bond rating”…Comm Clottey was puzzled and responded “We have none?” The TM said “We don’t , because we haven’t gone to the bond market and so”… The Mayor then chimed in “So that answers that. ok”..

VM Dodd ” The other question I really would like to know is if we had to decide to go out and borrow 3 million to do the undergrounding for the sake of argument on El Mar or just the downtown what are the current rates that we could get that money on compared to this plus its pre-payment?

Finance Dir. Haag” Ah, it’s gonna vary a little bit depending on terms, things like that but kinda just a very broad ballpark estimate that I received for financing on this which is roughly a 10 year term would have been just a little north of 3%”

TM Hoffmann” And we need to look to what the League of Cities does loans to cities too. So we’ll have to check their interest rates.”

VM Dodd” So you’re telling me that we could go and get another loan for around 2 million and for a little over 3% plus the regular fees and here we are with a #.95% loan with a pre-payment penalty. Doesn’t seem to add up in my book yet! Maybe I’m missing the point here? You’re telling me we could go out and get some more money if we wanted to at a little over 3%?

Doug Haag” But remember there’s at least right now we’re looking at the 112,000 dollar pre-payment fee. So refinancing when we look at a refinancing at about 3% the interest savings wasn’t enough to offset the $112,00.”

VM Dodd” No, I’m not looking at refinancing. I’m looking at going to SunTrust to say are you gonna play ball with us because if you’re not you took us over the coals for the 6 million one (loan) where we repaid a very high pre-penalty fee and if you want our business then my attitude would be that we need to actually put to them that we could pay this off now and we could go out on the free market and get a new loan for 10 years at 3% is what we could do and we could take our banking elsewhere if we have to because it doesn’t strike me we’re making any benefit here. We’re carrying a fairly heavy loan at 3.95% plus pre-payment and I agree with Commissioner Sasser here that we should do everything we can to get rid of this as a Commission and there are better terms that we could get out there and better banking terms probably.”

Comm. Vincent “Can I respond , you know in the real world Vice Mayor if we could go out pay this loan off and tell SunTrust we’re not giving you your 112,000 dollars and go out and get another loan for 3% yeah that’d be great! I’d do that tomorrow with my own money! But we don’t know those answers yet. So to sit here and micro-manage and split atoms all night long and we don’t have any answers yet, SunTrust has not gotten back to us as Connie stated. So to sit here and suggest they’re not gonna make us pay the 112,000 pre-payment is preposterous to even go on any further in a conversation!”

BC- The Vice Mayor never made any such statement…Micro-managing would be better aimed at the Mayor for her ongoing instructions to the TM and as for splitting atoms… all I can say is 2014 and Comm. Vincent will be split from the Commission…no doubt!..

Mayor “ok”

Comm. Sasser ” As philosophical as Connie stated which is do you want to pay off the debt that you can afford to pay off” …Comm. Vincent interjected “Right”… Comm. Sasser continued “My answer’s yes and I think that’s what we’re gonna come back to.”…VM Dodd could be heard to say “as is mine.”…

Mayor Minnet” As Commissioner Clottey stated too there are concerns about reserves that you want to maintain so I think that there are both sides to this. I think we need to really look at this and see where we want to go. So those decisions will be brought back during budget time and Connie this is certainly a priority cause it sounds like this Commission wants to see during budget time to see where we’re going to be at to reduce this debt. If we’re gonna reduce this debt as part of this next fiscal year. Alright is that the direction? I think we’ve got that. Connie’s gonna get that information together. Alright.”… Comm. Sasser clearly exasperated replied “Yes!”

BC- I’m with Sasser and Dodd …pay off the the debt…and do not even consider getting any other loans until you ask the voters what…when and how…

More to come…

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