September 05, 2012 - The Sunset Hills Board of Aldermen could begin the process of retiring roughly $450,000 in outstanding capital-improvement bonds next week.
The Board of Aldermen is scheduled to meet at 7 p.m. Tuesday, Sept. 11, at City Hall, 3939 S. Lindbergh Blvd.
During a work session last week at the Community Center, Mayor Bill Nolan and the Board of Aldermen discussed the process of retiring the bonds with Reagan Holliday of Gilmore & Bell, the city's bond counsel.
Sunset Hills voters last month approved a permanent extension of the city's half-cent, capital-improvement sales tax, which will allow the city to retire the bonds.
The half-cent, capital-improvement sales tax originally was approved by voters in 1994 to fund a more than $5.7 million bond issue for City Hall repairs, a new police station, a new public works building and street improvements, among other items.
The bonds were issued in 1996, refunded in 2004 and were set to be retired in 2016. The bonds have been callable since February 2007, Holliday said during the Aug. 28 work session.
Without approval of the sales-tax extension, Proposition 1, the half-cent, capital-improvement sales tax would have ended in 2016 when the bonds were retired. The tax currently generates $875,000 per year for capital improvements.
When the remaining bonds are redeemed, the city will save an estimated $41,000 in net interest expense and have a cash surplus of $300,000 to $350,000 — more than originally anticipated, according to Ward 4 Alderman Art Havener, who serves as chairman of the city's Finance Committee.
Those surplus funds will be placed into a separate account and the Finance Committee will decide how to allocate that money in the 2013 budget, according to Nolan.
Because the capital-improvement sales tax was tied to a bond issue, restrictions existed on how revenue from it could be used.
For example, for every dollar the city wanted to spend from the capital-improvement tax for street improvements, 57 cents had to be appropriated from general revenue. As a result, a surplus accumulated in the capital-improvement fund because the city has been unable to match the sales-tax revenue with general revenue.
Once the outstanding bonds are retired, the matching requirement will be eliminated. The sales-tax revenue then can be allocated to fund capital improvements and the costs of operation and maintenance of those capital improvements, as outlined in the ballot language for Prop 1.
"… Until these bonds are paid off, that is what your capital-improvement sales tax has to be used for — either the repayment of the bonds or the operation and maintenance of those projects that were financed by the bonds …," Holliday told aldermen. "So, basically, I think for your purposes, the sooner the better as far as getting those paid off … At that point then, once the bonds are paid off, then you can go ahead and utilize your capital-improvement sales tax pursuant to the new proposition …"
Nolan told the Call the outstanding bonds could be retired as early as mid-October.