Crestwood aldermen eye bond issue, restructuring
Board OKs $3 million line of credit
October 12, 2005 - By MIKE ANTHONY
Placing a general obligation bond issue on the April ballot and considering restructuring alternatives were scheduled to be discussed earlier this week by the Crestwood Board of Aldermen.
The Board of Aldermen was scheduled to meet Tuesday night — after the Call went to press.
Aldermen last week voted 5-1 to adopt an ordinance authorizing a $3 million line of credit with Southwest Bank, pledging City Hall and the property on which it sits as collateral. Board of Aldermen President Tim Trueblood of Ward 2 was opposed, while Ward 2 Alderman Jim Kelleher and Ward 4 Alderman Pat Duwe were absent.
The city's previous $2 million line of credit with Southwest Bank expired Sept. 28 and the Board of Aldermen voted Sept. 27, with Trueblood opposed, to approve a "bridge loan" not to exceed $2 million to repay the line of credit. City officials said that the line of credit had to be increased to $3 million — through Oct. 31 — to keep the city operational and in return, the bank asked the city to pledge City Hall as collateral.
During the Oct. 4 special meeting, Trueblood questioned whether approval of the $3 million line of credit would violate the provision of the state Constitution that limits how much debt governmental entities can incur without voter approval. The constitutionality of the $3 million line of credit also was questioned by two residents — David Brophy and Karen Trueblood, Tim Trueblood's wife.
At one point, Tim Trueblood made a motion to instruct City Attorney Rob Golterman to draft legislation placing a bond issue not to exceed $6 million on the April 4 ballot for the board to consider Oct. 11. Trueblood's motion did not receive a second, however, after Golterman questioned the appropriateness of making such a motion at a special meeting without proper notice to the public.
But Tim Trueblood contended the board needs to take action to retire the line of credit and he did receive assurances from Mayor Roy Robinson that the issue of placing a general obligation bond issue before voters would be on the Oct. 11 agenda, along with other alternatives previously discussed by the board, including Greer's staff restructuring proposal. Greer's restructuring plan includes increasing the benefit level for employee pensions to encourage retirements for a two-year period. The city participates in the Missouri Local Government Employees Retirement System.
Crestwood voters last spring defeated Proposition 1, a general obligation bond issue not to exceed $6 million that would have allowed the city to retire its line of credit with Southwest Bank, establish reserves sufficient to meet the city's cash-flow needs and reconcile debts the general fund owes other city funds. Before the election, Greer said that issuing $4.732 million in bonds would accomplish those goals. A 24-cent tax-rate increase for 10 years would have been required to retire the bonds.
The city has been operating with a line of credit from Southwest Bank since September 2003 when the Board of Aldermen approved an ordinance establishing a line of credit not to exceed $1.25 million. The line of credit was to be repaid on or before June 30, 2004. In May 2004, aldermen adopted an ordinance extending the line of credit until Sept. 29, 2004. Aldermen last September approved an ordinance to extend the line of credit — in an amount not to exceed $2 million — until Sept. 28, 2005.
In the June 23 letter, Southwest Bank Assistant Vice President Mark C. Niemeyer noted that the city's line of credit was renewed last year "without incident, thanks in large part to the bank's knowledge of the general obligation bond proposition, which served as a concrete plan of action to improve the city's financial condition.''
"With the bond issue failing to pass this April the city currently lacks a defined plan of action to make marked improvement in its overall financial position,'' Niemeyer wrote. "Please understand that Southwest Bank values the relationship we have with the city of Crestwood, however, when it comes time to begin the renewal process on the city's line of credit later this summer, it will be imperative that the city provides a concrete plan of action to improve the current financial situation.''
At last week's special meeting, Tim Trueblood asked why the line of credit had to be increased to $3 million.
"This is actually the bridge to get us to the end of the month so that we have the opportunity to renew the standard line of credit ...,'' City Administrator Don Greer replied. "I think between the cash that was needed for the defeasance, the outstanding warrants, the status of the line of credit occur at a time when we're at our $2 million limit, and the line of credit for the following year is being sought in the amount of $3.5 million. This is the — we're entering our worst time of the year for cash flow, being October, November, December, and we need to pay bills.''
The Southwest Bank board is scheduled to meet Oct. 11 to consider the city's request for a $3.5 million line of credit, and the Board of Aldermen will consider approval of that line of credit Tuesday, Oct. 25, Greer said.
During a discussion of the ordinance authorizing the $3 million line of credit, Tim Trueblood quoted from the state audit of the city that was completed last spring: "The board must continue to monitor the financial condition of the city and develop a long-range plan which will allow the city to reduce its expenditures and/or increase its revenues to operate the city with available resources.''†
"... I'm of the position, the thought that we should tonight instruct the city attorney to prepare a bill for the reading at next meeting, next Tuesday, to put on the ballot in April general obligation bonds not to exceed $6 million. I would make that motion at this time,'' he said.
Robinson said, "It's not a proper motion tonight because we can only discuss what's on this (agenda).''
Tim Trueblood said, "Then I will vote no on first reading and we'll do it next week.''
Greer said that delaying approval of the ordinance would mean the city would not be able to meet payroll.
Tim Trueblood said, "... We know what we're facing. We're all sitting here saying it will go away. It won't. I could make the motion that we would instruct staff to reduce payroll effective Dec. 1 for $500,000. Would there be a second for that motion? We have the power and authority to do that ...''
Golterman said no votes could be taken on topics not on the agenda, but staff could be instructed to prepare materials for discussion at a future meeting.
Tim Trueblood said he wanted to discuss proposals to eliminate the need for the line of credit.
"... I don't get it. We have put the citizens and the city administrator and the staff of this city through the wringer the last year, and we have sat on our hands. It's fish or cut bait time,'' he said. "If you don't want to do GO bonds for whatever reason, come up with another solution. Reduce staff Dec. 1 (by) $500,000 this year. That would be a great step if you want to do that. I don't. But do we have any other methods? The mall is not going to explode into Frontenac next week and turn into a bundle of money for us.
"Let's be very honest about it. We're under taxed when it comes to property taxes. The GO bond on a 10-year note cost the average citizen $860 for the 10 years. We knew that last year. Why do you think the bank lent us the money last year? They thought our citizens might vote for this. But they didn't. Now we have the opportunity to approach it again or we can make cuts. I see no recourse in that but those decisions, but those solutions.
"If there's another solution, I'll gladly accept it and be listening for it .... Let me explain something to you why I'm so adamant about this. The objective requiring cities to have a balanced budget and not to go into long-term debt is to prevent exactly what we're doing — rolling the debt over from year to year to year so future elected officials and citizens will be faced with a debt they had nothing to do with when it came to voting,'' the board president said.
"The state also says very clearly that from time to time the citizens should be asked to vote on issues regarding the future of the city and its indebtedness and finances. We're not doing that ...,'' he said.
Ward 3 Alderman Jerry Miguel later said, "... I feel there's more than one solution, and I feel that a work session would be the appropriate format to discuss possible solutions to the issue.''
Tim Trueblood said, "We've had in the last year at least 15 work sessions ... It is best handled where we are now, at a public meeting where our vote counts and a record is kept ... I am absolutely stunned and astonished that from last Tuesday to this Tuesday no one took me seriously when I said this was a problem that needed to be resolved. We've been told this for a year. What are we running from? What are we running from? Ourselves? A promise that we made in a campaign three years ago that we can't keep? Say you can't keep it. Say you made a mistake. We've made mistakes, this board has. Are we now putting our citizens at risk because we refuse to do the correct thing and that's pay off our debt. Ask the voters to do it. And if they don't, then the consequences belong to them ...''
Noting that aldermen were in agreement regarding a potential April ballot issue, Miguel later said he preferred a more gradual approach.
"... I think there's a half a dozen different alternatives or options that can be taken to this issue, and they will take some time to discuss,'' he said.
Tim Trueblood said, "I'm — with all due respect, I'm absolutely baffled by what you just said. I am stunned that there are six other ways. Where have you been? Where are they? Go slower?
"Unfortunately, the bank does not lend us money based on our ability to pay slower ...,'' he said, urging the board to place a bond issue on the April ballot.