City attorney to draft ordinance to put bond issue on April ballot
October 19, 2005 - By MIKE ANTHONY
A motion instructing City Attorney Rob Golterman to draft an ordinance placing a general obligation bond issue on the April 4 ballot was approved last week by the Crestwood Board of Aldermen.
The general obligation bond issue, if placed on the ballot and approved by voters, would be used to "pay off and end the use of the line of credit and bring all funds to a current balance of zero,'' according to the motion made by board President Tim Trueblood of Ward 2 and seconded by Ward 4 Alderman Pat Duwe.
The amount of the general obligation bond issue was not specified in the motion, which aldermen approved with a 7-1 vote. Ward 3 Alderman Jerry Miguel was opposed.
If placed on the April ballot, a four-sevenths supermajority vote would be required to approve the bond issue.
As proposed, the general obligation bonds would be retired in 10 years, at which time the tax-rate increase needed for bond payments also would end.
Aldermen voted 5-1 Oct. 4 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. Trueblood was opposed, while Duwe and Ward 2 Alderman Jim Kelleher were absent.
City Administrator Don Greer said Oct. 4 that the city had asked Southwest Bank for a $3.5 million line of credit. The Board of Aldermen will consider approval of that line of credit Tuesday, Oct. 25, he also said.
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. Trueblood also contended the board needs to take action to retire the line of credit, and he received assurances from Mayor Roy Robinson that the issue of placing a general obligation bond issue before voters would be on the Oct. 11 agenda.
At the Oct. 11 meeting, board members discussed True-blood's proposal for a general obligation bond issue, which some residents said they would oppose if it was placed on the ballot. Trueblood also continued to question the constitutionality of the line of credit, but Golterman said the city was not violating the Constitution.
Trueblood initially proposed placing a $4.9 million general obligation bond issue on the April ballot, but some aldermen balked at the amount.
"... I guess in stating this, I want to make sure that if there's any other way of relieving us of the constitutional duty of being out of debt by the end of '06, I want to hear them,'' Trueblood said. "I certainly know what happened in the April election of this year on the same issue, but the problem hasn't gone away and so if there's another method, I mean let's talk about it. Let's review it. Let's find out the pros and cons on it ...''
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.
Ward 3 Alderman Don Maddox later said, "... The GO bond is the quickest way to get out of debt ... You've got to remember, though, one of the points that was made in the information given to us by the administration was that if we don't clear up the line of credit in short order, within one year, let's say, then we pass on that problem to future boards. To take out a GO bond does limit future boards because what it does is it takes whatever we decide on a GO bond support in the way of tax income, it takes that income away from future boards for the operation of the city. If we decide to tie up 24 cents in property taxes, that's used entirely to pay off the debt. That goes toward no operations, except for what you set aside in the non-expendable trust ... So going to GO bonds does saddle future boards with a debt, and it limits their capability to go for additional property taxes from our population.''
Regarding Proposition 1, Maddox said, "Our citizens said $6 million was ridiculous, and they were correct. I feel the same way about $4.75 (million) or $4.9 (million). I think that's way beyond what we can honestly request to solve our problems ...''
Noting that the "amount you ask for becomes critical,'' Ward 1 Alderman Richard LaBore asked Trueblood, "Is $4.9 (million) the needed necessary funds? I'm picking up from Alderman Maddox's comment about ask for what you need.''
Trueblood replied, "What I said was 'not more than,' which simply means that if it turns out to be $3.2 (million), that's what the bonds are sold for. You're asking the board, as we did this last time, and the opponents to the GO bonds successfully portrayed that we didn't have a clue as to what we were doing because we couldn't tell them exactly what the amount was six months in advance. How many of us can tell right now six months down the road what your bank balance is going to be? ... My point is this: Quite simply, 'not more than' means just that, 'not more than,' which means at the time of the election, if the citizens grace us with this and say yes, we see this as a way of getting us out of long-term debt, the bonds are sold. And the amount of the bonds are going to be $3.2 (million) because that's what the credit line is right now. If it's going to be $3.5 (million), that's what it is. I don't understand why the 'not more than' is the issue when the issue should be the debt we're carrying with the line of credit.''
LaBore said he believed the actual amount of a bond issue could be determined later and suggested that aldermen establish a panel of financial experts to assist city officials.
"That's not to indicate our incompetence. It's just to involve people a little bit more, including some expertise that may not be here,'' he said.
Ward 3 Alderman Jerry Miguel later proposed a plan that he said would eventually eliminate the line of credit.
"To me, the issue is GO bonds vs. the line of credit. No argument that we need a tax increase. The question is should that tax increase go to GO bonds or should it go into city operations to support normal city operations and with the changes that the city already has identified, etc., etc., the line of credit could be paid down. And in my estimation, it can be paid down by $3 million by the end of 2008,'' he said.
Noting that he had not seen Miguel's proposal before, Greer said, "I'm curious as to how you're going to move the $730,000 in special tax money to accomplish this goal. I don't know how you're going to do that. Are you going to move $730,000 worth of expenses from the general fund to the capital improvements fund?''
Miguel said that his proposal was a framework for eliminating the line of credit and some details still needed to be resolved.
After the board approved Trueblood's motion to have Gol-terman draft the ordinance, resident Frank Spinner, whose background is in banking and municipal finance, offered the board some "advice.''
"... If that bond issue doesn't pass, if you think the bank has been obnoxious now, you haven't seen anything. They will give you nothing but a rough time,'' he said. "So if you're going to have the bond issue, boy you better be pretty sure it's going to pass because if not, they're going to want out, OK, based on my experience ...''
Kelleher asked, "Mr. Spinner, are you going to oppose this one so vociferously ...''
Spinner replied, "From what I've seen so far, yes.''
Kelleher said, "Well, there you have it.''
Spinner said he opposed spending money on interest for a bond issue, while a tax-rate increase could solve the city's problems over four or five years.
Karen Trueblood, Tim Trueblood's wife, said she had spoken with the Attorney General's Office about the line of credit.
"... On first blush, the gentleman (from the Attorney General's Office) said it appears that you are deliberately skirting the current law. Is that who you guys want to be? Is that who you want to be? You remind me of my 17-year-old son who wants to skirt his curfew. You know the truth as well as I do. The state Constitution says you cannot incur debt without allowing me to vote for more than one year. I do not understand who you people think you are that you should deny me the right to vote on spending for this city. I'm astonished. The reason the state allows debt in the form of bonds is because people vote on it, and long-term debt is easier for a city to carry than short-term debt ... If you all were honest, you know you can't make these payments on this line of credit you're asking for.
"I think that's perfectly obvious. The reason we need a bond is because you can't pay this bill. Why do you think the bank previously allowed you to have a signature loan and now they want the paper to this building? They know that you can't make these payments. But if you want the loan, they're going to give it to you. Why not? They have a great piece of property ...,'' she said. "I don't understand why you're afraid to let us vote, and I resent it hugely ...''
Resident Martha Duchild said, "I think before any further discussion is made, we probably need to establish because there seems to be some disagreement with the city attorney and others as to whether or not there is a law in which we are in violation of, before any further discussion. Because as to the need for a general obligation bond to convince the bank that we're doing something, that could also be done with a property tax increase. There's no reason that they would be more convinced with a general obligation bond than a property tax in-crease. So that negates that argument with the bank and so the only thing that remains out of Alderman Trueblood's need for a general obligation bond is the state Consti-tution. So I think the city attorney's opinion would be needed at this point.''
Robinson said, "He's made it. It's not in violation of the Constitution.''
She said, "So we're not in violation of the Constitution. So there's no reason that a general obligation bond is the only answer and I think all options should be on the table.''