KENTON COUNTY FISCAL COURT
CALLED MEETING MINUTES
SEPTEMBER 8, 2004
The special meeting was called to order by Judge Executive Ralph A. Drees at 2:00 p.m., September 8, 2004, in the courthouse in Covington. Present at the meeting were Commissioners Barbara Black and Adam Koenig; Deputy Judge Executive Scott Kimmich; County Treasurer Ivan Frye; Assistant County Attorney Brandon Voelker; Court Reporter Cathy Johnston; and Guest Bob Cooper. Commissioner Dan Humpert was absent because of illness.
The special meeting was called to hear the first reading of Ordinance No. 225.39.
Ordinance No. 225.39
Approving the issuance of general obligation bonds for the purpose of refinancing existing debt of Kenton County related to the administration building jail bonds, Kenton County recreation bonds and Kenton County parking garage bonds, Ivan Frye reporting: This information was previously given to the court but additions have been made. The amount has not changed and $16,100,000 is still the maximum amount that will be issued and includes three parts that includes the buying out from the state of the lease on our building.
Commissioner Black said she did not think that Mills Road was listed before. Mr. Frye said that Mills Road would not stand alone as a refunding because the bond issue of $1,600,000 is too small. When the other two bond issues were there to absorb the issuance cost, putting it in now will save us money. There are significant fixed costs in doing a bond issue and refunding, and when these are absorbed in a larger issue it makes sense to include them. In fact, it has a larger percentage savings of all which is nine percent.
Judge Drees said he would like to talk about the dollar amount of savings estimated at this time. Mr. Cooper passed out a synopsis of the sources and uses of funds (copy attached) that was taken to Frankfort today for the hearing and it is approved. Everything is in order to go forward.
Mr. Cooper said listed on the first page is the sources and uses of the funds and the second page is a breakdown of the those three with parks listed as $1,620,000, parking $11,855,000 and the jail component as $2,585,000.
Judge Drees asked if these amounts were the exact principle owed at this point. Mr. Cooper said this was not interest but the exact amount it would take to refund those bonds on the day the principle is refunded. Mr. Frye said these amounts were slightly greater than the absolute principle being paid off.
Judge Drees also asked for the amount it was costing the county for the reissuance of the bonds. Mr. Cooper said this was listed on the first page in the amount of $134,070 and the underwriter's discount is listed at $200,750. They are allowed to take 1.50 percent, but this is less than 20 years, so it was cut to 1.25 percent. Most of this will be used for insurance because most Kentucky bonds are insured and the county is not paying for the premium. The underwriter will be paying for the insurance out of his potential profits. Mr. Cooper said the bonds were being insured on the current rate and this was a "double A three bond" on its own without any enhancements, but underwriters like to insure so they will pay for the insurance of 1.25 percent out of their pockets.
Judge Drees then asked if the county was borrowing an additional $335,000 to cover these expenses and Mr. Cooper answered yes. Mr. Frye said our savings are the net of this number.
Mr. Cooper said on page two the savings show a total of approximately $750,000 net present value savings. Mr. Frye said this is down from $900,000 because it doesn't include the jail savings.
Mr. Cooper said that on page three under bond pricing the anticipated rates that we are using today are listed, and it will be noted that in 2014, we have $1,745,000 showing and in 2015, there is $1,290,000. Mills Road Park only goes out to 2014, so we do not extend any maturity. Everything is the maturity that was originally set.
Judge Drees said when the rate is set it will be triggered as to what the rate is at that point. Mr. Cooper answered this is a competitive issue and the process used is getting the information out, going to state government, publishing and there are timeframes that must be met. A September 30 sale date has been set, official statements will be sent out and it will be put on the website as a competitive sale on September 30. During this period of time there will be brokers who will form syndicates and they will submit a bid as one syndicate on September 30 and the lowest in the interest cost will own these bonds.
Judge Drees asked if the county is committed at this point or can we say no? Mr. Cooper said if the refunding does not work, we will not accept it. Commissioner Black asked if we could not accept the bid, even if it is the lowest. Mr. Cooper said this was correct and if the interest schedule does not satisfy or meet the county's needs, we do not have to accept it.
Mr. Kimmich said that on page three an interest payment date of June 1, 2005, is shown as the first payment date. Mr. Frye said this is correct and the principle date due is shown as December 1. Mr. Kimmich said he wanted to make sure there was not a cash flow problem and the county would not get in trouble with the revenue. June 1, 2005, is in this fiscal year and we will be making a payment on the interest of the bond in this fiscal year. Mr. Frye said this would not be a problem because the jail plot issue is still pending and all of them would have a bond payment due, and this payment should be less than the county otherwise would have made.
Mr. Cooper said on page four the bond summary statistics are listed. What is expected using the listed rates, the net interest cost of all expenses is 3.5731. This gives the treasurer for budgeting purposes the maximum annual debt service. Judge Drees asked what was meant by net interest cost versus true interest cost. Mr. Cooper answered that the state asked for the cost on a NIC basis as opposed to a TIC basis. This is part of the program that is used so both can be provided. Some bidders want the cost on a TIC basis as opposed to the NIC basis.
Judge Drees asked for an explanation of the average life of the bond and the duration of issue. Mr. Cooper said this means that if you have a bond that is a 12-year bond, the average life means that it can be paid off in that period of time. Mr. Frye said it is a weighted average of all outstanding bonds every year divided by the number of years and it comes back to this number.
The bond debt service listed on the next page is a breakdown of the total principle and interest and when it is due and this is more of a management tool. The savings page is next and prior debt service and refunding debt service are the two columns looked at to tell where the real savings are listed. The dollar amount of the savings total is $938,524, but using present value at today's rates, it is really $750,000. The bottom and important line is that the savings of the two issues of the parks and the garage of the refunded bonds, is that we expect them to be in excess of six percent.
Mr. Cooper stated that as far as the jail is concerned, it is being treated as new money because we are actually paying off a lease. The Department of Corrections is going to be doing their refunding at about the same time we do ours, so whatever it is, it will be the same as what would have come from the state. Mr. Frye said that currently the lease on the jail is being financed under general obligation debt and we will be borrowing money to pay this and will not pay it out of the general fund. The difference between the debt payment on the borrowed money for the bond will be approximately $20,000 and next year our budget will have slightly less debt service than it has today.
Judge Drees asked for a motion of approval of the first reading of the ordinance. Commissioner Koenig made the motion for approval; seconded by Commissioner Black. The motion was unanimously approved upon roll call.
Mr. Frye said the second reading of the ordinance would be next week and that has already been advertised. The bond hearing was held this morning and was approved by the hearing officer and an actual opinion will be issued on September 15, after our document is approved on September 14. A signature page of the copy of the ordinance will be faxed to the hearing officer and he will send back to us the next day the approval of the state local finance officer of the bonds. There is a 15-day waiting period for an appeal period that will end on September 29 and we can plan to sell bonds on September 30. Another 15-day waiting period will begin and the bonds will actually be signed on the closing day of October 18.
Commissioner Black asked if the rate will be received on the closing date and Mr. Frye answered that the rate will be received on September 30.
Authorization was asked for the County Judge Executive and the County Treasurer to take the measures necessary to effectuate the sale of the bonds. Commissioner Black made the motion with Commissioner Koenig's second. Judge Drees asked for any questions and, there being none, asked for a roll call vote. The motion unanimously passed following roll call.
The meeting was adjourned with a unanimous vote of aye since there was no further business to come before the court.
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Ralph A. Drees
Kenton County Judge Executive
ATTEST: _________________________________
Kenton County Court Clerk
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