Council chose a two-pronged option which includes a two-year, short-term taxable note proposed by Bank of America and a long-term, tax-exempt package.
The two-year taxable note assumes a fixed interest rate of 2.98 percent on principal of $3,675,000, according to a presentation by Ted Cole of Davenport & Company, which has served as the city’s bond advisors since it began discussing the possibility of restructuring the debt.
The proposal, according to Cole’s presentation, has a two-year final maturity date on the taxable note.
It would allow the city, Cole said, “to buy an extra year” to put a plan together on how to come up with the $3.67 million.
It would also allow the city to negotiate an extension rollover with BOA or utilize term out provisions.
The potential savings over the 15 years of the tax-exempt bonds will vary year to year, according to the presentation,with $754,341 realized in the 2018 fiscal year and more than $860,000 in the 2020 through 2022 fiscal years.
Payments on theater would essentially stay fixed at $964,952 for the majority of the 15 years, according to Cole’s presentation. The city currently pays slightly more than $1.8 million a year.
Councilman Wayne Smith, who made the motion to go with the option, said he wanted to go with the proposal which represented bigger savings. “I think in the next two years, the theater is going to be sold.”
He said after the meeting there are discussions with three individuals interested in buying the venue. He would not divulge the names and said no offers have been made. “I feel confident it will be sold.”
He said the savings the city will realize if the refinancing agreement is approved by the LGC are “going to have a great benefit with expenses and capital outlay.”
In a statement on the matter, City Manager Joseph Scherer said the action taken this evening, which included passing the adoption of a bond order and a final authorizing resolution, allows him to deliver documents which will call for the redemption of the city’s original 2007 special revenue bonds.
“The city council’s actions allow the administration to continue to move forward in attempting to restructure the city’s financial obligation with Bank of America while establishing long-term financial stability and improved annual cash flow relief,” Scherer said in the statement.
The city manager said, “At the end of the day, these actions will allow us to do away with the uncertainty of our annual payments on bonds that have a variable interest rate, which continues to trend upward, along with numerous fees and transaction costs and instead establish a fixed rate loan that we can budget for with certainty into the future.”
He continued in the statement, saying, “Our annual payment will be lower than what we pay now to Bank of America, giving us some income to make up for the loss of revenue by state legislature decisions.”
LGC consideration of refunding the original bonds and swap termination will occur on May 2.
Once the city receives LGC approval, “We hope to complete these transactions by mid-May. This will allow us to finalize our budget projections for next year,” Scherer said in the statement.