Italy voted on $5.2 million bond proposal
By 07/19/2007 00:00:00
ITALY - The Italy City Council made a decision to go to an out-of-town bank and voted to go with a $5.2 million bond proposal from First Southwest of Fort Worth for the sewer treatment plant and lines at a workshop at a meeting held last Saturday.
Citizens National Bank originally financed the five million dollar project in 2005 approximately 18 months ago, according to Mark Singleton, president of the bank.
Nick Bulaich, with First Southwest, presented the council with a history of interest rate trends over the last 20 years.
He said interest rates were at the market's highest at 9 percent in 1987.
Bulaich said, 'The rates have trended downward and are starting to creep back up.'
Bulaich had two proposals for the city.
The first proposal had the city making interest payments for three years. Payments on the principal would begin following the three years.
The second proposal had the city making principal payments after one year. The drawing card for the city was the fixed interest rates offered by First Southwest.
The First Southwest representative said interest rates should be in the neighborhood of 4.65 percent.
Bulaich urged the Council to lock in interest rates saying they might risk higher interest rates after five years.
Singleton told the Council, 'We (CNB) are an asset in your community. First Southwest — they are not here everyday.
'If you can't make a payment with First Southwest, you are in default.
'If you can't make a payment with us, we make modifications.
'I don't mean to sound like a broken record but the city needs to be looking at repayment of the debt.'
Singleton added the cost to refinance with First Southwest would be an additional $267,000.
'I would love to continue to finance the note and who's to say the interest rates won't go down in five years,' he added.
'We feel as though we are a partner with the city. We're here working every day in this community for a broader base.'
John Droll, council member, said through news outlets, the overriding issue with staying with Citizens is that he likes the ability to pay off the debt early if the opportunity presents itself.
Bulaich told the council that the bonds through First Southwest are sold for a 10-year period. After 2017, he indicated the city could make increased payments without penalty.
Mayor Frank Jackson told the Council, 'The bottom line is that the tax rate has to be raised regardless of who we go with.'
City Secretary Cynthia Olguin told the Council that the city has been collecting $11 for the sewer escrow account on all water bills.
She said an additional $5 is scheduled to be added to the sewer bill Oct. 1 and an additional $7 would need to be added in October of 2008.
Mark Souder Jr., water superintendent, said the minimum water bill is now $52.93.
He said the bill should increase $8 in October of 2007 and then increase $6 to $66.93 in October of 2008 and it would be a $14 increase on the water/sewer side of the debt.
The other half of the $5 million debt would come from increased taxes.
Council member Greg Richards said he would like to see the rates locked in but, at the same time, wanted to support the people in the town.
Jackson said the city department heads were meeting later in the day to discuss raising various fees throughout the city.
He indicated many of the city's fees are lower than other communities the size of Italy.
After an hour-and-a-half discussion regarding the financing, Droll made the motion to refinance with First Southwest under the one-year scenario.