Disagreement delays bonds

Published 12:18 am Tuesday, June 7, 2016

3 Opp Council members dispute having agreed to refinance, despite what minutes say

After heated discussion last night, the Opp City Council couldn’t agree to suspend the rules, and accept the more than $1 million in proceeds from the refinance of a portion of its 2007 bond issue.

The portion refinanced was the more than $10 million secured in 2007 to build the new elementary school.

Finalizing the bond deal requires adoption of a city ordinance. Ordinances generally require two meetings, but council members can, if they agree unanimously, suspend the rules, and adopt ordinances on the first reading.

Ken Funderburk of Stifel told the council with the refinance they would be able to drop the interest rate from 4.45 percent to 3.002 percent.

Funderburk reported that the net proceeds from the refinance grew from $675,000 in March to $902,667.

“Interest rates improved 39 basis points since March,” he said. “Interest rates were at an all-time low in February and increased in March.”

At least three of the five council members said they didn’t remember authorizing Stifel to actually secure the bonds, despite having approved minutes to the contrary.

Council member Bobby Ray Owens said he remembered the wording to be “exploring the bonds.”

Council member Mary Brundidge also said Mayor John Bartholomew “told us you were going out and soliciting.”

“You’re OK,” Brundidge said to Funderburk. “There’s a problem here.” Brundidge then gestured to Bartholomew.

Funderburk explained that the bond business doesn’t work like that.

Owens said he remembered council member Mike Booth asking several times if the OK the council gave was just to explore.

“You can’t just stick your toe in the water,” Funderburk said.

Owens said he didn’t think they were selling them.

According to the minutes from the January 19 meeting, “the first item of business was Resolution 2016-01 authorizing certain actions with respect to general obligation refunding warrants series 2016.”

Brundidge asked the mayor what the city’s $500,000 would go to.

“You are the legislative body,” Bartholomew said. “I don’t spend the money. You authorize it.”

Bartholomew’s plan has been from the start to use the money for repairs at the library, fire department and Channell-Lee Stadium.

Opp City Schools will contribute $50,000 toward Channell-Lee Stadium and will upgrade the system’s technology infrastructure.

Also questioned was Stifel’s $7.50 per $1,000 bond underwriter cost.

Councilmember T.D. Morgan said that another bond firm had approached them seeking to do the underwriting cost for $4.50 per $1,000 bond.

“The average underwrite cost is $10.50 per bond,” Funderburk said. “I’m sure there’s a difference in service.”

Funderburk said last year his firm did 900 issues, which was the most of any firm in the nation.

“That would save us $3 per thousand,” Morgan said. “That’s like $78,000 total.”

Bartholomew said the firm usually does more “Rolls Royce” deals.

Bartholomew called for the council to suspend the rules and adopt the ordinance Monday night, but only Mike Booth, Arlin Davis and Owens would agree to it. Suspending the rules requires unanimous consent, and

Brundidge and Morgan would not agree.

Bartholomew introduced the 57-page ordinance.

The council will vote on the ordinance at a special called meeting on Wednesday at 1 p.m., when only a simple majority vote will be required.