MEMORANDUM 07-135

 

TO:             Mayor Hornaday and Homer City Council

 

FROM:       Walt Wrede

 

DATE:        August 10, 2007

 

SUBJECT:  Ordinance 07-27 A.

 

Ordinance 07-27 (A) is the ordinance that if adopted, would place a proposition on the October election ballot which asks the voters to authorize the Council to borrow up to $7 Million dollars to construct City Hall and the Town Plaza. This ordinance is scheduled for a public hearing and second reading at the meeting on Monday, August 13. Ordinance 07-27 (A) is the amended ordinance and contains the amendments made by motion on the floor at the last meeting. This is the ordinance on the floor Monday.

 

The agenda also contains Ordinance 07-27 (A) (S). This proposed substitute ordinance contains the additional suggested amendments offered by Gordon that I told you about and quoted at the previous meeting. This ordinance is not on the floor at present but is a proposed substitute for Ordinance 07-27 (A).

 

I was the sponsor of the original ordinance; Ordinance 07-27 (A). My reasons for bringing the ordinance forward at this time were outlined in Memorandum 07-109. You will recall that the primary reasons for doing so were:

 

  • To put the Council in position to proceed with the construction schedule if it decides to enter into a MACC Agreement and Construction Contract in March.
  • To save money by avoiding a special election this winter
  • To take advantage of a larger voter turnout in the General Election
  • To get an early signal from the public about support for this project so that the Council would have time to react and adjust its approach and strategy before March.

 

I am writing to let you know that there have been some new developments and new information that has come to my attention since this ordinance was introduced that has changed my thinking regarding whether it is prudent to take this issue to the voters now. On balance, I now think it would be best to postpone this ordinance and have a special election in the winter. My reasons for this change of heart include:

 

  • Loan Options Diminished: As you know, the ballot proposition in this Ordinance authorizes the Council to borrow money. It does not authorize the Council to sell bonds. Selling bonds is another way to borrow money but it would require a completely different ordinance, a completely different proposition, and a specialized bond attorney. Going this route is more complex and expensive. There was no way an ordinance of this type could have been ready in time for this election and we do not presently have enough information to prepare one even if we wanted to. I was confident that there were enough relatively simple loan options, either through public agencies or private lending institutions, that the Council could find good financing and have the construction money in place by March. However, I recently learned that USDA will no longer loan money directly and will require that the City sell bonds before it participates. This is the agency that the City borrowed money from for the Library. I considered them one of our best options. The bottom line is that the range of loan options has been narrowed significantly and the likelihood that the City would have to bond if it borrows money has increased. This means that the City might have to take this to the voters twice if the voters approve this proposition and the Council later decides it is best to sell bonds. I don’t think that is a good idea.
  • The Impact of Ordinance 07-18 (S). I recently met with a group of volunteers that are organizing themselves to mount an independent public education campaign for Ordinance 07-27 (A). The members have a great deal of experience with campaigns in Homer. They expressed strong reservations about having this proposition appear on the ballot next to the proposition contained in Ordinance 07-18 (S). They said they were afraid that having these two propositions side by side could be confusing to voters and might result in hard to interpret results for both. They stated further that the Ordinance 07-18 (S) proposition is complex and has many components and it was unclear what effect it might ultimately have on the fate of the loan proposition. In short, the committee members believe there will be strong support for the City Hall / Town Center Project and they would prefer a straight up or down vote on the loan proposition. They would prefer it to be the only proposition on the ballot.
  • Taking This to the Voters Now is Premature; During the past two weeks I have become more convinced that this ordinance may be premature and that it would be better to wait and have a special election this winter, even if it costs $10,000 or thereabouts. That is really not a lot of money compared to the project cost and it is important that we get the right question on the ballot. The Committee expressed similar sentiments. Following are some reasons to have a special election in January or March.

 

1.      If the Ordinance 07-18 (S) proposition makes it on the ballot and the voters approve it, the City will have an identified source of revenue to make loan payments. That might make it easier to ask for approval from the voters to incur long- term debt. It might also have an impact on Council’s decision about which financing mechanism to use and whether it is even necessary to take a proposition to the voters. For example, if the money raised by the tax increase is enough to make loan payments, the City could sell Revenue Bonds which do not require voter authorization.

2.      If Council waits until January or February, it will have a finance plan available to it which will offer current comparisons of various financing mechanisms, rates, terms, and long range costs. Council might for example, decide that it is in its best interest to self finance or to lease with the option to own. In that case, it would not take a proposition to the voters at all.

3.      Waiting until winter would allow the public to make a much more informed decision on whether to borrow money for this project. By January, the City should have much more information on financing options and terms, refined costs estimates, an approved project budget, and a preliminary design for both City Hall and Town Plaza that has been reviewed by the community. In other words, the public would have a much better idea what it was voting on. If Council took this to the voters now, we would be asking them to take a tremendous leap of faith.

 

RECOMMENDATION:  Proceed with the public hearing, adopt a motion to substitute Ordinance 07-27 (A) (S) for Ordinance 07-27 (A), and Adopt a motion to postpone Ordinance 07-27 (A) (S) until December 10, 2007.