ITALY - The Italy City Council 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 and called meeting held Saturday morning.
Citizens National Bank of Texas originally financed the $5 million project in 2005 - about 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.
“The rates have trended downward and are starting to creep back up,” he said.
Bulaich had two proposals for the city. The first 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 every day. 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 said, adding that 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,” Singleton said. “We feel as though we are a partner with the city. We’re here working every day in this community for a broader base.”
Council member John Droll said the overriding issue with staying with Citizens is that he liked 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. He advised the council that should more funds become available, he would recommend the city to place them in the fund balance, which he said needed to be built up.
“The bottom line is that the tax rate has to be raised regardless of who we go with,” Mayor Frank Jackson said. “This is not going to be easy, especially for people on fixed incomes. And, people want other things, they expect other things from the city. They want a community center, parks, other things. But, the TCEQ told us that we had to build a new sewer plant. If we didn’t, they would.”
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. She said an additional $7 would need to be added in October 2008.
Water superintendent Mark Souder Jr. said the minimum water bill is now $52.93. He said the bill should increase $8 in October 2007 and then increase $6 to $66.93 in October 2008. He said that 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 department heads were meeting later in the day to discuss raising various fees throughout the city. He indicated many of the 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. Dennis Perkins Jr. seconded the motion that passed unanimously.
“This is not a knock at CNB,” Droll said. “They have done a lot for us (the city) and still do.”
In other business, the council approved changing Susan Delephimne’s title from court clerk to court administrator. Olguin told the council that Delephimne has gone beyond expected training and certification and provides support for other courts around the county.
Council member Rodney Guthrie was not present at the meeting.