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HomeMy WebLinkAboutREP FC 439 08/27/1991 REPORT OF THE COMMITTEE ON FINANCE Date: August 27, 1991 Re: Comm. 2759 Place: Councilroom Time: 10 : 00 a .m. Chairman and Members Hawaii County Council Hilo, Hawaii 96720 Your Committee on Finance, to which was referred Bill 471, reports as follows : The purpose of Bill 471 is to authorize the issuance of thirty million dollars ($30, 000 , 000) of General Obligation Bonds of the County of Hawaii for the purpose of financing various public improvements of the County of Hawaii ; fixing the form, denominations, and certain other details of such bonds and providing for their sale; and authorizing the issuance and sale of a like principal amount of General Obligation Bond Anticipation Notes in anticipation of the issuance and sale of such bonds . Communication No . 2759 from Councilman Harry S. Ruddle, Chairman, Hawaii County Housing Agency (HCHA) dated August 18, 1991, transmits subject Bill 471 and Bill 470 which amends Ordinance 91-51 by adding the Waikoloa Affordable Housing Project and appropriating $30, 000, 000 for which funds will be provided from the sale of the general obligation bonds described in Bill 471 . Also transmitted together with Bill 471 is a letter dated August 8, 1991, from the County Bond Counsel Wood Dawson Smith Hellman to Frank Manalili , Treasurer, COH. Therein is stated that the subject Bond Ordinance 471 (Draft 1) had been modified to reflect suggested changes made by the bond underwriter to permit the issuance of variable rate bonds, which will be issued as reimbursable general obligations . It further states, if variable rates bonds are issued, the County Council must adopt at the time of sale of the bonds a resolution approving the support facility agreement, tender agreement and remarketing agreement . Your Committee reviewed and heard testimony regarding Communication No . 2799 , dated August 19 , 1991 from the Council Chairman to the Managing Director, which questioned the impact the $30 million bond issue would have on the County' s present and future municipal bond rating, and Communication No . 2800, dated August 26, 1991, the Managing Director ' s response to Communication 2799 . The Administration' s representatives explained they had received assurances from their bond counsel that the issue would not negatively affect the County' s bond rating and the debt service projections were within legal and financially prudent limits . FC REPORT NO, 439 ADOPTED: SEP 10 1991 • FC-439 Page 2 August 27, 1991 Referring to a debt service projection chart attached to Communication No . 2800, they stated the subject G.O. Bond issue of $30 million, plus anticipated sewer and wastewater bond issues totalling approximately $44 . 6 million, plus the County' s existing funded debt would not exceed the legal net funded debt limit allowable under the State Constitution. They noted the Constitution places a 15% ceiling on the County' s net funded debt which is based on the County' s total Net Assessed Valuation of Real Property. They further explained the State Constitution allows them to exclude the subject $30 million bond issue from the County' s net funded debt calculations . However, the Administration did add the $30 million issue and all present and future issue amounts when calculating the prudent financial limits of debt service based on general fund revenue projections . Again, the projected debt service is below the prudent financial ceiling of 15% of general fund revenues over the anticipated 20 year term of the $30 million bond issue. The Administration explained the $30 million bond issue is scheduled to be retired within 5 years from issuance, but due to the present favorable bond market conditions and uncertainty of future market conditions for the sake of financial flexibility, the 20 year schedule for repayment was incorporated into the issue and used for debt service projections . Your Committee members questioned the practice of retaining bond counsel for the subject bond issue prior to receiving Council authorization to proceed with issuance of the bonds . The County' s Treasurer responded by explaining the bond counsel Wood Dawson Smith & Hellman has been used for many of the County' s previous G.O. Bond issues and provided satisfactory services . He also stated that although the same bond counsel has provided opinions regarding the subject $30 million issue, the firm has not been formally retained and the County will not be charged until the Council authorizes the issue and the Administration selects bond counsel . Some Committee members expressed their concern that the $30 million bond float represents the largest issue in the history of the Council for public improvements and will be the first time the County has engaged in such a large financial endeavor with a private developer . The Administration responded by saying although there are risks, the savings possibilities and benefits outweigh the risks to the County. FC- 439 Page 3 August 27, 1991 Your Committee noted the development agreement Section 2(b) (ii) and (iii) states, units to be sold or rented at prices affordable to families earning more than 100% of the Median Household Income, but Section 4 states rentals available to families earning up to 100% of Median Household Income. The OHCD representative stated this reference was an oversight, and the intent had always been to provide rentals to only those persons in the category earning less than 100% the Median Household Income. He further stated the use of the term "Development Agreement" was not appropriate and a new draft inserting "Agreement" in place of "Development Agreement" was being prepared. Your Committee Chair indicated she had several more questions to the Administration and developer but she yielded to another Committee member, who made a motion to move the previous question. After this motion passed, the original motion to approve said Bill 471 and pass it on to the full Council for adoption, was passed by a majority vote. Your Committee on Finance is in accord with the intent and purpose of Bill 471 and recommends that it pass first reading . HELENE H. HALE, CHAIRWOMAN ROB' RT H. MAKUAKANE, VICE CHR. BRIAN I . DE LIMA, MEMBER TA SHI DOMINGO, MEMB MERLE K. LA , MEMBER HARRY S. DDLE, MEMBER SPENC K. SCHUTTE, MEMBER POL • • MIS.JRITY REPORT OF THE COMMIT`. ON FINANCE Chairman and Members Hawaii County Council Hilo, Hawaii 96720 We do not concur with the Finance Committee Report regarding Communication 2759/Bill 471 because we do not believe that the issues were thoroughly discussed. We believe that a General Obligation bond float of $30, 000, 000 for a private developer is too important a decision to be made without more public input . In particular, we object to the motion to "call the previous question" which effectively cuts off debate. . i 1_-- �' HEL NE H. HALE, COUNCILWOMAN MERLE . LAI , COUNCILWOMAN