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1979 01 04 CC Minutes, Special9UI04 -1 MINUTES OF A SPECIAL MEETING OF THE CITY COUNCIL OF THE CITY OF BAYTOWN January 4, 1979 The City Council of the City of Baytown, Texas, met in special session, Thursday, January 4, 1979, at 5:00 p.m. in the Baytown City Hall Council Chamber. The following members were in attendance: Jody Lander Jimmy Johnson Ted Kloesel :Mary E. Wilbanks Eileen Caffey Allen Cannon Emmett 0. Hutto Fritz Lanham Scott Bounds Eileen P. Hall Absent: Dan Savage Councilman Councilman Councilman Councilwoman Councilwoman Councilman Mayor City Manager City Attorney City Clerk Assistant City Manager Mayor Hutto called the meeting to order, and he asked Tom Masterson, the City's Fiscal Advisor, to review, open and read the bids for the issuance of $2,880,000 Permanent Improvement Bonds, Series, 1979. Prior to opening the bids, Mr. Masterson explained the rating agencies have continued the A - -1 and A -plus ratings. However, Standard and Poors has indicated that should any of the propositions carry, a meeting with City representatives would be arranged to analyze and reopen the question of ratings. In any case, Standard and Poors did notify the bidders on this bond issue when the ratings were released, that there would be a possibility of reviewing the rating after the referendum, which could result in suspension or perhaps a downward adjustment in the rating. With respect to Moody's, they also have indicated a desire to look at the situation again. Moody's has requested to be notified Monday, January 22, 1979, of which propositions carried, if any. On this basis, a determination will be made concerning the City of Baytown's rating. Given these facts, some of the bidders chose not to bid. Two bids were received on this issue as opposed to seven bids on a comparable sale a few months ago. Mr. Masterson pointed out that one of the bids received did not represent the interest rate that these bonds would have obtained under normal conditions. Mr. Masterson surmised that one bid represented a difference of from 1/4 of to to 3/8 of 1%, or a level of interest rates that is comparable to a B -AA rated bonds in todays market. Anticipated delivery of the bonds is on or before January 19 because any bonds sold prior to the referendum, and paid for and delivered by the time the City might vote a reduction or change in its tax rate limitation, would be subject to the original limitation - -any sold thereafter would be subject to the new limitation. Mr. Lanham informed Council that he had received a call from Bill Gidley with Citizen's National Bank who usually brings one or more bids over for bidders. Mr. Gidley called to say that originally he was going to have two bids to submit, but Republic National of Dallas withdrew because of the referendum, and one of the other bidders joined with Underwood, Neuhaus and Company instead of submitting their own bid. Mr. Masterson explained that the First National Bank of Dallas declined to bid because of the referendum, which accounts for a total of five of the seven total bidders last time. 90104 -2 Minutes of the Special Meeting - January 4, 1979 Councilman Kloesel commented that uncertainty is the greatest danger that the City Council is facing now. Mr. Masterson acknowledged that after the election, the bidders would at least :know the facts, but the facts could potentially be such that the City could not sell bonds at all. Councilman Lander commented that he would like to explore Mr. Masterson's comments. After the referendum it could be the City could not sell the bonds at all. This is assuming that the referendum passes. Mr. Lanham explained that after the last trip to New York to meet with the bond rating firms, he was very optimistic that the next time around the City of Baytown would receive a Double A rating. Councilman Lander moved to open bids for the issuance of $2,880,000 Permanent Improvement Bonds; Councilwoman Wilbanks seconded the motion. The vote follows: Ayes: Council members Lander, Johnson, Kloesel, Wilbanks, Caffey and Cannon Mayor Hutto Nays: None Prior to open and reading the bids, Mr. Masterson explained the highest coupon rate may not exceed the lowest coupon rate by more than lo. The bids were opened and read publicly as follows: Bidder(s): Underwood, Neuhaus and Company Paine Webber Jackson and Curtis Rauscher Pierce Refsnes, Inc. Rotan Mosle, Inc. Cullen Center Bank Rowles Winston Corporation Blyth Eastman Dillon National Bank of Commerce of Dallas Fred Baker Associates First National Bank of Fort Worth Maturity Coupon Rate 1980 6.75% 1981 6.75% 1982 6.7570 1983 6.750 1984 6.75% 1985 6.75% 1986 6.75% 1987 6.75% 1988 6.7070 1989 5.750/0 1990 5.75% 1991 5.80% 1992 5.85% 1993 5.90% 1994 6.00% 1995 6.007 1996 6.10% 1997 6.20% 1998 6.30% a. Total Interest Cost $2,077,113.34 Less Cash Premium None Net Interest Cost $2,077,113.34 Net Effective Interest Rate 6.1307950 90104 -3 Minutes of the Special Meeting - January 4, 1979 Bidder(s): First City National Bank of Houston Maturity Coupon Rate 1980 6.75% 1981 6.75% 1982 6.750 1983 6.75% 1984 6.75% 1985 6.75% 1986 6.75% 1937 6.75% 1988 6.75% 1989 6.00% 1990 6.00% 1991 6.00% 1992 6.00% 1993 6.00o 1994 6.05% 1995 6.10% 1996 6.20% 1997 6.30% 1998 6.40° Total Interest Cost $2,113,306.26 Less Cash Premium None Net Interest Cost $2,113,306.26 Net Effective Interest Rate 6.237622% Mayor Hutto commented that this must be an indication of the investment banking circles. Mr. Masterson responded that the bids totally reflect the higher level of interest rates and also indicate a small penalty for the uncertainties. Councilman Kloesel commented that his preference would be to wait and hold a bond sale after the election. Mayor Hutto explained that before the bids were opened, he had set a ceiling of 6o interest rate and that he would personally vote to reject all the bids and try to hold the bond sale after the tax referendum election. Mayor Hutto stated that he had a brief conversation with Lamar Kelley who indicated that he would support Proposition No. 4 and would recommend to others that Proposition No. 4 should be passed. Mayor Hutto felt that after the referendum election bidders would know exactly what to expect. The Mayor reiterated that Mr. Kelley wants to assure Council that he would publicly endorse all four amendments. Councilman Lander commented that in the event Propositions 1, 2 and 3 passed and Proposition No. 4 failed, and Council went on ahead and issued the bonds now, the City would have to pay for them. Mr. Lanham pointed out that principal and interest on the bonds are paid first and something else would have to be eliminated. In response to a question from Councilman Lander, Mr. Lanham explained that the Administration included approximately $140,000 in the current budget for principal and interest on this bond issue to cover the first year. 90104 -4 Minutes of the Special Meeting - January 4, 1979 Councilman Cannon inquired if the bond market was in unfavorable trend at the present time. Councilman Cannon stated that he felt the interest rate was more an effect the market rather than the referendum. Mr. Masterson clarified if the uncertainty of the January 20 referendum were not pending, and if the City did not need this money for an extended period, he could not in clear conscience recommend that the City sell the bonds at this time. Councilman Kloesel moved that City Council reject the bids; Councilman Lander seconded the motion. an of Councilman Lander stated his concern in obligating the City to pay these bonds off should the worst possible result occur in the election; Councilman Cannon concurred. Councilman Lander commented that the citizens are not aware of the ramifications of the passage of the first three amendments and the failure of the fourth, and there is no way of getting this information to them unless some citizens group takes it upon themselves to do so. Councilman Kloesel stated that he agreed with Councilman Lander and felt that the soundest thing for Council to do is to reject the bids and be prepared to go back out for bids later. He further commented that it is not sound for the City to sell bonds with speculation of the first three amendments passing and the fourth amendment not passing. Councilwoman Wilbanks pointed out that if the City were to sell the bonds this evening and Amendment No. 4 does not pass, then Council in effect has made a commitment without looking at the overall picture to establish priorities. Councilwoman Caffey asked for the Administration's recommendation. Mr. Lanham explained that with the possibility of Amendment No. 4 passing, he would suggest that Council reject the bids. However, the people voted these bonds for the improvements that are being talked about; therefore, the City is not going ahead with something that the people have spoken to. That is a factor that should be considered. There is a possibility after January 20, the City will still be on a sound footing. Councilwoman Wilbanks suggested that another important issue to consider is that somehow Council is not communicating to the people the various aspects involved with the election itself. Councilman Lander pointed out that the City could not expend public funds toward this purpose. Councilman Kloesel requested that an item be placed on the next Council agenda so that Council could look at the different aspects of the proposed amendments. The vote follows: Ayes: Council members Lander, Johnson, Kloesel, Wilbanks, Caffey and Cannon Mayor Hutto Nays: None Mr. J. A. King Appeared Mr. J. A. King appeared regarding the anti -noise ordinance. Mr. King explained that he has been in Baytown for 30 years and that he owns and operates a produce house in a residential area. His operation supplies over 100 schools in the Baytown, Pasadena, and Deer Park area. This produce must be delivered by 6:00 a.m. 90104 -5 Minutes of the Special Meeting - January 4, 1979 Mr. King had no problems with complaints from his neighbors, and he pointed out that if Council adopted an anti -noise ordinance, it would automatically put him out of business. Mayor Hutto informed Mr. King that an item concerning the anti -noise ordinance will be on the agenda for the regular Council Meeting to be held on January 11, 1979, and stated that others who operated businesses in residential areas would be affected should an anti -noise ordinance be adopted. Councilman Kloesel inquired if the City has a chart that gives the noise level for certain types of equipment and further commented that he would like to have guidance on this. Mr. Lanham responded that he will attempt to locate information in this regard. Councilman Kloesel commented that possibly Council could study the passage of an ordinance that would regulate operations where noise reached a certain level. Councilman Lander said that federal regulations exist regarding industrial plants. Councilwoman Wilbanks absent. Councilman Johnson requested an executive session with Council to discuss personnel. Mr. Lanham stated that that item would be included on the next Council agenda. Adjourn With no further business to be transacted, Councilman Johnson moved for adjournment; Councilman Kloesel seconded the motion. The vote follows: Ayes: Council members Lander, Johnson, Kloesel, Caffey and Cannon Mayor Hutto Nays: None Approved: Eileen P. Ha 1, City Clerk Karen Petru, Deputy City Clerk