Hard choices faced in Redkey (04/13/06)

REDKEY — “These are some hard choices you have to make,” town attorney John Brooke told council members here Wednesday night.

Meeting in special session to discuss financial concerns and a pending sewer bond payment, due April 28, council members agreed to refinance the bond issue over a 10-year period to lower the individual payments, after pooling all available resources to make the $82,200 payment on time.

“We just can’t default on that (sewer bond payment) loan,” town council president Dottie Quakenbush said prior to taking a vote on the plan to use all available resources, including an advance property tax draw of between $10,000 and $12,000, to make the $82,200 bond payment on April 28.

Town officials said they would limit spending to essential items until the refinancing procedure is completed on about June 1, making money available to pay back the town’s other accounts.

Brooke outlined this procedure Wednesday night to council members, as opposed to taking out a bond anticipation note (BAN) loan from a local bank and then making the bond payment on April 28 with the idea of paying off that loan with interest, and then proceeding with the bond refinancing plan at a later date. This would result in additional interest and bond consultant fees totaling several thousand dollars more than those for just the refinancing project alone, Brooke said.

The attorney explained that he had been in contact with the bond consulting law firm of Bingham-McHale of Indianapolis to develop the refinancing plan which would spread the payments for the remaining $240,000 in principal on the sewer bonds over a 10-year period.

This would decrease the individual payments considerably from the $80,000 range to amounts between $30,000 and $35,000, or lower.

With the current payment schedule, the sewer bond issuance would be paid off on May 1, 2008. The refinancing plan would pay off the current bonds but require Redkey to enter into a new loan agreement, selling new bonds and extending the time period for paying them to 2016.

This will make the individual bond payments lower but increase the overall amount of interest to be paid.

The plan, approved unanimously by council members Wednesday night, calls for clerk-treasurer Sandy Kirby to provide a list of all possible fund transfers so Brooke can prepare a resolution for the town council’s next regular meeting on April 20, combining all that money temporarily so that the $82,200 sewer bond payment can be made on time.

The down-side of the plan is that this will deplete all the town’s funds, making only essential expenses such as payroll, gas, electricity and insurance premium payments possible through the beginning of June.

Kirby said that the town’s March bank statement of all available accounts showed a balance of $107,000.

Once the $82,200 is deducted from that amount, the town will have approximately $24,800 to pay all its bills through June 1 when the refinancing should be completed and these other funds can be repaid. Kirby added that with the $12,000 advance property tax draw, expected to be received later this month, that total would increase to $36,800 but that will have to last until the beginning of June.

Could the town meet its payroll for the next several weeks with that amount of money, Brooke asked Kirby. The attorney said that payment of most outstanding bills, including the one from his own law firm, could be held off, but the bills for gas, electricity, insurance and payroll will need to be met.

The town’s payroll totals approximately $3,275 a week.

With papers spread all over the council table and a small calculator in hand, Kirby checked over her financial account records with Brooke’s help during Wednesday’s meeting.

“It’ll be tight but you could do it,” Brooke said.

“I have robbed Peter to pay Paul for years, and this still blows my mind,” Quakenbush said.

Calling all of this financial maneuvering “kind of scary,” Brooke said he could sympathize with the clerk-treasurer’s concerns.

Also at the meeting, Brooke told Kirby and town council members: “This is a problem that wasn’t of your making,” referring to former clerk-treasurer Brenda Adkins who resigned from that position last year as the State Board of Accounts was conducting an audit of the town’s financial statements and bookkeeping procedures.

If the town had collected all its outstanding utility bills, Redkey would have an additional $90,000, Kirby pointed out.

Quakenbush added that water shut-offs for nonpayment of current bills were scheduled to begin on April 24, and a no-exception policy will be followed.[[In-content Ad]]