by Andre Clayton
Reporter
Twinsburg -- While Council is considering whether it should reissue bonds sold in 2001 and 2002 to acquire Gleneagles Golf Course and Darrow Road Park, and to construct the Senior Center, some legislators say market conditions are not good for the move.
According to Deputy Finance Director Michelle Bowens, cities sometimes raise cash for major purchases by selling bonds to the public.
The city pays back the borrowed money, plus interest, over a matter of years. But when the interest rate drops, cities might choose to reissue new bonds and use those proceeds to pay off the old bonds that carry a higher-interest debt.
The move is similar to a homeowner refinancing their mortgage, Bowens said.
But Council President Bob McDermott said today's market is "high" for municipal bonds to be reissued, explaining the current interest rate for the city's bonds is 4.7 percent.
"The reasonable percent for municipal bonds is 3 to 3.5 percent," McDermott said.
When first issued, Darrow Road Park bonds had a 2 percent interest rate, while Gleneagles Golf Course bonds and Senior Center bonds had 3 percent interest rates, according to city documents.
Bowens said the city hopes to save at least $300,000 by reissuing bonds -- when the market is better.
"The timing is terrible now," Councilor Gary Sorace said.
City Interim Finance Director Tom Zammikiel said he agreed that the market is high for municipal bonds, but explained he wants Council to approve the legislation now so they will "have the ability to be ready when the market is good."
"I think it won't pass," said Councilor Bill Furey, the finance committee chairperson.
According to the three Councilors, the legislation needs to be updated.
"The legislation was written to have an outside financial agency handle [it], but now we have a deputy finance director who is capable" of doing that, McDermott said of Bowens, who was hired in March.
Furey said he does not want the city to spend $25,000 on an outside financial adviser or $40,000 on outside legal counsel that specializes in bonds, which is also written into the legislation.
"Council will be looking at ways to lower professional costs," Furey said, by perhaps negotiating with the outside agencies to lower their fees through competitive bidding.
Furey said the legislation, as it stands, would permit at least $120,000 to be spent on professional service fees.
The Darrow Road Park bonds were issued in 2002 at about $3 million to acquire 95 acres of land on Darrow Road, the legislation states.
The Gleneagles Golf Course bonds were issued in 2001 at $2.4 million to acquire the golf course, constructing a maintenance building, improving the parking area and buying equipment, according to the legislation.
The Senior Center bonds were issued in 2001 at $2.3 million for building renovation, construction, equipment and furniture, the legislation states.