Town of Nolensville
Board of Mayor and Aldermen Special Meeting
Date: November 22, 2010, Time 6:30 p.m.
Nolensville Recreation Center
Mayor Beth Lothers opened the meeting at 6:30 p.m. Members present were Mayor Lothers, Aldermen Jimmy Alexander, Tommy Dugger, Larry Felts, and Brian Snyder. Staff present was Counsel Robert Notestine, and Recorder Cindy Lancaster. There was one citizen present.
Mayor Lothers led the Pledge of Allegiance and introduced Mr. Chad Jenkins with the Tennessee Municipal League.
Mr. Jenkins addressed the Board noting his position as Deputy Director of the Tennessee Municipal League located at 226 Capital Boulevard, Nashville, Tennessee, with tonight representing the Tennessee Municipal Bond Fund. He explained to the Board the TML Bond Fund and their roles working with Tennessee Municipalities.
Mr. Jenkins noted that the Board has two options to choose from, a variable and a fixed rate. Mr. Jenkins explained the variable rate in length noting that the initial resolution the Board passed several months ago, gave the authorization to borrow up to 4 million dollars. There is a cost that is based on ratings. He stated that Nolensville has a “AA” credit rating. He added that few cities have such a good rating. He added that there is an administration fee of 15 bases and a $125 per month trustee fee. Mr. Jenkins said that if funds were obtained today the variable rate would be 1.23, with a one-time cost of approximately $28,000. He noted that there is not a pre-payment penalty and the Town can refuse the loan within 90 days after signing with no penalty. Mr. Jenkins noted to his knowledge a city has never refused the loan, although it can be done. On a variable rate loan the Town can draw the money down for a three-year period. The Town does not have to obtain the funds until it is needed. Therefore the Town only pays interest on the funds it is actually using. Mr. Jenkins advised the Board that the loan is reviewed every seven years with a six-month notice and the rate is adjusted accordingly to the market.
Mr. Jenkins began describing the fixed rate which is the second option. He stated that there is a one-time cost of 1% of the loan amount, which would be $40,000 for a 4-million dollar loan. Once the loan is obtained the entire amount would be taken from the loan proceeds, with annual principal payments being made in addition to semi-interest payments. A fixed rate loan cannot be pre-paid except after seven years.
Mr. Jenkins noted that amortization schedules were ran on each with the fixed rate resulting in 3.15% and the variable rate averaging 1.9%. He ask the Board to note that with the economic challenges the variable rate is significantly lower.
Alderman Felts clarified that on a variable rate the Town can draw down funds as needed and on the fixed rate the lump sum must be taken at once.
Mayor Lothers clarified that by resolution the Board must make a decision on whether the loan is going to be a fixed or variable rate. Previously by resolution the Board had approved the amount of up to 4-million dollars.
Alderman Dugger stated that in the past the Budget Committee had always recommended 5% be set aside for the payment.
Counsel Notestine stated that the next step is the loan agreement, with the final step being submittal of the paperwork to the State Comptroller. Mr. Jenkins noted that TML has never had a loan denied, although the State Comptroller has denied other loan documents.
Mayor Lothers asked for a motion for resolution #10-20, a resolution authorizing a fixed rate loan. The resolution died for lack of a motion.
By acclamation the Board agreed to move to agenda item three.
Alderman Alexander made a motion to approve resolution #10-21, a resolution authorizing a variable rate loan pursuant to a loan agreement by the Town of Nolensville, Alderman Snyder seconded, the vote was taken and Resolution #10-21 passed unanimously.
The meeting adjourned at 7:18 p.m.
Respectfully submitted, Approved,
Cindy Lancaster Beth Lothers
Town Recorder Mayor