The Cleveland City Council approved a resolution asking attorneys to review and advise the city on the SWAP agreements and associated termination fees tied to two 2001 bonds issued to build Cleveland Middle School.
The resolution by Councilman Richard Banks authorizes attorney William Young Jr., of Orlando, Fla., and attorney Joseph Peiffer, of New Orleans, to investigate possible claims the city could have if the SWAP agreements were terminated.
The resolution centers around $21 million of low interest variable rate debt and its associated bond insurance. The insurance is designed to stabilize the variable rate debt so it acts more like fixed-rate debt. The city’s bond insurer, AMBAC, fell into financial difficulty and its credit status fell. The city transferred it SWAP agreements to Deutsche Bank in January.
Part of the city’s ability to redo the SWAP agreements was based on a letter of credit from BB & T Bank set to expire in June. It might cost the city about $210,000 annually (1 percent of the debt) to extend the letter of credit with BB & T. It could cost less if it was renewed for longer lengths of time.
The city’s financial adviser, Joe Ayers, of Morgan Keegan, said terminating the SWAP agreements would cost the city $3.9 million in additional debt service compared to the annual cost of credit with BB & T.
Banks asked Ayers if it would be feasible to look into the possibility of refinancing the variable rate debt and getting out of the SWAP agreements. Ayers agreed that some municipalities refinanced, but the majority took the same action as the city of Cleveland. He said it would not be feasible at this time.
In other action, the City Council passed the first reading of a resolution to begin eminent-domain procedures against a local business to obtain a right-of-way needed to improve the intersection at Dalton Pike and 20th Street.
The city acquired rights-of-way on the northwest corner of the intersection for about $400 but have unsuccessfully negotiated a price for approximately 300 sq. ft. on the southwest corner where Dalton Pike Market is located.
According to a memo from City Manager Janice Casteel, the store owners, Kishan Properties, asked $15,000 for right-of-way. Based upon the Bradley County Tax Assessor's appraisal, the property is worth $678.30.
Pete Patel of Kishan Properties told Council members at a previous meeting the loss of land area would interfere with business and he needed compensation. The Council offered Patel $1,500. Patel made a counter-offer of $10,000.
Taking the property by eminent domain was suggested at the April 26.
After discussion, Councilman Bill Estes recommended offering Kishan Properties the $4,000 it would cost to acquire the property through eminent domain.
The store owners have not responded to the city’s latest offer, according to Casteel.
Agenda items include:
The City Council approved the consent agenda with the exception of accepting a bid on two pickup trucks and purchase of irrigation heads for Waterville Golf Course.
The bid on the pickup trucks was not accepted and will be rebid. The irrigation heads for the golf course were approved by a vote of 4-3. Councilwoman Bambi Hines, Councilman George Poe and Banks voted “no.”
The City Council passed all items by a 7-0 vote.
- Final passage of Ordinance 2010-11 to rezone approximately 9.5 acres at 4305, 4310, 4312, 4322,4338, 4358,4362,4368 and 4422 Ellis Circle N.W. from Multi-Family Residential (R3) to Planned Unit Development No. 7.
- Resolution 2010-63 authorizing Mayor Tom Rowland to sign an animal rescue agreement with Exclusively Shelter Pets.
n Resolution 2010-64 authorizing the mayor to sign an agreement for the construction Greenway restroom.
- Resolution 2010-65 authorizing the mayor to sign a grant contract amendment with the State of Tennessee for the FY2011 MPO Grant. The federal match is $295,109 and the city share of the match is $73,777
n Resolution 2010-66 authorizing submission of the 2010 Assistance to Firefighters Grant.
n Resolution 2010-68 authorizing Rowland to sign a contract with TDOT for a traffic signal at State Route 60 and Spring Creek Drive.