The Morristown City Council on Tuesday resolved to move as quickly as possible to issue $36 million in fixed-rate bonds to finance the construction of a community center in West Morristown.
Chris Bessler, Morristown’s financial advisor, said this morning the competitive bond sale could occur as soon as early November. Interest rates are at or near historical lows,
“You’re not going to see these types of interest rates for long, and you’re not going to see them again,” Morristown City Administrator Tony Cox told councilmembers in making a case to act now.
The recent 25-cent tax increase is sufficient to retire the $36 million debt over 30 years, Joey Barnard, assistant city administrator, said this morning.
Bessler, senior vice president for Cumberland Securities in Knoxville, says he expects to have the bond resolution and his proposed employment contract ready for the Oct. 1 council meeting. After the resolution is published in the newspaper, city government must wait at least 20 days to sell the bonds.
Bessler says the bond offering will be advertised to hundreds of prospective buyers interested in tax-exempt municipal bonds, which likely will be resold to life insurance companies, municipal funds and private investors.
Councilmember Kay Senter, a member of the Tennessee Municipal League Bond Fund board, floated the idea of getting a proposal from TML, but her proposal gained no traction.
TML does not offer 30-year, fixed-rate bonds, according to the city administrator. The longest TML could guarantee a fixed rate is approximately three years. After that, the interest rate could be adjusted upward. City government could pay the higher rate or go to a long-term fixed interest rate like the one available currently through Cumberland Securities.
“You’re on the bond board,” Morristown Mayor Gary Chesney told Senter. “It’s the elephant in the room, but it seems like (going with Cumberland Securities is) an easy call when we’re talking to the taxpayers.”
Senter told Chesney that it’s an affront to suggest she is making decisions with taxpayer money based on her affiliation with TML. When city government reissued millions of dollars in Morrsitown Utility Commission bonds, Senter insisted that TML be allowed to make a proposal, despite the fact the TML does not offer long-term, fixed-rate bonds.
Councilmember Tommy Pedigo, a TML board member, said he doesn’t like having just one option.
Bessler says the proposition that TML offers a competitive alternative to Cumberland Securities is illusory. TML deals exclusively or almost exclusively with one bank, so TML’s offer is based on the policies of a single financial institution.
The bond sale Cumberland Securities will conduct resembles an auction. Not only is bidding open to many investors, the one that offers the lowest interest rate wins.
Bessler says nine institutions participated in a $37 million bond sale for Knox County government on Monday. J.P. Morgan Securities submitted the low interest-rate bid, the financial advisor said.