Audio and Transcript from Somervell County March Hearing about the Certificate of Obligation (2008)Somervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas


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Audio and Transcript from Somervell County March Hearing about the Certificate of Obligation (2008)
 


22 July 2009 at 7:03:52 PM
salon

Audio link here -my general transcript-to hear the specifics, listen to the audio.

Start listening at about 1:37 in.

Maynard. We'll move into the agenda. the first item is George (wilson?) from First Southwest Securities... update on the financing of the hospital and ??

FSS: Judge, members of the court... tried to keep Ron and Gary Marks involved. in fact Gary and Hal have spent an inordinate amount of time.... a county owning a hospital in most cases that's fairly straightforward.... but when it became known that the hospital was in fact leased by the 5013c corporation that introduced some requirements under federal tax guidelines to really prove up the 5013c status of the hospital ... and to make sure that any other agreements or utilization didn't provide any other tax consequences.... The physicians you have and their utilization of space does introduce but he's concluded that's such a minor percentage.. that we can do the whole CO issue as one. Preliminary debt schedules.. I've been working with Gary., course we would assume that CO issue would be sold in the public market. ... bond ratings, underwriters... reoffering premium... advised Gary that whatever the project costs are ... need to outright add all the other costs  14 mill -Gary had given the final cost 13900 some odd.  Amount for underwriting etc. ... I was telling commissioner Ford the market's gotten kind of crazy  last 2 or 3 weeks.  Talking with Mr Marks and so on anticipated the county going in could provide 2 quarters of a million for annual debt service and county make up difference from revenue, tax rate.  Payment level is low.

Consideration and action on resolution to publish notice to issue CO. Legislature changed in 07-publication period had to be 15 days prior, now it's 30 and it really messes up month to month action date. Pressed publication -April meeting. If court acts to publish notice, then publication,then one week later. April 14th would authorize CO. COs would work the thursday before the monday meeting.

Been working with Darryl to find bond insurers, get elements in place by April 10th. Notice.

(Maynard) What happens after the April 14 hearing if the court decides not to issue the CO (SS)-Well, I would hope that wouldn't ... today is really the time the court needs to, in your minds, we're proceeding or not. (Maynard). Then why are we having a public hearing then. The idea of a public hearing is to hear from the citizens of their opinion of this and we should wait to make a final decision after we hear from them, should we not? (SS) The public hearing really is something totally separate. In most cases of issued certificates, there's not a public hearing. The reason you're having to have a public hearing, it's called a Tafer (sp?) hearing. (I think probably TEFRA-ed) strictly under the IRS guidelines since a 5013c entity is involved so that the public can comment if they choose  about the appropriateness of issuing taxative bonds for a non-governmental entity, the 5013c on their behalf. As far as the CO themselves, no hearings necessary... notice. If there were sufficient question by the public during that publication period leading up to the point of authorization,  there's an opportunity for a petition to be generated that would contest issuance of this certificate. (Maynard) Reason I asked, I guess I misinformed the commissioners, then, becuase they're concerned about having the commissioners present today and taking the final action .. I told them this would not be the final action, that after the public hearing we actually take the final action. .. I thought if you had a public hearing you still had a chance to make your decision after the public hearing. (SS) What I was discouraging is, if between now and April 14 this board determines we don't want to or we want to defer .. what you don't want to do is the COs have been priced and buyers think they've bought 'em and get to the meeting when they're expecting formal and final award and then say no we're not going to approve the issuance. .. you could rescind or determine (Maynard) uncomfortable with making the final decision this morning with not everybody present (SS) Even on the meeting on the 14th you could say we're not going to approve the issuance. ... that just makes everybody involved say well if it comes back again we're not interested because we thought we had bought and the'd been issued. .. can stop the process at any point.. [Resolution already printed up that says on April 14 they would issue COs]. Provides that the COs would be secured by the county's ad valorum tax and Ron and Tom resolving this-any time personal property involved under county statutes, you can't  just have the tax pledge, you have to at least nominally have a pledge or revenues as well. What is a revenue stream you have in place, in this case it's the solid waste. 1000 dollars.  9:30 instead of 9:00 on April 14.

Other item action on resolution to appoint a hearing officer. Not specifically under CO but under TEFRA. Tom to be appointed hearing officer, open hearing, not contesting the issuance by the county per se but more under federal tax requirements. Commissioners court is not in session, doesn't have to convene. Trying to keep it where you don't have to convene just a hearing officer. Tom would take docs to AG's office for approval. 30 days, mid-May would receive the proceeds. Not really clear need to get with hospital, but monies they've expended for architects, not hard construction costs are eligible to be reiumbursed, which shiould help them have some money to set aside towards debt service. Because these are secured and payable from taxes, debt service starts in 09. fiscal year that way you can set a tax rate to provide for that servie beginning next year (Maynard) This tax rate is it part of the M&O tax or bond (SS) IFalls under the 80 cent constitui8onal tax limit. but it will be segregated becuase you can't roll it back, legally you're required to levy sufficient tax to provide for debt service so it's treated differently than the underlaying tax rate for operations and rollback purposes. (Maynard) Darn, I was going to put it on top of that 80 cents.

(Ford) what does the resolution need to include? Amount? Length? (SS) Length doesn't have to be specified, legal notice and publication a motion just needs to be not to issue in excess of 14.5 million (Maynard) what if 5 years from now we've converted to a hospital district , how would that affect this? (SS) If there's debt outstanding the district would also assume debt related ot the hospital. (Ford) It's not an unusual circumstance (SS) haven't had one this recent and this large. District would be formed and part of the formation process if approved by voters, they'd also assume debt related to the hospital. And of course the hospital district if formed would have a completely separate tax rate. (Maynard) The money that is proposed to come from federal goverment for project, hospital would retain it to use for part of their debt service, is that correct? (SS) Nothing directly related to the debt itself. (Ford) You did say 10 year? (SS) That's standard. (Barnard) Penalty for 10 years? (SS) No penalty prior to that date, just can't outright redeem them, if interest rates fell, have to create an escrow to pay the dollars. Old bonds are legally no longer on the books. (Ford)I'm going to go ahead and make a motion that we take action on the resolution and notice... 14.5 million. (Cummings ) second. Vote. Motion carries 3-0.

Maynard-item 3 sets hearing, march 24 for tax equity. Tom hearing officer.


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1 - salon   23 Jul 2009 @ 9:49:32 AM 

a few comments re: the above, strictly my opinion. It appears to me that the cart was before the horse on this one, that Gary Marks did the work on getting COs prepared and then brought them to the commissioners court via Southwest Securities for approval. If you listen to the recording, that's what you will hear from the Southwest Securities guy. Southwest Securities was also having discussions with Mike Ford re: this. Notice that the issue to begin with is that the hospital is OWNED by Somervell County but the entity Glen Rose Medical Foundation is a 5013c corporation that leases FROM Somervell County (as we know elsewhere, that's for a buck a year.. and as a side note, in the tax return for 2007, GRMF was then a 501a so the status changed sometime in the next year(s).

Southwest Securities badly wanted the commissioners to approve starting the process so that they could be finished by the meeting in April 2008. In fact, they had already printed up some documents. Judge Maynard, to his credit, expressed some valid reservatoins to this rush job. One was that the court might decide AFTER THE NOTIFICATION OF THE PUBLIC PERIOD not to issue the COs. Plus there was a public hearing involved where reservations about county money going to a private entity  could be expressed. At the local level, citizens could have gotten up a petition to require that a vote on this money take place, but it would have had to be done during the original notice to the public period. (As another side note, I saw recently that Friendswood has, in their city charter, a requirement that any proposed allocation of funds through COs MUST be taken to the public for a vote). My point is that even if this was not a public hearing period, nonetheless, any decision regarding moving forward with the CO should NOT have been made UNTIL the notice period was up.

And there was also a federal hearing process for TEFRA. Although apparently the commissioners could have asked for the person doing the hearing to be one of them, for some reason the hearing officer was a guy FROM Southwest Securities. Regardless, even though this was an IRS requirement, nonetheless, the commissioners should have waited until at least after that hearing to make a determination, in my view, BECAUSE the point of the TEFRA hearing is for the public to decide IF it's appropriate to give funds to a private, non-governmental entity. Because these are TAXATIVE bonds.

Maynard then says that he didn't intend for that meeting to be one in which a decision was made for final action. "I thought if you had a public hearing you still had a chance to make your decision after the public hearing". It is at that point that Southwest Securities applies some pressure, implying that if Somervell County doesn't do the bonds after they've (SS) gone to so much work, the people who would buy them may not be interested anymore. In fact, SS had already printed up a resolution which was handed out to the commissioners (except Lloyd Wirt, who was not there) which SAID that on the date April 14 they would issue the CO.

Where did the money come from that secured the CO? From, first, the sewage plant, and secondly, from OUR TAXES. You remember, if you got your tax bill in the last month or two, how your property taxes tripled? Well, guess what. The CO was secured by the county's ad valorum tax.  SS points out that any time you have personal property involved under county statutes you can't just pledge the tax, you have to have a pledge AND REVENUES.  SS goes on to say that these are secured and payable FROM TAXES and that Somervell County can SET A TAX RATE to provide for that service. And in fact, that's what Somervell County did about 6 months later, they RAISED the tax rate to COVER the budget that included the CO. And apparently this is not a rollback tax, because it's segregated.

Maynard asks what would happen if 5 years from now we're converted to a hospital district, about WHO would assume the debt? Again, guess what, ti's US. The entity GRMF, the private 5013c foundation would not be responsible for the debt but it would fall on the taxpayer's shoulders entirely. (Not to mention the separate and included tax rate of the hospital district-you remember how there was that indigent tax which was NOT going to be returned back to the taxpayer). I also wonder when I hear that from Judge Maynard about *5 years from now* about the hospital district. Was the disingenuous or had they really not decided yet to go for the hospital district election? (Which failed, by the way, but expect it to rear its ugly head again early next year).

Judge Maynard, as I understand it, doesn't vote but might possibly be the tie breaker if a vote goes that way, not sure. At any rate, despite all the reservations he had about going forward with this at that time, WHO made the motion, despite no notice to the public yet or the TEFRA hearing, to go ahead with the motion? Mike Ford.  I've already said here before that there appears to be a clear conflict of interest in Mike Ford voting on the COS since he was also at the very time the executive director of the Roger E Marks Foundation and continued to be on the board. (One more side note-I heard scuttlebutt that Ford told the Lions Club at their last meeting that he is being investigated by the Texas Attorney General's office, I'm supposing for the conflict of interest claims).


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