CITY OF EAST PROVIDENCE

RHODE ISLAND

JOURNAL OF SPECIAL COUNCIL MEETING

April 5, 2018

Council Chambers, City Hall, 145 Taunton Avenue, East Providence, RI 02914

7:30 P.M. Open Session

 

I.                   CALL TO ORDER

 

Mayor Briden calls the meeting to order at 7:54PM

 

II.                SALUTE TO THE FLAG

 

III.             WORKSHOP REGARDING THE ACQUISITION, CONSTRUCTION, FURNISHING AND EQUIPPING OF A NEW HIGH SCHOOL

 

The Mayor states that at the last meeting it was requested the council receive an updated 5 year plan from the school department relative to their plans for building needs over the next few years.

 

Mr. Luba came to the podium stating he did view the 5 year plan and the needs do appear to be covered in the schools current and projected budgets.

 

Mr. Moore states the city worked on 2 scenarios within the 5 year plan and added debt services which were provided by Mr. Fazioli and discusses what happens to the tax increase from the tax levy.  Adding what the state and city looks at is the increase in levy from year to year.  This includes the residential, commercial and tangibles.  The council can apply it to the different categories and adjust each area as it sees fit.  The numbers were run two ways one at 54% which is the most conservative which would be the max of tax rate increase.  They are not going to receive bonding payments for a couple of years.  The project itself won't start in the next fiscal year it will kick in the year after and then after will become what the city will pay for debt service.  They took out the synchronization amount when the debt service payments start and what they came up with in the next year if it didn't the minimum tax increase would be 3%, next year 4% the year after and it would be 5.7% in year three.  This will be over the state guideline in year 3 and the city will have to get a waiver.  It could be done but the department of revenue will have to give a waiver.  In year 4 it would be 3.2%, in year 5 around 4% again.  However, what if they tax the first increase next year even though they don't have to.  They don't need it but it will smooth out the increases going forward then every year after will be 4%.   The Scenario of a 64% reimbursement causes the increases to be less with the cliff year but all the others in the 3% range. The question is when does the city want to take the hit?  They probably need more work as they go along.  There are different ways to structure bonds.

 

Mr. Luba states the third topic is can the city do it with their bonding capacity.  He notes he was educated on this issue recently.  Right now East Providence has debt outstanding with net assessed value of about 1.1% with the bonds out now.   The state would like cities and towns to be under 3% because that is what bonding agencies look at and it is indicative of a financially healthy community.  If they add this bond and they count gross bond not the reimbursement the city goes up to 6%.  It is high and would be the second highest in the state in back of Woonsocket which is 10%.  It means that going forward the city is going to have to work harder at the debt.  They could probably get small debt but the rating agencies may question it and they will need to have a good story and one is the $189 million bond but getting reimbursements and taking that into effect the city would be at 4.22% worst case scenario to 3.5% best case scenario and the city would most likely be somewhere in between.  It is something to be concerned about but the city can get around it if the voters and legislators approve it they can probably do it.

 

Assistant Mayor Britto asks of they can explain to the public what this translates to in dollar amounts per year.

 

Mr. Luba explaines that if a resident pays approximately $3000 in taxes each year they would go up $120 per year that is assuming they want to take everything across the board.   When they get closer to election they recommend this be as transparent as possible so residents know what to expect.

 

Councilman Faria asks if they are also factoring in the $2.3 million in those numbers and the response is yes but next year and last year they will have it but after that it would go directly to this bond.

 

Mayor Briden states given the fact they are making the decision not to synchronize the tax year and are spending it on the bond, recalling a year ago when they had a joint meeting Mr. Luba gave a presentation with the perfect storm scenario. One of the caveats they have is the ability to procure TANS in the future if there is a recession and keeping their debt level low in all likelihood in the not too distant future and when they have more debt this could be a problem.  He asks for Mr. Luba’s opinion to obtain TANS or if they would be at risk.

 

Mr. Luba states there is always a risk even if the city is doing well if there is a perfect storm.  That year Central Falls went bankrupt and that alone spooked all the lenders so if they are also running deficits that’s a problem.  Neither the school nor the city can run a deficit.  They are going to have to ensure that they have enough to make the debt payments and have enough in surplus like they do now, which is good, and don't tap into that so they can withstand some blows.

 

Assistant Mayor Britto asks what does this do to the bonding cap for future projects.

 

Mr. Luba states it's tight they can do it but in a smaller cap and at a higher rate and they have to convince the lenders they can do it.  If they start running deficits they probably won't.   If they have to cut they have to cut.  The perfect storm probably won't happen again but it will be stormy in the future.

 

Mayor Briden states that to maintain a surplus account would be a safeguard.

 

Mr. Luba states yes a restricted surplus like that which has been here for 5 years is important.  He adds there have been three attempts to tap into it and the Council has got to say no.

 

Councilman Faria asks about the original 3 proposals and that one contained a rehab and one a partial build and one a full build and he asks about the reimbursement on a rehab.

 

The Superintendent states yes they were offered the 54% reimbursement on a rehab.  Adding that the number initially was $90-100 million but they didn't consider the relocation of students, renting pods etc…adding when they look at that it came to $120 million but they always get the 54% right back into the capital improvement line item.

 

Assistant Mayor Britto asks if the $189 million is everything.

 

The Superintendent states it is and includes furniture, safety upgrades and fields and that is with what construction costs are.

 

Assistant Mayor Britto asks what if they decide at some point in time to scale back for example by reducing athletic fields or classroom size.

 

The Superintendent states that certain things can’t be changed, they can change fields if they see themselves going over.

 

Councilman Botelho provides a few thoughts regarding a focus session he was able to conduct with neighborhood residents.  He notes it was interesting that all were generally supportive but at the same time wanted to make sure they had all the facts and that it was done in a profession manner because the city has a history of not doing this.  People like his Dad who taught at Martin still remember what happened.  The state is saying $135 million is the amount they will reimburse up to and the school is going to cost $189 million.

 

The Superintendent states the true number is $189 million for the present plan.  RIDE will look at it and determine what they will reimburse regarding RI regulations for things like class size and ADA requirements.  The city can do whatever they want above $135 million.   The state will only reimburse for the $135 million.  She adds that a State Representative is here tonight, Greg Amore and she calls him to the podium.

 

Representative Amore states the General Treasurer’s office said today that RIDE uses building costs based on the national average.  The city’s architects use the north east average.  Schools in Massachusetts came in lower than what their town bonded for.

 

Councilman Botelho states people are asking if there is any possibility between now and the project that the city could extract more money from the state.  He also wonders why since this is the north east does RIDE use the national numbers.

 

Representative Amore states it is possible but probable he doesn't know, if the state legislature passes legislation a lot of this will be pulled from RIDE based on these types of queries.

 

Councilman Botelho states they have been asked by the school department to act boldly so if they are going to do that they are all in this together and they are going to try to get the best school possible and as much money as they can so that taxpayers feels they are being represented well as there is an opportunity for us if we all work together.

 

Representative Amore states the state delegation is in full support but that some are still at hearings at the State House.

 

Councilman Botelho states what they really need is a state formula as this doesn't align with what it actually costs.

 

Representative Amore states it reflects a lack of funding and a moratorium which existed.  They hear this same complaint and the process of the Governor’s Tax Force brought this forward and it is why the Governor and General Treasurer are working on this.

 

Councilman Botelho states people generally don’t mind paying a little more in taxes if they are seeing something for it.  Infrastructure in schools determines the value in the community.  It is interesting that people also said why don't they throw a road bond in and they would really be in favor of that.  They could actually look at this as a city improvement.  It’s a program to get all on board and get as much from the state as they can and use this to transform the city.  It would cost him about $16 a month.

 

Representative Amore states the funding formula mechanism is flattening out.  East Providence has been a benefactor of that.  Once it flattens, based on the student population and keeping the population where it is and then increase it when they create a facility that is 21st Century.  They will attract people into the community and those thinking of private schools might stay in the East Providence school system.  Every single principal in other areas where a school has been built had a rise in student population.

 

Assistant Mayor Britto states they have looked at short term goals for a long time and this is a long term goal.  He doesn't have any kids in the public school system but is more than willing to provide his share to this because it is for the community as a whole.

 

Mayor Briden agrees with what has been stated.   What they need over time is to continue to make decisions within the 5 year plans.  They have to make choices and there will be many they won't be able to do.  Making a choice based on limited resources and making sure they maintain good reserves to have the ability to maintain TANS as they are not synchronizing they have to stay financially strong because the economy is cyclical.  He supports going forward and approving this resolution.

 

Councilman Faria states as a father and taxpayer he supports this high school.  It is the best investment he can make.  His daughter has instructed him to vote on this.   They ask a lot of questions but they are only trying to balance it.  It is a decision bigger than the council.   It’s up to the voters.

 

Councilman Botelho states he is reminded of his Grandfather stating a penny saved is a penny earned and his Uncle who would say if you only have pennies you only have pennies to count and taught him the value of investment.  For 30 or 40 years this city has been starving for investment.  He wants to invest as a council and person who lives here.  He wants to see the city go that way.  The investment is well worth it and they are trusting a lot of people to make this happen and he is sure the city can.

 

IV.             NEW BUSINESS

 

A.    Resolutions

 

1.      A RESOLUTION MEMORIALIZING THE GENERAL ASSEMBLY TO ENACT LEGISLATION AUTHORIZING THE CITY OF EAST PROVIDENCE TO FINANCE THE ACQUISITION, CONSTRUCTION, FURNISHING AND EQUIPPING OF A NEW HIGH SCHOOL AND ALL EXPENSES INCIDENT THERETO, INCLUDING BUT NOT LIMITED TO COSTS OF DESIGN, DEMOLITION, ATHLETIC FIELDS, LANDSCAPING AND PARKING BY THE ISSUANCE OF NOT MORE THAN $189,500,000 BONDS, NOTES AND/OR OTHER EVIDENCES OF INDEBTEDNESS THEREFOR, SUBJECT TO APPROVAL OF STATE HOUSING AID AT A REIMBURSEMENT RATE OR STATE SHARE RATIO OF NOT LESS THAN 50% FOR EXPENDITURES ELIGIBLE FOR REIMBURSEMENT

 

WHEREAS,  the City Council of the City of East Providence endorses and supports the issuance of general obligation bonds, notes and other evidences of indebtedness to finance the acquisition, construction, furnishing and equipping of a new high school and all expenses incident thereto, including but not limited to costs of design, demolition, athletic fields, landscaping and parking by the issuance of not more than $189,500,000 bonds, notes and/or other evidences of indebtedness therefor, subject to approval of state housing aid at a reimbursement rate or state share ratio of not less than 50% for expenditures eligible for reimbursement (the "Project");

 

WHEREAS,  in order to undertake and complete the Project, there would be a need to issue bonds, notes or other evidences of indebtedness in an amount not to exceed $189,500,000.  NOW, THEREFORE, BE IT

 

RESOLVED: that the City of East Providence hereby memorializes the General Assembly to enact legislation authorizing the City, with the approval of the qualified electors, to issue bonds, notes or other evidences of indebtedness in an amount not to exceed One Hundred Eighty-Nine Million Five Hundred Thousand Dollars ($189,500,000) for the above purposes, subject to approval of state housing aid at a reimbursement rate or state share ratio of not less than 50% at the time of issuance.  AND BE IT FURTHER

 

RESOLVED: that the City Solicitor, working with Bond Counsel for the City of East Providence, ensure that the appropriate legislation in substantially the form attached hereto is submitted in a timely manner to the Rhode Island General Assembly to ensure that all requirements are met to ensure consideration of this question by the electors.  AND BE IT FURTHER

 

RESOLVED: that this resolution is an affirmative action of the City Council of the City of East Providence toward the issuance of bonds, notes or other evidences of indebtedness in accordance with the purposes of the laws of the State.  This resolution constitutes the City's declaration of official intent, pursuant to Treasury Regulation Section 1.150(2), to reimburse the City for certain capital expenditures for the Project paid on or after the date which is sixty (60) days prior to the date of this resolution but prior to the issuance of the bonds or notes. Such amounts to be reimbursed shall not exceed $189,500,000 and shall be reimbursed not later than eighteen (18) months after (a) the date on which the expenditure is paid, or (b) the date the Project is placed in service or abandoned, but in no event later than three (3) years after the date the expenditure is paid.

 

This Resolution shall take effect upon its passage.

 

Requested by:  Director of Finance

 

A motion to approve the Resolution is made by Councilman Sousa, seconded by Councilman Faria and on a roll call vote it is unanimous.

 

V.                ADJOURNMENT

 

A motion to Adjourn at 8:34PM is made by Assistant Mayor Britto, seconded by Councilwoman Sousa and on a roll call vote it is unanimous. 

 

 

Approved By Council:  April 17, 2018

 

Attest:  _______________

                  City Clerk