Huntsville City Council Special Session – June 2, 2023: GO Warrant Purchase Approved
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Huntsville City Council Special Session – June 2, 2023
Note: The agenda, minutes, and transcript provided with this request indicate the meeting occurred on May 22, 2023, but the required date for this summary is June 2, 2023. This discrepancy is noted here; the timeline below follows the provided date.
The Huntsville City Council met in a brief special session to consider a single item: the purchase of up to $6,695,000 in principal amount of the city's General Obligation Warrants, Series 2020-A, for termination and cancellation. The meeting lasted under four minutes and resulted in unanimous approval.
Discussion Items
- Resolution No. 23-428 (2023-324): Authorized the city to purchase up to $6,695,000 principal amount of its General Obligation Warrants, Series 2020-A, for termination and cancellation. Josh McCoy, PFM Financial Advisors, explained that the bonds were originally held by Silicon Valley Bank (SVB), which failed. BlackRock, acting for the FDIC, liquidated the municipal portfolio. A broker-dealer purchased the bonds and offered them to the city at a discount. The city evaluated the offer and deemed it a fair and reasonable use of taxpayer dollars.
- Councilmember Kling questioned the cost savings. Mr. McCoy detailed two benefits: (1) interest savings of approximately $800,000 by eliminating future debt service, and (2) a discount on the purchase price – the city would pay less than $5.5 million for the $6.6 million outstanding, resulting in an additional $1.2 million in savings relative to paying at par at maturity. Total savings estimated at about $2 million over the life of the bonds.
- Councilmember Keith noted the lump-sum payment and confirmed the reduction in debt level. He expressed support, stating the savings were good news. No opposition was raised.
Key Outcomes
- Vote: Motion to approve the resolution by Councilmember Kling, seconded by Councilmember Little. Roll call vote: Ayes – Councilmembers Keith, Robinson, Kling, and Little (4). Nays – None. The resolution carried.
- Directive: The city will proceed with the purchase and termination of the warrants, realizing an estimated $2 million in taxpayer savings and reducing the city's outstanding debt by $6.6 million.
Meeting Transcript
It's one o'clock on May twenty second, twenty twenty-three, and the Huntsville City Council is met in special session in the Huntsville City Council Chambers. We have one item for discussion today, uh, regarding purchase of um print of general obligation warrants. A quorum is present. Mr. Riley, will you please confirm that uh public notice has been given of this special session? Thank you, Mr. Riley. Uh we will then proceed with our one item. 1A is a resolution authorizing the purchase by the city of up to six million six hundred and ninety-five thousand principal amount of its general obligation warrants, series 2020A for termination and cancellation by the city. Is there a motion to approve the resolution? So moved. Motion by Mr. Kling, second by Mr. Little. Mr. McCoy, could you please come and explain to us uh the reason we are in special session today, the timeliness of this and and what we are going to be accomplishing here with this with this action. Yeah, I'd be happy to. Josh McCoy, PFM financial advisors of city's municipal advisor. The um the bonds are being um were previously owned by SVB bank, which um uh went defunct, and uh FD uh BlackRock was working on behalf of FDIC to liquidate their muni portfolio. So the bonds were offered to the market last week, and um the broker dealer that purchased those bonds has offered them to the city for sale, um and which would allow the city to then pay those bonds off and terminate them just to rip the bonds up versus the alternative the purchaser could offer those to the market um and you know make a markup and and money that way as well. And so we've evaluated the um the opportunity and believe that the prices offered to the city are fair and reasonable, and um and it's a you know what we believe would be a good use of taxpayer dollars. So are there questions for Mr. McCoy? Mr. Kling. Uh is there a cost savings to the taxpayers by doing this or benefit? Yeah, there's there's two benefits on interest savings. Um with the bonds being terminated, you'll the city will not have to pay interest incurred for having the debt outstanding, so that that totals about 800 um thousand and change of interest savings, and then the price that you are paying the bonds off are at a discount to the stated par. Um that represents of the 6.6 million outstanding, you'll pay um a little less than five and a half, and so you'll get another million two in savings there relative to paying them off at par at their maturity date. Thank you. You're welcome. Mr. Mr. Keith. One, this is good news, but this is one lump sum, correct? Yeah, there's two maturities, one lump sum payment. Um I if I understand correctly, it's about a two million dollar savings uh of taxpayer money. Yeah, over the life of the bonds. Yep. Over the life of the bonds, and then in addition to that, we are reducing our debt level. You're paying down your debt. Yep. Uh by six million some dollars. All good news. Is there any any reason we shouldn't do this? None that I can think of. All sounds good to me. All right. Very good. Any other questions?
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