Monday, December 12, 2016

Refunding Bonds- Changing what was approved? Why? 12/12/16

Hi All,

On Monday, December 12, 2016 at the Board of Trustees meeting in Bloomfield Township is agenda item # 14:

At the  11/14/16 Board of Trustees meeting Refunding Bonds was approved under agenda #5.  Now, this agenda item on 12/12/16  seems to be attempting to CHANGE some part of that decision.   But How?  What?

For the record:  the people that approved refunding bonds on 11/14/16   will not be the same people on 12/12/16 because of the 11/8/16 election results.   Brian Kepes was a Trustee presenting this refunding of the bonds, and now he is the Treasurer presenting this refunding of the bonds.  There are 2 new members as Trustees this time.

The minutes from 11/14/16 have 3 refunding bond issues, and 12/12/16  agenda seems to be only referencing 2 bond issues.  Notice some bonds were to be "limited" and some "unlimited".  Here is just one page from the 11/14/16 minutes:

 Better yet, here is the past documentation (Board Packet/11/14/16    see pages 57-105 of the pdf) from the meeting where the resolution was approved and which this township wants to AMEND.  Why is this not referenced for this meeting?     You can also view the audio/video of that 11/14/16 meeting (agenda #5)   and listen to all the comments and discussion as it happened.   There are many pages of figures and assumptions.  How has all that changed for this meeting?

The 12/12/16 Board of Trustees meeting the Board Packet/ PDF  has only 1 document found on page 252 concerning agenda item #14.  I've copied that  one page below.  Notice the yellow rectangle in the letter below that states "additional information to follow".   Where is it?  What does it say?  Who has that information?  

Keep reading.  I'm going to present more facts, opinions and ask more questions.  However,  at this Monday meeting,  no public will be permitted to comment during the agenda presentation.   Public comment was officially changed on 11/28/16  to the beginning of the meeting ONLY.  No more public comment on each agenda item.    So here are my thoughts on this agenda item.  I really need to hear the issue explained.  Perhaps my comments and questions presented in this blog will be answered or not.   I present to you in this blog what I think I know and ask questions here for what I need to know.

FYI:  as you read this memo  from the board packet for 12/12/16  please realize that Louis  (aka Lou) Orcutt  is with Fifth Third Securities.  His company was given the underwriting duties at the 11/14/16 meeting without any competitive bids and with objections from some Trustees and some public.    I also believe that Mr. Orcutt is the same man that made a huge error when doing the $85 Million Bond deal for the Township  DB Pensions back in 2013  and that cost the township an unexpected $1 million or more as a payment that became due immediately.  I also believe that this man was in a different division of Fifth Third when a negotiated deal was made with Supervisor Savoie and where personal debt Savoie owed was reportedly closed.  Treasurer Kepes  is also reported to have conflict of interest issues with Fifth Third.

FYI:   as you read this memo please realize that "Wendy and Terry"  are with Dickinson Wright PLLC  and "Bobby"  is  Bendzinski & Co.   both long time NO BID vendors that deal with any and all bond issues at the township. 

FYI:   as you read this memo please realize that "Leo, Jan and Brian"   are the township elected Supervisor, Clerk and Treasurer.   Also realize that Jason Theis is the Finance Director at the township, not elected but an employee.

FYI:   as you read this memo please realize that Treasurer Brian Kepes just became the Township Treasurer on 11/21/16  and has been in the real estate business for the past decades.  Curiously, he is not CC in this memo nor appears to have been contacted directly.   Why did these vendors go directly to the Finance Director  and the Supervisor  versus the newly elected Treasurer?   However, Treasurer Kepes will "present" the issue at the meeting.  I'll bet he does not say much.  Leo will take over and the no bid vendors will do the talking. 

FYI:   as you read this memo a person named Tom Colis updated the language in the POS  ( Public Offering Statement).  So, where is that language to review?  Not here.  Who is Mr. Colis and who does he work for?  Don't know.  Will any changes affect the COST to the township as fees to the three different vendors?  Will the interest rates be as favorable as suggested back on 11/4/16?

FYI:   more initials... what do they all mean?  LTGO means Long Term General Obligation  bonds ;   UTGO means Unlimited Term General Obligation bonds  ;  BQ means Bank Qualified  ;  and Non-BQ  means Non Bank Qualified.     The wording there is a "very large spread"  indicates the cost varies greatly.    Interesting that on 11/14/16  the initials were listed as:  GOLT and GOUT Bonds.  I'll assume same meaning?   However,  I see nothing about the initials:   BQ and Non-BQ terminology on 11/14/16 presentation.  How are those initials important here?   Below is from the board packet 11/14/16  page 57 of the pdf.

FYI:  don't forget to read the small print at the end of this one page memo for the 12/12/16 meeting.   Was it really OK for the township to put this memo out for the public?  Was there more sent to the township, but not shared?  Yes, perhaps?.  Remember the yellow rectangle message of "more to follow".

Ok, so what exactly will the Trustees be voting on?   What is the exact language and why is this being proposed?   Written document/amendment not presented here.  Will there be changes in fees?  Will the savings be less?  

I spoke against these bonds being refunded in November.  Several reasons, one being 3 no bid vendors.   Since the interest rate recently changed, this makes refunding even more questionable in my opinion.    Another reason I was against the resolution to refund was because it allowed up to 6% interest for the new bonds.  Why?  The current bonds go until 2028 and have interest rates fixed at 4% or lower for the duration of the LTGO  and just over 4% for the UTGO bonds.  Why would you approve a resolution that allows a 2% higher interest rate than the already fixed rate through 2028? 

So here we have Fifth Third Securities , a no bid contractor and a contractor with reported conflict of interest with some on the township board,  suggesting something different than what was approved weeks ago.  Maybe it is time to ask for bids from other companies/banks to act as underwriter and hear another opinion?   What exactly is the issue with BQ and Non BQ bonds?   With BQ the bank needs to certify the township investments and assets and be assured that the township has the funds to back it up.    The Non Bank Qualified bonds are not guaranteed and usually will have higher interest rates than the BQ bonds.  What about Long Term (LTGO) vs Unlimited Term  (UTGO) general obligation bonds?   What are the reasons for one vs the other?   I wonder if our newly elected Treasurer Brian Kepes can explain this? 

Is this a grab for cheaper money? 
Is there a cash flow problem?  
Will refunding bonds really be cheaper after fees are paid to 3 no bid vendors? 
Can the township borrow more money than is currently needed ?   
Is there financial danger in the future of the township? 
Will the township be losing it's AAA rating soon?    I say could be.  
  • Supervisor Savoie still hasn't said boo about the employee contracts that expire on 3/31/17.   
  • He hasn't said boo about how many employees retired on or before 12/3/16  so they could get the "guarantee"  of their Defined Benefit Pension.  For each person that retired, a major monetary contribution must go from the Schwartz managed pension bond equity portfolio immediately to Prudential that pays the retirees.  That equitiy portfolio has taken big hits with the many retirees.   All remaining employees in the DB Pension will not have that "guarantee" certificate from the township into the future.  
  • Employees hired in and after 2011 are in a Defined Contribution Pension (401K) with generous % from the township (reportedly 10-14 %).   
  • Supervisor Savoie's preliminary budget for 2017-2018  show no signs of caution and no significant signs of funding the underfunded debt in some funds.    
  • Will the township just keep assessing our property higher and higher to satisfy Savoie's budgets?
This agenda item #14  resembles many at the township:  not fully explained, not fully documented, and perhaps not truthfully presented at the meeting.   Having sat at many financial study sessions at the township, I know there are people on the Board that are not well versed in these kind of deals (including on occasion our new Treasurer, Brian Kepes, who was absent from many financial study session meetings over the years when he was a Trustee).
I don't have a vote, but if I don't understand something...I would vote NO or vote to TABLE.  IF there are Trustees that don't have full understanding of this proposed amendment and whether or not it is a good deal for the taxpayers,  I hope they vote accordingly based on presented written facts. 

When the Trustees choose their vote,  they will also be choosing the consequences that come with it...good or bad.

My opinion.


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