MARCO ISLAND — Marco Island’s City Council revised the amount of permanent financing it will seek for the Septic Tank Replacement Program (STRP) in Mackle Park and Kendall sewer districts. The decision came during a specially called meeting on Wednesday.
Permanent financing of $3 million will partially replace a temporary note from Bank of America due on March 2. Council approved permanent financing of $1.55 million for Mackle Park and $1.45 million for Kendall. The revised amounts passed in separate motions with 6-0 votes for each. Councilor Wayne Waldack was not present at the meeting.
At council’s Feb. 21 meeting, Patricia Bliss, city finance director, initially requested council approve up to $4 million: $2 million for Mackle Park and $2 million for Kendall, however, those amounts were estimates. On Tuesday, Bliss confirmed the revised $3 million represented the actual amount needed.
Bank of America’s line of credit will be paid with the permanent financing and an additional $3 million in cash from residents who did not seek financing, Bliss said.
“I feel confident we will have sufficient revenues to cover payments,” she said.
The amount of financing needed for each district is determined by the number of property owners deferring payments on sewer capacity charges. Payments can be scheduled for up to 20 years on property tax bills or deferred for up to 20 years. If a property sells or transfers ownership, payment is due at that time. Amounts collected each year are used to pay back the loan.
Permanent financing will be provided by Branch Banking and Trust, the only bidder meeting STRP’s criteria. BB&T offered the financing through 18-year bonds at 4.17 percent. The city accepted the BB&T bid on Feb. 9 with an agreement that the bank would hold the terms of the bid for 45 days.
No other bid met the city’s criteria. Council received a communication from Mutual of Omaha Bank about the limited turnaround time from receiving bid information to requiring bids be received. Bliss said she telephoned Mutual of Omaha Bank to confirm whether or not they could bid under State of Florida statutes, but said she had not received a return call.
Although not an issue with the refinancing vote, Bliss reported that Bank of America had agreed to extend the note for 90 days if council needed more time for the decision. The bank did not confirm what the extension rate of interest would be, she said.
On another matter, Vice Chairman Larry Magel asked city financial advisor John White of Fifth Third Securities what impact the city would face if it changed its debt ratio. Fitch, a rating agency, upgraded the city’s bond rating to “AA+” in 2011.
White said lending institutions consider a 1.5 to 2.0 ratio favorable. Utilities that get downgraded pay more interest to borrow money.
“If you drop in actual to 1.3 in a year, it’s not the worst thing that can happen but it’s not good,” White said. “A consistent pattern of decreasing coverage, that’s a no-no.”
Rating companies like to see debt ratios at 1.6 to 1.8, White said. He suggested the city keep its rating where it is now.