Monday, April 26th, 2010
Auditor: Celina in danger of 'fiscal watch' status
By William Kincaid
CELINA - City Auditor Emily Stewart said she doesn't know what's going to happen when the city attempts to renew $3.59 million in bond principal for various projects this fall.
If the city defaults on its borrowings, the state could initiate fiscal watch and supervise much of the city's financial transactions, Stewart said.
The city has $3.59 million in principal alone in various purpose notes- a total of $3.61 million with processing and issuance costs and bond writing fees - that need renewed this fall. The interest rate on the notes was 2.5 percent.
The various purpose notes include $500,000 for the Main Street water and storm water improvements; $662,000 for Grand Lake Road improvements, $625,000 for Meyer Road interceptor and many other funds.
Stewart is uncertain whether the one-year notes - which expire on Nov. 4 - will be renewed because of the city's finances.
Stewart said Katie Kleinfelder, a representative of RBC Capital Markets and a financial underwriter for the city, recommended the city have 20 percent of the notes' value available in its operational general budget.
At the least, it should have 10 percent, Stewart said.
Currently, the city has less than 1 percent.
"My biggest concern is that we don't have the reserves," Stewart told the newspaper.
Late last year, Kleinfelder urged city council members to seek a municipal credit rating, which it has never had, due to drastic changes in the credit market.
That may not happen because of the city's current financial situation, according to Stewart.
If in November Kleinfelder is unable to find a buyer for the city's notes, Celina could default on its borrowing and go under fiscal watch by the state, Stewart said.
Earlier this year, the city had a similar close call.
According to Stewart, in early February, the city needed to renew a $1.2 million, one-year TIF (Tax Increment Financing) revenue note - first created in February 2007 to pay for the boardwalk.
But Kleinfelder couldn't find a buyer on the open market.
The Celina branch of First Financial Bank stepped in at the last moment and picked up the debt as a loan package to the city a few days before the note was set to expire, Stewart said.
"We didn't default at all but it was very close to the timing," she said, pointing out a city meeting was held on a Saturday during a snow level emergency to approve the deal.
The existence of a default on any debt obligation for more than 30 days constitutes fiscal emergency.
Fiscal watch is declared by the auditor of state, who then comes in and provides technical and support services to the city as deemed necessary. The state controlling board would funding to the auditor of state for any costs incurred.