City Council Revisists the Discussion of SWAPs
by Ashley Murphy

Tuesday, May 11, 2010

The Cleveland City Council opened their regular session Monday afternoon with Joe Ayers of Morgan Keegan, the city's financial adviser. Ayers was present to discuss the city's SWAP agreements and the city's consideration to terminate them. These particular SWAPs center around two 2001 bonds issued to the city in order to build Cleveland Middle School.

Council members approved a resolution, submitted by Councilman Richard Banks, asking attorneys William Young, Jr. and Joseph Peiffer to investigate possible claims the city could have if the SWAP agreements were terminated.

The resolution itself refers to a little over $21 million in low interest variable rate debt and bond insurance associate with it. The city transferred SWAP agreements in January from AMBAC, the city's previous bond insurer, to Deutsche Bank after AMBAC fell into financial difficulty last year.

Banks reasoning for proposing the resolution in the first place was based on his concerns for finances of the city. Currently, BB & T holds a letter of credit for the city, but it is set to expire in June. This letter of credit would enable the city to redo SWAP agreements, however, if the city wishes to extend the letter of credit with BB & T, it cost around $210,000 annually.

Ayers stated, however, terminating the SWAP agreements could cost the city up to $3.9 million in additional debt service. The Cleveland City Council adjourned Monday's meeting until Thursday, May 13, 2010 at 4 p.m. to discuss this matter further, when information from various banks regarding the letter of credit is opened for reviewed. Ayers will also be present at this meeting to provide additional information on the topic.

Other legality issues for the council concern the process of eminent domain of a property the city has been trying to obtain off Dalton Pike. A permanent right-of-way is needed at 2000 Dalton Pike as improvements begin along the road, however, Kishan Properties, Inc. (said property owner) does not wish to sell the property for less than the $10,000 that was a counteroffer to the city at a previous meeting.

The property is approximately 300 square feet and based upon Bradley County Tax Assessor's appraisal, the property is only worth $678.30, much less than the requested amount. The council had previously offered $1,500 to Pete Patel of Kishan Properties before raising the amount to $4,000 after several failed negotiations and counteroffers. Patel still refuses the money that was offered, leading the City Council to allow the City Attorney to begin the eminent domain proceedings for permanent right-of-way and temporary construction easement on the property.

New bids were received for the construction of a Greenway restroom. The winning bid went to Angel Brothers Construction of Pikeville, TN for the amount of $67,586.50. A resolution was then approved to be signed by Mayor Tom Rowland to enter into a contract for construction of a restroom to be located near the Harris Circle parking area along the Greenway. Once final approval of Angel Brothers Construction is received from the Tennessee Department of Transportation, construction will begin.

Also approved on the consent agenda was a resolution authorizing Mayor Rowland to sign a contract with the Tennessee Department of Transportation to place a traffic signal on SR60 (APD40) at Spring Creek Drive near the new Spring Creek Commercial/Residential Center.

Some council members had concerns regarding a bid report for Waterville Golf Course; it was then pulled from the consent agenda for discussion. In early May, bids were opened for additional materials for Waterville Golf Course, which included irrigation heads, swing joints, fittings, a computer system and installation materials. Two companies, Keeling Company of Knoxville, TN and Smith Turf & Irrigation Company of Nashville, TN, responded to the bids. Keeling Company won the bid with an amount of $249,552.84. The bid was approved with Councilmen Richard Banks and George Poe and Councilwoman Bambi Hines voting against the report. Banks stated that he "{doesn't} agree with spending a quarter of a million dollars on an irrigation system for a golf course" when there are more important issues, such as roadwork that the money could be spent on.

The Cleveland City Council will meet again for their work and regular sessions on Monday, May 24, 2010 at 2 p.m. and 4 p.m. in the Council Room of the Cleveland Municipal Building.