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HomeMy WebLinkAboutMinutes_Workshop_01/09/20031 i--- 1 ~~ ~ v ;~. ~~ f ~`, o~ i VILLAGE OF TEQUESTA Post Office Box 3273 250 Tequesta Drive, Suite 300 Tequesta, Florida 33469-0273 (561) 575-6200 Fax: (561)575-6203 MINUTES VILLAGE COUNCIL WORKSHOP VILLAGE OF TEQUESTA THURSDAY, JANUARY 9, 2003, 6:04 PM 399 SEABROOK ROAD TEQUESTA, FLORIDA 33469 I. CALL TO ORDER AND ROLL CALL The Tequesta Village Council held a workshop meeting at the Tequesta Recreation Center, 399 Seabrook Road, Tequesta, Florida, on Thursday, January 9, 2003. The meeting was called to order at 6:04 p.m. by Mayor Geraldine A. Genco. A roll call was taken by Mary Miles, Village Clerk. Council Members present were: Mayor Geraldine A. Genco, Council Member Edward D. Resnik, Council Member Russell von Frank, and Council Member Basil E. Dalack. Council Member Joseph N. Capretta was absent. Also in attendance were: Village Manager Michael R. Couzzo, Jr., Village Attorney John C. • Randolph, Village Clerk Mary Miles, and Department Heads. II. APPROVAL OF AGENDA HI. DISCUSSION OF POSSIBLE ALTERNATIVE FORMS OF FINANCING FOR VILLAGE RESIDENTS FOR THE ENCON SEWERING PROJECT-Village Manager Michael R. Couzzo, Jr. Village Manager Couzzo stated concept and premise of the discussion tonight is because of Council Member Dalack's request to look at alternative financing for Encon for some of you along Dover road to explore any opportunities to lessen the interest rate and help the financing. This is preliminary to see if there is interest in doing it. He introduced Mark Raymond and Ed Rivera. He stated some of us want to know why is Encon charging seven percent. Mark Raymond, Lawyer with Moyle, Flanagan and Katz, stated he represented the bank that made the loan to Encon. In 1999 Encon borrowed money from Sun Bank. One purpose was to finance the construction of sewering, some in Tequesta, some in surrounding areas. Special assessments levied upon the residents of the Village will be subject to fixed interest, not variable. The loan documents preclude Encon from prepaying the interest on the loan. The bank wants to be guaranteed they'll receive that same interest rate. The loan is not subject to be prepaid. The special assessments are subject to being prepaid, a requirement of Florida law. Encon is subjected to market risk. • Encon will not be able to invest the prepaid assessments. To the extent that prepayments of special assessments are made, and interest rates do not change. The special assessments are subject to being prepayed, and paid over a term of 20 years. The interest rate is one percent greater than the interest rate on the underlying loan. I am told, how Recycled Paper • may Village residents are affected by this is between 200 and 500. When I was first contacted by Village staff, the idea was to borrow at a tax exempt rate. Whether the Village could borrow money would assist the residents to repay the loan. This special assessment that would only affect the people that are getting the sewering- only they can participate in this program, voluntarily. There is a demonstrable benefit- someone else is putting in an improvement. Anyone interested in participating would go into contract with Tequesta. This contract would be a covenant running with the land, the subsequent owner would be subject to the assessment. I made some phone calls to banks, fora 20 year fixed rate loan, assuming it was reasonably good credit, they said a 4.5 percent interest rate, we are talking about $7,500 as prepayment, so that makes a difference of $125 a year, on a per unit basis, and then you could come into some overall value to see if you should go into the effort. Mavor Genco mentioned we are looking at between two and three million dollars, assessed through the tax roles, we would have to do a small carrying charge for administration having staff do this, and would there be legal problems? Mark Raymond said the contract would cover the legal, he wasn't considering the carrying charge. Mavor Genco I think they would benefit from a greatly reduced interest rate. I am most concerned about Encon. They have a special assessment. In their original • loan, they were probably including other areas and not just Tequesta properties. If they end up losing percentage points, I can see them jerking up everyone's rates to make up for it. Mark Raymond stated he doesn't recall areas that were assessed. I think the Tequesta residents would come out ahead, but as a group, not individual by individual basis. The result of the shortfall from the prepayment would be borne by all residents: everyone's rates go up. Council Member Resnik asked if the basic premise you are using is that if Tequesta would borrow the entire amount, what prevents the individual getting a loan and paying Encon off? Mark Raymond stated they would not be able to borrow on the same base as the Village of Tequesta. The special assessment is a super priority mortgage, if you don't pay your taxes you lose your property. The maximum benefit I can see in present value terms is $1,600 per resident without the administrative cost. This could cost $50,000 in fees and expenses, and you could spread that out over the individuals. Each resident could secure his own individual loan. Council Member Resnik remarked the bank would assess each individual on its background-what protection does Tequesta have? • Mark Raymond responded the loan is secured solely by the special assessments. The lending bank is taking the risks the assessments would be paid. Because you have the tax collector collecting taxes, it is an easier process. 2 • Mavor Genco stated if someone prepays, Encon is holding the bag, if the Village steps in, it prohibits people from prepaying their assessments. Mark Raymond said we are not going to grant the right of prepayment. A Member of the Audience asked about income tax deductibility-if we can write that portion off, we are being reimbursed by the government--will this be deductible the way property taxes are deductible? Mavor Genco said Encon will show up as a non ad valorem as well. It is like a capital improvement. A Member of the Audience remarked we have a neighbor that just got a home equity loan for 4.89, as a home equity loan, it is deductible on your income tax. Mark Raymond commented we are talking about a fixed interest rate that will not change over the next 20 years. A home equity loan will go up. Ed Rivera, with Bank of America, stated we do have, for those of you seeking finance on your own, equity lines of credit and home loans-4.25 is a variable rate, amortized over 20 years, which is 15 years for us. On loans, interest rates are higher than on lines of credit. The range on the loans is anywhere from 6 to 8 percent depending on the • amount and ability to pay back the loan. Equity starts at 4.25. Council Member Resnik asked if there was a time element by which this decision has to be made as per individuals. Mark Raymond replied he thought there was a deadline of May 1 ~` for prepayment. We probably have about two months before we need to get started. The contracts are between the residents and Village-we can't negotiate 500 contracts with 500 individuals, this has to be a take it or leave it. We need to start within two months from now. Mavor Genco asked if a person were to take a home equity loan, what does the bank charge for processing a home equity loan? Do you have any closing fees? Ed Rivera stated with equity lines of credit there are no closing fees. On loans, it would be anywhere from two to three percent depending on the ability to pay the loan and the amount of the loan. Mavor Genco commented people would still have the ability to use it as a tax deduction with equity lines of credit. Ed Rivera mentioned it takes two to three weeks for an equity line. If you decided on a • higher line of credit, if you decide you need to do other fix-ups on a house you can still do other things with the funds. 3 • An Audience Member commented we are basically talking $10 a month. I'm beginning to think it really doesn't seem worth it to do it. Steve Gordon remarked the home equity loan will float with the prime--the interest can go up. An Audience Member said if the Village were to assess a $100 processing fee, the cost would be covered. The interesting thing about doing that program is who would ever want to prepay that when you are getting a 4.25 interest rate? The amount can be assumed by prospective buyers. If you pay that off now, you are throwing that money around now. You may have paid that off, but the new buyer isn't going to give you any more money because that assessment has been paid. In Abacoa, they assessed for all the infrastructure. The developer gets bonding and puts it on the tax roles. Mark Raymond stated you are borrowing the money on a lesser interest rate. The benefit to you as a homeowner, 10 years later, it is like not having to come up with the money. It could potentially work if the Village wanted to do this. These are supermortgages. V. ADJOURNMENT Meeting was adjourned at 6:52 p.m. ` SCHEDULE OF MEETINGS* (To be held in the Tequesta Recreation Center, 399 Seabrook Road, Tequesta, unless otherwise noted) Regular Village Council Meeting-Thursday, February 13, 2003, 7:00 p.m. Special Master Meeting-Thursday, January 23, 2003, 10:00 a.m. • 4