Emergency
action alters tax allocation
by
Brian DiTullio
CAVE
CREEK – In emergency measures Monday evening, Cave Creek
Town Council voted to change how certain local tax monies
can be spent.
By
unanimous votes, after approving the emergency actions,
the council amended two ordinances,
97‑01 and 99‑03, pertaining to allocation
of the privilege license tax, the town’s water system
and Spur Cross Ranch.
The
changes now allow the town to pledge excise taxes “toward
bonds, loan agreements or other obligations issued or
incurred to finance water or sewer utilities,” according
to the meeting agenda.
“What
it does is, it allows you to expand the amount of excise
tax you can pledge toward the loans,” said Fred Rosenfeld,
an attorney working with the town on the Cave Creek Water
Company acquisition.
Since
passed as emergency measures, the change are effective
immediately.
The
emergency measures, and suspension of the normal rules
requiring two readings before adoption, necessitated a
super majority vote, meaning at least six “yes” votes
were required on the motions. With Vice Mayor Dick Esser
absent from the meeting, the votes had to be unanimous
for the measures to pass.
Rosenfeld
clarified the actions do not raise any taxes, but change
the way the town may allocate them and increases the town’s
“coverage,” or ability to make payments, for any loans.
Councilman
Tom McGuire asked Rosenfeld if amending the tax code really
was necessary, to which Rosenfeld replied “yes” and reiterated
his statement about expanding the town’s ability to borrow
money.
“It’s
the cost of doing business,” said McGuire in response
to Rosenfeld.
In
conjunction with those decisions, the council also voted
to enter into a bridge loan with Bank of America for $17,750,000
to pay off the debt to Global Water Resources, thereby
lowering the town’s daily interest rate until a Water
Infrastructure Finance Authority loan is approved, estimated
to take 60 days.
Rosenfeld
said the BofA loan would be closed April 5 and that it
would reduce Cave Creek’s interest rate from 8.25 percent
to 3.85 percent. He added that attorney Marvin Cohen,
also working with the town on water company negotiations,
still has not received the final numbers from Global.
Rosenfeld noted that the bank fees are now about $70,000.
Mark
Reader, the town’s financial advisor, informed council
they were paying Global about $4,000 a day in interest.
Taking the bridge loan would cut the daily interest to
about $1,740. If the WIFA loan closes in the expected
60‑day period, Reader estimated the town would save
about $71,000 after the banking fees were factored in.
Councilman
Gilbert Lopez, prior to voting on the motion to approve
the loan, said “this is
prudent and necessary in case WIFA is late, and it reduces
our interest.”
The
loan was approved by a unanimous vote.
Reader
later told The Desert Advocate it was his belief the town
already had the coverage it
needed for the loans it is undertaking at present, but
expansion of the ability to pledge excise taxes is necessary
to cover potential future costs.
Rosenfeld
agreed, saying, “You need the coverage for the long term.”
After
the meeting, Town Manager Usama Abujbarah said expanding
the coverage would give the town more flexibility.
When
asked what will happen to the affected funds, like those
for Spur Cross, should the town get into financial trouble,
Abujbarah said, “Nothing will happen to the other funds
as long as we keep making payments.”
Mayor
Vincent Francia told The Desert Advocate that he “won’t
allow” the town to be put
in a position where pulling dollars from the other funds
would be necessary.
“We
know what we can spend,” said Francia. “We’re running
the water company, not the other way around.”
In
related business, council approved RBF Consulting to analyze
the Cave Creek water system and make recommendations on
improvements. The council also approved extending the
final closing date of the transfer agreement for Desert
Hills Water Company to May 15, as the process is taking
longer than expected. Both items passed unanimously.
