Cave Creek approves policy against loan default
Town council redefines excise taxes regarding future loans
by Brian DiTullio

CAVE CREEK – Town council last week approved paying for an insurance policy to protect the town against default on its loan for the purchase of Cave Creek Water Company.

Attorney Fred Rosenfeld presented two items at a special meeting May 29 concerned with paying back Water Infrastructure Finance Authority loans taken out by the town. The first concerned the definition of excise taxes and what may be pledged toward repayment of loans. Water and sewer development fees are now included within that definition.

The council approved similar measures in April when the water company purchase was originally approved. The resolution May 29 changed that definition for any future loan the town might seek.

“What we need to do is plan for the future,” Rosenfeld said. “As you develop, water and sewer development fees become critical as sources of revenue.”

Rosenfeld stipulated that this move wasn’t needed for current loan agreements, but would be needed should the town seek further loans from WIFA or other lenders.

The council voted unanimously to approve the resolution, as well as the next one, which officially authorized the loan agreement with WIFA to pay off the interim Bank of America loan for purchase of Cave Creek Water Co. and to reimburse the town for its initial down payment. The resolution also authorized an insurance policy in regard to the repayment plan, should the town default.

Rosenfeld said the town needs to make a premium payment of “about” $100,000 as part of this resolution and pointed out the insurance policy will protect the town in case of a default. However, he stressed it wouldn’t get the town off the hook completely, but would give the town more protections and allow another avenue for creditors to regain their money.

Rosenfeld noted this resolution basically “refinances” the loan already taken out by the town for the Cave Creek Water Co. purchase. With the approval on May 29, Rosenfeld said the WIFA loan could close as soon as June 8, with the BofA loan paid off by June 12.

Councilman Tom McGuire said this is a “big step” for the town, but that it ultimately will save a lot of money.

“It’s a move toward the future,” said Vice Mayor Dick Esser.

In other business, Town Manager Usama Abujbarah informed the council he would like to have a work session scheduled for June 11 regarding the upcoming wastewater treatment plant contract.

“It’s a substantial contract,” said Abujbarah.