TEFRA BOND HEARING
AUGUST 6, 2018
Mayor Cerino called the public hearing to order at 7:12 p.m. In attendance were Council members Linda C. Kuiper, Ellsworth Tolliver and Mauritz Stetson, along with W. S. Ingersoll (Town Manager), Jennifer Mulligan (Town Clerk) and guests.
Mr. Ingersoll stated that the Town of Chestertown has acted as the conduit in issuing bonds for Heron Point several times in the past. He said that Heron Point is refinancing their last bonds from 2013. They are covering the Town’s costs in the process, including bond counsel for the Town (Lindsey Rader).
Mr. Stetson stated that he thought the Town acted as a conduit for another entity and there was a fee assessed for the service. Mr. Ingersoll stated that Washington College once paid a fee to Chestertown for a bond issuance, but that was the only time a fee was exacted. He said that although the Town is acting as the conduit issuer there are no fees incurred by them. He said that the Mayor and Council act in this capacity because they can and it helps the institutions in Town. Mr. Stetson stated that the Town has never been in such dire straits for money and that these institutions do not pay taxes. Mr. Ingersoll stated that all of the cottages at Heron Point are taxed, and Heron Point could ask the Kent County Commissioners to act as their issuer and it would appear as though Chestertown did not want to help its own institutions. Ms. Rader stated that the Heron Point did have Kent County act as a conduit in 1989 and Mohefa in 1998.
Mr. Ingersoll introduced Linsey Rader, bond counsel for the Town.
Ms. Rader stated that a TEFRA hearing was required by the Federal Tax Code when an issuer such as the Town loans the proceeds of bonds to a 501(c3) entity as the bonds will be known as qualified 501(c3) bonds. The purpose of the public hearing is to allow the public to comment on the fact of the bonds, size of the proposed bond issue, and the nature of the facility.
Ms. Rader stated that the Town was being asked to approve the issuance of not to exceed $26,250,000.00 in tax exempt and/or taxable bonds, the proceeds going to Heron Point. The proceeds will be used to refinance the bonds that the Town of Chestertown issued in 2013 for the benefit of Heron Point in full and to pay issuance costs. Ms. Rader stated that in 2013 the bonds were issued for refinancing purposes and for new construction. The 2018 bonds are strictly for refinancing.
Ms. Rader stated that the bonds will not be backed by a pledge of the Town’s full faith and credit and limited taxing power. If Heron Point defaults with respect to the bonds, the Town has no obligation to make payments. The only obligor is Heron Point.
Mayor Cerino asked if Heron Point will get a lower interest rate if the municipality acts as conduit. Ms. Rader stated that Heron Point will receive the lower tax exempt interest rate rather than going to a commercial bank and receiving conventional terms of financing.
Mr. Ingersoll asked the duration of the bonds. Ms. Rader stated that the bonds were not to exceed 30 years.
Mr. Ingersoll asked if private investors could buy the bonds. Ms. Rader stated that these bonds being discussed this evening for Heron Point were proposed to be privately placed but many times these types of bonds are offered in $5,000.00 denominations to the public, noting that Washington College bonds have been publicly offered.
Mayor Cerino asked if there were any questions from the Council or the audience. There being none, Mr. Stetson moved to close the public hearing at 7:21 p.m., was seconded by Rev. Tolliver and carried unanimously.
Submitted by: Approved by:
Jennifer Mulligan Chris Cerino
Town Clerk Mayor