Columbus, Georgia

Georgia's First Consolidated Government

Post Office Box 1340
Columbus, Georgia, 31902-1340
(706) 653-4013
fax (706) 653-4016

Council Members

Agenda Item # 1



Columbus Consolidated Government

Council Meeting



August 12, 2008



Agenda Report # 305



TO: Mayor and Councilors



SUBJECT: 1990 GMA Lease Pool Payoff



INITIATED BY: Finance Department





Recommendation: Approval is requested to payoff the 1990 GMA Lease Pool

Variable Rate Demand Bonds, authorize the City Manager and Finance Director to

complete all necessary documents, and approval to use $700,000 of Debt Service

Fund-Fund Balance and $1,000,000 of General Fund-Fund Balance.



Background: In 1990, the Columbus Consolidated Government entered into a lease

pool agreement through GMA to provide low interest, short term financing for

capital equipment. The lease pool has proven to be a viable option during the

budget process each year and the city has taken advantage of this program over

the past 18 years.



On June 5, 2008, Standard & Poor?s rating agency downgraded MBIA Insurance

Corporation from an AAA to an AA rating. On June 19, 2008, Moody?s rating

agency downgraded MBIA Insurance Corporation from an AAA to an A2 resulting in

a decline of five (5) rating categories due to their exposure in the sub-prime

collateralized debt obligation (CDO) market. MBIA provides the bond insurance

for the 1990 GMA Lease Program. As a result of MBIA?s recent downgraded

ratings, the interest rates on the variable bonds has risen from less than 2%

to almost 4% to 8% as of July 24, 2008. GMA has decided to terminate the

program.



Columbus Consolidated Government received the July 2008 invoice on July 8, 2008

and noticed the invoice was significantly higher than expected. The invoice

for June 2008 was $11,404.78 and the invoice for July 2008 was $51,540.44. GMA

was immediately contacted as no notification was provided to the participants

of the lease program of any change in the program. GMA provided a brief

explanation of the issues with a formal explanation provided on July 30, 2008.



Analysis: GMA offered participants to exit the lease pool on September 1, 2008

or October 1, 2008. In order to avoid continued higher interest rates on the

balance of $2,099,048.63, Columbus Consolidated Government will exit the lease

pool on September 1, 2008.



Financial Considerations: The payoff of the 1990 GMA Lease Pool will be funded

by the current amount budgeted in FY09 for lease pool principal and interest,

$700,000 of Debt Service Fund-Fund Balance, and $1,000,000 from the General

Fund-Fund Balance. GMA did provide an option to have alternative financing

directly with a lending institution, but considering the balance outstanding,

it did not prove to be overwhelmingly beneficial compared to paying off the

lease pool balance. In FY2010, the millage rate for debt service will be

evaluated for possible reduction based on the expected digest.



Legal Considerations: Pursuant to Sections 4.5 (d) and 4.7 (a) of that certain

Lease Agreement, dated December 1, 1990 between Columbus Consolidated

Government, as Lessee, and the Georgia Municipal Association, Inc., as Lessor,

the Columbus Consolidated Government provided written notice to exercise its

Purchase Option with regard to Equipment subject to the Lease and of the

Termination of the Lease, effective September 1, 2008 by paying the Purchase

Price no later than five (5) days prior to said termination date.



Recommendations/Actions: Approval is requested to payoff the 1990 GMA Lease

Pool Variable Rate Demand Bonds, authorize the City Manager and Finance

Director to complete all necessary documents, and approval to use $700,000 of

Debt Service Fund-Fund Balance and $1,000,000 of General Fund-Fund Balance.













ATTACHMENT 2.



"Lou Comer"

07/31/2008 10:40 AM



To

,

cc

, "Matt Williams" , "Ronnie

Patterson" , ,

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Subject

Termination of 1990 GMA Certicates of Particpation















Gentleman:



As you know the 1990 GMA Lease Pool Variable Rate Demand Bonds have been

remarketing at rates substantially above the SIFMA index due to MBIA?s

downgrade. As a result of this occurrence our participants are exercising

their ?purchase option and termination? rights under Sections 4.5 (d) and

4.7(a) of their individual leases to pay off their outstanding leases and

subsequently terminate all outstanding COPs. Attached are letters from nine of

our twelve participants giving notice of their intention to pay the purchase

price no later than five days prior to termination on September 1, 2008.



Letters are attached from the following nine (9) governments:



Cobb County Board of Education

City of Columbus

City of LaGrange

City of Macon

City of Rome

City of Savannah

City of Smyrna

City of Sugar Hill

City of Valdosta



The remaining three (3) participants, City of Atlanta, Gwinnett County Board of

Education and Savannah-Chatham Board of Education, could not execute their

notices in time to meet the thirty (30) day purchase option notice requirement

for September 1 but plan to tender their notice for a termination effective no

later than October 1, 2008. If these participants are able to take action

within the next few weeks, we would like for you to consider granting a waiver

of the 30-day notice requirement in order to terminate all leases earlier than

would otherwise be possible.





Lou Comer

GMA

678-686-6260 (direct dial)

678-686-6360 (fax)

lcomer@gmanet.com

www.gmanet.com



A Resolution

No. _______





A RESOLUTION REQUESTING APPROVAL TO PAYOFF THE 1990 GMA LEASE POOL

VARIABLE RATE DEMAND BONDS AND AUTHORIZE UP TO $700,000 OF DEBT SERVICE

FUND-FUND BALANCE AND $1,000,000 OF GENERAL FUND-FUND BALANCE FOR THE PAYOFF.



WHEREAS, in 1990, the Columbus Consolidated Government entered into a

lease pool agreement through GMA to provide low interest, short term financing

for capital equipment;



WHEREAS, in June of 2008, Standard & Poor?s and Moody?s rating agencies

both downgraded MBIA Insurance Corporation?s rating categories due to their

exposure in the sub-prime collateralized debt obligation (CDO) market;



WHEREAS, as a result of MBIA?s recent downgraded ratings, the interest rates on

the variable bonds has risen from less than 2% to almost 8% as of July 24, 2008;



WHEREAS, GMA has decided to terminate the program, offering participants to

exit the lease pool on September 1, 2008 or October 1, 2008;



NOW, THEREFORE, THE COUNCIL OF COLUMBUS, GEORGIA HEREBY RESOLVES:



That the City Manager and Finance Director are hereby authorized to:

1. Proceed with completing all necessary documents to initiate paying off the

1990 GMA Lease Pool Variable Rate Demand Bonds; and,



2. Expenditure of funds up to $700,000 of Debt Service Fund-Fund Balance and

$1,000,000 of General Fund-Fund Balance for the payoff.



_____________________



Introduced at a regular meeting of the Council of Columbus, Georgia held on

the 12th day of August, 2008, and adopted at said meeting by the affirmative

vote of ____ members of said Council.





Councilor Allen voting __________

Councilor Anthony voting __________

Councilor Baker voting __________

Councilor Barnes voting __________

Councilor Davis voting __________

Councilor Henderson voting __________

Councilor Hunter voting __________

Councilor McDaniel voting __________

Councilor Pugh voting __________

Councilor Woodson voting __________





_________________________________ __________________________

Tiny B. Washington, Clerk of Council Jim Wetherington, Mayor



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