How to save taxpayers money while financing several projects for the city was a topic of discussion at both the Enterprise City Council work session and voting meeting Feb. 4.
David Langham, a municipal investment banker with Intl FC Stone, showed some capital improvement financing options to the council that could bring to reality a multi-million-dollar retail project, the state’s fifth veterans administration home, an 80-bed hotel and a city soccer complex.
Langham’s underwriting work with the city in 2018 resulted in savings of $2,634,289 after the refinance.
At the voting meeting following the work session, Councilman Al Miller cast the single “no” vote when the council voted to sign a preliminary agreement letter with Intl FC Stone.
At the voting meeting Miller re-iterated that other financial institutions should be contacted before the city decided to refinance. He said that no Request for Proposals had been sought before to the 2018 refinancing. “For the record, I think that anytime the city of Enterprise starts to refinance millions of dollars of taxpayers’ money that we need to go out and get request for proposals from more than one underwriter to make sure the taxpayers’ money is being spent in a wise manner and they are getting the best deal possible,” Miller said. “My question is why do we have the gun to our head tonight to sign the G-17 agreement with this company?”
“Nobody’s holding a gun to anybody’s head,” Councilman Turner Townsend said. “This gives us the flexibility to take advantage of the current market.”
“We’re moving fast. Mighty fast,” Miller replied.
“You’ve been aware of this for a few weeks,” responded Townsend.
“No, the second time I’ve been around the underwriter is tonight,” Miller replied.
“Are we letting the local banking loan institutions look at this project?” Miller asked at the work session.
“In any underwriting that we do, we actually send a memorandum to the local banks for participation with us,” Langham replied.
Townsend said that proposals from other underwriters had, in fact, been sought in 2018. The proposal from Stifel, dated April 3, 2018, showed an estimated aggregate savings of $1,267,920. FC Stone produced an actual savings of $2,634,289. “We ended up delivering on exactly what we said we were going to do,” Langham said.
Langham said that in 2018 FC Stone charged the lowest fee that the city had paid this century. “We are prepared again to set the lowest mark that the city has paid,” he said.
“In the past, the lowest (fee) that you’ve ever paid was $7 and the highest you’ve paid is $12.75 for an average of $8.74 per transaction,” he added. “In 2018 we did it at $6.85 so we set the mark the lowest the city had gotten that century. On this issue, we’re prepared to come in at $6 and do it for you.
“With the $2.6 million (savings) we identified in 2018 and this $2.8 million (for 2020) the saving we have brought you is $5.5 million. We want to stand up beside you and say that your good work and partnership with us has now produced $5.5 million back into the general fund of Enterprise so that the citizens do not have to have their taxes raised to make up that.”
“David is bringing to us $2.87 million savings generated from refinance of portions of outstanding debt used to offset new financing needs,” Townsend said. “He did that unsolicited. Where are these other five institutions that have done business with us?”
“We’re spending taxpayers’ money. I think we ought to get the lowest fees,” Miller repeated.
“Like you all used to?” Townsend asked, noting that the city in previous administrations paid between $10 and $12 a bond instead of the $6 FC Stone charged in 2018.
“You’re dadgumed right,” Miller replied.
“You all paid between $10 and $12 a bond,” Townsend reiterated to Miller.
“In 2018, we set the lowest mark that the city had paid this century,” Langham said. “We are prepared again to set the lowest mark that the city has paid.
“Our job is to bring you what we feel is the very best deal,” Langham said. “I would stand here and say with the utmost of confidence that the taxpayers of Enterprise have gotten the very best deal.
“David has proven himself. He’s done this work and I know he’s proven that we’re saving the taxpayers money. Its been proven since 2018. It shows consistency.”
“My concern is that we’re going to keep on kicking things down the road,” said Council President Perry Vickers. “I am for going ahead.
Councilwoman Sonya Rich agreed. “We want to capitalize on the interest rates,” she said.
“We feel like our customer service level is what wins us opportunities to work with cities like Enterprise,” Langham said. “We consider it an honor and privilege to work with you and deliver this to the market in a swift and timely fashion.”
During the work session, Miller said that other underwriters should be contacted and cited the Montgomery-based Frazier Lanier Company as a company that should be contacted. They had served as underwriter for multi-million dollar municipal bonds for the city in previous administrations,
The company was fined by the Financial Industry Regulatory Authority in 2001 in connection with “advancing travel and entertainment expenses” for then Enterprise Mayor Kenneth Boswell’s wife on trips to New York City.
In the FINRA Letter of Acceptance, Waiver and Consent, signed by Frazier Lanier June 14, 2011, and accepted by FINRA June 17, 2011, Frazer Lanier was cited for having “violated the gifts and gratuities, fair dealing and supervisory rules of the Municipal Securities Rulemaking Board by advancing travel and entertainment expenses for a family member of an issuer official and family members of a Frazer Lanier principal. Frazer Lanier later received reimbursement for these expenses from the proceeds of the bond offerings made by the issuer.”
The FINRA settlement document says that in 2008 and 2009, the city of Enterprise sought to issue municipal bonds and retained Frazer Lanier as the underwriter. “In connections with (the city of Enterprise’s) efforts to obtain favorable credit ratings for its bond offerings and after the‘city had retained Frazer Lanier as underwriter, the (Enterprise Mayor) and a principal from Frazer Lanier made two trips to New York City to meet with analysts from the credit rating agencies.”
The first trip was during August 2008. “Both the mayor and the principal of Frazer Lanier brought their wives on this trip,” according to the FINRA document.
A second trip was in August 2009. “Again, the mayor and the principal of Frazer Lanier brought their wives on the trip and the principal of Frazer Lanier also brought his sister-in-law,” according to the document.
Frazer Lanier then sought—and obtained—reimbursement for the expenses from the proceeds of the municipal bond offering, according to the FINRA document. “The expenses reimbursed for the wives and sister-in-law included airfare, limousine car service and luxury hotel accommodations. The total amount of these unwarranted expense reimbursements was $3,838.17. Frazer Lanier has repaid (Enterprise) for these expenses.”
Frazier Lanier was assessed a censure and a $20,000 monetary fine, which they paid.
Boswell wrote a check, dated Sept. 28, 2010, to Frazier Lanier in the amount of $733.98 annotated on the memo line as reimbursement for his wife’s trip to New York, 2008.
The next meeting of the Enterprise City Council is Feb. 18 in the Enterprise City Hall. A work session begins at 5 p.m. in the mayor’s conference room. A voting meeting begins at 6 p.m. in the council chambers. Both meetings are open to the public.