Council authorizes $19 million sale of notes for major city improvements

November 17, 2008

Akron City Council Monday night passed five ordinances providing for the issuance and sale of a total of $19 million of municipal notes – in anticipation of the issuance of municipal bonds – to pay for major improvements throughout the city.

Proceeds will provide $9.1 million for road improvements, including Carroll Street, North Portage Path and Newton Street; $6.65 million to improve city parks such as the Cascade Locks Bikeway, Lock 3 and the Ed Davis Tennis Courts; $2.25 million to purchase new vehicles for police, fire and ambulance services; $760,000 to improve the CitiCenter, Municipal building and the Harold K. Stubbs Justice Center; and $245,000 to renovate Akron Fire Department facilities.

Budget and Finance Committee Chair Tina Merlitti (W-7) recommended authorization of the sale of notes in light of current market conditions which make municipal bonds more of a risk.

“Because of falling interest rates we felt it necessary and in the best interest of the city to authorize the issuance of notes as a temporary funding solution to make needed improvements throughout the city,” Merlitti said. “Right now municipal bonds are estimated at 5.5 to 6 percent per year for a fixed period of about 20 years.”

A municipal bond purchase is essentially a loan to the city in exchange for a set number of interest payments over a predetermined period. An investor who chooses to sell prior to the bond maturity date may not recoup the full amount of the original investment under current economic conditions. Notes, on the other hand, would bear a 3 percent interest rate and can be prepaid without penalty or premium any time prior to maturity under the ordinances passed. The ordinances authorize the Director of Finance to establish a note maturity date that is three months to one year from the date of issuance.

In other Council news, Ward 9 Councilman Mike Freeman announced that the Ohio Division of Liquor Control has denied Jaikissoon Singh Enterprises Inc., doing business as Leprechaun Party House, its application to transfer a liquor permit to a location that would have been in close proximity to schools and an alcohol rehabilitation facility in Ward 9.

“I want to thank all my fellow Council members, the Community Health Center and others in the community who supported our efforts in objecting to this particular permit transfer,” Freeman said. “I especially want to thank the Division of Liquor Control for listening to reason on this one. This is a victory for all of us.”