By JESSICA CRAWFORD
• Leader & Times
Last Tuesday, City of Liberal Finance Director Chris Ford asked the commission’s permission to pay off Series 2007 General Obligation Bonds early. The bonds were encumbered by the city for the Arkalon Wells. Ford informed the commission the early pay off will save the taxpayers a substantial amount of money – to the tune of $14,699.
“This is an opportunity we have to initiate the early payoff of our General Obligation Bonds Series 2007 for the Arkalon Wells,” Ford told the commission. “To give you a brief background, on May 2007, the Liberal City Commission approved the issuance of General Obligation Bonds, Series 2007, in the amount of $880,000. These bonds were necessary to perfect the city’s water rights interest at the Arkalon property, and we drilled three water wells and constructed a local distribution system. When we issued these bonds, they were for a five-year term, with a three-year early payoff option, and were scheduled to be paid off in December of 2012.”
Ford informed the commission that enough revenue has been collected to initiate the early payoff.
“Basically, in a nutshell, what has happened is we have collected adequate revenue to be able to retire these bonds,” he said. “Our first option to retire these bonds would be on June 1, and should the commission wish to proceed, not only would we pay off the bonds a year and a half early, but we would also save just short of $15,000 in additional interest expense.”
In order to legally pay off the bonds, a resolution must be drawn up and approved by the commission in a future meeting, Ford said.
“What our game plan would be, at our next commission meeting, we would have the necessary resolution and what not for the commission to consider,” he said. “Should that be approved, then we would be able to provide a 45-day required notice to our bondholders.
“Basically,” Ford said, “we are able to pay them off early and save some money.”
Commissioner Bob Carlile agreed the early payoff was the correct route for the city to take, however, he had some questions regarding money routinely used in the past to make payments.
“Anytime you pay something off early and make some money, that is the thing to do,” Carlile said. “What are we going to do with the money? Instead of making payments, we are going to have some cash.”
Ford explained the entire project still has a balance. Then, he said, additional funds will go to the water department and Arkalon.
“We still do have some additional monies to pay on the entire project,” Ford said. “But once those are paid off, what our intentions are, I believe, is we are proposing to have the revenues go to the water department and a portion to Arkalon, as they were the ones that generated the water rights originally. It would certainly help their budget, as royalties have declined.”
Commissioner Larry Koochel praised city staff for their fiscal responsibility.
“There was some good planning on this by city staff,” Koochel said. “This is a rarity – to pay off a bond early.”
Commissioner Dave Harrison said there was doubt throughout the city regarding the payoff of the bonds. However, he said, the outcome was exactly as predicted by city staff. He also explained the importance of Arkalon Energy to the City of Liberal.
“From day one, when this thing was presented, this is how it was presented to go,” Harrison said. “There was a lot of doubts that this day would come. It not only came, but it came a year and a half early. I really appreciate what staff did, I appreciate the program you put together. You have saved the taxpayers $15,000, I think that deserves an ‘atta boy,’ Chris.
“Probably one of our biggest customers out there is Arkalon Energy and Conestoga,” he continued. “I think sometimes because that plant is located outside the city, we don’t realize the impact it has on our community. There are a lot of good jobs generated, a lot of money generated by that plant and a lot of good jobs here in the city that come from that company.”
Carlile agreed with Harrison’s comment.
“It is a great asset to the city and the community,” Carlile said.
City Manager Mark Hall wished to explain to the commission just how much work Public Works Director Joe Sealey put into the project.
“I might add to and make the commission aware, we perfected two of the three wells, which the use of that water made it possible,” Hall said. “Not only did Joe (Sealey) step forward and recommend that we drill the wells and not lose the permit, but our worry was in the future, how would we perfect that? We had 40 years to do that, but we were worried how we would do it. With this we have perfected two of the three and we will perfect the third.
“So,” Hall added, “it has been a win-win situation for the rate payers in Liberal.”
The commission unanimously voted to move forward with the early payoff of the 2007 Series General Obligation Bonds.