Council agenda-2/12/2019

[Ted]

Some interesting items on this weeks city council agenda -

1. Set up of the Berwyn Municipal Securitization Corporation - A "not-for-profit" corporation and instrumentality of the City for the purpose of issuing certain corporation obligations for and on behalf of the City for specified City purposes, and the assigment, sale, transfer and conveyance of the City's interest in certain specified revenue source to such corporation."

This will be the legal entity that allows the City of Berwyn to get a loan from Barclay's bank for $83 million dollars in exchange for Barclay directly receiving the city's sales tax and income tax.

This is a controversial measure.  It is similar to what the city of Chicago did with selling its parking meter revenue and revenue from the Skyway toll Bridge in exchange for cash.  The city of Berwyn will be giving up its sales tax revenue and income tax revenue in exchange for $83 million dollars in cash to fund the pension funds.  This is in addition to the two $30 million dollar bonds that have been issued in the last 5 years by the city.

  The city recently had its bond rating downgraded from A to BBB because of the city's debt situation and its reliance on debt to fund its operations.

2. Change in canabis law - Law is changed to add "More than 30 grams but not more than 100 grams" as a misdemeanor fine of $750. Before law change, fines were up to 30 grams ($500 fine). Cook County States Attorney is no longer prosecuting cases of up to 100 grams.

3. Sexual Harassment law/policy - Ordinance enacting a sexual harrassment policy for the city of Berwyn employees.

4. Animal control project - City had been contemplating a new animal control contract with the Dr Leo Dennis Agustin Animal Foundation. The city council agenda state that the police chief has requested the agenda item be tabled indefinitely.

5. Chickens - Change in the ordinance on chickens as pets to increase the number of chickens allowed per property from 2 to 3.

6. Arts Project - Request on an update of the public arts mural project in the Depot District, which expected Metra to refund the city of Berwyn for the costs.

[Ted]

Here is a write up of what happened at the last city council meeting from Catey Sullivan:


HERE IS WHAT HAPPENED WHEN THE CITY SUDDENLY LEARNED THAT SELLING-THE-SALES-TAX-TO-BARCLAY'S DEAL WAS GOING TO COST MAYBE $3,000,000 MORE THAN THEY THOUGHT


The City Council's $86 million deal to sell its sales tax to Barclay's of London hit a snag at Tuesday's city council meeting after questions from Berwyn United Aldermen Jose Ramirez (2nd) and Jeanine Reardon (3rd) revealed that – unbeknownst to the council or the mayor – the 30-year deal included an annual fee of an annual fee of up-to $100,000 for "administration and maintenance."

City legal representative James Vassilli, a partner with Del Galdo Law Group, initially responded to questions by stating that the up-to-$100,000 fee was over the 30-year-life of the deal. Bond broker and financial consultant Daniel Denys corrected him, and told the council that the $100,000 fee was actually an annual expense.

The new information left the Council unwilling to vote on the securitization ordinance as presented by the Berwyn City Finance Department. Both Denys and Vassilli told the council that if they did not vote on the ordinance at the meeting, they risked losing the deal. Vasselli stressed that "all these parliamentary hurdles" could cost the city unspecified funds.

Mayor Lovero (DBOC) suggested that in lieu of a vote on the ordinance as written, he conduct a "straw poll" outside of council chambers (via email or phone call) after the ordinance had been amended to ensure that Barclay's absorb the annual $100,000 in fees; an official council vote could be taken as a "formality" at a later meeting. This proposal was met with objections from City Clerk Marge Paul (Berwyn United).

"I am not comfortable with this. It's unheard of. A 'straw poll' on something involving this much money?" Paul said. She then addressed Vasselli: "You're a municipal attorney, are you OK with this?" Paul finished: "Is the city attorney ok with this?" City Attorney Anthony Bertuca did not reply.

"I have heard the concerns of the city clerk, who doesn't vote. Anyone else?" Vassilli responded.

Denys reiterated the urgency of the vote to seal the deal with "Smith Barney."
"I mean Barclay's," he said after council members asked who Smith Barney was.

The sale of Berwyn's sales tax to Barclay's is a means for the city to borrow money to make its pension debt obligations in the wake of the city's downgraded credit rating. (See post of Jan. 22). The Barclay's plan involves the city giving the next 30 years' worth of sales tax to Barclay's in exchange for $86 million in bond loan. Barclay's will use the sales tax money to pay down the city's $90 million pension debt.

Denys, Jones and Vassilli say the city will save roughly $18 million over its 30-year term. The savings result because Barclay's can get a 5.75 interest rate on the bond debt, significantly lower than the rate Berwyn could get on its own.

Ramirez's question about the up-to-$100,000 "maintenance" figure was the final query before the vote was slated. "One last thing. Sorry. Is this $100,000 fee – is that over the life of the 30-year deal, or annually?" Ramirez asked.

"Thirty years, life of the loan," Vassilli said.
"No, it's yearly," Denys said.

At that point, Ramirez took out a calculator. "Annual? So that's – up to $3 million we'd pay and we're getting 5.75 interest - How does that $3 million compare to what we're saving on interest? Are we saving less than we're paying? "

Denys replied that the savings would be $15 million, provided the bond market was amenable to a 5.75 interest rate, adding that the figure might be different depending on bond market fluctuations.

Reardon: "I'm not voting on 6 percent or 5.9 percent. I'm voting on 5.75, which was the interest rate you presented us with when you brought this to us."

Denys: "I can't tell you at 8 p.m. on a Tuesday night what market is doing. It's closed. Well maybe it's open in Tokyo or somewhere. But not here." Denys added that the fee had always been a part of the deal, but because of the way the contract was written "you wouldn't see it. It's been there, it's just the way lawyers write stuff."

Further discussion ensued, some of it centered on exactly what the $100,000 per annum would pay for.

Denys explained that the deal required hiring an independent overseer and other staffers because otherwise the city would "too much on its plate." He also spoke to the need to hire qualified professionals for the maintenance job. Denys added that ye had "lowballed" a similar deal with a nearby suburb by giving them a $50,000 per annum fee.

"I can't just walk down the street and find somebody. These guys are hard to find," he said, adding "this is the way it's done everywhere," and reiterating that the fee was to city staff from having to take on time-consuming, highly specialized labor it was not equipped to do on its own.

At this point, Denys left the room and returned with Barclay's broker John Gerbino, who had been standing outside the council chambers. Further discussion ensued. The upshot: Gerbino told the council that he would make sure the up-to $100,000 annual fee is absorbed by Barclay's, and that the interest rate will not exceed 5.75 percent.

That left the matter of the vote. The ordinance prepared for the council to vote on did not include language incorporating Gerbino's assurances. It was at this point that Lovero proposed a "straw poll," to be followed by the "formality" vote at a later council meeting. Paul, as previously noted, questioned the legality of that. While the city attorney declined to weigh in, it's worth noting that straw polls are not legally binding. There is nothing precluding a council member from form voting one way in a "straw poll" and a different way during an actual vote.
In the end:
The ordinance was amended to give Lovero authority to seal the deal on behalf of the city. The council voted to approve the securitization. Lovero will be responsible for signing off on the final interest rate, not to exceed 5.75, and ensuring that Barclay's "subsumed" the "maintenance and administrative" fees.

[markberwyn]

Curious to hear how those fees will be "subsumed." Why would Barclay leave $2 million-plus in fees on the table when Berwyn has effectively no leverage against the bank?

[berwyn senator]

My opnion is why does the town start cleaning up the blighted buildings, over crowding, and alleys. Parts of Berwyn are getting pretty bad. Years ago people had chickens,rabbits,and pigeons.They brought nothing but rats and mice.The town made everyone get rid of them,are we going backward?

[markberwyn]

How serious of a problem is overcrowding in Berwyn? I'd like to hear a response from somebody with nonanecdotal knowledge and insight into the matter, along with actual statistics. It's been my experience that when somebody says Berwyn has an "overcrowding" problem, it's usually a white person who sees Hispanic families around.

[Ted]

How serious of a problem is overcrowding in Berwyn? I'd like to hear a response from somebody with nonanecdotal knowledge and insight into the matter, along with actual statistics. It's been my experience that when somebody says Berwyn has an "overcrowding" problem, it's usually a white person who sees Hispanic families around.

According to the Berwyn Development Corporation, Berwyn now has the densest population of any city in the state of Illinois.  That is based on number of people per square mile.

[Ted]

Curious to hear how those fees will be "subsumed." Why would Barclay leave $2 million-plus in fees on the table when Berwyn has effectively no leverage against the bank?

I think the council should have deferred until the "new" deal was put into the contract.  It bothers me that they voted to approve a contract that is supposed to be left up to the mayor to change.

That should not be the way things work.

[markberwyn]

I'm not surprised to hear that---Berwyn is famously built-out residentially in ways other suburbs aren't. That's not the same thing as saying Berwyn is "overcrowded," however---that three families are living in homes designed for one family, etc.

[berwyn senator]

A blind man could see we are overcrowded,most streets are difficult to find parking spot.Schools are overcrowded and expanding!

[berwynres]

Just the facts, ma'am!

Census Population Data for Berwyn:

1960:  54k
1970:  52k
1980:  47k
1990:  45.5k
2000:  54k
2010:  56k
2017:  55k

So, historically, for significant periods of time, Berwyn has had a resident population in excess of 50k.  I wonder if Berwyn Senator thinks Berwyn was "overcrowded" in the 60s and 70s?   And, the Census data indicates that the total population of Berwyn has been generally stable for the past 20 years.  The dip in population in the 80s and 90s was most likely due to the aging of the previous generation with their children growing up and moving out and homeowners remaining as empty nesters. Sounds like the "normal" aging process of most suburbs.  I would guess it tends to be cyclical.   

[berwynres]

Thanks, Ted, for the update regarding the last City Council Meeting.  What are your thoughts regarding the recent promotion of (3) patrolmen to sergeant?  It is my understanding that these promotions were approved prior to the release and dissemination of a City funded study to determine, among other issues, the appropriate staffing levels for the police department.  It would be nice if we could expect greater transparency from Berwyn's elected officials before they take actions that financially burden their constituents. 

[markberwyn]

A blind man could see we are overcrowded,most streets are difficult to find parking spot.Schools are overcrowded and expanding!

As I said, I wasn't looking for anecdotes. Look at berwynres' response. If you don't have actual numbers to share about "overcrowding," you can't be taken seriously.

[berwyn senator]

Go to the Berwyn police dept. on Facebook.This information is there BERWYN is the most over crowed city in Illinois!!!!!!!!!! Big difference from the 50's&60's

[markberwyn]

Go to the Berwyn police dept. on Facebook.This information is there BERWYN is the most over crowed city in Illinois!!!!!!!!!! Big difference from the 50's&60's

The population between then and now is effectively the same. What is this "big difference" you speak of? Where's the post on the BPD Facebook page that explains it? Post a link, please.

I am simply holding you to the very high standards you were held to when you were a student in Berwyn.

[Ted]

Thanks, Ted, for the update regarding the last City Council Meeting.  What are your thoughts regarding the recent promotion of (3) patrolmen to sergeant?  It is my understanding that these promotions were approved prior to the release and dissemination of a City funded study to determine, among other issues, the appropriate staffing levels for the police department.  It would be nice if we could expect greater transparency from Berwyn's elected officials before they take actions that financially burden their constituents.

I agree.  The audit report of the police department was eye opening - especially the statements that rank and file police officers believe promotions are based on political connections.

[berwynres]

Ted,

I was not aware that the report has been released.  Is it posted anywhere on the City's website?  Thanks.

[Ted]

Ted,

I was not aware that the report has been released.  Is it posted anywhere on the City's website?  Thanks.

I do not know if the report is available in electronic form on the website.  The report was released in December and is public in at least a paper form.  There have been several write ups of parts of the report on Facebook by Catie Sullivan.

  I have started a new thread here on BTF that has her write up as well as a link to the public Facebook page.  One of the posts has photos of pages in the report.