HomeMy WebLinkAbout06-07-2000 Called Meeting
CALLED MEETING COMMISSION CHAMBERS
June 7, 2000
Augusta Richmond County Commission convened at 3:00 P. M., Wednesday, June 7,
2000, the Honorable Bob Young, Mayor, presiding.
PRESENT: Hons. Beard, Bridges, H. Brigham, J. Brigham, Cheek, Colclough, Kuhlke,
Shepard and Williams, members of Augusta Richmond County Commission.
ABSENT: Hon. W. H. Mays, III, member of Augusta Richmond County Commission.
Also present were Ms. Bonner, Clerk of Commission; Mr. Oliver, Administrator; and Mr.
Wall, County Attorney.
The Invocation was given by the Reverend Williams.
The Pledge of Allegiance was recited.
Mr. Oliver: Let me set the stage —
Mr. Mayor: Mr. Oliver, let me do something first. Under the Commission rules,
delegations have give minutes to address the Commission. We're going to be giving the
presenters today some additional time, so the Chair would entertain a motion from the
Commission that we waive the five-minute rule for the presentations from the people who want
to be the bond underwriter, and I think ten minutes is what --
Mr. Oliver: Ten minutes for a presentation is what they have been advised, and ten
minutes then to give you an opportunity to ask any questions you may have.
Mr. Mayor: So if we could waive the rule and extend that for ten minutes for the purpose
of this meeting today, if someone could make that motion.
Mr. Beard: I so move, Mr. Mayor.
Mr. Kuhlke: Second.
Mr. Mayor: Is there any objection?
Motion carries 9-0.
Mr. Mayor: So we'll give them ten minutes each today. Go ahead, Mr. Oliver.
Mr. Oliver: As you mentioned, each firm will be given ten minutes to do a presentation
and then give you an opportunity to ask questions that you may have and for them to respond.
I've talked with each of the three underwriting firms. They have verbally agreed among
themselves that they would like an opportunity to make those presentations in the absence of the
other two firms, and that is something that they have informally agreed to among themselves. I
indicated to them this is a public meeting and we did not restrict anybody from being in
attendance of they so desired, but they have indicated they do that and this will be the honor
system, if you will, in that regard, and I just wanted to pass that fact on. What we are proposing
today is, and Mr. Larry Scott from CH2MHill will be going over the project list, is to go forward
with the bond issue of between $85 million and $90 million. We anticipate that that bond issue
will be done late July or sometime in August, but to that we've got to put together the project
team. The project team consists of bond counsel, an underwriting firm, as well as potentially a
financial advisor, depending upon the need and complexity of the project. The underwriter is the
firm that actually sells the bond in the market and the purpose is to get the lowest overall interest
rate on those bonds, so the bonds need to be sold on as competitive basis as possible. The firms
were, the presentations are being made in alphabetic order, and the first presenter is the team of
A.G. Edwards.
Mr. Mayor: If y'all would -- I need each group that is presenting today, if you have one
or more speakers, to identify yourself for the purpose of the record, please, if you would. So
when we go back and look at the minute we know who we were hearing from. And I brought
my stopwatch in here, too, so everybody will get ten minutes. I haven't started it yet. When you
identify yourself, I'll start it. Ms. Bonner, are you going to need him to use the microphone so
we can get it on tape? They can just take one off this stand. There you go. Whenever you're
ready.
Presentation by A.G. Edwards:
Mr. Widener: For the record, I'm going to introduce us and then go through a little
overview of why we're here and tell you a little bit about our team and try to stay within our ten
minutes. I'm Mark Widener with A.G. Edwards. I can't tell you how happy I am to be here. I've
been looking forward to it for a long time. As a matter of fact [inaudible] years ago, a long time
ago, before this. With me is Tom Edwards. Tom is with Securities Services Network here in
Augusta. He's a licensed broker. He is part of our team. And also Bill Thompson, with
SunTrust here in Augusta. He is also part of our team of A.G. Edwards, Securities Services
Network, and SunTrust. I want to start off by talking a little bit about each of our prospective
firms and what we bring to this team. I'll start off and tell you a little bit about A.G. Edwards
and then turn it over to Tom and let Tom talk a little bit about his involvement here in the
Augusta area and also what he brings to the table. And then turn it over to Bill, as well, and let
Bill talk a little bit about SunTrust and what SunTrust brings to the table. A.G. Edwards was
formed over a hundred years ago and was a family-based business. We're still by an Edwards, a
[inaudible] generation Edwards. We're consistently ranked in the top ten in underwriting. We
were ranked ninth in the country last year in terms of total volume underwriting. I won't run
down the thing simply because of a lack of time, the ten minutes. But the things that I think are
important to you all are, if you look at last year, 1991, total water and sewer [inaudible], we were
number two in the state in terms of [inaudible] business, and number one in the state in terms of
[inaudible]. There were a couple of big issues because of counties much like Richmond County.
Another very important thing for the county is [inaudible] in the country. We've got over 6800
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brokers, we've got over 660 offices which are all represented on this very busy United States
chart. What's most important about that is this outset here, which is the southeast, we have more
offices in Georgia than any other firm in the state. We have 19 offices. Why it is important to
you is because you're looking for someone who can take your bonds and sell them out at the best
interest rate. We've got the most people that are out there doing that, and when you combine that
with SunTrust and Tom here locally, nobody can match it. We also [inaudible]. One other
important thing, and we can talk about in a little more detail later, is that SunTrust alone, not
counting the capital that A.G. Edwards, not counting the capital SunTrust brings, they have
$1.74 billion in total capital. The reason that's important to you is it gives us the ability under
NASD rules, to underwrite up to $9.5 billion in securities at any one time. So while an $85
million issue is a lot of money, it's not near the limit to which we can go on a $9.5 billion
[inaudible]. SunTrust [inaudible] brings an additional $10 billion in capital. I turn it over to
Tom now.
Mr. Edwards: Thank you, Commissioners, for having us here today and giving us a little
time to talk about the issue. [inaudible] Mr. name is Tom Edwards and I would like to thank
everybody [inaudible]. Over the last 11 years, I have at one time or another, I have met and
talked to almost everybody in this room, as far as the elected officials are concerned. But from a
local level, from a local standpoint, [inaudible] process, the consolidation legislation and your
individual sense of purposes, minority businesses have been able to do a little bit better than we
have before. Whenever and wherever possible, the use of hometown products and services add
to the gross prosperity of Augusta, with the reinvestment of the money into our [inaudible].
Want to thank you for that. Through this issue, companies like mine will be able to hire, do
things like Bill does, things like A.G. Edwards does. Incidentally, A.G. Edwards is no relation to
me. Many of my clients are Augusta taxpayers and first-time investors. They're pretty
unsophisticated investors. They like to participate in the process of financing and helping the
city out. To enjoy tax-exempt investments. And to do the same thing that everybody else does.
The difficult thing is they're not aware of what tax-exempt investments are sometimes. They
have heard of Coca-Cola. They're heard of Procter & Gamble, but what is a tax-free investment?
So the challenge I have is to propose, to enlighten, to educate on things they've never heard of.
Being able to talk about the City of Augusta issue is a big deal. Believe it or not, it's a very big
deal. Trying to tell somebody about tax-free investments from somewhere else just doesn't get it.
It's a big deal for me. I've worked here for nearly 11-1/2 years to make this area a better place.
Most of the things I've done in the community have been for non-profit organizations or
foundations, spending my time and effort on those things. This gives me the chance, as a matter
of fact one of the first chances, to work in the private sector to put something back. I have two
part-time employees. My business is just growing. I've been independent for a little over two
years. I came before the city council at the end of '97, was unsuccessful to do business with the
City then. I'm looking for the opportunity to bring what I can to the table to broaden the base of
the wealth of the city of August. I thank you for your time and consideration and we'll talk some
more as you ask questions.
Mr. Thompson: I am Bill Thompson, president of SunTrust Bank here in Augusta, which
encompasses Richmond County, Columbia County, McDuffie County. Our bank has been in
this community over 100 years and we plan on being here a lot longer after this bond issue
occurs. We are a community player. As you can see from that chart, we add, have over 1100
branches total, about 11 in the counties that I mentioned earlier, mostly in Richmond. We have
225 employees. Most of those employees are employed in Richmond County. They are
property taxpayers. They are contributors to this community. And the thing, I think -- one of the
things we're most proud of is our community involvement. As you can, we're the largest bank
supporter of United Way, which you include our corporate employee contribution. So we're a
player in this community. Our people are involved. As I said, they'll be here before this bond
issue, have been for many, many years, and we'll be here afterwards. But we've put together a
very aggressive bid, because we want to do business with our city. And with that, I'll turn it over
to Mark.
Mr. Widener: I want to hit on a couple of final points. [inaudible] You have heard a
little bit about each sector of the team and what they bring. I want to talk a little bit about the
marketing strategy that we would employ for the issue. There has been a lot of discussion, and
rightly so, you're doing a lot of financing, [inaudible] for the next few years, want to make sure
you get [inaudible]. We have made [inaudible]. We have what's called yield curve in our
business, and if you think about it, you got to the bank and put money in it for a year and get one
rate, put it in the bank for five years for a little higher rate. And that's what the yield curve is.
Well, buyers of bonds buy out a various points [inaudible]. We go, and when we're trying to sell
any issue, we go for what's called [inaudible], we have enough retail participation [inaudible],
selling, and we're going to have [inaudible]. So what we do is we look on the yield curve to see
who the buyers are. So where we have buyers in here, we've got enough commission in the
transaction to entice those buyers [inaudible], and out on the long end where we have more
sophisticated investors that know what they're buying, we don't have to pay them as much money
so the commissions go down. We use several marketing tools, which I brought today and can
pass out. It's a flyer very much like this one, which we did for [inaudible] County. And then
we'll do ads in the paper. We'll do a focused effort on selling retailers. As Tom said, one thing
we want to do is sell as many bonds locally as we can. With SunTrust, Tom and A.G. Edwards,
and we've got an office right here in Augusta, you're going to get the most participation out of
this team than you are anybody else. The reasons [inaudible], one you get lower interest rate,
and number two, you get people buying in to what you're trying to do. When you have one or
two reasons, I don't think that's going to be hard to sell. Because I know we're coming into a
summer drought. [inaudible] But when you get people buying into the issue, people invest their
money in the Augusta Richmond County bonds, they're investing into that project. And they
have a vested interest in seeing that project go through. So we're going to have a concerted effort
on selling these bonds here locally and going to use our team to do that. The last thing that I will
touch on is the interest rate. The interest rates, if you want to know how you, how do you know
if you've got the best interest rates, it's very difficult. It's not like to stock market where you
want to go out and you want to buy GE, you know exactly what the cost of that stock price is.
Bonds you don't know that. Bonds are not as liquid as that and you don't know exactly what the
prices are. The only way you can do is you [inaudible] reputable firm and [inaudible]. What
we're going to do for you is we're going to give you a pricing book with daily pricing on it, that
compares your issue to other issues that are in the market that day. It gives you absolute
confidence that you know [inaudible]. There's no other way for us to do it. The other point I tell
you, if you want something with really more meat than anything else, is that I want to take this
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issue around afterwards, I want to show it to everybody I [inaudible], and the last thing that I can
do is take non-market interest rates out there and show them [inaudible]. Because the first thing
that will happen [inaudible]. So you have that. The last thing I want to say, and I'm quick to say
this, is one thing that A.G. Edwards and a lot of other big firms have gone for is more fee-based
pricing. We are going away from commission sales more into fee-based pricing. Commissions
in some [inaudible] on the underwriting spreads on [inaudible] is less important [inaudible].
With that, we finish the ten minute presentation, however, if you've got any questions, we'll be
happy to answer them
Mr. Oliver: Their price quote, for your information, was $157,250. The price, they were
asked to price it both as 100% retail transaction and as 100% institutional transaction, and the
price on both options was the same. $157,250.
Mr. Mayor: Are there any questions for Mr. Widener? Mr. Bridges?
Mr. Bridges: Mark, given that low price that you've got, what about -- I mean that's your
profit, as I understand it. If you get out there in the market and the bond is going kind of slow,
what will that say in regards to the yield or the discount that you may place on those bonds on
down the road, if possibly they're not selling as they should? And what will that say for the city
of Augusta?
Mr. Widener: That's a great question. It goes right back to what I was trying to get to
you. Again, the comfort that you're going to have is that we're going to take the interest rate, we
want to show it to everybody, we want to show what interest we've got for this. To answer your
question directly, the dollars we quoted is priced at $1.85 per thousand. $157,250. All that
money goes to pay our sales [inaudible]. Every penny of it [inaudible]. I can tell you, based on
my experience, [inaudible] very little [inaudible]. So any paper, any bond that comes from our
company are very well received. But I can tell you, to answer your question without being coy,
the bonds are going to, what we say, fly. They really will go. People want good quality
municipal bonds [inaudible] and A.G. Edwards selling these bonds, you've got such a huge sales
force that it's not going to be an issue. And again, we're less commission-sensitive than we used
to be. We used to be so much more -- our salespeople used to be commission sensitive. Now if
they get a client that has a portfolio of securities, whether it be bonds, stocks, anything, and they
make maybe one percent a year off of the total assets, all the assets they have invested. I'm a
broker now, and I can take $20,000 Augusta Richmond County bonds and put it in my client's
portfolio, I'm going to make one percent off of that every week. So I can get them to buy bonds
for ten years out there, every year I'm going to get one percent off of that. So I'm not as worried
about selling on commission. So whereas it used to be only thing they would make is right up
front. Now they're going to make that one percent a year because we're moving toward this
[inaudible] pricing. Does that answer the question?
Mr. Mayor: Mr. Beard?
Mr. Beard: My question is directed more or less to the local partnerships here. I know
that we've talked about a lot here in localizing this. I'm just kind of interested in the percentage
that would be involved in this. I know when we've talked before about partnerships being
formed, some of the companies have talked about the percentage that would be involved in here.
Because I know a lot times we could talk about localizing but we're not talking about any large
percentage, we're just talking about a minute type situation. And I would like to have that
explained from both Mr. Thompson and Mr. Edwards, an explanation of how much participation
is this. I don't know if you can give me a percentage or not, but other people have given me
percentages, so I would like to know that.
Mr. Thompson: I'll be happy to answer it unless you guys want to do that? You want to
answer the question?
Mr. Edwards: The thing is, as small as I am, I've got an agreement that I can handle to
get as much as I want of the bond issue. Which set aside is a fair portion as any partnership has
been. And I would say the same thing about Bill. Being as big as the bank is, they can handle a
lot bigger issue than I can. I was going to be worried that a small percentage of the deal would
be reserved for local, but I've been assured that I can move as much of the issue as I want to. So
that is a round-about way of saying that I wouldn't be locked and committed, because in an
underwriting situation, some places the lead underwriter would tell the selling group what
percentage they're responsible for, which is a catch-22. Obviously you want as much as you can
but then what if you can't move it? So I have the best of both worlds that I'll be able to handle all
I can, but not being locked into or committed to an amount that I can't handle. And I think the
bank is probably in the same situation there.
Mr. Beard: I just have one other thing. So in other words, you're saying that this is not a
flat fee for you? You are a participant in this and this is what I want to make clear, that you are a
participant in this and that you can get as high a percentage as you want and as many bonds that
you are able to sell?
Mr. Edwards: Right. In this business, the free enterprise business really works.
Mr. Widener: He's on as equal footing as any broker at A.G. Edwards. Every bit of the
dollars we quoted are sales commission, and so Tom as a licensed broker can make as much as
any broker in our system or any broker [inaudible].
Mr. Mayor: Mr. Shepard?
Mr. Shepard: Mark, suppose the interest rates are moving against us as the issuer on the
day of the market sale. What do we do? Do we not sell them that day or do we -- I mean
sometimes you have these overnight announcements by the Fed, a lot of things I don't understand
that we are hiring professional teams to guide us. What do we do in that situation?
Mr. Widener: That's a great question, also. And what we'll be doing as your
underwriting team is we'll be monitoring the market all, from the time that someone –
Mr. Shepard: From selection?
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Mr. Widener: From selection until time of the sale of the bonds. We're going to
negotiate underwriting. The great thing about negotiating underwriting is you can pull out the
day you were supposed to [inaudible]. If negative information hits the market that day, we
would absolutely tell you you should pull the issue that day. Now if something happens while
they're out there, obviously we've got less control of it. But if it does, you've got a firm with
capital that can swallow $85 million. We've got $1.47 billion with A.G. Edwards and over $10
billion with SunTrust. The ability, again, to write well into the tens of billions of dollars in
securities [inaudible].
Mr. Edwards: This is a different marketplace than federal securities. They move rapidly
on Fed announcements. Then there is a hierarchy which moves, and municipal bonds is kind of
down on the list, meaning that it's not as rate-sensitive immediately as everything else is, or the
other things on the list. For example, you don't raise mortgage rates the day the Fed raises rates.
So there is some lag time in there. I don't think it would be instantaneous.
Mr. Widener: The day before the pricing, usually about three o'clock in the afternoon,
we'll have a pre-pricing conference, where we get everybody together on a conference call and
we talk about the issue, where the market is, and make sure everybody's okay with where we are.
We do it again the next morning before we [inaudible] and make sure again everybody is
comfortable with where the market is. If the market's pretty solid, then we're okay. If everyone
doesn't feel together the night before or the day of, then we won't go that day.
Mr. Shepard: One more question, Mr. Mayor.
Mr. Mayor: Yes, sir, Mr. Shepard?
Mr. Shepard: There's been some discussion about whether these bonds move to the retail
market or to the institution market. What do we, as the issuing entity, why do we care about
that?
Mr. Widener: Well, the reason that you care typically is because -- this is a quick
definition. Retail. We are a retail buyer. Institutions are big firms in New York that know what
they're doing. They know what the rates are better than any of us in the room do. They know
exactly what [inaudible]. The idea is that a retail investor, because they're less sophisticated, is
likely to set a lower interest rate than an institution rate. And so the idea is the more retail you
sell, the lower the price, the lower the interest rate. If you go back to this curve here, bonds that
are out here [inaudible]. People aren't buying these typically. You have the occasional investor
who wants to put some money in them [inaudible] 30 years. The typical retail investment fall in
the [inaudible]. So to an extent that you've got bonds that fall [inaudible]. And we're going to
see to it, by putting enough commission in the securities, to entice our brokers to push them hard.
And again, I hate to keep coming back to it, but you have three, you have two very big
distribution members and one very small local. This is all retail right here. Everything Tom
does, every order he puts in will be a retail order. So it's important to the extent that you can
[inaudible]. A.G. Edwards alone has over 6800 brokers and you've got a very broad distribution.
To the extent that you can get the retail, it will help the price.
Mr. Mayor: Is there one person who will be identified as the manager of this issue?
Mr. Widener: More than likely. We would all be involved. But more than likely, since
A.G. Edwards would be the [inaudible] on the issue, I would be the lead person on the issue.
Mr. Mayor: And could you explain what experience you have in issues of $85 million?
Mr. Widener: Absolutely. Last year, last fall, we underwrote --
Mr. Mayor: I mean you. You personally as a manager.
Mr. Widener: That's what I did. Last fall, for Rockdale County, $110 million [inaudible]
for Rockdale County. And prior to that I had been involved in any number of [inaudible] for
water and sewage issue. I did $65 million [inaudible] Gainesville. So by virtue of being an
office where we are ranked number one in [inaudible] water and number two in [inaudible],
we've got a vast array of expertise.
Mr. Mayor: All right, we go around the table. Mr. Kuhlke?
Mr. Kuhlke: Mark, I think you mentioned this, but locally and it was in the state, how
many financial consultants does A.G. Edwards have locally, SunTrust, and of course Tom, and
how many statewide?
Mr. Widener: Well, locally I think our office has about 25. In the office here.
Mr. Kuhlke: You have one office here?
Mr. Widener: One office in Augusta with 25 brokers. And of course you've got Tom and
SunTrust.
Mr. Thompson: [inaudible]
Mr. Widener: You have to keep in mind, too, that a lot of the retail [inaudible] at the
branch level. May not necessarily be a sales person that sells the bonds to each person, but the
branches are telling their customers that this issue is coming. And [inaudible] so you've got
those people marketing the issue. In Georgia, A.G. Edwards has 186 brokers, 19 offices, and
that's more than anybody else in the state. And then SunTrust has [inaudible]. SunTrust brings
another 230 sales professional to the table, and that is from the southeast. I don't know how
many in Georgia.
Mr. Kuhlke: But y'all have 118?
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Mr. Widener: We have 186.
Mr. Kuhlke: 186?
Mr. Widener: In the state.
Mr. Kuhlke: In Georgia? Okay. Bill, you know how many y'all got in Georgia? In
Atlanta.?
Mr. Thompson: I'm sure it's, I'm going to be conservative in saying it's at least 75 out of
that 230 that he mentioned. I'm pretty sure it would be more than that.
Mr. Kuhlke: Okay.
Mr. Widener: I think what is important for Mr. Kuhlke to know as well that not only do
we have 186 resident brokers in the state of Georgia, there are 2000 licensed to sell [inaudible],
so you'll have folks -- there are folks in Alabama, Tennessee, Georgia, South Carolina.
Mr. Mayor: Mr. Jerry Brigham?
Mr. J. Brigham: Mark, I've got several questions for you. I want you to help me
understand some of this. First off, on your sales team, is it going to be limited only to the
partners in your organization?
Mr. Widener: That's up to you all. Typically I think what you're referring to is selling?
Mr. J. Brigham: Right.
Mr. Widener: We have come to you all as a team. And a lot of times, a lot of bond
buyers will say this firm and that firm will sell.
Mr. J. Brigham: So the sales groups could be every firm that's here today and may not
be?
Mr. Widener: Right. Richmond County is a great example [inaudible] but that
[inaudible].
Mr. J. Brigham: So it is possible? Okay. Also in Rockdale County, I assume that this
$157,250 would be a price, $157 per thousand?
Mr. Widener: That's correct. No, $1.85.
Mr. J. Brigham: $1.85 per thousand?
Mr. Widener: Yes.
Mr. J. Brigham: Okay. Can you tell me what the cost was in Rockdale County last year?
Mr. Widener: If I had to guess, and I don't remember exactly [inaudible].
Mr. J. Brigham: Can you explain to me --
Mr. Widener: [inaudible] We have seen several things happen [inaudible] but the
[inaudible]. It's not something we necessarily love to see. We'd love to make more money on it.
But we figure [inaudible] there are any number of -- and you all [inaudible].
Mr. J. Brigham: I understand that.
Mr. >>: I might add -- Mark, I think you told me that this [inaudible] match, one of our
competitors today in another market, as well.
Mr. Widener: That's correct. Cherokee County.
Mr. J. Brigham: But the average of the last several bond issues that have been issued in
Georgia in three or above, and that's the reason I'm asking the question. How can we -- why --
my mama taught me once upon a time if it's too good believe, then I start asking a few questions.
And that's the reason I'm asking.
Mr. Widener: That is a very good question and it has to do with, number one, it's just
good old fashioned [inaudible].
Mr. J. Brigham: There isn't something hidden that we're not seeing?
Mr. Widener: Absolutely not.
Mr. J. Brigham: $1.85 per thousand is going to get it?
Mr. Widener: Every dollar that this [inaudible].
Mr. J. Brigham: I'm going to get the lowest interest rate and the best commission?
Mr. Widener: Yes. And the [inaudible] we come to you [inaudible]. We do that.
[inaudible] The reason they call it negotiated underwriting is you're actually negotiating the rate.
Mr. J. Brigham: I understand that.
Mr. Widener: [inaudible] If you don't like you come back and tell us you [inaudible].
So the day we price these bonds, we're going to give you [inaudible]. Not how we priced it but
how our competition priced it.
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Mr. J. Brigham: Do you happen to know what the -- Atlanta did a billion dollars last year
on water sewer?
Mr. Widener: Yes.
Mr. J. Brigham: Do you happen to know what the cost for that was?
Mr. Widener: I really don't know. [inaudible]
Mr. J. Brigham: The figures I saw were about $3 a thousand. I know we're not in that
ball park and that concerns me that we can get a better price.
Mr. Widener: [inaudible] I assure you there is no [inaudible]. You're paying [inaudible]
to go back to [inaudible]. So this fee-based project means I'm a broker, I'm making [inaudible]
each individual investor [inaudible] so it's allowing us to lower the fee. I'd much rather
[inaudible], I would much rather [inaudible].
Mr. J. Brigham: Bill, can you tell me what your fee was for Columbia County, the issue?
Mr. Thompson: It was significantly higher than this, but I don't know. I will tell you
three things that address your question. Number one, we're going to make money at this price.
Number two, our reputation is at stake and we're not going to sacrifice our reputation. And
number three, we've been reading the paper and we understand that you're probably going to
need more water and sewer bonds over the next seven, eight, ten years and there's obviously an
incentive for us to be your underwriter and have an opportunity to participate in those as well.
But this is a [inaudible] price. I've confirmed that with our public finance people and we're not
going to sacrifice our reputation by bait and switch or anything like that. The price is
[inaudible].
Mr. Widener: The only reason I'm here and that the firm employs me is [inaudible].
There's no other reason for us [inaudible]. Every dollar that we make is going to our [inaudible].
My job is [inaudible].
Mr. J. Brigham: I understand. Also, we've got the biggest one and the best one that's
going out right now. From what I can tell.
Mr. Mayor: Mr. Kuhlke, one more question.
Mr. Kuhlke: Explain to me, your $1.85, is that called the gross spread?
Mr. Widener: That's the gross spread.
Mr. Kuhlke: That's the gross spread? Cause I'm looking at a list of gross spreads and
asking you a question. The one that I'm looking at out in Columbia County was $7.60.
Mr. Widener: [inaudible] now clearly, there are people out there getting higher spreads.
There is no doubt about it. But I also tell you Columbia County [inaudible]. We had not done
with for Augusta Richmond County, we wanted to do it.
Mr. Mayor: Thank you very much. We have been more than generous with question and
answer time, but I'll give Mr. Oliver the final question.
Mr. Oliver: I would envision that we're going to have to seriously consider doing this as
a rated issue versus an insured issue, and that will involve rating presentations to Moody's and
Standard & Poor, the underwriter we will expect taking a lead role in making those
presentations. Does your quote provide for that type of presentation and your expenses? I don't
know about anybody else's, but your expenses are covered in your numbers?
Mr. Widener: We have been very successful with our financing], meaning rate increases,
rate increases help the price go down as well.
Mr. Oliver: Will your firm contractually agree not to sell bonds at a premium for 30 days
after [inaudible]?
Mr. Widener: I imagine it would. I don't have my underwriter here with me, but I'm
certain we can talk about that.
Mr. Mayor: Thank y'all very much for your time. We appreciate it and we will take the
next one. Mr. Oliver, who is next in the rotation?
Mr. Oliver: The next person is J.C. Bradford, who has now been merged with Paine
Webber. I would note for future reference on official statements, if you look at the left of the
bottom of the official statement, the name that appears to the farthest left is what's called the
senior manager on the deal, and they quarterback it. So anytime you see an official statement or
a document with a number of people on the team, it's the person to the left.
Mr. Mayor: All right. Could we have somebody tell J.C. Bradford to come in, please?
Presentation by J.C. Bradford:
Mr. Mayor: Marshall, do y'all have charts to use in your presentation today?
Mr. Brown: We do not have any charts.
Mr. Mayor: Do you have other involved in your presentation other than yourself?
Mr. Brown: Yes.
Mr. Mayor: When each person comes up, if you would just identify yourself for the
record, and we will need you to speak into the microphone so that we can pick it up for the
13
keeping of the minutes. The previous presentation ran a little bit over and I will give your
company the same amount of time they got and we ran a little over on question and answer but
that will be dictated by the nature of the questions and the answers. So whenever you're ready to
start.
Mr. Brown: Honorable Mayor Young and distinguished Commissioners, my name is
Marshall Brown and I'm the co-manager of the office of J.C. Bradford & Co. here in Augusta.
My partner is Scott [inaudible]. Scott, if you'll raise your hand. In the few days, J.C. Bradford
will be merging with Paine Webber. As many of you know, Paine Webber is one of the largest
and best-known investment firms in the country, and today we have two of our teammates who
will be making our presentation. The firm will be Bill Homburg, who is managing director of
Paine Webber, and after Bill will be Allegra Ivy White, our teammate from Paine Webber. Bill?
Mr. Homburg: Thank you very much. And thank all of you for inviting us down today.
We certainly appreciate this opportunity to present our credentials to you. Before coming over,
joking with Marshall and Scott, in terms of how we've worked together so far in presenting our
qualifications to you, so well indeed that the firms have decided to get together and merge. As of
Friday, it will be one firm. Paine Webber is merging the assets of Robinson Humphrey into the
firm. What does that mean for you? What that means for you is a firm that has even more
distribution capability and focus in the southeast. Specifically in Georgia. In the merger, we
will add over 900 brokers to the Paine Webber system. Adding $46 billion of client assets to the
system, making Paine Webber all the more important, influential within the southeast and
specifically here in Georgia. I'd like to flip over, if you would, to Tab B --
Mr. Kuhlke: You're merging with Robinson Humphrey? You made a mistake there.
Mr. Homburg: I did make a mistake. For the record. I'm sorry.
Mr. Kuhlke: We need to go back.
Mr. Homburg: Thank you, Bill. Okay. If we can flip over to Tab B. The account team
we put together here consists of members of both Paine Webber and J.C. Bradford as shown on
this page, both from the financing side, the investment banking side, as well as from the
distribution side. If I can now flip over to Tab C, I'd like to spend a little time on our water and
sewer credentials. Suffice it to say that our combined team is the leader in this particular sector
of the municipal finance market. In terms of the national market for water and wastewater
bonds, we're number one ranked during the time frame that you have asked us to look at since
1991, 1995, on the basis of the negotiated transactions we have a 14 percent market share,
having senior managed close to $10 billion worth of water and wastewater bonds. More
specifically within the Georgia market, we are also ranked number one, having senior managed
$818 million during this time frame. We've had a tremendous amount of experience. We've
faced many of the issues that you face and would welcome the opportunity to work with you on
the forthcoming bond issue. With respect to particular Georgia financings that we've recently
done, City of Atlanta, we've senior managed two recent financings on their behalf, a $277
million issue in 1997, and more recently the $1.1 billion issue in 1999. We've also worked with
the city of Monticello and Athens-Clarke County on water and wastewater financings. If you'll
turn to page five, a general comment here. This, the market for public finance has been a
contracting one. Firms have elected to get out of the business and we've seen a lot of turnover
over the past few years. We believe that Paine Webber is the exception to this. While others are
downsizing, Paine Webber and now Paine Webber/J.C. Bradford are using the opportunity to
increase their exposure and focus on the public finance world. You can see on the bar chart on
the left that our market share has jumped from 6.5 to 11.8 percent within the aggregate public
finance market since 1991. In terms of overall senior managed rankings within the business, you
can see that we are consistently running at the number two spot within all national senior
managed business throughout the country. Suffice it to say, our commitment is there for this
sector of business. If we could flip over now to D, I'd like to turn it over to my cohort, Allegra
Ivy White, who is going to talk a bit on the financing plan.
Ms. White: I'm just going to briefly summarize the financing plan that we had in the
proposal and then talk about one alternative to fixed rate [inaudible]. As you saw in the
proposal, insurance is a viable option for the county's issue. And closer to the date of issuance,
[inaudible] and market conditions will perform a break-even analysis to evaluate the benefit of
using insurance. The two scenarios that we're presenting do assume insurance with a 20-basis
point premium. Scenario one is just basic level of that service for the proposed issue. Scenario
two is wrapping the debt services of the proposed issue around the county's existing debt to
create level aggregates of service. The benefit of scenario one is a lower par amount and a lower
true interest cost. The benefit of scenario two is a lower maximum aggregate in your debt
service, which will improve your covered ratios. Now if you turn to page seven, we can look at
variable rates and alternatives fixed-rate debt. As you can see from the graph here, fixed-rate,
fixed interest rates have been sufficiently higher than variable rates over the past ten years. In
fact, if you look at the average TBMA over the period versus RBI, we can see approximately a
300-basis point benefit, using variable rate debt. When used in moderation, variable rates can
lower your overall interest cost without having negative credit implication. In fact, it's been
proven that variable rate debt can be issued up to 25 percent of your aggregate debt with no
negative implications. And furthermore, it can be issued on subordinate basis to be a borrowing
capacity and improve your debt service coverage of your senior [inaudible] debt. Variable rate
debt offers reduction, flexibility, capital structure diversification, and can be used as a hedge
with your short-term assets, such as those in your utility general fund. Finally, if you turn to
page eight, we can just look at some examples of some water and sewer system who have
approximately 10 to 25 percent of their obligations in variable rate or short-term loans. You see
New York City, Massachusetts Water Resources Authority, Houston, Texas, and Miami-Dade
County. So this is something that many systems are starting to utilize. I turn it back to Bill.
Mr. Homburg: I want to talk a little bit about the marketing of the bonds. If you go to
tab E, we put a picture for you the way we approach our marketing, basically as a three-tiered
approach. The basic foundation of any marketing plan that we would do, particularly in a market
like today, is dependent upon the retail investor. This is the broadest market for municipal
bonds. There is an insatiable demand right now among retail investors for retail municipal bond.
We make a point to try to tap that. Leveraging that would be sales to institutional investors.
And finally, any bonds that were not sold at the time of marketing, Paine Webber and J.C.
15
Bradford would step up, using their capital, and underwrite on your behalf. If you flip to page
ten, we show you the branch office network of Paine Webber, as well as J.C. Bradford. You can
see Paine Webber's national scope throughout the country. You can also see what J.C. Bradford
adds to our equation in terms of real focus in the southeast, particular focus in Georgia, with nine
offices in state. In terms of page 11, we lay out for you the different types of investors that a
sales force will focus on. Starting at the top, you have what we call tier one institutions. Those
are the large financial institutions that all firms from an institutional perspective cover. Stepping
down in size from that, you get into tier two and tier three institutions, that manage somewhat
fewer assets and tend to be less price sensitive in terms of interest rate. Then you step into the
retail high net worth sales. And finally what we call mom and pop retail sales of bonds. Paine
Webber and J.C. Bradford are particularly able to attack all of these sectors of the market on
behalf of our issuers. In tab F, we have an underwriting discussion. I'd like to go through with
you in some detail. There's been a lot of talk recently about trying to deliver financing at a very
low underwriting spread. I think that argument by various funds tends to be a little disingenuous
to issuers who are concerned about delivering the lowest cost funding for their particular project.
Why do I say that? Well, to get the lowest cost you need the broadest distribution. The broadest
distribution by definition means a heavy retail sales effort. In order to get that retail sales effort,
one has to incentivize the retail brokers. Because municipal bonds are not bought, they're sold.
They're sold by brokers who make the call and who point out the various attributes of a given
municipal bond to an investor. What does it take to incentivise that broker? Well, it takes more
than $5 a bond overall spread to get the focus of that broker. Why is that? These brokers have a
lot of different investment alternatives they can sell. They've got stock. They've got preferred
stock. Mutual funds. A lot of these, most of these, have significant sales concessions. The risk
one runs, if the underwriting spread is set too low, is that broker will not spend the effort to make
the call on behalf of that municipal bond for which he views it not as attractive to sell as some of
the other products in his stable.
Mr. Mayor: You need to start wrapping it up now.
Mr. Homburg: Without the retail, there's a very strong risk that the interest rate goes up.
And the point I'd like to leave you with on this is just a very minor increase in rate will more than
offset any higher amount of the underwriting spread. For example, 5/100ths of a percent
increase in rate will result in $6.35 per bond equivalent in the underwriting spread, so the
leverage is very strongly on producing the lowest rate, the lowest rate is achieved through a
strong retail interest. I'd also like to mention that from the perspective of our team, we would
expect to work with a minority firm in underwriting your bonds. We have not selected that firm
at this point. We didn't want to presuppose any selection. We would want to work with you
folks in the selection of that team and would bring that particular firm in as a participant in our
financing, to share in the economics of the entire transaction. Thank you.
Mr. Mayor: Mr. Oliver, did you have some pricing information you wanted to share with
us?
Mr. Oliver: Yes. The pricing information provided by the J.C. Bradford/Paine Webber
team was $417,074, including expenses for the transaction. That was either institutional or retail,
but they indicated in their backup material that they expected 70 percent of the transaction
roughly based on today's market to be done retail and 30 percent institutional.
Mr. Mayor: Thank you. Gentlemen, do we have any questions? Let's start down at this
end this time. Mr. Brigham? Go ahead, Mr. Brigham.
Mr. J. Brigham: To start with, I'm going to try to ask the same questions I asked last
time. Help me understand on your pricing, now that's $4.17 per thousand?
Mr. Homburg: No. That result, that dollar amount on a per bond thousand basis equates
to $5.90.
Mr. J. Brigham: $5.90?
Mr. Homburg: Correct.
Mr. J. Brigham: I appreciate that. The second part of that, this appears to me to be a
little higher than some of the average costs I've seen over some bond issues that were issued in
the last year. Why are you saying it would cost more to sell our bonds than say the city of
Atlanta bonds or some other county's bonds?
Mr. Homburg: In order to deliver you the lowest cost of funding, we feel you need to
appeal to the retail sales force. In order to appeal to the retail sales force, this is a market level
that will get them engaged in selling your issue. You can sell the issue at a lower gross spread.
The risk you run is that you won't have the attention of that sales force and that you therefore
will sell the bonds strictly to institutional investors. A case in point. Recent Hawaii deal was
sold on the basis of a very low spread. There was no retail sales of that bond. Indeed, that bond
priced 20/100ths of a percent. 20 basis points. Higher in rate relative to an index than it did at
the prior sale, when it had a larger spread and appealed to the retailer.
Mr. J. Brigham: On that 20/100th of a basis point, where does that [inaudible].
Mr. Homburg: 20/100ths is going to cost you a spread equivalent close to $20 per bond.
Mr. J. Brigham: Okay. We're talking $400,000 in cost basically to issue these bonds?
Mr. Homburg: Right.
Mr. J. Brigham: Are you telling me that if you'd lowered the basis points where you're
selling it under cost and the interest rate would cost me more than $200,000? Is that what you're
trying to tell me?
Mr. Homburg: Yes. Definitely. Yes.
Mr. J. Brigham: Okay. I just wanted to make sure I understood.
17
Mr. Homburg: You try to equate the rate on the bonds to up-front costs.
Mr. J. Brigham: That's what I'm trying to relate to.
Mr. Homburg: Five basis points difference in interest rate relates to $6.36 per bond
higher and overall.
Mr. J. Brigham: And your sales agents, all your brokers are on commission? There's
nobody on salary?
Mr. Homburg: Some on salary, some on commission.
Mr. J. Brigham: Basically they get paid by commission?
Mr. Homburg: They look to sell and look for the highest sales credit involved in a
particular product, be it a bond or a stock.
Mr. J. Brigham: In your sales organization, are you limited only to your firm? What
other firms do you have participate with you or –
Mr. Homburg: We would contemplate putting a syndicate together.
Mr. J. Brigham: We would contemplate putting a syndicate together?
Mr. Homburg: Yes.
Mr. J. Brigham: So possibly every broker in this room could be a part of the sales
organization?
Mr. Homburg: That's right.
Mr. J. Brigham: I think those are the same questions.
Mr. Mayor: Mr. Kuhlke, did you have a question?
Mr. Kuhlke: Yes, I just want to know locally and statewide, how many financial
consultants do you have and how many brokers do you have?
Mr. Homburg: Within the state --
Mr. Brown: I might be better able to answer that. We have 11 J.C. Bradford offices in
the state and a very large Paine Webber office in Atlanta. [inaudible] I would guess somewhere
between [inaudible] brokers.
Mr. Mayor: That it, Mr. Kuhlke?
Mr. Kuhlke: Yes.
Mr. Mayor: Mr. Henry Brigham?
Mr. H. Brigham: I understand you said that you would probably look for a minority
company to get involved. Have you been involved with a minority company prior to this? If so,
whereabouts?
Mr. Homburg: We very frequently do. I'm currently doing a transaction for the city of
Baltimore that's due to price next week. We have the Chapman Co. as a co-manager on that
transaction. It's very typical that we will have a minority firm joining us.
Mr. H. Brigham: Thank you.
Mr. Mayor: What experience does the managing director of this issue have with bond
issues of this size?
Mr. Homburg: Quite a bit. Over the last 25 years —
Mr. Mayor: Let's say within the last five to ten years. Can you give us some examples?
Mr. Homburg: Five to ten years, a lot of water and wastewater, a lot of general municipal
work. As I mentioned, Baltimore is a transaction that's going next week and I've done a number
of transactions on their behalf. In prior years, I worked with Puerto Rico on water and
wastewater transaction. Columbia County. South Carolina. Done work with. Had the benefit
over my years of working with a lot of different issuers.
Mr. Mayor: Could you also address for us some of the community reinvestment issues
that the company's been involved with here in the local community?
Mr. Homburg: I'd like to really turn that over to Marshall.
Mr. Mayor: Could you do that, Marshall?
Mr. Brown: Yes. We've only had an office here for about two years, a little over two
years. And we're involved in basically all aspects of the community, from contributing to the
arts to just involved, I would say, in all aspects of the community. To give you any specifics, I
mean we support the Little Theater, the Opera, the Symphony, the Little League baseball, just
everything that you would expect from a full-service financial team.
Mr. Mayor: Mr. Shepard?
Mr. Shepard: Thank you, Mr. Mayor. Mr. Homburg, let me ask you this. You talk about
incentivizing your sales force. This issue would be exempt from Georgia income tax and federal
income tax as a municipal bond, would it not?
19
Mr. Homburg: Correct.
Mr. Shepard: Would that not, for a clientele within the state of Georgia, would that not
incentivise the brokers to call those folks who wanted to have a tax benefit from the municipal
bond?
Mr. Homburg: It would, but it depends on other bonds that are being offered within the
state of Georgia at that particular point in time, both in the primary market and in the secondary
market.
Mr. Shepard: Those bonds might carry a higher yield to the broker as a sales
commission, then?
Mr. Homburg: Yes.
Mr. Shepard: Those competing bonds?
Mr. Homburg: That's your risk. Not only in the new issue market, but in the secondary
market.
Mr. Shepard: Okay. You gave us an example from Hawaii. When did it appear in that
deal that the issue was not moving at retail but it was being taken institutionally? When did that
--
Mr. Homburg: At the time of sale.
Mr. Shepard: On the day that it went to market?
Mr. Homburg: Yes.
Mr. Shepard: Could you see, as a professional standing back from it, were you surprised
at that or did you feel like because of the structure of the deal that was what was going to
happen? I mean was it a turkey before it hit the ground?
Mr. Homburg: You could see that. People who are in the business could see that
coming. And also, the institutions could see it coming.
Mr. Shepard: Help me. What were the telltale signs?
Mr. Homburg: The fact that there was such a low spread.
Mr. Shepard: Okay.
Mr. Homburg: Not only the brokers knew it, but also the institutions who were looking
to buy knew it. So their immediate response was hold back, we know where the only outlet for
this particular bond issue will command our price for this.
Mr. Shepard: And then, maybe Ms. White would want to comment on this, but when she
went through her portion on page six, there was a scenario of true interest costs and one was
5.973 percent and the other was at 6.27. Are those just hypothetical scenarios or are those
something we could anticipate? How did those true interest costs numbers, is that just a
hypothetical scenario? How do you know those numbers from that page?
Mr. Homburg: Those number were predicated on number runs that were done last night,
predicated on interest rate as of last night.
Mr. Shepard: So this is like as if we went to market yesterday?
Mr. Homburg: Exactly.
Mr. Shepard: I see. Okay. Thank you very much.
Mr. Mayor: Mr. Beard?
Mr. Beard: I've just got a couple of questions, and maybe you can help me out a little bit.
How can there be such a significant difference in the bonds from different companies? Does this
all depend on the profit that the company would make?
Mr. Homburg: Difference meaning in the underwriting spread?
Mr. Beard: The difference in the amount of the bond that we're having here. Like you
said, yours is $5.90. I think that's what you said.
Mr. Homburg: Right.
Mr. Beard: Okay. That's from three something. Had some six something. Different
companies.
Mr. Homburg: Number one, it might depend upon what date the interest rates were
established. There has been a big rally in the market over the last couple of days, so an interest
rate that was set as of last week is different from where the interest rate was this week. Also, it
has something to do with how the bonds are contemplated to be sold, be it to the retail or
institutional investor.
Mr. Beard: And how do you -- and that was my next question -- about the retail bonds
and the wholesale bonds. Is there a difference in that, in the prices of that? Or do you plan to do
most of yours retail? And I notice you worked the Bradford company here. Would they be
retailing any? Most of these to the big companies wholesale?
21
Mr. Homburg: No. We would plan to retail these. We would expect the J.C. Bradford
would participate very actively, that 70 percent of the issue would likely go to retail, 30 percent
to the big institutions.
Mr. Beard: Okay. Now the other question is on the other spectrum of getting back to the
minority issue. What percentage do you usually expect the minority company to receive from
participating with you? I notice you have one involved tomorrow, so you should have some idea
of percentage participation.
Mr. Homburg: 15 percent.
Mr. Beard: Okay.
Mr. Mayor: Thank you. Next? Mr. Williams? Mr. Bridges? Mr. Oliver?
Mr. Oliver: We envision that as part of this process, that rating presentations will need to
be made to try to evaluate insurance versus just doing it as a straight-rated transaction. The
presentations, the Moody's and Standard & Poor's, the person that typically puts them together
and assists very greatly in these presentation is the underwriter. Does your proposal assume that
level of assistance and provide for your expenses related to that?
Mr. Homburg: Most definitely does. Those expenses are factored into the spec quote
that we have given you earlier. In addition to Allegra and myself actively working with you in
shaping that rating presentation, we would bring in Brad Wier, who is the head of our municipal
credit department. He comes from Moody's, he is very good at knowing what their particular hot
buttons are, he's worked with us, for example, on New York City water in getting multiple
upgrades there. We will bring a top flight group of people together to assist you in that effort.
Mr. Oliver: Thank you. That's all I have, Mr. Mayor.
Mr. Mayor: Okay. Any additional questions? Thank you very much for your
presentation.
Mr. Oliver: The next group is Robinson Humphry/Jackson Securities, so I can get the
detail out of the way. They priced this at $221,000 as an institutional placement, and $433,500
as a total retail placement. They expect the market mix to be about 50/50.
Mr. Mayor: What were those prices?
Mr. Shepard: Can you give them again, Randy?
Mr. Oliver: $221,000 or $2.60 a thousand for total institutional placement. And it was
$433,500 or $5.10 a bond for a total retail placement.
Mr. Mayor: If y'all would please come in. Do you have any charts you're going to set up
or do you have handouts? Handouts? Okay.
Presentation by Robinson Humphrey/Jackson Securities
Mr. Mayor: We'll start the clock when you start your presentation. I would ask each one
of you who is going to speak, when you come up to speak, if you'd please just give us your name
for the record. And additionally, the other two presentations ran over a couple of minutes so
we'll also be fair and give you the same amount of time. And then the question and answer time
will be dictated by the amount of questions that the Commissioners have to ask and the length of
the responses to those questions. You may start whenever you're ready.
Mr. Speaker: First of all, I'd like to thank you all for the opportunity to be here. We've
had a long relationship --
Mr. Mayor: Please speak right in the microphone so we can hear you.
Mr. Speaker: We've had a long relationship and y'all are an important client and this is a
great moment for us. We've got a short time to make our case and we're going to focus our
energies on why we think we're best equipped to deliver the lowest interest rate for this
financing. I've got this flipboard that's before you. If you would turn with me to page three, I'd
like to [inaudible]. Everybody that's here today will be a key part of the financing team if we're
selected. I'd like to start off by introducing my partner, Sam Baker. Sam's involved with
Jackson Securities and will be an investment banker, providing banking services, along with me.
And Guy Logan. Guy is from Robinson Humphrey and a former analyst with Moody's Investor
Service. John Kilgore. Runs our sales and trading operation and is head of our Municipal
Division. He'll be involved in the pricing and you'll hear some from John here shortly. And
M.A. Mullis. M.A. is our manager of the local office here and obviously if we're selected will
play a key role in distributing the securities. If you flip to the next page, I will turn it over to
John.
Mr. Kilgore: If y'all will bear with me, I will quickly go through our handout. I want to
be sure that we have time to talk about the things you specifically might want to discuss. On
page four, and I believe me, I'm very retail oriented because I've been doing it for 25 years, and
retail is the force that drives your aggressive prices. They're the ones who are the least sensitive
to an aggressive pricing, because number one, in most cases they want to support the local issue,
and number two, it's more advantageous for them to own in-state bonds than out-of-state bonds,
so five or ten basis points doesn't mean a lot. When you get to the institutional side of the
equation, whenever you price an issue, they're going to put you up in their matrix, and if you're a
AA credit they're going to put you up on the board against all the AA credits, and if you're more
23
attractive, meaning cheaply priced, they'll buy you. If you're not, then they'll go buy somebody
who is more attractively priced. If you look at the chart, and I think this is a chart that really
indicates things to come as much as what has happened in the past. Beginning in '97 and through
'99, you'll see the net change in municipal holdings on the retail side up from $30 billion to
almost $50 billion in that time period. And I think as you see the baby boomers prosper and do
well in this wonderful economy that we're all living in, this number is going to continue to grow
and probably grow even more dramatically as we all think about retiring in our older age. The
other side of the coin is the mutual funds property casualty insures, you're seeing their holdings
drop. You're seeing pretty wild fluctuations in input and outflow because of what's going on in
the [inaudible] market. And we can almost watch what they're doing with their money and tell
you what the stock market is doing. As we see downturns in the stock market, you'll see some
deposits into their [inaudible]. As the stock market does well, then you'll see withdrawals. So
theirs has become a very unpredictable world. But I think on the retail side, you're going to see
an appetite that's going to continue to increase. If I can get you to go to page five -- let me talk
about your credit for a minute. Because there's a little uniqueness to what you're bringing into
the marketplace. I talk about credits that are just credits and we look at the pricing, and if it's
something we are comfortable with then we'll take a look at it. You've got a wonderful thing
going here, because every year you're on TV for four days, and there are very few people in the
United States that don't know Richmond County and Augusta, Georgia. And believe me, that's a
big plus. We've got 11,000 brokers and I would venture to say that 90 percent of them, when
you mention Richmond County and Augusta, Georgia, they feel good about it. This is something
you're supposed to take advantage of. Very specifically, we've got 409 consultants in the state of
Georgia who, believe me, are going to insist that we've involved in their issue. I think if you let
us do it on a primary basis, we can save you some basis points. But no matter what, I tell you
they're going to pound the desk and we will be involved, either primary or secondary. M.A.
Mullis has a wonderful office. M.A. is my favorite lady in the whole world. She headed up our
marketing on the municipal end for ten years and was just phenomenal and obviously brings an
awful lot of that into a branch, and they do a great job for us in the municipal area. Just a quick
example. Forsyth County, Georgia, we did two weeks ago. This is page six. Retail did about
$15 million. Total of $29.5 million. We would have done more but there weren't a lot of serial
bonds. We're seeing an awful lot of serial interest from retail for ten or 12 years, and they did
some of the term bonds. But if you compare comparable pricings across the page, you'll see that
we're five to eight to ten basis points more aggressive than the comparable credits. That's
indicative of what retail can do for you. We've even reached a point in our marketplace that the
institutions are very sensitive about retail participation, because of the fluctuations they see with
their deposits and withdrawals, which means they're going to be in situations where they need to
sell some bonds out of their inventories and they want to know that retail is involved in Forsyth
County, Georgia water and sewer, or Richmond County, Georgia water and sewers, because they
know that that's going to give them an aggressive bid if we have to come out of that position
because of withdrawals in our funds. Page 7, just a quick synopsis of our history in Georgia,
beginning in '97, on the water and sewer side. We're awfully proud of this record. I think it
certainly speaks well for the job that our retail sales force is doing, and I think it would be silly
not to mention that we have 11,000 brokers and number one institutional sales force in the
industry. When you talk about our big brother, Salomon Smith Barney, it's a pretty impressive
package. M.A., I won't make you come up, but I just want to briefly let you look through the
next couple of pages, just a quick synopsis and her branch. They just do a terrific job. I can't say
enough good things about M.A. Sam, if I can, my very capable co-manager. I will turn it over
to you.
Mr. Baker: Good afternoon. I'm Samuel Baker, vice president of Jackson Securities.
We have been here five years. We are now 13 years old. 100 percent owned by former Mayor
of Atlanta, Maynard Jackson. We are the largest independent municipal bond underwriting firm
in the state. We have done several transactions [inaudible] here and other places, too. We've got
nine offices across the country. We're the largest minority municipal banking, municipal bond
writing firm south of Baltimore in the nation. We're consistently ranked in the black enterprise
annual rating in the top five for the last three years. We have done now more than 275
transactions since 1995. Many of those, more than 25 have been for water and sewer programs.
The par value of all those transactions [inaudible]. Extremely good experiences. We have now
eight securities sales professionals who are all in house in Atlanta, with an underwriting
[inaudible]. They're all in Atlanta, Georgia. I just want to let you know that you have got,
without any discussion of the team that came before you, I think the best team. We've worked
for you in the past and it's worked very, very well. I understand what's going on here today.
And just outside of what you've already heard, Mr. John Kilgore, you've got a very strong,
incredible minority investment banking firm working on this case. We have come to play, if you
will. We will be a stakeholder in any transaction [inaudible]. We are willing. We've done it in
the past. We've put our capital at risk. We will do the best transaction possible. And I just leave
you with this important point, just to give you an indication of our willingness and commitment
to our client. Just yesterday, we were a co-senior on a $65 million civic center transaction for the
city of College Park, Georgia. Our sales people put in more than $30 million in municipal
bonds, out working hard for the client. That's what we do. We've come to play, play hard, and
make a very strong partner. Again, I just want to let you know that we think you've got the best
team in front of you and ask for your consideration.
Mr. Speaker: [inaudible] I'd like to address several issues. Distribution capability. We're
experienced in water and sewer finance. Price. Minority participation. And all those points
[inaudible] we're eager to serve you. In the interest of time, we'd love to entertain any questions
you have.
Mr. Mayor: Thank you very much. Gentlemen, do we have any questions? We'll start
down at this end this time. Mr. Bridges, and then we'll come around.
Mr. Bridges: Mr. [inaudible], the gross spread. You've given us two prices here. What's
the gross spread on each of those, the institutional and the retail?
25
Mr. Speaker: In the second [inaudible] that you asked for, the institutional takedown, and
I think ours was $2.50. The retail takedown, that is the individual investors, was $5.00. So
depending on the mix of retail and institution will determine the gross spread.
Mr. Bridges: I mean, you've given us $221,000 for institutional total and $433,000 for
retail total. What's the spread on each of those? What does it come to?
Mr. Oliver: 260 and 510. 260 institutional and 510 total retail. They projected a
retail/institutional mix of 50/50.
Mr. Mayor: Anything else, Mr. Bridges?
Mr. Bridges: No, sir.
Mr. Mayor: Come around the table here. Mr. Beard? Mr. Williams, you had something
you wanted to say? You go ahead, Mr. Williams, we'll take them in order here.
Mr. Williams: I'm going to probably steal Mr. Beard's question. He asked this question.
I'd like to know how much percentage are you talking about minority participation on this. How
much percentage?
Mr. Speaker: Our rate with Jackson Securities is a 70/30 split. 30 percent to Jackson
Securities.
Mr. Williams: 70/30?
Mr. Speaker: That's really a true figure there. That represents also our [inaudible] the
transaction. We are responsible, then for selling that amount of those bonds, so we step to the
plate, take those [inaudible].
Mr. Mayor: All right. Mr. Shepard?
Mr. Shepard: David, when you sell and predict a 50/50 mix, we could get the average
cost per bond basically by averaging $5.00 and $2.60. Is that exactly right?
Mr. Speaker: [inaudible] discuss this, whatever you think is a reasonable mix. 50/50 is a
reasonable mix going in. That would give you a good working number.
Mr. Shepard: And that number would be just deducted from our proceeds. I mean we're
selling bonds in order to raise money. Is that like a house when you sell it and you pay, I'll use
real estate commission as an example.
Mr. Oliver: With one exception. You gross up the amount of the bond issue so it's an
$85 million issue and you have $500,000 in issuance cost, you do an issue $85,500,000 so you
net $85 million.
Mr. Shepard: Thank you, Mr. Oliver. And then my last question, page six, you may
want to bring your cohort back up here, I'm trying to understand the difference between the
Forsyth County issue on May 23 and the Delaware County, Ohio -- is the difference, the
difference in 50 basis points, is that, am I right there, is it 50 basis points difference? On the first
transaction, with Forsyth County, you're saying 5 percent interest rate in bold and then way over
to the other side 5.05 percent. Is that the difference?
Mr. Speaker: We were five basis points more aggressive. And we tried to pull credits.
Mr. Shepard: Basis points is figured on the hundredths of a percent and this goes down
to the thousands?
Mr. Speaker: Yes.
Mr. Shepard: And so the interest costs to Delaware County, Ohio would be five basis
points higher over the life of then deal than for Forsyth County, Georgia?
Mr. Speaker: If the O-2, if that spread was maintained throughout the entire issue.
Mr. Shepard: And here again, is it not possible to have that five basis point fluctuation
just in one day? I mean Delaware County, you went to the market on May 22. Forsyth County
you went to market the day after? Is that correct? I mean, you not normally experience five
basis points spreads from one day to the next?
Mr. Speaker: Oh, you could see more than that. Believe me, you can.
Mr. Shepard: Thank you very much.
Mr. Mayor: Thank you, Mr. Shepard. I have a couple of questions. This relates to
minority participation. I believe you were involved in the issuance of the outstanding water
bonds that we have now and I'd like to know what the minority participation in that sale was.
Mr. Speaker: In the last go round?
Mr. Mayor: Yeah, the last go round.
Mr. Speaker: It was identical. 70/30.
Mr. Mayor: 70/30?
27
Mr. Speaker: Yes, sir.
Mr. Mayor: Okay. I think we've designated Robinson Humphrey to handle some airport
bonds for us and I wonder what the minority participation in that issuance would be?
Mr. Speaker: It's an open game at this point. We haven't started moving forward on that.
Mr. Mayor: All right. And then Robinson Humphrey also handles the management of
the pension funds, and I wonder what the minority participation in that is.
Ms. Speaker: [inaudible] manages funds?
Mr. Mayor: Well, however you want to describe it. What's the minority participation?
It's like $100 million in pension funds. And here we're trying to sell some water bonds and we
bring in a minority partner and what are we doing in the rest of the business we do with Augusta
Richmond County?
Ms. Speaker: I'd have to pull the information [inaudible] manages the funds.
Mr. Mayor: My other question goes to Jackson Securities. You have nine offices, and
I'm just wondering why we don't have one in Augusta, Georgia? Looks like all your folks in
Atlanta are going to make money off us.
Mr. Speaker: I will certainly take that back and place it under consideration.
Mr. Mayor: Please mention that to the Mayor, if you would.
Mr. Speaker: I certainly will. We've got ourselves rather spread-out across the nation.
Those offices, in fact, Atlanta is our southeastern presence. We have offices in Florida. Two in
Florida. But for the most part, Atlanta represents our southeast base. We are trying, though, to
increase that.
Mr. Mayor: Well, we'd like to help you increase that. Any questions on this side? Mr.
Brigham? Mr. Kuhlke? Mr. Jerry Brigham?
Mr. Brigham: David, I'm going to ask you several questions, because I'm kind of simple
and I don't always understand. Help me with the blended rate. Do y'all anticipate a 50/50 split
between institution and —
Mr. Speaker: I think these days, you're going to have a tremendous retail turnout. And in
your last transaction, Jerry, retail was involved but it was more institution marketed. About 13%
of the last transaction go retail. That was '96, '97 time frame when we placed that issue. As
Mayor Young pointed out in his remarks, the market has changed where retail is carrying the
load and institutions have evaporated. So the deals we're doing now, 50% is a reasonable
turnout, and with the credit quality you have, I think you expect that kind of turnout. We've had
higher, too. One thing I do want to shed some light on. Mr. Shepard, you asked about the
differentials. Forsyth County. All those deals that are comparable are full public offerings. Sold
to retail and institutional investors. So they're apples to apples in that perspective. If you get
into more of a limited offering, the volatility is more. I may have answered more of your
question than you wanted.
Mr. J. Brigham: On your sales organization, I assume that that could, is not necessarily
limited to Jackson Securities and Robinson Humphrey?
Mr. Speaker: I'm glad you asked that question. Our intention, and John may want to
expand on this, would be if we're selected as your investment bankers and senior managers on
this transaction, we'd suggest you form a selling group and put everybody who has offices in the
Augusta area in that selling group. Again the point of that is those firms would know that they
have retail orders from local retail investors and they would get their bonus. So they have an
incentive to sell it. Again, what drives us and being your bankers trying to get the lowest interest
rate possible, we believe that's found by reaching retail investors. So we're going to have them
as our number one priority. If your order comes in before Fidelity, your order is going to be
filled. In Augusta, a Georgia resident, because this bond is worth more to you. You've got state
and federal attention, and this is a high quality name that you, as a retail investor, will pay for.
You're not going to be upset if you get a 5 percent yield versus a 5.05. That is what we're talking
about in achieving maximum value for your paper. And that's our job. Now what think that it
glossed over, on page 7, the listing of deals. That shows you the gross spreads and [inaudible]
transactions in the last two years in water and sewage issues. So I would ask you not to look at
spreads in a vacuum. Look at what everybody else has done and see if the pricing we propose is
aggressive and adequate. Remember, we want to incentivise the sales force, ours and others, and
make the call, to get those retail investors to know about your transaction. This is the largest
deal that y'all have ever made. The last one was in the $70 million, now you're talking $80
million or $90 million and you're embarking on close to a $200 million CIP. This is big. But
y'all are a big time credit. You ought to achieve full value for it. And that's our sermonette on
the subject, but it's true. The market has changed and you need to take advantage of it.
Mr. Mayor: In reference to your chart on page 7, you haven't done anything within the
last year; is that correct? In the last year and a half? '99, 2000?
Mr. Speaker: Salomon Smith Barney is our parent and we're a wholly-owned subsidiary
and we're depending on them for the CAB position we're involved in.
Mr. J. Brigham: The other question, David, do y'all pay your brokers on commission or
do y'all pay them on salary?
29
Mr. Speaker: On commission.
Mr. J. Brigham: On commission? So the incentive is up-front sales commission, to sell
the bonds?
Mr. Speaker: Absolutely.
Mr. J. Brigham: I think that's all.
Mr. Mayor: Mr. Kuhlke, you had a question?
Mr. Kuhlke: David, I wanted to ask you, looking at the blended rate it's 3.85. $3.85 a
thousand. Looking at it from a total expenditure, do you take the two numbers, add them, and
divide by two? Is that what the fee would be to go institutional and retail?
Mr. Speaker: If you assume 50/50 distribution, you just add them together and divide by
two and that gives you --
Mr. Kuhlke: I think my question is, is if we went with you and just said sell the bonds
and hoping that you'll sell them on the retail market, is our fee $3.85 a thousand or is it
$327,250? And you sell them the best way you can and hope that you sell them retail? I think
that's my question.
Mr. Speaker: That's right. What we do, and I think the first go-round, assuming full
distribution, to maximum retail, is simply $3.70. That's about where we are. And we think that's
adequate, but aggressive pricing.
Mr. Speaker: We're a little bit innovative. Our competition is not A.G. Edwards and
Paine Webber and Merrill Lynch. Our competition is for the broker's time. So when we ask
them to go to work for us, number one we have to guarantee that they'll get their profit. And
number two, we have to pay them a reasonable commission for doing it. And what we've done,
and I started this five or six years ago, we do a structured pay-out. Basically I will go to retail
and tell them, number one, I'll guarantee you your product. If you'll go to work for us I'll
guarantee your product. And number two, I'll pay you $5 a bond for every bond you sell. And
then I give them an extended order period to work on the issue. Normally we start at least a day
before the initial pricing [inaudible]. So they're making the phone calls, they're planting their
seeds. When we get into the marketplace, I'll go out, and pricing, if we were doing this today, I
would go out with retail with $5 sales [inaudible] with a very aggressive schedule, I'd use the
same scale on institutional side and I would pay the institutional guys $2.50. The institutional
guy are going to absorb the penalty that's incurred because I'm overpaying retail because they're
the guys that are writing the tickets for $500,000, a million, two million, five million, ten million,
whatever. They're writing big tickets. I want everybody in M.A.'s office to be able to get on the
phone. If he gets an offer for ten bonds, it's not going to be a $30 ticket, it's going to be a $50
ticket. If he gets an order for a hundred bonds, it's going to be a nice ticket. I want to incentivise
them to go out and go to work. But I know we have to be competitive in the marketplace, and I
think we've given you guys a very aggressive number. But that aggressive number is going to
enable me to do the institutional side and the retail side and treat them both equitably.
Mr. Kuhlke: Okay. But just to make sure I'm clear, if we told you to sell the bonds, not
[inaudible] but just retail, then our up-front cost is $3.85 a thousand?
Mr. Speaker: Correct.
Mr. Kuhlke: $3.85 a thousand. That's what I'm saying. Where do we stand with
Robinson Humphrey if the issue doesn't move? When it goes to market?
Mr. Speaker: That's not a possibility. Unless there is total devastation and there is no
bond market. You people have done too good a job. You have a very marketable piece of paper.
It's our job to be sure you get top dollar for it. You're going to sell it. That's not a problem.
Mr. Speaker: [inaudible]
Mr. Speaker: At the end of the order period, unsold balances, you're hiring an
underwriter. At the end of the order period, if we have unsold balances, you're relying on us to
know what the market is. If that's the market and they're unsold, we don't have a problem
underwriting those bonds. Because believe me, retail is not nearly as sophisticated as the
institutional buyers. Sometimes there are days before people call back and say, you know, you
called me the other day. How were those priced? I think I'd like to take a look at that. We want
to [inaudible].
Mr. Mayor: Any other questions?
Mr. Speaker: I think one thing that is helpful in this analysis [inaudible]. If you put
yourself in [inaudible] and depending on what the market conditions are. [inaudible] watch the
stock market, the bond market's the same way. If on a given day you end up with that, you've
got an $85 million or $90 issue, and you may have $20 million or $30 million in bonds, but you
have [inaudible] underwriter. You've got a couple of choices. You think a price right, you
invest your firm's capital by owning those bonds. First of all, we've got a tremendous capital
base. Citibank. Second, we've got the largest retail system in the state and in the region of the
country. [inaudible] So we have confidence if [inaudible] that we can take the position and will
work those bonds off in the future. If you don't have a capital base or a distribution system, then
you have don't have many tools to work with. So your choices then move to do we raise the
yield [inaudible], and that is what you have to look at in your underwriter and understand what
you're getting. The capability to manage that process and experience, and it's a subjective call.
31
And you all have a tough job today. I recognize that. I think we have weathered the storm and
did a good job in '96, '97 and like to stand on that record.
Mr. Kuhlke: It just seems to me like it's to our advantage to go to the blended rate,
because it's more of an incentive, if I hear what you're saying, it's more of an incentive to push
the retail market in that scenario than it is the other way.
Mr. Speaker: Retail is your most aggressive buyer period. You've got to get them
involved. Plus, you've got a great story to tell. Enjoy it.
Mr. Mayor: Any other questions? Mr. Oliver, you have a question or two?
Mr. Oliver: Yes, I just wanted to ask. We envision that we need to consider doing this as
a rated issue compared to an insured issue, and as a result of that presentation that are going to be
made to Moody's and Standard and Poor's, the underwriter is typically the lead person in making
those presentations, preparing the presentation materials and things like that. Does your proposal
provide for in your fee quote the time and expenses for your people to be involved in those
presentations?
Mr. Speaker: Yes. In fact, I want to introduce my colleague, Guy Logan, who joined us
from Moody's. Our philosophy, we've got a good credit like yours, we need to [inaudible] with
ratings to tell your story. In '96 and '97, on the heels of consolidation, that was a story that was a
little more complicated. As you recall, there were transfers from the Water & Sewer system to
the General Fund. That needed to be articulated. Y'all evolved a game plan, you have executed
it, the story is a firm foundation to stand on, and now we're embarking on something even larger.
So we think that philosophy is critical. Let me introduce Guy Logan.
Mr. Mayor: I think you've answered his question, and the answer was yes. Is that right?
Mr. Speaker: Absolutely.
Mr. Mayor: Any other questions? Mr. Oliver?
Mr. Oliver: No, sir.
Mr. Mayor: Thank you very much.
Mr. Speaker: Thank you for your time. [inaudible]
Mr. Mayor: Very briefly.
Mr. Speaker: Very briefly.
Mr. Mayor: When you open your office here in Augusta, you can have more time.
Mr. Speaker: We have [inaudible] to underwrite up to about $20 million. We have also
got relationships to additional capital that we can probably underwrite up to another $50 in
bonds. So [inaudible] capacity [inaudible] in case there is an unsold bond issue.
Mr. Mayor: I'm glad to know you can bail out Robinson Humphrey. That concludes the
presentations, Mr. Oliver?
Mr. Oliver: That is correct. And based upon our agenda, our hope today was to come
out of here with a project team, if you will. I didn't know whether the Mayor and Commission
were comfortable with at this point selecting a bond underwriter. That is the next item on the
agenda.
Mr. Mayor: I think what we'll do at this point, Mr. Oliver, in view of the length of time
we've been hearing these presentations is take a five minute recess and then we can come back
and move ahead with the agenda and we'll move on to Item 3 if the Commission is prepared to
do so. So the Chair will declare a five minute recess.
[Recess]
Mr. Mayor: We're back in session. The next item is Item 3 on the agenda.
Selection of bond underwriter.
Mr. Mayor: We've heard the presentations and we've been through the Q & A and the
chair will ask if there is a motion at this point.
Mr. Bridges: Mr. Mayor?
Mr. Mayor: Mr. Bridges?
Mr. Bridges: I make a motion we accept A.G. Edwards as underwriter.
Mr. Cheek: I second that.
Mr. Mayor: We have a motion and a second to accept A.G. Edwards as the underwriter.
Is there any discussion of the motion? Mr. Kuhlke got his hand up first. Mr. Kuhlke?
Mr. Kuhlke: Mark, I thought you made a good presentation and obviously from a
standpoint of a fee you've got the best number to us. My concern is this, is that what you have
quoted us, is that enough incentive for your brokers to go out and aggressively market this issue?
33
Mr. Speaker: Yes, sir.
Mr. Kuhlke: And the reason I ask that question, just looking over some rates over the last
2-1/2 years, this is the lowest rate that I've seen.
Mr. Speaker: And it's the lowest rate that we've seen, as well, and is precisely why we
came up with the rate in the first place. There is a method to the madness, if you will. And the
answer to the question is yes, sir, absolutely I think our brokers want this business so bad. In the
state of Georgia, this is business we've never had before and we'd like to have this business.
Frankly, when you take the $85 million and break it out [inaudible] maturities, there's not a big
differences between $1.85 per thousand and $3.50 or $3.25 per thousand. There's not a huge
difference in what you're going to pay the broker. A lot of these bonds are going to be
institutional just by the nature of fact that they're out of [inaudible]. Those you don't have to
have [inaudible]. The short maturities that are going to go retail, we've got enough [inaudible] in
those bonds [inaudible] per thousand to pay the brokers to sell those bonds.
Mr. Mayor: Any further discussion? Mr. Beard?
Mr. Beard: I'm not prepared to vote on underwriters today, and my reason for that
is that there are a couple of questions that I need the answer and I don't think they could
be answered this afternoon, and I think that with a project this large, we really need to
make sure where we are at the point that we are going to vote on this, and I think we owe
it, in fact I owe it to my constituents, and I'm going to make a, I would like to make a
substitute motion that we defer the selection of underwriters until Wednesday of next week,
and the reason I'm saying Wednesday of next week is because I think on Monday, there
will be a number of Commissioners out Monday and possibly Tuesday. So to give
everybody, every Commissioner the opportunity to participate, I'm saying Wednesday, at a
called meeting Wednesday. And that would be the extent of my motion. And that's the
rationale behind it.
Mr. Mayor: Is there a second to that motion?
Mr. Colclough: I'll second it.
Mr. Mayor: Mr. Colclough seconds the motion. Is there any discussion on the substitute
motion to delay the selection for one week? No discussion heard, so we'll go ahead and proceed
with the vote on the substitute motion.
Mr. J. Brigham: Mr. Mayor, what was the original motion?
Mr. Mayor: The original motion is select A.G. Edwards as the underwriter. The
substitute motion is to defer action on this until a called meeting can be scheduled next
Wednesday. All in favor of that motion, please vote aye.
(Vote on substitute motion)
Mr. Bridges, Mr. Kuhlke, Mr. Shepard and Mr. Cheek vote No.
Motion fails 5-4.
Mr. Mayor: That takes us back to the original motion. Is there any further discussion on
the motion to select A.G. Edwards? Mr. Shepard?
Mr. Shepard: Mr. Mayor, I wanted to address one more question to Mr. Widener, if he'd
come forward. As you know, Mark, the presentations were done outside the presence of the
presenters and you did it in sequestration as we call in court. Did you not talk about a form of
compensation other than an up front sales charge commission that the brokers in your
presentation? Would you review that information for my benefit?
Mr. Speaker: [inaudible] that A.G. Edwards is implementing.
Mr. Shepard: Well, you better just explain it orally because my colleagues need the same
information I do. I'll be happy to look at it, but how does that --
Mr. Speaker: A lot of big brokerage firms, in fact Merrill Lynch started this, I think a
few years back, and I imagine most of them have gone to this now. It's more a fee pricing than a
commission based pricing. And we, along with just about most other large firms, are pushing
that their brokers into this fee based pricing, because frankly, spreads are coming down.
Mr. Shepard: But incentivizing the brokers does translate into lower interest expense to
the issue; isn't that correct?
Mr. Speaker: To the extent that you sell to retail, if you can get as much retail, it's
thought that retail will driving the pricing up.
Mr. Shepard: If you sell it retail, the interest expense cost is lower. That's the traditional
wisdom, isn't it?
Mr. Speaker: Absolutely. And the extent that a firm that has broad base distribution
[inaudible], because institutional clients will know they're dealing with a firm with the ability to
distribute on a retail basis, and so they can accept [inaudible] as a result of that.
Mr. Shepard: Thank you.
35
Mr. Mayor: Any further discussion or questions? We're back to the original -- yes, Mr.
Brigham?
Mr. J. Brigham: Mr. Widener, I need to ask you one question. Since the basis of your
sales organization is basically your [inaudible] get the money on the back end through
management of the portfolio, what kind of, what percentage of your agents that are on this type
of arrangement with their clients versus the ones that are on direct commission with your clients?
Mr. Speaker: I don't know the answer to that question. I will tell you it's a relatively new
[inaudible], it's been around six to nine months. We're in the process, there are a number of
brokers who are already doing it on their own, but it's been a pretty big emphasis placed on the
brokers. I wouldn't say, though, that [inaudible] is completely true, that we're basing [inaudible]
on the back end.
Mr. J. Brigham: On the front end? And you've got enough incentive to have the retail
[inaudible] the first five, six, seven years of the issue?
Mr. Speaker: I'd say probably a little more than that. About 12 years.
Mr. J. Brigham: About 12 years?
Mr. Speaker: Right.
Mr. Mayor: Gentlemen, any further questions or discussion? On the floor is a motion to
approve A.G. Edwards as the underwriters for the bond issue. All in favor of that motion, please
vote aye.
(Vote on original motion)
Mr. Beard, Mr. Williams and Mr. Colclough vote No.
Mr. H. Brigham abstains.
Motion fails 5-3-1.
Mr. Oliver: For the record, from the time the project team is assembled until time of
bond issue will be done will require approximately 60 to 90 days. And then the funds will come
in and the project work will start.
Mr. Mayor: Are there any motions -- yes, Mr. Bridges?
Mr. H. Brigham: Since we had two motions to fail today, and if I'm in order, I'd like to
revisit the motion that Mr. Beard asked that we come back next Wednesday. I don't know that
date.
Mr. Mayor: Would you like to make a motion to reconsider that?
Mr. H. Brigham: I'd like to make a motion to reconsider.
Mr. Mayor: Is there a second to that motion?
Mr. Beard: I second it.
Mr. Mayor: All right, we have a motion and a second to defer to this till we meet again
Wednesday, take this up? All in favor to convene next Wednesday and continue this
consideration of the bond matter, please vote aye.
Mr. Bridges: Mr. Mayor, I've got a question. If we don't meet Wednesday, it will come
up at the next Commission meeting?
Mr. Mayor: Yes, sir.
Mr. Beard, Mr. J. Brigham, Mr. Kuhlke and Mr. Shepard vote No.
Motion fails 5-4.
Mr. Mayor: Let's move along with the order of the day.
Mr. Oliver: The next item will come back to Item 1, and that's Mr. Wall.
Mr. Mayor: Mr. Wall?
Item 1: Selection of bond counsel.
Mr. Wall: Mr. Mayor and Commissioners, I'm asking that you approve Sutherland,
Asbill and Brennan as bond counsel and Arrington and Hollowell as special counsel and that fee
for bond counsel, special counsel and issuer's counsel be at $5.00 a thousand, $5.00 a bond and
ask for approval of that.
Mr. Beard: I so move.
Mr. Shepard: Second the motion.
Mr. Mayor: Motion and second the appoint the bond counsel. Is there any discussion?
Mr. Bridges?
Mr. Bridges: Mr. Mayor, I guess this is one I'm really ignorant on. I trust Jim's
recommendation but if there is anything he can tell us about this, what you're recommending
would be the recommendation for what we should be looking at in regard to a counsel, a bond
37
counsel. Other than following your recommendation, I don't know what question to ask is what
I'm getting to.
Mr. Wall: Let me explain. Insofar as selection of counsel, I think there are two things
you need to look for from our vantage point. Number one is reputation, national reputation. I
firmly believe the marketability of the bond is dependent upon the reputation of the firm. John
Mobley with Sutherland, Asbill and Brennan has an excellent reputation, has been in the
business for a long time, worked with the county for a long time, a good working relationship
with him. He's not someone who leaves you hanging out on a limb. And in the '96 bond issue,
that was a concern because of some of the issues that were being presented then. We have
different, a similar type issue this time in my opinion, so therefore that's the reason I'm
recommending him. Stan Foster with the Arrington and Hollowell firm, he worked last time
insofar as working with underwriter's counsel in that issuance. He, likewise, is familiar with
some of the disclosure issues that were a requirement last time and that similar, different but
similarly important issues are going to have to be addressed this time, and I think it's important
to have someone that we can work and have a tract record with.
Mr. Mayor: Any other questions? All right, the motion is on the floor to choose our bond
counsel. All in favor, please vote aye.
Motion carries 9-0.
Mr. Mayor: Item 4?
Clerk: Item 4: Presentation by CH2MHill for bond projects.
Mr. Oliver: Larry Scott will be conducting that presentation, and you can follow that
presentation in the handout. We've identified slightly over $89 million work of projects that we
believe are critical to keeping our system functional. Please note that our overall plan provides
for a bond issue this year, a bond to be issued in 2002, and a bond issue to be done in 2005. That
is staggered that way, both to meet the coverage requirements as well as to afford us the
opportunity to staff up to do the projects and to have the resources to do them.
Mr. Scott: What I've given you is a document that is updated slightly from what we had
submitted to you about two or three weeks ago. There's actually very little difference in it. But
there is something I want to call your attention to before we go on. When we made our
presentation on the master plan, remember we were looking at a 20-year plan. Now the spread
of the cost looked very similar to what you see here. That was the 20-year plan. This last
document, what you have before you now and what you received a couple of weeks ago, is
focusing on just the next five years, the most critical time. So that's all we're looking at at this
point. Now the cost that you see here for the capital improvements are targeted to be
implemented over in three funding phases. We had to do that because of keeping our coverage
and keeping things balanced in order that you can finance it so that these fine people that you
select can keep the money rolling in for you. So that's what you'll see. You'll see three phases.
The first bond being sold in 2000, the next being sold in 2002, and the third in 2005. And I'll
make a correction on the document in front of you. It says 2006-2010. I just didn't change that.
We are targeting 2005. What I'd like to do is begin through the projects but go quickly, focusing
on what you consider, any questions that you have, rather than trying to explain a lot of things, if
that's all right. And Mr. Hicks will be here.
Mr. Oliver: What I would suggest is you go to page 2. Those are the distribution system
projects that have been identified as part of the master plan as most critical. As you can see from
the first project, the 20" water line was put on earlier today. That is funded from the '97 bond
issue. The 5 million gallon tank will be placed into service this month. Then you'll see the
additional items labeled 2 forward, Tobacco Road 60" water line, $1,015,000; Tobacco Road 2
million elevated tank. These are the items that are envisioned to be included in this upcoming
bond issue.
Mr. Scott: I'd like to point out that what you're looking at here on page 2, these are the
projects that need to be implemented. There are several other projects that need to be
implemented right away, both water and sewer, but these are eight critical ones. One is
wrapping up right now. That need to be pushed ahead as quickly as possible because these will
bring us some of the biggest impact to assist us in our distribution problems that we have. So
although each of these projects that are listed, project number 2, 3, 5, 6 and 8 are not necessarily
going to be completed by next summer, but something will, those in regard to Tobacco Road will
be and will help us in further strengthening our water distribution areas.
Mr. Mayor: And how quickly do these have to be started to be of some benefit next
summer, Larry?
Mr. Oliver: They're not.
Mr. Mayor: They won't be ready by next summer is what you're saying?
Mr. Scott: Not next summer. They'll be wrapping up sometime during next summer.
Now there are certain elements here, for instance concerning the 18" raw water line. That's a
very quick thing. That will be active. And that will bring significant benefit. The 20" main for
the ground water treatment plant number 3 is something that we can. It's pretty straight forward
[inaudible] and this would be beneficial. Whether or not we can hit next summer would be
question. But it is within reason. We're in the process now, and I don't have a display. We have
all these projects scheduled, being scheduled, working on the schedule now, fine tuning it,
looking at resources, at how quickly we can get each element going. Setting some priorities. We
didn't want to finalize that schedule until we had this meeting and had concurrence this is the
way you want to go. We can get these schedules and set up trigger points [inaudible]. On the
next page, we begin with our distribution system lines. As you see here, basically you can see
39
the same recommendations. The first column are the ones that will be covered under the first
phase of the bond [inaudible]. We are adding two additional storage tanks that will be of benefit
obviously, as well as all the lines.
Mr. Bridges: Larry, the 1 million gallon on Brown Road, you've got demo exists?
Mr. Scott: Demolition is existing [inaudible].
Mr. Bridges: If you're going to put in a tank, an elevated tank, wouldn't it be better to put
in a 2 million or 3 million gallon rather? To me, we're staying too small for the problems and the
growth we've got out there.
Mr. Scott: Well, not necessarily. Obviously a 2 million would be good. But you have to
design your tanks so that the water does go up and down and you have circulation. If you over
design too large a tank, you can get to a point where you can encounter some stagnating of the
water. We're calling for the, one of the primary items we're recommending is just immediately
to get on upgrading of your water [inaudible], do that in order for your site study of the new
water plant, but that also will [inaudible] the location of the [inaudible]. So I'm not saying a
[inaudible], but right now we're looking at the million gallon. And the great value we want to
see here is not one super tank, one location, but in critical locations, the tanks give us a balance.
We'll certainly take that into consideration.
Mr. Cheek: While we're talking, I just wanted to mention a couple of other things, too.
We're talking about conveyance of water from Highland Avenue over to the south Augusta side.
We took a step back from the edge today with the 20" line, but we have an 18" line feeding a 20"
line coming into Belair that is 60 years old. We need to have a larger capacity pipe coming over
from there. That's not included on the list. And I have to agree with Commissioner Bridges, we
added this line and about 2 million gallons in improvement to our total amount of water available
to south Richmond County, but the tanks, we were dropping as many as seven out at a time
based on normal demand for summer under water restrictions. We do not have adequate
capacity in storage now to meet those needs. Are we planning not for just now but for the future
for 20 years down the road, building out of this plan?
Mr. Scott: And one thing I want to add to what I mentioned. There's a lot of work that
has to be done here. And we had to try and make some balances where maybe from your
standpoint you preferred we go larger with something. We had to kind of balance thing.
Looking toward the future and building for it, that type of approach. And I really feel that this is
the right step. You're not losing anything in going this way, but we may find, in running the
model and fine tuning the model, that a 2 million tank, elevated tank, is the right way to go. But
we think there are other locations we want to add tanks as we move forward [inaudible].
Mr. Oliver: Typically you're better off with two 1 million gallon tanks strategically
located than a 2 million gallon tank in one spot because you have to get the water from those
points. It's slightly more costly to do it, but it gives you better system balance.
Mr. Cheek: And that would be dependent on population concentration of an area?
Mr. Oliver: Correct.
Mr. Cheek: Are these figures inflation adjusted over the next couple of years?
Mr. Scott: Yes. In fact, one of the things you'll notice with these numbers, we've gone
back and we've continued to refine these, developing individual [inaudible] targets. They're not
really designs. They're targets on the project itself. Fine tuning the estimates and [inaudible] to
make sure we've got some cushion in there to [inaudible] right-of-way easements. We're
continuing to do that. That does exist.
Mr. Mayor: Mr. Henry Brigham?
Mr. H. Brigham: I think I heard you say a few minutes ago that several of the projects
could not finish by next summer. Do you have anything that can be finished by next summer?
Mr. Scott: Yes, there's quite a few. The one you're looking at here, many of these
distribution lines, lines connecting and help move the system, these will be [inaudible], assuming
we get underway. We also have some projects that are already designed. The well fields and
there's just a whole list of things that will be undertaken. Again, like I said, I guess I should have
tried to get that schedule so we can look at it.
Mr. Beard: At some point at a later date, I know we can't do it now, but I'd like to know
some kind of a timetable of how these are going to come up the line, where we are.
Mr. Scott: That's exactly what we're going to give you. I know you can't see it, but these
are the individual conceptual sheets we're doing on every project, and in addition to identifying
the project and its length, size, cost estimate, we're in the process of putting a schedule to it,
when to implement [inaudible], the whole process. We can target all this and give you the
answer. We want that answer also. We just can't do it all at once and try to target those key
things and hopefully be able to tell you, say, all right, these are the projects that if we begin by
September 1, this is the result by July of next year. Right now I can't.
Mr. Mayor: By Memorial Day of next year.
Mr. Scott: Memorial Day.
Mr. Mayor: Mr. Jerry Brigham?
41
Mr. J. Brigham: I want to take a little bit of pressure off. I am more interested in the
[inaudible] Road tank, the completion date of that tank. I'm assuming it's going to have to be
sited?
Mr. Scott: Yes, sir. The elevated tanks are running 12 to 18 months.
Mr. J. Brigham: 12 to 18 months?
Mr. Scott: [inaudible] process, getting the location, so forth. You figure that [inaudible].
Mr. J. Brigham: So we're talking about the summer of 2002?
Mr. Scott: Yes.
Mr. J. Brigham: As far as that tank. The other thing I'm interested in, I notice the 16"
water connector on Riverwatch, that should not take that long, I wouldn't think.
Mr. Scott: That's a quick fix.
Mr. J. Brigham: That's a quick fix? We should have that finished this fall? The other is
the 18" water line, the conversion. I would assume that would be a matter of weeks?
Mr. Scott: [inaudible] short time.
Mr. J. Brigham: It would be operational September? I'm not trying to put dates in your
head.
Mr. Hicks: It all depends on where we can connect that 18" line in. We were looking at
it yesterday, as a matter of fact. If we connect it to get the most use out of it, which we certainly
want to do, we will probably have to do some construction along Berckman Road, and that
would stretch it out a little bit. I would say that we could have it certainly in place before next
year. Whether we'd have it place by this fall, that might be a little risky to commit to that. We
did make the 20" line out there that we committed to those folks last year. I know what it's like
to make commitments and not be able to meet them. But we'll definitely have that 18" line
connected and ready to go by the time next summer's use comes on. I wouldn't want to say it we
could have --
Mr. J. Brigham: [inaudible]
Mr. Hicks: I know you do.
Mr. Mayor: And that line will feed National Hills?
Mr. Hicks: Yes.
Mr. J. Brigham: I understand exactly where the line goes.
Mr. Hicks: I think it will actually help around, for instance, if we connect the 564, which
is, we're actually changing the scope of that thing --
Mr. J. Brigham: We're connecting two systems, the Belair system and the Washington
Road system with Riverwatch?
Mr. Hicks: See, what that would do, looking at the 18" line, is to bring the Highland
Avenue level to the Washington Road area on a more direct route, and then it would then tie to
the Alexander Drive loop, which it would go down and tie to Riverwatch, which would come out
to help us. These ladies are my neighbors, I was just telling them that 18" line would actually
help out where we live. I'm one of those who is sprinkling my yard. It will be definitely one of
those things doable within the next year.
Mr. J. Brigham: Now my next question is more on the south side, and that's the
completion of the Doug Barnard [inaudible]. I assume that [inaudible] it already drawn and on
the shelf, I understand? That will allow us to loop and be able to move water to south Richmond
County quicker? Is that true or untrue?
Mr. Hicks: It is true. It is true. Now Larry, you might want to deal with that in regard to
the new filter plant location.
Mr. Scott: Let me get back to that.
Mr. J. Brigham: Let me finish up then. Tell me about the mid-county converter. Is that
[inaudible] south Richmond County?
Mr. Scott: [inaudible] that I wanted to [inaudible]. You were asking about the feeder line
from the [inaudible] plant going to the [inaudible]. What you see, you don't see a replacement
[inaudible], but what you see here is the central connector. That is our next big key component
of the skeletal network that we have. We're not sure exactly how we want to redo that line.
There's two or three alternatives. That's why it's not in there. We want to get this connector in
there and then again, I refer to the model. The model is going to help us clarify how you want to
just flat replace that line, run a parallel line, or have it rerouted. So that's why you don't see it in
here. When we set these priorities, that line is there, water is flowing. We need to get this
central connector in here where we'll have the biggest bang for the buck.
43
Mr. Cheek: Will the central connector be something that will allow us in the future to
convey water from our new plant to the existing Highland Avenue system?
Mr. Scott: That's [inaudible]. That's why it's so important. It goes down to the
[[inaudible] plant number 1 [inaudible] and it links back to [inaudible], but [[1816,787,2263,844][12][,,][Times New Roman]]you know where it is.
And this gives us that strengthening the central part of the system there and a direct link to the
Highland Avenue [inaudible] reverses that, so it's a redundancy and back up concept.
Mr. Mayor: If we could just back up a minute. I don't mean to dwell on this first page
for a majority of the time today. But you indicated that these nine items that are on here are the
most critical items. Is that not correct?
Mr. Scott: Well, they're critical [inaudible], we're looking at --
Mr. Mayor: These are the things we need to get going on?
Mr. Scott: Right.
Mr. Mayor: My question would be could you go down the list very briefly, give us some
idea of when these items will be completed under your timetable. Let's start with number 2.
Mr. Cheek: Best case/worst case.
Mr. Mayor: Just a ballpark figure. What are we looking at:
Mr. Cheek: I'm tired of living with ballparks.
Mr. Scott: Number 2, with the elevated tank and the 60" line, say 18 months.
Mr. Mayor: Okay.
Mr. Scott: Not from today, from the time the contract is let. [inaudible]
Mr. Hicks: That includes right-of-way acquisition and everything?
Mr. Scott: I was just getting ready to say, right-of-way acquisition can blow every
schedule. But allowing some in there, I think 18 months is a reasonable time.
Mr. Cheek: And we just pushed that back about a month with our decision today not to
go ahead and award the bond issue?
Mr. Mayor: But we can speed it up with design/build and some other initiatives like, too,
right?
Mr. Scott: [inaudible]
Mr. Mayor: And then on the central connector, what?
Mr. Scott: Central connector, you're probably looking at at least 24 months, maybe 30
months. That's a significant design endeavor, and construction and right-of-way, it's going down
just like it says, the center part. But we've got to get cranking on that now. Give 30 months on
that.
Mr. J. Brigham: Larry, on central connector, what size pipe are we talking about?
Mr. Scott: The center connector, we haven't set [inaudible] another question I'm going to
address in just a second.
Mr. Mayor: And then item number four?
Mr. Scott: Item number four, these will be picked up as we fund, like you see the
Maddox Road and [inaudible] Road, those will be started in '02. Those two projects right there,
you're looking at 12 months. Again, the elevated time and the [inaudible] Drive pump station.
That's shown funding, that's one of the projects that's shown funding in '06, but if we can
possibly move it up, we will.
Mr. Oliver: It's not scheduled to be funded till the next bond issue in 2002, however.
Mr. Mayor: But you've got it on here as one of your critical projects.
Mr. Scott: Right. It's critical to the balance of the whole system. So we just couldn't do
everything all at once. [inaudible]
Mr. Mayor: Doug Barnard?
Mr. Scott: Doug Barnard, you're looking at basically construction there and give us 18
months. [inaudible] 18 months.
Mr. Mayor: We went through the conversion and then 8 and 9.
Mr. Scott: Eight and nine, again, with design, you're looking at 12 months each. Again, I
think the right-of-way should be a pretty straight forward thing there but I have a couple of
questions there, it could take longer.
45
Mr. Mayor: Thank you very much. Mr. Shepard?
Mr. Shepard: Larry, you and Mr. Hicks, could we move to the sewer side? The
unsewered pocket projects, the way I understand this --
Mr. Mayor: What page are you on, Mr. Shepard?
Mr. Shepard: I'm sorry, Mr. Mayor, six. You're working first, you're anticipating having
funds available for the first time for Colony Park and National Hills. Mr. Hicks, those are two
different subdivisions? One is Sibley Road and the other is National Hills.
Mr. Hicks: Right.
Mr. Shepard: You're just wanting to bring those both on in 2001 subject to funds
availability, is that what you're saying in the chart? And since Mr. Mays is not here, I'll have to
ask about Belair Hills. He thinks I don't ever ask about that but I want it on the record and the
verbatim minutes that I had asked about it. Tell me, won't that neighborhood be served by a
combination -- moving to page 7, if you would, Larry -- looking at Butler Creek, doesn't the
Butler Creek interceptor have to be improved and the Butler Creek interceptor extended,
expanded, and the collector system built in order to get sewerage to that neighborhood? Isn't that
right, Mr. Hicks?
Mr. Hicks: Yes.
Mr. Shepard: So you're looking at funding in that area beginning in 2001, then you've
got another [inaudible] of improvements for 2002 for $1,320,000, but then you don't get into
your extension and collector work until phase two; isn't that right?
Mr. Hicks: That's right.
Mr. Shepard: And that's the way you prioritized that in light of other needs like the
central connector and things like that? Is that what you're telling us?
Mr. Hicks: Yes, sir.
Mr. Shepard: Thank you.
Mr. Cheek: Mr. Mayor?
Mr. Mayor: Yes, Mr. Cheek?
Mr. Cheek: Mr. Hicks, since we're on sewer, I wanted to ask you. It's on page six. The
Boykin Road project, does that include the areas between, the neighborhoods between Boykin
Road and Plantation Road, and generally that whole end of Boykin Road is unsewered.
Mr. Hicks: Larry, you had the map on that a minute ago that had Boykin Road.
Mr. Cheek: I've got a problem with some of the neighborhoods. Every time it rains, their
septic tanks back up and they're really anxious to get moving on it. The big blue areas in the
middle, the biggest ones, those are mine.
Mr. Hicks: [inaudible]
Mr. Cheek: Yes, sir, sure is.
Mr. Hicks: [inaudible] cover all of that [inaudible]. As well as I remember, it doesn't get
[inaudible]
Mr. Cheek: Is that other area that you mentioned not being covered in this, is that going
to be included in future plans?
Mr. Hicks: [inaudible]
Mr. Cheek: I notice Sand Ridge and Pinnacle Place are not listed on here per se. Is that
part of the Tobacco Road improvements?
Mr. Hicks: It's part of this area up in here. It's served by that [inaudible] trunk sewer,
and then [inaudible] pick up Sand Ridge [inaudible].
Mr. Scott: On the sewer and water both, [inaudible], we have to put the interceptor, the
extensions, but the intent is sewerage for that area.
Mr. Mayor: Since Mr. Shepard has moved us over to page 6 of the unsewered pocket
projects, let me ask you, are they listed in the order of priority and the order of sequence in
which the work will be done? Is there some meaning to this list, the way they are written on
here.
Mr. Scott: Based on the Commission's letter.
Mr. Oliver: With one caveat. If we have a construction project that we're doing a road
construction project in a given area, rather than having to rip the street up twice, we have
accommodated that within this schedule. For example, Skinner Road, that is out of order, but the
reason that is out of order is because of construction and we don't want to have to pay for things
twice.
47
Mr. Mayor: And those projects which have already been engineered are at the top of this
list, is that correct?
Mr. Hicks: They are. Yes, sir.
Mr. Mayor: Mr. Henry Brigham, and then Mr. Beard.
Mr. H. Brigham: Come back downtown just a little bit to Kissingbower Road, that
pocket in there. You've got P4 and P5. That doesn't mean we've got to wait on another bond
issue, does it?
Mr. Hicks: Phase 1 and Phase 2. Kissingbower Road, Commissioner Brigham, are in the
first bond issue. And they've already been designed.
Mr. H. Brigham: They've been designed?
Mr. Hicks: Yes. Cranston, Robertson, Whitehurst designed those, if you remember,
about a year ago when we thought we'd have the money available at that time. We had done the
first couple of phases in there. That's why this is called phase 4 and phase 5, but we didn't have
the funds. But they've already been designed.
Mr. H. Brigham: Phase 4 and Phase 5, we've got to still wait until after the next bond
issue?
Mr. Hicks: No, sir, it's, those funds will be available if the bonds sell this fall, those
funds will be available this fall.
Mr. H. Brigham: That's [inaudible] selling bonds.
Mr. Mayor: I think Mr. Brigham was noting that you had Phase 4 and Phase 5 written on
the sheet here, and that is what he was asking about.
Mr. Hicks: The Kissingbower Road phases, if you remember, we had Kissingbower
Road Phase 1 and then Kissingbower Phase 2, then Kissingbower Phase 3. Phase 3 was the
phase that went up to, it came on up to the high point where the Wife Saver used to be. Came up
to that area. Now Kissingbower Phases 4 and 5 are on the other side of the slope, where we had
it previously designed but we didn't have the money to do it. That's why it's called Phase 4 and
Phase 5. That's doesn't refer to the bonding phases, it refers to the Kissingbower Road phases.
Mr. Mayor: Now Mr. Beard.
Mr. Beard: Going back to help Mr. Shepard a little bit on Belair.
Mr. Shepard: Thank you.
Mr. Beard: How did you say we came up with this list?
Mr. Scott: This list, the Commission, I have this letter --
Mr. Oliver: I'll help you. You approved an unpocketed sewer list that was based on
criteria. The criteria included what the population of a given area was that would be served,
what the Health Department's recommendation was as it relates to septic tanks that were failing
and things like that. You adopted a prioritization for pocketed sewer areas. That prioritization
has been largely followed here, with the caveat that if there was a construction project that
resulted in road construction we tried to time the sewer with it. But it's based on a prior adopted
list by the Mayor and Commission.
Mr. Beard: Okay. Help me out a little bit here. Belair has been out there for 35 or 40
years and not only Belair but you have Buckhead and others that have grown just as much as any
other area of the city. And I don't see any of that listed here. We're not going out that far? Is
that the forgotten areas?
Mr. Cheek: No, mine is the forgotten area.
Mr. Hicks: If you'll notice, it's like Larry pointed out a minute ago, where you have the
Butler Creek interceptor extension, we first had to extend Butler Creek out to pick up the areas
that come in the Butler Creek section. Now insofar as designing sewerage pickup, the area that
you well pointed out the other day, it would be served by the Rae's Creek area, you've got an
agenda item coming before you on your next committee that deals with that. We're asking to
give a contract to Toole to design or restake Rae's Creek all along Wrightsboro Road, then at the
same time they'll design two arms to reach out across that regional storm water retention pond,
and go to Belair Road to pick up those subdivisions you were just mentioning. It would come to
it.
Mr. Beard: When?
Mr. Hicks: Sir?
Mr. Beard: When?
Mr. Hicks: Again, funding for that, there are undesignated funds that are in Water and
Waste Water, and it could be picked up under those.
49
Mr. Oliver: If you, I'm going to be candid, if you want it in this list, you need to get it
specifically identified, because you will have to establish the priorities for the community. That
is not something we can do.
Mr. Beard: All the way up to 2010, I don't see anything happening out there. And I don't
see how you can ignore as many homes, I mean you're going to be talking about health hazard.
Mr. Hicks: It's going to have to do with the undesignated sewer line extensions. In other
words, we need to pick up those funds. When you've got the Rae's Creek collector expansion,
we've got a fair amount of money there. And we just have to slide that back in, Commissioner,
and it would indeed be a worthwhile project.
Mr. Oliver: This will give you the framework for Belair Hills in the first phase, but it
will not put any distribution lines into the subdivision.
Mr. Mayor: Mr. Cheek?
Mr. Cheek: Mr. Mayor, hearing what I'm hearing now, it doesn't sound to me like we've
got a complete plan to have all of our current problems addressed by 2010. Certainly we need to
have these things on line, these areas Commissioner Beard is talking about and some projected
dates to have these projects taken care of.
Mr. Oliver: Well, your other guiding factor in this thing is money.
Mr. Cheek: Of course.
Mr. Oliver: And the reason I say that is this is predicated on the current system of rate
increases that you all previously adopted, and if you want to be more aggressive on the rate
increases, we can step up the construction schedule.
Mr. Cheek: We can do that, but it doesn't sound to me like we've got a complete listing
of some of these areas to even prioritize.
Mr. Oliver: On the pocket sewer, you've got a very complete list. I think it's a matter for
the new Commissioners of just giving you that document.
Mr. Beard: Am I correct in saying that at the present rate we are going, those people out
there in Buckhead and Mr. Shepard's area, they cannot look forward to anything until 2010?
Mr. Hicks: I don't think so because —
Mr. Oliver: It's going to be in the next issue. Going to be about 2005. By the time it's
done.
Mr. Shepard: That would be assuming -- well, number one, you can't run sewer without
having the extensions of Butler Creek unless we redo the priorities as commissioned in this last?
Mr. Hicks: That's right.
Mr. Shepard: That's what I was trying to determine. Okay.
Mr. Hicks: There are a number of areas that really need sewer lines, and that area is
certainly one of them because they're growing. And as we said, we're preparing to design the
sewer lines to reach the Rae's Creek portion of those subdivisions, and these projects will reach
the subdivisions from the Butler Creek side of it. Now to extend on up into the subdivision
itself, those funds could well come out of the 2002. They're not designated as such in here, but
that's why we wanted to have this meeting today. If that's an area that you wish to have those
funds designated for, then we can certainly do it. Certainly do it.
Mr. Scott: When we look at all the things that need to be done, we had to make the
decision to look at decisions that had been made in the past, such as this list that Randy referred
to, the prioritization. Things change and that's why you need to have this, that's why if you think
this is a priority, there's a lot of places here that maybe we need to change. But that's why we are
circulating this amongst you and want this kind of dialog because we want to hone in on these
areas that maybe when we make a decision we're looking at limited funds and trying to get things
done, and we make some decisions based on the information available to us, and if there is
additional information, your input, your decision, then that's what we need to know.
Mr. Oliver: If you want to add a project because the way a rate structure is set up, we
need to back another project out. Unless you want to consider other revenue mechanisms.
Mr. Bridges: Larry, what you're recommending to us here today is based on the growth
studies, based on existing water lines, including size of pipe, that type of things, and these are the
priorities that you and your engineers and geologists and everything see as the most needed at
this point? What other information would be out there that you don't have that would change
what you've got here, other than political decisions?
Mr. Scott: For instance, we, there are certain extensions [inaudible] Butler and Rae's
Creek [inaudible] systems. We've got moving on. But before we can extend them, we've got
[inaudible] Butler Creek. There's a lot of rehabilitation of the receptor itself that has to do with
having that program in there. So we programmed to get done, get that underway, and when it is
completed, then start in the collection systems of the various areas. Now for instance, if you
came up with an area and said we need sewer in this area and there's no interceptor or
[inaudible], that's the sort of problem we have. We would like to put sewerage everywhere, but
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we just can't do that all at once. We're trying to put some building blocks in here to work toward
these areas, and I am just saying if we have left out something here or we've misdirected, now is
the time to bring it up and we'll certainly look at it. I've made a lot of notes here, but working
with Mr. Hicks and his staff and meeting with each one of you, most of you, sending documents
around, dialog from you of what you consider to be most critical, we sure [inaudible].
Mr. Oliver: And we focused on water first.
Mr. Mayor: Let me ask the question this way. You're saying with the sewer
infrastructure that's already in place, you can serve the unpocketed sewer areas on Item No. 6,
and until the infrastructure that is on page number 7 is in place, you will not be able to serve
other unpocketed sewer areas?
Mr. Scott: Generally speaking, that is true.
Mr. Hicks: If you look at page 7, under that which is called undesignated sewer line
extensions, you'll notice that in this issue, we've only got $500,000. But in the next issue we've
got $4 million. Those are undesignated. That would be those such as Commissioner Beard is
mentioning, out in those areas. We knew there would be some of these that would arise, and so
that's why we designated $4 million in the 2002 bond issue and then $3 million in the 2005 bond
issue as undesignated. That's why I said with your bringing those up today, certainly then of that
$4 million that is undesignated in 2002 to 2005, we would need to designate part of it for these
that you are bringing up today. But the funds are there. They're just not named. They're just not
designated.
Mr. Mayor: Mr. Cheek and then Mr. Shepard.
Mr. Cheek: Mr. Mayor, maybe it's a philosophical point, but it seems to me we should go
in and on our priorities should be our new surface system, improving our conveyance of potable
water, and then working on our conveyance systems on these major trunks. They should all
come first in the line, and then we can worry about each individual neighborhood. If we can't
convey this stuff away and build now for what we are going to have to put on the system now,
plus what's still being built in all of these area, then we're just going in too many different
directions.
Mr. Oliver: This plan accommodates that. The focus is the backbone.
Mr. Cheek: Butler Creek expansion, Rae's Creek collector, expansion, some of these
major conveyance systems aren't even budgeted for the first couple of years.
Mr. Mayor: Mr. Shepard?
Mr. Shepard: Mr. Mayor, I was going to move that we receive this list as
information. We don't have the money this afternoon. We haven't voted it. I think there's
been some concerns raised by various Commissioners, including myself, about areas that
are currently unserved where we've had demands for service. I think we are going to be
waiting until the second meeting of this month, which is basically two weeks from
yesterday, to determine the financing which will begin, hopefully begin this in this year, so
I would move we receive this information in view of our previous vote.
Mr. H. Brigham: Second.
Mr. Mayor: There's a second to the motion to receive this as information. And I would
suggest that if the motion is successful that Commissioners with concerns about individual
projects would take that up with Larry and Mr. Hicks and use this opportunity to do some
additional homework.
Mr. Oliver: I would make one note. We have, based on our current rate structure in
place, we have roughly $90 million to allocate. You all have to decide how that $90 million is
best allocated based on the professional information, and while we may like to do $120 million
in projects, we have $90 million. So if we add something, we need to say, okay, this isn't as
important right now and take something else away. Unless there is a desire to do something on
the revenue side.
Mr. Mayor: But that doesn't take into consideration the sales tax that is coming up, too,
does it, Mr. Oliver?
Mr. Oliver: The sales tax committee recommended some money for utilities but
primarily related to road right-of-way relocations. That list is going to be coming to the Mayor
and Commission for adopting. A final list. And you may elect to put a large portion of that
money into water and sewer. That has not been calculated in here if that decision is subsequently
made.
Mr. Mayor: Mr. Cheek?
Mr. Cheek: Thank you, Mr. Mayor. Mr. Mayor, I think that something of this gravity
that affects not only the present, but the future of this city, we need a work session to work these
things out. I'm very concerned about political wranglings with the priorities of these projects
without them being based in the true needs of this community. I don't think we need to
individually go to Mr. Hicks or anyone else. We need to look at this as a combined Commission,
work it through, and come up with a priority list that meets the needs of this city, rather than
individual political needs. This is something that has happened in the past, we cannot afford to
repeat the mistakes of the past in the present and then carry into the future.
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Mr. Mayor: Thank you, Mr. Cheek. Any further discussion? Motion to receive as
information. All in favor of the motion, please vote aye.
Mr. Kuhlke out.
Mr. Williams abstains.
Motion carries 7-1.
Mr. J. Brigham: Mr. Mayor, I move we adjourn.
Mr. Shepard: Second.
Mr. Mayor: Motion to adjourn is non-debatable. All in favor of the motion, please vote
aye.
Motion carries 8-0.
[MEETING ADJOURNED]
Lena J. Bonner
Clerk of Commission
CERTIFICATION:
I, Lena J. Bonner, Clerk of Commission, hereby certify that the above is a true and correct copy
of the minutes of the Called Meeting of Augusta Richmond County Commission held on June 7,
2000.
Clerk of Commission