205 Main St. P.O. Box 586 Biddeford, Maine 04005

City of Biddeford, Maine

205 Main St. P.O. Box 586 Biddeford, Maine 04005

City Managers Report

February 2, 2010

John D Bubier, City Manager

Biddeford, Maine

Joint City Council and School Board Retreat:

On this coming Saturday February 6nd from 10:00AM to 2:00pm at Ketcham Library in the St Francis room a Joint City Council and School Board Retreat will be held. Lunch will be served. See you there. The joint boards will discuss a wide range of issues for the upcoming 2010 -11 Fiscal Year

York County commissioners vote to support a Charter Commission

City Theater Back With Start of 2010 Season with an innovative winner …

Get your tickets early. SEASON Ticket on sale 50.00 for all four shows… http://www.citytheater.org/

Our first production is just around the corner!

The Last Five Years is a one-act musical written by Jason Robert Brown. It premiered in Chicago in 2001 and was then produced off-Broadway in March 2002. Since then it has had numerous productions both in the United States and internationally.

The story explores a five-year relationship between Jamie Wellerstein, a rising novelist, and Cathy Hyatt, a struggling actress. The show uses a form of storytelling in which Cathy travels backwards in time (beginning the show at the end of the marriage), and Jamie travels forwards (starting just after the couple have first met). The characters do not directly interact except for a wedding song in the middle as their time-lines intersect.

Runs Thursday through Sunday, February 4th, 5th & 6th at 8PM and 2 matinees, Saturday the 6th & Sunday the 7th at 2PM

Limited, on stage seating of 100 per show for this black-box, behind the red curtain production.

Season ticket holders please call or e-mail your reservations using the last 2 numbers on the back of your Season Pass.

Biddeford City Manager Leads YCTCMA to testify for restraint in the county budget for

2010-11

Potential savings for the high school : Buy America Bonds save taxpayer dollars

The Metropolitan Water Reclamation District of Greater Chicago provides an excellent example of how to combine stimulus financing options with traditional instruments to stretch resources as far as possible.

The district treats wastewater and controls stormwater for more than 10 million customers, making it the largest facility of its kind in the world. A statutory debt limit of 5.75% EAV (equalized assessed value) on its $1.7 billion annual budget provides a debt margin of $7.7 billion. As of December 2009 it had $2 billion of debt.

More than half – 80% - of the district’s revenues comes from property taxes. Although interest income has taken a hit, Executive Director Richard Lanyon doesn’t expect a large decrease in property tax revenues over the next year or so.

Still, it never hurts to explore your options.

The district generally issues general-obligation bonds every other year as needed. But last year it sold $600 million in Build America Bonds (BABs), the district’s largest single bond sale since it was founded in 1889. These taxable bonds, introduced in the stimulus package, let issuers choose between receiving a 35% reimbursement of the associated interest or a federal tax credit equal to 35% of the cash interest payment.

District accountants crunched the numbers. After factoring in the reimbursement, the interest cost on $600 million in BABs is 3.72% compared to 4.88% for traditional tax-exempt fixed-rate bonds. Thus, taxpayers will save $180 million over the next 29 years in the form of monies the district would have used to service debt.

Labeling the process a "very rewarding experience," Lanyon says the district plans to sell another $600 million this year

Biddeford Financial Advisor MOORS and CABOT suggests we look at Buy America Bonds for the High School . It may not be for us because of the size of the issue . Ours is small compared to the 97 million dollar average of the BAB offerings. The following is provided by Biddeford Financial Advisor , Joseph Cuetara of Moors and Cabot to review.

/ Update …
In late July we published a quick summary of our perspective on Build America Bonds (“BABs”), a new financing vehicle that allows municipal issuers to sell taxable bonds and benefit from a direct federal subsidy in lieu of tax exemption on interest. The intent is for BABs to broaden access to municipal credits for investors that typically do not purchase tax exempt bonds including pension funds, foreign banks, foreign firms, foreign investors, non-profit foundations or banks that aren't income positive.
We mentioned that BABs seemed to need to conform more closely to corporate bonds’ structures than traditional municipal bond issues such as: longer maturities rather than shorter ones; bullets (terms) rather than serials (annual principal payments); non-callable or make-whole calls rather than 10-years @100% (although this hurdle is being overcome); and “size” offerings (to enjoy secondary market liquidity as well as to make opening the credit file worthwhile).
Well … is it worth it?
I guess it depends. In order to examine BABs relative economic value to traditional tax-exempt financing in the current market one example is the State of Wisconsin, which came to market in a competitive bid sale last week. The issuer opted for the 35% of the coupon interest federal issuer subsidy.
The actual structure, results and comparative tax-exempt rates to the until 13 to 21 years, and has two terms); the issue is “of size”; is a “quality” high-range investment-grade credit; and does enjoy a 10-year call @100%. Compared to the structure is a structure of a hypothetical traditional tax-exempt offering (e.g., 1 to 30 year serials). subsidized rates are displayed above. The structure is “typical corporate-like” (i.e., serial structure is delayed
Pros and cons? Even at higher net rates, the shorter average life costs less; but the lower BAB interest rates and deferred principal payments provides a PV savings (in favor of the BABs) of $13 million, or 5.80%. (September 21, 2009)
Perhaps there is value!

Steak only costs 89¢ a pound … but we’re outta steak!

The American Recovery and Reinvestment Act of 2009 (“ARRA”) established Build America Bonds (“BABs”) as a new financing vehicle that allows municipal issuers to sell taxable bonds and benefit from a direct federal subsidy in lieu of tax exemption on interest. In contrast to traditional taxable municipal bonds, however, BABs contain an embedded tax credit equal to 35% of the value of interest payments on the bonds. The issuer elects to structure its BABs with either an investor subsidy or an issuer subsidy. Once an election is set, it remains in place for the life of the security, as follows:

·  The investor subsidy provides a federal tax credit to investors in an amount equal to 35% of the coupon interest over the life of the bonds (net of the tax credit). Because of the way the tax credit is calculated, the US Treasury estimates that the effective subsidy to the issuer amounts to approximately 25% of the total return to the investor, including interest and the tax credit.

·  The issuer subsidy provides a federal subsidy through a refundable tax credit paid directly to state and local government issuers by the Treasury department and the Internal Revenue Service in an amount equal to 35% of the coupon interest over the life of the issue. Given the higher effective subsidy this direct tax credit provides the vast majority of BABs, to date, have been issued in this form.

Foreign banks, insurers and pension funds have previously purchased taxable municipal bonds, which they view similar to sub-sovereign credits, but in a theretofore as yet “thin” market. The introduction of BABs intend to broaden access to municipal credits for investors that typically do not purchase tax exempt bonds including pension funds, foreign banks, foreign firms, foreign investors, non-profit foundations or banks that aren't income positive (i.e., thus do not pay income tax). BABs typical size and structure offered these institutional buyers the opportunity to diversify into a previously-unavailable, relatively low-credit-risk asset class. Furthermore, based on the initial deals offered in the market BABs have not appealed to individual investors in the highest tax brackets as current tax-exempt yields offer a higher after-tax return.

Other Highlights:

·  BABs are likely to be structured similarly to corporate bonds. The bonds are expected to have a fixed rate coupon, a bullet maturity structure (i.e., non-callable) and longer maturity dates of up to 30 years.

·  BABs may have a “make-whole” call, standard in corporate finance.

·  Due to its desire to appeal to institutional investors, issues are typically “sized” consistent with that market (e.g., >$100 million/issue); consequently the “small” issuer is not “large enough” to participate in that market.

·  BABs must be issued for qualified purposes that would be eligible for tax-exempt funding by state and local government entities; but are not available to “private activity” issuers, such as not-for-profit hospitals or private universities.

·  There is no cap on the amount that may be sold, but they must be issued before January 1, 2011.

·  The security will be backed by the credit of the municipal obligor.

·  Interest income is subject to federal taxation but may be exempt from state and local income taxes within the state of issuance.

·  To date $17.4 billion of BABs gave been issued, in 178 deals, in 34 states. The average BAB issue is $97,750,000 (July 30, 2009).

Build America Bonds are available only through Dec. 31 of this year.

This particular financing option may not be right for your operation’s particular needs. But for other operations, especially those that didn’t receive other stimulus-related breaks, such as low-interest loans or principle forgiveness, it’s a way to fund capital improvements or new infrastructure that didn’t exist before the American Recovery and Reinvestment Act of 2009.

And it’s brought down interest rates on municipal bonds overall, from 4.5% in January 2009 to 3.7% today.

______

HOB and City Theater Light Up The Downtown on January 29th.

·  The ArtWalk was an awesome success!! NDM was full of spirit and happiness; artists came from all over (from Warren to Gray to Kennebunk to York) and everyone there (my guess, 250-300 ppl) was without question having a blast and loving the amazing art!

·  Mark from City Theater just reported: "Good show last night 300[UNE]students, faculty and staff atthe Theater."

·  Wonderbar was packed!! Guiness specials and giveaways galore!!

·  And I would love a report on the show at the HFS. I was bummed I missed it!

·  And if you were somewhere else and had a blast, let us know about that too.

“Great job everyone! It was so good to see suchliveliness even on a bitter cold January eve!

Celebrating successes is critical for motivation!: said Zeke Callanan new Director of HOB

300 UNE Students in the City for Recycled Percussion and and additional 300 folks were at the North Dam Mill for art and fun at the City Art Walk. Great work by both Stores and Restaurants report good sales That’s what we like Way to go HOB

The Downeaster Operations Committee: Due to scheduling conflicts the January 28, 2010 Operation Meeting has been cancelled. The Operation Meeting will now be held on Tuesday, February 23, 2010 at the UNH at 9:30 am. If anyone form the council would like to attend let me know.

Municipal Revenue Impacts

From

The 2010 – 2011 General Fund Budget and the

Proposals Included in Supplemental Budget -- LD 1671

The data below reflects negative financial impacts to local government and property taxpayers associated with the biennial state budget (LD 353) enacted by the Maine Legislature in May 2009.

The Negative Impact is $158.9 Million Dollars. The Information in Bold Italics Underlined is the Additional Impact of $107.68 Million in the Governor’s Proposed Supplemental Budget(LD 1671

TOTAL IMPACT = $266.58 Million in Reductions to Municipal Revenue

Revenue Sharing. The $44 million cut to municipal revenue sharing is the sum of an $18.8 million “transfer” out of the Local Government Fund and into the state’s General Fund in FY 2010 and a similar $25.3 million transfer in FY 2011.In addition to the “natural reduction of $21.3 million”

An Additional $27 Million ($12 Million + $15 Million)

Property Tax Relief Rebates. The $30 million cut to property tax relief rebate programs is the sum of a $17.4 million biennial cut in “Circuit Breaker” property tax and rent benefits and a $12.6 million biennial cut to the Business Equipment Tax Reimbursement Program (BETR).

An Additional $5.6 Million in “Circuit Breaker”

Homestead Exemption. The 23% reduction in the value of the Homestead Exemption program, from a $13,000 to a $10,000 exemption beginning on April 1, 2010 will “save” the state (and cost the homesteaders) $6.9 million in FY 2011 (and each year thereafter).

School Funding. The calculation of a $78 million cut to school funding is not based on the difference between actual state funding and the “55%” state funding level. Instead, it is based on the reductions in the state’s General Purpose Aid to Local Schools (GPA) relative to flat-funding levels. For the current 2009 Fiscal Year, the state level of support for GPA was $956.5 million.

According to the budget, the state’s GPA appropriation for FY 2010 is $947.4 million (representing a $9.1 million reduction) and the GPA appropriation for FY 2011 is $887.4 million (representing a $69 million reduction).

An Additional cut of $73.2 Million ($38.1million + $35.1million)

A new proposal to cut $1.88 Million from General Assistance

The above LD 1671 proposals do not include the proposed additional $531,000 cut to Tree Growth Reimbursement or the proposed $5.4 million “Push” to the Homestead Exemption reimbursement.

Financial Data compiled by the Maine Municipal Association and the Maine Service Centers Coalition from LD 353, LD 1671 and the Fiscal Notes

Biddeford Recreation Department

Operations Report

1-28-10