MURRAY — The main business for the Murray City Council Thursday came in a meeting of the council’s Personnel and Finance Committee about an hour before the main meeting at City Hall.
Bob Hargrove, president and CEO of The Murray Bank, appeared before the committee and countered a presentation from the Hilliard Lyons investment firm from two weeks earlier. In that previous proposal, Hilliard Lyons proposed a refinancing of a loan the city has with The Murray Bank for the Murray Fire Department’s Station No. 3 on North 12th Street. That station was put into service in 2015, and the loan with The Murray Bank is scheduled to continue through July 2035.
The original loan from The Murray Bank loan calls for an annual payment of $185,000 at an interest rate of 4.5 percent. Given a chance to make the deal more competitive, Hargrove presented a new plan Thursday and focused on the payback totals. The result was that the bank, going to a 2.9 percent fixed rate, would result in a payback from the city that is $6,000 less than what Hilliard Lyons proposed. This turned out to make the difference, with the committee saying yes to the The Murray Bank and the full council then following suit in unanimous fashion.
“We know you’re wanting to get this done as cheap as you can get with the least payback you can get, and hopefully I’ve presented you with an option that accomplishes what you want and to keep that funding local,” Hargrove told the committee members in his presentation Thursday afternoon. This came after he had met with Murray Mayor Bob Rogers, City Administrator Jim Osborne and City Finance Director Kim Wyatt after Hilliard Lyons made its proposal to the committee on June 27.
“I had gotten a call from Mayor Rogers about looking at our existing contract (before Hilliard Lyons met with the committee) and I was looking at it and working on a proposal. Let me tell you something; when he makes his mind up to do something, he does something, and a few days later, boy, it’s in the paper (The Ledger & Times reported on Hilliard Lyons’ proposal).
“I saw him a few days later and complimented him on that. I complemented him for looking after my tax dollars.”
Hilliard Lyons offered a proposal of refinancing the existing Murray Bank loan by issuing bonds at a rate of 2.56 percent. Thursday night, though, Hargrove said, in examining the Hilliard Lyons proposal, it was factoring in the maturity currently in place.
“As you’ll notice, your payment would be going down from what you’re paying now (with a fixed rate at 2.9 percent),” Hargrove said. “And if you wanted to pay extra on that, that’s why we put in no prepayment penalty of any type. Whether you wanted to pay an extra $2,000 a month or pay the whole thing off, there would be no prepayment penalty whatsoever.
“The only thing I can figure (as far as Hilliard Lyons’ 2.56 percent figure) is I think that’s the blended rate over maturity of different bonds that go into that. I think they also take their closing costs and added into the total, and I think that’s where (the $6,000) difference comes in. That closing cost is going to between $13,000 and $15,000. So what I did was to take what The Murray Bank could do at the best rate we could get you, so you can hopefully compare apples to apples.”
The Murray Bank loan concerns only Station No. 3, but the council also continued discussion of another fire department issue Thursday. In recent weeks, the council has been discussing the need to replace Fire Station No. 2 on South 16th Street, and council members committed to that goal last month. However, that journey may be on hold after Rogers unveiled some rather sobering numbers Thursday when it comes to the city’s required obligation payments to the Kentucky retirement pension system.
Before presenting the numbers that were compiled by Wyatt in advance of the meeting, Rogers tried to prepare his audience for what was coming.
“It’s not real exciting news for us, but it is what it is,” Rogers said, then listing what the total payment would be through 2025, along with the amounts payments would increase in those years.
It started $1,565,941 this year and got more bleak from there. It will increase by $262,532 in 2020 to $1,828,473, then will go up by another $263,785 to $2,092,258 in 2021. In 2022, that figure will increase even more, by $302,079, to $2,394,337, then will climb another $345,658 to $2,739,995 in 2023.
It gets worse, going up another $395,460 in 2024 to $3,135,455 before the time frame ends with another massive increase, up $452,894, to $3,588,349 in 2025.
Rogers said it is his understanding that a special session of the Kentucky General Assembly is set for next Friday, July 19, and he said he did contact both Calloway County legislators, 5th District state Rep. Larry Elkins (R-Murray) and 1st District state Sen. Stan Humphries (R-Cadiz). He said they told him it is their understanding that their only obligations would be to vote for the proposal presented in Frankfort.
“Any relief in that for cities?” asked committee member City Councilman Dan Miller. Rogers said he does not believe that is included.
Entities most affected by this special session will be state universities (including Murray State), along with nonprofits, health departments, libraries and others, Rogers said. He also indicated that he would prefer for the time being that the council take a back step from pursuing construction of a new fire station. He also said this was the wish of the committee’s chairman, Danny Hudspeth, who was out of town Thursday, but had met with Rogers prior to leaving.
Councilwoman Rose Ross Elder was in agreement with putting the brakes on this quest.
“I share the same sentiment and a lot of the reservations about going into that kind of debt. I personally think it would be a good idea to go ahead and wait,” she said.
However, Miller, Councilman Wesley Bolin and Councilman Jeremy Bell —who is not a member of the committee but was in the audience for the meeting — all said they did not want to see the fire station replacement idea go away entirely.
“I don’t want to give up on the fire station,” Miller said, adding that he would support building a smaller station downtown to replace Station No. 1, which has acted as the city’s main station for many years and continues to house MFD’s administrative offices.
The city is currently in the running for a $500,000 grant that would be used to build a new station. It is not known how waiting with the plan to build that new station would affect the city’s position with that grant.