08-25-37 Adjourned Regular
760
COUNCIL CHAMBER
August 25, 1937
The Counoil met in adjourned regular session
for the purpose of recmiving a recommendation of
the Delray Beach Citizens Refunding Committee as to
debt refunding.
The Mayor, ~ity Attorney and all members of
the Council were present.
""..
The report of said Citizens Refunding Committee,
as follows, was presented and read in full by the
Clerk:
August 24, 1937
Mr. C.W. Hill,
President City Council,
Delray Beach, Florida
Dear Mr. Hill:
r-',.
We, the undersigned majority members
of a Special Committee of Ten, appointed by the
City Counoil to study the Bondholders Protective
Committee's refunding proposal, and to make re-
commendations to the City Council in reference to
said refunding proposal, beg leave to report:
We have had two meetings of our
Committee--one on August 11 and also one on August
18. Before holding our first meeting our Chairman,
E.B. Foote, assembled various and sundry refunding
programs which had been put into effeot and which
were being studied by various Cities and Towns
in Florida. Mr. Foote also submitted to eaoh member
of said Committee valuable information relative to
the amount of outstanding bonds issued by the City
of Delray Beach, also percentage of tax colleotions,
and other information for our consideration.
-.-.
At the meeting on August 11th, we dis-
cussed the Bondholders Protective Committee's re-
funding proposal, and it was the unanimous opinion
of the Committee that the Bondholders' proposal
could not be accepted as submitted, and that we
recommend to your Body that said proposal be rejected
unless the same can be satisfactorily amended 80 as
to meet the recommendations hereinafter set out.
761-
COUNCIL CHAMBER - August 25th, 1937
At our meeting on August 18th, each
member of our Committee present discussed freely
the various problems which were confronting the
City in its effort to refund its outstanding ob-
ligations. Our Chairman, Mr. Foote, submitted to
the Committee three different refunding proposals,
insofar as the principal of the oustanding bonds is
concerned. After a careful consideration and study
of the three plans submitted by Mr. Foote, it was
unanimously agreed by the m~bars of the Committee
that the following plan, as to principal, be adopted:
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762
COUNCIL CHAMBER - August 25, 1937
It was the opinion of the Committee
that the foregoing plan as to payment of principal
wou~d possibly be the one which would meet with the
Bondholders' approval, in view of the fact that it
would not provide for any reduction in the principal
amount of the bonds, but would favor the City in
the interest rate, and that over a period of years
practically the same amount of money would be raised
by taxation and paid to the Bondholders as would be
in either of the two other plans submitted, whereby
a reduction in the principal was provided with an
increase in interest rate.
We call to your attention that in the
above plan for payment of principal of the bond
debt, that a sinking fund is provided, whereby an
estimated sum will be collected each year. Your
Committee recommends that when a certain amount of
money is accumulated in said sinking fund, that an
advertisement could be made asking that bonds be
submitted for redemption or purchase, and in that
way the principal amount of the refunded bonds oould
be retired from year to year, and as the City grew a
larger amount of bonds could be redeemed in this
manner.
Your Committee further discussed at
length the defaulted interest and other Obligations
outstanding against the City, and it is the unanimous
opinion of the Committee that, inasmuch as the ability
of the City to pay will be taxed to the utmost to
meet the terms of the settlement proposed for the
prinoipal of the outstanding bonds, a settlement shaid
be effeoted which will drastically reduoe this por-
tion of the City's obligations. We recommend, therefore
that all defaulted interest ooupons and other obli-
gations other than bonds be taken care of by the
issuance of non-interest bearing certifioates,
whioh certificates shall be redeemable by the City
at ten per cent of their face value, and which
certificates may be sold by the oity for the purpose
of meeting the costs of the refunding program, and/or
for any improvements to the physical property of
the City, i.e., street repairs, eto., said Certi-
ficates to be sold to taxpayers, who may use them
at their face value to pay delinquent taxes for the
year 193~ and prior years, and the payment of special
assessment liens.
Your committee also disoussed the suggest-
ion of the Bondholders Protective Committee that a
group of City officials or citizens be requested to
come to Chicago to discuss the refunding situation,
and it was the unanimous opinion of the Committee
763
COUNCIL CHAMBER - August 25, 1937
that all refunding discussions be held in the City
of Delray Beaoh, and that no speoial committee be
sent to Chioago or any other plaoe for this purpose.
We appreciate very much the cooperation shown
us by your Body, and also Miss Mae W. Cramp, City
Clerk, and in submitting this report, your Committee
offers its further services to you in assisting in
oompleting and working out the refunding of the
City of Delray Beaoh outstanding bonds.
Respectfully submitted.
(SIGNED) E.B. Fmote,
Chairman
(SIGNED) B.F. Sundy
(SIGNED) d.M. Berg
tSIGNED) Wm. d. Walker
(SIGNED) LeRoy Diggans
(SIGNED) d .L. Love
(SIGNED) E.C. Hall
It was moved by Mr. Barton that this report
be aocepted by the C~Unoil and the Citizens Refunding
Committee be thanked and asked to continue its organ-
ization as a Committee -- that said report be endorsed
by the Counoil and copy of same submitted to the Bond-
holders Committee as a oounter-proposal from the Counoil.
Mr. Wodischek seoonded the motion, and on roll call
the vote was as follows: Mr. Barton yes, Mr. Hill
yes, Mr. Genton ye~, Mr. Gwynn yes, and Mr. Wodisohek
yes. The motion was declared carried.
'.
The Clerk then read a letter addressed to the
City Attorney from Mr. A.C. Mittendorf offering a
proposal for refunding as follows:
?%. for the first three years,
2~ for the next three years,
3~ for the next four years.
4% for the next ten years,
5~ for the last ten years.
In disoussing the bond debt situation, Mr.
roote. Chairman of the Citizens Committee said that any
settlement the City makes whioh does not provide for
liquidation of these bonds during their lifetime would
not be a good one for the City.
Mr. Byrd replied that although this was a des-
irable objective for the City, yet from the discussion
he had had with the Bondholders, he believed they were
most anxious to Ret something in the way of a saleah1A
7tiq
COUNCIL CHAMBER - August 25, 1937
bond, that they could sell for eighty, eighty-five
or ninety. A 1% bond would have no market value, he
said, whereas one bearing a higher rate of interest
would be oonsidered a marketable one. He stated he
believed the Committee was looking for nothing beyond
a ten year period, that now the general trend through-
out cities and counties seemed to be towards an effort
to meet interest obligations only, and that hardly any
financing scheme nowadays meets its principal matur-
ities as they come due, but usually refunds on payment
date with paper or by renewal of some kind.
The principal object of the Bondholders committee
in its desire to effect a refunding, he believed, was
to enable the City to get a workable plan whereby
Delrayts debt problem would be taken care of for the
next ten years, getting the City out of the defaulted
class and thereby permitting Delray to progress, and
real estate to become active.
Mr. Hubbard, another member of the Citizens
Refunding Committee asked on what grounds the Bond-
holders Committee based its assumption that the City
was able to pay even 2% for the next three years. He
considered this was an impossibility.
Mr. Foote said the citizens would probably
agree to this "tiding over" idea by paying only the
interest as it comes due for the next ten years, if
they considered the debt a legitimate one, but every-
one felt that the large 1926 issue in partiuclar, was
"put over on them" -- that the Bondholders had accepted
these bonds, knowing they were floated on inflated
values and on outlying property assessments. Notwith-
standing this, the Committee felt that the City could
afford to legalize the whole amount of the debt at a
low rate of interest. If a higher rate of interest
was demanded, then a cut in the principal would have
to be made. The Committee he stated, had worked out
two such plans of payment at a higher rate of interest.
cutting the existing amount of principal to approx-
imately eighty and sixty percent respectively. Bonds
issued on this basis would be marketable. he argued,
and based on this reduction in principal could be
settled as oheaply as by the plan herein submitted.
Upon recommendation of the President of the Counoil
and the endorsement of the rest of the mambers, Mr.
Byrd waw instructed to reply to Mr. Mittendorf's letter.
enclosing the foregoing proposal as submitted by the
Citizens Refunding Committee, requesting that it be
given serious oonsideration and asking that the Bond-
holders advise us as to their reaction.
7ti5
COUNCIL CHAMBER - August 25, 1937
t
The City Attorney presented a stipulation in
the matter of the Geo. Kiess suit, covering bonds
and past-due interest coupons, whereby it is stipu-
lated that judgment shall not be issued as a basis
for mandamus proceedings for a greater levy than that
levied for other holders of bonds and interest ooupons.
He explained that M.F. Baugher, at~orney for GeO.
Kiess had agreed to this stipulation, and if the
Council approved of same, he planned to file same in
the Miami Court, the following day. Members of the
Council were all agreeable to this procedure.
The City Clerk reporte4 that the paving of S.E.
Seventh Avenue, between Second & Third Street, which
had been sanctioned in Resolution adopted by the
Council at its meeting of dune, 28th. was in course of
construction and would probably be completed by the
end of the week. She explained that before such work
could be paid for, contracts between Gulfstream Engin-
eers and abutting property owners required that the
paving be approved by the 'City Engineer, and since
the City had no regular Engineer 'it was necessary to
appoint someone to act in that capaoity for the purpose
of approving this paving work~ It was accordingly
moved by Mr. Genton that Howard Cromer be designated
"City Engineer" and that he be given the responsibility
of testing and passing on said street after its complet-
ion, oertifying as to whether it is built acoording to
City specifications. Mr. Wodischek seconded the motion.
which on roll call, carried unanimOUSly.
Upon enquiry by the Clerk as to whether the
Council intended to make a donation to the 40 and 8
to help defray cost of trip to New York, she was
instruoted to notify said organization that our pub-
licity fund was entirely depleted and that the City
was financially unable to give anything for this
purpose. '
After tentative estimates and discussion of the
1937-1938 budget requirements for operating purposes,
the Council. by motion regularly made. seconded and
carried. a dj oarned.
~~C~~c~