Mayor Margo G. Bailey called the meeting to order at 7:40 p.m. In attendance were Councilmembers Harrison C. Bristoll, Jr., Thomas A. Gross, Sr., Mabel Mumford-Pautz and J. Brian Kirby, W. S. Ingersoll, Town Manager, Joan Merryman, Stenographer, and guests.

Mayor Bailey said the minutes were not ready for approval. Mayor Bailey stated that an executive session was held on Monday, April 6, 1998 at 9:50 p.m. pursuant to Sec. 10-508 of the Annotated Code of Maryland to discuss a personnel matter. The entire Mayor and Council was present and voted unanimously to go into executive session. The action taken by the Mayor and Council was unanimous and minutes were taken and are part of the record.

Mayor Bailey called on the Town Manager for his report. He said the first thing on his agenda was the Heron Point bond issue which was discussed at the previous meeting. Mayor Bailey said Roger Simpkins had asked to speak. Mr. Simpkins stated he was a member of the Heron Point board and read a statement about the Board members, the Heron Point project and management of the project. He said the retirement community opened in 1990 and now has a 93% occupancy and a waiting list.

Mr. Ingersoll said he had questions from Councilmembers on whether the bond issue would be an encumbrance on the Town of Chestertown. He said if anyone present had questions they should be asked while the Heron Point representatives were present to answer.

Erma Miller asked what the interest on the bonds would be. Don Persinski stated the interest would be determined at the time of marketing and hopefully the bond issue would be done the end of May. He said right now the approximate rate was 6% compared with the rate of their current bonds which are 8.3 to 8-5%. Mayor Bailey said the bottom line for the Town of Chestertown and its citizens was whether there was any liability to the Town. Mr. Persinski said the liability to the Town of Chestertown or to Kent County or a State issuing authority, was basically zero. The government body will be fully indemnified from the bond issue. He said it will be purely revenues from the Heron Point facility that will pay the debt expenses.

Mr. Ingersoll asked if the first bond issue was to PUMH of Delaware or Heron Point. Mr. Persinski said Kent County, Maryland was the issuing body and PUMH of Maryland dba Heron Point of Chestertown was the borrower then and would be the borrower now.

Mr. Gross asked why they had come to the Town and had they sought out other types of financing. Mr. Persinski said going for straight bank financing was not very feasible because banks do not like to lend for 30 years. He said going to private markets or individual investors was very expensive and the tax exempt market was very mature and the most economical way to go.

Mr. Kirby asked if the liability was basically zero or absolutely zero. Davis Sherman from Venable, Baetjer and Howard, counsel to PUMH said the Town's liability was basically zero. He gave the council a copy of the Maryland Code section which authorizes towns and counties to issue this type of bond and states that the debt on the tax exempt bonds was only payable by the borrower, which would be PUMH of Maryland in this instance. He said the Town had no liability on the bonds. Mr. Ingersoll said we had that same language placed in the record from the TEFRA hearing for the Washington College bond issue and he read from the publication of that hearing.

Mr. Kirby said he understood the difference between the Washington College bond issue and this one was that the Heron Point bonds would be sold to the public. Mr. Sherman said these bonds would be sold by underwriting firms and Legg, Mason, Wood, Walker was the leading company who would sell the bonds to institutional investors as well as to individuals. Mr. Ingersoll asked what rating would be on the bonds. Mr. Sherman said typically the bonds would be nonrated. Mr. Gross asked what was the amount of the bond issue. Mr. Sherman said about $36 million but it would fluctuate until the actual bond issue. Mr. Gross said that he had stated $200,000 would be used to refurbish Heron Point on annual basis. He asked what the rest of the funds would be used for. Mr. Sherman said $300,000 would be for normal capital acquisitions, renovations, and upkeep. He said they will add one cottage since the marketing office occupies a cottage which has been sold. Mr. Gross asked what their debt figure was now. Mr. Sherman said $28 million of long term debt and a $6 million bullet due next month. Mr. Gross said the Town then would not be underwriting some other project but would eliminate debt and make improvements here.

Mayor Bailey said we are always talking about getting business in Chestertown but we do not talk about retaining business. She said if it was in the power of the Town, without hurting the Town taxpayer, to make business more efficient or more financially stable it was something we should do to help them. She said Heron Point has been a great asset to this Town and this county.

Mrs. Mumford-Pautz asked how long would be the Town under any obligation before we would be free of this. Mr. Ingersoll said at the end of this calendar year we would be free of this as it was a renewable bonding authority. We have only used it once for Washington College last year and this has been the only other request. He said once the County was through with its capital improvement program they would be back in a position to do these bond issues as they have in the past. Mr. Gross asked whether the Town Manager would have access to Heron Point's financial statement. Mr. Sherman said he would.

Mayor Bailey asked if there any comments. She called on Steve Meehan. Mr. Meehan asked if Heron Point had been to Kent County yet for this particular financing. Mr. Sherman said PUMH applied to Kent County but the County will do some of its own financing on a bank qualified basis. Under the IRS Code, a county or town may issue only $10 million worth of bank qualified bonds and if they did the bond issue for Heron Point they would be unable to do their own financing. He said the Town does not have this problem as there are not plans to use the $10 million bank qualified slot. Mr. Meehan asked if the County had said how large their own bond issue would be. Mr. Ingersoll said he had correspondence from the County and Mr. Meehan was welcome to have it. He said we asked someone from the County to be at the last meeting to answer questions.

Mr. Meehan said if PUMH goes, Heron Point goes. He said it was running deficits now and if it does not improve and runs into financial trouble and there are bond holder law suits, they would have to be defended. He asked if there was a guarantee that the Town's legal costs would be reimbursed. Mr. Sherman stated there was an indemnity provision in the loan agreement that allows the borrower to pay all Town expenses and there would be reserves for that. Maryland law regulates continuing care communities and their financial health was monitored by the Office on Aging.

Chris Kennedy asked what amount was originally financed on which this $36 million was left and will there be a payment plan. Bill Starcher, Chief Financial Officer for PUMH of Delaware said the original debt was $44,880,000, the principal will be delayed for five years and the debt would be extended for nine years.

Mr. Ingersoll reminded the Council that an issuer's fee was a possibility. He said Rev. Stazesky has already discussed that. He said if the Town wishes to proceed, a TEFRA public hearing would be held. Mrs. Mumford-Pautz asked what the amount of the issuer's fee might be. Mr. Ingersoll said he understood they vary, but the only standard he could find was 1/8 of 1% generally paid at issuance. He said some jurisdictions require a fee annually. He said it should be matched to this issue and to the plans of the Town but not defeat the purpose of the refinancing. He said it was not a money issue but a matter of security down the road for both parties and a benefit to the Town and Heron Point. Mr. Persinski said it was a matter of negotiation between the borrower and the issuing party which would be drafted into the documents. Mrs. Mumford-Pautz requested that if the bond issue was approved, that the issuer fee be negotiated.

Mayor Bailey was asked what Washington College paid as a fee. She said they did not pay anything as the Town was not aware of these fees. Mr. Persinski said issuer's fees originated when the State set up agencies whose sole function was to issue bonds and they sometimes charge issuer fees to cover their operating expenses.

A Heron Point resident asked if Kent County got an issuer's fee on the original issue. Mr. Persinski said he had not handled that issue and did not know. Mr. Ingersoll said he did not think they had and did not know if it was because they were not informed or that it was not a money issue.

Mr. Meehan said he was there on behalf of Chestertown Citizens in Action (Carrie Schreiber, President), a group of about 60 taxpaying members and Taxpayers for Accountable Government (headed by Elmer Horsey), a group of about 35 members. Their general opposition was the shifting of whatever liability there was from the County to the Town. He said since Heron Point was using the Town as the conduit to refinance a business that has financial troubles and was behind in its debt load. He said though Heron Point had projections for future income of $3.3 million in entry fees in the next two year but they only had about one and half million last year.

Mr. Meehan said Art. 41, Sec. 14102 had six rational purposes and he felt the bond issue for Heron Point did none of them. He said he thought the Town should have financial statement from Heron Point. He said on information from the Commission on Aging Heron Point was asking the Town to refinance their current debt and to avoid the $6.4 million payment due May 1 so that they do not have the cash to pay. He said this was different from the Washington College bond offer as it was a private residential facility. He said if Dixon Valve said they were running deficits and needed to refinance, he did not think the Mayor and Council would be saying that was great. He said it would raise questions about the Town getting into that business. He said there was a big difference between not for profit at Heron Point and not for profit at Washington College. He said a bond issue for a HUD type project for seniors or low income citizens of the community was different from Heron Point. He said he did not know the net worth of the members or residents of Heron Point but he was sure it was substantially greater than residents of the public housing projects in the county.

Mr. Meehan said another issue involved Mr. Bristoll. He said recusals were discussed on the Washington College bond and he did not know whether the Town consulted lawyers or not. He asked Mr. Bristoll if he had a familial relationship with Heron Point. Mr. Bristoll said he did. Mr. Meehan said he would leave the matter of recusal to Mr. Bristoll to think about though it did not meet the criteria of the Town ethics statute he thought it was close and he wanted to raise the issue.

Mr. Ingersoll asked Dave Taylor if Dixon Valve was having difficulty, would he recommend that the County work through a lower interest bond or something to retain the jobs there or not. Mr. Taylor said he would recommend it to the County and to the State. Mr. Ingersoll said he wanted to get that straight because he thought that was a poor example.

Mayor Bailey asked if the gentlemen from Heron Point would like to respond. Mr. Persinski said that the indication that PUMH was financially troubled was stretched. He said most CCRC's of the type like Heron Point do because of accounting standards operate at a deficit. You look at the cash flow and the way it has to be accounted for and it does flow through in a different way through actuarial studies. He said for this transaction PUMH of Maryland has engaged a nationally recognized feasibility consultant firm whose sole purpose is to provide things like this for institutions like PUMH of Maryland. They don't put their name on the study or sign off on the study until they are 100% comfortable with every assumption that management provides them for that, with every assumption that they have reviewed and every chart and graph they put in that study. He said secondly, to support that, there was an actuarial study done which is done on an annual basis by PUMH and every other CCRC to review the actuarial lives of the residents and of the community itself. That study was used to support the feasibility and for the financials and part of that process is to put some validity to the entrance fee projections and all the other projections on the lives of the residents was concerned and future residents. He said if you look at all the professionals involved it was not a situation where PUMH was just putting out projections to make the deal look good. He said there are reputable law firms, underwriting firms working on a creditable deal.

Mr. Sherman said PUMH, Inc. was a charitable corporation, has tax exempt status from the Internal Revenue Service and was operated for charitable purposes. The management company Peninsula United Methodist Homes was also a charitable corporation, there are no profits paid to stock holders, there was no money siphoned out of the community and the financial health of this enterprise was fully in the care of its Board of Directors. He said it was not accurate to compare it to a private business or to other ventures that might seek assistance from the Town. Mayor Bailey said the Town should not be discriminating between a project because someone has more money than someone else.

Mr. Moore of Heron Point asked how many taxpayers Chestertown has. Mr. Ingersoll said 4005 more or less. Mr. Moore said the gentleman who spoke represented about 2 or 2 1/2%. He said he would recommend to the Council that his remarks be declared null and void. Mr. Ingersoll said we have 4005 people and probably 2000 taxpayers, we have 2000 registered voters.

Mr. Simpkins said there was an accounting of the number of Heron Point residents who participate in local organizations in Kent County and they will provide the Mayor and Council with a copy. Mr. Davis read off the numbers which indicated volunteer participation in at least 50 local civic and religious organizations. Mary Caroline Vanerlang made a statement about the contributions of Heron Point residents to the community. Ann McLain stated she was on the board at Heron Point and pointed out the economic benefits to the community from Heron Point as an employer and through resident consumers. Mr. Ingersoll said that was discussed in the prior meeting and the Councilmembers had those figures.

Mayor Bailey asked for a motion on the matter. Mr. Bristoll stated that Mr. Meehan referred to the ethics ordinance and he had discussed it with his counsel. He said he had intended all along to recuse himself not because it was not in conformance with our statute, but the public perception would do more damage to the Council and its activities if he did not recuse himself. He said the Town ethics ordinance, and it was the same as the State, states that Town officials shall not participate on behalf of the Town in any matter in which to their knowledge there was a direct financial impact, as distinguished from the public generally on them, their spouse, their dependent child or business entity with which they are affiliated. He said his son-in-law, who was not a dependent, was an employee of with Heron Point. Mrs. Mumford-Pautz said if the person was not on the board or a resident, she would encourage him to vote. Mr. Ingersoll said that was a personal call for Mr. Bristoll about whether there would be an appearance of a conflict and he had recused himself.

Mr. Gross asked if the Council would meet with their bond counsel. Mr. Ingersoll said if the Council's passes this, the form of the motion should be that the vote be to proceed and make a last check with the bond counsel and discuss issuer fees and negotiate that and then head toward the TEFRA hearing.

Mrs. Mumford-Pautz moved that the Town back Heron Point for this bond issue including an issuer fee to the Town. Mr. Gross seconded the motion for discussion only. He asked if they could meet with the attorney first. Mr. Ingersoll suggested that it be approved and discussed with bond counsel before the FEBRA hearing which was where the Council would really decide to proceed formally. The vote tonight would be to go on with this to the hearing.

Mayor Bailey asked for the vote on the motion. Mrs. Mumford-Pautz voted yes, Mr. Gross and Mr. Kirby voted no. Mr. Bristoll abstained. The motion failed.

Mayor Bailey called on the Town Manager for his report. Mr. Ingersoll read the minutes from the bid opening for the roof on the Town Hall and Satterfield Court. The first bid was from AW Construction Company of Chestertown who bid $12,558 for the Town Hall and $18,500 for Satterfield Court, both $31,058. The second bid was from F & G Construction who bid $11,500 for Town Hall, Satterfield Court $25,600, bit for both $35,620. The last bid was from Arena & Company, who bid $9775 for the Town Hall and $22,875 for Satterfield Court, total of $31,850. He said the bids were split apart and he recommended that the bid for Town Hall be awarded to Arena at $9775 and the bid for Satterfield be awarded to A & W for $18,500 and add the ventilation systems to both. He said for the record the Town Hall roof was put on in 1992 and not four years ago and it was a big disappointment that the slate had failed. The company went into bankruptcy not long after our roof was put on and when our shingles started to fail, the court would not let the Town into the bankruptcy case.

Mr. Bristoll moved that the bid for the Town Hall be awarded to Arena and Company for $9775 and the bid for Satterfield Court be awarded to A & W for $18,500, was seconded by Mr. Gross and carried unanimously.

Mr. Ingersoll reported that the changes had been made to the Sultana Lease for the County yard property. Mrs. Mumford-Pautz said she had requested that work be stopped at 6 p.m. and the contract said 6:30. Drew McMullan said that change will be made. He said language had been included to change the fence line as discussed. He said he will approach their insurance company about the liability issue on fund raisers. Mrs. Mumford-Pautz moved that the lease be accepted with the changes discussed, was seconded by Mr. Bristoll and carried unanimously. Mr. McMullan asked about a move in date. Mr. Ingersoll said we were promised possession of the property by mid-May and he will notify them when this works out.

Mayor Bailey announced that the Town has cash on hand and in banks of $110,393.76.

Mr. Ingersoll said he had four permits to bring to the Council. The first was from Franklin Mench for the annual music event on Tea Party Day at the marina. He said Mr. Mench discussed this with the Council last year and he was approved to have the event. Mrs. Mumford-Pautz moved that the permit be granted and was seconded by Mr. Gross. Mr. Bristoll asked about the closing time. Mr. Ingersoll said it would end at 12:30 a.m. Mr. Ingersoll said Mr. Mench was asking that as long as the noise was reasonable that they not be shut down. Mr. Bristoll said as long as they are aware that the noise ordinance was still in effect. The motion carried by unanimous vote.

The next permit was from Robert Duffany to hold a concert/street revival at Garnett School from 10 a.m. to 7 p.m. on Saturday, May 9, 1998. The noise ordinance was in effect. Mr. Gross moved that the permit be granted, was seconded by Mr. Kirby and carried unanimously.

The third permit was from Dennis Hogans to use Wilmer Park and the Pavilion for hydroplane races and car show on September 5 and 6 from 8 a.m. to 5 p.m. Mr. Ingersoll said the boat races will be from the Queen Anne's County side of the river. They expect 5000 to 10,000 people. He said this would include the annual car show for Kent Youth. The Council asked that Mr. Hogans be asked to attend the next meeting and submit all the details for the events and who would pay for trash, restrooms, traffic, parking, policing, etc.

The last permit was from Ernie Robinson who had made a request at a previous meeting for a parade permit for August 8, 1998 starting at 1 p.m. and afternoon activities following. He read the permit request and stated Mr. Robinson had been asked to fill out the form. Mr. Robinson was asked to bring in a list of the specific activities, numbers of participants, etc. but that has not been submitted. Mr. Gross said the Council was asked to pay for port-a-potties and trash removal. Mayor Bailey asked the Council how they felt about paying for port-a-potties and trash removal. Mayor Bailey said before a decision would be made on the Town's participation and granting of the permit, we need the details from Mr. Robinson. The Council discussed the matter of the Town paying for the port-a-potties and trash removal and they agreed that the Town should not pay for those activities.

Mr. Ingersoll said that the Kent County Arbor Day ceremony will be at the Court House at 1:30 p.m. on Tuesday, April 21, 1998. He said the Town will plant a tree at the park area in Washington Park at 2 p.m. Tree seedings will be available at various places around the County including the Town Hall. Mr. Ingersoll announced that the Town had been awarded Tree City USA status for the 17th year.

Mr. Ingersoll asked the Council to set the date for the workshop meeting on the budget. The Council agreed to meet at 5:00 p.m. on Monday, May 18, 1998.

Mr. Ingersoll said the Chestertown Garden Club will hold the annual May Mart in the Fountain Park on Friday, May 1, 1998.

Mr. Ingersoll said an executive session was needed concerning a property acquisition matter. Mr. Bristoll moved that an executive session be held following the meeting pursuant to Sec. 10-508 of the Annotated Code of Maryland, was seconded by Mrs. Mumford-Pautz and carried unanimously.

Mayor Bailey called on Dave Taylor of the Kent County Economic Development and Advisory Board. Mr. Taylor said he wanted to leave with the Mayor and Council a copy of the five year economic plan. He said they had public hearings and several workshops and developed the plan for the next five years. He gave a brief overview of the findings in the report and gave the plan to the Council.

Mayor Bailey said there would be a meeting in Elkton on Saturday, May 2, 1998 from 9 a.m. to 1 p.m. held by the United States Attorney's Office. The meeting will be a 1998 Community-Based Outreach Program for Cecil, Harford and Kent Counties. Anyone who would like to attend should let Ms. Merryman know and the registration will be sent in. She said it was important that the community get involved and this was an opportunity.

Mayor Bailey read and signed a Proclamation for Arbor Day. Mayor Bailey read and signed a Proclamation declaring the week of April 20-25 as Municipal Government Week. She reminded the Council of the Eastern Shore Association Dinner on Tuesday, April 21, 1998. Mayor Bailey said Mrs. Mumford-Pautz would be running for District Vice-President and would need a nomination at that dinner.

Mayor Bailey asked if there was any other business. Mrs. Mumford-Pautz asked the outcome of the discussions on the 700 High Street house. Mr. Ingersoll said last August the Council agreed to pursue the sale of the property to a homeowner. He said he would like to market the property for sale to a select person, a first time homeowner, who would renovate and live in the house. He said he went to the house after the last meeting and boarded up a couple of cracked windows. He said he felt the house could be salvaged. He said the Town bought it for about $15,000 and it would take about $40,000 total (with an acquisition price of $10,000) to put the house back in livable condition. He said it would take a lot of work and the Town would want assurances that the work would be done within a set time frame. He said the only other option would be if someone bought the property, removed the existing structure and agreed to rebuild a two story single family dwelling on the lot with the design approved by the Town. He said the sale would have to be contingent upon the owner have a contractor lined up to restore the building.

Mr. Ingersoll said he wanted to clarify a statement made at the last meeting. The ceiling discussed was not asbestos but was celletex, which was a wood product. Mr. Gross moved that the Town advertise the sale of the property for $10,000 contingent upon the purchaser being willing to restore the house and occupy it within a set time table, was seconded by Mr. Bristoll and carried unanimously.

Mayor Bailey asked the Council to review the bills. Mr. Gross moved that the bills be paid as presented, was seconded by Mrs. Mumford-Pautz and carried unanimously.

Mr. Kirby moved that the meeting be adjourned at 9:10 p.m., was seconded by Mrs. Mumford-Pautz and carried unanimously.

Submitted by:

Joan Merryman

Stenographer

Approved by:

Margo G. Bailey

Mayor

(Word for word transcript requested by Mayor Bailey)

Mr. Meehan: Have you been to Kent County yet for this particular refinancing?

Mr. Sherman: Yes.

Mr. Meehan: And what did they tell you.

Mr. Sherman: The borrower PUMH of Maryland applied to Kent County and Kent County is planning this year to do some of its own financing on a bank qualified basis. And under the Internal Revenue Code a county or town may issue only $10 million worth of bank qualified bonds when taken together with all the other bonds of this type. And they told us that if they issued a $36 million bond issue for Heron Point that they would be unable to do their own financing because of this tax law limit on the bank qualified piece. The Town of Chestertown doesn't have this same problem, because as Mr. Ingersoll has informed us there are currently no plans to use the $10 million bank qualified slot here in Chestertown.

Mr. Meehan: These bonds that you are proposing, there is no institutional banking whatsoever.

Mr. Sherman: These bonds are not what the tax code calls bank qualified which means that banks can't buy them and they don't get the favorable tax treatment.

Mr. Meehan: When you mean $10 million there is a statutory limit on institutions or individual institutions.

Mr. Sherman: No there is a federal tax law limit on how much in bank qualified bonds a town or county can issue in a calendar year.

Mr. Meehan: Well, Kent County, did they tell you how large their bond issue is going to be?

Mr. Ingersoll: We have correspondence from Chip to us, to PUMH and a second letter form him to us. And you are welcome to have it.

Mr. Meehan: I just wonder if it indicates that they are going to . . .

Mr. Ingersoll: I think some of it's for 400 High Street, I think they also borrow for their own if its possible for their own budget.

Mr. Meehan: Well it strikes me that I don't think it's going to exceed $10 million and I just wonder . . .

Mr. Ingersoll: It doesn't have to exceed $10 million.

Mr. Sherman: Together with the $36 million for Heron Point and the $36 million for Heron Point would wipe out the full $10 million slot under the tax code and there would be no room left for them to borrow for their project under the way the tax law counts these bank qualified bonds.

Mr. Ingersoll: Mr. Meehan that's the first step that the Council took - we asked for someone from the County to be here the first time when PUMH came here because we wanted an answer to that question because the tendency is to think well why wouldn't the County do it and get nervous about the transfer. But that's been fully explained to the Council.

Mr. Meehan: The other question I had and it probably goes to Mr. Kirby's question about liability. If PUMH goes, Maryland goes. It's running deficits now, it doesn't improve its position, it runs into serious financial trouble and your bond was going into the retail public market and there are bond holder law suits, whatever. They can be defended but of course it has to be paid to be defended. Will this - will there be some guarantee for the Town that those legal costs will be reimbursed.

Mr. Sherman: Yes, there is an indemnity provision in the loan agreement that allows the borrower to pay all of the Town's expenses if that odd circumstance occurred.

Mr. Meehan: Well are there reserves for that? If they go bump there's nothing to get. Are there reserves for that sort of thing? There are no fees being paid.

Mr. Sherman: PUMH of Maryland has reserves, yes.

Mr. Meehan: Will that be stated in the agreement?

Mr. Sherman: The loan agreement and the trust indenture will require the maintenance of certain reserve money as does the overall Maryland statute regulating continuing care retirement communities. Their financial health is monitored by the Office on Aging and there's an operating reserve fund that they are required to maintain year in and year out. So the answer is there are reserves to back those indemnities.

Chris Kennedy asked what amount of money was originally financed on which this $36 million is left and will this be on a payment plan. Bill Starcher, Chief Financial Officer for PUMH of Delaware said the original debt was $44,880,000. He said the principal will be delayed for five years and the debt would be extended for nine years.

Mr. Ingersoll reminded the Council that an issuer's fee was a possibility if they feel the lease bit queazy about defense in the future. He said Rev. Stazesky has already discussed the possibility of that. Mr. Ingersoll said if the Town wishes to proceed with this the Town would have to have a TEFRA public hearing which can only come within a certain period of time and will be explained to us. Mrs. Mumford-Pautz asked what the amount might be for an issuer's fee. Mr. Ingersoll said from what he understood they vary but the only standard he could find was 1/8 of 1% and generally that was at issuance. Some jurisdictions require it annually but there could be different circumstances. He said he thought it should be matched to this issue and to the plans of the Town and a reason for doing so and should not defeat the purpose of the refinancing. He said it was not a money issue but a matter of security down the road for both parties. Mr. Persinski said Bill was correct that it could be all over the place and was a matter of negotiation between the borrower and the issuing party. He said it was not uncommon to receive an up-front fee up to an eighth and it was also common to get an annual fee throughout the life of the deal which would be negotiated and renegotiated in the middle of the period. That would be drafted into the documents. Mrs. Mumford-Pautz requested that this happen if it was approved.

Mayor Bailey was asked what Washington College paid for a fee on their bond issue. Mayor Bailey said they did not pay anything as the Town was not aware of these fees. Mr. Ingersoll said the fee should not just be a grab bag but should be an issue that was well thought out and something that would benefit both Heron Point and the Town. Mr. Persinski said issuer's fees originated when the State set up agencies whose sole function was to issue bonds and they sometimes charge issuers fees to cover their operating expenses.

?? asked if Kent County got an issuer's fee on the original bonds. Mr. Persinski said he did not handle that issue and did not know. Mr. Ingersoll said he did not think so that Kent County generally does. He said he did not know if it was because they were not informed or that it was not a money issue.

Mr. Meehan said he had comments: He said he was there to rain on the PUMH parade I guess. My name is Steven Meehan, I am here on behalf of Chestertown Citizens in Action. Their president is Carrie Schreiber and they have about 60 taxpaying members. The other group I am here for are Taxpayers for Accountable Government. Elmer Horsey heads that organization. It also have 35 taxpaying members. Their general opposition is the fact that we are shifting whatever liability there is from Chestertown - from the County to the Town. You are using the Town as the conduit really to serve as a refinancing for a business that has its own financial troubles, behind its debt load. Heron Point runs deficits and has some, if you review the documents they file with the Commission on Aging, I think they have some exceptional projections for future income given their occupancy rate. But I also think this is contrary to the stated purpose in Art. 41, Sec. 14102 and I think you all need to review the Code section. It's not simply to serve as a financing tool to keep any business in Town or to promote keeping Heron Point in Town but it's got six very rational purposes: number 1 to relieve conditions of unemployment. I don't if this bond issue goes through Heron Point is going to shut down and send all the workers home. Encourage and increase industry and commerce - this bond issue will do neither of that. I think the only, we have heard about $600,000 about renovations as well as the construction of a new marketing building in the next three years but that's not substantial, it's not a substantial impact on our local economy. No. 3 - assist in the retention of existing industry and commerce and the attraction of new industry and commerce. Mayor I think you make that point but the fact is Heron Point isn't going anywhere and why don't we save this for another day. Uh, because they aren't going anywhere. I think if they did they'd have a lot of angry tenants on their hands. Promote um - protect natural resources, encourage resource recovery. Well, Heron Point does none of that because they built that in an environmentally sensitive area anyway. And 6 promote the general health and welfare and safety of the public. I don't think this bond issue is going to markedly promote any of that. Um, what it does do, and I think the Council is correct about the risk of liability. I think the only thing you have to look at, look what happened in Orange County - wasn't a bond issue, was bad investments. But we are putting the Town of Chestertown on this investment and I think you need to have them produce their financials and review them. And they run - I got this from the Commission on Aging uh they are basically asking you to refinance their current debt. And really to avoid the $6.4 million payment that's due May 1 which they themselves don't have the cash flow for. But their parent company or their management company has secured a line of credit for. Last year's payment was $450,000. So it is not like they are making these huge multi-million dollar payments. This is a balloon they can deal with. They run deficits close to a million dollars in the last several years and although they project a reduction of that, they base that in part on a projection of the $3.3 million in new entry fees in the next two years when they did about one and half million last year and they only have somewhere between 8 and 14 units left. These are the kinds of things you need to look at. I think Mr. Diana was correct in that your risk is really the risk of legal fees but if this debtor goes bad, and the bond holders start suing, you need to make sure you have protection for that because that an expensive proposition. This deal is also I think very different from the Washington College loan or Washington College bond offer. Washington College is not a residence for financially privileged people, it's a public institution, it's a college, it serve a much broader interest in the community. I think this isn't. This is really, this is a private residential facility. Why they should be treated differently than any other private business. I think if Dixon Valve rolled into today and said, gee we are running deficits and need to refinance their debt, can we float it through you, I am not convinced the Mayor and Council would be saying that's great. I think they would be raising questions - why are we getting into that business. It's the same thing, they say they're not for profit but I think there is a big difference between not for profit at Heron Point and not for profit at Washington College. I think there is a big difference. And I also think there's a big difference, Heron Point is very different that doing a bond issue for a HUD type project targeting seniors, targeting low income citizens of the community. I think you need to consider that in making the decision. What's different, I don't know the net worth of the members or residents of Heron Point but I am sure it's substantially greater than the residents in those public facilities, public housing projects in the county. I think you need to weigh that.

Audience: Why, why, tell us.

Mr. Meehan: Because it's a private project.

Mayor Bailey: If someone has a question they need to stand up. We are getting into a lot of areas that . . .

Mr. Meehan: The other issue is to Mr. Bristoll. Just on the issue, I know you all discussed recusals on the Washington College bond. I don't know how far you went in terms of ethics or lawyers or what not. I probably would have told Jim don't vote on it. You sir, you have a familial relationship with Heron Point right now don't you.

Mr. Bristoll: That's true.

Mr. Meehan: And I will leave that to you to think about. I think while it certainly does not meet the criteria of your ethics statute.

Mr. Bristoll: That's correct.

Mr. Meehan: I think it's very clearly not within the statute, I think it's close quarters. I'll just raise the issue I am not going to go any further. Does anyone have any questions.

Mr. Ingersoll: I have one question. Mr. Taylor's here, its a coincidence. You raised the issue with Dixon Valve, if Dixon Valve was having difficulty. I'd like to ask Mr. Taylor while he is here, if Dixon Valve was having difficulty would you recommend that the County work through a lower interest loan or something to retain the jobs or not?

Dave Taylor: Yes sir, to the County and to the State.

Mayor Bailey: Thank you.

Mr. Ingersoll: I just want to get that straight because I think that was a poor example.

Mr. Meehan: The more I think about it, it was a poor example.

RETURN to 1998 Minutes