Carefree Truth

Issue #417, August 21, 2015

 

 

 

Mayor Les Peterson reported that 5 lenders had been contacted for quotes to finance the purchase of the building at 33 Easy Street which will house the Carefree Council Chambers in the future.  3 banks had responded as of the meeting on August 13.  Biltmore Bank offered the loan at 30% down ($122,500) and a loan amount of $284,900, for a 5 year fixed interest rate of 4.25%, with a prepayment penalty.  Desert Schools offered the same, but with 3.87% interest and no prepayment penalty.  National Bank of Arizona (NB) offered to finance 100% of the $407,400 required for the purchase, for a 5 year fixed rate of 3.92%, and no prepayment penalty, but imposed a $2500 origination fee.  The Mayor recommended moving forward with NB, where the Town's regular bank accounts are being transferred as of September 1st.

 

 

 

Councilman Mike Farrar said that one additional lender, the Arizona Business Bank (ABB), had expressed an interest in quoting.  There was no commitment letter yet, but they might come back with a "better than" offer.  Mr. Farrar asked that the vote be structured to agree with the Resolution to enter into the financing agreement, but not name a bank.  Gary Neiss said the Resolution before the Council did not name a bank.  

 

 

 

Councilman Glenn Miller thought the closing was required within 30 days of the Council meeting on August 4th, when the purchase was approved.  Mr. Farrar said the Town should receive an answer from ABB by Monday or Tuesday.  He clarified that the contract states closure on or before October 1st.  The 30 days to which Mr. Miller referred was the period the Town had in which to do its due diligence. 

 

 

 

Councilwoman Melissa Price was "bothered" that the Mayor was authorized to "make whatever deal".  She wanted to see it before a decision was made.  Mr. Neiss explained that NB is the "deal today".  Should ABB provide a better quote, then that would be the better deal.  The bottom line is that the chosen lender must finance the building 100% so nothing is taken from the 2015/16 Budget Contingency Fund, guarantee a low 5 year fixed interest rate, and not impose a prepayment penalty, as it is anticipated that the loan will be repaid early.  Ms. Price asked if the Town would go back to NB if ABB gave a better quote.  Mr. Farrar replied that as a courtesy to NB, there was no reason not to give them another chance to quote.  Councilman Gene Orrico agreed, especially since the Town is moving its accounts to NB. 

 

 

 

Vice Mayor John Crane wanted to know if making the quotes public had put NB at a disadvantage.  Mr. Farrar, a commercial Broker, said it's a common practice in the Real Estate industry to shop for the best quote.  Buyers get quotes, take them back to banks and say, "Can you beat it?"  The Vice Mayor pointed out the when jobs are sent out for bid, the bids are not shared with competitors, and asked Town Attorney Mike Wright if this should be handled as Mr. Farrar suggested. If banks choose to make a better offer, may they do so?

 

 

 

Mr. Wright responded, "Clearly, this is a little different situation.  This is not like sealed bids that the Town has obtained that, when opened, the lowest bidder is generally the one that gets the contract.  This is a series of negotiations with a number of banks, and as Councilman Farrar pointed out, it's pretty much a common practice to basically shop these bids.  You go to a bank; you go to the next bank."  The Resolution does give the Mayor the authorization to finalize the financing in accordance with the criteria listed.  It entrusts the Mayor to make the best deal for the Town.  Vice Mayor Crane said that answered his question.

 

 

 

Mr. Miller wondered if it was ethical to go back to NB if ABB would drop the origination fee.  He reminded everyone that NB came through for Carefree when they wanted to buy the building at 8 Sundial Circle where the Town Hall is now located, at a time when financing was scarce.  He and Ms. Price felt the Town should support NB.  Mayor Peterson agreed, saying if the quotes were equal, the Town would utilize NB.  Ms. Price said, "I like that. Delineating what you're going to do."  The Mayor replied that he wouldn't sign anything  disadvantageous to the Town.  Mr. Farrar gave "kudos to National Bank for an extremely attractive quote."  The Town will advise the citizens, via COINS, about the lender when a final decision is reached. 

 

https://vimeo.com/user18676056/review/136411878/7918ccf543

 

 

 

Lyn Hitchon

 

 

 

Prepared by Carefree Truth

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