Attempted explanations to the claims regarding the 65% higher interest rate on the middle school.
This story is an update to a story we published earlier. In that story we learned that Lakeland TN Mayor Wyatt Bunker intentionally negotiated an interest rate 65% higher than necessary so he could get "extra" money to build a 3.7 million dollar middle school athletic field. This article is found here.
So far there have been two attempts to defend this information none of which have come directly from the Mayor. He wouldn't participate in a recent news channel 24 story at all regarding this matter.
Mayor Wyatt Bunker's Response to the article:
He doesn't deny the claim or anything else. He just says the claims are outrageous and ridiculous. Why didn't he deny the claim and then offer some proof that the claims are wrong? Why did he refuse News Channel 24's interview to set the record straight? He chose not to try to defend the claims, not because they are not true, but because they are TRUE.
The first attempt to defend this was to say this had already been debunked. This was posted by a citizen:
A follow up by the same person said:
Note this point is disproved within the link that was posted:
Response from the Vice Mayor of the City:
The vice mayor is saying that the city received a “Premium” which is the extra money they have talked about because the market moved in their favor between the time the bond process started and ended.
Yes, this is not unusual to happen but there are a few problems with his claim.
- The bond process started on 7/1/2015 and ended on 9/16/2015 during that time the market moved in the OPPOSITE DIRECTION needed for ANY kind of a premium due the interest rate changing in favor of the city.
See the Bloomberg graph:
A more technical explanation from someone who underwrites bonds for a living was:
"From 7/1/15 (start date of process it appears was 7/6) to 9/16/15, 10yr rates were 13bps higher (not lower), 30yr rates were 12 bps higher. These deals would typically price off of the 10yr, so rates went from 2.294% to 2.422% over that time frame.The rate on the issue would’ve been lower than the “mkt”, and therefore would have been priced lower not higher. I.e. people would not pay a premium for a rate that was below what the current market would be."
- Another way we know this isn’t true is the interest schedule that was agreed upon and it was much higher than the rate quoted at that time.
This is what was expected according to the BOC resolution:
The adding in the "premium" which they ASKED FOR Resulted in paying a total of 54% MORE in interest payments than what was expected according to the signed resolution.
Another way to sum it up is the mayor who is running as a fiscal conservative borrowed 2.5 million dollars more and agreed to pay 2.5 million dollars more to build a 3.7 million dollar middle school field. This almost doubled the cost of the field.
Why did the city want to borrow 60 MILLION when they told people the school would only cost 33 million???
Lets do the simple math:
|New High School||$33,000,000|
|Repay the premium on the balance sheet ("extra money")||$2,500,000|
|Pay the pre-payment penalty on the original Middle School loan||$4,400,000|
|Pay off the original Middle School loan||$20,000,000|
* This is the rough estimated total using the original amounts. These values are less now. Actual values would be the values on the date they expected to receive the money for the $60,000,000 loan. Keep in mind the first few years of any loan you are paying mostly interest. A fair estimate is that the value would have been about 5% less or about $57 million. The rest would have been wiggle room for the construction budget.
To cover up the bad loan would have required an additional $6,900,000 in the new loan. Keep in mind the interest on our largest loan will go up from 2% to 5% starting 3/2/2019 and due 3/1/2020 - this is an increase in interest of 150%! See image below:
BUT Did we NEED the field right now?
There was also an alternative to spending this money all together.
The article below makes you believe the $500k grant money arrived in 2018. The city has had this grant for years and have always planned on building a park LESS THAN ONE MILE AWAY WITH ATHLETIC FIELDS.
See Map below for the location. Note it is .8 miles and 3 minutes away from the school.
If you are a politician why have one accomplishment when you can have two for a lot more money? Especially when it is long term debt and it will not be your problem.
One last thing
If you haven't seen it our city is already on shaky ground financially.
We already have over $4.4 million dollars in DEFICIT spending from 2017-2019 according to the adopted 2019 budget. This is without a 60 million dollar loan.
Also in 2015 the city collected money for a middle school and a high school that had not been built. Between 2015-2019 we will collect money for a High School that still has not been built.
A good indication of us being able to afford all of this would be the balance of that money. Here it is in the 2019 budget:
The money from the $0.55 tax increase had been going to the School Capital Projects Fund. Millions have gone in (look at balance on the left) and we will have $24,785 left by the end of 2019.
If you have also been told that the payment on 60 million for 30 years will be LESS than 20 million on 12 years and you believed it then don't take our word, take Wyatt Bunker's word that it will cost $1.1 million dollars MORE per year.
Final point to know before voting
In the article above he says $1 million of the $1.1 extra will come out of the general fund. He also recently said that the $1.6 million dollars the city pays in fire fees will be eliminated? The two obligations total to $2.7 million dollars in additional annual expenses. The only problems is the city has never had $2.7 million dollars in surplus at the end of the year in its ENTIRE HISTORY.
What is more likely based on these facts that the fire fees won't go away and that we will have a tax increase?
OR that a career politician is saying whatever he can to hold on to power and spending all he can to pad his own resume?