DALLAS - Officials in Moore, Okla., say the fiscal 1993 budget can be balanced only if the city restructures its public works debt with a financing plan that has split the city council.
Moore City Manager Jay Newton said the city next week expects to advertise for competitive bids on a $29 million taxable revenue bond issue to be sold by the Moore Public Works Authority, a city-created trust.
Mr. Newton said the deal, which is expected to be insured and triple-A rated, is necessary to fill a $1.1 million hole in the city's $14.6 million budget for the fiscal year that began July 1.
But the plan has divided the city council because it would also raise the principal outstanding of the authority to $104 million from $63 million and extend the utility's debt another 15 years, city officials said.
Also, the plan must use more costly taxable debt because the city has already refunded its tax-exempt bonds the maximum number of times allowed under the federal tax code.
Nevertheless, the city manager says he is planning to go forward with the sale.
"It's a real trade-off," Mr. Newton said of the plan.
Some in the city, a suburb of 50,000 near Oklahoma City, feel the solution is too costly.
"They're trying to lower our debt service by adding $41 million of debt," said Mayor Debe Homer, who took office in May. "We don't have a long-term problem. We have a short-term problem. We have a five-year problem."
The mayor has proposed short-term borrowing to balance the 1993 budget while the city rethinks its spending plan and solves the problem without new and higher debt burdens.
But the city's financial adviser, Stifel, Nicolaus & Co., and Mr. Newton say the mayor's proposal would not solve the problem.
"It's not a one-year problem. It's a long-term problem." the city manager said. "Short-term borrowing would only compound the problem dramatically next year."
While the two sides disagree on a solution, they agree the budget problems are a result of past actions of the city council that they say were exacerbated in 1989 when the council last refunded its debt.
In that year, the Moore Public Works Authority sold $24.2 million of refunding bonds in a negotiated deal handled by Stern Brothers & Co. of Kansas City. The bonds were triple-A rated by Moody's Investors Service and Standard & Poor's Corp. because they were insured by AMBAC Indemnity Corp.
Moore officials say the council was told by its financial adviser at the time, Neito, Cumbie & Associates, that it would gradually have to raise rates on the water system and closely manage the city's finances for the 1989 restructuring to work.
"It was stated over and over in the meetings that this was not an economic defeasance, that it was not a cost-saving refunding," said Greg Neito, president of the Oklahoma City financial adviser. "It was designed to give them some relief for the next two or three years."
But the mayor said the old city council chose instead to use general fund revenues to buy new police cars, garbage trucks, and raise salaries of some employees.
Also, it did not increase water rates gradually and was forced in July 1989 to raise water rates 67%. Mr. Newton said that when he joined the city earlier that year, the utility rates were generating enough to meet debt service, but not to cover all the costs of the public works authority.
As a result, the shortages in the utilities began to affect the city's general fund operations because the city's chief revenue source, the sales tax, first flows through the public works authority.
Compounding the problem in 1989, the city lost two major retail outlets that generated an estimated $500,000 a year in sales tax revenues.
Steve Levine, analyst at Moody's, said the sales tax accounts for 58% of the city's general fund operations and that any shortages in public works draws money away from other city operations.
Moody's and Standard & Poor's gave the city an underlying general obligation bond rating of single-A for the first time in February. But the city later secured insurance from Capital Guaranty, and the $10.9 million GO deal was raised to triple-A.
