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04-30-85 v MINUTES OF THE SPECIAL CALLED MEETING ON BUCCANEER UTILITIES HELD AT THE CITY HALL ON APRIL 30, 1985 AT 7:30 P. M. Mayor Howell called the meeting to order at 7:30 p.m. for the purpose of dis- cussing proposed amendments to Ordinance No. 80-85-26 and any other pertinent facts connected with the proposed purchase of Buccaneer Utility Service Co. Those present were Mayor Howell, Commissioners Cook, Gulliford, Morris, and Van Ness, City Manager Richard Fellows, and City Attorney Claude L. Mullis. Also present were Jerome R. Strayve of Buccaneer Utilities, and Daniel Livermore of Livermore Klein & Lott. To comply with Sec. 2-19-Rule 4 (Rules of conduct and procedure at meetings) of the Code of the City of Atlantic Beach, Commissioner Gulliford moved that the five minute limitation be waived. Commissioner Cook seconded and the motion carried unanimously. Mayor Howell turned the floor over to Commissioner Morris to present his pro- posed amendments. Commissioner Morris stated his reasons for proposing the amendments to the Ordinance were in case the city did purchase the utility, his points would have some validity at any purchase price agreed upon, especially in lieu of issuing bonds to pay for the utility. Commissioner Morris presented the following questions in connection with proposed changes in Ordinance No. 80-85-26: Page 1. Title (Par. 1) Question: What portion of the purchase price would not 410 be handled by the bonds? Answer: Bond was originally written with the chance a portion would be paid in cash and the balance in bonds. The City Attorney stated the Ordinance could be revised to show the total purchase price will be paid by the issuance of bonds in exchange for the property. Commissioner Gulliford moved that the Attorneys be instructed to revise the Ordinance to reflect the total purchase price, in case it is agreed to by the city of Atlantic Beach, will be paid by the issuance of revenue bonds in ex- change for the transfer of the property. Motion seconded by Commissioner Morris and carried unanimously. That would apply to any section of the Ordi- nance that referred to "a portion of the cost or a part of the cost". Page 2,Sec.2-C ". .and advisable for the public health, safety and welfare" (1) ". .provide extensions and improvements to its water and sewer systems" Question: There is no inner-connect proposed in the system. How will this be accomplished? The City Attorney explained "public health, safety and welfare" were standard terminology to protect the citizens. The utility would be the city's property and would be responsible for it whether you inner-connect or not. Discussion followed on what would happen if it be- came necessary to inner-connect. Commissioner Van Ness moved for the entire sentence ". .and advisable for the public health, safety and welfare" to be stricken from the Ordinance. Com- Missioner Morris seconded the motion. During the discussion before the vote, Mr. Livermore said if you eliminate the sentence which is all of sub- sec.c, he would be unable to give an opinion to the effect the bonds would 4111 be valid, as that was the legal foundation for doing it. The question was called and the motion failed with a four to one vote. Mayor Howell, Commis- sioners Cook, Gulliford and Morris voted no. Commissioner Van Ness voted aye. • PAGE TWO MINUTES April 30, 1985 Page 3. Sec. 2-F (last sentence) Add "of the District I system". Also Page 3 Sec. 2-G. Commissioner Morris moved to insert the words "of the District I system" wherever net revenues appear in the Ordinance. Commissioner Van Ness seconded the motion. During Discussion, the City Attorney asked if "of the the District I system" was to be added under the definitions. He asked they refer to page seven, which was put in at Commissioner Morris's request, and gave a definition. Commissioner Gulliford commented that apparently Commissioner Morris was concerned with those sections preceding the definition page because he addressed page three Sec. 2-F and 2-G. He said he would vote against the motion on the floor and make a substitute motion. Commissioner Morris withdrew his motion. Commissioner Gulliford moved a substitute motion to add "of the District I system" to Sec. 2-F (last sentence) and Sec. 2-G (at the end of net revenues) . Commissioner Cook seconded and the motion carried. Page 5. Sec.6 Definitions (3rd Par.) "authorized denominations".Question: should this amount be changed? Latest discussion at $3,100,000? Commissioner Morris moved to delete the dollar figures and insert "authorized denominations shall mean as to the initial bonds in the amount to be agreed upon between the buyer and the seller. Commissioner Van Ness seconded. Mayor Howell asked Mr. Livermore if it would be just as simple to leave all dollar figures blank to be filled in at the final passage, if the Ordinance was passed. Mr. Livermore replied in the affirmative. Commissioner Morris with- drew his motion, and Commissioner Van Ness withdrew her second. Commissioner Morris moved to leave the dollar amount blank in the Ordinance. Commissioner Cook seconded and the motion carried. Page 6. Sec.6. "cost of operation and maintenance". ."but shall not include any reserves for renewals and replacements, for extraordinary repairs or any allowance for depreciation". Question: Should we not provide for this by re- quiring some accrual from net revenues? The question was asked if they could provide for a minimum 20% net revenue set aside and not invalidate the Ordinance. Mr. Livermore said the Ordinance addressed the subject on page 18 and 19 sub-section 4. A lengthy discussion followed. Commissioner Gulliford moved to change the section to ten% (10%) of net revenues not to exceed accumulation of one-half million dollars in the fund. Page 18-19 Sec. 17 - B-(4.) Commissioner Morris seconded the motion. Discussion was held on Mr. Mullis's statement that impact fees could only used for specified purposes, and that was only for plant expansion, maintenance of the system, and supreme court decisions. Mayor Howell asked if the money could be used to pay the bonds inasmuch as the money was borrowed to improve and increase the system to begin with. The City Attorney stated plant acquisition and replacement costs of the plant could be used. The • Attorneys will advise any new developments from the Legislature. Commissioner Gulliford amended his motion to show the ten% (10%) will come first from the impact fees. Motion was withdrawn. PAGE THREE MINUTES APRIL 30, 1985 The question was called on the original motion and carried unanimously. Page l0.Sec. 10(last sentence) . ". .subject to defense and set off. . ." Commis- sioner Morris asked what that meant? The City Attorney answered that was the contract set forth a standard provision that any money owed could be set off against payment of the bonds. Page 12.Sec. 12 Bonds Mutilated (2nd par.) "any such duplicate bonds shall constitute original, (add) not additional contractual obligations. .". Question:Has the word "not" been left out? Mr. Livermore explained the word "not" should not be added. He also said "additional contractual" was a descriptive word. Any bonds lost would be indemnified by a bond. No further discussion. Page 14.Sec. 14.Form of Bonds . . ."Exhibit C". Question: Where is Exhibit C. Mr. Livermore commented the bond reflected what the Commissioners set forth so the bond had not been written. Page 14. Sec. 15. Bonds not Debt. . (lst sentence) (delete the word "prior") . . "lien upon and pledge of the net revenues (add) of the District I system • herein provided." Mr. Livermore said OK to leave the word "prior" in. Page 14. Sec. 16. Net Revenues Pledged. (1st sentence) . "irrevocable lien on the net revenues (add of the District I system - prior and superior. .".) Addressed on pg.2. Page 15. Sec. 17. Covenants of the City. "Revenue Fund" (second sentence) "Such revenue fund shall constitute a trust fund. . ." Question: Please explain. Mr. Livermore explained that was standard wording adopted for the purpose of protecting the bondholders, and to protect the city against other creditors. Page 16. Sec. 17 B. (3) (second sentence) ". . reserve account - created and established, in a sum equal to and sufficient to pay the maximum bond service requirement on all outstanding additional bonds becoming due in any ensuing fiscal year. . .". Question: Entire amount? Any estimate of amount? Why entire amount? Mr. Livermore said the section, as written, gave some assurance to the holders of the initial bonds. Commissioner Morris asked for a three or six month requirement instead of one year. The City Attorney advised to leave the sentence as written as it would be better for the city in the future. Page 17. Sec. 17 B(3) (Last Par. on Page 17) . "City shall not be required to make any further payments into the Sinking Fund or into the Reserve Account when. . .moneys in the Sinking Fund and the Reserve Account are at least equal to the aggregate principal amount of bonds then outstanding plus the amount of interest then due or thereafter to become due on the bonds then outstanding." Question: Entire amount? any estimate of amount? Why entire amount? The City • Attorney said when the bonds are all paid off they would not have to pay any more. Until the bonds are paid off, the amount necessary to make the annual payments is required to be put into the Sinking Fund. Commissioner Gulliford took the conservative approach and said he liked the idea of escrowing the PAGE FOUR MINUTES APRIL 30, 1985 money and plus the fact interest can be earned. No further discussion. Page 18. Sec. 17 B (3) (second paragraph Page 18.) . ". .in lieu of the required deposits of revenues into the Reserve Account, the City may cause to be deposited into the Reserve Account a surety bond or insurance policy. . .in an amount equal to the difference between the maximum bond service requirement and the sums then on deposit in the Reserve Account, if any, which surety bond or insurance policy shall be payable. . . ."Question: What is the premium cost estimate for the surety bond or insurance policy? Why is the entire amount to be secured? Suggest: 90 day requirement. A policy payment on $3. 1 would be in the area of $40M.? Commissioner Morris expressed the opinion that amount of money seemed a rather large expense for the city to pay out for a surety bond to insure the entire amount of the difference between the reserve account and the maximum bond service requirement. Mr. Livermore stated the insurance policy would be a one time charge. The City would also obtain a higher credit rating as insurance companies that offer the policies place all their assets behind the bond issue in effect, and the rating agencies rate their assets and not just the city's assets. The bonds could be sold at the highest invest- ment grade rating and the lowest interest cost. The City Attorney advised the paragraph should be left as written. No further discussion. Page 21. Sec. 17 E. Rate Ordinance. (Entire section) . Concern: All rates are baSED ON "in City" charges. The state allows a surcharge of +125% or +150% for out of city users under certain circumstances. Question: How can we raise rates in District I without first raising the "in City" charges? What are the circumstances under which the State will allow the surcharge? Concern: It is unclear as to the legal status of District I. If it is a part of our existing system, one set of rules apply. However, if District I is a separate legal entity, rates and charges could be set independently from the City's existing utility - providing more flexibility in the financial management of the system. A major concern is the ability to meet 0&M expense and P&I expense without affecting "in City" charges. Mayor Howell responded there was a circumstance when the rates outside the city could be raised without affecting the rates inside the city, and that was "if you are charging 110% or 120%, etc. of the rates inside the city, then you could raise it to that point. If you are already at the maximum, you cannot then raise the rates outside the city without raising them inside." He referred to the last sentence in Sec. 17E."However, nothing in this Ordinance shall ever require the City to raise rates or charges for utility services provided to areas outside of District I." Discussion followed on what would happen if 150% was not sufficient. Commissioner Morris moved to require the attorneys to submit a written legal opinion of the District I system: (a) Whether or not it could be a separate legal entity with independent rate making capabilities. (b) Whether or not the City of Jacksonville would have jurisdiction over the District I system, and if so, in what manner. (c) The legal reports should be substantiated by the various State Statutes, Duval County regulations and permits, and/or a written opinion by the Attorney . PAGE FIVE MINUTES APRIL 30, 1985 General of the State of Florida on this subject. Commissioner Van Ness seconded the motion. Mayor Howell asked the City Attorney if the Charter of the City of Atlantic Beach which was passed in 1957 provided that the city may operate utility systems outside of its corporate limits. Mr. Mullis replied in the affirmative and to the extent it can exercise the power of eminent domain and levy such charges as it deems fit and proper. Commissioner Morris said the City of Jacksonville was not consolidated in 1957. Mayor Howell said it was still the law which was upheld by the Supreme Court of the State of Florida. Commissioner Morris said these were his concerns - was the city in any way governed by the City of Jacksonville or PFC or who does the city come under? The City Attorney said they came under the Florida Legislature. Discussion followed on the powers of the City of Jacksonville and if we would be stepping into their territory. Mayor Howell expressed the opinion that Commissioner Morris had some good points, but they should also have been addressed some years ago. He cited an example of some months ago the entire City Commission voted unanimously to serve a rather large subdivision right outside the city city limits. Commissioner Morris said that was not the same magnitude. Following discussion, the question was called and the motion carried with a four to one vote. Commissioner Cook voted no. Mayor Howell declared a five minute recess at 9:30 p.m. The Mayor called the meeting back to order at 9:35 p.m. Page 23. Sec. 17 J Cont'd (1st sentence) No Free Service. "The City will not render or cause to be rendered any free services of any (add) appreciable nature. ." Also 1st sentence appreciable nature. Would we meter a fire hydrant? Commissioner Morris said no free service meant absolutely none. He asked to insert the words appreciable nature. The City Attorney recommended for the future, to protect the City of Atlantic Beach, that the city have a provision there will not be any free service. Mayor Howell said that was listed in our present Bond Ordinances, even to the extent meters were required to be on municipal buildings. Discussion followed. Commissioner Morris moved to insert the word appreciable after "of any" and before "nature by its District I system". Motion withdrawn by Commissioner Morris. Commissioner Gulliford moved to add Public Emergency to the sentence. "The City will not render or cause to be rendered any free services of any nature except for Public Emergency." Commissioner Van Ness seconded the motion. The question was called and the motion carried unanimously. Page 23. Sec. 17 J Cont'd (3rd Sentence) . "The City, including all of its departments. . .shall avail itself of the facilities or services provided by the District I system (add) for services within the District I system or any part thereof. . .". Question: Would we be required to run service lines from District • I to the City's departments to "avail itself of the facilities. . .provided by. . .District I?" Concern: If this is not changed, a bondholder could insist on this under these covenants. • PAGE SIX MINUTES APRIL 30, 1985 Commissioner Gulliford moved to add the phrase "for services within the District I system". The motion was seconded by Commissioner Cook and carried unanimously. Page 23. Sec. 17 K. Mandatory Connection (Entire Section) . Question: To what extent of law can an Ordinance in the City of Atlantic Beach be enforced outside of the City - in District I? Concern: If the City does not fall under Public Service Commission jurisdiction, who would enforce this? That would also apply to Sec. 17 E and Page 25. Sec. 17 P. No competing System. Commissioner Morris moved to require the attorneys to submit a written legal opinion of the legal protection the City of Atlantic Beach would have in enforcing a "mandatory connection Ordinance" in District I. (a) Whether or not any legal protection exists and under what legal jurisdiction would this protection fall - state, county, or city. (b) This legal report to be substantiated by the various State Statutes, Duval County regulations and permits - and/or a written opinion by the Attorney General of the State of Florida on the subject. Commissioner Van Ness seconded and the motion carried unanimously. Page 24. Sec. 17 M. Remedies. (Entire Section) . Concern: This appears to be remedies for default. This follows Sec. 17 B (3) pg. 18 second paragraph. ". .in lieu of the required deposits of revenues. .City may cause to be deposited. .a surety bond or an insurance policy. .". Section 17 B(4) pg. 19 last sentence-". .if necessary in order to prevent default. .", and Sec. 17E Rate Ordinance 5.21 - that requires rates to be increased to meet O&M and P&I Commissioner Morris referred to the minutes of April 1st and 8th re what happens if the city did not make enough money to pay the P & I. He said they were dealing with three different viewpoints: 1. The Ordinanced - that requires payment and provides remedies for default protecting the bondholders. 2. Mayor Howell's interpretation that says if the money is not there - we don't have to pay. 3. Mr. Strayve's offer to DEFER payment to year 16. Question: Shouldn't we try to be consistent with one view? Commissioner Morris moved to require the attorneys to make the appropriate revisions to the conditions of default and the rate covenants to be consistent with the offer to defer Bond payment in the event of revenue shortfall to the year 16 in the payout schedule. Motion withdrawn. Commissioner Morris moved to require the attorneys to make the appropriate revisions to the conditions of default and the rate covenants to be consistent with the offer to defer bond payment in the event of revenue shortfall to the year following maturity. The motion was seconded by Commissioner Gulliford and carried unanimously. Page 24. Sec. 17M. 2nd par. Addressed earlier. • Page 24. Sec. 17 N. Consulting Engineer. (Change 1st sentence) . Suggestion: The City will provide professional engineering service having a favorable reputation. . ." Concern: In the event the City employs a qualified engineer. Discussion followed. • • PAGE SEVEN MINUTES APRIL 30, 1985 Commissioner Morris moved to delete the term "Consulting Engineer" from the Ordinance. Replace with "Engineer" in the appropriate places. The City will provide professional engineering service in Section 17 N and throughout the Ordinance that requires the services of a Consulting Engineer. Commissioner Van Ness seconded the motion. The question was called and the motion failed with a three to two vote. Commissioners Morris and Van Ness voted aye, and Mayor Howell and Commissioners Cook and Gulliford voted no. Page 24 and 25 Sec. 17 0 - City Manager Reports (second paragraph) . This covenant should be considered along with the concerns in Sec. 17E. and Sec. 17M. "In the event that such annual report reflects that the rates and charges for the services are insufficient to protect the rights of the bond- holders then the city shall take such steps as are required by law to raise the rates and charges for services pursuant to Sec. 17 hereof." Commissioner Morris moved that Section 17 0- that this covenant be considered along with the rewrite as to Section 17 E and Section 17 M. Commissioner Gulliford seconded the motion. Motion carried unanimously. Page 25. Sec. 17 P. No Competing System (Entire Section) . Question: As in Sec. 17K, to what extent of law can the City enforce such covenant? What protection do we legally have? Commissioner Morris moved to require the attorneys to submit a written legal opinion as to the "Full extent permitted by law" the City of Atlantic Beach has in enforcing a no competing system covenant in this Ordinance. (a) Whether or not any legal protection exists and under what legal jurisdiction would this protection fall - State, County, City. (b) This legal report be substantiated by the various State Statutes, Duval County regulations and permits, and/or a written opinion by the Attorney General of the State of Florida on this subject. Commissioner Gulliford seconded the motion. During discussion before the vote, the City Attorney stated he might have to get an anti-trust attorney to research the section. After discussion, the question was called and the motion failed with a three to two vote. Commissioners Morris and Van Ness voted aye and Mayor Howell, Commissioners Cook and Gulliford voted no. Page 25. Sec. 17Q - Issuance of Other Obligations (4th line) "or being on a parity with" should be removed. Sec. 17R (1) . Concern: "additional bonds" are on parity with "initial bonds". Question: (last line) ". .in all respects to the bonds as to lien on and source and security for payment from the net revenues." The Attorneys suggested to leave it as stated. No further discussion. Page 27, Sec. 19 - Modification and Amendment (4th line) . "which insures against non payment of principal of and redemption of premium • . .Concern: This section should be addressed in the proposed rewrite of Sec. 17M Commissioner Morris moved to consider this under the rewrite as in Sec. 17 M. The motion was seconded by Commissioner Gulliford and carried unanimously. PAGE EIGHT MINUTES APRIL 30, 1985 Page 28. Sec. 20(b) Defeasance. ". .shall be paid by an insurer. .". Commissioner Morris moved that Sec. 20 (b) be considered in the same rewrite as Section 17 M. and Section 19. The motion was seconded by Commissioner Gulliford. The City Attorney advised Sec. 20(b) was necessary. Commissioner Morris pointed out that should be another consideration in the rewrite of Sec. 17M and Sec. 19. He wanted to address the fact if the payment was going to be moved out to the final year, you would not be in default under those circum- stances. The City Attorney explained Sec. 20(b) said "in case an insurer pays anything as result of the bonds, he is subrogated to the rights of the holder of those bonds" and he strongly suggested that not be changed. Commissioner Morris withdrew his motion. Commissioner Morris thanked the Commissioners for their participation, pa- tience and indulgence. Commissioner Gulliford asked Mr. Strayve if he would be kind enough to submit the most recent offer in writing (price and terms) . Mayor Howell said the price was $3. 1 without the building, trucks, inventory, furniture, fixtures, all inter-connect of systems. Commissioner Morris moved to instruct Mr. Fellows to obtain the 1983 and 1984 Public Service Commission Annual Report from Buccaneer. Commissioner Van Ness seconded the motion. The City Attorney commented the City Clerk had 1983 in the official files and he would furnish Commissioner Morris the 1984 report in the next few days. Commissioner Morris withdrew his motion. There being no other business to come before the Commission, the Mayor declared the meeting adjourned at 11:30 p.m. (SEAL) William S. Howell Mayor/Presiding Officer ATTEST: Cie 0. Adelaide R. Tucker CMC City Clerk