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05-20-85 v MINUTES OF THE SPECIAL CALLED MEETING OF THE ATLANTIC BEACH CITY 11/ COMMISSION HELD AT THE CITY HALL ON MAY 20, 1985 AT 7:30 P.M. Mayor Howell called the meeting to order at 7:30 p.m. for the purpose of going over the Stock Purchase Agreement and the Ordinance covering the purchase of Buccaneer Service Co. , Inc. due to the fact there were a number of changes made. Those present were Mayor Howell, Commissioners Cook, Gulliford, Morris and Van Ness; City Manager Richard Fellows, and City Attorney Claude L.Mullis. Mayor Howell mentioned that all Commissioners had received copies of the amended documents. The Stock Purchase Agreement was discussed first. Commissioner Gulliford moved that the Stock Purchase Agreement be approved. Commissioner Cook seconded the motion. Discussion followed. Commissioner Morris referred to page 2 (re Commissioner Gulliford's narrative at last meeting) and asked if they were purchasing the stock or the assets. Mr. Mullis replied they were purchasing the stock with the agreement that certain properties would be conveyed out to the individuals of the Company prior to the closing. Commissioner Morris expressed concern of pledged revenues on page 4 - "Pledged revenues shall mean the net revenues and available impact fees as defined in the Ordinance." "Impact fees" and "available impact fees" were used extensive- ly in the Stock Purchase Agreement and also the Ordinance. He commented a • serious question had been raised as to the availability of impact fees and how much of it could be used, if any, towards the payment of bond principal and interest of the system. For the record, he read a letter addressed to him from Mr. Robert Stubbs and is recorded verbatim: Dear Mr. Morris: Prior to the final vote of the Commission on the Ordinance providing for the purchase of the Buccaneer Service Company, Inc. system, I recommend that the Ordinance be revised appropriately to reflect the pledge of only those pro- jected revenues of District I that are legally available for the purchase. These: net operating revenues (user charges minus operation and maintenance) and a portion of impact fees. The Dunedin decision of the Supreme Court of Florida clearly compels that impact fee revenues must be used only for the benefit of the future users of District I, not for existing users or other purposes. Thus the only legal use of impact fee revenue is for the explicit purpose of future District I users. In particular, no impact fee revenues can legally be diverted to the City of Atlantic Beach for the benefit of its citizens. More crucially, with reference to the projected financial feasi- bility of the proposed purchase, the only portion of impact fee revenues that can be legally used to pay the debt service of the purchase price of Buccaneer is equal to that percentage of the purchase price that is allocable to portions of the facilities which are available for the service of future users of District I. This percentage should be determined by properly qualified, objective and professional Engineers. I roughly estimate that this extra capacity allocable percentage is approximately 20-25%. This means that 80 to 11/ 75% of debt service would have to come from the net operating revenue, that's the user charges minus 0 & M. Again, a professional Engineer must be engaged to determine this percentage before the Commission can responsibly determine the financial prudence of the proposed purchase. Based upon generally accepted principles of local government finance, an acquisition of the feasibility of Page 2 Special Called 111 May 20,1985 which depends sensitively upon steep growth projections, must be seriously evaluated under more conservative growth projections, otherwise you are betting upon an eventuality that might not materialize in the public interest. With good wishes, (signed) Robert Stubbs. Commissioner Nbrris asked what was available in tax figures and how could they be used to the best interest of the citizens of Atlantic Beach in paying off the system. Mr. Livermore expressed the opinion that Commissioner Nbrris's concerns were legally covered in the Ordinance. It was a provision that had been used many times in water and sewer systems that had impact fees. He agreed with Mr. Stubbs' letter that the percentages should be determined by the engineer. Mr.Mullis said the City of Atlantic Beach was clearly protected under the Ordinance. Commissioner Morris asked if the City had, in fact, determined the impact fees were going to be locked away for use only for future plant expansion. Mr. Mullis stated he was not sure we were limited to that. Commissioner Van Ness questioned if the impact fees collected over the past few years were in a special fund and Mr. Strayve explained they had all been used for municipal construction in the area of expansion. He added there were $322,000 obligated in agreements which will accrue to the City in impact fees. A lengthy discussion followed regarding • repairs and expansion during the past years. Commissioner Morris asked if there was anything projected in the six year forecast for maintenance on the tank by Jax Utilities. Commissioner Gulliford replied there was no specific breakdown. All operations were lumped together. Commissioner Morris asked who paid for the Jax Utility Study. He was told the City of Atlantic Beach paid for the study in the amount of $1,200, and was authorized by the City Manager. A lengthy discussion was held relative to Exhibit F: Plans and Specifi- cations, and who will be responsible for verifying they are what they are, where they are, and in what condition they are in. Mr. Mullis said there was a provision in the agreement that any breach in the condition of the contract, the city had the right to withhold the funds due the seller from the bond proceeds or the interest due thereon. Commissioner Morris commented on page 14 -middle of the page- "City shall have 5 days after the execution of this agreement to inspect the same and within 3 days thereafter shall advise the Company of any claimed deficiency". Commissioner Norris moved to amend Section H to read: 30 days after the execution of this agreement to inspect the same within 15 days thereafter. After discussion, Commissioner Morris withdrew his motion. S Page 3 111 Special Called May 20, 1985 Commissioner Gulliford moved to amend Page 14, Section H starting with: "that the condition of the property plant and equipment of the company and service on the closing date, will be in good and operable condition. Then starting with: "and" Strike, starting with "and acceptable as mutually agreed by the parties following such investigation and inspection made prior to closing by the City". Start again with: "City shall have 30 days after the execution of this agreement to inspect the same and within 10 days thereafter shall advise the company of any claimed deficiency. . .etc, etc and the company shall have 30 days after receiving a written notice of claimed deficiencies to either,"and then it gives the remedies. The motion was seconded by Commissioner Morris and carried unanimously. Commissioner Morris then raised a question relative to the third sewage tank cost listed not to exceed $425,000. He asked if it was going to be bid out, and Mr. Mullis responded it would be with competitive proposal, subject to Commission approval, which would be submitted to the Commission. Commissioner Morris presented another question, this in reference to page 6 relative to the interest rate being 9% instead of 7.5% originally proposed. Commissioner Norris moved to amend the 9% rate of interest on page 6 to read 7.5% The motion was seconded by Commissioner Van Ness. During discussion, Commissioner Gulliford noted during the process of negotiations with Mr. Strayve it appeared to him that it would in the best interest of the city to have a lower principal amount with a higher rate of interest. The savings would be approximately $30,000. The question was called and the motion failed with a 3-2 vote. Mayor Howell, Commissioners Gulliford and Cook voted no. Commissioners Morris and Van Ness voted yes. Commissioner Gulliford inquired if the pressure taps and TV testing reports to be included in Exhibit F were on video tapes or did Mr. Strayve just have paper results. Mr. Strayve replied the results were actually in the form of paper, and it runs from manhole to manhole. It tells the condition of each section of pipe and the location of every service between each manhole. At Commissioner Gulliford's request, Mr. Strayve agreed to specifically add the results to Exhibit F. Commissioner Gulliford referred to page 17 to insert "the City has the right to terminate prior to the expiration of this with 30 days written notice." Mr. Strayve had no objections. Commissioner Gulliford moved that whatever legal terminology necessary to establish the intent that the City has the right to terminate the services of Mr. Braid and Mr. Strayve prior to the expiration date with five (5) days written notice. The motion was seconded by Commissioner Cook and carried unanimously. • Page 4 Special Called May 20, 1985 Commissioner Gulliford moved a substitute motion to approve the Stock Purchase Agreement as amended. The motion was seconded by Commissioner Cook and carried with a four to one vote. Commissioner Van Ness voted no Action on Ordinance No. 80-85-26 AN ORDINANCE ACCEPTING THE OFFER OF THE STOCKHOLDERS OF BUCCANEER SERVICE COMPANY, INC. TO SELL ALL OF ITS ISSUES AND OUTSTANDING CAPITAL STOCK TO THE CITY FOR THE PURPOSE OF ACQUIRING THE WATER AND SEWER SYSTEM OWNED AND OPERATED BY BUCCANEER SERVICE COMPANY, INC. DESCRIBED IN SAID OFFER FOR THE PURCHASE PRICE SET FORTH IN THE ATTACHED STOCK PURCHASE AGREEMENT; ESTABLISHING THE BUCCANEER WATER AND SEWER DISTRICT OF THE CITY WITH WHICH THE CITY WILL PROVIDE WATER AND SEWER SERVICES THROUGH THE SYSTEM PURCHASED; AUTHORIZING THE ISSUANCE OF BUCCANEER WATER AND SEWER DISTRICT REVENUE BONDS FOR PAYMENT OF THE PURCHASE PRICE OF THE STOCK; AUTHORIZING PAYMENT OF THE BONDS FROM THE NET REVENUES AND AVAILABLE IMPACT FEES OF THE UTILITY SYSTEM SERVING BUCCANEER WATER AND SEWER DISTRICT; AUTHORIZING AND DIRECTING CERTAIN OFFICERS OF THE CITY TO EXECUTE THE STOCK PURCHASE AGREEMENT AND OTHER DOCUMENTS, AND TAKE CERTAIN ACTION IN CONNECTION THEREWITH; DIRECTING THAT BUCCANEER SERVICE COMPANY, INC. BE COMPLETELY LIQUIDATED AND DISSOLVED IMMEDIATELY AFTER • PURCHASE AND PROVIDING FOR ALL NECESSARY ACTION THEREFOR; AND PROVIDING AN EFFECTIVE DATE. Said Ordinance was presented in full, in writing, by Mayor Howell on second and final reading. Commissioner Cook moved for passage of Ordinance No. 80-85-26. The motion was seconded by Commissioner Gulliford. A lengthy discussion followed, including why so much attention was devoted to the sections on additional bonds . Mr. Livermore explained that was a standard set of provisions. Also discussed on page 21 how the percentage of 110% of the Bond Services requirement is becoming due on such fiscal year on the outstanding bonds was arrived at. Mr. Mullis explained that' s what they had negotiated. It minimizes the coverage necessary to have before you can issue additional bonds. Mr. Livermore explained monies on deposit on page 17 at the request of Commissioner Gulliford. Available impact fees on page 5 were also discussed-the formula they had discussed relative to establishing some assessment or allocation of impact fees to the existing plant. Mr. Livermore assured Commissioner Gulliford he had no legal problem with it. Commissioner Gulliford asked Mr. Gordon if he had talked to anyone using that formula as to what kind of dollar amount might be allocated out as to impact fees to that system. Mr. Gordon said he would call a S representative in Palm Beach the next day and report to Mr. Mullis . He had talked with the Engineer and told him they wanted some real numbers because it was going to be used in connection with the Ordinance. Page 5 Special Called May 20 , 1985 Mr. Strayve said if they were talking in unused capacity, they would come up with 46% is utilized. They worked their numbers off the present customers who are using 46% of what is available in capacity. He added that was approximately minus 5% . Commissioner Gulliford said according to the Ordinance we would have the capability in that fund,that Mr. Strayve distinguished as available impact fees ,to accumulate up to a million eight in that particular fund in order to utilize it to debt service. Mr . Strayve said that was correct. Commissioner Gulliford expressed the opinion the only place we had a problem was in the remainder of 1985 because we have potential negative cash flow of about $8 ,700 and beyond that you fund the whole thing, including debt service, strictly off gross revenues from your operation and you don' t touch impact fees but it' s still to some benefit to have them in reserve and that reserve could be something allocated to that fund called available impact fees. Mayor Howell had a question for Mr. Livermore: On page 4 , Section 5 - Establishment of Buccaneer Water and Sewer Districts: "upon the acquisition of the stock of the company by the City" , Mayor Howell suggested they strike "of the City" and insert "the area described in Exhibit J" . Mr. Livermore agreed. 110 Page 19 , Section 4 - The renewal and replacement account. Mr. Fellows asked why Mr. Livermore felt the city needed to accumulate $500 ,000. Mr. Livermore explained that was a Commission decision, and Commissioner Morris said he thought they should earmark that amount for renewal and replacement. Mr . Fellows said you could use impact fees for extensions and additions to the capital assets of the Buccaneer system. You use renewal and replacement to renew something that was already there. Mayor Howell noted that if something came up, replacements or such, you could use the money as long as you put it back in until such time as it reaches $500 ,000 . Mr. Fellows commented in his experience in 17-18 years was a renewal and replacement fund of $100 , 000 was usually fairly sufficient to take care of renewal and replacement of existing problems. The impact fees would take care of extensions and additions to the system. Commissioner Gulliford said they wanted to be ultra-conservative. Commissioner Morris added he had a concern with Mr. fellows on using the impact money. Commissioner Gulliford moved to amend the figure of $500 , 000 on page 19 to $250 ,000 , and the monies of renewal and replacement fund shall be used only for the purpose of the cost of replacement and renewal of capital assets . In other words we are striking "extensions, enlargements and additions , to "OR" . The motion was seconded by Commissioner Morris and carried unanimously. Commissioner Gulliford moved a substitute motion to pass Ordinance No. S 80-85-26 as amended. The motion was seconded by Commissioner Cook and carried with a three to two vote. Mayor Howell, Commissioners Gulliford and Cook voted yes. Commissioners Morris and Van Ness voted no. Page Six Minutes May 20, 1985 Discussion was held on the procedure of securing an Engineer. Commissioner Gulliford said he had no problem leaving it to the discretion of the City Manager, but he wanted an Engineer totally independent from any involvement with the City of Atlantic Beach. Commissioner Gulliford moved to request the City Manager to seek an independent Engineering firm to evaluate, investigate and inspect the Buccaneer System to seek out any deficiencies that might exist that might have been overlooked in accordance with the Stock Purchase Agreement. The motion was seconded by Commissioner Morris. Following a lengthy discussion, the question was called and the motion carried with a three to two vote. Commissioner Gulliford mentioned that at the last meeting, they asked the City Manager if he would prepare specifications for the operation and maintenance of the Buccaneer System. He suggested if the specifications were prepared that they request the City Manager to solicit bids. Discussion was held on whether to obtain a price on both the Buccaneer system and ours. Commissioner Gulliford moved the City Manager be authorized to advertise and receive competitive bids for the operation of the Buccaneer Sewer and Water System and report back to the Commission. Commissioner Morris seconded the motion. There was no discussion, and the motion carried unanimously. Commissioner Morris asked the City Attorney if we would be discriminating against the Engineers if we exclude them from the bid. Mr. Mullis stated not unless it comes within the pervue competitive consultant negotiations. You can discriminate if you so choose. There being no other business to come before the Commission, the Mayor declared the meeting adjourned. S