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11-04-92 v NEW UTILITY ORDINANCE, RAMS & MONTHLY BILLING PRESENTATION TO CITY COMMISSION AT SPECIAL MELl'ING NOVEMBER 4, 1992 1. INTRODUCTION: ALAN POTTER Introduction and explanation of the work of the Water and Sewer Committee in assessing the current status and proposed improvements in the city's utility systems 2. OVERVIEW: KIM LFINBACH Overview of finances, rates, and proposed ordinance etc. 3. NEH.i)S: BOB KOSOY, (Harry McNally, Tim Townsend) Explanation of need for improvements, review of conditions at city plants, etc. (Attachment 1 - Capital Improvement Plan) 4. FINANCIAL ANALYSIS: KIRK WENDLAND Introduction of Joe Welch, Purvis Gray & Company (Attachment 2 - Financial Analysis) (Attachment 3 - Water and Sewer Rate Ordinance) 5. CONCLUSION: COMMISSIONER FLETCHER Summary of project and proposed actions (Attachment 4 - Schedule with Critical Path) 6. COMMISSION REVIEW: Commission discussions, questions/answers MINUTES OF THE SPECIAL MEETING OF ATIANTIC BEACH CITY COMMISSION HELD IN CITY HALL, 800 SEMINOLE ROAD, AT 7:00 PM ON QDAY, NOVEMBER 4, 1992 Present: William I. Gulliford, Jr. , Mayor Glenn A. Edwards Lyman T. Fletcher Adelaide R. Tucker, and J. Dezmond Waters, III, Commissioners And: Kim D. Leinbach, City Manager Maureen King, City Clerk Robert Kosoy, Public Works Director Kirk Wendland, Finance Director Alan Potter, Committee Member Tim Townsend, Atlantic Beach Division Chief Harry McNally, Buccaneer Division Chief Joe Welch, Representative of Purvis Gray Company Alan Jensen, City Attorney, was excused. The Mayor called the meeting to order and invited Commissioner Fletcher, as Chairman of the Water and Sewer Committee, for his comments. Commissioner Fletcher reported the reports being presented that evening were the result of many hours of staff and volunteer time. Alan Potter briefly reviewed the growth which the city has experienced in recent years and the development and maintenance of the city's water and sewer system. He pointed out that upgrades and expansions of the utilities had not kept pace with growth and with the proliferation of government regulatory agencies and their stricter administrative rules. As a result, the city has experienced a DER Consent Order which mandated significant additions and improvements to the water and sewer systems. The Water and Sewer Committee had held thirty workshop meetings since its inception in January 1991 and had worked hard to accomplishing the Consent Order mandates, establishing fair utility rates, worked toward consolidating the three utility systems, and setting up a program of construction and financing to meet projected build-out, and maintaining the utility system thereafter. Kim Leinbach gave a brief overview and explained that when the rate adjustments were made a year ago it was with the knowledge that further adjustments would be necessary. He pointed out because of the Consent Order and the fact that Atlantic Beach was the only utility system available to many residents, the city now needed to undertake major capital improvements. He felt the city had accomplished a lot in the past through very conservative means but it was his opinion a solution to address future needs was necessary. He said the City Commission would be asked to adopt the Capital Improvement Program, approve a rate structure to support that program, and approve a plan to finance the long term debt. Bob Kosoy reviewed the five-year capital improvement program and indicated the proposed improvements would cost $10.5 million over the Page Two Minutes of Special City Commisson meeting November 4, 1992 five-year period. He said the majority of the projects were urgently required and explained in detail those projects which were scheduled for FY 1992/93. He reviewed a critical path illustrating each phase of the program and explained how they all worked together. Tim Townsend further reviewed some of the Atlantic Beach projects. He noted that $625,000 had been proposed for replacement of water distribution lines. He explained that some area of the city had 2-inch water lines which were thirty years old and in very poor condition. Consideration had been given to doing this work in smaller phases but it was felt the city could get better prices by going ahead with the larger project. Further discussion ensued regarding infiltration of stormwater into the sewer system and Mr. Townsend explained that televising, cleaning and sealing had been ongoing during the past few years and infiltration had been reduced. Kirk Wendland said the five-year improvement plan had been reviewed during budget preparations and had been refined and reduced from $14 million to $10.5 million. The rate structure had also been reviewed and it was apparent that revenues generated were inadequate to cover the cost of operating the system. Purvis Gray was then hired as a consultant to review the financial position of the three water and sewer funds, estimate funds currently available for improvements, and make recommendations regarding funding which would be required. Joe Welch of Purvis Gray & Company provided each Commissioner with a Financial Analysis of the Water and Wastewater Utility Systems, dated October 28, 1992. He reviewed the scope of services which his firm had been asked to perform which were as follows: 1. Analyze the current financial position of the three separate water and sewer funds and estimate funds currently available for improvements. 2. Structure a proposal to consolidate the three separate water and sewer funds into one water and sewer fund. Analyze the current debt positions of each fund and the consolidation of existing debt through refinancing. 3. Provide information and make a recommendation on potential funding mechanisms, including at a minimum, bank loans, bond issuance, DER loans, and user rates 4. Determine whether the existing rate structure is adequate to meet the requirements of the desired funding mechanism. If not, determine the required revenue stream. 5. If adjustments are necessary to the existing rate structure, make recommendations on a rate structure which will provide adequate revenues He reported the city's utility systems were in sound financial condition with cash available estimated at $3,756,336. He reviewed each of his conclusions and recommendations, a copy of which is attached hereto and Page Three Minutes of Special City Commisson meeting November 4, 1992 made a part hereof. He recommended the city use up to $3 million of existing funds to finance the needed improvements and finance the remainder through outside borrowing. He said he had contacted four government agencies regarding the loans and felt the best option for funding was through the DER which had low interest loans available for sewer improvements. Considering the current low interest rates he felt the city should proceed as quickly as possible to secure a DER loan for the sewer improvements and issue bonds to fund water improvements. If approved for a DER loan, he felt it would be at least a year before the city would receive the money. Mr. Welch pointed out the water and sewer funds were operating at a net loss. Based on the data provided by the city he felt rate increases totalling 39% for sewer and 46% for water would be needed over the next five years. Rate increases were also recommended for connection fees and he also felt the late payment fee should be changed from a fixed $5.00 to a percentage of the late balance. Mr. Welch further recommended paying off the Buccaneer and Oak Harbor bonds as early as allowable and refunding the pollution control bonds. He said city staff had expressed a desire to consolidate the throe water funds into one water account and the three sewer funds into one sewer account and he concurred with this suggestion. He felt this would be cost effective as far as record keeping and personnel were concerned. At this time the Mayor called for a five minute recess. The meeting reconvened and Alan Potter complimented Joe Welch for working so well with the Water and Sewer Committee. He said that George Worley had projected build-out in Atlantic Beach at 1,200 additional units and build-out in the Buccaneer district at about 2,400 units. He felt the five-year improvement plan as proposed, would accommodate build-out and the system would then just have to be maintained but that no future expansions would be needed. Mayor Gulliford inquired into the capability of diverting flow from the Buccaneer plant to the Atlantic Beach plant. Mr. Potter said this had been discussed some time ago but a pipeline would have to be built and it did not seem to be financially feasible. The Mayor also inquired whether an annual contribution from the water and sewer funds to the general fund had been anticipated. Mr. Welch replied that $200,000 had been included in the 1992/93 budget but he felt a decision should be made by the City Commission regarding establishing a percentage of funds which could be contributed. Commissioner Edwards expressed concern that the proposed projects would cost more than the projected figures. Mr. Kosoy felt if some of the projects were delayed the city could be subject to fines and may have to pay higher interest rates at a later date. Page Four Minutes of Special City Congnisson meeting November 4, 1992 Discussion then ensued regarding the rate increases and the change to monthly billing. It was explained the monthly billing would require additional work to administer but it had been times to lessen the impact of the rate increases. Storm water and sanitation services would be billed equally each month but until the new computerized meter reading system was on line, meters would be read quarterly and excess water and sewer would appear on one bill per quarter. The question was raised regarding whether it would be better to have one large increase or to spread the increases over a period of time. Alan Potter explained funds for the five-year program would be borrowed at the outset but funds not spent would be earning interest in a bank. The Water and Sewer Committee felt these savings should be passed on to the consumer by keeping the rate increases as low as possible and spreading them over the five-year period. Commissioner Edwards expressed concern that some residents could not afford to pay the increased rates and Alan Potter said that even with the proposed increases the water and sewer rates in Atlantic Beach would be lower than any public or private utility in Duval County. The City Manager agreed to work as much as possible with those people who had problems paying their utility bills. Joe Welch said he had spoken to DER and he felt Atlantic Beach would qualify for a low interest loan (current rate is 3.8%) and he suggested the city move ahead to pursue the DER loan as quickly as possible to lock in at the current low rates. Ccarmissioner Waters roved to authorize the City Manager to prepare and submit an application for a DER revolving loan to provide funding for the proposed sewer improvements. The motion was seconded by Commissioner Fletcher and was unanimously approved. The draft ordinance to implement the changes which had been discussed was then briefly reviewed. Following discussion two changes were made as follows: Page 2, Section 22-25 (New) the word "type" was changed to "class," and Page 6, Section 22-29, the last word of Paragraph 1 was changed from "period" to "date," and the City Manager was requested to include first reading of the ordinance on the Commission agenda on Monday, November 9, 1992. Mr. Kosoy asked the wishes of the City Commission regarding the capital improvement projects, and following further discussion it was agreed to prioritize the various projects into three categories: those projects which must be undertaken immediately, those projects which must be undertaken but which are less urgent, and those projects which could be postponed until later if necessary. Commissioner Fletcher summarized the outlined program and stressed the importance of moving ahead quickly to take advantage of the current economic conditions and the low interest rates. Page Five Minutes of Special City Connisson meeting November 4, 1992 A meeting between the City Commission and the architects who had been contracted to present recommendations and prepare plans for improvements to the concession stand in Russell Park, was scheduled for 6:00 PM on Monday, November 9, 1992. There being no further business to come before the City Commission, the Mayor declared the meeting adjourned at 10:00 PM. Che William I. Gullifo d, Mayor/Presiding 0 ic:� ATTEST: Maurcon King U City Clerk