FINANCE COMMITTEE MINUTES

 

AUGUST 2, 2005

 

 

The meeting was called to order by Chairman Fogt at 5:30 p.m.

 

MEMBERS PRESENT:  Dan Fogt, Ed Pleasant   Excused:  Nevin Taylor

 

OTHERS PRESENT:  John Green, Phil Roush, John Morehart, Tracie Davies, Kathy House

 

REPORTERS PRESENT:  Ryan Horns

 

AGENDA:

 

1)     Wastewater Feasibility Study

 

Mr. Morehart distributed a draft ordinance with proposed rates from 2006 to 2010.  He also distributed sheets analyzing currents rates and how they impact the rates in the out years beginning with 2006 for different volumes.    Information also includes monthly increases representing the new rates for 2006 thru 2010.  These numbers correspond with the numbers in the ordinance.  The study was done to support the rate increases.

 

Ms. House distributed maps showing the proposed plant and effluent line.  Plant design is only 30% complete.

 

Mayor has agreed to sponsor the legislation and asked if the Finance Committee would agree to co-sponsor.      

 

Mr. Pleasant calculated the increase to be about $6.00 per month. 

 

Ms. House stated these rates would be in an effort to have enough debt coverage for $110,000 million, which is what will need to be borrowed at the first of next year.   Ms. Davies worked out what that $110 million dollars consists of from the original planning stages back when the original plat estimate was done in the master plan, to this point in time, see attached sheets.  Ms. Davies noted as a positive, the figure is down on what is going to be spent on the existing plant.  

Mr. Morehart reported on Administration’s visit to Chicago for bond rating.  They met with Moody’s and S & P to get a rating on the system with the debt that we’re going to be involved in this month as far as converting some notes to bonds, and also the $110 million to be borrowed later this year or early next year.  Moody’s gave the City a Baa1 investment grade.  S & P gave the City an A- rating, which is a notch above what Moody’s issued, but is still an investment grade.  Andy Brossart from First Chicago is very pleased with these rates.  This means these are rates for the system, which will translate to substantial savings and interest costs when we go to the market and issue the debt.  Over a period of 30 years with this debt, it could translate to millions of dollars in savings because of the investment rating on the system.

 

Mr. Fogt asked how much of these costs have been funded with existing money.  Ms. Davies stated the asterisk items have either been paid or are in the process of being paid.  They are encumbered right now with funds we have.  Some is from the $7M that was borrowed, mostly for the engineering services.  The $2.7 million should be paid at some point with funds we already have.  The $2.3 million for upgrades will be funded with existing dollars.

 

Ms. House noted the bond ratings mentioned above are based on just user fees, not tap fees.  Tap fees are not considered secure payment. 

 

Mr. Pleasant asked if there was a chance that the debt could be lowered in future years?  Mr. Morehart responded that the first couple of years will be in notes, and we’ll have the ability to pay down if in fact we have this windfall of revenue.  Possibly year three or four, the notes will be converted to bonds.  It has been discussed to use cash on hand for projects farther on the out years, i.e. trunk sewers.

 

Mr. Pleasant agreed to co-sponsor the legislation. 

 

Mr. Fogt stated he was glad to see we’re looking at an 8 MPG plant.  Feels this is economically the right thing to do.  He felt 15% increase was too much.  At this point, he’s not ready to sponsor the legislation.  Ms. Davies commented that a lot of hard work has been done to keep the rates down as far as possible.  At one time, it was thought there would have to be a 30% rate increase. 

 

Mr. Fogt is in favor of looking at increasing tap-in fees.  He does not want to fall into a trap of having to raise them substantially again.  Mr. Fogt confirmed that federal money is not factored in. 

 

2)     Stormwater Utility Projections for 2006

 

Mr. Morehart distributed a sheet showing numbers based on where we are currently, and primarily what the numbers look like in 2006 from preliminary numbers that have been submitted and also in out years through 2010.  Following general assumptions were used:  Revenue growth 3.00%, Salary increase 3%, Medical Insurance increase 15.00%, O&M expense increase (includes capital) 4.00%.  These figures show there is not much capacity to consider issuing debt as far as having enough capacity for debt service.  These numbers are based on the current rate structure. 

 

Considerable discussion on Watershed Coordinator in 2006.  City will need to help the County fund this or this program will be eliminated.  Mr. Fogt feels this is a much-needed position.  Regarding the streetsweeper, he feels that money could be used for stormwater. 

 

Mr. Pleasant fears stormwater problems will occur if we get a big rain.  He used Fifth Street as an example and noted there have been several stormwater drains, receptacles and catch basins that were put in.  He asked if the intent of this work was to assist in the runoff?  Mr. Roush stated the intent is to catch it before it can create flooding.  Mr. Pleasant agreed with Mr. Fogt.  The initial setup of it, the disappointment of not being able to work on large prioritized projects is frustrating.  He needs to continue to be educated about what is being done so he can talk to the public.   Mr. Roush stated the work done this summer will not be appreciated until we have some rain.  It’s important that stormwater work continue in the future.  The City recently applied for some Issue 2 funding for some projects.  He distributed a summary of what the infrastructure is worth and what the needs are.  Summary shows $320,000,000 of replacement costs and $89,000,000 of repair costs needed.  Information also lists infrastructure type projects.

 

Mr. Fogt expressed concern with the south Hickory Street area.  He noted it’s anticipated that ORW is going to redo the detention pond, but it’s not done yet.    Mr. Roush said they are working on it; materials have been delivered to the area. Mr. Fogt asked if anything else had been done in that area.  Response was manhole repairs have been done, smoke testing has been done. 

 

Mr. Pleasant said if ORW were to complete their project today, is the City satisfied to what degree that would assist in the problem?  Mr. Roush responded he’s sure there’s a storm out there that would flood that subdivision.  He pointed out that the original request from the Study and the Administration was for a higher charge per ERU with increases built in.  The ERU value was also smaller, both of which added greatly to the amount of money collected.  Mr. Pleasant pointed out that citizens and businesses objected to the high fee.  There was a comparison done with other cities and the Committee decided to adjust to the current fee schedule.  The Committee also objected to some of the projects, which were originally included, which lowered the expense side.  The Administration has added back in some expenses for Joe Tracey, an employee and some equipment, so there is not much money left to do actual projects.  Mr. Pleasant said he is willing to talk with Administration about a possible increase (a one-time increase of 4% was mentioned), but no promises were made.  Mr. Fogt is reluctant to increase the fee, and feels that the stormwater money needs to be spent on the “problem areas” of Hickory in the Barrhaven Addition, the Hickory/Edgewood area and the Court Street/7th St. /8th St. area.

 

Meeting adjourned.