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HomeMy WebLinkAboutMinutes_Miscellaneous_07/22/1997_Finance & Administration Committee F Tf VILLAGE OF TEQUESTA Post Office Box 3273 • 357 Tequesta Drive o` Tequesm, Florida 33469 -0273 (561) 575 -6200 4 o Fax: (561) 575 -6203 F9ph cu ty VILLAGE OF TEQUESTA FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES JULY 22 1997 I. CALL TO ORDER AND ROLL CALL The Tequesta Finance and Administration Committee held a regularly scheduled meeting at the Village Hall, 357 Tequesta Drive, Tequesta, Florida, on Tuesday, July 22, 1997. The meeting was called to order at 5:05 P.M. by Chairman Carl C. Hansen. A roll call was taken by Betty Laur, the Recording Secretary. In attendance were the following Committee members: Chairman Vice Mayor Carl C. Hansen, and Co -Chair Joseph Capretta. Co -Chair Ron T. Mackail was absent from the meeting. Also in attendance were Village Manager Thomas G. Bradford, Village Clerk Joann Manganiello, and Department Heads. II. APPROVAL OF AGENDA Village Manager Bradford requested two additions to the agenda under ANY OTHER MATTERS: Direction from the Committee in regard to sale of water department land, and if time allowed, to view a video of an organization working in Tallahassee on important annexation issues. Co -Chair Capretta made a motion to approve the agenda as amended with the additions requested. Chair Hansen seconded the motion. The vote on the motion was: /tec P� �cd Prt /x"r FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 2 ------------------------------------ Carl C. Hansen - for Joseph N. Capretta - for The motion was therefore passed and adopted and the agenda was approved as amended. III. COMMUNICATIONS FROM CITIZENS (NON-AGENDA ITEMS) There were no communications from citizens. IV. REVIEW OF RO WATER TREATMENT FACILITY DESIGN PLAN Bill Reese of Reese Macon and Associates, consultants for the RO Water Treatment Plant, reviewed the site plan for the project and the architectural drawing presented to the Community Appearance Board, as well as a revised architectural drawing made after the Community Appearance Board meeting. Mr. Reese commented that the Community Appearance Board had wanted a cement tile roof, but had also directed that they did not want to increase costs. Since the initial cost of a cement tile roof had not been comparable to the proposed standing seam metal roof, and the tile roof would require ongoing high maintenance costs, Mr. Reese had consulted Water Department Manager Tom Hall, and the decision had been made to keep the standing seam metal roof. Mr. Reese commented that the building was designed for low maintenance. Mr. Reese reviewed the floor plan. In response to Co -Chair Capretta, Mr. Reese explained that the cost of the building without equipment was a little over $1 million. . Chair Capretta questioned whether the changes desired by the Community Appearance Board had increased the building cost. Mr. Reese responded that if the roof had been changed to cement tile that costs would have been increased. Mr. Reese reviewed the permits for this project and their FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 3 ------------------------------------ status. SFWMD and FDEP permits had been obtained, as well as right -of -way permits from Palm Beach County, FDOT, and Department of the Army. The FDEP Environmental Resource Permit had been received. The Palm Beach County Engineering /Traffic Driveway Access to Old Dixie Highway permit had been issued and required response. The Palm Beach County Health Department permit for the water treatment plant was in process, and the Health Department had asked for some items which would increase costs. The Palm Beach County Health Department permit for the sewer system connection for the plant had been submitted to ENCON and the permit was anticipated in September, 1997. The Village Community Appearance Board and DRC approvals were in process and the first Community Appearance Board appearance had been held July 16. Mr. Reese explained that some of these permits had an expiration and that the permits must be monitored so that renewals would be submitted when required. Mr. Reese explained that the project was now at the point to begin financial work and that an Engineering due diligence report would be needed. Discussion ensued regarding what Jupiter might do to prevent issuance of permits. Mr. Reese explained that the only permits remaining that Jupiter might object to were the Health Department permits. Any objections from Jupiter could be countered with the argument that the Village was in violation of the Health Department's regulation that a plant must be under construction, so if the Department would not issue a permit then they could do nothing about the Village's failure to comply. Proposed capacity of the new plant was discussed. Mr. Reese explained that one train of 1.2 MGD would be installed initially and that piping would be installed to allow a total of 7 -1/2 MGD to be installed in the future. It was pointed out that for future equipment additions only the Palm Beach County Health Department Water Treatment Plant permit would be needed, and if the building exterior changed then approval from the Village would also be needed. Co- Chair Capretta speculated that within five years the Village FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 4 ------------------------------------ would only be able to get 2 MGD from ground wells, therefore increased supply would be needed from the new plant and the village would have to install a second module. Co -Chair Capretta questioned whether in phasing out the old plant there was a point in time that the old plant would become impractical to operate. Mr. Reese responded that he could not predict the actions of SFWMD but expected them to remain conservative in the amount they would allow to be drawn from the surface wells; and there was no reason the old plant could not continue to operate at 2.7 MGD and that plant would always be cheaper to operate than the RO plant, so that the RO supply would always be the secondary water source. This assumption was based on known technology. Co- Chair Capretta commented that therefore the only reason to install a second RO module would be when the Jupiter agreement expired in 12 years. Chair Hansen questioned when the first gallon of RO water could be sold, assuming everything went as planned with the RO plant construction, to which Mr. Reese responded the target was mid 1999. Mr. Reese explained that as long as a plant was under construction that he believed the Health Department would cooperate and that if lack of water became a problem he expected SFWMD to grant a temporary permit to allow pumping more water from the ground. Discussion ensued regarding surface wells and the capacities they were permitted for versus the amounts available. Mr. Reese pointed out that the current plant could only handle 2.7 MGD. During discussion of the lawsuit with Jupiter, village Manager Bradford explained that before the trial on August 4, the judge would decide on Jupiter's challenge to Tequesta's RO plant project where their contention was that under FS Chapter 180 Tequesta had to have their permission to build an RO plant. Village Manager Bradford commented that if Jupiter lost that decision that he did not expect them to challenge the Health Department permit. FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 5 ------------------------------------ Mr. Reese explained to the Committee that his firm's next step would be to prepare an Engineering and Due Diligence Report, which would consist of an engineering document and the supporting documents to go into the bond issue. Finance Director Kascavelis commented that the bond rate was now the lowest in years. V. REVIEW OF FINANCIAL MATTERS ASSOCIATED WITH RO PLANT Village Manager Bradford introduced Robert Ori, Public Resources Management Group, Inc., Maitland, Florida, a Utility, Rate, Financial Management Consultant, whose services had been secured through Reese Macon and Associates. Mr. Ori explained that due diligence meant the Village must make sure the rates were adequate to cover operating expenses, including debt service, set aside funds for Capital Improvements, and financial requirements of the bonds. Certain financial ratios must be met; and bond insurers and ratings require these ratios. Mr. Ori explained that the purpose of the study he had done was to evaluate potential rates, taking into consideration the cost of the RO plant plus operating costs plus issuance costs of revenue bonds over a 5 -year projection, using FY 97 as a basis since that was the most recent financial plan of the Village. Mr. Ori stated that this was a preliminary plan which was subject to change, especially since the Jupiter litigation was an unknown; the cost of the plant could change, and any available cash reserves could change. Mr. Ori verified that the Water Department would carry this cost and that the Village could not be required to raise ad valorem taxes for this purpose. During explanation of the overview of his analysis, Mr. Ori commented that a projected rate adjustment of 8.5% would be needed and a one -time adjustment with no phasing had been FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 6 ------------------------------------ assumed. This one -time adjustment should meet financial and rate covenant requirements and no further adjustment was anticipated until the year 2001. Rate phasing options were available to the Village based on the financial needs of the system, cash reserves /fund balances, debt service payments, and operating expense requirements. Mr. Ori explained that rates were favorable at the present time and that rates could be phased. One known cost was that a Renewal and Replacement Fund contribution of $150,000 annually would be needed. Village Manager Bradford expressed agreement with Mr. Ori's analysis of a rate increase, since Village cash reserves were rapidly being depleted to pay legal fees. The village Manager explained that Water Department funds would not be available for a rainy day unless the reserves were replenished. Mr. Ori reviewed significant assumptions for financial forecast, explaining that the forecast was based on FY 1997 budget, and no recognition of Town of Jupiter bulk rate increase /litigation costs had been made. The assumptions made were: No change in water purchases from Town of Jupiter - Maintenance of minimum purchase requirement Incremental costs for RO water treatment plant - Operational June 1999 - Power /Chemicals /Insurance - Increased labor costs Debt service for expansion - $7,270,000 principal amount of bonds -Level debt service payment - Average interest rate 5.44* (very attractive) -30 year term -No capitalized interest FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 7 ------------------------------------ Bond resolution assumptions (Covenants) -Debt service coverage of 1.15 - Renewal and Replacement Fund deposit of 5% of previous year gross revenues - Capacity fees not considered as gross revenue (contingency factor of $50,000 annually included) Forecast of customer growth - Average compound growth rate of 1.6% - Higher during FY 1998, approximately It thereafter The rate impact assumed a stand -alone rate adjustment of 8.5W and 10,000 gallons of service. Proposed rate increase was $2.14. The difference between the proposed Village rate with a 9W utility tax and the current Village rates with Jupiter surcharge was $4.86. A sample utility average indicated rates would be competitive with other utilities utilizing RO water treatment, assuming 10,000 gallons and without a 9% utility tax. The proposed Village rate of $25.16 was compared to the average of $26.10. Other cities rates were discussed, several of which were considering increased. Mr. Ori commented that Boca Raton was considering a 27% rate increase. Mr. Ori reviewed other options which could affect rates, including debt service, outside service surcharge, guaranteed revenues, phasing options, and the Jupiter water purchase contract. Mr. Ori had concluded that the Village should finalize their financial forecast, adopt a rate adjustment prior to issuance of utility revenue bonds in order to achieve AAA rating, and ascertain that utility rates would be competitive for systems with RO water treatment. Mr. Ori explained that he had been very impressed with the Villages financial status, since they were virtually debt -free, and commented that even with $7+ million the picture was very good. Mr. Ori stated that the Village would grow into the new system and pay it off, and that the village was very strong in its ability to meet the FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 8 rate covenants. Chair Hansen commented that Mr. Ori had been very conservative in his analysis, and questioned whether the village was too small to proceed with this size plant, to which Mr. Ori responded he did not believe so. Co -Chair Capretta commented that Mr. Ori assumed that rates should be increased as soon as possible to replenish depleted reserves, and that Mr. Ori had recommended placing surcharges charges on non - residents, changing Village policy to reserve capacity to contractors, and planning to pay interest only until the RO plant became operational. Mr. Ori explained that the Village had an option of adjusting base charges, especially for seasonal residents. Water Department Manager Tom Hall verified that only minimum base charges were charged to seasonal residents when they were out of town. Mr. Ori estimated total cost for the engineering and financial documentation needed for the bond issue as $25,000 - $30,000, and explained that a bond issue would take approximately 2 months. Discussion ensued. Co -Chair Capretta commented that the Committee should recommend that the village Council authorize proceeding at their August 14 meeting. The Village's fixed charge per month of $8.80 was compared to Jupiter's charge of $9.80. Co-Chair Capretta made a motion to recommend the following actions to the village Council: To increase the base rate from $8.80 to equal Jupiter's base rate of $9.80; to consider the feasibility of 4% increase on commodity; to institute a reservation and capacity charge for developers; to capitalize interest to pay interest only in the beginning. Chair Hansen seconded the motion. The vote on the motion was: Carl C. Hansen - for Joseph N. Capretta - for The motion was therefore passed and adopted.. FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 9 ------------------------------------ The concept of a small rate increase now rather than a one- time large increase was discussed. This would mean that another small increase would be instituted in a couple of years. Mr. Ori suggested that both increases be adopted in the original ordinance with an effective date for each, which would help with bond insurers and avoid having to decide on the increase again. Discussion ensued. In response to Chair Hansen question, Village Manager Bradford reviewed the recommendations which had been made in the motion, and commented that the Committee had also recommended the possibility of an Ordinance with a dual increase. Chair Hansen made a motion to approve the Engineering and Financial documents needed for the bond issue. Co -Chair Capretta seconded the motion. During discussion of the motion, Finance Director Kascavelis recommended consultation with Clark Bennett, Financial Advisor, and with Bond Counsel to determine a source of payment for the documents. The vote on the motion was: Carl C. Hansen - for Joseph N. Capretta - for The motion was therefore passed and adopted. VI. STATUS REPORT ON POTABLE WELLS DRILLED ON TEQUESTA PENINSULA Tom Hall, Water Department Manager, reviewed the status of the wells. Well 25, located at the entrance of Turtle Creek, had been in service for two years. Well 26, on Country Club Drive, was placed in service in December, 1996. Well 27, inside Turtle Creek located on Turtle Creek Drive, had been in service since February, 1997. Mr. Hall explained that these wells operated well and the quality of their water was adjusted by blending with water from other FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 10 ------------------------------------ wells. 108,000,000 gallons had been pumped from these wells in two years. Co -Chair Capretta reported that at a meeting he had attended in Turtle Creek, someone had reported that the Village did not get any water from the wells in Turtle Creek. Mr. Hall verified that well just inside Turtle Creek was one of the best producers with the best water quality. VII. ANY OTHER MATTERS Village Manager Bradford reminded the Committee that adjacent to the new public service facilities garage behind the 222 Building there was a strip of land which had been leased to Mr. Shaw, the owner of the 222 Building, and to the owner of the building formerly known as the Hamilton building. Because of changes in Florida Statutes which required such city -owned properties to be taxable, and at the direction of the Village Council to offer the land for sale only, this land had recently been appraised. Callaway & Price had appraised one parcel at $42,000 and the other at $52,000. Village Manager Bradford explained that on the next Village Council agenda, the village Council would consider whether to appeal a recent decision by the Special Master to waive the requirement that a registered Landscape Architect must prepare plans submitted for Ordinance 377 improvements in the case of Mr. Shaw. The village Manager explained that the Village Attorney had indicated that the Village might want to find another way to gain compliance from Mr. Shaw, and suggested that the land sale could be used as leverage. It was considered a bad precedent to establish by allowing one person not to use a registered Landscape Architect and requiring all others to do so. Status of Ordinance 377 compliance was discussed. Chair Hansen made a motion to allow staff to proceed with the offer to sell the property at a price to include the FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 11 ------------------------------------ appraisal price plus any other charges which had been incurred. Co -Chair Capretta seconded the motion. The vote on the motion was: Carl C. Hansen - for Joseph N. Capretta - for The motion was therefore passed and adopted. Village Manager Bradford showed a video from Florida League of Cities, explaining the Commission on Local Government II. The Commission was requesting each municipality's input regarding their three greatest challenges, and what constitutional, legislative or other tools were desired to make their jobs easier. village Manager Bradford suggested that liberalization of annexation laws to provide Village services at a more reasonable price to all the people profiting from those services would be a tool helpful to the village, and that matter was under consideration by the Commission. After the video was concluded, village Manager Bradford explained that workshops were scheduled in West Palm Beach in November, and that comments were desired prior to September 1. Chair Hansen requested that the village Manager provide the Village Councilmembers with a written proposal requesting feedback regarding the seven areas discussed in the video and the three specific questions the Commission would like answered. Co -Chair Capretta requested that a workshop be held to discuss the Council's position on these issues. Co -Chair Capretta commented that the Federal government was balancing their budget by giving items to states but keeping the tax money, and the states were in turn passing on items to cities without the tax money to take care of those responsibilities. village Manager Bradford commented that Tequesta had always been a proponent of local control and home rule, which was a point that should be made to the Commission. Chair Hansen commented that Tequesta needed annexation. village Manager Bradford commented that this Commission could help institute major FINANCE AND ADMINISTRATION COMMITTEE MEETING MINUTES July 22, 1997 Page 12 ------------------------------------ changes. VII. ADJOURNMENT Co -Chair Capretta made a motion to adjourn the meeting. Co- Chair Mackail seconded the motion. The vote on the motion was: Carl C. Hansen - for Joseph N. Capretta - for The motion was therefore passed and adopted and the meeting was adjourned at 7:00 P.M. Res submitted, z 6-- Betty Laur Recording Secretary ATTEST: oann Mangano Village Clerk DATE APPROVED: i i 7