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HomeMy Public PortalAbout22-9945 - One Million loan from the General FundSponsored By: City Manager RESOLUTION NO. 22-9945 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF OPA- LOCKA, FLORIDA, AUTHORIZING THE CITY MANAGER TO INITIATE A LOAN OF $1,000,000 FROM THE GENERAL FUND TO THE WATER AND SEWER FUND; PROVIDING FOR INCORPORATION OF RECITALS; PROVIDING FOR AN EFFECTIVE DATE WHEREAS, the City of Opa-Locka is the Defendant in Case No. 2017 -008285 -CA -01, George Suarez, et al. v. City of Opa-Locka, Florida, a class action suit in regard to prior water billing disputes; and WHEREAS, a tentative Settlement Agreement and General Release, dated September 30, 2021, attached hereto as Exhibit "A", has been entered into between the Plaintiffs and the City of Opa-Locka; and WHEREAS, within the 30 days of the Court's order approving this Agreement becoming final, the City will need to pay $1 million from its Water and Sewer Fund to a Cash Settlement Account and provide the availability of a credit of $2 million to be applied towards the accounts receivable balances on City water accounts of class members for charges incurred during the period from April 1, 2012 through December 31, 2019 for valid claims; and WHEREAS, the financial condition of the City's Water and Sewer Fund is such that a $1 million payment from this Fund at this time would impair this Fund's ability to fund its operational requirements; and WHEREAS, the City of Opa-Locka's General Fund is in excellent financial condition with an available fund balance and no compelling requirement that these surplus funds be spent at this time; and WHEREAS, the City of Opa-Locka Code of Ordinances, Section 2-651 (3) permits interfund borrowing for lawful purposes predicated on the Finance Director determination that these funds will not be needed during the borrowing period and that the funds for repayment will be available by the end of the second fiscal year after the borrowing has occurred; and WHEREAS, the City's Acting Finance Director has determined that $1 million of General Fund available fund balance will not be required before September 30, 2023 and that funds will be available to repay this loan by September 30, 2023 based on the following conditions: Resolution No. 22-9945 (1) Repayment and funding of the loan repayment from the Water and Sewer Fund to the General Fund is through the budget; (2) The City Commission to approve restructured debt payments for the Water & Sewer Fund; (3) The City Commission, City Manager and Public Utilities Director reduce operating and capital expenditures and cost to satisfy repayment; and WHEREAS, the payment terms are such that the Water and Sewer Fund will repay the full $1 million by September 30, 2023. This is a non -interest bearing loan. NOW, THEREFORE, BE IT DULY RESOLVED BY THE CITY COMMISSION OF THE CITY OF OPA- LOCKA, FLORIDA: SECTION 1. The recitals to the preamble herein are incorporated by reference. SECTION 2. AUTHORIZATION The City Commission of the City of Opa-Locka, Florida hereby authorizes the City Manager to initiate a $1,000,000 loan from the City's General Fund to the City's Water and Sewer Fund to be repaid by September 30, 2023 with an annual interest rate of 0% to be used to pay into a Cash Settlement Account in conjunction with the settlement of Class Action Case No. 2017 -008285 -CA -01, George Suarez, et al. v. City of Opa-Locka, Florida and further directs the City Manager to take the necessary action to ensure repayment of this loan by September 30, 2023. SECTION 3. SCRIVENER'S ERRORS Sections of this Resolution may be renumbered or re -lettered and corrections of typographical errors, which do not affect the intent of this Resolution may be authorized by the City Manager, following review by the City Attorney, without need of public hearing, by filing a corrected copy of same with the City Clerk. SECTION 4. EFFECTIVE DATE This Resolution shall take effect upon the adoption and is subject to the approval of the Governor or Governor's Designee. PASSED and ADOPTED this 12th day of January, 2022 ronica J. William Mayor 2 Resolution No. 22-9945 ATTEST: ('- S. Joa .a Flores, City Clerk u SGC APPROVED AS TO FORM AND LEGAL SU,FFFICIENCY: i Burnadtte Norris -Weeks, P.A. Moved by: Commissioner Davis Seconded by: Vice Mayor Taylor VOTE: 5-0 Commissioner Bass: YES Commissioner Davis: YES Commissioner Dominguez: YES Vice -Mayor Taylor: YES Mayor Williams: YES 3 City of Opa-locka Agenda Cover Memo Department Director: Bob Anathan Department Director Signature: '' City Manager: John E. Pate CM Signature: Commission Meeting Date: Jan 12, 2022 Item Type: (EnterX in box) Resolution 0 i nce Other X Fiscal Impact: (EnterX in box) N/A Yes No Ordinance Reading: (EnterX in box) list Reading tad Reading X Public Hearing: (Enter X in box) Yes No Yes No Funding Source: Account# : (Enter Fund & Dept) Ex: See Financial Impact Section Advertising Requirement: (EnterX in box) Yes No Contract/P.O. Required: (Enter X in box) Yes No RFP/RFQ/Bid#: X Strategic Plan Related (Enter X in box) Yes No Strategic Plan Priority Enhance Organizational Bus. & Economic Dev Public Safety Quality of Education Qual. Of Life & City Image Communication Area: III Strategic Plan Obj./Strategy: (list the spe�flc objective/strategy this item will address) X • MI • • 0 Sponsor Name City Manager Department: City Manager short Title: General Fund Loan To Water And Sewer Fund In Conjunction With Settlement Of Utility Billing Legal Case Staff Summary: Issue / Recommendation: As part of the settlement of the utility billing legal case, the City has agreed to make a cash $1,000,000 payment as soon the Court order becomes final. Staff recommends that the City Commission authorize the City Manager to initiate a $1.0 million loan from the General Fund to the Water and Sewer Fund to enable this payment to be made by the Water and Sewer Fund, and to take the necessary actions to ensure repayment of this loan by September 30, 2023. History: Due to alleged problems of utility bill accuracy in the past, in 2017 the City became a defendant in a class action suit, Case No. 2017 -008285 -CA -01, George Suarez, et al. v. City of Opa-locka, Florida, where the plaintiffs alleged that the City failed to provide accurate water billing to its utility customers, causing them to suffer an economic loss as a result of the billings. This was ongoing case until tentative resolution was reached on September 30, 2021 Current Activity: The City has been engaged in a Water Utility Class Action case whereby the Plaintiffs pled damages of $20,000,000. After years of litigation, including two appeals to the Third District Court of Appeal and the two attempts by the Plaintiffs to obtain Florida Supreme Court jurisdiction, the parties reached a mediated settlement in advance of the trial, which was scheduled to begin on October 25, 2021. On September 30, 2021, the parties signed a Settlement and Release Agreement, which has been approved by the Opa-Locka City Commission and the Florida Oversight Board. Under the Settlement Agreement, the Plaintiffs have agreed to dismiss the Water Utility Litigation and the City has agreed to fund a $1Million cash fund to pay valid claims and to provide for up to $2Million in accounts receivable credits for valid claims of class members who have an accounts receivable balance on their water utility accounts with the City. (The class members are not entitled to a credit against balances on County administered accounts). The Water and Sewer Fund is currently operating at a loss due to the heavy debt service burden (principal and interest) on the Fund. Approximately $0.8 million of the FY 22 debt service is attributable to loans the City previously received from the State Revolving Fund to invest in infrastructure. Another $1.6 million is attributable to Miami -Dade Water and Sewer Department debt related to previously unpaid goods and services and additionally for the recent installation of an entirely new meter system on behalf of the City. Staff is working with these agencies to stretch out this debt service to provide the Water and Sewer Fund with sufficient current liquidity to meet its operational requirements while adhering to the terms of the settlement. Conversely, the General Fund is in excellent financial condition with a very strong available fund balance (reserves). Section 2-651 (3) of the City's Code of Ordinances permits interfund borrowing for lawful purposes predicated on the Finance Director determination that these funds won't be needed during the borrowing period and that the funds for repayment will be available by the end of the second fiscal year after the borrowing has occurred. The City's Acting Finance Director has determined that $1 million of General Fund available fund balance won't be required before September 30, 2023 and that funds will be available to repay this loan by September 30, 2023 based on the following conditions: (1) Repayment and funding of the loan repayment from the Water and Sewer Fund to the General Fund is through the budget. (2) The City Commission is to approve restructured debt payments for the Water & Sewer Fund once a plan has been finalized with the County and the State. (3) The City Commission, City Manager and Public Utilities Director reduce operating and capital expenditures and cost within the Water and Sewer Fund to satisfy repayment. Financial Impact; This interfund loan will allow the Water and Sewer Fund to fulfill the cash payment portion of the settlement. The rescheduling of the City's Water and Sewer Fund debt service will allow repayment of this borrowing within the prescribed period while providing the Fund with sufficient liquidity to meet its operating requirements. Staff recommends that the City Commission direct the City Manager to initiate the appropriate action to permit the Water and Sewer Fund to borrow $1,000,000 for the General Fund, subject to repayment by September 30, 2023 and further direct the City Manager to take the necessary actions to ensure repayment of this loan by September 30, 2023. Attachment: 1. Resolution