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HomeMy Public PortalAbout2024.01.29 Special Meeting MinutesMINUTES McCall City Council Special Meeting McCall City Hall — Legion Hall VIA TEAMS Virtual January 29, 2024 Call to Order and Roll Call Work Session Adjournment CALL TO ORDER AND ROLL CALL 1 Mayor Giles called the special meeting of the McCall City Council to order at 5:30 p.m. Mayor Giles, Council Member Maciaszek, Council Member Nelson, Council Member Nielsen, and Council Member Thrower all answered roll call. City staff members present were Anette Spickard, City Manager; BessieJo Wagner, City Clerk; Sarah Porter, Deputy Clerk; Erin Greaves, Communications Manager; Linda Stokes, City Treasurer; Stewart, Public Works Director; Sean Reilly, Network Administrator; Molly McCullough, Communications Assistant; Sabrina Sims, Water Systems Manager. Also, in attendance were Nate Weisenburger, AE2S; John McDevitt, Skinner Fawcett Bond Counsel; Eric Landsberg, Clear Solutions; Ross Hanson, AE2S; Greg Loscher, Bowen Collins; Sean Costello, Skinner Fawcett Bond Counsel; Michael Keith, Zions Bank Municipal Advisory. WORK SESSION 1 AB 24-028 Work Session II: Water Treatment Plant and Water Storage Expansion, Funding Amount, Ballot Question Review, and Direction to Staff City Manager Anette Spickard introduced the topic to the City Council. Public Works Director Nathan Stewart introduced Nate Weisenburger and Ross Hanson with AE2S, Eric Landsberg with Clear Solutions, Greg Loscher with Bowen Collins, John McDevitt Skinner Fawcett Bond Counsel, and Michael Kieth Zions Bank Municipal Advisor. On December 1, 2023, the City Council was presented with conceptual project designs, estimated costs and financing options to implement critical major capacity upgrades to both the system's water treatment plant (WTP) as well as additional system storage. A 2 -million -gallon water storage tank and a WTP capacity expansion are two major project elements. Since the December 1, 2023 City Council meeting, the Engineering team including AE2S the lead project engineer firm, Clear Solutions the support engineer firm, and Bowen Collins the water system and rate modeling engineer firm, have updated cost estimates for both the WTP improvements, adding storage and electrical components, and the proposed storage tank considering new geotechnical information from the proposed tank site received in mid -December. The updated cost estimate supports a recommended financing need of $16.5M, which is within the range of the $14-17M previous cost estimate received by the City MCCALL CITY COUNCIL Page 1 of 5 January 29, 2024 Special Meeting Council. In parallel, staff has coordinated the financial and legal consultants for the projects, Zions Bank Municipal Advisor and Skinner Fawcett Bond Counsel, to confirm recommended financing options; bonding term; and effective election ordinance language. Staff has also submitted a Letter of Interest (LOI) to Idaho Department of Environmental Quality (DEQ) to request funding assistance. Mr. Weisenburger gave an overview of the Water Treatment Plant (WTP) and Storage projects. Planned improvements include two additional filters, increased clearwell volume of 350K gallons, and additional storage volume. The current treatment facility is 23 years old and requires a new roof. Covered storage is also a need in the WTP expansion and is included in the CIP. Additional storage capacity addresses regulatory concerns and improves interaction and transfer of water across the system. Project costs include a Filter Expansion $630,000, a Clearwell Expansion $1,820,000, and an Additional Storage Tank $6,900,000 totaling $15,020,000. Mr. Lansberg reviewed the urgency for compliance at the WTP. The City has had challenges meeting the filtration and disinfection regulations driven by increased water usage during peak use times especially in the summer. The WTP project will take three years to complete. The storage tank is required to provide storage to meet peak and operational demand as well as demand for fighting fires. Currently storage is at 91% capacity and additional storage is required by 2027 and is scheduled to be complete in 2026. The additional storage will also help the WTP maintain compliance during peak demand times. Mr. Lansberg also reviewed the implementation schedule for both the WTP expansion and storage projects and the Idaho State Revolving Fund (SRF). The SRF provides low interest loans at 2.5% to municipal water systems and unlike other loans principal forgiveness is possible. Fundable projects will be announced in April and final project awards will be announced in June. Council Member Maciaszek expressed being comfortable directing staff to move forward with preparing documents to place a bond on the ballot. Council Member Maciaszek left the meeting at 6:00 pm. Mr. Loscher reviewed how to bond and water rate impacts. Water treatment and storage deficiencies result in a significant short term need for funding. The recommendation to obtain the short-term cash flow needed to fund the WTP and storage projects is to put a revenue bond on the ballot in Spring 2024. A Revenue bond in the appropriate amount will maintain positive cash flow and provide adequate funding for the WTP and storage projects. The water fund will run out of cash in 2024 without additional intervention. The estimated bond amount is $16.5 Million, slightly higher than the estimated cost of the project to appropriately plan for future contingencies. The bond debt will be serviced from water rate revenue not from a levy or tax. Mr. Loscher additionally reviewed long term water rate impacts. Revenue generation from currently adopted rates is nearly adequate but will likely fall short of long-term needs depending on inflation. The recommendation is to revisit the water rate study in 2024 to make necessary adjustments to proposed rates in order to maintain long term positive cash flow. The approximate range of adjustment is a total of 4% or additional 2% over two years. An alternative to the bond would be to increase rates substantially at 100% increase and maintain the increase for three years. With a bond and a 2% increase the typical residential user may see a $1.50 per month or $18 per year increase. Water rates increasing rates and not going to bond a typical residential user would see about a $75 increase each month MCCALL CITY COUNCIL Page 2 of 5 January 29, 2024 Special Meeting or $900 a year for three years. Mr. Loscher reviewed the current adopted rates put into place in October 2022 that will be in place until September 2028 noting potential adjustments to rates in 2025 and 2026. Director Stewart further explained that the current water rates plan for a 3.6% average increase in 2025 and 2026. The impact the bond would have on the planned increase would be 2% per year for two years, bringing the average percent increase up to 5.6%. Mr. Loscher reviewed 20 Year revenue and expenditures with bonding and rate adjustment as well as 20 -year cashflow. Projects in 2039 will also need additional funding but it would make no sense to bond for projects that far out at this time. Mayor Giles asked if the intention is for the City not to add bond upon bond. Mr. Loscher noted that the City does have a bond retiring this year. If the city did a $16.5M bond for 20 years, the projects in the future are far enough out that the City would not need to stack bond upon bond. Mr. McDevitt gave an overview of bond election vs. judicial confirmation. The city needs to incur debt that exceeds one year since the funds are not on hand to finance the required improvements. The State requires an approval process of either judicial confirmation or a bond election. Judicial confirmation is an option where the city can file a special proceeding with the district court to petition for approval to incur debt that is ordinary and necessary. The ordinary requirement is met because providing water service is ordinary business for the city. The necessary requirement is tougher to meet because it has been narrowed by the court to be an emergency expenditure that is required to be made within the current year. Additionally, judicial confirmation requires a 60 -day notice period and courts have been busier in the past 5 years which can put a strain on the construction timeline for projects. A bond election will require 50% +1 for approval. Successful bonding strategy includes pointing out to the public that the improvements need to be made and showing the options other than bonding. Director Stewart noted that City staff has pushed consultants to look into the judicial confirmation and the improvements needed do fit into the ordinary and necessary requirements. The biggest challenge with judicial confirmation is control of implementation, timing, and the ability for the judge to determine what is appropriate. Director Stewart noted that capital projects can be very costly and inefficient if the project has to be broken into multiple parts over multiple years. Additionally, the bond election route is more transparent for the ratepayers. Mayor Giles noted that the city has done well with sharing information with the public and can show the public that the City has looked at every possible option and explain the downside of some of the options. Additionally, Mayor Giles expressed appreciation for the format of the information presented to the City Council. Mr. Keith reviewed the bond process noting that the city cannot go into long term debt in Idaho without having the authority from either the voters or from a judge. When considering a bond election, it is important to consider built-in contingencies to ensure the city is set up for long term success when implementing Capital Improvement Projects and Plans. Higher inflation and growth have put a lot of pressure on cities to borrow instead of paying cash for projects. A benefit of debt financing is the ability to keep rates affordable for rate payers. The best term of the bond for the city's current needs is 20 years. The Election Ordinance is essentially a contract with voters and outlines the project and terms that the voters will vote on. The Bond Ordinance is essentially a contract with investors that outlines how much interest and principal will be paid to bondholders, MCCALL CITY COUNCIL Page 3 of 5 January 29, 2024 Special Meeting when and how payments will be made, how bonds may be redeemed, bond covenants and what happens in the event of a default. Mr. Keith additionally reviewed the election dates and deadlines of May 21 with a deadline of March 22 and November 4 with a deadline of September 5 as well as the bond issuance process, roles and responsibilities and how bond rates are determined. The proposed bond summary was also reviewed with an interest rate of 3.83% as of January 18, 2024, a term of 20 years, a proposed bond amount of $16.5M, an estimated interest cost of $7,636,750 for a total cost of $24,136,750. The average annual payment would be $1,206,838. Mr. Keith also reviewed municipal interest rates noting that current interest rates are lower for short term funding options compared to long term funding options. Rates are more stable this year than they were in 2022. Mayor Giles expressed thanks to the presenters and the information provided. Council Member Nelson asked about other entities going for bond this year including Payette Lakes Recreational Water and Sewer District (PLRWSD) and Valley County. Council Member Nelson also expressed it being unwise for city to bond for more than the project costs and concern over how politics might create extra hurdles. The city needs to do a great job at explaining the urgency to the public. Manager Greaves noted staff has done a lot of research leading up to the City Council making a decision. Staff has not been able to confirm that Valley County will be going out for a bond but PLRWSD, McCall Fire Protection District and McCall Donnelly School District are all confirmed to have bonds on the May ballot. Mayor Giles asked for insight on whether the City should put a bond on the ballot in May or November. Manager Greaves reviewed voter statistics noting that a lot more voters turn out during November elections and theories on going to election for a bond during presidential election. Manager Greaves also explained staff's ability to provide targeted messaging to City of McCall residents where other entities cover a larger area than city limits. City Staff felt that May is a more comfortable position for timing of projects. Manager Spickard noted that the revenue bond does not have a large impact on the rate payer but other bonds impact property tax and have different equations with a more substantial impact on taxpayers. Manager Spickard also expressed confident in staff ability to educate the community on the importance of clean and safe drinking water. Additionally, May offers time to listen to the voters if the bond does not pass and the city can try again in November. Council Member Nelson agreed with Manager Spickard. Council Member Thrower expressed that the presentations were clear and there will always be a concern with other bond elections at the same time, but the necessity requires the city to not wait. Council Member Nielsen asked if the PLRWSD is a property tax bond. Manager Spickard noted that PLRWSD could do either a general obligation bond or a revenue bond. Mr. Keith noted that PLRWSD will be considering a revenue bond and reviewed property tax bonds vs. revenue bonds. Council Member Nielsen additionally asked about municipal interest rates and if a 12 -year term would be a better option compared to the 20 -year term. Mr. Keith noted that the tradeoff is a higher payment annually which puts more pressure on the cash flow. It is also possible larger rate increases will be needed up front to keep cash flow stable. Manager Spickard asked if there would be a shorter repayment term available to the city if the city chose to refinance on a 12 -year term. Mr. Keith noted that typically refinance time is 10 years and the benefit of the 20 -year term, even though the interest rate is slightly higher is that it is more affordable and has the ability to call in bonds or refinance. Mayor Giles expressed that information given by presenters has been thorough MCCALL CITY COUNCIL Page 4 of 5 January 29, 2024 Special Meeting and provided recommendations based on the data for a 20 -year term. Director Stewart noted the challenges the city water staff have been faced with since 2022 and expressed that the WTP is on borrowed time. The sooner the project can start the better the city will be able to keep up service level without large rate increases. Council Member Nielsen expressed an interest in seeing the numbers on shorter bond terms. Mr. Loscher noted that analysis was run at 15-, 20- and 25 -year bond terms and the 20 -year is the most favorable based on the current market. Director Stewart asked if the term is set before or after the election. Mayor Giles noted when the city goes out to ballot the terms cannot change. Mr. McDevitt noted that the ballot is going to authorize and set the maximum term, a proposed interest rate and principal amount through the Election Ordinance. Council directed staff to prepare an Election Ordinance for the February 22, 2024 regular City Council meeting for the purpose of adoption and submission to the Valley County Clerk. ADJOURNMENT 1 Without further business, Mayor Giles adjourned the meeting at 7:15 p.m. ATTEST: BessieJo Wagner, City Clerk Robert S. Giles, Mayor MCCALL CITY COUNCIL Page 5 of 5 January 29, 2024 Special Meeting