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HomeMy WebLinkAboutMin - City Council - 1988 - 05/09 - WorkshopALLEN CITY COUNCIL CALLED - SPECIAL WORKSHOP SESSION MAY 9, 1988 Present: Joe Farmer, Mayor Council Members: Rex Womack Jerry Wilson, Mayor Pro Tem Bobby Glass Jim Wolfe Jim Pendleton Absent: Jack Pennington City staff: Jon McCarty, City Manager Marty Hendrix, City Secretary Charlotte Smith, Finance Director Guests: Lewis L. McLain, Jr., Administrative & Fiscal Consulting Services, Inc. Bob McLain, Administrative & Fiscal Consulting Services, Inc. With a quorum of the Council Members present, the Called - Special Workshop Session of the Allen City Council was called to order by Mayor Farmer at 7:04 p.m. on Monday, May 9, 1988, in the Council Chambers of the Allen Municipal Annex, One Butler Circle, Allen, Texas. Workshop Session: Presentation by Lewis McLain, with Administrative & Fiscal Consulting Services, Inc., on Updated Water & Sewer Rate Information (Agenda Item II) Mr. Lewis McLain distributed to the Council handout information showing rate increase considerations, which included information on the recommenda- tions that impact the fiscal years of 1987 - 88 and 1988 - 89; and information entitled "Revenue Bond Refunding Analysis as of May 1, 1988." Mr. McLain then began his review of those documents which included items that had been proposed at the workshop session held on April 18th: 1. Adjusting the water loss assumption from 25% to 20% in 1987 thru 1988 and from 20% to 10% in 1988 to 1989. 2. Raising the sewer ceiling to 14,000 gallons. 3. The critical adequacy test in 1987-88 is the 1.20 legal debt coverage test. 4. Lowering the G & A charge or funding all capital out of Capital Recovery Fees will not affect the coverage test. 5. If a ratio of 1.25 for the legal rate coverage test is met, if the ceiling on sewer is raised to 14,000 gallons, and if the water loss assumption is changed to 20%, then there would only be a need for a 25% rate increase to be effective by the end of May 1988. ALLEN CITY COUNCIL CALLED - SPECIAL WORKSHOP SESSION MAY 9, 1988 Page 2 Workshop Seasinn: Presentation by Lewis McLain, with Administrative & Fiscal Consulting Services, Inc., on Updated Water & Sewer Rate Information (cont'd) (Agenda Item II) 6. The alternative of adjusting the goal of meeting the legal rate debt coverage test for 1987-88. 7. To view a needed rate increase as effecting the next twelve months, not to be concerned with the coverage test at the end of the fiscal year 1988. 8. The rate increase would only then be 14.92%. The debt coverage test would not be met for FY 87-88, but would be met 12 months from now. 9. In order to meet the test by the end of FY 88-89, there would be a need to raise rates an additional 25% a year from now. Then a 5% rate increase would not be needed for 1989- 90. Mr. McLain then reviewed the figures shown on a chart of the North Texas Municipal Water District Water Purchase -- Changes in Water Loss. He then advised of the recommendations that will impact the fiscal year of 1987 - 88 and 1988 - 89. There was discussion by the Council on the removal of the $140,524 0£ interest accrued to the Beltz Outlet Mall per the contract and how it will effect the rate increase. There was further discussion on the general time frame for the debt restructuring to be presented by Mr. McLain. Mr. McLain explained to the Council the disadvantages of debt restruc- turing for their water and sewer revenue bonds. Mr. McLain then reviewed with the Council the "Revenue Bond Refunding Analysis as of May 1, 1988", beginning with the key terms to consider. Those terms included refunding versus advance refunding, partial refunding versus full refunding, call dates versus maturity dates, refunded bonds versus refunding bonds, escrow agent versus paying agent, state and local govern- ment securities (SLGS) versus open market securities, credit enhancements, underwriting fees, other issuance costs, present value versus future value, arbitrage limits, net interest costs (NIC) and true interest costs (TIC), bond indenture, and defeasance. Mr. McLain then reviewed with the Council the reasons for refunding the city water and sewer revenue bonds, the objectives of this refunding, key assumptions to consider, an overview of the process, and the conclusions. There was considerable discussion by the Council on this proposal for the refunding of the water and sewer revenue bonds debt. There was further discussion on the options that were available to the Council at this time and discussion on the Beltz Outlet Mall contract, how it can be shown in the figures, and how this effected the proposed rate increase. The Council reviewed again with city staff and Mr. McLain the major points to be considered. Those were: 1. Adjusting the water loss assumption from 25% to 20% in 1987 - 88 and from 20% to 10% in 1988-89. 2. Raising the sewer ceiling to 14,000 gallons. 3. To view a needed rate increase as effecting the next twelve months, not be concerned with the debt coverage test at the end of the fiscal year 1988. ALLEN CITY COUNCIL CALLED - SPECIAL WORKSHOP SESSION MAY 9, 1988 Page 3 Workshop Session: Presentation by Lewis McLain, with Administrative & Fiscal Consulting Services, Inc., on Updated Water & Sewer Rate Information (cont'd) (Agenda Item II) 4. Move forward with the debt refinancing. There was further discussion on how the proposed 13.4% rate increase was determined and what factors were involved in order to achieve that. There was discussion on the timing of rate increases and at what time during the year those increases should be implemented. Mr. McLain suggested that they should occur on January 1st or October let. There was discussion as requested by Councilman Womack on certain figures that were presented in the original study document that was dis- tributed prior to the workshop session held on April 18, 1988. City Manager McCarty advised of the water loss situation experienced on the Jupiter Road Water System and how the city intended to resolve this problem so that all of the water passing through the city's meter will be accounted and paid for. In further discussion, Mayor Farmer suggested that the proposed alternatives be reviewed by the Council and that they meet two tests. Those tests were, is the alternative reasonable and what was the net effect of it. The Council reviewed and discussed the water loss assumption from 25% to 20% in 1987 - 88 and from 20% to 10% in 1988 - 89 with city staff and asked the City Manager if he had any concerns in this assumption. Mr. McCarty expressed his concerns with the figures proposed for the next fiscal year of 1988 - 89 and whether they could be met. In conclusion, it was the consensus of the Council to go forward with this assumption as presented. The Council reviewed and discussed the raising the sewer ceiling to 14,000 gallons. It was pointed out how this increase will appear in the customer's bill and that it would be shifting the cost of the water to the sewer costs. In conclusion, it was the consensus of the Council to eliminate this item from consideration in the assumptions for the rate increase. Mr. McLain pointed out to the Council that this would bring the rate increase up to 14.92%. Of that figure, the rate increase for 1987 - 88 would be 13.34% and 1.58% for next fiscal year. The Council then reviewed and discussed changing the time frame for the debt coverage factor test. This would mean considering the time frame from May 31st rather than September 30th. The results of this change would mean that the city would not meet its debt coverage factor for FY 1987 - 88, but would meet it for next year. In further discussion, City Manager McCarty discussed with Mr. McLain how this revision in the proposed rate increase from the original 31% down to the 15% would be justified in the study in order to satisfy the bond rating agencies. In the conclusion on the discussion on changing the period for the debt coverage test, it was the consensus of the Council to go forward with changing the time frame from September 30th to May 31st. There was review and discussion on the last assumption, that being whether or not to go forward with the debt refinancing. There was considerable discussion on the refinancing of the bonds, how the interest rates could change, the advantages and the disadvantages and how to use the break even basis. In the conclusion on the discussion on whether to go forward with the debt refinancing, it was the consensus of the Council to not go forward with ALLEN CITY COUNCIL CALLED - SPECIAL WORKSHOP SESSION MAY 9, 1988 Page 4 Workshop Session: Presentation by Lewis McLain, with Ad®nistrative 6 Fiscal Consulting Services, Inc., on Updated Water 6 Sewer Rate Information (cont'd) (Agenda Item II) that at this time, however, work should be done by city staff in order to get ready to do the refinancing if the bond market opens up and the interest rates are favorable. There was further discussion on the Beltz Outlet Mall contract and the status of it. City Manager Jon McCarty advised the Council that there would be two additional items included in the proposed water and sewer rate ordinance to be considered by the Council. He advised that those items were the situation involving the Jupiter Road Water Supply System and to clarify in more detail the city's position as it relates to clogs in sewer lines and what action will be taken by the city. Discuss Schedule for Public Hearing and Consideration of Water and Sewer Rate Adjustment (Agenda Item I11) The city staff advised the Council that an ordinance would be prepared, based upon the discussions held at this meeting, for their consideration at the Council meeting to be held on Thursday, May 19, 1988, and that a public hearing would be held at that time on the rates. There was discussion on this public hearing by the Council and how it was to be conducted. Items of Interest to the Council (Agenda Item IV) City Manager Jon McCarty advised the Council of the results of a bid opening held on the infrastructure for the municipal complex site and that this item would also be placed on the Council's agenda for May 19. Adjournment (Agenda Item V) MOTION: Upon a motion made by Councilman Womack and seconded by Councilman Glass, the Council voted six (6) for and none (0) opposed to adjourn the called - special workshop session of the Allen City Council at 9:35 p.m. on Monday, May 9, 1988. The motion carried. These minutes approved on the 19th day of MAY , 1988. APPROVED: twe J96 Farmer, MAYOR ATTEST: Marty Hendrix, CEIC, CITY SECRETARY