03-26-1990 - Special
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CITY COUNCIL OF EDGEWATER
SPECIAL MEETING
MARCH 26, 1990
MINUTES
Mayor Mitchum called the meeting to order at 7:00 p.m. in the Community Center.
He stated the purpose for the meeting was for discussion and possible action on
the following: 1) Recommendation of financial advisor and consulting engineers
with regard to financing of utilities CIP and completion of State Revolving Fund
loan application and agreement and issuance of revenue bonds, and 2) Committee
report and possible action on referendum.
ROLL CALL
Mayor David Mitchum
Councilman Dan Hatfield
Councilmember Gigi Bennington
Councilman Russell Gold
Councilman Thomas Fish
City Attorney Jose' Alvarez
City Manager Elly Johnson
City Clerk Susan Wadsworth
Chief Lawrence Schumaker
Present
Excused
Present
Present
Present
Present
Present
Present
Present
Recol1l11endation of financial advisor and consultinq enqineers with reqard to
financinq of utilities CIP and completion of State Revolvinq Fund loan
application and aqreement and issuance of revenue bonds -
Mr. Stan Livenqood, Vice President, Raymond James & Associates, reviewed the 4-
page report held submitted to Council. He stated at the March 19th meeting
Council was notified there was to be a meeting this past Thursday in the
consulting engineers offices in Orlando and the DER representative was present.
He said the primary purpose was to determine exactly what requirements would have
to be met in order to insure the low interest rate SRF loans were still made
available to support the financing of the CIP in light of the fact they had a
substantial delay with the referendum. He pointed out it was immediately
determined if the loan agreements were to be secured and the revenues pledged
to support the agreements were to be special assessment revenues, we wouldn't
be able to meet the deadlines established under the SRF program. He stated if
the decision to hold a referendum is made, it will be approximately 60 days for
results to be known and upon referendum completion, the City would be in the
position to instruct the consulting engineers as to the type of sewer system
and the engineers would then start the design process for plans and specifi-
cations, which would be another 90 to 100 days. Councilmember Bennington asked
if that's in addition to the 60 days. Mr. Livengood replied yes, because it has
to be done sequentially, they have to determine what kind of system, then the
engineers must design it, and upon completion of the design and cost estimate,
the City can proceed to start the special assessment process which, based on bond
counsel Dan Livermore's memo, is an additional 60 days process. He pointed out
they're looking at 220 days before an equalization hearing could be held and
from that hearing and the special assessment process they'd finalize establishing
the assessment liens within Florida Shores for the benefit of all Florida Shores
properties. He said then there would be assurance that the special assessment
revenues would repay the loan and that's too late. He pointed out there's no
way anyone can guarantee the funds to fund this loan after the Federal fiscal
year ends September 30th, and this process takes them past that date.
Mr. Livengood stated their conclusion is if the City is going to enter into a
1990 loan agreement with the State to assure the first of the two loans, they'd
have to use special assessment revenues in order for the City to enter into the
agreement in a timely fashion. He added the DER representative agreed in concept
that what he felt DER could live with is an interim basis where the City would
pledge high quality non ad valorem revenue sources to initially provide the
pledged revenues needed in order to enable the State to enter into the agreement
with the City. He explained then there could be a substitution or exchange of
the pledged revenues but those pledges would be released and extinguished upon
the completion of the special assessment process within Florida Shores and the
assurance of that source of revenue.
Mr. Livengood recommended the only way the City can assure retaining the use of
these low interest loans is to agree to, on an interim basis, pledge non ad
valorem revenues in order to get the loan agreement completed in the June-July
time frame.
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Mr. Livengood pointed out they'd emphasized the City had previously agreed to
meet all conditions necessary by May 1st and if the City were unable to meet that
deadline, they'd be at risk of losing this loan commitment. He stated his
opinion is the risk of losing this loan commitment after May 1st is small if they
can meet the requirements in the June-July time frame, but there is a risk. He
explained it's a further risk to agree to pledge non ad valorem revenues and it's
not expected these revenues that would be pledged would ever have to be used to
repay the loan and expectations are the special assessment process will proceed
and those revenues will come into existence and there will be an exchange of
the two revenues. He pointed out there are a lot of hearings and notices and
equalization hearings for special assessments and it1s possible this process
cannot be completed prior to the November Council elections and there's a possi-
bility this special assessment process will not be completed as everyone would
expect, and in that event these pledged non ad valorem revenues that currently
are being used for other functions of City government would be pledged and
committed to repay this loan. He stated the only way they can retain this low
interest loan is to go ahead and pledge these non ad valorem revenues and they
recommend Council accept this risk because of the critical nature of these low
interest rates to the overall financial feasibility to keep the program within
reason and to enter into the 1990 loan agreement in the June-July time frame.
Councilmember Bennington asked if that's with the assumption there's a refer-
endum. Mr. Livengood agreed.
Mr. Livengood stated there's another requirement the City must meet before the
City can enter into the DER 1990 loan agreement. He pointed out the City has
three debts outstanding that have liens on the water and sewer utility revenues
and other resources and those three must be discharged before the City's in a
position to enter into the loan agreements with DER. He stated on March 7th they
presented to Council a financing plan for a 12-1/4 million revenue bond issue
to be issued in the May-June time frame and they would refund these three debt
obligations and raise in excess of 8 million new construction money necessary
to complete all the water system improvements.
Mr. Livengood stated their second recommendation regarding the refunding issue
is that the City delay borrowing the money to construct the water system improve-
ments until after the special assessment process is completed and proceed
immediately with as small a revenue bond as possible to defease the three
outstanding obligations.
Mr. Livengood summarized their recommendations: 1) City Council authorize the
preparation of legal documents by bond counsel to secure the revenue bonds and
1990 loan agreement with the State such that on a temporary basis those obli-
gations of the City would be secured by non ad valorem revenues as well as water
and sewer revenues and the special assessment revenues when they come into being.
He added theylll be exchanged later for special assessment revenues. 2) That
they approve what he earlier indicated for a delay in the issuance of bonds to
construct the improvements to the water system until after the special assess-
ment is completed. 3) Authorize the Finance Advisor to contact Sun Bank, owner
of the outstanding Bond Anticipation Notes, with a little flexibility to
negotiate a 30 to 90 day extension of maturity before repayment of that
obligation.
Councilman Fish stated they have a 60-day process because of the pending refer-
endum. He asked if they didn1t have the 60 day delay for referendum, how tight
will it be. Mr. Livengood replied it will be very tight without a referendum
and the one thing emphasized by DER is to look at May 1st and if you cannot sign
then, you are at risk because the original loan commitment was the agreement to
meet all the conditions by May 1st and they longer you delay, the more the risk.
He stated there's a process similar to other State processes where funds have
been appropriated for various projects and when people don't get the funds they
put the money into the pool. He added they'll be well into August without the
referendum process and it1s his opinion they're very much at risk if they adopt
a course of action that indicates it would be early August. Councilman Fish
stated if they don1t meet the time frame but enter into the interim financing
for non ad valorem revenues, theylll lose money this year, but what about in the
future? Mr. Livengood replied the consulting engineers could reply to that and
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March 26, 1990
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'he understands they get back into it and the project is re-evaluated and you're
back into the pool of over a billion dollars of loans requested by DER.
Ron Ferland, Dyer, Riddle, Mills & Precourt, replied if they don't access the
funds, you're treated like everyone else next year and you have no status or
standing except for priority points but you do lose for a year the amount of
money they've allocated to you for this fiscal year which is approximately 6.975
million for the wastewater treatment plant improvements and next year they're
on the planning portion for 6.6 million and are trying to increase that amount
with the re-use system and the outfall to the Indian River and they'll probably
allocate it at 9 million. He added the major problem in not accessing what
they've been allocated this year is that it was on a fundable list and next year
is planning and they may not get on the fundable list. He pointed out because
they're discharging to the Class II waters and alleviating a public health
hazard, they were told the points will put them higher on the list.
Councilmember Bennington asked what criteria was used to get the loan to begin
with. Mr. Ferland replied the loan program is similar to the former construction
grants and they looked at existing need, if they have to do it to come into
compliance with any consent orders, and do they have documented health hazard,
which is by the Health Department, the City, and DER, plus discharging to the
Indian River which is State protected Class II water, that this program will
eliminate. He noted they got about 200 points for that and have a total of 850.
Councilmember Bennington asked if it wasn't just design of the sewer system
itself but the criteria. Mr. Ferland replied no, it's central sewer in a septic
tank community to alleviate discharge to drainage ditches.
Councilman Fish asked how they rank on the list. Mr. Ferland replied they're
number 2 on the small communities list and that's why they got everything they
asked for the wastewater plant and they funded 4 or 5 communities. He said he's
talked to people who put the list together for next year and next year we'll be
competing in the master list behind Tampa and another big community for the
fundable portion because we have enough points.
Councilman Gold asked if the prospect of getting the loan depends on the type
of system. Mr. Ferland replied no, but by adopting the resolution for the 201
Plan which recommends low pressure is most cost effective and you go to a higher
priced system, there's a possibility you'll have to pay the incremental price
for the higher priced. He suggested they could approach the State with refer-
endum or Council action that because of the inability of the public to accept
the cost effective system, they're having to go to a different collection system
and request they fund that incremental amount. He added that doesn't guarantee
they will but it would be the first step.
Counci lmember Bennington asked if they go with gravity instead of the low
pressure they adopted with the 201, they may have to pay the difference, or what
does he base it on. Mr. Ferland replied the 201 Plan states it would be low
pressure which is the most cost effective to meet the needs and their guidelines
say you have to use the most cost effective method. He added when they talked
to them about the treatment plant and waste load allocation, they said they would
do advanced treatment which is the right thing and then one of the men said if
the waste load allocation says the limit is 1.5 and you're providing 1.0, they
may not fund that portion to get it from 1.5 to 1.0 as they say anything above
is the City's responsibility to pay.
Councilmember Bennington stated because they passed the 201 Plan that called for
the low pressure as most cost effective, that would be the thing that would
jeopardize whether they pay the difference between low pressure and gravity.
Mr. Ferland agreed.
Councilmember Bennington stated she has a lot of questions but hasn't had enough
time to go over them. Mr. Livengood apologized for the late submittal, adding
they're on a pressing time schedule and there are large risks either way.
Councilmember Bennington stated it bothers her to pledge non ad valorem sources.
She asked if they might have to do it regardless of which system is selected.
Mr. Livengood explained that Councilman Fish had asked him about doing away with
the referendum and cutting 60 days time and if that would solve the problem to
get into a position to have the special assessment revenue in place and not do
the interim that would then be exchanged, and held indicated the longer after
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March 26, 1990
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'May 1st it takes for the City to get into position, the more at risk they are
at losing this year's loan commitment. He added the special assessment process
is a very equitable process and you end up with the owners of the property who
will benefit paying for it. He pointed out the end result is an enforceable lien
on real property and the process provides for safeguards of the public with
advertising requirements and public hearings and public notices. He added it
always takes longer than the minimum time and bond counsel allowed 8 weeks or
60 days and he's not highly confident that from the time the consulting engineers
give them a cost estimate and plans and specifications, that 60 days later
they'll have finalized special assessment rates and revenues to use for this loan
agreement.
Councilmember Bennington asked if his estimate is August. Mr. Livengood replied
that would be the earliest. Councilmember Bennington stated no matter what they
do, they1re in jeopardy. Mr. Livengood agreed because they're not going to make
May 1st but they judge that to be a small risk and there probably won't be an
opportunity for the State to say they're taking it away until a hearing is held
perhaps the first week of June. He pointed out DER doesn't want to do this and
they want to make the loan but a lot of people also want this money and if
Edgewater can't meet the requirements in a timely fashion, it will go elsewhere.
Counci1member Bennington asked if they1d have to wait for next year if they lose
it, or if there's an alternative. Mr. Livengood replied the difference in
capital cost between low pressure and gravity is more than 8 million and a second
number is 10 million, the value today of a 3% low interest rate on about 15
million financed over 20 years and the value today of 4-1/4% versus 7-1/2%. He
added there's about 18 million at risk and if the more expensive system is
selected and not funded at the lower cost, it's an additional 8 million and
there will be an additional interest expense on that borrowing that has a value
of 10 million over the life.
Councilman Fish asked why it would be difficult to finance at public market.
Mr. Livengood replied the major security provision is the ratio between the
market value of the property being assessed versus the assessment and they'd be
getting into a range for unimproved lots of 30 to 40% of the market value for
the assessment. He added a financial analyst looking at secured bonds will ask
if someone wants to pay the bill on that assessment or will he let the property
go for tax certificates, and if so, will there be a buyer for that certificate.
Councilmember Bennington asked if it can be paid at one time if they go with
special assessments. Mr. Livengood replied yes, if they want. Counci1member
Bennington stated they1re assuming financing over 20 years. Mr. Livengood said
theylll be given the opportunity to finance it and the assessment will be levied
against the property as a special assessment and the property owner can repay
the amount in 20 annual payments at 1% greater than the borrowing cost or they
could prepay in cash immediately or any time in the future the unpaid principal
amount. Counci1member Bennington asked if the more people who pay up front, the
better financially off we would be. Mr. Livengood replied the City is neutral
from that standpoint and the question is getting the financing in place and
getting the capital secured. He added the City does not make money.
Committee report and possible action on referendum - Counci1member Bennington
stated she and the City Clerk had several telephone conversations with Katherine
Odham and she1s provided an information sheet which shows the earliest possible
date for referendum would be May 22nd or May 29th. She added the registration
books would close April 23rd for May 22nd and April 30th for May 29th. She
stated they'd use the old voting machines. She also stated it would cost
approximately $9,500 to $10,000 for this referendum. She noted the last
referendum in February of 1988 cost $6,000 approximately and the County bore
$1,200 of that. She said Katherine Odham will not certify this referendum other
than to say it was held in accordance with State Statutes and won1t certify the
voters are legitimate or whatever and that's their problem. She said they
contacted the City auditors to get some kind of certificate to see if they'd
certify our work done. City Clerk Wadsworth said they have approximately 2,814
people that have sewer and four of the five precincts are involved in the sewer
referendum. She added they1d have a list from Katherine Odham and would cross
reference it with the utility billing list to come up with names. She said
they'd invited John Vodenicker to speak tonight on what their firm could do.
Counc il member Benn i ngton exp 1 a i ned they wanted a way to get the referendum
validated in case there's a court challenge so it would be more legal.
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March 26, 1990
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'John Vodenicker, partner with Ernst & Young auditors, said he and Tom Cox have
been discussing this process and they considered using a computer to load it in
but feel that would take too much time and they weren't sure they could accomp-
lish that as they1d have to load Katherine Odham's list and then cross reference
it and decided it would probably be best on a manual basis, He recommended they
hire temporaries or use City staff and do the process of verifying voter regis-
tration to water customers. He said it would probably take about two weeks to
go through approximately 3,000 customers and the first pass would be to try to
get who resides at these homes and then go to voter registrations because they're
in alphabetical order and use the utility listing as the source to try to
identify each of the 3,000 customers and see if they're legitimate voters or no.
He added they can assist the City to initially establish the control to be sure
you have a good list of voters that are water customers and they1d perform some
test of the listing and go behind the clerical people to be sure on a test basis
the utility water only customers are legitimate voters. He proposed they give
a 1 etter of agreement upon procedures and they wou 1 d do the i r test i ng on a
sampling basis and results should give them an indication of whether they have
a good list. Councilmember Bennington asked the cost for their services. Mr.
Vodenicker clarified it would be about 250 hours and they estimate about 32 to
42 hours on their part so it will range about $2,000 to $2,500 for theirs.
Councilmember Bennington said it's not staff or temporary help. Mr. Vodenicker
agreed that's right.
Councilman Fish stated it seems an expensive and painful process to go through.
Councilmember Bennington explained she took the figures given to them and broke
it down and figured it will cost $9,500 to $10,000 for this referendum with the
cost of the auditors and temporary help. Mr. Vodenicker suggested they could
do a door to door survey but he's concerned they'd miss people not at home. He
said if someone lives there and is a tenant and is the voter, they'll vote on
this property and perhaps they could get owners of the property from the listing.
Councilmember Bennington said the City Clerk compared the list on survey cards
and she read the numbers: 5,950 cards sent out, total returned were 3,346; low
pressure 2,323 and gravity 1,023; 1,283 people with Edgewater mailing address
want low pressure; 713 with Edgewater mailing address want gravity, or a
difference of 570. She added there were 1,040 mailing addresses outside
Edgewater that wanted low pressure and 310 outside Edgewater wanted gravity.
She said several people didn1t get cards and they didn't realize if you owned
5 pieces of property, you could vote 5 times and if you're a property owner but
don't live there you cannot vote. She pointed out the way the referendum is set
up, the tenant will get the vote.
Councilman Fish stated this has been a difficult issue for all of them and every
time they turn around there's another problem and they're in a quandary with
major decisions to be made very soon because if they wait too long, they may lose
the low interest money and 10 million over 20 years is a substantial amount.
He said survey cards went out but they had problems and inequities, but if they
pledge non ad valorem revenues that fund day to day operations of the City and
something goes wrong with this process because they took too much time, they
could be in serious trouble. He pointed out with November elections there's a
possibility some things may not get done if there's an entirely new Council.
Councilman Fish moved they not go to referendum but. that instead this Council
elect to install the gravity sewer system as it seems as though in the long
run it will probably be more cost effective and less costly over a long period
of time. Councilman Gold agreed with Councilman Fish, adding the longer they
delay this, the more costly it has become and Council should live up to their
responsibilities and they should determine it, and he seconded the motion.
Councilmember Bennington stated she has a problem with a major reverse decision
without the entire Council and they've held off board appointments for a full
Council and this issue is too important not to have a full Council. She added
she'd like to have the time before she votes and she tends to agree with
Councilman Fish but wants to read the financial advisor's recommendation and
study it and ask questions. She asked the estimated cost of the gravity system
to the individual homeowner that will not be special assessed to bring it to the
City line. Mr. Ferland replied the cost to run the lateral from the home to the
street is approximately $375-$400 and another $250 for abandonment of the septic
tank. He explained that's pumping it out, crushing the bottom, and filling it
with clean sand, which is required by the Health Department. He added front
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March 26, 1990
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, . footage cost for gravity was $31 a month as a pro rated special assessment which
included that lateral cost, and it's about $26 a foot in front of the home. He
pointed out that many people can do it themselves which is a cost savings and
the City shouldn1t have any problems with that because they wouldn't be
responsible if that lateral clogged.
Councilmember Bennington asked about the dewatering cost with gravity and what
problems they'll have and where the water will go. Mr. Ferland explained they' 11
be well pointing with 2" pipes in the ground with 50 to 60 along the route they
will be excavating for the gravity sewer line and they'd stay on 24 hours a day
with big diesel engines and the water that's removed will be discharged into the
drainage systems and canals located throughout Florida Shores to bring the water
table down. He said itls usually 2 to 3 nights before, and then during the
excavation possibly, to prevent water from coming back in and once it's laid,
they'll pick up the well points and move that along to where they're working on
the next area. Councilmember Bennington asked if St. Johns River Management
has to permit this well point. Mr. Ferland replied he's never needed a
consumptive use permit from them for well pointing for dewatering for that sort
of excavation.
Councilmember Bennington again stated she'd like a full Council for this vote
because of the complexity and how important it is. She said if they don't want
to do that, she'd like to amend it to go with gravity system and paid for by the
Florida Shores property owners and not the City as a whole. Councilman Fish did
not agree to amend his motion. Mayor Mitchum stated he'll vote no because he
listened all these weeks to the reason for a referendum because they needed a
choice and hels had just as many calls from people who want low pressure as
gravity and this would deny them their choice.
Councilman Fish restated his motion to forego the referendum and install the
gravity system. (Councilman Gold had seconded his original motion.) Motion
DID NOT CARRY 2-2. Mayor Mitchum and Councilmember Bennington voted NO.
Councilmember Bennington moved they delay any further' action until the next
Council meeting when they have a full Council. Councilman Fish seconded the
motion. Motion CARRIED 4-0.
Mayor Mitchum suggested a motion to adjourn. Councilman Fish so moved.
Councilman Gold seconded the motion. Meeting was adjourned at 8:12 p.m.
Minutes submitted by:
Lura Sue Koser
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6 Council Special Meeting Minutes
March 26, 1990