08-05-97 WSCITY OF OTSEGO SPECIAL COUNCIL WORKSHOP
FOR FINANCING SEWER AND WATER
AUGUST 5, 1997 - 4:30PM
MINUTES
1. Mayor Larry Fournier will call meeting to order:
Mayor Fournier called the meeting to order at 4:30PM
Roll Call
Mayor Larry Fournier, CM Vern Heidner, CM Virginia Wendel and CM Berning
were present. CM Suzanne Ackerman was absent.
Tom Truszinski, Vice President, Juran & Moody, Inc., John Harwood and Kevin
Kielb, City Engineers, and Elaine Beatty, City Clerk/Zoning Administrator were also
present.
2. Information on financing of sewer and water .project by Tom Truszinski, Juran
and Moody. Inc., with input from John Harwood and Kevin Kielb, Engineers,
Mayor Fournier turned the meeting over to Tom Truszinski who distributed a cash
flow sheet for preliminary finance information of the sewer and water project. (see
attached).
Mr Truszinski reviewed the sewer and water information on financing with the
Council. The water improvement interest is based on current market, bumped up 1/4%.
He does not know what 1998 rates are. The total debt service will start out low and
gradually increase over the loan. ( He explained further)
Kevin Kielb stated that year 10 more work needed to be done re: replacement
and additional customers on line. John Harwood added that they followed the system for
the wastewater treatment study.
Discussion of size of water tower and that it will be matched to the'treatment
plant.
Tom Truszinski went on to explain that No. 8 is No.6A multiplied by column No.
7, (with cost of inflation plus two percent per year - multiplied together).
No's 6A and 7 is a revenue source. Column No. 9 is other system revenue.
Column 10 assumes 5.25% on debt service fund money. Column 13, every year you are
in the black 2019 you would have one million six hundred in excess cash based on
connection charges of $3,875.00. (conservative increase). The reason this is favorable is
by the time you update the system, you will have a trunk fund.
Virginia Wendel asked if cost per connection (#7) includes pipes to the house?
John Harwood answered only connection costs, If the pipe is in the street, add costs for
that. (Lateral add to connection costs.) More discussion of lateral and how charged.
John Harwood said it depends on the average of the project. Laterals would be part of
the development cost for their internal system.
The operation and maintenance (O & M) $32,000. per year. That is above and
beyond the water bill.
Tom Truszinski said he looked solely at debt as he didn't want an inflated picture.
CITY OF OTSEGO SPECIAL COUNCIL WORKSHOP FOR FINANCING
SEWER AND WATER OF AUGUST 5, 1997 - 4:30PM
-Page 2 -
John Harwood said some of the costs are better than a feasibility cost. When
refined, the connection charge of $3,875.00 may be reduced, when we order a public
improvement project.
Discussion was had as to costs presently to drill a well/install a septic system.
Wastewater was discussed - (See Page 2 of report attached). In the year 2000,
200,000 gal plant $2,100,000.00. Collection $2,134,000.00 ($165.00 capitalized interest
put on). In year ten, the second improvement put on of 1.9 million dollars. John
Harwood indicated that those were numbers from Bonestroo's report. Splitting these
apart is very important. Interest rate below 4% (conservative number). From date
project bid, 18 -months loan free interest for the construction period (no interest). The
bad thing is you pay even principal (straight amortization). The payment is the same year
1 and year 20. $150,000.00 capitalized interest to cash flow the project for the first ten
years.
Column No. 1 - $4,399,000. Year 2,000
Column No. 2 - Interest
Column No. 3 - Total debt service
Column No. 3A - Future debt - 20 year bond - 20 year analysis
Column No. 4 - O & M - Based in information from John Harwood.
John Harwood stated that with ten year increments, if refined, we can do annual increase.
Column No. 5 - O & M/Debt service/future debt
Column No. 6 - Residential Equivalent Connections per year
Column No. 6A - Cum. REC'S
Column No. 7 - $5,100.00 - ($3,000.00 for collection - $2,100.00 to treat)
Column No. 8 - Annual connection income (bumped by 2%).
Column No. 9 - Accumulated connections
John Harwood said it is based on $40.00 per quarter - sewer charge.
No. 13 - $150,000.00 interest cash flows. Year 2010 (second loan) always in the
black. (based on assumptions)
Mayor Fournier asked where collection system comes into play? John Harwood
said $2,134,000.00 has 1.3 some basis - two major lift stations connect forcemains to
treatment. Trunk portions are incorporated into this bond issue.
Mark Berning - PFA Loan has no legal, engineering or planning expense
included?. Answer: Those are calculated in this.
Discussion of acquiring land and if it would be done by condemnation, etc.
Mayor Fournier asked what costs are not included? John Harwood - Cost in
treatment plant study - land figured at $5,000.00 per acre. Collection system cost figures
existing right-of-way and existing easement, platted property as it develops, other along
the existing right of way and easements. (Very little easement costs, if it goes consistant
with development).
Mayor Fournier asked if it includes engineering and legal fees? John Harwood
answered normally yes.
CITY OF OTSEGO COUNCIL WORKSHOP RE: SANITARY SEWER
/WATER PROJECT AUGUST 5, 1997 - 4:30PM
- PAGE 3 -
Discussion was had on figures from reports regarding costs for water and sewer
and how they compare with other cities.
Bonding was discussed and if we had a limit for same. Conclusion was that the
City of Otsego has the ability to finance these projects and is in good shape with bonding
capacity compared to other Cities.
Tom Truszinski said he would work with the system so it does not impact the
general fund. Municipal bonds are now at a thirty year low as far as interest rates.
Mark Benning was concerned with slow hook-ups in the beginning and our two
lift stations in the center of the commercial areas. Its one-quarter mile to residential.
Very few communities allow leap frog development, industrial takes two to three years to
get going.
John Harwood said there will be some leap frog development. There appears to
be development pressure. We are trying to come up with cost for 1/4 mile. I assume the
City would pay the cost for leap frog. Cost funded by trunk system.
Discussion of #39 and Parish area and servicing West of this area Commercial
properties. John said we can come up with an estimate.
Discussion was had of interest rates - The next 6 to 12 months things look stable.
Discussion of present moratorium and development, possible extension of the
immediate service area.
Discussion of 68 RSCS being conservative, stormwater and other fees that are an
issue of development. It was noted that the interest rate is a fixed rate on date of PFA
loan execution.
John Harwood will meet with property owners in the sewer and water service
area.
4. Any Other Business:
There was no other business
Vern Heidner motioned to adjourn the meeting, Virginia Wendel seconded
the motion. Motion carried unanimously.
ADMINISTRATOR