February 13, 2008 Minutes

 City of Heyburn Council Minutes

February 13, 2008

7:00 P.M.

 

Council Present:

Cleo Gallegos, Dee Ray Bailey, Rocky Baker and Leann Smith.

Employees Present:

Linda Dayley, Scott Spevak and Steve Tuft.

Visitors Present: George Warrell, Sven Berg, Rose Schmitt, Nile Maricle, Del Kohz, Bill Jerrel, Eric Heringer, Josh Brown and Linsay Brown.

 

Council President Dee Ray Bailey excused Mayor Anderson.

 

Pledge of Allegiance led by Council President Dee Ray Bailey.

 

Meeting Conducted by Council President Dee Ray Bailey.

 

Approve Minutes of the Council Meeting on January 23, 2008.

Motion by Leann Smith to approve the minutes for the Council Meeting on January 23, 2008 as written. Second by Cleo Gallegos. Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Approve paying the Bills except the Bailey Oil Bill.

Motion by Rocky Baker to approve paying the bills except the Bailey Oil Bill. Second by Cleo Gallegos. Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Approve paying the Bailey Oil Bill.

Motion by Cleo Gallegos to approve paying the Bailey Oil Bill. Second by Leann Smith. Roll Call Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Abstained; Rocky Baker - Aye; Leann Smith - Aye.

 

Discuss/Approve Purchasing Water Rights - Nile Maricle - Scott Spevak.

This item moved until later in the meeting.

 

Discuss PSI Environmental Services, Inc. Garbage Contract - Scott Spevak.

Council President Dee Ray Bailey discussed with the Council whether to retain PSI Environmental Services, Inc. Garbage Contract, which would include a probationary period of six months.

 

Motion by Leann Smith to continue our services through PSI Waste Systems for a probationary period of six months. Second by Cleo Gallegos. Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Discuss/Approve Selection of General Services Agreement (Task Order Agreements) - Scott Spevak.

City Superintendent Scott Spevak discussed with the Council the selection of a General Services Agreement (Task Order Agreements), which simply is contacting them on a job-to-job basis.

 

After discussion this item will be back on the next agenda.

 

Discuss/Approve Ordinance No. 504 and Summary of Ordinance No. 504.

Bill Jerrel and Eric Heringer from the State Bond Bank updated the Council on the $3,000,000 water loan.

 

The City’s application to receive financing through the Idaho Bond Bank Authority (the “IBB”) received final approval from the IBB’s Board on January 29, 2008.  This memo outlines the remaining steps in the process of completing the financing and well as information on some of the key loan terms for the IBB’s Loan to the City.

 

I.             Schedule of Events

 

Attached is a Schedule of Events for your use and review.  Key dates include:

 

·   February 13, 2008 -  City adopts Ordinance authorizing Loan with the IBB

·   March 3, 2008 –   IBB prices bonds – final interest rate and repayment term set

·   April 1, 2008 –        IBB Loan closes – City receives Loan proceeds

 

II.          Review of Loan Terms

 

The City should receive a draft of the Loan Agreement together with the authorizing Ordinance.  The authorizing Ordinance sets pricing parameters for the Loan and delegates the authority to accept the final pricing terms (interest rate and repayment term) to the Mayor.  The following are some key provisions of the Loan Agreement:

 

Pricing Parameters:

 

·      Not to exceed par amount:          $3,000,000

·      Not to exceed interest rate:               5.00%

·      Not to exceed repayment term:       30 years

 

The repayment term (20 year, 25, year, 30 year or somewhere in-between) will likely be dictated by the coverage requirement discussed later in this memo.  The final interest rate on the Loan will be determined based on the interest rate market the day the IBB sells its bonds to fund the Loan (March 3, 2008).  Interest rates are currently below the 5.00% not to exceed rate.

 

Key Loan Terms

 

  • Reserve Fund – The City will be required to establish at closing and maintain a debt service reserve fund in an amount equal to the lesser of:  i) 10% of the proceeds of the Loan, ii) maximum annual principal and interest on the Loan, or (iii)125% of average annual principal and interest on the Loan.

 

The practical application of this Reserve Requirement will be maximum annual principal and interest on the Loan which will vary depending on the final repayment term and interest rate. 

 

  • Coverage Requirement – The Loan Agreement requires the City to maintain Net System Revenue equal to 1.33 times the annual debt service on the Loan for the first four years after the loan is made (the period of future rate increases) and 1.25 times the annual debt service of the Loan thereafter.  The definition for Net System Revenue can be found in the Loan Agreement (Revenues do not include hook-on fees and O&M expenses exclude depreciation).  The coverage requirement needs to be maintained for the entire life of the Loan.

 Additional Bonds Test – The additional bonds test (the “ABT”) lists the provisions for allowing the City to issue additional sewer revenue bonds that are secured by Net System Revenues of the Water Fund on a parity basis with the IBB Loan.  The ABT essentially requires that the City be able to maintain between 1.25 and 1.33 times coverage of all system debt that is paid from Net System Revenues on a parity basis prior to issuing the additional debt in the future.  The ABT also allows the City to issue subordinate debt, but not any debt with a senior lien on Net System Revenues.

 

Items for Discussion

 

  • Review projected coverage table (attached) to evaluate ability to meet coverage.

 

  • Discuss how the Reserve Fund will initially be funded.

 

III.        Pricing

 

Interest rates on the IBB loan will be set on March 3rd.  That same day, a form will be sent to you for your acknowledgement of the rates and confirmation of receipt.  We will need to have you return an executed copy immediately. 

 

IV.       Closing 

 

Between March 3rd and March 31st, you will be sent a packet of documents to execute and return to the Bond Counsel.  These are closing documents that will become part of your transcript.  Closing documents include the Loan Agreement, the Closing Memorandum that shows the sources and uses of your Loan proceeds among other things.

 

Given the revenue and expense amounts provided, we then calculate the Net System Revenue to estimate what is “available” after paying O&M to make payments on the bonds.  The bond amount is then structured so that the Net System Revenue provides “coverage” of the bond payment (133% coverage in FY ’08-FY 2012 and 125% coverage The 125% coverage in FY 2013 and after is a requirement of the bond bank – but the estimates come in below that percentage (121%).

 

I believe that the projections you have provided for Revenues and Expenses are on the conservative side (which we prefer to see) and I think can be summarized as follows:

 

REVENUES:

FY 2008 revenue increase is based on the rate increase applied to the minimum base rate only – and does not include any additional users of the system or an increase/decrease in consumption charges.  Likewise – projected revenue for FY 2009-2012 only assume increase in revenue from the increase in the minimum base rate (no additional users or increase/decrease in consumption charges).

 

EXPENSES:

Expenses estimates/projections for FY ’08 are based on a review of the budget compared to the first 4 months actual results.  The result is an estimated $50,000 (or 18.3%) increase in Operating Expenses over FY 2007.  Projected increases in expenses for FY 2009-2013 assume 3.00% annual increases (starting with 3.00% increase over FY 2008).

 

Motion by Rocky Baker to read Ordinance No. 504 by title only with the suspension of three readings. Second by Leann Smith. Roll Call Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Attorney Steve Tuft read Ordinance No. 504 by title only.

 

AN ORDINANCE AUTHORIZING AND PROVIDING FOR THE ISSUANCE OF A WATER REVENUE BOND, SERIES 2008, IN A PRINCIPAL AMOUNT NOT TO EXCEED $3,000,000, FOR THE PURPOSE OF FINANCING IMPROVEMENTS TO THE DOMESTIC WATER SYSTEM OF THE CITY OF HEYBURN, MINIDOKA COUNTY, IDAHO; DESCRIBING THE BOND; PROVIDING FOR THE COLLECTION AND DISPOSITION OF REVENUES; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BOND; ESTABLISHING FUNDS; PROVIDING COVENANTS RELATING TO THE BOND; PROVIDING FOR THE SALE OF THE BOND TO AND APPROVING A FORM OF LOAN AGREEMENT WITH THE IDAHO BOND BANK AUTHORITY; PROVIDING FOR RELATED MATTERS; PROVIDING FOR SUSPENSION OF THE RULE FOR THREE READINGS AND DECLARING THIS ORDINANCE ADOPTED AFTER ONLY ONE READING AND PROVIDING AN EFFECTIVE DATE.

 

Motion by Leann Smith to approve Ordinance No. 504. Second by Cleo Gallegos. Roll Call Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Approve the Water Loan Agreement between Idaho Bond Bank Authority and the City of Heyburn.

Motion by Leann Smith to approve the Water Loan Agreement between Idaho Bond Bank Authority and the City of Heyburn, Minidoka County, Idaho and to approve Mayoral signatures for the water loan. Second by Rocky Baker. Roll Call Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Approve Authorization for Mayoral Signatures for the Water Grant.

This item was included with the approval of the Water Loan Agreement.

 

Discuss Approve Purchasing of Water Rights.

Delbert Kohtz introduced himself to the Council. With direction from Attorney Steve Tuft this item was tabled and will be discussed in Executive Session.

 

Discuss/Approve Handheld Meter Reading Proposal - Scott Spevak.

City Superintendent discussed with the Council about purchasing handheld meter reading equipment from Application Software Products starting with one route.

 

Motion by Leann Smith to authorize Scott to purchase the electric hand held meter reading equipment not to exceed $25,000. Second by Rocky Baker. Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

Meeting Adjourned at 8:20 p.m.

 

Executive Session for Litigation and Land Acquisition of Real Property as Authorized by Idaho Code Section 67-2345.

Motion by Rocky Baker for an Executive Session for Litigation and Land acquisition of Real Property as authorized by Idaho Code Section 67-2345. Second Cleo Gallegos. Roll Call Vote: Cleo Gallegos - Aye; Dee Ray Bailey - Aye; Rocky Baker - Aye; Leann Smith - Aye.

 

 Council Meeting adjourned to Executive Session at 8:28 P.M.

 

Executive Session Minutes.

Council Present:

Cleo Gallegos, Dee Ray Bailey, Rocky Baker and Leann Smith.

Employees Present:

Scott Spevak, Steve Tuft and Linda Dayley.

 

The executive session commenced at 8:28 P.M. and ended at 9:10 P.M. The executive session consisted of a discussion of litigation. No decisions were made.

 

 

 

 

Dee Ray Bailey, Council President

 

 

 

Linda L. Dayley, City Clerk/Treasurer