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HomeMy WebLinkAbout1990 04 16 City Commission Workshop Minutes . . . ..... WORKSHOP MEETING CITY COMMISSION CITY OF WINTER SPRINGS APRIL 16, 1990 The Workshop Meeting of the City Commission of the City of Winter Springs, Florida, was called to order by Mayor Leanne M. Grove at 7:00 p.m. Roll Call: Mayor Leanne M. Grove, present Deputy Mayor Cindy Kaehler, present City Manager Richard Rozansky, present City Attorney Frank Kruppenbacher, present Commissioners: Arthur Hoffmann, present Philip A. Kulbes, present William A. Jacobs, present Paul P. Partyka, present Industrial Waste Services - Rates: City Manager Richard Rozansky explained that Industrial Waste Services has asked to give a small presentation this evening. They distributed reports to the Commission for their information and then another meeting will be held. Mr. Tom Daley and Mr. Julian Knackert spoke to the Commission. They spoke about some of the increases over the last few years, the major increase was because Seminole County had closed the landfill at Upsala. The Commission discussed mandatory garbage service, and having it included on the property tax rolls with Seminole County. For the next meeting Mr. Daly was asked to provide figures as to what the cost would be if the City did the billing, and also to include recycling. Another meeting will be held next month. Mayor Grove called a recess at 7:40 p.m. and called the meeting back to order at 7:50 p.m. Seminole Utilities Acquisition: Attorney Bill Sundstrom, Attorney John Jenkins, Terry Zaudtke, engineer and Stanley Cohen with the firm of Rachlin & Cohen were present to speak to the Commission. Attorney Sundstrom explained that about a year ago the City Council unanimously approved a resolution indicating an intent to acquire the assets of Seminole Utility through eminent domain proceedings. The lawsuit was filed in Circuit Court in Seminole County against Seminole Utility Company, Citicorp which owns an interest and Good Gulfstream Housing Corp. which owns a spray field. That lawsuit was filed in July of 1989. Attorney Sundstrom explained that all of the remarks that are being made to the Commission by himself, Attorney Jenkins, Terry Zaudtke and Mr. Cohen plus the City Attorneys should be considered remarks being made to counsel in the process of on-going litigation. Because he said technically we are still involved in litigation and the comments they make to the Commission are relative to the negotiations settlement of that litigation. On Oct. 23, 1989 an Agreement of Settlement of Condemnation lawsuit was presented to the Commission. That Agreement basically provided the mechanism by which the City would have acquired the assets of Seminole Utility Company and a spray field from Good Gulfstream Housing Corp. for a total of $12,300,000, being made up of a purchase . . . ~ Workshop Meeting, City Commission, April 16, 1990 Page 2 price of $10,500,000 for the utility and $1,500,000 for the spray field and $300,000 ancillary expenses to the defendants in the defense of that action. Attorney Sundstrom said at that time the Settlement Agreement was presented to the Commission and they suggested that they would carve out the terms and conditions of the trans- actions that they would recommend to the Commission as fair, and then they would go about the due diligence that was involved. The City was advised at that time that Topeka Group Inc. which is a wholly owned subsidiary of Minnesota Power Corp. had an option to acquire the assets of the Utility, and that that option would insure that under certain terms and conditions that there was litigation involved, and that there was a potential for additional litigation. True to that prediction, the City was sued directly by Topeka Group under a claim of conspiracy and others. In December the Commission was presented an amendment to the Settlement Agreement which disposed of the interest of Topeka. That amendment was executed, and it provided that the asset acquisition would be settled by April 15th. Attorney Sundstrom said "we are here today to bring you up to date as to what has happened since December and April". Mr. Terry Zaudtke then spoke to the Commission. He explained that previously he reported to the Commission they had done some preliminary investigation of the assets and found those to be in generally good condition. They have proceeded with some more detailed investigations, comparing the actual facilities with criteria that has been established for the City of Winter Springs to determine the capacity of each component, high service wells, etc. No significant problems were found. At the early part of the year there was a requirement by DER to load test all their existing wastewater disposal facilities and they put a temporary moratorium on Seminole Utilities. Seminole Utilities went ahead and did the testing,_ etc. and submitted a final report by Jammal & Associates which backed up their disposal capacity of the various sites and that was approved by D.E.R. Mr. Zaudtke said that D.E.R. issued them an operational permit on their wastewater site for 2.012 mgd which represents a capacity at their current usage of 8,000 per month per customer of various different components, the smallest of which would be the filtration which produces around 7400 customers. We have an agreement with Seminole Utilities the future criteria is 7272 for both water and sewer. The one remaining item that needs some additional improvements is the digester capacity. That is the opinion of the City engineers. D.E.R. has permitted the whole facility for 2.012 mgd. Mr. Zaudtke said we have an agreement to escrow future payments of $500,000 should D.E.R. mandate any improvements to the wastewater system, whether it be digester or other components. Mr. Zaudtke explained on the water side, they had determined that based on our criteria, that two additional high service pumps would be required to meet the 7272 futures and one would be needed to meet the 5000 level. The developer agreed to supply, at closing, $50,000 to cover one additional high service pump. The other high service pump would be covered under future revenues and future fees. In addition it was also determined that a well would be needed in the future, and the developer has agreed to provide a well site. The well itself would be constructed and purchased under future revenues and future impact fees. ~ ...~ ~. . Workshop Meeting, City Commission, April 16, 1990 Page 3 Mr. Cohen reviewed the financial aspect of the transaction. The price to be paid was $10,500,000 for the utility system properties, there was $300,000 added for reimbursement of certain costs and $1,500,000 for land acquisition to be used for effluent disposal. Mr. Cohen said they verified the accuracy of the projections that had originally been made with respect to revenues and cash flows available to service debt, and they came within a 1% variance. Mr. Cohen said he received the final report filed for 1989 by this Utility with the Florida Public Service Commission, and the depreciated cost, original cost, unadjusted for any inflationary cycles, actual cost of this system as depreciated was $10,496,000 as of Dec. 31, 1989. He said we are purchasing the system for $10,500,000. Mr. Cohen explained the financing of the transaction envisioned a five year Bond Anticipation Note with a refunding at the end of the fifth year, at which time it was anticipated having on board approximately 5,000 equivalent residential connections as opposed to what was on stream when we first got into this thing, somewhere around 3,700 customers. It was further anticipated at the end of the first year we would refund the $12,300,000 BAN and then go long term, and in order to payout $12,300,000 BAN, we would have had to issue approximately $14,195,000 in gross bonds, deduct from that the bonding costs, the funding of the Bond Fund Reserve and that would leave approximately $12,300,000 to payoff the debt. . The investment bankers for the sellers did an analysis on a 35 year bond, interest only, for the first five years which would allow the system to build up to the 5,000 level of equivalent connections that was needed. By going to the long term 35 year market for $12,300,000 in bonds now we would save$1,895,000 in additional bonds five years from today by locking in the interest rates and not taking any chances on variations in the interest market. Mr. Cohen said they have met with the two major insuring agencies for bonds, MBIA and AMBAC, and are still awaiting their final commitment. The insurance costs will be absorbed by the sellers. The sellers will also pay for the first few years of insuring the bond fund reserve and they would also pay all the underwriters discounts and issuance costs. Mr. Cohen explained our contract with the sellers provides that after they reached a threshold level of 5,000 customers on stream, we then will pay them out of connection fees for future customers up to a maximum of an additional 2272 units. If it should come to pass that D.E.R. orders the City to put in that additional digester which will be several years from now before we reach even those early flow levels, we have an agreement from the sellers that we will withhold the cost which is estimated to be $500,000 from any future payments that they get from this City for new customers when they come on line, so the City nor its customers will pay for that digester which may be a contingency, will be paid for by the sellers out of the proceeds that they are entitled to when future customers come on beyond the 5,000 unit level. As to the additional pump that is needed at this time, that money is being taken out of the closing proceeds from the seller. It is estimated to be $40 to$50,000, so again the City will not pay for those two capital costs. One that will occur immediately and the other is just a contingency. . . . . ~ .. Regular Meeting, City Commission, April 16, 1990 Page 4 Mr. Cohen further explained the cost to pay for these futures at the rate of $2,000 for equivalent residential connections will come from connection fees. There will be no bonds issued nor will the City be required to bring out any other sources of funding. So what happens is when a customer comes on or a permit application comes into being we will collect approximately $2,500 pursuant to our uniform rates and at regular accounting dates which is customary in this format, we will pay the sellers at the rate of $2,000 to the maximum of 7272 units for the entire system, including 5,000 needed to meet the level to service the debt. Mr. Cohen said he received this morning a financing proposal from Southeastern Municipal Bonds for a 30 year proposal which is being analyzed. Attorney Sundstrom explained that the amendment to the acquisition agreement had a final date of April 15th. That date has been extended to the end of this month. He explained that Topeka Group which is the parent of Southern States Utility now owns Seminole Utility. An extension agreement has been received to close at the end of the month providing a series of things take place. He said they are here this evening to answer any questions and to indicate that a preliminary official statement has been prepared, primarily the work product of Attorney Lang's office, Mr. Cohen's office, Attorney Sundstrom's office, the Engineer, the Underwriter and the City Manager's office. The anticipated closing schedule at this time is as follows: On Monday, April 23rd we would begin the pre-closing of the asset side of the trans- action assuming that on Monday evening the Commission approves the transaction. On Tuesday, April 24th we would attempt to complete the closing of the asset side of the transaction here in Seminole County, and if need be on Wednesday morning April 25th also. The closing on the financing on the transaction will be Wednesday, April 25 and actually close the funding on Thursday, April 26th. Attorney Sundstrom said several things would be brought to the Commission the end of this week: one would be a narrative of what was said here this evening, an index of the closing documents on the asset side and a summary of all the significant documents. Gary Akers, Southeastern Municipal Bonds, spoke about his 30 year bond issue proposal. There was discussion of the contract with Southeastern Municipal Bonds. Attorney Lang explained at the time the contract was terminated by the City it was on a representation that we were going to a different type of transaction. Attorney Lang suggested if there are no objections from the Commission, that the Mayor and City Manager be given the ability to approve the preliminary official statement. Mayor Grove asked the concensus of the Commission to "press on". And the Commission was in agreement. Meeting adjourned 10:10 p.m. Respectfully submitted, Mary T. Norton, City Clerk