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HomeMy WebLinkAbout05-20-87 SS - MINUTES OF THE SPECIAL SESSION OF THE CITY COMIIISSION HELD ON IIAY 20, 1987 Mayor leon called the Meeting to order at 7:35 p.m. and led in prayer and the pledge of allegiance to the flag. PRESENT: Mayor Ison, Commissioners 30hnson (arrived at 7:37 p.m.), Dabbs, Bateman and Hager, Special Leagal Counsels Rowland and Ade, Special Financial Consultants Cohen and Asmus, City Engineers Kelley and Refling, City Manager Ryan, Finance Director Poston, City Planner Wagner, Public Works Director Occhiuzzo, City Clerk Catron, Water Superintendent Cockrell, Sanitation Superintendent Dees, Street Superintendent Elmore, Purchasing Clerk Amesbury and Deputy Clerk Green. PUBLIC HEARING TO DITERIIINE WHITHER THE PURCHASE OF A PUBLIC SKWER FACILITY IS IN THI PUBLIC INTEREST (Prima Vista Utilities) - City Manager Ryan explained that this Public Hearing was being held pursuant to Florida State Statute and then introduced the special team that had been hired to assist with the proposed acquistion. The Special Team consists of: Drew Thomas, Attorney with the Firm of Rowland, Thomas & 3acobe, P.A.; 3ames Ade, Attorney with the firm of Martin, Ade, Birchfield & 3ohnson; Stanley Cohen, C.P.A. with the firm of Rachlin & Cohen, Barry Asmus, special financial advisor; Tom Kelley and Dave Refling, engineering consultants with P.E.C., Inc. and City Manager Ted Ryan. e Attorney Ade explained that in order to make a determination whether the purchase of a sewer utility system was in the public interest, the City Commission had to hold this public hearing and there were nine items, according to State Statute, that must be considered. These items are contained in the written report that was given to the Commission prior to the meeting and are as follows: 1) The Most recent available Income and Expense Statement for Prima Vista; 2) The most recent available Balance Sheet for Prima Vista, listing assets and liabilities and clearly showing the amount of contributiona-in-aid-of-conatruction and accumulated depreciation thereon; 3) A statement of the existing rate base of Prima Vista for regulatory purposes; 4) The physical condition of the utility facilities of Prima Vista; 5) The reasonableness of the purchase price and terms; 6) The impacts of the purchase on utility custOMers, both positive and negative; 7) Any additional investment required and the abililty and willingness of the City to make that investment; 8) The alternatives to the purchase and the potential impact on utility customers if the purchase is not Made; and 9) The ability of the purchaser to provide and maintain high quality and cost effective utility service. Mr. Ade reported that the most recent available income and 1 e Pa,e 2 Special seaaion S/20/87 e exp.nse state.ent they were able to obtain were the ones filed with the Public Service Commission (PSC) this month and were contained in the report as Exhibit A, Exhibit B is the balance sheet and Exhibit C is the letter to Tom Kelley from the PSC. Mr. Ade .xplained that for the calendar year 1986, Prima Vista Utilities(PVU) showed a loss of $147,532 as indicated in the income/expense statement in Exhibit A. Their balance sheet indicated value of the Utility Plant (Net) at $3,132,408, land .405,000, ca.h $311,000 and special deposita (cash being held in escrow) $2,918,616. Mr. Ade .tated that he wa. not reco.mending the Co..ission buy the cash value of PVU but only the land and the tangible personal property used in the utility such as plants, lines, etc.. He also noted two item. of .ignificance on page F2(a) of Exhibit B: 1) in the years Prima Vista had owned the facility, they had accumulated a deficit in retained earning. of $1,578,741 and 2) total equity capital(their own funds) of $275,695. He noted ite.s on page F2(b) of Exhibit B of total deferred credits of $2,191,585 and contribution in aid of construction of $2,191,585. The total equity capital and liabilities reported for the 1986 calendar year was $6,886,445. Certain information had to be obtained from PSC if the City were to purchase the utility. The rate base used by PVU, based on the 1985 report, wa. -$1,097,687 and the PSC allows a rate of return on that figure, but there was none since it was a deficit. The 1986 report filed with the PSC by PVU calculated the rate ba.e at .733,329. This takes care of item. 1, 2 and 3. Item 5 deals with the reasonableness of the purchaae price and term.. To date PVU had been unwilling to provide financial and operating record.; therefore, the only inforaation received had been froa the PSC. Mr. Ade stated that he believed the City should proceed in an orderly fashion and authorize the acquisition to move forward on two fronts; 1) obtain .ore information fro. PVU and 2) discuss and negotiate sales price. He reported that Mr. Ryan had been in touch with repre.entatives of PVU and had set a time to meet and discuss the acquisition and if this did not happen then the City authorize counsel to proceed and exercise the power of e.inent domain, condemn the assets and take over through condemnation. The price of six million dollars had been .et by PVU a. a sales price on 2/10/87 along with other ter.s mo.t of which are not acceptable to the City. Item 6 dealt with the i.pact both positive and negative on the customer. The positive aspect was that if the City owned the facility, the City could control all aspects in its City limits, could a.sure landowners and potential develop.rs that everyone would be treated fairly and equitably and could economize by combining the water and sewer .yst.... Some of the negative aspects would be that the residents might not agree with the rates the City would set and we may decide we want better environmental control. e 2 e Pag. 3 Special S...ion S/20/87 At this time all of the witnesaes were sworn in by the court reporter that was present at the meeting as Mr. Ade was going to call witnesses to testify. e Mr. Ade called Dave Refling and asked him to identify himself for the record. Mr. Refling was a principal %rom the firm of P.E.C. and had 14 years experience as an environmental engineer, especially in the wastewater field and prior to P.E.C. he was employed in one of the largest environmental firms. Mr. Ade asked Mr. Refling if he had been retained by Drew Thomas, if he had made a study of the area and as part of his analysis did he review the actual facililty and sewer lift operation and obtain most of his information from the 1986 files. Mr. Refling stated yes to all of the questions. He then pointed the area out on the map and explained that the utility facilities of Prima Vista were assumed to be in a condition comparable to that of systems of similar age and type of construction materials and since PVU would not allow representatives of the City to inspect the actual sites most of the information had been obtained from the 1986 report. Plant 1, located south of White Road, was 19 years old and utilized a 4.5 acre sprayfield located approximately 1/2 mile east 0% the plant. Plant II, located north of A. D. Mims Road, was constucted approximately 1982 time frame. Past on-site visits to this plant showed significant outcropping and an evaluation by a geo-technical firm determined that this site was not adequate to dispose of effluent. He stated that he understood they had acquired a 40 acre site for expanding PVU for effluent disposal. Mr. Ade questioned Mr. Refling as to the additional investment that would be needed to make it capable of disposing of the one million gallons per day as rated and Mr. Refling estimated approximately one and one half million dollars. He had nothing further to add. - Mr. Ade then called upon Stanley Cohen to give his name for the record and past experience. Mr. Cohen stated he was a Senior Partner with the firm of Rachlin & Cohen in Coral Gables, Florida. He had been a practicing Certified Public Accountant for the past 37 years and except for two of those years, they had all been involved in both investor and municipal acquisitions. He was with the PSC when State Statute 367 was written, he had negotiated the sales and acquisition 0% 60 public/private sewer/water systems all over the State of Florida, had lectured at several universi- ties and had written extensively on water, wastewater and the environment. Mr. Ade asked Mr. Cohen if he had reviewed the assets and liabilities and if he would discuss the process with the Commission. Mr. Cohen stated that he only had two sources of information which were the 1985 and 1986 annual reports %iled with the PSC and while they contained 3 e Page 4 Speciel S...ion S/20/87 - substantial information, they did not provide other data sources needed to make a complete report. When sales were negotiated in Florida, he stated that the overwhelming method used by municipal governments had been capitalized value 0% cash flow. If done this way for PVU, it would have to be reedited for municipal ownership as the City would not pay taxes, would not have a limited number of expenses in private sector and would not have the substantial amount of legal expense shown on PVU's report. The PVU reports %or 1985 & 1986 showed a -0- cash flow when combined as 1985 was $51,000 and 1986 was -S51.000. Mr. Cohen stated that if they talk about condemnation, <as a non-attorney) there were three elements to present: 1) would present capital cash flow, 2) condition of the system <replacement value less expenses) and 3) comparables (could find no sewer alone, Just sewer/water). Other factors considered were the costs per connection, they ranged fro. a high of Sl,029 to a low of S542 with an average of S838 per connection. If you use the figures of 1000 customers times the average of S838 that equals $1,341,000. He stated there were three methods of evaluation, the cash flow which was negative, the replacement value which had been quoted as $2,780,000 and the hook ups valued at Sl,341,OOO and divide by 3 then you come up with Sl,374,000. If the City decided to negotiate, then more accurate information would be needed. Mr. Ade asked Mr. Cohen if he had also considered the rate base or book value of assets and he replied that he had. Having used the figures from their report of 12/31/86, the net figure arrived at was $3,132,408. Mr. Cohen stated that he would not have prepared his report any differently if had been on the opposing side and he had no problem if PVU had someone who was an expert as long as they meet the test that he used in determining the value. Mr. Cohen had nothing further. Mr. Ade stated that Items 1-6 had been covered had been partly covered and that 8 & 9 were really domain of the City Manager. and 7 in the e City Manager Ryan explained that the City staff along with the special team analyzed the financial ability of the City to undertake the acqusition and found the City sound financially. Based on the last financial report, the City had eight million dollars in assets and only $400,000 in debts with a cash position of Sl.7 million. Mr. Ryan stated that he had considerable experience in the wastewater management field and the City had hired a public works director with over 20 years experience in the field along with a consulting engineering firm with vast experience. There were firms available to us if the City did a quick take over. He asked that the City Commission consider the opinion of the special team and authorize the passage of the 4 e Pege S Speciel S...ion S/20/87 resolution which would direct condemnation and further negotiations by purchase if possible. - There being no further witnesses the Mayor asked the Commissioners if they had any questions. Commissioner Dabbs questioned the replacement value and if that was using the best materials. Mr. Cohen explained that the engineer took the information available and standard indexing methods hallmark methods used nationally - since you do not know the physical condition. Mayor Ison asked if the negotitions did not go, how long would the City have to operate the facililty if condemnation was the next step. Mr. Ade said they recommended doing the two aimutaneously, prepare to negotiate and file for condemnation, and depending on a court/Judge it would take several months minimum. Mayor Ison asked what was next after the meeting tonight. Mr. Ade stated that i% a price was negotiated, if the City were to go in debt it would have to be approved by the Commission and if it were condemned, the Co.mission would still have another chance. Commissioner Dabbs questioned the two ways of condemnation and Mr. Ade it explained for him. Mayor Ison then opened questions up from the audience for the Public Hearing. Jerry Hartman, Professional Engineer, representing Gray, Harris & Robins, asked several questions but most had been answered previously. Mr. 30hn Sundheim, U. S. Homes, stated that they were pleased that the Commission had taken this direction. The Public Hearing was then closed. RE~OLUTION (87-09) AUTHORIZING THE ACQUI~ITION OF PRIIIA VISTA UTILITIES Mayor Ison read Resolution 87-09 in ita entirety and noted the schedule attached and the statement on the last page. Commissioner Bateman moved to approve Resolution 87-09 in its entirety, Commissioner Dabbs seconded and the motion carried unanimously. Mayor Iaon stated that he believed the Commissioners exercised their responsibility and had the trust and faith of the people on their action tonight. RECESS: 9:30 p.m. CALL BACK TO ORDER: 10:05 p... NOTE: Commissioner Bateman did not return after the recess. Mayor leon stated for the record that there would be no further discussion on Items II and III. IIID YEAR BUDGET REVIEW e City Manager Ryan pre.ented a copy of a memorandum from the employees to the Commission thanking them for their approval of financing the dependent care for the employee. 5 - Pege 6 Special Se..ion S-20-87 City Manager Ryan explained there were a couple of issues he would like to present and had presented them a summary of the Cash Position of the City as of April 30, 1987. The sidewalk program was discussed and the areas where the Commission would like to see sidewalks placed. They want sidewalks on Silver Star at least to Orange and Hill on the lake side and on Highway 50. Previous and present developers were discussed aa possible ways of getting some of the sidewalks done. Mayor Ison asked about a possible cost analysis on employee versus private companies putting in the sidewalks. Mr. Occhiuzzo explained that he would consider that possibility but they would fall behind in the regular maintenance if the City did the work. City Manager Ryan stated that an additional person was needed around the city complex in order to assist 3erry Reep and the Commission gave their approval. - City Manager Ryan also stated that Chief Boyd had disbanded the TAC unit and spread out those people throughout the department. They had decided they would like to keep lean and provide some manpower to the Fire Department. He would like for the Com.ission to give him authorization to hire more personnel for the Fire Department, not to exceed three but start with two and then come back to them. Discussion then ensued on the salaries for both the Fire and Police Departments as we were losing our personnel to the County and other larger cities. City Manager Ryan then asked for two vehicles for the Police Department, they would be administrative vehicles and the vehicles now being used had police packages and could be put on the road. There were sufficient funds to cover the purchase. The Commission gave their approval. The Police Department also needed administrative support and Mr. Ryan recommended a full time cross training dispatch type person. The Commission gave their approval. Mr. Ryan explained that another area of activity was monies for a summer program that would provide personnel at all three of the parks. e Another area of concern was the status of the cemetery program, we were getting low on lots available and until a survey can be taken on the need for the people on the over 65 program, Mr. Ryan asked that a moratorium be placed on the sale of cemetery lots. Com.issioner Dabbs stated that he supported the moratorium except in the case of an emergency as did the other Commissioners. No lots will be sold except in the case of an emergency. Refuse Collection Rate Study - A memorandum was presented to 6 . Pag_ 7 Speciel Ses.ion e/20/87 the Co..ission from Public Works Director Ochiuzzo showing the deficit expected by the end of this fiscal year and suggestions for rate adJustments in order to bring the refuse collection service to a positive position. The Commission suggested customers do away with the 55 gallon drum and they were not in favor of charging the customers on the over 65 program any monies. The staff will continue to analyze and study a level of service co.parable to ours. Commissioner 30hnson asked about the bathroom had been proposed for the vicinity around center. A proposal will be brought back approval. facilities that the community for Commission Mayor Ison commented on seeing the police officers at the school zone. Meeting adJourned at 11:10 P..._-~~-~------ MAYOR - AT~ -~---------~-- CITY CLERK - 7