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HomeMy WebLinkAbout10-13-87 SS r' I I l . MINUTES OF TIlE PUBLIC HEARING ON PRIMA VISTA UTILITIES HELD ON TUESDAY, OCTOBER 13, 1987 The meeting was called to order by Mayor Ison at 7:36 p.m. The Mayor led in prayer and in the pledge of allegiance to the flag. PRESENT: Mayor Ison, Commissioners Johnson, Dabbs, Bateman, and Hager, City Manager Ryan, Special Legal Counsels Andrew Thomas and Jim Ade, Special Financial Consultant Stanley Cohen, City Clerk Catron, and City Engineer Kelley. ABSENT: None DISCUSSION ON THE ACQUISITION OF PRIMA VISTA UTILITIES City Manager Ryan said that the document given to the Mayor and Commissioners was acceptable for Prima Vista Utilities (PVU) and was given to the City for consideration. City Attorney Thomas explained the City was looking to acquire PVU in such a way that it would not hamper the City and would not increase rates so that citizens would not be hurt and the company could remain competitive. Attorney Thomas said there had been numerous negotiating sessions between the City and PVU and that the two parties had not been able to come to an agreement. The present contract was endorsed by Barry Goodman, president of PVU, but had not been endorsed by the City. - Attorney Thomas said the first meeting between the groups was very much one-sided with PVU stating their price. The company wanted $4.5 million in cash - with no contributions from developers involved - as well as wanting rezoning and annexation inclusions and the ability to oversee other parts of the utility for years to come. Since that meeting, there had been many changes to the documents. Although the two parties seemed to negotiate on good faith, there was several major and minor conflicts with the present contract. The $4.5 million would now be paid with $2 million in cash (upfront), $2 million in two years, and $500,000 to be financed by PVU. The financial agreements are hard to understand since each party used a different formula to come up with their figures and the two figures have never been close to each other. It was very important for the City to find a formula that it could afford. The guaranteed revenues available would include fees paid to reserve use of the system, but the two sides differed on how much these fees could be and how they could be paid or financed. Attorney Thomas also said there was a danger for the City of liability suits that could result from this. He also cautioned that the City make sure that the contract make the present owners of the utility company pay for any and all debts that company had so the City would not have to do so in the future. Attorney Thomas said if negotiations could not be settled in the immediate future, the hearing for taking PVU by condemnation was set for early November. City Manager Ryan said the contract was workable to a large extent. Mr. Ryan said there was substantial movement on both sides and that PVU representatives should be commended for their efforts. Mr. Ryan also said that he had been assured that PVU wanted to negotiate a deal and did not want to see the issue brought to court. . I J .Page 2 City Commission Public Hearing October 13, 1987 Mayor Ison introduced Stanley Cohen, financial consultant for the City. Mr. Cohen said the most important thing was to use the system itself as a means of paying off any debts incurred. He said that guaranteed revenues was an essential part of the ability of the City to undertake ownership. Mr. Cohen said a major concession that was made involved the connection fees that the City would receive. It was agreed that there would be an escrow account of $2.5 million and because of that, the City agreed not to charge any additional fees. Mr. Cohen said of the $4.5 million purchase price, $500,000 would need to be paid in six months and $2 million would be due in two years. With this and the cost of constructing and additional plant at an estimated $2,100,000, the City would require funding of $7,100,000. Mr. Cohen said he met with two banks and talked to them about how the City could afford this venture. He said assuming the City collected all the guaranteed revenues - and that there were no legal complications - and the City got the forthcoming monies, and with a minimal increase in fees (10% or $2.00 a month), the City would then get about $550,000 a year in revenues from the company itself - $400,000 of which would come from guaranteed revenues. Mr. Cohen said the analysis and projection indicated that in two years there would be a 1:2 debt/coverage ratio. Mr. Cohen said going through condemnation procedures would work financially if the courts were reasonable. The advantage of condemnation proceedings would be that there I ~ould be no restrictions on how the City could pay for the system, the City could ~~harge whatever was "reasonable" to run the system. Mayor Ison said the contract contained four parts: 1. Purchase and Sale Agreement, 2. Master Developer Agreement, 3. City RCA Proposed Developer Agreement, and 4. The City (Jeff Yeager) Developer's Agreement. The third and fourth parts asked the City to agree to future zoning and annexation agreements. Mayor Ison said he did not think the present Commission could make those agreements since they dealt with future developments. He asked if parts three and four could be eliminated. Attorney Thomas questioned the legality of those parts of the contract and said he would discuss them with Attorney Hugh Trees. Mayor Ison said to leave those parts out of the contract. COMMENTS FROM COMMISSIONERS Commissioner Dabbs said the document he received was beyond his expectations. He said he was upset that he received his copy on Saturday although the parties had had since February to draw it up. He asked how the negotiations had come so far without input from him as an elected official. Commissioner Johnson questioned how the contract got from buying a sewer company to regulating future zoning issues. He was also upset that the teams had worked on the contracts from February to October and the Commission had from Saturday to Tuesday to catch up. He said he felt it was important for him to understand the contract since he was representing many people. He said he wanted to buy the company, but only if it was done in the citizens' best interest. . Page 3 City Commission Public Hearing October 13, 1987 -- Commissioner Hager wanted to clarify with Mr. Cohen the financial differences between acquisition and condemnation. Like the other Commissioners, Commissioner Hager thought the contract was hard to understand for lay people. Commissioner Bateman asked about condemnation procedures. He asked what the City would do if the court granted PVU an amount over $7 million. Attorney Thomas said the City could drop the law suit and PVU would remain its own company. Commissioner Bateman also asked what it would cost the City to build the additional one million gallon a day plant. Mr. Cohen said $2 million was a reasonable estimate. Attorney Thomas said if the City chooses condemnation, once the court assigns a value, the City would have a certain amount of time to come up with the cash. Commissioner Bateman wanted to go on record as saying that he would not participate in any negotia- tions having to do with future zoning restrictions. He also wanted to set a definite deadline to work something out with PVU or at that time to plan to go ahead with con- demnation. He said he was very frustrated with all the writes and rewrites and felt the negotiations were going nowhere. Mayor Ison agreed with the deadline. He said there were many things that depended on this acquisition: future developments, business expansions, future commercial cites, etc., but that the City should not be over anxious to reach an agreement. Mayor Ison said the Public Hearing would be continued to October 20, 1987 and the final date to approve or disapprove a contract would be November 3. He said at that 411rime PVU needed to address the main concerns of the Commissioners: 1. That the City .naintain its governmental capacity (it would not negotiate away the rights of the City), 2. There must be strict, clear, and precise language in the contract in regards to Reservation charges, 3. The financial formulas used must be clarified and the ways the City could use money from developers must be spelled out, and 4. The overall document must be such that the Commission could easily comprehend it and it must only address the acquisition of the sewer company and not future zoning issues. RECESS: 9:15 P.M. CALL TO ORDER: 9:50 P.M. Mayor Ison asked PVU attorney Steve Fieldman if he had any comments. Mr. Fieldman said PVU did not wish to comment at this time. Since there were no citizen comments, City Manager Ryan directed the City Attorney to put the four items discussed into legal language and to send it to PVU representatives so that they could respond on or before the October 20, 1987 Commission Meeting. Mayor Ison said the City would readvertise the Public Hearing for October 20, 1987 and it would be the first item under Old Business on the agenda. ADJOURNMENT: lOP. M. ::1LQ ~ MAYOR _TTEST: CITY CLERK