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09/04/2007-CC-Minutes-Work SessionMINI u No City Council Workshop September 4, 2007 PRESENT: Mayor Joe Higgs, Councilman Andy Garza, Councilman Glenn Ervin, Councilman Robert Patton, Councilman Mike Walker, Councilman Richard Muir OTHERS PRESENT: City Manager Mike Brice, City Secretary/Asst. City Manager Rose Chavez, Economic Development Director Cecile Carson, Water/Waste Water Supt., Eddie Branham, City Engineer Rob Woods, Ray Vinson and Jim 1. Call Meeting to Order. Mayor Higgs called meeting to order at 6:00 p.m. 2. Discussion on Revising the Phasing of the Street CIP Program. City Manager, addressed Council and updated the status of the CIP project. He advised that Phase I included Indian Springs, Phase II included Holt & Berry, and Phase III & IV were the downtown streets. The intent was to get Holt & Berry completed before school started and due to the rains it delayed the project. There are major concerns to proceed with that project at this time since school is in session. He advised that he would like to move Holt & Berry to Phase 4 and begin this part of the project in the summer when school is not in session. Staff is also requesting that Phase III and IV be combined to obtain a more competitive bid price. Councilman Ervin inquired on the right -of --way issues and if the easements had been taken care of. City Engineer advised that there are some gaps that need to be addressed and they will be taken care of before that project begins. 3. Discussion on Future Sewer Needs and Options. City Manager advised Council on his discussion with bond counsel concerning what it would take to finance a new sewer plant. He presented Council with a report on current bond indebtedness and the total outstanding debt for the city. In the report, he outlined the city's current debt, and the impact if the city issued a 12 million -dollar bond issue for a new sewer plant, financed at 25 years. City Manager expressed a concern that the city will incur 2 million dollars in debt until the year 2021. This will tie up city funds, put limitations on city projects. Basically projects would be put on hold for the next 15 years. City Manager advised that staff met with Upper Trinity and discussed possibilities of them building the sewer plant and operating the plant as a regional plant. City Manager gave a summary of the advantages and disadvantages of the project. The City will be the only customer at the present. The City will not save much money if Upper Trinity builds the plant. Upper Trinity can get a better bond rate. All the engineering and design can be done in-house which will save some money. The cost will be the same whether Upper Trinity builds the plant or the City. The utility rates will have to be increase to allocate funds for this expense. The difference is that if Upper Trinity does proceed with the plant then the City would pay them a maintenance fee similar to the water. The City will still have to pay the debt; however, the expense would move to a maintenance and operation expense. This will freeze up the bond money that can be utilized for future projects. Upper Trinity has sufficient funds for upgrades as needed. They can also accelerate the process by starting the design and planning for construction at a quicker pace. City Manager advised Council that he has met with Eddie Branham and the employees and has explained the situation. He has also reassured the employees that Upper Trinity has offered them a job. He also explained that if the employee does not want to work for Upper Trinity then he All find a place for them in the city and the positions will be eliminated through attrition. Employees will not lose their jobs. Mayor inquired as to who the plant would belong to. City Manager indicated that the city will probably sell the property. This could be part of the up front cost for design and engineering. Discussion continued on shutting down the old plant after Upper Trinity goes online. This will eIntimate any future maintenance cost. Coucilman Walker inquired on the monies the city has spent on sewer plant design. City Manager indicated this was afour-phase project and the city has spent more than $200,000, This is not wasted money since this information can be used by Upper Trinity. Counilman Walker indicated that he thought the money was in the budget for parallel sewer plants and asked if this was correct. City Manager indicated that those expenses were never in the budget. The tap fees were set in a separate account. Councilman Garza expressed that he thought the sewer tap fees were specifically to be used for the expansion of the sewer plant. Councilman Muir inquired as to whether there is a guide on the bonding capacity for a city. Is their a percentage that is set for debt service based on the city's budget? City Manager indicated that he is sure, but there has to be some rules. The information he was given by Ted Christen, bond counsel, was that cities can go and sell as many bonds as they want, it is whether a city can back them up. City Manager advised that in conversations with Mr. Christen, he advised that on the 6.5 million dollar bond issue it was difficult to get those bonds insured. They look at income to debt ratio and how much does your Enterprise Fund subsidize your General Fund. The limiting factor is whether the city can issue a 10 million or 12 million debt and if it can be insured. Discussion on the percentage of cost for debt service and the impact it has on the budget. Councilman Muir indicated that 14% of the budget is debt and in a household that is normal. City Manager indicated that the difference is that a normal household does not have payroll costs, which is a big expense to a budget. Discussion on the defined expenses that a city has, which limits the discretionary money that can be utilized for other expenses. This is the how the bond consultants analyze bond indebtedness. Councilman Walker indicated that staff is suggesting that the city consider Upper Trinity and asked what is the down side to that and the cost. City Manager indicated that the City will not control it anymore. The cost will be an annual fee that would cover the bond indebtedness and a per 1,000 gallon charge for treating the effluent. Upper Trinity did advise that the cost would be actual and they will not make a profit on treating the effluent. Upper Trinity has expressed that they are there to help their members' cities on a regional basis. City Manager again indicated that the disadvantage will be that the City will lose control of the plant. In the future if they can make money on the effluent, it will be their profit. Council Muir how does that fit with future development. City Manager indicated that the advantage to those developers is that service will be available at a faster pace. City Manager asked permission from Council to sit with Upper Trinity and work out details on how this process would work. He will keep Council informed at every aspect. Staff needs to move quickly on this and if the Council does not want to consider this option, then the city needs to move forward with preparations on the design of the new sewer plant. The city is not a situation where they can delay this. They have hit two months at 90% and TCEQ requirements are that once a city hits three consecutive months a new sewer plant must be under construction. This happened during the rain and it could possibly happen again. The city is in compliance since they are in the design stages. City Council did give City Manager their consensus to move forward. 3. General Discussion. City Manager discussed the agreement on the water CCN on Marion Road. Staff has not worked out the details with the developer on the sewer pro -rats agreement. He hopes that they can have this two items on the agenda for the next meeting on the 17' of September. Discussion followed concerning the water CCN and changes in legislation that give cities and landowner options on approaches that can be taken. The developer has to request service and if the rural water district cannot provide service then the City has to prove that they can provide the service. The law is very specific concerning the buy-out, there debt and the infrastructure they have in and around the property must be considered. This is the price for the property. The long version is that pipe will take months or years and the City will have to eventually do this for future growth. Discussion on how long the process can take, and the impact, it will have on the owners of the rural water district. Councilman Garza expressed a concern on the cost to "piece milli" this and not solving the actual problem. The agreement sets a precedent regardless whether it is indicated on the agreement that it is only for that one developer. City Manager advised that staff prepared this agreement as instructed by council at a previous meeting to renegotiate something with Mr. Koch. disapprove it. It is still up to Council to approve it or Discussion followed on whether to have the CCN agreement for the water on the agenda. Council to send City Manager an e-mail to request this as an agenda item. City Manager briefed Council concerning the items that were on the consent agenda for tonight's meeting. Councilman Garza asked staff to check status on Jennifer Circle. They were annexed about three years ago and have approached him concerning sewer service. City Manager advised he would check into this matter. 4. Adjournment. Mayor adjourned meeting.