Fort Walton Beach Council agenda — 06-12-2007 workshop agenda — reading text

a major concern of mine, if that fails we' re in deep trouble. Page 7 of 11  COUNCIL WORKSHOP 6- 12- 07 John Hofstad - I can assure you from my perspective as your Utilities Director, they' re all important issues to me. So I value our water needs just as much as our wastewater needs, but you' re absolutely right, we need to address the concern. Dr. Pullen - and the other thing is I was concerned that we aren' t piddling away stuff that maybe should be put some other place first, so I thought a good briefing for all the new Council members and myself to bring it up to date would be helpful to all of us. Thank you. Mayor - Mr. Hartwell Jim Hartwell- John exceptional briefing, very good, appreciate it. I had a question, bringing us up to date, not trying to put you on defensive, you may not have the answer, what's the status on that resident up in Kenwood and the water runoff problem, where do we stand on that? John Hofstad - actually that' s already included in another issue that I'm bringing forward to you tonight. Jim Hartwell- OK, that's fille John Hofstad - but we' re looking to reprioritize some of our stonnwater, our program funds to address those concerns in the Powell Drive area, very soon. Jim Hartwell- OK, thank you, appreciate it. That's all Mayor - anyone else, Thank you sir. Anyone from the audience have a question of Mr. Hofstad on this project? Anyone from staff want to add anything to this, Ms. Absher, Ms. Craig, or anyone? Ms. Shanahan City Manager - the only thing that I would say is that we do provide in the weekly report an update on all of these major projects so you would see on there that we' ve been working with Brown and Caldwell doing the design work. The design work was estimated to take between nine and twelve months for the wastewater treatment plant so we have just about finished that, as John said we' re waiting for the final cost estimate. So we do provide that in the weekly report. The page or two is the major projects that we' re working on so if you want to reference that that will help you. Mayor - OK thank you. Yes Mr. Miller Virgil Miller - OK can we remain fairly certain that this balance of $ 5.3 million remain constant when it comes time to address the wastewater facility. City Manager - what do you mean remains constant? Virgil Miller - we' re not going to spend it on any other capital improvement program Page 8 of 11  COUNCIL WORKSHOP 6- 12- 07 City Manager - we have, what we' ve outlined in the report as John showed you, that part of that was for water line improvements and there is still some money available for that, and another $ 800, 000. 00 was set aside for sewer line, I & I Improvements, and we spent about $ 500, 000. 00 on that. So there' s 300,000. 00 there that's still is available for expenditure for line improvements. So then we have not yet closed out the transmission lines, so those costs are going to be coming off of there. So in the large part to say we' re not going to spend that money for anything other than those capital projects that you' ve seen up here identified. Virgil Miller - then I have to share Dr. Pullen' s concern that if this bond was set aside for this important project with the wastewater and it' s disappeared on other things City Manager - it has not disappeared sir, it' s been spent exactly as we have indicated to you and to the bond market that it would be spent. The difference is that these costs have come in above what the estimates were in 2005 because the bidding environment and the competition environment, the contracting environment that we are currently in is much more expensive than when we originally went to market on those. So it's not that we' re spending this on things outside of what we have told you we' re going to spend that on, it' s that the prices and the cost have escalated since that original bid time. Virgil Miller - well I can share that but what I see is that lower priority items, lower than the sewer plant, had cost growth and it's eating away at the funds that were available for the sewer plant. City Manager - that is not correct, what you' re seeing, and I'll let John come up here and explain to you, that this was a three or four pronged project. We had wastewater tanks, we had capital improvements on- going for water lines, we had the sewer treatment plant and we had the transmission main as well as I & I work, on- going line work. So it was several projects rolled into one bond issue. Virgil Miller - right, but wasn' t there a priority system within those several projects? City Manager - no, there was no identified priority, it was all of those were provided as part of funding that. If you want to say at this point that you want to forestall any of the additional improvements that were outlined in that bond issue and dedicate all of the available revenue to the sewage treatment plant, we can certainly do that. But what I'm here to tell you is that part of the projects that we told the bond people and the people that bought our revenue bonds were that we were going to construct water tanks, that we were going to construct a transmission main, that we were going to upgrade our treatment plant, and that we were going to do water and sewer line improvements. And that' s exactly what we have done. John Hofstad - another thing I might add is that we had design plans and specifications in hand for the water system improvements. We had to do the design for the wastewater treatment plant. The other issue that I don' t think has been properly stated but is a very large and genuine priority of mine, the water system improvements we were mandated to make those improvements through a Consent Order ofFDEP. I'm not under a Consent Order on the wastewater side of the house. So from a regulatory stand point more emphasis was placed on making the water system improvements because we were under that Consent Order. We were placed on the clock by DEP to make those improvements or we faced stiffed penalties. Page 9 of 11  COUNCIL WORKSHOP 6- 12- 07 John Hofstad - So all the projects, and again addressing what I said earlier to Dr. Pullen, all of the projects are a major priority to me. We need the water system improvements just like we need the wastewater system improvements. So we' ve got to get it all done unfortunately. Virgil Miller - thank you John, thank you Ms. Shanahan Dennis Reeves - question if anybody can answer this but it's just for my own use, what, I know one you guys have already thought about an additional amount of money that we' re going to need for these improvements, how do we raise that, since we' re going through the bond money. It's just a question. City Manager - it' s a great question and we' re going to have to go back and look at various ways to raise that money, whether it's through additional bond issue, and what does that means to our rates, you know we have our rates set. So we have to explore that. Dennis Reeves - right, I just wondered how we would raise that. OK, that answered my question. Possibly increasing our bond or, OK City Manager - securing another bond is what you would do. Mayor - anything else, OK, Ms. Absher go ahead. Finance Director - I think when it comes to bonds and water and sewer I have just a little bit of experience in this area and I do think that, although maybe you don' t understand exactly what you were asking but you made an excellent point that I think City Council should be very aware of. When you do go into capital debt and you do go into bonds you want to make sure you aren' t paying for repairs out of those monies. You really should be making improvements or capital improvements. That's the part where it actually gets you in trouble with the bond market or with the folks that bought your bond is, did you say you were going to be making significant improvements but then did you turn around and really use that for what they call in the industry R & I, or repairs, renovations, regular repair type of maintenance items, not improvements. I believe out of all those projects generally they would fall under the improvement area. There is one, I believe Joyce will verify, there is one additional $ 800,000.00 repair project that wasn' t in the original bond deal, it wasn' t really described at least in the original bond deal that is in there. I don' t have a real problem with that passing that line, but you do need to make sure, and you' re points have merit, you always want to make sure whenever you go into debt, or capital debt, you' re not paying for your maintenance items or your repairs. So I think that's a very good point. In regards to funding options for the future, I think the very first day I ever worked here I met John Hofstad and I think the very first conversation we ever had was about what's called interim financing. There are tons of strategies out there that are utilized in the rest of the State of Florida for handling volatility in your construction costs. It is not unusual in south Florida to have a situation where you budget for a million and the project can come in at five million because of demand for contractors, because of fuel prices, that sort of thing. So the market place has adjustments for that. There is very, very excellent strategy and in fact the first day I ever worked here John and I talked about what is called a BAND, a bond anticipation note or what's called interim fmancing. And we also have had lengthy conversations about the timeline for funding, what's typical. I think that the funding that the City did, prior to these significant storms, was appropriate for the Panhandle. Page 10 of 11