Committee Minutes

Minutes of the Grand Forks City Council/Finance-Development
Standby Committee Wednesday, August 12, 2009 - 4:00 p.m.

The Finance/Development Standby Committee met on Wednesday, August 12, 2009 at 4:15 p.m. in Room A-101 in City Hall with Chairman Christensen presiding. Present at roll call: Christensen, Glassheim.

Also present were Saroj Jerath, Candi Stjern, Todd Feland.

1. Utility Bond Sale.
Details of agenda:
1. Sanitation Reserve Revenue Bonds, Series 2009A
2. Sewer Reserve Revenue Bonds, Series 2009B
3. Refunding bonds:
Refinancing of 1999-D Sewer Reserve Revenue Bonds
Refinancing of 1999-E Water Reserve Revenue Bonds
Refinancing of 2000-A Refunding Improvement Refunding Bonds
Refinancing of 2000-B Refunding Improvement Refunding Bonds
Refinancing of 2000-D Water Reserve Revenue Bonds.
Chairman Christensen asked if bond sale picks up all the money we need plus the $200,000 for hauling to Fargo. Mr. Feland stated that we have $1.5 and $2 million budgeted for hauling and anticipate having to use around $200,000 of that money - have that built in this year's budget and the less we spend of that amount, more of that will carry over to our cash balance or use for contingency. Christensen stated if put $200,000 more to the bond sale would build up more cash carryover, and to increase this by $200,000 or $250,000 because 20 year pay and will have the money in our cash, opportunity not to spend it. Feland stated that is operations and maintenance and not an asset.

Saroj Jerath stated they have some contingencies built in - that the project is for construction of the new landfill, not for maintenance, and have the money budgeted for hauling garbage from the old landfill. She also noted that if the City goes over $10 million in one year, would not be bank qualified bonds, that we are about $7 million for the landfill and $2 million for wastewater and have another bond coming up for the special assessments for $2 million. Bonds would not be bank qualified bonds, which means you can get a better interest rate probably higher than bank qualified tax exempt bonds. Bond counsel would have to determine if bank qualified or not and could call Brenda at Springsted.

Feland stated that if they don't spend the $200,000 which is budgeted now, it goes back to cash balance. Christensen stated that now have balance of $1.5 and use $200,000 to haul garbage for a month, takes that down to $1.3 - but if include $200,000 to the bond sale still have cash carryover for current uses. Feland stated whatever they don't spend out of this year's budget for interim hauling, could be used for other purposes; and hopefully will be down to one month - cost us more to haul this one month than anticipated. Jerath stated they can tell Brenda to include the $200,000.

Glassheim asked what is the value of having it if don't need the extra thousand. Christensen stated had $1.5 but have to haul and this way will keep cash, important to keep your cash to use for what need for the next 3 to 5 years and will be repaid over 30 years - every business levers to keep their cash and if we can add that amount. Jerath stated yes, can do it because they haven't structured the bonds that we will sell for $7 million, just an estimate now and can increase or decrease the amount.
Christensen stated that finance wants authorization to go forward, Jerath stated amount is $9 million because it includes the road construction, and now showing $9,050,000 and if increase would go to $9,300,000. Jerath stated that right now doing $9 and $2.3 for Wastewater and then have refinancing of various bond issues, that from time to time the bond advisors look at our debt service and debt and if the current market is better and rate of interest is lower, then they advise us to refinance and have interest cost savings. They advised and recommended 6 issues, that they have a test they apply whether beneficial for us to refinance, applied 3 tests to all 6 issues, and 5 met all 3 tests and will refinance those 5. Christensen asked if they would give a memo to the council of net savings - bond advisors will report; and all that will happen right now is that add by $250,000 and see what they tell us as far as bank qualified vs. non-bank qualified

Jerath stated that there are two other options, one is tax exempt bond and other is Build America bonds and Springsted will advise if we sell Build America Bonds rather than selling the tax exempt bonds - can issue Build America Bonds only until next year, time limit, can sell for 20 years, 30 years but there are some pros and cons and they are working on whether that will be more beneficial and have more interest savings or go with the traditional tax exempt bonds.

Glassheim asked if we know how much it will cost to borrow an extra $250,000 beyond what we need, and how much are we going to pay every year on that. Jerath stated Springsted will advise. Est. total interest cost would be 4.32% if 20 years, 4.63% for 25 years and 4.91% for 30 years. Christensen stated that the extra money that he just saved is in the first bond to be paid off

Glassheim stated he doesn't like bonding operating expenses, seems like bond long term construction projects, and that if there were some good reason but doesn't seem that if have $1.3 or $1.5 million reserve it hurts our operations. Christensen stated that is fine and that he doesn't want to sell $9.3 bond but sell $8 and take his cash down by another $1 million and if have reserves, have a reason for the reserves or spend it rather than sell bonds. Feland stated that they purchased half the property for another $750,000 and will have to pay that off and in the future, will have the option to buy the remaining portion of it - Christensen stated that will be rolled into another bond or deplete cash.

Christensen stated that we authorize to sell between $9,050,000 to $9,300,000 in bonds and may or may not use $200,000 of that to contribute towards the costs we incur to haul garbage for a month, as opposed to taking it out of our reserves - issue is rather than depleting our reserves or funding it as part of our project.. He also stated that the issue will be if we keep our cash, will have additional cash to cover that contingency if do what he is saying, or else if don't do that will still have sufficient cash but may not have enough cash to meet the reserve requirements in the cash carryover, as want to keep about a 15%-20% in reserves - so this is really good financing because anticipating a future depletion of his cash carryover to fund that contingency but yet keep the reserves up.

Glassheim moved the motion but not vote for it - recommend to council on a 1 to 1 vote and discuss at council

Feland stated that if he could add one more point, that there are people nearby the landfill that would like to be bought out, Homstad, Scott and probably sometime this fall come back and ask for a buyout.

Christensen asked what is cash carryover - Feland stated projecting $700,000 however have $1.5 million to $2 million that is set up in the budget for hauling; that they have come into the landfill closure account and have cash there - but that there probably are going to be things that may come up, whether Molenaar property can be paid off or nearby property owners. Christensen stated if don't want to deplete your cash, then do what he is suggesting - trying to see what want to do with cash.

Jerath stated we have the cash and that will be used for that purpose, $200,000 to haul it and that is how it is budgeted. Glassheim stated that cash was set aside for the purpose of new landfill and associated costs - Christensen asked what today's cash balance - for end of year projecting $700,000 in operating, $4.1 in reserve for landfill closure and intend to use $1.5 for post closure costs, and $1.3 to finish closing it. Christensen stated they anticipate $750,000 for Ms. Molenaar and have other issues with other people of $300,000, and have $1,150,000 of extra money, what is the reserve that you would normally have based on 15% of your operating expenses - Jerath stated 25% is what they keep it at.

Christensen asked how much extra money in this fund to pay for things if he goes with Mr. Glassheim's idea and not sell the bonds in order to save interest, and what would be his extra money so he could reduce how much he is going to sell this for. Feland stated the landfill closure account est. they have left in excess to pay for, start with $4.1 minus $1.5 for landfill closure and need to keep for 30 years and have 25 acres left to close and his est. is $1.3 million to do that.

Christensen stated that means the money that doesn't have anything designated for, forget about the $200,000, and now if concerned about interest, have $1.3 million you can pay cash and reduce the cost to the citizens because you aren't going to sell bonds for that. Jerath stated that then depleting everything, but Christensen said still have the $840,000 left, 15% operating reserves. Jerath stated that there are so many other things to consider, that every year have to file with State of ND financial assurance for the landfill closure and post closure costs, have to set aside that money until we are done with that, just filed that report that we have not closed the landfill yet, and until we close it we have to have that assurance with them that we have the money to do it. She stated that if you take that $4.1 million off, then only have $700,000 at the end of the year. Feland stated once have met that final closure of the 25 acres, and if can wait one year, thinks we might have some cash to use to redeem - about $1.3 excess.

Feland stated you could reinvest it in capital projects in sanitation, whether buying capital reserves for buying property in the future or payment of the cell, could reinvest in enterprise; and that in the midst of building area and hoping that in 30 days have a better picture and know what the final costs will be. Jerath stated that they may not even need $9 million, they still have to structure it, what will be the issuance cost, reserve and coverage ratio, and then Springsted will tell us what the amount is to sell the bonds.

Christensen stated our recommendation to council is to authorize finance to seek this sale of $9.3 million in bonds and before selling come back and report to committee, Todd will give us better handle on what we might have in free (available) money in that fund. Glassheim moved the motion, Christensen seconded motion. Carried.

2. Discussion - Water Tower Wireless Lease Agreements.
Todd Feland reported after talking with Howard Swanson, city attorney, to have discussion with committee relating to their consensus re. extension of leases with Alltel and Sprint Nextel who have requested to renew their lease agreements on the Viking Water Tower for as long a term as possible; that he is proposing to extend their lease agreements for an additional 10 years with a five-year renewal at midpoint. Alltel lease expires on November 27, 2011 and Sprint Nextel lease expires on October 23, 2011; original leases are 10-year agreements and were enacted in 2001 and extended in 2006. Rental rates were $2,000/month for the first five-year term and $2,200/month for the second five-year term; and proposing $2,500/month for 2011 to 2016 and $3,000/month for years 2016 to 2021.

He noted that the City of Fargo has similar wireless lease agreement rates with an extended time period and currently has monthly rental rate of $2,200/mo. for the first 5 years, with 3 five-year lease agreement extension for a total 20 year term, with a 15% increase in rental rates after each 5-year term.

Glassheim asked if over time the value of use of towers will become greater. Feland stated they are very valuable, reason is that the monopoles can't go up in the middle of the city and we have the only monopole which is the Viking Water Tower and is very strategic asset because high point in the middle of the city. Request from the committee was to authorize and negotiate another 10 year lease, a 5 and 5, with approximate values - $2500 for first 5 and $3000 for the second. Glassheim suggested going with $2500 for first 5 years and $3500 for the second. Feland stated if committee's okay with bringing this forward. Motion by Christensen and Glassheim to approve. Motion carried.

ADJOURN

The meeting adjourned at 5:15 p.m.

Alice Fontaine
City Clerk