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HomeMy WebLinkAboutMinutes - 10/8/1997 - Finance and Personnel Committee _ FINANCE COMMITTEE MINUTES �� October 8, 1997 Members Present: Chairman Murgatroyd, Bill Baird, Frank McClatchey Others Present: Mayor Cuda, City Administrator Lobaito, City Clerk Althoff, Alderman Bolger, Alderman Glab, Director of Public Works Batt, and Harold Warren of Warren & Associates. Finance Chairman Alderman Murgatroyd opened the meeting at 7:02 P.M. stating the purpose of this evening's meeting was to discuss increases in the water/sewer rates and capital development fees. WATER AND SEWER RATES Staff was directed, at the August 19, 1997 finance meeting, to develop a rate structure that would achieve a balanced budget in both the water and sewer funds utilizing the following criteria: *the rate increase should be spread over a 3-year priod; � *anticipated expenditures attributable to the Water/Sewer Funds over the next 5 years should be included in determining the new rates *present options allowing a rate comparison based on different annual percentage increases. City Administrator Lobaito reported anticipated sewer and water projects for the next five years were assessed by staff. Anticipated sewer expenditures totalling $288,235 and anticipated water expenditures totalling $1 ,894,528 were presented. A combined projected five year expenditure of 52,182,763 was acknowledged. City Administrator Lobaito stated approximately 5430,000 annually would be needed to generate monies over and above existing operation and maintenance costs to accomplish these projects. Federal and state regulation requirement costs, land acquistion costs and purchase of the McHenry Shores Water Company have not been incorporated into the anticipated expenditure figures presented. City Administrator Lobaito stated the revenue figures are exclusive of prior revenue sources, specifically S 128,000 from the McHenry Shores Special Assessment, capital development fees and interest income. Figures used to calculate projected revenue income include 6,725 annual water/sewer users, 670 sewer only users and a usage number of 61 1 .25 million gallons annually. These numbers were increased annually at a rate of 125 new residential connections and 1 1 .25 million � gallons per year based on building permit data. Finance Committee Minutes � October 8, 1997 Page Two The following three rate scenerios were presented: *10%-10%-10% *15%-8%-7% *24%-4%-4% Some discussion followed with Aldermen Bolger, Alderman Baird and Alderman Murgatroyd stating their support of the 10%-10%-10% proposal. Alderman Baird questioned staff as to whether the 15%-8%-7% three year rate proposal might be better if substantial monies were required immediately for anticipated water/sewer projects. Finance Chairman Alderman Murgatroyd noting some projects would not be initiated until years three and four stated the 10%-10%-10% scenerio would be the most practicable. Alderman McClatchey concurred. In response to Alderman Glab's inquiry City Administrator Lobaito explained expenses do not generally decrease as more water is used because operating � expenses are always increasing. Variable operating and maintenance costs are usually much more expensive than comparable fixed costs. Finance Chairman Alderman Murgatroyd also requested the committee consider instituting an annual CPI rate increase after year three. He stated this annual cost- of-living increase would assist the water/sewer fund revenues meet increasing operating and maintenance costs. Some discussion followed. It was suggested, if approved, the annual cost-of-living rate increase be approved by council on an annual basis in conjunction with the City of McHenry's fiscal year. Motion by McClatchey, seconded by Baird to recommend to full council a three year water/sewer rate increase program of 10% the first year, 10% the second year and 10% the third year effective with the May billing. Voting Aye: Baird, McClatchey, Murgatroyd Voting Nay: None Absent: None MOTION CARRIED. � Finance Committee Meeting � October 8, 1997 Page Three Motion by Baird, seconded by McClatchey to recommend to full council an annual cost-of-living water/sewer rate increase to be implemented with the May billing in 2001 rounding the cost-of-living percentage figure to the nearest .5%. Voting Aye: Baird, McClatchey, Murgatroyd Voting Nay: None Absent: None MOTION CARRIED. WATER & SEWER CAPITAL DEVELOPMENT FEES City Administrator Lobaito explained capital development fees for residential buildings are based on the cost per Population Equivalent (PE) of providing capital facilities to water and sewer users. Capital items include wells, treatment plants, storage tanks and wastewater treatment plant construction and engineering. The PE for residential buildings is obtained from the Illinois School Consulting Services. The 1997 figures were provided the committee. � City Administrator Lobaito stated the cost per PE for providing sewer service was based on expense figures associated with the City of McHenry's current expansion to the South Wastewater Treatment Plant. The expansion cost, including engineering fees, is approximately 53.6 million. The cost per PE is 5720 which represents the actual cost of adding a dwelling unit to the wastewater system. The proposed sewer capital development fee figures were distributed to the committee. 2 bedroom or less S 1,452.00 3 bedroom 52,087.00 4 bedroom 52,710.00 5 bedroom or more $2,714.00 The water capital development fees are calculated in the same fashion. The cost per PE is S 181 based on city engineer, Baxter & Woodman's, calculations in 1994. City Administrator Lobaito informed the committee staff review of the current water rates, factoring in inflation since the last water rate increase in 1994, revealed the current schedule provides sufficient monies to cover the cost of developing new water facilities. Some discussion followed regarding the desirability of incorporating any land � purchase costs in the capital development fee calculation formula. Finance Committee Meeting October 8, 1997 � Page Four Commericial and industrial water capital development fees were distributed for committee review. City Administrator Lobaito noted the 3/4" commercial/industrial meter size is equivalent to a 3-bedroom residential building and is used as the base line for larger sized meter figures. Finance Chairman Alderman Murgatroyd suggested the capital development fees be increased by the Construction Cost Index percentage annually. He noted other municipalities use this fee increase methodology. Alderman Bolger noted wastewater expansion requires more land than water expansion. Most water plants and well sites require only 1 acre parcels. More importantly current users should not pay for future development. In response to Alderman Baird's inquiry Director Batt explained commerical and industrial capital development fees are calculated on the 3-bedroom or 3/4" meter base line figure and applyng the applicable computational ratios for each meter size. Director Batt also noted the City of McHenry had very few users with 3" or larger meters. City Administrator Lobaito, in response to committee inquiry, noted the fire department is not charged for water usage. � Alderman Bolger left the meeting at 7:38 p.m. Alderman Baird complimented staff on their presentation and noted an increase in capitai development fees was long overdue. Motion by Baird, seconded by McClatchey to recommend to full council approval of a water and sewer capital development increase, incorporating the cost of all land purchases for residential, commericial and industrial dwellings as presented by staff and to increase these fees annually by the Construction Cost Index figure at a time specified by staff. Voting Aye: Baird, McClatchey, Murgatroyd Voting Nay: None Absent: None MOTION CARRIED. Some discussion followed regarding when to implement the capital development fee increases. Mayor Cuda noted past practice was to permit a grace period. In response to Alderman Baird's inquiry, staff noted annexation agreements will not � be adversely affected by the proposed fee increase. Director Batt left the meeting at 7:50 p.m. Finance Committee Meeting October 8, 1997 � Page Five REFUNDING BOND PROGRAM/SERIES 1990 GENERAL OBLIGATION BOND City Administrator Lobaito stated as per council direction at the October 1 , 1997 regularly scheduled council meeting discussion regarding the possible refunding of the 1990 G.O. Bonds was placed on the Finance Committee Meeting Agenda. Mayor Cuda and City Administrator Lobaito had met with Harris Bank Public Finance representative Eric Anderson to discuss the possibility of a refunding on Wednesday, October 1 st. City Administrator Lobaito noted Mr. Anderson examined the City of McHenry's existing debt and opined a refunding of the 1990 General Obligation Bonds for the construction of the Municipal Building will result in an approximate 556,000 debt service savings. The call date for these G.O. Bonds is December 1 , 2000. City Administrator Lobaito informed council Mr. Warren was in attendance as during the research and review of the proposed refunding staff discovered Mr. Warren had provided these services to the City of McHenry in 1994 for the water and sewer bonds saving the City in excess of 5500,000 over the life of these bonds. � Mr. Warren had examined the 1990 General Obligation bond issue at this time (1994) as well. Staff and Mr. Warren had concluded a refunding of this particular bond issue was impractical as the call date was too far in the future to be beneficial. Mr. Warren addressed the committee. He stated the 1990 issue was reviewed again in conjunction with the City of McHenry's recent bond issue for the extension of the sanitary sewer lines east of the Fox River and the expansion of the South Wastewater Treatment Plant. It was determined again by staff refunding the 1990 bond issue was not practical as the savings benefit was not significant enough. Mr. Warren presented a detailed explanation of the refunding process and examined the possibility of refunding the City of McHenry's 1990 G.O. bond issue. He concluded, based on the general information provided, a refunding of 556,000 was not very beneficial or appealling as the savings was not great. He also drew the committee's attention to additional costs associated with a refunding, specifically legal, banking and bond fees. Some discussion followed. The committee directed Mr. Warren to investigate the feasibility of refunding the � 1990 G.O. bonds utilizing current bond numbers and interest rates. Full council can utilize Mr. Warren's report to make a more informed decision regarding the refunding. Finance Committee Meeting Finance Committee Meeting October 8, 1997 Page Six � Mr. Warren also informed the committee about yield burning. Finance Chairman Alderman Murgatroyd informed committee members a review and probable revision of the City's personnel policy manual might be the next issue addressed by the committee. He requested committee members review their schedules so a November meeting date could be set at the October 15th regularly scheduled council meeting. City Clerk P Ithoff noted copies of a proposed revision by the City of McHenry's law firm, Z�kowski, Rogers, Flood and McArdle had been distributed to the full council previously. Finance Chairman Alderman Murgatroyd stated his intent to request full council approval to begin the personnel policy revision at the October 15th regularly scheduled council meeting. Motion by Baird, seconded by McClatchey to adjourn the meeting. The meeting was adjourned at 8:25 p.m. ,� Steven Murgatroy , Fin nce Chairman �-'