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HomeMy WebLinkAboutCOMMITTEE OF THE WHOLE - 09/08/1982 - NW SUBURBAN MUNICIPAL JOINT ACTION WATER AGENCY Minutes of the Committee of the Whole Meeting: September 8, 1982 A meeting of the Committee of the Whole was convened by Charles J. Zettek at 7:10 p.m. , September 8, 1982, in the Trustees' Conference Room pursuant to notices distributed on September 3, 1982. The following members of the Village Board were: Present Charles J. Zettek Michael A. Tosto Edward R. Hauser James P. Petri Joseph T. Bosslet Stephen M. Uhlarik Absent Ronald L. Chernick AIso present were Charles Willis, Village Manager, and George Coney, Director of Finance. Mr. Zettek advised the Committee of the Northwest Suburban Municipal Joint Action Water Agency's August 26 meeting and the Board's consideration of two plans for financing construction of the Lake Michigan water pipeline system. Under one plan the Agency would sell revenue bonds of some $135,000,000 for construction, professional services and interest payments for 2# years during the construction period. The second plan would, for the same purposes, call for the sale of $109,000,000. Under the second plan the Member Municipalities would pay the interest costs for l# years and the Agency's bonds would pay interest for 1 year. Mr. Zettek said the various Municipalities were reviewing the proposed plans in light of how they would impact their community. on September 9 the Water Agency's Board of Directors is to determine, by voting, which plan is to be authorized. The Agency expects to sell the bonds in December, 1982. The purpose of the Committee of the Whole meeting is for the Elk Grove Village Trustees to discuss the financing plans, review our projections as to their impact on Elk Grove and to indicate the preferred plan so that Mr. Zettek's vote on September 9 reflects the consensus of the Village. Charles Willis reviewed the Water Agency's planning and the status of the project. He also advised that, at the present time, the Agency plans to raise funds by the sale of about $60,000,000 in long term revenue bonds and $50,000,000 in short term notes. That plan . . . . . . . . . .continued -2- appears to provide the greatest flexibility and has the potential of producing savings on interest costs. The first group of bonds would be at a fixed rate of interest for 40 years. The second group of notes would be due in 2} or 3 years at which time they would be re- financed with either short term notes or long term bonds, whichever produced the lowest interest costs to the Agency and, hence, to the Municipalities. Information furnished by the Agency's Investment Banker, John Nuveen and Company, has been reviewed by George Coney, and he has prepared projections of our Water System income and expenses through the Fiscal Year of 1986-87. Mr. Coney cautioned, however, that the information (costs and projected rates) are tentative and subject to change as more definitive data is assembled from the other cities by Nuveen and Company. George Coney distributed copies of the projections. He pointed out that the assumptions used included the guidelines set during the Village Board's review of the 1982-83 Budget and Five-Year Forecasts, namely: 1. No additional personnel 2. Inflationary increases of 8% per year 3 Receipt of Lake water in the Spring of 1985 4. Discontinued use of the ground water system in 1985 5. Paying the Village's share of the interest due during construction of the pipeline (A copy of Mr. Coney's data and information is attached to these minutes.) He also noted that the information furnished by Nuveen and Company was based on local operating information furnished by the Village and Member Municipalities' information developed by the Agency All presently known costs are included: 1) Agency system design, financing, debt service, construction, Chicago water, and operation and maintenance; and 2) Village operations, maintenance, capital outlay, debt service, wholesale water from the Agency, and discontinuation of the Village's well water system. Mr. Coney pointed out that the projections, based on a one- year capitalization of interest and a 24 year capitalization results in the same impact on the Village's present rate of 69 cents per 1,000 gallons of water between 1983 and April 30, 1987, but the amounts and timing of the increases differ as follows: .. . . . . .continued next page -3- Agency's Capitalization of Interest One Year Two & One Half Years Increase Increase 1982-83 -0- -0- 1983-84 .69 .26 1984-85 .60 -0- 1985-86 .17 .81 1986-87 .20 .59 Total $1 .66 $1.66 Mr. Coney advised that the adjusted cost of the wholesale water due to selling some $26,000,000 more in bonds to capitalize interest for 2} years is not included in the .81 or .59 increase to our rates shown above. Predicated on an earlier report by Nuveen and Company, Mr. Willis _ advised that the 1985-86 rate of 81 cents and 1986-87 rate of 59 cents could be as high as 92 and 73 cents to retire the additional bonds under the 21 year plan. And further, that the higher rates would continue for the remaining 39 years of the Agency's bond issue. The currently estimated gross rate change of $1.66 per 1,000 gallons over the next 4 plus years, under the one-year plan, represents an increase over the current Water and Sewer commodity rate of 89 cents per 1,000 gallons of 186.5%. Mr. Coney noted that the increases would have to occur as follows under the Agency 's plan: May 1, 1982 (current rate) $ .89 May 1, 1983 (increase) .69 77.5% $ 1 .58 May 1, 1984 (increase) .60 38.0% $ 2.18 May 1, 1985 (increase) .17 7.8% $ 2.35 May 1, 1986 (increase) .20 8.5% $ 2.55 Gross change: $0.89 plus $1.66 = $2.55 186.5% Mr. Coney further advised that the gross change might be reduced by 1) minimizing the amount of money carried over at the end of each Fiscal Year for unusual and emergency repairs to the water system; and 2) by calling in and repurchasing the last of the outstanding 1963 bonds issued to purchase the Village's utility system. . . . . . . . . . .continued -4- By holding the cash carryover to $800,000 per year and by calling in the 1.85 million dollars on old bonds and purchasing them at less than par value it mmy be possible to reduce the rate by upwards of 14 cents per 1,000 gallons. While this may be possible, further calculations and analyses must be made to determine the ultimate impact on our fiscal status. If the Board would approve such policies, and if savings could be achieved, the rate could possibly be adjusted as follows; it represents an overall increase of 169.7% rather than 186.5%: 1982-83 Current Rate $0.89 60.7% 1983-84 Net Increase (.69 - .14) .54 $1.43 1984-85 Net Increase (.60 - -0-) .60 42.0% $2.03 1985-86 Net Increase (.17 - -0-) .17 8.4% $2.20 1986-87 Net Increase (.20 - -0-) .20 9.1% $2.40 Total overall increase 0.89 plus $1.51 = $2.40 = 169.7% Coney and Willis advised that the information and rates presented and discussed this evening are still subject to further change because the Water Agency's fiscal plans and schedules are not yet completed and negotiations are still in progress for certain land and rights-of-way. Further changes could also occur should the Village Board decide in the next year or two to use some of the money in the special Surface Water Fund toward the water rates or for interest payments to the Water Agency. Finally, the "tentative" rates could also change depending on when new rates are approved and the sequencing of future rate increases. The members of the Committee of the Whole indicated that they would prefer to see the one-year capitalized interest plan followed by the Water Agency. While the first year costs are greater per 1,000 gallons than the first-year costs under the 2; year plan through the remaining 39 years of the Agency's bond issue the cost per 1,000 gallons of water is some 25 to 30 cents less under the 1-year plan versus the 21 year plan. That difference to the utility customer is substantial whether the customer remains the same or whether new customers take their place. It was the consensus of all members of the Committee of the Whole: 1 To favor the one-year capitalized interest plan of the Water Agency; 2.To favor an $800,000 cash reserve for unusual or emergency water system repairs; . . . . . .continued next page -5- 3. To favor the repurchase of outstanding 1963 Water & Sewer System Bonds; 4. To consider such further adjustments to the project utility rate as may be possible and prudent; 5. To confirm and approve the Village's position on the Water Agency's one-year capitalization plan at the next Village Board meeting. The Committee meeting ended at 8:30 p.m.