HomeMy WebLinkAboutA064 - Council Action Form dated December 13, 2011 i ` J
ITEM # 39d
DATE: 12-13-11
COUNCIL ACTION FORM
SUBJECT: PLANNING AND DESIGN LOAN FOR NEW WATER TREATMENT
PLANT — DATE OF PUBLIC HEARING
BACKGROUND:
On July 14, 2009, the Ames City Council authorized moving forward with a new 15-
million-gallon-per-day water treatment plant. Staff has explored the most economical
financing options and is recommending that the City utilize the Iowa Drinking Water
State Revolving Loan Fund (DW SRF). The SRF program offers competitive interest
rates (currently 3%) as well as more favorable debt coverage requirements. The loan
fund can be used for planning and design purposes, as well as construction.
At this time, staff recommends that the City apply for a planning and design (P&D) loan
in an amount not to exceed $11 ,425,000. The planning and design loan administered
by the Iowa Finance Authority allows for a zero percent loan for up to three years with
no initiation fee and no servicing fee. Planning and design loans can be rolled into a
DW SRF construction loan or repaid when another form of permanent financing is in
place.
Ultimately, it is the intent of staff to apply for a construction loan through the DW SRF.
The public hearing and application for the construction loan will be done at a later date
after the project has bid and actual construction costs are known. Repayment of the
construction SRF loan will be from revenues generated in the Water Fund. The Capital
Improvements Plan being developed for Council in January will show an anticipated
total cost for the project of approximately $64 million, which includes the expenses
covered by the planning and design loan.
The planning and design (P&D) loan amount requested includes these estimated
expenses.
Reimbursement of Design Work from Previous $ 703,380
Years (FY 08/09 to FY 11/12)
Land Acquisition and Related Expenses 825,000
Environmental Assessments 25,000
Site work (Topo. Surveys, Geotech.) 50,000
Final Design, Value Engineering 8,718,000
Subtotal 10,316,380
Contingency, — 10% 1 ,103,620
Total P&D Estimate 11,425,000
1
r
Note that this amount exceeds the actual amount that is anticipated to be needed prior
to entering into a construction loan. There is no penalty, financial or otherwise, to the
City for requesting more than is needed in the P&D loan, and only those expenses
actually incurred would be rolled forward into the construction loan.
The project was placed on the DW SRF Intended Use Plan in December of 2009, a step
that needed to be accomplished prior to entering into the P&D loan agreement. The
next step is for the Council to hold a public hearing prior to taking action to incur debt.
Staff is recommending that Council establish January 24, 2012 as the date for the public
hearing. Immediately following the hearing, Council would be asked to authorize
executing the P&D loan.
ALTERNATIVES:
1. Establish January 24, 2012 as the date to hold a public hearing and take action on a
loan agreement with the Iowa Finance Authority in an amount not to exceed
$11,425,000 to plan and design the City's new water treatment plant.
2. Establish January 24, 2012 as the date to hold a public hearing and take action on a
loan agreement with the Iowa Finance Authority to plan and design for a new water
treatment plant in some other amount.
3. Direct staff to seek alternative financing options for the planning and design
expenses. Such options might include municipal revenue bonds, which would be
more costly and would require greater rate increases to retire the debt.
4. Take no action to incur debt on the new water treatment plant project at this time
and provide direction to staff on the future of the project.
MANAGER'S RECOMMENDED ACTION:
Entering into this loan agreement is necessary in order to complete the financing for the
planning and design of the City's new water treatment plant. Moving forward utilizing
the State Drinking Water Revolving Loan Fund is the most economical way to finance
the project for our utility customers.
Therefore, it is the recommendation of the City Manager that the City Council adopt
Alternative No. 1 , thereby establishing January 24, 2012 as the date to hold a public
hearing for a loan agreement with the Iowa Finance Authority in an amount not to
exceed $11 ,425,000 to plan and design the City's new water treatment plan.
2
i