HomeMy WebLinkAboutA074 - Council Action Form dated January 24, 2012 r Q
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ITEM # 25
DATE: 01-24-12
COUNCIL ACTION FORM
SUBJECT: LOAN AND DISBURSEMENT AGREEMENT TO FUND PLANNING AND
DESIGN FOR NEW WATER TREATMENT PLANT
BACKGROUND:
On December 13, 2011 , the Ames City Council established January 24, 2012 as the
date of a public hearing to enter into a Drinking Water State Revolving Fund (DW SRF)
planning and design (P&D) loan to fund the design of a new 15 million gallon per day
water treatment plant. The DW SRF program provides low-interest loans to allow
communities to minimize the financial cost for major capital projects. The loan fund can
be used for planning and design, as well as water plant construction. At this time, the
City intends to enter into an agreement for a planning and design 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 interest loan for up to three years with no
initiation fee, no servicing fee and no payments. Planning and design loans can either
be rolled into a State Revolving Fund construction loan or repaid when some other form
of permanent financing is in place.
The planning and design 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 890,000
Environmental Assessments 25,000
Site work (Topographical/Geotechnical) 50,000
Final Design, Value Engineering 8,718,000
Subtotal 10,386,380
Contingency, — 10% 1 ,038,620
Total P&D Estimate 11,425,000
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. Only the 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 City Council to hold a public hearing prior to taking action to incur
debt. Immediately following the hearing, Council is asked to authorize executing the
P&D loan.
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ALTERNATIVES:
1 . Authorize the Planning and Design loan and disbursement agreement with the Iowa
Finance Authority to fund planning and design for a new water treatment plant in a
principal amount not to exceed $11,425,000.
2. Authorize the Planning and Design loan and disbursement agreement with the Iowa
Finance Authority to fund planning and design for a new water treatment plant in
some other principal amount.
3. Direct staff to seek alternative financing options for the planning and design
expenses.
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:
Authorization of this loan agreement is critical to financing the planning and design for
the 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 authorizing a loan agreement with the Iowa Finance Authority
for the planning and design for a new water treatment plant in a principal amount not to
exceed $11 ,425,000.
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