HomeMy WebLinkAboutA083 - Council Action Form dated December 9, 2014 ' Old CAF
12-09-14 13
IT 11
DATE: 1 - -14
COUNCIL ACTION FORM i
SUBJECT: CONSTRUCTION LOAN FOR NEW WATER TREATMENT PLANT
BACKGROUND:
In financing the City's new 15-million-gallon-per-day water treatment plant, the City
Council determined that the most economical financing option for construction of the
plant is the Iowa Drinking Water State Revolving Fund (DW SRF).
On January 24, 2012, Council authorized the use of a DW SRF planning and design
loan to fund the design of the new treatment plant. These design loans can be rolled
into a DW SRF construction loan or be repaid when another form of permanent
financing is in place.
The most economical way to finance the entire plant — including both design and
construction — is to enter into one permanent loan for all work associated with the water
plant project. This will include plant design, plant construction, special inspections,
construction of the pipeline between the old and new plants, lime sludge disposal and
pond modifications, and easements.
The consolidated construction loan amount requested includes these estimated
expenses:
Planning and Design Expenses (includes land) $ 6,870,000
Easement Acquisition 50,000
Water Plant Construction 52,497,000
Engineering Construction Administration 3,574,000
Special Inspections 400,000
Lime Sludge Disposal 1,573,000
Pipeline Construction 5,281,000
Subtotal 70,245,000
Contingency, — 10% of construction activities 5,980,000
Total Construction Estimate 76,225,000
SRF Loan Origination Fee (0.5% of loan) 381,000
Total SRF Loan 76,606,000
Repayment of the SRF loan will be from revenues generated in the Water Fund. Water
Fund balance projections shared with the City Council in April 2014 accounted for the
anticipated debt service for this project, and the user rate increases needed to fund the
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project are already complete. 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 loan agreement. The next step is for the City to hold a public hearing prior to taking
action to incur debt. Immediately following the hearing, Council can authorize execution
of the construction loan.
ALTERNATIVES:
1. Establish December 9, 2014 as the date to hold a public hearing and take action on
a loan agreement with the Iowa Finance Authority to construct a new water
treatment plant in an amount not to exceed $76,606,000.
2. Establish December 9, 2014 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 construction expenses.
MANAGER'S RECOMMENDED ACTION:
Entering into this loan agreement is necessary to complete financing for the new water
treatment plant. Moving forward utilizing the Drinking Water State Revolving 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 as described above.
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