HomeMy WebLinkAboutA015 - Council Action Form dated October 9, 2012 {
ITEM # 22
DATE: 10-09-12
COUNCIL ACTION FORM
REVISED
SUBJECT: AUTHORIZE STAFF TO CLOSE ON LOAN AGREEMENT WITH THE
IOWA FINANCE AUTHORITY TO FUND CONSTRUCTION OF THE
WATER POLLUTION CONTROL PLANT DISINFECTION PROJECT
BACKGROUND:
On September 11, 2012, Council awarded a contract for construction of a new
ultraviolet light (UV) disinfection system for the Water Pollution Control Plant.
Construction of the system is required under the terms of the discharge permit for the
facility. Staff has explored the most economical financing options and is recommending
that the City use the Clean Water State Revolving Fund (SRF). As of October 1, 2012,
the current terms for the SRF loan program include a 0.5% loan origination fee and an
interest rate of 1 .75% over a 20-year term. Repayment of the loan will come from the
Sewer Fund and has been accounted for in the current rates and fund balance
projections. The SRF loan program will provide disbursements as funds are requested,
unlike bonds where the entire proceeds are provided at closing.
The first step to be eligible for the CWSRF loan is to have the project approved by the
State and placed on the Intended Use Plan (IUP). The project has been included in the
IUP since the first quarter of 2011 and is ready for financing. The WPC Plant
Disinfection Project is currently shown in the IUP with an anticipated cost of $3,120,900.
Based on current contracts awarded by Council, the projected cost is as follows:
Engineering Cost $ 333,335
Construction Cost & Equipment 2,021,780
Construction Contingency 210,000
Total Estimated Project Cost $ 2,565,115
A public hearing was held on August 28, 2012. Staff delayed closing on the loan until
after October 1 in order to benefit from a lower interest rate. No construction costs were
incurred.
The dollar amount Council is being asked to approve for the loan agreement is
$3,121,000. This matches the dollar amount included in the State's Intended Use Plan
(rounded to the nearest $1,000), and is consistent with the dollar amount shown in the
previous public hearing. The SRF program releases funds in the form of a
reimbursement only after an eligible expense has been incurred. This is different than a
traditional bond sale where the City takes on the entire amount of the bond immediately
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at the start of the project. For SRF projects, only those expenses actually incurred will
be ultimately be rolled into the SRF loan payments.
ALTERNATIVES:
1. Authorize staff to close on the loan agreement with the Iowa Finance Authority for
construction of the Water Pollution Control Plant Ultraviolet Disinfection System in
an estimated amount of $2,565,11 $3,121,000.
2. Do not authorize staff to close on the loan agreement and provide staff with direction
on the desired financing method for the project.
MANAGER'S RECOMMENDED ACTION:
Issuance of these bonds is necessary in order to complete the financing for the new
Water Pollution Control Plant Ultraviolet Disinfection System required by the facility's
discharge permit. Moving forward using a loan from the Clean 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 , thereby authorizing staff to close on the loan agreement with the Iowa
Finance Authority for construction of the Water Pollution Control Plant Ultraviolet
Disinfection System in an estimated amount of$2,565,11-5 $3,121 ,000.
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