HomeMy WebLinkAboutA014 - Council Action Form dated June 13, 2023 ITEM #: 27
DATE: 6-13-23
DEPT: FIN
COUNCIL ACTION FORM
SUBJECT: RESOLUTION AUTHORIZING AND APPROVING A LOAN
DISBURSEMENT AGREEMENT AND PROVIDING FOR THE ISSUANCE
AND SECURING THE PAYMENT OF $12,161,000 WATER REVENUE
BONDS 2023
BACKGROUND:
This resolution is the final step in authorizing a not-to-exceed amount of $12,161,000 in
Sewer Revenue Bonds through the Iowa Drinking Water State Revolving Loan Fund
(DWSRF) in support of the North River Valley Well Field and Pipeline Project.
On November 22, 2022, the City Council held a public hearing and adopted a resolution
instituting proceedings to take additional action for the authorization of a loan
disbursement agreement in an amount not to exceed $8,500,000 and identified the Iowa
Drinking Water State Revolving Loan Fund (DWSRF)as the funding source in anticipation
of the construction of three new wells and an interconnecting pipeline to the Water
Treatment Plant.
On March 3, 2023, bids were received and were significantly higher than the original
engineer's estimate and included a low bid of$10,200,956. Upon review, staff found that
the bid prices reflected the current market conditions and that the discrepancy between
the estimate and the bids resulted from a bad estimate rather than bad bids. As a result,
the bid was awarded to the low bidder, Keller Excavating, Inc., and as a precautionary
measure, the award was contingent on securing the necessary funding from the DWSRF
program.
Additionally, on May 9, 2023, in order to accommodate the increased cost of the project,
the City Council held a public hearing and adopted a resolution instituting proceedings to
take additional action for the authorization of a loan disbursement agreement in an
amount not to exceed $4,000,000.
With both public hearings and authorizations approved, the total not-to-exceed amount
for the project is now $12,500,000.
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The following itemization of costs associated with the project:
Total Project Loan
Admin Expense $ 37,472
Planning and Design 505,894
Engineering Construction 181 ,906
Construction 10,200,956
Test Drilling 124,005
Land 111 ,038
Contingency 939,229
Origination Fee 60,500
Total SRF Loan $ 12,161,000
Staff believes the DWSRF program offers the lowest cost option for borrowing for capital
projects with a 1 .75% annual interest rate and a 0.25% annual servicing fee, in addition
to a 0.5% origination fee. The funding source for the repayment of the loan will be water
utility revenues which have been included in the financial model used to project future
rate increases.
ALTERNATIVES:
1 . Adopt a resolution approving a State Revolving Fund Agreement in the amount of
$12,161,000 to be repaid with Water Utility Revenue.
2. Do not approve the loan and disbursement agreement and provide staff additional
direction for the financing of the project.
CITY MANAGER'S RECOMMENDED ACTION:
Authorization of the construction loan will allow the City to access State Revolving Funds
to finance the North River Valley Well Field and Pipeline Project. The financing terms of
the SRF program are the most cost-effective method of financing the project. The
principal and interest payments related to the loan have been accounted for in the Water
Fund rate design. Therefore, it is the recommendation of the City Manager that the City
Council adopt Alternative No. 1, as noted above.
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