Utility Committee Agenda and Packet 2020 07 28

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fee revenue may go based on the COVID response. So the last Council meeting we provided the Option B on all CIPs where we assumed no tap fees. In that case we wouldn't want to do the $2.5M down payment as we end up switching that for the reduction in tap fees. Overall it is built into the model on any of these options and there isn't a big swing one way or the other. Councilmember Jeff Lipton asked in our current fund balances have we reserved money for this project. Mr. Peterson responded, yes this is where the $2.5M was coming from and that's where we continue to figure out if tap fees continue to progress then there will be significant funding in the fund balance to pay that $2.5M as the down payment. If for some reason tap fees drop out then that $2.5M may have a bigger impact to our fund balance and may be something we want to hold in reserve and finance more of the project to maintain the fund balance. Councilmember Jeff Lipton added he didn't want to have another $2.5M floating in the system if it's already collected for a specific purpose. Committee continued discussing the model, scenarios and options. Mr. Kowar added, another area we can explore is that we can stay conservative for the next few years and if all the legal stuff gets finished up and COVID clears out maybe we keep that $2.5M and in a year or two when we know everything has cleared out and know our fund balances are healthy then we can put that money down then. Councilmember Jeff Lipton said let's not take it off the table yet. Mr. Peterson said we are looking at three scenarios, 1. Is a zero cash payment, 2. Is a $2.5M cash payment and 3. A $1 M cash payment. We will continue that analysis through this process until we get a more definition on either a. What our Capital Expense will be, b. Response to COVID and c. What the ultimate cost of the project will be. Mayor Pro Tern Dennis Maloney then asked Mr. Manire about the 8 scenarios and what his opinion is. Mr. Manire said we are working on coming up with a comparative analysis of the pool financing. Don't have a lot of details on that yet. The City has the option of selling Enterprise Revenue Bonds. So if you choose to be the borrower or issue water debt directly you'll have control of these variables we modeled here. We took the three funding amounts we discussed and put on a 20 year prepayment term and compared it to a 30 year prepayment term. If the City wants to control its repayment structure at a close level of detail I think it's going to do its own financing. It's not known yet how much flexibility you'll have as a participant in the pool program. We will be corresponding with Northern District so we can do an accurate comparison then the City can decide what option they prefer. As far as the determination of financing 100% or contributing a component of the cash reserves. I think you have some time to consider that alternative and think about the cash available. Everyone is cautious of COVID and such that they are defensive about their reserve match and fund management policies. If you choose to retain the cash and borrow the additional amount we'll be able to model the alternatives and help you see the impact of it. Councilmember Jeff Lipton thanked Mr. Manire. Mayor Pro Tern Dennis Maloney commented that he appreciates the way all these scenarios are laid out and gives us a recommendation because it give us something to react to and you all have put a lot of work and knowledge into this and it help guide our decision making process. Councilmember Jeff Lipton then asked Mr. Peterson what the blended interest rates will be. Mr. Peterson said he hasn't calculated that out yet but that's something we can provide. Mr. Manire added that these are our recent 7