City Council Minutes 2015 03 10 SP

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City Council Special Meeting Minutes March 10, 2015 Page 4 of 5 from each fund as presented. The cost of service adjustment refers to who pays for each of those revenue amounts. He explained the revenue cannot be smoothed any further because the lenders will want to see a certain amount of revenue to ensure payment for the debt service on the loan. Public Works Director Kowar reviewed the current utility bill for an average residential customer and the utility bill for reflecting the cost of service adjustment. He addressed the FEMA reimbursement for the flood damage as the current numbers do include financing for the new Intake Building. The City continues to pursue FEMA funding and just received a $300,000 grant for the Intake Building. Therefore staff does anticipate the cost covered by the City for the Intake Building will decrease, thus requiring less of a service adjustment in the future. Finance Director Watson explained the City's financing model used to set rates is very reliant on tap fees and any downturn on development will affect this model. The loan agreement that will be presented on March 17 will include a maximum loan amount of $43 million with a maximum interest rate of 3.25 %. The current utility rate model contains a $33 million loan at a rate of 2.25 %. Council member Keany stated his understanding the rate increases cannot be spread out over a period of more years because the revenue stream is needed to pay for the loans. Finance Director Watson confirmed the revenue increases, as presented, are needed for the loans. Council member Stolzmann noted some capital projects can be delayed. Mayor Pro Tem Dalton agreed and stated the only project which could be moved out is the stormwater project. Mayor Muckle felt something could be worked out to generate the money and slowly adjust the residential and non - residential rates to reach the total costs of service adjustment. He did not feel there was much difference in the models. He suggested increasing the rates earlier rather than later and looking at delaying some projects if necessary. Mayor Pro Tem Dalton wanted to see a review of the utility rates annually. Council member Stolzmann suggested the Water Committee meet at least quarterly and review the water use by customer class and the revenue by customer class. Council member Leh noted low in -come residents will be affected by the utility rate increases and asked if there is a program or something the City can do to encourage non - profit organizations to help out. Finance Director Watson stated there are non - profit organizations such as Sister Carmen's who may help out. He noted the City gives grants every year to non - profits, such as Sister Carmen.