31-Financial Management Payment for City's Water Rights

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CITY COUNCIL AGENDA ITEM BRIEFING SHEET Submittal Date: Originating Department: Presented By: Agenda Item No.: 10/l8/10 Council Date: Finance Gene Anderson 31. 10/25/10 RECOMMENDED MOTION: Move to approve a Resolution authorizing a supplemental agreement with the U. S. Government regarding payment for the City's water rights in Pat Mayse Reservoir and authorizing the City Manager to negotiate and execute all necessary documents. POLICY ISSUES): Financial Management In January 1965 the City of Paris entered into a contract with the U. S. Government for the use of 109,600 acre- feet also expressed as 55 million gallons per day (55 MGD) of water supply storage in Pat Mayse Reservoir for municipal purposes. Under the terms of the contract, the City would pay the associated construction costs of its portion of the reservoir plus interest. The City would also pay 23.659% of actual operations and maintenance expense of the reservoir. The City initially began making principal and interest payments on an 11 MGD space while interest at 3.137% accrued on the remaining 44 MGD. In June 1978, the City began making principal and interest payments on the second 1l MGD space. Interest continued to accrue on the remaining 33 MGD at 3.137%. In February 2005 the City proposed to prepay the remaining costs under this agreement and the related 1978 supplemental agreement. The savings under the proposal amounted to $1,750,935.12. The U. S. Congress approved the prepayment proposal in November 2007 as part of the Water Resources Development Act (WRDA 2007). At that time the savings to the City had shrunk by $149,484.03 due to principal and interest payments made by the City during the period between proposal and approval. However, the City also avoided O&M expenses of $169,969.41 during this same waiting period. Actual payment of the $3,461,432 settlement amount could not be made until a second supplemental agreement was drawn up by the U.S. Army Corps of Engineers. This supplemental agreement was received and reviewed by staff in September. By executing this supplemental agreement, the City of Paris will have paid in full its obligation regarding the water rights in Pat Mayse Reservoir. The Corps of Engineers has also agreed to refund to the City of Paris the $149,484.03 in principal and interest payments the City was required to make between the passage of the WRDA of 2007 and the City's acceptance of the new supplemental agreement. The City has the funds needed to make its payment held in reserve for this purpose and is prepared to make payment once the City Council has approved the supplemental agreement. The City will continue to have to pay its share of actual O&M costs at the lake estimated to be $70,000 to $100,000 annually. BOARD/COMMISSION RECOMMENDATION EXHIBITS: Resolution and Supplemental Agreement No. 2 ACTION: BUDGET INFO: ❑ Financial Report ❑ Minute Order Total Expense $3,461,432.00 ❑ Department Report ® Resolution W&S Bds 2000 $1,635,529.57 ❑ Presentation ❑ Ordinance Acct. Number 12-0916-82-98 ❑ Public Hearing ❑ Other Pat Mayse Res $1,825,902.43 Acct. Number 10-0916-82-98 FISCAL NOTES: None REVIEWED AND APPROVED BY: ® Administration ® City Clerk ❑ Community Development ❑ EMS/IT ® Finance ❑ Fire ❑ Municipal Court ® Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities City of Paris Revised 2/04/08 327