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02 City Council (01/28/04) MINUTES OF THE SPECIAL CITY COUNCIL MEETING JANUARY 28, 2004 The City Council of the City of Paris met in special session, Wednesday, January 28, 2004, at 12:00 Noon at Paris Junior College, Bobby R. Walters Applied Technology Building, Room 1208, 2400 Clarksville Street, Paris, Texas. Mayor Curtis Fendley called the meeting to order with the following Council Members present: Jim Bell, Joe E. McCarthy, and Francine Neeley. Also present were City Manager Michael E. Malone, City Attorney Larry W. Schenk, and Acting City Clerk Sherian Dixon. Mayor Fendley stated that the Council was there to consider a resolution authorizing the preparation, execution and filing of an application, with necessary documentation, with the Texas Water Development Board for a Loan from the Texas Drinking Water State Revolving Fund (DWSRF) Program to finance necessary improvements to the City Water Treatment Plant. City Attorney Schenk explained that the study and report presented by Freese & Nichols, Inc., at the City Council Meeting on January 12, 2004, which showed deficiencies in the sedimentation basins at the Water Treatment plants and other needed improvements to bring the plant to a 32 MGD capacity would qualify the City for a low interest loan from the State for those improvements. He continued that the deadline for posting the pre-application was at 4 p.m. today, making an emergency meeting necessary. City Manager Malone reminded the Council that Freese and Nichols had presented their report on the Water Treatment Plant at the last City Council Meeting, and, although there was not a printed copy of that report ready yet, the Council did have a copy of a letter from Freese and Nichols concerning the report. He related that when copies of the report were available, they would be given to the Council, staff members, members of the Water and Sewer Subcommittee, and also to interested citizens and industrial representatives. The City Manager said the report should be available next week. City Manager Malone explained that the purpose of this meeting was to discuss funding that was available from the Texas Water Development Fund in the City Council Meeting January 28, 2004 Page 2 form of a low interest loan. He mentioned that, if the City qualified, there might be some forgiveness of that loan. City Manager Malone said that if the Council members thought the customer base demand, including industrial customer demand, will stay the same or increase in the future, then they might want to consider going forward with the proposed improvements by the consulting engineer. Shawn Napier, City of Paris Engineer, came forward and reminded the Council this was a pre-application and if they sent it in today, it would go to the Texas Water Development Board and then would be passed on to the Texas Commission on Environmental Quality (TCEQ). The TCEQ would rank all of the applications, make a list, and would then look at the top third of the list in detail, taking into consideration how much money is being asked for and how much money is available from the Federal Government. He said that TCEQ would then send out letters. Mr. Napier called the Council members’ attention to a letter in their packet from the Drinking Water State Revolving Fund. He said the Board would notify prospective applicants of their priority rating and will encourage them to schedule a pre-planning conference for guidance in preparing the engineering, planning, environmental, financial and water conservation portions of the DWSRF Application. This would mean that the application was accepted and the Board was going to give the organization some money and needed to know exactly what needed to be done and how the money was going to be spent. He indicated that the application that was being sent today was to go through the ranking process. City Manager Malone said this was money that would be available for the year 2005. Mr. Napier said that this money was available every year and if we chose not to apply for it this year, we could apply again next year. He did say that interest rates would vary as to when we applied for the loan. City Engineer Napier called the Council’s attention to a form in the packet called Disadvantaged Community Program Worksheet. The sheet has the City Council Meeting January 28, 2004 Page 3 applicant to come up with an adjusted median household income. If the applicant falls into the State’s criteria for that, it pre-qualifies them, but there is a second step to the Worksheet. He indicated the City of Paris did not qualify under step 2. Councilman Bell asked if the Council makes the application, does that mean that they will go through with all the proposed projects? He said he would like to make a resolution that said they apply for the loan, and when they are notified of what sort of loan they will receive, then they will decide what all they want to do. Councilman Bell said they didn’t have copies of the reports from Freese and Nichols and the studies, but he felt like the sedimentation basins were the City’s weakness. He said the studies showed the City used an average of 12.5 MGD, which means sometimes it is below that and sometimes it is above that. The report says the peak is at 26 MGD and the law says that they must be able to produce that. He also said he didn’t see where the study took in to consideration the new water tank, which holds 2.5 million gallons. Councilman Bell said he would also like to see a report on the $9.5 million Certificates of Obligation. City Engineer Napier stated that each year TCEQ lowers the standards and probably at the time, the plant was doing just fine. He said the study shows the current condition the City is in. Councilman Bell asked if the City was required to do the study. Mr. Napier replied the City was not. Councilman Bell said TCEQ had the water plant rated at 32.5 MGD and this has given them official notice that the City does not really have a 32.5 MGD. City Manager Malone explained the Council decided to do the study because they needed to know the productive capacity of the plant, realizing that the City Council Meeting January 28, 2004 Page 4 plant capacity was not at the capacity set by the TCEQ, and also because the City is in contract negotiations with Campbell’s Soup and Lamar County Water Supply. He said the contracts could not be finalized without the correct information. He continued, at the time the study was approved, there was some thought that Campbell’s Soup might have an expansion and need even more water. He said they were now aware that is not the case, but when the study was approved that was a consideration. Councilman Bell asked if when TCEQ sets the capacity or changes it, once it is set, do they give the City time to get into planning? City Engineer Napier explained that TCEQ will tell the City they need to submit a process of how the City is going to deal with this, and then TCEQ will approve the process or reject it. Councilman Bell said he felt like the reduced water demand from Campbell’s Soup had put the City in a situation. City Attorney Schenk related the contract negotiated with Campbell’s Soup says 8 MGD. The figure Campbell’s Soup came up with was 6 MGD. He said the 8 MGD is cited in the study from Freese and Nichols. and that is the maximum Campbell’s Soup can get. He explained that if the number was dropped down to the requested 6 MGD, we would still be in the same situation. Councilman Bell asked if that was a take and pay contract. City Attorney Schenk stated it was not a take or pay contract. He continued that it was a contract based on the amount that they actually take, but it is not a simple contract. He related the issue was to let Campbell’s Soup set their own course for future demand. Councilman Bell asked how much water the City of Paris used. City Engineer Napier said the study stated 10.6 MGD maximum. Councilman Bell asked City Council Meeting January 28, 2004 Page 5 how much water was provided to Lamar County. Mr. Napier stated 5 MGD maximum by contract. City Attorney Schenk said with the 8 MGD to Campbell Soup, the 10 MGD to the City and the 5 MGD to Lamar County, that is a total of 23 MGD. Councilman Bell indicated that was the peak, not the average. Mayor Fendley indicated that the water contracts included Kimberly-Clark, Campbell’s Soup and Tenaska. City Engineer Napier indicated these were the three major industrial users and the study basically looked at these. City Attorney Schenk said the Freese and Nichols letter used the number 26.5 MGD. Councilman Bell asked how much Lamar County asked for. City Attorney Schenk explained the current contract with them says the City is obligated to provide them with a maximum of 5 MGD. The study indicated there were administrative considerations in that number that may cause Lamar County to require more water just for their current customers. City Engineer Napier explained that Lamar County has an exception with TCEQ. TCEQ requires most everyone to apply .6 gallons per minute per connection and Lamar County is currently at .35gallons per minute per connection. He related that sometimes TCEQ goes back and looks at the past record of water usage, and that would probably go up because of some drought years. He figured it could go up to as much as 9 MGD. City Attorney Schenk said that did not necessarily mean they would use that much, but they would have to contract to meet the State regulations, to have the availability of that water. City Manager Malone continued that this means the City would have to have City Council Meeting January 28, 2004 Page 6 the capacity to serve them and that is why the production study was done. He indicated that Lamar County has already said they want more water. Councilman Bell said we would have to have the production or tell them to get it somewhere else. City Manager Malone countered that if they do get it somewhere else, the City’s water supply at Pat Mayse Lake is in danger because City of Dallas may reach out and grab some of the water. He explained that if the City doesn’t have the capacity or plans to use the water, then the water is subject to being taken by another entity. City Attorney Schenk explained that their rate is based on what they contract to buy. If they have contracted to buy 5 MGD, they will have to participate in the cost of providing that water. If they contract for more, their rate will reflect the increase. He concluded there will be an additional cost for them, but the City will also have to have the ability to provide the water they contract to provide. City Manager Malone agreed that any customers who are benefitted by any improvements will be sharing in the increase of the cost to provide those improvements. City Councilwoman Neeley brought the Council’s attention to the first part of Councilman Bell’s question which was if the City passes the resolution to ask for this money, is the City obligated to do all these improvements and to take this money? City Attorney Schenk explained there are two resolutions; the one being used today authorizes the application for the grant. The other resolution we often use has a paragraph that states once the loan is accepted, so that means the loan would have to be accepted by the council. He continued that the Council could pull the plug on the process before that point if they wanted to save the State and the City the expense and time of having to do all the additional loan City Council Meeting January 28, 2004 Page 7 preparation. He summarized the City could file the loan pre-application now, and could change their minds if they wanted to. Councilwoman Neeley was just concerned that if they do get the reports and then realize that they are in over their heads, could they stop the process. Mayor Fendley agreed that the Council needed some time to run some numbers and Gene Anderson needed some time to see if he can float that issue without increasing water and sewer rates. Councilman Bell felt like they needed to look at some of the issues where they haven’t spent all of the $9.5 million plus interest. He stated there were $2.5 million in proposed projects. He felt like things needed to be prioritized if we see things coming down the pipe. City Manager Malone said that would be a re-prioritization, because they realized that the new Water Tank was the No. 1 priority. They did not realize that the study would down-size the plant to 20 MGD by regulation, even though they did realize that it wasn’t what it is currently rated. He reminded them that the Water & Sewer Sub-Committee had said there was excess capacity and there was no need for improvements. City Attorney Schenk reminded them the bonds were originally sold to satisfy an EPA administrative order. City Manager Malone said ADS did a study that the City was ordered to do. The administrative order required the City to implement all the repairs based on that report. The estimate of the money needed for those repairs was based on that report. He related the City was innovative in coming into compliance and getting out from under the administrative order for less money the report said. Mayor Fendley said they need to set up a meeting to discuss the 3 to 5 year plans to see if they have the necessary funding or need to look elsewhere. He City Council Meeting January 28, 2004 Page 8 agreed with Councilwoman Neeley that the main issue in this meeting was to see if the Council wanted to submit the application. Then, he figured, there would be time before they heard back from the application to discuss these issues. City Manager Malone said if the Council believed the current customer base including the industrial base will stay the same or increase, they might want to consider, at some point, implementing these recommendations by the study, because the City is currently not able to produce, according to regulations, the amount of water the City is already obligated to produce. At the same time, he suggested if they felt like a customer could drop off or there would be a decrease in demand in a substantial amount, there would be the debt already incurred plus the debt for the plant upgrade that would have to be shared by the remaining customers. Mayor Fendley felt like water capacity was a good economic development tool. He said Gary Vest is looking at a prospect that is a big water user. He felt if the City held back and didn’t expand, they might not be looked at any more because there wouldn’t be the capacity to provide the water needed. Councilman Bell indicated that he would make the motion that staff pursue the application with the understanding that the staff is not authorized to accept but that they will be coming back to the Council. He stated he also wanted the staff to study the current situation with funds and bring back a new priority list for the next 5 years. He wanted staff to look at all this with the priority of not increasing taxes or water rates. RESOLUTION NO. 2004-020, authorizing the preparation, execution, and filing of an application with the Texas Water Development Board for a loan from the Texas Drinking Water State Revolving Fund (DWSRF) Program to finance necessary improvements to the City Water Treatment Plant, authorizing the submittal of any supporting documentation necessary in furtherance of completion of said application, authorizing the City Manager, City Engineer, City Finance Director, and City Attorney to review, sign or submit City Council Meeting January 28, 2004 Page 9 documentation as required in furtherance of said application, making all findings and provisions related to the subject, was read. Councilman Bell made a motion to accept the resolution, which was seconded by Councilman McCarthy. The resolution carried 4 ayes, 0 nays. There being no further business, the meeting was adjourned. _________________________ CURTIS FENDLEY, MAYOR ATTEST: ________________________________ SHERIAN DIXON ACTING CITY CLERK