08-23-66SpMtg AUGUST 23rd, 1966.
A special meeting of t~e City Council of the Cit~ of Delray Beach,
Florida, was held in the Council Chambers st 7:30 P.M., Tuesday,
August 23rd, 1966, with Mayor Al. C. Avery iH th%':ch:a~r; "City'Mansger
DaVid M. Gatchel, City ~ttorney John Ross Adame,"'and' ~0un'c['lme~n J.
LeRoy Croft, James ~.-'Jurney, Jack L. Saunders and Ge°rg~' 'Tablet, Jr.,
being present.
An opening prayer was delivered by City Clerk R. D. Wo~thing, and
the Pledge of Allegiance to the Flag o3 the United States of America
was given.
Mayor Avery called 'the meeting to order and announced that same had
been called for the purpose of discussion with the COnsulting Engineers
and F~s%al Agents pertaining to a Water Works Improvement and Treatment
Plant, and for any other business .that may come before the mastiffS.
Mayor Avery reminded Council that the City's Fiscal Agents are B. J.
Van Ingen & Company a~ Goodbo~y & Company, and since B. J. van Ingen
& Company has gone out of..:bd$i~ss and Mr. Stanley Ross, formerly with
that company, is now assoC~at%~ with R. W. Pressprich a Co., Incorpor-
ated, suggested that the Council officially designate, R. W. Pressprich
a Co., Incorporated and Goo~bo~y & Company as the Fiscal Agents. It
w~s so moved by Mr. Saunders, seconded by Mr. Talbot and unanimeusly
carried.
Mr. Walter D. Hays, Water Engineer for .Russell-& Axon, Consulting
Engineers, gave a detailed explanation of the plans and ~pecifications
of the proposed Water Treatment Plant, and also explained that the pro-
ject has been divided into two parts, the water treatment plant proper,
and the water maine. Further, that said plans have been submitted
to the State ~oard of Health, and approved by that Board, with the
single stipulation that a switch to operate the fan in the chlorine
room should be on the outside of the door of that room.
Concerning estimate of costs, Mr. Hays said that the preliminary
estimate originally amounted to a total of $1,420,000 of construction
costs, to which w~s added about $280,000 to cover legal, engineerin~
and contingencies, for a total of a~proximately $1,700,000. Further,
based on the finished design, the final estiumte for the water treat-
ment plant end mains is $1,391,000 plus the $280,000 for legal,
engineering and contingencies, plus approximately $16,000 to cover
~ecessary alteration of the existing well pumps, making a total of
$1,687,000.
~t was pointad out that of th~ $~80,000 figure, contingenciea there-
in would a~omat to approximetel, y $100,000o hlao tl~t an electric hoist
for the chlorine cylinders has been requested by the Water Superintend-
eat and would cost approximately $1,750., but i~ the Council did decide
to purchase same, that would be too small an amount to change the esti-
mated total of $1,687,000.
Mr. Hays informed Council that said estimated cost was based on the
trend of construction costs over the past several years, and if the
present trend continues, the figures quoted would be good only.for a
matter of approximately three months.
City Manager Gatchel reminded 'Council that 'the Engineers' design
fee is an amount that will come out of the $280,000 figure to cover
legal, engineering and contingencies, and that al~proxima.tely $55,000
has already been encumbered" for the payment of that fee..
A bill in the amount of $54,768.15, less $~0,000 previously paid,
was presented from Russell a Axon covering the fees for design of said
water works improvement and treatment plant.
-I- Sp, 8-23-66
Following discussion, Mr. jUrney '~oved Sat the sum of ~$4,768.15
less the $10,000 previously paid on the preliminary feasibility study,
be paid to Russell & Axon. The motion was seconded by Mr. Saunders
and carried unanimOusly.
Mr. Stanley E. Ross presented and commented on a four page letter
from the 'fiscal agents signed by himself, represe~ting R. W. pressprich
& Co., Incorporatedf and by Mr. C, T.'McCreedy of ~oodbody & CompanY,
regarding the overall Water and Sewer projects started, in 1957.
(Copy of said;letter from the Fiscal Agents, dated August 23, le66
attached to ~the official copy of these minutes.) See pages 190-A-D.
Mr. Ross said that Council can determine for the fiscal agents what
is desired to be financed at this time so far as completing the water
and sewer facilities. Further, that would also require some revision
of revenue estimates by the consulting engineers in order to cover the
desired financing.
Mr. McCreedy informed Council that he had two specific illustrations
that would show' just ~hat the financing situation is, and continued=
"These a=e bonds that Goodbody & Company b~.ught last Wednesday. Wa
bought $1,000,000 of City of New York'General Obligation Bonds,
$$00,000 of which mature March 1, 1968, and $500,000 on March 1, 1969.
We thought wa had a bargain and we are offering these bonds at discount
prices t? ,yield 5,:~5 per Ce, hr. ~hat .~bond has :th.....e: se~, rati~ng as :De,ray
~each bonds~: Since Wednesday, ,we have sold not .quite .~300,000 of them
out',of $1; 0~0, 000 ~ 'S° ~he~ 'a~paran~ly' are no ~ar~a~n t~. ~'~
eh6. ~ey ~ ~eSS ::so: .~on~ght '~ecause 'this afternoon, 'we ;='a s-a '~mber
of' ~' S~d/~ate;' boUgh~ about $10,000,000 in bonds from the Mellon
National Bank, This is the wire ~e!easing the bonds-at,diScgunt prices
in every case. All.are A .rated bonds. They are all revenues, but..they
are all good Sol~d A rated'electriC revenues, etc. Allegheny. County
Pa.~ Massachusetts Port Author.it~ . New York State. Power. Authority~
Tri-Boreugh Bridge. A~thority~ Clark County Washington. E~l. ec~ric .Reve~
nues~ and Connecticut Expressways. They all mature from 1968 to 1974.
The Connecticut Expressways are priced to yield 5.25 per cent and from
that, all the way to six per cent for the Clark County .Washington, so
the 5 per cent interest cost that Mr. Ross and I th. ought ~w~;uld be real-
~Stic a few days ago W°uld not even be realistic t0aight.. You. c0u!dn't
come ,an ~where near-5 per cent interest cost as of today, ..and ~e. are...
talklng about months ahead of tOday, but there is nothing ~n sight at
~he moment to indicate any change in this trend. Each day it gets a
little worse, so that is something you should take into consideration
along with y~Ur Judgment aS.to'what portion of this project.you should
finance ;'" ' '
Mayor AVery asked'how far back this bond situation ~tarted; and M~.
McCreedy replied= "The most of it has been since.January. They have.
what they ca~l a Bond Buyer Index, which is published every Thursday.
Sometime last January that ~was at a 305 yield basis. It is .expressed
in yield '~a'ther than in. ~ollarS'. That is an average which is made up
of 20 different AAA, AA, ~A and B~A 'rated bonds of about'an average
twenty year maturity. It was at a 305 basis in January= .today.it is
417 basis and it will be 425 or h~gher this Thursday, by the looks of
things.. It is due, very largely, to the fact that all metropolitan
banks are dumping portfolio' securities as fast as they can. That is
what Mellon is' doing..~ellon sells ten to fifteen milli0n do, l!ars
worth of bonds almost every week. All the New York banks .ar..e doing
Chicago banks are doing it tO raise cash to meet their loan demand,
and all of that dumped into the market with only the ~ndividual in-
vestors to ..b, uY them, with no bank purchasing anymore, has juSt.gorged
the market and there are not buyers enough to take it up." . . .
During comments, Mr. Ross assured Council that bonds could be
sued, bUt they couldn't sa.y what the tim~9 might ~e on them. F. urther,
the fiscal agents recogniz~ the .importance of getting ~he water plant
improv.ement .Completed, and that .when the cSty determines the amount of
financing th&y d~siro~ the fiscal agents will proceed with developing
the financing plan and Procedures to do it, recognizing that these are
unusual times.
Mayor AVery said that he felt there would only be a need to finance
approximately '$1,200,000 at this time~ '
Mr. Ross said that would be increae~-ng the debt service by abOut
$72,000, bringing it to approx~tely .$37.2,000, a~d continued~ ' "That
means that you would need $~58f000 worth of revenues, or you would
need an increase ..... if yo~ want to do it on a parity basis--~-- as of
the end of this year, .it ~uld me. an an increase in rates, without
taking, into account what..the consulting engineers might come up with,
to bring in about $138,.00.0 more in revenue, to get the 150% of maximum
deb~' service on all boreas to be outstanding."
Mr. Jurney read the followin, g excerpt from a current issue of the
Florida Municipal Record regarding major problems listed by the Mayors
of small communities: "Small City Mayors list Mai.or Problems= When
Vice-President Hubert H. Humphrey asked Mayors of cities under 30,0.00
population what their principal problems were, he got a loud answer---
pro~viding Water and sewer facilities. Next in urgency the Mayors
listed the street needs. The Vice-President's questionnaire was given
to Mayors from Ohio, Mi0higan, Indiana, Illinois and Wisconsin at the
recent Clevela~ Regional Conference of Mayors, one of the series he
iS holding a.az~s~ the -~°.~ntry ,in coo.~eration with .the NatiOnal League
of' '~ities ~ diScusS'~ral 'Aid Programs. Of 139'responses 127 May-
ors cited .water and ~Wer needs the most critical of a11."
Following discussion, Ma.~or Avery said this meeting would be ad-
Journed with the understanding that immediately after the City Manager
returns from his vacation, anOthQr special meeting will be held if the
Council desires same, to make decisions on these matters, and the fis-
cal agents may, be a'gked~.~o attend such a meeting to explain the differ-
ent' plans of financing.
Mayor Avery said it is hard. to pu~. things out to bid unless there
is money ava~iable,, and Mr. Frank Os~een of Russell & AXon sa/d that
he would recommend this project not be put out to bid until the City
knows the money is availablg.
Mr. Walter Hays sa'id .that 'Russell ~ AXon has rec0~mmended in their
water report that s°me. new wells be drilled, but thaWc the estima2es of
cost preSented tonight do not include any new wells.
City Manager Gatchel reminded Counci-1 that there i$ ~oney encumbered
~n the Water and Sewer Fund. to. cover installation' of thre~ new wells.
Mr. osteen reminde Co &il-'that .of cost they had pre-
s. ented would be good only for approximately 90 days.
The meeting adjourned at '10:10 P.M.
City Clerk
APPROVED:
MAYbR .........
-3- Sp. 8-23-66
190-A
R.W. Bressprich
FIRST NATIOIqAL BA~X B~X~O · M~A~, F~. aai3t · Tz~x~o~a 305 8~a-aali
August 23, 1966
Honorable Mayor and City Council
of the City of De'lray Beach
Florida
Gentlemen:
In accordance with your request, we have reviewed data furnished by
Russell & Axon, Consultina Engineers of the City, audit reports prepared
for the City and estimates of expenses and revenues for the current year
prepared by the City's Finance Director,' ar~ other data relatin9 to the
water and sewer system of the City, for the purpose of preparin9
recommendations for financin~ the completion of the sewer project and
the construction of improved 'treatment facilities for the water system.
The Sewer Pro,eot: In 1957, when Water Revenue Certifl~tes were issued
to finance improvements for water supply and distril~ution purposes, pro-
~tSion was made for a combined water and sewer system at such time as the
:City would determine that municipal sewer service to its citizens would
be desirable. The initial project for sewer services was financed by a
combination of Water and Sewer Revenue Bonds and Utilities Tax Revenue
Certificates and initial construction commenced in 1962. After completion
of the outfall facility and the first stage of the collection system,
additional bonds were issued in 1965 to finance further extensions of the
collection system. A sugary of the oost of the over-ail project, taking
into consideration the facilities completed and the estimates of your
Consulting Engineers of the cost of completin9 the sewer collection system
to serve the remainin9 developed areas of the City, is:
Initial Project (1962) $3,100,0OO
Collection System Extensions (1965) 2~OOO;000
Tots/ Financing 5,100,000
Construction to be Financed $1,610,400
Less Construction F~ds on Hand 502,978
Total Project Cost $6,2071422
The Water Pro~ect: We have been advised by the City that its Consultina
En.~ineers have prepared a report recommendin~ construction ~nd acquisition
of improved water treatment facilities.at an estimated project cost of
approximately $1, ?OO,0OO.
Ho~orsblePm0~r sndCttyCoun¢[1 ~
of ~he C~ of Delsey Beach ?a~e 2 A:g~$t 2}, t~66
Fln~'~ci~ If tl~ City ~l~h2S to proceed at, ~ls ~l~c ~t~h ~ ~in~ncin~
~ ~ter ~ ~ f&cllities In *C~ wl~ t~ ~co~en~tions of
,' follows ~id ~
W~r 1 ~7~
Tot~ ~nd l~ue
~*~*s ~ ~en~es of t~ ~s~ ~ poll~ ,~p~d
iiie of ~* initial s~er"fl~cl~ ~s ~ pr°c**d with t~ ~nstructton of
fscllitiss ~i~ ~uld produ~ n~t r~e~ss s~ficl~nt ~ p~ debt se~ice
on ~nds issusd ~ t~t t~ f~cllitl~s constructed ~uld ~ self-
s~rting. ~ ~,r,~ing r,~l~a of t~ 1,st four co~leted fiscal y~ars
~ ,sti~t~d dat~ for 19~ l~lcat~ t~t ~ flow f~s
~n ssint~lned ~t ~xi~t*ly t~ 1~*1 of ~ w,t,r
the co~l~d wsS~r ~ ~wer operation:
Es~ l~a~d A=tu~
W~ter ~es ~20,~ ~96,~3 ~,77b ~,969 $b04,171
~r Se~ice ~a 187,~
~e~t lng ~enme~:
Wa~t g19,1~ 2~,7~ 202,755
~r 38.16~ kl,7~* ~ ' -
~teres~ & ~ ~r~s 142,78~ 113,974 81,36~ 61,901 ~,91~
~s Redeemed _ ~,~ ~5~ ~O~ 21,~ 20,~
N~r of
at S~r ~: ~,2~ 5~116 4,937
Water
-~ ~r 2,~ - ' '
. ~ ~t ~ pl~d in~ ~tion on ~ce~r 1.
190-C
Honorable M~r and City Council
of tbs City o£ Del~ay Beach Page 3 August 23, 1966
Estimated data for the fiscal ~ear e~ling September 30, 1966, indicate that
sewer revenues and e~penaes are in line with estimates of the Consulting'
Engineers but that net revenues of tbs w~ter system are considerably lower
due to the unusually heavy rainfall which has reduced water cons~ption.
Current estimates of net revenues of the water and sewer system are Shlg,58P ...
as compared with engineerst estimates of $I;97,1~35. F~stimated cash flow is,
therefore, considerably lower than had bsen expected. Debt service on
outstmndin9 bonds to be serviced from the sVstem~s net revenues has been
lower in the early years to permit accumulation of reserves b~t by 1971,
will reach a level of about $370,000. We' assume t~at the en§lneers~
estimates of revenues are Still valid despite the disappointing water
revenues of the current ~eax ar~ that in 1967, their estiaates of $581;,O10
will be achieved.
Capital Structure: The construction of the sewer ~stem project has been
financed almost entirely b~ use of borrowed funds. We believe the followin9
tabulation showing net assets (after deductin~ allowances for depreciation
and accounts payable as of each year end) as related to bonded indebtedness
and the remaining City's equity, shows tbs effect of debt financing:
Years Ended ~stimatod Actual
Net Assets $7,91;7,830 $5,883,560 $5,783,~38 $5,611,165 $2,901,871
Bonded
Indebtedness 6, ~10,O00 ~,505,0OO ~6OO;000 ~ 1..;785;0OO
City,s Equity as
Per Cent of
total l~ 23% 20~ 22% 3~
Al~ernative ~etbods o£ Financing.' I£ the City wishes to proceed with the
-i~suance of $2,800,000 Wa~er am~ Sewer Revenue Bonds to complete
project, additional debt service would De about $180,000 annually on the
basis of a 30 year loan assuming an interest rate of ~%. Over-aAA debt
service annually, after issuance .of the proposed bonds, ~ould consist of
~ater and Sewer Revenue Bonds, $480,000 amd Utilit~es Tax Revenue Certifi-
cates, $?0,000, aggrega~in9 $5~0,000. Hi~orAcal net revenues, assuming
the 1~66 estiaa~es are va~id, ~ould De $/~1~,~87; a~ ~he ~lme of the
£lnancing, estimates o~ ~he Consul~ing Er~ineers o£ ne~ revenues were:
1967, $584,010 and 1968, $618,~70 (At is our understanding ~ha~ these
estimates of net revenues do not reflect a~y increases which would ~e
derived from sewer improvements ~for th~s phase of ~bs project). The
following alternatives are ~,i~ed for ~our consideration:
A) Issuance of Parity Bends: The ~esolutions authorizing out- ''
standing Water ar~ Sewer Revenue Bonds provide for additional
parity bor~ts provided everage amlual net revenues of the two
' ' 190-D
ltonorable l~or and Cit~ O~uncil
of the City of Delra~ Beach Pa~e h August 2~, 1966
preceding years are equal to at least 1~0~ of maximum debt
service on all bonds to be outstanding; these revenues
be adjusted to reflect rate increases or estimated revenues
to be derived from the project. It is our tu~erstanding
that there will be ~ increase in revenues to be derived
from the water improvements end that this last phase of the
sewer improvements would bring in only marginal revenues.
In order to meet the parity test, the a~era~e annual net
revenues of about $h22,0OO would need to be adjusted by an
increase of $298,000 by a combination of rate increases and
net revenues to be derived £rom the improvements.
B) Authorization of Parity Bonds as described in paragraph A
abo~e, whidl bonds would not be issued until the revenues
derived from the system would be adequate to meet the parity
test: The City could obtain interim financing or could sell
subordinate ~onds which would be con~ertible into the parity
bonds when such bonds would qualify.
C) Issuance of ~econd Lien Bondsl Since this bond issue would
complete the needs for water ang sewer facilities for the
forseea~le future, second lien financing could be utilized.
The bonds would be callable and considerinl~ the unusually
high lnteres~ rates at this time, could peri,ps be refunded -.'_
at some later date to achieve s~vings in interest cost.
We ~pp~eciate the cooperation of ~our' City Officials and Consulting ~nginears.
in fumishin9 us wi~ l~o~tion vhich'~s used in ~e pr~tion of ~il ·
~rt.
~ct~lly s~itted,