11-21-66SpMtg NOVEMBER 21, 1966.
· A special meeting of the City Council of the City of Dalray Beach,
~lorida, was held in the Council Chambers at 8=00 P.M., Monday, Novem~-
bar 21st, 1966, with Mayor Al. C. Avery in the Chair, City Manager
Da'vid M. oat~he~', City Attorney John Ross Adams, and Councilmen J.
LeRoy Croft, James H. Jurney and Jack L. Saundsrs, being present.
Mayor Avery called the meeting to order and announced that same
had been called' for the purpose of receiving reports and recomend~-
tions from the Fiscal Agents concer~ing proposed Water Treatment
Plant, and for any Other business that may come before the meeting.
An Opening prayer was delivered ~y City Clerk R. D. Worthing, and
the Pledge of Allegiance to the Flag of the United States of America
was given.
Mr. Irwin W. Kresser, 234 N. E. 17th Street, informed Council that
from Tuesday thru saturday garbage is collected at the Plumosa School
during the early morning hours from approximately 3:45 A.M. to 4=15
A.M., and that he is disturbed by the noise from the garbage barrels
and from talking. Further, that there is an incinerator at the Plumosa
School and when t~ere is a north wind the smoke and soot from the in-
cinerator is a nuisance to them. Mr. Kresser asked if something could
be done to eliminate those..~..u~..sa~ces~t
ConCerning the incinerator, Mayor Avery suggested that the City
Manager be directed to ascer.tain .if.. a nuisa, nce exists a~ .if it does
· . C0ncer~ing' the Com~a~n~'6f ~oise''~om garbage 'colleCtion~j ~or
Avery. s~g~ea~e~ t~h'at' .the'. Ci~[~ ,Mana~e~ investigate' 'marne ~i.."~. ~-~' S°me-
thj, ng Can be done' ihr. 'the '5:outing o~ 'thb ~9az,ba~e~ trucks;.' 6~ ,'if' al nui-
s~;~e exists t~ see ~.f ~t 'can 'be abated. ' .....
YmYor AVery~'rep~r, ted .a .c~,laint h· h~d' r~e!~d~.0~ garbage, t~ucks
working 'in the 'early "m6~n~''h~ur~ .in. 'the Slimy.' .between ~..E.;, 1'at' and
2~d Avenues and 3=d add .~%h Streets and dis~ur~ing the tenants :i~;~,that
area.
.. H~. yet Avery ~-n~oduCed '.the' 'f6110wing 't~r;e. C°unail. candidates for
the General.Election to be held on December 6th', 1966; Mr. William J.
McLaughlin, Mr. LeRoy W. Merritt and Councilman James H. Jurney.
Mayor Avery re~°~nized Mr.. FraDk Osteen,~ Vice-President 'in charge
of ~lo=ida operkti0ns '~or' i~a~ssell/'i&j Ax0n' Consulting ~.ng~eers,'
Walter O,.'=Haya,' .Wat&r ~-ngineet f&r au~Seli .& ~°n,, a. n4...~.~ .,,7. watson
Dunbar ~nd Mr...~%d 'RSbihS0n' of '~e Bea~'~h Taxpayers Le~gU~ '
City Manager Gat. chel reminded Council that at the last meeting on
this .matter the .Engineers had been a'sked to re-evaluate the perspectus
as to the income in the water"~nd Sewer Fund, and that. the ~Engineers
have done ~hat on the.bas~S of the '~%scal ciosing a'~ ~.of S~'~te~ber~ 30th,
1966,. and .have, Pr0~ided ;the'FisUai Agents ~ the analysi~ and pro'
jecti0n .as 'to What can be antiCi~atRd in income for the future.
Mr-' W~lter' Hays said that th~. only new deve!Opment he can report
after the bookS'were cl0sed at' the e~d of the City's ~iscaI year is an
item of revenue that had been labeled "other" which was not due to water
sales or sewe~ service charges but represented interest on invested
constructi~.~nds,-therefore, ~he revenue projection was revised and
corrected t° be more in line w~th 'what was felt 'to be realistic. This
revi~ed the revenue figures dO~nward slightly and that informat.ion was
sent to the ~iscal Agents with a copy to the City 'of D~lray Beach. Mr.
Hays also mentioned that at the last meeting the City had been advised
that the estimates of cost of the'.w~ater treatment plant would, probably
be goO~ for about'.OO days in .light of the rapidly changing construction
costs at ~hat time~..further, that those 'figures have .not been re-evalu-
ated as of this date,' but that he believes the¥-..would still be realistic:'
~lr. Hays suggested that lk.~ ~he financing and proceeding with
~ater plant does ~ gO: ahead'~i~dtately that ~e cos~ es~es
should ~ looked ~nto.
~. Stanley Ross of ~ess~r~h & C~pany, one of ~e C~ty~s ~al
AgentS, ~ntioned t~ir fe~rt a~ rec~at~ons on f~snc~ng
was pfeden~d to ~c~l at ~ spec~l Me2~ng on AugUr2 '23rd, 1~6~
~. RoSa info~ Co~c~l ~at ~e Fis~l Agents h~d received a re~rt
~rom the ~nsult~ng Engineers a~ had al~ received ~ re~rt of the
ac2~1 revenues of tho ~ter and ~r System for ~e f~scal year end-
ing Septe~er 30~, 1966. He r~r~d ~at ~e earnings in 1966 are a
little higher t~n ~e esthetes on ~ich ~ey had based their report
in AUgUSt. b also mentioned that ~. Hays had'stated ~e reveals
have been adjusted do~ approxi~tely $30,000 or ~0,000 ~ ~ar for
1967 and 19~8~ but that none of those f~es ~uld alter, i~ any re-
spect, ~e reco~endations as far as ~e f~nanc~ng su~itted ~o the
City in August.
~. Ross continued: "I ~ ~ stand ready tonight to say ~o you
~at ~ bond ~Eket is ~rhaPS some~at ~mproved from what ~t
we were here ~n August. It ~s about as bad ~ as ~t-has ~en in a
long t~e. We have had s~ moveMnt to~r~' lo~ rates o~ ~n~rost.
This has not ~en mater~al, ho~ver, and I bel~e~ ~tha~ ~ see no rea-
son for any ~rked lmproveMnt ~n the ~ing mont~.or- 2~, but ~. think
that ~ should evaluate yo~ cons~u~ion needs ~or ~ ~ter and
sewer s~vice. If ~u feel t~t ~t ~s ,~ati~e tha2 ~u take some
s2eps a~ ~is time to f~nance all or any. ~rt of ~S, ~ stand ready
to devastate to you ~ich alter~ methOdS '~uld be the ~st rea-
so.bls for ~u to follow. I ~nk ~ ~ls do~ to a determ~t~on,
reco~iz~ng ~e fact that any of the sew= ~r0~ments ~ich
finance w~11 bring ~n s~ increased reveals,. ~e ~ter i~rovements,
~ understand, 'will not bring in ~ncreased reveals. We just have to
take what ~u ~nt ~o do, ~ke whatever adjustments are invol~d in
estimated future re~nues, ~at effec~ ~at will have on the funds,
o~er ~rds, ~ur o~rating throw-back, ~e ~ey ~at ~ ~eft over
after paint of'debt Service, and .I am 8~e that ~ .wilk find a
to finance ~t."
City ~ger ~tchel read ~e following Memorandum fr~ Finance
Director We~r, dated No~er 21, 1966t
*'Subject: Fi~ncing ~r Trea~ent Plant Construction.
As a result of a re~nt ~onferenco ~t~en ~. McCreed~ of
o~ flnanc~ng"c~no~f~%[~h' ~f ~e pro~d ~er t~eatmen% plant.
~ter' ~eh~n~ plant' '~ ..... $ 1,217,956.00
~w Water & Transfer ~ins 173,358.00.
'- 1,391,314.00
Alteration to ix!ottn~ Well pU~ 16,000.00
~al. ~iscal. End,earing ~ Contingency ,.. ~ ~80.000.00 .
$ 1,687,314.00
~SS~ Design fee paid from Water
~venue ~nd }!~ ~e.00
~t Estimated Cost of Construction . $ 1,632,546.00
II.
It is' e~ti~e~ a balance of ~500,000~0'0 will ~ on hand,, in the
Sewer ~truCtio~ ~ust F~d ~en ~e c~rent con.aCt8 are com-
pleted. If it is the ~unCii~s desire to 8top ~e se~ construc~
ties pro.am at t~is ~int an~ ~t e~a to the c~rent contracts or
put a~y fUr~er a~eas Out t6 bid] this balan~ can ~ used as
Estim~ted Unencumbered Funds on Hand in
Sewer Cons.truction Fund $ 500,000.00
Less: Transfer to Stnk~J~I Fund Reserve
to bring Reserve to. Maximum Debt Ser-
vice in any one yea;r- -., 13Qr. 000,O0
Sewer Construction Funds available for
Water Tree tment~ Pla.nt,. Construction . $ ~,, '3 ?0 i ~00.00
NOTE,,: ,,Z.,tl,mu,st ,,be .Fememb~.,red if ,t,h,e.se fund,,s are used, n,o further
additions, to the. p,resent se.w~, r system~ can ,be made ,until.a4dition-
,a. 1 bonds can ~e fin, ant. ed, possibly .in ,two or t~hFee
There is also unrestricted cash on hand in the Water end Sewer
Fund that may be used for construction purposes. This totals
approximate ly $150,000.00
It should be pointed out here that unrestricted cash in the
Water and Sewer:~F. und has not been increasi~ in the last two
years because of the following.-
Reduction of Certain Revenues
1. Elimination of charge to General ~und
for fire hydrant rental,' ar~nually - - - $ 13,400.00
2. Increase of contribution in lieu of
taxeS. ~om .$24, 0.00.00 .. t. oy .$71,0~00,00:
a~nua.! :ir~cre,sse,. o~. ..... .- 47~0OO,00.
: .Total an~tuel., revenue-, reduction .... $ 6~, ~00 '. 00~'
· ~., e.L..~C.~,i~...g 10. main. on West Atlanti~
Ave.a. ue fro~ ;,_current revenues ....... 10.~, 722?28
4. Rehabilitating old sewer system from ...... '' ':" ...... '
curren~:revenues . . . 20,.2S2..56
-.'s. ~'.~i~' fe:e': of water'~'ree'tme~t' p'l~.~
- fr0m. curr~ht--'revenues - (~. :- - -.~ -';-:;.'~ -' -'-- -;-<54; 7-68,:I5.
..... 6. -Comple~ion-of first-phase of'. sanitary-"~ewer'
.. p,~oject f~ :water revenue funds - 13S,485.11
Fro~ the 'above it can be assumed there are funds currently avail-
able as follows.
. ~B~..lance from.. ~wer coDstruction Fund $ 370,000.00
'Unre~riCt~d"cash in water & Se~e~ Fund ' .l~..0r000.00
~' "$' ~200000.00
At this time I would like to po.int out that it is my opinion if
additional bonds are sold, the $60,400.00 revenue reduction men-
tioned above will' have to be eliminated and these funds used for
debt service requirements of the' new issue for the next several
years', Th~'s would then resUlt-in a I mill. tax increase on the
1967-68 budget,' 'addedj-2o the' 1 mill tax'increase necessary/to''
produce that revenue which :is currently 'being produced bY the
Disaster. FUnd trsnsfer or a tote1 increase of 2 mills necessary
to maintain General FUnd revenue at itS, current level.
Net Estimated Cost of construction from'"I $ 1,632,546.~0.0
FUnds. Cur=ent:ly ~vailahle from I! .
_ Additional .Funds required .... ' ~-.1', 112, 54'6.00
Our presen2-'income is not sufficien~ to Sell addi~O~'l;"bonds
on a parity ~ithout additional'' inoome, however' these additi°~al
construction..' funds may be obtained by one of the following
me. ~hods:
1'~ Issuel Fir.st'~,ien ~onds and. Subordinate Bonds.
-3- 11.2~-66
'252
With this method 2 series of bonds, each in the amount of
$1,100,000 would be validated by the court. The subordinate
issue ~ould be Sold and the interest rate at ~hich it is sold
will also apply to the first lien Issue. The first lieh issue
~ould be placed in_ escrow with a bank or Rust company, the
subordinate issue delivered to ~U~Ohaser, The subordinate
issue would have a second lien on the revenues of the ~ater
and sewer fund and would n,,ot be on a parity with the present
outstanding issues. At such. time, two or three years, as our
revenues do meet the parity requirement of 1,5 times maximum
debt serViCe for all issues, the subordinate iSsUe will be
changed by the escrow agent for the original issue which wll.l..be
on a parity.
The two disadvantages to this method are: ia) By the time the
subordinate issue can be exchanged for the first lien issue,
interest rates may be more.favorable than current rates, but
the original rate would still apply to the first lien issue;
(b) the subordinate issue, with its second lien provision,
automatically sells at a higher interest rate than issues
that have a first lien on the revenue.
2. Interim Financing By USe o£ First Lien Bonds and Subordinate
Bonds.
By using this method, the two bond issues, each in the amount
of $1,100,000 would he validated but not sold. The validated is-
sues to be used as colhtarel for · bank loan of two to three
years at a rate o£ interest to he negotiated with the hank or
banks making the loan. In two or three years, when the first
lien issue can meet the parity provisions, it will be sold,
possibly at an improved interest rate, and the bank loan paid
with the proceeds.
3. Financing with Second Lien Bonds.
A third method would be to issue-bonds to be secured by a
second lien on the reV&hues of the ~ater. and Sewer Fund and
would carry no conversion £ea~ure. ?hess bonds, of course,
would not sell at as favorable an .interest rate as first lien
bonds.
4. First Lien Issue With Increase In Water Rates.
A fourth method would, be to Issue first lien bonds with the
provision that water rates be increased Sufficiently as that
revenues would then meet the parity requirements."
The City Nanager said he believed this is a summation of the re-
ports of last August and .of the current ~thiaking of the Fiscal Agents.
~t~. Saundere said that in his opinion Plan 4 would be the only one
in keeping with good financing and ai~ed if the Fiscal Agents had made
any study of how much water,rates would haVe to be 'increas~d in order
to put bonds on a parity with what the City already has.
Mr. C. T. McCree,~,~f~of C~odbody & Company, one of the Fiscal Agents,
said they had been discouraged from thinking about any increase in
water rates.
City Manager ~atchel said that question had been asked of Mr. Weber
and himself while in conference with Mr. Rose and Mr. McCreedy a few
days ago, and the Fiscal! 'Agents had' been told?~at that time that there
was no thinking of Council to that effect.
Mr. Ward Robinson, & resident of Delray Beach, asked' what had been
added to the cost of water and if there had .been any study made of the
overall monthly or annual increase in the cost o~ operation of the
water plant because, of the addition of this proposed facility, includ-
ing depreciation, and whether it is funded.
The City Manager said 'that was in the preliminary report prepared
for Council, and eske~; bt Mr'.. Hays could answ~-= M~...Robinso~t'e question.
-4~ 11,21-66
~at -- ;o~' ~._, · ~ng~e.,' '.Or. to pre--- ' · cra~taed
final ~1__ta~ ~e ~,. ttentng, ___d intone~: on of the ~- .
_._. t. ~s not
~ered
bee-~' ~binaon aok
~nd ~o~ ~ ~rent' ' o~°~ bOnds. ~ ~eber .sa~'..~ debt .ervt~e ~at
~60, OOn_. ~,e ~rO~e~' ne~Staadin~__ g lO~ue=~nat'~e~_ total t~t ~Uld ~ . had
~4~/~00 toyea~,
vou, O00. he ~lteved it ~d ~ OOme~fiere /rom
ueol6~ ..i~- ~ro~.; · y-~e~ a,.'~ ~Ul~ ~
.... ,=~..~t ~' .-'=ned i~ __. =a~ent
· = . ,' ':.~ ~-.a:'~uli ~ ~al~, , ~- *=~erend~; .... "~et the
~"'~ .: -~ "'" .~ ~ei/ to ~: ~8 absent ; -'. : .. -' : -'
n -~-.-~a~de'"' . :. ' . ~ete~. and fha
ight .before .~e eUggea~d ~.. ins '.~hich e-'.~ he.
.any k · cnt - ' ~ ' - ~e
~.. ~-'. -.lad o ~ ~ · to
--em 4 ot ~e~cer rate~ ~ :~e.
~ ' . ~O~AC' . , ~ '. .. . -. ·
~ec~d~= -c ~ula ~ 7 ~ZVe ~k- ':_ =fy aak~ L,
:' ~?~ upon. ' ~ invoi.._Z'? city ~_--~e ~i~c-- ' '
co~dtng ~_ _ n ~te~
. o Item 4
~na~Clng ~or- the ~ty is talking a~ut enough increase to
~aat ~-I e that we
into aec~ ~I
o~ ho~ ~u~t in ~ . n. additional
o~ re .... " ne~ i~Oue and
need to
built - · amount
Point ~, USer ted _~rate8. Ai,~s water ..~:.Or t~
Pl~t ~i~ ling to -. in ~reaa~.~ ~ ~tho a' ~ reined;, ould
p~O=_ .:~ .enuea, e._~.-~es.. ;~na~tUre ~_ . : ~UAd 2i~_ .
.... ~°~d to ~e in' our
in ~ton ~eaeh
254
years ago, that when you spend as much money for a water.plant in all
justice you should consider increasing the water rates tomske upfor
that amountof mQney that is b~ing spent ~hat doea~ t increase your
comeone single penny. I feel as ConsUlting Engineer I~ShOuld say that
to you."
During d'iscussion~ Mr. Ostaeff continued= "You are discussing
possible referendum. Th&s, of cou=Se~ isYour decision as a policy
matter, but should you go to a referendum, might I Suggest to you that
if you are going to give'the people this-choice'to vote, that you might
also consider the possibility of giving them an opportunity to decide
whether:they do or do not want softening facilities in this plant." Mr.
Osteen said it would be a very simple matter to include softening,, as
in the design of the plant tha~ had been taken into consideration.
Mr. Saunders suggested as follows~ "I suggest then that we get
another set of figures from the Consulting Engineers and our financial
advisors. One is what would the increased rate be without water soften-
ing, and what would the increased rate be with water softening, sO'that
could be put on the referendum, if we decide to have it.'"
Mr. Robinson said he ~ould like to endorse the thinking of getting
figures on the increase of water rates to include water softening, and
urged again that space be taken in the local media to explain this
whole thing, including figures, even if it costs the City several
hundred dollars for advertising space.
Mr. Wilmer B. Hogue, a new. resident of Delray Beach, said that he
is ,-ery much in favor of what is proposed to go to referendum, particu-
larly the water softening.
Mr. a. F. Loftus, 227 N. E. 17th street, asked how much the cost of
the proposed water treatment plant had gone up since it had first been
discussed some 18 months ago. He asked Mr. Osteen how much over their
estimates the wa~ter plan~sat Boston Beach and Lake Worth were from
the time they gave their first figure until the plants were built.
Mr. Careen said that the plants at Boynton Beach andLake Worth
were within the estimates made.
Mr. Hays said that over the past several years construction costs
have been climbing etea~il¥, perhaps going up about 2% per cent a year,
and it had been recognized that between the 'coDception of the idea un-
til the actual construction comes about there would be q~ite a length
of time, and that had been taken, into consideration in the original
prel~minary estimates.
City Manager Gatchel quoted some predictions of increases in con-
struction costs from the F.-W. Dodge construction Outlook for 1967.
Mr. ~W~. McLaughlin said that in light of what happened On November
8th he feels people are too concerned at this point with interest rates.
~urther, that he feels the Federal Govern~ent'will take a tur~ away
from free spending, that there will be money available at'lower rates.
Also the growth of the City will bring in more revenue and that point
should be considered. Ha'said he believes the growth factor and the
lower interest rates.that he feels will become available would almost
nullify any increase in water rates.
City Manager Gatchel commented~-"I..would like clarification from
Council so that we mayproeeed with the desires of'COuncil. In this
report, G~ntlemen, we reflect an estimated cost of construction of be-
tween $~,600,000 & $1,.700,000.'Coming down to the final analysis here
as to what would be required in the- nature of a bond~issue, using the
available funds on. hand for the purpose of the ~water treatment facility,
we come-up with between $1-,100.,000.~end-$1,2D~';000 as a needed'amount
for a bond issue. I-want Council to realize that we are contemplating
here using all of the funds~on...hand £or sewer construction purposes,
shelving them,.sett~ng them asideo~'n~t~ing a dim~ of'them, and saving
them solely for.~h_~s.water treatment facility. Is it the desire of
Council for.your~ngineersand your fiscal agents now to come up with
-6- 11-21-66
25b
a figure of what kind of water rate increase would be necessar~to'sell
these bonds on a parity with the Bonds we have outstanding, anticipat-
ing this issue to be in the neighborhood of $1,100,000 or $I]200,000
or $1,600,000 or $1,700,000.?"
Mayor Avery said that he would like to have both figures,i as at
this time he does not know if it would be wise to use these funds to
reduce the cost or to float the bonds for the whole job and to keep
the reserve and proceed with sewer expansion.
Mr. Saunders said he would like a recommendation from the'Fiscal
Agents on that.
City Manager Gatchel said that it has been determined by the
analysis that the City cannot issue bonds on a parity with the present
outstanding bonds unless more income is provided. He then asked the
Fiscal Agents if the Council decides at this time to proceed with the
expenditure of the available funds on hand, would it he possible for
Council to issue another series of bonds for sewer construction pur-
poses without increasing any rates on either water or sewer, on a
parity basis? The City Manager explained that it has been determined
that the City cannot issue bonds for a water treatment plant on a
~arity basis without getting additional income. The C~tyManager then
asked:if the Council was to decide at this time, or in the near future,
that it'wishes to continue with the sewer expansion program as it has
in the l~et several years, could.it then on the basis of the additional
income produced from a sewer expansion program, go outland sell a
$1,200,000 bond issue for sewer construction on a parity basis with
those of the past? The City Manager explained that there are areas of
the City programmed in the initial layout for sewer expansion that have
not been sewered.
Mr. Ross said that if sufficient additional revenues could be
generated from se~er charges from the lines constructed, he believed
that about $I,000,000 Worth of parity Bonds could be issued for sewer
purposes.
Mr. Dan Neff, Project Manager for Russell &Axon, speaking as a
private citizen of Delray Beach, said there are unsewered areas in
town that would cost about $200,000 to sewer, and produce revenue at as
low a cost per connection as any of the sewer areas that have been put
in~ and that would broaden the base for income for any further projec-
tions of the bond issue that covers water and sewers.
Mr. Neff said that he feels Delray Beach is ih a very sound fiscal
condition. Further, that in talkingw£th different people, he feels
sure,they would be glad to pay more money for water if it was softened.
~Mayor Avery said this Council had met to receive information before
any deciSio~s are made, and in view of discussions and questions, asked
the Fiscal Agents if they could ~ive anopinionas to whether Delray
Beach is in good or bad fiscal condition.
Mr. McCreedy reviewed the financing in Delray Beach since they were
retained as Fiscal Agents in 1950 and said that he doubts if there is a
better credit diong this section of the coast, and that Delray Beach is
in fine fiscal sha~e.
Mr. RoSs sai~that all of the bonds issued by De[ra~ Beach carry a
rating which permits banks to invest in them. That DelrayBeach has
taken their improvements in stages and at all times they have had re-
venues fully sufficient to meet their debt service requirements before
they have sold any bonds which accounts for the reason that every bond
issue has been rated. Further, as Mr. GatChel ~ointed out, with another
$1,000,000 in sewer revenue bondS, Delray Beach would be fully sewered
and that would be with investment quality bonds.
Mayor Avery asked the two members of the press to emphasize the
fact that the City has assurance from very conservative Fiscal Agents
that the City is in good fiscal shape.
The~ing ad~ourne~:,2~. ~.M, .. R. D. WORTHING
~rr~o~~ ~.~.~.~ City Clerk