Official Minutes of MARION COUNTY BOARD OF COUNTY COMMISSIONERS. October 21, 2015

Transcription

1 Official Minutes of MARION COUNTY BOARD OF COUNTY COMMISSIONERS October 21, 2015 The Marion County Board of County Commissioners met in a workshop session at 10:04 a.m. on Wednesday, October 21, 2015 in Commission chambers at the Marion County Governmental Complex located in Ocala, Florida. Upon roll call the following members were present: Chairman Stan McClain, District 3; Vice-Chairman Kathy Bryant, District 2; Commissioner David Moore, District 1; and Commissioner Carl Zalak, District 4. Commissioner Earl Arnett, District 5, arrived shortly after the meeting commenced. Also present were County Attorney Matthew G. Minter and Interim County Administrator Mounir Bouyounes. The meeting opened with the Pledge of Allegiance to the Flag of our Country. Utilities - Chairman McClain advised that today's workshop is scheduled to discuss the Marion County Utilities Department (MCU) update. The Deputy Clerk was in receipt of a 1 page Agenda and a 29 page handout entitled, "Marion County Utilities" to follow along with the PowerPoint presentation. Commissioner Arnett arrived at 10:05 a.m. Chairman McClain advised that Judy Brown is in attendance today, noting she is a long time constituent and a MCU customer. He opined that it will be good for staff to provide an overview of where the Utilities Department came from, where it is now, etc. Utilities Director Flip Mellinger referred to page 2 of the handout, which contains 6 bullet points for today's discussion as follows: 1) MCU financial standing; 2) water and sewer Territorial Agreement with the City of Ocala; 3) expiring Equivalent Residential Connections (ERCs) credits; 4) business software optimization plan; 5) Utilities Capital Improvement Plan (CIP)/2016 Bond; and 6) operator/mechanic pay issues. Mr. Mellinger introduced members of his management team: Deputy Director Doug Andrews, Customer Service and Billing Manager Nancy Jarvis, Utilities Engineer Paul Penumudi, Budget and Finance Manager Lori Ferrell, Operations Manager Lynn Coller, and Maintenance Manager Mark Williams. He also introduced Steven Bartlett, Information Technology (IT) and Utilities Consultant A.J. Brown, West Monroe Partners. Pages 3 through 12 contain information relating to the utilities financial standing, including the most recent rate sufficiency analysis; rate increase history chart; debt service/operating cost comparisons; and rate comparison charts. The charts and graphs on page 4 address information relating to the Financial Analysis and Management System (FAMS) summary and projections for fiscal years (FY) 2015 through Mr. Mellinger advised that the information reflects a 4% rate increase will be necessary going into the future, noting over the past several years the utility has provided for 0% rate increases until this year when a 2% rate increase went into effect. The model provides for future capital and operating reserves and reflects financial soundness for the utility. Bond coverage ratings and rate covenants are well above standard requirements with the utility having 4 months of Operating & Maintenance (O&M) Reserves. The chart at the bottom of the page reflects that the utility will acquire some debt in FY , which will be addressed later in the meeting. Mr. Mellinger stated the chart on page 5 addresses the background/history of utility Book U, Page 1057

2 October 21,2015 rate increases from FY's 2003 through 2015, noting the 13 year history reflects an average rate increase of 1.78%. He commented on Florida Water utility customers, noting when MCU acquired the utility in 2003 the system was in disrepair and in desperate need of an upgrade; therefore, in 2008 it was necessary to increase those rates. Mr. Mellinger compared MCU's average rate increase of 1.78% to that of the Public Service Commission (PSC) at 1.89% and noted the National Association for Clean Water Agencies (NACWA) reports a national average utility rate increase of 5.4%. He commented on the higher cost of future capital for water infrastructure in anticipation of the Minimum Flows and Levels (MFL) requirements being placed on the Silver River. The chart on page 6 addresses the history of the utility's personnel and operating costs from FY 2007 through FY 2016 and does not include any capital or debt service. Working through the regionalization of wastewater and other initiatives put together by staff, the utility stabilized operating and personnel costs to approximately $12.1 million annually for the past 3 years. The chart on page 7 addresses the history of the utility's debt service costs. There have been some increases due to bond debt and the acquisition of residential utilities. The chart on page 8 combines personnel, O&M and debt service costs to provide an overall operating cost comparison from FY 2007 through the proposed FY Page 9 provides a comparison of MCU capital charges to other counties and municipalities for water (blue line) and sewer services (green line) at 7,000 gallons per month. Mr. Mellinger stated the utility collects in capital $6,489 per ERC, wbich offsets the debt service for rate payers. He noted in 2008 the Board of County Commissioners (BCC) determined that 5% of the utility's rate should be supporting the capital program. Page 10 compares MCU capital charges to other counties and municipalities for water (blue line) and sewer services (green line) at 12,000 gallons per month. Page 11 compares MCU capital charges to other counties and municipalities for water (blue line) and sewer services (green line) at 15,000 gallons per month. Page 12 compares MCU capital charges to other counties and municipalities for water (blue line) and sewer services (green line) at 20,000 gallons per month. Pages 13 through 15 addresses the Territorial Agreement with the City of Ocala, which is set to expire on September 24, Mr. Mellinger advised that the benefit of the Agreement is that it defines the utility lines and decides who serves where. A letter received from the Ocala City Council in August 2015 stating that the City does not plan to renew the Agreement. He opined there is room for negotiations in order to define what will happen after the Agreement expires. Marion County Ordinance prohibits service extension by municipalities outside their city limits without an Interlocal Agreement. Mr. Mellinger addressed the Winding Oaks Farm area, noting at the time there were negotiations underway with the owner; however, due to the farm currently being for sale the parties decided not to designate the utility service area as either City or County and will leave it up to the new property owner to determine. Both utilities (City and County) bave infrastructure in place that will support the farm. Mr. Mellinger addressed other areas the County is looking to provide new services to in order to get homeowners off of septic tanks (i.e., Sleepy Hollow). The NE 36 th Avenue area near County Road (CR) 200A is one particular area that has the highest concentration of septic tanks in the Springs Basin. He stated the Silver Springs Basin Management Action Plan (BMAP) is going into final draft and identifies the nutrient loading on Silver Springs at 40% coming from septic tanks. Page 1058, Book U

3 October 21, 2015 Mr. Mellinger that he will meeting with City on Friday, October 201 regarding a cooperative funding effort sponsored by Senator Alan noting he will discuss the section of County with City staff meeting. If an agreement cannot be reached, County will to review matter to how it will serve that area; however, there is no surrounding wastewater plant serve for abatement of the septic tanks in that region. General discussion ensued. Mr. Mellinger opined that are approximately 3,000 tanks in northeast region. In 2007, the purchased a acre parcel in that area to wastewater plant; however, objected to plan and no was ever built. He stated is an older, privately owned wastewater plant in that region; however, the cost to upgrade the facility to County will be costly. General discussion resumed. Interim Administrator Bouyounes advised that the City of Ocala a surcharge to utility customers outside of City limits, which could be an if the City runs lines to unincorporated area of the County. In response to Commissioner Zalak, County Attorney Minter advised that there is a provision in the County Code that requires a municipality to have an agreement if it wants to extend utility services into unincorporated Marion County. opined that Code will block the City from ing its outside City limits without an agreement; however, the attorney for the City of Ocala d Mr. Minter there is not a lot of law in of Florida regarding this and hopes it does not go as as litigation once the current Interlocal expires. General ensued Mr. Mellinger advised the City of will be performing septic abatements for some of its residents utilizing the $10,000,000 it received in funds. If County performs an abatement for Silver Springs Regional example, estimated cost will $12,000 per customer. He commented on previous discussion in relation to public/private partnerships with regard the Rainbow Springs area where the State would helped the County develop the infrastructure (wastewater plant, transmissions mains, etc.) to remove septic tanks from that region; however, no private franchises were willing to into at that Mr. Mellinger opined that now may be a better and suggested work on developing a for Proposal to determine whether or not there is any interest in developing this type of investment program. In response to Commissioner Zalak, Mr. Mellinger that several package plants been, or will removed on Baseline Road, Sharpes Ferry and Highway, noting are several more within connection distance time. Mr. Bouyounes noted the Land Development (LDC) requires package plants meet specific standards (e.g. nutrient reduction) or go off-line by 1 General discussion 16 through 19 addresses expiring ERC credits, which are by I"'...,.,...'" who upsize water/wastewater infrastructure during development. In return, do not to pay capital charges when they build a number of homes because they have already paid through the infrastructure costs. Developer Agreements allow up to 7 use those noting numerous agreements written in 2007, 2008 and 2009 that have, or are about to Mr. Mellinger advised that most developments have gone through U, Page 1

4 October 21,2015 bankruptcy and the utility has been maintaining the infrastructure with no revenue being received from those empty lots. He noted many of the new owners/developers are requesting the County reinstate those ERC credits. In response to Commissioner Zalak, Mr. Minter stated the ERC credits are assets not debts, noting what is discharged in a bankruptcy case is debts not assets. Mr. Mellinger commented on a water plant that was constructed in the Irish Acres subdivision, which only has 5 customers connected to it. Fire Rescue staff has been utilizing the plant to teach firefighters how to hook up to hydrants just to keep water flowing through the system. He advised of similar water/wastewater plants that have become a financial burden when comparing the cost of operating and maintaining those systems to the revenue being generated by those few customers. Mr. Mellinger advised that if the Board wants to recognize old ERC credits his recornmendation will be to charge monthly base charges for each ERC to be extended beyond its original expiration date. He referred to the ERC base charge example on page 18 and clarified that if the credits have already expired, then the utility will go back to that expiration date and apply a monthly base charge (e.g. $12.50 for water and $22.09 for wastewater) in order to bring those ERC credits up to date. He noted the other alternatives would be to allow the credits to expire with no further consideration; or allow credits to remain intact, regardless of the expiration date. In response to Chairman McClain, Mr. Mellinger advised that ERC credits are carried on the books as a liability. He stated he was advised this morning by Joe Pitonzo, Finance Department, that in FY 2015 approximately $1.8 million in expired ERC credits was added to the departments revenue. In response to Chairman McClain, Mr. Mellinger stated there are a few ERC credits that currently remain with the original property owner. Chairman McClain advised that he will need more information before he will be ready to make a decision. Mr. Minter noted the original property owners have a legal right to those ERC credits if they have not expired. Mr. Bouyounes advised that the base charges do not offset the liability, but will help to offset the O&M costs. General discussion ensued. Chairman McClain requested staff provide an analysis of each development that has ERC credits, including those that have expired. Mr. Mellinger stated it will be done. Commissioner Zalak commented on the costs associated with maintaining aging infrastructure and opined that each ERC credit should have a reduction in value/depreciation due to the decreasing longevity of the infrastructure. Mr. Mellinger stated staff can bring back more options in regard to the concept of renewing and maintaining ERC credits. It was the general consensus of the Board to concur. Chairman McClain requested staff notify developers with ERC credits to inform them of the concept the Board is considering. Brian Sykes, attorney representing JB Ranch Partners advised that his client would definitely be interested in the concept of monthly base charges as presented by Mr. Mellinger. He stated his client foreclosed out the prior owners by buying the underlying debtfrom Regions Bank with the intention of developing JB Ranch in the future. Mr. Sykes advised that part of his client's analysis going forward with the project deals with ERC credits, Transportation Impact Fee (TIF) credits, etc., which will help to develop the property sooner from a financial standpoint, noting his clients' total rebates/credits equal approximately $4,600 per home. He noted his client may be willing to pay the base Page 1060, Book U

5 October 21,2015,...n-::lrl"l':~c on an annual rather monthly basis. In response to Chairman McClain, Senior Management Consultant Jay Public Management advised from his in the audience that from the base charge concept provides a revenue the Utility. Commissioner Bryant 11 :01 a.m. In response to Zalak, Joe Pitonzo, Department, advised process impacts utility's bottom line, noting money comes from 2 'TTO. O...T funds. He clarified that are considered connection fees so at the time County into the Developer's Agreement the liability is taking money out of the connection fees to fund the liability. As the subdivisions develop and the County back credits, it then that revenue. If a Agreement is cancelled the County will the full revenue it is not giving the credits developers. If the County those credits in it will have to keep that there until used by developers. The 10% base will be paying not this at all, noting revenue will go into sewer liability will be sitting until they develop; County will then connection as to water and sewer current liability (as of of FY 2015) for all Developer's Agreements $9,000,000 and of those that have recently expired, the utility will $1.8 million in revenue this year. Mr. Mellinger advised that are some Developer's an expiration date (Golden Trilogy, etc.), noting were into prior to him becoming the Director. Chairman McClain concern about the amount of money utilized to infrastructure and credits should a depreciation value. on the importance of a base help offset O&M costs. McClain opined to be performed by should include O&M depreciation of 1 for current and expired Developer Agreements. Mr. Mellinger stated staff will provide the 20 through 24 addresses the utility's business software optimization plan. Mr. Mellinger advised of the currently utilized by Utilities Department, including: 1) customer information system (CIS); 2) computerized maintenance system (CMMS); 3) geographical information (GIS); 4) InfoWater (hydraulic modeling software); supervisory control and acquisition software 'LJ'-''''LJ''', 6) automated reading (AMR); and 7) voice response (lvr). He commented on functionality, works; do not interact well with other. The C and IVR are antiquated software and further upgrades are not available for either program. In order to ensure the are taken to systems the Board hiring of the firm of West Monroe (consultants and technologists) in July, Mr. Mellinger commented on the importance of being able to tie all the software programs together in order for the data to communicate with each Mr. Mellinger advised that Monroe Partners has put a concept that will allow for future state calculate future through technology deployment and provide for a timeline. He stated investment is at $3.8 million; however, 15 years it is return on 10,,",Tl"\"'lonT (ROI) will be $11 Mellinger addressed how new software will department's workforce (i.e., customer service and the Book U, Page 1061

6 October 21,2015 convenience it will provide customers by communicating through their phones. Mr. Mellinger advised that the will be to continue to work with Monroe Partners to a blueprint that will design and deploy integrations an estimated cost to exceed $200,000, noting a Change Order requesting these funds wiil come before Board for consideration the November 3,2015 regularly scheduled BCC meeting. General ensued. In to Commissioner A.J. Brown, West Monroe Partners, provided a brief overview the firm's history, noting company is in Illinois and employs approximately 500 consultants of which specialize in practice. He that for the blueprint of the software project, the firm will put together the documents, vet/evaluate all vendors, as well as provide more requirements for software securitylinfrastructure and date the which will major component for the next phase. General resumed In response to Commissioner performed City Water service was put in place their customer system key performance indicators so that management team could identify what management were required for company's operation. The firm will also identify the total ownership, includ operating costs (O&M), one time costs and recurring spending associated with the software programs. Mr. Mellinger stated the County's Information Technology (IT) Department will be fully integrated into the process at the next phase of the project. Pages 26 address 2016 capital budget. Mr. Mellinger advised total projects in FY 6 is $25,000,000, which includes: AMR, CMMS, several and sewer Master Plan construction of new water plants, equipment and installation, toilet program, wastewater treatment plant improvements, water and fire hydrants, He commented on new force main runs from Golden to JB Ranch, noting this is a $5,000,000 project that will delay or do away with the need to expand the Golden Ocala Wastewater Treatment Plant. Mr. Mellinger provided an overview of several other primary capital the department will be constructing or improving over the next 12 months. Bryant retumed 11 a.m. Chairman McClain passed gavel Commissioner who the Commissioner McClain out at 11 :31 a.m. Page 27 addresses the 2016 utility bond and the proposed projects the utility can fund with the $20,000,000 bond issue. In to Commissioner Zalak, Mr. Mellinger the interconnect between Oak Run and Marion Oaks is already in place, which provides the utility the ability to move up to 2,000,000 gallons per day (gpd) of water to either location. He noted that interconnect will support all of US Highway 27's development throughout next 10 years. Commissioner McClain returned 11 :33 a.m. Chairman Bryant Commissioner McClain, who the Chair. Pages 29 addresses operators, mechanics and customer service Page 1062, Book U

7 October 21, 2015 representatives' pay/salary Mr. Mellinger advised that MCU has had a 20% turnover rate year (22 employees), noting most of the turnovers relate to level positions. commented on the salary survey performed by the Human Resources (HR) Department that reflects department is below competitive Mr. Mellinger it will approximately $90,000 to bring the entry up to a somewhat/halfway competitive pay He noted the salary increase will not affect managers, supervisors or department just lower entry employees whose top pay grade is currently at 17 or lower (approximately 60 In to Chairman McClain, Mr. Mellinger advised that the timeline for the entire software integration is 2 to 3 years and will be funded through the capital program over timeframe. He stated utility bond will be ready move forward once a project list is confirmed by the BCC. Commissioner Zalak more time to review the list by He commented on Highway 484 road noting would like to wait until a Developer's Agreement is in place in order to tie utilities into tha! project. Mr. Bouyounes stated that project will be added to the capital projects Mr. Mellinger advised that staff will put together a map to identify proposed projects for Board review. Commissioner Zalak opined that there is a need for a alignment with Highway 484. Mr. Bouyounes stated he will meet with utility staff to ensure utilities are included in that road project. It was general consensus Board to concur. Chairman McClain addressed the need to a priority list as it to some of the other corridors development has approved, but not yet constructed. General discussion Mr. Mellinger that if City of does not renew Territorial Agreement, the Board will have to determine how it will handle tanks in northern portion of County. opined that if the County invests in placing infrastructure in that area, it will want new development to come in and payback the capital costs of that infrastructure. Mr. Mellinger advised that County will have to the northeast area all the way out to 75 (1-75), noting is no room new development in those northern subdivisions. Commissioner concern that the City of Ocala not want to work with the County. Chairman McClain advised that through good from the County has able to grow its in utility system, which is a utility. Commissioner expressed concern with the City expanding territory outside the City limits with the intent to charge customers a surcharge. He concern with the costs to small and questioned if MCU's capital are competitive. Mr. Mellinger advised that he not have that answer, as was given rates from City of Commissioner Zalak questioned will happen if the County does not apply for the bond. Mr. Mellinger the utility needs to have the funding in place in order to move forward with Marion Oaks project, which will take at least 3 years to complete. He concern that if project is not completed there will not be enough capacity at Oak Run to handle future growth is the behind completing the Marion project In to Chairman McClain, Mr. Glover advised that there is plenty money available in the bond market at this time, noting it is usually a 90 day from the time BCC approves the until the County secures the loan. noted interest are at a historic low, which makes now a good time to borrow. Mr. Glover Book U, 1063

8 October 21, 2015 that the federal government has discussed raising short term interest rates; however, the utility bond will be a long term loan. In response to Commissioner Zalak, IVIr. Glover stated the upfront fees for this type of loan is typically $200,000 to $300,000, which includes the underwriter's discount to place the bond with investors. He advised that for a $20,000,000 bond over 30 years the County will have approximately $1.3 million annually in debt service payments, which equates to approximately $19,000,000 in interest over the life of the bond deal. ' In response to Commissioner Zalak, Mr. Mellinger stated the impact for the bond is built into the rate model. Chairman McClain clarified the Board's direction is for staff to continue ongoing negotiations with the City of Ocala; provide an analysis of each development that has ERC credits, including those that have expired; move forward with the blueprint for software optimization and bring back maps in relation to CIP/bond projects for Board consideration; and move forward with the recommended pay adjustments. Commissioner Zalak requested staff bring back more information relating to financing rates/capital charges for small businesses prior to bond issuance. He stated he is unsure if the County can have a different rate for commercial customers versus residential customers. Mr. Mellinger stated staff will bring back that information. In response to Chairman McClain, Mr. Glover advised that the County pledges the net revenues from the utility system so there is no Countywide General Fund support for the bond transaction. He stated there is a minimum requirement within the bond relating to net revenues; however, the County does not want to run down near that minimum because the utility needs excess cash flow in order to maintain the utility system. Mr. Glover clarified the bond market considers the day to day operation of the system and what the net revenues bring in. There being no further business to come before the Board, the meeting thereupon adjourned at 12:03 p.m. Attest: ann, Clerk Page 1064, Book U