1. CALL TO ORDER 2. INVOCATION 3. PLEDGE OF ALLEGIANCE 4. APPROVAL OF AGENDA 5. AUDIENCE TO VISITORS SYCAMORE CITY COUNCIL AGENDA February 4, 2013 CITY COMMITTEE MEETINGS No Meetings are Scheduled REGULAR CITY COUNCIL MEETING 7:00 P.M. 6. CONSENT AGENDA A. Approval of the Minutes for the Regular City Council Meeting of January 22, 2013. B. Payment of the Bills for February 4, 2013. 7. PRESENTATION OF PETITIONS, COMMUNICATIONS, AND BILLS. A. A Proclamation Supporting the Northern Illinois University Football Program and Recognizing the Accomplishments of the 2012-2013 Season which included a Mid- American Conference Championship and a Berth in the BCS Orange Bowl. 8. REPORTS OF OFFICERS 9. REPORTS OF STANDING COMMITTEES 10. PUBLIC HEARINGS 1
11. ORDINANCES A. Ordinance 2012.45 An Ordinance Authorizing the Mayor to Sign an Easement Agreement with the Sycamore Park District to Grant an Easement for Storm Sewer and Appurtenances Across Lands Lying in a Portion of the Sycamore Park District Golf Course in the City of Sycamore, Illinois. First and Second Reading. In the summer of 2012, the City s Public Works Department constructed storm sewers from Parkmoor Court to the creek that runs through the Sycamore Golf Course. The attached agreement defines the easement, allows for the City to access the property to make repairs and modifications to the storm sewer and protects the interests of the Park District. City Council approval is recommended. 12. RESOLUTIONS---None 13. CONSIDERATIONS A. Consideration of an Administration Request for Direction Regarding the FY2013-2014 Water Fund and Sewer Fund Budgets. At the last City Council meeting the City Manager introduced preliminary assumptions about revenue trends and spending priorities for general fund operations in the fiscal year beginning on May 1. The following report highlights the key revenue and spending features of the FY14 Water Fund and Sewer Fund budgets. These funds are commonly referred to as Enterprise Funds, meaning that they are self-supported by fees for service. WATER FUND The Water Fund is self-supporting and receives its main source revenue from user fees which serve as the principal funding source for the operations of the City s water system. The fund also pays the debt service for loans and bonds involving repairs or upgrades to the City s wells, two elevated water storage tanks, and 110 miles of water main. Operations No new hires are proposed in the Water Division in FY14. Operating costs associated with radium removal for Well #10 will be added as the well comes on-line late in the year. The cost of radium removal media will be based on a per exchange basis rather than a monthly fee. It is anticipated that the media exchanges will not be needed on an annual basis, rather every other year or potentially even longer. The FY2014 budget will include an expenditure set aside for a portion of the future change-out expenses. Annual radium removal media costs are expected to be approximately $250,000 in FY2014. This figure only includes the annual operating costs and does not take into account the millions of dollars of investment that have went into equipment. Capital Projects Well #10 on the Engh farm was drilled in 2011 next to Water Tower #2 and the design and incorporation of radium removal equipment is underway. The construction of the well house 2
and related radium treatment facility will begin in late FY13 and should come on-line in FY14. No borrowing will be needed for the new well, which should complete the necessary major system improvements. The Water Fund is budgeted to have about $2.4 million in reserve at the end of FY13 after $1.83 million in transfers to fund the radium removal equipment and well house. Looking forward the next priority will be to perform maintenance and re-paint water tower #1. Financial Forecast The table below illustrates the FY14 revenues and expenditures associated with operating the water system in Sycamore. Over the past few years the Water Fund has utilized significant reserve transfers to balance the operating budget. Revenues: User Fees $1,840,220 Water Meters $12,000 Investment Interest $10,000 Reserve Transfer $0 Other $3,750 Total $1,865,970 Expenditures: Personnel $792,537 Commodities $115,000 Contractual $540,000 Other $218,000 Equipment $150,000 Perm. Improvements $25,000 Transfers Out $298,236 Total $2,138,773 In FY13, $300,000 in reserve transfers were required to balance the budget and the gap for FY14 is expected to be almost $273,000. With reserve funds being reduced after the construction of well #10, there is no choice but to address the gap in revenues and expenditures. A breakdown of budget estimates for the next five years is as follows: FY2014 FY2015 FY2016 FY2017 FY2018 Revenues $1,865,970 $1,884,630 $1,903,476 $1,922,511 $1,941,736 Expenditures $2,138,773 $2,192,242 $2,247,048 $2,258,893 $2,271,034 Retired 2005 Bond (1/2) ($43,250) ($43,250) Total $2,138,773 $2,192,242 $2,203,798 $2,215,643 $2,271,034 Surplus (Deficit) ($272,803) ($307,613) ($300,322) ($293,133) ($329,299) 3
On the expenditure side, staffing levels are at the minimum level necessary to administer the system, read meters, bill and collect fees and repair system infrastructure. Other non-personnel costs are essential to the system and requirements such as radium removal have made it more expensive to operate the system. Each line-item is reviewed to ensure that only necessary expenditures are included. Given the limited ability to reduce operating costs revenues must be examined to help bridge the gap. There are only two basic ways that operating revenues can increase: 1.) Increase in Usage-The budget assumptions use a 1% natural revenue growth expectancy. Substantial use increases generally come from new development and new users. While the long-term plan expects new growth, economic trends indicate that it will be several years before a significant increase in new housing starts. 2.) Adjust User Fees-The last user fee increase was in January 2000 as part of a gradual twoyear increase approved by the City Council in December 1998. Over the past year, the average water portion of the bill equates to $24.10 per month. Based on the assumptions presented above and the reality that a significant increase in housing starts is still several years away, user fees need to be reviewed and adjusted to ensure they can sustain the operating costs of the water utility. Most businesses and municipal utility providers adjust fees on an annual basis to reflect actual costs. In the case of the City s Water Fund the current rate structure was sufficient as development continued through the majority of the last decade. As the development stopped new users and usage growth slowed resulting in the gap between revenues and expenditures during the recession. The choice was made to use reserves to minimize the burden on residential and business users during very difficult financial times. The gap has continued to grow as expenses associated with radium removal requirements and other state and federal mandates have significantly increased the costs to operate the system. Sycamore s water fee schedule charges a progressively lower per unit fee as the volume rises. However, those residents with the lowest rate of use i.e. those using 400 cubic feet or less per billing period pay $3.19 per 100 cubic feet or a $3.69 minimum bill (prior to May 1, 2003 the lowest users paid a $7.97 minimum bill). Except for Edgebrook mobile home park residents and users outside the City limits, the current schedule (less meter maintenance charges) is as follows: First 400 cubic feet Next 300 cubic feet Next 700 cubic feet Next 1,300 cubic feet Next 6,900 cubic feet Next 7,400 cubic feet All over 17,000 cubic feet $3.19 per 100 cubic feet ($3.69 minimum bill) $3.00 per 100 cubic feet $2.56 per 100 cubic feet $2.13 per 100 cubic feet $1.44 per 100 cubic feet $1.17 per 100 cubic feet $0.85 per 100 cubic feet 4
There are several different ways to increase user fee revenue to offset costs given the current structure. These options include across the board user fee adjustments, reduction in the number of tiers or some combination. The City Manager proposes that options for water rate adjustments be prepared for review at the next Council meeting on February 18 th. SEWER FUND The main source of revenue for the Sewer Fund comes from user fees. These user fees serve as the principal funding source for the operations of the City s wastewater treatment plant. The fund also pays the debt service for loans and bonds involving repairs or upgrades to the City s collection and wastewater treatment systems. Phase I of the treatment plant expansion which began in 2009 is complete with plans for phase II, the expansion phase, to begin in FY2014. Operations For the past three years current staff has maintained the upgraded de-watering equipment and collection system. As the expansion project moves forward one new position is proposed in FY2014 to help operate and maintain the additions to the wastewater treatment plant. The new position will allow the individual to develop an understanding of the current system and operations along with changes that the expansion will bring. No other significant changes are proposed for sewer operations. Capital Projects The Phase II expansion project will be funded by a combination of reserve funds in the Sewer Fund and Sewer Impact Fee Fund coupled with a low interest loan through the Illinois EPA. In FY2014 and FY2015 significant debt service obligations for the 1994 ($540,925) and 1995 ($189,223) IEPA loans will be retired and redirected to obligations for the 2009 phase I loan ($195,000-$210,000) and the borrowing for phase II. The debt service that will be retired the next two years exceeds the borrowing for both the first and second phases of the current project. In addition, the Sewer Fund pays debt service for a portion of the 2005 Bond Issue which will retired in October 2015 eliminating another $86,514 in annual debt service. A recap of the existing debt service is listed below: 1994 IEPA Loan. An original borrowing of $7.8 million in 1994 to build the excess flow facility on North Cross Street. This loan will be retired in January 2014 and carries an annual loan payment of $540,925. 1995 IEPA Loan. An original borrowing of $2.8 million to close the Electric Park treatment facility and re-route the sewage to the present treatment plant. This loan will be retired in 2015 and carries an annual loan payment of $189,223. 2005 Bond Fund. The Sewer Fund annually pays $86,514 on this annual debt service of $323,195. The obligation is owing to the sewer work funded in 1996. The 1996 bond was refunded in 1999 and again in 2005. This debt will be retired in October 2015. 5
2009 IEPA Loan. The Sewer Fund will pay an estimated $195,000 in FY14 on the 2009 IEPA loan that has funded the Phase I project at the treatment plant, focusing on sludge de-watering. Until the 1994 and 1995 loans are retired, the annual loan repayment on the 2009 loan will be repaid from the Sewer Fund reserve. Once the repayment schedule is finalized, $210,000 is expected as the annual debt service requirement. There are no plans to borrow additional funds once phase II is completed, therefore the excess portion of the debt service will help offset the imbalance in the Sewer Fund operating budget. Financial Forecast The past three fiscal years the Sewer Fund has needed reserve transfers to balance the operating budget. Using reserves rather than reviewing the fee structure was a logical choice as reserve levels were very strong, significant debt service obligations were soon to be retired and the costs associated with the expansion project were unknown. It appears a reserve transfer will be necessary again in FY2014 to balance the operating budget gap of approximately $180,000, resulting in the following: Revenues: User Fees $2,350,000 Permit Fees $2,000 Investment Interest $35,000 Reserve Transfer $180,000 Total $2,567,000 Expenditures: Personnel $885,096 Commodities $254,495 Contractual $254,650 Other $174,750 Equipment $75,000 Perm. Improvements $55,000 Transfers Out $866,662 Total $2,565,653 When projecting out the next five years it appears that the revenues generated will be enough to support operating costs in FY2015 once debt service obligations are retired. However the current rate of natural revenue growth is only about 1% per year, a rate that does not keep up with inflation and new requirements imposed on the system. A large portion of the reserve transfer utilized in FY2014 will be offset in FY2015. 6
FY2014 FY2015 FY2016 FY2017 FY2018 Revenues $2,387,000 $2,410,870 $2,434,979 $2,459,328 $2,483,922 Expenditures $2,565,653 $2,629,794 $2,356,342 $2,535,716 $2,554,777 Pick-up 2009 IEPA Loan $210,000 Est. 2013 IEPA Loan $350,000 Retired 1994 IEPA Loan ($540,924) Retired 1995 IEPA Loan ($189,223) Retired 2005 Bond (1/2) ($43,250) ($43,250) Total $2,565,653 $2,298,870 $2,473,869 $2,492,466 $2,554,777 Surplus (Deficit) ($178,653) $112,000 ($38,890) ($33,138) ($70,855) The average user pays $25.83 per month for sewer service. The last sewer user fee increase was in January 2001 as part of a gradual three-year increase approved by the City Council in December 1998. The base rate is presently $2.87 per 100 cu. ft. (748 gallons) or $3.84 per 1,000 gallons. In order to operate the plant and make the necessary system repairs, an annual adjustment that is tied to the consumer price index should be considered. The City Manager will prepare estimates that show the implications of CPI adjustments on February 18 th. City Council direction is requested. B. Consideration of a Request for a TIF Grant from the DeKalb County Community Foundation for Structural Roof Repairs at the Depot Building located at 475 DeKalb Avenue. On behalf of the Board of Directors of the DeKalb County Community Foundation, Executive Director Dan Templin has requested additional TIF assistance for structural repairs to roof trusses at the Depot Building, which now houses the DCCF offices. The Community Foundation acquired the Depot Building from the City after structural stabilization and weather proofing was performed with the help of a grant from the Douglas C. and Lynn M. Roberts Family Foundation and City TIF funds. When DCCF acquired the building from the City, the initial plans only included permanent office space for the Foundation on the two-story portion of the south end of the building. Soon after acquiring the property the Board of Directors committed to renovating the freight room into a community meeting space. The project kicked off with a fundraising campaign to raise $750,000 for interior renovations and exterior accessibility issues. As the project progressed it was discovered that structural repairs were needed to the roof trusses. The structural issues were unforeseen as the plaster ceiling concealed the need for the repairs. In consultation with Director of Building and Engineering John Sauter it was concluded that the repairs would have fallen into the scope of work the City outlined when taking on the project in 2010. The Community Foundation is requesting TIF assistance with the repairs which totaled $13,151. Funding would come from the 21-000-8624 line item of the TIF Fund. City Council approval is recommended. 7
14. OTHER NEW BUSINESS 15. APPOINTMENTS 16. ADJOURNMENT 8