Official Minutes of MARION COUNTY BOARD OF COUNTY COMMISSIONERS July 18, 2011 The Marion County Board of County Commissioners met in a workshop session in Commission Chambers at 1:10 p.m. on Monday, July 18, 2011 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 Charlie Stone, District 5; Commissioner Mike Amsden, District 1; Commissioner Kathy Bryant, District 2; and Commissioner Carl Zalak, District 4. Also present was County Administrator Lee Niblock. The meeting opened with the Pledge of Allegiance to the Flag of our Country. Utilities Utilities Director Flip Mellinger presented a 15 page handout entitled, Utilities Workshop to follow along with the PowerPoint presentation. He noted staff would be discussing the Rate Sufficiency Analysis; Strategic Acquisition Proposal; alternative water supply planning; interlocal agreements with other municipalities; and the Future Efficient Water Use Campaign. President Mike Burton, Burton & Associates, provided a brief background of the scope of worked performed by his firm, noting in 2008 Burton & Associates conducted a comprehensive Water and Sewer Rate Study for Marion County. He advised that, as part of that study, updates of the 10 year financial plan had been conducted annually since 2008. Mr. Burton provided an overview of the FY 2011 Water and Wastewater Revenue Sufficiency Analysis completed by Burton and Associates as part of the Master Plan to ensure Marion County Utilities (MCU) was financially sound. He stated part of the scope of service included performing the annual update in order to verify, or modify as necessary, the annual plan of rate adjustments as required. Mr. Burton advised that operating costs for FY 2011 were based upon actual year to date expenses (at the time of the analysis) and estimated through the end of the FY. He noted the analysis included budgeted FY 2012 expenses along with projected operating costs for subsequent years through FY 2021. In regard to the FY 2012 FY 2016 Capital Improvement Program (CIP), Mr. Burton stated the County would utilize the Series 2010 bond proceeds and unrestricted reserves to pay for those projects, noting the need to identify new borrowing sources for projects that were not able to be funded with current resources. He noted other requirements of the analysis included Operating Reserve equal to 3 month of operating expenses, as well as a minimum debt service coverage of 1.5 times net income coverage. Mr. Burton addressed several changes that occurred since the prior update, including: 1) significantly lower operations and maintenance (O&M) costs due to savings and efficiency measures utilized by MCU staff; and 2) reduced capital costs due to current economic conditions. The changes resulted in higher reserves than previously projected and slightly improved cash flow, which allowed for reduced borrowing and a higher level of capital funding from rates/revenues. Mr. Burton referred to the charts on page 6 of the handout, which provided the average annual growth/inflationary costs for Book P, Page 849
utility systems per the Consumer Price Index (CPI) as well as the 10 year financial plan projections. In response to Commissioner Amsden, Mr. Burton stated it was his assumption that due to the excess capacity in the system, new growth would have a large revenue impact at a small cost to the utility. In response to Chairman McClain, Mr. Mellinger stated staff would bring back information in regard to how much excess capacity was available within the system at this time. Commissioner Amsden referred to an email he received from Mr. Mellinger in regard to the number of residential, commercial and industrial water and sewer customers currently utilizing MCU and opined staff needed to target more commercial and industrial businesses to come online. Mr. Burton advised that no action was required by the Board of County Commissioners (BCC) at this time and recommended the Board continue with the adopted rate adjustments for FY 2012-13. Mr. Mellinger stated last year the Board authorized staff to review the possibility of refunding some of the Utilities debt, noting Accounting Financial Management Advisor Jay Glover, Public Financial Management (PFM), would be bringing forward a proposal to refund the 2001-02 Revenue Bonds, which would provide approximately $160,000 in annual savings. Mr. Mellinger advised that staff would be bringing forward a strategic acquisition proposal in regard to the possibility of purchasing Windstream Utilities, noting the County already provided water and wastewater services in the surrounding area. He provided an overview of the facility s condition, number of customers, distribution system condition and average customer usage. Mr. Mellinger noted the City of Ocala had previously requested the County include them in any acquisition negotiations with private utilities. He advised of previous discussions staff held with the owner of Windstream Utilities, noting the owner preferred to be paid over time and staff was recommending paying at $2,500 per Equivalent Residential Connection (ERC) over a 20 year period at 4%. In response to Commissioner Amsden, Mr. Mellinger stated it would equate to approximately $322,000 per year for 20 years (or $6.4 million in principal and interest). In response to Commissioner Bryant, Mr. Mellinger stated 50% of the utility s customers averaged above 1,500 gallons per month at $1.55 per 1,000 gallons of usage. Board discussion ensued in regard to Windstream water rates versus MCU rates. In response to Commissioner Stone, Mr. Burton stated it would take almost 64 months (5.5 years) to recover the County s investment if no improvements were made to the system. Commissioner Bryant expressed concern that there would be over $3 million in debt service, which would double the cost of acquisition. Commissioner Stone commented on previous utility systems purchased by the County, noting most required major investments to bring the systems up to grade. Mr. Burton provided a brief overview of the income analysis versus debt service and noted the utility s assets could have up to a 30 year residual life span. In response to Commissioner Bryant, Mr. Mellinger noted the County already provided wastewater services to some of Windstream s customers. Commissioner Amsden questioned when the Utility s infrastructure was put in place. Mr. Mellinger stated the Utility had been upgrading its infrastructure since 2003. Commissioner Bryant noted there were areas in the subdivision that were older than 2003 and requested Page 850, Book P
information in regard to the age and condition of the rest of infrastructure. Mr. Mellinger stated he believed approximately 70% of the Utility s current infrastructure was C-900 municipal standards, but noted staff would bring back more information for Board review. Commissioner Bryant out at 1:55 p.m. Commissioner Stone expressed concern with the cost for acquisition versus revenues that would be generated. Chairman McClain recommended the Board first determine whether or not there was an appetite to pursue the acquisition of the utility and then direct staff to bring back more detailed information. Commissioner Bryant returned at 1:58 p.m. In response to Commissioner Zalak, Mr. Mellinger stated approximately one-third of the utility area was located within the City of Ocala limits. It was the general consensus of the Board to direct staff to move forward with acquiring the information requested and schedule one-on-one meetings with Commissioners to answer questions. Commissioner Zalak addressed the timing of the acquisition and stated it was his preference that the current owner implement the tiered rate system as required by the State (by 2012) prior to the County taking over the system. Mr. Mellinger referred to page 10 of the handout, which listed the Alternative Water Supply Proposal options including the Lower Floridan, desalination, Ocklawaha River and the option to build a reservoir. He advised that the lower Floridan aquifer had been proven to be of good enough quality that it could be chlorinated and sold for potable water. Mr. Mellinger addressed previous discussions with the City of Ocala in regard to a cooperative development of alternative water supply planning, including the possibility of utilizing a lower Floridan aquifer well. He stated the City of Ocala moved forward with the project (without the County) and was recently permitted to use a well as their alternative water supply. Mr. Mellinger addressed the cost involved with desalination, which he opined was not a viable option for Marion County at this time. Mr. Mellinger noted utilizing the Ocklawaha River was not a favorable option, but opined it would eventually become a water source for Putnam County and other northern counties. He commented on the importance of indentifying long term planning that would lock in numbers (reserve capacity) for Marion County. Mr. Mellinger stated the proposal would include building a reservoir to capture water of the Ocklawaha or Silver River during higher flood stages to be utilized in drought conditions (pages 11 through 13). Commissioner Stone questioned if the County could follow the City s lead in regard to utilizing a lower Floridan aquifer well, perhaps in a partnership. Mr. Mellinger stated that was an option. Chairman McClain noted the County needed to control its own destiny in regard to future water supply planning. Board discussion resumed in regard to alternative water supply options. In response to Chairman McClain, Mr. Mellinger advised that staff identified approximately $40,000 in available funding for this year s budget that could be utilized to start an analysis (soil testing, etc.) in regard to the proposed reservoir site. Commissioner Stone opined the lower aquifer may be the answer for alternative water supply needs for all of Florida. Commissioner Zalak out at 2:24 p.m. Commissioner Bryant questioned the cost involved with identifying the lower Book P, Page 851
aquifer as the County s alternative water supply. Mr. Mellinger stated there would be no cost involved in identifying the viability of the lower Floridan as an alternative water supply source for Marion County. Commissioner Zalak returned at 2:25 p.m. Chairman McClain commented on the Marion County Water Resource and Management Study (WRAMS) that was performed, noting it was a 50 year water supply study. He stated the issue was that the water management districts required a county show a more immediate need before it could ask for water. Commissioner Amsden questioned the kind of treatment process that would be necessary if the County pumped water from the lower aquifer versus a reservoir. Mr. Mellinger stated staff would need more information (i.e., water quality of the well) before an exact answer could be given. Board discussion ensued. Chairman McClain clarified that it was the general consensus of the Board to direct staff to move forward with a preliminary evaluation report, prioritizing the Floridan Aquifer as the first choice for an alternative water supply. Mr. Mellinger addressed Interlocal Agreements for Utility services, noting the City of Dunnellon was requesting an inter-connect with the Dunnellon Airport Water Treatment Plant, which staff recommended. He also advised that the Department of Environmental Protection (DEP) had requested the County provide assistance in taking the Rio Vista Utility Plant off-line, due to effluent draining into the Rainbow River, however the County did not currently have a facility in the area to assist with that effort. Mr. Mellinger noted the Juliette Falls subdivision also approached the County in regard to taking over the utility within that subdivision, noting staff recommended the owner renew the permit omitting the reuse component. He advised that although the Juliette Falls Utility would not generate revenue at this time, it did provide an environmental opportunity for the County to own a utility in the Dunnellon area. Board discussion ensued in regard to the Interlocal Agreement with the City of Dunnellon. Burt Eno, SW 193 rd Circle, Dunnellon, advised of an upcoming public hearing the Dunnellon City Council would be holding in regard to an Ordinance that would provide for a division of the McBride property to allow for a low density residential subdivision. He commented on a proposed settlement agreement with the Rainbow River Ranch developer and the City of Dunnellon. Mr. Eno requested the Board s help in getting residents off of septic tanks on the west side of the Rainbow River. Commissioner Amsden noted the Board would need more information in regard to the capacity of water available at the Dunnellon Airport. Mr. Mellinger stated there was well capacity available, but the consumptive use permit was low due to the lack of demand. Commissioner Stone expressed concern as to whether or not the City of Dunnellon had the money to fund its portion of the project. In response to Commissioner Stone, Mr. Mellinger stated the City of Dunnellon built a new water tower on the west side of the City approximately 10 years ago. Commissioner Stone suggested the City of Dunnellon utilize underground water storage tanks for areas that had issues with flow pressure for fire hydrants. It was the general consensus of the Board to direct staff to bring back more information in regard to the request for an Interlocal Agreement by the City of Dunnellon. Mr. Mellinger addressed the request by the City of Belleview for an Interlocal Page 852, Book P
Agreement, noting the City was notified by the Department of Transportation (DOT) in regard to the need to relocate a portion of the 12 inch water main that ran north by Baseline Road. He noted the City of Belleview did not have the funding to accommodate the relocation. Mr. Mellinger stated the agreement would provide a conduit needed to start supplying water to the southern Baseline corridor. He advised that the City of Belleview qualified for grant money to help with the water main relocation. In response to Commissioner Stone, Mr. Mellinger stated he would bring back more data in regard to the cost involved in the water main relocation as well as information in regard to redrawing area service lines. He commented on discussions with the City of Belleview in regard to tying into their reuse water line in order to support the Baseline Golf Course. Mr. Mellinger advised that the County would either have to pay the City of Belleview to utilize their infrastructure or the County would sell the City their water. In response to Commissioner Stone, Mr. Mellinger stated the Baseline Golf Course was mandated to utilize reuse water. General discussion ensued in regard to the option of purchasing the City of Belleview s Utility System versus the option of activating the Marion County Utility Authority with the City of Belleview as a partner. Mr. Mellinger referred to the map on the bottom of page 15, noting the dark blue circles were 5 mile rings around wastewater plants the County had in place or planned for in the near future. He advised that there was approximately $14 million in Capital Improvement Projects (CIP) between the Silver Springs Shores, Silver Springs Regional and the Golden Ocala Plants to provide capacity upgrades to meet current obligations or for expansion of the County s service area. Commissioner Stone noted his preference would be to explore the option of forming a Water Supply Authority and recommended Commissioner Amsden act as the Board s liaison to work with other municipalities to discuss the option. It was the general consensus of the Board to concur. Mr. Mellinger summarized that, on a Countywide level, County Road 484, Baseline Road and Highway 441 would likely become the high corridors for moving water within the County. In response to Commissioner Amsden, Mr. Mellinger stated the aggregate amount of Utility Bonds totaled $100,000,000, noting there was approximately $6,000,000 above the Debt Service requirement. In response to Chairman McClain, Accounting Financial Management Advisor Jay Glover, PFM, clarified that there was approximately $5,000,000 set aside in the Debt Service Reserve Fund, noting some of those monies were borrowed from the Solid Waste Fund, however he did not believe any of those funds would ever become available for CIP projects. He provided a brief overview of the long term outlook for the repayment plan and noted the monies borrowed from the Solid Waste Fund should be repaid in the next 3 years. Mr. Burton advised that there would be an upcoming 4% overall rate increase for water and sewer services, noting there were 2 years remaining on the adopted rate structure. He noted if the Board chose to lower the utility rate there would be a need for an immediate rate increase next year or cut in services (CIP, O&M, etc.). Mr. Mellinger expressed concern with the impact a rate reduction would have on future debt funding (bonding). Board discussion ensued in regard to utility rates. Commissioner Zalak questioned how many more wastewater plants the County Book P, Page 853
could take offline. Mr. Mellinger stated the County would take off 5 over the next 18 months. In response to Commissioner Zalak, Mr. Mellinger stated if the County removed all proposed capital projects, it could reduce customer bills. Commissioner Bryant clarified that the only way to reduce rates would to be to place more customers online. Board discussion resumed. In response to Commissioner Zalak, Mr. Mellinger stated if the Board removed the top tiered rate for utilities there would be an immediate $1.1 million shortfall in revenue, which would affect the Bond Covenants. He noted the maximum rate for a wastewater customer was $61.45 per month. Mr. Mellinger stated he would email the Chairman the number of customers who utilized 1,000 gallons of water or less per month. In response to Commissioner Stone, Mr. Mellinger stated the adopted rate increase was to begin October 1, 2011, but was deferred until the first of January (for December s usage). It was the direction of the Board for staff to notify customers when the rate increase would start to avoid confusion. It was noted that the Deputy Clerk was in receipt of an email dated July 14, 2011 from Utilities Director Flip Mellinger; 36 emails and 660 petitions from Del Webb Spruce Creek Golf & Country Club residents in regard to Marion County Utility rates. There being no further business to come before the Board, the meeting thereupon adjourned at 3:52 p.m. Attest: Stan McClain, Chairman David R. Ellspermann, Clerk Adopted by the Board of County Commissioners on Tuesday, August 16, 2011. Page 854, Book P