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HomeMy WebLinkAboutMinutes - City Council - Special - 5/7/2003CITY OF LUBBOCK SPECIAL CITY COUNCIL MEETING MAY 7, 2003 8:30 A.M. The City Council of the City of Lubbock, Texas met in special session on the 7th day of May, 2003, in the Committee Room 103, first floor, City Hall, 1625 13th Street, Lubbock, Texas at 8:30 A. M. 9:29 A. M. CITY COUNCIL CONVENED Committee Room 103, first floor, City Hall, 1625 13th Street, Lubbock, Texas Present: Mayor Marc McDougal, Mayor Pro Tem Victor Hernandez, Council Member Gary O. Boren, Council Member Jim Gilbreath, Council Member Tom Martin, Council Member Frank W. Morrison, Council Member T. J. Patterson, Tommy Gonzalez, Interim City Manager; Anita Burgess, City Attorney; and Rebecca Garza, City Secretary Absent: No one. Mayor McDougal called the meeting to order at 9:29 A. M. The first item considered was Item 6. ( 1.) Presentation from the Interim City Manager regarding his activities and accomplishments for the month of April 2003. This item was continued to May 8, 2003. (2.) Presentation of the Monthly Financial Reports for the Month Ending March 2003 by Beverly Hodges, Managing Director of Financial Services, and Melissa Trevino, Budget Manager. This item was continued to May 8, 2003. (3.) Presentation on the interest rate Hedge Agreement related to Waterworks Revenue Refunding Bonds Series 2005 Lake Alan Henry. Vince Viaille, First Southwest Company. This item was heard after Executive Session. In 1989 and 1991, Brazos River Authority (BRA) issued bonds to fund the construction and acquisition of Lake Alan Henry. Subsequently, BRA issued $50,355,000 `Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995" ("Refunding Bonds") to refinance the 1989 and 1991 bonds. At the time of the original issuance, the City entered into a contractual obligation to make the payments on these bonds on behalf of BRA. The call date of the Refunding Bonds held by BRA will occur in 2005. At that time, the City intends to defease (or payoff) the debt held by BRA. The City will issue approximately $40,465,000 in August 2005, which is the amount necessary to payoff the remaining debt held by BRA. The City plans to sell and issue tax-exempt variable rate bonds to defease the Refunding Bonds. This defeasance will occur on, around or up to 90 days preceding August 15, 2005, when the Refunded Bonds may be redeemed at the option of the Brazos River Authority. In order to hedge against possible increases in the rate of interest to be borne by the variable rate bonds, the City entered into an interest rate hedge agreement with JPMorgan Chase Bank. The agreement was authorized by Ordinance No. 2002-00033, which was adopted April 11, 2002 in connection with and in anticipation of issuance of the variable rate bonds. This hedge locked in a rate at the current market rate environment on April 11, 2002, thus creating a fixed rate payment schedule for the variable rate bonds that will be issued in 2005. This hedge reduces the volatility of interest rate fluctuations that affect the interest costs associated with this transaction. Special City Council Meeting May 7, 2003 Page 390 The ordinance approved by the City Council on April 11, 2002 authorized the City to "lock" the interest rate on the bonds, which will be issued in 2005. Therefore, in 2005, the City will issue tax-exempt bonds and pay a fixed rate of 5.26%, thus safeguarding the City from rising interest rates. In this transaction, the City will own and control the debt and the City will receive $280,000 over the next three years as a premium for the contract the City entered into with JPMorgan. Currently, an amendment is proposed to the current hedge agreement. As mentioned earlier, the hedge agreement approved in April 2002 incorporated a $280,000 premium from JPMorgan for a period of 3 years (2003, 2004 and 2005). In the current amendment, eliminating that premium payment will allow the fixed interest rate on the hedge agreement to be reduced from 5.26% to approximately 5.04%. The overall impact on a present value basis is negligible and the dollar savings from doing this is approximately $60,000. Vince Viaille, the City's financial advisor with First Southwest Company, presented the proposed amendment to the current contract and other options available regarding this transaction. The presentation of options regarding the debt associated with Lake Alan Henry was for informational purposes and preceded an ordinance on the May 8 Council Agenda, which authorized an amendment to the hedge agreement. Council Member Martin asked if this meant we were trading current income for a future lower interest rate? Mr. Viaille stated that was correct. The next item considered was Item 7. (4.) Chancellor Smith to make presentation of "Texas Tech and State Funding". This item was considered following Item 6. Chancellor David Smith gave a Power Point presentation. He stated the title he would use is "To grow or not to grow." Council Member Martin requested a hard copy of the presentation. Chancellor Smith made this available to Council. He also passed out a strategic plan. Chancellor Smith gave details concerning current expenditure budget and enrollment for the Texas Tech University System. He also stated that Texas Tech had more diverse majors to offer than other universities in Texas. Chancellor Smith stated there was interest in expansion in East Lubbock. He also stated Texas Tech was in the midst of a Presidential search and had approximately 80 individuals who had expressed interest. Also attending from Texas Tech was Ben Locke. 12:05 P. M. CITY COUNCIL RECESSED 12:18 P. M. CITY COUNCIL WORK SESSION RECONVENED Committee Room 103 All council members were present except Mayor McDougal and Council Member Boren. Mayor Pro Tem Hernandez called the meeting to order at 12:18 P. M. ( 5.) Delbert McDougal — North Overton Update. Delbert McDougal updated Council about North Overton. He stated that 87% of this entire area has been purchased and 95% of the debris is being recycled. Mr. McDougal also stated they were two years ahead of schedule. 390 Special City Council Meeting May 7, 2003 Page 391 Mr. McDougal told Council that they had tried to be very responsive with the homeowners in this area. Council Member Hernandez stated he understood this was the largest privately funded redevelopment in the Country and thanked Mr. McDougal for this undertaking. Craig Farmer, Managing Director of Planning & Transportation, gave a "heads -up" on what his department has done in this area. Council Member Martin stated he understood that in the developer -- agreements, the property could not be transferred until the TIF bonds were paid off. Mr. Farmer confirmed this was true. Mr. Farmer stated that the whole North Overton area would realistically be somewhere around $300m of value. EXECUTIVE SESSION Mayor Pro Tem Hernandez stated the City Council will hold an Executive Session today for the purpose of consulting with the City Staff with respect to "competitive matters of the public power utility" as provided by Subchapter D of Chapter 551 of the Government Code, the Open Meetings Law. The next item considered was Item 8. 12:40 P. M. CITY COUNCIL RECESSED TO EXECUTIVE SESSION City Council/City Manager's Conference Room All council members were present. 2:17 P. M. CITY COUNCIL WORK SESSION RECONVENED Committee Room 103 All council members were present except Council Member Hernandez. 2:28 P. M. Council Member Hernandez arrived. The next item considered was Item 3. (6.) Presentation by Ernst & Young LLP, presenting the results of the engagement to review and define LP&L and WTMPA cost sharing processes and suggest improvements. This was the first item considered. Currently LP&L operates generation unit JRM8 and brokers purchased power for WTPMA. All power produced or redirected is billed by WTMPA to member cities. An internal review has determined that the cost sharing process has not been sufficient to recover all costs of operation. Ernst & Young LLP was engaged to perform an external review to provide for a more complete and detailed analysis by a firm with specific Electric Utility expertise in this area to determine what, if any, procedures and/or processes need to be changed to allow for sufficient recovery of all operational costs. This engagement was entered into, jointly, by the Cities of Lubbock, Tulia, Floydada and Brownfield. Ken Novak, Senior Manager with Ernst & Young, LLP, made a presentation. The engagement is complete and a copy of the report was provided in Council backup. The report stated the following: "Based on our review and other information the Cities may have, we recommend that the Cities improve the cost identification and documentation process, develop a robust planning process which will lead to the annual determination of realistic revenue requirements, determine the adjustments to payments and the 391 Special City Council Meeting May 7, 2003 Page 392 schedule for those adjustment payments to provide fairness and equity in the historic payment contributions of the Cities, and implement a rate design that provides for fair and equitable shares to the Cities consistent with the contracts among the parties going forward. We found no evidence of misappropriation of assets or intentional omissions of financial information..." Others present included: Eldon Jobe, City Manager of the City of Brownfield; Gary Brown, City Manager of the City of Floydada; and Steve Rohde and Paula Wilson, City Attorney and City Manager, respectively of the City of Tulia.. The next item considered was Item 4. (7.) Presentation of the City of Lubbock Comprehensive Annual Financial Report for the fiscal year 2001-2002. Beverly Hodges, Managing Director of Finance; John Burdette, CAP and Partner at Robinson, Burdette, Martin, Seright & Burrows, L.L.P Each year the Accounting Department prepares a comprehensive annual financial report (CAFR) that is designed to provide the City Council, citizens, representatives of financial institutions and others with detailed information concerning the financial condition and performance of the City of Lubbock. As a significant component of the preparation of the CAFR, an independent audit firm of certified public accountants performs an audit of the City's general-purpose financial statements and notes. This is the first year that the City has been required to implement the Governmental Accounting Standards Board (GASB) Statement No. 34 reporting model. The new reporting model is the single largest change to governmental financial reporting to date. John Burdette, CPA and partner of Robinson, Burdette, Martin, Seright & Burrows, L.L.P. introduced co-workers Andrew Robson and Dina Jansen. He then presented the Audit opinion to the City Council and addressed questions the City Council members had about the audit or audit opinion. Council Member Boren asked Beverly Hodges, Director of Finance, to furnish copies of a 10-year rate model for long-range planning to Council. Council Member Boren asked Mary House, Managing Director of Human Resources, to furnish copies of the actuarial study for the next budget presentation City Council was asked to take minuted action to accept by consensus the annual financial report. As the preparation of the report and acceptance by the City Council is required under the City Charter, staff recommended acceptance. ( 8.) Hold an executive session in accordance with V.T.C.A. Government Code, Section 551.086, on the following competitive matters (Electric Utilities): to discuss and deliberate a competitive matter regarding the strategies, goals, funding and strategic purpose of the City of Lubbock's relationship with and membership in the West Texas Municipal Power Agency 392 Special City Council Meeting May 7, 2003 Page 393 3:30 P. M. COUNCIL ADJOURNED. There being no further business to come before Council, Mayor McDougal adjourned the meeting. Read and approved this day of , 2005. ATTEST: k� Rebecca Garza, City Secretary 393