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HomeMy WebLinkAbout1992-06-16 - City Commission Workshop Meeting MinutesCity Council Workshop Meeting 06/16/92/elo Page 1 11 CITY OF TAMARAC, FLORIDA CITY COUNCIL WORKSHOP MEETING TUESDAY, JUNE 16, 1992 CALL TO ORDER: Mayor Bender called this workshop order on Tuesday, June 16, 1992, at 1:30 p.m. in Room # 1 of Tamarac City Hall, 7525 NW 88 Avenue, Florida. Mayor H. L. Bender Vice --Mayor Henry Schumann Councilman Joseph Schreiber Councilman Norman Abramowitz Councilman Irving Katz ALSO PRESENT: John P. Kelly, City Manager Dina McDermott, Assistant City Manager Mitchell S. Kraft, City Attorney Carol A. Evans, City Clerk meeting to Conference Tamarac, , Mike Couzzo Director of Public Services/Assistant City Manager Mary Blasi, Finance Director Clark Bennett, Florida Municipal Advisors Robert Ori, Hartman and Associates, Inc. Ellen Wood, Secretary ************************************************************* 1. Tamarac Utilities East and Tamarac Utilities West Water Rates. Mr. Kelly said each Councilmember has a rate study completed by Hartman and Associates. He said Robert Ori from Hartman and Associates will discuss the impact of this study. He said Clark Bennett from Florida Municipal Advisors, who is handling the bond refinancing for the City, is also present because there is an inter -relationship that needs to be discussed. Mr. Kelly said a public hearing is scheduled for Friday of this week to take action on the proposals and the time frame is rushed. He said the rate study was pushed to help complete the bond issuance before City Council vacation. Mr. Kelly said in order for Council to act, this workshop is needed so that issues can be addressed and a scenerio can be presented by Mr. Ori. Mr. Kelly said action could be deferred at the public hearing on Friday and put off until Thursday of next week. Ms. Blasi said Clark Bennett will speak in reference to what kind of rate increase is required in order to get insurance on the refinancing of the bonds. C/M Abramowitz asked the professionals to answer why rates have to be increased regardless of whether bond financing or restructuring is done. Mr. Kelly said the rate increase has to be done regardless but it is going to take much more time than the presentation by the people doing the refinancing. He said they would do the presentation first. Clark Bennett, Financial Advisor for the City from Florida Municipal Advisors, said they are attempting to refund certain water and sewer bonds and general obligation bonds. He said today, he is concerned with the water and sewer bonds. He said in order to get insurance and/or a rating on these bonds, the City must meet the rate covenant test in the 1985 Bond Resolutions, which require a coverage of 1.10 times City Council Workshop Meeting 06/16/92/elo Page 2 net revenues. He said this means the City must have revenues that exceed the bond interest and principle payments of 1.10 times and must meet a secondary covenant that requires net revenues plus impact fees of 1.20 times. He said at present the City does not meet those tests. He said if the City is going to get insurance and refund the bonds, save in excess of one million dollars for the water and sewer system it is imperative that the tests are met prior so that insurance can be given on the bonds. He said insurance does reduce the cost of interest on the bonds. Mr. Bennett said the insurance companies are waiting action to determine whether or not those convenants can be met through action the City takes. V/M Schumann asked if the City meets the covenants if the City is self -insured and Mr. Bennett said the City would be insured by one of the three major insurance companies and this is dependent on how their bids come in. V/M Schumann asked if this would be collateral for the insurance policies and Mr. Bennett said, in the sense that the bond covenant has to be met and this is the insurance companies basis for concern. Mr. Bennett said the City is only doing what it is required to do under the 1985 bond ordinance. Mayor Bender asked what the basis is for the bond covenant test. Mr. Bennett said when this bond ordinance was written, it was written as was the custom of the day on the assessed strength of the system. He said rate covenants are written anywhere from a 1.10 to 1.25, depending on the strength and growth of the system and the view of the rating and/or insurance companies at that time. He said this particular rate convenant was written in 1985 and it was the practice of the day. He said it is a good rate covenant in that it is not too high or too restrictive. Mr. Bennett said insurance companies will not insure the new bonds unless the City meets the rate covenant test. He said a refunding can be done but the City would not get insurance and eventually the current insurance company will send a letter to the City inquiring why the City is not meeting its current covenant. He said the City would be at technical default which means debts are being paid but the City has failed to meet one of the promises made to the bond holders. Mr. Bennett said technical default means the City is not meeting the covenants. He said each insurance company has a surveillance unit to watch this type thing. He said the enforcement is up to the insurance company, including cancelling. C/M Schreiber said he feels it is improper to take funds out of the Utility West fund to pay for everything else in the City. He asked if operating expenditures were reduced and the operating revenue raised, would the City meet the requirements. Mayor Bender said if the City takes away administrative functions, Utilities would have to go out and hire another administrator for which they would have to pay. C/M Schreiber asked about $685,000 in charges that Utility West fund uses to subsidize the City and Mayor Bender said a study was done and this is what the professionals came up with. C/M Katz said Mr. Bennett is not involved with this and possibly it could be put off until Mr. Bennett is finished and C/M Schreiber agreed. I _� C City Council Workshop Meeting 06/16/92/elo Page 3 Mayor Bender thanked Mr. Clark for his presentation. Robert Ori, Manager of Rates and Finance for Hartman and Associates in Orlando, Florida, said he had a briefing document to distribute. He reviewed the contents of the briefing document. He said the primary purpose of the study is to see if the water and sewer rates are adequate to meet the City's level of service requirements, financial operating needs, and resolution requirements. He said another aspect of the study was to implement a water conservation rate to help meet some of the mandates of the South Florida Water Manage- ment District. He said the City has to be financially able to do the refinancing. He said they want to set up a funding mechanism to fund capital improvement programs. Mr. Ori said Tamarac Utility West is averaging about 1% growth per year in revenues and the East system is a little higher. He said operating expenses have increased 12% since 1987. He said the City has really kept down expenses but when comparing the two and recognizing that growth has stopped, a solution is needed. He said 30% of the increase is for charges from Broward County, which is something the City cannot control. He said these increases have to be passed on to the customer. Mr. Ori said funds on hand have been used such as impact fees, to reduce the amount of increase. He said the East side has increased about 18%. He said the City has not raised rates commensurate with the increases. Mr. Ori said the external funds that are used to offset are no longer there. He said this also shows on the debt service coverage because it is going down. He said it was at a 1.83 in 1988 and in 1991 at a 1.22. He said the City is getting close to the 1.20 requirement. C/M Katz asked if the reserve was used to subsidize additional costs of running the utility department. C/M Abramowitz said in the equation to meet the bond covenants was revenue plus CIAC funds. He said in 1988 if the City had $1.2 million in CIAC funds it was part of the equation. He said at this moment if the City has $40,000.00 in the CIAC funds it has to make a dramatic impact in not meeting what the City is supposed to meet. He said CIAC funds, other than being used in the equation, were only used for new projects. He said being part of the equation is a tremendous decrease for the equation. Mr. Ori said another part of the equation is that if the City does not get CIAC funds, the net revenues must meet 1.20 test. C/M Schreiber said in 1988 and 1989 there were no adminis- trative charges to the TUW fund and one of the years there was no charge for property tax substitute on in lieu of tax funds. Mr. Kelly said there has always been administrative charges and C/M Schreiber said the budget does not show it. C/M Abramowitz said C/M Schreiber says one reason the City is having problems is because the utility is paying the City for administrative expenses. He said that is not factual. He said in 1988, $300,000.00 plus were in administrative expenses. He said Council was concerned that they were subsidizing the utility department by not charging enough. He said the City did a study because they did not know the answer. C/M Abramowitz said there is a combination of things that put the City where it is today. He said the City has gone from over a million dollars to $40,000.00 which is a dramatic drop. He said the City wanted to know what to charge the City Council Workshop Meeting 06/16/92/elo Page 4 utility for them to pay their fair share, every department in the City pays its fair share. He said every department is charged expenses. He said the money charged to administrative expenses goes into the general fund, which allows the City not to raise the taxes. He said if there is a short fall in the general funds, taxes will be raised. C/M Katz said basically this had nothing to do with adminis- trative costs. He said the difference was utilized for new projects and to make up deficits. He said at no time was this meant to subsidize administrative costs. He said last year when the budget process started, he asked Mr. Kelly the actual costs for administration to the Tamarac Utility and no one could give an answer. He said directly after that the study started and came up with $300,000 plus additional that was being funded to Tamarac Utility West. He said one of the reasons that the City was allowed to reduce the ad valorem taxes was that this information came in and the money was available prior to approval of the budget by the Council. He said if the study had not come in and the money been available as surplus, the City would have had to increase the ad valorem tax rather than decrease. He said he was satisfied last year that the money was not going to a slush fund but in reality to new projects and allowance for reduction in the ad valorem tax ate up the rest. C/M Schreiber said under Section 7.18 of the Charter, the utility fund cannot be billed. He said it is a user fund and should not have money taken out for the general fund. He said the property tax is for the general fund and should stand on its own. He said Utility West should be charged for the services rendered to them but they are being overcharged. He said the 1988 and 1989 there were no administrative charges going to Utility West. He said the property tax substitute is not in every budget either. Ms. Blasi said in the years detailed by C/M Scheiber, the general fund was given $350,000.00 in administrative service charges from TUW. She said she could show it to C/M Schreiber. She said the in lieu of tax contribution has been in existence for at least ten years. She said it is written in the bond covenant and based upon a percentage of operating revenues from the TUW fund. Mr. Ori said the City currently has five classes of customers: single family, multi -family, residential, commercial, homeowners associations, recreational and irrigation, which has subdivisions. He said they all have a like rate structure with a service availability charge and a consumption charge. He said the service availability charge is the fixed charge per month for residential. He said for TUW the single family cost is $4.65 and for commercial and homeowners association the charge varies by the size of the meter. He said the logic is the larger the meter and capacity, the larger the fee. He said the system is there always ready to serve and the customer should pay for that peak capacity up front. C/M Katz said the concept here is the same as a demand meter on electric. He said they charge on a rate at the peak amount. Mr. Ori said the system has to be there to serve. He said they are built for the peak demand of the system. Ms. Blasi said in the service availability charge is a debt service that is constant and a monthly cost with the billing. She said this has to be done every month whether the service is used or not. She said this up front cost is needed for this. Mr. Ori said many customers have zero consumption and if the City had a 100% consumption rate they would be charged nothing, even though the system is there to serve them. He City Council Workshop Meeting 06/16/92/elo Page 5 said the demand costs need to be collected upfront and they have to be there. He said the revenue also has to come in to meet the bond covenants. Mayor Bender said it is compiled of a gross plus an expense which brought it up to the net. He said billing, postage, customer service and meter reader are all included. Tape 2 Ms. Blasi said most of the expenses are constant whether there is usage or not. C/M Katz said the public has to be educated. Mr. Ori said water and sewer has highly fixed costs. Mr. Ori said the sewer bill is based on the water meter consumption and for the residential class is a 15,000 gallon maximum billing threshold. He said commercial is a 100% charge. Mr. Ori said the residential makes up the predominance of the rate class. He said they are about 96% of the total customers. He said TUW has an expected growth of less than 1% because the City is near build -out. He said TUE has no growth, .1%. Mr. Ori said the average residential customer used between 5,000 to 6,000 gallons per month. V/M Schumann said it is anticipated that the residential single family class will experience the most positive price increase of the rates because they tend to contribute a larger proportion shared toward peak demands. Be said residential multi -family customers do not have high water use because their requirements are practically all indoors. He asked what he would use in a single family that he would not use in a multi -family. Mr. Ori said in the single family the average customer uses about 5,300 gallons and the multi -family uses about 4,100 gallons. He said the single family class is more responsive to the water conservation rates. He said 5% of the residential customers use in excess of 15,000 gallons a month which is 10% of the total flow. He said this is what needs to be targeted. Mr. Ori said multi -family does not make a big demand on the system so the price responsiveness to the water conservation rate will come from the single family class because they control irrigation and reduce excessive waste. Mr. Ori said he prepares the customer forecast and then the revenue requirements which are expense needs. He said he projects customer and average use. He said he raised the average use per customer in 1992/93 because of the amount of rainfall the City has had. He said this study was based on the 1993 preliminary budget. He said operating expenses account for 69% of the rate needs. He said labor, chemicals, purchase power in Broward County is 50% of the total rate needs and 72% of that number. Mr. Ori said debt service accounts for 21% of the rate needs. He said this does not reflect the potential of the refinancing. He said the payment in lieu of tax is equivalent to property tax, franchise fee of private utilities in the City and is based on a 4% of prior year sales revenue and accounts for only 3% of the rate needs. He said this is a common type expenditure in utilities across the state. He said utilities that do not have a payment in lieu of tax have a utility tax. He said it is a very small dollar value over the whole picture. City Council Workshop Meeting 06/16/92/elo Page 6 Mr. Ori said the last major expenditure item is the capital improvements fund from rate revenue. He said this represents about 7% of the rate. He said consideration needs to be made on raising the rates in this area. He said the five-year capital improvement budget identifies $11 million in total projects. He said many of the projects are CIAC related but the money will run out within two years. He said these projects have to be funded from somewhere if they are going to be done. C/M Katz said the alternative is not to do the project unless it is demanded by federal, state or county. Mr. Ori said or level of service needs. He said in order to comply with a bond resolution the system has to be maintained and operated to produce the revenues to pay off the bonds. Mr. Ori said he tried to produce the lowest rate adjustment he felt was plausible to the City and met all needs. He said the rate covenant has to be met. He said net revenues equal 1.10 times maximum revenue service. Be said net revenue is total revenue less operating and maintenance expense. He said that number must be at least 1.10 times maximum debt service. Mr. Ori said he has targeted the rate increase to meet the 1.20 test without impact fees because of the uncertainty of those fees. He said the number was derived by looking at the total revenues of the system less the operating expenses as budgeted for the fiscal 1993 period. He said rates need to be raised about $1.2 million which is about a 13.2% increase. He said this rate increase does not recover all budgeted capital projects. He said if $1.2 million is budgeted for capital improvement projects, there is roughly $530,000 funded from CIAC funds, leaving a balance of $560,000 which the City is short. Mr. Ori said this covers what the City is going to do on the bonds, on the debt service. He said the 20% provides the City coverage and is made up of capital improvements, payment in lieu of tax (which is required from the bond resolution) and part of the 20% cut. C/M Abramowitz asked if in the Comprehensive Land Plan is the City mandated to do anything in the next few years. Mr. Kelly said the City has certain obligations to do certain projects in the next few years. He said nothing is mandated but the Comp Plan has to be amended in order to make changes. C/M Abramowitz asked if the lift stations are necessary by utility department standards for the next 2-3 years. Mr. Couzzo said four lift stations are done per year. He said there are 72 lift stations. Ms. Blasi said the Comp Plan does not segregate between years but combines the total for a five year period so the City is not mandated to do it any one year. Mayor Bender said everything cannot be left until the last year, it has to divided among the five years. He said otherwise taxes would be increased beyond what they should be. C/M Katz asked how much of this is infrastructure that the City may not be responsible for. Ms. Blasi said there is no capital improvement that deals with new development. C/M Katz asked if part of this is based on the City's responsibility, compared to making it easy for a developer to come into the City. He said it should be different when looking at a rate schedule. He said he asked about emergency City Council Workshop Meeting 06/16/92/elo Page 7 generators in the City and was told the City has two. He said he questions whether certain emergency situations are factored in. Mayor Bender asked if the City was going to receive money back when developments occur against City expenditures and is that factored in. Ms. Blasi said there would not be a reimbursement in utilities. She said those expenses are coming out of the CIAC fund. She said they will not affect the rates today. Mr. Ori said in the five year projection, growth system and funds coming back in were included. He said the City has pent up demand where people have paid CIAC charges and have not built yet. He said that is guaranteed revenue. He said customers have already paid and it has been utilized. He said he estimates high at $130,000 per year. C/M Abramowitz said this City takes money at site plan review not with the certificate of occupancy. Mr. Ori said there will be a 10% to 12% increase from Broward County next year and 10% this year. Mr. Kelly said the City does have excess capacity due to planning for the future. He said in the interim Tamarac could sell to neighboring cities. C/M Abramowitz said Tamarac was paying Deerfield Beach over $20,000 per month to flush. He said a mistake was made when Tamarac did not raise its rates. He said Council was anxious to maintain a level rate and not raise rates. Mr. Ori said to meet the 1.20 coverage a system rate increase is needed of 13.9% of the rate revenue. Mr. Ori said revenues are set and to get a 1.20 coverage from net revenues on the bond 13.9% is needed. He said project cuts do not reduce the amount needed. He said in order to do the projects in the budget 21% increase of rate revenue is needed. Mr. Ori said he is not recommending the 21% because he was told to kept it as low as possible. C/M Katz said as low as possible but realistic and Mr. Ori said personally he feels 20% is realistic but it is a political question. C/M Abramowitz asked if the City raises 13.9% today, what would the problem be next year and Mr. Ori said there is much uncertainty coming out in 1995. He said there is a new replacement plan starting and the City Manager discussed potential water sales to near cities. He said he recommended raising rates further in 1993 by 8.5% on the water side and 12% on the sewer side which still does not get the City to the five-year CIP. He said this year's rate increase is the 21% to provide debt service coverage. He said he is recommending a minimum two-year rate increase. Mr. Ori said he also wants to recommend a price indexing rate adjustment. He said the system is near build -out so growth is not there. He said it allows inflation to be covered by automatic increases being set in the ordinance and approved by Council. He said it would also guarantee a debt service coverage. He said there are changes in the regulatory climate coming. He said it would provide a mechanism to meet City needs and not have massive increases. He said he recommends after the second year increase, adopting a 3% indexing provision. C/M Abramowitz asked if there are any recommendations being made other than to residential areas and Mr. Ori said, yes. City Council Workshop Meeting 06/16/92/elo Page 8 Mr. Ori said the reasons for the rate increase are reduced growth, rising expenditures at 4% and revenue rising at 1% and interest income. Ms. Blasi said the City is estimating a decrease from 1991 to 1992 of $400,000 in interest for TUW funds. C/M Schumann asked what the 13.9% would do to the individual home owners bill. Mr. Ori said for single family it is about 18% at 6,000 gallons. He said he designed rates based on cost of service for customer classes. He said there are two types of water conservation rates in the rate design. Mr. Ori said the residential single family class is a three tier rate: 0-6,000 gallons per month. 6,000-15,000 per month and more than 15,000 gallons per month. He said 6,000 gallons is the basic amount for indoor use, the second block falls into the sewer cap, and the highest rate is for excessive use. Mr. Ori said he kept the same type rate structure but on the general services the homeowners associations and irrigation have been charged together. He said they will all pay the same basic facility charge. He said the rate increase for the commercial side will be less because the fixed cost is based on the meter and the service request is based on the service capacity to need. He said a commercial on a 2" meter pays $72.85 and after 2" the usage is looked at. He said Southern Bell is a 3" user and their service availability charge is $29.00 and will go to $139.25. Mr. Ori said the inverted rate block is being introduced to commercial. He said the first block is $1.12 and the second block is $1.57. He said the irrigation has higher bills and he recommends adopting a higher volume break from $1.04 to $1.57. C/M Abramowitz said he never wants to reduce a commercial users rate but he also does not want to chase them out of town. Tape 3 Mr. Kelly said is the trade off the number of people in that category from the reduction in the rate system and does it balance out. Mr. Ori said overall it still produces the 14% total revenue. He said the flow charge does not quite offset the service availability charge. He said it follows the cost of service principles. Mr. Ori said the commercial and the multi -family only have a two block and the second block is higher than the residential. He said there is a significant increase. He said the wastewater has the same type of rates as before. He said he is recommending that the City consolidate the debt service charge into the service availability. He said it is the same fixed cost but administratively easier for the City to handle. C/M Abramowitz said there is a 15,000 gallon cap on the single family home for disposal charges. He asked how the commercial is addressed and Mr. Ori said, no cap. C/M Abramowitz said if a cost is diminishing with the 2", their sewer is also being diminished. Mr. Ori said that is why there is a price elasticity factor based on studies done by South Florida Management District. City Council Workshop Meeting 06/16/92/elo Page 9 C/M Abramowitz asked in the 2" category where there is a drop in price, how many consumers fit that category in the City. Mr. Ori said there are 266 commercial and homeowners associations customers at the 2" in September, 1991. He said they are in the same rate. He said there are 287 customers at 5/8". He said the multi -family is based on units, not accounts. Mr. Ori said TUE rate increase will be the same as TUW. He said funds are available to help keep those rates down. Discussion was held on utility rate adjustments and waste- water. Mayor Bender said most cities also have a utility tax to offset the rates. Mr. Ori said another influence is how many people are serviced outside the city limits. Mr. Ori said the impact is greater on the wastewater than on the water. Ms. Blasi said the City does not have any control over the major wastewater charges because of Broward County and the debt service. C/M Abramowitz asked if other cities were looking for new bond issues to cover problems of this nature and Ms. Blasi said it was more infrastructure, that they could not go out for operational costs on a bond issue. Mr. Ori said if the City has many capital projects up front the debt might be beneficial because the payment can be spread out over time. C/M Abramowitz asked Mr. Kelly how many dollars the City has received up front for the platting process and what the City is obligated for. Mr. Kelly said the City is committed down the line. He said the City is obligated to Land Section 7. Ms. Blasi said regarding monies that may be needed in the near future to help fund capital improvements, instead of taking $65,000 per year savings over 19 years, the refinancing can be structured to have the savings up front at $200,000 per year for five years. She said the savings could be used to fund capital projects. She said it would not affect the 13.9%. Mr. Bennett said the funds could be used for any purpose of the system. He said the bond transaction is structured so that the savings occur in the first five years. He said it gives the City the opportunity to fund capital projects that the City is concerned about. Discussion was held on how to structure the bond transaction. Ms. Blasi said if the debt service is $2.5 million per year, to do it over 19 years the debt service will be reduced by $65,000 per year or it can be reduced by $200,000 to make it $2.3 million for five years and at the six years goes back to $2.5 million. She said the $65,000 over 19 years will be more than a million dollars. She said it is the present value of money so it is worth more now than then. C/M Katz said this money is limited to the utility capital projects. Ms. Blasi said it is reduced debt in those years. She said the rate covenant has to be based on the $2.5 million because it is the highest annual debt service. City Council Workshop Meeting 06/16/92/elo Page 10 C/M Katz asked what dollar amount is being projected for capital projects and Mr. Ori said eleven million for all projects. Mr. Bennett said those dollars being freed up will cost the City less than if it borrows the equivalent money in a new bond issue. He said it would be a higher interest cost and expense cost over that amount of up front savings. Mr. Kelly said no one knows what the market will be. He said a bull market could interfere with City plans. He said this needs to be thought about. C/M Schumann said this needs to be laid out at the bond refinancing so a decision needs to be made. C/M Abramowitz said he would like to know the differential between 19 years at $65,000 and five years at $200,000. He asked what the money was going to be spent on and if it is something that is a necessity or something the City would like to do. Ms. Blasi said there is capital budgeted this year. She said they expect to have $650,000 left from the general reserve fund. She said with the $200,000 the next year increase may get down to 7.5% instead of 10%. C/M Schumann asked if there were any time constraints on when or how the money has to be used. Mr. Bennett said it just means that the City does not pay that kind of interest that year. Ms. Blasi said it is not a revenue item but a decrease from the debt service. She said the payment is less to the debt service. She said it will keep down required increases in the next few years to fund the capital improvement program. Mayor Bender asked if the money is not used for three years the City would have $600,000 and interest. Ms. Blasi said the money will not be saved unless the 10.5% increases are implemented next year and the year after. Mr. Ori said on the net present value basis the total savings is the same with either scenerio. C/M Abramowitz said at the present cost of money it will be the same. He said in the future the City would not have to raise the rates and not cost the people anything more. C/M Schreiber disagreed and said numbers will do anything you want. C/M Katz said the 10.9% projected in 1994 incorporates the capital for the year. Mayor Bender said it is time to close this item and there could be more discussion at the Council meeting. Mr. Ori said CIAC charges were not discussed and he proposed raising them based on current costs. He said he also recommended several miscellaneous service charges. He said they are cost recovery type charges that help keep rates lower. Mr. Kelly said a public hearing is scheduled for this Friday. He asked will Council be ready to pursue or defer this issue to another time frame. After discussion, Mayor Bender said action would be taken on Friday and suggested that Council read the first fourteen pages of the handout. City Council Workshop Meeting 06/16/92/elo Page 11 Tape 4 C/M Abramowitz said TUW has 25,000 customers and TUE has 1,000 customers. 2. Discussion regarding Audit of Cable Franchise Agreement by David-R. Griffith and Associates. Mayor Bender called for a five minute break at 3:40 p.m. and reconvened the meeting at 3:45 p.m. with the same people present. Mr. Kelly said Mr. Griffith has advised the City that he is willing to submit a revised price quotation. He said Council previously rejected a proposal quoted for over $30,000. He said the new cost for an audit focused on certain task elements is within the $16,000 threshold which is within the amount of money refunded to the City by Continental Cable Company when an audit was first threatened. He said it was discussed that if it was in the range of money returned to the City it might be reconsidered. Mr. Kelly said a proposal has been submitted and Mayor Bender has had conversations with them relative to what they are proposing and other observations regarding the personal property. Mayor Bender said he met with Mr. Griffith and feels that some of the tasks proposed can be disregarded to reduce the cost or replace the work to be done. He said they want to verify the customer coding and he feels this was accomplished several years ago. He said this is 20 hours that can be substituted. He said there are also other items to be discussed. Mayor Bender said he needs a consensus for him to advise Mr. Kelly to put the item on a regular Council meeting so that it can be voted on. C/M Schreiber asked if this audit is worthwhile since several tasks are unnecessary. He asked if sufficient funds will be discovered to cover the costs. He asked if the books can be seen. Mayor Bender said that is not Continental Cable. He said the City has gone to the Broward Appraisers Office for records on Continental Cable. He said according to the franchise agree- ment, Continental Cable has to let the City examine their books. He said the Cable Company has not objected to letting the City do that. V/M Schumann said he wants to make sure that the City has access to their personal property records because without it the City is spinning its wheels. He said if this information is confidential because of competitors in the field it is not an audit. He said the City needs a base for what the cable company should pay the City for what it has in the ground. Mayor Bender said he wrote a letter regarding this to the Attorney General. He said they are also talking about financial statements that contain this information that they give to Broward County and the County claims they cannot make public. He said this has nothing to do with the franchise agreement between the City and Continental Cable that gives the City the right to look at the books. V/M Schumann asked why they objected to the County releasing it. Mr. Kraft said the County Appraiser's Attorney said there is a statutory prohibition against them releasing those records. He said the records are exempt from 119 as they sit in the appraiser's office. He said it is confidential in that office City Council Workshop Meeting 06/16/92/elo Page 12 unless released by a court order. V/M Schumann said he wants to make sure that before the City has this audit, that the City has the right or approval from Continental Cable to look at books and records to find out what their personal property holdings are in this City. Mayor Bender said the City will take the necessary action. He said the City Manager will notify Continental by a formal letter saying the City retained this company after approval is given to go ahead. V/M Schumann said the letter should be sent before the company is retained. Mayor Bender said the City is not retaining the company now. He said at this meeting Council is offering the consensus to go ahead to proceed to the next step. He said the next step is to bring this contract to Council to vote on. V/M Schumann said, no, he is not approving the contract until he is assured the City is going to get what it is looking for. C/M Abramowitz said if the City spends this money is there the ability to recover the money or get funds that the City has not received. He said the proper procedure would be to get a legal opinion from the City Attorney as to whether the City has the legal right to go in to Continental Cable and say the City has the right to examine anything they want to examine. He said if the proposal has a task that is not needed, eliminate it. He said is the City going to come out better than when going in. C/M Schreiber asked if the City Attorney sends them a letter and says under the contract the City is entitled and Continental refuses to allow it, does the City have to start legal action which will cost more money than the whole thing is worth. Mayor Bender said if Continental does not let the City in, it is the basis for breaking the franchise agreement. He asked why this City is reluctant to have an audit on any franchise agreement. He said he finds evidence that the City has been short changed. He said Continental Cable has their office in Pompano. He said they write contracts for advertising and transmit through many cities. He asked why the cities are not entitled to a pro rated share of the revenue they make. He said an auditor needs to check all of this. Mayor Bender said he just received information from the Broward County Appraiser's office on commercial personal property. He said Continental Cable only shows $2,200,000 and Southern Bell shows $18,000,000 for underground cable. He said some kind of physical audit is needed. V/M Schumann said he wants to make sure that the City gets the complete open book audit. He said there must be a reason why the Cable Company is withholding. Mayor Bender said that is another reason that he wrote the letter to the Attorney General asking them to intervene on the City's behalf. He said the City has Ordinances where taxes have to be collected for real estate property and personal property. He said he wants to know why the City does not have the right to determine the validity of the information submitted to the County by Continental Cable. Mr. Kelly said that the proposed contract is based on task elements. He said there are seven tasks and the Mayor has proposed eliminating two. He said with this type of contract the monies are reimbursed based on the performance of each task. 1 City Council Workshop Meeting 06/16/92/elo Page 13 F] Mayor Bender said he does not want the work duplicated that was completed several years ago. He said he wants these tasks replaced with other tasks such as the personal property aspect. He said Continental Cable is not reporting any real estate in Tamarac. He said Continental Cable has 177 miles of cable, transmission towers, microwave equipment and amplifiers all over the City and this is personal property. He said this is why an audit is needed. C/M Abramowitz asked if Council could acquiesce with the stipulation to make sure the City has the ability to look at the books. V/M Schumann said to look at anything of their operation that the City deems advisable and not just what Continental Cable is willing to show. Mayor Bender asked Mr. Kraft to review the franchise agreement and the supplement. V/M Schumann said he agrees with the Mayor that the biggest item is personal property situated in this City by the cable company. Mayor Bender said they are not reporting all the gross revenue to the City. He said they have advertising contracts and broadcast in other cities but the revenue goes to Pompano. He said he wants to find out how to divide the money proportionate to the cities. EXPRESSION OF INTEREST ALL AGREED WITH STIPULATION THAT THE CITY CAN LOOK AT ANYTHING THEY DEEM ADVISABLE. 3. Discussion regarding the City's Travel Allowance Program to conform with the IRS Code. Mayor Bender said the City has been giving $ .21 per mile when the IRS is authorizing $ .27 1/2 per mile. He said he would like a consensus be given to make this change. Mayor Bender said on page 3, bottom paragragh of the Ordinance, it should be changed to say "prevailing rate of the IRS" rather than an amount. He said the deductible allowed by IRS would be automatically taken care of. EXPRESSION OF INTEREST ALL AGREED With no further business, Mayor Bender ADJOURNED the meeting at 4:05 p.m. w, - Carol A. Evans City Clerk