HomeMy WebLinkAbout1980-07-11 - City Commission Reconvened Regular Meeting MinutesL-
5811 NORTHWEST 88TH AVENUE 0 TAMARAC, FLORIDA 33321
TELEPHONE (305) 722-5900
July 10, 1980
CITY OF TAMARAC
CITY COUNCIL
The Tamarac City Council will hold a Reconvened
Regular Meeting on:
Friday, July 11, 1980
2:00 P.M.
in Council Chambers.
Council may consider such other business as may
come before it.
All interested citizens are invited to attend.
MARILYNBERTHOLF
CITY CLERK
MB/mt
� i r
CITY OF TAMARAC, FLORIDA
REGULAR CITY COUNCIL MEETING
JULY 11, 1980
(Reconvened from 7/9/80)
CALL TO ORDER: Meeting which was originally scheduled at 2:00 P.M., was
delayed to 3:00 P.M., due to the absence of particular individuals from
New York City.
Mayor Falck called the reconvened meeting to order on Friday, July 11, 1980,
at 3:00 P.M., in the Council Chambers.
ROLL CALL:
TAMARAC UTILITIES - WEST
PRESENT: Mayor Walter W. Falck
Vice -Mayor Helen Massaro
Councilman Irving M. Disraelly
Councilman Irving Zemel
Councilwoman Marjorie Kelch
ALSO PRESENT: City Attorney, Arthur M. Birken
Ass't.City Manager,Laura Z.Stuurmans
Ass't.City Clerk, Carol Evans
Clerk/Steno., Mimi Reiter
3. Bond Financing - Report by City Attorney. Discussion and possible action.
SYNOPSIS OF ACTION: Authorization approved for expenditure
not to exceed $10,000, as an emergency, for Official Statement
printing. Authorization for City Officials to travel to New York.
Mr. Birken advised that Robert Pietrzak of Bond Counsel, Tony Nolan
of Williams, Hatfield & Stoner, and Rick Tilghman of First Boston, were
in attendance. He additionally stated that Mr. Pietrzak is associated
with the firm of Brown, Wood, Ivey, Mitchell and Petty, and a litigation
specialist,'who has been involved in Tamarac Utilities bond and valida-
tion matters. He further noted that Mr. Tilghman and Ed Meyers, with
First Boston Corporation, were very familiar with the issue.
The City Attorney said the primary purpose of this meeting was to enable
Mr. Nolan to complete computations, which he has been projecting, as to
the customer rates to be considered for different variables.
28. Land Section 7 - Discussion and possible action concerning continued
work of Consulting Engineer on a master plan for this area.
V/M Massaro requested that this item be heard this day, and be removed
from the 7/23/80 meeting, as she originally requested, to which the
City Attorney agreed that it could be handled this day, without a motion.
3. Bond Financing (continued)
Mr. Nolan advised that the original Capital Improvement Plan, on page
36, has been revised, and reduced to reflect items that should be paid
from system revenues. This amount of $1,325,000.00, he said, has been
reduced to $980,000.00, to be financed through the bond issue.
He referred to page 39, which revised 1980 through 1984, with another
column being added for 1985.
V/M Massaro said that it was her understanding that the building modi-
fication of $100,000.00 was to be removed, to which Mr. Nolan concurred.
Mr. Nolan again referred to the hand-written Capital Improvement Plan,
and stated that the remote ground storage tank is shown as being funded
the first year, 1981, ii the amount of $15,000.00. This was the prepara-
tion for bidding, with building to be effected in 1982, for $595,000.00,
with a total cost of $610,000.00, he stated. The other .item being shown
under the water portion is the high service main, the inter -connect
between the Water Treatment Plant and University Drive, in the amount of
$120,000.00, which is in the first year, namely Fiscal Year 1981.
He said that under the sewer portion, in the 1980 column, the first item
is the Turnpike Force Main, which is the 18 inch force main inter --connect
under the Turnpike that would tie the Commercial Boulevard improvements
together. This figure is estimated to be $200,000.00, he said, and is
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scheduled for Fiscal Year 1981. The Sunshine Plaza force main is a
project which has been completed, but it was necessary to show pros-
pective bond purchasers that improvements have been made to the system.
The $45,000.00, he said, has been expended.
Mr. Nolan referred to the next three items, which relates to Utility
Line Relocation; Commercial Boulevard East, Commercial Boulevard West,
and McNab Road West. He responded to a question of C/W Kelch, by stating
that east and west refers to the Turnpike. He additionally stated that
the portion east of the Turnpike was virtually completed, with the final
asphalt being placed at this time. The first installment, he said, in
the five -installment package to the County, was being projected for next
year, with interest being added to the construction cost, as requested
by Mr. Birken, which has been divided over a five-year pay -back period.
Mr. Nolan advised that while the items appear in the Capital Improvement
Plan, it is not the intention to finance them out of bond revenues.
Mr. Nolan additionally advised that Commercial Boulevard west is that
portion between 64th Avenue and the Turnpike.
The next line item, of Plant Modifications, is the work to be undertaken
at the Sewage Treatment Plant, which would be installing flow -control
items, and is $50,000.00 that will be paid this year. Again, he said,
it is for purposes of indicating to prospective bond buyers, as to an
interest in the system, with improvements being made.
Under the next heading of General, the item of vehicle acquisition is
for $50,000.00 in 1981, which consideration was for a substantial up-
grade of the vehicular fleet that exists.
Building Modification was the next line item, for $100,000.00, with a
complete total of the Capital Improvement Plan; revealing that $95,000.00
was being expended during the Fiscal Year 1980; projecting $585,000.00
in 1981, $732,000.00 in 1982; with $137,000.00 for the succeeding three
years.
Mr. Nolan indicated that the next group of numbers represented where
the funds were being obtained, for such improvements, with the first
line being Bond Proceeds, which is for $385,000.00 in 1981, and $195,000
in 1981, will come out of Renewal and Replacement. The items comprising
the $195,000.00 in Fiscal Year 1981, he said,are $100,000.00 for building
modifications; $37,000.00 pay -back to the County for line relocation
on West Commercial Boulevard, and $58,000.00 for line relocation in
East Commercial Boulevard. Also, he said, in 1982, the bond proceeds
would pay the $595,000.00 of capital improvements; with the Renewal and
Replacement Fund contributing $137,000.00. He additionally stated that
$137,000.00 represents payment back to the County for McNab Road,and Com-
mercial Boulevard East and West. He felt that all of the capital improve-
ments were being shown, that could be foreseen between the present time
and 1985; also demonstrating to prospective bond buyers that the City
has an interest in the system, and was putting monies back into the sys-
tem.
The total amount to come out of Bond Proceeds, he said, was $980,000.00;
with the total amount of system revenues, being $838,000.00.
C/M Disraelly inquired as to vehicle acquisition, and whether this was
for replacement of the antiquated vehicles in one year, to which Mr.Nolan
responded that consideration was for replacement of approximately 50%
of the fleet in the first year; and 25% of those remaining, would be
replaced in the next two succeeding years.
C/M Disraelly also inquired as to vehicle acquisition for 1982, 1983 and
1984, to which Mr. Nolan said this was an oversight on his part, but
should have been entered, and also shown as coming from Renewal and
Replacement. Mr. Nolan said that from a practical standpoint, every-
thing that comes out of revenues, Renewal and Replacement, is subject
to budgetary consideration at the time the system budget is approved.
Mr. Nolan reiterated that attempts were being made for changes that are
required, but the question arose as to striking the $100,000.00 com-
pletely. He said regardless of it being shown, it is still considered
every year, as a budget item, when the Utility Systems budget is ad-
dressed. Mr. Nolan explained that it is shown to demonstrate the major
Capital Improvements that the system will be able to support on its own,
without consideration of bond financing. He additionally stated that
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it was customary to show it in this manner.
. Nolan the page _. s
Projected Revenues . enses.
Healsostated that thesystemRevenues andExpensesfromaE T1980 through
1984, were readdressed, and 1985 was added; with consideration to show
the first five years of operation after the bond sale. The bottom of
the page, he said, in hand-written form, has projections made on Water
and Wastewater Revenues, which changes the figures in the upper right-
hand corner; and also includes Miscellaneous Income and Interest Income,
with totals in each of the six years shown. This commences in 1980
at $3,900,000.00, and going through $4,720,000.00 by the year 1985.
He said that the operating expenses were revised, with Steve Wood's
assistance, and indicates such expense for the year 1980, to be
$1,912,000.00, which will progressively increase through 1985, to
$3,294,000.00.
Mr. Nolan stated that the system revenues for this year, is shown to be
$2,002,000.00, with a decrease for next year to $1,920,000.00; and a
progressive decrease in net system revenues, to $1,478,000.00 in the
year 1985. He also indicated that First Boston provided an amortization
schedule, or a listing of debt service, which is required for the first
five years of operation, after the sale of the bonds. He felt this
schedule was predicated on an 8.5% interest rate.
Mr. Nolan said that the first year indicates interest on the bond issue,
with no pay -back of principal, but the second year begins the pay -back,
and will continue through the life of the issue. The coverage factor
is the following line, and is a division of the debt service into the
line captioned "Net"; with the coverage being 1.7 X debt service, and
decreases through 1984, where it is 1.15 X net. By subtracting the
debt service from the net, the balance is obtained;which are the monies
left to the system, after payment of debt service. This line, he said,
begins in 1981 at $791,000.00, and decreases across the page to
$191,000.00 in the year 1985. Mr. Nolan further indicated that the
bottom on the previous table, did show that certain dollars would come
from Renewal and Replacement or the bond issue itself, and are the same
numbers.
He said that the revenues that are generated through water and sewer
customers, have been projected, using the existing rate structure, and
using a system growth from between 1980 and 1981, of 650 customers;
between 1981 and 1982, 600 customers; between 1982 and 1983, 500 cus-
tomers; between 1983 and 1984, 500 customers; 1984 and 1985, 500 cus-
tomers. This, he indicated, is considered to be a very conservative
growth rate, and, debt service coverage is met, with the existing rate
structure and projected growth pattern. If the growth rate is not ex-
ceeded, then the City will be faced with a 4% rate increase in the year
1985, he stated. The previous report, he said, did note that a 3.2%
rate increase was needed in the year 1982.
Mr. Nolan further stated that the last table which was printed on the top
right-hand corner of the page, is predicated on a bond issue of
$15,000,000.00, an interest rate of 7 1/20, and a coverage factor of
1.3. He also noted that the table at the bottom of the page is predica-
ted on a $14,000,000.00 bond issue, at an 8 1/2% interest rate, and
1.15 coverage factor, at a minimum. He also said that the growth of
the projected system, was residential.
Mr. Birken felt that Council would be interested in whether 130 coverage
and 7 1/2o, would represent higher or lower rates to the customers
monthly, than 115 or 120% coverage at 8 1/2%.
Richard Tilghman of First Boston Corporation, said that assuming a
$14,000,000.00 bond issue, which would provide all the necessary funds,
and a 7 1/2% borrowing cost, the annual debt service would be approxi-
mately $1,200,000.00 X 130%, which would have to be earned, would re-
quire revenues of $1,560,000.00 per year. Also, he said, $14,000,000.00
at 8 1/2%, would require annual debt service of $1,290,000.00. It was
further noted that 120% X that number, would be approximately $1,548,000,
which compares to $1,560,000.00, and is 1% plus or minus, on the assump-
tion of an 8 1/2% borrowing cost at 120% coverage.
Mr. Tilghman said that 115% coverage, at 8 1/2%, for $14,000,000.00,
would be an annual debt service requirement of $1,290,000.00 X 115%,
and equals $1,483,000.00 in annual revenues, which is required to comply
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with the covenants, and is approximately 5% below the $1,560,000.00.
He further added that he has worked on other water and sewer financings
in Florida, that have had coverage as low as 110%.
He said the Consulting Engineers were advised that it is conceivable,
in their opinion, that it would be possible to reduce the coverage
requirement to 115% from 120%, and not materially affect the rating
or the marketability of the City's bonds. Mr. Tilghman said there is
a six (6) months record of operating history, which has been very good,
and is the net revenue line, and is the basis for the coverage.
Mr. Tilghman reiterated that the numbers reflect the projection on a
nominal growth rate, which averages out at 550 customers per year, for
the five-year period. The Land Use Plan, he said, discussed 915 units
per year. He also stated that the system revenues were in excess of 1.3
in the first year, and the second year was 1.28, and the following year
it is 1.23. The only year that it gets down to 1.15, by itself, he
said, is 1984. He additionally stated that the last projections that
were made, it was suggested, if the growth went, as predicted, the rate
increase would have been necessary in 1982, but on the same basis, it
would now be 1983. Mr. Tilghman felt that the system will carry itself
one year further, before the rate increase has to be anticipated.
V/M Massaro inquired as to the cost for paying 8 1/2%, as compared to
7 1/2%, to which Mr. Tilghman replied would be represented by the
annual debt service, and would be approximately $1,200,000.00 at 7 1/2%,
and $1,290,000.00, and felt it would be approximately $100,000.00 per
year. He said that at 30 years, it would be $3,000,000.00 more paid
at 8 1/2 0 .
Mr. Tilghman advised that in order to provide financing at 8 1/2%,
it would be necessary to pay $100,000.00 more in debt service. In order
to get to the effect on the City and its consumers, it would be neces-
sary to move -up to that net revenue line, to find out the amount of
revenues to be generated. He said that even the annual debt service
is higher at 8 1/2%, as clearly indicated, the requirements to generate
revenues from the users of the system, is lower, because of the ability
to adjust the coverage factor.
C/M Disraelly confirmed the fact that 7 1/2o at 130, would generate
1.56, and if it was 8 1/2%, at 120 coverage, the generation would
Tape have to be 1.548; with 8 1/2% at 115, would generate 1.483. He con -
Side firmed the fact that the amount to be charged each resident would be
#2 less under the 8 1/2% at 115.
Mr. Tilghman said it would amount to $77,000.00 less in net revenues
per year, but the entire package should be reviewed, in order to de-
termine the effect on the consumers.
C/W Kelch inquired as to the change -over to the County system in 1983.
Mr. Nolan advised that the system has been expanded as a function of
land development, and will continue in this manner. He said a provi-
sion was provided on page 38 of the report, as to Item #2, which dis-
cusses inflation and extraordinary increases in chemicals, with ranges
from 3% to 15% which have been used, to project expenses for individual
items.
Leo Platz inquired as to the bond interest and the amortization of
the bonds, and whether $14,000,000.00 would still be owed at the end
of the 30 year period.
Mr. Nolan said that the debt service portion reflects Fiscal Year 1981,
as merely being an interest payment. The actual amortization of the
loan, would begin in 1982, with full interest and principal, and would
cancel out at the end of 30 years.
Mr. Tilghman responded that the structure of the financing was intended
to currently be serial and term bonds, which would be approximately 10
to 15 years of serial bonds; and a term bond in 30 years, amortizing
from the 16th through the 30th year. The 7 1/2% and 8 1/2% is an ap-
proximate borrowing cost, he said, and the debt service numbers repre-
sented estimated debt service level, which would fully provide for the
payment of serial and term bonds within the 30 year period. At the end
of the 30 year period, he stated, there would be no bonds outstanding.
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He further indicated that selling the bonds was included in sizing
the bond issue, and by amortizing the bonds, it has been provided;
with inclusion of issuance and borrowing costs, and compensation to
the underwriters, will be paid out of bond proceeds,for the amount of
bonds to be sold. It will be repaid each year, he said, in terms of
paying off all the bonds over the 30 year period. He further stated
that it resembles a mortgage, because it indicates a monthly or annual
amortization for the pay-off, over the period of the mortgage, but
the principal is not broken-down for every payment or each year. It
is computed for distribution during the tax period, he said.
Alan Bernstein on the Utilities Committee of the Presidents Council,
said that his old-fashioned arithmetic indicates that $117,000.00
of additional monies are being paid each year in debt service, on 8 1/2%.
He said this figure appeared to be close to the figure presented by
the Bond Counsel. He did not understand how a savings could be effected
to the people, at this level. He felt that if it was money in the bank,
it should earn money for the City, because his arithmetic indicates
a difference of $118,000.00 per year.
Mr. Bernstein referred to page 19 of the Purchase Agreement, and quoted
various portions of this section. He felt that the agreement gives
the City the right to demand that Marmon take $11,000,000.00 of the bonds
at 7 1/2%, and was the duty of the Council to effect this, or to permit
Marmon the opportunity to take the step. He reiterated that $117,000.00
of the peoples money should not be given away year -after -year.
C/M Disraelly inquired of Mr. Nolan, as to the route of 130%, with all
the funds being generated, and whether the monies would "sit" there?
And,what is accomplished with the prior years, after the bonds have
been paid -off for the first year, he asked?
Mr. Nolan said that in some instances it might sit in the bank, because
there is a provision in the bond resolution, which provides for funds
to be removed for the Utility, which is called "In Lieu of Tax Funds",
and is a pre -determined maximum amount.
Mr. Tilghman said that $1,200,000.00 was being paid --off, and $360,000.00
was being put in the bank,with $1,560,000.00 being generated for the
second year. In the legal documents which were drafted for the financ-
ing, he said, there were a series of deposits to various funds, in a
specific order, which is generally to first pay principal and interest,
and then to go into the Renewal and Replacement fund, as necessary.
There is also a bottom fund, he said, which is called the General
Reserve Fund, and the monies not required for the other fund, that flows
down each month, does end -up in the General Reserve Fund. Mr.Tilghman
indicated that at the end of the year, the total is $300,000.00 in that
Fund.
This Fund can be used for capital improvements to the system, and for
paying -off debts that might be incurred, that are subordinate to the
bonds; or, for the purchase of bonds. He reiterated that if it ends
up in the General Reserve Fund, a benefit can be achieved, by 1) using
it for capital improvements, which would mean not borrowing it, or 2)
to take the $300,000.00 and purchase bonds in the open market at what-
ever price is available, and thereby reduce next year's debt service.
Mr.. Tilghman said there is use for the excess monies, by starting with
Net Revenues of $1,560,000.00; with the first use being payment of debt
service, which is $1,200,000.00. The next use, he said, is to pay into
the Renewal and Replacement Fund, which is the account from which annual
Capital Expenditures are provided for. After the Renewal and Replace-
ment Fund, he said, some of the monies have to be deposited to "In Lieu
of Payment Fund", which represents property taxes that TUI would have
paid. Thereafter, it goes to the General Reserve Fund, and any excess
monies that are not required to provide for the other items, it will
be left in the General Reserve Fund, whether it is $300,Q00.00 or
$150,000.00.
C/M Disraelly confirmed the fact that the monies could be used to reduce
rates rather than increase the rates by 1985.
Mr. Platz assumed that the bonds were callable, if there is a call
schedule, and if they are serial bonds, then every year, whatever the
number is, would be due; with such a provision in the debt service.
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He also said that while a straight --line is indicated on the outlay
of the money, a declining --line will be indicated on the amount of
the outstanding debt. The interest will be higher in the first ten
years, and, thereafter, more money will be paid -off on principal, and
less on interest.
Mr. Bernstein said that $14,000,000.00 of bonds were to be issued, of
which $11,000,000.00 is required for Marmon, and the other $3,000,000.00
has other uses, including a variety of capital improvements that were
to be made in the plant, over the next three or four years. He felt
that the use of the excess money could be properly applied to the
purchase of those capital improvements, and after review of the entire
picture, the issue of $14,000,000.00 in bonds might not be necessary,
at 7 1/2%, but promote $500,000.00 in bonds, which would reduce the
debt service.
C/M Disraelly referred to page 5, as to the pay-off by year and amount.
Mr. Birken said that due to the discussion expressed by Council, on
Wednesday, 7/9/80, with no interest in Bond Anticipation Notes, there
were two avenues to pursue; namely, 1) to endeavor to accept the offer
that Marmon made, relating to October 15, 1979, which would be a step
down the road, Also,the Official Statement to be completed, and the
rating made as quickly as possible, which are pre -requisites to
Marmon's acceptance of the bonds. He further stated that the second
area would be to not consider the Marmon option, and sell the bonds
in the open market, close, and make refunds quickly; also, holding
the rates where they are, for the foreseeable future.
He said that a calendar has been prepared in order to sell the bonds
on July 23rd, 1980, if option #2 was to be followed. Mr. Birken also
noted that Mr. Tilghman has expressed the fact that Council would
endeavor to have the bonds sold later, in order to permit First Boston
the opportunity to market the bonds, which might allow a better interest
rate.
Mr. Birken felt that Mr. Pietrzak could discuss Option 1, and Option
2 could be discussed by Mr. Tilghman. Ile felt that making an initial
determination to proceed under Option 1, does not preclude dovetailing
into Option 2, if Council desired, in the future. Ile responded to a
question by C/W Kelch, in stating that the July 23rd deadline exists
on the $11,000,000.00, but reserve funds need to be funded under the
resolution, with costs involved.
Robert Pietrzak, with the firm of Brown, Wood, Ivey, Mitchell and
Petty, in New York, said that he was a specialist in litigation for
the firm, and has worked on the validation of these bonds, which was
recently approved by the Supreme Court of the State of Florida. The
City Attorney has requested his review of the documents; namely, the
Purchase Agreement and the Option Letter of October 15th, as to the
litigation involved.
He assumed that the first option will be taken, with a letter from
Council, accepting the option of Marmon, prior to July 23rd, in order
Tape to meet the deadline, and avoid the breach of the contract by the City.
Side This letter, he said, may cause Marmon to initiate suit, in a form of
#3 a Declaratory Judgment Action, or Specific Performance Action. The
intent, he stated, would be to get a judicial determination of "who
owes who, what", under the Purchase Agreement and the Option Agreement.
If Marmon initiates the litigation themselves, they could hypothetically
bring it to Chicago, or wherever they want. He was only addressing
some of the possibilities that might occur. Mr. Pietrzak also said
that should the City bring'an action against Marmon, to force them to
take the bonds, or pay damages, with respect to their failure to take
the bonds, such action could be brought to Florida, because of the
activities of doing business, by Tamarac Utilities, and would be subject
to the jurisdictions of the Court.
Since the parent group Marmon is a non --resident of the State of Florida,
he said it was possible for them to seek to have the action removed
to the Federal Court, on the versity of citizenship. Once it is re-
moved to Federal Court, and brought to Florida, it could be transferred
to somewhere else in the Country.
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Mr. Pietrzak said that in connection with either an action by the City,
which Marmon could put in a claim for damages they would be seeking,
or declaratory relief. In connection with such an action, it would
be possible for Marmon to attempt to obtain action to enjoin an offer
by the City of the bonds in the public market. However, he said, once
Marmon has breached its contract, by not taking the bonds at 7 1/2%,
the City could take the position to go out and sell at 8 1/2%. It is
possible, he said, but could not speak for the likelihood that Marmon
would attempt to enjoin such a bond offering, or otherwise impede it.
Additionally, he said, it is possible that Marmon could attempt to
attach or tie-up the assets of the City. Particularly, he stated, if
the bond offering did go out at 8 1/2%, then Marmon might attempt to
tie-up the $11,000,000.00, including the $4,000,000.00 reserve for
rebates to customers, until the action was finished, so the money will
be available.
Mr. Pietrzak related to the merits and issues of the litigation, by
stating that upon reading the Purchase Agreement and the Option Letter,
that if Marmon could be forced to take the securities, it has to do
with the 7 1/2%. This would involve an offer of 130% reserve, and
insurance on the deal. He said that the major question is going to
be, what the Option Letter of October 15th means, which reads, "that
Marmon offers to buy the bonds, if they cannot be marketed by the
City, within one year from the date of the letter." It does not state,
he said, what cannot be marketed means. The question, he said, for
the Court, is to determine "what cannot be marketed" indicates. He
felt that the City has an argument on this.
He said that if Marmon refuses to take the offer, when it is accepted,
they will say that marketability means unmarketable, under any circum-
stances. It was his understanding that they were thinking of a situa-
tion where validation could not be completed prior to the October 15,
1980 deadline, and would be there argument that these bonds are market-
able at 8 1/2%. Also, that there is nothing in the agreement which
requires marketability at 7 1/2%.
Mr. Pietrzak said the bonds have been validated, and are clearly
marketable, in a broad sense. He said that a Court looks at such an
agreement, initially, and attempts to determine what a term means.
He also stated there are two basic sources of information; 1) the con-
flict of the parties between themselves, and the usage they gave to
the term, which is marketability, and 2) the usage in the industry.
He said that marketability aspect was used in several different re-
spects, and was with respect to validation. In October of 1979, the
Statutes of the State of Florida appeared to limit the percentage of
interest that could be paid by a municipality, on the bond offering,
to 7 1/2%. The Statute, since then, he said has been amended to have
no limit, as to the amount of interest that could be charged. A
third meaning, he stated, that the evidence shows for this term, that
could be viewed by a Court, that the parties were thinking that the
offering had to go with 7 1/20, and was the one they suggested most
strongly.
The bottom line of the litigation, he said, was to be the meaning of
the term, and his suggestion is that it would be difficult to predict
whether the Court would accept that position. The consequences, he
said, if the City goes ahead with the litigation, on a potential bond
offering, or on the other terms of the contract; which would mean that
the Council chooses not to meet the 20-day guideline, by July 23rd,
but rather rely on acceptance of the offer from Marmon, it can be anti-
cipated that Marmon will come in, and allege the breach of contract on
the City's part. As a result of that, he said, it will allege that it
has been relieved of any responsibility under the contract. The argu-
ment,he felt, was weak, but not completely undefensible. Also, he
added, that Marmon could allege that the breach has caused certain
damages, and such breach could permit it to tie-up the funds of the
City, until a resolution of the matter can be decided..
Mr. Pietrzak said that the initial danger from sending a letter, at
this time, sometime prior to the 23rd of July, is the question of venue
and the possibility of preliminary injunction against an offering.
He said it was possible for Council to send a letter, but nevertheless,
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to go ahead with the 8 1/2o offering, and to institute the litigation
subsequently, for the difference, between the 7 1/2% and 8 1/2% rate.
It is one of the third --switching gears alternative that Mr. Birken
discussed. Also, he indicated, the negative part of this, and the
money is in the City's pockets, that it may lead the Court to be a
little less sympathetic, then if it has the City waiting to refund
money to its customers.
Again, he said, there is the possibility that even if the offer went
out, and if litigation is going forward, that those funds might be
tied up by injunction or otherwise, so that the payment cannot be made
in any event.
As relates to the potential cost and speed of litigation, he said, it
is possible, in this State, to bring a Declaratory Judgment Action,
which would declare the rights of the party, without having had
a determination of damages initially. The benefits involved, he said,
as provided by the Statutes, indicates that a Declaratory Judgment
Action shall be expedited. Expedition of the action may not be sig-
nificant, because no matter how effectively a Court wishes to expedite
items, it does always take time. Also, once a Declaratory Judgment is
obtained, prior to recovery of damages, or force the offer to be taken,
then additional proceedings have to be instituted. He additionally
noted an alternative to seek specific performance of the contract,
which would promote Court procedure, and immediately demand compliance
with the agreement; but added that litigation is a lengthy process.
Mr. Tilghman indicated that he read Mr. Birken's memo, and the long-
term bond approach, which Council selected at their 7/9/80 meeting,
was preferable to short-term bonds.
C/M Zemel said that the referendum question was approved by the people,
as to purchasing the Utility, was due to assurance in writing by the
City Council, that the rate would be 7 1/2%.
Mr. Tilghman advised that the rate would be approximately 8 1/4% to
8 1/2%, and was the general level of the market. He did indicate that
there were some additional costs, and they have developed a schedule
which will provide for accomplishing the requirements of the Purchase
Agreement by July 23, 1980, as noted in a letter to the Mayor, by
Marmon. In meeting this schedule, he said, there was not adequate
time to have a public offering, and preparation of the documents to be
submitted and acceptable to Marmon; which is required under the Pur-
chase Agreement, on page 19.
He said that the first order of business is for a meeting in New York
City, on Sunday, July 13th, 1980, for review of the documentation,
and then establish a schedule for the July 23rd, 1980 sale. Addi-
tionally, as noted by Mr. Birken, that there is not sufficient time
to market the bonds, with more than two days for the canvassing of
potential purchasers, he felt the cost of printing, would involve
$3,000 to $5,000, for submission on Sunday. This, he said, would be
for the purpose of meeting the July 23rd schedule.
C/M Disraelly inquired as to the City following the Marmon route, and
$3,000,000.00 had to be sold, to which Mr. Tilghman stated that there
was concern about funding the reserve fund, which was a cushion fund
to provide for revenues, if it does not come up in the future.
C/M Disraelly said that it was imputed in the original figures, to
cover $14,000,000.00, and then 130% of the $3,000,000.00 would still
be intact.- He again inquired as to the funding of the $3,000,000.00
which would be essential, if Marmon took the $11,000,000.00 in bonds.
Mr. Tilghman responded that the other $3,000,000.00 represented a
deposit to the Construction Fund of approximately $980,000.00; also,
a deposit to this reserve account, of approximately $1,290,000.00, or
$1,200,000.00, which depends on the approach being taken. The payment
of insurance and issuance expenses are involved, he stated.
The Construction Fund, Mr. Tilghman said, could be accumulated over a
period of years, but there were dangers involved, because the expendi-
tures could not be made immediately, in order to wait for the revenues,
to earn enough money for the capital expenditures. This would require
postponement of the capital expenditures slightly, he stated, in order
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to await the revenues. He said that the Debt Service Reserve Fund
could be provided for accumulation over a period of time, but such
a provision would have to be negotiated with Marmon, because they are
required to approve the bond resolution. Payment of expenses and in-
surance could be taken from revenues, he indicated.
Mr. Tilghman said that it was necessary for discussion with the lawyers,
as to the possibility of a bond issue; the proceeds of which are only
going to pay reserve funds and construction costs. He felt it was a
legal question, but could be resolved.
C/M Disraelly confirmed the fact that the $3,000,000.00 is not needed
immediately, if a portion is going .into the Reserve Fund; and the time
element involved for accumulation of the funds in the next few years.
Mr. Tilghman said that the integrity of the system should be upper-
most, because the expenditures cannot be postponed; also, to not have
maintenance go out -of -sight, because of out -dating. He additionally
stated that as relates to the Debt Service Reserve Fund, it was his
recommendation that if bonds are offered publicly, it is necessary to
fund this out of bond proceeds. But, if something can be negotiated
with Marmon, he stated, there was nothing that could be indicated on
these particular points.
Mr. Tilghman felt that a special letter could be drafted for the re-
quirements of the litigation, but is included in his Status Reports,
as to the interest rates for comparable security. He reiterated that
the .interest rate for the type of bonds to be offered would be at 8 1/4%
or 8 1/2% today, and by inference, they could not be sold at 7 1/2%.
C/M Disraelly inquired of Mr. Nolan, as to living without the
$3,000,000.00 for a time, to which Mr. Nolan responded that his portion
was the Construction Fund, and from a practical standpoint, one of the
items in the Construction Budget, is $610,000.00 for a remote ground
storage tank, and the Health Department is on record of wanting it
built at once. It was, he said, indicated to them that it would be
built through the Bond Process.
Mr. Nolan advised that the Health Department has a series of letters
back to TUI, and discussions were held, in terms of showing the City's
intent to go forward with the construction of the remote storage tank.
The high service main inter -connect is $120,000.00, and another item
of concern is in the waste water, and is $200,000.00 for the comple-
tion of the inter -connect.
C/M Disraelly inquired about the City borrowing $1,000,000.00 for
purposes of loaning this to the Utility, to which Mr. Birken responded
that the City could lend money to the Utility, if it is paid back in
the same fiscal year, which is the only thing permissible.
Mayor Falck turned the gavel over to the Vice -Mayor, and MOVED to
proceed to finalize the Financial Statement, and the Marmon Company
be notified prior to July 23, 1980; that we expect them to honor
their Purchase Agreement, to the extent of $11,000,000.00, at a rate
of 7 1/2% interest, and that we determine the amount of additional
bonds needed to handle the capital improvements over the next two (2)
years, so that these bonds can be issued at a time designated by the
Council. And, further, that Council from time to time, determine
additional issues as may be required, not to exceed a total of
$15,000,000.00, as approved by the public at the referendum. He
further MOVED that the City Attorney be instructed to prepare the
necessary documents effectively implementing this motion.
Mr. Birken felt there were three additional items to be indicated;
1) rating authorization, 2) authorization for travel to New York,
in order to get the Official Statement finalized, for rating by the
appropriate City Officials, including the Mayor, and 3)the printing
matter has to be addressed by Council, either in a separate motion,
or this motion.
V/M Massaro inquired about the time element involved, and if it was
reasonable to wait until correspondence has been returned from the
Marmon Company, prior to AMBAC or MBIA, due to the difference in
cost.
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Mr. Tilghman advised that the MBIA insurance has expired, but has
applied within the period for a new commitment from MBIA. A letter
has not yet been received, he said, and the fee has not been deter-
mined.
Mayor Falck INCLUDED the additional items in his MOTION, as recom-
mended by the City Attorney. C/M Disraelly SECONDED THE MOTION,
and concurred with the additional recommendation of the City Attorney.
VOTE: ALL VOTED AYE.
MAYOR FALCK CALLED FOR A FIVE-MINUTE RECESS.
Mr. Birken said that he wanted to verify a form of an agreement with
First Boston Corporation, and that they do not consider the action
of accepting Marmon's offer, to be a breach of that agreement.
Per. Tilghman said that the Purchase Agreement existed at the time
we entered into the contract, and they were aware of the options,
and there would be no problem with the breach of the contract.
Mr. Birken suggested that Council authorize an emergency expenditure
for the printing of the Official Statement, to which Mr. Tilghman
stated that a particular amount should not be included, because this
figure is an estimate, but a bill will be submitted.
C/M Zemel MOVED that authorization be made for the expenditure
up to $10,000.00, in accordance with the terms of the letter, and
that the City Manager should have the authority to determine the
amount of Official Statements that are required -to be printed by
Sorg Printing Company in New York. The emergency is due to the
short time frame which the City has under its Purchase and Sale
Agreement of July 31, 1980, to sell and deliver bonds, in accordance
with that agreement, making formal competitive bidding, with adver-
tising impossible. C/M Disraelly SECONDED THE MOTION.
VOTE: ALL VOTED AYE.
28. Land Section 7 - Discussion and possible action concerning continued
work of Consulting Engineer on a master plan for this area.
SYNOPSIS OF ACTION: Removed from the table;
Tony Nolan authorized to proceed with lake/canal sketch;
also contacting SFWMD; estimated cost not to exceed $4,953.00.
V/M Massaro MOVED that the item regarding the drainage in Land Section
7; the proposal from Williams, Hatfield & Stoner, which was tabled,
be REMOVED FROM THE TABLE at this time, and C/P2 Disraelly SECONDED.
VOTE: ALL VOTED AYE.
V/M Massaro said they were eager to get the work under way, relating.
to the comprehensive plan for the drainage in Land Section 7, and its
completion. She advised that Mr. Nolan has prepared an estimated fee,
which was submitted to Council, in the amount of $4,953.00. This price,
she said, includes the plan and submittal of an application for a water
management permit, which covers Land Section 7.
The Vice -Mayor indicated the completion date has been designated by
Mr. Nolan, as August 15th.
Mr. Nolan advised that the master plan would be predicated on the land
uses delineated in the City's Comprehensive Land Use Plan, in response
to C/M Disraelly's inquiry as to the zonings having been approved.
C/M Disraelly also inquired as to assessment districts being established
to cover the cost of ultimately draining and dredging, and building
canals; to which Mr. Nolan replied in the affirmative.
V/M Massaro felt that the general thought is, as the work progresses,
the various individuals desiring to develop the area, would institute
these improvements.
Mr. Birken inquired about the funding of such projects, to which
Mr. Nolan responded that it was not anticipated, outside of the assess-
ment approach.
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He felt that it might be addressed subsequent to the adoption of the
plan, and which refers to implementation. Mr. Nolan said that his
letter relates to recovery of the engineering costs involved, to the
beneficiaries.
C/W Kelch referenced Mr. Nolan's letter of 5/21, which was a general
letter, and read a portion that discussed the matter of functioning
on the individual projects, as submitted; which was based on one owner-
ship.
Mr. Nolan advised that the ownership was essentially controlled by one
party in all the land sections, but was fragmented ownership in Land
Section 7; with the feeling that the City take the initiative and do
the planning for the canal network.
C/W Kelch confirmed the fact that authorization this day would be for
the preparation of the plan itself, and no matter addressed as to its
completion and the augmentation plan.
Mr. Nolan added that the South Florida Water Management District
criteria involves each of the land sections outfalls into a district
controlled canal, and they would have to abide by the amount of water
permitted to be removed from a land section at a given period of time.
The balance of it, he said, has to be contained on sight. This parti-
cular land section drains to the south, he stated, into the C-13 basin,
with a different set of outfall requirements for the C-13.canal.
Mr. Nolan advised that the land was originally part of the Florida food -
lands plat, and rights -of --way have been delineated on the plat, which
is for public use. Historically, he said, the land use dictates to
the extent of where the canals are most appropriately placed, and,by
fracturing ownerships and render portions of people's property useless,
then the value of the land being taken for canal rights -of -way does
increase. He additionally stated that the completion of the canal
network and the plan,should remain a function of the development of
the property, but all precautions should be taken at this time, to
insure the ultimate development being done properly.
V/M Massaro MOVED that Mr. Nolan of Williams, Hatfield & Stoner, be
authorized to proceed with the tentative lake/canal system sketch,
and to also contact the South Florida Water Management District, in
order that the plan can be made in conjunction with their requirements;
at an estimated cost to not exceed $4,953.00. C/M Zemel SECONDED.
VOTE: ALL VOTED AYE.
V/M Massaro anticipated that the plan would be prepared by August 15th,
to which Mr. Nolan stated that he would do his best.
MEETING ADJOURNED.
Mayo
ATTEST:
This public document was promulgated at a cost of $�742.5. ,�Jor so3 -e Y"
per copy, to inform the general public and public officers and employees
about recent opinions and considerations by the City Council of the City
of Tamarac.
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CITY COUNCIL ONSa
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