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HomeMy WebLinkAbout12-14-1981 MinutesMINUTES PASCO CITY COUNCIL SPECIAL MEETING DECEMBER 14, 1981 CALL TO ORDER: Meeting called to order at 8:00 P.M. by Mayor E. A. Snider. ROLL CALL: By City Manager. Councilmen present were: S. K. Adams, E. M. Morgan, Charles Grigg, Ira Schmidt, E. A. Snider and Joe Jackson. Councilwoman Beverly Green was absent from the meeting. Also present were: Lee Kraft, City Manager; Greg Rubstello, City Attorney; Diane Dolan, Finance Director; Jim Ajax, City Engineer; Dick Erickson, Parks and Recreation Director; Gary Crutchfield, City Planner and Ken Neilsen, Data Processing Supervisor/Office Manager. VISITORS: There were no visitors wishing to address the Council at this time. PUBLIC HEARING: TURNBACK AGREEMENT - HORIZON ESTATES: Mr. Jim Ajax, City Engineer, opened the meeting by stating: Using the vicinity map in the agenda package, he pointed out to the Council that the North and East section of the present city limits lie fairly close to the by-pass highway. This property is out- side the present city limits of the City of Pasco but within the City of Pasco's water service area. That water service area was established in approximately 1977 and was adopted by the Benton-Franklin Governmental Conference. Through the rules that the Conference has promulgated specifically relat- ing to utilities, one of those rules is that whenever a utility develops within one of the cities of Pasco, Kennewick, Richland or West Richland's service area, that that system should be designed to the standards of the utility that potentially and ultimately may take over that facility to make sure that it is compatible as long as it is within the service area. In the agenda package is a letter from the Benton-Franklin Health Department which basically indicates that the Health Department has approved the proposed well site for this development, but points out that the subdivision is within the City of Pasco's water service area. The system should be designed in accordance with the City of Pasco's standards and that an agreement should be entered into, if possible, between the City and the developer providing for the ultimate ownership and management of the water system. If Pasco declines to enter into an agreement similar to the above, the establishment of this water system will be subject to the approval of the Governmental Conference in accordance with the procedures of the management element. If the devel- oper in Franklin County or Benton County cannot come to terms with the utility who ultimately plans to serve the area, then the Conference itself has adopted standards that must be met to protect the public interest as far as water systems being established. The developer's engineer has provided a proposed agreement and I think it basically covers the areas that the City of Pasco should properly be concerned with. On my agenda report under item 4, I did list six (6) specific items which correspond to terms in the proposed agreement from the developer which I believe Important to protect the City's best interest. It is my understanding that five (5) of the six (6) conditions are acceptable to the developer. The one that the developer has engineered and would like to talk to the Council about is item No. 7, which includes the distribution system (the mains in the street; the source, which is the well; and the storage, SPECIAL MEETING DECEMBER 14, 1981 which will be a tank of some type) to remain under the owner- ship of the developer for twenty (20) years. That is to say, the City would not have a right to take it over for a period of twenty (20) years. My suggestion is that we should have a right to take over the distribution system at any point in time. The basis of my recommendation is that when a developer puts in a development system within the city limits, he puts in the whole distribution system and dedicates that to the City immediately. He recoups his cost for the distribution system by including that cost in the sale price of his lots. I suggested if we took over the system in a period of less than ten (10) years, then put a well and storage facility for each year, less than ten (10) years of existence of the system that we took it over, we pay to the developer ten percent (10%) per year of the capital cost of the well and the III storage facility, but nothing for distribution. Mr. Ajax then introduced Mr. Larry Gaddis of G & G Engineering representing the developer. Mr. Gaddis stated they had no problem with items No. 1, 2, 4, 5 and 6 as proposed by the City. The only one we do have a discrepancy is with item No. 7. We had proposed the twenty (20) year period for the possible takeover because we hope to anticipate getting our cost back for the well and for the storage facilities by a fee that is prorated to the homeowners in their monthly or annual service fee for the water, like a monthly billing. The twenty (20) years are hard to project. We are looking at a total of eighty (80) lots. The first year we hope to sell ten (10) or more. After ten (10) years we could possibly sell half. We propose that after twenty (20) years projected cost for development, we are to a point where we were at the beginning of the twenty (20) year period and in the end, we are finally in a position where we recouped all our initial costs for the well, the pump and the storage and this means that Instead of a ten (10) year agreement, that we could make it a twenty (20) year agreement. Takeover could be at any time, and Instead of 1/10th per year of the balance of the twenty (20) years to pay off, it would be 1/20th, so in that case if the City decided to take over in fifteen (15) years, we would save 1/4 of the cost put out by the developer for the well and storage. We are guessing on how fast the wells will sell, what the final cost will be and what our annual operation and maintenance cost is, and to our best guess at the present time we are trying to make it economical for people to buy the lots and also to leave them with the element of a reasonable water fee. We feel very strongly that the twenty (20) year period is very essential for this agreement. Mayor Snider asked Mr. Gaddis if they needed to amortize their cost over a twenty (20) year period rather than a ten (10) year period. Mr. Gaddis stated that if you look at the cost of the distribution cost versus the well and the storage, you have about 1/3 in the lines and 2/3 in the well and storage facilities, and if you tried to put that total cost in the loss up front, you would be sitting there with eighty (80) lots twenty (20) years from now. You wouldn't sell a nickle's worth of them. If you can make the lots a reasonable price the first time and try to regain your expenses over a 15-20 year period, it makes the numbers a little bit better. Mayor Snider then asked whether this is going to be a standard subdivision or a mobile home subdivision' Mr. Gaddis's reply was that it is proposed at 1/2 acre lots and it is zoned in the county for RMH1 which is Rural Mobile Homes. We are allowing either mobile homes or stick built houses. Mr. Grigg asked if we accept the twenty (20) years at a five percent (5%) figure, are you going to charge for the distri- bution lots or is the price to be built into the distribution lots? Mr. Gaddis replied, yes, that's correct. 1 I SPECIAL MEETING DECEMBER 14, 1981 Mr. Grigg then asked whether they were going to depreciate at a minimum of probably five (5) years on the pumping facility and probably fifteen (15) years on the storage facility and maybe five (5) on all of them. Mr. Gaddis's reply was that the storage facilities could last indefinitely. Grigg: Well, I would hope they would, but you will be writing those off in a five (5) to fifteen (15) year period. No longer than fifteen (15). You'll recapture that in fifteen (15) years at a maximum. Gaddis: Your first five (5) years of operation, income coming back from the patrons would be paying for your present operation and maintenance cost. It is not until later years that you are paying off the total cost of your storage and pumping facilities. Jackson - addressed to Mr. Ajax: Item No. 7 indicates that the city shall have the right to take over the distribution system at any time. My question is, under what conditions would the City desire to take over the distribution system prior to this period of time? Ajax: Two circumstances. 1) If the area were annexed into the city limits, those residents then become a part of the City, and for some reason, it is inside the city limits and the level of service they are receiving is not satisfactory. You could reach a situation where the residents were coming to you as a City Council and saying, "please take this over. We are not getting good service. The developer who started it is no longer involved, or whatever, and the new person isn't providing good service." 2) There's a possibility that the City might want to connect a present system to the south end of the system and also connect to the north end so water would flow through it to provide water service to a development on the far side of the development, rather than laying mains around it. We were looking at a system prior to negotiating in the hallway that it lookPd like the City would have no right until twenty (20) years had passed. What I'm hearing now is that we would have the right at any point in time so long as we paid five percent (5%) per year. Five percent (5%) per year of his initial capital outlay. That is saying in the sense that we are in the driver's seat. If it is worth it to us, we have something that's fixed at this point in time. Consider how the City twenty (20) years ago existed on West Pasco water. If one looks at their initial cost that number of years ago versus what they are now claiming the system is worth, it would have been very nice to tie something in at five percent (5%) per year, wh a t with inflation and so on. Grigg: Are you saying that this is acceptable to you? Ajax: I think it makes good sense to me. They've certainly shown a lot of movement there. This gives us the option, if it's not worth it to us, they can continue in existence. If it does become worth something to us, we've got a distribution system at no cost, a storage facility at ten (10) years in the future based at today's prices without interest. Grigg: What is the distance to the city limits? Ajax: The city limits would be approximately 1/2 mile. Grigg: It is obviously within the realm in that twenty (20) year period. I doubt if the owners will want to be in the water business. Ajax: It is kind of interesting and speculation on my part but I think a developer going into a development obviously is looking at the dollars going out versus dollars coming in. Ten (10) years down the road it is my opinion that if the developer hasn't sold his lots and made his money by then, he is never going to. After about ten (10) years of owning a water system it is to the point and time where all you're hearing about is the frozen meters and the water that doesn't quite taste right. If the developer wants out of it in ten (10) years, he may change the terms in his favor. Likewise, we set our terms. -3- SPECIAL MEETING DECEMBER 14, 1981 Grigg: Would the developer be Interested in some type of an agreement with an intent to annex should the City ever desire annexation? Gaddis: I would hate to make a commitment for the people who would buy this property. Sterl - addressed to Mr. Ajax: Would you explain item No. 1, and why the fifty (50) years instead of thirty (30)2 Ajax: What prompted me to do that is West Pasco Water Company. I believe it is approaching about 20 years in existence and that is a considerable period of time. We have not yet taken over that system and I didn't feel that it was automatic that the City will have taken over this system in 30 years, and saw no disadvantage to extending the term to 50 years for the City. The terms we are talking about now is modified after 20 years. There would be no cost to the system. We would have the right to take over the system. As the agreement originally proposed, that right would only exist between the 20th and 30th year. What I am suggesting, it would exist between the 20th and 50th year and beyond 50 years, most probably, the value of the system is essentially gone because the materials involved have a useful life that is finite. Sterl: In other words, the City would, in 20 years or before that, take over the system. Ajax: I think what we heard from the developer is somewhat of a compromise. If we take it over in less than 20 years, if it's year one, we pay nothing for distribution, but we pay 100% of the storage and well. If it is the 20th year, we would pay none of the storage and well and that would hold true from the 20th to the 50th year. After 50 years if nothing happened, it would be his system and if the City wanted to take it over, we would start negotiating again. Sterl: Would you explain item No. 5? Ajax: The City of Pasco has a system fee that is on place in our books right now and if anybody develops within the City and connects a water service up, there is an assessment that is made against that property to pay their share of the main facilities of the system, their share of the water plant, their share of the water plant, their share of the main reservoir and so on. How this is written is at such time as the City took it over and it would run with the land, whatever that fee is the property owners of that subdivision would pay the same fee as they would in the city at that point in time. They may well be in the City at that point and time, or there is a possibility they may not be in the City. Mr. Grigg moved to authorize the Mayor to execute an agreement on behalf of the city of Pasco between the City of Pasco and Tr-City Development Corporation which in effect would authorize the Tr-City Development Corporation to construct a water system outside the city limits, however within the City's water service area and at a later date when it becomes practical connect the said system to the City's system. Said system would be turned over to the City under the terms set forth in the agreement amending the ten (10) year term to a five percent (5%) per year on a twenty (20) year basis, including items No. 1 through 7. Seconded by Mr. Schmidt. Motion carried by roll call vote of five (5). Mr. Adams opposed the motion. ADJOURNMENT: Meeting adjourned at 8:36 P.M. E. A. nider, Mayor PASSED and APPROVED thiso2/1 day of -,-a/..-ee..07..e....4.../ , 1981. ells, City Clerk