10/05/2004 Minutes
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OFFICIAL PROCEEDINGS
CITY OF GRAND ISLAND, NEBRASKA
MINUTES OF CITY COUNCIL STUDY SESSION
October 5, 2004
Pursuant to due call and notice thereof, a Study Session of the City Council of the City of Grand
Island, Nebraska was conducted in the Council Chambers of City Hall, 100 East First Street, on
October 5, 2004. Notice of the meeting was given in the Grand Island Independent on September
29, 2004.
Mayor Jay Vavricek called the meeting to order at 7:00 p.m. The following members were
present: Councilmembers Meyer, Whitesides, Pielstick, Gilbert, Nickerson, Cornelius, Pauly,
Hornady, Walker, and Haase. The following City Officials were present: City Administrator
Gary Greer, City Clerk RaNae Edwards, Finance Director David Springer, Public Works
Director Steve Riehle, and City Attorney Doug Walker
RESERVE TIME TO SPEAK ON AGENDA ITEMS: Two individuals reserved time to speak
on agenda items.
MAYOR COMMUNICATION: Mayor Vavricek commented on the Harvest of Harmony Parade
and complemented those people who helped put it on and the people who attended.
Update on 1/2 Cent Sales Tax Projects: Mayor Vavricek commented on meeting with the Hall
County Board of Supervisor's and requesting property for the Law Enforcement Center. Mayor
Vavricek stated that the County Board unanimously approved the donation of 5 acres of property
located east of the city on Highway 30.
City Administrator Gary Greer reported that recently there had been a lot of discussion
concerning the financing strategy of the 1/2 Percent Sales Tax Projects. As usually is the case
most of the time, there was not enough money to accomplish all the projects immediately.
Mentioned was the need to continually prioritize, cost contain, value engineer, justifY expenses,
seek other revenues, and avoid unnecessary costs.
Mr. Greer stated they were finding bid construction costs to be coming in higher due to the many
projects that were in store for the community. It was the City Administration's recommendation
that City Council consider Fire Station #1, the Law Enforcement Center, and the Library
Expansion as top priorities. In order to assure that these facilities moved forward it appeared that
the other proposed sale tax projects needed to be delayed, phased, and/or considered as pay-as-
you-go projects.
Reviewed were the original 1/2 Percent Project Plan and the possible Re-Prioritization of the 1/2
Percent Sales Tax Projects as follows:
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Page 2, City Council Study Session, October 5, 2004
Oril!inal1/2 Percent Project Plan
Financed Projects:
1)
2)
3)
4)
5)
Fire Station #1 Replacement
Fire Training Facility
(Land, Building, Burn Building, Training Tower)
Police/Sheriff Law Enforcement Center
Library Expansion
Aquatics Projects (according to Aquatics plan)
$3,000,000
$4,000,000
$3,000,000
$7,000,000
$3,000,000
Total:
$20,000,000
The aforementioned if amortized for 20 years at 5% would create approximate annual costs of:
$1,593,449.
Annual Cash Projects:
1)
2)
3)
4)
Grand Generation Center Capital Fund
Cornhusker Army Ammunition Recreation Development
Hike/Bike Trail Development
Infrastructure Emergency Funds
$100,000
$125,000
$125,000
$ 56.551
Total:
$406,550
Annual Grand Total:
$2,000,000
Possible Re-Prioritization of 1/2 Percent Sales Tax Projects:
Financed Projects:
1)
2)
3)
Fire Station #1 Replacement
Police/Sheriff Law Enforcement Facility
Library Expansion
$3,000,000
$8,600,000
$7,000,000
Total:
$18,600,000
The aforementioned if amortized for 20 years at 5% would create approximate annual costs of:
$1,492,512.
Councilmember Gilbert questioned the costs for Fire Station #1 since the Law Enforcement
Center came in twice what was estimated. Mr. Greer stated he was confident that we could build
a Fire Station, but it depended on a lot of other things like if we would have to buy land, the type
of station, etc. Also questioned was the delay in the Fire Training Facility. Mr. Greer stated the
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Page 3, City Council Study Session, October 5, 2004
delays would not be significant and that we were working on the Training Facility, but that it
would take some time.
Glendale Reiss, 910 North Boggs commented on concerns about putting the Fire Station on the
back burner. Mr. Greer stated the Fire Station was a high priority and was one of the immediate
projects. Lewis Kent, 624 East Meves asked that the Council hold off on the Law Enforcement
Facility because it was going to cost twice what the City had estimated. He suggested we move
forward with the Fire Station.
Update by Bill Stovall. Hall County Regional Airport for Air Service to the East: Bill Stovall,
Executive Director for Central Nebraska Regional Airport updated the Mayor and City Council
on air service to the east. Chairman Harold Rosenkotter and Vice President Doyle Hulme
representing the Airport Authority Board were present for the meeting.
Reviewed were the Industrial Park Development (Tech Park, Infrastructure, and Long Range
Goals), Aviation Development (A&P School, Avionics, Summer Programs, Air Show, and
Destination Charters), and Geographic Information System. The following projects were
presented:
New Hangar 2003-2004
AlP 25 - Runway 2004-2005
AlP 24 - ARFF Vehicle 2005-2005
$2.3 Million
$7.2 Million
$700,000
2004-2007
Enviommental Impact Study (EIS), Engineer Selection, Design - $1.5 Million - Total
$20 Million
AlP 26 - North Apron Reconstruction 2006 $3.3 Million
Presented was the proposed Mesa Airlines Routing from Denver, Grand Island, Manhattan, and
Kansas City. Projects were mentioned for 1999 - 2005 with $25 Million coming into Grand
Island. The following community economic impacts were mentioned:
14 New Businesses
70+ Employees
Over 300 Employees Total
#3 in Nebraska
Annual Economic Impact $21,139,600
Annual Payroll $6.6 Million
Mr. Stovall commented that the total community economic impact and return on investment
from 1999 - 2007 would be $48 Million.
Presentation of the Electric Utility Economic Study: Utilities Director Gary Mader reported that
the last rate increase in the Electric Department was in 1980. That was due to an unusually stable
period of electric costs including steady city load growth, low inflation rates, and stable fuel
prices nationally, particularly coal and natural gas. But over the last few years, that stable
environment had changed.
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Page 4, City Council Study Session, October 5, 2004
The Electric Utility financial reports had shown a general down trend in the financial position
over the last year with the department's reserves being reduced by 26% from December '02 to
December '03. This was directly attributable to increased energy costs for production, fuel costs,
and purchase power costs. The following indicated the state ofthose factors:
. Delivered coal costs had increased 14% since December '02 and were expected to firm
up at that or a higher level.
. Natural gas prices were extremely volatile but on average, had approximately triple in the
last two years.
. Oil prices had increased sharply and OPEC continued production limits.
As a result of the declining financial condition of the Electric Utility, an economics evaluation
was begun in May, 2004. The firm of Stanley Consultants was commissioned to conduct the
study working closely with Electric Department Staff. The Study concluded that it was necessary
to increase Electric Department revenue to maintain that Department.
Mr. Mader introduced Mary Garrison representing Stanley Consultants, Inc. who presented the
Economic Evaluation and Rate Revision Study.
Ms. Garrison presented the following Overview of Process that had taken place to determine the
need for a rate increase:
1. Financial Forecast with Existing Rates:
a.) Project Annual Revenues
b.) Project Annual Expenses
c.) Project Annual Capital Improvements
d.) Project Debt Service Payments
e.) Compare projected Revenues & Expenses
f.) Determine Net Income & DSCR
g.) Set Guideline for Net Income
h.) Determine Overall System Rates Increases
2. Rate Design:
a.) Power Cost Adjustment Base (formerly fuel adjustment)
b.) Base Rate Schedules
3. Financial Forecast with Provo sed Rates:
a.) Project revenues based on new rates
b.) Compare to projected expenses
c.) Determine net income with new rates
d.) Determine new debt service coverage ratios (DSCR)
Presented were number of customers & annual usage growth rates, projected Mwh sales,
projected sales revenue, project system expenses, fuel costs & purchase power costs, projected
expenses, projected Capital Improvements and debt service payments, and projected operating
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Page 5, City Council Study Session, October 5, 2004
results with current rates. By 2009 the end of year cash would be ~$17,260,749 with the current
rates.
The following was presented:
Set Guideline Net IncomelDetermine Overall Revenue Increase
Set Guideline Net
Income
2005
$4,000,000
2009
$5,000000
2006
$5,000,000
2007
$5,000,000
2008
5,000,000
Cumulative Req.
Revenue Increase
9.65%
11.28%
11.62%
13.75%
15.01%
Option I Revenue
Increase
11.50%
3.00%
Option 2 Revenue
Increase
5.00%
5.00%
3.00%
Ms. Garrison recommended that Grand Island use Option 2. Reviewed were the proposed rates.
The following conclusions and recommendations were presented:
1.
2.
3.
4.
5.
6.
7.
Both power supply & non-power supply costs were increasing
Net income, cash reserves, and DSCR are decreasing
GIED has committed to 30 MW of Nebraska City #2
Retail rates must be adjusted
Recommend phasing-in rate increases: 5% (Jan 2005), 5% (Jan 2006), 3% (Jan 2008)
Recommend GIED install load profile meters
Recommend GIED use financial forecast model as a budgeting tool and a method of
monitoring GIED's financial position for a forward five year period
Discussion was held with regards to customer rates, transportation and production costs. Mr.
Mader stated that once Council reviewed this information it was proposed to bring an ordinance
before Council within 60 days with a rate increase.
ADJOURNMENT: The meeting was adjourned at 8:15 p.m.
Respectfully submitted,
Qs\~ IDw~
City Clerk
RaNae Edwards