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FEDRAC MINS 05-27-2003 City of Federal Way City Council Finance/Economic Development/Regional Affairs Committee Tuesday, May 27, 2003 2:00 p.m. City Hall Mt. Baker Conference Room MINUTES Committee Members in Attendance: Chair Michael Park, Member Mary Gates, Member Eric Faison. City Council Members in Attendance: Mayor Jean n e Bur bidge, Deputy Mayor Dean McColgan , Coun cil Member s Lin da Koch mar an d Jack Dovey. Staff Members in Attendance: Iwen Wang, Management Services Director; David Moseley, City Manager; Derek Matheson, Assistant City Manager; Pat Richardson, City Attorney; Michael Olson, Deputy Director of Management Services; Karen Kirkpatrick, Deputy City Attorney; Rob Van Orsow, Solid Waste/Recycling Coordinator; Medhi Sadri, Information Services Manager; Cary Roe, Public Works Director; Mary McDougal, Human Resour ces Man ager ; Jason Suzaka, Man agemen t An alyst. Others in Attendance: Pamela Berry and Joe Thomas. 1. CALL TO ORDER Chair Michael Park called the meeting to order at 2:02 pm. 2. PUBLIC COMMENT None. 3. COMMITTEE BUSINESS a) Approval of the Apr il 22, 2003 meeting minutes Motion to approve the April 22, 2003 meeting minutes. Motion seconded and carried. b) Legislative and Regional Affairs Update Presented by Der ek Math eson Staff has been tracking a number of bills in the legislature regarding annexation, transportation revenue, shoreline management, and international building code. To date, the governor has signed all of those bills. Right now the legislature is in special session, although currently only the leadership are present. The rest of the members should be arriving shortly. Although the legislature is busy with the budget, a number of high priority items have arisen. The first is Washington State’s competition to build the Boeing 7E7, which the company put out an RFP (Request for Proposal) to build it. The legislature is looking at unemployment and workers’ compensation programs. A-1 One of the items staff is trying to get on the special session agenda is the EDGE (Economic Development For a Growing Economy) bill, which is tax increment financing. The whole legislature has been working to put together a budget. The Senate has agreed on a 5-cent liquor in cr ease an d mor e aggr essive r even ue collection . Th e House h as agr eed to mor e spen din g cuts than they had wanted. The capital budget is in-line with the operating budget. Regional Affairs: A Municipal Court Options Group was been formed -- a number of cities are thinking about forming their own municipal court. Mr. Matheson will be making a powerpoint presentation to the group on June 11th. Asked if the County was looking at allowing cities to contract with one another for municipal court services, Mr. Matheson replied that the issue is som et h i n g t h a t st a ff h a s been l obbyi n g t o t r y t o get , but i t h a sn ’t wor ked out . However , Ma pl e Valley is already contracting for those services with Enumclaw. While it is doable, staff prefers th at th e City sh ould get some statutor y auth or ity befor e pr oceedin g. c) Purch ase of PCs for PS - SIU Presented by Medhi Sadri Mr. Sadri reviewed the proposal with the committee. A question was asked regarding why the City did not set aside funds in the asset seizure fund for future PC purchases when we know that the PCs will eventually go out of date. Ms. Wang explained that the PCs were purchased around the time that the police department was formed – a number of items/services purchased were specialized or were pilot programs. Due to some unpredictability in the future of the programs (th er e is a policy to collect r eplacemen t r eser ves if r eplacemen t is in evitable), r eplacemen t reserves were not collected for th e PCs. The committee asked staff to start to identify sources of funding if this program were to become permanent, meaning staff should start to collect replacement funding. Currently, there is appr oximately $350,000 to $400,000 in the asset seizure fund and is growing. The SIU is operated primarily out of this fund. Motion to approve the use of $10,000 from the asset seizure fund for the purchase of PCs. Motion seconded and carried. d) Franchise, Negotiation and Rate Review of Comcast Cable Co. Presented by Medhi Sadri Mr. Sadri reported th at staff h as r eceived th is year ’s cable r ates fr om Comcast; a con sultan t is currently examining the documents and will make a report at the next FEDRAC meeting. In addition, staff has received letter s fr om compan ies r egar din g th e two fr an ch ises we h ave. A letter from Comcast h as been r eceived an d staff is employin g th e ser vices of Ber r y an d Elsn er to assist with the franchise negotiations. Pamela Berry and Joe Thomas were present and gave an introduction and plan to the committee. Ms. Berry stated that Berry and Elsner is a law firm specializing in representing local governments during franchise negotiations. They plan to analyze the documents, determine the issues, examine customer service, and will report back with an identification of issues and a list of options for the Council to consider and provide direction. They also stated that they might need to recommend hiring outside expertise on the technical side to evaluate some components of th e system. Apparently Comcast is the only company that has approached the City for franchising. Mr. Faison asked staff if they have considered speaking to Tacoma about partnering in the Click program. Mr. Sadri replied that a team did go to Tacoma and inquire about the program; but that they determined it would not be cost effective for the City to get involved. Mr. Dovey C:\staging\41706B82-22AD-18F79D\in\41706B82-22AD-18F79D.doc A-2 reminded the committee that as a cable company, Comcast does pay utility taxes, which brings in revenue to the City. Any questions or citizen comments should be directed to Mr. Sadri or Ms. Kirkpatr ick. e) Approval of Interlocal Agreement with King County for I-Net Services Presented by Medhi Sadri Referring to Attachment C (page E17) Ms. Gates asked if the section conflicts with the City’s franchise negotiations. Upon initial glance, Ms. Berry felt that there shouldn’t be a problem. Mr. Sadri reviewed the agreement with the committee. A key component of the agreement is that the monthly charge for using the network goes from $950 down to $800. In addition, the City will be experience an increase in bandwidth so that more data (including audio and video) can be sent at on ce. A question was raised regarding the costs of adding additional sites (Item 7.4, page E7), especially with the move to the new city hall next year. Mr. Sadri explained that fiber optic strands that travel to the current city hall would need to be moved to the new building, which can be very expensive due to trenching and installing costs (although other options are being looked at). A consultant is currently examining the possible options available to the City. Mr. Faison stated that his initial preference would be to move the fiber to the street if it is going to be moved. The committee also asked staff to check with the insurance broker to find out if the $1 - 2million insur ance policy requirement is adequate enough (Item 10, page E8). Motion to forward the I-Net agreement to full Council for approval. Motion seconded and carried. f) Region al Solid Waste Systems Plan n in g Pr esen t ed by Rob Va n Or sow Mr. Van Orsow gave a report to FEDRAC on solid waste issues as requested at th e Mar ch meeting. Public Works Director Cary Roe is serving as the Solid Waste Policy Work Group’s leader. Of the 12 cities involved in the work group, the City of Bellevue is included; however, the City of Seattle is not. This is because Seattle is not part of the Comprehensive Solid Waste Management Plan. They in fact provide their own solid waste planning services. Discussion circled around the $7 million “rent” payment that is being proposed by King County for use of the Cedar Hills landfill. Mr. Roe indicated that there may be a legal issue with the County’s ability to charge the rent, as well as questions as to how the County arrived at that number. Questions were also raised about the estimated $40 million in outstanding solid waste debt by the County. Mr. Roe stated that if cities are serious about exiting the Solid Waste Interlocal Agreement, then they will need to take a long look at the figures (the Comprehensive Plan states that any city that abandons the agreement would be liable for a proportional share of the outstanding debt). The Solid Waste Division is an enterprise fund (funded by fees/rates charged for handling solid waste). There was also discussion about other potential alternatives to the County’s proposal, such as the use of th e pr ivate sector h auler s. g) Paragon Loan Assumption C:\staging\41706B82-22AD-18F79D\in\41706B82-22AD-18F79D.doc A-3 Presented by Iwen Wan g Ms. Wang reviewed the loan assumption with the committee. Staff is working hard for the City to r eceive appr oval by th e len der of th e existin g balan ce of th e loan on th e Par agon Buildin g. There are a number of unfavorable terms on the loan itself; including the interest rate (7.58%). The cost of prepaying the loan ironically gets higher as interest rates go down. In fact, the prepayment penalty is high enough that Ms. Wang recommended that the City is better off assuming the note. In addition, the loan will be “called” on November 1, 2007; meaning that there is a balloon payment for the remaining balance of $5.8 million. After this date, there is no prepayment penalty. At that time, the City will need to issue bonds to lower the interest rate for paying the $5.8 million balance. Using this method instead of prepaying the loan in its entirety (including the prepayment penalty) will save the City approximately $700,000. Ms. Wang will discuss with Council possible option s on th e size of th e bon d, th e ter ms, etc. at eith er a special study session or FEDRAC meetin g. The loan is “securitized,” meaning that it is backed by bonds. Consequently, there are a number of investors (bondholders) associated with this loan. The debt service is going through GMAC. Staff has made attempts to re-negotiate the terms of the loan; however because the loan is securitized (due to the number of investors (bondholders) involved – who have very favorable terms already on the loan), there is virtually no chance the City will be able to re-negotiate. Ms. Wang stated that the utility tax would not be used to fund the debt service on the balloon payment. Mr. Moseley suggested combining this discussion with that of the due diligence report on the Paragon Building in a special Council study session. Deputy Mayor McColgan requested that staff present numbers from the $24 million that was budgeted for the municipal facility project. Motion to recommend to full Council approval of the loan assumption and advance the draft ordinance, with any amendments, to second and final reading with adoption on June 17, 2004. Motion seconded and carried. h) Fleet Main ten an ce Con tr act Presented by Iwen Wan g Ms. Wang reviewed the recommendation with the committee. She stated that the vehicles given in the spreadsheets are sample vehicles taken from the overall fleet to use for standardizing the annual costs of maintenance. So the actual annual costs may vary since there will be some services that certain vehicles will not use. Staff is recommending that the contract be split between Eagle Tire and Automotive and Sparks Car Care, with Eagle handling the Public Safety vehicles and Sparks handling the general fleet. Mr. Dovey suggested splitting the fleet in half between the two companies to get a better comparison of how much each company is charging for the same services, the quality, and capacity to handle the fleet. He felt that setting this benchmark will help during the budgeting process next year . He h ad some con cer n s with th e n on -exclusivity of th e con tr act, sin ce th e City may use other vendors at its own discretion. He didn’t feel that it send a good message to the vendor s given the awards. Ms. Wang r eplied that during the whole process the responding companies were well aware of the non-exclusivity of the contract. In addition, Ms. Wang felt that because this is the first time the City has put out an RFP for the fleet maintenance contract, that the City should have as much flexibility as possible. Staff will work with the vendors closely and make any adjustments as necessary. C:\staging\41706B82-22AD-18F79D\in\41706B82-22AD-18F79D.doc A-4 C:\staging\41706B82-22AD-18F79D\in\41706B82-22AD-18F79D.doc A-5 Staff’s main concern with Sparks was their capacity to service so many vehicles, and not the quality of their work. The Federal Way School District (who played a role on the interview team) uses as a rule of thumb 20 vehicles per technician. Sparks currently employs three technicians – which, going by the FWSD’s rule of thumb, is a total of 60 vehicles (the City uses a fleet of 123). Ms. Gates suggested that one way to handle this is to foster competition between the two vendors. She voiced her support for the non-exclusivity of the contracts in order to foster this competition. Both vendors are located in Federal Way. Motion to forward to full Council the award of a two-year exclusive fleet maintenance contract to Sparks Car Care and Eagle Tire and Automotive, and authorize the City Manager to execute the respective agreements. Motion seconded and carried. i) April 2003 Monthly Financial Report Presented by Michael Olson Michael Olson reviewed the April 2003 Monthly Financial Report (MFR) with the committee. Of note: The utility tax revenues are low partly due to the rate decrease in gas and electricity. In addition, utility tax revenues were overbudgeted (the 1% utility tax cannot be collected for the months of January and February). Those two reasons make up about half of the shortfall. Ms. Wang stated that based on current trends, sales tax revenues are projected to fall about $500,000 short of budget. However, Real Estate Excise Tax revenues are $500,000 above YTD budget, although they can only be used for specific purposes. Motion to accept the April 2003 Monthly Financial Report and forward to full Council for approval. Motion seconded and carried. j) Vouchers Presented by Michael Olson Mr. Olson presented the vouchers for approval. Motion to accept the vouchers and forward to full Council for approval. Motion seconded and carried. 4. OTHER None. 5. FUTURE AGENDA ITEMS 6. NEXT SCHEDULED MEETING June 24, 2003 at 2:00 pm. in the Mt. Baker Conference Room. 7. ADJOURN Chair Michael Park adjourned the meeting at 3:35pm. Recorded by Jason Suzaka