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HomeMy WebLinkAboutmin 12-08-82237 MINUTES OF THE MEETING OF THE CITY COUNCIL OF THE CITY OF UKIAH - DECEMBER 8, 1982 The City Council convened in an adjourned regular session at 4:00 p.m. in the City Council Chambers. Roll call was taken and the following Councilmembers were present: Feibusch, Kelley, Hickey, Myers, Riley. Staff present: Payne, Orchard, Kruth, Roper, Tillotson, Gutierrez 2. INTRODUCTION OF ORDINANCE APPROVING LEASE PURCHASE AGREEMENT, REDWOOD EMPIRE FINANCING AUTHORITY M/S: Hickey/Myers to introduce Ordinance No. 801 by title only was carried by a unanimous voice vote: M/S: Hickey/Myers to introduce Ordinance No. 801, "An Ordinance of the City Council of the City of Ukiah Approving and Authorizing Execution of Lease-Purchase Agreement With the Redwood Empire Financing Authority" was carried by the following roll call vote: Councilmembers Feibusch, Kelley, Hickey, Myers, Riley. None: None ABSENT: None 3. LAKE MENDOCINO HYDROELECTRIC PROJECT City Manager stated that now that we are at another decision point, staff, financial consultants and project engineers are present to present the project in detail and to answer any questions the Council may have. A. INFORMATION AND PRESENTATION ITEMS 1) LAKE MENDOCINO PROJECT HISTORY AND OVERVIEW INCLUDING SLIDE PRESENTATION ON MODEL STUDIES (GORDON MARSH & SALLY SIMONE, TUDOR ENGINEERS) Mr. Gordon Marsh, Tudor Engineers stated that they have been processing the license application, the water rights permits, have had the bond election, and have negotiated an attractive agreement with Western. The facts now are the same as prior to the bond election. There is no impact on fisheries and drought issues have been covered. Sally Simone, Project Engineer, showed slides on the model studies performed in order to give the Council an idea of the complexities involved and indicate the effect of the facilities on the Corps Dam. Mayor Riley questioned the certainty of these model studies. Sally explained that it was due to hydrolic equations, and that the Corps of Engineers were pleased with the results. Mr. Marsh noted that although economic conditions have changed (interest rates and costs are higher) since the bond election was held that as the data prepared for the bond election was conservatively set, the anticipated costs still hold. City Manager clarified that although there is a difference in the mills per kWh from the original FERC license to today, there is projected no change in the mills per kWh from what was stated at the time of the bond election to today. 2) PROGRESS AND STATUS REPORT ON 115 kv SUBSTATION PROJECT (AL KRUTH, UKIAH PUBLIC WORKS DIRECTOR) Mr. Kruth noted that included in the bond issue was the possible financing of the substation which has been a continuing project before the Council for many years. The design by SAI Engineers has been completed and the contract documents are ready to go out. Staff has negotiated purchase for the right of way for the transmission line from the interconnection with PG&E to where our new substation is and also purchased the property on which they will expand the substation. Ail the groundwork is laid. Staff would like to proceed and put out the heavy equipment (large transformers and control equipment) in conjunction with or at the same time as the bond in order to know what the costs are at that time. Adj. Reg. Mtg. 12/08/82 Page 1 238 Councilmember Feibusch asked if the Mendocino Project and the substation are considered one. He asked if something goes wrong with the Mendocino Project, could we still proceed with the substation? Mr. Kruth stated that we could still proceed but perhaps would have to find alternate financing for the substation. City Manager stated that it is advisable to keep it with the bond issue, but if necessary they could be separated, provided we had voter approval. 3) REVIEW OF UNITED STATES DOE, WESTERN AMENDATORY AGREEMENT WITH CITY OF UKIAH (GORDON MARSH, TUDOR ENGINEERS) Mr. Marsh reviewed the contract in detail for the Council and answered questions requiring clarification. 4) REVIEW OF PROJECTED ELECTRIC SYSTEM COSTS AND REVENUES (MAURICE ROPER, UKIAH ELECTRIC DISTRIBUTION ENGINEER) Mr. Roper reviewed charts explaining the costs and revenues involved in this project. City Manager emphasized that by 1986 we will be able to sell power to our customers at a cheaper rate than we can purchase it from our present major source. As the rate charged to us in mills will be constant for the duration of the contract, we know what our costs will be. We do not know how much PG&E will charge in later years. When it becomes necessary for the City of Ukiah to raise electric rates, it will not be due to the cost of this project, but rather due to the normal progression of economic times. Rates will be raised eventually, with or without the project, but he felt that the City of Ukiah's rates will still be considerably less than what PG&E will charge. If we do not build the project, rates would go up even higher as we would have to purchase our power from PG&E. Jack Simpson, Chairman of the Citizens Committee for this project noted that the government also gives a subsidy to those entities which are not fossil fuel related. He further noted that as the bond issue made possible the funding of the substation, he would not want to see it separated from the Lake Mendocino Project. 5) FINANCIAL CONSULTANTS REPORT ON PROJECT FINANCING (ROBERT POWELL, RAUSCHE PIERCE REFNES, INC.) Mr. Powell explained in detail how they arrived at the figures for the bond issue. He noted we are looking ahead one year before selling the bonds. Mayor Riley questioned what type of rating we can expect to receive. Mr. Powell answered perhaps an "A" or "BAA". Both are quality investment grades. This year's operations will be very important to the rating. Councilmember Kelley questioned if the insurance companies look at how often or how much we have increased our rates? Mr. Powell answered yes and that the City of Ukiah has a favorable history. Councilmember Kelley also asked if the Council would be able to see the documents before they are sent to the rating agencies? City Manager answered affirmatively and stated that in fact the Council would be approving the documents beforehand. Mayor Riley asked if local brokers could sell the bonds. Mr. Powell stated they could. However, it is very difficult to round up people who would put money in this locally. B. CITY COUNCIL ACTION ITEMS 1) ADOPT RESOLUTION AUTHORIZING MAYOR AND CLERK TO EXECUTE AMENDATORY AGREEMENT, U.S. DEPARTMENT OF ENERGY (WAPA) CITY OF UKIAH City Manager explained that contract is the same as the one given to the Council two weeks ago. He did not expect any changes from Western other than minor non substantive changes. If there are substantive changes it would be brought back to the Council. City Manager asked the Council to authorize the agreement, even though there may be some non substantive changes. Adj. Reg. Mtg. 12/08/82 Page 2 239 Mayor Riley asked who would decide if the changes were substantive. City Manager answered that the City Attorney, City Manager, engineers and the financial consultants would make the determination. City Manager also explained that WAPA agreed with and was committed to allow the City of Ukiah to immediately use the City's 2.5 mw Lake Mendocino allocation on the Shell II project. We could shift temporarily our 2.5 mw allocation from the Lake Mendo Project to the Shell Project and start receiving the benefits of that 2.5. mw allocation immediately, which would give us 1½ years of using that allocation with approximately one half million dollar savings to the City. We would be reaping 1½ years benefit. As Shell II is a JPA the other member cities would have to approve it also. City Manager did not anticipate any difficulty with other cities approving this. Mayor Riley questioned what this had to do with the resolution and agreement between WAPA and the City of Ukiah. City Manager stated that although this is not part of the agreement it gives us more money to pay for the Lake Mendocino Project. We want to know for certain that we can get those benefits before we formally proceed with the WAPA agreement. M/S: Myers/Kelley to adopt Resolution 83-39 authorizing the Mayor and the Clerk to execute the Amendatory Agreement between the U.S. Department of Energy and the City of Ukiah with the additional stipulations that member cities of Shell Project approve early allocation from WAPA and also subject to no substantive changes to the actual agreement was carried by the following roll call vote: AYES: Councilmembers Kelley, Hickey, Myers, Riley NOES: Councilmember Feibusch ABSENT: None 2) APPROVE AND AUTHORIZE LAKE MENDOCINO POWER PROJECT CONSTRUCTION SCHEDULE Mr. Marsh explained the construction schedule of the project beginning in 1983 and the importance of proceeding in an orderly and timely manner. Councilmember Feibusch questioned how the weather will affect the schedule. Mr. Marsh answered that the schedule is very tight. Rain would cause delay of work needing to be done outside, but not work done in the tunnel or under cover. We must get into the tunnel by May, 1984 or there will be a 9 month delay. Councilmember Kelley asked if there will be penalty clauses in the contract. Mr. Marsh stated it is illegal to do so. However, the term liquidated damages could be used. He would also consider an early completion incentive. M/S: Hickey/Myers to approve and authorize Lake Mendocino Construction Schedule was carried by the following roll call vote: Councilmembers Kelley, Hickey, Myers, Riley NOES: Councilmember Feibusch ABSENT: None 3) APPROVE TUDOR ENGINEERS WORK ORDERS NO. 9, 10, & 11 Mr. Marsh reviewed the work orders and explained the urgent need to complete them. M/S: Hickey/Kelley to approve all three Tudor Engineer work orders was carried by the following roll call vote: Councilmembers Kelley, Hickey, Myers, Riley NOES: Councilmember Feibusch ABSENT: None ADJOURNED 6:50 p.m. Sandra Gutierrez Deputy City Clerk Adj. Reg. Mtg. 12/08/82 Page 3