HomeMy WebLinkAboutCity Council Committees - Operations Committee - 04/07/2015Unless otherwise noted, the Operations Committee meets at 4:00 p.m. on the first and third Tuesday of each
month. Council Chambers East, Kent City Hall, 220 4th Avenue South, Kent, 98032-5895. Dates and times are
subject to change. For information please contact Annalise LaPorte at (253) 856-5705.
Any person requiring a disability accommodation should contact the City Clerk’s Office at (253) 856 -5725 in
advance.
For TDD relay service call Washington Telecommunications Relay Service at 1-800-833-6388.
Operations Committee Agenda
Council Members: Bill Boyce * Dana Ralph * Les Thomas, Chair
April 7, 2015
4:00 p.m.
Item Description Action Speaker Time Page
Call to order
Roll Call
Changes to the Agenda
1. Approval of Check Summary Report dated
3/1/2015 thru 3/15/2015
YES
2. Approval of Minutes dated March 17, 2015 YES 1
3. Ordinance acknowledging the merger of tw
telecom inc. and Level 3 Communications –
Recommend
YES P. Fitzpatrick 5 3
4. Financial Sustainability Taskforce YES D. Matheson 10 9
5. Multi Family Tax Agreement with Tarragon YES M. Gilbert 10 13
6. Ordinance Approving an Interfund Loan for
the LED Lighting Replacement Project
YES A. BeMiller 5 27
7. Contingent Loan and Support Agreement
Language
NO A. BeMiller 5 35
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OPERATIONS COMMITTEE MINUTES
March 17, 2015
Committee Members Present: Les Thomas, Chair; Dana Ralph, Bill Boyce.
The meeting was called to order by L. Thomas at 4:00 p.m.
1. APPROVAL OF THE CHECK SUMMARY REPORT DATED 2/16/2015 THROUGH
2/28/2015.
D. Ralph moved to approve the check summary report dated 2/16/2015 through
2/28/2015. B. Boyce seconded the motion, which passed 3-0.
2. APPROVAL OF MINUTES DATED MARCH 3, 2015.
B. Boyce moved to approve the Operations Committee minutes dated March 3, 2015.
D. Ralph seconded the motion, which passed 3-0.
3. ePLUS – VMWARE SRM ENTERPRISE LICENSES PURCHASE - AUTHORIZE.
Information Technology Director Mike Carrington introduced Technical Services Manager
James Endicott. Mr. Endicott explained the contract provides the necessary software
licensing to replicate the City of Kent’s virtual production servers (in the Primary Data
Center at Station 74) to the backup data center (City Hall). This functionality provides
better business continuity for the City’s primary application servers. It was noted that the
IT Capital Budget funds are earmarked for this expenditure.
D. Ralph moved to approve authorization of the ePlus – VMWare SRM Enterprise Licenses
purchase to allow Mayor Cooke to sign the Agreement For ePlus Technology, Inc. in the
amount of $76,773 for the purchase of 150 VMWare Site Recovery Manager Enterprise
licenses with 1 year Maintenance, subject to terms and conditions acceptable to the City
Attorney and Information Technology Director. B. Boyce seconded the motion, which
passed 3-0.
4. BUSINESS AND OCCUPATION TAX ORDINANCE ADJUSTMENT -
RECOMMENDATION
Chief Administrative Officer Derek Matheson introduced an ordinance that amends the
Business and Occupation (B&O) tax code by allocating all revenue, after payment of
necessary administrative costs, to the maintenance and improvement of the city’s existing
street system.
Finance Director Aaron BeMiller explained that continuing the B&O cap and contributing to
the Capital Improvement Fund (CIF) will allow the city to be out of debt by the end of
2016 with a positive balance of $830,000. Then, in 2017, funding can start for information
technology (IT) and street capital at about $1 million each, to continue to full funding at
$1.2 million each. Mr. BeMiller further explained that if the cap is removed and resources
no longer go towards the CIF the city would nearly be out of debt by end of 2016 with a
negative balance of $300,000. Then can start contributing the four percent utility tax to IT
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Operations Committee Minutes
March 17, 2015
Page: 2
and street capital with a much longer buildup of $120,000 in 2017, almost $1 million in
2018, and the full amount by 2020.
It was noted there will be no impact to the biennial budget projections, but because
excess revenues will be diverted away from the CIF for street purposes, this revenue
reallocation will likely increase the length of time it takes to eliminate the existing debt
burden carried in the capital improvement fund and have the effect of delaying the city’s
ability to invest in new capital projects..
During the meeting and in a memo to the Operations Committee, Mayor Cooke expressed
although great progress has been made to reduce the Capital Improvement Fund by 2016
now is not the time for the Council to eliminate the existing B&O tax contribution to the
fund and encouraged the Committee to continue these contributions as is.
B. Boyce moved to have full Council review the motion to adopt the ordinance to
amend the B&O tax code by allocating all revenue, after payment of necessary
administrative costs, to the maintenance and improvement of the City’s existing street
system. L. Thomas seconded the motion, while D. Ralph opposed, which passed 2-1.
The meeting was adjourned at 4:25 p.m. by L. Thomas.
___________________
Jennifer Hays
Operations Committee Secretary
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LAW DEPARTMENT
Tom Brubaker, City Attorney
Phone: 253-856-5770
Fax: 253-856-6770
Address: 220 Fourth Avenue S.
Kent, WA. 98032-5895
DATE: April 7, 2015
TO: Operations Committee
SUBJECT: Ordinance acknowledging the merger of tw telecom inc. and Level 3
Communications – Recommend
MOTION: Recommend Council adopt an Ordinance acknowledging the merger of
tw telecom, inc., and Level 3 Communications, Inc., and approving the resulting
indirect change of control of the tw telecom franchise with conditions and
establishing an effective date, subject to final approval by the city attorney.
SUMMARY:
On May 20, 2014, the City adopted Ordinance No. 4112, effective May 28, 2014, granting
a nonexclusive telecommunications franchise to tw telecom of washington LLC (the
“Franchisee”) to operate a telecommunications system.
On June 15, 2014 tw telecom inc. (“TWTC”), tw telecom LLC’s indirect parent company,
entered into an Agreement and Plan of Merger with Level 3 Communications, Inc. (“Level
3”).
As a result of this merger agreement, Level 3 will acquire direct ownership of TWTC and
indirect control of the tw telecom LLC.
Section 28 of the franchise requires that Level 3 and TWTC receive the consent of the City
for the indirect transfer of control to Level 3. Following this indirect change of control the
Franchisee will continue to remain bound by the terms of the franchise and will continue
to remain responsible for the obligations within the franchise. Both Level 3 and TWTC
have jointly requested that the City Council consent to the indirect change of control. The
consent of the City to the indirect change of control shall not constitute a waiver or
release of any rights the City may have under the franchise.
Exhibit: Ordinance
Budget Impact: None
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ORDINANCE NO.
AN ORDINANCE of the city council of the
city of Kent, Washington, acknowledging the
merger of tw telecom inc., and Level 3
Communications, Inc., and approving the resulting
indirect change of control of the tw telecom of
washington LLC, telecommunications franchise
with conditions and establishing an effective date.
RECITALS
A. On May 20, 2014, the City of Kent (the “City”) adopted
Ordinance No. 4112, granting a nonexclusive telecommunications franchise
to tw telecom of washington llc (the “Franchisee”) to operate a
telecommunications system (the “System”) within the city limits of the City
of Kent, with an effective date of May 28, 2014 (the “Franchise”).
B. On June 15, 2014, tw telecom inc. (“TWTC”), the Franchisee’s
indirect parent company, entered into an Agreement and Plan of Merger
(the “Merger Agreement”) with Level 3 Communications, Inc. (“Level 3”).
C. As a result of this Merger Agreement, Level 3 acquired direct
ownership of TWTC and indirect control of the Franchisee.
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D. Section 28 of the Franchise requires that Level 3 and TWTC
receive the consent of the City for the indirect transfer of control of the
Franchisee to Level 3.
E. Both Level 3 and TWTC have jointly requested that the City
Council consent to the indirect change of control.
F. The consent of the City to the indirect change of control shall
not constitute a waiver or release of any rights the City may have under
the Franchise.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT,
WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS:
ORDINANCE
SECTION 1. Consent. The City hereby consents to the indirect
change of control in accordance with the terms of applicable law, subject
to and contingent upon the following conditions:
1. The City’s consent to the indirect change of control shall not be
construed to constitute a waiver or release of any rights the City may have
now or in the future under federal, state or local law, the Franchise, or any
separate written agreements with the Franchisee that relate to the
Franchise. Level 3 shall acknowledge in writing that the Franchisee remains
responsible for any and all non-compliance issues, if any, that may have
arisen prior to and after the effective date of the Merger Agreement and
any and all obligations under the Franchise that existed prior to and after
the effective date of the Merger Agreement.
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2. Level 3 has represented that substantially all of the tangible and
intangible assets of the Franchisee acquired by Level 3 as a consequence
of the Merger Agreement with TWTC remain in the Franchisee.
3. Following the indirect change of control and receipt of written
acknowledgement of the Franchise from Level 3, the Franchise shall
remain in full effect through May 28, 2024.
4. By consenting to this indirect change of control, the City does not
waive or release any rights of the City in and to the rights-of-way as
provided by state law and the Kent Municipal Code, nor does the City
waive or release any claim or issue of non-compliance it may have, known
or unknown, now or in the future related to the Franchise.
5. Written acknowledgement shall be filed by Level 3 with the City
Clerk, with copies to the City Attorney, within sixty (60) days after the
enactment of this ordinance. Such written acceptance shall be
accompanied by construction and completion bonds, security funds, and
evidence of insurance all as may be required pursuant to the Franchise, if
any such construction and completion bonds, security funds or insurance
change as a result of this indirect change of control.
SECTION 2. - To the best of the City’s knowledge and belief, there
are no existing facts or circumstances that with or without the giving of
notice or the passage of time, or both, would constitute a default of any
term or condition of the Franchise.
SECTION 3. – Effective Date. This ordinance or a summary thereof
consisting of the title shall be published in the official newspaper of the
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City, and shall take effect and be in full force five (5) days after
publication.
SUZETTE COOKE, MAYOR
ATTEST:
RONALD F. MOORE, CITY CLERK
APPROVED AS TO FORM:
TOM BRUBAKER, CITY ATTORNEY
PASSED: day of , 2015.
APPROVED: day of , 2015.
PUBLISHED: day of , 2015.
I hereby certify that this is a true copy of Ordinance No.
passed by the city council of the city of Kent, Washington, and approved
by the Mayor of the city of Kent as hereon indicated.
(SEAL)
RONALD F. MOORE, CITY CLERK
P:\Civil\Ordinance\Kent Level 3 tw merger ordinance.docx
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OFFICE OF THE MAYOR
Suzette Cooke, Mayor
Phone: 253-856-5700
Fax: 253-856-6700
220 Fourth Avenue S.
Kent, WA. 98032-5895
DATE: April 7, 2015
TO: Kent City Council Operations Committee
FROM: Derek Matheson, Chief Administrative Officer
SUBJECT: Financial Sustainability Task Force - Establish
MOTION: Recommend Council establish a Financial Sustainability Task Force.
SUMMARY: The City Council at its February 2015 strategic planning retreat discussed
the establishment of a financial sustainability task force. The attached operating
guidelines are based on the retreat summary and additional input from the mayor,
councilmembers, and Mayor’s Leadership Team.
BUDGET IMPACT: None
EXHIBITS: Operating guidelines
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City of Kent
Financial Sustainability Task Force
Operating Guidelinesi
Purpose
o Represent, educate, and engage the community to provide detailed
recommendations to the mayor and city council regarding the city’s long-
term financial sustainability
Structure
o 15 members
o Appointed by the mayor with the council president’s consultation and
confirmed by the city council
o Represent the diversity of Kent’s residents and businesses in opinions,
cultures and economic status
Include civic leaders, business owners, property owners, financial
experts, city residents, and youth
o Chair appointed by the mayor and confirmed by the city council
o Finance director will provide staff support
Community and government affairs manager will assist with public
engagement
o Mayor, city councilmembers, and city staff may provide information but
otherwise must not attempt to influence the task force
o Task force will sunset upon issuance of final report
Duties
o Meet 1-2 times per month
o Abide by the Open Public Meetings Act and operate transparently
o Evaluate the revenues collected and scope of services provided by city
departments
o Compare Kent’s finances with the revenues collected and scope of services
provided by peer cities
o Determine the cost to live in Kent
o Determine the local tax burden to operate a business in Kent
o Strive to make decisions by consensus
If consensus is not possible, include a minority report
o Keep the mayor and city council informed via quarterly reports to the chair
to the Operations Committee
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o Use an array of marketing mediums to keep the community informed,
educated, and engaged, such as the city website, newspaper, newsletter,
social media, community meetings, focus groups, and/or surveys
o Use staff time efficiently, i.e. focus on activities with a high return on
investment
o Prepare a draft report by May 1, 2016 for public review and comment
o Provide a final report to the mayor and city council by June 30, 2016, that
includes ten-year perspective on:
The city’s needs (operating and capital)
The community’s priorities (operating and capital) within existing
revenue
The community’s priorities for elimination of functions and services
The community’s priorities (operating and capital) for new revenue
The community’s preferred sources of new revenue
i Please see the 2015 Council Retreat Summary for additional background information on the mayor and city
council’s expectations for the task force
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ECONOMIC and COMMUNITY DEVELOPMENT
Ben Wolters, Director
PLANNING DIVISION
Charlene Anderson, AICP, Planning Manager
Phone: 253-856-5454
Fax: 253-856-6454
220 Fourth Avenue S.
Kent, WA 98032-5895
April 1, 2015
TO: Chair Les Thomas and Operations Committee Members
FROM: Matt Gilbert, AICP, Principal Planner
RE: Multifamily Tax Exemption Contract
Meeting of April 7, 2015
SUMMARY:
Tarragon has applied for Kent’s Multifamily Tax Exemption (MFTE) program for its
Kent Station Apartments project. The next step toward obtaining the exemption is
City Council approval of a contract with Tarragon.
BUDGET IMPACT: None
BACKGROUND:
The MFTE program allows owners of qualified downtown multifamily projects to
avoid paying some of the increased property taxes resulting from their development
project. The general goal of this incentive program is to stimulate new construction
of multifamily housing in downtown Kent. The program was first adopted in 1998,
expanded in 2009 and renewed in 2014.
Property taxes are based on both the value of the land and the value of the
improvements. Normally, when a new construction project is completed, the value
of the new improvements results in a higher property tax for the owner. The MFTE
exempts owners of qualifying projects from paying the additional taxes derived
from the value of the new improvements for eight (8) years after the project is
completed. The exemption is not applied to the land value. Once the exemption
period expires, the owner resumes paying taxes, on the current value of the land
plus improvements.
Tarragon is currently constructing a 154 unit apartment building within the
downtown target area which meets the requirements for consideration under the
MFTE program. The MFTE ordinance requires Tarragon to enter into a contract with
the City, approved by the City Council, regarding the terms and conditions of the
project. Terms generally require that Tarragon construct the project as depicted on
the approved permit plans, maintain the project for permanent residential
occupancy, and meet all City codes and requirements for construction. This contract
has been reviewed by the City Attorney’s office and is attached.
MOTION: Recommend to the full Council authorization for the Mayor to
sign the Multifamily Housing Property Tax Exemption Agreement with
Kent Station Phase III, L.L.C. subject to terms and conditions acceptable
to the Economic and Community Development Director and City Attorney.
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If the contract is approved by the City Council, Tarragon will be issued a conditional
certificate of acceptance of tax exemption, which is valid for three years, during
which the project will be constructed. They will then file for a final certificate of tax
exemption and the 8 year exemption period will begin the following January 1st.
Staff will be available to answer questions at the April 7th Committee meeting.
MG/al P:\Planning\Operations Committee\4-7-15 MFTE Memo.doc
Encl: MFTE Contract signed by Tarragon
cc: Ben Wolters, Economic & Community Development Director
Charlene Anderson, AICP, Planning Manager
David Galazin, Assistant City Attorney
File
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Multifamily Housing Property Tax Page 11 of 11
Exemption Agreement
MULTIFAMILY HOUSING PROPERTY
TAX EXEMPTION AGREEMENT
EXHIBIT 1
LEGAL DESCRIPTION
KENT STATION DIV 2 LDT 7; TGW W 10 FT IN WIDTH OF S 90 FT IN WIDTH OF LOT
10 KENT STATION DIV 1 (AKA LOT “B” DESCRIBED AND DELINEATED PER CITY OF
KENT LOT LINE ADJUSTMENT NO LL-2006-21 RECORDING NO 20080825900006)
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Kent Council Operations Committee 2015 Internal Financing for
LED Lighting Replacement Project
FINANCE
Aaron BeMiller, Director
Phone: 253-856-5260
Fax: 253-856-6255
Address: 220 Fourth Avenue S.
Kent, WA. 98032-5895
DATE: April 7, 2015
TO: Kent City Council Operations Committee
FROM: Aaron BeMiller, Finance Director
SUBJECT: Ordinance Approving 2015 Internal Financing – LED Lighting
Replacement Project - recommend
MOTION: Recommend adoption of an Ordinance approving an internal finance for
the LED Lighting Replacement Project in an amount not to exceed $2,245,000.
SUMMARY: The Public Works Committee has requested that an internal financing
for the Public Works LED Lighting Replacement Project be brought before
Operations for consideration. The City has received a $375,000 grant from the
Washington Department of Commerce for converting City-owned street lights to
LED. The total project cost is $2,620,000 of which $375,000 is funded through
grant resources. The remaining $2,245,000 will be funded through an internal loan
from the following sources and amounts:
Sewerage Operating Fund: $1,000,000
Self-Insurance Fund: $800,000
General Fund (Strategic Investment): $445,000
Upon completion of the project, and expected within the current calendar year, the
City will receive a rebate from Puget Sound Energy, anticipated to be $445,000.
The rebate will be applied to the General Fund portion of the financing. The
remaining $1,800,000 will be internally financed over nine (9) years and will include
interest.
The LED Lighting Replacement Project is projected to save the General Fund at
least $230,000 annually in electricity savings after the conversion of the City owned
street lights to LED lighting. This annual savings will be applied to the repayment
of these loans, plus interest, over nine (9) years.
EXHIBITS: Ordinance
BUDGET IMPACT: $2,620,000 in 2015, plus annual debt service through 2024
BACKGROUND: The WA State Department of Commerce offered a 2013-2015
Energy Efficiency and Solar Grant to agencies in Washington. The Public Works and
Parks Departments both had interest in applying for the grant. The maximum
award to any jurisdiction is $500,000. Though each department has very unique
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Kent Council Operations Committee 2015 Internal Financing for
LED Lighting Replacement Project
projects, Public Works and Parks combined the projects into a single grant
application to prevent city projects from competing for the same funds.
The Public Works department proposed a LED street light conversion project of city
owned-street lights. The total project cost is approximately $2,620,000 with
$375,000 of the grant being applied to the LED project. An inter-fund loan in the
amount of $2,245,000 is necessary to fund the remaining portion of the project.
Following project completion, a Puget Sound Energy rebate of approximately
$445,000 will be provided to the City which will be credited back the loan balance.
The remaining $1,800,000 long-term financing will be paid back through energy
savings from in less than 10 years from electricity savings from the conversion of
City-owned street lights to LED. The project is estimated to save approximately
$230,000 per year in energy savings and will take approximately 6 months to
complete.
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1 2015 Internal Financing
LED Lighting Replacement Project
ORDINANCE NO.
AN ORDINANCE of the City Council of the
City of Kent, Washington, approving an internal
financing for the LED Lighting Replacement Project
not to exceed $2,245,000. The Council approves a
nine (9) year repayment schedule for $1,800,000
of the $2,245,000 total as long-term internal
financing.
THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DOES
HEREBY ORDAIN AS FOLLOWS:
ORDINANCE
SECTION 1.
Internal Financing. The City Council approves the internal funding
for the LED Lighting Replacement Project to come from the following
sources and amounts:
Sewerage Operating Fund: $1,000,000
Self-Insurance Fund: $800,000
General Fund (Strategic Investment): $445,000
Upon completion of the project, and expected within the current calendar
year, the City will receive a rebate from Puget Sound Energy, anticipated
to be $445,000. The rebate will be applied to the General Fund portion of
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2 2015 Internal Financing
LED Lighting Replacement Project
the financing. The remaining $1,800,000 will be internally financed over
nine (9) years and will include interest.
Repayment. The LED Lighting Replacement Project is projected to
save the General Fund at least $230,000 annually in electricity savings
after the conversion of the City owned street lights to LED lighting. This
annual savings will be applied to the repayment of these loans, plus
interest, over nine (9) years. The electric bills for street lighting are paid
from the General Fund. Annual debt payments will be made by the Public
Works General Fund to the Sewer and Insurance funds as summarized and
set forth in Exhibit A and Exhibit B, which are attached and incorporated
into this ordinance.
Financing Terms. Unless modified by the City Council, the term of
the internal financing shall be not exceed nine (9) years and the annual
interest rate is to be the higher of 1.2% or the annualized interest rate
earned on the investments in the LGIP (Local Government Investment
Pool). The interest rate will be reviewed at the end of each fiscal year and
the debt service recalculated if necessary.
SECTION 2. – Severability. If any one or more section, subsection,
or sentence of this ordinance is held to be unconstitutional or invalid, such
decision shall not affect the validity of the remaining portion of this
ordinance and that remaining portion shall maintain its full force and
effect.
SECTION 3. – Corrections by City Clerk or Code Reviser. Upon
approval of the City Attorney, the City Clerk and the code reviser are
authorized to make necessary corrections to this ordinance, including the
correction of clerical errors; ordinance, section, or subsection numbering;
or references to other local, state or federal laws, codes, rules, or
regulations.
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3 2015 Internal Financing
LED Lighting Replacement Project
SECTION 4. – Effective Date. This ordinance shall take effect and
be in force five (5) days from and after its passage and publication, as
provided by law.
SUZETTE COOKE, MAYOR
ATTEST:
RONALD F. MOORE, CITY CLERK
APPROVED AS TO FORM:
TOM BRUBAKER, CITY ATTORNEY
PASSED: day of , 2015.
APPROVED: day of , 2015.
PUBLISHED: day of , 2015.
I hereby certify that this is a true copy of Ordinance No.
passed by the City Council of the City of Kent, Washington, and approved
by the Mayor of the City of Kent as hereon indicated.
(SEAL)
RONALD F. MOORE, CITY CLERK
P:\Civil\Ordinance\Budget Adjustment 4th Quarter 2014.docx
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4/2/2015
EXHIBIT A
Internal Note
Funding of LED Street Lighting Project
Interfund Note from Sewer Fund to General Fund
Repayment Schedule 1
Original Principal Amount 1,000,000.00$
Interest Rate 2 1.20%
Loan Years 9
Note Dated 3/31/2015
Maturity 12/31/2024
Payments $127,777.78
Date
Beginning
Balance
Estimated/
Actual Interest
Estimated/
Actual
Principal Total Payment New Balance
12/31/2016 1,000,000.00$ 12,000.00 115,777.78 $127,777.78 884,222.22
12/31/2017 884,222.22 10,610.67 117,167.11 127,777.78 767,055.11
12/31/2018 767,055.11 9,204.66 118,573.12 127,777.78 648,481.99
12/31/2019 648,481.99 7,781.78 119,996.00 127,777.78 528,485.99
12/31/2020 528,485.99 6,341.83 121,435.95 127,777.78 407,050.04
12/31/2021 407,050.04 4,884.60 122,893.18 127,777.78 284,156.86
12/31/2022 284,156.86 3,409.88 124,367.90 127,777.78 159,788.96
12/31/2023 159,788.96 1,917.47 125,860.31 127,777.78 33,928.65
12/31/2024 33,928.65 407.14 33,928.65 34,335.79 -
56,558.03 1,000,000.00 1,056,558.03
* Actual payment
Notes:
1Per City Council action, the estimated $230,000 in annual electric savings on the street lighting
costs after the coversion of the City owned street lights to LED lighting will be applied to repay
these loans, plus interest, over nine (9) years.
The street lighting electric bill are paid from the General Fund, so that is where the electric
savings will occur. Annual payments will be made by the Public Works General Fund to the
Sewer and Insurance Funds.
2 The annual interest rate is to be the higher of 1.2% or the annualized interest rate earned on the
investments in the LGIP (State investment pool). The inteerest rate will be reveiwed at the end of
each fiscal year and the debt service recalculated if necessary.
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4/2/2015
EXHIBIT B
Internal Note
Funding of LED Street Lighting Project
Interfund Note from Insurance Fund to General Fund
Repayment Schedule 1
Original Principal Amount 800,000.00$
Interest Rate 2 1.20%
Loan Years 9
Note Dated 3/31/2015
Maturity 12/31/2024
Payments $102,222.22
Date
Beginning
Balance
Estimated/
Actual Interest
Estimated/
Actual
Principal Total Payment New Balance
12/31/2016 800,000.00$ 9,600.00 92,622.22 $102,222.22 707,377.78
12/31/2017 707,377.78 8,488.53 93,733.69 $102,222.22 613,644.09
12/31/2018 613,644.09 7,363.73 94,858.49 $102,222.22 518,785.60
12/31/2019 518,785.60 6,225.43 95,996.79 $102,222.22 422,788.81
12/31/2020 422,788.81 5,073.47 97,148.75 $102,222.22 325,640.06
12/31/2021 325,640.06 3,907.68 98,314.54 $102,222.22 227,325.52
12/31/2022 227,325.52 2,727.91 99,494.31 $102,222.22 127,831.21
12/31/2023 127,831.21 1,533.97 100,688.25 $102,222.22 27,142.96
12/31/2024 27,142.96 325.72 27,142.96 27,468.68 0.00
45,246.44 800,000.00 845,246.44
* Actual payment
Notes:
The street lighting electric bill are paid from the General Fund, so that is where the electric
savings will occur. Annual payments will be made by the Public Works General Fund to the
Sewer and Insurance Funds.
1Per City Council action, the estimated $230,000 in annual electric savings on the street lighting
costs after the coversion of the City owned street lights to LED lighting will be applied to repay
these loans, plus interest, over nine (9) years.
2 The annual interest rate is to be the higher of 1.2% or the annualized interest rate earned on the
investments in the LGIP (State investment pool). The inteerest rate will be reveiwed at the end of
each fiscal year and the debt service recalculated if necessary.
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Kent Council Operations Committee Contingent Loan and Support Agreement
FINANCE
Aaron BeMiller, Director
Phone: 253-856-5260
Fax: 253-856-6255
Address: 220 Fourth Avenue S.
Kent, WA. 98032-5895
DATE: April 7, 2015
TO: Kent City Council Operations Committee
FROM: Aaron BeMiller, Finance Director
SUBJECT: Contingent Loan and Support Agreement
MOTION: No motion. Information only.
SUMMARY: In December 2014 the finance department brought to the Operations
Committee legislation that would amend our current Contingent and Support
Agreement with the Public Facilities District (PFD). The amendment would have
changed the language in the agreement in how the contribution the City makes
toward PFD debt service payments are characterized. The current language
characterizes these contributions as loans and requires repayment plus interest.
The amended language would have changed the characterization of these debt
service contributions from the City to subsidies with no expectation of repayment.
The Operations Committee sent this issue to full Council in December and the
amendment was not approved. It was requested by a Councilmember that finance
bring this issue back to Operations in the first quarter of 2015 for further
consideration.
During full Council deliberations on the amendment it appeared the significant issue
Council wrestled with was addressing what would happen if the loan were forgiven
and the PFD had balance available after the bonds were retired. The City finance
and law departments have worked with Bond Counsel and we believe we have
come up with language that addresses both the characterizations of the City
contributions toward PFD debt service and any ending monetary balances in the
PFD once the bonds are retired.
However, as we continue to work through this issue other considerations have
come forward which need to be fully vetted and understood before finance is ready
to seek policy direction. These considerations include: how to handle the loan
receivable the City booked in 2014, how to address the possibility of refunding the
PFD bonds in a few years, status of the sales tax credit with a refunding, and what
is the best course of action for the City to address these considerations with the
PFD.
BUDGET IMPACT: $0
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Kent Council Operations Committee Contingent Loan and Support Agreement
BACKGROUND: Section 3.3 of the Contingent Loan and Support Agreement
Regarding Financing for Kent Special Events Center Agreement, signed in 2008, by
the City of Kent and the City of Kent Special Events Center Public Facilities District
(PFD) states generally that any monies contributed by the City towards debt service
payments for the Special Events Center are to be treated as loans by the PFD. As
such, the PFD is obligated to repay these monies, both principal and interest, to the
City.
Due to the economic realities of PFD revenue generation, the finance department
does not believe there is a reasonable expectation of repayment from the PFD for
contributed debt service and as such, accounting rules dictate that the City not
consider the contributions made to date, or future contributions, to be loans but
rather to be subsidies. Until the end of 2014 the City had never shown on its
financial statements a loan receivable for monies contributed to the PFD for debt
payments. The City now shows an $18M receivable from the PFD for contributions
made toward debt service, which is 100% offset, by a contra allowance for doubtful
accounts. The PFD financials now include a liability for the same $18M.
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