Minutes of The Special Price City Council Meeting
City Hall: Price, Utah
January 30, 2001, 9:00 a.m.
Mayor Lou Colosimo
Councilmembers: Vernon W. Jones, Community Administrator
Roy A. Nikas Pat Larsen, Finance Director
Betty P. Wheeler Gary Sonntag, PWD/City Engineer
Joe L. Piccolo
Stephen L. Denison
Excused: Councilmember Richard Tatton
Joanne Lessar, City Recorder
Lisa Petersen Ben Grimes Kimball Young
Tye Burgess Mark Bruce Allred
The Council met to receive proposals from financial consultants for the Water Transmission Line
replacement. Tye Burgess, Wells Fargo (First Security Bank), and Kimball Young, Lewis, Young,
Robertson and Burningham, Inc., presented the proposals.
Lewis, Young, Robertson and Burningham, Inc.
In order for the Council to familiarize themselves with Lewis, Young, Robertson and Burningham,
Inc., Kimball Young presented a list of projects that they have been involved in the past several
years. He explained the background of his partners and the amount of time they have been
involved in banking, finances, and consulting services. He stated that it will be necessary to obtain
as much low interest, no interest, or grant money as we can get, in view of the potential rate
increase to rate payers to handle the total cost of the project. He presented a list of resources that
can be considered for funding - U.S. Department of Agriculture, Rural Development, Community
Impact Board, Board of Water Resources, and Drinking Water Board. Mark felt that the City has a
very good chance of receiving help from the CIB, Board of Water Resources and the Drinking Water
Board. He feels the grants won't be as large, but the loans will be at low or almost no interest.
Three million dollars seems to be the amount the City can expect from the CIB. The Board of
Water Resources has a program to help buy down the interest rate on the publicly sold portion to
the extent the City has to go out and get financing at market rates. They find their money goes a
lot further by helping borrowers buy down the interest rate. This can be done through a number of
different mechanisms, such as bond insurance that will get a lower interest rate. Kimball Young
stated that in talking to Rural Development, their indication is that they may have upwards to $1.5
million available at 4-5% interest. The rate wouldn't be quite as good, but it would be better than on
the open market. In talking to the Board of Water Resources, Kimball Young feels that there is a
good possibility of getting a direct loan at a low rate as well as a buy down. Once all the state
funding is complete and the balance is left for Price City, he feels it would be an opportunity to get
the Board of Water Resources involved in public financing to at least pay for the cost of municipal
bond insurance. The City would get two different kinds of assistance from the Board of Water
Kimball Young stated that the General Obligation Bond would be the lowest cost for the City to
finance. Public approval will be needed to issue these bonds to the extent that no tax increase is
anticipated. If taxes are raised, then it becomes more of a sales effort. The public would need to
be convinced that the need is great and rally their support. This would require an election. Mark
stated that a General Obligation Bond would be a quarter to a half point. Total interest costs would
be several hundred thousand dollars over a 20 year period, which is a significant savings.
Kimball Young felt the City can rely on a half a million dollar grant from the CIB and the rest will be
borrowed. He feels the City can achieve less than 3% to 0% money. He doesn't see any
significant grant from any other source. The City will likely have to seek half of the costs of the
project from the public. Kimball stated that their service fee is typically not greater than 1% of
the total cost of the project. If the project turns out to be a lot less than anticipated, the fee will be less than 1%. They will work this out with the City. The Council thanked them for their presentation.
Wells Fargo (First Security Bank)
Tye Burgess explained who they represent and stated that Wells Fargo took over First Security
effective December 8, 2000. He provided information pertaining to the number of personnel
employed within their agency and the different jobs each individual does. He also presented
information on past performances. They will perform services either as a financial advisor or an
underwriter and will do everything necessary to structure the City's bonds in either case. He
explained the procedure for revenue bonds. He provided reasons why it would be best for them to
act as the underwriter. He presented information on all kinds of municipal debt and the differences
between a financial advisor and an underwriter. In both cases, they will help the City structure the
project. If they are hired as a financial advisor, somewhere down the line they will hire an
underwriter to underwrite open market bonds. Acting as the underwriter, their cost would be $8.00
per thousand dollars of debt. He broke down the various costs and steps totaling the $8.00
proposal. If both an underwriter and a financial advisor were hired, it would cost more.
Tye discussed the sources for funding the project, which would be the CIB, Board of Water
Resources and the Drinking Water Board. Once it is determined what amount the City could
expect from these sources, he explained the different options in order to come up with the balance.
One option would be to hold an election for a general obligation bond. However, if the election
failed, the State would not give the City a dime towards this project. Another option would be to
pledge a portion of the City's sales tax to pay off an excise tax revenue bond. This bond could be
sold on the open market.
Tye reviewed the City's present financial condition and felt that it is in very good shape. He
presented a scenario of projected revenue from the above sources (loans and grants), what the City
presently has and what they can expend in future years to pay back the amount needed for the
project. The scenario used 2% per year for future expenditures and growth. Another scenario
presented was paying back the debt in 25 years versus 20 years and using a Capital Appreciation
Bond. The Council thanked them for their presentation.
The Council discussed the presentations conducted by the above consultants. Pat Larsen stated
that she called a couple different entities for references and received a good recommendation on
both firms. MOTION. Councilmember Denison moved that Tye Burgess, Wells Fargo, be hired as
the bond underwriter for the water transmission line replacement. Motion seconded by
Councilmember Piccolo and carried.
Meeting adjourned at 11:45 a.m.
ATTEST: Lou Colosimo, Mayor
Joanne Lessar, City Recorder