Town Council Regular Session


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  Item # H.       
Meeting Date: 01/15/2014  
Requested by: Shirley Seng Submitted By: Shirley Seng, Water
Department: Water  

Information
SUBJECT:
Resolution No. (R)14-03, approving a loan in the amount not to exceed $5,000,000.00 from the Water Infrastructure Finance Authority of Arizona for Oro Valley Water Utility Phases 2, 3 & 4 of the Advanced Metering Infrastructure and Meter Replacement Project; authorizing the execution and delivery of Loan Agreement No. 920246-14; authorizing the taking of all other actions necessary to the consummation of the transactions contemplated by this resolution and declaring an emergency
RECOMMENDATION:
Staff recommends approval.

EXECUTIVE SUMMARY:
On September 4, 2013, Council adopted Resolution No. (R)13-52, authorizing the Water Utility to apply for a loan from the Water Infrastructure Finance Authority of Arizona (WIFA) to finance Phases 2, 3 & 4 of the Advanced Metering Infrastructure and Meter Replacement Project.

On December 18, 2013, WIFA approved their Loan Resolution 2014-003 which authorized WIFA and the Town to enter into a loan agreement in the amount not to exceed $5,000,000.00.  The term of the loan would be for 15 years with an expected combined interest and fee rate of 2.92%. The Town Council is now being asked to authorize the Finance Director and Water Utility Director to take such steps as necessary to execute and implement the loan agreement.  The WIFA loan will be repaid with water sales revenue from the Enterprise Fund.

The Water Utility Commission and its Finance Subcommittee has been briefed on this loan.

BACKGROUND OR DETAILED INFORMATION:
WIFA's interest rate index is currently 3.50%.  The Town is eligible for a subsidy rate index of 85% which brings the interest rate down to 2.97%.  Additionally, WIFA considers meter replacement projects as "green projects" which allows the Town to receive an additional discount, bringing the final estimated interest rate to 2.92%.  The actual interest rate will not be determined until 3 days prior to closing. 

The Town's Bond Council has reviewed all documents for the loan agreement.  The resolution authorizes the Finance Director, Water Utility Director and Town Clerk to execute and deliver the loan.   

The Water Utility began the Advanced Meter Infrastructure (AMI) and Meter Replacement Project in FY 2011-12 which continued through FY 2012-13.  Please note the first phase of the project was financed with cash reserves in the Enterprise Fund.

The WIFA loan will finance the remaining 3 phases of the AMI and Meter Replacement Project as follows:
  • Phase 2 - Replacement of approximately 4,000 meters to be completed in FY 2013-14
  • Phase 3 - Replacement of approximately 5,600 meters to be completed in FY 2014-15
  • Phase 4 - Replacement of approximately 4,700 meters to be completed in FY 2015-16
FISCAL IMPACT:
The adoption of Resolution No. (R)14-03, authorizing the execution of this loan, will provide the Water Utility the means to finance these projects and maintain an adequate cash balance over the long term.  The loan will be for a 15-year term and will contain an anticipated interest rate of approximately 2.92%.  The annual debt service is estimated to be $413,000 per year, which will come from revenues collected from water sales.  This loan and annual payments are included in our 5-year projection in the recent water rates analysis.

SUGGESTED MOTION:
I MOVE to (approve or deny) Resolution No. (R)14-03, approving a loan in the amount not to exceed $5,000,000.00 from the Water Infrastructure Finance Authority of Arizona for Oro Valley Water Utility Phases 2, 3 & 4 of the Advanced Metering Infrastructure and Meter Replacement Project; authorizing the execution and delivery of Loan Agreement No. 920246-14; authorizing the taking of all other actions necessary to the consummation of the transactions contemplated by this resolution and declaring an emergency.
Attachments
(R)14-03 WIFA Loan


    

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