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October 21, 2019- Work Session Minutes - Capital Improvement Projects

Capital Improvement Projects Update
Monday, October 21, 2019

A Special Meeting of the City Commission for the City of Buchanan was scheduled at City Hall, 302 N. Redbud Trail, Buchanan, Michigan Monday, October 21, 2019 at 5:30 p.m.  The Mayor called the meeting to order at 5:33 p.m. 

Members present: Mayor Moore, Commissioners Toerne, Downey, Weedon, and Denison
Members absent:  None
Staff present:        City Manager Bill Marx, Wastewater Treatment Plant Operator Bill Housand, Craig Miller, City Treasurer Juli O’Bryant, and City Clerk Brenda Hess
Guests/Visitors present:  Mike Schwartz and Jason Washler from Prein and Newhof and 2 members of the public

Mike Schwartz from Prein-Newhof reviewed grant which provided an inventory and replacement plan for water and wastewater infrastructure.

Sanitary system was reviewed.  System materials and ages were reviewed.  SAW grant included 6 reports.  Scale of 1 to 5 with one being good and five being bad.  Smoke testing was conducted.  30% of system in failed category and 50% in fair. Front Street, Redbud and Main corridors are in the poorest condition due the oldest age.  Shared photos of problems.  Infiltration was noted in the downtown area from the creek and large quantities of storm water go directly into sanitary sewers.  Assets need to be replaced using a priority matrix, noting most critical and high-risk areas.  

Storm water system had the same examination as the sanitary system.  The City’s storm water ends up in McCoy Creek and on to the St. Joseph River.  Storm system dating back to the 1920s with an expansion in the 1950s.  Generally, storm water system is not in as bad shape as the sanitary system.  Noted pockets of debris, but lower amounts of structural defects.  Followed the same rating scale as sanitary system. Same areas were structurally in need.  Storm systems can fail, causing flooding, which is an inconvenience, but sanitary failures relate to public health and involve the DEQ.  Storm water systems are not built to today’s standards and City pipes are not designed to handle the flooding of today.  

Water system, but the SAW grant did not cover the evaluation of water systems. We were conducting a water reliability study through the DPW.  The water system dates back to 1915 and is the oldest of the 3 systems.  There is a combination of galvanized, ductal iron, and plastic delivery lines which is unique having 3 different types of materials.  Cast iron breaks easier than the other 2 materials.  Water service runs by pressure, not gravity.  The City predominately has 4-inch mains which need to be upgraded to 6-inch and can be part of the lead copper replacement program which is mandated by the State.

Jason Washler, of Prein and Newhof noted it is important to have coordination of replacement projects as to not have to start over and keep ripping up roads repeatedly.  The middle of the City and south and north corridors are in the most need.  The 29 total planned projects have been placed on a 20-year schedule.  The sections of Redbud and Front will need to be started as they make up the core of the projects.

Consideration of three questions 1) What would make sense for a bonded project?  2) What would be the scope of each project? What would be the cost for each project moving forward?  Replacement of storm, sanitary, water, and roads in the core area fixed simultaneously.  First project will begin in 2022 which would be a 2-year project for a total of $9,000,000.  Deciding a schedule and a scope for the project.  Financing comes next.  USDA Rural Development Plan would provide a 40-year plan.  Andy Campbell of Miller-Canfield is leaning towards this funding of the project.

Marx asked for clarification of original cost of $60,000,000 which covered everything.  Readjusted plan to bond every 4 years into smaller projects over the 20 years instead of a plan to bond every two years.  A four-year cycle is good for planning and financing.  New lift stations were removed from this bond into the next bonding period because they can be fixed with existing parts. Projects would be lead-galvanized service replacement driven which would occur over the next 20 years.  

Housand reiterated the need for improvement as the wastewater plant treats a high volume of storm water which is directly related to issues in the downtown area with the creek breaching into the system.  The sanitary system cannot keep out the storm water.

The plan has divided up the entire replacement into the 29 projects by price and the order of completion can be adjusted.

Moore inquired about the practically of repairs and how they would be divided during construction and the impact this would have on residents and business owners.  Schwartz noted sanitary lines go through the middle of the street and will require entire streets be closed for periods of time.  Described how City of Vicksburg is currently working on replacement.  Construction will move slowly so residents will be prepared and not have surprises.  There will be the need for periodic detours.  Marx said construction would start at the wastewater treatment plant working on the interceptor sewer to the downtown intersection of Front and Redbud.  

A permanent dewatering system will be added to the downtown area.  Moore commented upon a way to help the downtown businesses during these projects.  Washler noted that staging by contractors combined with good communication from the City and the construction companies will help the downtown business owners to lessen negative impact.  Moore encouraged public education and noted planning is key.  Underground work can be completed in winter, but finish work on the surface can only occur in the summer.  

Housand noted that a massive failure of the system would be far more inconvenient to residents and business owners than thoughtful, well planned construction projects. Moore expressed concern for people who will be most affected but won’t attend meetings.  Parking alternatives need to be planned well in advance.  Public education is key, and the planning of projects won’t happen in the dark.  

Marx reminded all that the yellow projects from the map are the most important to get started.  He also expressed interest in seeing how the community of Vicksburg’s project is going.  Noted the City is just starting the conversation regarding these projects and there will be many planning meetings.  Dewatering will greatly improve the downtown area.  There are many smaller issues that can also be addressed throughout these projects.

Schwartz noted that sewers are either in the middle of the street, or 6 feet from center so vehicles do not travel over them.  Noted all utilities need to be involved in planning including cable, electric, fiber optic, phone, and gas.  Noted new downtown amenities and streetscapes can be improved as part of the underground projects.  Noted it is premature to get too much public input regarding streetscape changes because financing needs to be addressed first.   

Housand noted that water and wastewater departments are feeling pressure from State to complete upgrade projects.  EGLE (Environment, Great Lakes and Energy) wants the City to have a plan and to start moving forward and address the issue of storm water in the sanitary system soon.

Residents and business owners should not worry at this point as City is far from beginning any projects.  The more the Commission understands, the better they can explain it to residents as the time approaches.  

There was general discussion about the planning process used in Vicksburg.  The focus is to solve underground issues and then any other projects that come out of the process are an added bonus.  Emphasizing the end product helps people understand during the inconvenience of the construction process.

O’Bryant reviewed the five capital improvement projects 1) The Oxidation Ditch $9M 2) DPW Building $2M 3) Sewer Improvements $11.8M 4) Water Improvements $7.2M and 5) General Road and Storm Water $3M.  O’Bryant emphasized that these are preliminary discussions.

Oxidation ditch is on track for start in April of 2020.  $9,000,000 of the oxidation ditch bond payments have been structured into the latest water and sewer rate increases which were an 11% increase for consumers.  The bond will be a 20-year bond.  

O’Bryant shared a letter from Andy Campbell, the City’s Financial Advisor from Baker-Tilley, which reported the City used conservative estimates during rate increase discussions held earlier year.  He believes City may be able to work projects into the current rate structure which has increases of 8% per year going forward.  This is dependent upon the funding commitment from USDA Rural Development if the City were to choose to go with that option.

The USDA could provide several possible options for funding.  They could offer an intermediate interest rate (2.375%) and no grant money; an intermediate interest rate and some grant money; a poverty interest rate (1.75%) and no grant money; or poverty interest rate and some grant money. Once the City has a discussion with the USDA about potential projects, Campbell will reassess the current rate track based on the funding commitment. Currently the estimate is a $5 per month increase to satisfy the annual bond payments for the Water and Sewer portion of the Capital Improvement Projects which does not include the rate increase for the Oxidation Ditch.  The yearly debt repayment for a 40-year USDA loan will be $107,000.  The City is currently levying under the maximum allowed by the Headlee Amendment by approximately 1.6000 mills. It was also noted that the average house has a taxable value of $40,000 would pay an additional $66 on their summer tax bill to cover the 40-year debt.

DPW building would require a loan $2,000,000 for 15 years at a 3.9% loan rate. Campbell believes this rate it too high and the City could get a lower interest by going out for a bond.  The City would save on interest but would have to pay between $25,000 and $30,000 for bond issuance costs and fees.

Additionally, O’Bryant reported the City spoke with Dan Fette from Berrien County regarding funding for the DPW building project.  The County can issue bonds for local governments.  The advantages are:
1.  The County can obtain better bond rates as they have a high credit rating of A++
2.  The County DPW would then run the project freeing up local staff to focus on regular projects and not on the construction project.
3.  The County does not have to run an election for these which saves time and money.
The County has sponsored $40,000,000 in bonding.  The downside to going with the County is USDA grants are not included in this.  If City went through the County, we would not get grant money.

Moore inquired as to future work sessions.  Marx commented City needs to hear from USDA regarding cost. Prein-Newhof to help in process so we can decide if we go through County.  Noted Buchanan has a low enough per capita income level but doesn’t have a “public crisis” which is required to get grants.  Through Rural Development we will most likely get a grant for sewer, but not for water according to Washler.  The County has a streamlined process for approving grants which would only take 3 months.  

Being no further discussion, The Mayor adjourned the meeting at 7:05 p.m

____________________________            ____________________________
Brenda J. Hess,  City Clerk                         Patricia Moore, Mayor

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