1 00:00:04,120 --> 00:00:09,480 First thing is stand for pledge of allegiance or moment of silence. 2 00:00:10,000 --> 00:00:17,360 » I pledge allegiance to the flag >> of the United States of America and to 3 00:00:14,840 --> 00:00:24,120 the republic for which it stands, one nation under God, indivisible, with 4 00:00:20,440 --> 00:00:24,120 liberty and justice for all. 5 00:00:28,800 --> 00:00:31,520 » Thank you, everybody. 6 00:00:33,800 --> 00:00:42,080 Okay, tonight's meeting consists of funding analysis from Shannon. 7 00:00:40,280 --> 00:00:45,120 And I guess all these papers are from you. 8 00:00:43,080 --> 00:00:47,440 » Yes, I got a revised one. >> Oh, more. 9 00:00:46,160 --> 00:00:51,640 » It's sent to you this afternoon. >> Oh, yeah. 10 00:00:48,200 --> 00:00:54,120 » So, I think you got it. I sent it out. >> So, 11 00:00:56,600 --> 00:01:01,240 » We had the one-pager in there. >> It was the one that was no good. 12 00:01:00,600 --> 00:01:05,440 » I know. >> Yeah, we needed to make the correction, 13 00:01:03,080 --> 00:01:05,440 so I'm sorry. 14 00:01:06,320 --> 00:01:12,120 » Here's some [clears throat] extras. >> Thank you. 15 00:01:09,680 --> 00:01:12,120 » So, 16 00:01:12,280 --> 00:01:22,800 we have three projects that consist of a well for $735,000, 17 00:01:18,160 --> 00:01:22,800 water main reconstruction for $827,040, 18 00:01:23,120 --> 00:01:30,880 and treatment plant, which is the big one that's is $2,835,000. 19 00:01:27,840 --> 00:01:36,120 And what I had indicated in the letter is that ultimately the public facilities 20 00:01:33,400 --> 00:01:40,600 authority's view of the world is that they look at your median household 21 00:01:37,560 --> 00:01:45,640 income and they indicate that uh the residents on water projects are able to 22 00:01:42,800 --> 00:01:49,640 afford 1% of your median household income on water projects 23 00:01:47,920 --> 00:01:53,240 and you have to reach that level before you're grant eligible. 24 00:01:51,760 --> 00:01:58,040 So, they're saying that we're only going to give you a loan until your water rate 25 00:01:55,640 --> 00:02:01,840 gets to $81.67 per month. 26 00:01:59,720 --> 00:02:05,600 And after that, if your project costs are enough and you're taking loan 27 00:02:04,080 --> 00:02:09,720 uh to such an extent that you're going to exceed $81.67 28 00:02:07,800 --> 00:02:14,440 per month, and that's including your operating costs and all those things, 29 00:02:12,320 --> 00:02:20,880 that then you're grant eligible. And they say that that grant eligibility is 30 00:02:17,520 --> 00:02:25,160 up to $10 million for $20,000 per connection. 31 00:02:22,600 --> 00:02:29,240 That first draft of the letter I just relied on the 10 million, but ultimately 32 00:02:27,640 --> 00:02:33,120 you're capped based on your number of connections at $4,420,000. 33 00:02:34,480 --> 00:02:39,920 You know, when you put a project together and they evaluate it, that's 34 00:02:37,520 --> 00:02:42,760 how much grant you're you're capped at. By state statute, they won't go beyond 35 00:02:41,920 --> 00:02:46,320 it for any good reason. 36 00:02:44,440 --> 00:02:49,920 The only way you can exceed it is if you were successful in getting a state 37 00:02:47,840 --> 00:02:55,400 appropriation. And so, I looked at two different ways, 38 00:02:53,080 --> 00:02:59,519 you know, of uh well, I looked at two scenarios for your three projects that 39 00:02:58,080 --> 00:03:03,560 total uh 40 00:03:00,239 --> 00:03:03,560 it's about 8 million per 41 00:03:03,800 --> 00:03:09,959 It's 8 million 397,000 for all three projects. So, 42 00:03:08,280 --> 00:03:13,720 the first scenario I looked at, well, what if we got just to the affordability 43 00:03:12,519 --> 00:03:18,080 level, and since they weren't going to give us 44 00:03:15,400 --> 00:03:22,560 any more grant, and we, you know, maxed out our loan to get to the 8167, where 45 00:03:20,720 --> 00:03:25,680 does that get us? And that would get you the water 46 00:03:23,920 --> 00:03:29,640 treatment and well project, but not the water main project. So, 47 00:03:28,280 --> 00:03:34,080 they they they tied almost exactly based on the cost 48 00:03:32,200 --> 00:03:36,560 estimates to uh 49 00:03:35,000 --> 00:03:40,920 based on the terms that you'll get on the PFA loan, which will be 50 00:03:39,000 --> 00:03:46,239 it'll be a state loan of 30-year term between 2 and 2 and 1/2% 51 00:03:44,120 --> 00:03:49,800 interest. I've used 2 and 1/2% interest in this estimate. 52 00:03:47,959 --> 00:03:57,200 And so, that annual loan payment that puts you 53 00:03:52,560 --> 00:03:57,200 at that affordability level is $150,350, 54 00:03:57,680 --> 00:04:05,560 which you know, is a loan of 3,146,000. 55 00:04:03,640 --> 00:04:11,440 So, I'm what I'm telling you is the state will say 56 00:04:07,240 --> 00:04:17,400 this city can afford a loan of 3,146,000 over 30 years at 2.5% interest because 57 00:04:14,800 --> 00:04:20,720 that gets you to 1.2% of your median household income, which is their 58 00:04:18,880 --> 00:04:23,800 affordability threshold before you're grant eligible. 59 00:04:22,600 --> 00:04:26,800 And so, after [clears throat] that, to maximize 60 00:04:25,560 --> 00:04:31,919 the grant, you know, you got another 4,420,000 61 00:04:30,120 --> 00:04:35,520 dollars in project costs that you would want to incur [clears throat] because at 62 00:04:33,160 --> 00:04:40,880 that point you're grant eligible and you can cover that amount with free 63 00:04:37,600 --> 00:04:46,640 dough from the state. And so, that means the optimal sized project for maximizing 64 00:04:44,080 --> 00:04:51,560 our grant loan combination, minimizing the loan, maximizing the grant is about 65 00:04:48,919 --> 00:04:56,680 7,570,000 dollars. 66 00:04:52,880 --> 00:05:02,040 So, that means well or uh well and treatment almost are exactly 67 00:04:59,280 --> 00:05:05,440 that amount or within 4,000 dollars. If we throw on the water main instead of 68 00:05:04,240 --> 00:05:08,600 the well, you're going to have a little bit more 69 00:05:06,560 --> 00:05:12,280 loan because what the state will tell you is 70 00:05:09,960 --> 00:05:16,560 uh we'll fund you to your affordability 71 00:05:14,240 --> 00:05:20,400 level. You can choose to exceed it by taking more loan if you want to. 72 00:05:19,320 --> 00:05:24,520 But, you know, once you reach the cap on your 73 00:05:22,640 --> 00:05:29,080 grant, you've reached the cap on your grant and they're not going to 74 00:05:26,680 --> 00:05:31,160 that 4,420,000, they're not going to go up any beyond 75 00:05:30,680 --> 00:05:35,080 that. >> Any other improvements would be on us. 76 00:05:33,320 --> 00:05:39,080 » Yeah, but they would they would do it in the form of a 77 00:05:36,840 --> 00:05:44,480 long-term low-interest loan, but you'd have to decide that you want to increase 78 00:05:40,680 --> 00:05:50,320 your rates beyond that 8167 dollar level in order to do it. And so, 79 00:05:47,040 --> 00:05:54,240 the second page of this two-pager to do all three, 80 00:05:52,160 --> 00:05:59,480 I'm telling you that the supplemental loan that you have to take would make 81 00:05:56,480 --> 00:06:04,720 your take your own payment from 150,000 to 190,000. 82 00:06:01,880 --> 00:06:09,400 And that per user per month per average user would be $96.62 83 00:06:07,760 --> 00:06:12,400 rather than uh $81.67. 84 00:06:12,760 --> 00:06:18,760 And that estimate is based on your annual operating cost. You have a 85 00:06:16,760 --> 00:06:23,120 reserve requirement that the state will impose. It's called We call it a whiff 86 00:06:20,880 --> 00:06:28,880 reserve on this worksheet. They say that you have to set aside cash 87 00:06:26,200 --> 00:06:35,160 equal to 50 cents per thousand gallons pumped each year in your system 88 00:06:32,440 --> 00:06:40,240 uh as a cash reserve to maintain the stuff that they're funding. So, 89 00:06:37,560 --> 00:06:45,560 particularly the water treatment plant, you're supposed to accumulate that 800 90 00:06:42,760 --> 00:06:50,200 $8,500 each year. And over time, you use it to replace 91 00:06:48,000 --> 00:06:54,840 pumps at the water treatment plant and you know, critical assets that that wear 92 00:06:52,160 --> 00:06:59,640 out. It's a It's a short-lived asset reserve is what USDA calls it, but 93 00:06:58,160 --> 00:07:03,680 ultimately, it's a reserve that you're required to 94 00:07:01,360 --> 00:07:07,120 uh accumulate in order to pay for maintenance on this stuff. 95 00:07:05,280 --> 00:07:09,800 » Well, you know, that money is accumulated every every month now, you 96 00:07:09,760 --> 00:07:14,080 know. >> Yes. It already is, but 97 00:07:12,120 --> 00:07:18,919 » They want a like a little extra cushion or something? 98 00:07:15,400 --> 00:07:22,360 » Well, you mean ultimately, it would be uh 99 00:07:20,440 --> 00:07:25,960 We've used operating costs that should reflect what you're actually going to 100 00:07:24,000 --> 00:07:31,280 pay for operating costs. We've looked at audit data, you know, and 101 00:07:28,760 --> 00:07:34,520 what the new treatment plant work means with regard to what maintenance will 102 00:07:33,080 --> 00:07:37,000 cost. And so, 103 00:07:35,919 --> 00:07:41,560 uh based on your history, you may 104 00:07:38,320 --> 00:07:45,880 accumulate more than that $500, but the state requires you to accumulate that 105 00:07:43,640 --> 00:07:48,440 $8,500 a year. Uh 106 00:07:46,640 --> 00:07:53,080 » And that's throughout the entire the loan period, 30 years? 107 00:07:49,720 --> 00:07:58,000 » Yeah. Yeah. They're I don't I I haven't seen many letters go out on 108 00:07:55,640 --> 00:08:01,480 you haven't accumulated it, but it's it's a requirement of the loan agreement 109 00:07:59,720 --> 00:08:05,120 that you sign, and so, you know, you should be mindful of it. 110 00:08:03,560 --> 00:08:10,000 And I understand that that's part of this rate I'm communicating to you, but 111 00:08:07,520 --> 00:08:13,720 it's cash that stays in the city instead of going for a loan payment or operating 112 00:08:11,640 --> 00:08:18,640 costs. It's right accumulating for maintenance. So, 113 00:08:16,040 --> 00:08:22,360 So, for me, the decision is uh 114 00:08:20,240 --> 00:08:27,800 what approach to take with the public facilities authority on this, and I 115 00:08:24,200 --> 00:08:33,080 thought of a few different ways. Um You know, ultimately, if your bids came 116 00:08:30,280 --> 00:08:36,159 in better than expected on these three things, you may choose to do one as an 117 00:08:34,800 --> 00:08:40,000 alternate, which, you know, if your bids came in 118 00:08:38,039 --> 00:08:44,839 low, maybe you're doing all three because it's close enough to the funding 119 00:08:41,960 --> 00:08:51,040 package and maximizing the grant that uh you want to proceed. Uh otherwise, 120 00:08:48,400 --> 00:08:54,360 you know, this with consideration uh 121 00:08:51,640 --> 00:08:59,000 isn't a one-time lifetime deal. It's each time you have a project that you, 122 00:08:57,360 --> 00:09:03,880 you know, of significant size that you bring to the state. And so, if you have 123 00:09:01,360 --> 00:09:07,720 supplemental phases that you're going to be doing stuff in, 124 00:09:05,800 --> 00:09:11,800 maybe it becomes part of the second phase where you're eligible for that 125 00:09:09,920 --> 00:09:15,640 grant again because you've already brought your rates up to that 126 00:09:13,040 --> 00:09:20,880 affordability level. Those will continue to go up as the median household income 127 00:09:18,560 --> 00:09:24,560 rises, if that's the case. And so, but you're much closer to it 128 00:09:22,760 --> 00:09:28,240 than you are today, you know, with regard to what you 129 00:09:26,320 --> 00:09:31,320 what you'd be charging, and you know, your eligibility would be much closer. 130 00:09:30,040 --> 00:09:34,560 It wouldn't be this uh 131 00:09:32,760 --> 00:09:38,920 this uh significant increase that's required to get to the point where it's 132 00:09:36,080 --> 00:09:41,000 affordable. That's 96 bucks. That's just the cost of the water. 133 00:09:40,640 --> 00:09:45,760 » Yes. >> You know, what is the minimum now? 134 00:09:44,760 --> 00:09:49,520 What does it cost a month >> Like $12 or $13 a month just for the 135 00:09:48,320 --> 00:09:52,920 connection fee? >> Well, but the water 136 00:09:51,200 --> 00:09:57,040 » The water >> How many gallons do they get for the 137 00:09:54,520 --> 00:09:57,040 minimum? 138 00:09:57,320 --> 00:10:02,520 » I don't know. Give me a second. 139 00:10:00,640 --> 00:10:07,200 » I was just wondering how much that would basically and then we have contingencies 140 00:10:04,600 --> 00:10:10,800 fees on water and the sewer, but none of that would ever account for any of this, 141 00:10:10,160 --> 00:10:14,480 right? >> Well, 142 00:10:12,120 --> 00:10:19,280 that stuff, you know, this this rate I'm giving you is meant to include 143 00:10:17,400 --> 00:10:24,640 everything in your water system and completely cover operating, maintenance, 144 00:10:22,760 --> 00:10:29,360 asset reserve and loan payment that you'll have. So, 145 00:10:27,160 --> 00:10:33,120 you shouldn't have other expenses if we're doing this right at the end of the 146 00:10:30,760 --> 00:10:37,440 day outside of what I'm telling you your rate needs to be at to support it. If 147 00:10:35,680 --> 00:10:42,680 there is additional cost, we should be aware of those now so that we can throw 148 00:10:40,160 --> 00:10:46,200 those into the rate because it would reduce our loan amount. 149 00:10:44,560 --> 00:10:49,280 » I was wondering how much we have to go up 150 00:10:47,320 --> 00:10:51,720 by next summer, right, to be in compliance? 151 00:10:50,040 --> 00:10:57,440 » Well, they would make you Yes, they would make 152 00:10:54,240 --> 00:11:00,080 you adopt when you bid the project, you're going to close on your loan with 153 00:10:58,880 --> 00:11:05,000 the state and they will make you adopt uh a 154 00:11:02,839 --> 00:11:08,000 resolution establishing rates that are sufficient to pay the debt service on 155 00:11:06,960 --> 00:11:12,240 the loan. So, next summer is when you'd have to 156 00:11:09,920 --> 00:11:16,400 adopt a rate resolution when you bid the project uh 157 00:11:14,040 --> 00:11:20,160 establishing the new rates. They will allow you to phase it in over 158 00:11:18,400 --> 00:11:21,120 a couple of years if you choose to do so. 159 00:11:20,880 --> 00:11:24,480 » But >> Uh I was just working on a project 160 00:11:23,040 --> 00:11:29,520 yesterday where we were looking at phasing in that rate over 3 years, for 161 00:11:26,560 --> 00:11:33,640 example. And on a 3-year loan, which is what you're going to get when you get 162 00:11:31,080 --> 00:11:36,680 your grant eligibility. They'll be flexible on that. So, you 163 00:11:35,400 --> 00:11:40,120 don't have to do it all at once. >> That's what I was wondering. Do do we 164 00:11:38,080 --> 00:11:43,920 need to start the next quarter to go up a little bit and then each quarter keep 165 00:11:41,720 --> 00:11:48,120 going up a little bit or you say they got 3 years, so that helps. 166 00:11:46,200 --> 00:11:52,160 » 3 years of phasing it in, but you'll have to adopt a resolution that 167 00:11:49,720 --> 00:11:54,360 establishes those rates next summer. >> At the end of 3 years, we're up to that 168 00:11:54,040 --> 00:11:57,880 rate. >> Yep. And that resolution will have to 169 00:11:56,000 --> 00:12:00,640 state that. You'll have to state year one we're doing this, year two we're 170 00:11:59,200 --> 00:12:04,640 doing this, year three we're going to be here. 171 00:12:01,240 --> 00:12:07,720 » And hope to go up to the $81. >> Yes. 172 00:12:06,320 --> 00:12:11,280 » That's going to at least double our water bills for what 173 00:12:10,240 --> 00:12:15,280 people are paying right now. >> Oh, it's going to triple some of them 174 00:12:12,640 --> 00:12:19,080 like yours. So, right now our monthly is $12.83 for just for the contingency 175 00:12:17,800 --> 00:12:23,880 charge. And it's $4.08 up to 1,246 gallons. 176 00:12:22,800 --> 00:12:28,040 » How much? $4.08? >> $4.08. So, a lot of we have a lot of 177 00:12:26,400 --> 00:12:31,240 users that are that. >> So, you're probably 178 00:12:29,280 --> 00:12:37,000 » So, you're talking up in 60, 70 bucks. 179 00:12:34,680 --> 00:12:39,600 » Yeah. Yeah, we 180 00:12:38,120 --> 00:12:43,320 based on what it is started it's on like $20 would be a 181 00:12:41,960 --> 00:12:46,240 medium-sized customer. >> Right. Yep. I think mine is roughly 182 00:12:44,880 --> 00:12:48,978 around 20 bucks a month just for the water. 183 00:12:47,200 --> 00:12:51,000 » Yeah. What does >> [clears throat] 184 00:12:49,240 --> 00:12:54,200 » You This has nothing to do with waste waste water though. 185 00:12:51,960 --> 00:12:58,760 » No, this is just water. And they they view waste water they 186 00:12:56,480 --> 00:13:01,640 actually your affordability threshold is even higher and they would tell you that 187 00:13:00,240 --> 00:13:04,920 your rate would be need to be higher because it's based on 188 00:13:03,360 --> 00:13:10,160 1.4% of household income versus 1.2%. So, 189 00:13:08,640 --> 00:13:15,800 » What does that make that going up per gallon on something like that? If you 190 00:13:12,400 --> 00:13:18,040 had to have that at 80 at 80 what 80 >> 8167 191 00:13:16,480 --> 00:13:25,160 » 8167 and you did but the by that gallons 192 00:13:21,120 --> 00:13:25,160 What does that make that per per gallon? 193 00:13:25,600 --> 00:13:31,400 » Our average customer is probably in that 4,000 gallon per month range. 194 00:13:30,560 --> 00:13:35,760 » 3,000 >> No, I think our No, our No, we're 195 00:13:35,040 --> 00:13:38,200 » I don't know what our average >> Somewhere I want to say somewhere 196 00:13:36,880 --> 00:13:41,520 between two and three. >> Okay. 197 00:13:38,800 --> 00:13:45,040 » Our average cuz we have a lot of elderly or single 198 00:13:43,000 --> 00:13:49,880 um homes that just in the bare minimum is like 66, 36 for everything. 199 00:13:47,720 --> 00:13:54,440 » You see a lot of 35 gallons. >> Yeah. Yep. Yep, that's roughly right 200 00:13:51,800 --> 00:13:57,240 around there. >> Oh, boy. 201 00:13:55,360 --> 00:13:59,480 » Yeah. That's going to be a hard pill of to swallow for everybody. 202 00:13:58,880 --> 00:14:03,640 » Mhm. >> Yeah. 203 00:14:00,840 --> 00:14:03,640 » Holy cow. 204 00:14:04,720 --> 00:14:13,680 » Cuz if you're going to put the water up just to that, the rest of it is 205 00:14:09,120 --> 00:14:17,480 it's going to be $140 to $150 a month. >> So, how does Do you know how contingency 206 00:14:15,800 --> 00:14:22,680 fees work? You know, that was kind of a little 207 00:14:18,520 --> 00:14:27,320 fee to help create money for the operation of water and sewer. 208 00:14:25,400 --> 00:14:31,640 So, would we still want to keep that contingency fee on there that we're 209 00:14:29,680 --> 00:14:37,720 raising the water so much or could we drop the contingency fee on the water to 210 00:14:35,520 --> 00:14:40,680 help compensate for the big increase in the 211 00:14:39,680 --> 00:14:44,920 cost per gallon? >> So, how do you charge the contingency 212 00:14:42,640 --> 00:14:47,320 fee and what is it used for? >> It's 213 00:14:45,760 --> 00:14:49,360 » goes just to the water fund just to >> accumulate cash. 214 00:14:48,640 --> 00:14:53,280 » Right. >> That's kind of like for the maintenance, 215 00:14:51,080 --> 00:14:59,000 you know, pumps and and stuff. >> So, you you 216 00:14:55,960 --> 00:15:03,680 if it's just accumulating cash and it's and it's not going for standard 217 00:15:01,160 --> 00:15:07,320 operations and maintenance on an annual basis. So, if it's not paying your 218 00:15:05,240 --> 00:15:11,600 employees, it's just paying for big projects or repairs as they come along, 219 00:15:10,000 --> 00:15:13,920 you would not need to include that in your rate. 220 00:15:12,760 --> 00:15:14,720 » You could drop that. >> Yes. 221 00:15:14,400 --> 00:15:18,400 » To make >> of the $8,500 you'd be relying on at 222 00:15:17,200 --> 00:15:24,480 that point. Um but you wouldn't have if that 223 00:15:21,160 --> 00:15:29,160 contingency fee is large, you'd be able to reduce that and but you're adding on 224 00:15:27,560 --> 00:15:32,440 a bunch of other, you know, basically loan payments is what you're really 225 00:15:30,600 --> 00:15:35,920 adding on next. Of 150 grand. 226 00:15:34,160 --> 00:15:37,440 » How much is the contingency per month right now? 227 00:15:36,400 --> 00:15:42,440 » 1283. >> 1283 so that's 228 00:15:39,440 --> 00:15:42,440 123,000 229 00:15:42,800 --> 00:15:46,560 » That just goes into the general water. >> $50 a year. 230 00:15:45,600 --> 00:15:50,800 » But for whatever. >> Per per household 231 00:15:48,480 --> 00:15:52,400 the contingency would add up to 150 dollars a year per 232 00:15:51,560 --> 00:15:54,320 » Roughly. Yep. 233 00:15:52,720 --> 00:15:57,200 » But holy cow what we're going up on the rate is going to be 234 00:15:55,760 --> 00:16:01,040 » But you know another thing is two to think about is there's a lot of cities 235 00:15:58,920 --> 00:16:04,280 that if you're connected whether you actually have water in your home or not 236 00:16:02,800 --> 00:16:08,480 or whether your your water is shut off you're still paying that fee. 237 00:16:06,320 --> 00:16:11,160 And we do not Correct. We do not charge that. 238 00:16:09,120 --> 00:16:14,480 » Yeah. >> We don't have a lot of homes like that 239 00:16:12,920 --> 00:16:17,480 but that is something to consider as well. 240 00:16:15,200 --> 00:16:17,480 » Yeah. 241 00:16:18,880 --> 00:16:21,320 Oh my. 242 00:16:23,600 --> 00:16:28,560 So we would have to be up to that 8167 at 243 00:16:26,960 --> 00:16:31,120 to get grant eligibility. >> To get the 244 00:16:29,520 --> 00:16:35,240 » But you do a smaller project and just take the low interest loan. Yes. You 245 00:16:33,400 --> 00:16:38,720 have the ability to do that. But generally if you're getting close to 246 00:16:36,560 --> 00:16:41,800 that 8167 you're going [clears throat] to want to 247 00:16:39,200 --> 00:16:44,280 maximize your grant and then do as big a project as you can to max out that 248 00:16:43,520 --> 00:16:47,960 grant. >> Cuz yeah cuz the funding 249 00:16:46,600 --> 00:16:52,320 well what we were awarded through the state I'm hoping You're saying that's 250 00:16:51,480 --> 00:16:56,280 what the state will come back in and say you 251 00:16:54,240 --> 00:17:01,156 know we're going to grant or I don't know it's not award is a better term. 252 00:16:59,160 --> 00:17:04,120 » Yeah and they they wait till they >> [laughter] 253 00:17:02,480 --> 00:17:08,480 » They wait till to do their final commitment until you have the bids in 254 00:17:06,000 --> 00:17:11,079 and for your project which stinks. >> You wish you would 255 00:17:09,560 --> 00:17:16,199 » have it right now so you'd know what you're getting into but 256 00:17:12,920 --> 00:17:22,040 that that award is made essentially when you're bidding your 257 00:17:17,480 --> 00:17:27,439 project and at that point they're about based on these factors to see what the 258 00:17:23,839 --> 00:17:27,439 grant loan combination is. 259 00:17:27,720 --> 00:17:37,800 » If I get my figuring right, it's about $68 for I think I took 260 00:17:33,120 --> 00:17:43,720 I just took a 68 * 12 that's $816 a year more just for the water. 261 00:17:40,360 --> 00:17:48,240 You know, so I sort of be done for the minimum to be $816 more per year per 262 00:17:47,200 --> 00:17:52,160 meter you know as a minimum usage. 263 00:17:58,360 --> 00:18:05,880 So if you added all the stuff up and just the water right now, the water and 264 00:18:03,000 --> 00:18:13,640 the contingency. What did you say the water was uh 265 00:18:08,120 --> 00:18:13,640 » $4.08 up to 1246 gallons. 266 00:18:18,040 --> 00:18:23,240 » Yeah, well we're getting in order we have 3 267 00:18:21,040 --> 00:18:25,280 years to get it up to there, right? Just got to have a plan. 268 00:18:24,640 --> 00:18:27,120 » Yes. >> Okay. 269 00:18:25,920 --> 00:18:32,600 » And we got to understand where you're going, you know, and 270 00:18:29,360 --> 00:18:37,840 how you want to get there. So typically I see the rate increases, 271 00:18:35,360 --> 00:18:42,040 you know, being in you know, some some communities start in advance but by and 272 00:18:40,200 --> 00:18:46,160 large most are when we're awarding a construction 273 00:18:43,440 --> 00:18:49,880 contract or adopting rate increases because the people are going to see the 274 00:18:47,240 --> 00:18:52,680 work happening in the community and you know, we're increasing rates so they can 275 00:18:51,480 --> 00:18:56,280 tie the two together. >> Does it sell sell the project better 276 00:18:54,600 --> 00:18:59,680 doing it that way? >> It always 277 00:18:57,520 --> 00:19:02,720 there you know, nobody wants to pay three times their water bill and so 278 00:19:01,240 --> 00:19:05,360 people are going to be unhappy about that but 279 00:19:03,643 --> 00:19:08,960 » [clears throat] >> you know, if you're also telling him 280 00:19:07,000 --> 00:19:12,480 that we maximize our grant to do these other things the well, you know, part of 281 00:19:10,880 --> 00:19:15,720 the treatment plant project, and we got $4,420,000 282 00:19:14,280 --> 00:19:18,160 in free money. Um 283 00:19:16,560 --> 00:19:22,600 you know, it I would just say it could be worse. 284 00:19:21,040 --> 00:19:26,800 If that wasn't available, we didn't maximize that. 285 00:19:23,800 --> 00:19:26,800 » Yes. Um 286 00:19:28,800 --> 00:19:36,120 » But, I understand the the politics of of making that kind of an increase. It's 287 00:19:33,080 --> 00:19:36,120 not pleasant. So, 288 00:19:40,323 --> 00:19:42,343 » [clears throat] 289 00:19:47,400 --> 00:19:52,200 » So, you're talking raising it like three times. I just 290 00:19:51,000 --> 00:19:55,880 pulled my bill cuz I haven't brought it home yet. 291 00:19:53,240 --> 00:19:59,440 And I'm on the lower I'm around average, but my bill just for the water is $23, 292 00:19:57,920 --> 00:20:03,120 $24 a month. >> You pay another 12 for that contingency? 293 00:20:01,200 --> 00:20:07,160 » No, that's including that. That's That's the contingency and my gallons. 294 00:20:04,840 --> 00:20:09,680 » Yeah. Okay. And you're 295 00:20:07,800 --> 00:20:11,440 » And we just need to get that 24 up to the 81. 296 00:20:11,000 --> 00:20:14,800 » Yes. >> Well, we know that 297 00:20:12,800 --> 00:20:19,040 contingency is free we can leave in there then. 298 00:20:15,760 --> 00:20:23,200 » Well, you're you're going to $81, you're probably reducing what you're set aside 299 00:20:21,040 --> 00:20:28,320 in cash because you're only going to be set setting aside $8,500 a year at that 300 00:20:26,360 --> 00:20:31,720 point. Your contingency fee is probably accumulating more than that. 301 00:20:30,440 --> 00:20:36,040 And so, but the thought is is if we have a new 302 00:20:33,680 --> 00:20:40,760 treat or you know, like new treatment facility and we've replaced some stuff 303 00:20:38,000 --> 00:20:44,600 that's been breaking, hopefully our our uh maintenance costs aren't going to be 304 00:20:42,680 --> 00:20:48,280 as far as having repairs and such aren't going to be as bad. We can get by on a 305 00:20:46,360 --> 00:20:51,080 lesser contingency amount. >> Well, people need to understand that 306 00:20:50,080 --> 00:20:55,720 that backup well over here 307 00:20:53,520 --> 00:20:59,520 is probably man, I mean, it originally was sunk in 308 00:20:57,720 --> 00:21:02,240 the ground probably almost 100 years ago. 309 00:21:00,440 --> 00:21:04,360 80 years ago for sure. >> Yeah. 310 00:21:02,480 --> 00:21:08,360 » And it doesn't only pump about 60 gallons a minute, I believe it's 311 00:21:06,000 --> 00:21:13,160 something like that. So, and you know, if the main well went down really bad, 312 00:21:11,400 --> 00:21:18,080 it has a hard time to keep up. People need to understand that we are making 313 00:21:15,320 --> 00:21:21,840 things better and it cost money to make things better. 314 00:21:19,920 --> 00:21:27,040 You know, the other well has been there for many years already, too. 315 00:21:25,200 --> 00:21:31,560 And the treatment plant, that needs a lot of work inside, so 316 00:21:29,320 --> 00:21:33,160 » $6.8 million worth is what the engineer estimated to that. 317 00:21:32,440 --> 00:21:36,800 » How much? >> $6.8 million. 318 00:21:34,880 --> 00:21:40,040 That's the bulk of the cost of all of this stuff. He said treatment project is 319 00:21:39,000 --> 00:21:41,499 the expensive one. >> Yeah, right. 320 00:21:40,960 --> 00:21:43,480 » And >> [clears throat] 321 00:21:41,520 --> 00:21:45,960 » cuz everything the infrastructure in that building is right across the 322 00:21:44,800 --> 00:21:49,000 street. It's It's at end of life, you know, it's 323 00:21:48,705 --> 00:21:52,480 » [clears throat] >> And people got to understand there's new 324 00:21:50,520 --> 00:21:57,040 regulations like the chlorine and the other stuff. It has to be isolated. This 325 00:21:55,000 --> 00:22:00,360 one's sitting out there in the same building and that's why all the 326 00:21:58,160 --> 00:22:04,640 electrical gets corroded up and everything. So, you know, we're 327 00:22:02,760 --> 00:22:08,360 updating a facility that's probably been there since 328 00:22:06,520 --> 00:22:11,960 Oh, man, who knows? >> I think it's 100 years old, wasn't it? 329 00:22:09,840 --> 00:22:12,960 Or close to 100. >> Yeah. 330 00:22:12,320 --> 00:22:14,200 » The building >> You think so? 331 00:22:13,760 --> 00:22:16,280 » Yeah, I think >> I think that's what they said, yeah. 332 00:22:15,640 --> 00:22:20,440 » I I think it was >> That's what Brian said. 333 00:22:17,920 --> 00:22:23,680 And really, the the brick itself is in beautiful shape, but it's the equipment 334 00:22:22,520 --> 00:22:27,760 inside that's >> Yeah, that's looking good shape. 335 00:22:25,360 --> 00:22:32,440 » It does. There's nothing, you know, really that bad on the exterior. It's 336 00:22:30,880 --> 00:22:35,800 all interior. >> But it's on 337 00:22:33,720 --> 00:22:38,400 borrowed time for the last 10 years. >> Oh, yeah. 338 00:22:37,040 --> 00:22:41,400 And we're just hoping we can get by another 339 00:22:39,880 --> 00:22:44,800 12 months. >> Just working on one in Howard Lake, 340 00:22:43,160 --> 00:22:49,240 that's $21 million and their rates are going to 90 some 341 00:22:47,240 --> 00:22:52,360 dollars and they're not happy about that, either. So, it's uh 342 00:22:50,960 --> 00:22:55,480 » How big a town is that? >> Howard Lake. 343 00:22:53,840 --> 00:22:58,720 A little over 2,500, I think. >> Yeah, so they got more people to spread 344 00:22:57,040 --> 00:23:02,360 it out on, too. That helps. >> But the loan they're taking is 345 00:23:00,800 --> 00:23:05,600 uh I think it's closer to 17 million. 346 00:23:04,440 --> 00:23:08,720 » Oh, wow. >> Well, 347 00:23:06,160 --> 00:23:11,920 » 30-year 30-year there, too? >> It should be, yeah. 348 00:23:10,320 --> 00:23:15,360 Right now, they've shot them 20 cuz they didn't think they were above their 349 00:23:13,080 --> 00:23:18,800 affordability level, but they are, and which we can get a 30-year there. 350 00:23:17,520 --> 00:23:21,680 I don't think you should worry about that. 351 00:23:20,000 --> 00:23:25,760 » So, for us then, that's the main thing is just getting up to that 8167 a month? 352 00:23:24,080 --> 00:23:29,240 » Yeah, just understanding that that's what you have to get to, you know, 353 00:23:27,280 --> 00:23:34,520 before you dive even deeper into our construction contract. 354 00:23:32,040 --> 00:23:39,560 It's it's important to know how the state's going to view this, and 355 00:23:37,520 --> 00:23:44,400 you know, over time the two things that work against you are 356 00:23:42,680 --> 00:23:48,360 most likely median household incomes will continue to rise, which means their 357 00:23:46,320 --> 00:23:54,560 affordability level would go up, and construction inflation is horrible. Um 358 00:23:51,200 --> 00:23:58,800 these water treatment plants have through COVID doubled, you know, almost 359 00:23:56,680 --> 00:24:02,680 in cost. And so, I don't expect we'll see a doubling again, cuz then nobody 360 00:24:00,680 --> 00:24:06,720 will be able to afford to do anything at all, but they they went up 361 00:24:04,280 --> 00:24:10,520 significantly, and so generally, we think the projects are 362 00:24:08,080 --> 00:24:13,520 going to get only more expensive. Um so, 363 00:24:11,880 --> 00:24:17,360 that's that's the thought on it, so. 364 00:24:15,640 --> 00:24:20,280 » But, if we sealed the deal, we have to have we got 3 years to get up to that 365 00:24:19,520 --> 00:24:21,880 eligibility. >> Yeah, they'll give you that amount of 366 00:24:21,400 --> 00:24:28,080 time. >> Okay, so we could take that $68 or 367 00:24:24,760 --> 00:24:33,240 whatever, 70 say 70, and divide that out per quarters, you know, we'd have 12 368 00:24:30,640 --> 00:24:37,920 quarters in that 3 years, or we could start the last quarter of this year, you 369 00:24:35,600 --> 00:24:42,240 know, and it won't be a such a 370 00:24:39,680 --> 00:24:45,440 shocker, you know, if you only went up Well, if you have 371 00:24:43,640 --> 00:24:49,520 12 quarters, and you went up $10 a quarter, it'd be 100 one year, right? 372 00:24:47,640 --> 00:24:52,800 So, you could make it phase in, and not hurt quite as 373 00:24:52,160 --> 00:24:56,440 much. >> So, is your just to be clear though, is 374 00:24:54,720 --> 00:24:58,080 your 20 bucks a month, or is that a quarter? 375 00:24:57,360 --> 00:24:59,312 » That's a month. >> Okay. 376 00:24:58,640 --> 00:25:00,720 » Yes. Yeah. >> [laughter] 377 00:24:59,600 --> 00:25:03,480 » Yeah, we do monthly billing. He's talking quarters, but yeah. 378 00:25:01,640 --> 00:25:07,440 » Yeah, that's right. I'm talking to the old way. Yeah, I'm still 379 00:25:05,960 --> 00:25:12,240 Yeah, thank you. Just want to make sure I wasn't 380 00:25:09,480 --> 00:25:15,200 » Just Yeah, just uh transitioned over to that. It How long 381 00:25:14,440 --> 00:25:19,200 has that been? >> Yeah, almost 2 years. 382 00:25:16,600 --> 00:25:19,200 » Is it really? 383 00:25:19,800 --> 00:25:25,120 » I'll have to give that some thought. See if we'd want to start it in September 384 00:25:23,360 --> 00:25:27,600 maybe. Of course, I don't know if we can even do that. 385 00:25:26,120 --> 00:25:31,280 » That's That's too soon on the >> Too soon, yeah. 386 00:25:28,640 --> 00:25:36,320 » I I try to have a community mailing or meeting as the project starts to develop 387 00:25:33,920 --> 00:25:40,520 if you're proceeding, you know, make everybody aware that, you know, we're 388 00:25:38,160 --> 00:25:43,760 going to be building a or bidding a water treatment plant project along with 389 00:25:42,480 --> 00:25:49,080 other stuff uh in the, you know, early spring or 390 00:25:46,600 --> 00:25:51,120 early summer. And uh once we do that, we're going to [clears throat] be 391 00:25:49,880 --> 00:25:55,880 committed. Uh most likely, you know, 392 00:25:54,200 --> 00:25:59,800 the state's going to the state's going to essentially tell us 393 00:25:57,600 --> 00:26:00,360 this is where we need to be in order to uh 394 00:26:00,227 --> 00:26:03,760 » [clears throat] >> fund the project. So 395 00:26:06,040 --> 00:26:11,960 » And this basing it on the median household income, that must just be a 396 00:26:10,000 --> 00:26:13,800 formula that the state came up with on how to 397 00:26:12,280 --> 00:26:15,920 » Yes. They've been using it for a long time. 398 00:26:14,840 --> 00:26:19,680 Uh What they 399 00:26:18,080 --> 00:26:23,480 What they should did a few years ago though is they 400 00:26:20,960 --> 00:26:29,040 they were using 2010 median household income for 10 years. 401 00:26:26,520 --> 00:26:33,760 Which was really nice because it was much lower. And uh 402 00:26:31,440 --> 00:26:38,360 the demand for the funding shot up significantly with construction 403 00:26:36,400 --> 00:26:42,160 costs doing what they're doing. And ultimately, they had to make that more 404 00:26:40,040 --> 00:26:46,160 current in order to temper some of the demand for their funding and funding 405 00:26:44,480 --> 00:26:48,480 particularly the grant funding cuz that triggers the grant availability. 406 00:26:47,880 --> 00:26:53,640 » Right. >> So now they're using current relatively 407 00:26:50,880 --> 00:26:59,040 current. They're using 2024 right now, median household income data. And so 408 00:26:56,640 --> 00:27:04,960 » Yeah, our our our engineer they had suggested that we 409 00:27:01,440 --> 00:27:08,320 I remember this conversation before. And we we actually they helped us do a 410 00:27:07,040 --> 00:27:13,840 survey that was sent out to the residents and Sure. It it was basically 411 00:27:11,720 --> 00:27:17,040 yeah, that 80-some thousand whatever number two that it worked out to be. So 412 00:27:15,720 --> 00:27:20,680 » Okay. They're probably trying to determine if 413 00:27:18,600 --> 00:27:23,160 you're below Right. >> Right. 414 00:27:21,080 --> 00:27:27,240 » met some additional requirements to trigger some additional rates. So 415 00:27:26,080 --> 00:27:29,640 » Like small cities and >> Mhm. 416 00:27:30,200 --> 00:27:33,400 » Yeah, that was like three summers ago. 417 00:27:35,520 --> 00:27:40,800 So then as far as the money 418 00:27:39,200 --> 00:27:44,000 They were talking about grant when we were going through this with our with 419 00:27:42,400 --> 00:27:45,760 our engineer well >> Yeah. 420 00:27:44,560 --> 00:27:49,040 » Um The well move we're but I we're going to 421 00:27:47,520 --> 00:27:52,880 put out a little over a million dollars in engineering costs to them to get this 422 00:27:51,720 --> 00:27:56,160 so we can get it out to bid. >> Yes. 423 00:27:54,000 --> 00:28:02,160 » Are you on the side that does any grant dollars to refund us for that or is that 424 00:27:58,960 --> 00:28:08,160 » No, I I what I have here tonight is a loan and to help get you through and the 425 00:28:04,840 --> 00:28:10,920 loan is eligible to re- be repaid from this PFA funding. 426 00:28:10,360 --> 00:28:15,040 Uh Sue had to submit an email to the public 427 00:28:13,000 --> 00:28:20,280 facilities authority indicating we're intending to do some temporary financing 428 00:28:17,920 --> 00:28:24,840 and PFA had to respond that we're okay to proceed with it. Uh 429 00:28:23,320 --> 00:28:30,240 meaning they recognize that you have a project that's more imminent. Uh You're 430 00:28:28,080 --> 00:28:35,400 designing it so it moves on to the other funding list uh because they know you're 431 00:28:32,520 --> 00:28:39,760 about to bid it. And uh And so 432 00:28:37,040 --> 00:28:43,360 it triggers some final scoring and engineers would probably argue that once 433 00:28:41,600 --> 00:28:48,200 you've designed it and certified it in the next phase that the scoring 434 00:28:45,440 --> 00:28:51,960 typically improves, but your scoring was already in the funding range, 435 00:28:49,840 --> 00:28:55,880 traditional funding range for projects. So, 436 00:28:53,480 --> 00:28:55,880 Oh, my. 437 00:28:56,640 --> 00:29:04,040 But, that's the next stuff I had to talk about when we're done with this portion 438 00:29:00,840 --> 00:29:06,800 is the loan stuff. So, let me know if when you're ready for 439 00:29:05,560 --> 00:29:08,440 that part. >> You're not going to blow our mind on 440 00:29:07,760 --> 00:29:11,240 that one, are you? >> Okay, so 441 00:29:11,400 --> 00:29:17,800 It's not my intention. >> [laughter] 442 00:29:15,680 --> 00:29:20,880 » I want you to understand the state's view of the world is how they're going 443 00:29:19,760 --> 00:29:24,760 to approach your funding. You know, I think you got to really focus on that. 444 00:29:22,400 --> 00:29:24,760 So, 445 00:29:28,240 --> 00:29:33,520 So, the next letter I want to refer to is it's 446 00:29:31,920 --> 00:29:39,400 our preliminary recommendations letter, and it You'll see a number in the middle 447 00:29:35,600 --> 00:29:39,400 of the page that says $576,000. 448 00:29:39,480 --> 00:29:46,480 And that's our That's the loan amount that 449 00:29:44,120 --> 00:29:50,680 uh based on an input from your engineer, they've said you need in funding in 450 00:29:48,840 --> 00:29:53,560 order to get to uh 451 00:29:51,320 --> 00:29:56,720 basically the bid process in order to bid the project. 452 00:29:55,160 --> 00:30:01,000 And so, they're saying that you need $500,000. 453 00:29:58,880 --> 00:30:07,440 Uh we have issuance costs that are $16,250 454 00:30:03,400 --> 00:30:11,200 that includes legal work, my work, uh a small program fee to the Minnesota 455 00:30:09,800 --> 00:30:17,760 Rural Water, and then capitalize interest of $59,040. 456 00:30:15,600 --> 00:30:22,360 So, you're borrowing interest payments so that you don't have to make those out 457 00:30:19,280 --> 00:30:26,160 of pocket uh for a period of 2 and 1/2 years. And so, 458 00:30:26,600 --> 00:30:33,320 ultimately, uh you're going to still accumulate cash in your 459 00:30:30,760 --> 00:30:36,720 water fund based on uh you always been because you're not going to have 460 00:30:34,200 --> 00:30:38,760 additional out-of-pocket expense due to this loan. 461 00:30:38,160 --> 00:30:42,640 Uh It's a temporary loan. There's no 462 00:30:40,080 --> 00:30:47,120 principal due for 3 years. There's interest only payments due for 463 00:30:45,560 --> 00:30:52,920 uh that 3-year period and we're borrowing the money to make 2 and 1/2 464 00:30:49,440 --> 00:30:56,840 years of those payments cuz we expect by well before, but it gives us some 465 00:30:55,080 --> 00:30:59,720 additional time in case we have to go through a second funding cycle with the 466 00:30:58,560 --> 00:31:02,120 state to 467 00:31:00,960 --> 00:31:06,720 uh have our bids in hand or at least have 468 00:31:05,000 --> 00:31:09,720 the project designed and be ready to bid. 469 00:31:07,800 --> 00:31:13,480 Um The interest rate on the loan, so it's a 470 00:31:11,840 --> 00:31:17,560 3-year term which is which is the maximum that's allowed for a temporary 471 00:31:15,480 --> 00:31:19,920 under state statute. Uh 472 00:31:18,200 --> 00:31:25,360 the interest rate provided by the program lender is 4.1%. That's fixed for 473 00:31:23,120 --> 00:31:30,920 the duration. Uh the first opportunity to pay it 474 00:31:28,720 --> 00:31:35,440 is March 1st of next year, which is about the time that you'll be gearing up 475 00:31:33,360 --> 00:31:40,160 to bid a project. And so, as soon as your PFA funding comes through, we'll 476 00:31:37,840 --> 00:31:44,040 use that to pay this off. And the interest will be eligible as 477 00:31:42,160 --> 00:31:47,640 well as the principal cuz it's gone for project-related costs. 478 00:31:48,000 --> 00:31:51,760 And so, uh 479 00:31:52,120 --> 00:31:59,920 ultimately, it's those terms that are then memorialized in this giant 480 00:31:57,520 --> 00:32:03,840 resolution that you received, which is an award resolution for a bond 481 00:32:02,520 --> 00:32:09,000 for a city. Uh we call it an note in this instance. 482 00:32:05,920 --> 00:32:13,880 It's being placed with a program lender. Again, the amount is $576,000. 483 00:32:12,160 --> 00:32:19,280 The term is 3 years, which is the maximum we can do for a temporary. 484 00:32:16,680 --> 00:32:22,160 And ultimately, uh 485 00:32:20,040 --> 00:32:26,680 the interest rate is that rate I quoted you uh 4.1%. 486 00:32:26,840 --> 00:32:34,040 Um First opportunity to prepay again is 487 00:32:31,440 --> 00:32:38,880 March 1st of next year, uh which should align with your funding. 488 00:32:36,760 --> 00:32:41,747 And then, anytime after that it can be prepaid without penalty. 489 00:32:41,160 --> 00:32:43,880 Uh >> [clears throat] 490 00:32:42,040 --> 00:32:47,480 » and it's the expectation that we'd be closing out a PFA loan 491 00:32:46,520 --> 00:32:54,360 uh in 2027 I think is the goal 492 00:32:50,480 --> 00:32:54,360 in order to implement the project. 493 00:32:57,080 --> 00:33:03,280 What questions can I answer on that stuff? There's a 494 00:33:00,600 --> 00:33:06,960 There's a debt service schedule attached that shows you the principal and 495 00:33:04,600 --> 00:33:13,120 interest principal's just the new in the final year September 1st of 2029. 496 00:33:11,440 --> 00:33:17,520 So worst case scenario the state of 497 00:33:14,720 --> 00:33:21,480 Minnesota has issues where they 498 00:33:19,280 --> 00:33:25,760 they they can't fund grants for example through their public 499 00:33:23,760 --> 00:33:29,480 facilities authority. Not aware that that's ever happened but 500 00:33:28,000 --> 00:33:33,240 let's say it did. Uh 501 00:33:30,720 --> 00:33:36,360 you would have 3 years for them to get things figured out to participate in 502 00:33:35,000 --> 00:33:39,920 your project or at that time you could choose to 503 00:33:37,960 --> 00:33:44,960 either pay off or refinance that temporary note an additional time to try 504 00:33:42,520 --> 00:33:47,903 to work through their process. I've never had anybody that had to do 505 00:33:46,720 --> 00:33:50,600 that. >> [laughter] 506 00:33:48,880 --> 00:33:55,320 » I don't expect that you're going to be the first so 507 00:33:52,840 --> 00:33:59,560 but we want to make you aware of all the risks. 508 00:33:57,320 --> 00:34:05,480 You know all the terms that are applied and uh 509 00:34:01,920 --> 00:34:05,480 make sure you understand them so 510 00:34:07,200 --> 00:34:15,200 Again we do an awful lot of these for small communities for both USDA and 511 00:34:12,679 --> 00:34:19,600 PFA projects. USDA is just not the funder of choice of late because their 512 00:34:17,360 --> 00:34:23,200 grant funding is very limited and so the state of Minnesota through its public 513 00:34:21,159 --> 00:34:28,560 facilities authority is getting more traffic these days. And 514 00:34:26,360 --> 00:34:33,080 so I would tell you that you're going after the right funding source. Now 515 00:34:31,080 --> 00:34:36,800 » How does the First Independent of Russell get involved or 516 00:34:34,919 --> 00:34:42,720 » Yeah, they're a they're a relatively large bank. Actually, they have both the 517 00:34:39,879 --> 00:34:46,600 First Independent Banks and the Northview Banks north of the cities and 518 00:34:45,520 --> 00:34:50,760 uh they 519 00:34:47,879 --> 00:34:54,639 have been a pretty aggressive purchaser of small bond issues for 520 00:34:53,520 --> 00:34:56,520 uh 15 years now. 521 00:34:55,879 --> 00:34:58,560 » All right. >> Yeah. 522 00:34:57,440 --> 00:35:02,720 They uh they understand what they're purchasing 523 00:35:01,040 --> 00:35:07,080 which means they're pretty competitive on interest rate. Not pretty, they're 524 00:35:05,120 --> 00:35:12,040 they're First Independent Bank was probably our best lender for quite a 525 00:35:08,800 --> 00:35:17,880 while. Uh then they quit purchasing bonds for about 2 years, but now they're 526 00:35:15,040 --> 00:35:23,240 back at it again. We use both them, Security Bank and Frandsen Bank uh for 527 00:35:21,320 --> 00:35:29,200 the program and we always go to the lender that is 528 00:35:26,480 --> 00:35:31,200 providing the best interest rate at the when we're asking and so 529 00:35:30,680 --> 00:35:36,680 » Okay. >> And we we actually price it you know, 530 00:35:33,520 --> 00:35:40,920 part of the program is we price it uh comparable to something that would have 531 00:35:39,040 --> 00:35:45,800 an A credit rating. Uh 532 00:35:42,960 --> 00:35:53,200 so it's a it's generally a little bit better than what you'd be able to get uh 533 00:35:48,960 --> 00:35:56,240 by selling an unrated bond issue. Uh And so 534 00:35:54,840 --> 00:36:00,800 we do a lot of them because the pricing's competitive and and uh we have 535 00:35:58,840 --> 00:36:03,720 lenders that understand the nature of what they're doing. There hasn't been a 536 00:36:02,120 --> 00:36:07,360 default on general obligation bond that we're aware 537 00:36:05,600 --> 00:36:12,005 of uh and so it's pretty secure, you know, 538 00:36:10,000 --> 00:36:14,400 cities pay their bills >> [laughter] 539 00:36:12,520 --> 00:36:16,840 » and ultimately uh they're priced accordingly because of 540 00:36:16,320 --> 00:36:21,120 that. [clears throat] >> They're probably more familiar with 541 00:36:18,360 --> 00:36:25,320 small cities small towns versus >> Yes, yes. 542 00:36:22,080 --> 00:36:26,320 » other of the cities or even Mankato >> Agreed. 543 00:36:25,800 --> 00:36:27,720 » you know. >> Yep. 544 00:36:27,040 --> 00:36:31,120 » Yep. >> Agreed. Uh the 545 00:36:29,680 --> 00:36:35,840 bank [clears throat] owner actually is involved in the pricing and 546 00:36:33,720 --> 00:36:39,720 purchase. We communicate with him directly and 547 00:36:37,920 --> 00:36:44,000 he knows what he's buying. So, and he knows that he knows where 548 00:36:42,480 --> 00:36:48,920 where we should be at with the rate we pitched him and where he wants to be at. 549 00:36:46,920 --> 00:36:53,160 So, ultimately the conversations are usually pretty short short. We tell him 550 00:36:51,440 --> 00:36:56,040 that this is what today's market conditions are. This is 551 00:36:54,760 --> 00:36:59,280 what we think the rate should be and then 552 00:36:57,360 --> 00:37:03,480 And we we do uh 553 00:37:00,560 --> 00:37:05,840 in this instance we you are rewarded for your financials. 554 00:37:05,160 --> 00:37:10,520 Uh We suggested a rate that's typically 555 00:37:07,720 --> 00:37:15,800 lower than a community your size because you have good financials. 556 00:37:12,440 --> 00:37:19,960 Uh and the banker agreed and gave us I just did one of these the other day at 557 00:37:17,120 --> 00:37:23,480 4.7% who didn't have as good financials and so 558 00:37:21,040 --> 00:37:27,240 you got credit for that. So, you know, pat yourselves on the back for having a 559 00:37:25,040 --> 00:37:31,120 good audit and keeping some cash in reserve and taking care of things. So, 560 00:37:36,160 --> 00:37:39,080 Hm, cool. 561 00:37:39,800 --> 00:37:46,280 The the resolution that goes along with that 562 00:37:44,240 --> 00:37:51,560 also authorizes execution of a loan agreement which says 563 00:37:49,160 --> 00:37:56,920 the exact same stuff I just told you. 576,000 564 00:37:53,120 --> 00:38:01,800 4.1% can be pre prepaid on or after March of next year. 565 00:37:58,800 --> 00:38:08,480 And then it authorizes execution of that compliance policy. 566 00:38:05,640 --> 00:38:12,520 Which is a nine-page document that Sue ran through today and asked me a 567 00:38:10,160 --> 00:38:15,240 question and and it was on the last page that she was asking me the question and 568 00:38:13,880 --> 00:38:17,880 I said I'm like, "Oh my gosh, she read the whole thing." 569 00:38:16,680 --> 00:38:24,080 Um So, when we issue tax exempt bonds, 570 00:38:21,440 --> 00:38:27,680 there's specific IRS regulations that we have to meet. 571 00:38:25,520 --> 00:38:31,640 Most of them don't apply to anything that we're doing today because this is a 572 00:38:29,320 --> 00:38:35,760 temporary financing for, you know, preliminary costs that are going to 573 00:38:33,560 --> 00:38:39,480 ultimately be paid off in the near future by the state of 574 00:38:37,160 --> 00:38:45,000 Minnesota with long-term loans. Uh but with this and other financings 575 00:38:42,600 --> 00:38:49,840 that you do, including your state loans, you have to file an IRS form that's 576 00:38:47,160 --> 00:38:53,600 called a 8038-G. Because these bonds are tax-exempt and 577 00:38:51,760 --> 00:38:57,680 the federal government pays attention to that tax-exempt status to make sure 578 00:38:55,400 --> 00:39:01,360 everybody's complying with the law because you're getting a benefit of them 579 00:38:59,320 --> 00:39:05,160 not charging tax on the interest earned on this. So, your interest rate's lower. 580 00:39:03,560 --> 00:39:11,600 Uh On that form 8038-G, there's a box that 581 00:39:08,800 --> 00:39:15,640 says, "Do you have a compliance policy?" And all the attorneys now are sending 582 00:39:13,840 --> 00:39:18,760 out these compliance policies so that they can check that box cuz they feel 583 00:39:17,480 --> 00:39:22,240 it's uh you're less likely to be audited by the 584 00:39:20,680 --> 00:39:25,960 federal government because you have a compliance policy. 585 00:39:24,680 --> 00:39:29,200 The compliance [clears throat] policy basically 586 00:39:27,480 --> 00:39:34,320 does a fair amount of it is just regurgitating federal law that we have 587 00:39:31,280 --> 00:39:38,440 to meet regardless. Uh And again, uh 588 00:39:36,640 --> 00:39:42,840 the primary reason is so that they can check the box so that they think it's 589 00:39:40,440 --> 00:39:47,800 going to help you avoid audit. I've only had one 590 00:39:44,600 --> 00:39:52,120 issue audited in 26 years. Maybe two. 591 00:39:49,560 --> 00:39:52,120 And uh 592 00:39:52,840 --> 00:39:58,640 It wasn't for any particular [clears throat] 593 00:39:55,240 --> 00:40:02,840 reason. One was a state loan that you can't do anything wrong with cuz the 594 00:40:00,840 --> 00:40:07,000 state disperses it. It's a PF There was a PFE loan that 595 00:40:05,400 --> 00:40:12,400 they don't want you to earn extra profits on this bond proceeds. So, they 596 00:40:09,160 --> 00:40:16,080 don't want you to borrow this 576,000, put it in the bank at a higher interest 597 00:40:14,120 --> 00:40:22,160 rate, earn money on it, and just sit on it. That's That's not legal beyond a 598 00:40:19,000 --> 00:40:26,200 certain period of time. And so it's those types of situations that 599 00:40:23,840 --> 00:40:29,800 they're really trying to determine if laws were broken or if you owe the 600 00:40:28,240 --> 00:40:34,200 government money. Cuz if you earn excessive interest on 601 00:40:32,400 --> 00:40:37,640 the reinvestment of these proceeds, they want some of that money. Um 602 00:40:36,720 --> 00:40:40,640 you're not going to be in that situation. 603 00:40:39,080 --> 00:40:43,040 Just so you understand with this temporary note, 604 00:40:42,360 --> 00:40:46,920 uh we have we can earn unlimited interest 605 00:40:45,200 --> 00:40:51,720 during a construction period and we don't have to pay it's called rebate to 606 00:40:49,360 --> 00:40:54,760 the federal government. So, uh 607 00:40:52,920 --> 00:40:58,920 getting deep into the weeds on a policy that will never apply to much of 608 00:40:56,400 --> 00:41:03,360 anything that you do. So, uh and I appreciate you reading it, too. 609 00:41:01,518 --> 00:41:07,240 » [laughter] >> But, this this would would be considered 610 00:41:05,200 --> 00:41:10,680 just a regular municipal bond and it was under a kind of a some kind 611 00:41:08,640 --> 00:41:15,680 » Technically, it is. Um it technically is. Uh and that's the 612 00:41:12,800 --> 00:41:20,520 only way cities can really borrow money. >> I've fractured being some instances, but 613 00:41:18,920 --> 00:41:25,360 » It's technically a bond and a note in this instance. Um 614 00:41:23,200 --> 00:41:28,560 It's because it's one bond. Uh it's not being sold to multiple 615 00:41:27,080 --> 00:41:33,160 investors. Um and so, it and it's being bought and 616 00:41:30,880 --> 00:41:37,400 held by one lender with no intention to resell it. So, 617 00:41:35,600 --> 00:41:41,400 you'll be dealing with First Independent Bank until you pay off. So. 618 00:41:41,920 --> 00:41:44,920 » And nobody else. 619 00:41:45,360 --> 00:41:54,520 » The other thing we avoided on this, uh because of your finances again, is 620 00:41:51,440 --> 00:41:58,280 for a lot of these, we have to seek the state credit enhancement program, which 621 00:41:56,760 --> 00:42:02,680 is a program through the public facilities authority 622 00:42:00,480 --> 00:42:06,760 that requires us to use a paying agent that would cost $450 a year. 623 00:42:05,600 --> 00:42:10,520 Uh And would 624 00:42:08,680 --> 00:42:14,880 indicate that the state would step in in the case that we didn't make the payment 625 00:42:12,400 --> 00:42:19,200 on very small communities. Our lender requires that credit enhancement a lot 626 00:42:16,680 --> 00:42:22,640 of times and again I think wasn't it wasn't required on this one. 627 00:42:21,600 --> 00:42:27,000 So, we're saving that 450 bucks 628 00:42:24,840 --> 00:42:32,160 a year on paying agent fees and with the $750 setup charge. So, 629 00:42:30,680 --> 00:42:34,840 again that's because of your financial condition. So, 630 00:42:39,960 --> 00:42:46,760 » So, for small towns like us, you go to present this to them on a night like 631 00:42:44,520 --> 00:42:52,680 this, do they ever want time to have a attorney look 632 00:42:49,040 --> 00:42:59,240 at stuff like this or this is your job. You know what you're doing. We don't all 633 00:42:56,280 --> 00:43:03,400 know. I mean, how do we treat this? >> So, 634 00:43:01,480 --> 00:43:07,120 everything that's presented tonight is based on 635 00:43:04,720 --> 00:43:10,600 an award being made tonight. And so, if you were to approve this 636 00:43:09,440 --> 00:43:13,880 tonight, you'd probably have to redo some of this 637 00:43:12,200 --> 00:43:18,880 stuff, which isn't the end of the world, but we would. 638 00:43:15,280 --> 00:43:22,360 The attorney that's drafted this and all they're out in Duluth and 639 00:43:20,240 --> 00:43:26,160 they're not close by, but they're paid to act in your interest in drafting 640 00:43:24,400 --> 00:43:29,960 these documents. I'm here to act in your interest and 641 00:43:27,920 --> 00:43:34,640 tell you whether or not it's a good deal and I would say this is as fair as it 642 00:43:32,120 --> 00:43:38,000 gets. And so, I think it's more along the lines of 643 00:43:37,000 --> 00:43:40,080 mayor uh 644 00:43:38,840 --> 00:43:43,160 if you think you're going to proceed with the project, 645 00:43:41,640 --> 00:43:46,240 it's probably most efficient to act tonight, but if you're not sure if 646 00:43:45,000 --> 00:43:50,880 you're going to proceed with all this stuff and you need more time to talk 647 00:43:48,080 --> 00:43:55,520 about it, I respect that completely. So, it's up to you guys. 648 00:43:53,040 --> 00:43:58,920 » Pretty well spelled out, isn't it? Pretty well spelled out. I mean, you 649 00:43:56,960 --> 00:44:03,640 know, I think you've covered everything very well for us, you 650 00:44:00,920 --> 00:44:06,760 » I try to cover any question you have as best I can. So, 651 00:44:08,040 --> 00:44:13,560 and I'm not here to push you into a project either, so that's not my deal. 652 00:44:11,880 --> 00:44:15,840 » Well, projects, some of them need to be done, 653 00:44:15,320 --> 00:44:18,280 so. >> Yeah, yeah, that's pushing it on its 654 00:44:17,520 --> 00:44:20,760 own, so. >> Understood. 655 00:44:19,280 --> 00:44:25,640 » Yeah, we're just giving you the keys. >> Look out the window and see that reminds 656 00:44:23,200 --> 00:44:29,360 you that it needs to be. So, do we have to have two 657 00:44:27,720 --> 00:44:31,960 motions tonight, one for the loan agreement or the resolution or just the 658 00:44:31,160 --> 00:44:35,560 resolution? >> Resolution handles everything else. 659 00:44:33,760 --> 00:44:42,000 » Okay. All right. So, would somebody like to make the 660 00:44:36,760 --> 00:44:42,000 motion to approve resolution 2026-07? 661 00:44:43,280 --> 00:44:49,000 » I will make that the motion. >> Someone to second? 662 00:44:47,400 --> 00:44:50,680 » I will second the motion. >> favor? 663 00:44:49,680 --> 00:44:54,840 » I. >> Motion carried. 664 00:44:53,120 --> 00:44:57,600 All right. Probably want some of these signed 665 00:44:56,120 --> 00:45:00,960 tonight, too, then, buddy? >> Actually, you're going to get signature 666 00:44:59,440 --> 00:45:03,800 packet from Freiberger. >> Yep. 667 00:45:01,600 --> 00:45:05,480 » And so, I don't need to pick any. >> Oh, okay. 668 00:45:04,600 --> 00:45:09,480 » So. >> All right. 669 00:45:07,760 --> 00:45:12,800 » And next important date 670 00:45:11,000 --> 00:45:15,360 back over there. Uh 671 00:45:18,080 --> 00:45:24,360 We have the closing date, uh 672 00:45:23,040 --> 00:45:27,040 » It's September 1st. >> Yeah, that's what I think. It's better 673 00:45:25,640 --> 00:45:31,760 when I see the statement in black and white there. Verified. 674 00:45:28,560 --> 00:45:36,680 » The one I have is September 1st, and so closing is when funds are transferred to 675 00:45:33,880 --> 00:45:40,080 the city either by check or by wire. And uh 676 00:45:38,440 --> 00:45:43,480 the only thing that happens between now and then is signature pages. If you 677 00:45:42,000 --> 00:45:46,080 change your mind and you didn't want to close, 678 00:45:44,640 --> 00:45:50,520 uh you can call and say we're not going to close. And uh 679 00:45:48,520 --> 00:45:53,120 we don't close, so. We just want you to understand that. 680 00:45:52,280 --> 00:45:57,280 Uh we've made people aware if you 681 00:45:55,520 --> 00:46:01,400 right up to the closing date, you can choose not to do something, so 682 00:45:59,600 --> 00:46:05,800 So, that's on your side, and if you have questions in the meantime, I'm 683 00:46:02,880 --> 00:46:05,800 available. So. 684 00:46:10,080 --> 00:46:14,680 » So with our our finances [clears throat] 685 00:46:12,600 --> 00:46:20,000 being in pretty good order, I think you said the other guy was paying 4.7 and 686 00:46:16,840 --> 00:46:22,880 we're paying 4.1. And we got over over a half percent off. 687 00:46:23,440 --> 00:46:25,880 That helps. >> Yeah. 688 00:46:25,000 --> 00:46:28,840 » All helps. >> It does. 689 00:46:26,520 --> 00:46:28,840 » That's 690 00:46:29,240 --> 00:46:34,240 » Means more is going in the ground versus going out to banks and 691 00:46:32,720 --> 00:46:39,000 » Yeah, right. Yeah. [laughter] 692 00:46:36,240 --> 00:46:39,000 » Which is good. 693 00:46:42,920 --> 00:46:45,400 » Well. 694 00:46:45,440 --> 00:46:49,280 I think I got it explained good enough for everybody. 695 00:46:47,960 --> 00:46:52,120 » Yeah, I don't think I could explain it to everybody else. 696 00:46:50,440 --> 00:46:55,840 » Yeah. Yeah, I know I didn't. >> It's uh just that the water rates are 697 00:46:53,960 --> 00:46:58,760 going to have to go up because >> Yeah. 698 00:46:56,680 --> 00:47:04,640 » we're we're dealing with an aging system and an aging treatment plant and uh 699 00:47:02,120 --> 00:47:08,280 a very old well and a not so new well other well. So. 700 00:47:06,520 --> 00:47:13,640 Um And there's there's steps to 701 00:47:11,520 --> 00:47:15,880 everything to improve or to >> Yeah. 702 00:47:17,280 --> 00:47:21,480 » All right. Well, I guess that should do it then. 703 00:47:20,240 --> 00:47:23,480 Thank you very much. >> Good luck. 704 00:47:22,680 --> 00:47:25,920 » All right. Would you like these extra copies I 705 00:47:25,040 --> 00:47:27,960 brought along? >> Um yeah, if you want, I'll put them 706 00:47:27,640 --> 00:47:30,920 » Sure. >> Just in case the other council wants 707 00:47:29,160 --> 00:47:35,520 them or I'll put them in. But thank you. >> You're welcome. 708 00:47:33,480 --> 00:47:38,480 » That wrap your brain around all these numbers. 709 00:47:36,487 --> 00:47:41,680 » [laughter] >> I know. 710 00:47:39,920 --> 00:47:42,680 I I hope I make it clear enough in writing. 711 00:47:42,080 --> 00:47:46,080 » Yeah. >> It's in there. 712 00:47:44,360 --> 00:47:48,840 You know, jog your memory when you need to, but if it's not, just call. I'm 713 00:47:48,040 --> 00:47:52,480 happy to help. >> Yeah, as it sinks in, I may have more 714 00:47:51,160 --> 00:47:56,000 questions, too. So. >> Yeah. 715 00:47:54,240 --> 00:47:58,960 I think my email's on there as well. So. >> Mhm. 716 00:47:57,000 --> 00:48:01,880 Happy to answer questions. >> So, that's good. 717 00:48:00,680 --> 00:48:05,200 All right. Thank you. >> Thank you. 718 00:48:02,840 --> 00:48:05,200 » Thank you. 719 00:48:22,160 --> 00:48:29,760 You want me to comment? Anything? Um we supposed to just look at this or 720 00:48:32,440 --> 00:48:36,320 » That I don't know. 721 00:48:35,120 --> 00:48:42,000 I'm not sure what that is, so we can discuss that as a part of your packet. 722 00:48:39,560 --> 00:48:44,760 So, >> You see it there? 723 00:48:43,360 --> 00:48:50,080 I don't know why it's not in here. >> Oh, because I put packets together today 724 00:48:46,800 --> 00:48:54,000 and I evidently did not pick that up. It's all Everything is in your packet. I 725 00:48:52,560 --> 00:48:56,440 was putting packets together for Monday, so that must have I must have left that 726 00:48:55,680 --> 00:49:00,080 laying there. >> Okay. So, sorry about that. All right. 727 00:48:58,680 --> 00:49:03,600 » That's my fault. >> This side 728 00:49:01,320 --> 00:49:06,160 Resolution 2026-06 is dated Monday, so it's in that for 729 00:49:05,560 --> 00:49:09,440 Monday's meeting. >> Yeah, I put it in here, but I'm thinking 730 00:49:07,880 --> 00:49:13,360 we need to I'm not even sure if we actually have to. Okay, so the one I 731 00:49:11,640 --> 00:49:16,960 have cuz I corrected the date because this came with the packet. I created 732 00:49:15,240 --> 00:49:20,040 this one cuz I wasn't sure if we needed to have a resolution for that policy. 733 00:49:18,680 --> 00:49:22,640 Normally when we when we approve a policy, we do a 734 00:49:21,360 --> 00:49:26,120 resolution with it as well. >> Okay. 735 00:49:23,320 --> 00:49:29,000 » So, the one I have is dated for today. >> Okay, this one is 736 00:49:27,040 --> 00:49:32,200 » That one's dated because that yeah, I had put it in there, but I changed the 737 00:49:30,880 --> 00:49:36,280 date on it. But if we could get that today, then we can just tie it with 738 00:49:33,600 --> 00:49:41,520 everything else. >> Do you have the same one I have? 739 00:49:38,320 --> 00:49:47,000 » Resolution 2026-06 for today, May 5th or August 5th, sorry. 740 00:49:44,520 --> 00:49:50,000 » So, this is just for the 741 00:49:48,480 --> 00:49:53,080 » the pre and post compliance, that policy, yep. 742 00:49:51,120 --> 00:49:56,680 » Compliance with what we just went over. >> Correct. That's what I thought. 743 00:49:54,800 --> 00:49:59,680 » I'll make a motion to approve resolution 2026-06. 744 00:50:00,880 --> 00:50:05,760 » I'll move to second. >> Yeah, it's a short one, page one. 745 00:50:04,400 --> 00:50:09,814 » That one >> All in favor? Motion passed. 746 00:50:07,794 --> 00:50:09,814 » [clears throat] 747 00:50:10,200 --> 00:50:15,360 » All in favor? >> Aye. 748 00:50:12,960 --> 00:50:15,360 » That's right. 749 00:50:17,360 --> 00:50:21,080 » I'm going to second that. >> I can second that. 750 00:50:20,280 --> 00:50:24,560 » All in favor? >> Aye. 751 00:50:22,120 --> 00:50:30,320 » Motion carried. All right, nothing else, no community 752 00:50:26,640 --> 00:50:32,480 comment. Make a motion to adjourn. >> I'll make a motion to adjourn. 753 00:50:31,680 --> 00:50:34,160 » I'll move to second. >> I'll second that. 754 00:50:33,440 --> 00:50:36,120 » All in favor? >> Aye. 755 00:50:34,720 --> 00:50:38,600 » All those motion carried. Thanks everybody.