11-10-1998 Council Agenda - Laserfiche WebLink

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515 Little Canada Road, Little Canada, MN 55117 -1600 (651) 484 -2177 / FAX: (651) 484 -4538 MEMORANDUM TO: Mayor Fahey & Members of the City Council FROM: Joel Hanson, City Administrator DATE: November 6, 1998 RE: Tri- Magnet School Water and Sewer Connection Agreements MAYOR Michael I. Fahey COUNCIL Beverly Scalze Jim LaValle Steve Morelan Bob Pedersen ADMINISTRATOR Joel R. Hanson In September of 1995, we approved an agreement with the Tri - County School District #6067 to connect to our water system on their property located in the City of Maplewood. The connection fee for water was $95,033. They were to make us payments on this fee over a 15 -year period with interest accruing at a 7% annual interest rate In July of 1996, we also entered into an agreement for their connection to our sanitary sewer system. This connection fee was calculated at $65,237 and was also to be made in 15 equal annual installments with 7% interest. To -date, they have not met the payment requirements due to their unique financing structure. I met with Mr. P. Fred Storti, Principal /Administrator of the Tri- District School and Mr. Jene T. Sigvertsen, Architect/Project Manager. They asked if the City would be willing to forgive the payments due under these connection arrangements. I explained to them the City's policy in this regard and that from a consistency standpoint, I could not recommend that. They asked if we would be willing to forgo the interest on the amount outstanding. I again indicated the problem that poses for us in terms of consistency with other fees that we assess and charge interest. I did indicate to them that I could recommend we look at the interest rate given current market factors. I doing so, I believe we should earn an amount at least equal to what we are able to generate through our investments. (Currently, we are earning around 5.75 %. Keep in mind that should rates rise, we have the ability to see our return rise as current amounts are reinvested at rollover.) We must also be consistent with interest rates charged to the private property owners we are assessing for public improvements. (In 1997, we assessed the Centerville Road people 6.5% over a ten -year period.) To -date, only one payment on the these connection agreements has been made in the amount of $10,687.20. With accrued interest calculated at 6.5 %, the balance owing as of December 31, 1998 is $181,945.92. (see schedule attached) The School District is proposing to make a one- time payment of $35,000 to buy down this balance. I have assumed this would be made on December 31St of this year. After applying the $35,000 payment and stretching the Page 21