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HomeMy WebLinkAbout05/15/1969 Council MinutesIt ) A special meeting of the Lino Lakes Village Council was held on May 15, 1969.. Called to order at 8:10 p.m., all members were present, Mr. Rosengren arriving late. Also present were the Attorney and the Engineer. The purpose of the meeting was to discuss the proposed water and sewer franchises presented by U.S. Lakes Development Co. for Lakes Addition #1, etc. at Reshanau Lake. Those persons present for the company were Mr. Busch, the Attorney, Mr. Dielentheis, Vice President and Mr. Jensen of Suburban Engineering. Mr. Jaworski moved to waive the notice of the special meeting as required by Ordinance No. 20. Seconded by Mr. Cardinal. Carried. It was stated that the Attorneys and Engineers of both the Village and U. S. Lakes Development Co. had met previously to discuss questions on the proposed franchises. Mr. Locher read the letter written by Mr. Busch subsequent to this meeting, giving the changes in wording which the attorney and the engineer had requested. 1) The company recognizes that approval will have to be secured from the Minnesota Pollution Control Agency of its proposed sanitary sewer system before it is constructed and put into operation. This requirement is intended to be within the scope of the last two lines of part I of the proposed franchise agreement and, also, a prerequisite to the Village's approval of the sanitary sewer system's plans, specifications, and profiles as called for in part II of the agreement. 2) The company understands that the franchises that it is to receive from the Village will be exclusive only to the extent permitted by law and part III of each of the proposed franchise agreements is intended to be interpreted in that manner. 3) In order to reserve to the Village the right to call for a special re- pair bond for any repair project that involves damage to the village's roads streets or alleys that has reasonably estimated restoration costs of more than $2,500.00, the last sentence of part VIIof each of the proposed franchise agree -' ments is to be revised so as to read in substance as follows: "Further, Company shall provide -- (i) a bond to Village in the sum of $5,000 conditioned on Company's duly repairing, replacing or restoring, as the case may be, any of the Village roads, streets or alleys which Company might damage or into which it might have to dig for the purpose of maintaining, replacing or repairing any pipes, conduits or material; and (ii) ?.in each instance where the estimated cost of the repairing, replacing or restoring of Village's roads, streets or alleys in connection with any single maintenance, replacement or repair job of Company exceeds $2,500, Company shall provide a bond to Village coverning that specific job in the amount reasonably determined by the Village Engineer or the Village Council to cover the expected costs of repairing, replacing or restoring Village's roads, streets or alleys affected by such job, and such job shall not be commenced until such special bond has been provided by Company to Village." 4) In order to provide for the determination of the schedule of rates by a board of arbitration in the event that the village and the company are unable to agree upon what constitutes a reasonable set of rates at any given time, and also, for the purpose of specifically eliminating the possibility of including as al- lowable charges against the company's operating income for rate making purposes any compensation payments in excess ofreasonable compensation for survives rendered to the company, it is suggested that part Xi of each of the franchise agreements be changed to read in substance as follows: Company shall file with Village, prior to the rendering of any statements to its customers, a schedule of rates to be charged to its various classes of users, such rates to be fixed and determined by Company so as not to produce more than a reasonable rate of return on the fair value of Company's sanitary sewage (water works) system properties, after allowing for all operating expenses of Company, exclusive of - (i) Company's interest expense; (ii) Company "s depreciation charges, if any, in excess of straight line depreciation over the reasonable useful lives of Company's depreciable operating properties; and (iii) any compensation payments in excess of reasonable compensation for services actually rendered to Company. Adjustments bay be made by Company in its schedule of rates to be charged for its sanitary sewage (water) services to any one or more of its classes of users as and when, in Company s judgement, such ad- justments are needed to maintain the reasonable rate of return to which Com- pany is entitled thereunder; provided; however, that no such change in rates shall be put into effect earlier than 30 days after Company has filed with Village a written notice of its proposed revised rate schedule; and provided, further, that if within such 30 -day period Village mails to Company written bbjecti ons to any part or all of the proposed rate change such rate changes shall not be put into effect excepting to the extent and as of the effective date determined by a board of arbitration which shall be composed of three arbitrators one of whom shall be selected by Village, one by Company, and the third by the two arbitrators so selected. The board of arbitration shall oper- ate under the rules of arbitration of the American Arbitration Association and shall be convened in St. Paul, Minnesota promptly after Company receives Village's notice of objection to the given rate change proposal. The expense of the arbitration shall be borne in equal shares by Village and by Company. The decision of the board of arbitrators shall be final and conclusive on the parties but it shall not be interpreted as restficting Company from pro- posing a further change in its schedule of rates as to the classes of suers covered by the arbitration determination at any time after 12 months following the effective date of the rate for such users as determined by the board of arbitration, nor shall Company be restricted by such determination from revising its schedule of rates for classes of users not covered by the board determination at any time." 5) The special assessment possibility referred to in the third paragraph of my letter of March 20, 1969 will be recited in the deed, as well as the earnest money contract, covering each lot sold in the U. S. Lakes Development Co., area so that subsequent purchasers will be notified of this contingency. The reason for the change in Number 5 was that subsequent buyers of these parcels in Lakes Addn. No. 1 would know that they were not being assessed for the sewer and water systems by Jandric, but that the systems were wholly owned by U.S .Lakes Development until such time that the Village might buy out under the franchise. Mr. Locher listed alternatives to giving a franchise for the sewer system. 1) A straight municipal system financed by special assessments. This would be impractical since the property between the development and the near- est sewer outlet is not developed and the assessment to such property owners would be too high -- ti would either cause premature development or forfeit. Money could be raised by bond issue under the Green Acres deferral plan, but the interest would still have to be paid currently. 2) Installation by the developer with the immediate charge to be made to each parcel owner in the closing costs. 2 3) A combination system of installing a larger tank to serve the larger area with the Village paying into it on a fair share basis - -the sewer system in the same way. 4) Installation of individual systems- -sewer as set forth in Ord. #48. 5) A franchise by the developer at his expense on a 25 year basis. The developer thus owns the systems and charges fees to each user. At the time that the Village has an outlet at the property, the developer will hook into 1 165 into same. This would possibly mean an aeration unit for the sewage system and a self - contained tank for water. The rates charged to users would be somewhat higher than those for users on a municipal system because the developer must pay income tax and property tax on his lines. At an estimated cost of $500,000 for the line to run from County Road J to Lakes Addn. #1, with a valuation of $1 million, we would have to bond at 1/2 of our valuation. Mr. Gotwald stated that his objections to the proposed franchise had been covered by Mr. Busch's letter. The plans will have to be inspected when drawn and also approved by the Minn. Pollution Control Agency. The $500,000 would be es- timated for a line to run from Seventh Avenue to County Road J, and could be ex- pected to be a low estimate as costs are rising. Mr. Busch took the floor, mentioning the previous meetings, etc., stating that the proposed franchises were nearly parallel, with a difference of fire protection mentioned in the water franchise and the necessary approval by the Pollution Agency in the sewer franchise. He then proceeded to outline the changes to be made in the franchises. art. I. Mentioned that Exh. A was not yet available as they did not have the complete legal description of all the property to be included in the whole devel- opment. However, he stressed that all of the area to be included in the franchise agreement would be purchased by U. S. Lakes Development -- none of it would be property on option. The definition of 'public places' was asked by Mr. L'Allier. Mr. Busch stated that this would be a logical place for pipes to run other than in the Village's streets or alleys in the case of surface drainage, etc, when a line might be run through a park, for example. In any case it would be subject to the Council's approval. Art. Ii. There was much discussion on the approval of plans, both by the Council and the Pollution Control Agency. Mr. Busch stated that this had to be done on a step -by -step basis, with approval by both on each step. This is the way all such engineering projects are done. They don't care to risk their funds on an expensive overall design only to have it rejected. Mr. Jensen stated that they wouldn't receive written approval until the last stage of the project is provided. If any stage was not approved, they would have to revise it. Mr. Gotwald concureed in':thetstep -by -step proceedure. Mr. Bohjanen queried the word various under the third 'whereas' on page 1 of the agreement since there were only two franchises. Art. III Mr. Busch stated that the word exclusive was necessary as it would raise havoc to have competing sewage and water companies in the same area. Art. IV. Mr. L'Allier asked whether any stock in the company would be sold to the public. No, because they wouldn't want the public to gain control of a utility; this could affect the rates. The Village retains complete approval of the rates or else it goes to an arbitration board. (See No. 4.) in the Busch letter for changes to be made.) This in eluded a definition of a reasonable rate of return and that there would be no extra compensation to employees to raise the costs in order to increase the rates. It was stressed that after the denial of a request for a change in rates, it would be one year before another request .could be made. Changes in the class of certain users would affect their rates. Art. V. Mr. Busch stated that the wording was as such so that laying of the lines would cause the least interference with the construction of the streets. At the time that the Village installs }.;municipal sewer it shall be mandatory that an outlet be provided for the developer's use. Art. VI., The word 'shall' to be changed to 'may' and the words ' at the expense of the Company ' to be added after ordinance in line one. Art. Vii. To hold the Village harmless in case of accident in repairing streets, the company shall provide a permanent bond in the amount of $5000.00. Also, a paragraph from Mr. Busch's letter _page 2) concerning an additional bond if the cost of road work in an instance shall exceed $2500.00. Art. VIII. On page 7 of sewer contract, second line, add the words 'or until such time as the Village acquires such system' after franchise. Mr. Busch stated that no people would be living in the development before November. Mr. Jaworski questioned the 60% market value pric.e which the Vil- lage would have to pay for the system under default, etc. Mr. Busch couldn't conceive of the company allowing the systems deteriorate by 40% since the creditors would have to take over and the company would lose too much. Mr. Locher pointed out that at the end of 25 years the Village must either take over the system or grant a new franchise. Art. IX. Page 8 of the franchise, fourth line, wording changes to read 'if it is deemed by the Village not Wto be useable by it.' The company would receive some salvage from sale of the sewage plant in this case. Mr. Locher asked whether they would depreciate the treatment plant rapidly and was told that a normal life depreciation would be charged. They expect 15 years on an aeration system and 40 years on the pipes life expectancy. Mr. Locher asked whether the said of the plant at a loss would be included in the 'reasonable profit' and was told no. The rate was to be determined thus: annual depreciation (different rates on different parts) plus the operating expenses plus salaries prorated over the volume plus a reasonable return. Depreciation should amortize the losses. Mr. Locher asked whether any losses would be reflected in the rates and was told no since the company must swallow loses. In this case when the company loses the treatment plant it will be out of business as the Village has taken over. Mr. Jaworski wanted to be sure that the cost of the system to the Village would not exceed the cost of the original construction, He was told this was impractical to put in the franchise as using 'market value' was safer, despite inflation or depression. The market value will re- flect the depreciation. Art. X. The Village will receive a copy of an annual audit of the company. Art. XI. This had been rephrased in Mr. Busch's letter under No. 4. There was much discussion on the determination of a 'reasonable returns. Mr. Busch hedged on this, saying it couldn't be determined until the system was at 60 -75% capacity (density usage), but that it wouldn't be set so high so as to prevent persons from buying the homes. Mr. Busch finally stated that the 'market value of interest' is about what they considered to be a reasonable return. However, they wouldn' receive this until 60 -75% utilization was oper- ating; they would lose money until then. They expect no profit while expanding, and would not make a regular profit until the system was complete. Mr. Bohjanen asked whether the rates would be kept compatible with those of neighboring similar systems. Mr. Busch stated that their costs would be the same as that of the Village installing the same system except that they must pay personal prop- erty taxes which run as high as $12,000 on a $5000000 assessment. 1 They also pay more interest and their costs are somewhat higher. He thought that the rates between the municipal and private would vary by $1 -$1.50 /month, per user. However, the extra costs are taxes which go to the county and reduce everyone's taxes. Mr. L'Allier inquired whether they had an option to use in- ventory value instead of personal property taxes and was told no, since utilities and other services can't take the option. If they could, rates would drop. Chrystal Ahlman from North - Northeast Realty asked Mr. Busch how the system would be assessolto the people, how long until the system was completed, and whether several hundred acres of land across Birch from the Addn. No. 1 could use their water. She was told that only the franchised area could (she had misunder- stood, thinking the franchised area meant the whole Village.) Mr. Locher inquired whether, for instance, persons on a 1/4 of 1/4 section line road on the perimeter.; of the franchised area would have to run an extra line in the street to service them. Mr. Busch stated that any such system was designed so that owners on both sides could use the line and both be assessed. They watched their perimeters very closely. There was discussion of using a double - declining system of bookeeping to help on income taxes, this negative. Mr. Busch stated that he had no further comments, but wished the Council would adopt a resolution authorizing the franchises, these not to take operative effect until the local approvals are secured. Mr. Gotwald elaborated on some of the points already discussed. He felt that the franchise was good in that it benefitted only the people who have to pay. He expected it would be 364 years until the Village adopted a municipal sewage system. He stated that when the Village took over the system it would be assessed only to the property owners at a rate equal to anyone else on municipal sewer. They would only have to pay for the pipes plus a fair share of the pipe main; assessed by acreage or by lot. Mr. L'Allier inquired how the sewer and water would be listed on their advertising. The words suggested ranged from community to developer to central. Mr. Dielentheis stated that they definitely would never call it municipal. Mr. Bohjanen thought that since there had been so many changes and additions to the franchises, it would be better if Mr. Busch had them re- drafted and copies sent to the Council for consideration at the next meeting if the attorney and enginer had read them. Mr. Busch promised to have the copies sent out by May 26th. We will let them know our decision. Mr. Bill Houle asked how many acres the system would service, and was told that about 700 acres were owned by the company, excluding optioned property. Mr. Busch thought that 1200 -1500 families would be served depending on how many town house units are built. Would there be some commercial area: Yes, but it would place very little demand on either sewer or water. Mr. Busch stated that several things are in the offing and are not ready to be announced. They plan to use over 100 acres for the golf course. They were thanked for coming. ]mss. Ahlman inquired whether it would be possible to get sewer and water on Co. Rd. 12, and was told again that a petition would be necessary. Mrs. Anne Bohjanen asked whether, if they put lines in the Lakeview Addn., the State could force Lino Lakes to bring him water and sewer. Mr. Gotwald stated that he felt no, since the cost of installing the necessary pumps would be too great to put in the sewer lines. Mr. Locher felt that there was a legal problem here of a private line running down a public road. Mir. Locher asked about use of Federal funds if we pur- chased the package deal from Jandric. No, since would only be buying laterals and funds are for mains and interceptors. The estimated cost of a small sewage plant to serve 300 families would be around $150,000. Double that cost for a force main to run down to County Road J. Mr. Gotwald felt that this franchise was good, since he has seen plenty which weren't - -some places charged as much as $15.00 per month for water, Mrs. Bohjanen asked whether the State could force us to put in sewers since we have so little bonded debt not. No. Mr. Gotwald felt that the new sewer bill would change the whole pic tore. Mr. Bohjanen asked whether a lift- station would handle 300 families. No, build piece -meal. Mr. Bohjanen then asked how much a lift station for the Lakeview area and for area from Highway 8 up to Main Street would cost. Mr. Gotwald estimated that it would be about $125,000 now, but labor costs are rising rapidly. Mrs. Bohjanen asked whether, if the Village had a municipal sewer system designed would Jandric's system flow into it by gravity. No, the Lift- station would have to be retained. Mr. Bill Houle felt that we should stall Jandric for awhile and see what the sewer bill brings. Two members of the State Pollution Control Agency were in the audience. They offered a few comments on sewage in the area; felt that the interceptor would come through within 3 years. They had little to say on the franchise, stating that they would deal with them as they come up through regular channels. Mr. Gotwald commentd, that since the Pollution Agency had turned down a request by Forest Lake, it would have no trouble turning down something unfavorable from Jandric. Mrs. Ahimen asked why the State gets away with Pollution at the Youth Center. Mr. Gotwald proceeded to give a resume of his trip there and subsequent action, stating that a report would be available in a couple weeks. Mr. L'Allier reminded the Council that they had three choices to consider for Lakes Development C. 1) municipal sewer which was hardly feasible; 2) allow private wells and septic systems or 3) consider granting the franchises. Mr. Jaworski moved to adjourn at 11:03 p.m., seconded by Mr. Cardinal. Carried. Minutes approved at the meeting of June 9, 196 erk- Treasurer The regular meeting of the Lino Lakes Village Council held on May 26, 1969 was called to order at 8:06 p.m. by Mayor Ralph L'Allier with all members present. Several corrections were made to the minutes of the May 12 meeting as follows: page 1, paragraph 7 - -put last sentence after 'later on;, Cross out second to last sentence, after 'Mr. Bohjanen inquired whether' *?- insert 'this was setting a precedent and if other'. Page one, paragraph ten -- after '3.2 beer' insert 'for the "49" Club'. Page two, paragraph one -- after 'them' insert 'on the Engineer's recommendation', second paragraph -- after 'cost' insert '(excluding work done by the Village road department" would not reach the figure of $2,000, which would require bids and. Also add -- Seconded by Mr. L'Allier. Carried.