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Mr. Sweatt said they are doing a lot of things to try to polish up their image. We
were just over there today and the program director lives here in Schertz. He
said they were doing talent shows all over the city now, crews are in every school
all over the city of San Antonio.
Mr. Sweatt advised of one (1) minor abrasion over the question of the GVEC
franchise. The school district has proposed a fiber optics connection between all
the campuses and other locations perhaps. They contacted us to see if the City
had a concern - they would have to work out their deal with whoever owns the
poles and the school would not require a franchise because they aren't charging
for the services. They took the letter and flashed it at GVEC who took the tack
that I was saying that didn't involve a franchise and they could do whatever they
wanted to. One of their folks talked to one of our folks and said the city manager
waived the deal about franchise. Mr. Sweatt said he called Marcus and they had
a discussion, the end result, as he understands it, they are not going to charge
the school for the use of their poles to string fiber optics; therefore, if they are not
charging the school it is not a franchise issue. If they start charging somebody, it
gets to be a franchise issue.
#4 Discuss bids on 45hp diesel boring machine for Public Works
Department.
.
Mr. Sweatt stated this was a budgeted item in the current budget. We sent bid
invitations to three (3) companies that supply this equipment and did the bid
notice in the newspaper and received only one (1) bid from International Boring,
Inc. by the deadline. This is under our estimated cost but there is, unfortunately
only one (1) bid in the amount of $37,513.60. It is a very important piece of
equipment particularly as we get into more and more force account work and
having this larger boring equipment opens up some opportunities to do it with
force account work, save some money because we can do small boring now but
have to contract out for larger jobs. This will be a very valuable item and we
would like to go ahead and buy it.
Mayor Baldwin asked if we have that much requirement for boring. Mr.
Greenwald interjected that he thinks we rent it out more than we use it right now
for sub-dividers when a major tap is done.
Mr. Sweatt said a 14" or 16" bore is generally needed for as little as an 8"
extension. We would not only be able to use the equipment but would be able to
charge a sub-divider or developer as opposed to having the work contracted out
and passing through the cost.
.
Mr. Swinney inquired if we ever rent it out to other cities and Mr. Sweatt said that
we have on a couple of occasions on a city-to-city deal. If it were a large job we
probably would charge.
Mayor Baldwin asked if we have competent people that can bore under a road
without ending up half-a-block up the next street; they aren't that easy to operate.
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Mr. Sweatt said our people are generally experienced and can run the equipment
but won't guarantee that something won't happen once-in-a-while.
Following discussion, it was agreed to accept the one bid.
#5 Discuss the following service contract agreements:
A. Guadco MUD No.1; and
B. Guadco MUD NO.2.
.
Mr. Sweatt called attention to proposed draft agreements in the packet. They
were originally prepared in Public Works and have been reviewed by city
attorney's, comptroller's and our office. We furnished copies to the two Boards to
make certain they have no problems. We have not been apprised of any issues
on their part. If you have no objections, we would like to place this on next
week's action agenda. They have been made aware of the schedule so if they
have any issues, they need to get them to us before next Tuesday night's action.
Recapping, a formula was developed that prescribes the manner in which there
are three (3) sets of charges for Guadco NO.1. They are a new group with
whom we will contract. A $40,000 start-up cost is estimated to include labor
service and equipment purchases (a one-time cost). Two (2) other sets of
charges include: 1.) their operating cost based on 15.36% of the total charges
we bill in their behalf for the services of preparing, collecting and accounting for
their bills. In addition, they would pay, based on a billing-for-services, a monthly
maintenance and repair cost for services rendered based on our standard hourly
rate plus materials and equipment and a maintenance and repair administrative
fee of 10%.
Mayor Baldwin wondered how the 15.36% was derived and not just 15%. Mr.
Sweatt said it was predicated on their share of some calculated total direct costs
for both MUD 1 and 2 and applied the number of accounts in each of those
districts as a percentage against the whole and came to a conclusion that
Guadco No. 1 's 692 accounts is 82.19% of the total cost. . . .
Mayor Baldwin interjected that if it was a mathematical calculation he had no
problem - it just struck him funny that we didn't just charge a flat 15%.
.
Mr. Swinney inquired why Guadco Mud No. 1 and No. 2 haven't combined to
which Mr. Sweatt responded that they are each separate districts because each
have different sets of outstanding bonded indebtedness. They were created as
two (2) separate legal entities, MUD #1 has a considerably higher bonded
indebtedness. MUD #1 has more vacant properties available for U.S. Homes to
develop. MUD #2 has refused to issue any future debt in order to be annexed
into the City of Schertz. MUD #1 has less debt but more folks interested in being
annexed. It appears right now, that if we can work out this side debt that MUD
#2 seems to owe U.S. Homes, and create (probably a PID), to take over the debt
so they can continue to fund their debt and will pay City of Schertz taxes to pay
their pro rata share of all of our debt. Overall we could lower their taxes and
water rate and everyone would be happy.
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.
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Mr. Swinney asked what the reasoning for the one-year term on these
agreements. Mr. Sweatt said just to make sure it is working right.
MUD #2 is the same except they don't have an initial start-up cost. Their
percentage is 16.39% versus the 15.36%. The only comment to be aware of is in
the shared cost. Part of their cost includes additional personnel. We are
proposing to hire an additional service person and a meter reader and their costs
are built in to these numbers.
#6. Discuss assignment of tax abatement from Genuine Parts, Inc. to
Atlantic Financial Group.
.
Mr. Sweatt advised that a new term has been introduced to us, a synthetic lease,
an off balance sheet method of financing. Genuine Parts, Inc. (an office supply
warehouse in Tri-County Business Park) requested a tax abatement and it was
approved by city council. Before perfecting all of that they came back with this
financing technique being that Atlantic Financial Group will buy the land and build
the building and lease it back to Genuine Parts. The beauty of this is this lease is
considered operating cost and to some companies there is an advantage to that,
they don't have to report to their stockholders a big capital issue. We can find
nothing wrong with this arrangement. Atlantic Financial Group is the taxpayer,
owing the land and building. If they don't meet the requirements we've got
provisions in our abatement agreement. This is really an assignment rather than
a name change.
Mr. Swinney stated a strong concern that the city is giving a tax abatement to an
investment group and the purpose of the abatement program is to bring in
businesses and allow them to be feasible on large capital outlays. This synthetic
lease deal seems that we are subsidizing an investment as opposed to the
capital structure.
Mr. Sweatt said he understood Mr. Swinney's reasoning but didn't think that was
true necessarily, it is purely and out-and-out financing technique. Even if it were
a RIM, part of the advantage of having the tax abatement would allow them,
because they are all triple net arrangements, to pass along the savings of the tax
abatement to the end user; therefore making it attractive to be here as opposed
to being somewhere else.
Mr. Swinney stated he would buy that explanation but was just concerned about
getting into a very gray area.
.
#7 CITY MANAGER'S REPORT: A. Stated the budget recommendation for
the salary plan is forthcoming.
B. . Suggested the plaques on the new emergency services buildings include
outgoing councilmember Charles McDonald and newly elected council member,
Pia Jarman.
C. Reminded Council National Night Out is August 4 from 7:00 to 10:00 p.m. -
unfortunately that is council meeting night.
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