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07/08/1986 City CouncilTHESE MINUTES SUBJECT TO JULY 15, 1986 APPROVAL EDMONDS CITY COUNCIL MINUTES JULY 8, 1986 Councilmember Jaech noted that Councilmember Hall was absent because she was involved in an auto- mobile accident on Monday and is in the hospital, and Mayor Naughten is on vacation. COUNCILMEM- BER OSTROM MOVED, SECONDED BY COUNCILMEMBER KA.SPER, TO APPOINT CHAIRMAN NORDQUIST AS MAYOR PRO TEM FOR THE EVENING. MOTION CARRIED. The regular meeting of the Edmonds City Council was then called to order at 7:00 p.m. by Mayor Pro Tem Nordquist in the .Plaza Meeting Room of the Edmonds Library. All present joined in the flag salute. PRESENT ABSENT STAFF PRESENT John Nordquist Larry Naughten, Mayor Bobby Mills, Pub. Wks. Supt. Steve Dwyer Laura Hall Peter Hahn, Comm. Svcs. Dir. Jo -Anne Jaech Bob Alberts, City Engineer Bill Kasper Art Housler, Admin. Director Lloyd Ostrom Mary Lou Block, Planning Div. Mgr. Jack Wilson Scott Snyder, City Attorney Nigel Euling:; Student Rep. Jackie Parrett, City Clerk Margaret Richards, Recorder rnNCFNT nrrmn❑ Items (B), (D), and (E) were removed from the Consent Agenda. COUNCILMEMBER JAECH MOVED, SECOND- ED BY COUNCILMEMBER OSTROM, TO APPROVE THE BALANCE OF THE CONSENT AGENDA. MOTION CARRIED. The approved items on the Consent Agenda include the following: (A) ROLL CALL (C) SET HEARING DATE OF AUGUST 5, 1986 FOR HEARING ON APPEAL OF HEARING EXAMINER DECISION DENYING CONDITIONAL USE PERMIT FOR AMATEUR RADIO TOWER AT 7300 - 174TH ST. S.W. (CU-17-86/APPELLANT: BULCHIS) (F) AUTHORIZATION TO ADVERTISE FOR BIDS FOR REROOFING PORTION OF ANDERSON CENTER ($26,000) (G) ACKNOWLEDGMENT OF RECEIPT OF CLAIM FOR DAMAGES FROM MICHAEL AND DEBORAH HOWARD ($1,117.65) APPROVAL OF MINUTES OF JULY 1, 1986 [ITEM (B) ON THE CONSENT AGENDA] COUNCILMEMBER KASPER MOVED, SECONDED BY COUNCILMEMBER JAECH, THAT APPROVAL OF THE MINUTES BE PLACED ON THE JULY 15 AGENDA BECAUSE THE MINUTE TAKER WAS UNABLE TO COMPLETE THEM FOR TONIGHT'S MEETING. Councilmember Ostrom said he did not believe that the minutes reflect that Mr. Pomeroy answered negatively to the question asked by City Attorney Scott. Snyder as to whether he submit- ted a landscaping plan to the City. MOTION CARRIED. APPROVAL OF MEBT PLAN AMENDMENTS RELATED TO MEDICARE TAX FOR EMPLOYEES HIRED ON OR AFTER APRIL ITTEE THAT COUNCIL TAKE NO ACTION REGARDING EMPLOYEES Councilmember Ostrom inquired if the difference will be compensated for when 1.45% tax is deduct- ed from the present 7.15% MEBT contributions. Administrative Services Director Art Housler said the employer will contribute 6.7% to MEBT and 1.45% to the. Federal government for Medicare, which will have no impact on the budget. Councilmember Ostrom inquired if the employee will be affect- ed. Mr. Housler said the employee will contribute 1.45% to Medicare rather than to MEBT. Councilmember Kasper inquired if employees who began .working for the City prior to April 1, 19.86 will be precluded from receiving Medicare benefits. Mr. Housler replied affirmatively. He said it was his understanding that this provision may become mandatory in 1987, though. Councilmember Kasper inquired if those employees are aware that they are forfeiting Medicare benefits. Mr. Housler said he was unsure. City Attorney Scott Snyder said LEOFF I and II employees will be unaffected by the change, and employees who have worked for forty quarters under Social Security will be vested for Medicare benefits. Councilmember Kasper said he was concerned that the City may create a liability if employees are not fully aware of the impact. Councilmember Jaech inquired what medical benefits a City employee is entitled to from the City when he/she retires. Mr. Snyder said limited medical benefits are provided to LEOFF I and II employees through the retirement system; the PERS system does not provide medical benefits. The City is required to keep a health plan open for a period of eighteen months after an employee retires, but the employee is responsible for paying the premiums. Councilmember Jaech inquired if any union contract provides health coverage until an employee deceases. Mr. Snyder replied negatively. Councilmember Jaech said she was concerned if an em- ployee does not have the ability to utilize Medicare coverage and they are covered under City policy, the City's premiums would be greater because the amounts paid in claims against the City's insurance would be greater. Mr. Snyder said the working woman who returns to the work force after a long period of. time who had never earned forty quarters and is employed by the City for four or five years would be the most likely to be affected. He said this issue was presented to the Council as a suggestion for no action but only to .inform the Council of the MEBT Board's recommendation. However, the MEBT Plan amendments are required. City Clerk Jackie Parrett said because her office is in close proximity to the Personnel office, she is aware that the Personnel office had received many telephone calls during the time employ- ees were voting on this issue, and Personnel Manager Pat LeMay circulated several memos in re- sponse to specific questions. COUNCILMEMBER KASPER MOVED, SECONDED BY COUNCILMEMBER OSTROM: 1) THAT ITEM (E) BE PLACED ON NEXT WEEK'S CONSENT AGENDA, AND 2) FOR THE APPROVAL OF ITEM (D). MOTION CARRIED. REPORT FROM JO ANN STEVENS - LOCAL/REGIONAL TOURISM UPDA Ms. Stevens noted that she has served in the following capacities: July 1983 to present, Repre- sentative to Region IV of the State Division of Tourism, Department of Economic Development; February 1984 to present, Representative to Snohomish County Visitors Information Center (VIC); March 1985 to present, Representative for the City to the Sister Cities Board of Directors; 1986, Representative on the City of Edmonds Tourism Committee appointed by the Mayor for prioritizing expenditure of.Hotel/Motel Tax revenue; Liaison to Edmonds Chamber of Commerce, South Snohomish County Chamber of Commerce, Main Streets Program, and Edmonds Parks and Recreation Dept. on mat- ters related to tourism development. Ms. Stevens said in addition, she has served on the South County Tourism Committee meeting that VIC. She served actively in bringing about the of the board, serving last year as chairman. many subcommittees. It was at her suggestion at a task force be formed to establish a county wide interlocal agreement and has since been a member Her current committee responsibilities include organizing Snohomish County participation at Expo '86. More specifically, she was directed by the chairman of the VIC to work with Karen Charnell, Director of Tourism for the City of Everett, to develop a plan for disbursement of Hotel/Motel Tax revenues for Snohomish County. Ms. Stevens served as an active member on the Region. IV board to host the "Team Washington" State conference on tourism in Everett. Her input and knowledge of this area resulted in the inclusion of the regional description into the State Division of Tourism pages of Travel Washington. This publication is used as the promotional tool for all requests for information on Was ington State. She initiated a project to contract with the State for matching monies to produce an all- inclusive restaurant guide for the City of Edmonds. However, the contract was cancelled because of the time limitation for completion. Ms. Stevens said the latest report for the City's Tourism Committee is that the first priority of expenditure was for postcards .of Edmonds. It received a high priority because the sale of cards will produce additional revenue. She said there is a need at this time for a responsible person to manage and account for the distribution. Ms. Stevens submitted two of the postcards to the Council which have been distributed to local merchants. Ms. Stevens said Mayor Naughten appointed her as the City representative to the Sister Cities Program, and since that time the Committee has evolved to a properly elected board and a member- ship structure has been formulated. The schools are cooperating with friendship letter exchanges. 1 EDMONDS CITY COUNCIL MINUTES Page 2 JULY 8, 1986 Ms. Stevens said she was sure that the Council recognized that a lot of time, energy, and person- al expense has gone into the performance of these activities. She said at no'time has she submit- ted any requests for compensation for her time., gas mileage, phone calls, or postage. She cannot continue to perform the ever increasing responsibility without compensation. She said she be- lieved that the promotion of tourism does. and will have a profound effect on the economic growth and development to the City of Edmonds, and she sincerely desires to be a part of that growth. Ms. Stevens said she has received the impression that the Council and Mayor did not perceive a need for a Director of Tourism. However, she believes that through her efforts she has shown the need for a full-time position. And if such a position is created, she would like the opportunity to be considered. Ms. Stevens added that Mike Caldwell, who is the assistant to the Mayor of the City of Lynnwood, executes a large percentage of tourism responsibilities, and Karen Charnell is a full-time paid Director of Tourism for the City of Everett. Councilmember Wilson inquired if Ms. Stevens had statistics regarding the benefits that tourism has provided to the community in the recent past. Ms. Stevens said Governor Booth Gardner has committed to making tourism one of the big "T's" in the State's economic and development plan, i.e., Trade, Technology, and Tourism. She said State research indicates that tourism brought in 3.5 million dollars in taxes and created more than 2,000 jobs in Snohomish County alone. Councilmember Wilson inquired if any input has been elicited from local merchants. Ms. Stevens said she could not state whether or not merchants understand the benefits of. tourism, but it will take the leadership of the Council and Mayor to commit themselves to tourism as an economic devel- opment plan. Councilmember Wilson inquired if Ms. Stevens was seeking a position in South County or Edmonds exclusively. Ms. Stevens said she was unsure if Lynnwood would be interested in a joint effort. She said if she did resign from her tourism activities, the City would be asked to appoint a representative to the VIC. Councilmember Kasper asked Ms. Stevens if she is personally involved in the business of tourism. Ms. Stevens replied affirmatively. Councilmember Kasper inquired if she would pursue this inter- est if appointed by the City. Ms. Stevens said her company, "Creative Tours", would serve as an adjunct to the City's Tourism program because it provides transportation to the City. Councilmember Kasper inquired about the facility on 164th. Ms. Stevens said a trailer was ini- tially.set up to accommodate the Site Committee in order to receive State funding. Another site is currently being pursued because the Committee has outgrown its facility. Councilmember Kasper asked how the postcards were funded. Ms. Stevens said they were funded by the 2% Hotel/Motel Tax. COUNCILMEMBER OSTROM MOVED, SECONDED BY COUNCILMEMBER K,ASPER, TO REFER MS. STEVEN'S REQUEST TO THE COMMUNITY SERVICES COMMITTEE FOR FURTHER DISCUSSION. MOTION CARRIED. MEETING WITH PLANNING BOARD Chairperson Sherry Claussen introduced the Planning Board members present as follows: Richard Kirschner, Hank Lewis, Tom Snyder, Dean Nordquist, and Tom Murphy. Ms. Claussen said the Board recently discussed absences because of vacation in that to be excused the Code requires that the vacation be an extended vacation longer than two weeks, and they felt that a criterion that Board members must attend a required number of meetings would be more appro- priate. Councilmember Wilson inquired if an extended vacation, i.e., 3 months, would create a hardship for the Board. Ms. Claussen replied affirmatively. Councilmember Ostrom said he felt there should be some allowable vacation time. He asked what the Board's viewpoint was. Mr. Nordquist noted that the Board has an alternate member so meet- ings are very seldom attended by less than seven members. He said he did not feel that a hard- ship would be created if a member took a three or four week vacation as long as it was not on a regular basis. Councilmember Kasper said that prior to the current ordinance that a Board member could not be forced to resign if he/she failed to attend meetings. EDMONDS CITY COUNCIL MINUTES < Page 3 JULY 8, 1986 Councilmember Ostrom observed that many of the conflicts which arose between the Planning Board and Council in the past have diminished. He said it has been his perception that the two bodies seem to be working more harmoniously together. He asked the Board what their perception has been. Mr. Lewis said there used to be opposing personalities on the Board, but the current Board members tend to work as a team and relate to each other very well. He said the Board displays more respect for the Council and vice versa. Councilmember Nordquist said when he served on the Planning Commission, applicants would only submit partial information. But when he/she appeared before the Council, he/she would surrender all of the information. He inquired if this scenario still takes place. Mr. Nordquist replied negatively. He said the Planning Department has provided very complete position papers and state- ments to the Board. Councilmember Ostrom commended the Board on the product it submits to the Council. He said it makes it much easier for the Council to discuss issues. Councilmember Wilson said he felt it would be appropriate to charge a filing fee for the appeal process. Ms. Claussen said it has been the Board's observation that many appeals are filed by persons without a vested interest. She said a filing fee may discourage appeals by these people as well as help defray some of the costs. Mr. Nordquist said he felt if the appeal process is heard by the original board that considered the matter, it may eliminate some of the appeals which go to the Council. Councilmember Ostrom inquired if an applicant has an opportunity to engage in discussions at an Architectural Design Board meeting if the Board rejects an item. Mr. Nordquist said the structure of the meeting does not lend itself to that opportunity. Councilmember Ostrom asked City Attorney Scott Snyder what his opinions were regarding the appeal process as suggested. Mr. Snyder said an additional step would be added if there is a mandatory procedural requirement for a motion to rehear. Councilmember Dwyer said complaints may be lodged regarding the cost and effect of money. Planning Division Manager Mary Lou Block noted that the Hearing Examiner may consider a request for reconsideration of his Decision. Ms. Claussen inquired if the Council had any suggestions regarding communication between it and the Board. Councilmember Ostrom said the Board has simplified the Council's process when it submits its findings because the Board has been very thorough in recent years. The Council is pleased with the Board's methods. Ms. Claussen said when the Board makes a determination based on City Code, the question of wheth- er that is a Board issue or policy for the Council to consider arises. Councilmember Ostrom recommended that the Board refer to Chapter 15 of the Edmonds Community Development Code to in- sure that the philosophy used in making decisions on discrete issues agrees with the broad princi- ples expressed in the Code. Councilmember Dwyer inquired how the Council may be more helpful to the Board. Ms. Claussen said it would be helpful if the Council clarified what its perceptions are regarding a specific issue when the Council refers matters to the Board. Councilmember Jaech said a method of relating information to the Board by Staff from the Council needs to be devised because Staff is the liai- son. Ms. Block said there is a fine line when relaying information to the Planning Board from the Council because Staff is charged with dealing with an issue objectively and not to give the Board any direction. Mr. Snyder said in the two years that he has worked with the City, he has frequently heard the Council express concerns that a particular item was not addressed or that it did not understand some portion of a recommendation of the Planning Board. He said he has not seen the Council refer a matter back to the Hearing Examiner or Board for further clarification. If the Council would exercise that power, it would foster better communication. Councilmember Kasper asked Mr. Snyder if, in his experience, he has observed de novo proceedings in one case and not another. Mr. Snyder said the City has the most extensive use of de novo hearing powers and final decision -making authority by the Council of any City that he is aware of. Board member Snyder asked what the Council's position was regarding the five-year Comprehensive Plan for parks. Councilmember Ostrom said the Council has never discussed that issue. lie recom- mended that a joint discussion with the Council and Board be scheduled. Councilmember Jaech recommended that the neighborhood for which a plan is devised be included in the discussions prior to a decision being rendered. Councilmember Dwyer recommended that beaches be included in the park plans because they are a major financial drain and service provider to the City. EDMONDS CITY COUNCIL MINUTES Page 4 JULY B, 1986 Councilmember Nordquist expressed his appreciation to the Board for attending the meeting. He said the Council looked forward to an invitation to a Planning Board meeting to discuss the parks comprehensive plan. The meeting recessed at 8:20 p.m. and reconvened at 8:24 p.m. DISCUSSION ON PRIVATIZATION OF SEWAGE TREATMENT FACILITY Community Services Director Peter Hahn introduced Phyllis Lamphere, formerly a Seattle City Coun- cilmember, President of the National League of Cities, and Regional Administrator of the Economic Development Administration, and now a Consultant (Lamphere Associates); Mark Alpert, Signal Envi- ronmental Systems representative; Kline Barney, Parsons Municipal Services; Ron Doctor, Arthur Young & Co.; and Dave Reynolds, CH211 Hill. Mr. Hahn said the State Department of Community Development has recently completed a generic study of joint development financing (privatization) which analyzed all public works. He said Arthur Young & Company has completed a study which showed that the City of Lynnwood could realize potential benefits from privatization. Lynnwood has recently decided to prepare a full Request for Proposals (RFP). Mr. Hahn sai,d significant savings are possible between a privatizer and a city. However, these savings could be decreased under certain changes proposed for Federal tax laws. He said that there is an element of risk in privatization and, also, by being "trail blazers". Mr. Hahn referred to Table 3-2 "Results of Financial Feasibility Analyses" on the overhead projec- tor. He said the report shows that privatization can save the public sector 24.2% over conven- tional financing for waste water treatment plants. However, those savings are subject to change under the existing tax laws. Ms. Lamphere said the Public Works Report that was authorized by the 1983 session of the legisla- ture pointed out that there was over $4 billion of needed improvements by the year 1988 which excluded secondary treatment and solid waste disposal. Of the $4 billion, $2 billion plus were unfunded so•the quality of life in the State of Washington was threatened. As a result, the legislature passed the Public Works Board and Public Works Trust Fund in 1985. Additionally, the legislation called for a feasibility study of unconventional financing alternatives. Ms. Lamphere submitted the report to the Council. She said the result of that study showed: 1) that privatization is feasible for jurisdictions in. Washington State to consider as an alternate means of funding their public works needs, 2) privatization is most applicable to the functions of water supply, waste water treatment, and waste disposal. The team submitted its report in December of 1985 to the legislature, and the measure was passed in March of 1986. Ms. Lamphere said the Council is responsible for: 1) critical policy decisions, 2) quality of service delivered to its constituents, 3) cost of service, 4) determining the method of financ- ing, and 5) authorization of contracts. Ms. Lamphere noted that there are risks in any uublic works project. The more the policy makers are advised and aware of the options and familiar with the analyses that have gone into the alter- natives, the more sound their decision will be. Mr. Alpert said his company reviewed at least three ways to approach a project with the City on a privatization basis: 1) own and operate. The private company would own and operate.the facility on a long-term service contract with the City and would provide certain guarantees. Councilmem- ber Jaech inquired if the company would purchase the City's existing site under this option. Mr. Alpert inquired if the plant was funded with Federal monies. Mr. Hahn said it would have to be leased back even if only small grants were awarded. Councilmember Dwyer inquired about the requirements for maximum tax advantages that the private company must run the facility. Mr. Alpert said that would only apply in the own and operate arrangement. The other arrangements are as follows: 2) design/build operate, 3) design/build, 4) contract operations. He said the City would own the facility under those scenarios. Councilmember Dwyer inquired under, which options the City would retain its power to condemn prop- erty. Mr. Alpert said the City would retain that power under all of the options. Councilmember Dwyer inquired if the City would retain the power of condemnation under an option EDMONDS CITY COUNCIL MINUTES Page 5 JULY 8, 1986 where the City has the least involvement and the private organization has the most control. Mr. Alpert said his company is not interested in controlling city functions but, rather, to provide a waste water treatment plant. Mr. Hahn said only the City has the authority to condemn property. He said the City has the power to require that the service contract gives the City total authori- ty over land use issues, eminent domain powers, or anything else it wishes to specify. Mr. Alpert reviewed the financial arrangements on the overhead projector as follows: 1) tax exempt municipal bonds, 2) municipal lease/purchase, 3) revolving loan funds, 4) dedicated taxes, 5) traditional revenue bonds, and 6) general obligation bonds. Mr. Alpert said the key issues in privatization are control, guarantees, performance, financial backing, and cost savings to users. The issues of any arrangement that relates to the City and zoning policies remain with the City; companies of substance which approach the market will pro- vide substantial guarantees and will, hopefully, relieve the City of a significant amount of risk; performance will be guaranteed; the City should look to major companies to provide financ- ing; the new law in the State of Washington regarding privatization requires that privatizers present information which assures that privatization transactions do result in savings to users. Mr. Alpert said that most of the major risks of a project, when constructed under conventional methods, are routed to the city. However, under privatization, those same risks are borne by the company. The only true responsibility the privatization company looks to in a community relates to the following: 1) assurance to the privatizer that the quality of waste water routed to the plant is of a quality consistent with Federal pretreatment requirements, 2) method of agreement to a schedule 'of quantity of waste water routed into the plant is devised, 3) arrangement of change in laws is devised. Mr. Barney said he is an engineer and is registered in many states, including Washington State. Mr. Barney said the key issue in privatization is flexibility. He said his company has been in privatization of sewage treatment plants for 3-1/2 years to four years. The first plant constructed in Chandler, Arizona was contracted for and bonds were sold in three weeks, and the plant was on line and running in less than two years. He said the Mayor of Chandler anticipates that the city will realize a savings of $1 million over the conventional bonding approach per year. The second plant constructed in Gilbert, Arizona was a complete de- sign and construct project by Parsons. The first phase of operation will be on line in one year from the date the contract was signed. The project was backed by the developers. Another project under way in Pelham, Alabama is a centralized sewage treatment plant which will be owned and operated by Parsons. And a fourth project under construction in Downingtown, Pennsylvania is an existing plant which will be expanded. Mr. Doctor said potential savings through privatization may range from 12 - 70%. Other savings may be realized as well that are not monetary savings but are savings in the way the plant oper- ates and shifting of risks and responsibilities from the city to the privatizer. Mr. Doctor said the Lynnwood study focused on a seven million gallon per day secondary waste water treatment plant by the year 2006. The engineering construction cost is $20 million. The study addressed financing alternatives, effects of interest rates, and effects of tax reform on potential savings. He said savings in the early years to rate payers are as high as 40% but would taper off over time to approximately 20%. Mr. Doctor said the City Council of Lynnwood is going to issue an RFP. Mr. Doctor referred to the ten steps of privatization as follows: 1) financial feasibility analy- sis, 2) develop an implementation plan, 3) prequalify bidders, 4) develop and distribute an RFP, 5) hold a bidders' conference, 6) evaluate response to an RFP, 7) review financial market and the Federal tax environment, 8) select the top bidder, 9) negotiate and draft a service contract, and 10) establish site and public information programs. Mr. Hahn said the panel is the most reputable and knowledgeable group in the field. He said as the administrator of the program, lie felt the City should be in preliminary design. The City could spend the next few years raising and answering questions about sites, privatization, joint development, etc. He said in Staff's opinion, the decision to proceed with privatization re- quires a commitment to a new philosophy and a leap of faith. There is no way to answer all the possible questions in advance or to write a contract with a privatizer to eliminate all of the risks. He said a conventional approach also has risks and will encounter problems. Mr. Hahn said there is no question that privatization can work and there probably is an 80% chance that no major problems will be encountered. 1 EDMONDS CITY COUNCIL MINUTES Page 6 JU.LY 8, 1986 Councilmember Jaech asked why fees will be less to rate payers.through privatization. Mr. Alpert said construction fees will be lower. The facility could be on line in 24 months as opposed to 5 to 7 years through the traditional method, and time is money. Councilmember Jaech inquired why construction would take less time through privatization. Mr. Alpert said the various processes which a city traditionally takes are time consuming and would be circumvented through privatization. Councilmember Jaech inquired how tax benefits relate to the rate payer. Mr. Doctor said the privatizer will realize tax benefits which will enable it to lower its costs and charge the city less for services which can be translated into savings to the rate payers. Councilmember Jaech inquired about the cost of normal year-to-year operations. Mr. Doctor said the operating costs are tax deductible to the privatizer. Councilmember Jaech inquired about the contract for service fees. Mr. Doctor said the contract is a long-term contract, usually 20-25 years, which may include provisions for changing the terms. Councilmember Jaech noted that Edmonds and Lynnwood participate in a shared plant. She inquired if Lynnwood is considering privatizing that plant. Mr. Hahn said the City owns a very small percentage of the plant. However, the City would realize a savings from the savings that Lynn- wood received from the privatizer. Councilmember Kasper asked how many contracts the privatizer can carry and what their financial' source limitations are: Mr. Hahn replied twenty-eight. Councilmember Kasper inquired about the time savings in construction through privatization. Mr. Barney said the engineers fit the projects into their schedules. Under the new tax laws, he said the bonding market is very attrac- tive. Mr. Alpert said his company has a billion dollars of privatization projects which it owns and operates and another billion under construction plus a third billion in negotiations. The company was recently offered the largest stock offering in U.S. history. Mr. Doctor said his company was concerned whether there would be sufficient interest among the privatization communi- ty coming into Washington State to do these projects so they conducted a survey. One hundred surveys were sent and 26 responses received. Of the 26, 17 said they were definitely interested in coming to Washington and privatizing and putting up their own equity. Councilmember Kasper inquired if privatization is feasible for the City of Edmonds or if Edmonds should consider joint participation with Lynnwood. Mr. Doctor said the key question is the engi- neering question of whether or not there is a site that can handle joint participation, which is the main constraint. In terms of financing, he said Lynnwood has already conducted their feasi- bility study and Edmonds has not. Councilmember Wilson inquired how the rates are established. Mr. Barney said there is competi- tion among privatizers, and an RFP can be constructed, to analyze the different options which are available. Mr. Doctor said it is anticipated that 10 - 15 qualified proposals will be submitted to Lynnwood in response to an RFP. The top proposal will be selected and negotiations will be well struc- tured in advance. City Engineer Bob Alberts clarified Mr. Wilson's question by inquiring how rates will be estab- lished in the future. Mr. Doctor said rate increases can be limited in the service contract. Mr. Alpert said a formula will be defined based on what the competition will bear, the nature of the terms of the Condit Mns, and quantity and quality of water flow. Mr. Barney said there are two parts to the fee schedule: 1) long-term amortization of the debt, which is set in advance for 20-25 years, and 2) a.nnual operation and maintenance fee. A formula is established which can guarantee for long periods in advance what the cost will be. Councilmember Dwyer said he was concerned that twenty-one years from now the pool of operators will be limited and their bargaining powers will be greater. Councilmember Wilson added that the cost savings benefits decrease as the end of the term period approaches. Mr. Hahn said this scenario could easily take place not only at the end of the twenty-year service agreement but also in year 6. He said that is one of the risks of privatization. Mr. Doctor said if the cash flow, as depicted in Exhibit #I, is not satisfactory to the City, factors can be adjusted to change it. Cash flows will level out because depreciation will be taken over a longer period of time. Mr. Barney said the contract can be drawn up to include features which wil'1 provide that the City will take control of operations in the 20th year if there are problems encountered or to spell out the method of renegotiation to allow the privatizer to continue to provide the EDMONDS CITY COUNCIL MINUTES Page 7 JULY 8, 1986 service. Councilmember Dwyer said he assumed that at the end of the 20th year, the City would not want to purchase the plant and is concerned that the marketplace for negotiations appears to be nonexistent. Mr. Hahn said the City would also be in a position of having to buy the plant back at fair market value. Mr. Doctor said the City would not have to buy the plant back or continue with the same privatizer. Councilmember Dwyer inquired where the marketplace would evolve from assuming that the City did not want the plant but was interested in renegotiating the service contract. Mr. Alpert said the City would have the following options at the 21st year: 1) purchase the plant at fair market value, 2) take over the responsibility of ownership and operation, 3) rebid the repurchase of the plant to someone else, 4) renegotiate with the privatizer to continue services. Mr. Alpert said in continuing services, there is no debt ser- vice component of the service fee, which is probably 75% or more of the fee. Councilmember Kas- per inquired if a contract can be negotiated in which fees are paid after 20 years. Mr. Barney said one of the features of privatization is the mandate for tax reasons to pay fair market value at the end of the service contract. He said a value cannot be set in advance. However, on a true leaseback arrangement, the plant could be purchased for $1.00. The City can only receive tax exempt money or tax benefits; not both. Councilmember Wilson asked Mr. Hahn what the time constraint is in making a decision. Mr. Hahn said the City should proceed immediately if it wishes to meet the milestones set up in the DOE order. Councilmember Kasper noted that the August 12 agenda is available. He said he was not willing to proceed until he fully analyzed privatization. Ms. Lamphere noted that the panel was willing to answer any questions in writing which the Councilmembers may submit. COUNCILMEMBER WILSON MOVED, SECONDED BY COUNCILMEMBER KASPER, TO ACCEPT THE REPORT AND INSTRUCT MAYOR PRO TEM NORDQUIST TO SCHEDULE A DATE FOR FURTHER DISCUSSION OF PRIVATIZATION. MAYOR PRO TEM NORDQUIST SCHEDULED AUGUST 12. MOTION CARRIED. Mayor Pro Tem Nordquist adjourned the meeting at 10 p.m. COUNCILMEMBER KASPER MOVED, SECONDED BY COUNCILMEMBER WILSON, TO EXTEND THE MEETING TO 10:30 P.M. MOTION CARRIED. Mr. Alberts noted that it is not a requirement of privatization that the privatizer draft the design. He said the design can be drafted by an independent consultant. CONTINUED DISCUSSION ON SUGGESTED ANNEXATION TO LIBRARY DISTRICT Administrative Services Director Art Housler reported that this subject was continued from June. 10, 1986. After Mae Schoenrock concluded her presentation, the Staff was requested to compare the cost of present library service to that of annexation. The comparison reflects roughly a 14% increase in the cost if the library is annexed into the City under their current tax levy rate. Mr. Housler said he learned from a study conducted by Management and Planning Services that present service charges are less than what the annexation levy would be because library districts in the State of Washington give credit for cities providing space, and maintenance, and use by nonresidents of the City. Mr. Housler said the City would consider annexation under these circumstances because of fair- ness. When the City had surpluses and citizens needed relief from high utility bills, the City cut taxes. Now that the City is having shortfalls and needs money to pay the -library debt pay- ment, citizens are asked to help out. The effect of annexation is that there will be $306,200 more in tfre General Fund to maintain the same services. Councilmember Jaech said if this issue is placed on the ballot in the near future, it would only be fair that the citizens are apprised that annexation will increase costs to the citizens be- cause they will pay more in real estate taxes. She recommended that the $306,200 is earmarked and set aside if annexation is passed. Councilmember Dwyer inquired if taxes would be lowered in the unincorporated areas of the City if annexation was passed but the budget was not rolled back and taxes were increased within the City. Mr. Housler said the City is paying ninety cents less in taxes so it would still be less in the County. Councilmember Wilson noted that the utility tax was raised when the library was built and then subsequently cut back. Councilmember Jaech said that the amount the City is receiving in utility revenue has drastically increased. Mr: Housler said with a cut of the utility taxes from 1982 to 1985, the increase in revenues from those were approximately equal to what the CPI increases were. EDMONDS CITY COUNCIL MINUTES Page 8 JULY 8, 1986 1 Councilmember Kasper recommended that further information be provided to the Council. The Coun- cil could then discuss this issue and make recommendations during the budget.meeting. He request- ed the Library Director to discuss suggestions with Staff to improve the City's position . COUNCIL Councilmember Kasper thanked the Library Board for attending the meeting. Councilmember Wilson said the Cemetery Board has established the southwest corner of the cemetery as the location for the Veterans' memorial. He requested that Staff draft a plan so the Board can finalize it. Community Services Director said there has been a question in the past regard- ing whose design Staff would be implementing, i.e., Kirby White's or the Cemetery Board's. Sec- ondly, Linda Sullivan, who typically would perform this task, recently resigned from the City. Public Works Superintendent Bobby Mills said he spoke with Mr. White last week and recommended to him that a certain Eagle Scout be appointed to draw up the concept to be presented to the Council for approval. Councilmember Nordquist recommended that more time be allocated to issues which require in- depth discussions. Mr. Hahn said he had requested more time for the privatization issue but was not allocated more time. The meeting adjourned at 10:22 p.m. JACQU LINE G. PARRETT, City Clerk J01-111 NORDQUIST, Mayor Pro-tem EDMONDS CITY COUNCIL MINUTES Pacie 9 JULY 8, 1986