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HomeMy WebLinkAboutCC Minutes - 09/19/01 Work Session MINUTES Eugene City Council Work Session McNutt Room--Eugene City Hall September 19, 2001 Noon COUNCILORS PRESENT: Betty Taylor, David Kelly, Nancy Nathanson, Scott Meisner, Gary Rayor, Gary Pap~, Bonny Bettman, Par Farr. CITY COUNCIL WORK SESSION Mayor James D. Torrey called the meeting to order. A. Work Session: Resolution 4689: An Amendment to Joint Resolution 4626 of the City of Eugene and the Eugene Water & Electric Board The council was joined by Eugene Water & Electric Board (EWEB) commissioners Peter Bartel and Dorothy Anderson, EWEB General Manager Randy Berggren, and Telecommunications Project Manager Debra Wright. Randy Kolb of the City's Information Services Division was also present for the item. Ms. Wright requested council adoption of an amendment to Joint Resolution 4626, covering EWEB telecommunications activities. She noted that the initial resolution was passed early in 2000, prior to a successful charter amendment vote giving EWEB the authority to provide advanced telecommunications capability and associated services. Ms. Wright noted that the most recent version of the amendment to the joint resolution, reflecting changes requested by councilors, had been distributed to the councilors at their places. Those changes included Section 2(d), which addressed the geographic areas to be served by MetroNet and involved a small wording change, and the addition of text to Section 2(e), which spoke to coordination between the City's land use plans and policies and EWEB's communications plans. She said that commissioners Bartel and Anderson believed the full board would accept and adopt the changes. Ms. Wright acknowledged questions and comments from the council that had not yet been fully addressed. She called attention to a document including questions posed by the council and answers from EWEB. She briefly reviewed the questions and answers. Ms. Taylor, seconded by Mr. Kelly, moved to approve revised Resolution 4689, an amendment to Joint Resolution 4626 of the City of Eugene and MINUTES--Eugene City Council September 19, 2001 Page 1 Work Session Eugene Water & Electric Board, and adopted by the EWEB Commissioners on September 4, 2001. Mayor Torrey called for council comments and questions. Ms. Nathanson questioned why the council needed to approve a project already approved by the voters. She thought many of the questions about the propriety of EWEB's actions were related to a fundamental question about whether EWEB should offer the service at all. She believed the voters had spoken in favor of the service, and the utility needed to start somewhere. Ms. Nathanson pointed out that the service was always to have been phased in, and EWEB was merely proposing a different phasing approach. She thought the voters would approve of the conservative approach being taken by EWEB. Ms. Nathanson noted the council was frequently criticized for interfering in the business of other agencies and urged not to get involved. She found it ironic that in this case, there were people who did not trust the board, which was accountable to the ratepayers, and were urging the council to insert itself between EWEB and its customers. Ms. Nathanson thought the risks involved were small, and said the council should trust the EWEB commissioners and allow EWEB to proceed. Mr. Kelly said that the project was EWEB's and for that reason he gave deference to the EWEB commissioners, who were responsible to the public that elected them. However, because of the fact of the joint resolution, he wanted to ensure he was comfortable with the amendment. He thanked EWEB for the changes to the amendment to the resolution made in response to his concerns. Mr. Kelly thought on balance, the issue involved was one of economic development. He believed the presence of MetroNet would give local businesses a competitive advantage and attract the types of businesses compatible with the community's goals. Mr. Kelly noted he had determined from Ms. Wright that $4.5 million on hand would get the system running for two years, the business plan indicated short-term borrowing would begin in the out years, and the voters would approve future indebtedness, including such short-term borrowing. Mr. Farr wanted EWEB to proceed with the project, which would benefit small businesses in the long run. He had been convinced that the project was viable and one that would eventually sustain itself. He was not concerned the project would compete with the private sector, but thought the project would compliment existing businesses and would also attract new businesses to the community. However, Mr. Farr was concerned that the voters approved spending money in one way, and the amendment changed the way in which the money was spent. He thought there was a community perception that the council did not care how the people voted. Mr. Farr was worried that changes to the resolution could be interpreted as ignoring the public. He asked staff to address that concern. MINUTES--Eugene City Council September 19, 2001 Page 2 Work Session Ms. Wright responded to Mr. Farr's concern, saying that the only difference was that in the charter vote the discussion was around new money, and the money in question was existing money, and EWEB's bond counsel had indicated that funding the project was an acceptable use of those bond proceeds. Mr. Farr said he was comfortable with the explanation, but it did not address what he believed would be the negative perception in the community. There were people who believed that if the council changed the wording in the joint resolution, it would be changing what they voted on. He had not made up his mind at this point, but was inclined to vote against the resolution. Ms. Bettman asked whether the the original resolution would move forward if the council did not adopt the amended resolution. Ms. Wright said yes. Regarding the issue of short-term borrowing, Ms. Bettman said the cost of MetroNet build was about $10 million; there was $4.5 million left from the original bond, so it was clear there was insufficient money to pay for the MetroNet project. That left the real possibility the utility would have to seek more funding from the voters in two more votes, one for the short-term funding, and one for the long-term funding. Ms. Bettman agreed that the project was a good economic development tool and she wanted to see it go forward, but had yet to hear an argument that justified amending the original resolution. She found the amended resolution to be inconsistent with the initial resolution, particularly in regard to future indebtedness. She thought providing limited commercial service and separating it from the universal build would prejudice the outcome of the universal build. Ms. Bettman said that presumably, public utilities provided the service because universal service was generally not profitable, and there was cross-subsidization between the commercial and residential customers. She was concerned that there would be a limited number of businesses able to benefit from the public investment in MetroNet, giving those businesses a competitive advantage; universal build would spread that advantage to many more businesses, taking away the competitive edge from the businesses initially served, and she questioned whether EWEB would lose those businesses' support for a universal build. Mr. Pap6 had not been in favor of the original resolution because he thought EWEB should have had a business plan first. He was pleased because there was now a business plan and because he thought EWEB did a good job in engaging the public about the project and giving the council time to educate itself about the issues involved. Mr. Pap6 thought the business plan lacking in the ways mentioned in a recent editorial published in The Register-Guard, and expressed hope the commissioners would consider the questions voiced in that editorial and answer them. Mr. Pap6 said that the council should acknowledge that acceptance of the resolution was changing what the council approved previously; that is, that the indebtedness for the project would be paid for by the project. He agreed that there was an economic development benefit from the project, and those he had spoken to said they would use the system and it would enhance their business MINUTES--Eugene City Council September 19, 2001 Page 3 Work Session opportunities. He did not think the existing service providers would provide the system to the community in as timely a fashion. Mr. Rayor noted his concurrence with many of Ms. Nathanson's remarks, particularly with regard to phasing. Mr. Rayor clarified with Ms. Wright the details of the original bond and what the bond had funded. Mr. Rayor asked how long it would take for the utility to clear a default. Ms. Wright said it depended on when the default happened; she noted that the 20-year bonds were initially issued in 1998. Mr. Rayor called attention to a typographic error in Section 2(d) of the revised resolution on page 2, noting subsection "5" should be subsection "e." Mr. Rayor did not recall that the charter amendment passed by the voters was specific to funding. Ms. Wright agreed, but pointed out that the joint resolution specific to the funding mechanism was included in the voters pamphlet as background. Mr. Meisner said that developmentally, economically, and philosophically the project made sense. However, he shared Mr. Farr's concern over the breach of trust with the voters. There was to be no future indebtedness without obtaining voter approval. Mr. Meisner said he had called those offering him comment about the initial resolution the previous year and was surprised to find them unanimously opposed to amending the resolution. They opposed offering service to commercial users first rather than residents first; while they understood a phased approach, they would have liked to have had a voice in the phasing through a vote; and they were also concerned about using recourse bonding at this time. Even though the bond counsel indicated the proceeds could be legally used for MetroNet, Mr. Meisner did not think the use of those proceeds was consistent with the joint resolution, which he maintained people had read carefully. He was not prepared to support the resolution at this time. He suggested that EWEB offer a phased system to the voters in a new ballot measure. Ms. Taylor was inclined to support the resolution, in part because the funding did not depend on the resolution and because no further money was proposed to be spent in a different way. She questioned what happened if the utility did not have enough money to complete the system, asked the voters for it, and was turned down. Ms. Wright said that EWEB would sell the distribution part of the system together with a lease on backbone fiber. She termed that the worst-case solution to the worst-case scenario. Ms. Taylor asked ifEWEB objected to going to the voters again. Mr. Berggren said it was a matter of timing and expense. Ms. Taylor asked what was lost if the system was started and not MINUTES--Eugene City Council September 19, 2001 Page 4 Work Session finished. Ms. Wright said that conceivably, nothing would be lost because the community would still have the components of the system, now owned by a private provider. Ms. Taylor determined from Ms. Wright that it was not possible to get a measure on the November 2001 ballot but it was still possible to get one on the March or May 2002 ballot. Ms. Nathanson thanked staff for providing her with a copy of the charter amendment and suggested that the McNutt Room could benefit from Internet access. Staff could look up information on line when needed. Ms. Nathanson quoted the following from the charter amendment: "The board is further authorized to provide advanced telecommunications capability and associated services, including but not limited to, voice, video, data, internet, and telecommunications services." She said the amendment did not describe the phasing sequence, nor did it include a funding amount; it was intended to give broad authorization to EWEB to enter into a new area of service provision. She believed the proposed service was important enough to be called a utility. Ms. Nathanson likened the system to a telephone system, asking what would happen if only half the city's citizens could access long distance service. People would think it wrong. She said that Internet access was becoming as essential as telephone service. Ms. Nathanson did not think that modifying the resolution changed the intent of the charter amendment or what the voters approved. Ms. Nathanson did not want Eugene to become an economic "backwater," and said that would occur if the citizens did not have the technology to do what they needed to do. She regretted Eugene's lack of access to broadband, noting that nearly all of Springfield had such access. She said that the project in question was an even better new technology. Ms. Bettman did not support the amendment to the resolution, adding that not supporting the resolution did not mean the project could not go forward; it meant that EWEB had to uphold the agreement to provide universal service it made to the voters in 1999 or go back to the voters to modify the plan. She believed that the voters' support of the charter amendment was based on the assurances printed in the voters pamphlet. She quoted from the resolution printed in the pamphlet: "Any indebtedness incurred for EWEB's telecommunications activities shall utilize only finance that is nonrecourse to EWEB's electric and water utility system revenues and assets." She said the $4.5 million is recourse to the electric and water utilities, and any loss would be borne by the ratepayers. Ms. Bettman said that might not seem like a large amount, but she noted that EWEB was on a future council agenda with a request for $2.5 million in low-income energy assistance because of anticipated rate increases. Speaking to Ms. Nathanson's comments, Ms. Bettman said that a previous council had inserted itself into the process by stipulating that EWEB would not incur future indebtedness for its telecommunications activities without first obtaining the approval of the City Council and then the voters. Three of the commissioners had argued for the charter amendment in the voters pamphlet MINUTES--Eugene City Council September 19, 2001 Page 5 Work Session with reassurances that the water and electric ratepayers would not fund future telecommunications costs and indebtedness did not distinguish between short- and long-term indebtedness. Ms. Bettman noted that EWEB's modeling of the risk indicated there was a 90 percent chance revenue would not meet projections. Mr. Farr expressed trust in the EWEB board and management and believed the voters also trusted EWEB. He reiterated his previous concerns about violating the public's trust. He thought the voters would support EWEB in another special election. He asked about the implications to EWEB of a five-month delay. Ms. Wright said she would prefer to consult with potential telecommunications customers before she answered that question. Mr. Bartel indicated that without adoption of the resolution, the project stopped. Mr. Farr determined from staff that a special election would cost about $100,000. Mayor Torrey said in the event of a tie, he would vote against the motion. He was not opposed to the proposed project, but he was concerned that EWEB was risking its credibility with the community. He did not believe the community understood what EWEB was doing, and he feared the upcoming electricity rate increase would be perceived by the public as paying for the costs of the system. He acknowledged that was not the case, but repeated it would be the community perception. Mayor Torrey encouraged EWEB to hold another vote. In the interim, EWEB would have the opportunity to prove the project's viability. If the voters voted no, he advised EWEB to take their advice. Mayor Torrey acknowledged that in the absence of competition, some private providers would be slow in providing telecommunications access; he suggested that over the next five months, EWEB could leverage their guarantee to provide the service if it did not. Ms. Taylor, seconded by Mr. Pap~, moved to extend the item an additional ten minutes. The motion passed, 5:3; Mr. Rayor, Mr. Meisner, and Mr. Farr voting no. Responding to a request for input from Mr. Farr, City Manager Jim Johnson believed that it was EWEB's responsibility to educate the public. He thought there would be confusion, but it was hard to judge the extent of that confusion, or the extent to which people understood the distinctions between the resolutions or recalled what was said during the election campaign or printed in the voters pamphlet. He thought that any problem would be perceived as EWEB's problem rather than the City of Eugene's problem. Responding to a follow-up question from Mr. Farr, Mr. Johnson confirmed the statement of EWEB's bond counsel. Ms. Bettman said if the council did not adopt the amended resolution, it was her understanding that the remaining $4.5 million could be used for continued planning and community education and outreach in preparation for another vote. MINUTES--Eugene City Council September 19, 2001 Page 6 Work Session Ms. Bettman believed that moving forward with a system split up between the MetroNet and the universal build jeopardized the universal build; the two systems must move forward, linked, or there was no guarantee of a universal build. If universal build was the council's ultimate objective, she asked why not get certainty and community support early in the process, rather than investing in the commercial aspect of the project and never having universal build. Referring to the potential the system did not work or the voters would not support it, Mr. Pap~ reiterated that the first backstop was not to increase rates, but to sell the system. There was a potential the system could be worth more than the utility's investment. Any failure would not all fall on the rate payers. Mr. Pap~ thought the project was a risk venture, but it was risk being taken, and he thought the risk involved was being addressed reasonably. Ms. Nathanson indicated appreciation for Mr. Pap6's comments, saying those facts had been key to her when reviewing the business plan. Responding to Ms. Bettman's statements regarding the need to move forward with MetroNet and universal build in a linked fashion, Ms. Nathanson did not agree that what was being proposed would preclude universal build. Rather, EWEB was proposing a phased approach that made the most sense to it. She agreed that universal access was very important, and emphasized that it was still part of EWEB's plan. She noted that those speaking in support of the concept before the EWEB commissioners included representatives of public utilities, school districts, and nonprofits. Responding to a question from Mr. Rayor, City Attorney Glenn Klein said he perceived no potential loopholes in the amendment related to nonrecourse. However, he felt that Section 3 of the amendment could be made more clear, and suggested the following revision to the second sentence: EWEB may proceedwith the initial phase of MetroNet and PAN to the extent that EWEB can do so without incurring any future indebtedness. Mr. Rayor, seconded by Mr. Pap~, moved to amend the resolution by revising the second sentence to read: E WEB may proceed with the initial phase of MetroNet and PAN to the extent that EWEB can do so without incurring any future indebtedness. Ms. Bettman asked Mr. Klein to define future indebtedness. Mr. Klein defined it as including both short- and long-term borrowing. In regard to the unspent bond proceeds, Mr. Klein agreed with a statement from Ms. Wright that those funds were not future indebtedness, but rather "money in the bank" that did not need to be borrowed; he referred the council to Section 3, which stated that EWEB could move forward with the initial phase of MetroNet using unspent bond proceeds. Responding to a concern raised by Mr. Rayor about the lack of specificity about the bond in question in the text of the resolution, Mr. Klein offered as a friendly amendment, accepted by Mr. Rayor and Mr. Pap~, to change the phrase in Section 3 reading "above-mentioned existing bond authorization" to the "1998 revenue bond authorization." MINUTES--Eugene City Council September 19, 2001 Page 7 Work Session Ms. Bettman asked if the unspent $4.5 million would be sufficient to fund all four nodes. Ms. Wright said yes. She estimated $3 million would be needed in the first year, with approximately $500,000 to $1 million needed annually after that to make continuing customer connections. All areas would be operational. In Year 5 of the capital cost model, EWEB assumed it had updated and purchased all new electronics to keep the system current; other than that, most capital expenditures after Year 1 were customer connection costs. It would require additional money to continue to connect new customers. Ms. Bettman stated that EWEB would make the system available in those areas, and certain customers would be connected using the existing funding; there would then be a percentage of customers who would not be connected, even within those geographic areas. Ms. Wright clarified that there would be customers who had not asked to be hooked up; EWEB's capital cost projections were based on its sales projections. Ms. Bettman determined from Ms. Wright that the difference between the ultimate project cost of $10 million and the existing $4.5 million was the amount of customers that would be connected, even in those limited geographic areas. The amendment to the motion passed unanimously, 8:0. The amended motion passed, 5:3; Ms. Bettman, Mr. Meisner, and Ms. Taylor voting no. MINUTES--Eugene City Council September 19, 2001 Page 8 Work Session B. Work Session: Funding of the Long-Range Downtown Space Plan Assistant City Manager Jim Carlson joined the council for the item. He noted the distribution of information regarding the staff recommendations related to the agenda item. Mr. Carlson reviewed the information, which identified funding sources to underwrite the cost of constructing new City facilities, summarized the services and buildings involved in staff-recommended Scenario C, provided details of the Downtown Space Plan time line, identified the total funding available and the funding gap that needed to be filled, and outlined options for filling the gap. Those options included: 1) asking for voter approval of general obligation bonds; 2) contribution of ongoing General Fund resources of $5.5 million annually; or 3) a combination of the above two approaches. Staff recommended the third option. Mr. Carlson reviewed next steps in the process, which included budgetary adjustments in Supplemental Budget #1 to implement a market-based rent concept, a request for council approval of the land purchase for Fire Station 1, and council review and adoption of implementation plans for Police Special Operations and Fire Station 1. Mr. Carlson called attention to two suggested motions in the distributed information. He noted the inclusion of the council's goal related to Effective, Accountable Municipal Government. Mr. Johnson called the council's attention to the decision steps outlined on page 40-42 of the meeting packet. Ms. Taylor, seconded by Mr. Kelly, moved to direct staff to develop Downtown Space Plan projects in the recommended priority order, with Police Special Operations and Fire Station #1 in order of completion. Responding to a question from Ms. Taylor regarding the amount of funding immediately available, Mr. Carlson indicated it was approximately $3 million; a downtown fire station would cost $5.5 million. Ms. Taylor said she preferred to build a fire station first because she thought that was most urgent. She suggested moving Police Department staff in the City Hall basement to that facility on a temporary basis. She thought it was important to get the fire equipment out of City Hall as she understood it was damaged being taken in and out of the structure. Ms. Taylor asked if charging market rents to City services was not just taking money from one place and putting it in another place. Mr. Carlson said that the City has existing dedicated moneys going to the Facilities Reserve, and staff was proposing that those moneys be translated to rent to show the full cost of the services provided in the different facilities. By doing that, the City could also charge rent to such non-general funds as the Wastewater and Stormwater funds for the space their staffs occupied, for example, at 858 Pearl Street. Ms. Taylor said that would take money from those funds that could be used for something else. Mr. Johnson said that what the staff was presenting was the beginning of a ten-year program; this was one step in that program. MINUTES--Eugene City Council September 19, 2001 Page 9 Work Session Ms. Taylor, seconded by Ms. Bettman, moved to amend the motion to construct the fire station first as quickly as possible. Ms. Nathanson said she assumed the order of construction of the two facilities was the topic of discussion among staff and the executive team. She was reluctant to change the staff recommendation given that the staff had looked at the needs of the organization. Mr. Johnson said that during the staff discussion, it was agreed that the two facilities were the first priority, with no difference between them in terms of degree of risk. He indicated staff disagreement with the amendment. Mr. Pap~ agreed with Ms. Nathanson's remarks. He respected the staff opinion on the order of construction. He said that after the events of the previous week, it was clear both agencies were very important. Mr. Meisner also concurred with the staff recommendation. He agreed a downtown fire station was important, but not at the expense of the Police Special Operations. Ms. Bettman said she had seconded the motion for the sake of discussion. She was glad to hear the two facilities were considered equally important by staff. Responding to a question from Ms. Bettman regarding the time line for proceeding with the two facilities, Mr. Carlson said that staff would return to the council with that information early in 2002. He said that it was likely the staff recommendation would involve a bond measure in November 2002 so both facilities could be built. Ms. Bettman asked if separating the two facilities would result in one facility being built sooner than anticipated. Mr. Carlson said that it was possible; staff would want to examine the two facilities and determine how far along it was with site design and acquisition before that was decided. Mr. Johnson thought Ms. Bettman correct; because one would cost less than the combined total of the two facilities, the City would be able to build one much more quickly. Which one was constructed first would be a council decision. Ms. Bettman asked about the damage that fire equipment was suffering. Mr. Johnson said that was a concern, but added that the building had been damaging fire equipment for as long as it had existed. He added that the problem had been fixed and equipment was not being damaged beyond repair. He thought there was a chance for greater loss of life for Police Special Operations given its location in the basement of City Hall. He would recommend constructing the Police Special Operations facility first if the City had to choose between the two. Responding to a question from Mr. Rayor regarding the location of Police Special Operations at the Roosevelt Boulevard site, Mr. Johnson reminded the council that it had authorized staff to go forward with master planning for that site. He noted that the City had purchased an additional two properties in that area from willing sellers. The amendment to the motion failed, 1:7; Ms. Taylor voting yes. MINUTES--Eugene City Council September 19, 2001 Page 10 Work Session Mr. Meisner determined from Mr. Johnson that staff had not yet decided if the downtown fire station should be on land not owned by the City because its location was unknown. Mr. Kelly said he was troubled by the market rent issue and was not prepared to authorize that at this time. He said that he understood that for fiscal year 2002 the City could dedicate the marginal tax, but he needed to hear more about what happened in the out-years, and what dollar amounts were being taken from General Fund and non-General Fund services, and what service implications that had. Mr. Johnson said that staff was committed to returning with that information prior to Supplemental Budget # 1. Mr. Kelly said he could not support a general obligation bond without a "road map" of the various other funding initiatives that might be necessary in the future. Mr. Carlson indicated that a multi- year financial plan was coming to the council for review in the fall. Mr. Pap~ summarized the market rent approach as a means of enforced savings to establish a sinking fund for construction. Mr. Johnson concurred. Mr. Pap~ was unsure of the mechanism and thought more information was needed. However, he thought the City needed more discipline in addressing its infrastructure needs, and applauded the staff for its creative thinking and asked that it continue to work on the issue. Mr. Pap~ wanted more information about the potential of consolidation with other police agencies. Mr. Johnson noted that the City had committed, through the Public Safety Coordinating Council, to a regional discussion of police special operations. Mr. Carlson indicated other services were also involved in the discussion. Mr. Rayor said he would oppose the motion not because he did not support safe facilities for staff but because he was interested in a more comprehensive, wide-ranging discussion. He said that staff had addressed the issue of remodeling existing buildings in a memorandum that indicated the costs were about half the cost of new construction, but then the memorandum discussed why the space was not desirable. He thought there was a basic lack of understanding on the part of staff regarding the concepts of reuse and rebuild. Mr. Rayor called for a longer meeting on the subject. He did not think he would get what he wanted in a work session. He thought the Sears building might be a perfectly viable building, did not think the staff was willing to consider its use. Mr. Rayor wanted the Police Special Operations out of the basement of City Hall, but would oppose the motion until he could develop a better overall plan for proceeding. Mr. Johnson said that Mr. Rayor had made some good points, but suggested that his reasons were not relevant to the motion on the floor. The motion passed, 6:2; Ms. Taylor and Mr. Rayor voting no. The meeting adjourned at 1:30 p.m. Respectfully submitted, MINUTES--Eugene City Council September 19, 2001 Page 11 Work Session James R. Johnson City Manager (Recorded by Kimberly Young) MINUTES--Eugene City Council September 19, 2001 Page 12 Work Session