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CITY COUNCIL AGENDAPORTERVILLE, CALIFORNIA

AUGUST 3, 2004 6:00 P.M.

Call to OrderRoll Call

CLOSED SESSION: A. Closed Session Pursuant to:

1 - Government Code § 54956.9(c) - Conference with Legal Counsel - Anticipated Litigation:One Case.

7:00 P.M. RECONVENE OPEN SESSION AND REPORT ON ANY ACTION TAKEN INCLOSED SESSION

Pledge of Allegiance Led by Council Member Kelly WestInvocation by Pastor Bud Goings, Living Word Fellowship Church

PROCLAMATION“Porterville Kids Day” - August 7, 2004

PRESENTATIONEmployee of the Month - Tony Espinosa

ORAL COMMUNICATIONS This is the opportunity to address the Council on any matter of interest, whether on the agenda

or not. Please address all items not scheduled for public hearing at this time.

CONSENT CALENDARAll Consent Calendar Items are considered routine and will be enacted in one motion. There

will be no separate discussion of these matters unless a request is made, in which event the item willbe removed from the Consent Calendar.

1. Approval of City Council Minutes of July 6, 13 and 27, 2004

2. Claim - Consuelo GuzmanRe: Allowing a claim for $1,441.00 filed for a fall in a crosswalk at South Hockett and OliveAvenue on February 28, 2004.

3. Budget Adjustments for the 2004/2005 Fiscal YearRe: Increasing the appropriation in the General Fund for: expenditure of donations to the Library($10,000), return contributions to equipment replacement from sedan fleet ($98,965); andincrease appropriation in the Special Gas Tax Fund to allow for the re-appropriation of unused2003-04 resources for Indiana Street Project ($13,565).

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4. Purchase of Specialized EquipmentRe: Authoring the purchase by negotiation for pieces of specialized equipment in Field Services,Police, Shop and Transit.

5. Award of Contract - Williford Drive Street Reconstruction and Drainage ProjectRe: Awarding the bid to Halopoff & Sons, Inc. for a base amount of $146,855.45.

6. Scheduling a Public Hearing for the Revised Disadvantaged Business Enterprise (DBE) ProgramRe: Setting a public hearing for September 21, 2004 to hear testimony regarding the proposednew 11% goal and revised program.

7. Approval for Community Civic Event Downtown Porterville Association Nuestro Pride CarShow, September 26, 2004Re: Approval of this annual event subject to the application restrictions.

PUBLIC HEARING8. Maintenance of Landscape and Lighting Maintenance Districts, Confirming the Engineer’s

Report and Assessment for Fiscal Year 2004-2005Re: Continuing the maintenance of all Landscape and Lighting Maintenance Districts in the City.

9. Levy of Assessments for the Business Improvement Area of the City of Porterville for the FiscalYear 2004/2005 Re: Confirming the BIA Report which constitutes the levy of an annual assessment for FY 2004-2005.

10. Consideration to Remain in Phase II of the Water Conservation Plan and Continuation of PublicHearingRe: Accepting public testimony on remaining in Phase II of the Water Conservation Plan, andconsideration of moving to Phase III, and continuing the Public Hearing to August 17, 2004.

SECOND READING11. Ordinance 1657, Amending the Method of Regulating Businesses Selling Alcohol

Re: Adopting the Ordinance amending Article 21 of the Zoning Ordinance to no longer requirea Conditional Use Permit for a bona fide restaurant, which does not have a separate bar or liveentertainment, with additional restrictions and automatic regulations.

A Council Meeting Recess Will Occur at 8:30 p.m., or as Close to That Time as Possible

SCHEDULED MATTERS12. Funding Options for Wastewater Treatment Facility Improvements

Re: Analysis of borrowing outside funds or borrowing City monies to fund the various capitalprojects needed to comply with Regional Water Quality Control Board’s (RWQCB) Cease &Desist Order (CDO) 5-01-104 and Waster Discharge Requirements (WDR) 5-01-103; with arecommendation to authorize the Mayor to execute a resolution authorizing the City Managerto execute the “Enterprise Fund Installment Sale Agreement” in the amount of $5,356,000 froma California Infrastructure and Economic Development Bank (CIEDB) Loan.

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13. Airport Policy on Leasing Individual Private HangarsRe: Consideration of adopting a policy at the Airport for private hangars to be owner occupied,for the City to acquire hangars at fair market value when deemed appropriate, and authorizationto make a contingent offer to purchase hangars at the Airport, subject to CalTrans approval ofa loan agreement.

Adjourn to a Meeting of the Porterville Redevelopment Agency.

PORTERVILLE REDEVELOPMENT AGENCY AGENDA

Roll Call:

WRITTEN COMMUNICATIONS

ORAL COMMUNICATIONS

SCHEDULED MATTERPRA-1. Approval for Community Civic Event Downtown Porterville Association Nuestro Pride Car

Show, September 26, 2004Re: Approving the request to use the Redevelopment Parking Lot on Second Street fromGarden to Olive Avenue.

Adjourn to a Meeting of the Porterville City Council.

ORAL COMMUNICATIONS

OTHER MATTERS

CLOSED SESSIONAny Closed Session Items not completed prior to 7:00 p.m. will be considered at this time.

ADJOURNMENT - to the meeting of August 10, 2004

In compliance with the Americans with Disabilities Act and the California Ralph M. Brown Act, ifyou need special assistance to participate in this meeting, or to be able to access this agenda anddocuments in the agenda packet, please contact the Deputy City Clerk at (559) 782-7442. Notification48 hours prior to the meeting will enable the City to make reasonable arrangements to ensureaccessibility to this meeting and/or provision of an appropriate alternative format of the agenda anddocuments in the agenda packet.

COUNCIL AGENDA: AUGUST 3, 2004

SUBJECT: FUNDING OPTIONS FOR WASTEWATER TREATMENT FACILITY IMPROVEMENTS

SOURCE: Administrative Services

COMMENT: At the July 27th adjourned meeting of the City Council, the Councildirected staff to prepare a report and analysis of the utilization of portfolioassets, in lieu of the CIEDB loan, as a mechanism to fund the WastewaterTreatment Facility improvements required by the Regional Water QualityControl Board.

The information gathered to prepare the analysis includes a graphicdepiction of the average portfolio balances and average portfolio earningsover the past eighteen years. A thirty year analysis was desired, however;that information was not tracked prior to 1986. Also obtained for theanalysis was the Investment Policy as ratified by the City Council in Aprilof 2004. In addition to these internal documents, a phone call was placedto Mr. Brian Quint, Bond Counsel for the City of Porterville, for additionalinput.

ANALYSIS: As represented in Attachment “1”, the average return on the portfolio overthe past eighteen years is 5.99%. Although the current return is far belowthe eighteen year average, it is now on the upswing. As represented inAttachment “2”, the average cash balances in the portfolio have grownfrom $8.42 million to roughly $32 million over the past eighteen years. Asrepresented in Attachment “3”, the portfolio balance is made up of cashfrom all the Funds utilized by the City.

Based on the above information, the initial rule of thumb regarding thedecision to borrow or use reserves is that if you can borrow money at arate below what you are earning on your own money, borrow. If theinterest rate paid on borrowed money is greater than what you are able toearn on your own money, you should use reserves, if balances permit. Thisrule of thumb can be established in policy for utilization whencircumstances warrant the use of reserves. Draft policy language isattached as Attachment “4” for initial consideration. Staff can prepare aformal borrowing policy for later adoption should Council desire.

______ ______ ______Dir. Appro./ CM Funded Item No. 12

On page 2 of Attachment “5”, the Investment Policy, an excerpt from Government Code Section 53600.3 addresses the need for any such utilization of portfolio assets to be invested in accordance with the“Prudent Person Standard.” This would dictate that portfolio assets wouldneed to be repaid at a rate equal to or related to portfolio earnings. Alsoon page 2 of the policy is the listed investment criteria in order ofconsideration: Safety, Liquidity, and Yield. The utilization of portfolioassets for long-term investment could be deemed to have a negative impacton liquidity for those funds outside of the Sewer Enterprises in thisexample. Since Attachment “5” represents a Council Policy, it can bemodified by the Council at their discretion, however; applicableGovernment Code Sections would still be in effect.

In conversation with Bond Counsel, the topic of discretionary vs. non-discretionary portfolio assets was discussed. Discretionary portfolio assetswould be those assets attributable to the General Fund, or those assets thatbelong to the Fund responsible for the project. Bond Counsel’s advicewas, in this case, to first fully utilize the assets of the Sewer Revolving andWastewater Treatment Facility Capital Reserve Funds, with the balance ofneeded proceeds to come from General Fund portfolio assets. Thesewould include the balance in the Building Construction Fund, the GeneralFund, and the General Fund contributions to Equipment Replacement andRisk Management. Bond Counsel’s recommendation was to avoid usingnon-discretionary assets if at all possible, to avoid any potential challengesfrom taxpayer groups. The $5.4 million could be obtained by fully utilizingthe anticipated 2004-05 fiscal year end cash balances in Fund 82, 86, 88,and a portion of the General Fund contributions to Fund 54. Cash balancesin the General Fund, Fund 1, would also be available for this purpose,however; given the current nature of State finance, it may not be prudent toutilize them for this purpose. These actions could also reduce the City’sability to fund components of the 10 year capital improvement plan in thefuture.

In summary, it is staff’s opinion that cash reserves invested in the portfolio can be utilized to fund projects given certain restrictions and taking severalissues into consideration. These issues include the cost of outside capital,the anticipated return on the portfolio, the availability of discretionary cashreserves, the anticipated certainty or uncertainty in the budget, and theneed for reserve assets for other projects as determined by the Council.

Given the parameters of the project at hand, staff concludes the following:

1. Adequate discretionary reserves do exist to cover the cost of theWastewater Facility improvements required by the Regional WaterQuality Control Board.

2. Given the nature of the current economic climate in California,the City budget would have greater risk exposure if discretionaryreserves are reduced by $5.4 million.

3. Given the low fixed interest rate available on the loan throughthe CIEDB, the sewer users would have the most rate certaintyutilizing this financing tool.

4. Should the portfolio perform at levels closer to the eighteen yearaverage during the repayment period, rate payers would pay moreover the repayment period than if under the fixed rate scenario ofthe CIEDB loan. This is depicted in Attachment “6” as draftamortization schedules that calculate interest paid on a variety ofinterest rate scenarios. The amount saved by not paying prevailingwages and administrative fees can be deducted from the amount oftotal interest paid to make the numbers most comparable.

RECOMMENDATION: That the City Council:

1. Authorize the Mayor to execute Exhibit “A”, which willallow the City Manager to execute the Enterprise FundInstallment Sale Agreement in the amount of $5,356,000.

2. Authorize the named Department Heads or individuals toexecute the various exhibits attached to this item.

3. Authorize the Public Works Director to deliver by certifiedmail the executed documents for counter signature and finalexecution.

ATTACHMENTS: Attachment “1” Graph depicting portfolio performance since 1986.Attachment “2” Graph depicting portfolio balances since 1986.Attachment “3” Cash balances as of June 30, 2004 (Preliminary).Attachment “4” Draft language for consideration of borrowing policy.Attachment “5” Investment Policy.Attachment “6” Amortization Schedules.Enterprise Fund Installment Sale AgreementExhibit “A”Certificate of ResolutionExhibit “B” - “H”