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Home My WebLink AboutRes2017-088CITY OF SEWARD, ALASKA Sponsored by: Hunt RESOLUTION 2017-088 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, RESCINDING SECTION 1 OF RESOLUTION 2015-015 WHICH AUTHORIZED A LOAN IN THE AMOUNT OF $1,201,196 REPRESENTING THE SECOND 10% CITY COST SHARE ON THE BREAKWATER CONSTRUCTION PROJECT, AUTHORIZING FINAL PAYMENT IN FULL IN THE AMOUNT OF $1,265,195.91 AND APPROPRIATING THE REMAINING BALANCE OF $63,999.92 WHEREAS, the City of Seward entered into a Project Cooperation Agreement ("PCA") with the U.S. Department of the Army, Army Corps of Engineers ("USACE") to construct a new harbor breakwater in June, 2003; and WHEREAS, the PCA required the City to pay for the local project costs plus 20% of the General Navigation Features of the project and the City paid the initial 10% of project costs upon notification from USACE of the estimated project costs; and WHEREAS, the Seward City Council authorized a loan in the amount of 11,211,196 on February 23, 2015 via Resolution 2015-015, based on estimates by the USACE of final project costs; and WHEREAS, the Seward City Council authorized funding be set aside in the amount of $1,130.215.99 from Commercial Passenger Vessel Tax toward the costs of this project, in addition to $70,980 via Resolution 2015-093, for a total appropriation of $1,201,195.99; and WHEREAS, on November 11, 2017, the City received a final accounting from the USACE, identifying the final project cost of $1,265,195.91, leaving an amount to be appropriated from CPV Funds at $63,999.92; and WHEREAS, the administration recommends payment in full rather than a 30-year loan, to save approximately $822,800 in lifetime borrowing costs. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, that: Section 1. Section 1 of Resolution 2015-015 approved by the Seward City Council on February 23, 2015 authorizing a loan with the USACE in the amount of $1,201,196 is hereby rescinded. L CITY OF SEWARD RESOLUTION 2017-088 Section 2. The city manager is hereby authorized to make payment in full to the U.S. Department of the Army, Army Corps of Engineers, in an amount not to exceed $1,265,195.91 retroactive to November 11, 2017. Section 3. Funding in the amount of $63,999.92 is hereby appropriated from the Commercial Passenger Vessel Fund transfers -out account no. 11103-0000-3710-0000-11000 to the Harbor Enterprise Fund account no. 11000-2000-8100. Section 4. This resolution shall take effect immediately upon its adoption. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 1 ltn day of December, 2017. THE CITY OF SEWARD, ALASKA David Squires, Ma or AYES: Casagranda, Keil, McClure, Slater, Towsley, Horn, Squires NOES: None ABSENT: None ABSTAIN: None ATTEST: -'� , _'i', a_&1J'6_Vt Brenda J. Ballou, MC City Clerk •S551019888" Of SE � (City Sea �'�••%P0P'4 %,Q�' • = SEAL • b Council Agenda Statement Meeting Date: December 11, 2017 Through: James Hunt, City Manag 4q From: Kristin Erchinger, Finance Director Ft/ Agenda Item: Recommendation to Pay in Full, Final 10% Payment for the Harbor Breakwater Project BACKGROUND & JUSTIFICATION: The Water Resources Development Act ("WRDA") passed by Congress in 1999, included authorization for the U.S. Department of the Army, Army Corps of Engineers ("USACE") to construct a new harbor breakwater in Seward. The City and USACE entered into a Project Cooperation Agreement ("PCA") in June, 2003 approved by Resolution 2003-64, with General Navigation Feature ("GNF") costs to be shared 80% federal and 20% local match. In addition, the City was required to pay for 100% of local service feature costs which the City included in the project. The City agreed to pay 10% of the local matching costs up -front, with the option to either pay the remaining 10% lump -sum, or to enter into a long-term loan to finance the remaining 10% of local matching costs. The City paid the first 10% of project costs utilizing funding from the commercial passenger vessel tax proceeds. The parties agreed that once the project was complete, a final accounting would be made and the USACE would request the remaining 10% balance owed for the project. The City would have the choice of paying the remaining 10% of project costs with cash, or with a 30-year variable interest rate loan with an initial rate of 3.875%. The initial breakwater construction was completed in 2005 at a total cost of $8,384,563.20. The City's initial 10% cost share for that portion of the project was $838,456.32. Due to design deficiencies in the construction of the breakwater however, the City and the USACE worked together to obtain additional funding to correct the deficiency which allowed potentially damaging wave action in the harbor basin. The WRDA Bill approved in 2009 authorized correction of the design deficiency but required the City to pay 20% of the project costs. The PCA between the parties anticipated a difference between the initial cost estimates for the project, final bid prices, and final project costs, and required the parties to finalize their respective contributions to the project once all costs were known. The City was notified in September, 2012 of the total estimated amount of project costs, and that the City could expect its second 10% to equal approximately $1,201,696. The Seward City Council approved Resolution 2015-015 on February 23, 2015, authorizing the City to borrow this amount from USACE, if funding could not be found to pay the costs in full. This resolution was needed to demonstrate the City's commitment to pay its share of project costs, to avoid jeopardizing the ability to obtain other federal funding such as for the Lowell Creek Tunnel Project, as well as to satisfy the requirements of generally accepted accounting principles to record the known expenses of a project. Although the City sought federal relief to cover these remaining costs (passing no less than nine legislative priority resolutions seeking funding: Resolutions 2009-009; 2010-103; 2011-084; 2012-084; 2013- 012; 2013-093; 2014-012; 2015-105; 2016-067) the City has not obtained relief. On November 11, 2017, the City received a final accounting from the USACE, with the City's total remaining share of project costs finalized at $1,265,195.91. The City has previously set aside all but $63,999.92 to fund these remaining costs. The administration recommends paying the bill in full to avoid approximate additional lifetime borrowing costs of $822,800. INTENT: The intent of this action is to rescind previously authorization to enter into a loan agreement with the USACE to pay final project costs and instead, to pay the final project cost in full utilizing commercial passenger vessel tax proceeds. The City is informed that failure to either pay the bill or enter into a final loan agreement will delay further federal funding for other USACE projects. CONSISTENCY CHECKLIST: Yes No N/A 1. Comprehensive Plan (document source here): 2. Strategic Plan (document source here): 3. Other (list): Project Cooperation Agreement between City of Seward and USACE dated June 2003, as subsequently amended. Numerous Resolutions as named in this statement. X FISCAL NOTE: Funding for this project is available in the Harbor Enterprise Fund cash reserves set aside for this final payment, amounting to $1,201,196, and necessitating a final payment of $63,999.92 slated to come from commercial passenger vessel tax proceeds. Approved by Finance Xis �iteec(.r ATTORNEY REVIEW: Yes X No RECOMMENDATION: 'ReSo(u+ ov^ 20 % � — The City Council authorize the City Manager to rescind Section 1 of Resolution 2015-015 which had authorized a loan agreement with the US Army Corps of Engineers in the amount of $1,201,196, and instead, authorize the City to pay the final project costs of $1,265,195.91 in full, to avoid 30-year lifetime borrowing costs in excess of $800,000. City Manager City of Seward P.O. Box 167 Seward, AK 99664 Dear Mr. Hunt: In accordance with the Project Cooperation Agreement between the Department of the Army and the City of Seward, Alaska for Construction of the Harbor Improvements, Seward, Alaska, as amended, the City of Seward is requested to pay its second 10 percent of costs associated with construction of general navigation features, equal to $1,265,195.91. A check of this amount can be made payable to "FAO, USAED, Alaska (J4)" and mailed to: District Engineer U.S. Army Engineer District, Alaska P.O. Box 6898 JBER, AK 99506-6898 Please let me know if the City of Seward wishes to, instead, pay off this principal amount with interest over a period not to exceed 30 years. I can be reached at (907) 753-2539 or via email at IKimbed ,.E."Townsend usa ..airrn ,.rniil„ Thank you for your ................................... ...... attention to this matter. Sincerely, TOWNSEND.KIMBERLY. DIgitallysIgrwd by TOMENQ. MBERLYELIZAB£111.1385137963 DNu nUS, SUS. Government ou�Do%ou--Plp, oo=USA, ELIZABETH.1385137903 `DateTOW201751.21p6:5g27Y-DVW 1315137903 Kimberly Townsend, P.E. Project Manager Kris Erchinge