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Home My WebLink AboutRes2015-015 Sponsored by: Hunt CITY OF SEWARD,ALASKA RESOLUTION 2015-015 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING A LOAN IN THE AMOUNT OF $1,201,196 IN ACCORDANCE WITH THE PROJECT COOPERATION AGREEMENT BETWEEN THE CITY OF SEWARD AND THE U.S. ARMY CORPS OF ENGINEERS, REPRESENTING THE SECOND 10% CITY COST SHARE ON THE BREAKWATER CONSTRUCTION PROJECT, AND APPROPRIATING FUNDS 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, as authorized by Resolution 2003-64, in accordance with the 1999 passage of the Water Resources Development Act ("WRDA") authorization to construct the Seward harbor breakwater; and WHEREAS, the PCA required the City to pay for the local project costs plus 20% of the General Navigation Features ("GNF") of the project, with costs to be allocated between the USACE and the City upon completion of the project; and WHEREAS, a breakwater design deficiency added unexpected additional costs to the initial project, and the project was further amended to include dredging the Small Boat Harbor to achieve economies of scale during a separate USACE dredging project; and WHEREAS, the City paid the initial 10% of project costs upon notification from USACE of the final project cost, with the remaining $1,201,196 eligible for loan financing over thirty(30) years at an initial variable interest rate of 3.875%; and WHEREAS, the Seward City Council has passed no less than seven legislative priority resolutions requesting $2.66 Million in relief from the requirement to contribute toward the local cost-share for this project but has been unsuccessful in its efforts to obtain relief; and WHEREAS, the City administration will continue to seek assistance toward this debt, but in accordance with generally accepted accounting principles, is required to book the transaction as a loan on the City's financial statements. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD,ALASKA that: Section 1. The city manager is hereby authorized to enter into a loan agreement with the U.S. Department of the Army to fulfill the outstanding balance of the second 10% of project costs for the breakwater construction project, in accordance with the PCA dated June 13, 2003, and in an amount not to exceed $1,201,196, with the terms of the loan to be thirty (30) years at CITY OF SEWARD,ALASKA RESOLUTION 2015-015 an initial variable interest rate of 3.875%. The loan will not be executed except at the request of USACE. Section 2. Funding in the amount of $1,201,196 is hereby appropriated from the Harbor Enterprise Fund (account no. 11000-0000-3400) to the Infrastructure account, to be capitalized as a fixed asset in 2014. Section 3. This resolution shall be retroactive to December 31, 2014. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 23`d day of February 2015. THE CITY OF SEWARD,ALASKA 4 ' , can Bardarson,Mayor AYES: Keil, Casagranda, Terry, Squires, Darling, Bardarson NOES: Butts ABSENT: None ABSTAIN: None ATTEST: J hanna QV CM C y Clerk (City Seal)ee...e, ,.* G � . •• • O • • I SEAL • -•• •.S •.;....N..`1 L•.• •• #'ti1 E 0 F P��•. Council Agenda Statement e� of SFw9 Meeting Date: February 23,2015 From: James Hunt,City Manager 11.44-90" Agenda Item: Loan with US Army Corps Covering the Second and 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 has satisfied its obligation for the first 10% of project costs, paying those in full 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 any remaining 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. In 2009,the City and the USACE determined a need to dredge the Small Boat Harbor to eliminate vessel groundings and provide for safer navigation but the project was not pursued due to federal budget constraints. In January,2012, the City was informed that the federal government appropriated funds to dredge a portion of the Small Boat Harbor which was the federal government's responsibility. To take advantage of potential economies of scale by piggy- backing on the project,the City Council agreed to further amend the scope of the PCA between the City and USACE. Appropriations for the expanded scope were made on July 23 and October 8,2012. The City's total cost for local features for the dredging and breakwater projects was$1,920,770.06,with the City required to pay 100%of those costs. The PCA between the parties anticipated a difference between the initial cost estimates for the project, fmal bid prices,and final project costs,and required the parties to fmalize their respective contributions to the project once all costs were known. The City was notified in September,2012 of the total amount of project costs,was presented a bill for the remaining initial 10%project costs in the amount of$469,615.22,and paid that bill in 2013. The City was also informed of the need to make arrangements to pay the second 10%,equal to$1,201,696. The City intends to enter into such a loan agreement under the previously agreed-upon terms(i.e.30-year term,variable interest rate loan with initial 3.987%rate),but will continue to seek federal relief to cover a portion of the City's contributions to the project. Indeed,the City Council has passed no less than seven legislative priority resolutions(2009-009;2010-103; 2011-084;2012-084;2013-012;2013-093;2014-012)seeking$2.66 million in relief. Despite persistent efforts,the City has not obtained relief. The goal of requesting Council authorization for this loan is to avoid jeopardizing our ability to obtain other federal funding,to satisfy the requirements of generally accepted accounting principles,and to book the costs of this project as a fixed asset of the City. 2.(p INTENT: The intent of this action is to authorize the City Manager to enter into a loan agreement with the US Army Corps of Engineers,as previously agreed between the parties in the Project Cooperation Agreement. Until such time as the City is required by USACE to sign the loan agreement,the administration will continue to seek federal legislative relief from this repayment requirement. The amount of the expected loan principal is $1,201,696. 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 X and USACE dated June 2003, as subsequently amended FISCAL NOTE: Funding for this project will come from the Harbor Enterprise Fund. Estimated annual debt service payments are $71,590 based on an average estimated interest rate of 4.25%. A potential source of funding for repayment of a portion of this debt remains the cruise ship head tax proceeds. This funding source was used to provide the local match for the harbor breakwater and breakwater extension projects and a portion of dredging associated with the security dock. Dredging costs associated with the Small Boat Harbor but not considered beneficial to cruise ships, were paid from the Harbor MRRF Fund. Due to the need to provide a 50%match for the replacement of the harbor's floats utilizing the State Harbor Matching Grant program,the Harbor Enterprise Fund is not expected to have reserves available to pay the cost of this debt. Approved by Finance ATTORNEY REVIEW: Yes X No RECOMMENDATION: The City Council authorize the City Manager to enter into a loan agreement with the US Army Corps of Engineers with substantial terms to include an amount not to exceed$1,201,196,a term of thirty(30)years, and a variable interest rate with an initial rate of 3.875%,as agreed between the parties in the Project Cooperation Agreement dated June,2003, and authorize the loan to be recorded in the City's 2014 fmancial statements. 2rl