Council - Special Meeting

Pledge algiance to the flag of the United States of America and to the republic for which it stands. One nation under God, indivisible, with liberty and justice for all.

Hbert All right. The agenda agenda to approve our motion. Motion. All in favor? I. All right. Number excuse me. Advisor funding option and drive development. Come on up everybody. How you guys doing? All right. Good. Sure. Thank you.

Well, thank you very much for uh letting me come and uh and present to you all. And I think one of the things that we want to do is just kind of give you an update of uh what we've been talking to um Jennifer and Cameron about about the upcoming uh projects for the city. Um let you know kind of have the opportunity to kind of hear kind of what our thought process is and kind of how we're going through things. uh where we see things um what the timing and expectation is and different things and then pretty obviously open the floor for you guys answering you know asking questions you might have and so that's what we thought it'd be good just kind of have this time to to kind of keep you all up to date on anything on things and so I put together this little presentation um you know going over the agenda uh I think it's really good to first set the table and look at some comparisons, some key statistics on how city compares the some other cities in the area. Um, look at your current structure of your payments for your outstanding debt. Uh, which is called debt service payments. Uh, look how those are. Talk a little bit about the funding uh that we discussed for the phase, you know, the the project that's coming up. Really four phases. uh primarily looking at the first two phases, seeing how that goes and then looking at phase three and four after that. Um talk about timing, talk about the future needs and uh and planning and uh you know next steps that you might be able to um to see kind of coming forward. Any questions? All right. So on page three, I put together a little bit of comparison to similar um Missouri cities to kind of give you an idea of where the state of

Cuba kind of compared to different things. So we look at the population uh population growth uh you know from the census uh tax revenue that the city brings in. Um general fund expenses of uh general fund expenses compared to some other cities. general fund balance, uh total cash balance, uh that the city currently has uh total outstanding debt that you have, um and kind of compare it to some of the of the other cities in the area. Um you know, we're using um for the city of Cuba, we're using a budget uh grabbing most information from the budget. The one difference is total cash balance is the current cash balance. So that's as today or fairly fairly recently. Um so obviously that's a little bit different as that fluctuates throughout the year. So um so it's a little bit different. All the other ones are from their audits uh that we're able to find um and uh looking at their fiscal year end for those different cities they have. So it just kind of gives you more of just kind of how things look you because a lot of times I think you get kind of focused on on us and kind of focus on what we do and not look at the broad picture of what how does it compare to other cities and stuff. So, so I'd love your coaches kind of set the table showing, you know, City of Cuba, you got some really good positive strengths, right? So, you know, you're if you look at your taxes, tax revenue, it's very strong credibly. Um, you don't have any property tax, uh, which is really wonderful and, uh, it's a it's a really strong position to be in. um and your total outstanding debt. Uh if you look at the total debt that you have

outstanding, you've been very fiscal with that. And so um you have a very low uh amount of debt and our goal is to keep it as low as possible going forward. So we're not looking to borrow a whole bunch or or finance a whole bunch. Um but we want to be prudent. And I think that's one of the things too is that debt is important and it's not all bad. So, it's a little bit like, you know, um if you you know, I remember when my wife uh uh announced that she's pregnant, uh we're very excited. This is our second uh pregnancy. Halfway through we realized we're having twins. Uh and so I kind of threw a wrench into things and so we're talking about, oh my gosh, how are we going to do this? at the time. Should we build out the house? Should we get a new house? You have all these kinds of things that you kind of think about because things change, right? And so, um, unfortunately, we didn't have the wherewithal to just pay cash and be done with it. Uh, we had to borrow and you have to. So I think if you borrow for the right reasons and you do it and structure it in a proper way it's uh it it's a improvement and it helps overall. So I think that's important to kind of realize as you go through things. So uh so that's something that we want to make sure of that the city really maintains and is focused on and that uh will improvement on on how to structure things. So um okay so the next page talks about the current debt service payments. So currently um pretty much the only debt outstanding is the 2011 bonds that were issued. Um those were originally issued at about 2.4 million uh in 2011 or 20-year financing

um average interest rate 1.6%. You see a great uh a great financing. Uh those payments you'll see there um are fairly level. rise up a little bit. Um, but it's a fairly level structure. Um, around $150,000 a year. Those will be paid off in 2031, January 2031. Uh, and you won't have any debt after that uh without issuing any new debt. And so you'll see that one of the things that we talk about uh within future debt is how to incorporate these payments into your debt payment and minimize the cost that you have on it. So you kind of what we refer to as wrap around. So we want to wrap around these payments provide more of a allin level payment structure for the for the city to have. And so that's kind of the structure that we talked about. plan funding for phase one and two. Um, now I use the word bonds. Um, there a lot of times it's certificate participation is is really what it is as opposed to a bond issue. I kind of use them interchangeably, so I apologize for the confusion that that may cause, but whenever you hear me say bond, it's the same as a cop or or scripted participation. um a bond technically a bond for you to issue bonds you have to go to voters to get approval and uh so the certificate of participation allows the city um to issue debt without going for that approval um but it's uh it's it's more of a lease type of of financing um but it's very common in uh in Missouri to use those uh this type of structure so when I when I talk about bonds or participation.

That's kind of what I'm referring to. Um our estimates, which you'll see um a little bit later, is for the phase one to to cost the city right around $500,000. Uh our current uh anticipation is that those funds will be paid out of funds on hand by the city. Um then second phase we believe will be um more extensive needs for the city. So we're we're thinking a little over a million dollars for those. And so the what we're contemplating right now is that the city would reimburse yourself for all of those funds that you currently have expended that 500,000 plus any additional needs for uh phase two. So, if you recall, the city adopted what's called a reimbursement resolution. And what the reimbursement resolution does, it allows the city to pay yourself back through tax exempt bonds uh for funds that you that you expend on the project. So if you don't if you don't pass that and you just issue bonds, then tax law requires you only to go you can only reimburse yourself back 90 days prior to that issuance. So by by producing that or providing that reimbursement resolution, it allows you to capture more of those funds to be reimbursed. Now you don't have to reimburse. As a matter of fact, you can say no, we're not going to reimburse ourselves any of it. Can you repeat that for me?

Uh, so the reimbursement resolution that you adopted, it allows the city to reimburse yourself for any funds that you've paid out of cash for the project. And without that reimbursement, then tax law uh limits you to only reimburse yourself for what you expended 90 days prior to closing that financing. So, it's a very short window and we're talking about maybe possibly issuing these bonds or certificate participation at the end of this year or the beginning of next year a year from now, let's say. And so, that's a broader time frame that you have that you'll be expending money for these projects. And so it gives you the opportunity that you can re reimburse yourselves and for those funds that have been spent, but it's not a requirement. So you can say, well, you know what, we want to reimburse ourselves 300,000 or we want to reimburse ourselves 200,000 or we don't want to reimburse ourselves at all or cash or fine or whatever it is. It gives you the flexibility to do that. And I think that's ultimately what we want to do is provide as much flexibility as possible to the city. Okay. Now phase two um you'll see is estimated at 1.3 million. Um and you'll see later we we provide some for that service payments. Um those payments assume all of it. So it assumes $500,000 for phase one, 1.3 million for phase two. Now that might come to fruition. It might not. Might be lower, might be a little bit higher. So those are just kind of estimates at this time.

That's kind of what the the model is is set up for. And as I mentioned before, payments will be structured around the existing bonds to try to keep it as level as possible uh for the city. Uh I also anticipate that the annual payment will be made out of the capital improvement fund that the city currently has and it would not require additional funding. So it wouldn't it wouldn't require a tax increase from the city. Okay. So where's the money? Right. So how do you how do you come up with those money? So this is on page six uh a kind of an estimate of where those those projects that we're that we're talking about. Um again they're estimates. They're not exact. Um the other thing that we wanted to point out is that some of the funding uh incorporates um planning and engineering costs for phases three and four which may or may not happen. Um, and they also include other projects that are maybe in the pipeline that haven't been funded yet. So, it just gives you a little bit more flexibility. But again, these numbers are not set in stone. This is kind of more for modeling purposes and understanding what we're what we're thinking about.

It says approximate improvement cost breakdown. It says includes planning engine cost to prepare for phase three and four. Do you have

that'll be later? So this one but and those are years down the road. All right. So the plan debt service payments on page seven. Uh, like I said, uh, the black right there is the series 2011 bonds that were in the previous page. And then the gray is looking to see, okay, what the new bonds would look like. So, we we basically limit the the payments the first few years until the series 2011 bonds are paid off and then fill in uh after that. And um, we ran different scenarios. We ran a 10 year, a 15 year or 20 year to kind of show different different items. The 15-year right now seems to be the most economic. Um it provide the lowest payment with the lowest interest rate. Um but it also um gives you flexibility. The other thing I would say is that you know we would look to structure in early payment option. So it's called feature so that the city would be able to refinance those bonds, pay them off early uh if funding comes in or something like that. So it gives you a flexibility that typically is 8 to 10 years from the date that you issue it uh that you have that capability

without penalty

that's without penalty. Yeah. And that's then just principal that's outstanding at that time. So the way that the model is set up right now um the payments all in payments are less than $300,000 a year. Um again idea is the current capital improvement fund I think you're getting over $400,000 a year in that fund uh so that uh these payments would be made out of that fund but without anticipating growth. So obviously growth will help provide additional flexibility. Talk about growth on page eight. Um this is the population growth that um our models and stuff are anticipating for the next five years. And I think it's it's very modest, right? Um I mean it's it's positive but it's not leaps and bounds. And so I think that's one thing to recognize that um obviously if things speed up, if um you know houses get built quicker, more houses get built, whatever it is, uh that will only help um with the numbers. Um but um I think this kind of shows that we're looking for uh a modest growth for the first two phases. Okay. Now, page nine looks at uh water and sewer rate consideration. So, this will probably be a future date. You'll probably see these numbers again and uh have have a little bit more clarity with it. This basically shows that if you currently your water and sewer rate if

they stay the same uh even with a little bit of growth as on the previous page uh you're still going to end up in um you know some deficits coming in. And so, um, I think that's one of the things that, uh, as we talk about next steps that the city should really look to do is, um, to finalize a rate study and to adopt, uh, a plan, uh, to kind of address this. I think what you'll find is most cities um benefit from gradual increases in rates uh for a number of years to kind of get you to the point instead of waiting waiting waiting and then all of a sudden you have this big increase. And so um you know I think that's something that again I know Cameron and his group is kind of working on for the city but um but just be mindful that that's something that um should be addressed. All right. Uh timing considerations. So, um as I mentioned to you, phase one, we're thinking that uh we paid out the current funds on hand. Uh as phase one ends and phase two begins, you'll have a better understanding of what the costs are associated with it. So, that will kind of uh fine-tune the numbers that we talked about. Um it will also allow us then to then decide on when to issue the bonds or certificate of participation to do the uh to the next phase. And so as I mentioned, you know, our thought is that it be about a year from now that we would issue those bonds or certificate participation, but uh it can move up if the development goes well and and speeds up or it can be push back a little bit.

And I think one thing with this is that it gives you flexibility to kind of monitor as things progress and uh not leap into something right away. um anticipating something to happen, but being in a position to kind of watch it and and monitor it as it goes through and then you can make a decision as things kind of progress at that stage, which I think is good. And as I mentioned, this provides the city flexibility, right? It provides flexibility to increase the amount of debt that you issue, decrease the amount, uh reimburse yourself, to not reimburse yourself, to you know move quicker if if things are are moving more rapidly or push it off by a month or two months or 6 months or something depending on how things progress. So again, I think it just gives you a lot more um the strategy provides you a lot more as things go forward. Uh future needs and planning again um you know after the phase two is completed uh then we looking at phase three and four and this goes to your point of how much do we expect? So, uh, what we're anticipating is that there'll be another 3 to, uh, 4 to 5 million, excuse me, for phase three, 5 to 6 million in, uh, phase 4. And that will take place in the next 5 to 10 years. So, we're not talking about something immediately. We're talking about something um down the road, but I think it's something that you have to plan for. So, you're estimating for phases four, for phases, 9 to 10 million for those two phases.

Uh probably about four years for the first phase and then another five years after that for the second phase or for the fourth phase. No, I'm talking about total months. You're improving the whole system, right? Yeah. You're talking about you're talking about the treatment plan and everything. So that assumes that the full development builds out in that 10 year period and maybe that's 15 years out. Maybe it never gets to that point. But ultimately, you know, assuming that all of your infrastructure needs that period by the time that development is finished, those are kind of some of the those are the figures of that's taking in consideration growth, rate increases, everything.

Yeah. So that would be right. Exactly. And that somebody got up, right? Company four years ago. I went back and looked that broke up. He just gave us. Okay. Right. 31. I look back. We We really can't look at that though because our census shows us that we've actually lost 5%, right, over the years. So we can't even look at the fact that we might get a growth because we're we're we've actually been losing since what 2010 all up to this day. So, our youth are leaving. We're hoping that the older group come in and buy the homes. We're Yeah, we're in trouble. Well, and I think that you're as I as you can see on the previous page on the comparison stuff, you're not alone. There's a lot of the same

small towns, same situation. Um, a question real quick if you don't mind me asking. On the water treatment plant, we're showing according to David probably about 100. We've got apartment buildings that are popping up everywhere. How do you are you foreseeing that we actually will grow into this in phase one or two well before we reach phases four or five?

I don't think so. Kind of going back to your point about what the actual population is done. So if you go back to page eight, this is a some projections that Chris and I have been working on. So what we try to do um we don't want to we don't want to count on that subdivision being overly fruitful. We obviously wish it success, but basically what this does, if you run those numbers, that equates to about a 100 homes being built over the course of the next 5 years. So that doesn't necessarily mean 100 McBry homes, but 100 new paying residential water consumer customers. And those projections and some of the rate increases that we've looked at preliminarily don't account for any new commercial. They don't count on you collecting any new commercial water or sewer either, which hopefully, you know, in a perfect world, we're showing the worst case and things improve even more, but we've tried not to over uh overstate the estimated growth.

Cameron, our water department, we found some leaks in the main. We were running 5,000 per minute. Now we're down to 2500 per minute. That makes a huge difference with all these houses being built. We can handle that at this time. I believe we can. Yeah, because we cut that way down.

We can. But I think, you know, that's where that that 2031, that big $4 million number comes in. The other thing I kind of wanted to make sure is clear. You know, as we're doing our rate study, we are assuming that you're going to borrow money for phase 2. We're trying to set rates so that you could make a payment as though you were borrowing money for phase two. But if if this growth doesn't happen um as quickly or we don't need to borrow the money, I think we we hope to show you a plan that would raise rates so that you can make that debt service. But if you're able to cash flow improvements for another year, you know, Chris isn't going to force your hand to go borrow this money at any certain period of time. We just need to be ready to react if you need to. So we're going to try to kind of look at some step increases that would allow you to make payments should you need to borrow. But ultimately, if we can if we can push the need to borrow, you know, further into the future, that's a good thing for everyone. I think we just need to make sure that the city's in a position that if you do need to go borrow a couple billion dollars, your rates are going to support that and you don't have to react to that.

Yeah. We have to act like it's going to happen because it's not going to slow down. They're going to keep putting the infrastructure in whether we have the houses sold or build houses. Right.

And you have some project needs that have been uh identified, you know, separate from the McBride project that really don't have any way to fund them. So part of what we're showing in phase two is maybe we maybe we move some of these beneficial projects to the rest of the city up and try to tackle some of those over the next few years. Um and then you know ultimately phase three and four are probably more growth and development driven whereas you know phase two is more of a immediate need that just hasn't been budgeted for in the you know in the recent past. There's not there's not been a funding mechanism for some of those water and sewer projects.

Thank you. So, uh, the last thing I want to talk about is next steps. What page? Uh, this is page 12.

So, some of the things that the city has accomplished, uh, you hired us. That was a great choice, by the way. Uh, you passed reimbursement resolution. I talked about that a little bit. uh and you hired an auditor for uh 25 through 27 which is really important uh this next year some things that um as you're gearing up towards the funding for phase two there's some things that the city should really look to do and so that's one of the things I wanted to you know bring up and that is that um your your annual audits obviously you're working on getting caught up I think continuing to be caught up and you you know, trying to make sure to to get it completed 180 days uh within fiscal year end or after fiscal year end is really important um because that will really help if you need to access capital markets um allows you to do that uh a lot a lot smoother than you do otherwise. The other thing is that we've gone through and looked a little bit at your financial policies and I think we'll continue to do that. Uh we do have some recommendations that we've been working on Jennifer um with Jennifer on some of those and those include some of them include fund balance policy to really maintain a good fund balance as go back to the different comparisons. I think it's one thing that uh and as Cameron mentioned about you know increasing rates and different things and stuff making sure that you're on really solid foundation and that you that you continue to keep those foundation and grow it. um as opposed to spinning it down and then um and not having it uh for future needs. Uh speaking of that, a transfer policy um I think is really important. uh it allows Cameron and his group to

kind of look at really looking at uh what your projections are a little bit easier to figure out what's going to happen in the future if we have some solidity and some kind of um formal policy to know that this is what's going to be transferred from one fund to the other. Um obviously you can have exceptions and there's things that happen, but I think if you have something that you try to maintain can be really important. um that you don't have right now. I think a debt policy is really good uh when you're talking about okay when do we want to issue debt right um and I think it's good because a policy establishes what future wars are obviously they can change in the future but a lot of times when you have a policy it sticks right and so you can determine and say this is when we have to issue debt and if we don't then we'll pay it out in cash and you have different things you say well this is when we're going to refinance our debt, you know, if we hit these bogeies, we hit these savings kind of things. It just puts the guard rails on the city to really think about. So, so those are the types of things that you might see come for action items for the board to uh to address and to adopt. And so those are things that we'll be working on behind the scenes. idea really is to build up the city to get you into a position to be as strong as possible when if you borrow that you're a very strong credit and that you're able to show that to the rating agencies, potential buyers, different things like that debt. So, uh so the idea is to kind of take this opportunity to kind of get you to that to that point. Um, and I mentioned to you about the rate study and and the different changes in the rates, which I think are important to do. And lastly, continue to monitor funding um needs and

um and uh keep track of how things roll and make any adjustments as needed. A lot of those questions I was expecting maybe now questions. So, you know, years ago, I passed Captain Burn tax and the board kind of laughed at me. I said, "We need it." I figured for factories or something coming in city Cuba big. So, I went after to pay off debts and to move the city of Cuba forward when the time came. Y Well, apparently the time has came to use that capital improvement to improve our town and get this business up. This was planned years ago.

Yeah. You have to plan years ahead, right? Like you say, we knew we were going debt because you can't afford everything, but you got that capital improvement tax to make a payment and go on. We have that capital improvement forever. So, we know we can afford this. Yeah. But without that capital improvement tax, we're going to grow. Yeah. Exactly. So, good planning does a lot for our town. Our current debt service payments is actually 2,1949. Let's see 2.194.928 not 934. Oh, that was

our long-term debt is 2.194. Yeah, that includes other debt, right? So that that's not just I know you're talking about audit, right?

Well, no. back in we had a uh just like we just had back in let me see I think when I pulled this 2012 July 1st 2012 until January 1st 2031 um right now our principal on that is 1.187 interest is 73,928 The total debt right now is 1 1.260928. That was for back in we had a cold snap

and we received a bill for that and they did a longterm payback on that. That will not be paid off. Uh I'm not sure when that will be paid off here. Not according to this, but what are you talking about? You sent me this when I asked about long-term debt. MJM EU deferred payment 1.5

that is considered part of our long-term debt according to audit purposes. But what he is specifically referring to is only the 2011 bonds. Those will be paid off that that particular bill will be paid off um at the end of this fiscal year. And the other long-term debt that's showing up on the audit is considered our compensated absences. And this has to be reported as part of our debt for audit purposes. But the only debt as far as bond purposes go are the 2011 COP bonds. So they're for

right. Well, both are long-term debts. Now, the question would be, do you see us getting bonds or will this be another type of financing? the last we had talked we did not know if we because of our our audits and our lake audits whether or not that would affect our

Yeah. So yes and I think that's one of the things you talked about is getting your audits of up to speed which I think is really important. Uh but these are these would be what are considered certificate participation similar to bonds and not quite bonds but um but they are similar to that. And so uh now how you the funding for that depends. So um given the size and the structure and there's a couple ways that you can go about it. You can go out to financial institutions such as local banks and ask them to uh to provide a loan. And some of them like to book it as a loan for their for their books. Sometimes they like to book it as a security. So that be, you know, direct security participation. Either way, having uh a bank provide that funding or going out to do what's called public offering where you would then offer the bonds out to the public and then different investors would be able to bid in. You would hire an underwriter to do that. And so those are really the two different options. I think that given the situation that you're in and because you've done a very good job of getting your audits caught up and that you're continuing on that path and the timing that we're talking about, I think that you won't have any problem um going in either of those directions. And we would pretty much, you know, our recommendation would be the approach that it gives you the greatest flexibility for the lowest overall cost. And so that's kind of what we would recommend at that time.

Well, you know, you take like3 or four million dollars in that next phase, phase two, three or something. If we go out for grants and get grants, that's going to lower if we can get the grants. Exactly. Right. And we're going after electric water and all that. Yes. So this is just the worst scenario. Yes. And if we go after these grants, it could may not be near. Right. Right. And I think but I think also talking about especially with those phases and those costs and stuff. All of that is has more to do with treatment plants and different things. It's important that you prepare for the worst. Mhm.

And so I think that's where you really want to look at your your rates and and different user charges and stuff to anticipate these things in the future, the bills up that you have the um the cash and the the funds there to Well, I assure you if I'm mar I'm going after grants for citizens hard. I'm going to try to really cut this down. Right. Is that right? You know what I'm saying? Right. Right. 100%. Did that help?

Thank you. Okay. I guess that's it. All right. Y uh my information is on there, too. I encourage you, um feel free to give me a call, shoot me, email, whatever you'd like if you have any questions or hear something or I can provide any help or uh let you know just kind of where I'm always open and available. So,

one question. Yeah. under 1.3 million in page two. Should we get started on it as soon as possible or not? Uh, no. No. Okay. You should wait. I mean, because you want to make sure that that is

accurate, right? You don't want to and and I think the other thing that you have going for you is that we're in an environment where interest rates are fairly steady and there's a lot of pressure to for lower rates in the future. So, not to It's going to be a huge drop, but you're not in a situation where it's going to cost you a lot more in interest if you wait 12 months versus what you do it today. So, questions. Yeah.

All right. Welcome to the gym.