TOWN OF PLAINFIELD TOWN COUNCIL. July 13, 2009

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1 TOWN OF PLAINFIELD TOWN COUNCIL July 13, 2009 The Plainfield Town Council met on Monday, July 13, In attendance were Mr. Kirchoff, Mr. Brandgard, Mr. Gaddie, Ms. Whicker and Mr. McPhail. PLEDGE OF ALLEGIANCE CONSENT AGENDA 1. Approval of the minutes of the regularly scheduled Town Council meeting of Monday, June 22, Third reading and adoption of Ordinance No : Deadly Weapons Prohibited at the Plainfield Municipal Building, Plainfield Police Headquarters Building and the Plainfield Recreation Center. 3. Approval of the Parks and Recreation Director s and Town Engineer s Reports dated July 10, 2009, IT Director s Report dated July 11, 2009 and the Human Resources Director s Report dated July 13, Approval of the June 2009 monthly reports for the Department of Public Works and the Plainfield Police Department. 5. Approval of a contract with MacDougal Pierce Construction for the Plainfield Fire Territory Station #123 and authorizing Council President Brandgard to sign the agreement on behalf of the Town of Plainfield. 6. Approval to sign the 1511 Certification letter related to receipt of ARRA funding for the U.S. 40 Streetscape Project and authorizing the Town Council President to sign the letter on behalf of the Council per the Town Engineer s Report dated July 10, Approval of the Project Coordination Agreement between the Town and the Indiana Department of Transportation related to receipt of the ARRA funding for the U.S. 40 Streetscape Project and authorizing the Town Council President to sign on behalf of the Council per the Town Engineer s Report dated July 10, Approval of a LPA Consulting Contract between the Town and Butler, Fairman and Seufert providing for construction inspection and project management services related to receipt of ARRA funding for the U.S. 40 Streetscape Project in an amount not to exceed $845, subject to receipt of federal funding for the U.S. 40 Streetscape Project per the Town Engineer s Report dated July 10, Approval to connect the following properties to the Plainfield sewer or water system due to damage caused by construction of Vestal Road south and to waive sewer and water connection fees associated with these properties: 603 West Main, 605 West Main, 607 West Main, 609 West Main, 713 West Main and 715 West Main per the Town Engineer s Report dated July 10, Approval of an amendment to a professional services agreement between the Town and Terra Site Development Services in an amount not to exceed $33, for the Brownfield Grant Administration and Professional Services associated with the Shouse Landfill project including a geotechnical investigation at the site of the proposed South Hills area drainage pond to be paid out of the storm water availability fund per the Town Engineer s Report dated July 10, Mr. Kirchoff made a motion to approve the Consent Agenda as read. Second by Ms. Whicker. Roll call vote called. Ms. Whicker yes Mr. Gaddie yes Mr. Kirchoff yes Mr. McPhail yes Mr. Brandgard yes 5-ayes, 0-opposed, 0-absent. Motion carried. Mr. McPhail abstained from voting on item one since he was not present at that meeting.! 1

2 BUSINESS FROM THE FLOOR Mr. Aaron Turner, an Eagle Scout at 7929 Southern Ridge Drive, Mooresville, Indiana said I m an Eagle Scout of Troop 11, which I would like to first start by thanking Clay and the Parks Recreation for giving me this opportunity to do my Eagle project for them. To start off this is just a little replica or little map of all trails that are around Plainfield. For my Eagle project we placed little markers along Vandalia and the White Lick Creek Trails. We had some large schematics that we were given from Clay and it basically gave us a little distance from a certain mark like the center of the street and then we would measure out to that designated spot. It consisted of three days. For the first day myself and another scout and Clay went along the trails and marked all of the spots with paint and a number. We marked about 14 to 16 spots so it was actually kind of fun. Then on the second day I gathered together a team consisting of members of my scout group and also others who were volunteers from around the community. To help us carry the equipment around we used, with the help of the Parks and Recreation, their cub cadet so we were able to take the cement and the cones and the water with us. We split off into two groups; one group would go ahead of the other and we would dig the holes about eight inches wide and then six to seven inches deep. Then we would just keep going along until all the holes were dug. The second group would come through and take concrete and water and they would pour into the hole and then we used a screwdriver and drill bit that was fastened to it and then we were able to just mix the concrete easily with a screwdriver. So, it was very convenient for us. After that we would take those little markers represented and they would say what trail and the distances in between. It was about.5 miles in between per marker. After we set the marker we would just do a little bit of cleaning up so that way it would be nice and easy to see and also if anybody were walking or biking or running along the trails they would be able to look down and see the marker and say I ve gone two miles now. It was actually really cool for us, which I would like to thank you for allowing me to present this to you today. Mr. Brandgard said Aaron I want to thank you on two counts. One for coming up with the project and doing so well putting it in because it does look very good. I ve got to commend you on your organization abilities to be able to get a group together to work with you on that. It is really good and it appears that you organized very well because the project seemed to go very smooth. Also, I want to congratulate you on the presentation you just made. I have to tell you when I was your age, to give a presentation just to stand up in class was a chore to do and I m glad to see that you young folks are able to do that today because communication is so important. Again from the Town s standpoint I want to thank you for your efforts; they will be there for a long time. Is there anything the Council would like to add? Mr. Kirchoff said well done. Ms. Whicker said they look very nice. Mr. Turner said thank you. Ms. Heather Buck with the Christopher B. Burke Engineering said we were contracted by the Hendricks County EMA to help prepare the Hendricks County Multi Hazard Mitigation Plan. It is a big long statement but basically what it boils down to is FEMA has decided or the Federal Emergency Management Agency decided in 2000 that it was a requirement now that communities prepare these plans. So, they look at the hazards that affect the communities and the vulnerabilities and what can be done to lessen the damages or prevent those hazards from happening. So, because of that there are several grant funds available. The Hendricks County EMA applied and received those grants and contacted us so we worked with the communities and the county that participate in the National Flood Insurance Program. Obviously, Plainfield is one of those, Avon, Brownsburg, Danville and the County are the other communities. So, hopefully you have had a chance to look at and review is the final plan as it has been approved by FEMA. For sometime it was just conditionally approved based on the fact that the County had not yet adopted it but they did so a couple of weeks ago. Now we are just trying to get to the other communities and get them to adopt that as well. Basically, the requirement says that in order to receive any further mitigation funds or disaster funds you have to have this plan adopted. Is that set in stone? Is there a cushion? It is always best to have the plan ready to go so what we are asking that it! 2

3 is adopted and hopefully you won t need disaster funds for quite some time but you never really know. That is kind of the basis for the plan. If there are any specific questions, I can obviously answer those but the even broader statement of the plan is we again looked at the hazards in the County. So, we looked at hail storms, thunderstorms, wind storms, tornados, snow, even looked at radon as a potential hazard. We used the steering committee, if you have read the plan, there are probably 40 members. Some came quite often; some came as their schedule allowed, others were just kept informed as the process proceeded. We looked at all of those hazards and how they affected each community and then the County as a whole. So, we ranged those based on the historical damages, the potential for damages, so we looked at all of the homes still in a floodway or a floodplain, downstream of the dam and an area more susceptible to damages to a critical facility so to speak. Then we tried to come up with a way to look at future hazards so if there were a 100 year flood in each of the communities, what would that potentially cost? And that is a lot of ifs but it is based on some pretty good numbers as well. We came up with the background for each of those hazards and then the most important thing really, and we don t want to steer you away from the rest of the plan, if you had to take just a couple of pages from the plan, it would be Section 5 where all of those potential measures are almost laid out step by step. Who would be involved potentially? Where could you seek funding? Where would you start? That s based on a lot of meetings and conversations with those folks that are listed on the steering committee table. So, what we have done is put that together. There are some, what I feel to be, pretty good exhibits in there highlighting all of the critical facilities, the areas of concern and just saying are some ways that you could potentially reduce the damages in the future. Mr. Brandgard asked, was this just a deal with natural disaster? Ms. Buck said when it originally started, that was the intent but realizing that there are some hazards like hazard substances, transportation storage and production, those really affect some communities and really affects some larger areas as well, multi county areas. So, a lot of the communities and a lot of the groups will decide to study those as well. We previously also studied pipelines, gas pipelines, underground facilities, that has since become sensitive information. Some of the information like pandemic flu or some of the viruses that pop up are already dealt with in more discrete plans. These are public documents that we don t really say here are all the stores where you would get your vacations. So, the intent is natural disasters but we also then studied, to the communities discretion, what other hazards they feel are important in that area. Mr. Brandgard said the reason I asked is the one thing that we are pretty aware of from a disaster standpoint is our neighbor to the east called the airport. Also, to the north, Avon. Those are the two big potentials for disasters that could be caused by environmental weather but not necessarily so I didn t pick up anything. Ms. Buck said we did discuss the airport hazards, the transportation hazards and we discussed with several members quite at length and I guess the consensus was at one of the meetings that there are a lot of plans, what ifs ; things are practiced with the fire departments, EMS and several response agencies. Those are practiced regularly. We weren t quite sure what else we could discuss or what else we could look at as far as how do you prevent an airline crash. Unfortunately, those are some pretty major things but for instance making sure that the windows are secure, that the homes are constructed in a certain way, certain distances, those are handled in zoning and other ordinances. So, we left that out because it was felt that it was already discussed. Mr. Brandgard said I don t take too much issue other than the fact that if you have something like a multi hazard mitigation plan, I would expect to open it up and see everything or other plans referenced for certain activities but that is my typical line of thinking. I had just been able to skim through it. I want to read it a little more in depth. When do we need to have this approved? Ms. Buck said before your next disaster. It is an open-ended sort of an agreement on your part whether you chose to adopt it at all is entirely up to you. There are some communities that chose not to adopt. There are some communities that are concerned about how does! 3

4 this tie us into someone coming in the next two years and going you didn t do anything on Item 5. Well this is similar to a long range plan. What would you do in the next fives years, if? If personnel lined up, if staff lined up, if money lined up, if the sun were shining everyday, what would you do? So, that is the intent of this document. It doesn t lock you into anything. What it does do is the EMA has to resubmit a plan every five years. It is the EMA s responsibility to reconvene the steering committee and they can do this every year after every major disaster if they choose to just kind of go over it and say do we want to re-rank these? Or we just built this brand new facility; we need to add that to the critical facilities list. So, it is a living document. If at any point you chose to add something to it, you really wish something would be added to it, there is always an opportunity for that. At this point the main contact right now is the EMA office in Danville. You are more then welcome obviously to call us too but right now as it stands the main point of contact would be them. So, again it is kind of opened but you won t get any funds if and until it is adopted. Mr. Kirchoff said I also scanned it and read most of it. I don t remember if there is a schedule for revisiting this periodically or is it only upon request? Ms. Buck said both; right now in the document I believe it is in Section 6 way back in the back and it suggests that the committee reconvene every year just to go over some of the issues. It also suggests that after every major disaster that at least the communities that are involved or affected are reconvened to look at things. But again every five years it does have to be resubmitted to FEMA. That is the responsibility of the EMA. Mr. Brandgard said as a question you mention that if we don t approve this, then we can t get disaster relief. This is a loaded question but how many different organizations are out there charging with the same goal? I know we are involved with two other groups that tell us the same thing; if we don t do this quote planning and sign up on this, we lose our ability to get disaster funds. I guess where I m going is if there is a requirement to have something to get disaster funds, there ought to be a central clearing house for all of these different things because obviously the Town is not unlike other entities; we don t have a whole lot of people we can dedicate to chase all of these different things. Like I said it s a loaded question. You are only aware of what you are dealing with I m sure. Ms. Buck said again is that their cushion? I m sure if something on the order of what happened in Bartholomew County, the City of Columbus, if that were to happen, I m sure that they would be more than willing to say okay you have a plan at least in the County, let s get it adopted, let s get it through. Would it be easier and quicker to do things if you already had that? That s a guess of mine but I would imagine it would be and you would be able to hit the ground running. I know Lisa Crouch in the EMA office is already working on several grants to do some of the things in the plan at least for the County level. Obviously, I m sure that s going to overlap somewhere for the Town of Plainfield has well. Yes I mean there are the deadlines and if you want this, then you have to do this. I m sure several groups have those. This is just what FEMA tells us. Mr. Brandgard said if there is nothing else, I appreciate you taking the time to come out and go over that with us. I received that last week and there is a lot of information. Ms. Buck said there is a lot of information. If you do have any other questions, I think Tim has my and Lisa is in front of the document, the EMA office is in front of the document so just feel free to let us know. If you do pass a resolution, let us know and we will ship that right off to FEMA and let them know that everybody is on board. TOWN MANAGER S REPORT Mr. Belcher said I m filling in for Rich this evening and I will try to fill those shoes as best as I can. The first thing that I wanted to get passed through with was the certification from the Plan Commission. This is a certification of the Secretary of the Plan Commission. It says be advised that pursuant to Indiana Code on Monday, July 6, 2009 the Town of Plainfield Plan Commission gave a favorable recommendation to a proposal to amend multiple sections of! 4

5 the Town of Plainfield Zoning Ordinance. That was noted as TA The Plainfield Plan Commission hereby certifies said proposals to amend the Town of Plainfield Zoning Ordinance to you for your consideration with a favorable recommendation. A copy of the proposal to amend the Town of Plainfield Zoning Ordinance is attached as Exhibit A dated this 13 th day of July It s signed Richard A. Carlucci and there is an ordinance further on in the agenda. Mr. Brandgard asked, is there any discussion relative to the Plan Commission certification? If not, I need a motion. Mr. McPhail made a motion to accept the recommendation from the Plan Commission to approve the favorable recommendation to amend the multiple sections of the Town of Plainfield Zoning Ordinance, TA Second by Ms. Whicker. None opposed. Motion carried. Mr. Belcher said the next item that I would like to discuss with you is something that we have already talked about at a work session regarding the northeast water tower and the proposed rates that would support the construction of that project. I wanted to start with a little bit of background of this project. It goes back quite some time. Actually when I came to the Town in 88/ 89, they were just beginning the development to the north. Williamsburg in the Woods was one of the largest projects at that time that came in. As the Town looked at their water planning and the growth to the north it was pretty well recognized at some point we were going to need to look north for a tank. The tanks that we have now, we have one on Carr Road, it is a half million gallons, the one on SR267 by the fire station is a million. We actually have a ground storage tank southwest of Plainfield that is 750,000. So, that is 3,250,000 gallons of water or two million. We are proposing to add one so that would put us up to 3,250,000. Just as a matter of a rule of thumb that is about a day s worth of our current demand on an average. Again there is no hard and fast rule that you have to have one day storage of water but that is something that is nice to have. We also have done a good job in terms of looking at our system pressures and where we maybe lacking and as we went north knowing that we were going to have to deal with issues of our tanks and to the south with the development occurring just to give you a feel the north edge of Williamsburg is at an elevation of 800, the ground is. It is 25 feet lower at the Carr Road tank. It doesn t seem like it. There s 25 feet of difference. There s 50 feet of difference to the bottom of the tank on SR267, which doesn t seem possible but it is 50 feet of difference and obviously with elevated tanks it s all about how high the water is and what your pressure is. So, as Williamsburg grew and other developments grew to the north again we knew that we were going to have to come after this. The first thing that we did is build a booster station at Carr Road and that booster station provides what we call a high pressure district in the Town. If you took the old railroad corridor where the trail is at now, north of that is essentially what we call our high pressure district. That Carr Road station creates a pressure much higher than the tank would create at Carr Road and provides people in that area a much higher pressure at their homes and better fire protection for the area and actually even allows for us to sell water. That is all that the booster station does for us. But even the booster station while it solves the pressure problem it is also a mechanical device. Mechanical devices wear out and they break down and power goes out and things like that. So, the product that we are looking at, which again is north of U.S. 40 and it is northeast of where we are now along the new extension of Ronald Reagan Parkway. That little box there is essentially where the project is proposed. This is U.S. 40 and Ronald Reagan is here and CR200 is here. Plainfield goes off the map there and up to CR100 even. We have customers in a lot of that area. So, the tank is a million gallon tank. It has a booster station in the base of it also, within the base, it is not visible from the outside. So, essentially it provides both an elevated storage and another booster station that is supplied by that. Water from this tank will not only give a redundancy in the high pressure district but also obviously can feed to the other side. The whole rest of the Town essentially will provide benefit to this project. It is certainly a customer wide improvement to our system. Again, we knew this was going to happen in our long range planning and we pride ourselves with trying to stay ahead of the curve as best as we can and this is actually a 20 year lookout project too.! 5

6 It is not for today only; it is for the future of the Town and putting us in a position to respond to the needs of our community as it grows. I think the other thing about the tower that is different from our other one is we have another tower essentially this is a photograph of essentially what our tank would look like. It is not our design, it doesn t say Plainfield on the top yet but it is a metal bowl where the water is at and a concrete essentially tube that holds that structurally up in the air. Why we have a composite is for two reasons; one we thing the cost is better on concrete verses steel in the short run and also there are long term benefits of concrete in terms of maintenance costs are lower and there will be a lower cost to the Town maintenance wise long term. Again, even when I came to the Town, we were doing those kinds of things to try to keep their system costs of operation as low as possible by buying high quality materials and maintaining them well and keeping them up and that long term pays off benefits to your customer base. This is the design of our actual project. The base of that tower is about seven ninety to give you a feel for it. It is as far north as Williamsburg but it s not all the way that far north. You probably remember this but the site came off of a parcel that we purchased as part of a road project. We cut through another parcel and the owner obviously didn t have any benefit to that piece and he wanted to sell it also so we bought it all and later on we discovered that would be a good location for this. I believe it is about an acre and a half. To give you a sense of what the other sites are they are about a quarter of acre so this is a much bigger location than our others. The part of this project that is in the cost that you will hear tonight is a 16 inch water main that will run from the tank, both north and south, U.S. 40 and tie into a system that is already in place and north to tie the system that is already in place on CR200. So, that is how the water gets out into our system or it gets into the tank from our system so it is in and out like any tank everyday. So, that is essentially in a nutshell why we are doing the project, why it is a benefit to our customer base, where it s at. Again, we bid this project last fall and we had hoped to go forward then. At that time, as we all remember, the economy was crashing. There was some financial distress. We were concerned about being able to get bonds at that time because the bond insurance companies were going out of business right and left. So, we knew that SRF was looking at, as a state revolving loan fund, they get funds from the federal government anyway and those are triple A rated and our financial folks can talk to you more about that. But that would allow us to get a high rated bond even as a small community so we started to look at that and it was a lower interest rate. As we started to look at that then the stimulus came into the picture and in February there was a stimulus package passed. So, we thought we had all the things that a stimulus project needed. It was construction ready. It literally had already been bid. It was ready to go, the design, land was in hand, permits were in hand. We had everything we needed and we applied for some stimulus funds. We were fortunate enough to get $800, approximately, which is about a fifth of what the project cost in stimulus funds. Again, our financial folks may talk about this a little bit later but essentially it s not a grant; it s some kind of forgivable loan, a different kind of agreement where after five years of making payments on that loan I believe that balance goes away from the loan and the remainder is still payable. It essentially ends up with our ratepayers having a lower rate because those funds are acquired through this process. So, we ve had other projects up there. We weren t as fortunate on some of our sewer projects but that is still a very nice addition to our project to have money that will help lower our rates. Do you have any questions on how the project got here? Mr. Kirchoff said the only question I have since we typically don t need that much land for a water tower does that mean that we might have some excess area for Jason to use from the DPW standpoint? Mr. Belcher said that has been discussed. As a matter of fact, the base of the tank itself has some storage in it. Of course, it will have a booster station not nearly as much as the current tower on SR267 but with that site the idea of storing something there that could be used on the road possibly in that area instead of having to track all the way back to the Town garage is a possibility. Again, I think it is! 6

7 a very worthwhile project to keep the Town s water utility and the position that it is now, which is ahead of the curb on the demand and service to our customer. The redundancy goes a little further, not just in the booster and the pressure but we have two tanks, these elevated tanks, that we have to take down occasionally and paint. In taking those down and you lose a million or a half million gallons of water is something I know as a water operator and Jason s guys working for him doing that it makes them really nervous. We don t know when fires are going to occur and having those tanks out of service is extremely nerve racking on everybody to get those painted. So, we are going to have to do that to our two tanks relatively soon. So, we think getting this project going and getting it built when it s done, the very first thing we want to do is take one of the other tanks down and be able to have all the time we need to do it right and make sure we get a good coating on that. Again, it is expensive to operate a water system but when you maintain them properly, I think the results, and you will see that later in terms of our rates, come through pretty clearly. So, with all of that the big question is how much does it cost and again I said it is about a 3.2 million dollar project to borrow the funds that we need to do this. We believe we can do it for essentially ten cents a day for an average water customer and that average water customer we are assuming it is 6,000 gallons a month. That is actually a little high. I have a daughter who is in college at home this summer and I m not using that much water. So, 6,000 maybe a little on the high side and again three dollars a month or ten cents a day is essentially what we have found out in our rates and again I think that is pretty favorable. It is in 2002 that we did our last rate increase and I believe it was almost exactly the same amount per day, about ten cents a day. We essentially used that rate increase to build the southwest plan and have that infrastructure in place now so all of those things have worked together to make the system really strong to serve our customers. I m going to have folks from our financial team, from Umbaugh come up and talk about how we arrived at the ten cents a day and how we are going to pay back the loan and talk about how they tracked in the rate. It is a new method of how to essentially develop our rate that we have used before instead of across the board kind of rate increase. It will be a little bit different than that, which I think is good and that came out of the work session. The Council was asking is there some way on the lower end of the scale in terms of water uses could there be a little less rate increase than the higher end and they figured out a way to do that in a fair fashion I think across the whole rate base. So, somebody that uses a lot less water would probably even have a much less increase than the three dollars a month. I think I have covered everything that Rich asked me to cover plus some other things maybe. Now I think I will turn it over to Tom Michalak from Umbaugh who is going to present his portion of his presentation tonight. Mr. Tom Michalak with Umbaugh said I laid before you two documents. There is a report that is dated June 18, These are our calculations of the impact of the project itself and then there is a supplemental report dated tonight that has the calculation, or I guess it is more of a presentation, of the impact of the alternative method of conducting the rate increase that we talked about at the Council session. I don t want to get too long winded with this so I would just like to walk through a couple of things over five minutes and then open it up for any questions or discussions with you. I ve got Dave Fredrick here from our firm tonight and I think between the two of us we can probably handle anything that you could ask us. In the way of projects as Tim mentioned, we have got a water tower project that we are looking at funding. Page 3 of the thicker report shows some details of the estimated project cost and funding. A couple of high points of this is the estimated project cost total is $3,353,000.00, which includes approximately $2,787, worth of direct construction cost and then an additional approximately $566, for engineering and design and construction administration, legal and then, of course, financial services to bring the project through. So, your total is $3,353, As Tim mentioned, through the stimulus program that the federal government opened up they put some money out there for communities that had what they call shovel ready projects. The state revolving fund program or SRF deemed the water project to be shovel ready and ready to move. So, what they are extending to the Town is an opportunity to get a 25% principal! 7

8 forgiveness they call it. This is the proposed American Reinvestment and Recovery Act Bond Anticipation Note of What this does is they are staying away from calling these a grant in this particular case because to give a community grant you, of course, have to play by the grant rules. You need grant administrators and it sort of gums up the works so what they are doing is a principal forgiveness program similar to some programs that Farmers Home has done in past decades. But what it does is they will issue you on the day of closing of the financing two debt instruments. In this case we are assuming that they would total $3,353, Twenty-five percent of the borrowing will be this bond anticipation note and the intent of it is that you as the community and Town would not be expected to repay the principal amount of that. It is a non-interest bearing note and what they would do is five years after the date of issuance the federal government will okay the write-off of this debt instrument as long as you have continued to make payments on the other 75% of the total borrowing. That other 75% of the total borrowing is the $10,515,00 waterworks revenue bonds of What our analysis assumed is that it would be a traditional SRF loan through the subsidized interest rate program. What they do with that is it is a 20 year bond amortization and they offer you a much better than market rate interest rate. At the time that our analysis was done the interest rate that we assumed, and this is all shown on page four, was 4.13%. The rate changes quarterly so our report is from June. Here in July we now know that there has been a 26 basis point reduction in the interest rate so I think that translates to a 3.87% that would be your new current interest rate. We did not update the study to reflect that necessarily because in looking at it we found it meant about $9, in total revenue requirement for the community. So, it doesn t make a huge difference but a three point anything is a pretty attractive interest rate at a time where a lot of open market bond issuers are seeing six or seven percent. So, in the context of the project itself I would like to fast forward to page 10. On page 10 and 11 we go through and we sort of calculate what a couple of the revenue requirements are for the water utility but properly designed water rates there is no profit motive in any of this. We simply want to seek to recover the true costs of operating and maintaining the system along with a reasonable allowance to be able to expand for future development and some of the other things that the utility may need to do. So, in the context of that we really have four key items that we need to fund. The first one is the day to day expenses and we call those operation and maintenance expenses. We went ahead and based those for purposes of our study on the adopted budget that you have for the calendar year And then in addition to that you can see below that we have an allowance for contingences and inflation. We assumed a factor of five percent of the 2009 budgeted operating cost as room for additional costs, cost of growth, things to change. We always try to be conservative in our analysis and make sure that we are really giving you a proper presentation of maybe not the totally worse case scenario of operating the utility but certainly not your best day and everything else that goes in it but a pretty solid picture of where things come in. We also have an allowance for additional utility receipts tax, which is something that would have to be paid on a potential increase. The next item that must be covered is debt service on the outstanding bonds. So, we have some 2003 and 2004 bonds and then, of course, we have the proposed 2009 bonds. You can see that the additional debt service on the 2009 bonds would be approximately $194, a year. With the 2009 bonds, with these being issued through the SRF, they will have a requirement that you all have a debt service reserve funded. Currently the debt service reserve is covered by an insurance policy, which is called the debt service reserve surety on the 2003 and 2004 bonds. It is our recommendation that we try to avoid a debt service reserve surety for the new bonds because as you are aware, there have been some major problems in the credit markets and the companies that deal with these debt service reserve sureties are not very highly rate right now. So, for the premium that you pay for them it is hard to make sure that you are going to get the value back out of it. So, as an alternative to this what you can do is set aside a certain amount of money and just put it in the bank and, of course, the account would be an account opened and held in the Town s name and the Town would be entitled to any interest earned on the account. What this money will do is it will act as approximately your maximum year worth of principal and interest payments on the bonds and in the event that there would be some sort of major economic downturn this is a measure of security that the creditors will still be able to! 8

9 get paid on these particular bonds. So, it is basically money that you put in the checking account and if for some reason the normal rates can t take care of the bonds, you do have the cash available to be able to take care of your maximum year. So, we would propose to fund that with available money through the rate and charges over a five year time span, which is in accordance with the current bond ordnances that are out there. So, the requirement there is about $39, a year. And then in addition to that we also want to make sure there is room in the rates to allow for replacements and improvements and just general expansion of the system. In this particular case under Alternative A we assume that we would have 35%, we call it bond coverage. What that says your bond ordinance requires that you maintain rates that provide at least a 25% measure of coverage. Coverage is the amount of available revenue that is left over after you have paid just your daily operating expenses. You have to have your debt service payments plus an extra 25% that is built into the existing debt covenants. We recommend as a managerial practice when you look at rates, if you use coverage, make it 35% because what you want to do is adopt rates that will be hopefully in effect for a couple of years. If you adopt right at 25%, if there is the slightest change, you can suddenly find yourself in technical default. So, we want to advise you to avoid that and because of the dollars in play an extra 10% of your bond coverage is really not a huge impact on ratepayers. So, we go ahead and suggest that. So, what that all boils down to is you have total annual revenue requirements of $3,624, So, those are all the things that the water utility needs to be able to pay for. Out of that we know that there are some reoccurring revenues that are not necessarily driven by the current rates and charges. So, on the water side you can see that we back out some interest income and some penalties. There s some money that comes in for teller rental, wholesale water sales. That is the contract, the current contract that is in place with Indianapolis Water. They purchase wholesale bulk water from you. It s kind of an emergency system, sort of a backup function for Indianapolis but that is a major revenue stream for the community. We have assumed that that amount would stay at its current level. I know the contract will be up for renegotiation and I m not aware that there is any major progress that has been made one way or the other on the contract. So, we assume that would continue at its current level. Then finally we have some tap and inspection fees. So, taking in mind all of our sort of miscellaneous income we have to find $2,986, to be able to operate the water utility with the project. So, we can compare that to the normalized non wholesale user revenues that came in and these, of course, are the bill payments that have gone to just your typical ratepayer. There s $2,507, worth of wealth that comes in every year so you can see under Alternative A we have a shortfall. We have a need for additional revenues of $479, So, what we have done with that number is we take that and we initially looked at it with an across the board increase perception. And if you do that, then you would need to increase each of your charges 19% across the board. In some discussions that we had with the Council session it was pointed out that the current water rates, which are shown on page 13, the current water rates you have a monthly service charge and then you also have some metered rates per month depending on how much flow a particular user uses. You will notice that there are two meter rates that are in play. There is one metered rate if you use less than 10,000 gallons every month, it s $2.48 currently and if you use more than 10,000 gallons, it s only $1.80 per thousand gallons currently. So, what happens is there is a sixty-eight cents spread there that if you apply an across the board increase, you end up increasing that spread to almost a dollar under Alternative B and I think it was eighty-five or ninety cents under Alternative A. So, it was mentioned that there is kind of an issue of maybe appropriateness or fairness that comes into play with that. What we wanted to do was sort of come up with maybe a different way to put in the additional revenues that we would need but build it in equally to all of the users of the system. So, we talked about it in our shop and one idea we came up with was to do what we call a tracking factor for the additional revenues that we would need. What that does is we take that $479, revenue shortfall that we need and we divide that by the number of build gallons of flow in the test year, which in this year was calendar year 2008 and we come up with a need for an additional fifty-six cents per thousand gallons worth of flow. So, what we are proposing to do now is to leave all of the monthly base charges alone, leave all of the various fire! 9

10 protection charges that are there, leave those alone and because the project will primarily be there to assist with the flow of the system and the overall availability of water we will go ahead and propose that we just track the cost, the additional cost and put that into the flow of water. So, what that will do is that will allow us to maintain the current sixty-eight cent spread as we move into the new rates. The supplemental handout that I left for you is where you have the impact of the revised rates. So, if you will open up to page one and compare that to page 13, this is really where the rubber meets the road as far as the rate impact. You can see from a base charge standpoint at the top of page one of the supplemental handout regardless of what meter size you have your minimum monthly service charge, excuse me, your base charge every month will remain the same. The homeowner will pay $2.49 as opposed to $2.96 under Alternative A. So, then the other piece that comes into this is the actual flow rate itself and on page one you can see that we would propose to set the flow rate at $3.04 as opposed to the $2.95 that was shown on page 13. However, your over 10,000 gallon user to help sort of make up some of that difference and maintain that spread their flow rate would go to $2.36 as opposed to $2.14 under the previous method. So, what that would mean for a typical ratepayer here in the Town you can see the chart on the board. Currently we have put together a list of what a typical water user is paying right now in some local communities. You can see the communities presented there Plainfield, of course, is in yellow. Currently for 6,000 gallons of water, which is a pretty typical user based on the averages that we found in your system they are paying $17.37 now and what we would propose to do is increase that to $20.73 to include that service for the financing and offset that $479, shortfall in the rates and charges. You can see compared to a lot of your other neighboring communities it is very reasonable. These are never fun things to talk about but as we look at some of the other communities around you can see that there are some much higher rates that are, of course, nearby. So, from a rate impact standpoint it is still an increase but as Tim mentioned it boils down to about ten cents a day for the average ratepayer. It sounds like the benefits of the water tower itself and some of the additional things that it would allow you to do would really help put the community in a pretty good position moving forward. So, with that I would like to open it up for any questions. Mr. McPhail said I did not make the work session; does this affect the remedy in the Deer Path customers or are they going to stay on the fixed rate they are on? Mr. Michalak said they would still be at a fixed rate but you bring up an excellent point. That rate would change. On page two of the supplemental handout the Deer Path customers, presently it is $27.54 and that rate would increase to $ The way that we did that if you look at the $27.54 rate, if you look at the billing components that are implied there, there is an implied flow rate of little over 10,000 gallons so we went ahead and assumed that same level of flow that is assumed in the current Deer Path rate and applied that towards the Alternative A using the new flow rate. So, they would see the same increase that any other user that had that same level of usage would. Mr. McPhail said they are metered aren t they? Mr. Belcher said (inaudible). I will say this; there really isn t (inaudible) are much higher than Plainfield (inaudible). Mr. Gaddie said (inaudible). Mr. Belcher said that was Liberty. Mr. Daniel said correct. Mr. Bennett asked, is that revenue bond, that 3.87%, currently is that a fixed rate or does it fluctuate over the term? Mr. Michalak said that is a fixed rate. Mr. Bennett said for 20 years? Mr. Michalak said yes.! 10

11 Mr. Bennett said (inaudible) basis points? Mr. Michalak said yes and on an annual basis it would translate to about a $9, savings for the utility per year. Mr. Bennett said if we lowered the terms from 20 years to 15, it would change the payment a little bit? Mr. Michalak said it would because the principal would be the driver of that. If we cut out a quarter of the time for the principal to be paid that, all of that extra money has to be paid quicker. term? Mr. Bennett asked, would the rate be lower if we had a shorter Mr. Michalak said the rate would not. As a matter of fact the rate would be higher with a shorter term than 20 years. Mr. Bennett asked, why is that? Mr. Michalak because the amount of principal that would need to be paid to accelerate that schedule because you are looking at a 3.87% interest rate I think the acceleration of the principal schedule would mean two things. On one hand you would pay less interest over the life of the loan itself but on the other hand to get there you have to have probably higher annual payments to be able to make that happen. I can run the numbers on that for you and give you a solid number but my initial estimation is that you would end up with a higher rate if you did a 15 year amortization. (Inaudible). Mr. Bennett said so the rate would stay the same. same. Mr. Michalak said I m sorry the interest rate would stay the (Inaudible). Mr. Bennett said no I m sorry the interest rate on the bond. Mr. Michalak said I m sorry the interest would be the same but I think a 15 year amortization would lead to a higher water rate. (Inaudible). Mr. Bennett asked, could you briefly explain again the difference between Alternative A and Alternative B? Mr. Michalak said sure. Alternative A assumes that we would have 35% of the service coverage and that is an annual amount that we want to have available to keep you in compliance with your bond ordinance. But more importantly it is money that is available to be put back and reinvested into the water system itself. Alternative B we worked with Tim and he identified a number of projects that are kind of out there over the next 10 years or so that the water system would need to do. There is a schedule in the thicker report; I think it is page nine. Yes page nine; there were $7,110, worth of projects that were identified and if we look at those and say that the water utility would do those over the next 10 years, that would result in an annual requirement of $711, a year. So, that is the difference between Alternatives A and B. Alternative A goes with the bond coverage requirement and Alternative B would actually fund all of the identified capital projects. Having said that Alternative A will still provide over the next 10 years you will get about 2.5 or 2.7 million dollars worth of available funds to be able to reinvest in the system. Mr. Kirchoff said at the work session we talked about various ways to kind of slice this pie from a rate standpoint. One of the things that we talked about was looking at a bill frequency study. Did you have a chance to do that and what other options did you consider as far as rate design? Mr. Michalak said we did not have an opportunity to do that. That particular type of study would require quite a bit of work for a utility this size. We went ahead and offered this suggestion up as an! 11

12 idea to try to find a happy medium of being able to give you all the opportunity to extend maybe a little more equitable increase to the area. The bill study would probably take another four to six weeks to complete and one of our concerns was that if we step back and change the scope of the rate analysis to include that, we may end up running sort of short on time to be able to get all of the activities finished. Mr. Kirchoff asked, if we divided ten thousand and less and ten thousand and above do we have a sense of what percentage are in those two buckets? Mr. Michalak asked, percentages as far as the water flows themselves? Mr. Kirchoff said the number of customers. How many customers are ten thousand or less and how many are ten thousand and more? (Inaudible) said typically when we (inaudible) at least 90% of the residential customers (inaudible). What we did is instead of doing a percentage increase to arrive at the same (inaudible). What we did is we just had the (inaudible) increase (inaudible) for every customer. So, what it does it makes the rate increase a little bit higher (inaudible). Mr. Kirchoff said so you were able to take a very modified study from the standpoint you have the numbers that you know what customers are in which bucket and that this will produce the right revenue. Mr. Michalak said based on the flows of 2008 this will produce the right revenue. What this will do is it sort of steps away from the distinction between above ten thousand gallons or below ten thousand gallons as far as flow goes. It just looks at the overall target flow. What we found is that 2008 wasn t horribly wet and it wasn t horribly dry. In a lot of regards it ended up being a pretty fair basis of what a typical flow would be for the system. And part of calculating the flows we used the actual billing information based on summaries. We don t get into the line item by line item detail for the individual bills but looking at the summaries of everything. The concept here is that the driver of this would be comparable flow going forward. Mr. Kirchoff asked, what kind of growth factor did you put in there? Mr. Michalak said the study itself does not include a growth factor. What we did for estimating the current revenue base is we gave the Town credit for all of the users who connected for So, what we did is we factored up a full years worth of the customer s revenues with the assumption that they were added evenly across the year itself. We found that going from 12/31/07 to 12/31/08 the total number of billable customers increased 352. So, what we did is on I think it is Schedule 8 or page 8 of the larger report we assumed that each of those 352 customers was a residential user. So, what we wanted to do was to capture the potential revenue that was there from a conservative basis and go ahead and bill that into the rate base carried forward. But we intentionally stayed away from building in an allowance going forward of an extra 200 customers a year or something. Mr. Kirchoff said so you took the 308 customers or whatever it was and divided by 12 and just said we have one-twelfth throughout the year. Mr. Michalak said the calculation itself assumes that we divided them basically by six, or excuse me, by two. Page eight kind of schedules that out. We took the 352 increase in users and multiplied it by six to assume that we had what we called ratable. Meaning in looking at the actual bill information itself it was difficult to determine what the specific count was at a given time period. Lois provided us with year end accounts so what we did is we took that information and to estimate it we were able to see that assuming that these 352 connections all happened kind of in the same pattern throughout the year that we end up with an additional 2,112 bills that would be available if all of these customers were connected on the system for the entire year. So, then to that we know that the average bill is around 6,000 gallons as far as flow goes so we use that current $17.37 charge as the basis for the additional revenues that we gave you credit for as part of the study in the normalized test year. So, we come down to an additional $36, of a normalized increase that we went ahead and built in.! 12