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Agenda Item: 15(c) |
Prepared By: Jeffrey E. Poteet, General Manager |
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Business: City Council Item |
Department: Water and Sewer |
Subject:
Title
Resolution - Authorizing a Lease-Purchase Financing with Banc of America Public Capital Corp. for Water Efficiency Improvements and Related Agreements with Argent Institutional Trust Company - Jeffrey E. Poteet, General Manager, Water & Sewer Department
Body
BACKGROUND:
On June 2, 2025, the City Council authorized the City Manager to invest $4 million of existing Water & Sewer Capital Improvement funds and to secure financing for the remaining $7.58 million necessary to replace approximately 11,500 aging water meters with advanced ultrasonic Advanced Metering Infrastructure (AMI) meters and endpoints, build and integrate an island-wide AMI network with our billing system, and carry out the EPA-mandated service-line material survey. This resolution approves the financing component - up to $7,700,000 in principal amount, to fully fund the meter replacement.
To cover the $11.58 million project cost, $4 million has been reallocated from the Water & Sewer Capital Improvement Program savings, and the balance will be financed through a tax-exempt capital lease. Debt service on the lease will be drawn from our existing annual meter-replacement program allocation, so there is no impact on the operating budget. The proposed financing is a 15-year lease schedule to match the asset life, while retaining the flexibility to repay early if desired with a 2% premium. The fixed interest rate is 4.019%. A recommendation memo, which is attached to the agenda item, was prepared by PFM Financial Advisors LLC (the City’s financial advisor) that outlines the rationale for the selection of Banc of America Public Capital Corp. as the lease provided.
Along with this executive summary, for your consideration, attached is a formal resolution authorizing this financing package, the Escrow Agreement, Master Equipment Lease/Purchase Agreement, and Equipment Schedule.
FUNDING SOURCE / FISCAL IMPACT:
Annually, $800,000 is allocated in the Water and Sewer Capital Improvement program to replace existing water meters. These funds will be used to pay the debt service on the capital lease, which is estimated to be $682,000 annually through 2040.
RECOMMENDATION:
Approve the resolution authorizing the approval of the capital lease.
POTENTIAL MOTION:
“I move to approve Resolution 25-34 authorizing the City Council Chair to execute the capital lease with Banc of America Public Capital Corp for Water Efficiency Improvements and Related Agreements with Argent Institutional Trust Company.”