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1998-03-30 SPECIAL TOWN BOARD MEETING MARCH 30, 1998 7:00 p.m. MTG. #12 RES.125-126 TOWN BOARD MEMBERS PRESENT SUPERVISOR FRED CHAMPAGNE COUNCILMAN THEODORE TURNER COUNCILMAN RICHARD MERRILL COUNCILMAN DOUGLAS IRISH COUNCILMAN PLINEY TUCKER CONTROLLER HENRY HESS WATER SUPERINTENDENT RALPH VANDUSEN GUESTS: SUPERVISOR HARRY GUTHIEL TOWN OF MOREAU MOREAU WATER CONTRACT Controller Hess-Passed out materials to the Town Board-this is a SUllllllary to the extent that a lot of things happened, there is a lot of talk, some of the things were reduced to, there was no really sequence of offers and counter offers that you could track. It was pretty much what the term was the offers from Queensbury and some discussion and offers from Queensbury. . . what I did is put the jest of where the offers as the discussion centered around during a period of time. What I started here with is what we calculated and what we accepted along the way as the cost to do this project, that comprises the left hand side of the page. I did not concern myself with how these costs are going to be covered at this side or what you negotiated to get in, I just listed all the items that we can consider as costs. Using the amortization procedures, methods that we used in the past, we have the buy in, the river crossing the Big Boom pipe line which I separated to the best of my ability from the information that I had from the Big Bay pipe line since they would be done at two separate times in two separate phases of the water supply. Transmission was a factor although I did not put it as a cost there because I really could not tie down and we had debate along the way. My cost, I calculated a cost much higher than we were going to sell it for at the time which was five cents. So, I just sort of disregarded that nickel since it was negotiated away along the way anyhow, I did not put a cost in there with it. Now, other factors, we talked about along the way, which were really never factored into negotiations, town over head, engineering work had been done to get this thing going and other engineering work done in the future perhaps, legal start up, production is a formula that has never been in dispute, at the bottom of the page I sort of totaled up what I see of these negotiated points. As you can see the calculated costs in terms of thousand, per thousand gallons of water production come to about seventy three cents. That is the number that I have been trying to zero in on as far as covering costs in one way or the other. Back in 1997 or as far back as I can determine the formula is pretty much the same it was fifty cents, as a cash buy in it was five cents for transmission so it was a fifty five cent contract. Unless I missed something I think that is what it was through out most of 1997 until we came into 1998 and started looking at it in terms and started factoring in some of the cost of capital. In January the negotiations pretty much centered on breaking costs of capital down, breaking some of these components down into their individual parts. So, we calculated out the buy in, the compliance portion of the buy in which it worked out to thirty nine and a half cents on three hundred thousand gallons. The river crossing left a, it was ten and a half cents if you deduct thirty nine and a halffrom fifty cents it comes to ten and a half cents so we had ten and a half cents then we dealt with a Big Boom Pipe line and I went back and it look like we were dealing with about ten cents. I could not let down any further it was a lot of negotiations and a lot of talk there, it seems like we are dealing with about ten cents there and then the transmission costs of about five cents we were zeroing in during the month of January at about a sixty five cents package, it might have been a little bit more or a little bit less at one time or another but that basically is where negotiations centered in January. Then we had a meeting in February and the idea of the second level surcharge came into effect, because we had a difference between the fifty five and the sixty five although the fifty five was never signed and what ever accepted that seemed to become the focus at that point. How do we get back to it and we looked at a way to relieve the some of the recover the, the Town of Queensbury had to get from the first level and move it into the second level so that the price of water to Moreau would be in an acceptable range. So, we introduced a second level surcharge and there were any number of formulas that evolved from that but basically it was fifteen to twenty five cents per thousands gallons on the second level. The transmission charge was created away in exchange for ownership and responsibility for the river crossing and the cost for the first three hundred thousand gallons of water became fifty cents at that point. Pretty much the same thing that happened in March accept the formula, the formula was changed up here, there were several meetings and negotiations and several discussions back and forth with the second level surcharge I did not want to reflect it on here different ceilings different cut off points and whatever but basically the concept was the same and basically it came up with a fifty cents per gallon per thousand gallon charge for the first three hundred thousand gallons in variables on anything over that. This cost summary does not include totals, where I have totals seventy two point nine cents does not include any factor for the Big Bay pipe line although I did factor in the cost of the Big Boom pipe line because that is a required part to get this thing started. Big Bay would be optional sometime down the road so it was not factored in. I made a note here that January 1998 we started figuring in costs of capital that is when that was introduced into negotiations although we were factoring it into our cost estimates since last July it became part of the negotiations in January and then the significant factors in February and March were that the Moreau ownership of the river crossing and transferring some of the costs to the second level surge charge became an issue. And then I made a further note up here for February and March that the second level surge charge provided the possibility to recover full costs, although if you recall the charge we dealt with at that time they were kind of complex, when did it kick in and when did it fall out and what was the earliest possible recovery and what was the latest possible recovery. I did not find an efficient way to try and summarize that for you here I think you are looking for a scenario where have we gone and what bottom lines have we dealt with? I think this is a fair representation we started out, we are dealing with a cost of about seventy three cents no matter how you cut it, not considering the Big Bay pipe the original cost on the table, the original proposal on the table had they closed last year would have been about fifty five cents plus production and we are now at about fifty cents plus production plus a calculated or negotiated second level surcharge to recruit the possibility of getting back some of the additional costs that are not included in this, in your last proposals. Supervisor Champagne-Well summarized Henry, I think that the numbers that you see there have been the numbers that we have worked with over the course of the last year, and a couple three months. Controller Hess-Let me just say one thing here, because now it is one of the things, gets reiterated every time and I might as well say before aqnyone else does, the seventy two and a half cents is the number, we keep saying, well we keep working with the same numbers and that is because we are dealing with a cost project. It is, we are selling at cost, we are trying to sell at cost lets put it that way. Seventy two point nine cents is the cost that you are dealing with so everything beyond that become where you absorb something else, but seventy two point nine cents has never changed and until we do an re-analysis of a new budget if we were to start negotiations today we would start with 98 budget instead of 97 that might be a different number. We are using the same basis, 72.9 cents and that is the number that we are trying to zero in on. Councilman lrish-I an kind of baffled as to why, what we are doing. Supervisor Champagne-I think it is back on the table, because we are in the position where we kind of bogged this thing down, we have been where we are, obviously February, March, has there been any movement there? Are we still at that same level, if so we need to put that in black and white and say this is our firm offer on the part of Queensbury. Councilman Tucker-I understand that Moreau was negotiating with Saratoga Water and the Saratoga Water Authority. Supervisor Champagne-My understanding in a telephone conversation today that Harry, you are in the process of putting a letter together and dictating a letter to be sent off to the Saratoga Water Authority Unable to hear tape Supervisor Champagne-..although they have not met at this point it is still through correspondence. I guess my question is, is this where we hold the line with the thirty nine and a half plus the ten and a half plus the second level surge charge of the fifteen to twenty five cents, I guess it is varied, Henry, am I right? We looked at some at fifteen cents, we looked at other surcharges at twenty five, is that why you show that? Controller Hess-I think you know, you say where are we today, what was the last thing on the table I believe it was officially March the third that we had offered basically this proposal with a twenty five cents per thousand second tier surcharge between three and five hundred thousand gallons and a fifteen percent per thousand gallons second tier surge charge between five and six hundred thousand, that was what was on the table. Now there has been other discussions since then about what do we do about cost of capital and those issues and that was the one that had the possibility of recovering even though I consider it a remote, it had the possibility of recovering full costs. You had mathematically it was possible. Councilman Merrill-As I see it we are below costs and we are counting on the surge charge to try and re- coop some of those costs I do not see where else we can move. Councilman Tucker-My computer went on the blink February 13th when we got up away from that table over in the Town of Moreau, the entire board and walked out of that building thinking we had an agreement. That is where I am coming frorn. Supervisor Champagne-So you are endorsing these numbers, as they are. Councilman Tucker-Nothing beyond February 13th it was negotiated by one or two members of the Town Board. Controller Hess-That was a twenty five cents surcharge. Supervisor Guthiel-I think we all felt pretty good about that meeting and then came in with the numbers and questions. . .. something came up after that meeting ... I think both board walked out of that meeting thinking ... Councilman Merrill-And we agreed to a cap. Supervisor Guthiel-And it wasn't finalized until.. Supervisor Champagne-We left here what Henry was saying we had to put the numbers down in order to take a look at them to see Controller Hess-I think we left that meeting with numbers in our minds, saying these numbers sound satisfactory I hope it is like, this sounds like something we can afford. We ran into a problem after we calculated the cap, the cap gave the Town of Queensbury full opportunity to recover its full cost and Moreau I think found that objectionable, my feeling is that we are supposed to be contributing to that and I think there was a philosophical judgment. The numbers at twenty five cents over wasn't objectionable I think that even tonight if there were a cap built in you would not find twenty five cents objectionable, it is where it stops. It has never stopped above our costs, it has never provided a penny of profit. Supervisor Guthiel-this is the first time I have seen the numbers on Big Bay and Big Boom, you costs. . . Controller Hess-I am showing that as cost that is not in our recovery schedule, that has never been since January 1 st. Supervisor Guthiel-that is not on Controller Hess-that is not on the right hand side, that is only shown here because if the boards negotiating away I want to remind them what it is they are negotiating away. Supervisor Guthiel-The thirty-nine and a half cents... Controller Hess-the thirty-nine and a half cents is the, that is what it takes to recover the finance portion of the main ... Supervisor Guthiel-Is that the first year or every year? Controller Hess-Every year for twenty years. Supervisor Guthiel-So that is an actual. . . refinance Controller Hess-Well, its yea, it is what, if we were to go out and borrow that amount of money over twenty year period that is what our payment would be. Supervisor Guthiel-You have done that? Controller Hess-We ran an amortization schedule on that. Supervisor Guthiel-this matches the amortization schedule for ..? Controller Hess-yes. It runs down to five and a quarter percent so it would self retire, yes. Supervisor Guthiel- Then the ten and a half would pay for the ... cost? Controller Hess-The ten and a half is what is left over out of fifty cents that was originally negotiated but doesn't fully cover the river crossing. The river crossing costs us twenty three cents, ten and a half covers a little less than half of that, that is what we threw in the fifteen and twenty five for to try and recover the difference between twenty three cents and ten and a half cents. You see the twenty three over here on our tabulated costs, that is our cost of it... Supervisor Guthiel-that is river crossing? Controller Hess-That is river crossing, that is our cost of the river crossing and what we have left out of the fifty to recover on is ten and a half. We never got to a point and we understood the point at the meeting in Moreau that night that trying to get that back out of the first three hundred thousand gallons moved your water price up where it was uncomfortable so that is when the idea of having a second tier where you are actually, your price for water would come down but would not drop down as fast as it would so we would have a chance to recover that price and that was a risk the board was taking at that time. As far as I know is still on the table. The price would drop down, what happens in that case over three hundred thousand gallons your surcharge drops from fifty to twenty five and then over, once you get over five hundred thousand gallons it drops down to fifteen. So, it stays there to six hundred thousand gallons. . . or you reach a cap. Supervisor Guthiel-But there wasn't a cap. Controller Hess-Yes, there was a cap. . . .it was a big number because it was calculated out as what would it take to ... that bill. We made certain assumptions, and the cap was calculated making an assumption, what we did, we did two scenarios which you do not need to make assumptions on. If you were to start pumping at six hundred thousand gallons from day one how soon would we recover and how late could you start paying that for us to recover the full amount by the end of the twenty years? Those are two ca1..we can calculate those numbers. So, the range of possibilities exists between them so when you deal with that range of possibilities your cost of capital fluctuates and what we did was put a cap in there that cut back the range of possibilities right down the middle, so we had a risk and you had a risk, you might never cover your costs and we might never you know, but you never go over your costs. Well you could go over your costs if you started pumping Supervisor Guthiel-..the other deal was better because it was capped at two hundred and seventeen thousand and went up to five hundred and .. Controller Hess-My feeling is if you want to put a cap on it that says we want an amortization and cap it at the amortized cost when you reach it I would not have a problem with that but what we have been trying to do is work with clear numbers and the last one we had on the table did have a cap and I cannot recite right this minute what it was but it was based on if you started pumping earlier we might make a buck and if you started pumping later then we estimated we lose a buck. Councilman Merrill- I believe that was two hundred and seventeen. . . Controller Hess-Ok, there are so many numbers and I did not pull that out of a hat because I did not know if we would have focus on that but, that is easy to resurrect tomorrow if that's what we are going to come back to. Supervisor Guthiel-I keep going back to the one that was proposing on January 29th when it looked like we had a short fall of one hundred and sixty five thousand one hundred dollars. I am not sure that I know where the one sixty five came from if you take the ten point five multiply that times three hundred thousand gallons a day by three hundred and sixty five days a year times twenty years you get the one hundred and seventy one thousand dollars shortage. Controller Hess-It was one hundred and seventy one, you were using the number one sixty five and we talked about it, it was one seventy one three or one seventy one, one. Supervisor Guthiel-That is the number these are the numbers that were presented to us ..one sixty five. Controller Hess-Well, you know what happens when you, you are dealing with the numbers and we did a couple of sets of those and we changed the formula in doing those because, slightly because we started out with an assumption the first couple of sets we did, we made an assumption that your payment schedules would be ninety days late and I built an extra ninety days of cost of capital in there. Then the board assured me that they were going to try and resolve that in a separate negotiation, like how are we going to cut that cost back so I took that extra ninety days of cost of capital out an we did a straight amortization assuming it is going to come due and you are going to pay it on an early basis. So, you, there were two sets of numbers there they were not dramatically off over a course of twenty years they might have been six thousand dollars off, but I don't. I would think that if we get to a point of saying we agree in principal what we will do then is sit down and cut the numbers down to the decimal point because conceptually you have agreed. Six thousand dollars in twenty years I doubt that is going to make or break ... Controller Hess- I think you are right, Fred said one time it was one hundred and sixty five. . . when I refined it at one point it came one seventy one, I think it was because I changed the method slightly. Supervisor Guthiel-I have been looking at it saying we have been one hundred and sixty five thousand dollars apart can't we resolve this, because you are saying ..it looks to me like it is costing Queensbury twelve thousand dollars a month every month that this delays because basically your debt service is around seven thousand dollars a month on ... Supervisor Champagne-We know the numbers we have run the numbers I think this board to be very honest with you my sense is that this board today is where we are on this chart and whether we are making seventy three thousand dollars a year based on pumping out another three hundred thousand gallons and what that seventy three thousand dollars does in terms, I guess I do not want to call a profit it certainly is a benefit to the local user in Queensbury. We are all fully aware of that and I think what this Board is saying is that although that is very true and it is right there looking at us right in the face this Board is saying these are the numbers and I think that is why we needed this meeting tonight. If we are where we are and we are not going to consider the other benefits to the user out there then these are the numbers then we have got to leave here tonight saying this is where Queensbury is. That is what I am trying to get out on the table before we leave here tonight. So, that is where I am at. Supervisor Guthiel- I cannot speak for our whole board, I am looking or the one hundred and sixty five ... in the middle and ... or another way of saying it. Councilman Merrill-We have restructured it quite a bit from the original one Harry. I am sort of at a loss as to where else we can go with this. Councilman Merrill-the January our original. Councilman Merrill-that is a significant movement and Queensbury is investing in this project. Supervisor Champagne-We have been at fifty five since day one, that was what was in the original contract going back to some time in July when we finally got a contract that was complete, there was a fifty five cents on a thousand and we are at fifty cents now with a second level and I do not know how we are going to do much to shave that. I mean if we are arguing over the one sixty five vs the one one seventy one I am sure Henry as got magic that he can you know, put to work to get that taken care of. We also have an application in the Staffords office. Supervisor Guthiel-I think some of it is the cap because the true difference between one hundred and sixty five and one hundred and seventy one then why wouldn't the board be happy with that? Controller Hess-Well you know maybe that is something that should be looked at you know you take that we can go back to the second little surcharge put a twenty five cents surcharge and cap it at actual costs so that there is no possibility we are going to make any money but yet, we can cut the difference. Supervisor Guthiel-That way ..you are taking the risk and we are taking the risk. Controller Hess-There is a little bit. I can, we can resurrect that if there is a hope that, that is going to do it, I guess. Councilman Irish-Would that eliminate the possibility that we didn't recover our costs? Controller Hess-There is no way I would, put one in and say that I would eliminate the possibility we could recover. I think you are at risk that you may not but you have the possibility that you could and I think that is critical. I in good conscience couldn't put one out that says I want you to gamble on something that there is no possibility you could win. Councilman Irish-What I was saying is if you put the cap in there can we do it in a way that we cannot do it in a way that guarantees our recovering our cost? Controller Hess-There is, well the cap would way we are going to recover the cost and it is going to stop. But we would not put a time cap on it, saying look we are just going to collect it and for twenty years and we had that at one time and Merrill did not like the fact that it could have gone on for twenty years. At the end of twenty years if we did not recover our costs then we lost it. I think that is a reasonable risk because that is the way that contracts are written. We continue for twenty years at twenty five or fifteen or some mix of that and at the end of twenty we did not get our full costs back then we did not get it back. Councilman Irish-Well if they reach their Controller Hess-but if they reach the number it is fine, and make it a floating cap, a cap that takes into account the cost of capital and just rises it is an amortization schedule, it builds capital and they pay against it and at the end of twenty years, it is either paid off or it is not if not it goes away. Councilman Merrill-I think we are willing to take that risk because like you we do believe that it will be beyond the three hundred thousand, so we are willing to do that. Councilman Irish-Isn't that the same deal we had in February though? Controller Hess-Pretty much, that is really what it said, except. Supervisor Champagne-The cap has been played with a little bit and this twenty five and fifteen is relatively new. Controller Hess-What we ran into a problem with when we put the cap in, we are going to put the money out there into the infrastructure, which means the money is going to come out of the bank and it is going to cost us five and a quarter percent so when we start putting that five and a quarter percent on it, that's what looks like one hundred and sixty five or one hundred and seventy one thousand dollars expenditure grows every month because if there is no payments against it, it is accruing interest and it looks like a big number when it gets down the road and I think, I think Moreau balked at that when it came in. I do not know how to do it any differently that is the way you ought to finance works, unless you just waive the interest charge on that if you want to waive the interest charge, that is your call. Councilman Merrill-But, that is a true cost to us. Controller Hess-That is a cost and I have to declare it a cost. Supervisor Guthiel-..the last time we met I had the girl transcribe those minutes at least five or six times you mentioned no interest, no interest. Councilman Irish-That was with the surcharge though. Supervisor Guthiel-That is what we are talking about now, right? Councilman Irish-The surcharge covered the interest on the debt service, right? It worked out to five point two five no matter how you did it. Controller Hess-I am using a five point two five cost on capital on everything we are using. Supervisor Guthiel-..all the discussions that night were around..distinctly said no interest I asked... Councilman Irish-That was without a surcharge. If we give you the deal without a surcharge we were going to charge the interest on what we put up and the way to avoid charging you isn't that the way you had that worked out? Controller Hess- I do not remember exactly because Harry has had the benefit of listening to the minutes a few times play the tape play but I remember a few times that night Supervisor Champagne-I got the minutes here Harry but I remember reading the minutes again and I think what you are eluding to is a different interest and I am trying to trace back in my mind. You are suggesting interest being paid on the one seventy one or the one sixty five whatever that number is, but the no interest that we discussed that night was an entirely different chunk of money and I cannot put my finger on it exactly. I can go back and look in my minutes that you sent me though. Controller Hess-The one thing I will say during the course of discussion there was a lot of discussion back and forth and some of the statements were accurate some of them were partially accurate but for the sake of discussion we let it ride but near the end of the meeting I specifically remember saying I need to clarify one issue, based on something you had said, I need to clarify one issue before we leave here I do not want anybody to mis-understand that this cost is not going to be included in the final analysis. It as been said a few times but that is not the case. I do not remember exactly how that related to but if I could hear the tape maybe it would refresh my memory, but I specifically remember that issue coming up because I wanted to make sure when we left there that before anybody left that room that I was going to calculate in interest. Supervisor Guthiel-I know distinctly that stuck in my mind..distinctly discussing no interest..five or six times so what were we talking about no interest on .. .no interest on the loan... Supervisor Champagne-Again I have got to go back and look at those minutes again, but I.. Supervisor Guthiel-I guess you might have said you had fund balance ..interest on that, I do not know. I was thinking that the one hundred and sixty five thousand if we had one seventy one I thought we were going to pay back without interest. Councilman Tucker-Can we do that? The Division of Audit and Control the State controller allow us to lead money without collecting interest? Controller Hess- I think if the board wants to do that it could be constructed in such a way using the off set type, you want to sell back some of your benefit swap some of your benefit back I do not think that the Division of Audit and Control would step in and tell you what you could do or what you couldn't do. I think you have to make the decision as a prudent business decision. They are not going to second guess your business decisions, I do not think it violates the law, but you have to decide if it is a prudent business decision. Supervisor Champagne-I I think what it evolves into Pliney is and this is my again conversation with local Audit and Control and the one in Albany that you can as a board you can assess a benefit to your users in whatever way you choose. If we say that because we are going to pump out three hundred thousand and I will use that same old routine again, if we are going to pump out three hundred thousand gallons day one and they are going to start paying on that, that automatically reduces our cost of operation by seventy three thousand dollars a year. Audit and Control is saying you could apply that seventy three thousand dollars a year as a benefit to your existing users in the Town of Queensbury. You can do that, even though they are paying you know, nine tenths, you have got three million going out from us, three hundred thousand going out for them, it is still a major savings if you will in the cost benefit to the local Queensbury user. If we are going to pump out six hundred thousand and I know I use these what ifs but if six hundred thousand is going to go out that pipe every day five years from now that cost just went from eighty four cents down to sixty eight somewhere in that vicinity you know, now you are looking, your real benefit here obviously is in the quantity . Councilman Tucker-I understand what you are saying we are furnishing them a product and we are reaping a benefit because they are using that product, but what I am saying is, how can we take taxpayers money in Queensbury, their money in the water district and put a deal together with Moreau and not charge them interest on that money? Supervisor Champagne-You can do that because Audit and Control is saying as Henry so nicely says it, you know, is it a prudent, excuse me, is it a prudent financial deal for the Town of Queensbury to lend Moreau water at no interest on this side of the coin and then on the other side of the coin we are saying that interest can in fact be made up based on some of the savings that is over here the benefits of the town, you do not measure benefit to the users by dollars and cents you do not measure dollars and cents. I did not do that when I first started talking to Moreau about this deal, I knew that Queensbury was going to benefit over the course of time and that benefit would certainly go into the equation in terms of the up side. So, I did not look at the cost of money at that level I really didn't. Councilman Irish-The only benefit is dollar and cents when you get right down to it. The more water they use the less it costs the user so it all comes back to dollars and cents. Supervisor Champagne-But what I think what Pliney is saying Councilman Merrill - But, if you take that savings and use it to invest you have taken that savings and the real question is when would the tax payers in Queensbury see any benefit in their rate, if they would? Supervisor Champagne-Let me try and answer that one because these are the numbers that I work with since a year and a half ago, maybe longer. If you take that seventy three thousand dollars that we say is going to come in, if you also take the five hundred and Councilman Merrill-But if we apply it to the river crossing or something else the taxpayers never see that? Councilman Irish-That is not a benefit. Controller Hess-In the long run it would be because you would Supervisor Champagne-You are coming in with the five twenty or whatever it is, that is the cash on the barrel head. That money is going to go to put the pipe in across Councilman Irish-But that is supposed to be for the buy in isn't it? Councilman Merrill-That is the buy in. Councilman Irish -You are taking their buy in money and putting it into the ground. Supervisor Champagne-You are absolutely right, you are absolutely right. At the same, let me get this straight now, at the same time that buy in money you are not using all of it, you are using the first one hundred and forty five to put the Big Boom line in and you are using three ten right, so we are back to about that half a million dollars. That is going to be our investment. Now, the three ten is the the ten and a half cents will be coming back in over a period of time so that is going to, you know, pay back a portion of that river crossing. About a hundred Councilman lrish-I do not have any problem doing it that way as long as the Town of Moreau is paying the same money that I am paying for my water. If we want to take the money from the savings that we are going to get over five years they should be paying, if I am paying eighty four cents then they should be paying eighty four cents. Unknown-I think the formula is written that way. Councilman Irish-No, because you are taking that savings for the Queensbury water user and using it to pay that river crossing when their rates will actually be paying less. Supervisor Champagne-Ok, I understand what you are saying, ok, that is a different. Councilman lrish-I do not have any problem in doing that as long as they are paying the same rate I am paymg. Supervisor Champagne-But, in addition to that, you are saying that all up front capital costs the initial capital costs even though we maybe floating the bond or we are being the banker for the Town of Moreau all of that money plus five and a quarter needs to come back in, forget any of the benefits or any of the savings over on this ... Councilman lrish-I think it would lower the cost of water for everybody Supervisor Champagne-See that is my point with Moreau I mean, once they start pumping the four hundred and the five hundred and the six hundred your cost just as our costs once Hudson Falls comes in all those costs are going to come down. You may never see that twenty five cents. If we can get the production of water down Councilman Merrill-But we may never see more than three hundred thousand and the contract has to be written guaranteed... Supervisor Champagne-That is why we are trying to get that escalating you know formula in that second level. Controller Hess-Your point is well taken, if the cost of water today is eighty four cents and it were to drop down to sixty cents it would be, there is twenty four cents and that would off set the twenty four at the top and price of water. That is really one of the things, I think Queensbury is a good supplier of, for Moreau because although we are talking about the benefit of Harry's three hundred thousand or Moreau's three hundred thousand gallons to us Moreau is jumping on the band wagon with three million gallons being pumped out a day in Queensbury. That is a real cost savings there, you are buying into a program that has three million gallons flowing and that is a neat benefit too that is coming at no cost. So, you can banter back and forth all day about who is getting the real deal here but, to me as the financial officer of the town I really try to focus my attention on what are your cost. Your costs are seventy two point nine cents when Queensbury went out and I am going to take your scenario about selling the plant back and what you can do with that five hundred thousand dollars, Queensbury bought that capacity and they bought it for a reason and I doubt if the reason was to give it away so we could sell more water to lower our rates. I mean it was to sell it, so we could get our money back, because we are selling that at cost too. We are only selling the plant at cost and we are selling the water at cost. The minute you share it and well we are going to give you a benefit back that is a benefit that Queensbury bought and paid for and is not going to see. People have, we paid our cost every nickel of it when we built the plant and every nickel for producing the water and I guess what I am saying is it takes seventy two point nine cents for Moreau to do the same thing. Supervisor Champagne- Well, ok. Ralph is there anything more you wish to add to this? Water Supt. VanDusen-We are just deciding numbers back and forth and it just comes back to the basic question, Queensbury appears that the Board's interest is selling it at cost and until Moreau's is in agreement to pay that cost. Councilman Irish-Actually we would like to sell it for more but when you start at cost it is tough to go up. Water Supt. VanDusen-you can move numbers from colunm a to colunm b to column c but it still has to add up to total cost. . . Councilman Tucker-Henry .. Unknown.. . Controller Hess-No, we are saying cost, we are not charging you that, no where in this formula does it show you paid that, Supervisor Champagne-Go way over to the right hand colunms Controller Hess-..I got the Big Boom, Big Bay is not added into that. . ..1 am not proposing Harry that the board go back and add that ten twenty four cents in I am just showing it is a cost, is a capital expenditure they have to make to get this thing done. Councilman Tucker-The million dollar buy in what is that for that Moreau is buying, what are they buying for a million bucks? Controller Hess-They are buying a million gallons of capacity so they are sure that we they can receive up, they can get a million gallons of water every day. Councilman Tucker-For how long? Controller Hess-For twenty years, actually up to forty, they are buying it for twenty but if they renew their contract the equality relationship stays for another twenty years. So in effect they are buying it for twenty with the right to renew it for another twenty. Councilman Tucker-We sign a contract we get a million bucks from Moreau, what does that Controller Hess- We get half a million Supervisor Champagne-. . . you are wrong when you sign a contract you are going to get Controller Hess-half Councilman Tucker-I know the actual contract, I amjust, ok, we have been tossing things here maybe we will maybe won't, I got a maybe we will and maybe we won't, the million dollars what will that do for Queensbury water rates? You do not know do you. Controller Hess-Well, yea, if you give me time to think about it I might, it is going to reduce debt service and lower the advalorum tax. Councilman Irish-So, the only thing that reduces the production cost is more volume. Councilman Turner-Yes. Councilman Irish-The volume lowers the advalorum tax. Controller Hess-It lowers it in one way or the other, either goes in the bank and we use the interest to pay debt service the board has decisionS to make as to how it is actually used but it does not go against production it goes against the advalorum tax. ..It is guaranteed but here again we can talk about, .. Councilman Irish-It is guaranteed by the way it is written it is over twenty years. Controller Hess-We are tempted to trade that back but the fact is we bought that I mean Queensbury bought that and it has to pay for it and we can't, I do not see that as a benefit that we can offer to give back and off set some of Moreau's costs. Councilman Tucker-I am not interested in giving it back but we have been talking about what the benefits are if we go into the money lending business and do not charge interest for it. Controller Hess-I will tell you what the effect of that is if you say, you asked me a minute ago what the benefit of that, buy in is? It is five cents on the tax rate. That is based on the calculation that Ralph did and supplied to me some time ago. Councilman Tucker-A million dollar buy in would be one twelfth of our total cost of the expansion of the water plant I gather. It is about eleven five or something like that? Supervisor Champagne-You are pretty close. OK. Controller Hess-Is there any interest in, I should really be asking Harry, because I can do these numbers all day long, one of these days I would like to hit the jack pot. Is there any interest in taking this fifteen and twenty five cents off the surcharge and calculating it out on a scale that stops at the cost, to show you what it might look like? Supervisor Guthiel-Are we talking about the one hundred and sixty five and a hundred and seventy.. Controller Hess-What ever it is..we are using that number and I hate to say yes, I am not sure but, what ever that number is, I will spread that out. Supervisor Guthiel-. . . Councilman Merrill- I do not recall saying no interest. Councilman Irish-It was either ..interest or it was a surcharge that would cover the same benefit as the interest, it would amount to the same amount. Supervisor Guthiel-. . . Councilman Irish - I do not believe that that would be fair to the Town of Queensbury in all honesty, I mean we are paying interest on the debt. Supervisor Guthiel. . . Councilman Irish-We are not making any profit. Supervisor Guthiel-But still there are some benefits for you. Councilman Irish-Not if it's costing us money. We are giving you that money and we are still paying five and a quarter percent on it. Supervisor Guthiel-I do not think you borrow that money. Councilman Irish-At one point in time we borrowed to make that money. Controller Hess-Either its borrowed at five and quarter or sits in the bank at five and a quarter. Supervisor Guthiel-.. Controller Hess-But we can borrow a BAN at four and put it in the bank at five and a quarter... .five and a quarter is our cost.. . because that is what we can get on it in a bank. Councilman Tucker-Harry where is your board at right now? Supervisor Guthiel-I cannot speak for them Councilman Irish-Did they know you were coming? Supervisor Guthiel-. . .I want to get it done. . . every month this ticks away. . . the more meetings we have . . . we are going cover the debt service on that million dollars that is worth seven thousand dollars a month to Queensbury that we are going to cover if you are going to save on the O&M that is worth five thousand dollars a month for Queensbury guaranteed because of the three hundred thousand gallons so I am saying time is money. . . when we are talking about one hundred and sixty five thousand dollars. . . six months is half of it right there. .. Supervisor Champagne-Harry I think we have to come to a conclusion here that's given these last two columns on the right hand side, February 98 and March 98 it looks like that is where this Board is going to stand still, is that what I hear you say? He needs to go back to his Board and make that same presentation or Henry and I or all of us, however you want to do it. Controller Hess-That is really one of the benefits of the second tier surcharge, we really get back that nickel and lowered the cost fifty five to fifty but I left that meeting thinking we were going to get our interest charge back, I know Harry feels the opposite way and I am not arguing that his understanding is wrong but I haven't heard the tape but, .. Supervisor Guthiel-I do not even remember the fifteen and twenty five to be quite honest with you,..there was no cap on it and there was over a half a million dollars ... Controller Hess-It started out at twenty five it wasn't fifteen and twenty five, it was twenty five to start out and then we came back later and there was some talk about it and we re-stratified it to fifteen to twenty five and then down to fifteen and that is why I say this is the third time. Supervisor Guthiel-fifteen up... Controller Hess-I am not sure how, that one did come..that one came to you on March 3rd. Councilman Irish-That is the one Larry came up to you one night and he Supervisor Guthiel-. . . no cap and we could have conceivable be paying over five hundred thousand dollars a short fall of one hundred and sixty five thousand. Councilman Irish-No capped that after the 13th. Supervisor Guthiel-that one was not capped... Controller Hess-I think he is right I think that one wasn't.. .but then again a very likely unlikely possibility of us recovering our full costs with interest and I know the interest is where we are coming down, that is exactly where we are, its interest.. ..we are talking interest on a hundred and sixty..the thing is we are not talking on it for one year Harry we are talking about on the possibility we may never get it back and it may take us twenty years to get it, if we do. That is a lot of interest. If you take a loan for a one hundred and sixty five thousand and do not make a principal reduction on it, five and a quarter percent you do not make a principal reduction on it for the first seven years and then start reducing it, lets say at ten percent a year and with interest, your payment is going to be five hundred thousand dollars, it is. I show you an amortization schedule to show that. That is the whole point it is building up for the first year and then you are charging interest in interest and I am only compounding it annually. Supervisor Guthiel-I remember distinctly that night we talked about it and we said can we recover the one hundred and sixty five and said yes and a quarter and in the conversation ..you said no interest, no interest, no interest. Councilman lrish-I think the quarter worked out to be the interest didn't it? When I talked to you the next day you told me the quarter would cover the interest. Controller Hess-Yes the quarter will cover the interest but you will have to carry it out far enough. Councilman Irish-That is where you are coming up with the no interest because we were going to use that quarter surcharge to off set the interest charge. Controller Hess-We were building it in there the quarter is enough to cover the principal and the interest if you carry it out far enough, but when you, when it adds up. Supervisor Guthiel-carry principal and interest then you said no interest in there .. Supervisor Champagne-Well Harry we can go on, we are just arguing and repeating ourselves over and over I think where we are right no is you are saying no interest on the one seventy one we are saying interest, that's the gap, is that what I gather from everybody, that is the gap. Without your board here obviously we could argue that interest from now until tomorrow morning I think the issue right now is that you know, you need to go back to your board and make it very clear I guess, from what I hear this board say is that the twenty five and fifteen will take care of the one seventy one plus five and a quarter percent over twenty years. It will kick in however the amitorization schedule reads I guess is the way we would like to make it presented. Councilman Irish-the other thing you can do is go out and bond it and then you do not have to worry about paying us anything. Then pay. Supervisor Guthiel-Ifwe have to do that we would lose.. Councilman Irish-So, there is a benefit for you to pay us the interest then we can get it done quicker for you. Supervisor Champagne-I guess this is where this board is at. Supervisor Guthiel- Y ou people to not want to put a cap on ... Councilman Irish-We would cap it at what the cost was. Controller Hess-I think we should cap it I am willing to cap it at principal and interest on an amortization but not cap it on principal only. Councilman Irish-Yea, I agree Controller Hess-In fact if you wanted to ban that separately at four something we could put a ban on it and get four percent we could calculate interest at four percent the reason..capital five point two five if you want to arbitrage that we can go out and borrow that separately. Councilman Irish-No, I do not want to borrow any money Controller Hess-Then just charge them the cost ..in effect what we would be doing we would be borrowing the money that Harry doesn't want to borrow. Councilman Irish-If someone is going to be borrowing money it should be the Town of Moreau. Controller Hess-We have the capacity to do that but I am not recommending that I amjust saying, it is still interest, it is four percent instead of five and a quarter. WATER BUY IN BY DEVELOPERS WATER SUPERINTENDENT RALPH VANDUSEN-Discussed a buy in fee by developers for extensions of the water district to address the equity that the water district has established for the treatment plant, transmission lines and storage tanks that are already existing and is partially paid for by the Town. Recommended we establish a buy in fee of one hundred dollars per lot to be collected at the time the subdivision was approved. The town would inspect the piping that the developer proposed to be installed and up size that to meet the needs of the town for the town's master plan for growth, the town paying the difference in cost between the pipe sizes. Noted that has been done in the past... COUNCILMAN MERRILL-Noted Chris Round is looking into developers fees.. . compare to other areas... WATER SUPT. VANDUSEN-Noted Clifton Park impact fees for water...source and storage fee...on residential lot $600. Source and $300. Storage... SUPERVISOR CHAMP AGNE- Will have a resolution ready for next Monday night... on VanDusen's recommendation.. . WATER SUPT. VANDUSEN-Spoke to the Board regarding the development Surrey Fields...the buy in fee would not apply to Surrey Fields because that project was underway. . . will be putting in 12" line at no cost to us. . . Sent a memo to the Board regarding hydraulic model of our distribution system, old system outdated, need a new system, cost approximately eighteen to twenty five thousand dollars ..noted existing computers will be able to be used. . . this would be of assistance in planning for the growth of our system. . . O'Brien and Gere has the basis of the model now. . . they are familiar with our system. . . requesting permission to go for an RFP... . agreed to by the board. 1.3 PURCHASING AGENT COUNCILMAN TUCKER-This was on your wish list, what are the benefits, is everyone going to be players and if they are we should get moving. CONTROLLER HESS-We should work out a purchasing policy, get centralized purchasing policies from neighboring towns. . . SUPERVISOR CHAMPAGNE-Look at purchasing in a bigger picture, not just within the Town of Queensbury but purchasing in a grander scale, with school systems, other towns, with the county. . . spoke about using Tom Schweickert for purchasing. . . requested that Controller Hess, speak to other municipalities ... NEWSLETTER Will be discussed during executive session SUMMER INTERNS Controller Hess-Use College interns to do fixed asset inventory to be updated, revise our reports to the board, year 2000 program updates. . . web site and system update... fuel monitoring system. . . etc. requesting authorization to approach College for an accounting internship and computer internship. . . cost 2,500-3,000 per intership... Board agreed HENRY HESS CONTROLLER POSITION Executive Session NON-UNION SALARIES Executive Session RESOLUTION CALLING FOR EXECUTIVE SESSION RESOLUTION NO. 125, 1998 INTRODUCED BY: Mr. Theodore Turner WHO MOVED FOR ITS ADOPTION SECONDED BY: Mr. Richard Merrill RESOLVED, that the Town Board of the Town of Queensbury hereby moves into Executive Session to discuss Personnel, hiring of person to work on newsletter, controller position and non union salaries, planning department position and litigation on Birdsall Road. Duly adopted this 30th day of March, 1998 by the following vote: AYES: Mr. Merrill, Mr. Turner, Mr. Irish, Mr. Tucker, Mr. Champagne NOES: None ABSENT: None RESOLUTION ADJOURNING EXECUTIVE AND SPECIAL SESSION RESOLUTION NO. 126 1998 INTRODUCED BY: Mr. Douglas Irish WHO MOVED FOR ITS ADOPTION SECONDED BY: Mr. Theodore Turner RESOLVED, that the Town Board of the Town of Queensbury hereby adjourns its Executive Session and Special Session of the Town Board. Duly adopted this 30th day of March, 1998 by the following vote: AYES: Mr. Turner, Mr. Irish, Mr. Tucker, Mr. Merrill, Mr. Champagne NOES: None ABSENT: None Respectfully submitted, Miss Darleen M. Dougher Town Clerk-Queensbury