Thursday, December 14, 2006

Oskaloosa juggling finances on projects

by Kenneth Lassiter

The financial future of two major city projects again was on the mind of Oskaloosa city council members Dec. 7 as the council approved moving forward with one project while the other hangs in limbo for the time being.

Jay Zimmerscheid and Brian Kingsley of BG Consultants, the city’s contracted engineering firm, met with council members to discuss the city hall construction project and the citywide sewer project council members have been discussing in recent months.

Discussion centered first on the city hall project with Zimmerscheid. Council members reviewed bids for the project Nov. 16 and the low bid was from Shirley Construction, which submitted a base bid of $213,500 with a completion date of May 15. Zimmerscheid was to take that bid for review with plans to revisit the issue at the Dec. 7 meeting.

Zimmerscheid said Shirley met the bid specifications and BG had no problem with the city moving forward with the project with Shirley Construction. Council members in November had questioned geological costs for moving dirt at the would-be building site just south of the square along Delaware Street after the new Cotton-O’Neil Clinic on the next lot north has progressed quickly without the need for a lot of change to the base dirt below the building.

Zimmerscheid said he had talked to the geotechnical engineers that recommended the extent of dirt removal and replacement and they did not change their recommendation as to the extent of the work. Zimmerscheid reported the material left in the ground from the previous city hall building being there may have a part to play in the amount of dirt needed to be removed and replaced.

“We want to be careful with the building because the last thing we want is any settlement under there to cause problems in the future with that building,” Zimmerscheid said. “It’s not to say the city couldn’t do something different (than recommended) but at that point, we would want the city to say “Do this instead,” and make it official (so the city takes responsibility for the move). (The geotechnical engineers) are not recommending we consider something different.”

Council members received a schedule of values from Shirley for all the materials that would be used in the project and Zimmerscheid said the city could have several areas in which they could save money. He detailed the different areas in which money could be saved in terms of the trim, plywood, windows, siding and other materials used. Council members took no action on any of the items.

After going through each option, Zimmerscheid asked where the council was in terms of readiness to move forward, as council members were weighing the costs of the hall project against the costs of the needed sewer improvements in town. Council chairman Mike Boyd said the council hadn’t had much discussion on the future of the hall project. Zimmerscheid said if council members decided to delay the project the plans would likely be good for the next couple years but Shirley would want to know soon whether or not the project was going to happen.

City attorney Jan Hayes pointed out the bids were only good for 30 days when submitted in November. That 30-day period for Shirley’s bid expires Dec. 16. Zimmerscheid said after that Shirley could withdraw his bid and move on but many contractors don’t do so because they would rather get the money for the project if it is going to be done at that point. Council members said they would discuss the project and let Shirley know what their intentions are soon.

Discussion then turned to the city sewer project as Kingsley had met with state officials regarding a Kansas Department of Health and Environment low-interest loan for preparatory work for the citywide project. Kingsley said after talking to state officials he found expenditures applying to the city’s lagoon cleaning project would also qualify for a loan without restrictions he thought had applied. Council members voted in November to seek loan funding for the television inspection of sewer lines and engineering costs to prepare for the project but had intended to use lagoon reserve funds to pay for the lagoon work.

Kingsley said since the lagoon costs for sludge removal and the installation of transfer structures can be included in the loan application, it may be smart for the city to go ahead and include them in the loan application and save the sewer reserve funds to help pay for future expenditures for sewer work and help the loan for the bigger-scoped project be more lucrative. Once the engineering report and TV inspection is done, Kingsley said the city would have a better idea of the scope of the large project, which he has estimated in the past to be $3 million or more. He said at that point the city could also break the project into phases as needed to help make it easier to handle financially.

City Clerk Patty Hamm asked how much the city’s sewer rate would likely need to be increased to pay back the loan. The city’s average sewer rate is $12 a month. Kingsley estimated the average sewer rate in the state is between $25 and $28 a month and said the city’s low rate could work against it in procuring the bigger loan for the project when the time comes to apply for that loan. He said for the initial loan for the preparation for the project and the lagoon work, the city would likely be looking at about a $2 rate increase. He said the state likes for cities or counties who apply for the low-interest loans to have about an average sewer rate to be assured reserves are building up to pay for long-term maintenance so future large-scale state loans may not be necessary.

Council members didn’t seem enthusiastic about the prospect of hiking rates by at least double in the future for the project but Bill Heard, city maintenance superintendent, pointed out the city won’t know how big the project will be until the TV inspection and engineering report are completed.

Kingsley said the city should know within 60 to 90 days of applying for the initial smaller loan if they would receive the funds and be able to move forward with the TV inspection and engineering work. Council members voted unanimously to seek $210,000 in loan funds to cover the lagoon costs as well as the TV inspection and engineering costs. The interest rate on the loans is less than 3 percent.

Council members didn’t revisit the city hall issue later in the meeting but plan to revisit the issue at the Dec. 21 meeting. Before leaving the meeting, Kingsley pointed out the city could find a way to finance both projects as neither will be paid back out of the same fund. The council had budgeted for the hall project in 2007 but hadn’t planned for the sewer project.

In other business Dec. 7, the council:

• Approved cereal malt beverage licenses for Casey’s General Store, Metzger’s Bear Essentials, Oskaloosa Thriftway and Golden Pizza pending inspections.

• Approved an ordinance setting the city basic fire district limits as the city limits.

• Dedicated a piece of real estate as an alley.

• The council’s next meeting will take place at 7 p.m. Dec. 21 at the fire station on the west edge of town along Jefferson Street. A budget amendment hearing is scheduled to take place at that meeting.