HomeMy WebLinkAbout2014-11-24 City Council Minutes Approved City Council Study Session Minutes— November 24, 2014
At approximately 7:00 p.m. Mayor Laurie Gere called the Anacortes City Council study session of
November 24, 2014 to order. Roll call found present City Councilmembers Eric Johnson, Ryan Walters,
Erica Pickett, Brad Adams, Liz Lovelett and Matt Miller. John Archibald was absent.
Mayor Gere reversed the published order of the evening's agenda items to accommodate the guest
speakers.
Public Fiber Optic-based Broadband Network Discussion
Public Works Director Fred Buckenmeyer advised that since the last study session presentation on this
topic staff had met with members of the community to work on a proposal for establishing such a network.
He introduced Wayne Huseby, Bruce McDougall and Pam Allen to elaborate on the proposal.
Wayne Huseby, 3318 W 2nd Street, Community Advisory Committee member, introduced the topic by
explaining that municipal infrastructure now includes high speed fiber broadband networks in addition to
traditional services such as water, sewer, storm, streets, and electricity. He addressed what it takes to
become a tech and fiber friendly community: formal recognition of broadband as a strategic public asset,
creating a municipal broadband strategic plan, aligning public policies to foster implementation, and
arriving at broadband services characterized by very high speed symmetrical transmission, reliability,
affordability, widespread availability, and short provisioning cycles. Mr. Huseby addressed investment
challenges for private telecom firms that prevent or discourage free market response to achieve that type
of service in communities the size of Anacortes. He shared the results of municipal broadband networks
established in other cities in the nation including dramatic improvement in price and performance,
reduced rates by incumbent service providers, telecommunications dollars being spent locally, attraction
of outside business, and a 1-2% increase in GDP.
Mr. Huseby said his group recommended that the City issue an RFP to conduct an in depth feasibility
study with the objective of evaluating various business model options that could be used to deploy and
operate a fiber-based municipal broadband network capable of meeting current and future requirements.
The results of such a study would form the basis for an Anacortes strategic broadband plan. He outlined
the desired elements of a feasibility study. He then shared a number of frequently asked questions
including why fiber is preferable to WIFI, the unlikelihood of fiber becoming obsolete, and why current
providers' offerings are not sufficient.
Bruce McDougal, 4404 Orchard Avenue, Community Advisory Committee member, shared a map of
Wave Cable's local fiber network as of October 2014, described the vulnerability of that network and
discussed with Council the need to and means of building redundancy into a fiber network.
Ms. Pickett inquired if municipal fiber networks are run as public utilities because they aren't profitable.
Mr. Huseby and Mr. McDougall explained that the rate of return on investment does not typically meet the
demand of private shareholders. Mr. McDougall added that a feasibility study should cover the spectrum
of operating models ranging from doing nothing to establishing a fully city-owned utility and a series of
options in between. Mr. Johnson observed that private companies are more concerned about their return
to investors whereas a municipally owned network is concerned about return to the entire City of
Anacortes.
Pam Allen, 14533 Jura Place, spoke in favor of prepositioning fiber in conjunction with where the city
plans to encourage commercial development, resulting in a business-friendly environment that will attract
economic growth.
Mr. Miller observed that fiber is available in Anacortes now but is not accessible affordably to businesses
that need it. He agreed on the need for redundancy to ensure reliability. Ms. Lovelett suggested that
affordable high-speed internet can help attract both small businesses and high tech businesses. She
supported Anacortes being ahead of the curve and facilitating such growth. Mr. Walters asked what the
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proposed RFP might cost. Mr. Huseby advised that Missoula, Montana recently engaged a consultant for
a similar study and paid approximately$50,000 for it. Mr. Adams asked how much economic impact such
a utility would have on the city and the potential payback in terms of economic development.
Mayor Gere said this was a very appropriate time to go in this direction as Anacortes plans its vision for
the next 20 years. The mayor said broadband fiber is basic infrastructure for the future and an economic
driver. She thanked the presenters for their extensive efforts.
Mr. Walters said more and more businesses will move to Mount Vernon and Burlington which are
expanding their broadband network. He urged investing at the same scale but faster than neighboring
cities to remain competitive. Ms. Allen said a fiber optic-based broadband network is a tool that allows
towns to retain a small town feel and soft footprint but still communicate with and compete in the world
economy.
Mr. Buckenmeyer suggested that staff prepare and issue an RFP for a feasibility study, then bring the
proposals back to Council for consideration. He reminded that the study, if Council decided to pursue it
based on the proposals received, would need a budget amendment. Councilmembers concurred.
Water Utility: Three Million Gallon Tank Construction and Funding Discussion
Public Works Director Fred Buckenmeyer distributed hard copy of his PowerPoint presentation on this
subject and advised that the Public Works Committee had met earlier in the evening to discuss the topic.
He summarized the water system, how the proposed project at the 3MG tank on Whistle Lake Road fits
into the system, the project cost, funding alternatives, some additional water system capital projects, and
closed with a funding recommendation.
Mr. Buckenmeyer noted that the tank's high elevation allows it to feed the city network as well as backfeed
the regional system in emergencies. He described the corrosion problems that have accumulated since the
tank was installed in the 1970s and were reported in 2011 by Gray and Osborne following inspection. He
described the sequence of work to repair the tank, estimated to take 5-6 months, and said the tank cannot
be out of service for that length of time so the proposed alternative is to first build a new 1MG tank on the
same site to stand in for the 3MG tank while it is being refurbished and then provide both redundancy and
additional emergency backup water after the 3MG tank is back in service. He noted that the cost of that
alternative was actually less than to build a new 3MG tank and demolish the existing 3MG tank and added
that the Department of Health requires the system to maintain 3MG of storage for ongoing operations. The
total project cost was estimated to be just under$4.2M.
Mr. Buckenmeyer then reviewed funding alternatives including a Drinking Water State Revolving Fund
(DWSRF) Loan for 20 years at 1.5%; a 20-year bond at 4%; and a 5-year interfund loan at 1.5%. He
cautioned that award of DWSRF Loan is not guaranteed. He said that the least expensive option overall is
the interfund loan, with an annual payment of$724,583 and total interest of$143,174, all of the interest
coming back to the city. In response to a question from Ms. Pickett, Mr. Buckenmeyer and Finance
Director Steve Hoglund explained the constraints on and benefits of the interfund loan which would benefit
all city funds that currently have cash reserves invested in the LGIP. Mr. Miller asked how the interest rate
is set for an interfund loan; Mr. Hoglund explained the "reasonable" rate required, noted that the 5-year
treasury rate is about 1.5% and said that would satisfy the requirements.
Mr. Adams observed that a 5-year vs. a 20-year payback would have a large effect on monthly water bills.
Mr. Buckenmeyer agreed that as with any loan, the longer the term, the lower the monthly payments but
the more interest cost overall. He discussed the relative advantages of the presented funding scenarios in
more detail.
Mr. Buckenmeyer then advised that other capital facilities projects identified in the recently adopted 2015-
2020 Capital Facilities Plan would require an additional $103,000 per year not included in the current rates,
which were prepared in 2010 based on the 2011-2016 CFP.
Mr. Buckenmeyer concluded with the staff recommendation: funding the 3MG tank project with an interfund
loan and implementing a Capital Facility Rate Surcharge of$7/MEQ/month for the tank project and another
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$1/MEQ/month for the other capital projects for a total surcharge of$8/MEQ/month for the seven years
2015-2017. He explained MEQ (meter equivalency)which is greater depending on meter size and added
that commercial accounts have MEQ 1.5 times greater than the same size residential meters.
Ms. Lovelett observed that the surcharge would likely stay in place for longer than seven years in order to
fund future required water system improvements. Mr. Buckenmeyer said the surcharge would ideally begin
January 1, 2015 but the interfund loan would begin two years later and pay off 2017-2021. He said the City
could perform the design portion of the project with the surcharge funds and then use the interfund loan for
the construction phase. Mr. Buckenmeyer closed with a comparison of Anacortes water rates to the rates
in surrounding cities and showed that even with the proposed $8/MEQ/month surcharge Anacortes would
still have the lowest water rates in the region. He also compared the price of Anacortes water to bottled
water. He reminded that water rates had not increased since the 1990s until the 2011 increase for the
Water Treatment Plant Improvement Project. He suggested that the next steps would be enacting the
surcharge to go into effect January 1, 2015, authorizing the interfund loan for January 2017, and beginning
preliminary design of the 1 MG tank so it could be constructed in 2017.
Councilmembers requested more information, public input and discussion regarding other potential funding
scenarios, including a 10-year bond rather than a 20-year bond, a longer term interfund loan, a shorter
term public loan, using a combination of bonds and an interfund loan, structuring the surcharge to
incentivize water conservation, and structuring the surcharge to build a capital reserve for future projects
up to 20 years out. Mr. Walters also asked how much cash reserve is available for an interfund loan.
Mr. Buckenmeyer addressed questions from councilmembers and Mayor Gere explaining the necessity of
the 3MG tank project.
Mayor Gere said it had become apparent that the City needs to be serious about funding infrastructure
moving forward and building reserves to address immediate and long term infrastructure needs. She
observed that Anacortes had been conservative in the past and had endured some lean years so now had
some catch up to do. Mayor Gere said staff would get Council the information it needed to make good
decisions. Councilmembers spoke about the need to educate the public on the necessity of funding
infrastructure. Several councilmembers said commercial ratepayers should not bear an undue share of
the burden. Mr. Walters urged a 20-year forecast of infrastructure needs that could be shared with the
public to explain the funding required.
There being no further business, at approximately 8:41 p.m. the Anacortes City Council study session of
November 24, 2014 adjourned.
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