Dubuque Metropolitan Area Solid Waste Agency Financing Plan Copyright 2014
City of Dubuque Consent Items # 9.
ITEM TITLE: Dubuque Metropolitan Area Solid Waste Agency
(DMASWA) Financing Plan
SUMMARY: City Manager recommending City Council authorization for
the Dubuque Metropolitan Area Solid Waste Agency to
borrow money and endorse the financing plan for its Cell #9
Phase III Construction Project.
RESOLUTION Consenting to Financing Plan for Dubuque
Metropolitan Area Waste Authority
SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Adopt
Resolution(s)
ATTACHMENTS:
Description Type
DMASWA Financing Plan-MVM Memo City Manager Memo
DMASWA Financing Plan Staff Memo Staff Memo
DA Davidson Recommendation Memo Supporting Documentation
Construction Estimate Supporting Documentation
Resolution Resolutions
Minutes to Adopt Resolution Form Supporting Documentation
THE CITY OF Dubuque
DUB E i"
Masterpiece on the Mississippi 2007.2012.2013
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Endorsement of Dubuque Metropolitan Area Solid Waste Agency
Financing Plan
DATE: November 14, 2016
Public Works Director John Klostermann recommends City Council authorization for the
Dubuque Metropolitan Area Solid Waste Agency to borrow money and endorse the
financing plan for its Cell #9 Phase III Construction Project, with an estimated project
cost of$5,005,040.
After evaluating all the options available, the recommended plan is to fund the Cell #9
Phase III construction project through G.O. bonds backed by the County. G.O. bonds
were selected over solid waste revenue bonds for the Cell #9 Phase III construction
project because of the lower interest rate available and the lower risk to the buyers.
This option will, however, impact the debt capacity of the sponsoring organization.
During discussions with City and County representatives, the County was identified as
having greater debt capacity than the City. If approved by the Board of Supervisors, the
G.O. bond debt would be carried by the County, and the Agency would make payments
to it.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Mic ael C. Van Milligen
MCVM:jh
Attachment
cc: Wayne Demmer, Dubuque County Supervisor
Daryl Klein, Dubuque County Supervisor
Jay Wickham, Dubuque County Supervisor
Crenna Brumwell, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
John Klostermann, Public Works Director
John Foster, DMASWA Administrator
2
Dubuque
THE CITY OF bAd
AII-Ame�icaCRY
Masterpiece on the Mississippi 2007 2012•20=3
TO: Michael C. Van Milligen, City Manager
I
FROM: John Klostermann, Public Works Director
SUBJECT: Endorsement of DMASWA Financing Plan
DATE: November 14, 2016
INTRODUCTION
The purposes of this memorandum are to provide information and request the City
Council's authorization for the Dubuque Metropolitan Area Solid Waste Agency
(DMASWA) to borrow money and endorse the financing plan for its Cell #9 Phase III
Construction project.
BACKGROUND
The Dubuque Metropolitan Area Solid Waste Agency is an intergovernmental agency
formed under Iowa Chapter 28E. The agreement entered into by the City and County of
Dubuque in 1975 is to manage the solid waste needs for Dubuque County. The
DMASWA now requires a significant upfront investment for the Cell #9 Phase III
Construction Project. To fully identify and evaluate its project financing options, the
DMASWA hired a financial advisory firm to assist staff in this decision. The engineer's
estimate for the project is $5,005,040. The engineer's estimate from AECOM is
attached.
DISCUSSION
D.A. Davidson was retained by the DMASWA Board of Directors, with approval from
City of Dubuque City Council and the Dubuque County Board of Supervisors. D.A.
Davidson confirmed that 28E organizations have the authority to borrow monies under
Iowa Code Chapter 28F.3 only with the permission of the governmental bodies entered
into the agreement. This restriction is also stated in the Agency's 28E agreement.
Borrowing and revenue bonds are the two generally-accepted methods to secure j
needed funding by 28E agencies. General obligation (GO) bonding is only available to
the Agency through a governmental body with taxing authority. The Agency's goal is to
secure project financing at the lowest cost without overexposure to the DMASWA and
its two owner-partners, the City and County of Dubuque.
i
t
After evaluating all the options available, the recommended plan is to fund the cell #9
Phase III construction project through G.O. bonds backed by the County. G.O. bonds
were selected over solid waste revenue bonds for the Cell #9 Phase III construction
project because of the lower interest rate available and the lower risk to the buyers.
This option will, however, impact the debt capacity of the sponsoring organization.
During discussions with City and County representatives, the County was identified as
having greater debt capacity than the City. If approved by the Board of Supervisors, the
G.O. bond debt would be carried by the County, and the Agency would make payments
to it. Attached is D.A. Davidson's memorandum outlining its recommendation and
proposed borrowing schedule.
To move forward under 28F.3, the DMASWA requires authorization to borrow monies
from the Dubuque County Board of Supervisors and the Dubuque City Council. Council
affirmation will be through approval of the attached resolution. This resolution was
prepared by the Agency's bond counsel, Dorsey and Whitney LLP, and reviewed and
approved by Senior Council Barry Lindahl. The Board of Supervisors gave approval at
its November 14th meeting. If approved by the City Council at its November 21 st
meeting, the DMASWA will then proceed to solicit a not to exceed amount of
$5,300,000 through the G.O. bonding process with the County for the cell #9 Phase III
project.
ACTION STEP
The attached resolution authorizing the DMASWA to borrow monies and endorsing its
financing plan is submitted for your consideration and subsequent approval by the City
Council.
CC: Crenna Brumwell, City Attorney
Barry Lindahl, Senior Council
Jennifer Larson, Budget Director
John Foster, DMASWA Administrator
Attachment
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D A DAVIDSON
Memorandum
To: John Foster,Solid Waste Agency Administrator, Dubuque Metropolitan Area Solid Waste Agency
Dubuque Metropolitan Area Solid Waste Agency Board
Denise Dolan, Dubuque County Auditor
Dubuque County Board of Supervisors
From: Michael Maloney,Senior Vice President—D.A. Davidson &Co.
Telephone: 515.471.2723 Email: mmalonev@dadco.com
Nathan Summers,Vice President-D.A. Davidson &Co.
Telephone:515.471.2722 Email: nsummers@dadco.com
Date: Thursday, November 3rd, 2016
Re: Recommended Financing Plan for Dubuque Metropolitan Area Solid Waste Agency Capital Needs
The purpose of this correspondence is to summarize Davidson's recommended financing plan for the
Dubuque Metropolitan Area Solid Waste Agency. Capital needs for the Agency include the cell 9 phase
III project. The total capital project costs identified total$5.0 million, which covers construction and
engineering only. Bond issuance costs would need to be added to this amount.The Agency plans to
secure financing by the end of 2016 to allow for bids in early 2017. The Agency will repay any debt
associated with these capital projects solely from landfill operations revenue.
A general obligation bond is a common type of municipal bond that is secured by a state or local
government's pledge to use legally available property tax revenues to repay bond holders.
Municipalities such as cities, counties or school districts may have the authority to issue general
obligation debt for certain project financing, but other projects may require a public vote (referendum)
for the authority to borrow. General obligation bonds are the lowest cost financing option. This type of j
debt is well received and understood by the municipal market. The property tax pledge for repayment is
the strongest security pledge available in the municipal bond market,though the debt may be repaid
from alternative sources.
Alternatively, revenue bonds solely pledge revenues generated by a specified revenue-generating entity
associated with the purpose of the bonds, rather than from a tax. Unlike general obligation bonds, only
the revenues specified (typically water or sewer revenues) are required to be used for repayment of the
principal and interest of the bonds. Because the pledge of security is not as strong as that of general
obligation bonds, revenue bonds typically carry a higher interest rate than G.O. bonds.
In terms of financing options,the Agency does not have the authority to issue General Obligation debt,
and could only directly issue solid waste revenue bonds. This financing would be secured solely by the
net revenues of the Agency and would likely also require funding of a debt service reserve fund
(increasing the borrowing amount). The rating for this financing would have a best-case outcome in the
'A' category, but there would be some uncertainty as a first time rating for the Agency. This type of
financing is also less common than general obligation bonds or even the more typical water or sewer
revenue bonds, so the cost of borrowing(interest rate) would be greater for this type of transaction.
Revenue bonds would also require a net revenue pledge of the Agency that would require Agency net
revenues (operating revenues less operating expenses)to equal a minimum of$1.20 for each $1.00 of
annual debt payments. The Agency would be legally required to set rates and charges sufficient to meet
this test on any projected debt prior to being able to issue revenue bonds. Based on the FY 2015
audited financial performance, that means the Agency would need to increase rates and charges
immediately to be able to proceed this with financing. This would run contrary to the Agency's current
plan to monitor rates as it focuses on increasing tonnage, in an effort to minimize cost impact.
Des Moines Office
515 East Locust Street,Suite 200 1 Des Moines,Iowa 50309 1 515.471.2700 1 800.642.5082 1 FAX 515.471.2702
davidsoncompanies.com/ficm
Alternatively,the City or County can act as a conduit issuer of General Obligation debt on the Agency's
behalf. A General Obligation bond would provide a financing that will be well received and understood
my municipal market investors. General Obligation bonds would be the lowest cost financing option,
and can take advantage of either City or County's general obligation authority(each enjoys a 'AA'
category credit rating). However,the financing options may be limited by City or County borrowing
plans (including annual bank-qualified status and debt capacity considerations).
For example,the County currently has$379 million of G.O. debt capacity, so the proposed Agency
financing would have a limited impact. Additionally,the debt would be fully repaid from Agency
revenues through a sharing agreement as in 2014. Therefore the County pledge would only be used as a
credit enhancement, with no direct cost to acting as conduit.
i
While the City could potentially act as a conduit,they are currently at 85.73%of their legal debt capacity
limit (the State Code limits municipalities to General Obligation debt of no greater than 5%of actual
valuation). This 85% level is a common maximum threshold for municipalities to institute either as a
matter of policy or to meet rating agency guidance. In the recent low interest rate environment,the
City had been increasing the use of debt to accomplish the projects that needed to be done. However,
beginning in FY 2016,the City Council adopted a policy of debt reduction as a High Priority. The City's 5-
year CIP has been set and was assembled to meet this policy. The Agency's project is not identified as
part of the City's 5-year CIP.
In 2014,the County,Agency and City reviewed potential financing options and established the plan for
the County to act as the conduit issuer for General Obligation debt on the Agency's behalf. This was
agreed to for three reasons. First,the County had capacity both in terms of the 5% legal debt limit as
well as the small-issuer tax benefit for issuing less than $10 million in a calendar year. Second,the
ability to issue the bonds through the County as bank-qualified meant that this option is the lowest cost
financing option available for the Agency. Third and finally,the Agency and County agreed upon a
revenue sharing agreement that established a legal framework for the Agency to pay the County's debt
payments in full (plus an annual administrative reimbursement fee).
Davidson recommends that the Agency pursue financing via General Obligation Bonds issued by
Dubuque County as it is the lowest cost financing option (see attached Exhibit 1 for summary
comparison). The Agency and County would sign a disbursement agreement that states that the Agency
would use landfill operations revenues to repay the County forsemi-annualdebt service payments. All
County costs related to the proposed General Obligation Bonds will be reimbursed by the Agency. The
County General Obligation Bonds would be tax-exempt, bank-qualified obligations, providing the lowest
cost of financing as the debt would be secured by the ad valorem property tax pledge of the County
(although the debt would be repaid solely from the Agency's revenues), j
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Budgetary Estimate
Cell 9, Phase 111 10 Acre Footprint AXON!
Dubuque, IA
Dubuque Metropolitan Area Solid Waste Agency
AECOM Project No: 60313201
Monday,August 29, 2016
BUDGETARY
ESTIMATE
DESIGN AND BIDDING $ 105,000,00
CONSTRUCTION RELATED SERVICES $ 280,000,00
ENGINEERING TOTAL $ 385,000.00
Item Description Unit EQuanttimasityted Unit Price Total Price
Call9,Phase 11110 Acre Feolprinl
BASE PROJECT
1 MOBILIZATION LS 1.0 $ 200,000.00 $ 200,000,00
2 CLEARING AND GRUBBING AC 9.9 $ 3,500.00 $ 34650,00
3 SITE PREPARATION AC 9.9 $ 2,500.00 $ 24,750.00
4 SOURCE TESTING-COA PROGRAM LS 1.0 $ 3,000.00 $ 31000.00
5 TOPSOIL STRIP AND STOCKPILE CY 7,952.8
$ 2J5 $ 21,87020
6 HAUL AND PLACE TOPSOIL CY 532.4 $ 3.50 $ 1,863.40
7 COMMON EXCAVATION.CLASS 10 CY 234,949.0 $ 275 $ 646,109,75
8 HAUL AND PLACE STOCKPILE CY 180,397.0 $ 2.50 $ 450,992.50
9 HAUL AND PLACE GW SUBGRADE CY 14,788.3 $ 4.50 $ 66,547,35
10 HAUL AND PLACE-EARTH SARRI ER CY 7,952.8 $ 6.00 $ 47,716,80 i
11 HAUL AND PLACE-CLAY BARRIER CY 31,810.9 $ 6.00 $ 190,86540
12 COARS E AGO RECAPS-GW TRENCH CY 650,0 $ 35.00 $ 22,750.00
13 COPPS E AGGREGATE-LEACHATE TRENCH CY 1,733.4 $ 100,00 $ 173,340.00
14 GEOCDMPOSITE SY 47716.4 $ 8,00 $ 381,731.20
15 60-MI L WHITE TEXTURED HOPE LIN ER SY 47,716,4 $ 525 $ 250,511.10
16 8 O GEOTEXTILE SY 46,800.0 $ 4.00 $ 107,200.00
17 32-OZ CUSHION GEOTEXTILE SY 47,716.4 $ 800 $ 301,731.20
18 TIRE DERIVED AGGREGATE-HAUL AND PLACE CY 44773.9 $ '3.50 $ 156,708.65
19 12-IN HOPE OR 11 PERFORATED PIPE LF 5,850,0 $ 35.00 $ 204,750.00
20 FERTILIZING,SEEDING TYPE 2&MULCHING AC 07 $ 1,500.00 $ 11050.00
21 SILT FENCE INSTALLATION AND CLEANING LF 1,200.0 $ 2,50 $ 31000.00
CONSTRUCTION SUBTOTAL $ 3,451,137.55
CONSTRUCTION CONTINGENCY 10% $ 345,113,76
TI RE DERIVED AGGREGATE.OWNER SUPPLIED ITEM TN 12,962.9 $ 40.00 $ 518,517.60
PROJECT TOTAL $ 4,314,768.91
OPTIONAL WORK
22 12-IN SUBGRADE STABILIZATION�OPTIONAL SV 1 6,044.5 1$ 20,00 $ 120890.00
23 6-IN THICK CLASS A CRUSHED ROAD STONE-OPTIONAL SV 6,044,5 $ 10,00 $ 60,445.00
24 6-IN ROAD STONE STABILIZATION SV 6,044,5 $ 1200, $ 72,53400
25 8-FT CHAIN-LINK FENCE-OPTIONAL LF 1,175.0 $ 18,00 $ 21.150.00
26 4-FT CHAIN-LINK PASSAGE GATE-OPTIONAL LF 5.0 $ 500,00 $ 2,500.00
CONSTRUCTION SUBTOTAL 3 277,519.00
CONSTRUCTION CONTINGENCY 10% $ 27,751.90
OPTIONAL WORK TOTAL $ 305,270.90
ENGINEERING TOTAL $ 385,000.00
BASE PROJECT $ 4,314,768.91
OPTIONAL WORK $ 305,270.90
PROJECT TOTAL $ 51005,039.81
DMAS WA/498519-21/City Consent
RESOLUTION NO. 390-16
RESOLUTION CONSENTING TO FINANCING PLAN FOR DUBUQUE METROPOLITAN
AREA WASTE AUTHORITY
WHEREAS, the Board of Supervisors of Dubuque County, Iowa (the "County") and the City
Council (the "Council") of the City of Dubuque, Iowa (the "City") have authorized and executed a
certain Intergovernmental Agreement Creating the Dubuque Metropolitan Area Solid Waste Agency (the
"28E Agreement") pursuant to Chapter 28E of the Code of Iowa; and
WHEREAS, the terms of the 28E Agreement provide for the creation of the Dubuque
Metropolitan Area Solid Waste Agency (the "Agency") for the purposes of providing for the economic
transport, processing, and disposal of all solid waste produced within .the metropolitan area of the
Agency; and
WHEREAS, the Agency has authority pursuant to the 28E Agreement and Chapter 28F of the
Code of Iowa to issue revenue bonds and interim financing notes to pay the costs of projects undertaken
by the Agency; and
WHEREAS, the Agency has proposed to undertake the construction of landfill facilities
improvements, including the Cell 9 Phase III Project, improvements to the landfill maintenance facility
and other capital improvement needs for the landfill (the "Projects"); and
WHEREAS, D.A. Davidson, the Agency's Financial Advisor (the "Financial Advisor"), has
prepared a financing plan (the "Financing Plan") for the funding of the Project; and
WHEREAS, the Financing Plan includes: (1) the issuance by the County of General Obligation
Landfill Facility Bonds (the "General Obligation Bonds") in a principal amount not to exceed
$5,300,000; and (2) the execution of a revenue disbursement agreement (the "Revenue Agreement")
between the Agency and the County covering revenue payments by the Agency to the County in an
amount equal to the principal and interest to be paid on the General Obligation Bonds, plus reasonable
administrative fees to compensate the County for its issuance and maintenance of those Bonds; and
WHEREAS, it is now necessary for the Council to take action to approve the Financing Plan, the
issuance of the General Obligation Bonds and the execution of the Revenue Agreement;
NOW, THEREFORE, It Is Hereby Resolved by the City Council of the City of Dubuque, Iowa,
as follows:
Section 1. The City hereby approves the undertaking of the Project and the Financing Plan as
prepared and presented by the Financial Advisor.
Section 2. The County's issuance of the General Obligation Bonds, as described in the
Financing Plan and the preamble hereof, is hereby acknowledged and approved.
Section 3. The execution by the Agency of the Revenue Agreement, as described in the
Financing Plan and the preamble hereof, is hereby approved pursuant to Chapter 28F of the Code of
Iowa. The Agency's fulfillment of its payment obligations to the County under the Revenue Agreement
is here by approved.
DORSEY & WHITNEY LLP, ATTORNEYS, DES MOINES, IOWA
-2-
DMAS WA/498519-21/City Consent
Section 4. All resolutions or parts thereof in conflict herewith be and the same are hereby
repealed to the extent of such conflict.
Passed and approved November 21, 2016.
CITY OF DUB ,v QUE, IOWA
By
0,- Le
Roy D. Burr Mayor
Attest:
DORSEY & WHITNEY LLP, ATTORNEYS, DES MOINES, IOWA
-3-
DMASWA/498519-21/City Consent
MINUTES TO ADOPT RESOLUTION
CONSENTING TO FINANCING PLAN OF
DUBUQUE METROPOLITAN AREA SOLID
WASTE AUTHORITY
Dubuque, Iowa
November 21, 2016
The City Council of the City of Dubuque, Iowa, met on November 21, 2016, at 6:00 o'clock
p.m., at the Historic Federal Building, 350 W. 6th Street, in the City. The Mayor presided and the roll
was called showing the following Council Members present and absent:
Present: Joyce Connors, Luis Del Toro, Ric Jones, Kevin Lynch, David Resnick, Jake Rios
Absent:
• • Other Business • •
Council Member Lynch introduced a resolution hereinafter next set out and
moved its adoption, seconded by Council Member Connors ; and after due consideration
thereof by the Council, the Mayor put the question upon the adoption of the said resolution and the roll
being called, the following named Council Members voted:
Ayes: Connors, Rios, Buol,Lynch, Resnick, Jones
Nays: Del Toro
Whereupon, the Mayor declared the resolution duly adopted as follows:
• • Other Business • •
On motion and vote the meeting adjourned.
Attest:
Kev Firnstahl, City
Roy D. Bu , Mayor
DORSEY & WHITNEY LLP, ATTORNEYS, DES MOINES, IOWA
-1-
DUBUQUE MASWA
FINANCING COMPARISON SUMMARY
EXHIBIT 1
Projectedi
merest`=
hating Bate (TIC} .:
Scenario:':
Projected
TotalNet
Debt Service 2
Debt Service
Comparison
vs. #1
1 General Obligation Bonds (County)
2 General Obligation Bonds (City)
3 Solid Waste Revenue Bonds 2
Aa2
Aa3
°A' (TBD)
2.39%
3.01%
3.35%
Notes:
1) All scenarios are structured with a 20 -year term and assume $5
2) Solid Waste Revenue Bonds require Debt Service Reserve fund.
I).\ D#VlDSO
$6,395,150
$6,761,321
$7,113,665
million project cost
Value is net of reserve.
n.a.
$366,171
$718,515
Page 1 of 1 Date: 11/3/2016