June 26
CITY OF HIAWATHA
CITY COMMISSION MINUTES
MONDAY, JUNE 26, 2006
5:35 P.M.
HIAWATHA CITY HALL
723 OREGON ST.
1. Pledge of Allegiance/ Call to Order
The Hiawatha City Commission met in regular session Monday, June 26, at 5:35 p.m. with Mayor Gernon, Commissioner Schmitt, Commissioner Collins, and Commissioner Gamble. Commissioner Shamburg was absent.
2. Approval of minutes of the June 19, 2006 City Commission meeting.
Commissioner Collins made a motion, seconded by Commissioner Gamble to approve the minutes of the June 19, 2006 City Commission meeting. Motion carried, 4 ayes.
3. Presentation of petitions, public comments, memorials.
a. Don Koontz dba Don’s Do It Best Hardware Request for Loading Zone.
Mayor Gernon presented Don Koontz, who explained his situation. He said that he needed a place where he could load appliances that he had sold, and that he could get by with one parking place being marked off as a loading zone.
Mayor Gernon asked him how many times a week this would be necessary.
Koontz replied that on an average he sold about six appliances a week.
Commissioner Gamble asked him why he could not load these out of his back door.
Koontz explained that his back door is raised about 12 inches and drops about 12 inches. Also there is a very old elevator platform that may not be safe to carry the weight.
Commissioner Collins asked how much time it takes to load these appliances, if they could put a time limit on the parking place.
Koontz replied that he needed a spot available at all times because if someone is parked out front he cannot load until the vehicle gets moved. There is no particular time of day that people want to get their appliances.
Mayor Gernon explained that there is an ordinance about loading and unloading which allows a two hour span.
Koontz explained that he has been having to wheel the appliances all the way down the street, between vehicles, etc. to get them to the purchaser’s vehicle.
Dennis Hartter suggested that they mark off a space to the corner east of the business, otherwise they would be cutting down the parking spaces on Oregon Street.
Commissioner Schmitt asked Koontz if he had checked with other small towns to see how they have handled these situations. He replied that he had not.
Commissioner Collins asked him if there was any feasible way of using the back door using a ramp or something.
Koontz did not feel that this was a solution.
Mayor Gernon asked Koontz if he would be willing to try using some orange cones to mark off the space in front of his store.
Dennis Hartter said that another suggestion would be to put up a sign limiting the parking to 15 minutes to one-half hour, so that they would not be able to park there for very long.
Commissioner Gamble asked him how cumbersome it would be to build a ramp in the back of the building.
Koontz replied that another reason that he didn’t want to load out of the back of the store was that he was there by himself much of the time, and that if he had to go to the back of the store, it left the front open with no one to watch the store.
Commissioner Schmitt thought that he should try the cone usage for now, that he could get a couple of cones from the city.
Koontz agreed to try this to see if it would work out.
b. Hiawatha Jayhawkers 4-H Club Community Service Proposal.
Mayor Gernon introduced the speaker from the Hiawatha Jayhawkers 4-H club, who presented a folder with the project information to the Mayor.
The Club indicated that they wanted to paint the benches and install a swing for young children.
Rebecca Schmidtberger, a Club leader, asked if there was a certain kind of paint that was required, or a certain type of swing.
Mayor Gernon directed her to get in touch with Dennis Hartter, Streets and Parks Supervisor, for specifications on the project.
Commissioner Gamble expressed his appreciation for their desire to help the community.
Old Business
4. Koch & Co. Resolution of Intent.
Mayor Gernon asked Interim Administrator Tom Armour if he had been in contact with City Attorney Kevin Hill about the resolution.
Armour replied that Kevin Hill had approved it.
Commissioner Schmitt commented on the 10 year 100% tax abatement which Koch & Co. was asking for and suggested that Koch & Co. be required to have a certain number of employees with a certain dollar amount in order to get this tax abatement.
Jeff Conner, Koch & Co., replied that he felt at this time they could not make any promises as to how many employees would be on the payroll. He explained that a cost benefit analysis would have to be done first and that it would show whether or not they could get the tax abatement. The resolution would need to be passed before the cost benefit analysis could be done.
Conner said that their average wage is around $9.60 for someone who has been there 6 to 12 months. From one to five years, they would have about a $2.00 to $5.00 increase. They offer health insurance, short and long term disability insurance, 401-K with 25% matching funds and attendance bonuses
Commissioner Collins asked Conner what his projection was for Hiawatha.
Mr. Conner explained that they were about two to three months from going into their Lowe’s plan. They plan to assemble the Frontenac doors at the Hiawatha plant.
Mayor Gernon pointed out that an IRB bond does not impact the city’s indebtedness. He said that the tax revenue for the city of Hiawatha was $6859.86 in 2005 on this building. At this point the commitment from the city’s standpoint is very minimal, in comparison to what it has done for other companies. He wondered if there could be a clause put in the agreement about the jobs.
Commissioner Schmitt would like to see in black and white how many employees they would start out with and their expectations of how many they could increase as well as what the wage amounts would be.
Conner explained that in the past with the Seneca plant they had surpassed the required job amount and would hope they could do the same with the Hiawatha plant. They would have to pay a competitive wage, otherwise they could not get good employees.
Commissioner Schmitt asked if he was open to establishing a set number of employees and a set amount of wages.
Conner said ten employees the first year, and an additional five every three or four years. He said that if the plant did not succeed well enough to have 30 to 40 employees within a five year time period, they would probably not stay open.
Commissioner Schmitt asked him if he would be willing to say a beginning of ten employees and add two each year at a minimum of $8.50 per hour.
Conner said that he wanted to say an average of $8.50 per hour, because they do hire some special needs employees at a lower wage schedule. He agreed that they would hire originally ten employees and add two each year at an average wage of $8.50 per hour.
Commissioner Schmitt wanted to add that to the resolution.
Conner asked if they could do a side agreement.
Commissioner Schmitt said that she had talked to their bond counsel, who indicated that if the city would adopt the resolution as is subject to whatever the discussion was this evening [June 26], it would be sufficient. She would then draft up whatever the commission decided upon.
Commissioner Collins made a motion, seconded by Commissioner Schmitt, to approve Resolution 2006-05, with the stipulation that there would be a minimum number of ten employees, with an increase of two employees per year, at an average wage of $8.50 per hour. Motion carried, 4 ayes.
5. Warren Gatz Agreement Changes.
Mayor Gernon explained that the repair of the berm and waterway as made in an oral agreement between Dave Grimm and Warren Gatz needed to be added to the agreement.
Commissioner Collins made a motion, seconded by Commissioner Gamble, to pay Warren Gatz $1000, with the changes noted in the agreement, and authorize the Mayor to sign the amended document. Motion carried, 4 ayes.
New Business.
6. Post Lantern Streetlights, Kevin Cowan with Gilmore & Bell.
Mayor Gernon introduced Kevin Cowan, with Gilmore and Bell, and Rance Hixson, with the streetlight committee. Mayor Gernon explained that the committee is now looking at various designs for the post lantern project, and need to know how much money they are going to have to spend. He asked Kevin Cowan to explain what the city’s options are with the respect to bonds.
Kevin Cowan explained that the sales tax has been stable; that the ¼% sales tax has generated about $125,000 the first year.
He said that the city has a couple of primary options. Option one is a G.O. sales tax bond. Option two is a pure Sales Tax Revenue Bond.
Before issuing the bonds, the city would need to pass a resolution of intent, which would have to be published once a week for two weeks. A petition may be filed with the Brown County election officer within thirty days after the final publication of the notice requesting an election on the issuance of the Bonds. The petition would require the signatures of not less than 4% of the electors of the City who voted in the last preceding election for a Sales Tax Revenue Bond and not less than 5% of the electors for the G.O. Sales Tax Bond. That is the process that the legislature has set in place.
The General Obligation Sales Tax Bond is considered a “double barrel” bond. By statute the tax revenue must generate enough revenue to pay the bond payments. It is unlikely that it would ever require the city’s taxing power to pay the payments.
On the pure Sales Tax Revenue Bond, the city would only pledge the sales tax revenue dollars. It is a less secure obligation, therefore it is a higher interest rate. In case there was a downturn in the sales tax collection rate, there would be a reserve fund required. This would mean a more conservative approach in the debt service plan.
If the sales tax revenue is 100%, they want the debt service to be 90%.
The General Obligation Bond is a more secure obligation, which leads to a lower interest rate, which makes for the lowest borrowing rate, which allows the city to maximize the amount you can borrow against that revenue.
The potential negative is debt limit concerns. Cowan said that he had talked to the attorney general about this. The attorney general had indicated that to avoid this issue, the bond could be considered a utility type improvement. A utility type improvement does not go against your debt limit. He did not think, therefore, that this would have any sort of impact.
Cowan said that if the commission decided to go with a General Revenue Bond, that they would make it very clear that this was to be paid with sales tax revenue, and not a mill levy.
Based on the $125,000 sales tax collection the first year and assuming a little bit of growth, you could look at about a 15 year payback. The current rate is 4.85%, which may seem a little conservative, but by the time the city would get the bond in place, the rate could be more. Cowan said the city would be looking at about a $1.3 million issue size. That would be with the General Obligation Bond, where the city would not have to have a reserve.
Mayor Gernon asked what impact a sales tax revenue bond would have.
Cowan said that on a pure sales tax revenue bond, approximately 10% of the issue would have to be set aside as reserve and would not be available for the project until the end of the issue. That means that approximately $130,000 would come out of the project funds as a cushion.
Mayor Gernon pointed out that the street light committee is in the process of design. There are some different options that they are looking at. Other things they are looking at are whether or not the city could furnish some of its own labor.
Rance Hixon, Post Lantern Streetlight Chairman, said that in the pilot project that the boring procedure alone accounted for approximately $22,000 to $23,000, for about $76,000 total.
Mayor Gernon said that the committee needs to know what their options are.
Cowan said that whether the city decides to go with the G.O. Bond or the Sales Tax Revenue Bond, there would still be a period of about 45 days once a resolution is passed, possibly 60 days before the city could say to go ahead with whichever type of bond they have selected.
Mayor Gernon asked Cowan to give us some print out sheets on these two options, and a summary of where the city is on their debt and bonding capability.
Cowan said he could send out two sets of documents, one for each type of bond, giving an alternative for the next meeting if they wanted to pass one of the resolutions.
Mayor Gernon said that he would like to see the projections first to see what our options are, and ultimately the streetlight committee would need to see them.
Rance Hixson said that BG Consultants is within 3 to 4 weeks of being ready to release the project for bids.
Cowan suggested to not accept any bids until the 30 day protest period has been completed.
Commissioner Schmitt said that if the information could be presented to the commissioner by July 5, they could put it on the agenda for July 10.
7. Greg Dekat, Bartlett & West, Water Tower Maintenance.
Mayor Gernon introduced Greg Dekat, of Bartlett & West. Dekat indicated that they had reviewed the draft specifications for the water tower maintenance. He said that there was lead on the south tank and chromium on the west tank, both at an elevated level. His recommendation was to do more testing to determine whether it is an issue or not. Dekat agreed that they both needed to be coated, especially the south tank, which was approximately 58 years old. It needs some attention if it is to remain in service.
Whenever there is sand blasting there is a loss of metal. Now with the pitting that is going on, you need to also allow a pit repair to extend the life of the tank.
Rick Koenig, Water Supervisor, said that they had the tanks inspected in 2005 for approximately $4000. He said that they definitely needed to have something in the 2007 budget to have this cleaning done. The inspections had been done already, so now we need to go ahead and take care of the problem.
Dekat explained that the levels were 50% over the limit. He was not comfortable with the testing that had been done. It could have been from one bad test, which would have skewed the test. The allowable amount is 5 parts per million, their tests are showing it is over 900. They would use a special blast medium which neutralizes lead down to those levels.
Mayor Gernon asked who would do the more sophisticated test.
Dekat replied that they could take the samples and have them analyzed at a cost of approximately $1000 to $1500.
Commissioner Schmitt asked if this sampling should have been done in a more efficient manner by the company that did the inspection.
Dekat said that he did not know.
Koenig said that he felt it would be sufficient to sandblast and recoat.
Mayor Gernon said that they needed to think about this and bring it up at the next meeting.
Commissioner Schmitt asked Rick Koenig, Water Supervisor, to have some figures ready for the next meeting as well to see if there is money in the budget for the extra testing.
8. NEK Bioenergy – Water.
Mayor Gernon asked to be excused from this discussion.
Commissioner Collins introduced Steve Smith who introduced the members of the committee.
Smith explained that they had started with a feasibility study in bio-diesel, to be located at Nigus Park in Hiawatha, but had to change plans because the Union Pacific Railroad refused to service the area.
He explained that they are currently pursuing a location south of Padonia to develop an industrial park that the railroad will service. He explained that this was for a bio-refinery.
Smith said that a bio-refinery would enhance the economic development for Hiawatha and Brown County with a 30 million gallon bio-diesel and 50 million gallon ethanol bio-refinery, a $130 million project. He said that the bio-refinery has superior performance over either bio-diesel or ethanol plants stand alone because of shared services of utility infrastructure costs, rail infrastructure, maintenance crews, marketing company, risk management, unit train discount from railroad, and many others.
Smith said that it is not dependent on one revenue source or one feedstock but will offer multi-products and have multi-feedstocks including corn oil from ethanol to be used by bio-diesel, thus giving the bio-refinery diversity for different market conditions. This would increase the base price to area producers of corn, provide about 60 jobs for the community with a $2.5 million payroll, and provide increased tax revenue to city and county.
Smith said that NEK Bio-energy is in the final stages of contract negotiations with their design/engineering firm and with their project builder. They have a good building site with a civil engineer doing utility planning and a rail design firm doing the rail layout. They are finalizing their contract with the marketer of renewable fuels as well as their risk manager. They will be offering private placement memorandum to local qualified investors in the next couple of weeks, and are finalizing their private equity as well as being in contact with several lenders for their capital loan.
Smith said that they are asking tonight for Hiawatha’s help in procuring water for their bio-refinery. Their need starts at 650 gallons per minute and could go higher as they develop and expand, and as other businesses come into the industrial park. They are proposing a joint project of developing a new water source that will serve the future growth of Hiawatha and the industrial park. They have an agreement to present to the city as a starting point. They are presenting this at this time because they know the city is in the process of developing next year’s budget, and they know the city needs time for their legal counsel to review the agreement and also for the commissioners to think about and discuss the issue. They are hoping to have a response by the July 10 meeting.
Commissioner Collins asked Smith if the aquifer in Hiawatha was the same as the one south of Padonia.
Smith said that the geologists have indicated that it was not the same aquifer, that it would be a whole new source of water.
Commissioner Collins asked Smith if he had any projections as to how much it would cost to do the complete project for the water.
Smith said that rough projections indicated it would cost about $40 to $50 thousand for research exploration, and $30 to $35 per foot to lay the pipeline approximately for four miles. Looking at what the city and what the industrial park needs, there would probably be ten to twelve wells. They would be willing to have the wells come to city specs, and be willing to pay their share of the cost of the number of wells that they need, then ask the city to maintain it in lieu of paying for wholesale water.
Commissioner Collins asked Smith if the water they needed had to go through a treatment process.
Smith said that it did, so they would be able to let the city have pure water. He said that the water would have to be treated before it goes in, so they would treat all the water.
Commissioner Schmitt asked what their time frame was.
Smith said that they are in the process of finalizing several things all at the same time. The time frame is three to six months. The earliest breaking ground late October or early November. If they are held up for permits, they are looking at January.
Commissioner Schmitt asked if they needed action on July 10.
Smith replied that is what they would like.
Commissioner Gamble asked if it would be four to five wells.
Smith replied that because of having to rest the aquifer and how they utilize the water, and because not knowing exactly how quickly they might expand, they are probably looking at probably eight wells or up for the refinery and probably four for the city, with probably a 12 inch line to accommodate that.
Commissioner Collins asked for some numbers.
Smith replied that they had authorized their civil engineers to start gathering the data the city needs for the July 10 meeting.
Commissioner Schmitt asked him if as far as the earliest that funding would be needed would be in January 2007.
Smith said that would be correct. He said that the first $40,000 would go out pretty quickly. After that they would be starting to lay the pipeline. He asked if the city’s budget started in January, and said that they might be in position to handle it until the next budget year.
Commissioner Schmitt asked if any other funding would be needed before January 1.
Smith replied that there would not.
Commissioner Gamble said that his main concern was finding a reliable water source. If they have indeed found a reliable water source, then it would be a good project. He did not want to cut the city short on their water supply.
Smith said that is why they are interested in doing this together with the city and finding a good water base.
Commissioner Collins expressed his appreciation.
9. CDBG Grant – Gene Atland, Maple Heights & Joan Hernly, Hernly Assoc.
Mayor Gernon explained that the deadline is approaching, that they can apply for one grant. He introduced Gene Atland.
However, Lesa Duryea approached the commission and explained that she had been available to be here after all and explained their situation with the water pipes at Maple Heights. She said that the original lines are two to four inch lines. The copper is a thin walled copper, and the leaks are coming because it is 30 years old and from mixing the galvanized and the copper lines together. Mixing these two could cause electrolysis in this area or anywhere down the line. She went on to say that if there is a leak in any of the four inch lines, they have to shut the entire building down because there are no shut off valves on those lines in the boiler room. She said that the copper lines in the attic are getting thin and pinholes are showing up, causing leaks into the rooms below, ruining the ceiling and causing puddles in which the residents could slip and fall.
Duryea said that Maple Heights is 67% Medicaid, and has non-profit status. She is asking the city for a block grant.
Mayor Gernon asked how many residents they house.
Duryea replied that they can handle 59 long term care and 15 residential, of the 59, 18 are Alzheimer patients. They currently house 52 residents. They never know how many residents they will have on a day to day basis.
Duryea explained that Maple Heights owns their own building through an IRB from the city.
Commissioner Schmitt asked Duryea if they had pursued all other avenues of funding.
Duryea said that she had no other way to come up with the estimated $250,000 to make the repairs.
Commissioner Schmitt asked her if she had applied for a loan at one of the banks.
Duryea explained that they could not get a loan, because they had no ability to pay it back. She explained that they are not affiliated with any other nursing home. In 1999 they received an IRB bond and purchased the building. In 2003 their management company, Tri-com, opted out and they are now a stand alone. She said that they are currently in the process of another management company, Altacare, taking over, who is also a non-profit organization.
Mayor Gernon asked Duryea how many employees they had.
Duryea replied that as of last Monday, Maple Heights had 72 employees.
Mayor Gernon asked Duryea if the patient is costing $139 per day, and they make only $107 from the medicare patients, then who is making up the difference.
Duryea told the commissioners that the private pay patients, who are paying a little over the $139 per day make up the difference. This barely makes up the difference, and they never know how many private pay patients they are going to have from one day to the next.
Mayor Gernon asked Duryea if she would be able to get the grant written. She said that she thought that if Marian [Tubach] could help her, she could write it herself.
Commissioner Collins mentioned that it sounded like Maple Heights was already operating in a negative position, and that if they did get the grant, would they be able to keep operating if they were still in a negative position?
Duryea replied that if they didn’t get something done soon, that they wouldn’t be able to keep it open.
Commissioner Schmitt asked Duryea if as a non-profit organization had she looked into the community service tax credit program that the State of Kansas offers.
Duryea asked Commissioner Schmitt if she could get that information for her.
Marian Tubach introduced Joan Hernly, with Hernly Assoc., explained the block grant application and the possibilities for the community.
Hernly said that there are three types of CDBG Grants available. The first is Housing, with a maximum of $400,000, and has a deadline of September 1, 2006. For this type of grant the city would need to present a target area. A pre-application would need to be sent out. Time is very short, so it would have to be done very soon to get the application in before the deadline.
The second type of grant is water/sewer. This is for outside water/sewer, and for Maple Heights would be a maximum of $112,000 based on a patient count of 56 times $2000 per patient. The deadline for this grant is October 2, 2006.
The third type of grant is for inside community facilities, and for Maple Heights would be a maximum of $112,000 again based on a patient count of 56 times $2000 per patient. The deadline for this grant would be November 1, 2006.
A separate grant could be applied for through the USDA for 15% of the project cost, with a maximum of $50,000. Although matching funds are not required, it would help on points as leverage to obtain the grant.
Commissioner Collins said that we have not had matching fees in the past.
Lesa Duryea indicated they could make do with $112,000 to at least repair the 4 inch lines, and repair the others as need be.
If the grant is received the city could not apply for another grant for 2 years. If the grant was not received they could apply again next year.
The latest the application should be started would be in two weeks.
Mayor Gernon said that if two weeks would not jeopardize the situation, they would wait until the next meeting in two weeks to make a decision.
10. Request for Approval for Rezoning and Variance for Property at 114 South 12th.
Interim City Administrator Tom Armour explained that there had been no adverse comments made when the rezoning and variance were presented to the Board of Zoning Appeals and the Planning Commission.
Commissioner Collins made a motion, seconded by Commissioner Gamble to approve the request for Rezoning and Variance for the Property at 114 South 12th. Motion carried, 4 ayes.
11. Approval of payment to League of Kansas Municipalities for Recruitment Services.
Commissioner Collins made a motion, seconded by Commissioner Schmitt, to approve the payment to the League of Kansas Municipalities for Recruitment Services for the City Administrator in the amount of $2,436.80. Motion carried, 4 ayes.
12. Approval of payment to BG Consultants for May 2006 Consulting Services for the Downtown Streetscape Project.
Commissioner Schmitt made a motion, seconded by Commissioner Collins to approve the payment to BG Consultants for the Downtown Streetscape Construction Administration for May services in the amount of $1,626.59. Motion carried, 4 ayes.
13. Approval of payment to BG Consultants for April 2006 Consulting Services for the Post Lantern Streetlight Project.
Commissioner Schmitt made a motion, seconded by Commissioner Gamble, to approve the payment to B.G. Consultants for the Post Lantern Street Light Project Consulting Services for April in the amount of $5,770.00. Motion carried, 4 ayes.
14. CONSENT AGENDA
a. Appropriation Ordinance #1095 in the amount of $3770.18.
b. Payroll Appropriation #1060 in the amount of $44,025.41.
c. Application for License for 1 Commercial Tree Surgeon & Trimmer and 1 Electrical Contractor.
Commissioner Schmitt made a motion, seconded by Commissioner Collins, to approve the consent agenda as presented. Motion carried, 4 ayes.
15. Tom Armour, Interim City Administrator.
Interim City Administrator Tom Armour told commission that he had a Tuesday meeting with Tom Singleton on budget adjustment for 2006.
Armour said that a homeowner at 3rd & Shawnee had contacted him about putting in new sidewalks on their corner propery and was inquiring about curb & guttering for that area.
Armour said that there was a delay on the Wal-Mart sale to Hemisphere. A survey that was to have been done was not, and legal description on title has the roads in Wal-mart’s name and would pass that on to Hemisphere. The bond issue proceeds are being held by an escrow agent. Armour asked if the commission wanted to withdraw the funds and put into our account to earn interest.
Sheila Schwalm told the commission that they are hoping to have transaction completed by Friday. If this is not scheduled to close then we need to transfer the funds back to the city. The title company has replatted the survey. They [Fidelity National Title Co.) cannot disburse the funds. The contract expires July 1. Legally we cannot do anything until after that.
Mayor Gernon was in favor of getting the money back so that we could earn interest on it.
Commissioner Schmitt said that if nothing is heard from Wal-Mart by 11:00 a.m. Tuesday, June 27, the city should request the money to be wired back.
Commissioner Schmitt made a motion, seconded by Commissioner Collins, to authorize HFED to request the money to be wired back to them if no reply has been received from Wal-Mart by 11:00 a.m. on Tuesday, June 27. Motion carried, 4 ayes.
Dean Tollefson, Hiawatha resident, brought up to the commission that they needed to check into the legalities of putting the money into an interest bearing account because it might cause repercussions down the line, and cause the bond to become a taxable bond. He cited an incident in Lawrence, Kansas, who had a similar type of incident and were now faced with a taxable bond.
Armour went on to his next item and reported that an ordinance is required to be amended in order to increase the court costs, as the commission had voted to do at the last meeting. The other option would be to abolish Ordinance 873 and enact a new ordinance stipulating that they can amend costs by motion.
Armour also noted that the city’s policy on Drug testing needs to be enacted and clarified, especially on part time and on temporary seasonal employees.
Mayor Gernon told him that they had decided to wait for the new city administrator to arrive to take any action on this.
16. Mayor Gernon.
Mayor Gernon asked for department figures to be presented for the 2007 budget at the next meeting.
17. Com. William Collins.
18. Com. Curtis Gamble.
19. Com. Marianne Schmitt.
20. Com. Steffen Shamburg.
21. Adjourn.
Commissioner Schmitt made a motion, seconded by Commissioner Gamble, to adjourn. Motion carried, 4 ayes. Meeting adjourned at 8:06 p.m.
Work Session on Grants