MINUTES OF WORK SESSION

OF THE NEWPORT NEWS CITY COUNCIL

HELD IN THE 10^th FLOOR CONFERENCE ROOM

2400 Washington Avenue

June 12, 2007

PRESENT:       Joe S. Frank; William Haskins; Madeline McMillan; Sharon P. Scott;

Joseph C. Whitaker; and Charles C. Allen ------------------------------------ 6

ABSENT:        Herbert H. Bateman, Jr. ---------------------------------------------------------- 1

OTHERS PRESENT:  Randy W. Hildebrandt; Stuart E. Katz; Jennifer Walker; Neil Morgan; William Mitchell; Alan Archer; Butch Blanks; Allen Jackson; Florence Kingston; Brian Ramaley; Eileen Leininger; Randall Lyons; Pam Barclay; Scott Dewhirst; Shelia McAllister; Richard Caplan; Al Riutort; Gerard Corneille; Angela Hopkins; Michael King; Cherry Croushore; Sylvia Berry; Alonzo Bell; Thad Holloman; Sabine Hirschauer; Lottie Vincent; Cleder Jones; Kim Lee; and Pam Foshee

Mr. Randy Hildebrandt, City Manager, informed that the Hilton Village Architectural Review Board’s Appeal had been postponed to the June 26, 2007 meeting. Dr. Tom Wessells, the applicant, asked that the matter be continued.

I.                    Amendments to Master Water Revenue Bond Resolution

Mr. Randy Hildebrandt, City Manager, informed City Council had been asked to amend the Master Water Revenue Bond Resolution in order to obtain insurance for the bond which provided a better interest rate for the bond. City Manager Hildebrandt distributed a copy of his June 11, 2007 memo to City Council. (A copy of the memo is attached and made a part of these minutes.)  He indicated that the Bond Counsel, Mr. Don Gurney; the City’s Financial Advisor, Mr. George Pugh; and the Director of Public Utilities, Mr. Brian Ramaley, had recommended this addition.

Mr. Ramaley, Director of Public Utilities, reminded City Council that this was the first issuance of Revenue Bonds that Waterworks and the City had undertaken. When the bonds were taken to the market for bids, $40 million in bids were received. As part of the package, the City would obtain insurance for the purpose of guaranteeing the bonds in the unlikely case that there was a default. With the addition of insurance, the rating increased, which lowered the interest rate.

Mr. Ramaley indicated that a premium had to be paid for the insurance to get the higher rating and as part of the process three bids for insurance were obtained. The low bidder recommended by the City’s Bond Counsel and Financial Consultant was Financial Security Assurance, Inc. (FSA). Mr. Ramaley informed that provisions needed to be incorporated into the Master Bond Resolution to cover the substance and technical

details of how the insurance would be provided. Mr. Ramaley explained to add the provision for insurance now would facilitate the ability to obtain insurance in the future.

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Councilman Haskins inquired about a cost analysis. Mr. Ramaley replied this involved the cost of the premium for the insurance versus the cost of interest for a lower rated bond.

City Manager Hildebrandt inquired whether future bonds would have the option of using the insurance because the provision would be in the Bond Resolution. Mr. Ramaley replied there would be an option and possibly a cost saving in the future as well.

Councilman Haskins commended Mr. Ramaley and his staff on the management of Waterworks. He credited the rating and the fact that the bonds were well received at the market to good management.

City Attorney Katz stated that the final sale date for the bonds, at the rate indicated, would be prior to Council’s Regular Meeting of June 26, 2007. He apologized for the lack of time to respond.   

Mayor Frank inquired about a comparison of the bid price versus the insurance and whether there would be a savings by taking the insurance. Mr. Ramaley replied the insurance cost less than the difference in the interest rate. The bonds were bid at 4.59% based on having the insurance, with the insurance costing .25% of the bond. Without insurance the bonds would have bid at about 5%.

Mayor Frank agreed that insurance made sense, but inquired about associated costs with the insurance and whether the premium was a one time or recurring expense. After a call to the City’s Financial Consultant, Mr. George Pugh, Mr. Ramaley informed that the actual cost savings with insurance was $179,000.

II.                 Staff Briefing: Walker’s Dam Emergency Repairs

City Manager Hildebrandt requested that the agenda be shifted to discuss Walker’s Dam emergency repairs before the Waterworks Customer Information and Billing System, as the Water Revenue Bonds and Walker’s Dam were obliquely related. He explained the Water Revenue Bonds would be used for preliminary work on the future water supply site, the King William Reservoir, and the current supply site, Walker’s Dam.

City Manager Hildebrandt explained that a breach was discovered at Walker’s Dam on Monday, April 23, 2007. The City responded quickly and closed off access to the dam immediately. Waterworks officials met with dam engineering consultants who recommended immediate action. The job was put out for bid, with bids received within nine days; however, after bids were received and before the bid was awarded, the boat lock collapsed. The drawings were modified by the consultant to make

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the repair part of the permanent restoration, which was more cost effective. Bidding was advertised, with construction anticipated to take sixty days.

Mayor Frank asked whether the level should be raised and a more effective structure built. Mr. Ramaley replied if the level was raised, the upstream development would be partly submerged, and if the level was lowered, boats could not launch.

Mr. Ramaley informed that the rough estimates indicated the cost of the initial work would be less than $200,000, with the first phase being $1 - $2 million and long term repairs totaling $10 million.

Councilman Haskins inquired whether the bidders received technical data. Mr. Ramaley replied a bid meeting was held to provide facts and drawings to each bidder.

III.               Staff Briefing: New Waterworks Customer Information & Billing System

Mr. Ramaley introduced Ms. Charlene Sevier, Information Technology Manager, Department of Public Utilities, and Ms. Darlene Mormon, Customer Service Manager, Department of Public Utilities, to provide a report on the new Waterworks Customer Information System. (A copy of the report is attached and made a part of these minutes.) He replied that the new billing system would go live on July 5, 2007, including a new bill format. Mayor Frank requested that a copy of the new bill and an instruction sheet be provided to City Council so they could assist citizens when calls were received.

Ms. Sevier informed that the project was on budget.  She stated that the new bills would include the FY 08 rates approved by City Council.

Ms. Mormon reported that budget billing would be implemented with the new system. Direct debit, which allowed customers to pay their water bills electronically from their bank accounts, would be an additional benefit. The City Manager emphasized this was a good system for the military on deployment.

Ms. Mormon further explained that new E-services modules would include the ability to update information, view bills and payments, along with many other features.  She explained customers had received billing inserts explaining the upgrade, posters had been placed in the Waterwork’s lobby, information was placed on the City Channel, and the Newport News in Review show on Channel 48 would feature the changes. Customers would receive a full page insert with the first new bill showing a sample bill and description of each item. Advertisements were scheduled to appear in the Daily Press about closings and the new system. 

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Mayor Frank inquired about a grace period for those whose bills would be due around the time of the switch over. Mr. Ramaley replied it would not be advertised but there would be no cutoffs during that period. Mayor Frank suggested that citizens be informed in advance so they would not be upset.

Councilman Haskins congratulated Waterworks on the cost savings and complimented good management.

Councilwoman Scott inquired whether the billing cycle would change. Ms. Mormon replied that in most cases, the billing cycle would not change.

IV.              South Precinct Police Facility Plans

City Manager Hildebrandt informed that a decision should be made about how to accomplish construction of the South Precinct Police facility. He reminded the original plan was to rehabilitate the Messic Hardware Store and noted the project was included in the Capital Improvements Plan (CIP). City Manager Hildebrandt stated since the cost to renovate the building would be extensive; it was more cost effective to build a new building. The new building would be built next to the Messic Hardware building but would keep the same historic character of other buildings in the block. Proposed designs for the new building were provided to Council. (A copy of the designs are attached and made a part of these minutes.)

Councilman Whitaker inquired whether the property adjacent to the Messic Hardware building had been acquired by the City. City Manager Hildebrandt replied the building had not been acquired to date, but the process had begun.

City Manager Hildebrandt inquired whether City Council wanted to continue with the current project or move forward with the concept of a new building.

Vice Mayor Allen inquired whether the City would be able to use the area behind the property for parking should the new concept be approved. City Manager Hildebrandt replied he was working with the Virginia Department of Transportation (VDOT) to obtain a lease for the property. He informed there may be requirements to vacate when the third crossing was built. Up until that time, the property could be used for parking.

Councilman Whitaker inquired whether it was cheaper to build a new building versus renovating the Messic Hardware building. City Manager Hildebrandt explained it would be cheaper to build new and the City would end up with a better design rather than retrofitting an existing building.

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Vice Mayor Allen stated that he was tired of the old retro looking buildings and suggested a contemporary design for the South Precinct. City Manager Hildebrandt felt the new building design would complement and maintain the existing character of the block, but a modern building could be designed, if Council was not interested.

Councilman Whitaker inquired about interested parties for the Messic Hardware building. City Manager Hildebrandt replied no one had come forward with available funds.

Mayor Frank stated, per discussions with VDOT, the City would be allowed to use the property for parking as long as VDOT did not need it for the widening of I-664 or the third crossing. He expressed concern about adequate parking for the new precinct. Mayor Frank inquired whether the Messic Hardware building should be taken down with the new building being centered, with landscaping on both ends, allowing future parking on both sides of the building. Mayor Frank stressed that the parking issue be addressed.

                        Vice Mayor Allen stated that the City owned parking lot across Jefferson Avenue and behind the Jefferson Avenue storefront would provide additional, if not adequate, parking for the police precinct facility.

Mayor Frank inquired about the cost differential between renovating the existing structure and new construction. City Architect, Mr. Gerard Corneille, replied that the costs would be approximately the same; however the Messic Building was not the same quality as would be built today. Mayor Frank asked if this would be an argument against leaving the building up for someone else to deal with. City Manager Hildebrandt reminded Council that cost overruns were inevitable with a rehab.

Councilwoman Scott expressed support for a new building because upkeep would be at a minimum in the beginning.

Mayor Frank expressed support for a new building, provided parking and landscaping were taken into consideration and would not argue against a modern design; although he liked the current design. Councilman Whitaker also agreed with the concept of a new building versus renovations.

Councilwoman Scott questioned what would be a compatible use for the Messic Hardware building. Vice Mayor Allen replied that residential would be a good use, with upgrades.

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Mr. Neil Morgan, Assistant City Manager, reminded that it was not absolutely critical for City Council to make a decision about the Messic Hardware building at this meeting. He stated that if the decision was to build a new facility, the City would have approximately 18 months to make a decision about the Messic Hardware building. The building could be marketed to see whether there is a buyer.

Councilman Haskins inquired about the scheduled completion date. Assistant City Manager Morgan stated the Police Precinct was included in the 2010 CIP. Councilman Haskins inquired how much money was budgeted for the project. City Manager Hildebrandt replied that $3 million was in the CIP and the design work had been appropriated.

There was consensus among City Council to build a new facility.

Councilman Haskins stated that Council would need an estimate of the total assessment, revenues and costs with debt service for the new building. Mayor Frank recommended that the design be whatever was approved so as to eliminate cost overruns and change orders.

V.                 Financing the Acquisition of 809 Omni Boulevard (State Farm)

City Manager Hildebrandt advised that the Economic Development Authority (EDA) offered a sealed bid on the auction of the State Farm building located at 809 Omni Boulevard. He indicated that it was critical for the EDA to control acreage that would be needed for a portion of amenities, such as street and stormwater, for future development as it moved beyond City Center.

Mrs. Sylvia Berry, Chair of the EDA, explained that the EDA submitted the winning bid, $3,501,000, for the State Farm building (117,000 s.f. on a 3.1 acre lot) located at 809 Omni Boulevard in Oyster Point. Mrs. Berry reminded Council that the property was highly strategic as it surrounded parcels currently owned by the City. She stated the EDA was unanimous in its support to submit an aggressive bid for the property or face even higher costs to obtain the property in the future. (A copy of Mrs. Berry’s remarks is attached and made a part of these minutes.)

Councilman Haskins inquired whether the Wilcox property was involved in this purchase. City Manager Hildebrandt replied the Wilcox property would be the only other privately owned property on that block. Councilman Haskins stated that the projected costs of the City Center plan had steadily increased since the plan was originally presented to Council.

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Councilwoman McMillan inquired whether the bid was based on future acquisition costs rather than on current value. Mrs. Berry responded that the price was a combination of both; if an investor purchased the property, the cost would no doubt escalate.

Councilman Haskins requested a cost to benefit analysis of development revenue versus debt service. He indicated that he thought $3 million to acquire a building when the future was unknown did not seem prudent. Mrs. Florence Kingston, Director, Department of Development, indicated that the Development staff had enough experience from previous cost benefits for numerous development projects to be able to do “rule of thumb” estimates.

Councilwoman McMillan, referring to a 2005 memo, indicated that until the May 11, 2007 memo the expansion of City Center beyond the perimeters was never mentioned. She recalled that the last update with a map, did not show City Center going that far. It was understandable to her why the EDA wanted to purchase the property; however, she was concerned about incurring increased debt over what the value may and may not be in the future. Mrs. Kingston reiterated that the property was key to implementing the project.

Mrs. Kingston indicated the financing plan was arranged to minimize the impact on the budget. The CIP contained $1,000,000 for economic development opportunities and investments. The EDA had benefited from a cost savings on City Center capital projects which had provided an influx of almost $1,000,000 in cash. The EDA proposed using $500,000 for this property purchase. Mrs. Kingston indicated that the remaining balance of $2,000,000 would be borrowed from private financing. The EDA would aggressively pursue commercial tenants to lease the property. She indicated that approval of the $1,000,000 appropriation from the CIP would allow the EDA to proceed with the project. The transaction must be completed by July 30, 2007. The EDA had deposited $70,020 in earnest money in connection with the Purchase Agreement. Inspections and due diligence had begun. The remaining $2,000,000 would be a loan with flexible financing from a local financial institution. (A copy of Mrs. Kingston’s remarks is attached and made a part of these minutes.)

Councilwoman McMillan questioned whether the $2,000,000 loan would be a general fund loan. Mrs. Kingston assured her that it would not and that the City would provide no guarantee of the loan.

Councilman Haskins inquired about the drainage issues related to further expansion of City Center. Mrs. Kingston replied City Center drainage was well designed. City Manager Hildebrandt stated that on-site drainage for City Center would be reconfigured with expansion to include the three off-site drainages. Councilman Haskins

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inquired about cost estimates. City Manager Hildebrandt replied that the project had not reached that point.

City Manager Hildebrandt indicated that a number of meetings and studies had been completed on drainage and transportation issues. The staff task force had been working on a final plan and cost estimate but there was not a final cost at this time. He reminded City Council that the focus of his administration, from the beginning, had been on City Center. The process had begun to identify a design concept and the cost of infrastructure.

Councilwoman McMillan inquired about the amount of property tax the building would generate. City Manager Hildebrandt replied approximately $15,236 in real estate tax.

Mayor Frank reminded that the lease would include compensation for tax revenues.

Councilwoman McMillan questioned the yearly debt service for a $2,000,000 loan. Mrs. Kingston replied the yearly debt service would amount to approximately 7%.

Councilwoman McMillan asked whether the City would be going into the commercial real estate business where it slowly purchased old properties to redevelop them. Mrs. Kingston replied no, not necessarily, but there was hope that property owners would upgrade as property values increased. The consensus of City Council was to wait for the June 26, 2007 meeting to vote on this appropriation.

VI.              Newport News Redevelopment & Housing Loan Request for Home Program – Great Oaks Apartments

Mrs. Karen Wilds, Executive Director, Newport News Redevelopment and Housing Authority (NNRHA), distributed photos of Great Oaks Apartments. (A copy of the photos are attached and made a part of these minutes.) She reported Great Oaks Apartments were built in 1978 by the Newport News Home Owners Association. Senior citizens occupied all 143 units on the 15.3 acre property. NNRHA had managed the complex since its inception. Ms. Wilds stated, NNRHA secured a low-income HOME grant to perform major renovations of the property. She requested that City Council provide funds to match the tax credit from the HOME grant. Ms. Wilds stated that siding would be replaced with Hardy Plank; appliances would be replaced, along with energy efficiency upgrades.

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Councilwoman McMillan questioned the reason for using Hardy Plank instead of vinyl siding. Ms. Wilds replied that Hardy Plank had been used in other projects, and was energy efficient, fire proof and durable. Councilwoman McMillan inquired about the possible reconfiguration of the roof overhangs. Ms. Kristin Clark, Development Manager from NNRHA, indicated that each unit would have a front porch with an A-frame and would have lower entrances for better accessibility.

Councilwoman McMillan questioned why only fourteen of the 143 units were handicapped units. Ms. Wilds indicated that NNRHA had managed the property since 1978 and never had a need for more handicapped units. Vice Mayor Allen interjected that all units would have handicap assistance items in them, such as rails in the tub.

Councilwoman McMillan inquired about wiring upgrades. Ms. Wilds responded that new HVAC systems would be installed, new kitchens, and water heaters would be moved from the attic to a closet inside, all of which required wiring upgrades.

Councilwoman Scott asked about relocation of current residents while renovations were taking place. Ms. Wilds replied that two buildings were currently vacant and five residents had moved off site, all of which were to return.

Mayor Frank addressed the previous drainage issue in Great Oaks. Ms. Wilds stated that $60,000 would be set aside to take care of drainage issues. She believed that most of the problems were due to construction projects in the area. Mayor Frank asked if the porches being made handicapped accessible would lower the floor to the extent where the flooding could enter units. Ms. Clark indicated that the renovated porches would not make the apartments more susceptible to flooding.

THERE BEING NO FURTHER BUSINESS,

ON MOTION, COUNCIL ADJOURNED AT 6:30 P.M.