HomeMy WebLinkAboutCCMinutes_2005_12_20 19
Brookings City Council
Tuesday, December 20, 2005
The Brookings City Council held work session on Tuesday,December 20,2005 at 5:00 p.m.,in City
Hall with the following members present: Mayor Scott Munsterman,Council Members Tom
Bezdichek,Michael Bartley,Julie Whaley, Ginger Thomson,Tim Reed, and Michael Reitz. City
Manager Alan Lanning, City Attorney Steve Britzman, and City Clerk Shari Thornes were also
present. �
December 20`''Agenda. The City Manager responded to questions pertaining to the action items
on the agenda.
City Staff To�ic Introduction:
Tanuary 10�'Agenda Briefing. Shari Thornes,Brookings City Clerk,provided a briefing oii the
January 10`�agenda items. �
Human Rights Committee Rec�uest. Lanning reported that the Brookings Human Rights
Committee recendy sent him a lettex xequesting a hearing by the Brookings City Council. Their
specific request is for the City Council to include Se�al Orientation among the protected
characteristics in the Brookings City Chaxter"Section 7.02 -Pxohibitions" and Ordinance No. 10-03
"Section 11.Additional Prohibited Activities." Lanning introduced the topic and requested Counc,il
action to place it on a futuxe agenda. No members of the Committee were present to xespond to
questions. The Council requested the item be rescheduled fox a time that representatives could
appeat.
Council Invitations. Thornes reviewed the City Council's upcoming invitations and obligations.
City Council Introduction of Topics for Future Discussion.
■ Convention Visitor's Bureau. A motion was made by Bartley, seconded by Reed,to schedule
discussion of the Convention Visitor's Bureau xequest on January 17`�and further discussion and
possible action on January 24�'. All pxesent voted yes,motion carried.
Executive Session. A motion was made by Reed, seconded by Whaley,to enter into Executive
Session at 5:17 p.m. to consult with legal counsel on pending contractual issues with the City
Council, City Managex, City Clerk,and City Attorney present. .All present voted yes,motion carried.
A motion was made by Reed, seconded by Whaley,to leave Executive Session at 5:54 p.m. All
present voted yes,motion carried.
6:00�.m.—Cit�Council Meeting.
Consent Agenda. Resolution No. 119-05, a resolution amending Res. 92-05 to include Financia.l
Securities Assurance Inc. bond insurance requirements,was added to the agenda as #6A. The
Hospital Board appointment and Resolution No. 118-05 were removed from the consent agenda for
additional discussion. A motion was made by Reed, seconded by Reitz, to appxove the consent
agenda as amended which included:
A. Council enda as amended.
B. Minutes. Action to approve the December 13, 2005 minutes.
C. Annual Committee a�pointments.All of the following are three year terms expixing on
January 1,2009: Board of Adjustment-Matt Kurtenbach and Mike Keating as 15C Alternate;
Boaxd of Appeals - Spencer Hawley and Ray FYOehlich;Board of Health-Pat Lyons,Paul
Irwi�l,Karen Cook;Brookings Committee for People who have Disabilities -Kurt Cogswell,
Emily Bennett Kristie Ching,Lois Hatton,Nanry Hartenhoff-Crooks;Event Center Board-
Tom Coughlin;Historic Preservation Commission-Richard Shillander;Hospital Board (see
sepaxate action below);Library Board—Carolyn Warmann and Tami Watson;Traffic Safety
Committee -Tim Heaton,Dennis Bielfeldt,Keith Bruinsma,Mathew Nelson. Planni.ng
Comniission (5 year term expiring 12/31/10)-Michael Cameron,Dave Kuxtz,and Sean
O'Brien.
D. Action on Resolution No. 112-05,.Fixing Time and Place for Hearing U�on
Assessment Roll for Sidewalk Assessment Project 2005-01SWR.
RESOLUTION N0.112-05
RESOLUTION FIXING TIME AND PLACE FOR HEARING UPON ASSESSMENT
ROLL FOR SIDEWALK ASSESSMENT PROJECT NO.2005-01SWR(2005 SIDEWALK
. REPAIR SITES)
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BE IT RESOLVED by the City Council of the City of Bxookings,South Dakota,as follows:
1. The assessment roll for Sidewalk Assessment Pxoject No.2005-Q1SWR having been filed in the
office of the Ciry Manager on the 16th day of December,2005,the City Council shall meet in the
Council Chambers,Ciry Hall,in said City on Tuesday,the lOth day of January 2006,at 6:00 o'clock
PM,the said date being not less than twenty(20)days fxom the filing of said assessment roll for
hearing thereon.
2. The City Engineer is authorized and directed to prepare a notice describing,in genexal terms
Sidewalk Assessment Project No.2005-01SWR,the date of fil�ing the assessment roll,the time and
place of hearing thereon,stating that the assessment roll will be open for public inspection at the
office of the City Engineer and refexring to the assessment roll for further particulazs.
3. The City Cierk is authorized and dixected to publish said notice in the official newspaper at least
one(1)week priox to the date set for hearing and to mail a copy thereof,by fixst ciass mail addressed
to the owner or owners of any property to be assessed at his,her ox their last mailing address as
shown by the xecords of the Director of Equalization at least one(1)week prior to the date set for
said hearing.
E. Action on Resolution No. 113-05, Fixing Time and Place for Hearing Upon
Assessment Roll for 5treet Assessment Project 2005-03STA Alley from 9�`Ave. to
Medary Ave. between 4`� St. and 5`''St.
RESOLUTION N0.113-OS
RESOLUTION FIXING TIME AND PLACE FOR HEARING UPON ASSESSMENT
ROLL FOR STREET ASSESSMENT PROJECT NO.2005-03 STA
ALLEY FROM 9TH AVE.TO MEDARY AVE.BETWEEN 4TH ST.AND 5TH ST. �
BE IT RESOLVED bq the Ciry Council of the City of Brookings,South Dakota,as follows:
1. The assessment roll for Street Assessment Pxoject No.2005-03STA having been filed in the office
of the City Manager on the 16�day of December, 2005,the City Council shall meet in the Council
Chambers,City Hall,in said Ciry on Tuesday,the 10�'day of January 2006,at 6:00 o'clock PM,the
said date being not less than twenty(20)days from the filing of said assessment zoll for hearing
thereon.
2. The City Engineex is authorized and directed to pxepare a notice describing,in general terms Street
Assessment Project No.2005-03STA,the date of filing the assessment xoll,the time and place of
hearing thereon,stating that the assessment xoll will be open for public inspection at the office of the
City Engineer and referring�to the assessment roll for further particulars.
3. The City Clerk is authorized and directed to publish said notice in the official newspaper at least
one(1)week prior to the date set for hearing and to mail a copy thereof,by first class mail addressed
to tlie owner or owners of any property to be assessed at his,her or theix last mailing address as
shown by the records of the Director of Equalization at least one(1)week priox to the date set for
said hearing.
F. Action on Resolution No. 114-05�Fixing Time and Place for Hearing Upon
Assessment Roll for Street Assessment Project 2005-04STA Alley from 14�'Ave. S. to
� 16�''Ave. S. between 18t St. and Wisconsin St.
RESOLUTION NO.114-05
RESOLUTION FIXING TIME AND PLACE FOR HEARING UPON ASSESSMENT
ROLL FOR STREET ASSESSMENT PROJECT NO.2005-04STA
ALLEY FROM 14'TH AVE.S.TO 16TH AVE.S.BETWEEN 1ST ST.AND WISCONSIN ST.
BE IT RESOLVED by the City Council of the City of Brookings,South Dakota,as follows:
1. The assessment roll foz Street Assessment Project No.2005-04STA having been filed in the office
of the City Manager on the 16�day of December, 2005,the Ciry Council shall meet in the Council
Chaxnbers,City Hall,in said Ciry on Tuesday,the 10�'day of January 2006,at 6:00 o'clock PM,the
said date being not less than twenty(20)days from the filing of said assessment roll fox heaxing
thereon. �
2. The City Engineer is authorized and dixected to prepare a notice describing,in general terms Street
Assessment Pxoject No.2005-04STA,the date of filing the assessment roll,the time and place of
hearing theieon,stating that the assessment xoll will be open for public inspection at the office of the
City Engineer and zeferring to the assessment roll fox further particulaxs.
3. The City Clexk is authorized and directed to publish said notice in the official newspaper at least
one(1)week prior to the date set for hearing and to mail a copy thereof,by fixst class mail addressed
to the owner or owners of any property to be assessed at his,her or their last mailing address as
shown by the records of the Dixector of Equalization at least one(1)week prior to the date set foz
said hearing.
G. Action on Resolution No. 115-05, Fixing Time and Place for Hearing Ution
Assessment Roll for Street Assessment Project 2005-O8STA Alley from 12`�Ave. to
13`�Ave. between 5`� St. and 6�'St.
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RESOLUTION NO.115-05
RESOLUTION FIXING TIME AND PLACE FOR HEARING UPON ASSESSMENT
• ROLL FOR STREET ASSESSMENT PROJECT NO.2005-08STA
ALLEY FROM 12TH AVE.TO 13TH AVE.BETWEEN 5TH ST.AND 6TH ST.
BE IT RESOLVED by the Ciry Council of the City of Bxookings,South Dakota,as follows:
1. The assessment roll for Stxeet Assessment Pxoject No.2005-08STA having been filed in the office
of the City Manager on the 16�'day of Decembex, 2005,the City Council shall meet in the Council
Chambers,City Hall,in said City on Tuesday,the 10�'day of January 2006,at 6:00 o'clock PM,the
said date being not less than twenty(20)days fxom the filing of said assessment roll for hearing
thereon.
2. T'he Ciry Engineer is authorized and directed to prepare a notice describing,in general terms Street
Assessment Project No.2005-08STA,the date of filing the assessment roll,the time and place of
hearing thereon,stating that the assessment roll will be open for public inspection at the office of the
City Engineex and referring to the assessment xoll fox fuxther particulaxs.
3. The City Clerk is authorized and directed to publish said notice in the official newspaper at least
one(1)week priox to the date set for hearing and to mail a copy thexeof,by first class mail addressed
to the owner or owners of any property to be assessed at his,her or their last mailing address as
shown by the records of the Dixectox of Equalization at least one(1)week prior to the date set fox
said hearing. �
H. Action on Resolution No. 116-05,Fixing Time and Place for Hearing U�on
Assessment Roll for Street Assessment Project 2005-09STA Allev from 2°d Street S. to
3`� Street S. between 6`�Avenue S. and 7`�Avenue S.
RESOLUTION N0.116-05
RESOLUTION FIXING TIME AND PLACE FOR HEARING UPON ASSESS1yIENT
ROLL FOR STREET ASSESSMENT PROJECT NO.2005-09STA
ALLEY FROM 2ND ST. S.TO 3�ST. S.BETWEEN 6TH AVE. S.AND 7TH AVE.S.
BE IT RESOLVED by the City Council of the City of Brookings,South Dakota,as follows:
1. The assessment xoll fox Street Assessment Project No.2005-09STA having been filed in the office
of the City Manager on the 16�'day of Decembex, 2005,the City Council shall meet in the Council
Chambers,City Hall,in said Ciry on Tuesday,the 10�"day of January 2006,at G:00 o'clock PM,the
said date being not less than twenty(20)days from the filing of said assessment xoll for hearing
thereon.
2. The City Engineer is authorized and directed to prepare a notice describing,in general te�ns Street
Assessment Project No.2005-09STA,the date of filing the assessment roll,the time and place of
hearing thereon,stating that the assessment roll will be open for public inspection at the office of the
City Engineex and refexring to the assessment roll fox further particulazs.
3. The Ciry Clerk is authorized and d'uected to publish said notice in the official newspapex at least
one(1)week prior to the date set for hearing and to mail a copy thezeof,by first class mail addressed
to the ownet or ownexs'of any property to be assessed at his,her oi their last mailing address as
shown by the records of the Director of Equalization at least one(1)week prior to the date set fox
said hearing.
On the consent agenda,all present voted yes;motion catried.
R�lution No. 118-05,Awarding Bids for the Swiftel Center Tents.A motion was made by
Bartley, seconded by Reitz,to approve Resolution No. 118-05. Discu.r.seon: Beed questioned if the sales
tax revenue generated by that event rvas enough to cover the co.rt.r Did they con�ider u�ing Third B money� On the
motion, all present voted yes,motion carried.
RESOLUTION NO. 118-05
RESOLUTION AWARDING BIDS
ON ARABIAN HORSE SHOW TENT PROJECT
Whereas,the City of Bxookings has received the following bids for Arabian Horse Show Tent Projec�t:
Central Bu.rine.r.r Supply,Inc.,Brnokings: Option#1:$28,000.00 Option#2: $37,000.00
Kar!'r Kenta!Center,Inc., Wircon.rin: Option#1: ,�29,431.02 Option#2: d38,S21.62
I.sncoln Tent,Inc.,Llncoln,NE: Option#1: no bid Option#2: �'29,228.00
A to Z Cla.rric Event,r,Minnetota: Option#1: $30,786.00 Opizon#2: ,835,930.00
Now Therefoxe,Be It Resolved that the low bid of Centra!Busine.r.r Supply,Inc.for$28,000.00 for Option
#1 be accepted.
Hos�ital Board ADUOintment. A motion was made by Thomson, seconded by Whaley,to appoint
Keith Corbett to the Hospital Boaxd for a three year term expiring 1/1/09. Discus.rion: It wa.r noted
that Be�dichek and Mun.rterman svould be ab.rtaining due to a conflict. The medical po�ition on the Board will
remain vacant until the Ho.rpital Board makes a recommendation on the j�mpo.red board ordinance amendment.
Council members a.rked for additional information beprovided with a�tipointment recommendation.r On the
motion, all present voted yes,Bezdichek and Munsterman abstained,motion carried.
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Resolution No. 119-05—Bond Rec�uirements. A motion was made by Whaley, seconded by
Bardey, to approve Res. No. 119-05,A Resolution Amending Resolution 92-05 to Include Financial
Securities Assurance Inc. Bond Insurance Requirements. Di.rcu,r.rion:Keed que.rtioned taking action on the
resolution becau,re it wa.c received at the time of the meeting. Lanning indicated that the amendment tvas required by
the Financial SecuritiesAs.rurance Inc. All present voted yes;motion caYried.
RESOLUTION N0. 119-05
RESOLUTION AMENDING RESOLUTION 92-05
To Include Financial Securities Assurance Inc. Bond Insuxance Requirements.
WHEREAS, Financial Secuxities Assurance Inc. (FSA) issued a policy with regard to the Bonds
issued pursuant to Resolution 92-05 ,(the"Resolution") adopted by the City;and
WHEREAS,FSA as one of its requitements requires the City to modify Resolution 92-05.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
BROOKINGS OF BROOKINGS COUNTY,AS FOLLOWS: ,
Section 1. Addition of Section 4.9. The Resolution shall be amended by adding the following
5ection 4.9:
Section 4.9. Bond Insurance: T'he Bonds shall be insured by an insuxance policy issued by
Financial Securities Assurance Inc. The Ciry shall be subject to the following:
a. 'The City (the "Issuer `� agrees that any Event of Default under the Insurance
Agreement shall constitute an Event of Default under the Resolution.
b. "Insurance Poliry" shall be defined as follows: "the insurance poliry issued by the Insurer
guaranteeing the scheduled payment of principal of and interest on the Bonds when due".
"Insurer" shall be defined as follows: "Financial Security Assurance Inc., a New York stock
insurance company, or any successor thereto or assignee thexeof".
c. The prior written consent of the Insurer shall be a condition precedent to the deposit of any
czedit instrument provided in lieu of a cash deposit into the Debt Service Reserve Fund if
. any. Notwithstanding,anything to the contrary set forth in the Resolution, amounts on
deposit in the Debt Service Reserve Fund shall be applied solely to the payment of debt
service due on the Bonds.
d. The Insuxer shall be deemed to be the sole holder of the Insured Bonds for the purpose of
exercising any voting xight or privilege or giving any consent or direction or taking any othex
action that the holders of the Bonds insuted by it are entided to take pursuant to the
provisions of the Resolution pertainuig to (i) defaults and remedies and (u) the duties and
obligations of the Paying Agent. Remedies granted to the Bondholders shall expressly
include mandamus.
e. If acceleration is perm�tted under the Resolution, the maturity of Bonds insured by the
Insurer shall not be accelerated without the consent of the Insurer and in the event the
maturity of the Bonds is accelerated, the Insurer may elect, in its sole discretion, to pay
accelerated principal and intexest accrued that, on such principal to the date of accelexation
(to the extent unpaid by the Issuex) and the Paying Agent shall be required to accept such
amounts. Upon payment of such accelexated principal and interest accrued to the
acceleration date as provided above, the Insurer s obligations under the Insurance Policy
with respect to such Bonds shall be fully dischaxged.
f. No grace pexiod for a covenant default shall exceed 30 days or be extended for more than 60
da.ys, without the prior written consent of the Insurer. No grace period shall be permitte�
for payment defaults.
g. The Insurer shall be included as a third party beneficiary to the Resolution.
h. Upon the occurrence of an extraordinary optional, special or extraordinary mandatory
redemption in part, the selection of Bonds to be redeemed shall be subject to the approval
of the Insurer. The exercise of any provision of the Resolution which permits the purchase
of Bonds in lieu of redemption shall require the prior written approval of the Insurer if any
Bond so purchased is not cancelled upon purchase.
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i. Any amendment, supplement, modification to, or waiver of, the Resolution or any other
transaction document including any underlying securiry agreement (each a "Related
Document"), that requites the consent of Bondowners or adversely affects the rights and
interests of the Insurer shall be subject to the prior written consent of the Insurer.
j. Unless the Insurer otherwise directs, upon the occurrence and continuance of an Event of
Default or an event which with notice or lapse of time would constitute an Event of Default,
amounts on deposit in the Construction Fund shall not be disbursed, but shall instead be
applied to the payment of debt service or Yedemption price of the Bonds.
k. The rights granted to the Insurex under the Resolution or any other Related Docuxnent to
request, consent to or direct any action are rights granted to the Insurer in consideration of
its issuance of the Insurance 1'olicy. Any exercise by the Insurex of such rights is merely an
exercise of the Insurer's contxactual rights and shall not be construed or deemed to be taken
for the benefit, or on behalf, of the Bondholders and such acti.on does not evidence any
position of the Insurer, affirmative or negative, as to whether the consent of the
Bondowners or any othex person is xequired in addition to the consent of the Insurer.
1. Only (1) ' cash, (2) non-callable direct obligations of the United States of America
("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and
principal payments on Treasuries held by a bank ox trust company as custodian,under which
the�owner of the investment is the real party in interest and has the right to proceed direcdy
and individually against the obligor and the underlying Treasuries are not available to any
person claimuig through the custodian or to whom the custodian may be obliga.ted, (4)
subject to the priox written consent of the Insurer, pre-refunded municipal obligations rated
"AAA" and "Aaa" by S&P and Moody's, respectively, or (5) subject to the prior written
consent of the Insurer, securities_eligible for "AAA" defeasance under then existing criteria.
of S &P or any combination thereof, shall be used to effect defeasance of the Bonds unless
the Insurer otherwise appxoves.
m. To accomplish defeasance, the Issuer shall cause to be delivered (i) a report of an
independent firm of nationally �ecognized cextified public accountants or such other
accountant as shall be acceptable to the Insurex ("Accountant") verifying the sufficiency of
the escrow established to pay the Bonds in full on the matutity or redemption date
("Vexification"), (u) an Escrow Deposit Agreement (which shall be acceptable in form and
substance to the Insurer), (iii) an opinion of nationally recogruzed bond counsel to the effect
that the Bonds axe no longer "Outstanding" under the Resolution and (iv) a cextificate of
discharge of the Paying Agent with xespect to the Bonds; each Verification and defeasance
opinion shall be acceptable in form and substance, and addressed, to the Issuer, Paying
Agent and Insurer. The Insurer shall be provided with final drafts of the above-referenced
documentation not Iess than five business days prior to the funding of the escrow.
n. Bonds shall be deemed "Outstanding" under the Resolution unless and until they are in fact
paid and retired ox the above criteria are met.
o. Amounts paid by the Insurer under the Insutance Policy shall not be deemed paid for
purposes of the Resolution and the Bonds relating to such papments shall rema.in
Outstanding and continue to be due and oafing until paid by the Issuex in accordance with
the Resolution. `I'he Resolution shall not be discharged unless all amounts due or to become
due to the Insuxer have been paid in full or duly provided for.
p. Each of the Issuer and Paying Agent covenant and agree to take such action (including, as
applicable, filing of UCC ftnancing sta,tements and continuations thereo� as is necessary
from time to time to pxeserve the priority of the pledge of the Trust Estate under applicable
law.
q. Claims upon the Insurance Policy and Payments by and to the Insuter.
(1) If, on the third Business Dap pxior to the related scheduled interest payment date or
principal payment date ("Payment Date") there is not on deposit with the Paying
Agent, after making all transfers and deposits required under the Resolution,moneys
sufficient to pay the principal of and interest on the Bonds due on such Payment
. Date, the Paying Agent shall give notice to the Bond Insuxer and to its designated
agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy o£the amount
of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on
the second Business Day prior to the related Payment Date, there continues to be a
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deficiency in the amount available to pay the principal of and interest on the Bonds
due on such Payment Date, the Paying Agent shall make a claim under the Insurance
Policy and give notice to the Insurer and the Insurer s Fiscal Agent (if any) by
telephone of the amount of such deficiency, and the allocation of such deficiency
between the amount required to pay interest on the Bonds and the amount requited
to pay principal of the Bonds,
copfirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon,
New Yoxk City time, on such second Business Day by filling in the foxm of Notice
of Claim and Certificate delivered with the Insurance Policy.
�(2) The Paying Agent shall designate any portion of payment of principal on Bonds
paid by the Insurer, whether by virtue of mandatory sinking fund redemption,
maturity or othex advancement of maturity, on its books as a reduction in the
principal amount of Bonds registered to the then current Bondholder,whether DTC
or its nominee or otherwise, and shall issue a replacement Bond to the Insurer,
. • registered in the name of Financial Security Assuxance Inc., in a principal amount
equal to the amount of principal so paid (without regard to authorized
denominations); provided that the Paying Agent's failure to so designate any
payment or issue any replacement Bond shall have no effect on the amount of
principal or interest payable by the Issuer on any Bond or the subYOgation rights of
the Insurer.
(3) The Paying Agent shall keep a complete and accurate record of all funds deposited
by the Insurer into the Policy Payments Account (defined below) and the allocation
of such funds to payment of interest on and principal of any Bond The Insurer shall
have the right to inspect such records at reasonable times upon reasonable notice to
the Paying Agent.
(4) Upon payment of a claim under the Insurance Policy, the Paying Agent shall
establish a separate special purpose trust account for the benefit of Bondholders
referred to herein as the "Policy Payments Account" and over which the Paying
Agent shall have exclusive control and sole right of withdxawal. The Paping Agent
shall receive any amount paid under the Insurance Policy in trust on behalf of
Bondholders and shall deposit any such amount in the Policy Payments Account and
distribute such amount only for purposes of making the payments for which a claim
was made. Such amounts shall be disbursed by the Paying Agent to Bondholders in
the same manner as principal and interest payments are to be made with respect to
the Bonds under the sections hereof regaxding payment of Bonds. It shall not be
necessary for such payments to be made by checks or wire transfers separate from
the check or wire transfer used to pay debt service with other funds available to
make such payments. Notwithstanding anything hexein to the contrary, the Issuer
agrees to pay to the Insurer (i) a sum equal to the total of all amounts paid by the
Insurer under the Insurance Policy (the "Insurer Advances"); and (ii) interest on
such Insuter Advances from the date paid by the Insuter until payment thereof in
full, payable to the Insurer at the Late Payment Rate per annum. "Late Payrnent
Rate"means the lesser of(a) the greater of(i) the per annum rate of interest,publicly
announced from time to time by JPMorgan Chase Bank at its principal office in the
City of New York, as its prime or base lending rate (any change in such rate of
interest to be effective on the date such change is announced by JPMorgan Chase
. Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Bonds and
(b) the ma�mum rate permissible under applicable usury or similar la.ws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the actual
number of days elapsed over a yeas of 360 days.
.(5) Funds held in the Policy Payments Account shall not be invested by the Paying
Agent and may not be applied to satisfy any costs, expenses or liabilities of the
Paying Agent. Any funds remaining in the Policy Payments Account following a
Bond payment date shall promptly be xemitted to the Insurer.
r. The Insurer shall, to the extent it makes any payment of principal of or interest on the
Bonds, become subrogated to the rights of the recipients of such papments in accordance
with the terms of the Insurance Policy. Each obligation of the Issuer to the Insurex under
the Related Documents sliall survive discharge or terminarion of such Related Documents.
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s. The Issuer shall pay or Yeimburse the Insurer any and all charges, fees, costs and expenses
that the Insuter may xeasonably pay or incur in connection with (i) the administration,
enforcement, defense or preservation of any rights or securiry in any Related Document; (u)
the pursuit of any xemedies under the Resolution or any other Related Document ox
otherwise affoxded by law or equity, (iu) any amendment,waiver or other action with respect
to, or related to, the Resolution or any otheY Related Document whether or not executed or
completed, ox (iv) any litigation ox other dispute in connection with the Resolution oY any
other Related Docutnent or the transactions contemplated thereby, other than costs resulting
from the failure of the Insurex to honor its obligations under the Insurance Policy. The
Insurer Yeserves the right to charge a reasonable fee as a condition to executing any
amendment, waiver or consent proposed in respect of the Resolution or any other Related
Document.
. t. After payment of reasonable expenses o£the Paying Agent, the application of funds realized
upon default shall be applied to the payment of expenses of the Issuer or rebate only after
the payment of past due and cutrent debt service on the Bonds and amounts required to
restore the Debt Service Reserve Fund to the Debt Service Reserve Requirement.
u. "The Insuter shall be entided to pay principal or interest on the Bonds that shall become Due
for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms axe
defined in the Insurance Policy) and any amounts due on the Bonds as a result of
acceleration of the matizrity thereof in accordance with the Resolution, whether or not the
Insuxer has received a Notice of Nonpayment (as such terms are defined in the Insurance
Policy) or a claim upon the Insurance Policy.
v. The notice address of the Insurer is: Financial Security,Assurance Inc., 31 West 52"a Street,
New York, New York 10019, Attention: Managing Director — Surveillance, Re: Poliry No.
206203-N, Telephone: (212) 826-0100; Telecopier: (212) 339-355G. In each case in which
notice ot other communication refers to an Event of Default, then a copy of such notice or
other communication shall also be sent to the attention of the General Counsel and shall be
maxked to indicate "URGENT MATERIAL ENCLOSED."
w. T'he Insurer shall be provided with the following infoxmation by the Issuer or Paying Agent,
as the case may be:
(i) Annual audited financial statements within 150 days after the end of the
Issuer's fiscal year (together with a certification of the Issuer that it is not
aware of any default or Event of Default under the Resolution), and the
Issuer's annual budget within 30 days after the approval thereof together
with such othex information, data or reports as the Insurer shall
reasonably request from time to time;
(ii) Notice of any draw upon the Debt Service Reserve Fund within two
Business Days after knowledge thereof other than (i) withdrawals of
axnounts in excess of the Debt Service Reserve Requirement and (ii)
withdrawals in connection with a refunding of Bonds;
(ui) Notice of any default known to the Paying Agent or Issuer within five
Business Days aftex knowledge thexeof;
(iv)� Prior notice of the advance refunding or redemption of any of the,
Bonds, including the principal amount, maturities and CUSIP numbers
thereof;
(v) Notice of the resignation or removal of the Paying Agent and Bond
, _ Registrax and the appointment of, and acceptance of duties by, any
successor thexeto;
(vi) Notice of the commencement of any proceeding by or against the Issuer
or Obligor commenced under the United States Bankruptry Code or any
other applicable bankruptry, insolvency, receivership, rehabilitation or
similar law (an "Insolvency Proceeding");
(vii) Notice of the making of any clai.m in connection with any Insolvency
Proceeding seeking the avoidance as a preferential transfer of any
payment of principal of, or interest on, the Bonds;
26
(viii) A full original transcript of all proceedings relating to the execution of
any amendment, supplement, or waiver to the Related Documents;and
(ix) All reports, notices and correspondence to be delivered to Bondholders
under the terms of the Related Documents.
x. Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set
forth in the Resolution, no such issuance may occur (1) if an Event of Default (or any event
which, once all notice or grace periods have passed, would constitute an Event of Default)
exists unless such default shall be cured upon such issuance and (2) unless the Debt Service
Reserve Fund is fully funded at the Debt Service Reserve requirement (including the
proposed issue) upon the issuance of such Additional Bonds, in either case unless otherwise
permitted by the Insurer. .
y. In determining whether any amendment, consent or other action to be taken, or any failure
to take action, under the Resolution would adversely affect the security for the Bonds or the
rights of,the Bondholders, the Paping Agent shall consider the effect of any. such
amendment, consent,action or inaction as if there were no Insurance Policy.
Section 2. Amendment of Article VII. Article VII shall be modified to read as follows:
ARTTCLE VII
ADDIT70NAL BONDS
The issuer reserves the right to issue Additional Bonds, payable fxom the Sales Tax, on a parity
as to both�rincipal and interest with the Bonds, if (i) the Issuer is current in the payment of
� principal and interest on the Outstanding Bonds and is current in the accumulations required for
the payment of principal and interest, (u) the Issuer is in compliance with the covenants herein
contained, and (iii) the Sa1es Tax collected by the Issuer in the last preceding fiscal years (as
determined by the Issuer) is sufficient top cover 1.25 times. the combined avexage annual
principal and interest xequixements on the Outstanding Bonds, and the proposed parity lien
bonds.
Section 3. All other pxovisions of the Resolution shall remain in full force and effect.
Ordinance No. 36-05—Budg,et Amendment. A motion was made by Reitz,seconded by Reed,
to approve Ordinance No. 36-05,Budget Amendment No. 5/�'inal for 2005 budget. All present
were given an opportunity to be heard. All present voted yes;motion carried.
Qrdinance No. 37-05—Rezoning, A motion was made by Thomson, seconded by Whalep,to
approve first reading of Ordinance No. 37-05, a petition to rezone Lots 3 and 4,and the vacated
W2' of Main Avenue South,Block 5, Folsom Addition from a Business B-3 District to a Planned
Development District (112 Main Avenue South). .All present voted yes;motion carried. Public
hearing was scheduled for January 10, 2006.
Real Estate Purchase—Donley's Computer Sales & Service,Inc. A motion was made by
Thomson, seconded by Whaley,to sign a REAL ESTATE PURCHASE AGREEMENT between
Donley's Computer Sales&Service, Inc.,and the City of Brookings, South Dakota, for real properry
located at the West Sixty Feet(W 60� of Block Qne (1) of Avery's Addition,City of Brookings,
County of Brookings, State of South Dakota. All present were given an opportunity to be heard.
All present voted yes;motion carried.
REAL ESTATE PURCHASE AGREEMENT
THIS REAL ESTATE PURCHASE AGREEMENT is made and executed by and between
Donley's Computex Sales&Service,Inc., (hereinaftex xeferxed to as"Seller'�,and the City of
Brookings,South Dakota,a South Dakota Municipal Corporation, (hereinafter xeferred to as the
`Buyer");
WITNESSETH:
WHEREAS, the Buyer desires to purchase the real property described below and Seller agrees to
convey to Buyer pursuant to the terms of this Rea1 Estate Purchase Agreement, the real estate
described below.
27
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
AGREEMENTS CONTAINED HEREIN, IT IS MUTUALLY AGREED BY AND BETWEEN
THE PARTIES HERETO AS FOLLOWS:
1. Purchase of Real Pro�e_T The Seller hereby agtees to sell to Buyer and Buyer hereby
agxees to purchase from Seller the following described real propexty: The West Su�ty Feet (W 60') of
Block One (1) of Avery's Addition, City of Brookings, County of Brookings, State of South Dakota.
2. Purchase Price. 'The Buyer shall pay to Seller the sutn of One Hundred Nine Thousand and
no/100 ($109,000.00) Dollars for purchase of the above-described property,payable at Closing.
3. Real Estate Closin,g Documents and Miscellaneous. Seller shall provide a Warranty Deed to
the Buyer at Closing to include the property described in Section One (1) above. Seller shall convep
said properry free of liens and mortgages,but said property may be subject to easements,rights of
way and restrictions of recoYd. In addition,the Buyer and Seller, as the case may be, shall also
perform the following:
A. Title Insurance Policv. The Buyer will not be requiring tide insurance for this transaction.
B. Deed Pre�axation. The Buyer will prepare the Warranty Deed and Certificate of Real Estate
Value.
C. Transfer Fee and Real Estate Taxes. There is no transfer fee because the property is being
conveyed to a municipal corporation.The 2005 Real Estate Taxes and all othex ta�tes and
assessments shall be the Seller's obligation because the Closing date will be very close to December
315C.All future taxes and assessments,if any, shall be Buper's obligation,however because the City is
a political subdivision the property will be exempt from real property taxes from the time of Closing.
D. Closing Date/Transfer Fee. The Closing Date shall occur on or about December 31,2005
on a date which is mutually convenient for Seller and Buyer.
E. Possession. Buyex shall acquire possession of the above-descxibed property immediately
following Closing.
4. Contingencies The obligations of the Seller and Buyer undex this Agreement are contingent
upon the following conditions: '
A. "I"hat Seller provides cleax and marketable tide to the Buyex concerning the above described
real property,by Waxranty Deed,which contains only easements,rights of way and reservations of
record.
B. The Buyer's obligation to purchase the property sha.11 be terminated if the City Council's
decision to purchase the properry is referred by the voters. Referred means (1) a referendutn petition
is filed within twenty (20) days of the date the City's decision to approve this putchase agreement is
published;and (2) the voters at an election vote to nullify the decision of the City to purchase or pay
for the property.
If there are any tide restrictions, defects or burdens to which Buyer objects,other than easements,
rights of way and restrictions of recoxd, such objection shall be stated in writing to Seller,and Seller
shall be allowed a reasonable time of not less than sixry (60) days in which to correct the saxne,and
the Closing date shaIl be delayed for not less than sixry(60) days to provide Seller with time to
correct said defect.
If the foregoing contingencies axe not satisfied, corrected or waived, as the case may be,by Seller or
Buyer as stated above,then this Agreement may be terxninated at the option of the Buyer.
5. Condition of the Pxonertv. The Buyer has inspected the above-described property and
accepts the condition of the property.
6. Use of the Pro�ert� The Buyer agtees to include a restriction in the Deed to the above-
described property that the property be used only for park and recreation purposes.
7. Notice. This Purchase Agreement was prepared by Steven J. Britzman, 319 Fifth Avenue,
Brookings, South Dakota 57006,Attorney£or Buyer.
28
8. Entire A�reement. This written Agreement constitutes the complete Agreement between
the parties and supersedes any prior oral or written Agreement between the parties regarding the
subject matter of this Agreement. There are no verbal agreements that change this Agreement and
no waiver of its terms will be effective unless such are made and executed in writing and duly
acknowledged as received by the parties.
9. Bindin E'g ffect• T'his Agreement binds the paxties hereto and theiY heirs, successors and
assigns,if any.
Discussion Items.
National League of Cities Re�ort. Council Members Bartleq and Bezdichek attended the
National League of Cities Congress of Cities Conference in Charlotte,North Carolina,December 6-
10, 2005. Both said it was an incredible conference. 'I'hey attended sessions pertain.ing to several
topics. They commented that only eight cities in South Dakota belong to NLC and Brookings had
the only voting delegates present. They urged other Council members to attend the annual session
and recommended the Council travel budget be increased to accommodate more training
opportunities. �
Executive Session for Pricing Strategies—Brookin�s Munici�al Utilities. This item was
originally scheduled as an executive session discussion between the City Council and Brookings
Municipal Utilities Board,but was noted that a public discussion on the Brookings Municipal
Utilities offering video services had already occurred. Both groups agreed to proceed in open
session. Any competitive pxicing discussion would be handled in executive session.
Bezdichek said BMU presented a capital improvement plan for 2005 to 2013 to include fiber optics
cable and video for$9.SM and an additional$6.2M to extend the video. He asked why BMU is
citing a$2M cost for the video expansion in the public sessions rather than the combined cost of
$15.9M. Steve Meyer,BMU staff, said the$9.SM figure includes fiber.Bezdichek asked if BMU
could do the video project without fiber. No. Meyer said the$2M figure is an estimate associated
with amount of electronics and capital that would have to be invested in a lump sum basis. The
$6.2M figuxe relates to the build-out cost if the system were fully loaded. Appro�mately$2M is
needed to get into the video businesses. As subscribez ship grows, so does the investment in
electric. $6.2M represents a fully loaded system. Bezdichek asked if the BMU Board was
comfortable when the fibex and video has a cost of$15.7M and has no problem telling the public it
will be$2M. Bezdichek questioned if BMU had been completely forward in the pxocess and if all
information was provided to citizens. Meyer said he believes all comments made have been
accurate. Bezdichek said he struggles as a Council member when a project will cost$15.7M is
owned by citizens,and those citizens are told it will only cost$2M.
Thomson asked if BMU needs$2M to get into the business and another$4.2M would be needed to
get it to the desired level. Meyer said as subscribers come on thete will be revenue generation;
however,an initial$1.5 to$1.8M investment is needed for staxt-up. Some additional marketing and
start-up costs rounded up to the $2M figure.
Reitz asked if the$9.5M figure counts what is in the ground. No. He asked what the total cost of
� fiber was iri the ground. In the$10M range. Reitz acknowledged there is value to an intact fiber
optic system,but is concerned about the financial security of the utility company. He further
expxessed concern rega.rding the cost to build-out the fiber s�stem and that BMU is looking at
another$2M investment to enter anothex business. He noted that BMU projects axe not being
financed by bond issues that required ciry approval,but rather by internal mechanics. The
governance process will requixe appraval for the TV Cable Franchise Agreement and bonding
authority. Bonding will be necessary for an additional$6M for infrastructuxe.
Reitz asked where the$2M funding will come from. Meyer said from e�sting money out of the
telephone fund.
Bartley also expressed concern about the Ciry's total indebtedness on fiber optics and payouts on
TV given the projections to 2013. How long can BMU remain in business if the market shifts,the
economq tanks, and a competitor price war starts? Many communities have gotten into fiber and
gotten into financial problems. He asked what the plan was if projections aren't met. How can the
rates and transfers be protected? He is concerned that the debt ratio is so high. Can the BMU
Boaxd assure the City Council that it has plans for the worst case scenario with the fiber optic bu.ild-
29
out project with the video supplementing it? Meyer said he hasn't known of many tel-cos that had
pxoblems with fiber optic build-outs. He noted that some communities have gone into the business
for various reasons not necessarily to generate profits. Some are also not operating as successfully as
projected. Tel-cos that deployed fiber optics have experienced more success. TheiY Yesearch has
found that the investment in fibe�is a risk mitigator because it allows retains voice customers plus
adding more customeYS.
Bartley said BMU's strategy is to retain customers by the installation of fiber rather than lose them
to another service. The bundling structure BMU wants to achieve is already being done by other
companies. A new trend is to unbundle fees which will change the maxket and favor larger players,
which Brookings won't be. He asked if BMU had xesearched anothex company using the Brookings
fiber opric system to provide video without taking on the risk. Can Brookings mitigate its risk by
taking on a partneY or lease out city lines and/or structuxes?
Meyer said BMU is not opposed to third party arrangements;however,the access rules are in a state
of flux. The plan that has been put together is the unregulated business that will pay the reg�ilated
business for access to the fiber. If another provider was paying the proper amount of access,BMU
would see it as a good financial move. The problem is access users are clairning that they should not
have to pay anything for that service. Rules axe yet to be established with court cases pending.
BMU is not against providing access to another provider if the access rates are fair.
Bartley commented that regulated paying to unregulated (interfund loans)is like"robbing Peter to
pay Paul." They axe taking from the fund that generates income to make that transfer. Rather than
look at a service that only retains customers,why not give them fiber at no cost and allows them to
bundle and have no risk?
Meyer said there is a big dispute on access rates. BMU is concerned that the access rates won't be
sufficient to compensate for loss of voice customer. Even if there is access to a system that works;
BMU feels it needs a video product to bundle to retai.n its voice customers. The voice customers are
too valuable to give away. � �
Bartley suggested retainuig the voice customers but provide access to the video through another
provider. It could be a seamless bundled operation and doesn't have to say who the provider(s) are.
He suggested this option because he is concerned about the risk to the City and is not comfortable
with getting into another business with unregulated fee structures. Can BMU structure the system
with a third paxty and still retain voice customers?
Meyex said no other company is going to put in a$10M investment for fiber optics. However,
another company may install video service and BMU retains the bundling service. City lines and the
service could be contracted out in a reselling arrangement., BMU woutd be open to any scenaxios
that xetain voice customexs and provide an adequate rate of return.
Bezdichek asked who are the voice customers and how many do we have. Meyer said there are
8,000 access lines generating$7M xevenue per pear.
Bezdichek noted there axe 5,466 phone hookups and hook-ups are not needed for every customer.
Meyer said 8,000 is based on customers and not premises (i.e, aparlment complexes with several
customers).
Cxaig Osvog said in order fox another company to use the city's fiber BMU would still have to spend
$2M to allow video signal through the central office and through the neighborhood. If BMU
pxovides the service it xemains the retailer. Allowing a third party access to fiber would still require
the city spending$2M. He was concerned about protecting the$7M revenue base that allows BMU
to be viable and make a return ta the owners. Under a reseller scenaxio the city would not be in the
position as a providex. The reseller would be the named party the customer would do business with.
He hasn't seen how the nuxnbers could work to xetain what we have and still be able to pay for fiber
thxoughout the community. BMU is the incumbent local exchange carxier (LEC) and must provide
service throughout the community. BMU was given the authority by the South Dakota PUC to be
the local provider. With that authority comes the responsibility to provide telecommunications of a
certain quality. As a LEC,BMU provides service to everyone regardless of economic sta.tus. As a
video provider BMU would do the same thing. However, a third party could present a packa.ge that
would be priced too high and"cherry-pick" high margin customers.
30
Bartley asked if providing services to everyone could be contractually guaxanteed with a third party.
Osvog said they may be able to get a company to agree to take every customer,but their sexvice will
be priced in the$200 plus range is due to BMU's abiliry to bundle.
Gail Robertson,BMU Boaxd Member, asked why the city would take all the risk of installing fiber
optics, hand over video to company X for them to "cherry-pick" off all the high margin customers,
leaving BMU and the citizens to pay for the system. No company would sign a contract requiring
them to provide for everyorie and only offer video when they axe up against a competing company
that can bundle. Fiber optics will best utilize the system to its maximuxn potential. Fiber is needed
to zetain the primary revenue generating voice customers.
Copper is deteriorating. Without fiber optics,BMU will be out of the DSL business. If fiber isn't
installed the only xemaining business is voice,which is decreasing. The curxent business model from
the last 20 years is no longer viable. The additional revenues are based on customer-driven costs. It
was clarified that the$9.5M ftgute includes fibex for the entire town.
� Robertson said the best way to xecover its investment in fibex is to bundle and sell as many services
as possible. BMU would have ability to bundle four projects,which no one else can.
Munsterman commented that bundling is a response to what people want. A provider must be able
to provide a"basket" of services and if the basket isn't full,they can't compete.
Thomson noted that there axe ongoing expenses in the cable business. Meyer said it will be far less
for BMU because it already has a trained staff in place. Wou1d BMU need to pay networks? BMU
would pay the same costs as others. Participation is projected as much higher than 50%because the
uniqueness of the BMU bundle. No one else will be able to provide customers with fiber optic to
their home. Fiber optics will also be an advantage for computers with unlimited speeds. No one
else will have that ability. Businesses highly dependent on data transfex will gready benefit from
fibex.
Reed noted that video consumers have many channel options. BMU xepresentative said BMU is not
dete�in;ng video content- that is decided by others. Fiber is necessary for BMLJ to continue as a
tel-com. Once fiber is in the ground,BMU must optimize its investment.
Thomson commented that the ciry is alteady committed on the fiber installation. It has already
started and won't stop. Yes,that is correct. BMU is also burying electric at the same time. The
question of investment risk of$2M is front-end only. The risk is already done by installing the fiber
at a cost of$9.5M.
Osvog said there is benefit to municipal control. It enables BMU to do thin.gs in the community at
its discretion. BMU has provided services and done projects that other companies would not have
done fox the benefit of the community.
Thomson asked if the video service could provide a cablecast of city council meetings. Yes.
Reitz asked if there are a number of private companies or cities completing fiber to homes. Osvog
didn't know. Rei�z said he knows that private telephone companies are installing fiber to homes.
Robertson cautioned that the private providers don't install to every home,only high margin clients.
Reitz asked how many municipalities own the fiber to the homes. Osvog didn't know,but noted
that it is haxd for municipalities to get into the video business.
Robertson said Bxookings had the first fiber optic line that carried a signal in the state and that has
allowed Brookings to retain 3M and attract others. Brookings was only one of six in the country to
have a digital switch. Those types of investrnents have allowed Brookings to enjoy the type of
industrial development it now.has. Brookings now needs to xnaximize its returns of what is
provided to the citizens.
Whaley questioned the number of and attendance at BMU's public meetings on video. Robertson
said in his years of public service it has been his experience that people who support the project
don't attend the meetings.
Osvog said the lack of public criticism is a good sign. Thep conducted an extensive market sutvey
that found a resounding affirmative response about offering digital service.
31
Thomson noted that people responding to the survey were in favor of bundling and would use
BMU services if available. She.asked if there was a question whethet they would switch to this
service. Meyex said the penetration estimate involved input fxom several different survey questions.
Thomson expressed concern that even BMU has the best services available,but is getting that
message out to the people,acting on that message is very difficult. She wondered if the ptojections
were overly optimistic. Osvog said BMU doesn't underestimate the challenges ahead. It will take a
great deal of work to maxket and sell video and bundling. During the last 6 to 8 years BMU has
undergone efforts to make its employees more tuned to customex services and the element of sales.
Reitz askecl what BMU's overall outstanding debt was. Meyer said$33M,some in revenue bond
debt and some leased. Reitz said the concern is the City Council and citizens have a stake in what
BMU does and its financial state. He is concerned about incurring more debt. Debt breakdown:
Telephone regulated 6.3M (lease purchase), SD PCS - $13.9M (lease purchase); SC PCS - $8.4M
(revenue bond);Electric-$3M,Water$500,000 and wastewater-$847,000.
Reitz commented that Elbow Lake,MN staxted a cable company in 1990. After a pxice war the city
had to sell out in 4 yeaxs. He listed other cities that embarked in the video business and were now
struggling. He asked the estimated cost for the proposed new water treatment plant. $29M with a
planr�ed revenue bond of$8.SM in 2013.
Osvog said no one is more concerned about debt than the urility staff. They would rather not have
debt but the needs axe such that it is imperative.
Reitz said price wars have caused those cities to spend more on marketing than ever planned.
Reitz asked if BMU were concerned with legal challenges. No.
Bezdichek said when BMU got into the wireless telephone business it had gxeat expectations. Since
then Brookings has had major losses into the millions. He asked what year the wireless business
would experience a profit. Meyer said the Sioux Falls maxket had a profit. Bezdichek asked if all the
service areas (Sio�Falls,iXlatextown,Yankton,Bxookings, Sioux City)were bundled together when
would it e�erience a pxofit. 10 yeaxs. Meyer noted that net profits fxom the wireless business were
over$350,000 moYe than projected. Bezdichek questioned how that number was arrived at.
Robertson clarified that wireless business opexates in two sepaxate units. BMU operates a SD
market. The otheY entity is owned 65/35 by BMU and the city of Bexesford. Bezdichek questioned
why when counting wireless customexs both sectors are used but in calculating other numbers only
one business unit is used.
Thomson asked if net profits fxom wireless activity exceeded the budget by$350,000. Yes, the
wireless pxofits exceeded expecta.tions in both maxkets.
Bartley said the budget was negative and is still negative. Yes,but it performed$350,000 better than
projected. �
Reitz noted that only in 2009 is the wireless business projected to have a posit'tve net income. He
asked how many years it will take to make up what has been lost. BMU representatives said there is
a big difference between positive cash flow and positive net income.An examii�ation of the entire
balance sheet is needed to make that dete�nination.
Bezdichek said the balance sheet will illustrate whether or not one particulax part of the business is
pxofitable or unprofitable. As a municipality,net losses can't be written off as opposed to a publicly
traded company that can wxite off losses against taxes.
Bezdichek said the city must examine how successful it has been with its 8,000 customers. Of the
21,000 wireless customers,do the 3,000 reside in city of Brookings? Yes. Of the 8,000 voice
customers BMU now wants to attract into video business,would there have to have a greater
percentage in order to see profits to 2013? No,BMU needs less than 3,000 clients to be profita.ble.
No fi�rther explanation would be given unless in executive session.
Bezdichek said it's the debt that the City Council is very concerned about. The new video business
is not projected to make any money in 2013. He expressed concern that BMU has reduced reserves
32
by$6M in only 2 years. They discussed the debt ratio calculations and Bezdichek and BMU staff
disagreed on how those calculations are made.
Robertson noted that bonding companies are very conservative and none have lost money on
Brookings. If would be entixely different if BMU wexe seeking money on the private market. The
only guaxantee is the actual cash flows or revenues from bonded indebtedness. The risk is on the
Utility Board,not the Ciry Council.
Reitz asked if the numbexs fox bonded debt includes interfund loans. No. Reitz is concexned that
he sees money leaving electric through xeserve reductions and interfund loans and knows BMU will
have to raise electric rates to xepay those funds. Meyez noted that all intexfund loans are repaid with
interest. Terms are renegotiated every 5 years over a 20 yeax period.
Alan Lanning,City ManageY, said even if each bonding issue is done separately (BMU&City
Genexal),if any went into default;the City's ability to bond would be negligible. To say that BMU's
bonding or,debt ratio won't affect the overall credit of the city is completely off-base. If one entity
failed,the City would be in sexious trouble citywide.
Bartley said he appreciated the BMU Board and staff coming to the Council meeting and for the
open and candor discussion in pubic session. He said these are difficult issues. People may not
come to the BMU public meetings an video,but these are questions that he gets asked constandy by
the public. � If the issue is difficult for Council to understand;imagine how hard it is for the general
public. He stressed that he was hopeful the two gxoups were not adversarial and that these are
questions the Council needs to ask to satisfy themselves and the public. He and members of the
City Council appreciate the work of the Utility Board.
Thomson asked if it were wise for the ciry utilities company to sta.y in the communications business.
She asked members of the Boaxd what were theix considexations and decisions to stay in the
business. Osvog said those axe questions the BMU staff and board asked continually. There has to
be a value that goes to the owners of the utility to justify its continued existence through lower rates,
local control, and transfers to city. Their economic analysis of the tel-co business identified a$7M
benefit to the community. The�City could easily e�ut the business;however, $7M per year would be
difficult to raise. What would the city be left with in terms of service with another provider? The
locally owned utilities company must continue to provide value to owners of the system.
Osvog said he and the board appreciated the opportuniry to visit. This interaction is needed in
ordex to move forward as a unit. As BMU moves forward on this initiative,they are coming to the
point of concluding the study phase and will require a decision and action. In January the Utility
Board will make a decision about moving forward with the video project and subsequent formal
requests to the City Council. BMU will need to know when the City Council would be readp to
respond to their request.
Munsterman illustrated the issue by referencing a 1950s South Dakota map without interstates. He
commented how dramatically impacted those cities were bp the development of the intersta.te road
system. 'I'he installation of state-of-the-art fiber optics will create a communications interstate
making Brookings more marketable fox economic development. He thanked the BMU Board and
staff for their courage to be on the cutting edge and being readp to change.
Thomson asked what BMU will be asking the City Council in their formal request. Osvog said a
cable fxanchise agreement and bonding tesolution.
Adjourn. A motion was made by Reed,seconded by Whaley,to adjourn. All pxesent voted yes;
motion carried. 1�Ieeting adjou�ned at 8:32 p.m.
ity
�a\�ooae Sco D Munsterman,Mayor
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� rnes,City Clerk