Pella Chronicle

December 11, 2012

Council approves sales of Healthcare Facilities Revenue Bonds

By Clint Brown
The Chronicle

Pella — The Pella City Council approved a resolution during last week's regular meeting authorizing the Issuance and Sale of Healthcare Facilities Revenue Bonds (Hearthstone Project).

This resolution authorizes the issuance and sale of conduit revenue bonds for the Hearthstone Project in the principal amount of not to exceed $10,000,000, in addition, the resolution also approves the loan agreement and pledge agreement and directs the Mayor and City Clerk to execute and deliver all other documents required for the purpose of the Hearthstone project.

On November 20, 2012, a public hearing was held, and Council approved a resolution for the issuance and sale of revenue bonds for the Hearthstone Project, in addition, the Council also authorized proceeding with all necessary agreements to issue conduit revenue bonds for the project.

The purpose of the conduit bond issue is to fund a senior retirement community Hearthstone is constructing on 50 acres directly north of the Pella Country Club at 1620 Main Street. This development will consist of 64 nursing beds and up to 34 one and two bedroom assisted living units. To finance the project. Hearthstone would like to issue tax-exempt bonds to fund the estimated construction cost of $20 million. The advantage of tax exempt financing is that it will allow the project to have a lower interest rate than taxable bonds. In order to accomplish Hearthstone's financing needs, they have made a request to the City of Pella to issue a $10 million Conduit Revenue Bond issue for the project.

This bond issue is a 'conduit' issuance because the City acts as conduit between the purchasers of the bonds and Hearthstone. Under this arrangement, the bonds are issued by the City and the proceeds of the bonds are then loaned to Hearthstone through a loan agreement in which Hearthstone agrees to repay the bondholders. It is important to note the following in issuing Conduit Bonds: the bonds do not constitute a liability or indebtedness of the City; the bonds do not count against the City's 5% constitutional debt limit; and the bonds will count against the City's bank qualified issue limits of $10 million per calendar year.

Staff performed a review of Hearthstone's financial plan to fund the project and feels Hearthstone has the ability to repay a conduit bond issue on a timely basis, in addition, staff also believes the proposed bond issue is in accordance with the City's Conduit Revenue Bond Policy which is enclosed for Council's review. Finally, it is important to note the City's bond counsel has reviewed the loan and pledge agreements.

In other action

-Council approved the third reading of and adopted an ordinance regarding wastewater rate increases.

At the Policy and Planning meeting on October 16, 2012, the City Council directed staff to proceed with a proposed wastewater rate increase, which is necessary to fund the Iowa Department of Natural Resources (IDNR) mandate.

In 2009 the City of Pella received a mandate from the IDNR to eliminate all known bypasses in our sanitary sewer collection system by October 2013. As a result of this mandate, the City of Pella is facing an estimated $3.5 million in expenses for sanitary sewer upgrades with a relatively short time period to complete these improvements.

On January 19, 2010, the City of Pella approved an increase in wastewater rates effective March 1, 2010 which was the first step of rate increases necessary to fund the IDNR mandate. The overall increase at that time was 25 percent. In order to fully fund this mandate, the City will need to increase rates by another 13 percent.

This ordinance amends the wastewater rates of the City of Pella and is the second step of rate increases necessary to fund the IDNR mandate.

Proposed Wastewater Rates

The rate increase proposed in this ordinance would be phased in, beginning with the February 2013 utility billing due March 20. At that time, the base fee for the wastewater rate will be increased from $ 15 per month to $16 per month. The usage charge per 1,000 gallons of water used will increase from $3.75 to $4.

The next phase of the rate increase is effective with the July 2013 utility billing due August 20. At that time, the base fee for the wastewater rate will be increased from $16.00 per month to $17.00. The usage charge per 1,000 gallons of water used will increase from $4.00 to $4.25. It is important to note, the base fee is intended to help stabilize the City's annual revenue stream, which will help in covering the fixed cost of the system and new debt issues to finance the IDNR mandates.

An increase in the rates is necessary to help fund the IDNR mandates put into effect for the City's wastewater system. If Council approves the ordinance, the proposed rates would be increased in two phases, the first effective with the February 2013 utility billing and the second effective with the July 2013 utility billing.

-Council approved the second reading of an ordinance regarding a rezoning application by Mike Verros to rezone Property from R1C Neo-traditional Single Family Residential District to R3 Multiple Family Residential District.

Mike Verros requested to rezone 515 Jefferson Street from R1C Neotraditional Single Family Residential to R3 Multiple Family Residential. The lot is 100 by 187.5 feet or 18,750 square feet in size, and the proposed use is for a duplex.

The Comprehensive Plan, Future Land Use Map targets the area proposed to be rezoned for Medium Density Residential. Since the proposed use is a duplex and the maximum density range for Medium Density Residential is 6 to 10 units per acre, staff feels the proposed rezoning is consistent with the Comprehensive Plan. The applicant is requesting the R3 designation because of adjacent R3 zoning to the south and southwest, including an existing duplex property on Houston Avenue. There is no immediately adjacent R2 zoning.

The Planning and Zoning Commission approved the rezoning 9 to 0 at their October 22, 2012 meeting subject to limitation of land use to either a single family home or a duplex. Otherwise, R3 rezoning for multi-family use would require a PUD Planned Unit Development under the Zoning Ordinance. This limitation also assures consistency with the Comprehensive Plan from a maximum density standpoint.

In summary, this ordinance would rezone 515 Jefferson from R1C to R3 and also limits the permitted land use for the property to be either a single family home or a duplex.