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HomeMy WebLinkAbout06/26/2015AT OFFICE OF THE CITY MANAGER June 26, 2015 TO: Honorable Mayor and City Council FROM: Alan Tandy, City Manager Subject: General Information Notable Items  The Bakersfield Law Enforcement Training Academy will hold graduation ceremonies for its newest recruits Thursday, July 2nd at 10:30 a.m. on at the Centennial High School. Thirty two Bakersfield Police trainees will graduate with this class and we look forward to them working in the field. Please see attached flyer.  Officer Philip Richardi and Aaron Mundhenke were recently recognized by the Downtown Optimist Club for their dedication in working with the homeless and mentally ill population within the City. Both officers are assigned to the department’s Foot Beat Officer Unit and have embraced the department’s commitment to building collaborations with other agencies in the community, particularly in the areas of homeless and mentally ill outreach.  These partnerships have led to numerous positive contacts with those citizens of Bakersfield who find themselves without shelter. By utilizing a problem oriented policing General Information June 26, 2015 Page 2 approach and generating positive contacts with these community partners. Many of the homeless of Bakersfield have been afforded the opportunity to improve their circumstances and find more permanent housing. This has led to a reduction in complaints regarding transient encampments and loitering in several areas in the Downtown and Old Town Kern areas.  We received favorable ratings from both Moody’s Investors Service and Standard and Poor’s Ratings Services regarding the recently authorized Wastewater Revenue Refunding transaction. Moody’s has confirmed a rating of Aa2 and Standard and Poor’s has provided a rating of AA. These are strong ratings and should provide for a very competitive pricing when the transaction goes into the municipal bond market in a couple of weeks. The strong ratings from both agencies reflect the Council’s continued commitment to conservative budgeting practices and the willingness to raise rates when necessary to maintain strong debt service coverage ratios. Thanks to both Finance and Public Works staff, who put in the time and effort necessary to provide the rating agencies with required information and details supporting the strong bond credit ratings. The rating reports from both agencies are attached for your review and information.  Another TRIP project has been selected for special recognition. The Southern San Joaquin Branch of the American Society of Civil Engineers (ASCE) has selected the State Route 58 Gap Closure Project to receive the 2015 ASCE Excellence Award in the transportation category. The award will be presented at the branch’s annual banquet in September.  I will be taking vacation time for a half day July 1st and then July 2nd, July 7th and 8th. During my absence Steve Teglia will be in charge and the office will have my contact information if necessary. General Information June 26, 2015 Page 3 TRIP Updated Schedule for Centennial Corridor Geo-technical Work Geo-technical surveys for the Centennial Corridor project’s preliminary design continues this week, with work scheduled for the locations listed below. The work entails drilling a small diameter hole within the right-of-way, collecting samples, and restoring the surface to pre-existing conditions. All work is expected to be completed between the hours of 8:30 a.m. and 4:30 p.m. Traffic control will be in place as necessary. The following schedule is subject to change. Thursday, June 25th •North Stine Road, just north of Stockdale Highway Friday, June 26th •South Garnsey Avenue, near the cul-de-sac •Williamson Way, between Stockdale Highway and Elcia Drive Monday, June 29th •South Real Road, between Stockdale Highway and Elcia Drive Tuesday, June 30th •Elcia Drive, at the eastern end of the street •Alamo Street, near Mona Way On July 1st-2nd, crews will be working at various locations that will not require traffic control. Crews may also be conducting work at the Wild West Shopping Center located on Real Road and Stockdale Highway. Council Referrals Attached are responses to the following Council referrals: •Councilmember Parlier o Council Question regarding Auction Company •Councilmember Maxwell o State Farm Sports Village License Agreement o 19th Street Housing Project o In response to Councilmember Maxwell’s question at the June 24th City Council meeting, it is estimated to take two years to construct 24th Street after completion of design and property acquisition.Report For your reference, the following report is attached: Streets Division work schedule for the week of June 28th General Information June 26, 2015 Page 4 Event Notifications  Event Calendar for Rabobank Arena Theater and Convention Center  Recreation and Park Announcements: o Friday Night Movies in the Park: This week, “SPONGEBOB” will be playing at Lowell Park. This is a free event and be sure to show up early because pre-show fun will begin at 6:30 p.m. with the movie starting at dusk. To see future movies, please see the attached flyer. o Beale Park Band concerts, performed by members of the Bakersfield Symphony, will perform Sunday, June 28th at 7:00 p.m. They are free every Sunday for the month of June. AT:CH:cb:al cc: Department Heads Roberta Gafford, City Clerk Bakersfield Law Enforcement Training Academy You are cordially invited to attend the Basic Peace Officer’s Academy Graduation Ceremony for Class 14-01 Thursday, July 2nd, 2015 10:30 a.m. Centennial High School Auditorium 8601 Hageman Road Bakersfield, California New Issue: Moody's assigns Aa2 to City of Bakersfield CA's WastewaterRevenue Refunding Bonds Series 2015A Global Credit Research - 23 Jun 2015 $184.3M debt affected BAKERSFIELD (CITY OF) CASewer EnterpriseCA Moody's RatingISSUE RATING Wastewater Revenue Refunding Bonds, Series 2015AAa2 Sale Amount $147,600,000 Expected Sale Date07/14/15 Rating Description Revenue: Government Enterprise Moody's Outlook NOO NEW YORK, June 23, 2015 --Moody's Investors Service has assigned an Aa2 rating to the City of Bakersfield,CA's $147.6 million Wastewater Revenue Refunding Bonds Series 2015A. Concurrently, Moody's has affirmed theAa2 rating on outstanding 2007A bonds and the Aa2/VMIG 1 rating on outstanding 2012A bonds. Post-sale, theCity will have $184.3 million in wastewater revenue bonds. SUMMARY RATING RATIONALE The Aa2 rating reflects the enterprise's diverse customer base and large service area; up-to-date facilities withexcess capacity to accommodate the growing residential population; conservative financial management that hasresulted in strong debt service coverage levels and very healthy reserves; and elevated debt levels. OUTLOOK Outlooks are usually not assigned to local government credits with this amount of debt outstanding. WHAT COULD MAKE THE RATING GO UP -Strengthening of service area socioeconomic indicators -Sustained increase in debt service coverage levels WHAT COULD MAKE THE RATING GO DOWN -Weakened service area socioeconomic indicators -Significant decline in reserves -Material decrease in debt service coverage STRENGTHS -Large and growing service area -Strong financial management CHALLENGES -Elevated debt level -Variable rate component of debt portfolio RECENT DEVELOPMENTS Recent developments are incorporated in the Detailed Rating Rationale. DETAILED RATING RATIONALE SERVICE AREA AND CUSTOMER BASE: LARGE, DIVERSE SERVICE AREA WITH MODERATE WEALTHLEVELS; SYSTEM WITH AMPLE CAPACITY FOR GROWING CUSTOMER BASE The wastewater enterprise provides sewage collection, treatment, and disposal in Bakersfield (Lease rental ratingA1/NOO) and small, adjacent portions of Kern County (Lease rental rating A1/NEG). Bakersfield is the countyseat and a regional economic center within an economy largely driven by agriculture and oil production. Theservice area is largely built out and residential, with the population having grown by 50% since 2000 to its current369,000. The median family income (MFI) in Bakersfield is a moderate 94% of US MFI, but significantly higher thanthe surrounding unincorporated areas. The housing market had been steadily recovering from a significantrecessionary decline, but plateaued since the drop in oil prices in January 2015. The enterprise's customer base isdiverse, with the top ten ratepayers representing 6.4% of total sewer usage charges, with the largest being an icecream factory at 1.9%. The others are largely made up of educational institutions and septage haulers, and theonly oil producer in the top ten equates to 0.3%. While agriculture and oil production influence overall economictrends and customer wealth levels in the service area, they do not have a direct impact on the enterprise'srevenues, which are charged almost entirely based on a flat, per dwelling unit equivalent (DUE) basis. The enterprise is part of the city's public works department, with forty employees responsible for operation,maintenance and administration, and an operating budget of $14.7 million. It operates two wastewater treatmentplants, both of which have been expanded to include power cogeneration, which has reduced the enterprise'soperating costs. The plants have significant unused capacity, with permitted maximum flows that are double thecurrent actual flows. The city council sets sewer assessments annually on 117,000 DUEs, which were equal to $205 per DUE in FY2015 and will be $210 per DUE in FY 2016. Sewer assessments are added to property tax bills and collected bythe county. For 1,800 commercial and industrial customers with volumetric usage charges, the city bills monthlyand collects the resulting revenues directly. DEBT SERVICE COVERAGE AND LIQUIDITY: STRONG COVERAGE LEVELS; ROBUST WORKINGCAPITAL AND RESERVES The enterprise has maintained a strong financial position, reflecting careful and conservative management. Thesystem's ratio of operating expenses to revenues is 45%, well below the median for the rating category, andnotable given that the system includes both collection and treatment. Debt service coverage The enterprise has maintained high coverage, averaging 1.98 times over the last five years. In FY 2014, theenterprise maintained a healthy debt service coverage ratio of 1.97 times. While coverage is budgeted to decline to1.56 times in FY 2015, the city's budgeting practices are conservative and we expect outperformance of budgetconsistent with prior years' results. Liquidity The enterprise's cash position is ample with $75.2 million in unrestricted cash at the end of FY 2014, equal to1,924 days of cash on hand. Unrestricted cash has been maintained in excess of this amount over the last 5years. The city uses these reserves for cash-funded capital improvements and to prepay debt, including $15million in 2012A bonds over the last three fiscal years. While unrestricted cash is likely to decline in FY 2015, withexpenditures for bond prepayment and capital improvements, the city's conservative projections yield increasingcash reserves in the next several years. DEBT AND LEGAL COVENANTS: ELEVATED DEBT RELATIVE TO SYSTEM SIZE; STRONG RATE COVENANT; LACK OF RESERVE REQUIREMENT OFFSET BY SIGNIFICANT CASH RESERVES The sewer enterprise has $188.8 million in outstanding debt, which includes $174.4 million in 2007A fixed ratebonds; $10 million in 2012A variable rate bonds supported by a standby bond purchase agreement (SBPA); and$5.4 million loan from the state water control board (on par with the bonds), which is unrated by Moody's butconsidered in our analysis. The bonds have a rate covenant of 1.25 times. While the enterprise has an elevateddebt level of 6.60 times its operating revenues, the city is actively reducing its outstanding debt with accumulatedreserves. The current issuance is a $147.6 million advance refunding of the callable portion of the 2007A bonds. Debt Structure The 2007A bonds mature through FY 2034 and bear a fixed interest rate. The 2012A bonds carry a variable rate and have one outstanding maturity in FY 2034. The state loan bears a fixed rate of interestwith maturities through FY 2021. The 2015A refunding bonds are fixed rate with maturities through FY 2034. Debt-Related Derivatives The district has no debt-related derivatives. Short-Term Rating The VMIG 1 short-term rating on the 2012A bonds is derived from the credit quality of JP Morgan Chase BankN.A.(Aa2/Stable), as the provider of the SBPA)expiring January 23, 2017, and our assessment that earlytermination of the SBPA without a final mandatory tender is unlikely. The $10 million of variable rate debtrepresents a very low 5% of total debt outstanding. As the bonds are not subject to a swap to a fixed rate, the cityhas the flexibility to prepay this debt, which was the primary reason it was issued in a variable rate mode. It hasutilized its high level of cash reserves to defease most of the variable rate bonds since the original $25 millionissuance. MANAGEMENT AND GOVERNANCE: STRONG RATE SETTING RECORD The city establishes its sewer charges annually with adoption of its operating budget and has a record ofincreasing rates when needed, including 75% cumulative increases from FY 2004 to FY 2012. This has enabledthe enterprise to maintain high coverage and cash fund a manageable capital improvement program. KEY STATISTICS -Asset Condition (Remaining Useful Life): 34 Years -System Size (O&M in 000s): $14,265 -Service Area Wealth (Median Family Income as % of US Median): 94.70% -Annual Debt Service Coverage: 1.97x -Days Cash on Hand: 1,924 Days -Debt to Operating Revenues: 6.60x -Rate Management: Aa -Regulatory Compliance and Capital Planning: Aa -Rate Covenant: 1.25x -Debt Service Reserve Requirement: None OBLIGOR PROFILE The City of Bakersfield is located at the southern end of the San Joaquin Valley in Kern County, approximately 110miles north of Los Angeles and approximately 290 miles south of San Francisco. The City covers a 150 squaremile area and has an estimated population of 369,000. LEGAL SECURITY The bonds and parity debt are secured the net revenues of the wastewater enterprise. The rate covenant on thebonds requires net revenues paid after O&M to be at least 1.25 times debt service. The additional bonds test is1.25 times debt service on a 12 month look back over an 18 month period on outstanding bonds and proposedbonds. While the city elected to establish a debt service fund for its 2007A bonds, no debt service reserve fundwas established for the 2012A bonds or will be established for the 2015A bonds. USE OF PROCEEDS The proceeds of the 2015A refunding bonds will be placed in an escrow account for the advance refunding of thecallable portion of the 2007A bonds, for level annual savings of $766,000. PRINCIPAL METHODOLOGY The principal methodology used in this rating was US Municipal Utility Revenue Debt published in December 2014.An additional methodology used in the short-term rating was Variable Rate Instruments Supported by ConditionalLiquidity Facilities published in March 2015. Please see the Credit Policy page on www.moodys.com for a copy ofthese methodologies. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatorydisclosures in relation to each rating of a subsequently issued bond or note of the same series or category/classof debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordancewith Moody's rating practices. For ratings issued on a support provider, this announcement provides certainregulatory disclosures in relation to the rating action on the support provider and in relation to each particular ratingaction for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings,this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and inrelation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case wherethe transaction structure and terms have not changed prior to the assignment of the definitive rating in a mannerthat would have affected the rating. For further information please see the ratings tab on the issuer/entity page forthe respective issuer on www.moodys.com. The following information supplements Disclosure 10 ("Information Relating to Conflicts of Interest as required byParagraph (a)(1)(ii)(J) of SEC Rule 17g-7") in the regulatory disclosures made at the ratings tab on theissuer/entity page on www.moodys.com for each credit rating: Moody's was not paid for services other than determining a credit rating in the most recently ended fiscal year bythe person that paid Moody's to determine this credit rating. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related ratingoutlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legalentity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures foreach credit rating. 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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. MEMORANDUM TO: Alan Tandy, City Manager FROM: Nelson K. Smith, Finance Director DATE: June 22, 2015 SUBJECT: Council Question regarding Auction Company Question: Councilmember Parlier requested that staff respond to a recent email submitted by a local auction company regarding the use and economic impacts of using an auction company outside of Bakersfield. Response: The attached email addressed to Councilmember Parlier was received last week from a local auction company. The email raises several points that warrant further comment and consideration. Point #1: local company replaced with an auction company from Pomona, CA. Yes, after using local auction companies for several years the City decided to conduct an RFP solicitation for auction services. Staff felt the rates we were paying for commissions on sales transactions were higher than market rate. We received six responses to the request for bids, with a departmental contract being awarded to US Auctions with the City paying only 3% commission. The new contract included vendor pick up and transport the surplus equipment from the City corporation yard, where the previous agreements required city staff to either deliver the equipment to their places of business or the City would have to pay to have the vehicles towed to their locations. The local auction company proposed a 10% commission rate during the most recent bid solicitation process. Point #2: How much sales tax revenue has been lost as a result of the new contract? The amount of surplus equipment sent to auction varies from year to year, but looking at annualized averages over the past three years, we estimate an average annual sales tax amount (either gained or lost) as a result of surplus equipment auction activity to be in the $3,000 to $4,000 range. Point #3: Does the out of town vendor pay the Bakersfield Business Tax? Yes, the City requires vendors who conduct business with the City of Bakersfield to obtain a Business Tax Certificate regardless of their physical location. Point #4: Local companies receive a 5% to 10% basis point advantage because of the local reinvestment in the local community? Bakersfield used to offer for many years a 1% local vendor preference on City purchases of merchandise, which was the equivalent of the local sales tax generated by the transaction. In 2012 the City Council increased the local vendor preference on City purchase of merchandise from 1% to 3%. The local vendor policy did not apply to this contract for services mainly because the difference between the low bid auctioneer at 3% and the local vendor bid at 10% was greater than the 3% local vendor preference would allow. Additionally, the preference policy normally only applied to merchandise being purchased by the City. Summary – The City of Bakersfield certainly values conducting business with local vendors as much as possible, but we also have a responsibility to use public funds in a responsible manner. In evaluating purchasing decisions the Municipal Code guidelines generally focus on the “lowest net cost to the City”. Application of the local vendor preference policy does allow for some business to remain local that might otherwise go to an outside vendor. Attachment – email from local auction company cc: Mike Vogal, Fleet Superintendent Kim Berrigan, Purchasing Officer File name: nks:/p:/memo-council question on auction company June 2015.doc Week of June 29_2015_Work Schedule Page 1 of 2 STREETS DIVISION – WORK SCHEDULE Week of June 29, 2015 – July 3, 2015 Resurfacing/Reconstructing streets in the following areas: Sealing streets in the area north of Panama Ln between Ashe Rd & Stine Rd Reconstructing streets in the area south of Wilson Rd west of So. “H” St Maintenance Grind & Pave on Wible Rd between Pacheco and Panama Ln Reconstruction of streets in the Auto Mall area East of Wible Rd and north & south of Pacheco Preparing Panama Ln. between Freeway 99 and Stine Rd for a Maintenance Grind & Pave Miscellaneous Streets Division projects: Video inspection of City owned Sewer & Storm lines to evaluate condition of pipes Repairing damaged sewer line found during video inspection Miscellaneous concrete repairs throughout the city Dirt work and storm line installation at Sports Village Working on Brick repairs at Centennial Plaza Grading for new parking lot at Mesa Marin Sports Complex THIS SPACE INTENTIONALLY LEFT BLANK Week of June 29_2015_Work Schedule Page 2 of 2 STREETS SWEEPING SCHEDULE Monday, June 29, 2015 All sweepers are assigned to sweeping streets that are not on a set sweeping schedule. Tuesday, June 30, 2015 All sweepers are assigned to sweeping streets that are not on a set sweeping schedule. Wednesday, July 1, 2015 Between Panorama Dr. & Bernard St. -- Union Ave. & Loma Linda Dr. Between River Blvd. & E. Columbus St. – Panorama Dr. & Columbus St. Between College Ave. & Azalea Ave. – Mountain Dr. & Raval St. Between Ming Ave. & White Ln. – Allen Rd. & Buena Vista Rd. Thursday, July 2, 2015 City areas between Kentucky St. & Quincy St. – Owens St. & Virginia St. Between Union Ave. & Washington St. – E. Truxtun Ave. & Brundage Ln. Between Progress Rd. & Old River Rd. – Panama Ln. & Pacheco Rd. (alignment) City areas between Progress Rd. & Old River Rd. – Meadow Falls Dr. & Rose Creek Dr. Friday, July 3, 2015 No sweeping service due to Holiday. NOTE: If raining, there will be no street sweeping service and all street cleaning personnel will be assigned to cleaning plugged drains and part circle culverts. This also applies when a large number of street sweeper are in Fleet for repairs. Areas that have been missed during this time will be swept at the end of the month only when possible. BOX OFFICE HOURS Mon-Fri 10 AM - 5 PM Closed Saturday & Sunday (Excluding Event Days) TICKETMASTER LOCATIONS Walmart - 2601 Fashion Place Walmart - 6225 Colony Street Walmart - 8400 Rosedale Hwy CHARGE-BY-PHONE 1-800-745-3000 GROUP SALES INFORMATION 661-852-7309 SEASON TICKET INFORMATION Bakersfield Condors 661-324-PUCK (7825) www.bakersfieldcondors.com Bakersfield Symphony 661-323-7928 www.BSOnow.org Bakersfield Community Concert Association 661-589-2478 661-663-9006 www.bakersfieldcca.org UPCOMING EVENTS May 29 – Adrian Uribe 8:00 PM $65, $35 On Sale Now June 2 – Theresa Caputo Live 7:30 PM $89.75, $69.75, $49.75, $39.75 On Sale Now August 27 - Florida Georgia Line7:30 PM $54.75, $34.75 On Sale Now June 2-3 – Sesame Street Live $30, $22, $15 On Sale Now June 4 – YG & DJ Mustard 8:00 PM $200, $120, $85, $65 On Sale Now June 5 - Freestyle Explosion 7:30 PM $40.50, $35.50, $30.50 On Sale Now July 11 – Intocable 8:00 PM $85, $70, $55, $45, $35, $25 On Sale Now July 14 – Dancing With The Stars Live8:00 PM $74, $48, $34 On Sale Now July 28 – Juanes 7:30 PM $73.50, $48, $38, $28 On Sale Now August 12 – Fifth Harmony 7:00 PM $47.50, $27.50 On Sale Now September 25 – Wild Kratts Live!7:00 PM $43.75, $37.75, $27.75 On Sale Now October 20 – J Balvin with Becky G7:30 PM $73, $47.50, $37.50, $27.50 On Sale Now September 18 - Firefall 8:00 PM $15 On Sale Now October 2 - Hotel California 8:00 PM $15 On Sale Now www.rabobankarena.com - www.bhnamphitheatre.com