BOARD OF DIRECTORS
LOUISA COUNTY OFFICE BUILDING
AUGUST 6, 2009
2:00 P. M.
Present: Goodman B. Duke, John Y. Gooch, G. Cabell Lawton, IV, Dale G. Mullen, Thomas E. Payne and John E. Thomasson
Others Present: Kurt Krueger, McGuireWoods LLP, Legal Counsel; Joe Hines, Timmons Group; Jim Christian, Timmons Group; Fred Pribble, Draper Aden and Alyson Simpson, Deputy Clerk, Louisa County Administration
CALL TO ORDER
Chairman Payne called the August 6, 2009 regular meeting of the James River Water Authority Board of Directors to order at 2:00 p.m., which was followed by the Pledge of Allegiance.
READING AND APPROVAL OF MINUTES OF PRECEDING MEETINGS
On the motion of Mr. Thomasson, seconded by Mr. Gooch, which carried by a vote of
6-0, the Board approved the minutes of the July 2, 2009 meeting.
CHAIRMAN/EXECUTIVE DIRECTOR ITEMS
ITEMS FROM THE PUBLIC
CONSENT AGENDA ITEMS
None.
OTHER BUSINESS
a. Discussion - Financing Options - USDA Rural Development (RD) and Virginia Resources Authority (VRA)
Mr. Lawton noted that a comparison analysis was included in the Board packet showing an example of borrowing $50 million from each funding agency. Mr. Lawton stated that the interest rate for the Virginia Resources Authority was shown as 5% in the example, but said it should be somewhere in the low 4% range. Mr. Lawton said the real decision between Rural Development and the Virginia Resources Authority was whether or not the localities wanted to pay more now or pay more later. Mr. Lawton stated that he did not see many other options besides the Aqua Virginia proposal.
Mr. Hines pointed out that there were certain advantages and disadvantages to each funding agency.
Mr. Hines stated that the Virginia Resources Authority would allow a tremendous amount of flexibility whereas Rural Development would require a “design-bid-build” and would have locked-in procurement procedures. Mr. Hines noted that the flexibility offered with the Virginia Resources Authority financing was a benefit that needed to be considered.
Mr. Hines reported that this project was significantly different than any project that Rural Development had financed in the past. Mr. Hines said Rural Development’s largest project had been somewhere in the $10 or $11 million range and their average project was around $4 or $5 million. Mr. Hines stated that this project would be about four or five times larger than Rural Development’s largest project and about eight to ten times larger than their average project, which was a factor that needed to be considered when deciding on a funding/financing agency.
Mr. Hines said Rural Development staff indicated the ARRA stimulus funds would most likely be extended over time. Mr. Hines noted that the stimulus funds would not be available for grants, but that Rural Development would be given the money to distribute to localities in the form of a loan consistent with their current programs. Mr. Hines noted that Rural Development had been considered a desirable option when it was thought that grants could be received as prior meetings with Rural Development had indicated. Mr. Hines noted that no longer having the possibility of grants, combined with the limitations of the funding program, made Rural Development a less desirable option for the Authority.
Currently Davenport is the designated Financial Advisor for the Virginia Resources Authority (VRA) and Mr. Hines noted that Davenport could work with the localities and Authority to try and position them to receive the most favorable interest rates. Mr. Hines noted that given the current market, Davenport might be able to position the Authority to get rates somewhere in the 4% to 4.5% +/- range and therefore thought it would be in the Authority’s best interest to engage Davenport via their current arrangement with the VRA.
Mr. Hines stated that after looking at all the factors and taking into consideration the flexibility with the Virginia Resources Authority, the consultant team felt that the Virginia Resources Authority would be the best financing path to pursue at this point in time. Mr. Hines added that if the Virginia Resources Authority did not work out, the Board could still pursue Rural Development financing because of the potential for extended ARRA funds.
Mr. Duke asked if the Board would be able to meet the Virginia Resources Authority deadlines. Mr. Hines answered affirmatively and added that the preliminary application would be submitted to the Virginia Resources Authority next couple of weeks for feedback.
Mr. Hines stated that he had worked in a similar capacity with Davenport in the past and felt they would be an invaluable resource to help determine the most appropriate manner to submit to the Virginia Resources Authority. Mr. Hines said Davenport may be able to help determine the best way to finance the project to meet the objectives of the Board and the respective localities.
Mr. Mullen stated that it was important to recognize that the comparison of the Virginia Resources Authority and Rural Development included in the Board packet was preliminary and was only to be used as a comparison tool. Mr. Mullen pointed out that the $50 million figure was used simply as a round number and added that there had never been a $50 million price tag for this project.
Mr. Mullen made a motion that the Authority direct its officers to work with the engineering firm, Timmons Group, and the legal advisor, Mr. Krueger, to (i) determine the terms under which the Authority could retain the services of Davenport Public Finance through the cooperative procurement arrangement it has with the Virginia Resources Authority to advise the Authority with respect to an application to, and the terms of financing arrangements with, the Virginia Resources Authority and (ii) pursue financing for the project with the Virginia Resources Authority by submitting a preliminary application for such financing to the Virginia Resources Authority. Mr. Lawton seconded the motion.
Mr. Lawton noted that it would not cost anything to submit a preliminary application to the Virginia Resources Authority so the Authority would not lose anything and would probably gain good direction. Mr. Lawton said he felt it would be wise to bring in a company like Davenport to do some of the financial analysis. Mr. Lawton disclosed that Davenport was Fluvanna County’s financial advisor.
On the motion of Mr. Mullen, seconded by Mr. Lawton, which carried by a vote of 6-0, the Board voted to direct its officers to work with the engineering firm, Timmons Group, and the legal advisor, Mr. Krueger, to (i) determine the terms under which the Authority could retain the services of Davenport Public Finance through the cooperative procurement arrangement it has with the Virginia Resources Authority to advise the Authority with respect to an application to, and the terms of financing arrangements with, the Virginia Resources Authority and (ii) pursue financing for the project with the Virginia Resources Authority by submitting a preliminary application for such financing to the Virginia Resources Authority.
Mr. Hines pointed out that applications were due to the Virginia Resources Authority by September 11, 2009, Board approvals would take place in September to October 2009, bond sale would take place in November 2009 and proceeds would be available in December 2009.
Mr. Gooch asked what kind of direction the Authority needed to go in as far as seeking support from the Louisa Board of Supervisors and the Fluvanna Board of Supervisors. Mr. Lawton stated that he did not feel the project was to that point yet. Mr. Lawton said he would like to have Davenport analyze the project and see what the Virginia Resources Authority thought about the project first. Mr. Lawton stated that once that was done, the Louisa Board and the Fluvanna Board could be updated with the choices and the options that were discussed.
Mr. Krueger stated that McGuireWoods represented the Virginia Resources Authority and also did a lot of work for agencies who borrowed from the Virginia Resources Authority. Mr. Krueger stated that the Virginia Resources Authority has done a cooperative procurement with Davenport which would allow the Authority to procure the services of Davenport relatively quickly without having to go through the full procurement process. Mr. Krueger noted that the Authority would not be doing a cooperative arrangement through the existing contract Fluvanna County has with Davenport, but directly with Davenport through the VRA’s cooperative procurement arrangement.
Mr. Krueger added that since the Authority did not have any revenues, the Counties would most likely have to financially back the Authority when the money was borrowed.
b. Resolution - Declaring the Official Intent of the James River Water Authority
Mr. Krueger called the Director’s attention to the draft reimbursement resolution contained in the Board packets and stated that the purpose of the resolution was to allow the Authority to reimburse itself through the proceeds of the bonds for expenses that were paid prior to financing.
Mr. Mullen said under the previous Memorandum of Understanding, there had been other discussions concerning the Fork Union Sanitary District and he wanted to make sure that the Water Authority understood that the Fork Union Sanitary District supply line was still considered as something different. Mr. Krueger stated that the resolution would not commit the Counties to any particular project, but would allow them to reimburse themselves no matter what parts the Authority ultimately decided to finance and build.
On the motion of Mr. Duke, seconded by Mr. Gooch, which carried by a vote of 6-0, the Board adopted a resolution declaring the official intent of the James River Water Authority to reimburse certain expenditures for the development of water supply, treatment and distribution facilities with proceeds of debt.
c. Update - Timmons Group Contract Assignment
Mr. Payne reported that everything had been signed and the executed copies of the Contract were given to Timmons Group today.
d. Discussion - Meeting with Aqua Virginia
Mr. Lawton reported that he and Mr. Mullen had a great meeting with Mr. Keith Smith, representative for Aqua Virginia, to talk about an agreement between the Board and Aqua Virginia. Mr. Lawton said Aqua Virginia’s thoughts were outlined in a letter dated August 6, 2009 that was presented to the Board just before the meeting started.
Mr. Lawton explained that the first idea for short term use was an initial agreement that Aqua Virginia would provide 0.5 million gallons per day to the Authority and deliver that water somewhere near Crofton Bridge. Mr. Lawton apprised that the Authority would then be responsible for receiving that water and installing a pipe system that would deliver the water down Route 250 and towards Zion Crossroads. Mr. Lawton said rates between $2.75 and $3.19 per 1,000 gallons would be charged. Mr. Lawton said this was discussed as an interim step. Mr. Lawton explained that an interim upgrade had been considered to increase the amount to 1 million gallons per day as there was a potential use for more water. Mr. Lawton said the last idea discussed was that Aqua Virginia would upgrade their plant to 4 million gallons per day and would offer 3 million gallons per day to the James River Water Authority.
Mr. Lawton stated that he had been working with Aqua Virginia for about eight years and this was the first time discussions had come this far and estimates in terms of cost and rate had actually been received. Mr. Lawton said Mr. Smith with Aqua Virginia was available if there were further questions.
Mr. Mullen added that the center of the entire conversation with Mr. Smith was how to provide dependable, efficient, effective and economical infrastructure to both Counties. Mr. Mullen said both Louisa and Fluvanna Counties had a common goal of providing water to their economic development areas.
Mr. Smith asked that an additional meeting be set up between Mr. Lawton, Mr. Mullen, Timmons Group and Aqua Virginia to delve into the details of the August 6, 2009 letter and report the discussions back to the Board.
Mr. Lawton stated that he would encourage Davenport to look at the proposal from Aqua Virginia as an option as well. Mr. Lawton said the Authority would have to borrow money for any option chosen, so having Davenport review the proposal from Aqua Virginia would not hold up the application to the Virginia Resource Authority.
Mr. Payne asked that a discussion of Aqua Virginia be placed on the next meeting agenda in order to provide everyone the opportunity to completely read through the August 6, 2009 letter from Aqua America and write down any questions they may have.
Mr. Gooch asked if the proposal from Aqua Virginia would provide water any faster than what the James River Water Authority could fully develop alone. Mr. Hines said one of the biggest roadblocks of the project was easement acquisition and stated that would have to take place regardless of whether or not the Aqua Virginia project was chosen or not. Mr. Gooch stated that the Aqua Virginia option would cost more and he wanted to have an idea of whether or not it would provide water to Zion Crossroads or the other development areas any sooner.
OTHER ITEMS FROM BOARD OR STAFF NOT ON AGENDA
Mr. Lawton said there would only be four members available to attend the next meeting which was scheduled for August 20, 2009 as two of the Fluvanna members would be unavailable.
The Board agreed it would still be beneficial to have a second meeting in August and decided to change the August 20, 2009 meeting to August 27, 2009.
On the motion of Mr. Duke, seconded by Mr. Lawton, which carried by a vote of 6-0, the Board voted to move the second meeting for the month of August to August 27, 2009 at 2:00 p.m. at the Louisa County Office Building.
ATTORNEY’S ITEMS
None.
FINANCIAL ADVISOR’S ITEMS
None.
ENGINEER’S ITEMS
Mr. Hines reported that Timmons Group had received comments from VDOT regarding the environmental report that was submitted. Mr. Hines noted that the comments seemed to allow for consideration of utilities to be placed in the VDOT right-of-ways under certain circumstances; however, their preference was for the utilities to be placed outside the right-of-ways. Mr. Hines noted he would be meeting with former VDOT staff to discuss the appropriate next steps to take in regards to coordinating with VDOT.
Mr. Hines stated that he received comments from Dominion Virginia Power regarding the easement agreement. Mr. Hines said he would be updating the agreement to address their comments. Mr. Hines noted that they would address the comments in an expeditious manner such that a formal agreement could be executed in a timely manner.
Mr. Hines explained that Timmons Group has initial comments regarding the Environmental Report (ER). Mr. Hines stated that the ER was a requirement of Rural Development financing and would be necessary for any type of Federal financing. Mr. Hines said additional work would be required and some of the comments would need to be further addressed.
Mr. Hines said he was looking for direction from the Board to formally negotiate on behalf of the Authority with East Coast Transmission, Inc. (ECTI) to finalize a pipeline agreement. Mr. Hines said he felt comfortable with the direction of the informal discussions he had with ECTI prior to the Authority being formed.
On the motion of Mr. Lawton, seconded by Mr. Gooch, which carried by a vote of 6-0, the Board voted to direct Timmons Group to pursue discussions with ECTI with respect to a pipeline agreement to bring back to the Board for approval.
Mr. Payne said he read an article in The Central Virginian that said if the Authority placed water lines along Route 600 (South Boston Road) in Fluvanna County, then Lake Monticello would have to build a concrete dam. Mr. Payne stated that he did not understand what effect the water line on Route 600 had on the dam at Lake Monticello. Mr. Hines said he did not think the water line would have any effect on the dam, but he would have to look at what information lead someone to believe that. Mr. Payne asked Mr. Hines to bring an answer back to the Board after he had looked into the matter.
On the motion of Mr. Duke, seconded by Mr. Gooch, which carried by a vote of 6-0, the Board voted to adjourn the August 6, 2009 meeting at 2:49 p.m.
BY ORDER OF
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THOMAS E. PAYNE, CHAIRMAN
BOARD OF DIRECTORS
JAMES RIVER WATER AUTHORITY