Palm Beach Daily News
Thursday, April 06, 2017
William Kelly – Daily News Staff Writer
Decisions due soon on first phase of utilities project in Palm Beach
After years of study, the clock is ticking toward decision time for the first phase of a town-wide conversion to underground utilities.
Town Council meetings on April 13 and June 13 are likely to be pivotal, Town Council President Richard Kleid said Tuesday.
At next week’s meeting the council is expected to decide whether to borrow money from a bank to finance phase one of the project, which is scheduled to start in June.
At the June meeting, the council would select the bank after receiving proposals for a loan in the form of a line of credit. The amount and term of the credit line hasn’t been determined. The town is considering borrowing up to $21 million through a line of credit over a three-year construction period.
Phase one involves the upper North End, between Onondaga Avenue and the Palm Beach Inlet, and the South End between Sloan’s Curve and the south town limit. To cover the town, seven other phases are planned between next year and 2026.
Also at the June meeting, the council expects to receive binding cost quotes from each of the two construction firms in line to do the north and south portions of phase one. Assuming council approval at the April meeting, Whiting-Turner Contracting and Burkhardt Construction will be hired as “construction managers at risk” for the south and north portions, respectively.
The figures the two contractors quote for the work cannot be exceeded by overruns under the manager-at-risk formula, so the council will know the true cost of phase one. Whether it falls within the range the council is willing to pay may prove “determinative” on whether phase one gets a green light, Kleid said.
The town originally planned to finance the town-wide, nine-year undergrounding project with up to $90 million in bonds to be repaid with assessments on properties over 30 years. Voters approved the bond issue in a March 2016 referendum, but two residents have filed separate lawsuits filed in Palm Beach County Circuit Court challenging the language and result.
With the lawsuits still unresolved, the council decided to look into a line of credit so it can get the project started on schedule. On Tuesday, the Underground Utilities Task Force recommended that the council issue a request for proposals from any banks that would be interested.
Town Manager Tom Bradford said it is possible one or more additional lawsuits will be filed challenging the assessments, specifically the method the town would use to determine how much each property owner pays.
Bradford said town attorneys have told him it will take anywhere from two-and-a-half months to 21 months to resolve the lawsuits.
All five council members and Mayor Gail Coniglio attended Tuesday’s task force meeting, where Jay Glover, managing director of the PFM Group, discussed ways to finance the early years of undergrounding with a line of credit of line, then following with a 30-year bond issue in the third to fifth year.
With the short-term borrowing paying a portion of the cost, the town would only need around $75 million in bonds, according to Glover. Assessments would initially pay annual bond debt of $5,080,000, but would be lowered to about $4.9 million in the fifth year of the 30-year payback period. Those figures assume today’s interest rates of about 3.9 percent.
“For the first four years, we would assess people for the dollar figure we originally told them starting from day one,” Bradford said. “There would still only be 30 years of assessments, and we would borrow less than the $90 million. The assessments would drop lower from years five through 30. You drop what owners pay over time.”
Task force member Susan Gary said the plan is “different from how people perceive we would do this. … We would collect assessments early on, and put that money in the bank.”
If the project begins this year, owners would begin paying the assessments on their November property tax bills.
If, however, the council decides not to start the undergrounding this year, and the project was delayed one year, it would add $752,000 a year to the cost, assuming 3 percent annual increases in inflation, Bradford said.
Two lawsuits have tossed a wrench into the town’s plan to finance the island-wide burial of utilities with a bond issue of up to $90 million.
The first phase of the nine-year project is scheduled to start in June. But Town Attorney John Randolph has advised against issuing bonds before the lawsuits are resolved, forcing the town to consider a short-term bank loan to get the project started.
Two separate lawsuits were filed in Palm Beach County Circuit Court last year by South End residents Carol Kosberg and Arthur Goldmacher. Both are challenging the validity of the March 2016 referendum in which voters narrowly approved up to $90 million in bonds to finance the project.
The two cases are both to be heard by Judge Cymonie Rowe. The town is filing a motion for a summary judgment, alleging the plaintiffs have no case and that the matter should not proceed to trial.
Bradford said town attorneys have told him there will likely be a hearing in late May. If the case moves ahead to trial, it is scheduled for a non-jury trial between Oct. 6 and Dec. 8. If the town prevails, the plaintiffs would have 30 days to appeal. If the appeal were granted, it could take anywhere from 90 days to a year to reach a final decision, Bradford said.