HomeMy WebLinkAboutNB 7 WTR MAIN EXT AG'S 5-18-81r~
DATE:
May 13, 1981
NO. 7
5-18-81
Inter-Corn
TO:
HONORABLE MAYOR AND CITY COUNCIL
FROM:
SUBJECT:
DAN B[ANKENSHIP, CITY ADMINISTRATOR
~ATIONS Ct~ CERTAIN WATER MAIN EXTENSION AGREEMEN~fS
The Staff has received two proposals in response t~ our letters the latter part of
April. They are detailed below and a recommendation cn each.
e
Briarcliff--Balance remaining: $36,122.96
1980 payment: $1,776.70
Projected payout:' 11 years
Estimated current cash value: $24,000.00
Holder is willing to accept: $12,000.00
Pmco~anendation: Approve the $12,000.00 payout to retire the agreement as
this will provide a reduction in Water Fund liabilities at a resonable price.
Village Homes--Balance remaining: $33,538.71
1980 payment: $1,266.64 (partial occupancy)
Projected payout: 8.5 years
Estimated current cash value: $23,000.00
Holder is willing to accept: $19,000 to $19,500
Recoramendation: ~the $19,000 payment to retire the agreement as a
payment in excess of $10,000 to $13,000 is not considered of sufficient
benefit to the Water Fund.
The method used to test the proposals was to calculate the current cash value of
the agreement based on the decreased value of money in the future and the fact
that no interest is paid on the obligation. At or near the current cash value,
the Water Fund is just as well off payihg the agreement in the future cheaper
dollars (the situation in case NO. 2). When the price is less than 60 to 65
percent of the current cash value, the Water Fund is in an area of a purchase
worth considering (the situation in case No. 1 with a 50 percent ratio).
It is reco~nended that the purchase of the Briarcliff agreement be approved in the
amount of $12,000.00 frc~ the Water Fund subject to receipt of an executed release
prepared by the City Attorney and that the proposal in the case of Village Homes
(held by C&C Utilities) be rejected.
Respectfully submitted,
City A~]mini strator
'to:
City of Tustin
Dan Blankenship, City Adm/ntstrator
MEMORANDUM
Repurchase by City of Water Main Extension Contract - Tr 10495
"Packers Sqn-~e"
As per our telephone discussions and your recent request be advised
that we feel that the current value of the above-noted refund contract
is between $19,000 and $19,500 based on a projected fourteen year
payout of the balance at approximately a 10.5% yield based on current
value comparable to that our investor clients would currently receive.
Please advise me of your interest to repurchase this contract and
what the tim/ng would be so we can determine ~hether to place it with
an investor or not.
I look forward to hearing from you soon. If you have aw questions do
not hesitate to call me.
sPC/Z
Very truly,
April 24, 19~1
Briarcliff
P.O. Box 6348
Orange, CA 92667
Gentlemen:
Ref No.: 112541
You are presently the holder of a Main Extension Agreement with the ~stin Water
Works. As you may be aware, the City of Tustin has acquired the Tustin Water
Works through a non-profit corporation an~ the system is now owned arrd operated by
the City. The City has assumed the obligation of honoring the present main
extensicn agreements as part of the acquisition agreement.
However, the City recognizes that those non-interest bearing agreements are not
totally desirable to many holders in these periods of increasing inflation. ~his
may create an opportunity of mutual benefit for ~le City to reduce the outstanoing
liabilities of the system while providing you with imnediate cash. ~is, of
course, would be at your option.
In addition to your April 30, 1981 payment of $],776.70, City Staff is prepared to
recor~nend to the City Council an inmediate cash payout of $5,418.44 in
consideration for your cancellation of the remaining future agreement bal~]oe of
$36,122.96. Our calculations indicate your present ~jree~ent may otherwise take
19 years to payout as currently scheduled.
We developed a projection of the present dollar value of your agreement Dy
estimating the annual payment in accordance with the terms of your agreement
assuming a reduced value of each subsequent annual payment due to inflation. Our
offer is calculated on less than the present dollar value which is essential in
order to make the transaction desirable for the City.
Please sign and return the enclosed copy of this letter to inoicate your interest
in this proposal. Thank you for your cooperation.
Sincerely yours,
City Administrator
Yes, we would definitely be interestc~ in the above settien~nt payout.
Please contact me to discuss it in detail.
No, we prefer to be paid off over the years in accordance with our agree-
raent.
Other: (explain)
~ do
Signature :~6~3~,. ~
Title: _A~.~_ ] /~w ~
Date: ,c'- ,( - ~/
Telephone: (7IV) ~ 7/-~-~
City Cen~er
300 Centennial Way
Tustin, California 92680
(714) 544-8890