HomeMy WebLinkAboutPH 2 PURCHASE WTR WKS 3-17-80MARCH 7, 1980
PUBLIC HEARING
NO. 2
3/17/80
-
TO:
HONORABLE MAYOR AND CITY COUNCIL
FROM:
SUBJECT:
DAN BLANKENSHIP, CITY ADMINISTRATOR
PUBLIC HEARING ON POSSIBLE PURCHASE OF TUSTIH WATER WORKS
Council has previously received a copy of the proposed agreement on the purchase
of the Tustin Water Works. March 10, 1980, and March 17, 1980, were established
by the City Council as dates for public hearings on the proposed acquisition.
Brochures were mailed out to the 13,500 customers of the Water Works on Friday,
March 7, 1980, in order to advise them of the facts and hearings. In addition,
an over-sized Public Hearing Notice was placed in the Tustin News (See page 5,
Section 2) on March 6th and March 13th.
The City Adminis[rator personally appeared before the Santiago Municipal Advisory
Council and spent over one hour exl)la'ining the proposed transaction and answering
their p ~ '
qu,.s~lons.
The fo]lowing is a comparison with the Council's conceptual approval last November
6, 1972:
Conceptual Written Reference to
_~t___e~ ~proval Agreement Agreement-
page paragraph
Price $6,000,000 $6,000,000 2 2
Assumption of Water Yes Yes 4 2(g)
Main Agreements
Price Date as of June l, as of June l, 2 2
1979 1979
Expenses of Sale
each side pays each side pays 4 2(h)
own costs own costs
Purchase 25 years at 7% 25-year payoff 5/6 5
payoff penalty 1st yr. 7¼%
of 5% when bonds 2nd yr. 8¼%
issued if not in 3rd yr. 9¼%
first year must pay off
(bonds were plan- by issuing bonds
ned to be sold), before 3 years-
but at no penalty
Honorable ~layor and City Council
Re: Public Hearing on possible purchase of Tustin Water Works
3/7/80
-2-
Conceptual Written
Item .Approval Agreement
Reference to
Agreement-
page paragraph
Company fully funds
employee liabilities
Yes Yes
17 lO(k)
18 lO(m)
City offers employment
to present employees
Yes Yes
Not specified in
agreement
Full & complete warranties
and cash or bonds
Yes-plus
$1,000,000 hold
for one year,
year, reduced to
$500,000 for se-
cond year and to
$250,000 for third
year.
Yes-plus 26 et
$500,000 to seq
hold for one 28
year, reduced
to $250,000 for
second year, but
liable for any_
amount if higher.
77
17(d)
Right to competiti~,ely
mar'~te; bonds
Yes Yes N/A
I.let?~od of Acquisition
Sale of assets or Purchase of
purchase of stock stock
2 1
ASSUF~?tion of City
operation before bond sale
Yes Yes 31 19
The agreement contains extensive technical provisions, but some of the other key
elements are as follows:
Price: The price is $5,000~000 as of June 1, 1979, without any inflation
fact or adjustment for the almost one-year d-elay to date.
There is a penalty provision of $200,000 if we do not make the transfer prior
to October 31, 1980, unless tile delay is caused by the company or shareholder?
(page q, paragraph 3).
The amount of cash or purchase price held back as a security against claims was re-
duced from $1,000,000 to $500,000 at the request of the company, and staff did not.
find this to be a problem. The company is still liable for any such valid claim
regardless of amount.
To: Honorable Mayor and City Council
Re: Public Hearing on possible purchase of Tustin Water Works
3/7/80
-3-
Staff recommends the execution of the agreement as complying with the direction
and intent oF the City Council once the public hearings are complete. This can
be accomplished by adoption of the attached resolution.
City Administrator
DB/hlr