05-09-77 Council Meeting Minutes

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REGULAR MEETING May 9, 1977 A public hearing was held at this time on the resolution. Council President Parent indicated thi was simply a restatement of the Council's position. He said this resolution was needed legally in order that the owners of Clay Utilities know the City has a continuing interest in the purchas of Clay Utilities. He said he felt it was necessary for all of the City's agents in this matter to agree the City has a continuing interest in the purchase of Clay Utilities. Mayor Peter J. Nemeth indicated there was nothing in the agreement which would require the City to indicate its intentions. He Bien read the following statement: The resolution of the Common Council regarding Clay Utilities whichv,as submitted by Council President Parent is rather confusing. It states that the acquisition of Clay Utilities would be beneficial to the city, but that the price should exclude the s6-called "contribution in aid on construction" which, according to past statements by Council President Parent, would lower the price by 1 million dollars from the 2.1 million dollar figure which my administration negotiated. The resolution also indicates that there was "inconclusive data showing that the acquisition will have any significant impact on pending annexations ". This is incredible in view of the fact that the city lost the northwest annexation because of a failure to demonstrate how water and sewer service could be provided to the area to be annexed. In the case of the Clay Township annexation, the city will fail without purchase of Clay Utilities because Clay Utilities has an exclusive franchise to provide sewer and water service to the area and this franchise precludes the city from providing sewer and water services to that area. As to the price,my administration negotiated a price of 2.1 million dollars which mould be paid for out of the water and sewer rates presently being paid by Clay Township resideni who are customers of Clay Utilities. This means that the purchase of Clay Utilities (excluding Aqua, Inc.) would not cost the residents and taxpayers of South Bend anything. InEEfect, the Clay users would have paid for the purchase of the facility by the City of South Bend. The Common Council, led,by Council President Parent, opposed this plan as costing 1 million dollars too much, notwithstanding the fact that it did not cost South Bend taxpayers a dime nor would it have required an increase in utility rates for Clay residents. Council President Parent called for the establishment of a "joint negotiating team" composed of two members of the Council and two members of my administration "to work out a fair and reasonable price for the purchase of Clay Utilities, Inc.*. In a spirit of cooperation, I agreed to Council President Parent's proposal in the hope that the purchase could be consummated. Council President made an offer to purchase Clay Utilities for a price of 1.7 million dollars at 7% interest. This was the same interest rate which my administration had negotiated and the offer: was only $400,000 less than the figure negotiated by my administration, and $500,000 higher than what,Council President Parent had earlier said the facility was worth. The end result was failure. Homer Fitterling, President of Clay Utilities, Inc., indicated that negotiations were finished and might be re- opened at some time in the future, but that the price would go up. Notwithstanding Mr. Fitterling's statement and the fact that Council President Parent failed-miserably-in his--effort. -to negotiate a lower price, he is now presenting a resolution urging me to resume negotiations to purchase the utility at a price even lower than that which he offered to Mr. Fitterling and which was rejected. Such a proposal is absurd to say the least. Finally, the resolution indicates support for condemnation of Clay Utilities. I must vigorously oppose this suggestion. Condemnation of Clay Utilities would require the city to issue revenue bonds to be funded by higher water rates to South Bend customers, and it could also require a general obligation bond issue which would increase the property tax rate of South Bend residents. It is incomprehensible to me that this Council would oppose my plan to purchase Clay Utilities which would have involved no expense to our city residents and taxpayers, but would support a proposal which would require the residents of South Bend to pay for Clay Utilities through higher water rates and increased property taxes. I urge you to defeat this resolution. Mrs. Jane Swan, 2022'.S. Swygart,. indicated the Clay Utilities purchase was based upon the hopes of annexation. She asked if Clay Township would pay the same water rates as the City, if they were annexed, and if so, where would the money come from to pay for the utility. Mayor Nemeth indicated their present rate could stay in force if annexation takes place. Mrs. Swan indicated she felt the Council as a whole had done a good job �n untangling the web surrounding the purchase of the utilities. She said this has come so far now that it has to be followed through to the end. She indicated that technically South Bend is providing the water and sewage to Clay. She indicated she supported this resolution. Council President Parent said that he wanted the record clear that he never made any kind of an offer to Clay Utilities for a certain specific price. Council Member Taylor indicated that the Mayor has stated that he does feel this of vital interest to the community. He indicated that if this is such an important matter then the Council and Administration should continue to show interest. Council Member Horvath indicated that by going the referendum route he thought the residents of the community will tell the mayor they do not want Clay Utilities. He said he felt Clay Utilities would have been a good buy if it was at a lower price. Council Member Miller indicated he would oppose the resolution. He said if the price that was negotiated was not acceptable to the Council, the Council would not be working in the best interest of the City to pursue condemnation. He indicated there was a lot of misinformation on the part of the Council and he was sorry the Council was not able to get high quality information and make a decision to purchase Clay Utilities. Council Member Adams made a motion to adopt this resolution, seconded by Council Member Dombrowski. Council Member Szymkowiak indicated he was opposed to the adoption of this resolution. Council President Parent indicated there were misleading statements made about this issue, and one of the statement: was that under condemnation the citizens of South Bend would pay for the utilities, whereas under the lease- purchase plan the citizens that are served by Clay Utilities would pay. He said actually we are talking about two different means of financing the purchase. He said under one means the City Water works could sell the bonds and purchase the facility, and the same people would pay for it. He said if they go through the lease- purchase it is Clay Utilities whicl finances_it. He said if the City goes through condemnation it is the City, through its Water Works, that will help finance the bonds that are sold. He said the end result is exactly the same. The motion to adopt passed by a roll call vote of seven ayes (Council Members Serge, Taylor, Kopczynski, Adams, Dombrowksi, Horvath and Parent)£ and two nays (Council Members Szymkowiz and Miller). BILLS, FIRST READING