MONDAY
OCTOBER 23, 2017
The
Governing Body of the City of Pratt met in a Special Call session in the
Commission Room located at City Hall.
Lucus Kumberg Mayor
Doug Meyer Commissioner
Bill Hlavachick Commissioner
Gary Schmidt Commissioner
Don Peters Commissioner
ALSO PRESENT:
Roy Eckert City Manager
LuAnn Kramer City Clerk
Regina Goff City Attorney
Diana Garten Finance Director
Russell Rambat Public Works Director
Jamie Huber Director of Electric Utilities
Reid Bell Airport Manager
Dee Brown Airport Secretary
Debbie Zang Airport Authority Board
Skye Bare Airport Authority Board
Tim Barker Airport Authority Board
Mike Johnston Airport Authority Board Attorney
CALL TO ORDER:
The Special Call meeting was called
to order by Mayor Kumberg. The Mayor
instructed the Clerk to note that all Commissioners were present.
BUSINESS:
Mayor Kumberg stated that the
Commission had not met with the Airport Authority Board since he was on the
Commission and we just wanted to make sure that we were on the same page. Mayor Kumberg commented that the City wants
to do a large scale community project and we wanted to communicate what the
scope of the project was. Mayor Kumberg
added that the main part of the discussion would be that none of this goes
outside of our utilities and it would help stabilize our utility rates.
Director of Electric Utilities
Jamie Huber informed the Airport Authority Board that the City was looking at
building a solar farm and it would take fifty acres. Mr. Huber stated that they had talked about
utilizing the City’s ground in the Industrial Park, but had outgrown that. Mr. Huber explained that the City’s 2018
purchase power agreement would be coming to an end and we had talked about
solar for a couple of years. Mr. Huber
commented that technology was better now and the cost was going down. Mr. Huber stated that they had tried to look
into the future and see what we would need to make it the best for the citizens
of Pratt. Mr. Huber added that the
energy from the solar farm goes back out to the City and not to the grid and had
the potential to stabilize a portion of our rates for the next twenty-five to
thirty years. Mr. Huber explained that
we would be putting money into a system that would put something into our
system that goes back into the community.
Mr. Huber stated that we believe
that this would eliminate 10,000 megawatts of generation. Mr. Kenny Kreutzer stated that that would be
done by fossil fuel generators and their environmental effects were huge. Mr. Huber commented that we had gone out for
proposals to see what the cost would be if we could get it on City ground and a
little chunk out at the airport. Mr.
Huber explained that, if we had to split it into two different sections, it
would cost way too much money; however, if we consolidated to one area we would
see savings. Mr. Huber stated that that
was why we were looking to keep it together and had looked at the ground at the
airport. Airport Manager Bell asked how
many acres they were talking about now.
Mr. Huber stated that we were looking for fifty acres. Mr. Huber explained that we had a line out to
the feed lot and that would keep our costs down to around $20,000, but if we
had to go outside our area it would cost about $60,000 a mile. Mr. Huber added that keeping the cost down
would be savings for everybody. Mr. Barker
questioned what the cost of the project was.
Mr. Huber stated that it was about $8.6 million. Mr. Barker asked how many megawatts that was. Mr. Huber commented that it would be
six. Mr. Barker asked how long the
project would take. Mr. Huber stated
that it was estimated at about seven months, so we were hoping that we would be
put on line January 2019. Mr. Barker
asked who constructs it. Mr. Huber
stated that it was up to them, but a lineman from the City would be there for
most of the project. Mr. Huber commented
that maintenance was very little and they had visited one in Missouri that sends
a guy out once a year to do a visual unless they get a signal.
Mr. Barker questioned if they had
talked to any pilots about it creating a glare as they were coming in. Mr. Huber stated that Mr. Bell had checked on
that when we were looking at a closer piece of ground. Mr. Bell stated that he had not done it on
the 74/60 because it was moved to the agriculture property; however, his
research showed that the FAA did not have any problems with this. Mr. Huber stated that they usually utilize
waste land or land that would not have anything else on it and they were
designed at a certain angle to get the most out of them. Mr. Bell asked if the stands were driven into
the ground. Mr. Huber stated that the
transformers were on concrete, but everything else was in the ground.
Mayor Kumberg stated that this was
unchartered territory as there were only two other projects in the State and
one was Westar in Hutchinson and the other was Midwest Energy in Colby. Mayor Kumberg commented that we could not
find something we could compare to.
Mayor Kumberg explained that this would offset the swing in what we buy
electric for on the open market and would bring us some notoriety. Mayor Kumberg commented that we could go out
and purchase land at a substantial price; however, we wanted to be partners
with the airport, but they had not had an opportunity to come together for
economic purposes.
Mayor Kumberg stated that the City
had gotten a cost of $54.50 per acre per month from the airport. Mayor Kumberg commented that Kansas State
University published a listing of average cash rent prices for irrigated and
non-irrigated land for the past five years, so the City was curious what the
rationale was for the pricing that we received from the airport. Mr. Bell stated that that was their minimum
fair market value for commercial property established on the highway and 30th
Street. Mr. Bell explained that they had
done this for BTI and had set a new fair market value off the highway. Mr. Bell added that the FAA’s initial offer
was $96 per acre; however, they agreed to the $54.50. Mayor Kumberg stated that, looking at some of
the leases, the range was from $32 per acre to $144 per acre. Mayor Kumberg commented that the City was
looking at the life of a project that would benefit everybody including the
airport. Mayor Kumberg questioned what they
were comparing the City to after looking into the fair market value. Mr. Bell stated that he had figured the fair
market value on new areas as he had stated earlier. Mr. Bell commented that he had checked with
Triple A and the Kansas Association of Airports and their rate structure was in
line with other airports our size.
Commissioner Peters questioned what
they were getting now for the fifty acres we looked at. Mr. Bell stated that they were getting $58
per acre per year. Mr. Barker explained
that, when changing the rate from agriculture to commercial and a tenant defaulted,
they would have a room full of farmers wanting to relet it. Mr. Barker added that they would be able to
relet it at that price or even higher.
Mr. Barker stated that he disagreed with Mayor Kumberg’s statement that
lease prices were down and he sees hungry farmers eager to expand on a daily
basis. Mr. Barker added that those rates
were standing firm. Mr. Barker stated
that there would be no bidders and no one to relet the property where the solar
farm was if they were unable to pay rent.
Mr. Barker questioned how long it would take to restore the land back to
normal if it takes nine months to build it.
Mr. Barker stated that they needed to consider the value of cash rent
for agriculture purposes and an outright purchase, because purchasing ground
and paying $60,000 a mile would be an unpleasant task. Mr. Bell commented that the last tenant paid
the highest rate and he was happy with his bid of $165 per acre for the
irrigated ground. Mr. Bell stated that
the tenant was willing to give up the fifty acres to the City and he understood
what they were trying to do.
Commissioner Peters questioned if the fifty acres was irrigated. Mr. Bell stated that it was not and he pays
$58 for the dry ground.
Mayor Kumberg questioned if this
person was willing to give up his lease.
Mr. Barker stated that it was a written lease, so they would have to go
by the terms of that lease. Commissioner
Peters asked if it was an annual lease.
Mr. Johnston stated that it was.
Mr. Bell added that the FAA liked for them to review leases every five
years and they were not always renegotiated.
Mayor Kumberg questioned if there was wiggle room on what the City was
quoted, because we were looking to secure land rather quickly, wherever that
may be. Mr. Bell stated that they had
dropped the original $350 per acre per year after their last board
meeting. Mr. Barker commented that
development was why the Airport Authority exists and part of their financial
difficulty was use of the land for a particularized purpose and then being left
with the remnants when the lease expires or they go broke. Mr. Barker added that they had to keep that
front and center when looking at a new project.
Mr. Barker explained that, looking at it on a twenty-five year basis and
purchasing it some other way, you would have to look at it another way and ask
what the value of that was. Mr. Barker
stated that they had to get to a number somewhere close to that and that was
how they came up with the $350 per acre.
Mr. Barker commented that that was a lot cheaper than buying land
somewhere else if you take that out over twenty-five years and a lot cheaper than
paying $60,000 a mile. Mr. Bell
explained that the $54.50 over a twenty-five year payout added up to about
$750,000 and the $350 per acre a year for twenty-five years was $385,000.
Commissioner Peters stated that the
Pratt Airport Authority wanted to be successful and be developed and this
project was going to benefit the entire community. Commissioner Peters commented that that should
be the ultimate goal of the Airport Authority and it would be a tremendous advantage
of savings if we were to develop the solar farm out there. Commissioner Peters added that he was looking
at it as a citizen of Pratt and how they would benefit from this solar
farm. Commissioner Peters questioned if
$60 an acre would be harmful to the Airport Authority by keeping something else
from coming in on that fifty acres vs the benefits to the citizens of
Pratt.
Mr. Barker asked how much of the
$1.9 million was made up of lease/purchase.
Mr. Kreutzer stated that none of it was, because we thought that we
would build on our own ground. Mayor
Kumberg commented that the lease letter indicated that we had the options to
pay in full, sixty months or one hundred twenty months and he questioned if
there was a reason for that. Mr. Bell
stated that he wanted to get the rent upfront so that they could clear their
debt with BTI and the City would be done with it for twenty-five years. Commissioner Peters asked if they had a
response to what he had said earlier.
Mr. Barker stated that it was the same.
Mr. Barker added that, cash rent year to year to year and to change the
use to build a $9 million facility that could unwind in one year and the ground
restored back, was not an assumption they were willing to make. Commissioner Peters questioned if the benefit
to Pratt citizens and their electric rates was not a factor. Mr. Bell stated that it was a big factor and
that was why they went to the $350 per acre per year. Commissioner Hlavachick stated that that was
still a pretty big piece of change. Mr.
Bell commented that he understood that; however, $385,000 over twenty-five
years was not a lot and they had tried to be fair to the citizens. Commissioner Hlavachick asked how much they
were making on that ground now. Mr. Bell
stated that it was around a couple thousand a year. Commissioner Hlavachick commented that that
was a lot of money and he was not sure the City should be paying off the BTI
debt. Commissioner Hlavachick added that
the City’s interest was to get affordable energy out there and not have to
raise rates.
Mayor Kumberg questioned the City
Attorney if there could be protection in the contract if their concern was that
the land be put back to a useful state or the same state. Ms. Goff stated that the contract provisions
would be written that the City would restore the land back to the original
state and the City would continue to pay the lease during the deconstruction
process. Mayor Kumberg asked if that was
typical to what they had for land leases now.
Mr. Barker stated that they were talking about 2 ½% of the gross total
cost of the project over a twenty-five year period. City Manager Eckert stated that he felt they
were forgetting that this was not a normal business and that we were currently
maintaining the water lines, utilities, streets and roads at the airport at our
expense. Mr. Eckert stated that the City
was also investing this $8 million and, with other costs built in, it gets out
of sight. Mr. Eckert commented that we
were looking at doing a 12” waterline going out there and it was at the City’s
expense if we lose any of the wells out there.
Mr. Eckert stated that this needs to be looked at as a utility and not a
business and we were trying to help everybody.
Mr. Eckert asked that they should look at the big picture and that all
of this falls on the City, which we understand, but it needs to be
reasonable. Mr. Barker stated that it
had to be reasonable in context to the transaction and, if you do not use your
own property, you were in the position to buy or invest in more property. Mr.
Barker added that their position had to be reasonable in that context. Mr. Barker added that it was in the best
interest to the community that it be as good a deal for the airport as it was for
the City. Mr. Eckert stated that they
had different perspectives from the utilities stand point and we were trying to
help the airport be successful. Mr.
Eckert commented that we provide the utilities solely at the City’s cost and we
were not asking for anything more than standard rates. Mr. Eckert added that we were all trying to
work this out and have the same perspective.
Commissioner Schmidt questioned
what prospects they had for that land in the next twenty to twenty-five
years. Commissioner Schmidt explained
that they would be stuck at $50 to $60 per acre if it remains agriculture for
that period of time instead of having $350 per acre, so there had to be a wash
in there someplace. Mr. Barker stated
that if it were all equal, it would be in the best interest of the airport to
leave it the same. Mr. Barker questioned
if it was either cash rent or the project dies.
Commissioner Schmidt stated that it could. Mr. Barker commented that was because the
original assumption was incorrect and that the City had other alternatives for
the land and asked if that was an accurate estimation. Mr. Huber stated that it could be if we had
to go outside the realm and start purchasing ground.
Mr. Kreutzer explained that the
$15,400 talked about would provide 256 houses with 750 kW of power every year
that the City would pay the airport. Mr.
Kreutzer added that if you divide 256 by twelve that tells you how many peoples’
bills that pays. Mr. Kreutzer commented
that an average house uses 750 kW and if you take that money by the eight cents
per kW, that is the predicted cost of solar, and divide that by 750 kW, it
comes out to 256. Mr. Kreutzer explained
that that was two hundred fifty six 750 kW bills a year and that was what it
adds up to for the citizens of Pratt.
Mr. Barker asked if he could put that in a formula because they were
working blind and did not know any of these economics. Mr. Barker stated that all they were getting
was an ultimatum on a short notice meeting and a take it or leave and we could
be killing a $9 million project. Mr.
Barker added that he felt that they were under informed and both sides needed
to view it objectively as Mr. Eckert stated.
Mr. Barker stated that he was not sure we were there. Mayor Kumberg apologized for the short notice
and that it was his assumption that this had been discussed for about three
months. Mr. Bell stated that they had
found out last week and were told that it was going to be a discussion about
the solar farm. Mr. Bell commented that
they had not had time to do more research.
Mr. Bell stated that they had given
the City one proposal that was outright reject and they understood that. Mr. Bell commented that they had come up with
a fair $350 an acre per year at their board meeting and had invited the City to
attend and the City chose not to. Mayor
Kumberg stated that this meeting was not meant to be a take it or leave it
discussion. Mayor Kumberg commented that
the City had not made a decision and wanted to have a discussion to see if
there was any room in that price. Mayor
Kumberg added that they did not know if anyone knew the scope of the
project. Mr. Barker stated that he
wanted to understand the economics of this, so he summarized that this was an
$8.9 million project without land and approximately a $9.5 million project with
land. Mr. Barker questioned if it was
still a viable project at that cost. Mr.
Kreutzer stated that there was a huge formula to see if the citizens would be
paying more than they do now; however, it was not that simple to say yes or no
without running it through the formula.
Mr. Barker asked how the $9 project was going to be financed by the
City. Mr. Kreutzer stated that the City
had not decided how it was going to be financed, but they were looking at
several options. Mr. Eckert added that
some of that was proprietary with the bidders.
Mr. Bell asked if the City sees it as viable. Mr. Kreutzer stated that he would run some
numbers and see what he comes up with.
Mr. Barker stated that they understood the request and it was a great
project, but the price was somewhere between agriculture fair market value and
alternative cost. Mr. Barker added that
it was a $9.5 million project and they were trying to help plug a $600,000 hole.
Commissioner Meyer stated that the
airport operates as a component of the City and he thought that they would look
upon the City as a dependable renter.
Commissioner Meyer commented that he agreed with Commissioner Peters and
the City never intended this to be a financial burden on the airport and pay
less than what they were currently receiving.
Commissioner Meyer explained that the City would take into consideration
the ground would be reusable if the solar field had to be dismantled. Commissioner Meyer stated that he understood
the business sense of the Airport Authority, but the Commission’s financial
responsibility was to get the best deal for the citizens. Commissioner Meyer commented that the City
wants to use the airport and we would be a reliable tenant. Mr. Bell stated that they had lost a reliable
renter recently that moved to Tulsa and had lost some when the oil patch went
down. Mr. Bell commented that most of
those that were left had been there for around twenty-five years. Mr. Bell stated that they do consider the
City as a reliable tenant, but they had reliable tenants now. Commissioner Meyer asked if he thought things
would be coming up. Mr. Bell stated that
they were steady, but losing $150,000 in revenue over three years hurt.
Mr. Barker asked if there was any
room on the City’s side of the table and what they thought was a reasonable
rate. Mayor Kumberg stated that that was
what the City was trying to figure out.
Mayor Kumberg explained that the issue of financing was not an issue and
we were interested in what was fair to the airport and the City. Mayor Kumberg commented that the City had to
look at it as what makes this the most financially viable for twenty-five
years. Mayor Kumberg stated that that
was within that scale of what was proposed and we were more than happy to have
this discussion. Mayor Kumberg added
that the City had to decide if it was going to be better to purchase land or
lease it. Mayor Kumberg stated that he
could not say that the City had a bottom line.
Mayor Kumberg stated that the City had reviewed what land we had and,
after review from the company, we found out that our land was not going to
work. Mr. Bell suggested the City see
what they could get together and then have another discussion. Mr. Bell stated that the airport would love
to have them out there. Mayor Kumberg
agreed and added that we would have absolutes instead of assumptions.
Mr. Bell stated that things should
move fairly quickly when we get to that point and should not hold up the
project. Mr. Eckert stated that it
should not take long to get everything together. Mr. Barker stated that the City had asked
about the current leases and the airport had asked the tenant to not plant a
wheat crop. Mr. Bell commented that he
had sprayed the fifty acres to prevent a disease for the next crop, but they
had stopped him and now the land was in limbo.
Mr. Bell added that that was a risk they were willing to take and the
tenant had agreed to release the ground.
Commissioner Peters stated that the City was not trying to harm the
airport, but make it better.
Commissioner Peters commented that the big picture was to keep the airport
whole and it continue to be an economic benefit to Pratt and that was a no brainer. Mr. Barker stated that they take the
Commission’s word for it, but they wanted to see the information requested and
discuss what that means. Mr. Kreutzer
asked what information they wanted. Mr.
Barker stated that they wanted to know the economics of the project, the cost,
jobs, whether they would be using local contractors to construct it or out of
town crews. Mr. Kreutzer stated that the
City could not answer those questions, because we could not award the bid until
we had ground. Mr. Kreutzer added that
the City was told that they would try to use local contractors, because it was
easier than bringing contractors in and paying for meals and hotels. Mr. Barker commented that they would like to
see how this many megawatts coming out were going to save the citizens of
Pratt. Mayor Kumberg stated they there
were asking for a pro forma.
Mayor Kumberg stated that the City
Manager would work with Mr. Bell on pricing.
Commissioner Meyer asked how that information comes into what the
airport charges per acre. Mr. Barker
stated that these questions help the Commission and the board close the gap
from where we are to where the City wants them to be, because it was for the
good of the citizens of Pratt. Mr.
Barker added that, if this was not an issue, it was purely economic, which was
his foundation perspective. Mr. Barker
commented that it was going to cost the City $600,000 somewhere else to get the
project done and the airport was an alternative and a competing bid to that. Mr. Barker commented that he did not
understand why the City was willing to pay the airport what they were getting
now and the airport should be happy with that.
Mr. Bell stated that there were
money issues for the airport with FAA on fair market value. Mr. Bell explained that it was a civil rights
issue and he did not think he could go to their compliance officer and get very
far when we were taking this parcel of ground from agriculture to commercial or
industry. Mr. Kreutzer stated that the
State of Kansas does not look at the City as commercial. Commissioner Meyer commented that the City
pays taxes on projects in that department and the profit from that utility
supports the other departments. With no
further discussion, the City Commission thanked the Airport Authority Board for
coming.
EXECUTIVE SESSION FOR
CONSULTATION WITH AN ATTORNEY ON MATTERS THAT WOULD BE DEEMED PRIVILEGED IN AN
ATTORNEY/CLIENT RELATIONSHIP TO LAST ONE HOUR.
Mayor
Kumberg made a motion to enter into executive session for consultation with an
attorney on matters that would be deemed privileged in an attorney/client
relationship to last one hour. The
motion was seconded by Commissioner Meyer and carried unanimously.
Mayor
Kumberg made a motion to return from executive session with nothing to report. Commissioner Hlavachick seconded the motion
and it carried unanimously.
ADJOURN:
Upon proper motion, the meeting was
adjourned.
___________________________________LUCUS KUMBERG, Mayor
ATTEST:
___________________________________
LUANN
KRAMER, City Clerk