Title
Consider/Discuss/Act on a Resolution Authorizing the Execution of Closing Documents Pursuant to a 1994 “Agreement for the Planned Extension of City of McKinney Utility Service into the Danville Water Supply Corporation Certificated Area” to Acquire the Assets and Customers of the Danville Water Supply Corporation
Summary
MEETING DATE: June 21, 2011
DEPARTMENT: Development Services/Engineering
Public Works
City Attorney
CONTACT: Jack Carr, PE, Director of Engineering
Hal Cranor, Director of Public Works
Mark Houser, City Attorney
RECOMMENDED CITY COUNCIL ACTION:
• Approval of Resolution.
ITEM SUMMARY:
• This Resolution authorizes the City Manager’s execution of closing documents as necessary for the transfer and acquisition of the assets, system and customers of the Danville Water Supply Corporation (DWSC) in conjunction with its dissolution.
BACKGROUND INFORMATION:
• In 1994 the City of McKinney and DWSC entered into an agreement that included provisions requiring the City’s ultimate acquisition of the DWSC system, including the entirety of its assets/liabilities. A primary purpose for the agreement was the orderly acquisition and integration of the then rural water customers into the City’s urban water utility system--as inevitable growth occurred.
• The closing agreement outlines the process, assets and consideration for the transfer of the entirety of the DWSC system, including the water system components, physical plant, real property, equipment, vehicles, contracts, customer accounts and cash-on-hand. The 1994 agreement also requires the City to retire any outstanding debts of the DWSC as of the transfer/closing date.
• The DWSC water system components include:
o A pump station on US 380 east of Custer Road
o An elevated storage tank on the west side of Custer Road north of FM 1461 in the Celina CCN.
o Predominantly small-diameter water lines
o Few fire hydrants
o 327 residential customers (this number has steadily declined over the years as the City has taken in DWSC customers within the dually certificated area)
• The DWSC area of Certificate of Convenience and Necessity (CCN area) is currently dually certificated with the City under an agreement reached in 2002.
• The proposed action will result in single certification for this area thereby resulting in most of McKinney’s ETJ being contained within the McKinney water CCN.
• The DWSC purchases from the City approximately 3.5 million gallons per month and pays the normal retail rate.
• After the acquisition and transfer is completed the customers located inside McKinney city limits will pay the normal city customer rate and based on city ordinance, the customers outside McKinney city limits will pay a 15% surcharge.
• DWSC has notified its customers of this pending transaction. The TCEQ requires formal notices be sent to all of DWSC’s customers and the neighboring water systems describing the process to protest and request a public hearing.
• A study of the DWSC system water line network has been performed to determine how the system will be operated if connected to the McKinney water system.
• The results of the study indicate the DWSC system can be operated by making direct connections and allowing the system to operate using the water pressure (without the need for booster pumps or elevated storage tanks).
• McKinney Public Works personnel will have the responsibility to maintain the water line system and have taken measures to ensure they have sufficient knowledge regarding the location of the system components.
• The McKinney Water Master Plan includes the DWSC area and identifies larger diameter mains, additional elevated storage tanks and pumping capacity that are necessary for the development of this area.
• As development occurs, the small-diameter DWSC lines will be incrementally replaced with larger lines in coordination with the development activity.
SPECIAL CONSIDERATIONS:
• The DWSC customers will become City customers and will pay a rate based on whether they are located within the city limits or not.
FINANCIAL SUMMARY:
• The additional work associated with billing, maintenance, and administration of the DWSC will be absorbed by existing City staff resulting in no staffing increases to operate the system.
• The water flowing to the DWSC system is currently being delivered by the City’s water utility system; therefore, there will be no net change in the demand on the City system.
• The estimated value of the real property (1.8 acres), cash (approximately $50,000), equipment, and other fixed assets to be acquired is approximately $180,000.
• The estimated debts and liabilities which will be retired with City funds is $102,805. Some obligations of DWSC may be retired after closing.
BOARD OR COMMISSION RECOMMENDATION: