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2013_09.12 CC Packet1 KENNEDALE You're Here, Your Home www.cityofkennedale.com KENNEDALE CITY COUNCIL AGENDA REGULAR MEETING September 12, 2013 CITY HALL COUNCIL CHAMBERS, 405 MUNICIPAL DRIVE WORK SESSION - 5:30 PM REGULAR SESSION - 7:00 PM I. CALL TO ORDER II. WORK SESSION *NOTE: Pursuant to Section 551.071, Texas Government Code, the City Council reserves the right to adjourn into Executive Session at any time during the work session or the regular session to discuss posted executive session items or to seek legal advice from the City Attorney on any item posted on the agenda. A. Update on water conservation and regional drought stages. B. Update on initiatives related to Village Creek. C. Update on status of jail and dispatch service contracts with the City of Mansfield. D. Discuss nominations to the 2013 -2014 Tarrant Appraisal District Board of Directors. E. Discuss any other items on the agenda. III. EXECUTIVE SESSION A. The City Council will meet in closed session pursuant to Section 551.071 of the Texas Government Code for consultation with the City Attorney pertaining to any matter in which the duty of the City Attorney under the Texas Disciplinary Rules of Professional Conduct may conflict with the Open Meetings Act, including discussion of any item posted on the agenda and legal issues regarding the preparation of developer's agreements and oil and gas leases. IV. RECONVENE INTO OPEN SESSION, AND TAKE ACTION NECESSARY PURSUANT TO EXECUTIVE SESSION, IF NEEDED V. REGULAR SESSION VI. ROLL CALL VII. INVOCATION 405 Municipal Drive, Kennedale, TX 76060 I Telephone: 817- 985 -2100 1 Fax: 817- 478 -7169 VIII. UNITED STATES PLEDGE IX. TEXAS PLEDGE "Honor the Texas Flag; I Pledge Allegiance to Thee, Texas, One State under God; One and Indivisible." X. VISITOR /CITIZENS FORUM At this time, any person with business before the Council not scheduled on the agenda may speak to the Council. No formal action can be taken on these items at this meeting. XI. REPORTS /ANNOUNCEMENTS In addition to any specific matters listed below, the city council may receive a report about items of community interest, including but not limited to recognition of individual officials, citizens or departments, information regarding holiday schedules, upcoming or attended events, etc. A. Information and updates from the City Manager, if any. B. Information and updates from the Mayor, if any. • Application deadline for city boards is September 20. C. Information and updates from Councilmembers, if any. XII. CONSENT ITEMS All matters listed under consent agenda have been previously discussed, require little or no deliberation, or are considered to be routine by the council. If discussion is desired, then an item will be removed from the consent agenda and considered separately. A. Consider approval of minutes from August 9, 2013 budget workshop. B. Consider approval of minutes from the August 8, 2013 regular meeting minutes. C. Consider awarding a request for proposal for professional janitorial services to Member's Janitorial Services LLC, and authorizing the City Manager to execute an associated contract for service. D. Consider approval of a Cooperative Technical Partnership Agreement with the North Central Texas Council of Governments regarding flood map modernization. XIII. REGULAR ITEMS A. Case PZ 13 -04 to receive comments and consider approval on a request by Alluvium Development, Inc. for a zoning change for an approximately 45.5 acre tract from "R -2" Single Family Residential District to "PD" Planned Development District for property located at 925 Mansfield Cardinal Rd, legal description of J M Lilly Survey A 980 Tract 2 & A 985 Tract 3, Tarrant County, Texas. 1. Staff Presentation 2. Applicant Presentation 3. Public Hearing 4. Applicant Response 5. Staff Response and Summary of the Case Page 2 of 3 6. Action by the Council B. Case PZ 13 -03 to receive comments and consider approval of an ordinance amending Chapter 17, Article VI, "Zoning ", of the code of ordinances of the City of Kennedale, Texas, as amended, by establishing new sections providing for creation and purpose, membership, organization, rules and requirements, and powers and duties of the board of adjustment. 1. Staff Presentation 2. Public Hearing 3. Staff Response and Summary of the Case 4. Action by the Council C. Public hearing to receive input on the Fiscal Year 2013 -2014 Proposed Budget. 1. Staff Presentation 2. Public Hearing 3. Staff Response and Summary 4. Council Action D. Public hearing to receive input on the Fiscal Year 2013 -2014 Tax Revenue Increase. 1. Staff Presentation 2. Public Hearing 3. Staff Response and Summary E. Consider approval of the city manager to execute a contract with the City of Mansfield for Public Safety dispatch and police jail services. F. Consider approval of an Ordinance amending section 4- 301(b)(3) of the City Code, requiring proof of insurance coverage from all contractors registering to work in the City of Kennedale. G. Consider approval of an Ordinance amending compensation for Council, Board, and Commission members. H. Consider adjusting the date of the October and November regular Council meeting. XIV. ADJOURNMENT In compliance with the Americans with Disabilities Act, the City of Kennedale will provide for reasonable accommodations for persons attending City Council meetings. This building is wheelchair accessible, and parking spaces for disabled citizens are available. Requests for sign interpreter services must be made forty -eight (48) hours prior to the meetings. Please contact Amethyst Cirmo, City Secretary, at 817.985.2104 or (TDD) 1.800.735.2989 CERTIFICATION I certify that a copy of the September 12, 2013, agenda was posted on the City Hall bulletin board next to the main entrance of the City Hall building, 405 Municipal Drive, of the City of Kennedale, Texas, in a place convenient and readily accessible to the general public at all times and said agenda was posted at least 72 hours preceding the schedule time of said meeting, in accordance with Chapter 551 of the Texas Government Code. t7 Amethyst G. Cirmo, City Secretary Page 3of3 KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: WORK SESSION - A. I. Subject: Update on water conservation and regional drought stages. II. Originated by: Bob Hart, City Manager III. Summary: Current reservoir storage is at 66.3% and has been dropping at a rate of about 1 %per week. Forecasting forward at this rate, storage could reach the Stage 2 trigger (60% capacity) by mid - October. Stage 2 set limits at once -a -week watering. In terms of rainfall, since January 1 of this year, DFW is only - 5.27" below normal, but since April 2012, the rainfall deficit is more than 15 ". However, water use through 08/13 was averaging 90% of expected demands for this year, and demands through June and July were the third lowest for this time period when compared to the last decade of water use. The Council may also wish to discuss lot sizes and their effect on water consumption and proper drainage in the city/ As a city we will continue to encourage water conservation at all times. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: WORK SESSION - B. I. Subject: Update on initiatives related to Village Creek. II. Originated by: Bob Hart, City Manager III. Summary: The City is participating with NCTCOG, the City of Arlington, and Tarrant County to secure a FEMA grant to conduct a Village Creek Watershed Flood Risk Identification Project. The grant program will be through the FEMA Cooperating Technical Partnership with Kennedale's match being $67,700. The study will establish floodplain elevations along the various tributaries feeding into Village Creek. The information will assist residents and property owners in calculating the new FEMA flood insurance exposure rates. The information will also be used in applying for future FEMA Hazard Mitigation grants and assist in the city's efforts to secure funding through the Corps of Engineers and TCEQ /EPA. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: WORK SESSION - C. I. Subject: Update on status of jail and dispatch service contracts with the City of Mansfield. II. Originated by: Tommy Williams, Police Chief III. Summary: Please see detailed information in the staff report for item in the regular session of this packet. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: WORK SESSION - D. I. Subject: Discuss nominations to the 2013 -2014 Tarrant Appraisal District Board of Directors. II. Originated by: Bob Hart, City Manager III. Summary: Please see the attached information. Nominees will be places on the regular agenda for the October 10 regular meeting. Note: The City of Kennedale is allocated 6 votes for the actual election. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: VII. Alternative Actions: VIII. Attachments: 1. ITAD 120130905155730567.tif Tarrant Appraisal District Mr. Bob Hart City Manager City of Kennedale 405 Municipal Drive Kennedale, Texas 76060 Dear Mr. Hart: Jeff Law Executive Director Chief Appraiser September 3, 2013 The terms of service for our five members of the Board of Directors will expire on December 31, 2013 and it is time to begin the process of conducting an election. Based on the amount of the 2012 adjusted tax levy imposed by each eligible taxing unit, we have calculated the number of votes for your entity. The enclosed list will provide you with that information. The first step in the procedure is the nomination of candidates. Each voting unit may nominate one candidate for each of the five positions to be filled. You are not required to make any nomination or you may nominate any number up to five. The County Tax Assessor /Collector is a member of the Board of Directors by law. In order to be eligible to serve as directors, the 2013 nominees must have resided in the Tarrant Appraisal District for at least two years prior to January 1, 2014. They may serve on the governing body of a taxing unit in the Tarrant Appraisal District and still be eligible to serve as a Director. However, an employee of a taxing unit is prohibited from serving as a Director unless that employee is also an elected official of the governing body. A Director may not be related to a person who is in the business of appraising property for property tax purposes or represents property owners in proceedings in the appraisal district or who is employed by the appraisal district. A person is ineligible to serve as a director if he, or a business in which he has a substantial interest, enters into a contract with the appraisal district or enters into a contract with a taxing unit in the district, if that contract relates to the performance of an activity governed by Title I of the Texas Property Tax Code (for example, appraising property for tax purposes or determining eligibility for exemptions). A substantial interest exists where the person and spouse have a combined ownership of at least 10% of the voting stock or shares of a business, or either of them is a partner, limited partner or an officer. If you have questions concerning the qualifications of nominees for a Board position, please call the undersigned. 2500 Handley Ederville Road Fort Worth, Texas, 76118 www.tadorg (817) 284 -0024 Letter to Taxing Units Election of Board of Directors September 3, 2013 Page 2 The nominations for Directors, which must be made in an open meeting of your taxing unit, should be submitted by the presiding officer to the Chief Appraiser in the form of a resolution adopted by the governing body by October 15, 2013, giving the names and addresses of the nominees. A current resume or vita is also helpful. The appointment calendar is as follows: By October 15, 2013 By October 30, 2013 By December 15, 2013 By December 31, 2013 January 1, 2014 Nominations by resolution Ballots listing nominees delivered to Presiding Officer Entity submits votes by resolution to Chief Appraiser Five (5) nominees receiving largest cumulative vote totals are elected Board takes office for two year term The duties of the Board are outlined in Chapter 6, Texas Property Tax Code. If you have any questions, do not hesitate to call the undersigned. JL:mm Encl. Sincerely, w tive Director Chief Appraiser KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: WORK SESSION - E. I. Subject: Discuss any other items on the agenda. II. Originated by: City Council, City Council III. Summary: At this time the City Council may discuss any other items on the agenda. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: EXECUTIVE SESSION - A. I. Subject: The City Council will meet in closed session pursuant to Section 551.071 of the Texas Government Code for consultation with the City Attorney pertaining to any matter in which the duty of the City Attorney under the Texas Disciplinary Rules of Professional Conduct may conflict with the Open Meetings Act, including discussion of any item posted on the agenda and legal issues regarding the preparation of developer's agreements. II. Originated by: Bob Hart, City Manager III. Summary: At this time the city council will meet in executive session. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: REPORTS /ANNOUNCEMENTS - A. I. Subject: Information and updates from the City Manager, if any. II. Originated by: Bob Hart, City Manager III. Summary: Information and updates from Bob Hart, if any. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: REPORTS /ANNOUNCEMENTS - B. I. Subject: Information and updates from the Mayor, if any. • Application deadline for city boards is September 20. II. Originated by: Bob Hart, City Manager III. Summary: Information and updates from the Mayor, if any. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: REPORTS /ANNOUNCEMENTS - C. I. Subject: Information and updates from Councilmembers, if any. II. Originated by: Bob Hart, City Manager III. Summary: Information and updates from Councilmembers, if any. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: None VII. Alternative Actions: VIII. Attachments: KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: CONSENT ITEMS - A. I. Subject: Consider approval of minutes from August 9, 2013 budget workshop. II. Originated by: Amethyst G. Cirmo, City Secretary and Communications Coordinator III. Summary: please see the attached minutes. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: Approve VII. Alternative Actions: VIII. Attachments: 1. (minutes 108.09.2013 CC Minutes - Budget Workshop.doc 1 KENNEDALE You're Here, Your Home www.cityofkennedale.com KENNEDALE CITY COUNCIL MINUTES REGULAR MEETING August 9, 2013, 8:30 AM CITY HALL COUNCIL CHAMBERS, 405 MUNICIPAL DRIVE I. CALL TO ORDER Mayor Clark called the meeting to order at 8:30AM. II. ROLL CALL Present: Mayor John Clark, Kelly Turner, Charles Overstreet, Liz Carrington, Frank Fernandez, Brian Johnson. Absent: none III. WORK SESSION A. Fiscal Year 2013/2014 Proposed Budget workshop. City Council met with the City Manager and department heads to go over the proposed FY2013 -2014 budget. IV. REGULAR ITEMS A. Discuss and consider approval of a Resolution of the City Council of the City of Kennedale, Texas, approving the plaement of a proposal on the September 26, 2013 City Council Public Meeting agenda to adopt a 2013 tax rate that will exceed the lower of the rollback rate or the effective tax rate; calling public hearings on a tax increase to be held on September 12, 2013 and September 19, 2013. Motion: To consider adoption a tax rate for the 2013 tax year of $0.7475 per $100 valuation that will exceed the lower of the rollback rate or the effective tax rate. The City Council hereby approves the placement of an item on the September 26, 2013 City Council public meeting agenda, such meeting being a special called Council meeting, to vote on a proposed tax rate of $0.7475 per $100 valuation that will exceed the lower of the rollback rate or the effective tax rate. The City Council hereby calls public hearings on the proposed tax increase to be held in the City Hall Council Chambers located at 405 Municipal Drive, Kennedale, Texas 76060 on September 12, 2013 at 6:00 p.m. and September 19, 2013 at 6:00 p.m., such dates being weekdays which are not public holidays. Action Approve, Moved By Brian Johnson, Seconded By Liz Carrington Motion Passed Unanimously V. ADJOURNMENT Motion To adjourn. Action Adjourn, Moved By Brian Johnson, Seconded By Liz Carrington. 405 Municipal Drive, Kennedale, TX 76060 I Telephone: 817- 985 -2100 1 Fax: 817- 478 -7169 Motion Passed Unanimously The meeting was adjourned at 4:35 PM. APPROVED: Mayor John Clark ATTEST: City Secretary Amethyst G. Cirmo Page 2 of 2 KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: CONSENT ITEMS - B. I. Subject: Consider approval of minutes from the August 8, 2013 regular meeting minutes. II. Originated by: Amethyst G. Cirmo, City Secretary and Communications Coordinator III. Summary: Please see the attached minutes. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: VII. Alternative Actions: VIII. Attachments: 1. (minutes 108.08.2013 CC Minutes.doc KENNEDALE You're Here, Your Home www.cityofkennedale.com KENNEDALE CITY COUNCIL MINUTES REGULAR MEETING August 8, 2013 CITY HALL COUNCIL CHAMBERS, 405 MUNICIPAL DRIVE I. CALL TO ORDER Mayor Clark called the work session to order at 5:30PM. II. WORK SESSION A. Discuss insurance requirements for contractors. Bob Hart gave a brief background on this issue, noting that the city currently does not require a copy of liability insurance for contracting trades (plumbing, electrical, mechanical) with the exception of Plumbers. The state of Texas maintains liability insurance for the professional trades. Some cities require proof of insurance from general contractors and some do not. Council discussed the issue and suggested that in order to better guarantee a high level of reputable service from any contractor working within the city, we adjust our code to require proof of liability insurance. B. Discuss Village Creek risk identification grant program. This program would be done by the Council of Governments, and would assist us in our pursuit of altering the landscape at Village Creek. FEMA expressed interest in the Kennedale project and Council would like staff to pursue this grant when it becomes available. C. Discuss Global Water contract change order. Bob Hart noted that there was a discrepancy between the number of digits that our current water meter registers are able to read and the number of digits that are necessary to make the new water system function to its highest potential. The city's options are to either maintain the current system and replace the registers as needed over several years, or to finance the purchase, of which Global Water will complete at cost, and install 100% new registers now. Staff recommended replacing all registers. D. Discuss health insurance bids. Kelly Cooper approached the Council, noting that the city's claims ratio had been fairly low, around under 60 %, however our current company, Blue Cross Blue Shield, came back with an 18% increase. Aetna came in as the best option, offering plans very similar to what the city has been using for the past year. Staff is recommended that Council consider approving the City Manager to approve a contract with Aetna which will include an HSA option, a PPO option, tele -doc, and a service that will allow employees to call for information on price comparisons for certain procedures. Staff is also asking that Council approve a one -time incentive of $600 to anyone who selects the HAS for the upcoming year. E. Effective Tax Rate & Rollback Tax Rate Summary. Sakura Moten - Dedrick approached the Council, noting the annual budget and tax publication schedule. F. Balanced Scorecard Report Bob Hart gave a brief update on the scorecard, noting that the city is doing well operationally, but struggling in the areas of taxation balance and overall staff turnover. 405 Municipal Drive, Kennedale, TX 76060 1 Telephone: 817 -985 -2100 1 Fax: 817- 478 -7169 G. Discuss other agenda items as needed. III. REGULAR SESSION Mayor Clark called the meeting to order at 7:00 PM. IV. ROLL CALL Present: John Clark, Frank Fernandez, Brian Johnson, Charles Overstreet, Kelly Turner, Liz Carrington Absent: none V. INVOCATION VI. UNITED STATES PLEDGE VII. TEXAS PLEDGE VIII. VISITOR /CITIZENS FORUM At this time, any person with business before the Council not scheduled on the agenda may speak to the Council. No formal action can be taken on these items at this meeting. One individual signed up to speak at the forum; however he will be speaking during item XI -E. IX. REPORTS /ANNOUNCEMENTS In addition to any specific matters listed below, the city council may receive a report about items of community interest, including but not limited to recognition of individual officials, citizens or departments, information regarding holiday schedules, upcoming or attended events, etc. A. Updates and information from the Mayor: • The mayor recognized Krystin Sanders for bring Kennedale's greatest advocate for recycling in Kennedale and for her recent publication in the Mansfield Magazine. • Recognize Library Summer Reading Program winners Brayden Thomas and Bailey • 2013 board appointment process and schedule B. Updates and information from Council, if any. • Special presentation from Brian Johnson. Mayor John Clark was thanked for his years of work in building the Kennedale community and being an integral part of Kennedale's history. • Councilmember Fernandez recognized several businesses for going above and beyond with regard to appearance, including cabinet, Wells Fargo, QT, Reds Roadhouse. • Councilmember Turner noted that his mother and Keep Kennedale Beautiful member has been keeping a blog on gardening that is regularly posted on the Keep Kennedale Beautiful Facebook page. C. Updates and information from the City Manager, if any. • No updates were provided. X. CONSENT ITEMS All matters listed under consent agenda have been previously discussed, require little or no deliberation, or are considered to be routine by the council. If discussion is desired, then an item will be removed from the consent agenda and considered separately. Page 2 of 4 A. Consider approval of minutes from July 11, 2013 regular meeting. Motion To approve the consent agenda with a correction to item XI -B as discussed. Action Approve, Moved By Charles Overstreet, Seconded By Frank Fernandez Motion Passed Unanimously XI. REGULAR ITEMS A. Appointment of a councilmember to serve as the 2013 -2014 Mayor Pro -Tem. Motion To appoint Brian Johnson as the 2013 -2014 Mayor Pro -Tem. Action Approve, Moved By Frank Fernandez, Seconded By Kelly Turner. Motion Passed Unanimously B. Discuss and consider approval of an Ordinance establishing a Planning and Zoning Commission and repealing all previous establishing ordinances for that board. Motion To approve an Ordinance establishing a Planning and Zoning Commission and repealing all previous establishing ordinances for that board, Action Approve. Moved By Liz Carrington, Seconded By Charles Overstreet. Motion Passed Unanimously C. Discuss and consider a resolution regarding a financing agreement for the purpose of procuring water meters and related technology. Major discussion of this item was held during the work session. Staff recapped this discussion and recommended that Council approve the change order regarding this financing agreement. Motion To. Action Approve Resolution 405 regarding a financing agreement for the purpose of procuring water meters and related technology., Moved By Charles Overstreet, Seconded By Brian Johnson. Motion Passed 4 -1. Ayes: John Clark, Brian Johnson, Charles Overstreet, Kelly Turner, Liz Carrington Nays: Frank Fernandez D. Discuss and approve bid award for health, dental, vision, life and AD &D, and voluntary life insurance and authorize the City Manager to sign the agreements This item was discussed at length during the work session. Motion To award a bid award for health, dental, vision, life and AD &D, and voluntary life insurance and authorize the City Manager to sign the agreements, Action Approve. Moved By Liz Carrington, Seconded By Charles Overstreet. Motion Passed Unanimously E. Discuss and consider approval of Developers Agreement with DR Horton for Beacon Hill Phase II. James Cowey approached the Council, noting that the agreement was very similar to the previous agreement for this area, however the developer has changed to DR Horton. Motion To approve a Developers Agreement with DR Horton for Beacon Hill Phase II, Action Approve. Moved By Frank Fernandez, Seconded By Kelly Turner. Page 3 of 4 Motion Passed Unanimously The Council recessed into executive session at 7:46PM. XII. EXECUTIVE SESSION A. The City Council will meet in closed session pursuant to Section 551.074 of the Texas Government Code to deliberate the appointment, employment, evaluation, reassignment, duties, discipline, or dismissal of a public officer or employee. 1. Discuss City Manager performance related to code enforcement. XIII. RECONVENE INTO OPEN SESSION, AND TAKE ACTION NECESSARY PURSUANT TO EXECUTIVE SESSION, IF NEEDED XIV. ADJOURNMENT Motion To adjourn, Action Adjourn. Moved By Brian Johnson, Seconded By Liz Carrington. Motion Passed Unanimously The meeting was adjourned at 8:23. APPROVED: Mayor John Clark ATTEST: City Secretary Amethyst G. Cirmo Page 4of4 KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: CONSENT ITEMS - C. I. Subject: Consider awarding a request for proposal for professional janitorial services to Member's Janitorial Services LLC, and authorizing the City Manager to execute an associated contract for service. II. Originated by: Amethyst G. Cirmo, City Secretary and Communications Coordinator III. Summary: The City opened a request for proposals for professional janitorial services on July 31, 2013, and received 6 proposals. After appropriate evaluation of the proposals by the selection committee, it was determined that Member's Building Services LLC would be the most appropriate choice for the City at this time. This will save us approximately $15,000 per year. Staff requests that you award this contract to Member's Building Service LLC, authorizing the City Manager to execute the contract. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: Approve VII. Alternative Actions: VIII. Attachments: 1. (Proposal Evaluation ITabulation.pdf 50% 30% 20% Cost Workplan Exp & Ref TOTAL Oriental 35% 30% 16% 81% I I I I Advantage 35% 5% 13% 53% I I I Emmanuel 45% 5% 4% 54% I I I Members 45% 25% 16% 86% I I I I Mr. G's 45% 5% 15% 65% I I I M &R Quality 20% 20% 15% 55% KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: CONSENT ITEMS - D. I. Subject: Consider approval of a Cooperative Technical Partnership Agreement with the North Central Texas Council of Governments regarding flood map modernization. II. Originated by: Amethyst G. Cirmo, City Secretary and Communications Coordinator III. Summary: Please see the attached materials in reference to this item. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: Approve VII. Alternative Actions: VIII. Attachments: 1. ICTP -ILA All ICTP -ILA All.pdf THE STATE OF TEXAS THE COUNTY OF TARRANT VILLAGE CREEK WATERSHED INTERLOCAL AGREEMENT THIS INTERLOCAL Agreement ( "Agreement ") is entered into between the North Central Texas Council of Governments ( "NCTCOG "), a political subdivision of the State of Texas acting by and through its Executive Board; and , a local government duly incorporated or established under the Constitution and the laws of the State of Texas acting by and through its governing body; and other government entities consenting hereto, WITNESSETH: WHEREAS, Pursuant to the Interlocal Cooperation Act, Chapter 791, Texas Government Code, (the "Act "), cities, counties, special districts and other legally constituted political subdivisions of the State of Texas are authorized to enter into interlocal contracts and agreements with each other regarding governmental functions and services as set forth in the Act; and, WHEREAS, the Parties to this Agreement recognize that the Village Creek Watershed is a unique regional resource in the heart of a growing Metroplex; that local governments and other community organizations are responsible for the overall health, safety, and welfare of their citizens and thus must take the lead as stewards of the watershed; and that the actions of upstream and downstream communities within the watershed directly affect each other; and, WHEREAS, the Parties to this Agreement have been cooperating and intend to continue cooperating with each other, in pursuit of a NCTCOG —FEMA CTP FY13 Project for the Village Creek Watershed; and, WHEREAS, local government Parties are participating members of the National Flood Insurance Program and recognize the importance of accurate floodplain mapping and other tools to assist in making sound development decisions; and, WHEREAS, the Parties to this Agreement understand that entering into this Agreement in no way obligates any Party to implement any portion of the project, and that separate agreements may be negotiated and executed; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, agree and bind them as follows: ARTICLE 1. — DEFINITIONS For purposes of this Agreement VILLAGE CREEK WATERSHED (HUC -10, 1203010204) — means the area of Tarrant County in which all land drains to Village Creek, upstream of the point where Village Creek joins the Trinity River West Fork. The Watershed begins in central, eastern Tarrant County in the southwestern portion of the City of Arlington and continues in a general southwest direction until terminating in northern Johnson County. For an illustration of the project area within this watershed see "Exhibit C." NCTCOG —FEMA CTP FY13 PROJECT — means the plan that will provide the framework to develop the hydrologic and hydraulic technical data for the Village Creek Watershed. Included as "Exhibit A ". VILLAGE CREEK PROJECT COST SHARING — means the arrangement negotiated and executed by the North Central Texas Council of Governments, as Project Plan sponsor and partnering with the Federal Emergency Management Agency (FEMA) on behalf of the participants, each sharing the local cost of conducting the project as outlined in the NCTCOG — FEMA CTP FY13 Project and presented in "Exhibit B ". VILLAGE CREEK WATERSHED COMMITTEE — means the committee that provides technical and policy guidance to NCTCOG regarding the Village Creek Watershed Project Plan, being comprised of one member and a designated alternate from each of the participating Parties; including Tarrant County, the City of Arlington, and the City of Kennedale. TRINITY RIVER COMMON VISION — means the cooperative management and comprehensive approach taken to create intergovernmental partnerships by NCTCOG and other entities to address flood damage reduction, transportation, greenway, waste management, conservation, development and other appropriate elements to achieve a safe, clean, enjoyable, natural, and diverse Trinity River. ARTICLE 2. — PURPOSE OF AGREEMENT The purpose of this Agreement is to accomplish the following objective: Develop hydrologic and hydraulic technical data to delineate a Village Creek urbanized 100 - year floodplain through Tarrant County and the Cities of Arlington and Kennedale, an effort that is consistent with the objectives of Trinity River COMMON VISION. The NCTCOG —FEMA CTP FY13 Project designed to accomplish these purposes is attached to this Agreement as "Exhibit A." Provide an administrative structure through this Agreement for NCTCOG to execute the NCTCOG —FEMA CTP FY13 Project in association with NCTCOG's consultant and to obtain cost - sharing funds from the participating Parties to accomplish the Project Plan. The Village Creek Project Cost Sharing is attached to this Agreement as "Exhibit B." ARTICLE 3. — ADMINISTRAIVE AND POLICY STRUCTURE The administrative and policy structure under this Agreement is as follows: A Village Creek Watershed Committee will provide technical and policy guidance for the cooperative project and make recommendations to NCTCOG; each Party that provides funding support to the project, except NCTCOG, will be entitled to appoint one member and a designated alternate to the Village Creek Watershed Committee. NCTCOG will be the administrative agent under this Agreement, will contract the technical services outlined in Exhibit "A" to NCTCOG's consultant, and will coordinate the work program with the Village Creek Watershed Committee. Unless modified by the Village Creek Watershed Committee, each participating Party will contribute its share to NCTCOG for funding and allowable in -kind support as provided in Exhibits "A" and "B." One hundred percent of each Party's cost share will be invoiced by NCTCOG upon execution of the Agreement and will be payable in full within thirty (30) days after receipt. This Agreement is recognized as a supplemental level of service, and is not intended to duplicate or diminish the products, assistance, representation, or services received by participating entities through NCTCOG membership. In accordance with the Interlocal Cooperation Act, the Parties will make payment for services rendered under this Agreement from available current revenues. ARTICLE 4. — RENEWAL AND AMENDMENTS This Agreement will be effective for one year from the effective date of the Agreement, and will be considered automatically renewed for each succeeding year. A Party may withdraw from this Agreement, through a vote of its governing body, provided it has notified the Executive Director of NCTCOG of such action in writing at least 60 days before its intended withdrawal date. Amendments may be made to this Agreement upon the approval of the governing bodies of all Parties to this Agreement. ARTICLE 5. — SEPARABILITY CLAUSE If any provision in this Agreement of any application hereof shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions and the applications shall not in any way be affected or impaired thereby. ARTICLE 6. — GOVERNING LAW This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. ARTICLE 7. — INDEMNIFICATION It is agreed that no Party to this Agreement shall be responsible for the acts of another Party to this agreement, and each Party participating herein indemnifies, releases and holds all other participating Parties harmless for all acts of its own officers, officials, agents and employees acting hereunder, to the full extent permitted by law. ARTICLE 8. — MISCELLANEOUS It is expressly understood and agreed that in the execution of this Agreement, neither the Parties to this Agreement nor NCTCOG waive, nor shall be deemed to waive, any immunity or defense that would otherwise be available to each against claims arising in the exercise of governmental powers and functions. The undersigned officers and /or agents are properly authorized to execute this contract on behalf of Parties hereto, and each hereby certifies to the other that any necessary resolutions extending such authority have been duly passed and are now in full force and effect. By entering into this Interlocal Agreement, the Parties do not create any obligations, express or implied, other than those set forth herein, and this Agreement shall not create any rights in Parties not in signatories hereto. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and their respective seals to be hereunto affixed and attested, as of the date and year noted below. (Signature) (Signature) (Printed Name) (Printed Name) (Title) (Title) (Local Government Participant) North Central Texas Council of Governments Date: Date: Attachments: Exhibit A — NCTCOG —FEMA CTP FY13 Project Description Exhibit B — Village Creek Project Cost Sharing Exhibit C — Village Creek FY13 Project Map NCTCOG - FEMA CTP FY 13 Project EXHIBIT A kE NCTCOG North Central Texas Council al Governments FEMA The North Central Texas Council of Governments (NCTCOG) is a proactive agency that has a long history of supporting floodplain management activities in our region comprised of 16 counties and covering over 24% of the population of the State of Texas. NCTCOG has been a Cooperating Technical Partner (CTP) with FEMA since 2004. In 2012, NCTCOG began Discovery projects in the West Fork Trinity and Elm Fork Trinity Watersheds in North Texas. NCTCOG looks to continue our partnership with FEMA moving forward and provides a dedicated team focused on moving North Texas communities and stakeholders to ACTION that will reduce the flood risk for our citizens. Village Creek Watershed Flood Risk Identification Project NCTCOG has long been an organization that brings communities and other stakeholders together to accomplish goals as a team. Moving forward with FEMA's CTP Program, NCTCOG proposes to coordinate watershed -based flood risk analysis projects. The Village Creek Watershed is an excellent first project because the key communities are already working together to determine how they can implement mitigation actions to reduce future losses from flooding. Residents of the Village Creek watershed and their property are continually threatened by severe storm events. There have been 20 major flooding events in the watershed since 1916. In 2010, the residents of this watershed experienced significant flooding as a result of Tropical Storm Hermine. Hydrologic and hydraulic analyses for Village Creek are over 25 years old and do not accurately represent the flood risk within this watershed. A Multi -Year Approach is proposed to accomplish the development of accurate flood risk information and Risk MAP products to give the communities the tools necessary to move toward Mitigation Actions. Each of the proposed projects below include survey, hydrology, hydraulics, floodplain mapping, and Risk MAP Product data development tasks. NCTCOG will manage this project and will solicit the local funding match from the communities. This first year project will be an excellent pilot project for developing a watershed based collaboration approach to be used throughout the region. Bringing several communities together, with NCTCOG serving as the regional organization to manage the project, all stakeholders will be able to accomplish the flood risk reduction goals that could not have been achieved by any one entitiy alone. September 2010 Flooding in Kennedale along Village Creek Multi - Year Plan Year Project Area Stream Miles Estimated Project Cost Year 1 Stream VC3 & Stream VC4 11.6 $292,500 Year 2 Chambers Creek & Tributaries 8.6 $190,000 Year 3 Elm Creek, North Fork of South Creek, Stream VC -5 & Stream VC -6 10.8 $220,000 The exhibit on the following page shows the multi -year plan within the Village Creek watershed. NCTCOG proposed the Year 1 project as an FY13 CTP Project. The scope of work and costs are included below. FY13 Project Task Task Cost Local Match FEMA Contribution Outreach $5,000 $1,250 $3,750 Develop Topographic Data $6,500 $1,625 $4,875 Perform Field Surveys $114,000 $28,500 $85,500 Develop Hydrologic Data and Perform Independent QA /QC $48,000 $12,000 $36,000 Develop Hydraulic Data and Perform Independent QA /QC $62,000 $15,500 $46,500 Perform Floodplain Mapping: Detailed Riverine and Perform Independent QA /QC $34,500 $21,750 $12,750 Develop DFIRM Database $4,500 $1,125 $3,375 Develop Non - Regulatory Products $18,000 $4,500 $13,500 Total $292,500 $86,250 $206,250 FY13 CTP Project NCTCOG North Central Texas Council of Governments FEMA Village Creek HUC -10 CITY OF RIVER OAKS CITY OF .,WHITE SETTLEMENT TOWN OF WESTOVER �H` LLS CITY OF BENBI2O.OK CITY OF EVERMAN CITY OF HALTOM CITY CITY OF GRANND PRAIRIE CITY OF FORT WORTH TOWN OF P■NTEGO CITY O DALWORTHINGTON ,*'GARDENS CITY.OF KENNEDALE CITY-OF CROWLEY CITY OF BURLES.ON CITY OF ARLINGTON CITY OF MANSFIELD CITY OF( GRAND PRAIRIE Johnson Village Creek Streams Year 1 Streams - 11.6 mi Year 2 Streams - 8.6 mi. Year 3 Streams - 10.8 mi. Other Streams HUC -10 Watersheds HUC -12 Watersheds County Boundaries FY13 CTP Project NT. North Central Tcxas Council of Governments ?:` FEMA Exhibit B NCTCOG Calculations Village Creek Project Cost Sharing Political Area Stream Length (miles) Committed Cash Match City of Arlington 0.88 $ 3,850.00 City of Kennedale 9.95 $ 67,700.00 Tarrant County 2.21 $ 14,700.00 Total 13.04 $86,250.00 FY13 Village Creek Watershed Flood Risk Identification Project Figure 1 - Stream Miles with Current Floodplains Project Area Parker Tarrant Low -r West Dallas Fork Trinity HUC -8 Villag. Gr•ek HUC -10 Ellis Johnson .ri. . 1 q: OFTSF ARLINGTo6 CITY OF FORT WORTH 0.3mi iho T�ifitwCC WEI:a t VC- A -1 0.23m R NT oUNT KENNEDALE VC -4A ANT • UNTY VC -4 -4, 4o1ffriuutt I,Ca. it VC -4 -4A 0.28m Village Creek Streams Village Creek Streams - Year 1 Other Streams Effective DFIRM Floodplains Zone A (Approx. 100 Yr) Zone AE (Detailed 100 Yr) Shaded Zone X (500 Yr) HUC -12 Watersheds Kennedale City Limits KENNEDALE You're Here,Your Home www. cityofkenneda le.com Staff Report to the Honorable Mayor and City Council Date: September 12, 2013 Agenda Item No: REGULAR ITEMS - A. I. Subject: Case PZ 13 -04 to receive comments and consider approval on a request by Alluvium Development, Inc. for a zoning change for an approximately 45.5 acre tract from "R -2" Single Family Residential District to "PD" Planned Development District for property located at 925 Mansfield Cardinal Rd, legal description of J M Lilly Survey A 980 Tract 2 & A 985 Tract 3, Tarrant County, Texas. 1. Staff Presentation 2. Applicant Presentation 3. Public Hearing 4. Applicant Response 5. Staff Response and Summary of the Case 6. Action by the Council II. Originated by: Rachel Roberts, City Planner III. Summary: CASE NUMBER: PZ 13 -04 REQUEST: Rezone property from "R -2" Single Family Residential District to "PD" Planned Development District (residential) APPLICANT: Alluvium Development, Inc. Overview and Background. The Harper family owns a 45 -acre parcel of land located on Little School Road and Mansfield Cardinal Road (see attached map). The property is currently zoned R -2 Single Family Residential, and the Planning & Zoning Commission approved a preliminary plat under that zoning classification several years ago. The preliminary plat has expired, but the R -2 zoning designation remains in place. Terry Jobe, of Alluvium Development, met with city staff several months ago to discuss the possibility of developing the site as a residential subdivision. Because the city's existing zoning classifications do not fit the comprehensive land use plan, staff asked Mr. Jobe to consider submitting a request to rezone the property as a Planned Development in order to incorporate elements that are drawn from the comprehensive plan. In addition to meeting with staff, Mr. Jobe also held a meeting with owners of property near the Harper property to get a better understanding of what their concerns might be. Drainage and traffic safety on Mansfield Cardinal Rd were two of the major concerns voiced during the meeting. Mr. Jobe has been working with an engineering firm to address the drainage issue. The city conducted a study of the tributary of Village Creek that runs through the property several years ago, and the engineer has reviewed the study and incorporated it into the drainage and grading plans. Brief outline of proposed development standards. The proposed ordinance, as originally written, would: *Allow only residential, open space, and related uses (no commercial or industrial uses are permitted). * Allow four different lot sizes, all smaller than the R -2 minimum lot size. * Require larger minimum house sizes. * Require smaller setbacks. * Establish a series of five detention ponds that serve to control the rate of storm water flow and also would be designed to serve as permanent natural amenities for the neighborhood. * Require the same 80% masonry requirement as the R -2 zoning district requires, except for lots that border the north and east sides of the property. These buffer lots would be required to have 90% masonry, which is higher than is required in any other zoning district. A small number of lots (13) would be permitted to have front entry garages, due to the reduced lot width. These garages would be required to have ornamental garage doors, and the garage would be limited to no more than 50% of the front facade (to prevent the building of "snout" houses). * Establish a restriction on how often an elevation may be repeated (none of our standard zoning districts have this requirement). * Requires non -turf landscaping (e.g., flower beds) to use high- efficiency irrigation systems, such as soaker hoses. * Requires minimum sidewalk width of 5 feet (standard is 4 feet). * Allows for a community garden to be established, if land is dedicated for that purpose and would be managed by a home owners' association (a community garden is not required, but it is permitted, reflecting the current trend to allow community gardening as a neighborhood amenity). Staff Review. Comprehensive Plan compliance. The bulk of the property is categorized as "Neighborhood" in the Future Land Use Map. Neighborhoods are intended to be primarily residential in nature and should have a clear center that has a civic, public, or community use in which people can come together. Sample development types include (but are not limited to) single family residential, accessory dwelling units (guest houses), and small parks. The proposed PD very clearly meets this description, with the proposed development entirely residential in nature, except for the detention /open space features located in the center of the development. The western and southern edges of the property are classified as "Neighborhood Corridor" in the future land use map. This district classification denotes areas where people can come together shop, eat, and socialize, and is generally expected to be the site of small retail or commercial uses. In this respect, the proposed development does not fit the future land use map. However, it should be noted that it is not intended that all of the properties shown in the FLUP as neighborhood corridor will develop as commercial uses. Kennedale does not have the population or the daily traffic to support that much commercial use. It is expected that some of the areas indicated as "neighborhood corridor" will develop as other land use types, and with that in mind, staff does not see a conflict between the proposed development and the comprehensive plan. In addition to supporting the Future Land Use Map, the proposed rezoning also supports the following goals from the comprehensive plan: Support a walkable built environment. The development is intended to have a more pedestrian - friendly environment than the standard subdivision permitted in Kennedale. Promote human health and the environment. The development would use greenbelts "to bring open space into urbanized areas" (p. 4 -2). Promote access to housing. Although the proposed development would not be considered "affordable" in the sense of "affordable housing," the range of lot sizes and housing sizes will give more options for housing. Potential buyers or existing residents who prefer small yards, for example, would have access Page 2of5 to housing options that Kennedale does not offer currently. Establish a sense of place. The proposed development, with the required front porches, series of open spaces /detention ponds, and wider sidewalks, would stand out from the typical subdivision in the region. Although other cities are beginning to adopt regulations similar to those proposed in this ordinance, the regulations are not standard across the region. Compliance with other plans. In 2009, the City adopted a strategic plan to guide the City's actions for the next five years. As the Commissioners who were involved in developing the plan may recall, one of the recommendations was to revise residential zoning standards to allow uses such as zero lot line homes, senior housing, and neo- traditional developments. While not falling neatly into any of these three categories, the proposed development would provide smaller yards desired by buyers of zero lot lines homes and senior housing. The smaller setback, front porches, and wider sidewalks are borrowed from neo- traditional zoning standards. Staff believes the requested rezoning is in compliance with the strategic plan. Other issues. Our engineers have reviewed the preliminary drainage and grading plan and believe the preliminary plans as submitted are sufficient for this stage. When the property is platted, the plat applicant will submit detailed plans, which will also be reviewed by the engineers. Some changes from the preliminary plans could be made at that stage. Final plat approval will not be granted until adequate plans are submitted by the applicant. At this stage, however, only preliminary plans are needed, and our engineers say the submitted plans are sufficient at this time. In terms of traffic safety on Mansfield Cardinal, the developer is willing to move the entrance location if needed. Compliance with City Council priorities. Staff reviewed the application for fit with the Council's goals set for the balanced scorecard. The scorecard's goals that relate to planning and zoning are: Be a Sustainable, Attractive City Be Family Oriented Be a Sustainable, Attractive City The "attractive" part of this goal includes activities such as code compliance that are not applicable to this case, but it also includes elements such as good design standards. The proposed ordinance requires, at a minimum, the same masonry standards as is required in other districts and also requires changes in elevations so that the homes in the neighborhood will have variety. The soaker hose requirement is intended to help with water conservation, an issue of growing concern around the state. The smaller yard setbacks (the front yard setback, in particular) are also expected to help with water conservation. Providing a range of housing options should make the neighborhood more attractive to a wider segment of the population, making it more economically stable and, therefore, more sustainable over the long- term. Be Family- Oriented The proposed standards require front porches for a majority of the homes. While front porches can't guarantee neighbors will interact with each other, they do provide a vehicle for residents to meet and to interact each other more easily. In addition, a front porch provides space for parents to more easily watch children playing outside, which allows children to play in the front yard more securely. The sidewalk width is wider than the standard minimum in order to accommodate pedestrians better, in order to facilitate walking, whether for exercise, recreation, or visiting a neighbor. Page 3of5 The open spaces would provide extra areas for families to recreate together. Staff Recommendation. The rezoning requested is in compliance with the comprehensive plan and other city plans. In addition, it furthers the Council's recently- adopted goals through the balanced scorecard. Staff recommends approval of the Concept Plan and ordinance. Recommendation of the Planning & Zoning Commission. During its August meeting, the P &Z Commission recommended approval of Case PZ 13 -04 with the following conditions: 1. Staff will add to the ordinance a requirement that there be a Home Owners' Association, which is related to the maintenance of the ponds, green areas, etc. 2. The developer must conduct a traffic study for entry /egress on Sonoma Drive. 3. House elevations should have more variety in use of stone, cedar, etc. 4. Houses backing to ponds or side of ponds shall have wrought iron fences. 5. Hardwood trees of a minimum of 2" caliper shall be planted for each house and along the street. 6. The developer will address the drainage on the property, and runoff is required to be less than is currently running off, utilizing the city's previous VC -3 study. 7. Staff will amend the language in the ordinance to make it clear that J- swing, side, and rear entry garages are all permitted. 8. Street lighting, signs, and benches shall be ornamental. 9. Front elevations shall be 100% masonry excluding ornamentation such as structural timbers or structural brackets, and siding shall be limited to the rear of the house. 10. All houses shall be a minimum of 90% masonry. 11. Houses shall have a minimum roof pitch of 8/12. 12. Fencing around the entire subdivision shall be masonry or pre -cast masonry, and the fencing must be installed before the houses are built. The ordinance in your packet includes these recommended changes; the changes are underlined to make them easier to find. Staff review of Planning & Zoning Commission recommendation. 1. Requirement that the developer conduct a traffic study The City has already conducted a traffic study for this area, and staff does not believe an additional study is necessary. We therefore do not support this requirement recommended by the Commission. 2. Requirement for front elevations to be 100% masonry and for siding to be limited to the rear of the house The proposed development as submitted by the applicant will meet a higher standard of design than is usually required for a residential subdivision in Kennedale (buffer lots are required to have 90% masonry, front porches are required, and elevations are limited in how often they can be repeated, etc.). Staff believes this requirement recommended by the Commission is not necessary to ensure a quality subdivision, and we do not support this requirement. We would support a modified version of this requirement, such as restricting siding to the rear elevation of homes located on corner lots or, for homes that can be seen from Little School Rd or from Mansfield Cardinal Rd, restricting siding to areas where it won't be seen from those streets. 3. Requirement that all homes be a minimum 90% masonry The proposed development as submitted by the applicant will meet a higher standard of design than is usually required for a residential subdivision in Kennedale (buffer lots are required to have 90% masonry, front porches are required, and elevations are limited in how often they can be repeated, etc.). Staff believes this requirement recommended by the Commission is not necessary to ensure a quality subdivision, and we do not support this requirement. 4. Requirement regarding subdivision fencing Page 4 of 5 The standard requirement in Kennedale is to require a masonry perimeter fence be installed by the developer along the public streets surrounding the subdivision and then for privacy fences to be installed on remaining lots as houses are built (Sec. 17- 303(14) For residential subdivisions and the rear property line of nonresidential subdivisions, masonry screening walls shall be constructed adjacent to any street designated as thoroughfare, or larger, on the master thoroughfare plan). This masonry recommendation was added by one of the P &Z Commissioners in response to a concern expressed by a neighboring property owner about children from the subdivision wandering onto his property and possibly becoming injured while on his property. While staff can understand his concern, we do not believe it warrants a requirement for a masonry wall to be installed around the entire subdivision. We therefore do not support this requirement recommended by the Planning & Zoning Commission. Action by the City Council. According to city code, the Council may grant the requested zoning change; or it may change the zoning designation on a portion of such property; or it may initiate a request to consider changing all or a portion of such property to a district other than that requested and of a different character. Furthermore, not withstanding any provision to the contrary, the city council acting on the recommendation of the planning and zoning commission or on its own initiative, in considering a rezoning application may consider and approve any zoning classification set forth in the city's adopted zoning ordinance having a lesser intensity and being more restrictive than the zoning designation requested by the applicant" (Sec. 17- 429(f)). Sample Motions. I make a motion to approve the Concept Plan ordinance as originally written. I make a motion to approve the Concept Plan ordinance with the changes recommended by I make a motion to approve the Concept Plan ordinance, with the following changes ... I make a motion to deny Case PZ 13 -04. presented under Case presented under Case the Planning & Zoning presented under Case I make a motion to deny Case PZ 13 -04 without prejudice. IV. Fiscal Impact Summary: V. Legal Impact: VI. Recommendation: Approve VII. Alternative Actions: VIII. Attachments: PZ 13 -04 and PZ 13 -04 and Commission. PZ 13 -04 and the adopting the adopting the adopting 1. PZ 13 -04 map of site PZ 13- 04.pdf 2. PZ 13 -04 site plan PZ 13 -04 site plan.PDF 3. PZ 13 -04 site plan with lot types labeled PZ 13 -04 site plan (lots labeled).pdf 4. PZ 13 -04 preliminary drainage & grading plan PZ 13 -04 drainage & grading.PDF 5. PZ 13 -04 preliminary utility plan PZ 13 -04 utility plan.PDF 6. PZ 13 -04 application pz 13 -04 application.pdf 7. PZ 13 -04 sample elevations PZ 13 -04 elevations 8.5x11.pdf 8. 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ONINOZ *X3 x You're Here,Your Home The following pages contain documents that were submitted or presented during the meeting. I Rachel Roberts From: Roy Boenig < Sent: Wednesday, September 11, 2013 4:13 PM To: Rachel Roberts Subject: Kennedale City Council meeting regarding Case PZ 13 -04 I would appreciate if you could give this to all of the city council members since I will be out of town tomorrow night. To all City Council members: This is from Roy Boenig, 1020 Kennedale Sublett Rd. I can't attend the meeting about the rezoning of for Case PZ 13- 04. I will be out of town. If you recall, the last time that a developer came to rezone this property, I was against it and it took you 3 times before you passed the zoning change to R -2. I have decided this time to support changing the zoning to PD. As you know, you can basically write your own rules regarding this zoning. I have 2 concerns regarding this development. Drainage and fencing. Drainage Currently, any water that does not soak into the 48 acres, eventually drains onto my property. The current conceptual design that they have also sends all of that water to my property. The big difference is that once streets, driveway, sidewalks, and houses are built, about half of that 48 acres will no longer allow water to soak into it and that water has to go somewhere which means that potentially my property could be receiving much more water than it currently receives. Currently, my property has no erosion problems along the property line between my 9 acres and the 48 acres and as soon as winter comes, I plan on videoing to document how my property is currently affected by the current drainage situation. That way if the City or the City's engineering firm fail to do their job properly, then I have proof of the changes that occurred after this subdivision is developed and how it affect my property. Let's just say I'm doing this to protect myself from damages in the future. On a brighter side, the development's engineer has been very cooperative and willing to work with me to make sure we are not affected. In fact, he said that if he does his job, that they will effectively reduce the current amount of water flowing on to my property by 35 %. I have had a meeting with Teague, Nall, & Perkins to express my concerns (and Rachel was also in attendance). The best thing that you did was have the drainage study done by them back in 2007. That gives us a footprint to work from regarding the requirements for the drainage on to my property. If you recall the last developer said they only needed to build a 1 1/2 acre retention pond. My calculation was that it needed to be twice that size. As it turns out & John gave me a hard time about underestimating the size because the drainage study calls for two 7 acre retention ponds. Even though I am good with numbers, I am not a civil engineer. I need the city and their engineers to make sure that this development is done so that the retention ponds on this property work as has been suggested by this study. Fencing 1 The developer planned on putting masonry along Little Road and Swiney Hiett but stockade fences or leave up to the homeowners to put up the perimeter fences along the interior property lines of these 48 acres. I explained to P &Z that my concern is that with my baseball field at the back of my property and 3 tanks on my neighbors properties that these areas would be very inviting to children of this new development to explore and play on our properties. Plus if it is like most developments, the backyard fences are not constructed until a house is built on that lot, leaving open lots until houses are built. Secondly, if it is left up to the property owners, in 10 years, all of those stockade fences would be falling down and need replacement. So I requested that they fences be constructed at the beginning of the development and that they be made of some type of masonry so that we can be insured that they will be there permanently. The members of P &Z felt the same way and as a result included in their motion #12 - Fencing around the entire subdivision shall be masonry or pre -cast masonry (which I would be satisfied with), and the fencing must be installed before the houses are built. Please include this in your motion also. Please just make sure that the drainage meets the requirements of the 2007 drainage study and that the city does their job in making sure those requirements are followed through. Remember you are allowed to make restrictions tougher under a PD zoning and I hope you do just that. Thank you. Roy & Glenda Boenig ( 2 The developer planned on putting masonry along Little Road and Swiney Hiett but stockade fences or leave up to the homeowners to put up the perimeter fences along the interior property lines of these 48 acres. I explained to P &Z that my concern is that with my baseball field at the back of my property and 3 tanks on my neighbors properties that these areas would be very inviting to children of this new development to explore and play on our properties. Plus if it is like most developments, the backyard fences are not constructed until a house is built on that lot, leaving open lots until houses are built. Secondly, if it is left up to the property owners, in 10 years, all of those stockade fences would be falling down and need replacement. So I requested that they fences be constructed at the beginning of the development and that they be made of some type of masonry so that we can be insured that they will be there permanently. The members of P &Z felt the same way and as a result included in their motion #12 - Fencing around the entire subdivision shall be masonry or pre -cast masonry (which I would be satisfied with), and the fencing must be installed before the houses are built. Please include this in your motion also. Please just make sure that the drainage meets the requirements of the 2007 drainage study and that the city does their job in making sure those requirements are followed through. Remember you are allowed to make restrictions tougher under a PD zoning and I hope you do just that. Thank you. Roy & Glenda Boenig ( 2 This form must be submitted to the Secretary BEFORE the meeting begins VISITOR /CITIZEN'S FORUM - Request to Speak Today's Date: dy 2o ❑City Council ❑Planning & Zoning Comm. ❑Building Board of Appeals ❑Board of Adjustment ❑Library Advisory Board ❑Parks & Recreation Board DArts & Culture Board ❑Keep Kennedale Beautiful NAME: 1,./0&20 Kit% ADDRESS: /211 G� 1 ��`- -- . ♦ �.� I AM REPRESENTING: ❑M t&ECF ETHE FOLLOWING PERSONS /FIRMS /CORPORATIONS /GROUPS: • IS THE SUBJECT YOU WISH YO PRESENT RELATED TO AN ITEM ON THE CURRENT AGENDA? EiNo DYes, Agenda Item # • HAVE YOU DISCUSSED THIS SUBJECT WITH ANY COUNCIL /BOARD MEMBERS OR CITY STAFF? ❑ No es, (please list names) PLEASE DESCRIBE THE SUBJECT THAT YOU WISH TO PRESENT: a eceriosw... SIGNATURE: KENNEDALE City of Kennedale Texas Recommendations for 2013/2014 city budget Due to financial short fall of revenue the follow recommendations should be considered by the Kennedale Mayor, City Council and City Manager. 1. Recalculate all expense lines by use of zero base line as a starting point and cost justify each expense on 20013/2013 budget built from that base line rather than using trend budget factors with increases. 2. All lines that are discretionary in nature should be removed from the budget. 3. Put immediate freeze on hiring, land purchases by city, road construction projects that are non essential to maintaining basic city operations. 4. Balance staffing across all departments based on need for maintenance of city infrastructure and service level. 5. Put all city employees on pay for performance to reduce turnover. (funds to come from staffing to a 6000 population city rather than a 12000 population) 6. Reduce fire and police staffing to pre 9 -11 levels. Negotiate with Tarrant County to perform all felony investigations, fire investigations and swat support as needed. Contract out jail and dispatching activities for public safety departments. 7. Calculate the cost of repair /replacement of city water system. Use consultant engineers to determine cost to bring our system to standards and reduce massive leaking of water. Use savings from the reduced leaking to partially fund implementation of a scheduled maintenance program and alleviating our crises management style. ( Estimate of repair and refurbishing is $12000000) 8. Recalculate water rates to fund short fall in city water department fund. ($350000) 9. Replenish city surplus on a scheduled formulae. 10. Seek financing source as our surplus levels and current indebtedness will not allow a $12000000 bond. 11. Only take a tax increase as a last resort . 12. Adopt a strong mayor concept in Kennedale by amending the city charter. (As the elected head of our city government the mayor needs not only to influence and lead but to vote on each item before the council.) 13. Improve communications to our citizens so they are not surprised by increased taxes, water fees or reduction of service levels in our city. Make them a part of the decision making process. Hollis Matthews From: Hollis Matthews [ Sent: Tuesday, August 13, 2013 5:34 PM To: 'jclark @cityofkennedale.com' Subject: FW: bankruptcy Attachments: KBkcy.pdf Importance: High Mr. Mayor, As you know I have been deeply concerned with the financial condition of our city for some time. The business model currently in use in Kennedale has not delivered an improvement in our position. This has largely resulted from the economic down turn at the national level and the lack of businesses in our city, both of which are effecting our tax base. I know some small improvement is being experienced but it is of a long term nature. My estimate is ten to fifteen years to full recovery. Mr. Hart and his staff have done everything possible to turn the financials to a more positive level and have in fact held the service standards for our city to a reasonable level, in spite of a major of reduction in employees. They have reach a point of no return. John, there is not one strategy or refinement of budget that will drastically improve our condition in the short term. I ask one of my associates, Richard Swarb, Attorney at Law and Investment Advisor, to research the bankruptcy provisions as they relate to city governments. As an attorney I know you are well versed in the protection of bankruptcy under chapter 9. "This is a last resort that should be put into play only after every effort has been made to avoid it." I recommend a discussion for restructuring of the city debt be started in the near future. This would at least maintain our option of keeping our city organization in place in some modified basis. I am enclosing an attachment for your review and comments. Warmest Regards, Hollis Matthews Matthews Insurance Group PO Box 174450, Arlington, Tx 76003 5840 W. 1 -20 Ste 135, Arlington, Tx 76017 http://www.thematthewsinsurancegroup.com 1 Hollis Matthews From: Hollis Matthews [ Sent: Monday, August 19, 2013 10:48 AM To: 'Bob Hart (External)' Subject: FW: bankruptcy Attachments: KBkcy.pdf Importance: High Tracking: Recipient Read 'Bob Hart (External)' Read: 8/19/2013 12:26 PM Bob, Hope all is well with you. I sent the Mayor an email with an attached write up on city management. I thought you might be interested in a copy for study. It is a back up position that I believe needs to be considered for Kennedale. The Mayor, the Council and yourself have done a great job in managing the finances of our city. The ability to sustain the in place structure may require considering an additional strategy . This is a last resort step and all I am asking is that as leaders of our city you prepare for any eventuality. Warmest Regards, Hollis Matthews Matthews Insurance Group PQ Box 174450, Arlington, Tx 76003 5840 W.1-20 Ste 135, Arlington, Tx 76017 http:// www .thematthewsinsurancegroup.com From: Hollis Matthews [ Sent: Tuesday, August 13, 2013 5:34 PM To: 'jclark @cityofkennedale.com' Subject: FW: bankruptcy Importance: High Mr. Mayor, As you know I have been deeply concerned with the financial condition of our city for some time. The business model currently in use in Kennedale has not delivered an improvement in our position. This has largely resulted from the economic down turn at the national level and the lack of businesses in our city, both of which are effecting our tax base. I know some small improvement is being experienced but it is of a long term nature. My estimate is ten to fifteen years to full recovery. MANAGEMENT TOOL FOR SETTING BUDGETS Has to be: Nice: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Municipal Bankruptcy: Avoiding and Using Chapter in Times of Fiscal Stress JOHN KNOX and MARC LEVINSON DISCLAIMER: Nothing in this booklet should be construed or relied upon as legal or financial advice. Instead, this booklet is intended to serve as an introduction to the general subject of municipal bankruptcy under chapter 9 of the Bankruptcy Code and related mattters, from which better informed requests for advice, legal and financial, can be formulated. Published by Orrick, Herrington & Sutcliffe LLP All rights reserved. Copyright © 2009 by Orrick, Herrington & Sutcliffe LLP No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system, without permission in writing from the publisher. Municipal Bankruptcy: Avoiding and Using Chapter 9 in Times of Fiscal Stress 0 JOHN KNOX and MARC LEVINSON O R R I C K r- : is Municipal Bankruptcy: Avoiding and Using Chapter 9 in Times of Fiscal Stress Introduction 1 Chapter 1. Avoiding Chapter 9 3 Assessing the Problem(s) 3 Cash Position and Special Funds 5 Acknowledgement by Stakeholders 7 Chapter 2. Advantages and Disadvantages of a Chapter 9 Filing 9 Advantages 9 Disadvantages 11 Chapter 3. Preparing for Chapter 9 13 The Importance of Negotiations 13 Authorization to File 13 Federal Securities Law Considerations 14 Timing 15 Dealing With Vendors and Trade Creditors 16 Chapter 4. Seeking Bankruptcy Protection 17 Pre - Filing Requirements 17 Assignment of the Bankruptcy Judge 18 Chapter 5. The Tenth Amendment and Limitations on the Role of the Court 21 Tenth Amendment Limitations 21 Role of the Bankruptcy Judge 22 Chapter 6. The Chapter 9 Case 23 Initiating the Chapter 9 Case 23 Official Committees 24 Effect on Litigation 24 Assumption and Rejection of Contracts and Leases 25 Special Revenues 26 Financing Leases 27 Chapter 7. Emerging From Bankruptcy 29 Dismissal of the Case 29 The Plan of Adjustment 29 Chapter 8. Yes, There Is Life After Bankruptcy 33 Capital Markets Issues 33 Avoiding a "chapter 18" 33 Chapter 9. Conclusion 35 About the Authors 36 Introduction Municipalities' have been increasingly squeezed between the cost of providing basic services (which in general has been increasing at a rate significantly higher than inflation) and flat or declining revenues (due to the economic slowdown and in particular the difficulties in the housing market affecting property tax revenues and spending patterns). In the face of these pressures, the possibility that some may want or need to seek protection under chapter2 9 of the United States Bankruptcy Code has become more real. In May 2008, the City of Vallejo, California filed a chapter 9 petition, and several other California municipalities have been reported in the media to be considering a filing. Jefferson County, Alabama, also has been reported to be on the edge of filing for several months due to financial problems with its sewer system, among other things. Whether this is the start of a larger trend remains to be seen, but it is clear that the stresses that can produce the drastic step of filing for bankruptcy protection currently are affecting many municipalities. We intend this pamphlet to provide an overview of chapter 9 for those who manage and govern municipalities. We offer some thoughts on how to avoid filing as well as how to successfully navigate a bankruptcy case and emerge in stronger financial health. This pamphlet does not provide an exhaustive technical exposition of the law. Due to its size and format, this pamphlet only briefly summarizes, and in some cases omits entirely, areas that in particular cases might be very significant, but which we feel would not be of interest to the majority of our audience. ' Throughout, we use the term "municipality" to refer to a local government entity that may file a chapter 9 case. The term covers a wide variety of local governments that may or may not be considered "municipalities" under state law. 2 The observant reader will note that "chapter" is not capitalized when referring to the chapters of the Bankruptcy Code. This is the standard convention. Avoiding and Using Chapter9 in Times of Fiscal Stress 1 Accordingly, this pamphlet does not purport to provide legal advice or serve as a template for a practitioner seeking to advise a client considering a chapter 9 filing or to prosecute the case once there. Rather, what we hope to achieve in this effort is to provide a basic framework to consider the chapter 9 alternative and enough background to enable decision makers and managers to ask informed questions of their advisors and appropriately consider the alternatives. Bankruptcy is a complex area of the law, and the adage "don't try this at home" should be heeded. Any municipality seriously considering a chapter 9 filing should obtain expert legal counsel as well as financial advisory help. 2 Municipal Bankruptcy: CHAPTER ONE Avoiding Chapter 9 If the reader takes away only one thing from this pamphlet, it should be that filing for bankruptcy protection under chapter 9 should be considered a last resort, to be effected only after every effort has been made to avoid it. As we discuss below, there are several significant downsides to such a filing, and in the end, the problems that brought the municipality to the point of filing will have to be solved anyway, so it is far better to resolve them, if possible, outside of bankruptcy. Assessing the Problem(s) The initial step in trying to avoid bankruptcy is to clearly and dispassionately assess the underlying problem(s) that are pushing the municipality in that direction. The degree of self awareness and transparency among municipalities can vary widely, and for some, one of the main problems may be just getting a good handle on the real drivers of financial stability and solvency. Not being financial managers, we will leave it to those more qualified to get into the technical details, but suffice it to say that if a municipality cannot identify in clear terms the specific factors that are driving revenues down and /or expenses up, it has some serious homework to do before venturing into bankruptcy court. Municipalities that have been forced to the brink of, or into, bankruptcy, generally experience one or both of two types of fiscal problems. The first is a large and extraordinary one -time financial hit that cannot be absorbed by the budget or covered out of reserves. This could be a sudden and catastrophic investment loss (such as that experienced by Orange County, California, leading to its chapter 9 filing in 1994) or a large judgment rendered against the municipality (such as that experienced by Desert Hot Springs, California, leading to its chapter 9 filing in Avoiding and Using Chapter9 in Times of Fiscal Stress 3 "... filing for bankruptcy protection under chapter9 should be considered a last resort, to be effected only after every effort has been made to avoid it." 2001). In each case, these significant one -time liabilities forced the municipality into seeking bankruptcy protection. The second kind of problem is a structural operating deficit that continues long enough to burn through reserves and is not resolved by revenue increases or spending cuts quickly enough for the municipality to avoid running out of cash as it attempts to meet necessary and fixed expenses such as debt service and payroll. A municipality with this type of problem could be pushed over the edge by a relatively small one- time expense or drop in revenues, as it may have little or no cushion available to absorb even a modest setback. For example, the City of Vallejo, which had spent down its reserves in order to meet its obligations over a period of several years, became insolvent as a result of California's economic slowdown and the concomitant drop in real estate and sales tax revenues, combined with significant employee salary and benefit cost increases dictated by collective bargaining agreements. In general, fiscal stress related to one -time problems can be resolved by financing the cure costs over a long enough period so that those costs can be absorbed in the budget over time. And while bankruptcy protection may be necessary to buy time to get such a financing done and delay disruptive collections efforts or the forced liquidation of collateral, all efforts should be made to convince creditors to be patient and not to cause the municipality to incur the significant costs associated with a bankruptcy filing. Fiscal stress related to ongoing structural deficits and lack of reserves is much more difficult to tackle because a financing will have little impact on solving the underlying structural problem: in fact this tactic will likely make things worse by "kicking the can down the road" and increasing the overall costs to the municipality. In these circumstances, painful cuts in service levels, employee compensation and other expenses may be required, as well as increased revenues through higher taxes or fees. Bankruptcy protection may be needed to avoid Municipal Bankruptcy: immediate sanctions for breaching contracts, including labor agreements, missing debt service payments or failing to provide required levels of service. Cash Position and Special Funds Most municipalities (particularly general purpose entities such as cities and counties) maintain scores of separate funds within their treasuries, each having a particular function and source of revenues, and each burdened by legal or grantor restrictions as to the use of the funds. For example, in California, revenues from municipal utilities such as water and sewer systems may be used only to pay the costs of operating and maintaining those systems or for capital improvements (including debt service) to those systems. Many states require that special funds be held in trust and not diverted for unrelated uses. Similarly, moneys received in grants and state subventions may be restricted for particular uses by the terms of the grants, or by statutes or regulations. Careful analysis must be made of the various funds held by the municipality to determine what diversions can legally be made and, more importantly, how limitations on the uses of funds will affect the true available cash position of the municipality. While it is not uncommon for all of these funds to be commingled for investment purposes into a pooled cash account, a significant positive balance in pooled cash can mask a serious problem in the municipality's underlying financial condition. Typically, the only fund completely unrestricted as to its use is the municipality's general fund. It is common and accepted practice for municipalities to use their pooled cash accounts as a source of cash flow within a fiscal year to carry funds that have intra-year cash inflows that do not match their cash outflows; provided, that the budget and reserves are sufficient' to ensure that at the end of the fiscal year, restricted funds are not in a position of having funded items not permitted within their restrictions. For example, the general fund may receive large infusions from property tax revenues twice a year, but have a monthly cash outflow that is relatively even. Generally, it is not improper for the cash outflow deficits to be covered from pooled cash during the year so long as the general fund makes up the difference from cash inflows by the end of the fiscal year. 3 The Government Finance Officers Association (GFOA) recommends that agencies maintain general fund unrestricted reserves of at least five to fifteen percent of the annual general fund budget. Avoiding and Using Chapter9 in fines of Fiscal Stress 5 The trouble arises when the budgeted revenues for a general fund will not meet budgeted expenditures, and there are insufficient reserves to cover the shortfall. Often these imbalances are not apparent until the fiscal year is well under way and it becomes clear that projections of revenue and expense will not be met. In such a case, use of restricted funds in pooled cash could be a violation of the restrictions imposed on the special funds and therefore illegal. It is important to note that while municipal financial officers generally have immunity from personal liability for official acts, that immunity does not necessarily extend to knowing violations of the law. Thus, a municipal finance officer should be very careful not to permit advances from restricted funds intro year if he or she knows that the amounts cannot be restored from budgeted revenues or reserves by the end of the fiscal year. It is very important for a municipality that appears to be headed for insolvency to monitor its cash position, particularly in the funds that are projected to go negative by the end of the "... the fiscal year, so that it can determine when it will municipality run out of funds to keep operations going. A municipal official who requires or even permits could be faced employees to come to work if the official with the choice of knows that the municipality will not be able to either breaking pay them may be violating state labor laws or committing common law fraud. In some states, the law b y this may even constitute a criminal offense. using restricted For example, if an employee is paid from a funds f ©r an municipality's general fund (and cannot be allocated to some other special restricted fund impermissible because the employee's duties do not support the purpose or by special fund's activities), and the general fund failing to pay budget position is such that, taking into account contracted f ©r any available reserves, it will be unable to achieve at least a zero year -end balance without wages after using legally restricted funds in pooled cash, the work has been municipality could be faced with the choice of performed." either breaking the law by using restricted funds 6 for an impermissible purpose or by failing to pay Municipal Bankruptcy: contracted for wages after work has been performed. If either of these occurs with foreknowledge by the municipality's managers or governing body, normal governmental immunity for official acts may not protect such officials from personal liability. This issue becomes important with respect to the timing of a bankruptcy filing, as will be seen below. Acknowledgement by Stakeholders Once the municipality's management has identified and quantified the underlying fiscal problems, it must recognize that a key ingredient to solving them is to clearly and transparently communicate the nature and scope of the challenges to all potentially impacted stakeholders so that they are able to understand and acknowledge the problems. Managers and political leaders should insist on clear and open disclosure of the financial data and related facts, and they should make sure that stakeholders both receive all relevant information and have an opportunity to ask questions and offer solutions. All reasonable suggestions to solve the problems should be investigated and taken seriously. The ins and outs of labor negotiations are far beyond the scope of this pamphlet, but if payroll costs or benefits are a key component of the municipality's fiscal stress, it will be necessary to engage labor law advisors and to assist resolving these problems. Outside a bankruptcy case, in most states labor laws applicable to public employee contracts place numerous restrictions on revising labor agreements, even if the agreements are pushing the municipality toward bankruptcy. However, if all parties realize that failure to modify extant agreements would likely land the municipality in bankruptcy court, all parties should be willing to work very hard to achieve consensual modification of burdensome agreements. Although bankruptcy may provide more flexibility in dealing with labor agreements, bankruptcy is not necessarily a "silver bullet" with respect to such matters, so every effort should be made to reach an agreement that provides a workable arrangement for the municipality prior to the decision to file. Similarly, creditors such as banks, bondholders and credit enhancers may be willing to restructure long term debt in order to avoid forcing a municipality into bankruptcy. Attempts should be made to approach these stakeholders with clear and transparent information in order to reach some accommodation. Avoiding and Using Chapter .9 in Times of Fiscal Stress 7 Often an intermediate step in such a restructuring is a forebearance agreement under which the creditors agree not to declare a default and /or take remedial action against the municipality for a specified period of time while the parties attempt to reach a negotiated settlement. Finally, the officers and governing body of the ailing municipality must make the hard decisions about ongoing projects and programs that may have to be postponed, scaled back or cancelled in order to free up cash. These are often painful political choices, but the looming possibility of a bankruptcy filing can serve as a catalyst to reach consensus on these difficult issues. 8 Municipal Bankruptcy: CHAPTER TWO Advantages and Disadvantages of a Chapter 9 Filing There are many misconceptions about the utility of a bankruptcy filing in addressing extreme financial problems for municipalities. While bankruptcy clearly provides certain benefits for municipalities that cannot otherwise solve their fiscal problems, it is no panacea and comes with some significant downsides. Advantages Protection. One of the most important and immediate advantages of a bankruptcy filing is the protection against actions that might be taken by creditors or others against the municipality, its officers, elected officials, employees and even its inhabitants. Filing a bankruptcy petition invokes an automatic stay— basically a federal court injunction— against any action that could otherwise be taken against the municipality (which becomes the debtor upon the filing of the bankruptcy case) or its officers or employees. Unlike a bankruptcy involving a private entity, in chapter 9, the automatic stay extends to elected officials and to all inhabitants of the jurisdiction of the debtor municipality. ".,. the automatic This means that even if the municipality or other protected persons take or omit to stay extends t0 take actions related to claims against the elected officials and municipality that would otherwise subject to all inhabitants them to sanctions or liability in state or of the jurisdiction federal court, or to actions by regulatory bodies, those actions may not proceed of the debtor without the claimants first obtaining the municipality." permission of the bankruptcy court. The Avoiding and Using Chapter9 in Times of Fiscal Stress 9 stay lasts during the pendency of the chapter 9 case, but the bankruptcy judge retains the right to modify or terminate the stay for cause shown. Breathing Space. Bankruptcy gives the debtor breathing space in which to function while it tries to work out its creditor and cash flow problems. Raising new revenues, renegotiating contracts and restructuring debt obligations takes time. If a municipality is forced to breach contracts or face other legal claims caused by fiscal stress outside of bankruptcy, it may have to spend time fighting off creditors trying to seize assets or collateral, or be forced into regulatory or other state fora to answer for such actions and redress grievances before it is able to fashion a workable solution for the benefit of all creditors and residents. The bankruptcy case allows all of these disputes to be addressed in one forum, and the automatic stay provides the municipality the opportunity to focus on a comprehensive solution rather than simultaneously fighting multiple brushfires. Access to an Expert Arbiter. An often underestimated advantage of a bankruptcy filing is found behind the bench of the bankruptcy courts. Bankruptcy judges are experts in financial restructuring, negotiations and arbitrating complex debtor /creditor and intercreditor disputes. While chapter 9 filings may be rare, bankruptcy judges see similar issues in the private sector day in and day out, and generally are very well equipped by dint of knowledge and temperament to help the parties arrive at workable compromises. Furthermore, because of the unique system of assigning bankruptcy judges to chapter 9 cases, it is very likely that a chapter 9 case will be assigned to one of the most qualified and experienced judges within the applicable federal circuit. The value of a highly qualified and experienced judge in helping the stakeholders get to a solution should not be underestimated. Ability to Adjust Obligations. Most people see the ability to adjust debts and other obligations as the prime benefit of a bankruptcy filing. If a plan of adjustment can be confirmed in a chapter 9 case, it may provide that unpaid claims of creditors be either reduced (paid in "tiny bankruptcy dollars ") and/ or extended and restructured. There are limitations on how these adjustments can be made, and it may be possible for creditors to block a debtor from making 10 Municipal Bankruptcy: the adjustments they would like (or feel that it needs) to make. Nevertheless, in situations where it is not be possible to fully repay all creditors absent some sort of debt relief, the plan of adjustment can provide a fresh start and the ability to achieve Long -term financial stability for the municipality by deferring and /or reducing past obligations. Disadvantages Credit Markets Reaction. Municipalities that seek bankruptcy relief (and even those that seriously consider filing) should expect the immediate suspension and /or downgrade of their credit ratings. Particularly if bondholders are not fully repaid, this credit stigma may last for many years. However, it is certainly possible, as was seen with Orange County, that the municipality may emerge from bankruptcy and have its credit standing restored to robust levels within only a few years. Municipalities contemplating bankruptcy should expect intense scrutiny "Establishing from their capital markets creditors and a track record rating agencies. One of the best things a municipality can do to position itself to get ©f providing its credit ratings restored is to be able to trustworthy provide timely and transparent information information, even about its financial condition to the capital markets and rating agencies. Establishing if it is not favorable a track record of providing trustworthy information, is an information, even if it is not favorable absolute necessity information, is an absolute necessity if a municipality expects to emerge from if a municipality bankruptcy and get back on its feet in the expects to emerge credit markets. This effort takes time and from bankruptcy resources from the municipality's finance staff at a time when the staff will be under and get back on its tremendous stress. Municipalities must feet in the credit take this burden into account when they markets." contemplate a filing. Avoiding and Using Chapter9 in Times of Fiscal Stress 11 Cost and Distraction. Filing and pursuing a chapter 9 case is very expensive. Legal and financial consulting fees can easily range into seven figures (or even more for very large and complex entities). Every dollar spent on these costs is a dollar that cannot go toward solving the underlying financial problem. It is therefore in the interest of all stakeholders to realize that unless they can come to a negotiated settlement that avoids bankruptcy, these costs ultimately will consume funds that otherwise could be more productively used. Another component of cost is the opportunity cost that will be expended by taking valuable senior staff time away from solving core problems and directing it to managing and responding to the demands of the case itself. Most municipalities that take the drastic step of filing a bankruptcy petition already will have cut staff to the bone in order to try to avoid insolvency. The distraction of dealing with a bankruptcy case - preparing for and attending hearings and depositions, responding to endless requests for information and documents from creditors, rating agencies, collective bargaining units, elected officials and the public - can be a major distraction from the core work the staff must do to keep the organization functioning. A municipality contemplating a bankruptcy filing should have a clear plan regarding how to address these issues going in, lest the demands of the case simply overwhelm the ability of the organization to function. Stigma on the Community. Bankruptcy likely will be viewed by citizens, workers, and creditors as a stigma, and that perception can affect the self - esteem of the citizens and have an adverse impact on the overall business climate in the community. New businesses may be reluctant to locate in the community, real estate sales may be affected, and general economic conditions may be depressed. This stigma could linger for a period of time after the municipality emerges from the bankruptcy in the legal sense. Of course, the bankruptcy filing is not the cause of the municipality's problems, but rather the result of not being able to solve them any other way. It is the underlying financial health of the municipality, including its ability to deliver services and promote a strong community, that really matters. 12 Municipal Bankruptcy: CHAPTER THREE Preparing for Chapter 9 The Importance of Negotiations It is crucial that, once the magnitude of a financial crisis is established, thorough negotiations be undertaken with creditors and stakeholders to avoid insolvency. In fact, such negotiations, undertaken in good faith, are a legal prerequisite to filing a chapter 9 case. Even if the municipality already has determined that it likely will be forced to file for bankruptcy protection, it should continue to try to negotiate with key creditors to avoid that result, and should carefully document what steps are taken to reach agreement. It is not necessary that a municipality accept a short term fix that only briefly defers an inevitable meltdown. But if such a fix is offered, the municipality must analyze it carefully and make sure it can prove that in fact it will not solve the municipality's problems sufficiently to avoid both short -term and long -term insolvency. For example, it makes no sense to renegotiate a long -term debt obligation by deferring interest or other payments for a year if, on the first anniversary of the deferral, the municipality will be unable to satisfy the revised obligation absent something akin to divine intervention. Similarly, a municipality should not accept one -time concessions from labor that would avoid insolvency in the short term but extend unsustainable labor agreements by one or more years such that insolvency is inevitable and the deficit facing the municipality will be even deeper as a result of the extension. Authorization to File A municipality may not validly file a chapter 9 petition unless the governing body of the municipality specifically authorizes the filing. Local law determines what form this authorization must take, but the typical approach would be by resolution adopted by the governing board in an open meeting. In many states, while Avoiding and Using Chapter9 in Tines of Fiscal Stress 13 discussions with counsel leading up to and after a filing usually are conducted in closed or executive sessions under the litigation exception to most open meeting laws, the actual vote on whether or not to file typically must take place in an open meeting, or at least be reported out immediately after the vote in an open meeting. Authorization could take the form of an immediate direction to file, or a delegation to the executive officer of the municipality to file in the event that certain conditions are not satisfied (such as approval by creditors or bargaining units of offers made by the municipality pursuant to authorizations from the governing body). Taking a vote to file a bankruptcy petition is obviously a momentous step; the municipality should expect significant public and media attention, and should be prepared to respond fully and accurately to inquiries, providing relevant details and information regarding the process. While media strategy is beyond the scope of this pamphlet, municipalities should carefully consider how they will provide timely responses to media inquiries, and should have a clear plan in place including identification of one or more spokespersons. Also, legal counsel should be consulted about public statements and press releases so as not to inadvertently waive important privileges concerning confidential negotiations and strategy. Federal Securities Law Considerations If the municipality has any outstanding publicly- traded securities, counsel should be consulted regarding its obligations under the federal securities laws with respect to the bankruptcy filing and other material events. Securities issued after July of 1995 are generally covered by Securities Exchange Commission ( "SEC ") Rule 15c2 -12, which requires both annual and material event disclosure to be made by the issuing municipality. Filing for bankruptcy protection is a material event that triggers disclosure. It is possible (even likely) that leading up to the bankruptcy filing, deteriorating finances and public discussion of the potential for insolvency will trigger rating agency actions, which may constitute material events as well. Any statement to the market by an issuer, such as a material event notice, must satisfy Rule 10b -5 promulgated by the SEC. Rule 10b -5 requires that information provided to the public intended to be a statement to the securities market may �4 Municipal Bankruptcy: not misstate a material fact nor omit to state a material fact necessary, in light of the circumstances, to make the statements made not misleading. The omission portion of the rule is most difficult with which to comply. In general, saying that a credit rating has been downgraded or that a bankruptcy petition has been filed by itself will not be enough. Experienced counsel should be consulted to assist in crafting a public statement that provides the relevant facts and materials in order to satisfy the broader standard of Rule 10b -5. Establishing a pattern of complete and accurate information dissemination to the market will be important in helping a municipality reestablish a good credit rating after it emerges from bankruptcy. Bad news is made worse by late discovery, much more so if it appears that suppression or obfuscation was involved. "Bad news is made worse by late discovery, much more so if it appears that suppression or obfuscation was involved." Timing As noted earlier, it is important to monitor the municipality's cash position in the period leading up to a potential bankruptcy filing so as not to knowingly violate the law —for example by permitting employees to work when the municipality lacks the ability to pay them, disregarding legal restrictions on special funds, or entering into essential contracts knowing that there will be a lack of sufficient funds to meet the contract terms. Having an idea of when this crossover point may occur is crucial in determining when a petition must be filed in order to protect the municipality and its officers. While there will be tremendous pressure from many quarters to delay the ultimate step of filing a chapter 9 petition until the last possible moment, it is prudent to leave at least some room between the time management would be compelled to shut the doors of the municipality and the date of filing the petition. The precise amount of time will depend on the circumstances of that particular municipality, but in general, 60 to 90 days would be a prudent period. The reason for this is to allow the court time to conduct an orderly process of considering the petition and any objections to it before drastic actions that potentially affect public health and safety (such as forced furloughs of essential service personnel) must be taken. Avoiding and Using Chapter9 in Tirnes of Fiscal Stress 1g Dealing With Vendors and Trade Creditors Most local government agencies have significant commercial relationships with vendors and trade creditors of various types, such as specialized service providers and suppliers. A municipality preparing to file a chapter 9 petition should expect that these providers will stop extending credit to the municipality in the form of delayed billing arrangements once news of the filing becomes public. It is likely that they will require COD or prepayment terms for future transactions and the municipality should be prepared to implement these arrangements for critical services and supplies. Moreover, payments made within 90 days of the filing of the bankruptcy case on account of prior unpaid invoices may be recoverable as preferences, so in order to protect favored vendors that have not put it on COD terms, the municipality should pay them during the normal payment cycle rather than to fall behind and then make catch -up payments. Unlike in chapter 11, though, payments on account of a note or bond are not avoidable as preferences. 16 Municipal Bankruptcy: CHAPTER FOUR Seeking Bankruptcy Protection Pre - Filing Requirements In order to be eligible for relief under chapter 9, an entity must meet certain threshold requirements: 1. The entity must be a municipality within the meaning of the Bankruptcy Code. The definition of municipality in the Bankruptcy Code is quite broad, and includes cities, counties and other instrumentalities of the state. It does not include states themselves. Section 109(c) defines municipality to mean a political subdivision or public municipality or instrumentality of a state." 2. Applicable state law also must authorize municipalities to seek chapter 9 protection. In some states, such as California, there is a very broad statute that grants blanket filing authority to all California municipalities. However, many states limit which entities can file and under what circumstances, or require special approval of state authorities to permit a filing. For example, in Connecticut, the governor must approve all chapter 9 filings. Twenty -six states prohibit chapter 9 filings. A municipality in those states in need of bankruptcy relief must seek enactment of a specific statute particular to it authorizing the filing. It goes without saying that floundering municipality faces an uphill battle in such states. Avoiding and Using Chapter9 in Times of Fiscal Stress 17 3. The municipality must be insolvent as defined in the Bankruptcy Code, which means that the municipality either must not be paying its undisputed debts as they come due at the time of filing, or be unable to pay such debts when they become due in the near future. The latter test is a prospective, but must be based on a projection of the current or immediately ensuing fiscal year. A projection that the municipality will not be able to meet its obligations in subsequent years is not sufficient to establish insolvency. 4. The municipality must "desire to effect a plan to adjust its debts." It is important to note that the plan of adjustment does not have to be in existence as a precondition to filing, but there must be evidence that the municipality wants to effect a plan through the vehicle of the bankruptcy case. 5. The municipality must demonstrate that it has attempted to avoid the filing or that the filing was necessary by proving one of the following: a. It has obtained the agreement of creditors holding at least a majority in amount of the claims of each class that the municipality intends to impair under a plan of adjustment of claims, or b. It has negotiated in good faith and is unable to reach such an agreement, or c. Negotiations are impracticable (for example, because there are a multitude of claimants and no practical way to negotiate with all of them individually or to identify a representative with authority to negotiate), or d. A creditor is attempting to gain a preference (basically a payment that would unfairly disadvantage other creditors because it disproportionately favors the creditor that seeks to receive the payment). Assignment of the Bankruptcy Judge In all other types of bankruptcy cases (such as chapter 11 cases), the bankruptcy judge is assigned by lot to each case as it is filed. Due to the importance and rarity of municipal bankruptcies, and due to the powers reserved to the states under the Tenth Amendment to the United States Constitution, the Bankruptcy Code provides that the Chief Judge of the Circuit in which the case is filed has the task of assigning a judge to each chapter 9 case. While it is probably likely that a judge s8 Municipal Bankruptcy: from the District in which the case is filed will be assigned, the Chief Judge could assign any bankruptcy judge in the Circuit to hear the case. This is an important feature because it means it is very likely that a chapter 9 case will be assigned to a highly competent and very experienced judge, which is good for all parties. Moreover, the Chief Judge will consider whether a judge who resides in or near the debtor municipality ought to play a role in the case filed by that municipality. Bankruptcy judges, unlike judges of the U.S. Supreme Court, the various Circuit Courts of Appeal and the numerous U.S. District Courts, serve pursuant to Article I of the United States Constitution, for terms of 14 years. Any party to a chapter 9 case has the right to petition the federal District Court to remove the case to the District Court so that it can be heard by a District Court judge, who serves under Article III of the United States Constitution and is appointed for a lifetime term. It is up to the District Court to decide whether or not to take the case away from the bankruptcy court or to leave it there. In either case, all rulings by the bankruptcy court are appealable to the Article III court system. Avoiding and Using Chapter9 in Times of Fiscal Stress 19 CHAPTER FIVE The Tenth Amendment and Limitations on the Rote of the Court Tenth Amendment Limitations The Tenth Amendment to the United States Constitution reserves certain powers to the states regarding the management of their internal affairs. In chapter 11 cases (which municipalities are ineligible to file), the bankruptcy judge wields significant power to control what the debtor may and may not do during the course of the case. For example, without court approval, any proposed action by the debtor outside the ordinary course of business must be approved by the court after creditors and other parties in interest have been provided with the time and the opportunity to object. Nor may the debtor borrow funds outside of the ordinary course of business, grant collateral for a new loan or settle a significant claim against it absent court approval. However, in light of the Tenth Amendment and provisions of the Bankruptcy Code that implement it, the court plays a significantly more limited role in a chapter 9 case, and state law restrictions on the activities of municipalities and their uses of funds must continue to be observed. Thus, for example, the court cannot take over the operation of the municipality, remove governing board members, direct the actions of the governing board or appoint a receiver or trustee to run the affairs of the municipality. Similarly, the court cannot permit the municipality to override state laws such as those requiring voter approval for new taxes, or limiting the use of restricted funds for particular purposes. Obviously, the court lacks the power to require the sale or lease of a park or a sewage facility in order to satisfy the municipality's obligations to creditors. One important effect of the Tenth Amendment on municipal bankruptcies, distinguishing them from nongovernmental entity bankruptcies, is that there can be no forced liquidation of a municipality under the Bankruptcy Code. If a private firm files for bankruptcy under chapter 11 seeking to reorganize and thus continue Avoiding and Using Chapter9 in Times of Fiscal Stress 21 "...the court cannot `take over' the operation of the municipality..." to operate, but it fails to achieve that objective, the case likely will be converted to a liquidation case under chapter 7 of the Bankruptcy Code. In chapter 7, a trustee is appointed, and is charged with liquidating all assets for the benefit of creditors, who go away with whatever share they can receive. Assets are sold or foreclosed upon, the entity no longer operates, and it ceases to conduct business. For obvious practical reasons, and due to the Tenth Amendment's limitations on the powers of the federal courts, there is no chapter 7 analogue for municipalities other than those that may be provided by applicable state law outside of the bankruptcy court system. Thus, if the chapter 9 case fails to produce a plan of adjustment allowing the municipality to exit bankruptcy, the case is dismissed and the municipality continues to exist with all of its problems and claims as it did before bankruptcy, with whatever remedies are available to the municipality and its creditors under state law.4 Role of the Bankruptcy judge The primary responsibilities of the bankruptcy judge are to approve or disapprove the bankruptcy petition by determining eligibility; to oversee the assumption or rejection of executory contracts and unexpired leases, to decide avoidable transfer actions (i.e., preferences and fraudulent transfers) and to confirm or decline to confirm a plan of adjustment. The municipality may consent to the judge's exercise of jurisdiction in many of the more traditional areas of bankruptcy court oversight in bankruptcy in order to obtain the protection of court orders and eliminate the need for multiple fora to decide issues. Indeed, these latter features reflect some of the benefits of filing for bankruptcy in the first place. Despite this limited role, the judge in a chapter 9 case does exert considerable influence over the parties and can be a very helpful neutral arbiter of difficult disputes. While, as described below, the only real "hammer" the judge ultimately has is to dismiss the case and throw the municipality out of court, the judge nevertheless is likely to be very helpful in bringing the parties to the point where a plan can be approved. 4 The rules governing the ability of municipalities to disincorporate or otherwise be dissolved vary greatly by jurisdiction and type of entity and are beyond the scope of this pamphlet. 22 Municipal Bankruptcy: CHAPTER SIX The Chapter 9 Case The following sections discuss specific aspects of filing and prosecuting the chapter 9 case important to municipalities. Initiating the Chapter 9 Case In addition to filing the chapter 9 petition itself, the municipality must file a number of pleadings in order to initiate the bankruptcy case. These include the following: Creditors List —This is a list of all persons who may assert a claim against the municipality. The Bankruptcy Code defines the term "claim" very broadly, and the municipality should include each and every person that may assert a claim, even if the municipality believes that a given claim is specious. List of Creditors Holding the 20 Largest Unsecured Claims —This list contains more detail than the general list of creditors, including the requirement that contact persons and phone numbers be listed. The list is used by the United States Trustee to solicit creditors to join an official committee or committees.' Pleadings Establishing Eligibility —The Bankruptcy Code contains a number of eligibility requirements, and the municipality must prove that it satisfies each one. It does so by submitting a pleading and declarations. If the municipality 5 The Office of the United States Trustee is an arm of the United States Department of Justice, and the various regional offices assist the court system in administering bankruptcy cases. The U.S. Trustee's role in a chapter 9 case is much more limited than it is in cases under chapters 7 or 11. Avoiding and Lasing Chapter 9 in Times of Fiscal Stress 23 anticipates that one or more creditors or parties in interest will object to the claim of eligibility, the pleadings and declarations will need to be more extensive than in a case where eligibility is unquestioned. Notice by Publication —The municipality must publish a notice once a week for three weeks in a local newspaper and in a national publication read by bondholders. The notice must provide details about the filing of the chapter 9 case and provide the date by which objections to eligibility must be filed. The form of notice and the eligibility objection date must be approved by the bankruptcy judge in advance of publication. Official Committees Following the entry of the order for relief —in other words, after the court determines that the municipality is eligible to be a chapter 9 debtor —the United States Trustee for the relevant district may appoint a committee or committees to represent the interests of creditors holding similar classes of claims. In the Vallejo case, for example, there is one committee, and it represents the interests of retirees. Unlike in the case of a chapter 11 debtor, a municipality is not obligated to fund the costs of counsel to such a committee, but prudence may dictate that the municipality should pay reasonable costs because an informed and organized creditor body will expedite the resolution of the case. Effect on Litigation The automatic stay that becomes effective the moment the chapter 9 petition is filed serves to enjoin litigation against the debtor, its officers and its inhabitants. The stay also prevents all other forms of creditor enforcement remedies such as seeking a judgment lien or foreclosing on an asset (other than special revenues, as described below). The stay continues throughout the chapter 9 case, although a claimant may seek permission to terminate or modify the stay by filing pleadings that attempt to convince the bankruptcy judge that cause exists for the litigation to proceed in court or for an enforcement action to resume. 24 Municipal Bankruptcy. Assumption and Rejection of Contracts and Leases The Bankruptcy Code provides a chapter 9 debtor with the ability to assume its favorable contracts and real and personal property leases and to reject its burdensome ones. Neither is automatic, though. To assume a contract or lease, absent consent by the nondebtor party, the municipality must cure all monetary defaults and provide adequate assurance that it will be able to perform under the agreement in the future. So- called ipso facto clauses in contracts or leases (which provide that the contract or lease terminates on account of a bankruptcy filing by one of the parties) are not enforceable in a chapter 9 case or any other bankruptcy case. In the event a lease or contract is rejected, the nondebtor party will have a general unsecured claim against the municipality for the damages it has suffered on account of the rejection of the agreement. The damage claim will have to be addressed in the plan of adjustment along with the other general unsecured claims against the municipality. Collective bargaining agreements are subject to assumption and rejection as well. However, due to the importance and the widespread impact rejection of a collective bargaining agreement could have, the U.S. Supreme Court has placed extra burdens on debtors seeking to reject such agreements. These include mandating that the bankruptcy court balance the hardships employees would suffer as a result of rejection of the agreements against the benefits to the municipality for rejecting those agreements. The court also must conclude that the municipality employed reasonable efforts to resolve contract issues short of rejection, and that a prompt resolution would not be forthcoming. A special Bankruptcy Code provision makes it even more difficult to reject a collective bargaining agreement in a chapter 11 case, but Congress has chosen not to extend the sweep of that provision to chapter 9 cases. "...due to the importance and the widespread impact rejection of a collective bargaining agreement could invariably have, the U.S. Supreme Court has placed extra burdens on debtors seeking to reject such agreements." Avoiding and Using Chapter9 in Times of Fiscal Stress 25 Special Revenues Many agencies have separate governmental enterprises that are owned and operated by the municipality but are not separate legal entities. For example a city may own and operate a system that provides potable water to its inhabitants and businesses. Typically, such systems are treated as separate accounting units and are paid for from revenues received from the users of the system in the form of fees and charges for service. Often, new users that desire to connect to the system and receive service must pay a capital charge or assessment to contribute their share of the capital cost of the system. These systems often are financed through debt obligations secured by a pledge of a lien on the system revenues, and the capital, operations and maintenance costs of the system are similarly supported only by the system revenues. In most cases, this is the sole source of security and payment for the obligations of the system, but in some cases, the municipality also is obligated to pay such amounts from the general fund if revenues are insufficient. The Bankruptcy Code treats the revenues of such a system that are pledged to the payment of debt obligations as "special revenues" and provides that those special revenues may not be diverted to pay the debts of the municipality that are unrelated to the system or enterprise that generated them. As noted above, in many jurisdictions, this also is the result under state law, which restricts the use of such revenues to the enterprise itself. Notwithstanding the automatic stay, which prohibits certain post- bankruptcy actions by creditors, the automatic stay in chapter 9 permits the holder of a lien on special revenues to apply such revenues to the obligation secured by the lien. Obligations payable from special revenues are treated as secured obligations for bankruptcy purposes, and as such the plan of adjustment may not impair those obligations at least to the extent they can be paid from the special revenues (but, for example, if the special revenues are insufficient, the municipality's obligation to pay from general revenues, if any, could be impaired by the plan). Another class of special revenues obligations is special assessment or special tax financing, which is commonly used to construct infrastructure to serve new development or to improve infrastructure of special benefit to the assessed property. In these situations, the special assessments or taxes levied and pledged to support the bonds issued to provide such financing are treated as special 26 Municipal Bankruptcy: revenues and cannot be invaded to pay other obligations of the municipality in bankruptcy. This is also generally consistent with most state laws restricting the use of these types of revenues solely to the purposes for which the assessment or tax was levied. Financing Leases In many states, municipal agencies use lease financing for capital projects and equipment. Although styled as leases (usually to avoid limitations on debt under state statutory or constitutional provisions), these instruments typically bear tax - exempt interest to the investors who fund the projects or equipment (which requires that they be treated as debt for federal tax purposes), and are also treated as debt for accounting purposes. Although the matter is not entirely free from doubt and will depend on the facts and circumstances of each case, these instruments should in general be treated as debt obligations under the Bankruptcy Code and not as true leases. The significance of such characterization might be that the municipality would not be required to assume or reject the lease within a relatively short period of time after the court's acceptance of the chapter 9 petition, and that the creditor (lessor) might be unable to evict the municipality from the "leased" property (or to require return of the "leased" equipment) in the event of a payment default. Avoiding and Using Chapter9 in Times of Fiscal Stress 27 CHAPTER SEVEN Emerging From Bankruptcy Dismissal of the Case The bankruptcy court may dismiss the chapter 9 case for cause, including unreasonable delay by the debtor or denial of confirmation of a plan of adjustment. Conversely, the case may be voluntarily dismissed by the municipality, as the bankruptcy judge cannot force it to remain in bankruptcy against its will due to Tenth Amendment considerations. Thus, if the municipality and its key creditors (such as indenture trustees, major vendors and unions) reach agreements during the case and such agreements are binding on the parties under applicable nonbankruptcy law, the municipality can and should dismiss the case not only because confirming a plan of adjustment is no longer necessary, and also because there is no need to incur the significant cost and delay of drafting, confirming and consummating a plan of adjustment. The Plan of Adjustment A Good Plan Is the Product of Negotiation Among All Constituencies. A plan of adjustment, like a chapter 11 plan of reorganization, is little more than a contract among various parties that provides for the treatment of the various claims against the municipality. One of the benefits of chapters 9 and 11, other than preserving assets by way of the automatic stay during the negotiation period, is that the bankruptcy court has the power to approve a plan over the objection of dissenting creditors so long as the requisite majorities of creditors holding similar claims have approved the plan and so long as the plan does not discriminate among holders of similar claims. As described above, the municipality is not eligible for chapter 9 unless it has, among other things, negotiated with its creditors prior to filing the case in an attempt to Avoiding and Using Chapter9 in Times of Fiscal Stress 29 avoid the need for a filing. Once the case is filed, "One of the the negotiations should resume as soon as possible benefits of with the goal of either reaching agreement and chapters 9 and dismissing the case or reaching agreement with the requisite majorities and confirming a plan 11, other than of adjustment. Unfortunately, if a creditor (or preserving creditors) mount an eligibility challenge, there is assets by less room for negotiation during the several month period that will be devoted to determining whether way of the the debtor is eligible for chapter 9 relief. automatic stay during the The Role of Committees in the Plan Process. Committees serve and speak for all similarly situated negotiation creditors, and the members of and professionals period, is that employed by a committee have a fiduciary duty to the bankruptcy the class they represent. An energetic and informed committee, particularly one that is both proactive court has and constructive during the process of negotiating a the power plan of adjustment, will be beneficial for all parties to to approve a the bankruptcy case. plan over the The Role of the Court in Approval of the Plan objection of of Adjustment. The bankruptcy court must dissenting confirm the plan of adjustment if it finds that the creditors , , , " various chapter 9 confirmation requirements have been satisfied. These include, among others, that at least one class of impaired creditors has voted to accept the plan; that post- bankruptcy claims will be paid in full on the plan's effective date (unless an impacted creditor agrees to different treatment); that any necessary approval by regulators or voters (in the case of most tax increases) has been obtained; and that creditors will receive as much under the plan as they would were the case dismissed. Broadly stated, the court should find that the debtor municipality has used all reasonable efforts to pay its creditors 30 Municipal Bankruptcy: as much and as quickly as possible, recognizing that application of state law (such as tax limitation initiatives or other restrictions) may dramatically limit the ability of municipality to raise revenues. The court also must find that the plan is feasible, which means that the municipality will not need further reorganization or another chapter 9 case in the near future. Failure to Approve a Plan of Adjustment. If the plan of adjustment is not confirmed either by consent or by a court order binding non - consenting creditors (often referred to in bankruptcy parlance as a "cramdown "), the bankruptcy judge has the discretion to send the parties back to the drawing board to craft a better plan, or to simply can dismiss the chapter 9 case. Due to the Tenth Amendment and the applicable Bankruptcy Code provisions, the judge has no ability to craft a plan of adjustment and compel the municipality to accept it. Dismissal of the case, of course, is a nightmare scenario because the municipality, which the judge earlier concluded (during the eligibility phase of the case) was unable to pay its debts, is now out of court, without the protection of the automatic stay, and is still unable to pay its debts. Such a result benefits neither the municipality nor its residents nor its creditors, and should provide a compelling incentive for the parties to the chapter 9 case to reach agreement on a plan of adjustment. Avoiding and Using Chapterg in Times of Fiscal Stress 31 CHAPTER EIGHT Yes, There Is Life After Bankruptcy Capital Markets Issues As should be expected, the capital markets will punish a municipality for having become insolvent. The degree and lengthy of that punishment will depend in large part on several factors: • The degree to which capital market debt holders and guarantors are made whole • The strength and viability of the negotiated settlement or plan of adjustment • The degree of cooperation and "buy in" among stakeholders • Whether voters and /or elected officials have contributed to the settlement or plan by approving new taxes, fees or other revenue sources • Whether the municipality can demonstrate that it has stable and effective management in place • How well the municipality communicates with the market and the timeliness and transparency of the financial information presented • How well the settlement or plan of adjustment is implemented and monitored While it is unavoidable that access to the capital markets after a bankruptcy will be more expensive and limited than it normally would be, it is not certain that the fact of a bankruptcy will be a permanent or even a very long term problem. Focus on the factors listed above will help municipalities mitigate the adverse effects of a bankruptcy and emerge stronger and in a better financial position than before they filed the case. Avoiding a "chapter 18" When a private company successfully navigates through a chapter 11 case with a confirmed plan of reorganization, but either cannot perform its obligations under the plan or the plan is flawed because it failed to adequately resolve all of the Avoiding and Using Chapter9 in Tirnes of Fiscal Stress 33 company's financial problems, the company may be forced back into bankruptcy court to seek yet another reorganization. This is euphemistically referred to as seeking "chapter 22" relief; several commercial airlines have taken this route. If this were to happen to a municipality after a chapter 9 case, we assume that the second round would be deemed a "chapter 18" case. However, given the cost, disruption and pain of going through a bankruptcy case, chapter 18 is to be avoided at all costs. Also, and particularly if the need for new bankruptcy relief occurs soon after the completion of the original case, the bankruptcy court may be very skeptical of the municipality's eligibility to file again (remember, that one of the criteria is that the municipality "desires to effect a plan of adjustment "). Avoidance of a "chapter 18" scenario will be best achieved by driving the hard bargains required to achieve a settlement or plan of adjustment that not only works, but that can weather contingencies and uncertainties. The successful arrangement must: • Provide for adequate rainy day reserves • Leave the municipality with flexibility to adjust costs and service levels to account for future unforeseen downturns • Limit exposure to undue risks in the debt markets (by for example, relying on too much variable rate debt without appropriate hedges or cushions against rising rates) • Avoid reliance on uncertain future revenue streams, particularly if they require voter approval or are otherwise outside the control of the municipality • Be supported by a consensus of at least a majority of the affected stakeholders, and backed by a meaningful commitment to implement the plan Finally, the municipality's management and governing board must have the discipline to stick to any settlement or plan and make it work. Remember that the bankruptcy court has limited oversight powers due to the Tenth Amendment. It may be tempting in light of the heartfelt and legitimate desires of the citizens and the politicians who represent them to spend more or tax less than the plan contemplates. Perhaps a review of the costs of going through the first bankruptcy —in money, time, energy and reputation —would be warranted if such temptations arise. 34 Municipal Bankruptcy: CHAPTER NINE Conclusion For the overwhelming majority of municipalities, even severe economic downturns such as the one currently being experienced will not result in the filing of a petition under chapter 9 of the Bankruptcy Code. Municipalities feeling financial stress should work as hard as possible, accepting as much pain as they and their constituents, creditors and employees can endure, to avoid that path. However, for some municipalities, the challenges will be too great, the avenues of solution too limited, and the window of opportunity for corrective action too small, to avoid using chapter 9 as a tool to help right the ship. For those entrusted to manage and govern municipalities, we hope this pamphlet provides some initial guidance and promotes a disciplined and thoughtful approach to avoiding or using chapter 9 in times of fiscal stress. Avoiding and Using Chapter9 in Tunes of Fiscal Stress 35 About the Authors John H. Knox, a partner in the San Francisco office of Orrick, Herrington & Sutcliffe LLP, is a member of the firm's Public Finance Department. Mr. Knox has been involved in several municipal workout situations, representing the City of Vallejo, California, in its chapter 9 bankruptcy case, the City of Richmond, California, in a successful financial restructuring that allowed it to emerge from a near - bankruptcy situation to become a solid 'A" rated credit, and the City of Half Moon Bay, California, in connection with a very large judgment that threatened to bankrupt it. His bond practice focuses on local governmental infrastructure financing, primarily for cities and counties, including general fund financings, pension bonds, special assessment and other land- secured financings, redevelopment tax increment financings, enterprise revenue bonds, municipal lease transactions and general obligation bonds. He also has been involved in creating various statewide financing programs, including financings for governmental receivables, infrastructure and development impact fees. He also assists nonprofit institutions, including colleges, universities, and private K -12 schools with tax - exempt financings. Marc A. Levinson, a partner in the Sacramento office of Orrick, Herrington & Sutcliffe LLP, is a member of the firm's Restructuring Group. Mr. Levinson is nationally recognized for his capabilities in complex reorganizations and restructurings, out -of -court workouts and other insolvency matters. Mr. Levinson is the lead insolvency lawyer on the Orrick team that filed a chapter 9 case for the City of Vallejo —the largest California city to seek bankruptcy relief. The case has generated cutting edge legal issues, as well as litigation over a number of hotly- contested factual issues, including those relating to the City's insolvency and its eligibility to be a chapter 9 debtor. Mr. Levinson is a conferee of the National Bankruptcy Conference and a member of the Board of Directors of the American College of Bankruptcy, and he is a frequent speaker on bankruptcy topics. 36 Municipal Bankruptcy Contacts For further information about any of the topics discussed in this book, please contact one of the Orrick lawyers listed below. San Francisco John Knox 415- 773 -5626 jknox @orrick.com Sacramento Marc Levinson Norm Hile New York Lorraine McGowen Washington, D.C. Pauline Schneider Darrin Glymph 916- 329 -4910 916- 329 -7900 maleyinson@orrick.com nhile @orrick.com 212-506-5114 lmcgowen@orrick.com 202 - 339 -8483 202 - 339 -8401 paschneider@orrick.com dglymph @orrick.com ORRICK, HERRINGTON & SUTCLIFFE LLP plublicfinance @orriciccom EUROPE ( NORTH AMERICA BEIJING HONG KONG SHANGHAI TAIPEI TOKYO BERLIN DUSSELDORF FRANKFURT i LONDON MILAN MOSCOW PARIS'. ROME LOS ANGELES NEW YORK ORANGE COUNTY 'rr PACIFIC NORTHWEST SACRAMENTO SAN FRANCISCO SILICON VALLEY WASHINGTON DC ORRICK WWW.O R RI CK.COM This form must be submitted to the Secretary BEFORE the meeting begins VISITOR /CITIZEN'S FORUM - Request to Speak Today's Date: ityCouncil ❑library Advisory Board ❑Planning & Zoning Comm, ❑Parks & Recreation Board ❑Building Board of Appeals ❑Arts & Culture Board ❑Board of Adjustment ❑Keep Kennedale Beautiful NAME: ADDRESS: EMAIL: 010 -en n -e 44 Y PHONE: 9/ / ,S-40/3 fir. ARE YOU A KENNEDALE RESIDENT? LINO laKS I AM REPRESENTING: 2"MYSELF LITHE FOLLOWING PERSONS /FIRMS /CORPORATIONS /GROUPS: • IS THE SUBJECT YOU WISH YO PRESENT RELATED TO AN ITEM ON THE CURRENT AGENDA? • No • Yes, Agenda Item # O • HAVE YOU DISCUSSED THIS SUBJECT WITH ANY COUNCIL /BOARD MEMBERS OR CITY STAFF? • No Is, (please list names) ifitW fV /1/t e-6,4-7 ° ` �JYe 7=r -.nk F-er tva,e /I rncI hvo-/ eiI-- PLEASE DESCRIBE THE SUBJECT THAT YOU WISH TO PRESENT: / C -/ /7 0 % �t �°i�!?e c%ie/ S',.{1/ 0 A 4,-//to Ole' ,, ( -is etA> c r.. ,4 on/yl/3'Ium04JCdy--) 6 / tfAq 119 . SIGNATURE: KENNEDALE This form must be submitted to the Secretary BEFORE the meeting begins VISITOR /CITIZEN'S FORUM Request to Speak ❑CIty;Council ❑Planning & Zoning Comm. ❑Building Board of Appeals ❑Board of Adjustment ❑Library Advisory Board ❑Parks & Recreation Board DArts & Culture Board ❑Keep Kennedale Beautiful NAM E: `Vc4 Y kia\k ADDRESS: 9(D41' � 1 , EMAIL: ") PHONE: ARE YOU A KENNEDALE RESIDENT? ❑ NO L IYES I AM REPRESENTING: IEMYSELF LITHE FOLLOWING PERSONS /FIRMS /CORPORATIONS /GROUPS: • IS THE SUBJECT YOU WISH YO PI' ENT RELATED TO AN ITEM ON THE CURRENT AGENDA? ❑No CI Yes, Agenda It- r • HAVE YOU DISCU ED 1'- BJECT WITH ANY COUNCIL /BOARD MEMBERS OR CITY STAFF? • No • Yes, (. ;a - li• names) PLEASE DESCRIBE T S BJECT THAT YOU WISH TO PRESENT: SIGNATURE: KENNEDALE s ukb 0,4;4444 4 Cev- pAkto l,i c Ca.0 PZ. 13 -OH et - t z.- Z-015 Rachel Roberts From: Roy Boenig < Sent: Wednesday, September 11, 2013 4:13 PM To: Rachel Roberts Subject: Kennedale City Council meeting regarding Case PZ 13 -04 I would appreciate if you could give this to all of the city council members since I will be out of town tomorrow night. To all City Council members: This is from Roy Boenig, 1020 Kennedale Sublett Rd. I can't attend the meeting about the rezoning of for Case PZ 13- 04. I will be out of town. If you recall, the last time that a developer came to rezone this property, I was against it and it took you 3 times before you passed the zoning change to R -2. have decided this time to support changing the zoning to PD. As you know, you can basically write your own rules regarding this zoning. I have 2 concerns regarding this development. Drainage and fencing. Drainage Currently, any water that does not soak into the 48 acres, eventually drains onto my property. The current conceptual design that they have also sends all of that water to my property. The big difference is that once streets, driveway, sidewalks, and houses are built, about half of that 48 acres will no longer allow water to soak into it and that water has to go somewhere which means that potentially my property could be receiving much more water than it currently receives. Currently, my property has no erosion problems along the property line between my 9 acres and the 48 acres and as soon as winter comes, I plan on videoing to document how my property is currently affected by the current drainage situation. That way if the City or the City's engineering firm fail to do their job properly, then I have proof of the changes that occurred after this subdivision is developed and how it affect my property. Let's just say I'm doing this to protect myself from damages in the future. On a brighter side, the development's engineer has been very cooperative and willing to work with me to make sure we are not affected. In fact, he said that if he does his job, that they will effectively reduce the current amount of water flowing on to my property by 35 %. I have had a meeting with Teague, Nall, & Perkins to express my concerns (and Rachel was also in attendance). The best thing that you did was have the drainage study done by them back in 2007. That gives us a footprint to work from regarding the requirements for the drainage on to my property. If you recall the last developer said they only needed to build a 1 1/2 acre retention pond. My calculation was that it needed to be twice that size. As it turns out & John gave me a hard time about underestimating the size because the drainage study calls for two 7 acre retention ponds. Even though I am good with numbers, I am not a civil engineer. I need the city and their engineers to make sure that this development is done so that the retention ponds on this property work as has been suggested by this study. Fencing 1