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March 11, 1994 Smith & Gillespie EngineersSUMMARY INFORMATION SMITH AND GILLESPIE ENGINEERS, INC. POST OFFICE BOX 53138 JACKSONVILLE, FLORIDA 32201 (904) 743 -6950 Form of Business Corporation Years in Business 53 Ownership Employee owned, thirteen (13) Stockholders Bank Reference First Union National Bank Sun Bank INTRODUCTION TO SMITH AND GILLESPIE ENGINEERS, INC. Smith and Gillespie Engineers, Inc., with headquarters located in Jacksonville, Florida, is a Florida corporation offering a complete range of consulting engineering services. Quality service to our clients has been, and will continue to remain, the prime objective of our firm since it was organized as a partnership in 1940. History of Smith and Gillespie Enaineers. Inc. The company began in September 1940, as a partnership of W. Austin Smith and Wylie W. Gillespie. Both Mr. Smith and Mr. Gillespie had practiced independently as engineering consultants for many years prior to 1940, and had collaborated on several engineering projects. Mr. Smith, in early practice, spent considerable time and gained valuable experience in the South Florida phosphate industry. Gradually, he became more interested in public utilities and gained considerable professional recognition through his articles published in engineering journals. Mr. Gillespie became one of the youngest Registered Professional Engineers in the State of Florida in 1929. He became interested in public utilities, particularly sanitary facilities, early in his practice and completed a large number of waterworks and sanitary- sewage projects. Mr. Gillespie became well known and highly respected in the profession because of his interests and efforts in both State and National engineering societies working to promote the excellence of the profession. During Wold War II, Smith and Gillespie operated primarily in Defense Projects. The immediate post -World War II years were devoted to the transition from U.S. Government defense projects to a general engineering practice, which was always the firm's objective. In 1980, the firm was relocated from its longtime downtown Jacksonville location at 123 E. Forsyth Street to a modern, two-story office building in the Arlington section of Jacksonville. At present, the management of the Company is Robert W. Gehrig, M.S., President; James J. Berry, P.E., Chairman of the Board; James C. Williamson, P.E., Executive Vice President; artcfDr. Harold R. Bridges,, P.E., Vice President. EXPERIENCE For over 50 years, Smith and Gillespie Engineers, Inc. has prepared feasibility studies, preliminary engineering reports, detailed plans and specifications, permit and variance application, and performed other related services in relation to municipal water and wastewater utilities. The treatment facilities which Smith and Gillespie Engineers, Inc., has designed have been tailored to satisfy the particular requirements of the application. Where basic standard treatment processes will satisfy the requirement, this type of system is designed and applied. Where necessary, tertiary and advanced wastewater treatment techniques have been incorporated into projects to meet more stringent requirements. Smith and Gillespie Engineers, Inc., as a firm, provides complete engineering services. It is important however, to recognize that Smith and Gillespie Engineers, Inc., is a recognized authority in the engineering services required for municipal water and wastewater utilities. The professional services provided in this area of activity represent more than 75% of our experience during the 53 years of our professional activity as a firm. PERSONNEL Smith and Gillespie Engineers, Inc., currently employs a total of 39 personnel. Twenty-nine (29) of these are technical and professional engineering personnel and the remainder are secretarial, accounting, word processing, reproduction and clerical personnel. A breakdown of the technical and professional engineering personnel is as follows: 6 Sanitary/Environmental Engineers 4 Civil Engineers 1 Structural Engineer 4 Electrical Engineers 2 Technical Consultants Civil/Transportation 2 Technical Consultants Electrical 5 Designers and CADD Operators 5 Resident Observers A HAROLD R. BRIDGES, PhD, P.E. 0 VICE PRESIDENT, HEAD OF ENVIRONMENTAL DEPARTMENT SMITH AND GILLESPIE ENGINEERS, INC. Post Office Box 53138 Jacksonville, Florida 32201 (904) 743 -6950 Academic Background: Iowa State University, PhD, Sanitary Engineering, 1970; Iowa State University, MS, Sanitary Engineering, 1967; Iowa State University, BS, Civil Engineering, 1965 Professional Background: Smith and Gillespie Engineers, Inc. Vice President, Secretary, Environmental Department Head 1990 to date; Smith and Gillespie Engineers, Inc. Vice President, Manager Engineering Division 1986 to 1990; Smith and Gillespie Engineers, Inc. Vice President 1984 to 1986; Smith and Gillespie Engineers, Inc. Project Engineer 1974 to 1984; U.S. Army Medical Laboratory Sanitary Engineer 1970 to 1974; Iowa State University Civil Engineering Instructor 1966 to 1967; Black and Veatch Consulting Engineers Sanitary Engineer 1965; City of Los Angeles Department of Water Power Student Engineer- 1964 Registration(sl: Professional Engineer in Florida Fields of Special Competence: Project Management; Water Processing and Advanced Wastewater Treatment Design; Water and Wastewater Chemistry; Civil Engineering; Residuals Management; Water Resources; Statistics and Related Fields. Professional Assoclatlons(sl: Water Pollution Control Federation; American Water Works Association; American Public Works Association; Florida Institute of Consulting Engineers. Representative Project Experience: Dr. Bridges is the head of our Environmental Engineering Department. Prior to the establishment of the departmental organization of the Company, Dr. Bridges supervised the Engineering Division which included all engineering and drafting personnel plus computer, reproduction and word processing personnel. Prior to his assignment as Manager of Engineering, Dr. Bridges was the Project Manager for a major utilities improvements program for the City of Bradenton, Florida. The assignment under his management included 27 projects comprising a total construction cost of over $52 million. These projects have all been completed and included all phases of site development, mechanical engineering, structural engineering, electrical engineering, architecture and landscaping, eg. a new 6.0 MGD wastewater treatment facility, a new 12 MGD water treatment plant, the expansion of a water supply reservoir, development of a new water supply wellfield, wastewater collection systems, two irrigation wells, lift stations and pressure sewers and water transmission mains. For the City of Melbourne, Florida, Dr. Bridges was responsible for the design to increase the capacity of the South Water Treatment Plant from 8.0 to 16.0 MGD. This project also included design of a new 4.0 MGD ground storage reservoir, expansion of low and high service pumping facilities, transmission mains, SCADA, and sludge handling facilities. Dr. Bridges was also responsible for the design to increase the capacity of the Grant Street Wastewater Plant in Melbourne, Florida. This contact stabilization activated sludge plant was increased from 2.5 to 3.5 MGD, in addition to adding a solids contact unit with post aeration to improve effluent quality. HAROLD R. BRIDGES, PhD, P.E. (Continued) Dr. Bridges has been responsible for the completion of numerous studies and report on water and wastewater systems. These have included master plans for the cities of Bradenton, Leesburg, Plant City and Alachua, Florida. Wastewater System 201 Facilities Plans prepared by Dr. Bridges include: Bradenton /South Manatee County 201 Facility Plan Hardee County 201 facility Plan Plant City 201 Facility Plan Bartow 201 Facility Plan DeLand 201 Facility Plan Central Hillsborough County/Tampa 201 Facility Plan Jacksonville Core District 201 Facility Plan Dr. Bridges was Project Manager for water, wastewater, paving and storm water management improvements for the City of Plant City, Florida. Water system improvements have included 2 new wells and chlorination facilities, a 500,000 gallon elevated tank, and transmission mains. Dr. Bridges also performed a special water quality study for the city to obtain relief from FDER's proposal to impose a no discharge requirement on the Plant City Wastewater Treatment Plant. For the City of Jacksonville Beach, Florida, Dr. Bridges was responsible for the design of wastewater collection and paving improvements. Dr. Bridges is Project Manager for the water and wastewater systems improvement program for the City of Alachua, Florida. These projects include a 1.5 million gallon ground storage tank and booster pumping station, a 16 -inch diameter water transmission main, and a 600,000 gallon per day wastewater treatment plant. For the City of Bradenton, Florida, Dr. Bridges is Project Manager for a wastewater effluent reuse project. This project will enable the City to reuse treated wastewater for irrigation of a baseball field, golf course, baseball training complex and about 300 acres of citrus groves. Dr. Bridges is a member of the Water Pollution Control Federation, Water Works Association, American Public Works Association, Florida Institute of Consulting Engineers, Tau Beta Phi and Chi Epsilon. FREDERICK M. BRYANT Senior Partner Moore, Williams, Bryant, Peebles Gautier, P.A. 306 East College Avenue Tallahassee, Florida 32301 (904) 222 -5510 B. A. Stetson University 1967 Attended Stetson University on basketball and academic scholarships; J.D. University of Florida 1987/70; Assistant City Attorney to City of Tallahassee 1970/72; Vice Chairman and Chairman of the American Public Power Association Legal Section 1980/81; General Counsel Florida Municipal Power Agency 1978 to Present; General Counsel Florida Municipal Electric Association (formerly known as Florida Municipal Utilities Association) 1975 to Present; Represents Florida's 33 municipal electric utilities before the Legislature, State Agencies, Governor and Cabinet, and Florida Supreme Court; Primary Area of Practice in Municipal Utility Law and Municipal Bond Finance; Lectured at Continuing Legal Education "CLE Seminars on the following topics: Theft of Electricity/Meter Tampering The Role of Legal Counsel in Bond Issues Coping with Antitrust Liability Problems of Publicly Owned Utilities Legal Developments in the Pacific Northwest and Their Impact Nationwide "WHOOPS" Municipal Utility Employee Participation in State and Federal Political Action Committees: Legal and Practical Problems Meter Tampering, Power Diversion Underbilling Practical Problems Related to Annexation Dealing with Current Diversion Territory Disputes Between Municipal, Cooperative and Investor -Owned Utilities Current Developments in Florida Cogeneration Authored the following article which will be published in the Local Government Law Deskbook for the Florida Bar "Annexation: Effect on Utilities and the Provision of Utility Services" Listed in the Bond Buyer's Municipal Marketplace (the "Redbook as a nationally recognized bond attorney. FREDERICK M. BRYANT RUSSELL D. GAUTIER SUSAN D. MICHAELS E. MURRAY MOORE, JR. WILLIAM J. PEEBLES F. PALMER WILLIAMS L. LEE WILLIAMS, JR. WILLIAM B. WILLINGHAM Dear John: MOORE, WILLIAMS, BRYANT, PEEBLES GAUTIER, P.A. Mr. John W. Abney, Jr. Abney Abney Construction, Inc. P.O. Drawer 700 Okeechobee, Florida 34973 ATTORNEYS AT LAW 306 EAST COLLEGE AVENUE POST OFFICE BOX 1169 TALLAHASSEE, FLORIDA 32302 March 11, 1994 RE: Okeechobee Utility Working Group QUALITY OF SERVICE W. T. MOORE, JR. (1896 1 EDGAR M. MOORE Of Counsel TELEPHONE (904) 222 -5510 FACSIMILE (904) 561 -6226 Dr. Harold Bridges (Smith Gillespie Engineers) and I enjoyed our visit to Okeechobee, and we thank you for your time and courtesy in facilitating our meetings with the Okeechobee Utility Working Group "Working Group on March 9, 1994. I believe those meetings were productive and that the members of the Working Group are very close to achieving unanimity in their conclusions. I also sense that the three parties, City of Okeechobee "City County of Okeechobee "County and Okeechobee Beach Water Association "Beach (collectively, the "Parties are moving towards a commonality of interest. As is often the case, the "witnesses" stories were not totally in agreement, but I believe these differences will not be an impediment to a successful resolution of the problems. As I stated to the Parties, I view the engagement of my services to be as a problem solver and facilitator rather than one whom finds right or wrong or, more importantly, who sides with one or more of the Parties. The purpose of this letter is to state my findings, conclusions and possible solutions, but I hasten to add that the possible solutions that are set forth herein are not intended to be exhaustive nor have I attempted to prioritize these solutions. I also want to restate that my client is the Working Group and not the City, County or Beach. The City, County and Beach agree that the water and wastewater problems are a combination of quality of service, cost and politics. Each of these areas is discussed below. As to quality of service, there is a recognition that the Lake Okeechobee area presents unique and difficult quality of service problems for the effective and efficient provision of water and wastewater services. Numerous reports and studies have been commissioned by the Parties which address these quality of service problems and I will not attempt to describe the technical problems associated with the water and wastewater Mr. John W. Abney, Jr. March 11, 1994 Page 2 services. Dr. Bridges certainly is better able'to do this than I. Nevertheless, I believe that the overriding concern of the Parties is that water and wastewater service be made available to all the potential users at the lowest cost possible and with the highest quality that is practicable. The Parties agree that the goal of providing water and wastewater services to all potential users is not immediately achievable and, as a practical matter, may not be achievable in the foreseeable future. However, there is agreement on this goal as well as a recognition that the economic viability of the community is inextricably linked to these quality of service problems. COST OF SERVICE As is often a paramount issue, the cost of providing water and wastewater service is another major concern. The current rate structures of Beach and City do not appear to be prohibitively high, although City rates are approaching the critical point. All indications are that there are and will continue to be increasing pressures on the rates of Beach and City and future expansions of the systems by Beach or City to meet demand, growth and environmental mandates will undoubtedly increase these cost pressures. There are definite economies of scale that can be achieved by the Parties acting in unison for the provision of water and wastewater service. Unfortunately, there can also be significant cost penalties resulting from the Parties pursuing separate facilities. I am very concerned with the current lack of coordination and cooperation between the City, County and Beach as to the construction and operation of the water and wastewater facilities as well as conflicting and overlapping service areas of Beach and City. A closer and unified working relationship between the Parties could potentially achieve substantial cost savings for consumers as well as avoid unnecessary duplication of facilities. There was agreement that if there is a county -wide approach to the problems, then there should be equal rates between City and County residents. POLITICAL ISSUES A more intangible but clearly identifiable problem is the "political issues." The use of this terminology should not have a negative connotation. Rather, the provision of essential and traditional governmental services (water and wastewater treatment) requires a thoughtful analysis of political considerations. Which citizens will or will not be able to utilize the water and wastewater treatment facilities? Which citizens may be required to utilize these facilities? What will be the cost of those services? What governmental entity should be responsible for the provision of those services or should those services be privatized? These are all political issues that must be resolved. The Parties were in agreement that their preference is for some type of separate governmental entity having the responsibility for the water and wastewater facilities. That conclusion of the Parties Mr. John W. Abney, Jr. March 11, 1994 Page 3 is based upon the premise that a private, for profit company would tend to be less responsible and less likely to solve the stated problems. The Parties are in agreement that some type of separate utility authority, board or commission may help resolve the political issues. The composition of this separate governmental entity and its powers, responsibilities and accountability were not discussed in any great detail. I have provided the Working Group with a "Model Charter" of a separate utility authority "Authority However, this so called Model Charter is not Intended to be a final work product, but merely a working paper to stimulate and guide discussions. Representation on the Authority by City, County and Beach appears to be required by the Parties. SOLUTIONS As stated, a separate, county -wide Authority appears to be the preference. This Authority could be formulated by a contract between City and County "Interlocal Agreement pursuant to the provisions of Section 163.01, Florida Statutes. Numerous communities have created separate governmental entities by Interlocal Agreement to provide traditional governmental services such as police and fire protection and utility services. While I have not reviewed the charters of County and City and this needs to be done, typically county and city charters would not prohibit the entering into this type of Interlocal Agreement. A separate governmental entity created pursuant to Section 163.01 can be granted extensive and sufficient powers to manage and operate utility systems. The language of Section 163.01, Florida Statutes, does appear to allow for this separate governmental entity to issue bonds for the construction of water and wastewater facilities but this bonding authority would need to be reviewed in greater detail and closely coordinated with a competent bond attorney who is familiar with the provisions of Section 163.01. I can provide the Working Group with several suggested bond counsel should this avenue be pursued. In addition, any bonds issued by the Authority would need to be validated by the circuit court, but this should not be a complicated matter. While Beach could not contractually participate (that is, enter into this Interlocal Agreement), its interests could be adequately addressed through several methods including a Beach representative on the Board of the Authority. If the Working Group chooses the Interlocal Agreement approach, further legal issues will need to be addressed but I do not believe any of those legal issues are insurmountable. I am preparing a model Interlocal Agreement and I will submit this draft for discussion purposes within a week or two. Mr. John W. Abney, Jr. March 11, 1994 Page 4 A second methodology to create an Authority would be by a Special Act of the Florida Legislature. While Special Acts are relatively easy to pass, especially when the Special Act has the support of the community's legislative delegation, there are timing problems inasmuch as the 1994 Legislative Session is at the halfway point and the drafting and passage of a Special Act this year is virtually impossible. While there is a possibility of a special session prior to the commencement of the 1995 Legislative Session in February 1995, in all likelihood a Special Act could not be accomplished until approximately April 1995. However, if the Special Act vehicle is chosen, the necessary planning and development processes to create and implement an Authority could easily consume most of this year's time period. In addition, if it were deemed advisable to pursue the creation of an Authority by Special Act as opposed to an Interlocal Agreement, one possibility is to create the Authority by the Interlocal Agreement and then "merge" it into the Authority created by Special Act. This scenario would allow for an Authority to be created in the very near future. I believe the methodology of creating the Authority Interlocal Agreement vs. Special Act) to be of secondary importance at this time. The more critical issue appears to be deciding what functions the Authority should pursue. The Authority could take over the county -wide provision of water and wastewater utility services including the distribution /collection systems of Beach and City. Alternatively, the Authority could assume responsibility for the water and wastewater treatment and leave the distribution /collection functions with the City and Beach. Another possibility is for the Authority to assume the entire responsibility for the provision of water and wastewater services but contract with the City and Beach to operate their respective distribution /collection facilities. Each of these alternatives entail differing contractual arrangements that will need to be addressed in greater detail. Of critical importance to either of these alternatives is the current revenue bond indebtedness of the City. I understand that the City is in the process of refinancing this indebtedness as well as issuing bonds for additional funding needs. I recommend that this process be delayed by the City as long as is prudently possible. I have not reviewed the City's current bond resolutions, but those provisions could have significant contractual impediments to the City's participation in an Authority. In addition, the City currently pledges non utility revenues (utility taxes, franchise fees, and guaranteed entitlements) to the payment of these bonds and if the Authority does assume the assets and liabilities of the City's water and wastewater systems (or a portion thereof), then these non utility revenues should not be pledged to the payment of any bonded indebtedness that the Authority assumes. I recommend that a financial advisor be retained at some point in time to review the current city bonding structure and to suggest the optimum bond structure for an Authority. While this is not essential, it should be remembered that bond Mr. John W. Abney, Jr. March 11, 1994 Page 5 underwriters are not advising the City. I can suggest several financial advisory firms that are very familiar with these types of issues. I also suggest that Smith Gillespie perform an appropriate rate analysis and rate study of a combined Beach and City water and wastewater system. I understand that Smith Gillespie is in the process of preparing an initial scope of services for consideration by the Working Group. I believe it is a safe assumption that the combination of Beach and City into one utility system under the control of an Authority would enhance the financial and operational stability of both systems but that assumption should be documented. Considerable discussion at the March 9, 1994 Working Group meeting revolved around the appropriate "equity" of Beach and City in their respective systems as well as the appropriate capital contribution that the County should make to the Authority, all dependent of course upon which functions, assets and liabilities the Authority assumes. While this issue is of critical importance to the Parties, I suggest that this "equity issue" needs to be resolved in the appropriate sequence of decisions and I do not believe this issue can be resolved until a tentative decision is made by the Parties as to whether or not the Authority assumes all the assets and liabilities of Beach and City. There are several possible solutions if these "equity contributions" need to be adjusted between the Parties. The ultimate successful resolution of these problems needs to be guided by an agreed to timetable with definitive mileposts that result in a step -by -step decision making process. Dr. Bridges and I will be preparing and submitting this timetable to the Working Group for their approval. It is contemplated that certain decisions will have to be made by the Parties at appropriate intervals. I would suggest that these decisions would be non binding on the Parties and subject to a final review and approval of the completed work product. Nevertheless, the Parties must be willing to "honor" these sequential discussions until such time as the final work product can be formally adopted by the Parties. Substantial time, effort and money may be wasted without this commitment. I also recommend that the "cooling off agreement" between the Parties be extended for an additional 90 days. While I do not believe that everything which needs to be accomplished can be accomplished within this 90 -day time frame, I am confident that if the Parties continue to cooperate, significant progress can be achieved with this additional time. I would expect that if the Parties are in agreement with this extension of time, that they also indicate an agreement as to the findings, conclusions, and recommendation of this report. I am enclosing a suggested amendment to the "cooling off agreement" to be adopted as soon as possible by the Parties. Mr. John W. Abney, Jr. March 11, 1994 Page 6 In conclusion, let me emphasize that I cannot tell the Parties what to do, but I can recommend solutions based upon my experiences with numerous other governmental entities. While it is little comfort to state that your communities' problems are not unique, it should be of great encouragement to state that these same types of problems have been successfully resolved in other communities with a great deal of hard work, faith and trust. The Working Group should be commended for their efforts to date and if the Parties commit to continue their cooperation, I believe a successful resolution is at hand. Should you have any questions, please contact me. I will await further instructions from the Working Group before I proceed any further. FMB /km Enclosure cc: Dr. Harold Bridges C: \W PDOCS \FMB \OKEECHOS\ABNEY.LTR Sincerely, Frederick M. Bryant AMENDMENT NUMBER ONE TO AGREEMENT BETWEEN PARTIES TO DISCUSS SETTLEMENT OF OKEECHOBEE WATER ASSOCIATION, INC. VS. CITY OF OKEECHOBEE /COUNTY OF OKEECHOBEE LAWSUIT Pursuant to the terms and conditions of the Agreement between Parties to discuss Settlement of Okeechobee Beach Water Agreement vs. City of Okeechobee /County of Okeechobee Lawsuit "Agreement the Parties thereto do hereby consent to an extension of the Agreement until June 30, 1994 and the terms and conditions of the Agreement will remain in effect and binding upon the Parties until June 30, 1994 unless further extended by the Parties upon mutual consent. AGREED this day of March 1994 by the City of Okeechobee. Mayor, City of Okeechobee AGREED this day of March 1994 by the Okeechobee County, Florida. Chairman, Okeechobee County AGREED this day of March 1994 by Okeechobee Beach Water Association, Inc. President, Okeechobee Beach Water Association, Inc.