12-09-1992 Council Agenda - Laserfiche WebLink

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Mr. Joel Hanson, City Administrator City of Little Canada Page 5 ,Storm Sewer Construction Project: The City's Storm Sewer Construction Project was a $2.5 million project financed by a combination of bond proceeds and MSA Construction Allotments. This project was substantially completed in 1989 with a projected balance of approximately $242,000. This projected balance was deemed (by the City Council) to be excess MSA Allotments and was transfened to the State Aid Roads Fund in 1989. This cash transfer will enable the City to fmance 100% of the previously under financed MSA construction projects. See the attached Schedule 6. This also allowed the City to re- designate its previous cash transfers from the General Fund towards partial financing of City Hall improvements. The City's Storm Sewer Construction Project is complete, and fmal costs were paid in 1991 with a remaining balance of $94,450 at December 31, 1991. This balance has previously been deemed to be excess MSA Allotments by the City Council. The City transferred this balance to the City's State Aid Road Fund to increase the reserve balance of this fund at December 31, 1991. This entire balance is available at the discretion of the City Council. Past Bond Interest - MSA Bonds: During 1987, the City was informed that it could not longer finance interest on its MSA bonded debt by special - purpose tax levies (i.e. levies in addition to the "levy limit" amount). Accordingly, an alternative source of financing for this interest was necessary. See Schedule 4 for a complete tabulation of such interest (i.e. both past and future). The MSA rules and regulations allow a City to use up to 25% of its total MSA Allotment for maintenance purposes. Such maintenance purposes include actual (MSA) street maintenance and interest on MSA bonded debt. This "25% rule" requires the City to apply to the State (by letter) for such use and to document (by actual expenditures) that the money was actually used for such purposes. During 1988, the City did make such an application (for the maximum allowable 25 %) to be used for past and current interest on MSA bonded debt. The State replied that such 25% could be used for actual maintenance costs plus current interest only. The State did (in fact) allocate the maximum 25% (i.e. $57,461) to maintenance for 1989. Additionally, the State remitted the entire amount to the City (in February and April, 1989) and stated that a portion of the amounts so remitted "will be applied to prior years' interest ". Based upon actual State "remittance advices" for 1989, the State does (sometimes) allow a City to use maintenance allocations for past and current interest on MSA bonded debt. The City has heretofore incurred (and paid) such interest totaling $221,578. (See Schedules 1 -B and 4.) Such interest has been previously financed by bond proceeds, general property taxes, and "normal" MSA maintenance allotments. We have discussed the situation with the State and they are now allowing the City to "draw down" a total of $178,287 for such past interest. See Schedule 1 -B. Additionally, the State will apparently allow the city to "do its own thing" for the recovery of this "past bond interest." We have calculated that the City can fully recover this "past bond interest" by maximizing such draw downs for the years 1989 through 1996. See Schedules 1 and 1 -B. If such draw down schedule is followed the City will accumulate an additional $178,288 in its State Aid Road Fund by 1996. It should be noted that such draw downs are entirely discretionary at the option of the City. To effect this plan, the City must make written application to the State (annually) for the annual amount being requested. Page 36