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<br />WS – Item 3 <br />WORK SESSION STAFF REPORT <br />Work Session Item No. 3 <br /> <br /> <br />Date: November 2, 2020 <br /> <br />To: City Council <br /> <br />From: Hannah Lynch, Finance Director <br /> <br />Re: Capital Equipment Plan <br /> <br />Background <br /> <br />The Council is being asked to consider the Capital Equipment Plan. The Plan includes the <br />2021 capital equipment requests for the Fire, Police, and Public Services Departments. <br />This Plan focuses on equipment funded by the tax levy within the Capital Equipment <br />Revolving Fund. Equipment within the Water and Sewer Departments is funded by user <br />fees and will be considered at the next Budget Work Session and throughout the rate <br />study process. <br /> <br />Capital equipment within the Capital Equipment Revolving Fund is currently financed <br />through the tax levy. Certificates of Indebtedness are issued annually which spread the <br />capital cost over 3 years at a 1% interest rate. The attached Capital Equipment Plan <br />assumes that no more Certificates of Indebtedness will be issued, but instead, an annual <br />capital levy will be established. These levy dollars will go directly to the Capital <br />Equipment Revolving Fund to be used on current capital equipment needs as outlined in <br />the Plan. <br /> <br />The Capital Equipment Plan is a forecast. The goal was to keep the City’s tax capacity <br />rate stable at 39.87% while making conservative assumptions in regards to the Net Tax <br />Levy and Net Tax Capacity over the next 10 years. The Council will see an annual update <br />of this Plan with a focus on the next immediate fiscal year’s capital purchases. Each year <br />the mechanic will continue to evaluate equipment to determine if replacement is <br />recommended. <br /> <br />Tax levies are needed to pay back previous equipment certificates until 2023. As a result, <br />a capital levy is not feasible until 2022. During this transition in financing methodology <br />cash reserves in the Capital Equipment Revolving Fund will need to be utilized in 2021. <br />During fiscal years 2022-2030 a capital levy would be available along with the Fund’s <br />cash balance to finance capital equipment. <br /> <br />Requested Council Direction <br /> <br />If the Council is supportive of the Capital Equipment Plan and requested 2021 capital <br />equipment purchases, staff will incorporate it into the 2021 Annual Budget which will be <br />on the December 14th City Council agenda for approval.