02/07/2007 Council Packet - Laserfiche WebLink

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SAC charges when they hook up to the sewer service. About 18% of the residents at that time elected an option. Staff informed the Council in June that since the city accepted the refunds, the amount of the city's unfunded liability that has accumulated in this fund is roughly double the actual dollars available. This liability is projected to grow in the future, with increases to the SAC charges expected to eclipse interest revenue on the fund. Staff Recommendation: The potential impact of this liability on the City in the future will be quite heavy — over one -half million dollars. The only sources available to relieve the liability are utility fees or property tax revenue. In any case, it falls on all other residents of the city to pay the difference in SAC costs attributable to these properties. Staff recognizes that residents were given an option in the past, that properties have changed ownership over time, and that it may be many years before sewer service is available for these properties, or maybe never. However, given the potential magnitude of this liability, staff recommends that these property owners be made aware of the situation and that a refund be issued to the affected property owners, thereby eliminating the potential liability. Dedicated Parks Fund In 1999 the City purchased a 67 acre parcel of property on the east side of the city to be developed into a recreational facility. The purchase was financed through an interfund loan from the Area and Unit fund to the Dedicated Parks_fund. The loan was to be repaid from the proceeds of a successful bond referendum for this project. As you know, the referendum was held in 2001 and failed. Since then, the Dedicated Parks_fund has had fund deficit. Our auditors have strongly recommended that the city cure this deficit through one of the following options: 1) Make the loan a permanent transfer of funds, 2) develop a repayment schedule for the loan, or 3) sell the property to repay the loan. The City Council has been holding the property for possible development, and the property is certainly worth more today than it was purchased for. However, Council seemed reticent to sell the property at this time. Staff Recommendation: In light of the auditor's recommendation, and interpreting the vibes from the Council, staff recommends establishing a repayment plan for the interfund loan. An outright transfer of the funds would not be an appropriate use of the Area and Use funds, which were collected to implement trunk sewer and water facilities. In addition, the Area and Unit fund is having its own financial challenges, as was discussed in June. Therefore, a repayment plan seems to fit best. The loan can be repaid over a 10 — 15 year period with a moderate rate of interest. The source of the repayments would be park dedication fees. As a result of this plan, there will be an impact on the rate of park development over this repayment period. If, at some point in the future, it is determined that the city should divest itself of this property, the proceeds would flow into the Dedicated Parks fund to be used toward repaying any unpaid loan balance and /or completing development in any of the remaining city parks. 3