HomeMy WebLinkAboutFinancing City FacilitiesSTAFF REPORT
DATE: May 11, 2021
DISCUSSION
AGENDA ITEM: Financing of New City Facilities TO: Mayor and Council
SUBMITTED BY: Kristina Handt, City Administrator
BACKGROUND: As noted at the March 16, 2021 meeting, the current estimated project costs are $14.6 million. If 10% of the costs are paid by the water fund and 10% by the sewer fund the estimated tax impact to the average
home ($430,200) based upon 2020 valuation data is about $149 per year. Staff noted a number of things the council could consider to reduce the tax impact in the March 16th staff report. We will discuss them in further detail tonight in order to provide direction to staff as we prepare the bonding documents.
ISSUE BEFORE COUNCIL: How should the city pay for the new city hall, fire station and addition to public works?
PROPOSAL DETAILS/ANALYSIS: The following are a list of possible funding mechanisms/approaches staff would like feedback on:
1) Change Allocation of costs amongst funds The 80/10/10 split has been in the CIP for the last few years. However, those were just discussion numbers. After review and comparison of operating budgets for the general fund, water, and sewer funds, staff would recommend a breakdown of 65/25/10 (General Fund/Water/Sewer). This change essentially shifts about $2 million from the general tax levy to
the water fund. As of 12/31/20 the water fund had a cash balance of $7,052,022.08 and the sewer fund had a cash balance of $7,736,215.95. The stormwater fund had a cash balance of $1,057,584.84. 2) Waive WAC, SAC and connection charges It is estimated that the new space will result in 10 additional REC units for WAC, SAC, and connection charges. Staff had already assumed the sewer connection discount in the cost
estimates. If council decided to waive these city fees in total it would provide a savings of $60,000 to the project budget. The city would still have to pay Met Council fees. 3) Waive building and planning permit fees The current budget estimate includes about $96,830 for plan reviews and permits. While this can’t be reduced entirely because some fees will be paid to outside organizations such as the state surcharge ($1,866), the council could waive city fees to reduce this amount.
4) Apply American Rescue Plan Funds The city is estimated to receive just under $1.05 million. However, at this time Treasury has not released specific guidance on how the funds can be spent. We do know it can be used to replace lost revenue and for water, sewer and broadband infrastructure. Because of the lack of guidance, staff would recommend that ARP funds be utilized for other projects in the city that can still provide a benefit to all property owners.
5) Apply City Facilities Fund Balance The city facilities fund had a cash balance of $95,788 as of 12/31/20. These are funds left over from when the city bonded in the early/mid 2000s for the new public works building and potential city hall. Since the intention was to use these funds for a new city hall, staff would recommend they be applied to the city center project.
6) Apply Brookfield EDA Fund Balance
Fund 221-EDA Brookfield was created in 2018 to track the rental revenue and expenses related to
the Brookfield building. Since the bond that paid for the purchase of the building will be refinanced as part of the new city center bond and the Brookfield building is remodeled, there will not be a need to keep this separate fund. As of 12/31/20 the cash balance in this fund was
$60,077. Staff would not recommend allocating any of these funds at this time. It is anticipated that rental income will be about $29,000 short if most tenants are moved out in September rather than December. Three tenants have ended their leases by the end of this month. A number have
60-90 day notice periods so more could terminate early. If a balance remains in this fund after all tenants are out and bills paid, staff will bring a recommendation to council at that time to transfer funds.
7) Apply General Fund Balance The fund balance of the general fund was $ 4,364,816.57 as of 12/31/20. This is 72% of the following year’s general fund expenses. Given that the city’s fund balance policy sets a targeted floor of 50-60% of the subsequent year’s expenditure as the goal for fund balance, council may allocate about $750,000 of fund balance to this project. Staff would be hesitant to recommend this full amount be allocated given the likelihood of the 2022 general fund expenses increasing. If Council wanted to apply fund balance, staff would recommend no more than $400,000-500,000 be spent from fund balance.
FISCAL IMPACT: Dependent upon direction on alternatives noted above.
Staff is also proposing to add a double wide trailer for about $45,000 for city offices in order to keep the council chambers available for meetings. So our project budget has increased slightly since March to $14.7
million. OPTIONS: The most important item to determine tonight is the amount of the bond for the new facilities. Staff will arrive at that by applying any additional funds or allocations directed by Council. ATTACHMENTS:
• None