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March 9, 2009 Item No. 7D <br />Page 3 <br />The first financial analysis had the projects in their original order as adopted in <br />October 2007, with Area A being bid in 2009, through Area I being bid in 2017. <br />As has always been the case, this scenario predicted a positive cash balance for <br />the City throughout the duration of the Street and Utility Improvement Program. <br />The second analysis run by the Finance Director combined the Area C project <br />with Area B in 2010, and accelerated the remaining projects in the Program by <br />1-year as well, with the Area I project being bid in 2016. This analysis showed <br />that the Street and Utility Program would encounter a negative fund balance <br />towards the end of its duration. <br />The Finance Director also ran a third analysis. That analysis again had the <br />Area C project combined with Area B in 2010, but it introduced a 1-year <br />interruption into the Street and Utility Program sometime later in the schedule. <br />By doing this, the later projects in the Program would be back on their original <br />schedule, with the Area I project being bid in 2017. The analysis showed that <br />introducing a 1-year interruption into the program eliminated the negative fund <br />balance encountered in the second financial analysis. <br />Based on this information the Streets and Utilities Committee were interested in <br />pursuing the option of combining Areas B and C, and introducing a 1-year break <br />later in the Street and Utility Improvement Program schedule. The Committee <br />requested that Staff discuss the issue with the City Council to gauge their initial <br />reaction. <br />Staff reported the information to the City Council on February 23, 2009. Council <br />reaction to the idea was generally positive, and they requested that a Staff <br />Report be prepared to consider initiating the project for Area C and showing how <br />it could be combined with Area B. <br />Economic Advantages of Combined Project for Areas B & C <br />There are three primary economic advantages of pursuing a combined project for <br />Areas B and C: <br />1. Lower construction costs <br />2. Savings on maintenance costs <br />3. Savings on engineering costs <br />A brief expansion of each of these points follows: <br />1. Lower Construction Costs <br />With the current economic slowdown, and its predicted duration of at <br />least 12 more months, it is reasonable to assume that construction <br />bids in January 2010 will again be very competitive, with unit prices <br />anticipated to be similar to those received when the Area A project was <br />bid in January 2009.