Agenda Packets - 2002/06/10 - Laserfiche WebLink

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Item No. 7C Type of Business: CB WK: Work Session; PH: Public Hearing; CA: Consent Agenda; CB: Council Business City of Mounds View Staff Report To: Honorable Mayor and City Council From: Charles Hansen, Finance Director Item Title/Subject: Report on Proceeds of Clear Channel Billboard Lease Payments Date of Report: June 4, 2002 Last fall, the City of Mounds View reached tentative agreement with Clear Channel regarding lease payments from enlarging a billboard on Highway 10. Part of the agreement called for an initial payment to the City of $50,000 followed by annual payments of $7,000, indexed for inflation. There was no way of telling if the initial $50,000 payment would come in 2001 or in 2002. The 2002 General Fund budget assumed it would receive the first $7,000 annual payment. No decision was made as to where the $50,000 payment would be credited. It now appears that the $50,000 may be made in the near future. The first payment of $7,000 can be expected one year after the date of the $50,000 payment. The General Fund will need $7,000 of it to satisfy its budget. The remaining $43,000 may be deposited in any fund at the City Council’s discretion. In making this decision, it is useful to think of city expenses as either on going or one-time. Hiring an employee is an ongoing expense because the wages and benefits will need to be paid this year, next year, and every year thereafter. Capital project can be thought of as one-time expenses. Once the purchase price of a capital asset is paid, that large purchase price won’t need to be paid again for many years. By that time, another one-time source of money may be available. My recommendation is that the City Council place the $43,000 in one of the City’s capital projects funds. The one-time nature of this income and the expenditures of the capital projects funds are consistent.