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1987 LONG TERN FINANCIAL PLAN <br />Page Thirty <br />when future purchases can he projected with accuracy. <br />In the Spring of 1984 a Special Projects Fund was <br />established by ordinance. Proceeds of the cash <br />defeasance of several bond issues were placed in the <br />fund. The ordinance provides that the monies of the <br />fund be used for the purchase of capital items for all <br />City funds but the Utility Funds. As of December 31, <br />1986 the balance in the fund was $1,535,344. <br />Staff recommends that, as far as practicable, only the <br />interest- earnings of the fund be used to finance capital <br />items. It is estimated that interest earnings of the <br />fund will be approximately $67,000 in 1987 and subsequent <br />years if the interest rates remain constant and the fund <br />balance remains at the current level. <br />4. 8orrowin - General obligation bonds may be issued to <br />finance various capital items subject to State laws and <br />City Charter provisions. Tax levies <br />would be pledged to repay the bonds. <br />The City has the ability to acquire equipment under <br />lease -purchase agreements. A lease is a form of <br />borrowing as an interest rate is inputted when the lease <br />payments are calculated. Advantages of leasing are two <br />fold: First, it allows expenditures for capital outlays <br />to be smoothed out over a number of years versus large <br />expenditures in years when major items are purchased, <br />and, second leasing allows needed equipment to be <br />purchased now rather than waiting. The major <br />disadvantages of leasing is that it is a form of <br />indebtedness and interest is paid. <br />5. Special Tax Levies - Minnesota Statutes allow cities to <br />issue Capital Notes Eor the purchase of Public Safety and <br />Street Equipment. A special tax levy, which is not <br />subject to the property tax levy limitation laws, may be <br />levied to repay Capital Notes issued. <br />Minnesota Statutes also allow cities to establish an <br />Infrastructure Replacement Fund to finance replacement of <br />streets, roads, curbs, gutters, and storm sewers. The <br />city is allowed to levy outside of the levy limit to <br />finance replacement of infrastructure mentioned above. <br />A special levy outside of the levy limit is also allowed <br />for construction and maintenance of storm drainage <br />Facilities. Projects financed by this levy must be <br />within a storm drainage district designated by the <br />Council and approved by the local watershed district. <br />