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Home My WebLink About9.B. Public Works Facility Funding 9. jj I CITY OF SHAKOPEE Memorandum TO: Mayor and Council Mark McNeill, City Administrator FROM: Gregg Voxland, Finance Director SUBJ: Public Hearing On Public Works Facility Funding (CIP) DATE: January 12, 2004 Introduction Council is holding a public hearing on the issuance of $6 million of General Obligation (GO) Bonds for the construction of a new Public works facility. Background In 2003, the state legislature passed a law that allows cities to issue GO Bonds (supported by tax levy) for certain types of facilities. One of the requirements of the new law is that the Council has to hold a public hearing on the Capital Improvement Plan that includes the facility to be funded by the bonds. Proposed is a six million dollar bond issue to fund the new public works facility that includes the current SPUC building acquisition and demolition, and some remodeling of the current building. Points to be considered in the process of holding the hearing and issuing the bonds include: 1. Condition of the existing facility and the projected need for repair or replacement. 2. The likely demand for the facility. 3. The estimated cost of the project. 4. The available public resources. 5. The level of overlapping debt in the City of Shakopee. 6. The relative benefits and costs of alternative uses of the funds. 7. Operating costs of the proposed facility. 8. Alternatives for providing services most efficiently through shared facilities with other local government units. 1. The city has outgrown the current facility. The current building will continue to be used with some remodeling. The architects have estimated that it is more costly to remodel, bring up to code and expand the current building than to construct a new building. 2. Shakopee is a growing city that has already outgrown the current building and will continue to grow in the foreseeable future. 3. Estimated cost of the project is six million dollars as per the architects. 4. The funds available in the Building Fund, General Fund, Capital Improvement Fund, Sewer Fund and other funds of the city are not sufficient to meet the current funding need for the facility without compromising the financial situation of the city in other areas. The Building Fund does not have the funds to complete the project and will not for several years. The General Fund is in its target range for fund balance and is under fiscal stress due to legislative actions on state aids and levy limits. The Sewer Fund is and has been used only for sewer utility purposes. The Capital Improvement fund has no reliable source of on going funding and does not have sufficient funds to complete the project. Much of the money in this fund came from highway state aid and therefore the case could be made that it should be used mainly for road improvements. Other funds of the city are restricted in their use and not available for this project. 5. The level of overlapping debt in the City of Shakopee is moderate. As of 12/31/02, the direct debt of the city was 17 million and indirect debt of other jurisdictions was 56 million for a total of 73 million. Direct Indirect Total Ratio of debt to tax capacity 42.7% 253.7% 296.4% With proposed debt 70.1% Average of 9 other cities 206.3% 277.3% 483.6% Debt per capita $418 $2,481 $2,899 With proposed debt $685 Average of 9 other cities $1,433 $2,032 $3,465 6. The benefit and cost of using bonded debt for the project is that the interest rate on GO debt is usually lower than the interest earning on invested funds. In other words, due to the usual difference interest rates, it is advantageous for a city to borrow money rather than pay cash for a project. The city has no contemplated alternative uses of the proposed bond issue. The bonds would be supported by a tax levy. The annual debt service would be about $440,000 per year over 20 years, which translates to about $36 a year in tax increase for the average value residence. Year by year, council could decide to use other funds to make the debt payment and cancel the tax levy. 7. Operating costs are estimated to increase by about $25,000 per year initially for utilities. Building rental cost to the Building Fund would be about $185,000. Maintenance costs will of course increase as the building ages. 8. possible shared facilities for this project with other cities or Scott County are considered not efficient or cost effective due to distances involved. Possible joint use with ISD 720 is being explored. Part of the existing facility is a refueling station that is also used by SPUC, ISD 720 and Scott County. Additionally, city mechanics also work on SPUC vehicles and equipment. Issuance of the proposed bonds would not exceed the cap of debt service costs of .05367 percent of the taxable market value of the county for bonds issued under MS 475.521. The bonds also would not exceed the net debt limit under MS 475.53 of 2% of market value ($35 Million) in the city. These bonds would be subject to an election for approval if a petition requesting a vote on the issuance is signed by voters equal to five percent of the votes cast in the city in the last general election and is filed with the city clerk within 30 days after the public hearing. Action Move to approve the Capital Improvement Plan for municipal facilities for 2004 - 2009. Gregg Voxland Finance Director g:\finance\budget04\cip04 City of Shakopee, Minnesota Building Fund Projected Fund Levels 2004-2009+ Capital Improvement Program REVENUES: 2004 2005 2006 2007 2008 2009+ Rentals $788,280 $908,880 $924,432 $940,000 $940,000 $940,000 Donations 2,750,000 Storm and Sewer contributions 600,000 Bond proceeds - Public Works 6,000,000 Bond Proceeds - Fire 2,500,000 5,300,000 Bond Proceeds - Park Referendum 11,000,000 Transfers 500,000 500,000 500,000 500,000 500,000 500,000 Interest 27,407 192,035 133,671 195,995 155,835 105,269 Total Revenue 7,315,687 15,950,915 1 ,558,103 1,635,995 4,095,835 6,845,269 EXPENDITURES: Maintenance Type Fire Station 1 reroof 100,000 PW remodel Debt Service Construction Type Library Police Station Pool Bathhouse Building 660,000 Comm Center Expansion 11,000,000 Comm Center Multiuse 2,750,000 PW Expansion 3,000,000 3,000,000 New City Hall 540,000 2,860,000 2,000,000 Fire station 1.1 2,500,000 Fire station 3 2,100,000 Fire station 3 Site Fire station 4 site 100,000 Fire station 4 2,300,000 Fire Training Tower 1,000,000 Total Expenditures 3,200,000 17,410,000 - 2,640,000 5,360,000 5,300,000 Excess (Deficiency) 4,115,687 (1,459,085) 1 ,558,103 (1,004,005) (1,264,165) 1,545,269 Cash Balance 1/1 685,182 4,800,869 3,341 ,784 4,899,887 3,895,883 2,631,718 Balance 12/31 $4,800,869 $3,341 ,784 $4,899,887 $3,895,883 $2,631,718 $4,176,987