HomeMy WebLinkAbout7B-Funding Options for Sewer/Water Fee DeferralECONOMIC DEVELOPMENT AUTHORITY AGENDA REPORT
MEETING DATE: June 17, 2013
AGENDA #: 7B
PREPARED BY: Dan Rogness, Community and Economic Development Director
AGENDA ITEM: FUNDING OPTIONS FOR SEWER/WATER FEE DEFERRAL PROGRAM
DISCUSSION: Introduction
At the May EDA meeting, a motion was approved to have staff bring options to the EDA in June for
further review and discussion to fund the Sewer /Water Fee Deferral Program. The Commissioners
have previously discussed ways to provide a sustainable funding source (i.e., annual tax levy or
revenue bond). The cost associated with each local Sewer/Water fee deferral is $2,500 per SAC
Unit, but then reduced to $2,000 per unit due to the required 20% initiatial payment by the business.
History
The City Council's approval of the Sewer and Water Fee Deferral Program Policy in February re-
quires the EDA to financially support all local fee deferrals with up -front funding. This funding is
used to make the city's sewer and water accounts "whole" rather than having the city see those
accounts have deficits. Therefore, the EDA must identify funding sources that sustain the fee de-
ferral program in order to make it accessible and effective in Prior Lake.
Current Circumstances
Treasurer Jerilyn Erickson has developed some projections that were reviewed at a previous meet-
ing. She will review these projections again on June 17. Currently, the generally accepted approach
is to have the EDA fund this program from its annual budget as an economic development programis
program. Therefore, levy dollars must be allocated on an annual basis with the aim of making it
more self sustaining once loan repayment proceeds begin to replenish the program fund balance.
Conclusion
The EDA will further discuss how to establish a funding source that will support the effective use by
eligible businesses of the Sewer and Water Fee Deferral Program. Erickson's projections establish
a way to evaluate potential funding needs into the future. If the city takes on more of the financing
role from the EDA, then the corresponding sewer /water funds must be in a shortage condition,
thereby causing potential problems with future capital improvements. If the city council would con-
sider funding this program on a one -time basis up -front with reserves, then that should be considered
under the city's budget reserve policy.
ISSUES: City staff has not yet developed more options for funding the fee deferral program since it essentially
comes down to using levy and /or reserve dollars, especially in the early years of this program.
FINANCIAL There will be direct costs within the EDA budget, although this program will essentially be a revolving
IMPACT: account with payments being made by businesses for their deferred fees (plus interest). For 2013,
the EDA previously allocated $20,000 to support the program from the Professional Services ac-
count of $60,000. A subsequent approval provides additional funding to be taken from the Profes-
sional Services balance of $40,000.
ALTERNATIVES: 1. Continue to fund the SAC Deferral program through the EDA Budget.
2. Fund the SAC Deferral program through the General Fund Reserve.
3. Fund the program through the sewer and water funds.
RECOMMENDED As directed by the EDA.
MOTION:
ATTACHMENTS: Funding and cash flow projections
Projected Deferral Activity (Local Program A & B)
Cost/Unit: $ 2,500
(18,000) (32,000) (24,000) (16,000) ( (9,000) (5,000) (3,000) (1,000) (125,000)
Balance (18,000) (50,000) (74,000) (90,000) (107,000) (116,000) (121,000) (124,000) (125,000) (125,000) (125,000) (125,000)
Interest on loan balance has not been included.
Assumption that six months of payment is made in the first and last year of the 5 -year term.
Negative cashflow = net cash out
Postive cashflow = net cash in
PROJECTIONS FOR TWO PROGRAMS:
Program Revenues:
Allocation of professional services budget
EDA Tax Levy
General Fund Reserves
Loan Repayments
Total Revenues
Program Expenditures:
Loans Issued (Payment to City Trunk & Water Storage Fund)
Net Change
Program Balance
Totals
20,000 - - - - - - - - - - 20,000
- 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 400,000
2,000 8,000 16,000 24,000 33,000 41,000 45,000 47,000 49,000 50,000 50,000 365,000
22,000 48,000 56,000 64,000 73,000 81,000 85,000 87,000 89,000 90,000 90,000 785,000
20,000 40,000 40,000 40,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 490,000
2,000 8,000 16,000 24,000 23,000 31,000 35,000 37,000 39,000 40,000 40,000 295,000
2,000 10,000 26,000 50,000 73,000 104,000 139,000 176,000 215,000 255,000 295,000
Funding Plan:
2013 - Reallocate $20k of professional services budget
2014 - Additional EDA Tax Levy for this purpose; or use General Fund reserves (if available)
2015 - Continue additional EDA Tax Levy started in 2014;
Etc.
If EDA prefers to limit the program to $50k each year, dedicate the $50k of EDA tax levy to this program.
http: / /splash /teams /EDA /Shared Documents /June 17, 2013 /EDA Report 7B attach (2013.06.17) 6/14/2013
Payments CASHFLOW ...
Units
Initiate
Financed
Per Year 2013 2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
2013 •.
25,000
20,000
4,000 (18,000) 4,000
4,000
4,000
4,000
2,000
2014
2 0
50,000
40,000
8,000 (36,000)
8,000
8,000
8,000
8,000
4,000
2015
50,000
40,000
8,000
(36,000)
8,000
8,000
8,000
8,000
4,000
2016 ` '
50,000
40,000
8,000
(36,000)
8,000
8,000
8,000
8,000
4,000
2017
25r+
62,500
50,000
10,000
(45,000)
10,000
10,000
10,000
10,000
5,000
2018
62,500
50,000
10,000
(45,000)
10,000
10,000
10,000
10,000
5,000
2019
62,500
50,000
10,000
(45,000)
10,000
10,000
10,000
10,000
(5,000)
2020
2
62,500
50,000
10,000
(45,000)
10,000
10,000
10,000
(15,000)
2021
2S
62,500
50,000
10,000
(45,000)
10,000
10,000
(25,000)
2022
62,500
50,000
10,000
(45,000)
10,000
(35,000)
2023
62,500
50,000
10,000
(45,000)
(45,000)
(18,000) (32,000) (24,000) (16,000) ( (9,000) (5,000) (3,000) (1,000) (125,000)
Balance (18,000) (50,000) (74,000) (90,000) (107,000) (116,000) (121,000) (124,000) (125,000) (125,000) (125,000) (125,000)
Interest on loan balance has not been included.
Assumption that six months of payment is made in the first and last year of the 5 -year term.
Negative cashflow = net cash out
Postive cashflow = net cash in
PROJECTIONS FOR TWO PROGRAMS:
Program Revenues:
Allocation of professional services budget
EDA Tax Levy
General Fund Reserves
Loan Repayments
Total Revenues
Program Expenditures:
Loans Issued (Payment to City Trunk & Water Storage Fund)
Net Change
Program Balance
Totals
20,000 - - - - - - - - - - 20,000
- 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 400,000
2,000 8,000 16,000 24,000 33,000 41,000 45,000 47,000 49,000 50,000 50,000 365,000
22,000 48,000 56,000 64,000 73,000 81,000 85,000 87,000 89,000 90,000 90,000 785,000
20,000 40,000 40,000 40,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 490,000
2,000 8,000 16,000 24,000 23,000 31,000 35,000 37,000 39,000 40,000 40,000 295,000
2,000 10,000 26,000 50,000 73,000 104,000 139,000 176,000 215,000 255,000 295,000
Funding Plan:
2013 - Reallocate $20k of professional services budget
2014 - Additional EDA Tax Levy for this purpose; or use General Fund reserves (if available)
2015 - Continue additional EDA Tax Levy started in 2014;
Etc.
If EDA prefers to limit the program to $50k each year, dedicate the $50k of EDA tax levy to this program.
http: / /splash /teams /EDA /Shared Documents /June 17, 2013 /EDA Report 7B attach (2013.06.17) 6/14/2013