HomeMy WebLinkAbout01(B) - 2027-2031 Capital Improvement Program Report
ITEM: 1B
CITY COUNCIL AGENDA REPORT
MEETING DATE: July 28, 2026
PREPARED BY: Jason Etter, Accounting Manager
Angela Gieseke, Finance Supervisor
Nicole Klekner, Finance Director
PRESENTED BY: Nicole Klekner
AGENDA ITEM: 2027-2031 Capital Improvement Program
RECOMMENDED ACTION:
The Council is asked to provide comments on the draft Capital Improvement Program (CIP) so
the CIP process can proceed on schedule. The CIP plans are as follows:
Equipment Replacement Plan
Park Plan
Facilities Management Plan
Pavement Management Plan
Technology Plan
Utility Funds
Water Financial Plan
Sanitary Sewer Financial Plan
Water Quality Financial Plan
This work session will also include the financial analysis of the CIP plans. The draft summary
documents have been included for City Council review.
BACKGROUND:
At the June 23 work session, staff presented Part 1 of the CIP which was a presentation of the
projects in equipment, park, facilities, and pavement management plans. Part 2 of the CIP will
be a presentation of the following:
Utility funds financial plans, including proposed rate changes
CIP financial impacts: debt analysis and tax impact
UTILITY FUNDS – FINANCIAL MANAGEMENT PLANS
The City’s utility funds finance their portions of the Capital Improvement Program through
transfers-out to other funds and by transactions occurring within the specific utility funds
themselves. The utility funds make transfers-out to the Construction Fund for their portions of the
Pavement Management Plan (PMP) projects. Other items that specifically relate only to that utility
are accounted for within the fund, such as a water tower rehabilitation occurring in the Water fund.
Staff develop a financial management plan for each utility fund that includes planning financing
sources for capital activities.
City of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372
2027 Proposed Annual Monthly
FundRate IncreaseImpactImpact
Water4.0%$ 24 $ 2
Sewer4.5%$ 30 $ 3
Stormwater3.0%$ 5 $ 0
Combined Total4.1%$ 59$ 5
Item 1B
Page | 2
The financial management plans for water, sewer and stormwater utility services achieve the
following goals:
Rate Calculation: Provide a rate calculation that results in equitable and competitive fixed
versus variable portion charge to customers and considers conservation impact of tiers
and block rates.
Revenue Sufficiency: Focus on revenue sufficiency to provide cash balances that support
the following objectives:
o Revenue to meet current and future obligations.
o Avoid future debt issuance consistent with city objectives.
o Cash on-hand to provide:
• Three-months of operating expense
• Following-year debt service payments
• Following year capital acquisition (planned to be paid from cash)
• Reserves for replacement of infrastructure located under private streets.
• Reserves for future capital improvements
2027 Resident Impact and Sample Bill:
The City plans for annual increases in utility rates to accomplish the objectives discussed above
while moderating the effects on utility users. Based upon the City’s current estimates and water
consumption level and utility replacement component of street projects, utility customers will
experience increases of 4.0-4.2% in their 2027 utility bill based on their level of water use.
For the utility funds to support operations and their respective portions of the Capital Improvement
Program, funding is achieved through rates charged and/or debt issuance over the 10-year
planning period.
To achieve this, the following rate increases are proposed for 2027 (medium water user):
MCES fee details: It should be noted that city utility bills also include an MCES Fee for sewer.
This fee does not support City operations or the Capital Improvement Plan, but rather is a fee
collected by the City from residents to pay the Metropolitan Council’s Environmental Services fee
for regional wastewater treatment. The fee will increase 6.94% for 2027, reflecting the increased
fee that the Metropolitan Council is charging Prior Lake. This fee increase, as well as the utility
rate increases needed to support operations and the Capital Improvement Plan, is reflected
below.
Total per Year202620272028202920302031
High User$ 6,562$ 6,835$ 7,088$ 7,351 $ 7,618 $ 7,895
Medium User$ 1,423$ 1,482$ 1,535$ 1,590 $ 1,642 $ 1,695
Low User$ 933$ 970$ 1,004$ 1,040 $ 1,070 $ 1,101
Annual Increase
High User$ 273$ 253$ 263$ 267$ 277
Medium User$ 59$ 53$ 55$ 51$ 53
Low User$ 37$ 34$ 35$ 30$ 31
Item 1B
Annual Percentage Increase
High User4.2%3.7%3.7%3.6%3.6%
Page | 3
Medium User4.1%3.6%3.6%3.2%3.2%
Low User4.0%3.5%3.5%2.9%2.9%
Average4.1%3.6%3.6%3.3%3.3%
The projected annual increase for all utility services is shown below:
Sample Bimonthly Utility Bill:
The Water, Sewer and Water Quality Financial Management Plan Cash by Purpose, projected
change in rates and CIP are shown on Attachment 1, 2, and 3.
FINANCIAL IMPACT:
The City has been working over the last several years to document its assets and plan for major
maintenance or replacements. The City Council is asked to provide Staff with comments and
input on these components of the draft CIP so that they can be refined in preparation for the
City’s financial planning, public review and approval process.
A public hearing before the City Council is scheduled for the proposed CIP on Wednesday,
August 12, 2026.
ATTACHMENTS:
1. Attach 1 - Water Fund Cash and Capital Projects (10 Year)
2. Attach 2 - Sewer Fund Cash and Capital Projects (10 Year
3. Attach 3 - Stormwater Cash and Capital Projects (10 Year)
4. Attach 4 – Debt Analysis and Tax Impact
2026
Water Fund202720282029203020312032203320342035
(estimate)
Cash by Purpose
For future capital improvements 4,668,343 2,130,806 1,229,842 2,538,313 2,493,774 3,420,266 2,761,375 2,343,671 3,240,744 4,305,659
For following year pay-go capital 1,911,000 3,482,000 2,435,500 227,000 1,685,000 1,511,025 2,086,076 3,467,155 2,067,763 2,039,401
For 3-months of operating cash 1,033,485 1,055,866 1,008,793 1,039,905 1,074,231 1,120,318 1,400,624 1,187,398 1,226,675 1,267,248
For following year debt service 801,700 810,450 645,350 652,650 659,200 - - - - -
Ending Cash 8,414,528 7,479,122 5,319,485 4,457,869 5,912,205 6,051,610 6,248,076 6,998,223 6,535,182 7,612,308
Average Annual % Change in Water Bill for Billing Period
High Volume Customer (78,000 gallons)3.0%4.0%3.0%3.0%3.0%4.0%4.0%3.0%3.0%3.0%
Medium Volume Customer (18,000 gallons)3.0%4.0%3.0%3.0%3.0%4.0%4.0%3.0%3.0%3.0%
Low Volume Customer (8,000 gallons)3.0%4.0%3.0%3.0%3.0%4.0%4.0%3.0%3.0%3.0%
Water Fund
Summary of Key Financial Informa?on
Water FundEstimate
Project Description2026202720282029203020312032203320342035
Capital Outlay
Transportation Plan 1,161,600 1,201,000 2,554,000 1,647,000 - - - 1,362,000 3,320,000 1,865,000
Wells 60,000 445,000 52,000 65,000 65,000 67,500 140,000 72,500 75,000 75,000
Boosters and misc projects 475,000 70,000 80,500 228,500 91,500 72,000 80,000 35,000 30,000 25,000
Current Year Projects - Facilities 145,000 140,000 765,500 440,000 10,000 - - - -
-
Water Storage & Tower Reconditioning 1,810,000 - - - - 40,000 - - -
-
Technology Plan - SCADA - - - - 10,000 10,500 11,025 11,576 12,155 12,763
Equipment - 55,000 - - 20,500 215,000 - 575,000 - 60,000
WTP Filter Media Replacement - - - 25,000 - 1,250,000 1,250,000 - -
-
WTF Rehabs & Equipment - - 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Total Capital Outlay 3,651,600 1,911,000 3,482,000 2,435,500 227,000 1,685,000 1,511,025 2,086,076 3,467,155 2,067,763
Source of Funds
Bond proceeds - - - - - - - - - -
Current revenue / use of cash in fund 3,651,600 1,911,000 3,482,000 2,435,500 227,000 1,685,000 1,511,025 2,086,076 3,467,155 2,067,763
Total Source of Funds 3,651,600 1,911,000 3,482,000 2,435,500 227,000 1,685,000 1,511,025 2,086,076 3,467,155 2,067,763
Water Fund
Capital Improvement Plan
2026
Sewer Fund202720282029203020312032203320342035
(estimate)
Cash by Purpose
For future capital improvements 547,416 2,870,364 2,156,741 2,136,107 4,626,078 9,925,880 6,101,917 7,553,835 6,559,664 4,691,208
For following year pay-go capital 2,586,000 - 4,131,000 2,381,000 - 1,569,025 - 4,685,155 3,253,763 4,199,401
For 3-months of operating cash 985,308 994,707 1,100,174 1,108,517 1,157,011 1,266,273 2,512,461 1,361,484 1,374,856 1,435,484
For following year debt service 165,500 168,000 497,325 394,550 391,900 1,055,408 917,700 1,518,540 1,391,230 1,393,568
Ending Cash 4,284,224 4,033,071 7,885,239 6,020,174 6,174,988 13,816,586 9,532,078 15,119,014 12,579,513 11,719,660
Average Annual % Increase for Fees and Charges
High Volume Customer (47,000 gallons)7.5%4.4%3.4%3.4%4.0%4.0%3.4%3.4%3.4%3.4%
Medium Volume Customer (12,000 gallons)7.3%4.5%3.4%3.4%4.0%4.0%3.4%3.4%3.4%3.4%
Low Volume Customer (7,000 gallons)7.7%4.4%3.4%3.4%4.0%4.0%3.4%3.4%3.4%3.4%
Sewer Fund
Summary of Key Financial Informa?on
Sewer FundEstimate
Project Description2026202720282029203020312032203320342035
Capital Outlay
Transportation Plan 1,631,900 1,059,000 1,533,000 2,120,000 - - - 1,161,000 2,581,000 1,631,000
Sewer Lining - Inflow/Infiltration Prevention 468,000 482,000 496,000 511,000 526,000 542,000 558,000 575,000 592,000 610,000
Lift Station Rehabilitation 720,000 545,000 900,000 750,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000 1,000,000
Technology Plan - SCADA 500,000 500,000 500,000 500,000 10,000 10,500 11,025 11,576 12,155 12,763
Generator/Equipment - - 125,000 250,000 845,000 85,000 - 160,000 - -
Total Capital Outlay 3,319,900 2,586,000 3,554,000 4,131,000 2,381,000 1,637,500 1,569,025 2,907,576 4,685,155 3,253,763
Source of Funds
Bond Proceeds - - 5,150,000 - - 6,815,000 - 6,188,400 - -
Current revenue / use of cash in fund 3,319,900 2,586,000 (1,596,000) 4,131,000 2,381,000 (5,177,500) 1,569,025 (3,280,824) 4,685,155 3,253,763
Total Source of Funds 3,319,900 2,586,000 3,554,000 4,131,000 2,381,000 1,637,500 1,569,025 2,907,576 4,685,155 3,253,763
Sewer Fund
Capital Improvement Plan
2026
Stormwater Fund202720282029203020312032203320342035
(estimate)
Cash by Purpose
For future capital improvements 3,336,145 3,218,229 2,739,466 3,525,690 4,157,350 4,846,345 6,264,909 5,331,759 4,962,354 4,284,047
For following year pay-go capital 1,174,000 1,080,000 1,396,000 481,000 644,000 658,000 - 2,316,000 1,865,000 2,006,000
For 3-months of operating cash 270,260 267,316 325,793 284,541 293,567 302,880 313,741 332,974 332,639 386,947
For following year debt service 87,650 90,650 88,400 91,150 88,650 91,150 88,400 231,880 199,570 197,883
Ending Cash 4,868,055 4,656,194 4,549,659 4,382,381 5,183,567 5,898,375 6,667,050 8,212,613 7,359,563 6,874,877
Average Annual % Increase for Fees and Charges
Per Residential Equivalent Unit3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%
Stormwater Fund
Summary of Key Financial Informa?on
Stormwater FundEstimate
Project Description2026202720282029203020312032203320342035
Capital Outlay
Transportation Plan 600,490 589,000 473,000 937,000 - - - 705,000 1,630,000 1,165,000
Pond Maintenance & Retrofit 218,000 230,000 237,000 244,000 251,000 259,000 267,000 275,000 283,000 291,000
Stormwater Improvements 150,000 165,000 170,000 175,000 180,000 185,000 191,000 197,000 203,000 209,000
Stormwater Pond Planning 34,000 - - - - - - - -
-
LSWMP Implementation Plan - - - - 50,000 200,000 200,000 200,000 200,000 200,000
Misc projects - 190,000 200,000 40,000 - - - - - -
Total Capital Outlay 1,002,490 1,174,000 1,080,000 1,396,000 481,000 644,000 658,000 1,377,000 2,316,000 1,865,000
Source of Funds
Bond Proceeds - - - - - - - 1,451,600 - -
Current revenue / use of cash in fund 1,002,490 1,174,000 1,080,000 1,396,000 481,000 644,000 658,000 (74,600) 2,316,000
1,865,000
Total Source of Funds 1,002,490 1,174,000 1,080,000 1,396,000 481,000 644,000 658,000 1,377,000 2,316,000 1,865,000
Stormwater Fund
Capital Improvement Plan
Amount as of
Debt TypePurpose
December 31, 2025
G.O. Special Assessments 7,055,000Street Improvement Projects
G.O. TIF Bonds0Tax Increment Project
G.O. Bonds (MV) 1,565,000 Referendum Project (Fire Station #2)
G.O. Bonds2,965,000Street Reconstruction Projects
G.O. Bonds3,760,000Public Works Building and CIP Projects
520,000
G.O. BondsEquipment
Maintenance Facility, Water Treatment
G.O. Revenue Bonds5,555,000
Facility & Utility Replacement Projects
G.O. Capital Improvement
Debt Analysis and Tax Impact
2,625,000City Hall & Police Station
Bonds
Energy Lease Loan Payable Guaranteed Energy Savings Program
0
(GESP)Projects
24,045,000
Total
In reviewing the 2027-2031 Capital Improvement Program, the City Council should consider the
level of debt as well as the annual tax impact of the scheduled projects.
The 2027-2031 CIP includes projects that are planned to be funded by bond proceeds/debt.
Bonds are issued for the project costs that the City is funding through tax levies as well as the
costs that are specially assessed to property owners.
As of 12/31/2025, the City of Prior Lake had $24.0M in debt. The following chart reflects the
type of debt. One-third of the debt is for facilities: Water Treatment Plant (through 2030), Fire
Station #2, City Hall, and the Police Station (through 2031).
The 2027-2031 CIP anticipates the following bonding (debt issuance) needs:
The Equipment Replacement Plan includes $3,810,000 of bonding for major equipment
replacement expenditures primarily for fire truck replacements (ladder truck in 2027 and
pumper truck in 2028).
Bonding of $3,500,000 for major park replacement expenditures includes the replacement
for the four Ponds Parking Lots and entrance road in 2028.
The Facilities Plan includes $11,230,000 of bonding for major facility repairs for City Hall
and Police Station replacement of membrane roofing and heating, ventilation, and air
conditioning (HVAC) updates, addition of dormitories at Fire Station #2, and parking/safety
enhancements.
Long-Term Financial Planning
Long-Term Financial Planning
Bond Proceeds for Capital Projects
Projected Change in Debt Outstanding
Projected Bonding by Year
Fund Name
202620272028202920302031
20272028202920302031
Total Debt Outstanding (Existing & Planned)
Revolving Equip Fund F410 2,265,000 1,545,000 - - -
Governmental Funds Debt Outstanding
20,980,000 22,550,000 30,225,000 32,030,000 32,680,000 32,505,000
Revolving Park Equip Fund F430 - 3,500,000 - - -
Enterprise Funds Debt Outstanding
3,585,000 2,735,000 6,995,000 6,245,000 5,460,000 11,460,000
Facilities Mgmt Fund F440 515,000 3,915,000 2,165,000 2,060,000 2,575,000
Total Debt Outstanding (Existing & Planned)
24,565,000 25,285,000 37,220,000 38,275,000 38,140,000 43,965,000
PIR Revolving Fund F450 - - - 710,000 -
Construction Fund F501 2,895,000 2,810,000 4,215,000 1,575,000 695,000
-
Governmental Funds Subtotal 5,675,000 11,770,000 6,380,000 4,345,000 3,270,000
Water Fund - - - - -
Stormwater Fund - - - - -
Sanitary Sewer Fund - 5,150,000 - - 6,815,000
Utility Funds Subtotal - 5,150,000 - - 6,815,000
The Pavement Management Plan includes bonding of $12,900,000 for transportation plan
City total Debt Issuance - All funds 5,675,000 16,920,000 6,380,000 4,345,000 10,085,000
projects and street mill & overlay projects. The repayment sources for this bonding include:
o Tax levy
o Project Special Assessment (The city provides the upfront funding for the special
assessment portion via bonding)
The Sewer Fund includes bonding of $11,970,000 for planned expenditures for sewer
replacement costs on street reconstruction projects as well as lift station rehab, sewer
lining, and SCADA software update.
The table below summarizes the proposed bonding by fund and year:
Summary of Projected Debt Balances
The following tables reflect all bonding requirements referenced in the CIP, Pavement
Management Plan, Facilities Management Plan, and Equipment Replacement Plan.
Based on the proposed projects in the CIP, debt is projected to increase from $24.0M at the end
of 2025 to $44.0M at the end of 2031.
Projected CIP Tax Levy
Long-Term Financial Planning
Projected Debt Service (funded by Utility Fund
CIP Tax Levies:
20272028202920302031
2027-2031 CIP
Revenues)
Debt Service Levy 3,454,655 3,889,440 4,390,759 4,060,724 3,530,139
Projected
20272028202920302031
Equipment Revolving Fund 1,025,000 1,075,000 1,075,000 1,150,000 1,200,000
202620272028202920302031
Water 801,700 810,450 645,350 652,650 659,200
Revolving Park Equip Fund 655,000 705,000 705,000 750,000 800,000
Debt Per Capita (assumes population growth)
Sewer 165,500 168,000 497,325 394,550 391,900
Facilities Management Fund 355,000 405,000 555,000 600,000 650,000
Debt Per Capita 868 890 1,304 1,328 1,311 1,497
Stormwater 87,650 90,650 88,400 91,150 88,650
PIR Fund - - - - -
Total CIP Tax Levies 5,489,655 6,074,440 6,725,759 6,560,724 6,180,139
Projected Debt per Capita:
Projected debt per capita based on the current capital projects planned is shown in the table
below. The city is working to manage its debt load while providing needed capital replacement
projects in a growing city.
Bond Repayment through Debt Service Tax Levy:
The table below is a summary of the annual projected total CIP tax levy by component.
Bond Repayment Debt Service supported by Utility Fund Revenues:
The projected annual debt service for the utility funds is shown below:
CIP Impact on Long Range Financial Plan:
The financial plan incorporates the debt and tax levy impacts of the Capital Improvement
Program. Approval of the CIP does not obligate the city to complete the proposed projects or
purchases. The 2027 projects/proposed purchases will be incorporated into the 2027 budget
requests for budgeted funds. Further Council approvals may be necessary to comply with state
statutes and the city’s purchasing policy.
The city’s financial planning reflects funding general operations, future planned capital
improvements, including related debt service on planned bond issuance to support capital
CITY OF PRIOR LAKE
CITY PROPERTY TAX PROJECTION
Five Year Planning Period
202620272028202920302031
TAX LEVIES
General Fund Levy - Tax Capacity 16,267,024 16,864,136 18,032,656 19,595,626 20,819,085 22,357,525
General Fund Levy - Market Value 265,888 273,988 281,638 283,838 290,738
277,888
Debt Service Fund 2,979,220 3,454,655 3,889,440 4,390,759 4,060,724 3,530,139
CIP Funds 1,825,000 2,035,000 2,185,000 2,335,000 2,500,000 2,650,000
Total Tax Levies 21,337,132 22,627,779 24,388,735 26,605,223 27,670,547 28,815,553
Annual $ Change 1,485,227 1,290,646 1,760,956 2,216,489 1,065,324 1,145,006
TOTAL % CHANGE IN TAX LEVIES7.5%6.0%7.8%9.1%4.0%4.1%
improvements for streets, equipment replacement and facilities capital maintenance projects.
CITY TAX CAPACITY TAX RATE32.03%33.54%35.45%35.77%36.05%
Debt repayment is based on level annual debt service payments.
Annual % Change2.07%4.72%5.69%0.92%0.77%
Debt per Capita 868 890 1,304 1,328 1,311 1,497
Funding for proposed projects in the CIP results in an estimated 10-year average tax levy increase
Bonds Outstanding 24,565,000 25,285,000 37,220,000 38,275,000 38,140,000 43,965,000
Change in Bonds Outstanding 720,000 11,935,000 1,055,000 (135,000) 5,825,000
of 6.8% and an estimated 10-year average tax rate increase of 3.0%. This is in line with the
parameters established in the city’s 2023 long range financial planning study.
The estimated tax levies and tax rate projections for the city’s five-year financial plan are shown
below.
PriorLakeMN.gov Rick SteinhausLori OlsonLiam DugganNicole KleknerNick Monserud IMPROVEMENT PROGRAM2031 CAPITAL -2027
PriorLakeMN.gov2 CIP2031 -: Public Hearing and Adopt 2027August 12•levy & debt service): Part II: Financial Plan with CIP Impacts (tax July 28•: Part I: Capital Plans ReviewJune 23•2031
CIP Schedule-2027
PriorLakeMN.gov3 Water Quality Financial Plan•Sanitary Sewer Financial Plan•Water Financial Plan•Separate discussion at 7/28 work session–Utility Funds 1)2031 CIP Schedule-2027
PriorLakeMN.gov 3.0%–Stormwater 4.5% (includes MCES increase)–Sewer 4.0%–Water follows:Proposed rate changes for 2027 are as $1,461,270-2033 •Stormwater fund:$6,178,730-2033 •$6,815,000-2031
•$5,150,000-2028 •Sewer fund:no debt issuance–Water fund year plan as follows: -tenfinancial model reflects debt issuance in the rates charged and/or debt issuance. The Funding for
utility funds is achieved through and stormwater respectively. $6.8M, $5.3M and $2.7M for water, sewer, projects: management plan street reconstruction funding needs to support the
pavement year total Water/Sewer/Stormwater -The 5 4 PlanUtility Funds Financial Management
PriorLakeMN.gov Monthly Utility Bill:-Sample Bi 5 All Funds–Utility Bill Combined Impact
PriorLakeMN.gov in 2032for the maintenance center expansion year plan reflects $37M in bonds -10$44.0M at the end of 2031.from $24.0M at the end of 2025 to the CIP, debt is projected
to increase Based on the proposed projects in 6
PriorLakeMN.gov7 City Property Tax Projection
PriorLakeMN.gov to be ~$1,500per Capita projected 2031 Prior Lake Debt 2025End-Per Capita as of YearBar Chart: G.O. Debt 8 Debt Per Capita Projection
Questions/Discussion