HomeMy WebLinkAbout8A - 1998 - 2002 CIP
STAFF AGENDA REPORT
DATE:
IA
RALPH TESCHNER, FINANCE DIRECTOR
CONSIDER APPROVAL OF 1998-2002 CAPITAL IMPROVEMENT
PROGRAM (CIP) AND RESOLUTION 97-XXX AUTHORIZING FUND
TRANSFERS TO ESTABLISH REVOLVING EQUIPMENT FUND
MAY 19,1997
AGENDA #:
PREPARED BY:
SUBJECT:
INTRODUCTION:
Annually the City prepares a capital improvement program which is
designed to identify infrastructure improvements and funding sources
therefore which are necessary as a result of primarily two factors;
community growth and infrastructure replacement.
Such projects include City initiated improvements, county and state road
improvements and improvements requested by developers. In some cases
they involve financial responsibility on behalf of Prior Lake, while in others
they may not. In addition, an Equipment Matrix is included which identifies
the City's equipment needs and establishes a regular replacement schedule.
Please bring your draft copy of the 1998-2002 Capital Improvement
Program with you to the meeting. Within the CIP are condensed project
summary sheets (see inserts entitled "Capsule Project Summary") that
present a list of projects by year along with a financing source recap and the
City's specific share of the project cost and the estimated tax impact of
each year's projects. This capsule summary should be helpful for the
Council to refer back and forth between years as a quick reference guide.
BACKGROUND:
The City Council conducted a workshop to discuss the draft CIP on 5/5/97.
Council and Staff reviewed the revolving equipment fund concept, the
proposed funding levels and the improvement project list for each year. At
the conclusion of the workshop the Council directed Staff to bring back the
1998-2002 Capital Improvement Program for adoption and to prepare the
necessary resolution for establishing the Revolving Equipment Fund.
DISCUSSION:
It is important for the Council to recognize that the document is a flexible
planning tool that is affected by the actions of a number of governmental
agencies (State, County and Shakopee Mdewakanton Dakota Community).
The Council should critically review those projects proposed for 1998.
Those improvements selected for bonding will affect the property taxes
payable in 1999. Council should remember that the school district and
county will also influence the level of taxes through their annual levies and
periodic referendums and bond issues.
16200 Eagle Creek Ave. S.L Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY' E,,\PLOYER
Those programs which are not deemed to be of high priority should be
eliminated now so they do not generate public expectation and also to avoid
unnecessary City effort and expense.
New this year is the equipment matrix which includes the projected
turnover of existing equipment and planned new equipment additions
exceeding $5,000 over the next 12 years. These equipment expenditures are
proposed to be purchased from a Revolving Equipment Fund. Outlined
below are the recommended funding sources necessary to convert the
existing equipment fund to a true revolving equipment fund:
Proposed Financing Sources:
1. Equipment Fund Balance
2. General Fund '96 Surplus Allocation
3. General Fund Balance Appropriation
4. S& W Fund Balance Appropriation
5. Property Tax Levy
$302,699.00
$250,000.00
$200,000.00
$250,000.00
Annual Equip. Levy
A number of advantages would be provided by a revolving equipment fund
which in turn would result in property tax savings as well. These are
indicated as follows:
Advantages:
· Establishment ofregular replacement schedule
· Equipment maintenance service costs are reduced
· Increased operational efficiencies as a result of newer technological
improvements
· Equipment reliability is increased which decreases downtime
· Operational safety is increased
· Elimination of interest dollars spent on equipment certificate
financing
· Trade-in values are realized which reduces net purchase costs
· Positive community image
Tax Payer Savings:
· Interest dollars savings in excess of$120,000.00
· Annual budget decrease will reduce yearly tax levy by approximately
$20,000.00 as such equipment expenditures will be funded by the
Revolving Equipment Fund
· Reduced maintenance expenditures will be realized which will reduce
repair and maintenance expenditure categories within the operating
budget thus reducing the impact upon property taxes.
· Liability exposure is reduced by operational equipment that is in good
shape. Less likelihood of an incident occurring that could result in a
property tax levy to pay for court ordered punitive damages.
CIPAGEN.DOC 2
Following Council approval of the Capital Improvement Program,
Engineering will prepare a feasibility report. Adequate lead time is
extremely important for surveying, right of way acquisition and engineering
to obtain the best possible bids, which is generally early in the year.
Subsequent years in the CIP are more important from a planning
perspective. Our objective in preparing the CIP has been to balance the tax
impacts from year to year while addressing infrastructure needs.
ISSUES:
In reviewing the draft 1998-2002 Capital Improvement Program, the
Council should discuss the annual tax impact of the scheduled projects.
While levy limits are anticipated to be enacted again beginning for payable
1998, debt levies associated with our capital improvement program are
exempt.. While it will be difficult enough to continue maintaining a zero
budget tax increase, it may not be possible to accomplish the capital
improvement projects without a minimal sort of tax increase.
The major projects proposed for 1998 which involve a project tax levy are
listed below along with their respective tax impact:
Project Description
Project Levy
Duluth Ave Reconstruction
Pleasant/Colorado Reconstruct.
$167,000
$609.000
City Tax Impact
$ %
$3.65 0.61%
$13.32 2.24%
TOTALS
$776,000
$16.97 2.85%
Listed below is a year by year tax recap if all the projects that include a tax
levy were implemented. The Scott County Assessor has estimated the
average mean Prior Lake market value home to be approximately $120,000.
This typical value has been utilized for purposes of calculating the
following tax impact.
(A 1997 base tax of $595.73 [City portion) was utilized to compute the
beginning percentage increases. Budgetary increases are excluded for
purposes of comparing the effect of capital dollars only within the context
of the CIP. Also this model assumes an annual 2% tax capacity valuation
growth.)
Project Year and Levy Amount
1998
1999
2000
2001
2002
$776,000
$805,000
$605,000
$776,000
$708,000
Tax Impact
$ %
$16.97 2.85%
$17.30 2.82%
$12.77 2.03%
$15.96 2.49%
$14.28 2.17%
CIPAGEN.DOC
3
The annual tax impact is very balanced over the course of the CIP, with the
largest variance occurring in year 2000. As to the Equipment Matrix, only a
very small incremental tax increase of $10,000 annually would occur.
ALTERNATIVES:
The appropriate department heads will present project summations of those
improvements which would come under their departmental responsibility.
The Council should carefully examine the proposed projects for each year,
focusing particularly upon those scheduled for 1998.
The following alternatives are available for Council consideration:
1. Provide direction to the staff to modify the proposed program to
mitigate annual tax increases while insuring appropriate maintenance of
public infrastructure.
2. Amend the 1998-2002 Capital Improvement Program by motion and
amounts within Resolution 97-x"XX Authorizing Fund Transfers to
Revolving Equipment Fund as per Council determination.
3. Approve the proposed 1998-2002 Capital Improvement Program by
motion as submitted and approve Resolution 97-XXX Authorizing
Fund Transfers to Revolving Equipment Fund.
RECOMMENDATION: Staff would recommend Alternative #3. While it is important that the
Capital Improvement Program be adopted expeditiously, it is equally
important that the Council be comfortable and supportive of the proposed
projects and their tax consequences. Once the CIP is approved the
Engineering department will begin the feasibility study as soon as possible
for those projects scheduled for 1998.
ACTION REQUIRED: Motion to approve the 1998-2002 Capital Improvement Program as
submitted and approve Resolution 97-XXX Authorizing Fund Transfers to
Revolving Equipment Fund.
CIPAGEN.DOC 4
MOTION BY:
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
RESOLUTION 97-XXX
RESOLUTION AUTHORIZING FUND TRANSFERS
TO ESTABLISH REVOLVING EQUIPMENT FUND
SECOND BY:
The City Council has determined that the City establish a regular replacement
schedule for its equipment needs: and
Equipment reliability is increased and maintenance costs are reduced as a result of
not extending the useful life of equipment beyond recognized industry standards;
and
The City would realize significantly greater trade-in values which would reduce the
net purchase cost of its equipment if such equipment is replaced based upon life
cycle expectancy; and
Individual operational safety is a primary concern which would be increased by the
utilization of quality equipment; and
The establishment of a revolving equipment fund would provide the financing
method to fund city department equipment needs of $5,000 or more; and
A Revolving Equipment Fund would result in property tax savings by reducing
capital expenditures within the City's operating budget and by the elimination of
interest dollars spent on debt financing; and
It is important that the City of Prior Lake present a positive community image by
maintaining its equipment fleet in good condition and promoting pride of ownership.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that a
permanent Revolving Equipment Fund be created for the purpose of funding replacement and new
equipment purchases of $5,000 or more and that the following allocations and appropriation transfers
from the General Fund, Sewer & Water Fund and Equipment Fund balances are hereby authorized as
follows:
Financing Source:
Fund Transfer:
Amount
1. Equipment Fund Balance
2. General Fund '96 Surplus Allocation
3. General Fund Balance
4. S& W Fund Balance
Revolving Equipment Fund
Revolving Equipment Fund
Revolving Equipment Fund
Revolving Equipment Fund
$304,727.96
$250,000.00
$200,000.00
$250,000.00
162cfCfITgl~CXCreek Ave. S.E., Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
Passed and adopted this 19th day of May, 1997.
Andren
Greenfield
Kedrowski
Mader
Schenck
{Seal}
RES97XXXOOC
YE~
\
I
,
NO
- Andren
Greenfield
Kedrowski
Mader
Schenck
City Manager
City of Prior Lake