03/29/2007 - City Council Finance Committee
DRAFT?3/21/07
AGENDA
FINANCE COMMITTEE MEETING
THURSDAY
MARCH 29, 2007
CONFERENCE ROOM 2A&B
7:30 A.M.
I.AGENDA ADOPTION
a.Review meeting notes from 3/08/07 meeting
(Dianne)
II.REVIEW TH149 BIDS AND BID ALTERNATE FOR FIBER
CONDUIT
(Gene/Tom C./TG)
III.UPDATE ON NICOLS RIDGE CONCEPT REVISION
PROPOSAL
(Jon)
IV.OTHER BUSINESS
?
Update on Thomson Expansion Proposal
(Jon)
V.ADJOURNMENT
AGENDA
FINANCE COMMITTEE MEETING
THURSDAY
MARCH 29, 2007
7:30 A.M.
CONFERENCE ROOMS 2A & 2B
I. AGENDA ADOPTION
a. Review meeting notes from 3/08/07 meeting
II. REVIEW TH149 BIDS AND BID ALTERNATE FOR FIBER
CONDUIT
III. UPDATE ON NICOLS RIDGE CONCEPT REVISION
PROPOSAL
IV. OTHER BUSINESS
V. ADJOURNMENT
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
I. AGENDA ADOPTION
a. Review meeting notes from 3/08/07 Finance Committee meeting
ACTION TO BE DISCUSSED:
No action is needed. The enclosed meeting notes are for the review of the committee.
FACTS:
Per the request of the City Council, meetings notes are being taken at each City
Council standing committee meeting in order that the City Council can review staff's
understanding of the discussions and recommendations made at each of the
committee meetings.
The Committee meeting notes will be forwarded the City Council after the committee
has had the chance to review the notes.
ATTACHMENTS:
• Enclosed on pages0~ through ~ are the meeting notes from the March 8, 2007
Finance Committee meeting.
Meeting Notes
Finance Committee Meeting
March 8, 2007
Attendance: Mayor Maguire, Councilmember Carlson, City Administrator
Hedges, Director of Public Works Colbert, City Engineer Matthys, Transportation
Engineer Plath, Director of Parks and Recreation Seydell Johnson, Director of
Community Development Hohenstein, and Director of Administrative Services
VanOverbeke.
Agenda/Meeting Notes
City Administrator Hedges opened the meeting at 7:30 a.m. requesting feedback
on the Finance Committee meeting notes for the February 20, 2007 meeting.
Members responded that the notes were good and helpful and appropriate to
forward to the full City Council. Administrator Hedges also outlined the need to
keep the full Council informed of all of the actions resulting from the various
committee meetings.
He asked that presentation of the background material on the Thomson
expansion proposal be added to the Committee agenda based on the City
Council direction at the regular meeting on March 6. The agenda was revised to
consider the Thomson item first.
Other Business
Thomson Expansion Proposal
Director of Community Development Hohenstein provided background
information on the meetings and discussions that have taken place since
Thomson representatives first approached City staff in August of 2006. Director
Hohenstein noted the challenge of respecting Thomson's request for
confidentiality with the need to inform the City Council of the discussions, and to
make sure all public policy determinations and formal agreements are discussed
in a public forum. He also outlined the State Department of Economic
Development's role as the first contact with the proposal and Thomson's desire
to deal directly with the County and School District in regard to any approvals
required from those entities.
The Finance Committee directed staff to stay the present course with the City's
primary role being to assist Thomson in their efforts at the State Capitol to
achieve the necessary special legislation and then in the consideration of the
creation of a TIF District at the appropriate time. The Committee noted a desire
to fully understand the complete incentive package being requested by Thomson
and observed the potential requirement for the same information at the State
Legislature.
Director Hohenstein also presented a memo presenting an overview of the
process to date and outlining potential components of the assistance package as
they are currently known to City staff.
Update on Civic Arena Proposal
City Administrator Hedges and Director of Parks and Recreation Seydell Johnson
provided background on discussions with the representative of the Wild Hockey
Team. These discussions have been on and off since the spring of 2006;
however, there seems to be more interest from the Wild in moving the discussion
to a definitive conclusion at this time.
The Finance Committee reviewed the list of City interests contained in the packet
memo and provided the following responses:
• The financial interests are okay as presented. The City should not incur
any additional bonding or operational costs as a result of any construction
or use resulting from the potential partnership with the Wild.
• It is difficult to balance the community benefits as envisioned by the Wild
against potential displacement/interruption to current City programming.
Certain potential challenges/conflicts e.g. relocation of dry floor activities,
could be worked around especially with the inclusion of a studio rink in the
overall project. However, last minute requests for ice time cannot be
allowed to displace games and/or other previous commitments to other
stakeholders or users such as the Eagan Hockey Association, the School
District, and community open skate sessions. Last minute ice time
requests for Saturdays and Sundays would be problematic and probably
would not be entertained. The Finance Committee would like to see more
information on typical schedule requests from the Wild, primarily those
that might impact the City's scheduling of prime time ice at the facility.
• The City needs more detailed information regarding the expectations of
the Wild for both advertising and naming rights before City parameters
can be developed. In general the Finance Committee is open to having
the discussion, but is not committing to anything without more information.
• The Finance Committee would like to participate in subsequent meetings
with Wild officials at the decision making level to move the discussions to
a conclusion.
• It is important that the Eagan Hockey Association receives an answer to
their interests regarding facility expansion and use.
Major Street Infrastructure Funding Options
Director of Public Works Colbert opened the discussion by reporting that as a
result of the meetings that have been held, staff has concluded that the chance
of getting any additional money from either the State or Federal government is
nil, after the bid is awarded for the Highway 149 project. State elected officials
and Minnesota Department of Transportation staff are sympathetic to the City's
problem, but no additional dollars are likely to be secured, if the City is willing to
proceed with the project at this time.
One potential option is for the City to reject the bids on the project thereby
sending the message that the City is not prepared to make an increased financial
commitment to a State highway project. The result of rejecting the bids would
likely be to delay the project for at least one year. A one year delay would likely
cause an inflationary cost increase; however, that may be somewhat offset by
better bids resulting from bidding in the fall rather than in the spring.
It was noted that the State commitment to this project is held through September
of 2010 and the Federal money is not available until October of 2007 so a delay
would not immediately impact the availability of those dollars. City Engineer
Matthys also noted that the temporary construction easements are in place for
three years so a one year delay should not cause a problem with easements.
In the event the project is delayed it will be important to have calls directed to
State elected officials and MNDoT as the responsible governmental entities and
that the media is properly informed of responsibility. A preliminary list of potential
costs resulting from a delay include: efficiency of travel, safety, increased project
costs, deteriorating road conditions, and impact on Thomson expansion.
It was noted that continuing efforts need to be made to consolidate City efforts
with those of Thomson in requesting funding assistance so we are not in
competition with each other for the same potential dollars.
Councilmember Carlson requested more detailed information listing which future
State Highway projects are actually included in the 5-Year CIP. She also asked
how we can develop a mechanism to determine the advisability of moving ahead
or delaying other County and State projects that might place too great a financial
burden on City resources thereby limiting the City's ability to take care of its own
street obligations. Director of Administrative Services VanOverbeke responded
that the response to this question is ultimately the CIP process itself; however,
that review may require a longer time frame. City Engineer Matthys added that
the TINA study is designed to help with the long-term obligations and should
assist in addressing this question.
Councilmember Carlson suggested that it might be appropriate for the City to set
aside and dedicate some Major Street Fund reserves in another fund to be
specifically set aside and ear marked for defined future projects e.g. bridges.
The intent would be to more clearly match on-going revenue streams and
reserves against both short-term and long-term project costs.
A Finance Committee Meeting was scheduled for 7:30 a.m. on Thursday March
29 with the agenda to include at least the following:
1. Additional review of the financial commitment related to the Highway 149
project. The bids will be opened on March 22 and the City Council is
scheduled to take action on the bid award at its meeting on April 5.
2. A response to the bid alternate for fiber conduit related to this same bid
opening.
v
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
II. REVIEW TH149 BIDS AND BID ALTERNATE FOR FIBER CONDUIT
ACTION TO BE DISCUSSED:
1.) Review TH 149 bids and provide direction regarding financing options for TH 149 to the
City Council as a whole.
2.) Review the bid alternate for the fiber conduit and recommend a financing mechanism for
payment of the fiber conduit for consideration by the City Council as a whole.
FACTS:
• The Finance Committee was directed by the City Council to review bids for the proposed
TH149 project including an alternate bid for fiber conduit; the Finance Committee met on
March 8 and discussed both the major street infrastructure funding options and a specific
breakdown on the proposed estimates for Highway 149 and, more specifically, the
anticipated costs to the City of Eagan.
• Bids were received on Thursday, March 22; a breakdown is enclosed as an attachment for
Council review.
• Director of Administrative Services VanOverbeke and Director of Communications
Garrison have reviewed the fiber conduit financing and provided an update on the work
of the Technology Task Force to-date and offer some background for public policy
consideration relative to funding the Highway 149 conduit. This discussion is outlined in
memos that are attached from Director of Administrative Services VanOverbeke and
Director of Communications Garrison.
ATTACHMENTS:
• Enclosed on pages ~ through ~ is information pertaining to Trunk Highway
149 and alternate bid for conduit bi summary and further discussion on the State
management of the project.
• Enclosed on pages ~_ through ~ is another copy of the March 2, 2007 Major
Street Infrastructure Funding Options prepared by Director of Administrative Services
VanOverbeke.
• Enclosed on pages ~' 3 through ~ is a copy of a memo explaining the work of the
Technology Task Force prepared by Director of Communications Garrison.
• Enclosed on pages ~~ through ~( is a copy of a memo from Director of
Administrative Services VanOverbeke relating to fiber conduit financing.
Ciiy of Ea~au Me~o
To: THOMAS L HEDGES, CITY ADMINISTRATOR
From: THOMAS A COLBERT, PUBLIC WORKS DIRECTOR
Date: MARCH 23, 2007
Subject: FINANCE COMMITTEE MEETING -MARCH 27, 2007
On February 20, 2007, at the direction of the City Council, the Finance Committee discussed the
local financing obligations of City Project 778 (TH 149 upgrade). The discussion focused on the
anticipated significant escalation in local cost participation due to state and federal contribution
caps and the related impact on the City's Major Street Fund (MSF). The total local obligation of
$16.6 million was based upon apre-bid construction cost estimate of $11.2 million (base bid).
The TH 149 cost estimates presented to the committee on February 20 indicated a resulting MSF
deficit of about $2.5 million at the end of the currently approved 5-year CIP (2011). The
Finance Committee discussed avoiding such a deficit by the reduction/elimination of projects in
the current CIP's remaining four years ('08-'11) or by finding additional funding for the MSF.
The significance of the potential impacts to the currently approved 5-year CIP (as well as other
major pending financial obligations) and the challenges of alternative funding options required
further analysis based on firm bids for the Committee's consideration of any final
recommendations to the City Council.
TH 149 BIDS
On March 22, the bids for Project 778 were opened. 16 bids were received from a variety of
heavy construction contractors. All but one of the bids were well below the Engineer's Estimate
($11.2M). Both the number of bidders and the competitive bids submitted indicate a very strong
interest in securing this contract early in this construction season, possibly due to limited
availability of heavy construction work. The current competitive bidding climate likely offset
the effects of the recent industry cost escalations.
The apparent low bid is $9,474,728.98. This bid is $1.73 million below the Engineer's Estimate
used in previous financial analyses. The following reflects a revised cost participation summary
based on bids received.
Finance Committee Memo
February 15, 2007
Page 2
Source
Federal Funds
MnDOT Funds
Inver Grove Hts
Eagan or ?
TOTAL
Feas. Rpt Est. CIP Budget
$5,500,000
$2,140,000
$ 220,500
3 310 860 $5,230,000
$11,171,360
Final Design Est•
$6,094,000 +11%
$2,256,000 + 5%
$ 803,197 +264%
$7,411,168 +124%
$16,564,365 + 48%
Bid
$ 6,094,000
$ 2,256,000
$ 729,095 (+/-)
$ 5,760,000 (+74%)
$14,839,095(+33%)
IMPACT ON MSF BALANCE
While the previously discussed pre-bid estimate was projected to increase the MSF deficit to
about $2,500,000 by 2012, the actual bid would reduce that deficit to about $750,000. As
previously noted, this projected deficit may substantially increase further as other future
programmed projects are re-estimated with the next CIP update due to continued industry cost
escalations. Public Works staff is currently working on the 2008-2012 CIP and will have a
variety of project reductions and alternative funding options, and their related implications, for
the Council's consideration at a May workshop. Unfortunately, this information will not be
available prior to the Apri15 TH 149 bid award consideration.
FIBER OPTIC CONDUIT ALTERNATE BID
In response to the Council's stated goals, the placement of six conduits for future fiber optics
installation was included as an alternate bid as part of the TH 149 bid package. The apparent
successful low bidder had a bid of $151,023 for the installation of these conduits along TH 149
from TH 55 to Wescott Road, including the crossing of the CP Rail railroad tracks at Yankee
Doodle Road and Wescott Road. The source of funding for the placement of these conduits is
unknown to date. The Council's consideration of contract award for the TH 149 upgrade will
also need to consider this alternate bid and the funding source for the conduit placement.
While the results of the TH 149 bid opening were positive, the remaining financial burden for the
City of Eagan is still overwhelming in relation to our long term local transportation needs.
I am always available to help identify feasible options and/or modifications to our future
construction program or alternative funding scenarios to provide a balanced and deliverable
transportation infrastructure for our community and intend to present such information at the
May workshop.
c: Gene VanOverbeke, Director of Administrative Services
Russ Matthys, City Engineer
Tom Pepper, Chief Financial Officer
City of Ea~a~ bemo
To: City Administrator Hedges
From: Director of Administrative Services VanOverbeke
Date: March 2, 2007
Subject: Major Street Infrastructure Funding Options
It is my understanding that staff was directed to undertake two activities resulting
from the Finance Committee meeting of February 20, 2007.
First, a menu of options is to be presented to pay for the significant cost increase
($2.5 more than budgeted in the 2007 CIP) to the City's obligation for Highway
149. I believe we might have created the misunderstanding that dollars are not
available in the Major Street Fund to actually make the payment. The dollars are
available and can be used for this obligation. The deficit that is created is in the
5-year CIP currently programmed through 2011. For all practical purposes there
is no short-term problem in proceeding with the project and in making the
payment from the Major Street Fund. The problem is long-term in getting
projected revenues and expenditures into balance within future CIP's. That will
probably require a combination of new revenues and reduced expenditures.
The following table illustrates the five year CIP including the additional $2.5
million in Highway 149 costs added in 2007.
Major Street Fund 2007 -- 2011 CIP Presentation
2007 2008 2009 2010 2011 Totals
Beginning Cash Balance $11,461 $ 1,921 $(1,677) $(2,670) $(2,846) $11,461
Additons:
Property Taxes 1,188 1,188 1,188 1,188 1,188 5,940
Municipal State Aid 755 755 755 1,555 1,555 5,375
Total Receipts 1,943 1,943 1,943 ~ 2,743 2,743 11,315.
Subtractions:
Financing Obligations 11,483 5,541 2,936 2,919 2,736 25,615
Total Expenditures 11,483 5,541 2,936 2,919 2,736 25,615
Ending Cash Balance $ 1,921 $(1,677) $(2,670) $(2 $(2 $ (2,839)
Using the increased 2007 costs, adjusting the 2007 tax levy to the actual amount,
and including a 5% increase in the tax levy for the years 2008 through 2011
results in the following CIP Presentation:
';2007 - 2011 CIP With 5%Tax Increase and $2.5 Million Additional 2007 Costs
2007 2008 2009 ~ 2010 ! 2011 Totals
~~ ^--~ ~* r ~~
Beginning Cash Balance..: $11,461 $ 1,981 ;$(1,457) $(2,262) '$(2,181) $11,461
Additons: ,
Property Taxes 1,248 1,310 1,376 ' 1,445 1,517 ~ : 6,896 ':
Municipal State Aid 755 793 755 1,555 1,555 5,413
Total Receipts 2,003 2,103 2,131 3,000 ' 3' ,072 12,309 '
Subtractions: '
Financing Obligations 11,483 5,541 2,936 2,919 2,736 ~ 25,615
Total Expenditures 11,483 5,541 2r ,936 , 2,919 2,736 25,615
Ending Cash Balance $ 1,981 $ 1,457 $ 2,262 $ 2,181 ' $ 1,845) $ (1,845)'
Along-term increase in the ad valorem tax levy beginning in payable 2008 of
$1.0 million (also increased 5% per year) with no other changes in the projected
expenditures (except the additional $2.5 million in 2007) results in the following
5-year CIP projection.
:2007 - 2011 CIP With 5%Tax Increase and $2.5 Million Additional 2007 Costs
With Tax Increase Beginning in Payable 2008
2007 ' 2008 2009 2010 2011 Totals
!Beginning Cash Balance $11,461 $1,981. $(457) $(212)' ' $ 971 $11,461
Additons:
Property Taxes 1,248 ', 1,310 1,376 1,445 ; 1,517 6,896
T.~~ Inc~re~sa~' 1,QO~Q 1,p5Q 1,1Q~ 1,18 4,31,U ,
Municipal State Aid 755 793 '! 755 1,555 1,555 5,413
Total Receipts 2,003 3,103 3,181 ' 4,102 ! 4,230 16,619
Subtractions:
Financing Obligations 11,483 5,541 2,936: 2,919 2,736 25,615
Total Expenditures ; 1 41 83 5,541 2,936 2,919 ! 2 37 6 25,615
Ending Cash Balance $ 1,981
.~ $ (457 $(212 ; $ 971
~. $2,465 '
.~ $ 2,465
5
The following table which is a summary of the currently approved 5-year CIP
illustrates the impact of State and County projects on City resources. See
particularly the "Summary by Primary Jurisdiction" section of the table.
2007 -- 2011 CIP By Street Type
Total Project Costs
2007 2008 2009 2010 2011
~~ ~~ ~~
Arterial 8 Collector
..State __ '' 4,928,400 1,450,500 _ ?
County 470,000 1,900,000 1,200,000
City _ 750,000 805,000 ;. ',
Total 5,398,400 3,350,500 750, 0 805,000 ' 1,2
Local Streets
City 1,505,500 2,636,700 2,691,000 2,321,000
Trails
'City 331,155 156,870 138,500 41,500
Sealcoating
City 366,589 ' 314,808 203,873 174,736
Intersection Improvements
__ _ _
'State 150,000 ' ' 650,000
f County 1,125,000 125,000 500,000
city_ _ soo,ooo
Total 1,925,000 :' 275,000 650,000 500,000
Summary By Primary Jurisdiction
State 4,928,400 1,600,500 650,000 -
County 1,595,000 2,025,000 - 500,000
City 3,003,244 3,108,378 3,783,373 3,342,236
Total 9,526,644 6,733,878 4,433,373 ' 3,842,236
Tota Is
6,378,900
--
3,570,000
1,555,000
11,503,900
1,945,000
{ 11,099,200
234,000 ; 902,025
180,632 ' 1,240,638
800,000
1,750,000
800,000
3,350,000
- 7,178,900
1,200,000 '!; 5,320,000
2,359,632 15,596,863
3,559,632 28~ 095 763
Major Street Fund Share
Arterial & Collector 5,363,400 3,098,500 490,000 ~ 665,000 1,000,000 ! 10,616,900
Local Streets 1,007,000 1,695,460 1,454,000 1,538,000 1,321,000 '
_. 7,015,460
Trails 321,155 ', 156,870 138,500 ,
_ 41,500 234,000 892,025
__
Sealcoating
366,589
314,808 _
203,873 _
174,736 _
180,632 ': ._
1,240,638
Intersection Improvements' 1,925,000 275,000 650,000 500,000 - 3,350,000
Total Major Street Fund 8,983,144 : 5,540,638 2,936,373 2,919,236 2,735,632 ?' 23,115,023
The table demonstrates $7,178,900 of City Cost related to State Highways
before the additional $2,500,000 is included bringing the new total to $9,678,900.
Any long-term solution will probably require a review of the City's commitment to
cost sharing on State and/or County projects; with review of the impact related to
timing at a minimum.
If delaying and/or reducing City obligations to State and/or County projects are
options, the tax increase programmed above is probably the only required City
action at this time. In the event the City desires to proceed with State and/or
County projects on the schedule of the existing CIP and TINA study other
revenue sources will be required. The twenty year shortfall noted in the TINA
report is $35 to $50 million or $1.75 to $2.5 million per year. After the $1 million
increase noted above the shortfall remains at $.75 to $1.5 million per year in that
~n
time frame. Doubling the tax increase to $2 million per year would for all
practical purposes eliminate the projected deficits. However, additional cost
increases to projects included in this and future CIP's would also increase the
problem of balancing the CIP's on an on-going basis.
The following chart demonstrates the impact of adding a $1 million additional levy
to property taxes on the 2007 payable average market value house in Eagan.
Tax Impact Per $1,000,000 Levy Increase
MSFund
MSFund Tax
Payable
. Capacity,
,
Levy Rate
;2007 Actual ~ 1,247,812 ~ 0.01533
',$1,000,000 Increase 1,000,000 0.01229
Total 2, 247,812. 0.02762
Total
City
Tax Estimated Taxes
Capacity ';$278,021 House Value
'
Rate ` Increase
Amount
0~ 25239 ~ 42 2
0.26468 34.17
76.79 34.17'
Attached to this memo is a matrix outlining potential methods of increasing
revenues for the Major Street Fund including both short-term cash infusions and
long-term changes in the revenue stream. The matrix is broken down to
differentiate between potential revenues that are primarily controlled by the City
and those that would require or result from some State action. The estimated
fund balances noted on the matrix are very preliminary and additional work is
necessary to both confirm the dollar amounts and to review other commitments
already in place or contemplated in the future. For example, some of the
General Fund balance is in place for working capital, but not officially designated
as such within the statements. Payment for the newly approved replacement
ladder apparatus for the Fire Department will also require dollars from one or
more of these sources.
The matrix does not include bonding options or any other methods to advance
funding, since they only change the timing and there is no increase in overall
resources available in total.
Further, the matrix does not account for other potential City projects/initiatives
noted in the recently approved City goals that may compete for funding from the
same revenue sources, both long-term and short-term. Since little definitive work
has been completed on these potential projects/initiatives, I am not including any
estimated cost numbers. The preliminary list is as follows:
1. Open space acquisition
2. Fire stations
3. Fiber project
4. Cedar Grove Redevelopment
5. Retiree health insurance
6. Other public utilities infrastructure
The second activity regarding the development of a policy that addresses long-
term needs and provides the same long-term financial stability that the City has
experienced historically will continue and become formalized upon direction
resulting from this meeting.
Please let me know, if you would like any additional information or if you would
like to discuss any of this material.
Director dministrative Services VanOverbeke
cc: Director of Public Works Colbert
Chief Financial Officer Pepper
City Engineer Matthys
Transportation Engineer Plath
~a
City of Ea~a~ Mcmo
To: CITY ADMINISTRATOR HEDGES
From: COMMUNICATIONS DIRECTOR GARRISON
Date: March 23, 2005
Subject: UPDATE ON PROGRESS OF TECH WORKING GROUP &
PERSPECTIVES REGARDING NECESSITY OF 149 CONDUIT
You asked that I provide a brief update of the preliminary findings of the Tech Working
Group with respect to priority areas for extending conduit, a fiber master plan, and
specifically the importance of the bid alternate for conduit along the Highway 149
construction route.
Progress To Date
• The Tech Working Group has learned from electrical engineering experts that to
build a successful fiber ring from which to deploy services, it is NOT necessary to
go down every street or to take advantage of every open trench possibility.
• Rather, it is important to identify and have a strategy for taking advantage of
certain key routes and zones that might now or in the future be interconnected.
• Based on expert testimony, it is the belief of the Tech Working Group that
Highway 149 is a key route representing the major line along the eastern edge of
Eagan and the only time this area is likely to be open trench in the next 40-50
years. For that reason conduit should be installed there with an eye to the future.
• The good news is, there appears to be no more immediate high profile or high
priority location construction projects in at least the next year that would represent
a missed opportunity if not pursued. As stated later in this memo, that will allow
the City Council, advised by staff and the Working Group, time to make a better
decision on its preferred options.
• Those options will arise as full results are known from industry discussions that
were also directed by the Communications Committee. Per direction, we have
been contacting and meeting with current and potential providers to see what they
might be able to do in concert with the City to achieve our broadband goals.
• To date, high level discussions have been held with Qwest and Comcast officials
and we are awaiting answers from both about their willingness to extend fiber to
homes and businesses, and whether or not City participation might help extend
fiber the last distance necessary to hook-up a home or business off of the main
line. A similar meeting will be scheduled with Frontier Communications because
it already has a great deal of fiber running through Eagan. An earlier intended
meeting with them had to be rescheduled past March because of schedules
l3
requiring key Frontier personnel to be out of state. We have also re-contacted
Dakota Electric to gauge their willingness to partner
• Additionally the Working Group is investigating a European technology to use
sewers as a cheaper way to deploy fiber, and so-called "dark fiber" possibilities
available in Eagan. Dark fiber is installed fiber that has never been lit up, but is
available for lease. It is possible, with long-term leases, that this option maybe a
cheaper alternative than installing fiber in certain locations. Costs in these areas,
until one is willing to do a deal, are closely guarded. Even local IT experts calling
for us have not been able to secure the information.
• Because of the city and the Tech Working Group's interest in making sure its
major greenfield-like opportunity in the Cedar Grove Redevelopment District has
the capability for high speed fiber, the RFP for Cedar Grove was modeled on the
specification for conduit along Highway 149. Submitters can choose to only
install conduit or work directly with a provider for fiber optic service. Initial
responses are due back April 30.
• Lastly, we have updated the original fiber estimates from Dynamic City fora city-
wide build and a "Plan B" alternative.
Next Steps
I think you can see that while several discussions and requests for information are in
progress, we await the final answers that will allow the Tech Working Group to come
back to City Council and say, "Here are the various options, the expected price tags, and
the pros and cons." The Council will then be in a position to opt for a desired alternative,
that can be fully engineered and priced as part of a master plan.
Until we know who is a willing potential partner, what they might be willing to do for us
and with us, and what they would expect us to pay for, the Council is not yet in a position
to choose from those alternatives. We would expect to have those initial "back of the
envelope" answers and prices no later than mid-June, and sooner if possible. We have
found that getting answers, particularly from the incumbent providers during the current
legislative session which is expected to last through May, has been difficult at best.
When we do get those answers, I'm confident that we can proceed quite quickly for
Council feedback and questions, and settle on a preferred alternative to fully master plan.
It should be noted than it maybe necessary to secure an outside firm with the proper
electrical engineering expertise to produce the master plan called for by the Council when
it adopted its 2007-08 goals in February regarding the installation of high speed fiber
optic broadband.
Please let me know if you or the Committee would like any further information.
/~}-
City of Ea~au Mcao
To: City Administrator Hedges
From: Director of Administrative Services VanOverbeke
Date: March 23, 2007
Subject: Fiber Conduit Financing
You asked that I provide this memo outlining the background on previous City fiber
related construction in Eagan and possible funding alternatives, if the fiber conduit
alternative is approved with the Highway 149 project bid award.
Background
City Use
In cooperation with ISD 196, a number of other cities, Dakota County, and the State,
Eagan participated in the construction costs related to the ISD 196 fiber upgrade project.
This project included fiber installation to Fire Stations 3 and 4, City Hall, and will provide
for the City's primary connection to the State through the Western Service Center in
Apple Valley. In the primary loop the City uses fiber strands within the ISD 196 conduit.
The City has sole ownership of the conduit and fiber specific to its own facilities. The
City has paid $169,062.90 from its Cable TV Retained Franchise Fees Fund for this
installation.
Entrepreneurial
In addition, to take advantage of lower construction costs the City Council chose to have
empty conduit installed through the same 11.5 mile loop during the same construction
activity. That conduit is under the sole ownership of the City and was installed at a City
cost of $242,227. Construction costs were paid through a non capitalized enterprise
fund which has a 12-31-06 cash deficit of $248,187. The dollars have been borrowed
internally and are expected to be recovered in the future through the use/sale/lease of
the conduit which at this time remains undefined pending additional study. This study
continues as part of the City Council 2007-2008 goal of "Pursuing world class Internet
speeds, connectivity, and access to all Eagan residents and businesses by developing a
master plan, including finance options and policies, for the installation of high speed fiber
optic broadband."
Funding Alternatives-Highway 149 Conduit
The installation and funding issues related to this Highway 149 conduit option are
consistent with the earlier dilemma faced by the City at the time of the ISD 196 project.
The first question being whether or not the risk related to a City investment of $151,000
to maintain future conduit use options in the Highway 149 corridor is reasonable.
1S
In general, the City is trying to balance a fixed cost today against an uncertain future
benefit.
Installing the conduit at this time effectively starts the risk clock today. The pro to that
choice is a lower cost while the con is a sunk cost that generates an asset with a wide
range of potential future value ranging from enormous to little or at the extreme none.
Not installing the conduit at this time effectively delays the risk until a future time. The
pro to that approach is today's cost avoidance and a more precisely defined
need/project at some future time. There is also the possibility that the future could
potentially show no need at all, thereby avoiding all of the construction costs. The con is
the potentially much higher construction cost in the future, although higher costs could
potentially be more than off-set by reductions with a more defined project.
Unfortunately, I am not aware of a straight forward method to quantify the risk/reward of
the choices that would assist in determining the best course of action. The goal related
to internet access, speed, etc. results in the City moving into uncharted territory. The
Technology Working Group is continuing to help define the options for the course and as
their work continues an overall financing plan can be incorporated. Staff is not aware of
any other pending City construction projects where this same install conduit /don't install
conduit question will be raised before the more comprehensive policy matters can be
decided.
If the City Council answers this first question in the affirmative and chooses to proceed
with construction at this time, the payment should probably be handled in the same
manner as the 11.5 mile City owned (entrepreneurial) conduit in the ISD 196 loop. The
payment would be made from the enterprise fund with dollars advanced from the City's
investment pool and interest charged. The challenge with this approach is that obviously
the enterprise fund will incur carrying costs and will eventually need to be capitalized. If
the enterprise fund does not become self sustaining, a backup plan of charging the
Cable TV Franchise Fees Fund could cause a significant drain on its resources and any
tax supported capitalization may not look attractive.
Please let me know, if you would like to discuss this information or if you would like any
additional information.
Direct f Administrative Services
cc: Director of Communications Garrison
Chief Financial Officer Pepper
~~
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
III. UPDATE ON NICOLS RIDGE CONCEPT REVISION PROPOSAL
ACTION TO BE DISCUSSED:
l.) Provide preliminary direction relative to negotiations with Lennar regarding the Nicols
Ridge TIF development agreement for presentation to the City Council as a whole.
FACTS:
• Lennar approached the City in late 2006 requesting a concept review for a modified
redevelopment scenario for the Nicols Ridge that would replace the remaining
condominiums with additional townhouses, resulting in a net decrease in total units from
230 to 175.
• The developer is requesting that the City consider waiving TIF liquidated damages in the
development agreement for the default circumstance and consider selling the City
acquired properties to the developer at a reduced price to permit them to cover costs and
achieve a return.
• This request was heard by the Council at its February Work Shop and the matter was
referred to the Finance Committee.
ATTACHMENTS:
Enclosed on pages ~~ through is a copy of a memo that provides background
information on the proposed concept revision along with copies of the actual layout
revisions.
i~
FINANCE COMMITTEE
March 29, 2007
III. NICOLS RIDGE CONCEPT REVISION
ISSUE:
Lennar Corporation, the developer of the Nicols Ridge project in the Cedar Grove Redevelopment
District, has completed the townhouse units anticipated in Phase I of the three phase project and has
constructed the first sixteen of the townhomes in Phase II. However, in response to the downturn in the
condominium market, the developer chose not to continue with its condo product after the first of four
buildings was completed in Phase I. The completion date for Phase I passed at the end of 2006 and the
developer is technically in default at this time.
Lennar approached the City in late 2006 requesting a concept review for a modified redevelopment
scenario for the Nicols Ridge that would replace the remaining condominiums with additional
townhouses, resulting in a net decrease in total units from 230 to I75. In addition, the developer is
requesting that the City consider waiving TIF liquidated damages in the development agreement for the
default circumstance and consider selling the City acquired properties to the developer at a reduced price
to permit them to cover costs and achieve a return.
Due to competing agenda items and the holidays, the request was heard by the Council at its February
workshop and the matter was referred to the Finance Committee.
Within the past week, Lennar has contacted staff proposing to discuss an alternative that would introduce
a development partner that may take over some portion of the condominium obligations for the project.
Nonetheless, the project is technically in default at this time and the developer indicates that it will still be
proposing a reduced number of condominiums for the project, so staff will want to provide an overview
of the situation to the Finance Committee and receive direction with respect to the next steps to be taken
with the developer.
BACKGROUND:
The TIF development agreement with Lennar called for the company to construct the 230 housing units in
three phases over a specified period, in exchange for the City to use TIF proceeds to pay for the special
assessments for the public improvements serving the site and to pay for the cash parks and trails
dedication for the units. Failure by the company to meet the unit counts by the phase completion dates
results in financial liquidated damages on a per unit basis.
The Council response to the presentation of the Lennar request was that the alternative townhouse
product the company proposes for the remainder of the project appears consistent with the product
that has been constructed to date and would be a reasonable alternative to the previously proposed
townhome units, provided they continue to meet the finish material standards set for the
redevelopment area and the project.
Councilmembers indicated, however, that the City is not obligated to insure a profit for a developer
and that financial considerations would need to be reviewed in more detail to determine whether to
require performance under the development agreement, negotiate a revised agreement, declare the
project in default or take other action relative to the project.
~a
To date, Lennar has constructed 62 units, including 46 of the 88 units called for in Phase I and 16 of
the 66 units called for in Phase II.
The company has presented two base scenarios. In the first, they would propose to eliminate the
remaining condo buildings and replace them with an additional 57 townhome units to be constructed.
on property the company owns, which represents the remainder of the Phase I property and the Phase
II property. This would result in a total of 119 Lennar units in roughly the area that had been planned
for 154 units. Under this scenario, Lennar would dispose of the one property on the western portion
of the site that it currently owns (former Gonyea parcel), presumably by sale. Because of that
property's shape, it can only be developed effectively in combination with the four City owned
parcels on that end of the project area. The company analysis indicates that none of these scenarios
generates a profit, even if the full price of the price of the Gonyea parcel ($563,000) is recovered.
Under the second scenario, Lennar would prose to complete development of the site through the
construction of 113 additional townhomes for the reduced total or 175 housing units instead of 230.
The company represents that it only sees scenario #9, in which it would achieve a 4% return, as
financially viable, which assumes that the City would sell its parcels to the company at 20% of the
price agreed upon in the development agreement and waive the TIF liquidated damages in the
agreement for failure to construct the total number of units required and failing to construct a
requisite number of units by the phase deadlines. The Lennar profit of $1 million would depend on
the City donating an additional $1.14 million in land value to the project and provide the TIF benefits
as if all 230 units were built in the timeframe originally agreed to.
In either the 57 unit or 113 unit scenario, the reduction of the number of units and the delay in their
construction will result in reduced TIF proceeds available to support the TIF assistance to the project
and the additional proceeds that were expected to support activities in the Core Area of the
redevelopment.
Staff and the City consultants have reviewed the financial information presented to date, starting
instead with the scenarios under which the company would be obligated to pay the liquidated
damages in the agreement and/or truncate its development by transferring the Gonyea parcel to the
City in consideration for a renegotiation of the development agreement.
While the financial impacts of the alternatives will shift under the revised proposal the developer is
expected to present with the new condominium partner, the current analysis suggests the following:
• The shortfall of 42 condominium units at the end of Phase I translates to a TIF penalty of
$290,915 today. Depending upon the terms of a renegotiated development agreement, it is
likely that the developer would not complete enough units by the end of 2007 to meet the
Phase II unit count and ultimately they would not meet the overall unit count. Therefore, in
any alternative scenario, the issue of additional liquidated damages or reduced City assistance
would need to be defined.
• The developer is postponing the completion of each of the phases by one year, which would
result in TIF liquidated damages for all phases unless the agreement is renegotiated.
• The valuation assumptions in the developer's scenario comparison appear very low. Most
significantly, the analysis is based on am average home price of $220,000, when the
townhome units constructed to date have averaged between $280,000 and $290,000. To the
extent that the proposed alternative townhome product is intended to address marketing
challenges associated with the original product (living space on entry level rather than split
entry), it is unlikely that it would sell at a 25% discount compared to the original units. Even
1~
if the units were to sell for that amount, the $17,600/unit pretax income appears to be low for
a production builder. Staff has asked for a clarification of the difference.
The use of pretax comparisons does not provide a clear picture of the developer's financial
position. The Council has appropriately indicated that the City is not to be expected to cover
developer risk. To the extent that the developer is making representations regarding
perceived returns as part of its decision making process, staff has also asked that the pretax
analysis be supplemented with an after tax comparison of the scenarios, since tax benefits are
one of the considerations in property development. Between the presentation of only pretax
calculations, the low comparative selling price of the units and the apparent pretax return per
unit used in the calculations, the gain/loss calculations cannot be confirmed. Staff has asked
for after tax comparisons of the scenarios.
Pending the presentation of the alternative proposal with the condominium partner, staff has
identified the following alternative directions:
• Negotiate the completion of the site on the basis of the original unit types and counts with
Lennar and its condominium partner.
• Negotiate the completion of the development of the eastern portion of the site with Lennar
under terms favorable to the City, including the transfer of the Gonyea parcel to the City for
completion by an alternative development partner.
• Negotiate the completion of the entire site development with Lennar for the reduced unit
count under terms favorable to the City.
• Declare the developer in default and negotiate the transfer of all remaining undeveloped
property to the City for development by an alternative development partner.
• Other alternatives to be identified through the discussion.
ATTACHMENTS:
• Original project site plan.
• Lennar request for revised concept plan.
• Proposed project site plan.
• Property ownership map.
• Table illustrating current unit count and TIF liquidated damages.
• Lennar comparison of project scenario.
COMMITTEE RECOMMENDATION OPTIONS:
Provide preliminary direction relative to negotiations with Lennar regarding the Nicols Ridge TIF
Development Agreement.
Other:
~~
~ o
.w y v
V C y y - ., ~ ~~~ F- z Q ~~
Q ~ ~ C ~ x ~ ~ ~ ;. i~ ~ Z~~
~. 4 r Z~ w
/_ W 4 4
y __ _ Q. aO ZN z F
_+ Ql \ ~ F ~ K C a ~ - ~ °~ ^ 'WSJ A ~ .1 U, $$$ ~. V
[. h F 1 N €^i U OW
Q ~ZC y 4C qtt ~ ~ 1 f O ao a.g ; Y ZW $;~ a,,`
O~ 0~ ~ CC q e R ~1 U U ~ r~ \,y 4 //~ ~^ OnF o G ~9$ n ~~' 9 O
r/ tl
,~ ~ ~' i~°' o ~,~ o o ~ _ 1 ~-~ o sr wwzf~ ~°wz ~~4 °~5
o F~ «~ ~ K a F ~ o~ a` O R9. a Sw S
v 0~ ~nR` h c\4, tq ul y N
(0 q o 0 0 0 0 I w o ~
N >i < vj vi b \\
Q ~ V V V V V 4 V V •y'` ^'
S
F o
u
S
••11 ~ >, '; . Esc, ~~
i - r F-, '.
~ \~:; /i
\- `ir •\ ~~ ~ ~ rat„r
t ~ - ,~
Swag ~ •Y .` ~~' •' l; F -i~~ `>~
~c, \ i, ,Y',F ~ '-~i
,'''fie ) \ •'•< ^ _ •~,.P,`. '~ ___~;
,;
•Y! 111 ."'N~ 1` 1 i
.: ~;~ :111 I1%~ ~~~ .• ,••~\ -_ _M1 _~__ ___ ~' I ~_n_____~ 1
• :•i •
.•
~ ': • ;
i
~ t. ~ .• ..\ \• 1 I ~ ~ i
i
1 - ---- r--~---~----- \~ _~;
----------- -~ ••~i._
d
c
c
c~
~.:..
C
FF
4.:~
~;~
{{V':a7
Ksi
~-~
f~/+~~~
i:~a
~1
Jon Hohenstein January 23, 2007
Director of Community Development
City of Eagan
3830 Pilot Knob Road
Eagan, MN 55122
Re: Nicols Ridge
Jon,
Thank you for meeting with Marc Anderson and myself last month. I realize that the time period just
before the holidays was a busy one and we appreciate your finding time in your schedule for us.
As we discussed at the meeting, we would like the City to undertake a Concept Plan Review fora re-
cast ofthe remaining Nicols Ridge property. We no longer offer a condo product and would be building out
the N icols Ridge development using our `Colonial Manor'(back-to-back townhomes) and `Colonial Manor
Split'(rowhome) products. The site plan for the re-cast is enclosed along with elevations of the product. I
have supplied you with the addresses of several locations in the area where the Colonial Manor buildings
are located so that you and /or the staff (EDA or Council) can view the finished product.
The result of this product change is that we would be unable to meet the total density numbers which
were used in the TIF and Development agreements currently in place. The original number was to be 230
units, whereas our revised plan calls for a total of 175 units. We have updated the chart that we shared with
you at our meeting, copy attached. The homesite count was adjusted up by one to reflect the site plan. We
would ask that no penalties be imposed due to the decrease in density. In addition, we would ask that the
sale price of the four remaining parcels which we would need to acquire from the City for completion of
the project be reduced to an amount which would allow for the project to be financially feasible, that
amount being 21.6% of our current option price.
Our attached chart includes thirteen iterations. Per your request we've provided detail on two versions
(Versions 3 & 9), attached. Please understand the attached pages contain proprietary and extremely
confidential land modeling data which must NOT be considered public information and should be
distributed on a `need to know' and `eyes only' basis. If this is not possible, please return all copies. Of the
thirteen iterations only Version 9 works for Lennar to make the project financially feasible. This takes our
usual 8% NPI floor down to 4.04%. Since we already own some of the land, it gives us a good case with
Corporate to obtain their blessing.
Because time is of the essence, we would request that the City EDA discuss this matter at their February
meeting. We would appreciate a `first blush' response south=we can continue (or not) our planning
process.
If our proposal is acceptable, we would like to be able to begin construction on the first Colonial Manor
building this spring/early summer. The build out of the remaining Nicols Ridge area would likely be done
in three phases. Phase One this year. Phase Two in 2008. The final Phase in 2009.
In addition, we'd like to thank you for forwarding the information on the overall Re-development District.
As indicated in the meeting, we may have an interest in participating in the Master Development, at least as
far as any residential component is concerned.
~~
935 East Wayzata Boulevard, Wayzata, MN 55391 • Phone 952.473.1231 • Fax 952.473.7401 • www.lennar.com ,.,,-,~w„
i ~~ t
' ~ ~ j:
r
y ! 7 ~.
( 7 ~ # -
i,
i
M .~_ ;,-- ~. ~ .,~ ~
i ~ ~. ~
~ ~
4 ~ ' ~ ~' ~„ ~f~af ~ ~
4 ~ i . ~, ~ ~ ~ ~D'. y (~'~~ ,Fri 5' 3an4 51. _ ~ I
I r b'~i
,_ ~ ,~ >R
~, ,,
: ~,~. ~ ~ f ~~~~
~,
Y ~ Ir r
'~~ ~
N rS4 ~ !: i r~ R ~ [1,"w
l .:~~~.~ '~ ~, -~.. ` b~` d t
j, j~F r I ,: x ,.~ ~ w r~ ~ `~
i p' d ~ bF4 ~ f ~ L " r ,~ ~,
_ f-.
f i F 'r f '~ ~ ~: V :, f
z_~
.~
r '.e , t ~?r F` ~. `
r, rw., ,.
~ ; '" \ / ;
~• rt
1 1
1 ~ V~u' ' 'I ~ ~'`'' ~''
~ ~ ~.
r ~ `~ ~ ;
4, ~ `fir" ~ I ~i' ~
'~~•.
- ; ~~ ~~~
i "~ 7
Ixr T ~~4 ~/
i; ~~,
~ ~v,Y ursf` `~ f
i H [;~ ~ ~
i.- t ~ s;~t ~~~
F y ~ ~ ~ ~ ,~. ~ ~ ~~
P
~ ~i ~, ~~~y~~
I ~ } j
l ~ 4
` + .. Jh
~ ~ ~ ~ I
~ i ~ ~ .,d
F ~'
' ~ ~~~~ f
,li
,! a -- -- -- ~,.
r -r
p
_:,.. ,, ~ ~.._ ... _. s ~
~~
0
0
N
N
N
N
d
a
x
W
m
~,
n
a
d
0
a
T
L
a
m
rn
0
0
L
a
m
.~
Q
++
~_
X
W
Q
L
a
.~
.~
as
a~
a
0
a~
as
0
a~
a~
o ~~
z
as
6-Mar-07
Delta Development:
Phase I Phase II Phase III Total
Townhomes 32 16 28 76
Condominiums 56 42 56 154
Total 88 58 84 230
USHomes:
Phase I Phase II Phase III Total
Townhomes 32 24 20 76
Condominiums 56 42 56 154
Total 88 66 76 230
Totals are verified in the contracts. The
type breakdown is arrived at by deduction.
Constructed by USHomes:
Phase I Phase II Phase III Total
Townhomes 32 16 0 48
Condominiums 14 0 0 14
Additional Proposed 42 t5 d 57
Total 88 31 0 119
Shortfall in Total: 0 35 76 111
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase:
Dollar Penal 23 201,517 507,286 708,826
`Q
Constructed by USHomes (57 units and no Phase III):
Phase I Phase II Phase III Total
Townhomes 32 16 . 0 32
Condominiums 14 0 0 14
Additional Proposed 0 29 t) 29
Total 46 45 0 75
Shortfall in Total: 42 21 0 63
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase:
Dollar Penalt 290,915 120,905 N/A 411,820
Constructed by USHomes (113 units respread over phases, but no change in phase deadlines:
Phase I Phase II Phase III Total
Townhomes 32 16 0 32
Condominiums 14 0 0 14
Additional Proposed 0 29 28 57
Total 46 45 28 103
Shortfall in Total: 6880 5713 0 12593
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase:
Dollar Penal 290,915 120,905 320,386 732,206
a7
0 0 ~ t~ ~
N N COO. N C
j O O D U
T T T (D '^^
'
W
.
U U "L ~L.
.
c0 o N to ~ Q Q
a
o-
~. L ~ ~ `~ _
_
`~ O O
~ ~
C C
0 O
~
Cn O
~
(n O
o O
0 0 0
J J 4)
"~ 0
"~ 'i ~ 2 ~ 2 0 0 0 0
Q
Q ~.. U ~ U ~
L r r
L
O O ~ ~
~ L L
~ O O
~
p ~ ~
O O O
o O O
0 0 ~
~ ~
O ~
~ ~
O
N
~ 03 03
~ ~ ~ L .~ C~3 .= C~3 .~ O O O O
fi
3
3 (~ (d
C
C~
'~
~ ~ .
e
lV e .
t
.
~ tV O
L cu O
L c~ 'o '_o
T
t
V _O
~( O
~ O '^ /~
~ Vl VJ
of
•V
J ~e!
`V ~
J J w(
aV
~ ~
~ r r ct Ln
U U
> T .-
> > >
U _
U
U o
T T
M
~
y
0
~ N
0 0 O
N O N
~ Cfl
0 r
O r
r O M
~ ~ ~ T r0 O ~ N C
D
07
N N
a V N T lf~ O T 0 I~
M N t N N C7
C CO CA M M O N o T
~
Z CO v Cn
T M
T ~ ~ ~ ~~
LL ~ ~ Z ~ Z ~ Z Z ~ Z ~ Z 4) Z
r
a
N
N CrJ C'7 C7 C'') C'0 CrJ C'7 1~ I~ ~ ~ ~ ~
"
T
T T
T T T
T T T
T T T
T T ~ ~ ~ ~ ~"~ ~
~
2
L L L 1...
Q Q Q ~ Q. Q
O O O O O O
Q Q Q Q Q Q
~ ~ ~~ ~ ~~ ~ ~ ~ ~ 0 ~
N ~ a~ m a~ ~~ W W W W W W
fl- °- ~- o- °- °- °- Z Z Z Z Z Z
0 0 0 0 0 0 0 > ~ ~ >~>
°- °- ~ ~' °" °' °" O O O O0 0 O
~ ~ ~ ~
: ~
:r ~ ~
:~ : ~ ~ a a a
c
o
~
m :_.
c
~ },
~
c c
~ ~,
c
a, .
c c
m o
c
0
c
0
c
0
~ c c
0 0 0
+~
a ~
o c
0 c c
0 0 c
0 c c
0 0 c
0 c
0 c
0 c c c
0 0 0
D ~ ~ ~~ ~ ~v7 ~ ~ ~ ~v7~
U U U U U U U U U U UU U
Q Q Q Q Q Q Q Q Q Q Q Q Q
U U U U U U U U U U UU U
~_ ~_
.Q ..Q ~ ~ ~ ~ .Q
L L L
L
cti L
c~ L L
03 td L
c~ L L
c~ c~ L
c~ L
RS L
nY c~ RS (~
C
C C
C C C
C C C
C C C
C C C
C C
C C
C C C~
C C C
4)
J 0)
J O N
J J N O O
J J J O
J 0)
J O
J O O O
J J J
r
O
O
N
N
r
O
c0
L
'~
m
N
.N
Q
'~
N
O
V
0 0
O o 00 000 N
0 ~ ~ ~ O
N o0 r 0 0
T T
2 = _
C ~ ~ T
T
C C ~ 0: O
._ X N O ~
+O-' 03 ~ 0-
03 ~ C z c~
a>d- ~ o
•~ ~ ~ O I-
°- Z ~ ~'
a~ ~
E
o ~-
~ m
~ Z
zn
a~
Q
D_
T
A~
I
N
N
N
T
~~
FINANCE COMMITTEE
March 29, 2007
III. NICOLS RIDGE CONCEPT REVISION
ISSUE:
Lennar Corporation, the developer of the Nicols Ridge project in the Cedar Grove Redevelopment
District, has completed the townhouse units anticipated in Phase I of the three phase project and has
constructed the first sixteen of the townhomes in Phase II. However, in response to the downturn in the
condominium market, the developer chose not to continue with its condo product after the first of four
buildings was completed in Phase I. The completion date for Phase I passed at the end of 2006 and the
developer is technically in default at this time.
Lennar approached the City in late 2006 requesting a concept review for a modified redevelopment
scenario for the Nicols Ridge that would replace the remaining condominiums with additional
townhouses, resulting in a net decrease in total units from 230 to 175. In addition, the developer is
requesting that the City consider waiving TIF liquidated damages in the development agreement for the
default circumstance and consider selling the City acquired properties to the developer at a reduced price
to permit them to cover costs and achieve a return.
Due to competing agenda items and the holidays, the request was heard by the Council at its February
workshop and the matter was referred to the Finance Committee.
Within the past week, Lennar has contacted staff proposing to discuss an alternative that would introduce
a development partner that may take over some portion of the condominium obligations for the project.
Nonetheless, the project is technically in default at this time and the developer indicates that it will still be
proposing a reduced number of condominiums for the project, so staff will want to provide an overview
of the situation to the Finance Committee and receive direction with respect to the next steps to be taken
with the developer.
BACKGROUND:
The TIF development agreement with Lennar called for the company to construct the 230 housing units in
three phases over a specified period, in exchange for the City to use TIF proceeds to pay for the special
assessments for the public improvements serving the site and to pay for the cash parks and trails
dedication for the units. Failure by the company to meet the unit counts by the phase completion dates
results in financial liquidated damages on a per unit basis.
The Council response to the presentation of the Lennar request was that the alternative townhouse
product the company proposes for the remainder of the project appears consistent with the product
that has been constructed to date and would be a reasonable alternative to the previously proposed
townhome units, provided they continue to meet the finish material standards set for the
redevelopment area and the project.
Councilmembers indicated, however, that the City is not obligated to insure a profit for a developer
and that financial considerations would need to be reviewed in more detail to determine whether to
require performance under the development agreement, negotiate a revised agreement, declare the
project in default or take other action relative to the project.
To date, Lennar has constructed 62 units, including 46 of the 88 units called for in Phase I and 16 of
the 66 units called for in Phase II.
The company has presented two base scenarios. In the first, they would propose to eliminate the
remaining condo buildings and replace them with an additional 57 townhome units to be constructed
on property the company owns, which represents the remainder of the Phase I property and the Phase
II property. This would result in a total of 119 Lennar units in roughly the area that had been planned
for 154 units. Under this scenario, Lennar would dispose of the one property on the western portion
of the site that it currently owns (former Gonyea parcel), presumably by sale. Because of that
property?s shape, it can only be developed effectively in combination with the four City owned
parcels on that end of the project area. The company analysis indicates that none of these scenarios
generates a profit, even if the full price of the price of the Gonyea parcel ($563,000) is recovered.
Under the second scenario, Lennar would prose to complete development of the site through the
construction of 113 additional townhomes for the reduced total or 175 housing units instead of 230.
The company represents that it only sees scenario #9, in which it would achieve a 4% return, as
financially viable, which assumes that the City would sell its parcels to the company at 20% of the
price agreed upon in the development agreement and waive the TIF liquidated damages in the
agreement for failure to construct the total number of units required and failing to construct a
requisite number of units by the phase deadlines. The Lennar profit of $1 million would depend on
the City donating an additional $1.14 million in land value to the project and provide the TIF benefits
as if all 230 units were built in the timeframe originally agreed to.
In either the 57 unit or 113 unit scenario, the reduction of the number of units and the delay in their
construction will result in reduced TIF proceeds available to support the TIF assistance to the project
and the additional proceeds that were expected to support activities in the Core Area of the
redevelopment.
Staff and the City consultants have reviewed the financial information presented to date, starting
instead with the scenarios under which the company would be obligated to pay the liquidated
damages in the agreement and/or truncate its development by transferring the Gonyea parcel to the
City in consideration for a renegotiation of the development agreement.
While the financial impacts of the alternatives will shift under the revised proposal the developer is
expected to present with the new condominium partner, the current analysis suggests the following:
?
The shortfall of 42 condominium units at the end of Phase I translates to a TIF penalty of
$290,915 today. Depending upon the terms of a renegotiated development agreement, it is
likely that the developer would not complete enough units by the end of 2007 to meet the
Phase II unit count and ultimately they would not meet the overall unit count. Therefore, in
any alternative scenario, the issue of additional liquidated damages or reduced City assistance
would need to be defined.
?
The developer is postponing the completion of each of the phases by one year, which would
result in TIF liquidated damages for all phases unless the agreement is renegotiated.
?
The valuation assumptions in the developer?s scenario comparison appear very low. Most
significantly, the analysis is based on am average home price of $220,000, when the
townhome units constructed to date have averaged between $280,000 and $290,000. To the
extent that the proposed alternative townhome product is intended to address marketing
challenges associated with the original product (living space on entry level rather than split
entry), it is unlikely that it would sell at a 25% discount compared to the original units. Even
if the units were to sell for that amount, the $17,600/unit pretax income appears to be low for
a production builder. Staff has asked for a clarification of the difference.
?
The use of pretax comparisons does not provide a clear picture of the developer?s financial
position. The Council has appropriately indicated that the City is not to be expected to cover
developer risk. To the extent that the developer is making representations regarding
perceived returns as part of its decision making process, staff has also asked that the pretax
analysis be supplemented with an after tax comparison of the scenarios, since tax benefits are
one of the considerations in property development. Between the presentation of only pretax
calculations, the low comparative selling price of the units and the apparent pretax return per
unit used in the calculations, the gain/loss calculations cannot be confirmed. Staff has asked
for after tax comparisons of the scenarios.
Pending the presentation of the alternative proposal with the condominium partner, staff has
identified the following alternative directions:
?
Negotiate the completion of the site on the basis of the original unit types and counts with
Lennar and its condominium partner.
?
Negotiate the completion of the development of the eastern portion of the site with Lennar
under terms favorable to the City, including the transfer of the Gonyea parcel to the City for
completion by an alternative development partner.
?
Negotiate the completion of the entire site development with Lennar for the reduced unit
count under terms favorable to the City.
?
Declare the developer in default and negotiate the transfer of all remaining undeveloped
property to the City for development by an alternative development partner.
?
Other alternatives to be identified through the discussion.
ATTACHMENTS:
?
Original project site plan.
?
Lennar request for revised concept plan.
?
Proposed project site plan.
?
Property ownership map.
?
Table illustrating current unit count and TIF liquidated damages.
?
Lennar comparison of project scenario.
COMMITTEE RECOMMENDATION OPTIONS:
1. Provide preliminary direction relative to negotiations with Lennar regarding the Nicols Ridge TIF
Development Agreement.
2. Other: __________________________________________________
AGENDA
FINANCE COMMITTEE MEETING
THURSDAY
MARCH 29, 2007
7:30 A.M.
CONFERENCE ROOMS 2A & 2B
I. AGENDA ADOPTION
a. Review meeting notes from 3/08/07 meeting
II. REVIEW TH149 BIDS AND BID ALTERNATE FOR FIBER
CONDUIT
III. UPDATE ON NICOLE RIDGE CONCEPT REVISION
PROPOSAL
IV. OTHER BUSINESS
V. ADJOURNMENT
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
I. AGENDA ADOPTION
a. Review meeting notes from 3/08/07 Finance Committee meeting
ACTION TO BE DISCUSSED:
No action is needed. The enclosed meeting notes are for the review of the committee.
FACTS:
• Per the request of the City Council, meetings notes are being taken at each City
Council standing committee meeting in order that the City Council can review staff's
understanding of the discussions and recommendations made at each of the
committee meetings.
• The Committee meeting notes will be forwarded the City Council after the committee
has had the chance to review the notes.
ATTACHMENTS:
• Enclosed on pages through 1— are the meeting notes from the March 8, 2007
Finance Committee meeting.
Meeting Notes
Finance Committee Meeting
March 8, 2007
Attendance: Mayor Maguire, Councilmember Carlson, City Administrator
Hedges, Director of Public Works Colbert, City Engineer Matthys, Transportation
Engineer Plath, Director of Parks and Recreation Seydell Johnson, Director of
Community Development Hohenstein, and Director of Administrative Services
VanOverbeke.
Agenda/Meeting Notes
City Administrator Hedges opened the meeting at 7:30 a.m. requesting feedback
on the Finance Committee meeting notes for the February 20, 2007 meeting.
Members responded that the notes were good and helpful and appropriate to
forward to the full City Council. Administrator Hedges also outlined the need to
keep the full Council informed of all of the actions resulting from the various
committee meetings.
He asked that presentation of the background material on the Thomson
expansion proposal be added to the Committee agenda based on the City
Council direction at the regular meeting on March 6. The agenda was revised to
consider the Thomson item first.
Other Business
Thomson Expansion Proposal
Director of Community Development Hohenstein provided background
information on the meetings and discussions that have taken place since
Thomson representatives first approached City staff in August of 2006. Director
Hohenstein noted the challenge of respecting Thomson's request for
confidentiality with the need to inform the City Council of the discussions, and to
make sure all public policy determinations and formal agreements are discussed
in a public forum. He also outlined the State Department of Economic
Development's role as the first contact with the proposal and Thomson's desire
to deal directly with the County and School District in regard to any approvals
required from those entities.
The Finance Committee directed staff to stay the present course with the City's
primary role being to assist Thomson in their efforts at the State Capitol to
achieve the necessary special legislation and then in the consideration of the
creation of a TIF District at the appropriate time. The Committee,noted a desire
to fully understand the complete incentive package being requested by Thomson
and observed the potential requirement for the same information at the State
Legislature.
Director Hohenstein also presented a memo presenting an overview of the
process to date and outlining potential components of the assistance package as
they are currently known to City staff.
CR
Update on Civic Arena Proposal'
City Administrator Hedges and Director of Parks and Recreation Seydell Johnson
provided background on discussions with the representative of the Wild Hockey
Team. These discussions have been on and off since the spring of 2006;
however, there seems to be more interest from the Wild in moving the discussion
to a definitive conclusion at this time.
The Finance Committee reviewed the list of City interests contained in the packet
memo and provided the following responses:
• The financial interests are okay as presented. The City should not incur
any additional bonding or operational costs as a result of any construction
or use resulting from the potential partnership with the Wild.
• It is difficult to balance the community benefits as envisioned by the Wild
against potential displacement/interruption to current City programming.
Certain potential challenges/conflicts e.g. relocation of dry floor activities,
could be worked around especially with the inclusion of a studio rink in the
overall project. However, last minute requests for ice time cannot be
allowed to displace games and/or other previous commitments to other
stakeholders .or users such as the Eagan Hockey Association, the School
District, and community open skate sessions. Last minute ice time
requests for Saturdays and Sundays would be problematic and probably
would not be entertained. The Finance Committee would like to see more
information on typical schedule requests from the Wild, primarily those
that might impact the City's scheduling of prime time ice at the facility.
• The City needs more detailed information regarding the expectations of
the Wild for both advertising and naming rights before City parameters
can be developed. In general the Finance Committee is open to having
the discussion, but is not committing to anything without more information.
• The Finance Committee would like to participate in subsequent meetings
with Wild officials at the decision making level to move the discussions to
a conclusion.
• It is important that the Eagan Hockey Association receives an answer to
their interests regarding facility expansion and use.
Maior Street Infrastructure Funding Options
Director of Public Works Colbert opened the discussion by reporting that as a
result of the meetings that have been held, staff has concluded that the chance
of getting any additional money from either the State or Federal government is
nil, after the bid is awarded for the Highway 149 project. State elected officials
and Minnesota Department of Transportation staff are sympathetic to the City's
problem, but no additional dollars are likely to be secured, if the City is willing to
proceed with the project at this time.
One potential option is for the City to reject the bids on the project thereby
sending the message that the City is not prepared to make an increased financial
commitment to a State highway project. The result of rejecting the bids would
3
likely be to delay the project for at least one year. A one year delay would likely
cause an inflationary cost increase; however, that may be somewhat offset by
better bids resulting from bidding in the fall rather than in the spring.
It was noted that the State commitment to this project is held through September
of 2010 and the Federal money is not available until October of 2007 so a delay
would not immediately impact the availability of those dollars. City Engineer
Matthys also noted that the temporary construction easements are in place for
three years so a one year delay should not cause a problem with easements.
In the event the project is delayed it will be important to have calls directed to
State elected officials and MNDoT as the responsible governmental entities and
that the media is properly informed of responsibility. A preliminary list of potential
costs resulting from a delay include: efficiency of travel, safety, increased project
costs, deteriorating road conditions, and impact on Thomson expansion.
It was noted that continuing efforts need to be made to consolidate City efforts
with those of Thomson in requesting funding assistance so we are not in
competition with each other for the same potential dollars.
Councilmember Carlson requested more detailed information listing which future
State Highway projects are actually included in the 5 -Year CIP. She also asked
how we can develop a mechanism to determine the advisability of moving ahead
or delaying other County and State projects that might place too great a financial
burden on City resources thereby limiting the City's ability to take care of its own
street obligations. Director of Administrative Services VanOverbeke responded
that the response to this question is ultimately the CIP process itself; however,
that review may require a longer time frame. City Engineer Matthys added that
the TINA study is designed to help with the long-term obligations and should
assist in addressing this question.
Councilmember Carlson suggested that it might be appropriate for the City to set
aside and dedicate some Major Street Fund reserves in another fund to be
specifically set aside and ear marked for defined future projects e.g. bridges.
The intent would be to more clearly match on-going revenue streams and
reserves against both short-term and long-term project costs.
A Finance Committee Meeting was scheduled for 7:30 a.m. on Thursday March
29 with the agenda to include at least the following:
1. Additional review of the financial commitment related to the Highway 14c.
project. The bids will be opened on March 22 and the City Council is
scheduled to take action on the bid award at its meeting on April 5.
2. A response to the bid alternate for fiber conduit related to this same bid
opening.
Iq
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
II. REVIEW TH149 BIDS AND BID ALTERNATE FOR FIBER CONDUIT
ACTION TO BE DISCUSSED:
1.) Review TH149 bids and provide direction regarding financing options for TH149 to the
City Council as a whole.
2.) Review the bid alternate for the fiber conduit and recommend a financing mechanism for
payment of the fiber conduit for consideration by the City Council as a whole.
FACTS:
The Finance Committee was directed by the City Council to review bids for the proposed
TH149 project including an alternate bid for fiber conduit; the Finance Committee met on
March 8 and discussed both the major street infrastructure funding options and a specific
breakdown on the proposed estimates for Highway 149 and, more specifically, the
anticipated costs to the City of Eagan.
Bids were received on Thursday, March 22; a breakdown is enclosed as an attachment for
Council review.
Director of Administrative Services VanOverbeke and Director of Communications
Garrison have reviewed the fiber conduit financing and provided an update on the work
of the Technology Task Force to -date and offer some background for public policy
consideration relative to funding the Highway 149 conduit. This discussion is outlined in
memos that are attached from Director of Administrative Services VanOverbeke and
Director of Communications Garrison.
ATTACHMENTS:
• Enclosed on pages �Q_ through r7 is information pertaining to Trunk Highway
149 and alternate bid for conduit bid summary and further discussion on the State
management of the project.
• Enclosed on pages 5? through � is another copy of the March 2, 2007 Major
Street Infrastructure Funding Options prepared by Director of Administrative Services
VanOverbeke.
• Enclosed on pages 13 through is a copy of a memo explaining the work of the
Technology Task Force prepared by Director of Communications Garrison.
• Enclosed on pages _Lg- through/ is a copy of a memo from Director of
Administrative Services VanOverbeke relating to fiber conduit financing.
City of Evan Memo
To: THOMAS L HEDGES, CITY ADMINISTRATOR
From: THOMAS A COLBERT, PUBLIC WORKS DIRECTOR
Date: MARCH 23, 2007
Subject: FINANCE COMMITTEE MEETING — MARCH 27, 2007
On February 20, 2007, at the direction of the City Council, the Finance Committee discussed the
local financing obligations of City Project 778 (TH 149 upgrade). The discussion focused on the
anticipated significant escalation in local cost participation due to state and federal contribution
caps and the related impact on the City's Major Street Fund (MSF). The total local obligation of
—$16.6 million was based upon a pre-bid construction cost estimate of $11.2 million (base bid).
The TH 149 cost estimates presented to the committee on February 20 indicated a resulting MSF
deficit of about $2.5 million at the end of the currently approved 5 -year CIP (2011). The
Finance Committee discussed avoiding such a deficit by the reduction/elimination of projects in
the current CIP's remaining four years ('08-'11) or by finding additional funding for the MSF.
The significance of the potential impacts to the currently approved 5 -year CIP (as well as other
major pending financial obligations) and the challenges of alternative funding options required
further. analysis based on firm bids for the Committee's consideration of any final
recommendations to the City Council.
TH 149 BIDS
On March 22, the bids for Project 778 were opened. 16 bids were received from a variety of
heavy construction contractors. All but one of the bids were well below the Engineer's Estimate
($11.2M). Both the number of bidders and the competitive bids submitted indicate a very strong
interest in securing this contract early in this construction season, possibly due to limited
availability of heavy construction work. The current competitive bidding climate likely offset
the effects of the recent industry cost escalations.
The apparent low bid is $9,474,728.98. This bid is $1.73 million below the Engineer's Estimate
used in previous financial analyses. The following reflects a revised cost participation summary
based on bids received.
�`I
Finance Committee Memo
February 15, 2007
Page 2
Source
Feas. Rpt Est. CIP Budget
Final Desig Est.
Bid
Federal Funds
$5,500,000
$6,094,000 +11%
$ 6,094,000
MnDOT Funds
$2,140,000
$2,256,000 + 5%
$ 2,256,000
Inver Grove Hts.
$ 220,500
$ 803,197 +264%
$ -729,095 (+/-)
Eagan or ?
$3,310,860 $5,230,000
$7,411,168 +124%
$ -5,760,000 (+74%)
TOTAL
$11,171,360
$16,564,365 + 48%
$14,839,095(+3.3%)
IMPACT ON MSF BALANCE
While the previously discussed pre-bid estimate was projected to increase the MSF deficit to
about $2,500,000 by 2012, the actual bid would reduce that deficit to about $750,000. As
previously noted, this projected deficit -may substantially increase further as other future
programmed projects are re -estimated with the next CIP update due to continued industry cost
escalations. Public Works staff is currently working on the 2008-2012 CIP and will have a
variety of project reductions and alternative funding options, and their related implications, for
the Council's consideration at a May workshop. Unfortunately, this information will not be
available prior to the April 5 TH 149 bid award consideration.
FIBER OPTIC CONDUIT ALTERNATE BID
In response to the Council's stated goals, the placement of six conduits for future fiber optics
installation was included as an alternate bid as part of the TH 149 bid package. The apparent
successful low bidder had a bid of $151,023 for the installation of these conduits along TH 149
from TH 55 to Wescott Road, including the crossing of the CP Rail railroad tracks at Yankee
Doodle Road and Wescott Road. The source of funding for the placement of these conduits is
unknown to date. The Council's consideration of contract award for the TH 149 upgrade will
also need to consider this alternate bid and the funding source for the conduit placement.
While the results of the TH 149 bid opening were positive, the remaining financial burden for the
City of Eagan is still overwhelming in relation to our long term local transportation needs.
I am always available to help identify feasible options and/or modifications to our future
construction program or alternative funding scenarios to provide a balanced and deliverable
transportation infrastructure for our community and intend to present such information at the
May workshop.
c: Gene VanOverbeke, Director of Administrative Services
Russ Matthys, City Engineer
Tom Pepper, Chief Financial Officer
'7 7
City of Eagan Memo
To: City Administrator Hedges
From: Director of Administrative Services VanOverbeke
Date: March 2, 2007
Subject: Major Street Infrastructure Funding Options
It is my understanding that staff was directed to undertake two activities resulting
from the Finance Committee meeting of February 20, 2007.
First, a menu of options is to be presented to pay for the significant cost increase
($2.5 more than budgeted in the 2007 CIP) to the City's obligation for Highway
149. 1 believe we might have created the misunderstanding that dollars are not
available in the Major Street Fund to actually make the payment. The dollars are
available and can be used for this obligation. The deficit that is created is in the
5 -year CIP currently programmed through 2011. For all practical purposes there
is no short-term problem in proceeding with the project and in making the
payment from the Major Street Fund. The problem is long-term in getting
projected revenues and expenditures into balance within future CIP's. That will
probably require a combination of new revenues and reduced expenditures.
The following table illustrates the five year CIP including the additional $2.5
million in Highway 149 costs added in 2007.
_..__.. ......_ _ __.._._ _..__._
!Major Street Fund 2007 - 2011 CIP Presentation
# 2007 2008 2009
s
�2010�
2011 i Totals
Beginning Cash Balance, $11,461 I $ 1,921 $(1,677)a
s
$(2� (2,670)11$
,8 $11,461
( �
Additons
_
_-P roperty Taxes
1,188 1,188 1,188
1,188
_.._.._
I '. 1,188 ir. 5,940
Municipal State Aid
755 755 755 j
1,555
it 1,555 ; : 5,375
Total Receipts
1,943 ._ . 1..,943 ,._.._.1,9 l 2,74
i 2,74
Subtractions:---...---__t.i.....__
-_
Financing Obligations
11,483 , 5,541 2,936 `
2,919
j; 2,736 ; s 25,615
Total Expenditures
11 483 ' 5,541 i 2 9 a
2 9
2,736 ' ` 25,615
;Ending Cash Balance
_..
$ 1,921 $ (1,677) $ (2,670); I $ (2,846)'
�.
i
`I, $ (2,839); '', $ (2,839;
i.---------1_!
Using the increased 2007 costs, adjusting the 2007 tax levy to the actual amount,
and including a 5% increase in the tax levy for the years 2008 through 2011
results in the following CIP Presentation:
2007 -- 2011 CIP 1
Beainning Cash B
Additon_s:
Propert_y Taxes
Murncipal State
M. Total Receil
Subtractions:
Ending Cash Bala
_..
Vith 5%Tax
�uT2007
glance
.
increase
$11,461„
and $2.5
_2008
_._$_1,981
Million
2009
$(1,457)
Additiona
2010
2621
$(2, w )
_Costs
_.�_„_,_._..___.._.__.
2011 ��
M 181)
...___...._____
Totals
$11,46
Aid_.._..._.__..._._.
)ts
1, 248
755
2,003
,.,....
1
793
10312,309
103
...._._2'__..._.....
755 }
2,131
w .._.__,._..
1,555.
3,000
l
_.
1,555
3,072
__. _..k....;
6, 896
5, 413
'
__... ...... ...._....._.,..._.
11'-
tions
iitures
11,4831
11,483
_.. ___..._.____ .
_..._ .
5,541
,_.__.__
2, 936
2, 919
919
2, 736
2,736
. 25,615
25,615
nce
_.
3 $
i $(1� 457)
$ 2 262)
$(2,181)
$(1,845)
$ (1,845)
A long-term increase in the ad valorem tax levy
$1.0 million (also increased 5% per year) with no other changes in the projected
expenditures (except the additional $2.5 million in 2007) results in the following
5 -year CIP projection.
The following table which is a summary of the currently approved 5 -year CIP
illustrates the impact of State and County projects on City resources. See
particularly the "Summary by Primary Jurisdiction" section of the table.
2007 -- 2011 CIP By Street Type.
_..._........_.._._...,........._,_..____. ,�..-._.,_.,_.............._..._
Natal Project Costs
_...._..____
__......
_.__._
__._._.__.,,__.
2007 ,
2008
2009
2010
2011
Totals
Arterial & Collector
State
4,928,400 ;
1,450,500
6,378,900
-_..__ __._-.._,
County
470,0001,900,000
I ___ . _
1,200,000
3,57_0,000
C!'__......,.__....,...___.,_.__
II
750,000
1,555,000
..__._,.......___._..._..i
Total
5,398,400
3,350,500
750, 000
805,000
1,200,000
11,503,900
Local Streets
City
1,505,500
2,636,700
2,691,000
2,321 000
1,945,000
11,099,200
Trails
City
331,155
156,870
138,500
41,500
234,000
902,025
Sealcoating ....�w._ _..
City
366,589 j
314,808
_v.,,....._.
203,873
,_.,_ ..a..._..,..... ...__..
174,736
180,632
t
1,240,638
Intersection Improvements
State _.
_.._
150,000
_ 125,000
_.___...._.__.___ .._.__..,__._..,._..__...,__.
k
650,000
_, y_r.
_._._____ _.___ .._.
__._..__._.______.._._..
800,000
t
County
1,125,000
.._-_.._.._.__._....,__..___
500,000
1,75_0,000
Ci
800,000}
!
....__
t�
i-�m._,._.._.___.�..,..._
,._.___-__._.__.,__,._,_.__800,000...
_._....__._�ry_.....,w_....�...,._.,..,_.__.___.__.-_..._._.__.�_..
Total
___.___...___.__.__......._......____.__r_{Jurisdiction
1,925,000 �
_,__._..._..,__.
275,000
650,000
_._._.,_,..._.._...._..._.-,_...
500,000
-
3,350,000
Summar
B Prima
Yy_..__..._._-___.y_.�
__,._____.__._._.........,.._�___.._._,.__.,_
,.
_e
_]__4
County
4,928,400
928, 0
1,595,000
1,600,500
! 2,025,000
650,000
-
- __.
500,000
1,200,000
7,178,900
5,320 000
Ci
_..._ __..._
3,003,244 ;
__.__
3,108,378
.. _..__._,___
; 3,783,373
_______. _...._.____
3,342,236
2,359,632
_ ._,_._.
15,596,863
6,733,878_
4,433,373
3,842,236,
3,559,632
28,095,763
I
Mayor
Street Fund Share
Arterial &Co11ect6r
5,363,400
3,098,500
490,000
665,000
11000,000
10,616,900
Local Streets
! 1,007,000
1,695,460
1,454,000
1,538,000
1,321;000
7,015,460
Trails
321,155
i
156,870
138,500
.41,500
234,000
892,025
_.,.
Sealcoating
366,5891
..,....
314,808
203,873
174,736
i 1.80,632
1,24_0,638
Intersection Improvemen ts
.._..,,_._�,.._.._.....___.., en
1,925,000
I� 225,000
, 650,000
s 500,000
-
3,350,000
Total Major Street Fund
8,983,144
5,540,
t _. 638 _ ! _..,.._
2,936,373
p' ,36
I 2919,2
1 .,,2 3
2, 735,632
2,
23,115,023
._..,...
The table demonstrates $7,178,900 of City Cost related to State Highways
before the additional $2,500,000 is included bringing the new total to $9,678,900.
Any long-term solution will probably require a review of the City's commitment to
cost sharing on State and/or County projects; with review of the impact related to
timing at a minimum.
If delaying and/or reducing City obligations to State and/or County projects are
options, the tax increase programmed above is probably the only required City
action at this time. In the event the City desires to proceed with State and/or
County projects on the schedule of the existing CIP and TINA study other
revenue sources will be required. The twenty year shortfall noted in the TINA
report is $35 to $50 million or $1.75 to $2.5 million per year. After the $1 million
increase noted above the shortfall remains at $.75 to $1.5 million per year in that
��n
time frame. Doubling the tax increase to $2 million per year would for all
practical purposes eliminate the projected deficits. However, additional cost
increases to projects included in this and future CIP's would also increase the
problem of balancing the CIP's on an on-going basis.
The following chart demonstrates the impact of adding a $1 million additional levy
to property taxes on the 2007 payable average market value house in Eagan.
Attached to this memo is a matrix outlining potential methods of increasing
revenues for the Major Street Fund including both short-term cash infusions and
long-term changes in the revenue stream. The matrix is broken down to
differentiate between potential revenues that are primarily controlled by the City
and those that would require or result from some State action. The estimated
fund balances noted on the matrix are very preliminary and additional work is
necessary to both confirm the dollar amounts and to review other commitments
already in place or contemplated in the future. For example, some of the
General Fund balance is in place for working capital, but not officially designated
as such within the statements. Payment for the newly approved replacement
ladder apparatus for the Fire Department will also require dollars from one or
more of these sources.
The matrix does not include bonding options or any other methods to advance
funding, since they only change the timing and there is no increase in overall
resources available in total.
Further, the matrix does not account for other potential City projects/initiatives
noted in the recently approved City goals that may compete for funding from the
same revenue sources, both long-term and short-term. Since little definitive work
has been completed on these potential projects/initiatives, I am not including any
estimated cost numbers. The preliminary list is as follows:
1. Open space acquisition.
2. Fire stations
3. Fiber project
4. Cedar Grove Redevelopment
5. Retiree health insurance
6. Other public utilities infrastructure
The second activity regarding the development of a policy that addresses long-
term needs and provides the same long-term financial stability that the City has
experienced historically will continue and become formalized upon direction
resulting from this meeting.
Please let me know, if you would like any additional information or if you would
like to discuss any of this material.
qK)
Director dministrative Services VanOverbeke
cc: Director of Public Works Colbert
Chief Financial Officer Pepper
City Engineer Matthys
Transportation Engineer Plath
ja
City of Eagan ma
To: CITY ADMINISTRATOR HEDGES
From: COMMUNICATIONS DIRECTOR GARRISON
Date: March 23, 2005
Subject: UPDATE ON PROGRESS OF TECH WORKING GROUP &
PERSPECTIVES REGARDING NECESSITY OF 149 CONDUIT
You asked that I provide a brief update of the preliminary findings of the Tech Working
Group with respect to priority areas for extending conduit, a fiber master plan, and
specifically the importance of the bid alternate for conduit along the Highway 149
construction route.
Progress To Date
• The Tech Working Group has learned from electrical engineering experts that to
build a successful fiber ring from which to deploy services, it is NOT necessary to
go down every street or to take advantage of every open trench possibility.
• Rather, it is important to identify and have a strategy for taking advantage of
certain key routes and zones that might now or in the future be interconnected.
• Based on expert testimony, it is the belief of the Tech Working Group that
Highway 149 is a key route representing the major line along the eastern edge of
Eagan and the only time this area is likely to be open trench in the next 40-50
years. _ For that reason conduit should be installed there with an eye to the future.
• The good news is, there appears to be no more immediate high profile or high
priority location construction projects in at least the next year that would represent
a missed opportunity if not pursued. As stated later in this memo, that will allow
the City Council, advised by staff and the Working Group, time to make a better
decision on its preferred options.
• Those options will arise as full results are known from industry discussions that
were also directed by the Communications Committee. Per direction, we have
been contacting and meeting with current and potential providers to see what they
might be able to do in concert with the City to achieve our broadband goals.
• To date, high level discussions have been held with'Qwest and Comcast officials
and we are awaiting answers from both about their willingness to extend fiber to
homes and businesses, and whether or not City participation might help extend
fiber the last distance necessary to hook-up a home or business off of the main
line. A similar meeting will be scheduled with Frontier Communications because
it already has a great deal of fiber running through Eagan. An earlier intended
meeting with them had to be rescheduled past March because of schedules
/3
requiring key Frontier personnel to be out of state. We have also re -contacted
Dakota Electric to gauge their willingness to partner
Additionally the Working Group is investigating a European technology to use
sewers as a cheaper way to deploy fiber, and so-called "dark fiber" possibilities
available in Eagan. Dark fiber is installed fiber that has never been lit up, but is
available for lease. It is possible, with long-term leases, that this option may be a
cheaper alternative than installing fiber in certain locations. Costs in these areas,
until one is willing to do a deal, are closely guarded. Even local IT experts calling
for us have not been able to secure the information.
• Because of the city and the Tech Working Group's interest in making sure its
major greenfield -like opportunity in the Cedar Grove Redevelopment District has
the capability for high speed fiber, the RFP for Cedar Grove was modeled on the
specification for conduit along Highway 149. Submitters can choose to only
install conduit or work directly with a provider for fiber optic service. Initial
responses are due back April 30.
• Lastly, we have updated the original fiber estimates from Dynamic City for a city-
wide build and a "Plan B" alternative.
Next Steps
I think you can see that while several discussions and requests for infonnation are in
progress, we await the final answers that will allow the Tech Working Group to come
back to City Council and say, "Here are the various options, the expected price tags, and
the pros and cons." The Council will then be in a position to opt for a desired alternative,
that can be fully engineered and priced as part of a master plan.
Until we know who is a willing potential partner, what they might be willing to do for us
and with us, and what they would expect us to pay for, the Council is not yet in a position
to choose from those alternatives. We would expect to have those initial "back of the
envelope" answers and prices no later than mid-June, and sooner if possible. We have
found that getting answers, particularly from the incumbent providers during the current
legislative session which is expected to last through May, has been difficult at best.
When we do get those answers, I'm confident that we can proceed quite quickly for
Council feedback and questions, and settle on a preferred alternative to fully master plan.
It should be noted than it may be necessary to secure an outside firm with the proper
electrical engineering expertise to produce the master plan called for by the Council when
it adopted its 2007-08 goals in February regarding the installation of high speed fiber
optic broadband.
Please let me know if you or the Committee would like any further information.
'r
City of Evan Memo
To: City Administrator Hedges
From: Director of Administrative Services VanOverbeke
Date: March 23, 2007
Subject: Fiber Conduit Financing
You asked that I provide this memo outlining the background on previous City fiber
related construction in Eagan and possible funding alternatives, if the fiber conduit
alternative is approved with the Highway 149 project bid award.
Background
City Use
In cooperation with ISD 196, a number of other cities, Dakota County, and the State,
Eagan participated in the construction costs related to the ISD 196 fiber upgrade project.
This project included fiber installation to Fire Stations 3 and 4, City Hall, and will provide
for the City's primary connection to the State through the Western Service Center in
Apple Valley. In the primary loop the City uses fiber strands within the ISD 196 conduit.
The City has sole ownership of the conduit and fiber specific to its own facilities. The
City has paid $169,062.90 from its Cable TV Retained Franchise Fees Fund for this
installation.
Entrepreneurial
In addition, to take advantage of lower construction costs the City Council chose to have
empty conduit installed through the same 11.5 mile loop during the same construction
activity. That conduit is .under the sole ownership of the City and was installed at a City
cost of $242,227. Construction costs were paid through a non capitalized enterprise
fund which has a 12-31-06 cash deficit of $248,187. The dollars have been borrowed
internally and are expected to be recovered in the future through the use/sale/lease of
the conduit which at this time remains undefined pending additional study. This study
continues as part of the City Council 2007-2008 goal of "Pursuing world class internet
speeds, connectivity, and access to all Eagan residents and businesses by developing a
master plan, including finance options and policies, for the installation of high speed fiber
optic broadband."
Funding Alternatives -Highway 149 Conduit
The installation and funding issues related to this Highway 149 conduit option are
consistent with the earlier dilemma faced by the City at the time of the ISD 196 project.
The first question being whether or not the risk related to a City investment of $151,000
to maintain future conduit use options in the Highway 149 corridor is reasonable.
In general, the City is trying to balance a fixed' cost today against an uncertain future
benefit.
Installing the conduit at this time effectively starts the risk clock today. The pro to that
choice is a lower cost while the con is a sunk cost that generates an asset with a wide
range of potential future value ranging from enormous to little or at the extreme none.
Not installing the conduit at this time effectively delays the risk until a future time. The
pro to that approach is today's cost avoidance and a more precisely defined
need/project at some future time. There is also the possibility that the future could
potentially show no need at all, thereby avoiding all of the construction costs. The con is
the potentially much higher construction cost in the future, although higher costs could
potentially be more than off -set by reductions with a more defined project.
Unfortunately, I am not aware of a straight forward method to quantify the risk/reward of
the choices that would assist in determining the best course of action. The goal related
to internet access, speed, etc. results in the City moving into uncharted territory. The
Technology Working Group is continuing to help define the options for the course and as
their work continues an overall financing plan can be incorporated. Staff is not aware of
any other pending City construction projects where this same install conduit / don't install
conduit question will be raised before the more comprehensive policy matters can be
decided.
If the City Council answers this first question in the affirmative and chooses to proceed
with construction at this time, the payment should probably be handled in the same
manner as the 11.5 mile City owned (entrepreneurial) conduit in the ISD 196 loop. The
payment would be made from the enterprise fund with dollars advanced from the City's
investment pool and interest charged. The challenge with this approach is that obviously
the enterprise fund will incur carrying costs and will eventually need to be capitalized. If
the enterprise fund does not become self sustaining, a backup plan of charging the
Cable TV Franchise Fees Fund could cause a significant drain on its resources and any
tax supported capitalization may not look attractive.
Please let me know, if you would like to discuss this information or if you would like any
additional information.
�-7.ho
Direct'l
Administrative Services
cc: Director of Communications Garrison
Chief Financial Officer Pepper
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
III. UPDATE ON NICOLS RIDGE CONCEPT REVISION PROPOSAL
ACTION TO BE DISCUSSED:
l.) Provide preliminary direction relative to negotiations with Lennar regarding the Nicols
Ridge TIF development agreement for presentation to the City Council as a whole.
FACTS:
• Lennar approached the City in late 2006 requesting a concept review for a modified
redevelopment scenario for the Nicols Ridge that would replace the remaining
condominiums with additional townhouses, resulting in a net decrease in total units from
230 to 175.
• The developer is requesting that the City consider waiving TIF liquidated damages in the
development agreement for the default circumstance and consider selling the City
acquired properties to the developer at a reduced price to permit them to cover costs and
achieve a return.
• This request was heard by the Council at its February Work Shop and the matter was
referred to the Finance Committee.
ATTACHMENTS:
Enclosed on pages R through is a copy of a memo that provides background
information on the proposed concept revision along with copies of the actual layout
revisions.
17
FINANCE COMMITTEE
March 29, 2007
III. NICOLS RIDGE CONCEPT REVISION
ISSUE:
Lennar Corporation, the developer of the Nicols . Ridge project in the Cedar Grove Redevelopment
District,.has completed the townhouse units anticipated in Phase I of the three phase project and has
constructed the first sixteen of the townhomes in Phase 1I. However, in response to the downturn in the
condominium market, the developer chose not to continue with its condo product after the first of four
buildings was completed in Phase 1. The completion date for Phase I passed at the end of 2006 and the
developer is technically in default at this time.
Lennar approached the City in late 2006 requesting a concept review for a modified redevelopment
scenario for the Nicols Ridge that would replace the remaining condominiums with additional
townhouses, resulting in a net decrease in total units from 230 to 175. In addition, the developer is
requesting that the City consider waiving TIF liquidated damages in the development agreement for the
default circumstance and consider selling the City acquired properties to the developer at a reduced price
to permit them to cover costs and achieve a return.
Due to competing agenda items and the holidays, the request was heard by the Council at its February
workshop and the matter was referred to the Finance Committee.
Within the past week, Lennar has contacted staff proposing to discuss an alternative that would introduce
a development partner that may take over some portion of the condominium obligations for the project.
Nonetheless, the project is technically in default at this time and the developer indicates that it will still be
proposing a reduced number of condominiums for the project, so staff will want to provide an overview
of the situation to the Finance Committee and receive direction with respect to the next steps to be taken
With the developer.
BACKGROUND:
The TIF development agreement with Lennar called for the company to construct the 230 housing units in
three phases over a specified period, in exchange for the City to use TIF proceeds to pay for the special
assessments for the public improvements serving the site and to pay for the cash parks and trails
dedication for the units. Failure by the company to meet the unit counts by the phase completion dates
results in financial liquidated damages on a per unit basis.
The Council response to the presentation of the Lennar request was that the alternative townhouse
product the company proposes for the remainder of the project appears consistent with the product
that has been constructed to date and would be a reasonable alternative to the previously proposed
townhome units, provided they continue to meet the finish material standards set for the
redevelopment area and the project.
Councilmembers indicated, however, that the City is not obligated to insure a profit for a developer
and that financial considerations would need to be reviewed in more detail to determine whether to
require performance under the development agreement, negotiate a revised agreement, declare the
project in default or take other action relative to the project.
To date, Lennar has constructed 62 units, including 46 of the 88 units called for in Phase I and 16 of
the 66 units called for in Phase II.
The company has presented two base scenarios. In the first, they would propose to eliminate the
remaining condo buildings and replace them with an additional 57 townhome units to be constructed.
on property the company owns, which represents the remainder of the Phase I property and, the Phase
II property. This would result in a total of119 Lennar units in roughly the area that had been planned
for 154 units. Under this scenario, Lennar would dispose of the one property on the western portion
of the site that it currently owns (former Gonyea parcel), presumably by sale. Because of that
property's shape, it can only be developed effectively in combination with the four City owned
parcels on that end of the project area. The company analysis indicates that none of these scenarios
generates a profit, even if the full price of the price of the Gonyea parcel ($563,000) is recovered.
Under the second scenario, Lennar would prose to complete development of the site through the
construction of 113 additional townhomes for the reduced total or 175 housing units instead of 230.
The company represents that it only sees scenario #9, in which it would achieve a 4% return, as
financially viable, which assumes that the City would sell its parcels to the company at 20% of the
price agreed upon in the development agreement and waive the TIF liquidated damages in the
agreement for failure to construct the total number of units required and failing to construct a
requisite number of units by the phase deadlines. The Lennar profit of $1 million would depend on
the City donating an additional $1.14 million in land value to the project and provide the TIF benefits
as if all 230 units were built in the timeframe originally agreed to.
In either the 57 unit or 113 unit scenario, the reduction of the number of units and the delay in their
construction will result in reduced TIF proceeds available to support the TIF assistance to the project
and the additional proceeds that were expected to support activities in the Core Area of the
redevelopment.
Staff and the City consultants have reviewed the financial information presented to date, starting
instead with the scenarios under which the company would be obligated to pay the liquidated
damages in the agreement and/or truncate its development by transferring the Gonyea parcel to the
City in consideration for a renegotiation of the development agreement.
While the financial impacts of the alternatives will shift under the revised proposal the developer is
expected to present with the new condominium partner, the current analysis suggests the following:
• The shortfall of 42 condominium units at the end of Phase I translates to a TIF penalty of
$290,915 today. Depending upon the terms of a renegotiated development agreement, it is
likely that the developer would not complete enough units by the end of 2007 to meet the
Phase Il unit count and ultimately they would not meet the overall unit count. Therefore, in
any alternative scenario, the issue of additional liquidated damages or reduced City assistance
would need to be defined.
• The developer is postponing the completion of each. of the phases by one year, which would
result in TIF liquidated damages for all phases unless the agreement is renegotiated.
• The valuation assumptions in the developer's scenario comparison appear very low. Most
significantly, the analysis is based on am'average home price of $220,000, when the
townhome units constructed to date have averaged between $280,000 and $290,000. To the
extent that the proposed alternative townhome product is intended to address marketing
challenges associated with the original product (living space on entry level rather than split i
entry), it is unlikely that it would sell at a 25% discount compared to the original units. Even
31
if the units were to sell for that amount, the $17,600/unit pretax income appears to be love for
a production builder. Staff has asked for a clarification of the difference.
• The use of pretax comparisons does not provide a clear picture of the developer's financial
position. The Council has appropriately indicated that the City is not to be expected to cover
developer risk. To the extent that the developer is making representations regarding
perceived returns as part of its decision making process, staff has also asked that the pretax
analysis be supplemented with an after tax comparison of the scenarios, since tax benefits are
one of the considerations in property development. Between the presentation of only pretax
calculations, the low comparative selling price of the units and the apparent pretax return per
unit used in the calculations, the gain/loss calculations cannot be confirmed. Staff has asked
for after tax comparisons of the scenarios.
Pending the presentation of the alternative proposal with the condominium partner, staff has
identified the following alternative directions:
• Negotiate the completion of the site on the basis of the original unit types and counts with
Lennar and its condominium partner.
• Negotiate the completion of the development of the eastern portion of the site with Lennar
under terms favorable to the City, including the transfer of the Gonyea parcel to the City for
completion by an alternative development partner.
• Negotiate the completion of the entire site development with Lennar for the reduced unit
count under terms favorable to the City.
• Declare the developer in default and negotiate the transfer of all remaining undeveloped
property to the City for development by an alternative development partner.
• Other alternatives to be identified through the discussion.
ATTACHMENTS:
• Original project site plan.
• Lennar request for revised concept plan.
• Proposed project site plan.
• Property ownership map.
• Table illustrating current unit count and TIF liquidated damages.
• Lennar comparison of project scenario.
COMMITTEE RECOMMENDATION OPTIONS:
1. Provide preliminary direction relative to negotiations with Lennar regarding the Nicols Ridge TIF
Development Agreement.
Z. Other:
� a
ti z
7 t i
ZN z
VV
OC o ro •• _ �,
az
UV �r�� tl tl ti vq ti pp
1 '� C?C �.?C O q33 b o •1 U py m WS'�fi ° WZ�6 U
y0. �0. h p, W W h ',+•I , - '��1 oa a` 0Aaf a` SW .3k
G Icy i n�I
V�J
A.y V V
8
F �
E
sz
ll:,
Thr
--------- ---
--------------------------------------
--
---� _
LENF./�►RW
Jon Hohenstein January 23, 2007
Director of Community Development
City of Eagan
3830 Pilot Knob Road
Eagan, MN 55122
Re: Nicols Ridge
Jon,
Thank you for meeting with Marc Anderson and myself last month. I realize that the time period just
before the holidays was a busy one and we appreciate your finding time in your schedule for us.
As we discussed at the meeting, we would like the City to undertake a Concept Plan Review for a re-
cast of the remaining Nicols Ridge property. We no longer offer a condo product and would be building out
the Nicols Ridge development using our `Colonial Manor'(back-to-back townhomes) and `Colonial Manor
Split'(rowhome) products. The site plan for the re -cast is enclosed along with elevations of the product. I
have supplied you with the addresses of several locations in the area where the Colonial Manor buildings
are located so that you and /or the staff (EDA or Council) can view the finished product.
The result of this product change is that we would be unable to meet the total density numbers which
were used in the TIF and Development agreements currently in place. The original number was to be 230
units, whereas our revised plan calls for a total of 175 units. We have updated the chart that we shared with
you at our meeting, copy attached. The homesite count was adjusted up by one to reflect the site plan. We
would ask that no penalties be imposed due to the decrease in density. In addition, we would ask that the
sale price of the four remaining parcels which we would need to acquire from the City for completion of
the project be reduced to an amount which would allow for the project to be financially feasible, that
amount being 21.6% of our current option price.
Our attached chart includes thirteen iterations. Per your request we've provided detail on'two versions
(Versions 3 & 9), attached. Please understand the attached pages contain proprietary and extremely
confidential land modeling data which must NOT be considered public information and should be
distributed on a `need to know' and `eyes only' basis. If this is not possible, please return all copies. Of the
thirteen iterations only Version 9 works for Lennar to make the project financially feasible. This takes our
usual 8% NPI floor down to 4.04%. Since we already own some of the land, it gives us a good case with
Corporate to obtain their blessing.
Because time is of the essence, we would request that the City EDA discuss this matter at their February
meeting. We would appreciate a `first blush' response southat we can continue (or not) our planning
process.
If our proposal is acceptable, we would like to be able to begin construction on the first Colonial Manor
building this spring/early summer. The build out of the remaining Nicols Ridge area would likely be done
in three phases. Phase One this year. Phase Two in 2008. The final Phase in 2009.
In addition, we'd like to thank you for forwarding the information on the overall Re -development District.
As indicated in the meeting, we may have an interest in participating in the Master Development, at least as
far as any residential component is concerned.
935 East Wayzata Boulevard, Wayzata, MN 55391 e Phone 952.473.1231 c Fax 952.473.7401 • www.lennar.com
We at Lennar have enjoyed our relationship with the City of Eagan and hope to continue it with the
completion of Nicols Ridge,
Please call myself or Marc Anderson with any questions you or your consultants may have. (Marc is the
financial genius, not me)
Thank you.
Steve Grohoski, Project Manager
Enclosures
°p;lti.
AR
I � I I I, 4�'I, ; rl'4i r4 � ��. Vit;} a k tr13�,4'4¢'41 � ,: ,, � \±•l:4YW `
I I Y•I i � ���� �<�ll kt z�,f�� Yy
Irl�l,l 4 6)r "'155('Sfilfi�l'TM-K, Sd Iti t117Eav �1i� t I y�� <
• i I' i ya �RI i RU t
1, lllh j
, I;Y, ,�+; 11t`'1W,ry,,� � .c. � _ #tRS �yr�1'Sl•• ' tc , \i''� \. �" C S1, ' , 4vr � � ttl
a I N�•'Y'r tJr1 \( Nr7.rtrk� 76d, :Mri� l+� � x2`�`{, n rYk\v 47rA.
l4 rl Lc�tl ti i jy i. 1,
' r II l i `% _,,; r ' I• : ,, I, ' :.fit r . � + •-.
fav
➢I ,li�;C�C�`�y,��7� IIrI ::i , 2% r, �4„� 5 �I i`+(24 ,t ``�rt �+��II / t••. `,
• i r �Iu Itek /Si r
Am
>%t
-1,. Frry ,.{'W�'Pr '� F-,:aoo�.,�l -++v tl�, f f :.tf r r• ,_ \,., 'r,
:
! F'!S RRJp � .rl�I ! � �-• 1� rl, N�, • •. \
},k iPf r'�"z �t r ^I E t: �• i ref 1, . .
4 tr'ryIkS9 .�,+•r, r,l I r�,
f I 111 1 f 6 �i L
n'r�
i 1• I 1 a... ltr�i r: y
l• ! v w,ir t r'
r
1.
tll. h iat�' i7l'�• �. ly -.. i ,nll �� i)}' ' + ,, I^rr�."r a i �` .. .r I
s" � r rz �� �� �'•i`x YI, 1p IS s, t r-�I� r r }
. _L,...
I �r f , �i I t � �. ,, 1 • -,�r `�^'•'; r i
r
f �
r I �v � 11, I I � 1J'� r%i, J tti •�6 �u,�l (�L� .
i t 14� y (�a � aq r r V r},a lr �•"+�
4 E
Ip,tll1�;
r
'Stl( +lr
I J }I! 4.11
I �1.: AL
L. rr.i, , I,,''�J , R 1. V1 <:;:,I i.lI',I
��� � e A � �
Y ��
Lic' "..
1 �-
:a f4 --
6 -Mar -07
Delta Development:
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase: .
Dollar Penalty 23 201,517 507,286 708,826
Phase I
Phase II
Phase III
Total
Townhomes
32
16
28
76
Condominiums
56
42
56
154
Total
88
58
84
230
USHomes:
Phase I
Phase II
Phase III
Total
Townhomes
32
24
20
76
Condominiums
56
42
56
C7154
Total
88
66
76
230
Totals are verified in the contracts. The
type breakdown is arrived at by deduction.
Constructed by USHomes:
Phase I
Phase II
Phase III
Total
Townhomes
32
16
0
48
Condominiums
14
0
0
A�dltional Proposed u � �` 42 - 15 � 0 _ r-
Totalj
88
_
31
0
119
Shortfall in Total:
0
35
76
111
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase: .
Dollar Penalty 23 201,517 507,286 708,826
Constructed by USHomes (57 units and no Phase III):
Phase I Phase 11 Phase III Total
Townhomes 32 16 . 0 32
Condominiums10 14
Atlditional Proposed 0 r. x 29;' �g
Total 46 45 0 75
Shortfall in Total: 42 21 0 63
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase:
Dollar Penalty 290,915 120,905 N/A 411,820
Constructed by USHomes (113 units respread over phases, but no change in phase deadlines):
Phase I Phase 11 Phase III Total
Townhomes 32 16 0 32.
Condominiums 14 0 0 14
MOMoposed A ,b 0
Total 46 45 28 103
Shortfall in Total: 6880 5713 0 12593
Liquidated Damages 6,926 5,758 6,675
per Unit by Phase:
Dollar Penalty 290,915 120,905 320,386 732,206
ti
O
O
a
N
T
0
cd
0
O 0 0000
CO CD N
O o0 co
CT r 0000 O
N 00 �- C7> O
T T
0 co co
> 2 = _
a) E b , LO
T
c c I., -c o
_ O O _
Ern
o Z Z
c
U O
QO X 0
Z (�
(D
E a -
O'
Z
0)
Q
Y
LJ
0-
CD
LO
t~
O
O
cN.
N
T
0
0
0
OOO
LO(?
co
NNN
NU
NU U U
r
rN
r
LoLOco
(D
N
Q
p Q iZ
L
L
4-
'+- O O
cd
cCf
N
O
O
O
c
C N
N
O
-
fn
2)
C)
0
0 0 0
0
0 0 0
O
0
O Q
Q
Q
U
i�
Ln
U
I�
Lo
Ir -r
0
0
0
cd
L
cd
L
0
2) 0 0
0
o
O o
O
o
>
O
O
CO as W
z
U
U RS
°
�
o
N O
co
C >, >1
CW
Y)
0
0 0 0
c6�
o(c�
z
o
w
2
-0 -0 •0
4-
o
O
C/)U)tgc°
Cli
(Z
J
J
J
N
CM LC)
>
>
>
>
>
>
>>
>
d
u7
—
N
mNN
C7
O
co
It
N�
CD
o
co
r
co
,
wE CY)
IL vLOOa
r
O
c
�
C
��O C\ p
C
(D
mo
o
co
O
co
N
Ln
N N
z
r
T
C\
LL. as
N
O
N
O 10
o
o
U)O
w
O 0 o
z�zy
zz
y°'
z
j
zj z
icy
a
m
m
m
m M
Co
M
T
T
T
T T
T
T
u-)
'^
LO
'^ LO Lo
0
L
a
Cl
0- C2 C2
O
0
0
0 0 0
'
o.
a
a
aaQ
o
r-)
0
to 0 0
0000000
w
wwwww
0
0
0
0 0
0
0
Z
Z
Z
Z Z Z
CL
CZ
cl
C2
C2
L2
Q
O
O
O
O O O
0
0
0
N
0 0
0
0
O
0
0
0 0 0
41
Q.
c
O
c
o
c
o
c c
o
c
o
c
c
c
o
c
c c c
O o
0ccnc))VcicoccoU)
� /o•�
� /o
/0
U)
ccnc/c)c)„C!
� /0
� /0ry
G
G
G 2
C
�
G
C
G
2 2 2
U
U
U
U U
U
U
U
U
U
U 00
U
U
U
U U
U
U
U
U
U
U U U
'O
'O
•D
'D "t7
t3
'O
'O
'O
•a
•a 'a "a
L
L
L
L L
L
L
L
L
L
L L L
C
c
c
C c
c
c
C
c
C
c c c
O
N
N
CU N
N
N
CD
4)
N
N N 4)
0
O 0 0000
CO CD N
O o0 co
CT r 0000 O
N 00 �- C7> O
T T
0 co co
> 2 = _
a) E b , LO
T
c c I., -c o
_ O O _
Ern
o Z Z
c
U O
QO X 0
Z (�
(D
E a -
O'
Z
0)
Q
Y
LJ
0-
CD
LO
t~
O
O
cN.
N
T
Meeting Notes
Finance Committee Meeting
March 29, 2007
Attendance:
Mayor Maguire, Councilmember Carlson, City Administrator
Hedges, Director of Public Works Colbert, City Engineer Matthys, Director of
Communications Garrison, Director of Community Development Hohenstein, and
Director of Administrative Services VanOverbeke.
I. Agenda/Meeting Notes
City Administrator Hedges opened the meeting at 7:45 a.m. requesting feedback
on the Finance Committee meeting notes for the March 6, 2007 meeting.
Members responded that the notes were appropriate to forward to the full City
Council. Administrator Hedges also outlined the need to keep the full Council
informed of all of the actions resulting from the various committee meetings.
II. Review TH149 Bids and Bid Alternate for Fiber Conduit
The Finance Committee asked that the Highway 149 bid be discussed before the
fiber conduit alternate since the conduit could not proceed without the base
project. City Administrator Hedges asked that Director of Public Works Colbert
or City Engineer Matthys review the results of the bid opening. Director Colbert
reported that the bid news was favorable with the results being $1.7 million less
than the most recent estimate and that only $120,000 separated the three lowest
bidders. Mr. Matthys explained spread sheets showing the results of the bidding
against earlier estimates and the impact on the 5-year CIP projections.
The results of continuing discussion with MNDoT were explained and it was
noted that MNDoT is agreeable to providing inspection services on the project at
no cost to the project. This should generate approximately $450,000 to $500,000
in total savings, although the net savings is probably closer to $300,000 since
Bonestroo will need to continue to be involved in certain aspects of the project as
they completed the design and know the easements, etc.
Historically, the City participation on these types of projects has been in the
range of 10 to 20% of the total cost compared to the +35% on this project;
however, today the determining factor is more who initiates the project
demonstrating the greatest desire to have it completed. In response to a
question, it was noted that Inver Grove Heights has not been asked for a position
on accepting the bids and what their position is on honoring the agreement in
place with that City. Finance Committee members directed that Eagan is not to
absorb any costs that are the responsibility of Inver Grove Heights.
General consensus was reached that the City has been somewhat effective in
getting MNDoT on board and that they would follow through on the revised
commitment. Mr. Matthys suggested that a new agreement for the in kind
services would be in place before the work begins, but not before the contract is
awarded. Per Russ delay of the acceptance of the bids would result in additional
costs of approximately $750,000, if the project extends over the winter. He noted
that this project should not be susceptible to a large number of change orders
due to the tight plans and specs reflected in the limited comments from
contractors. Based on the available information, the Finance Committee is
recommending to the full City Council that the bid be awarded and that the
project proceed at this time. Assuming a contract award on April 5, 2007,
construction should start the end of April or the first part of May.
The financial impact of this project will be discussed as part of the CIP review
scheduled for the May 8 Special City Council Meeting.
After additional discussion about the actual bid award and the bidder qualification
system, the Finance Committee directed staff to proceed with the independent
review and to recommend the award of the bid to the lowest qualified bidder to
the full City Council.
Regarding the conduit, in response to the overall concern about laying out money
without knowing where revenues will be coming from i.e. a complete business
plan, Director of Communications Garrison provided background on the option of
installing conduit in the Highway 149 corridor while the road is under
construction. Given the combination of the desire for bandwidth capacity and
speed, fiber will probably be a component of any subsequent business plan,
although certain elements may change with new technology. It was the
conclusion of the Eagan Technology Working Group that while not every
roadway constructed generates an opportunity for a high speed backbone,
conduit in the Highway 149 corridor is an important component of any plan.
Timing is important since MNDoT says Highway 149 will not be open or torn up
again for 40 ? 50 years. The most conservative business plan at this point is to
install this strategically located conduit in the City and to sell it to the private
sector to recover the base investment. This is the same logic applied when the
decision to proceed with installation was made for the entrepreneurial ISD 196
City loop. Development of the business plan will explore other options in addition
to this most conservative approach.
Director Garrison noted the continuing attempts to have discussions with Quest
and Comcast regarding their potential interest in more fiber. After deliberation,
the Finance Committee determined that at this point it would be prudent to install
the conduit, since there is the opportunity to cost share with the larger project.
The rest of the ?whole picture? will come in incremental stages and will allow for
the establishment of priorities. The installation is to be funded in the same
manner as the 11.5 mile City owned (entrepreneurial) conduit in the ISD 196 loop
from the newly created enterprise fund. The new fund will require internal
borrowing until such time as it is capitalized through future revenues with the
parameters to be determined as part of the business plan to be developed.
III. Update on Nicols Ridge Concept Revision Proposal
Director of Community Development Hohenstein presented background
information regarding inquiries from Lennar (USHomes) about the possibility of
requesting modifications to the approved development agreement for
construction of housing units in the Cedar Grove Redevelopment TIF District.
The Finance Committee is interested primarily in maintaining total unit counts
and valuation for the area. Staff was given direction to continue to meet with
Lennar officials to solicit more information and to work out potential mutually
beneficial solutions. Members reiterated that there is a housing construction
correction taking place, but the overall market is not that bad and the City has no
obligation to guarantee developer profits.
Director Hohenstein noted that the deadline for responses to the Cedar Grove
Redevelopment RFP has been extended to April 30, 2007 to allow respondents
to take advantage of the information to be provided in the market study that is
underway and due to the City on April 10.
Agenda Information Memo
March 29, 2007 Finance Committee Meeting
I.AGENDA ADOPTION
a.Review meeting notes from 3/08/07 Finance Committee meeting
ACTION TO BE DISCUSSED:
No action is needed. The enclosed meeting notes are for the review of the committee.
FACTS:
?
Per the request of the City Council, meetings notes are being taken at each City
Council standing committee meeting in order that the City Council can review staff?s
understanding of the discussions and recommendations made at each of the
committee meetings.
?
The Committee meeting notes will be forwarded the City Council after the committee
has had the chance to review the notes.
ATTACHMENTS:
?
Enclosed on pages ___ through ____ are the meeting notes from the March 8, 2007
Finance Committee meeting.
To:
City Administrator Hedges
From:
Director of Administrative Services VanOverbeke
Date:
March 23, 2007
Subject:
Fiber Conduit Financing
You asked that I provide this memo outlining the background on previous City fiber
related construction in Eagan and possible funding alternatives, if the fiber conduit
alternative is approved with the Highway 149 project bid award.
Background
City Use
In cooperation with ISD 196, a number of other cities, Dakota County, and the State,
Eagan participated in the construction costs related to the ISD 196 fiber upgrade project.
This project included fiber installation to Fire Stations 3 and 4, City Hall, and will provide
for the City?s primary connection to the State through the Western Service Center in
Apple Valley. In the primary loop the City uses fiber strands within the ISD 196 conduit.
The City has sole ownership of the conduit and fiber specific to its own facilities. The
City has paid $169,062.90 from its Cable TV Retained Franchise Fees Fund for this
installation.
Entrepreneurial
In addition, to take advantage of lower construction costs the City Council chose to have
empty conduit installed through the same 11.5 mile loop during the same construction
activity. That conduit is under the sole ownership of the City and was installed at a City
cost of $242,227. Construction costs were paid through a non capitalized enterprise
fund which has a 12-31-06 cash deficit of $248,187. The dollars have been borrowed
internally and are expected to be recovered in the future through the use/sale/lease of
the conduit which at this time remains undefined pending additional study. This study
continues as part of the City Council 2007-2008 goal of ?Pursuing world class internet
speeds, connectivity, and access to all Eagan residents and businesses by developing a
master plan, including finance options and policies, for the installation of high speed fiber
optic broadband.?
Funding Alternatives-Highway 149 Conduit
The installation and funding issues related to this Highway 149 conduit option are
consistent with the earlier dilemma faced by the City at the time of the ISD 196 project.
The first question being whether or not the risk related to a City investment of $151,000
to maintain future conduit use options in the Highway 149 corridor is reasonable.
In general, the City is trying to balance a fixed cost today against an uncertain future
benefit.
pro
Installing the conduit at this time effectively starts the risk clock today. The to that
con
choice is a lower cost while the is a sunk cost that generates an asset with a wide
range of potential future value ranging from enormous to little or at the extreme none.
Not installing the conduit at this time effectively delays the risk until a future time. The
pro
to that approach is today?s cost avoidance and a more precisely defined
need/project at some future time. There is also the possibility that the future could
con
potentially show no need at all, thereby avoiding all of the construction costs. The is
the potentially much higher construction cost in the future, although higher costs could
potentially be more than off-set by reductions with a more defined project.
Unfortunately, I am not aware of a straight forward method to quantify the risk/reward of
the choices that would assist in determining the best course of action. The goal related
to internet access, speed, etc. results in the City moving into uncharted territory. The
Technology Working Group is continuing to help define the options for the course and as
their work continues an overall financing plan can be incorporated. Staff is not aware of
any other pending City construction projects where this same install conduit / don?t install
conduit question will be raised before the more comprehensive policy matters can be
decided.
If the City Council answers this first question in the affirmative and chooses to proceed
with construction at this time, the payment should probably be handled in the same
manner as the 11.5 mile City owned (entrepreneurial) conduit in the ISD 196 loop. The
payment would be made from the enterprise fund with dollars advanced from the City?s
investment pool and interest charged. The challenge with this approach is that obviously
the enterprise fund will incur carrying costs and will eventually need to be capitalized. If
the enterprise fund does not become self sustaining, a backup plan of charging the
Cable TV Franchise Fees Fund could cause a significant drain on its resources and any
tax supported capitalization may not look attractive.
Please let me know, if you would like to discuss this information or if you would like any
additional information.
____________________________
Director of Administrative Services
cc: Director of Communications Garrison
Chief Financial Officer Pepper
To: THOMAS L HEDGES, CITY ADMINISTRATOR
From: THOMAS A COLBERT, PUBLIC WORKS DIRECTOR
Date: MARCH 23, 2007
Subject: FINANCE COMMITTEE MEETING ? MARCH 27, 2007
On February 20, 2007, at the direction of the City Council, the Finance Committee discussed the
local financing obligations of City Project 778 (TH 149 upgrade). The discussion focused on the
anticipated significant escalation in local cost participation due to state and federal contribution
caps and the related impact on the City?s Major Street Fund (MSF). The total local obligation of
~$16.6 million was based upon a pre-bid construction cost estimate of $11.2 million (base bid).
The TH 149 cost estimates presented to the committee on February 20 indicated a resulting MSF
deficit of about $2.5 million at the end of the currently approved 5-year CIP (2011). The
Finance Committee discussed avoiding such a deficit by the reduction/elimination of projects in
the current CIP?s remaining four years (?08-?11) or by finding additional funding for the MSF.
The significance of the potential impacts to the currently approved 5-year CIP (as well as other
major pending financial obligations) and the challenges of alternative funding options required
further analysis based on firm bids for the Committee?s consideration of any final
recommendations to the City Council.
TH 149 BIDS
On March 22, the bids for Project 778 were opened. 16 bids were received from a variety of
heavy construction contractors. All but one of the bids were well below the Engineer?s Estimate
($11.2M). Both the number of bidders and the competitive bids submitted indicate a very strong
interest in securing this contract early in this construction season, possibly due to limited
availability of heavy construction work. The current competitive bidding climate likely offset
the effects of the recent industry cost escalations.
The apparent low bid is $9,474,728.98. This bid is $1.73 million below the Engineer?s Estimate
used in previous financial analyses. The following reflects a revised cost participation summary
based on bids received.
Finance Committee Memo
February 15, 2007
Page 2
Source Feas. Rpt Est. CIP Budget Final Design Est. Bid
Federal Funds $5,500,000 $6,094,000 +11% $ 6,094,000
MnDOT Funds $2,140,000 $2,256,000 + 5% $ 2,256,000
Inver Grove Hts. $ 220,500 $ 803,197 +264% $ ~729,095 (+/-)
Eagan or ? $3,310,860 $5,230,000 $7,411,168 +124% $ ~5,760,000 (+74%)
TOTAL $11,171,360 $16,564,365 + 48% $14,839,095(+33%)
IMPACT ON MSF BALANCE
While the previously discussed pre-bid estimate was projected to increase the MSF deficit to
about $2,500,000 by 2012, the actual bid would reduce that deficit to about $750,000. As
previously noted, this projected deficit may substantially increase further as other future
programmed projects are re-estimated with the next CIP update due to continued industry cost
escalations. Public Works staff is currently working on the 2008-2012 CIP and will have a
variety of project reductions and alternative funding options, and their related implications, for
the Council?s consideration at a May workshop. Unfortunately, this information will not be
available prior to the April 5 TH 149 bid award consideration.
FIBER OPTIC CONDUIT ALTERNATE BID
In response to the Council?s stated goals, the placement of six conduits for future fiber optics
installation was included as an alternate bid as part of the TH 149 bid package. The apparent
successful low bidder had a bid of $151,023 for the installation of these conduits along TH 149
from TH 55 to Wescott Road, including the crossing of the CP Rail railroad tracks at Yankee
Doodle Road and Wescott Road. The source of funding for the placement of these conduits is
unknown to date. The Council?s consideration of contract award for the TH 149 upgrade will
also need to consider this alternate bid and the funding source for the conduit placement.
While the results of the TH 149 bid opening were positive, the remaining financial burden for the
City of Eagan is still overwhelming in relation to our long term local transportation needs.
I am always available to help identify feasible options and/or modifications to our future
construction program or alternative funding scenarios to provide a balanced and deliverable
transportation infrastructure for our community and intend to present such information at the
May workshop.
c: Gene VanOverbeke, Director of Administrative Services
Russ Matthys, City Engineer
Tom Pepper, Chief Financial Officer
To:
City Administrator Hedges
From:
Director of Administrative Services VanOverbeke
Date:
March 2, 2007
Subject:
Major Street Infrastructure Funding Options
It is my understanding that staff was directed to undertake two activities resulting
from the Finance Committee meeting of February 20, 2007.
First, a menu of options is to be presented to pay for the significant cost increase
($2.5 more than budgeted in the 2007 CIP) to the City?s obligation for Highway
149. I believe we might have created the misunderstanding that dollars are not
available in the Major Street Fund to actually make the payment. The dollars are
available and can be used for this obligation. The deficit that is created is in the
5-year CIP currently programmed through 2011. For all practical purposes there
is no short-term problem in proceeding with the project and in making the
payment from the Major Street Fund. The problem is long-term in getting
projected revenues and expenditures into balance within future CIP?s. That will
probably require a combination of new revenues and reduced expenditures.
The following table illustrates the five year CIP including the additional $2.5
million in Highway 149 costs added in 2007.
Major Street Fund 2007 -- 2011 CIP Presentation
20072008200920102011Totals
Beginning Cash Balance$ 11,461$ 1,921$ (1,677)$ (2,670)$ (2,846)$ 11,461
Additons:
Property Taxes 1,188 1,188 1,188 1,188 1,188 5,940
Municipal State Aid 755 755 755 1,555 1,555 5,375
Total Receipts 1,943 1,943 1,943 2,743 2,743 11,315
Subtractions:
Financing Obligations 11,483 5,541 2,936 2,919 2,736 25,615
Total Expenditures 11,483 5,541 2,936 2,919 2,736 25,615
Ending Cash Balance$ 1,921$ (1,677)$ (2,670)$ (2,846)$ (2,839)$ (2,839)
Using the increased 2007 costs, adjusting the 2007 tax levy to the actual amount,
and including a 5% increase in the tax levy for the years 2008 through 2011
results in the following CIP Presentation:
2007 -- 2011 CIP With 5% Tax Increase and $2.5 Million Additional 2007 Costs
20072008200920102011Totals
Beginning Cash Balance$ 11,461$ 1,981$ (1,457)$ (2,262)$ (2,181)$ 11,461
Additons:
Property Taxes 1,248 1,310 1,376 1,445 1,517 6,896
Municipal State Aid 755 793 755 1,555 1,555 5,413
Total Receipts 2,003 2,103 2,131 3,000 3,072 12,309
Subtractions:
Financing Obligations 11,483 5,541 2,936 2,919 2,736 25,615
Total Expenditures 11,483 5,541 2,936 2,919 2,736 25,615
Ending Cash Balance$ 1,981$ (1,457)$ (2,262)$ (2,181)$ (1,845)$ (1,845)
A long-term increase in the ad valorem tax levy beginning in payable 2008 of
$1.0 million (also increased 5% per year) with no other changes in the projected
expenditures (except the additional $2.5 million in 2007) results in the following
5-year CIP projection.
2007 -- 2011 CIP With 5% Tax Increase and $2.5 Million Additional 2007 Costs
With Tax Increase Beginning in Payable 2008
20072008200920102011Totals
Beginning Cash Balance$ 11,461$ 1,981$ (457)$ (212)$ 971$ 11,461
Additons:
Property Taxes 1,248 1,310 1,376 1,445 1,517 6,896
Tax Increase 1,000 1,050 1,103 1,158 4,310
Municipal State Aid 755 793 755 1,555 1,555 5,413
Total Receipts 2,003 3,103 3,181 4,102 4,230 16,619
Subtractions:
Financing Obligations 11,483 5,541 2,936 2,919 2,736 25,615
Total Expenditures 11,483 5,541 2,936 2,919 2,736 25,615
Ending Cash Balance$ 1,981$ (457)$ (212)$ 971$ 2,465$ 2,465
The following table which is a summary of the currently approved 5-year CIP
illustrates the impact of State and County projects on City resources. See
particularly the ?Summary by Primary Jurisdiction? section of the table.
2007 -- 2011 CIP By Street Type
Total Project Costs
20072008200920102011Totals
Arterial & Collector
State 4,928,400 1,450,500 6,378,900
County 470,000 1,900,000 1,200,000 3,570,000
City 750,000 805,000 1,555,000
Total 5,398,400 3,350,500 750,000 805,000 1,200,000 11,503,900
Local Streets
City 1,505,500 2,636,700 2,691,000 2,321,000 1,945,000 11,099,200
Trails
City 331,155 156,870 138,500 41,500 234,000 902,025
Sealcoating
City 366,589 314,808 203,873 174,736 180,632 1,240,638
Intersection Improvements
State 150,000 650,000 800,000
County 1,125,000 125,000 500,000 1,750,000
City 800,000 800,000
Total 1,925,000 275,000 650,000 500,000 - 3,350,000
Summary By Primary Jurisdiction
State 4,928,400 1,600,500 650,000 - - 7,178,900
County 1,595,000 2,025,000 - 500,000 1,200,000 5,320,000
City 3,003,244 3,108,378 3,783,373 3,342,236 2,359,632 15,596,863
Total 9,526,644 6,733,878 4,433,373 3,842,236 3,559,632 28,095,763
Major Street Fund Share
Arterial & Collector 5,363,400 3,098,500 490,000 665,000 1,000,000 10,616,900
Local Streets 1,007,000 1,695,460 1,454,000 1,538,000 1,321,000 7,015,460
Trails 321,155 156,870 138,500 41,500 234,000 892,025
Sealcoating 366,589 314,808 203,873 174,736 180,632 1,240,638
Intersection Improvements 1,925,000 275,000 650,000 500,000 - 3,350,000
Total Major Street Fund 8,983,144 5,540,638 2,936,373 2,919,236 2,735,632 23,115,023
The table demonstrates $7,178,900 of City Cost related to State Highways
before the additional $2,500,000 is included bringing the new total to $9,678,900.
Any long-term solution will probably require a review of the City?s commitment to
cost sharing on State and/or County projects; with review of the impact related to
timing at a minimum.
If delaying and/or reducing City obligations to State and/or County projects are
options, the tax increase programmed above is probably the only required City
action at this time. In the event the City desires to proceed with State and/or
County projects on the schedule of the existing CIP and TINA study other
revenue sources will be required. The twenty year shortfall noted in the TINA
report is $35 to $50 million or $1.75 to $2.5 million per year. After the $1 million
increase noted above the shortfall remains at $.75 to $1.5 million per year in that
time frame. Doubling the tax increase to $2 million per year would for all
practical purposes eliminate the projected deficits. However, additional cost
increases to projects included in this and future CIP?s would also increase the
problem of balancing the CIP?s on an on-going basis.
The following chart demonstrates the impact of adding a $1 million additional levy
to property taxes on the 2007 payable average market value house in Eagan.
Tax Impact Per $1,000,000 Levy Increase
Total
MSFundCity
MSFundTaxTaxEstimated Taxes
Payable CapacityCapacity$278,021 House Value
LevyRateRateAmountIncrease
2007 Actual 1,247,812 0.015330.25239 42.62
$1,000,000 Increase 1,000,000 0.012290.26468 34.17
Total 2,247,812 0.02762 76.7934.17
Attached to this memo is a matrix outlining potential methods of increasing
revenues for the Major Street Fund including both short-term cash infusions and
long-term changes in the revenue stream. The matrix is broken down to
differentiate between potential revenues that are primarily controlled by the City
and those that would require or result from some State action. The estimated
fund balances noted on the matrix are very preliminary and additional work is
necessary to both confirm the dollar amounts and to review other commitments
already in place or contemplated in the future. For example, some of the
General Fund balance is in place for working capital, but not officially designated
as such within the statements. Payment for the newly approved replacement
ladder apparatus for the Fire Department will also require dollars from one or
more of these sources.
The matrix does not include bonding options or any other methods to advance
funding, since they only change the timing and there is no increase in overall
resources available in total.
Further, the matrix does not account for other potential City projects/initiatives
noted in the recently approved City goals that may compete for funding from the
same revenue sources, both long-term and short-term. Since little definitive work
has been completed on these potential projects/initiatives, I am not including any
estimated cost numbers. The preliminary list is as follows:
1. Open space acquisition
2. Fire stations
3. Fiber project
4. Cedar Grove Redevelopment
5. Retiree health insurance
6. Other public utilities infrastructure
The second activity regarding the development of a policy that addresses long-
term needs and provides the same long-term financial stability that the City has
experienced historically will continue and become formalized upon direction
resulting from this meeting.
Please let me know, if you would like any additional information or if you would
like to discuss any of this material.
_______________________________________
Director of Administrative Services VanOverbeke
cc: Director of Public Works Colbert
Chief Financial Officer Pepper
City Engineer Matthys
Transportation Engineer Plath