10/16/2007 - City Council Finance Committee
AGENDA
FINANCE COMMITTEE MEETING
TUESDAY
OCTOBER 16, 2007
9:00 A.M.
CONFERENCE ROOMS 2A & 2B
1. AGENDA ADOPTION
II. 2007 PAYABLE MARKET VALUE HOMESTEAD CREDIT
III. STATUS OF FUND BALANCES
IV. COMMUNITY INVESTMENT FUND (CIF)
a. Civic Arena Improvements
b. Fire Apparatus--Ladder Truck
c. DCC Capital Funding
V. FIRE APPARATUS FUNDING
VI. OTHER BUSINESS
VII. ADJOURNMENT
Agenda Information Memo
October 16, 2007, Finance Committee Meeting
V. FIRE APPARATUS FUNDING
ACTION TO BE CONSIDERED:
To provide direction to staff regarding funding alternatives for purchase of Fire
apparatus.
FACTS:
?
At the September 25 retreat, the City Council directed that the Finance
Committee review fire apparatus needs and funding alternatives.
?
Fire Chief Scott has identified seven pieces of fire apparatus that each cost in
excess of $100,000; three of which are scheduled to be replaced in 2008
(estimated total cost of $675,000) and four of which were purchased in 1988
and are scheduled to be replaced one per year in 2009 through 2012 (estimated
total replacement cost of $2,400,000). One of the four is currently a first line
truck. Replacement costs are in today?s dollars.
?
Replacing fire apparatus that costs in excess of $100,000 from the resources of
the Equipment Revolving Fund has been problematic as the annual levy is not
large enough to generate the necessary resources. Replacement of other City
vehicles and equipment is already straining the capacity of that funding source.
?
The most recent acquisitions of replacement fire apparatus have been financed
through the accumulation of reserves, primarily in the City?s General Fund.
?
As noted in the background material for Agenda Item IV b, the General Fund
balance is no longer a viable funding source for expenditures of this magnitude.
?
In addition to apparatus replacement needs, the Fire Department is analyzing
other capital needs, including potential remodeling and a new and/or relocated
station.
?
Most options regarding the financing of these needs result in a tax levy for debt
service.
?
The City has statutory authority to issue capital improvement bonds without an
election under an approved capital improvements plan and subject to certain
conditions, including a three-fifths affirmative vote by the City Council and a
public hearing. The issuance is subject to a reverse referendum through a
petition process. The definition of capital improvement includes acquisition or
betterment of public lands and public safety facilities, therefore purchasing land
and building or remodeling fire stations could be financed through that type of
bonding. The bonds would result in a tax levy based on tax capacity to support
the debt service.
?
The purchase of equipment is not included in this enabling legislation.
However, equipment can be purchased using equipment certificates payable in
not more than ten years without an election. These bonds would also result in a
tax levy based on tax capacity for debt service.
?
Any other debt issuance for either these public safety facilities and/or equipment
would require an election and would result in a referendum market value levy.
The benefit to this financing would be in that the debt service period on the
equipment could be longer. A market value levy shifts more of the cost to
residential property and away commercial/industrial property. However, with an
election, the community would be demonstrating its support for the
improvements and by extension, the new tax levies.
?
It appears that the best available non-tax levy option for financing the
replacement equipment would be to use the Community Investment Fund as a
source. Information on the status/potential uses of the CIF is included with
Agenda Item IV a.
?
Use of any options requiring a tax levy need to be carefully reviewed and
scheduled to keep the tax levies from stacking, especially the equipment
certificates for which debt service is limited to ten years. If the levies get
stacked, the City runs the risk of repeating the problem of the 80?s in that annual
levies for debt service are greater than the amount of equipment being
purchased in a particular year because of interest. In that case, an annual levy
for equipment (current Equipment Revolving Fund model) is preferable as the
return on the investment is higher without the interest costs.
?
An annual levy of enough size to impact capital purchases would result in a
more significant increase to the levy in the first year, while a series of debt
service levies would result in a gradual increase to the overall levy over a
number of years.
?
Annual debt service levies are typically not subject to levy limits. Annual levies
made directly for equipment purchases would be subject to levy limits, if levy
limits were to be imposed by the State. That is not a problem if the levies are
already in the base, but levy limits would restrict the City?s ability to increase the
levy for additional equipment.
ATTACHMENTS:
?
Enclosed on pages ______ and ______ is a copy of the fire apparatus
inventory including purchase date and price and expected replacement date
and cost.
Agenda Information Memo
October 16, 2007, Finance Committee Meeting
III. STATUS OF FUND BALANCES
ACTION TO BE CONSIDERED:
This item is presented as information only unless the Finance Committee would like to
direct additional analysis of any or all of the City's fund balances.
FACTS:
• As a follow up to a detailed review of the status of the Community Investment
Fund, staff was directed to present information to the City Council concerning the
fund balance status of all of the City's various funds.
• This information was presented at the August 14, 2007 Special City Council
Meeting.
ATTACHMENTS:
Enclosed on pages through is a copy of a memo from Director of
Administrative Services VanOverbeke providing information regarding the financial
status of the various City funds as of December 31, 2006. (Same memo as presented
for the August 14, 2007 Special City Council Meeting)
Enclosed on page is a copy of the minutes for this item from the August 14,
2007 Special City Council Meeting.
Agenda Information Memo
October 16, 2007, Finance Committee Meeting
II. 2007 PAYABLE MARKET VALUE HOMESTEAD CREDIT
ACTION TO BE CONSIDERED:
This item is presented as information only unless the Finance Committee would like to
direct additional analysis or provide other direction.
FACTS:
?
For taxes payable in 2007, the City Council certified a tax levy that included an
amount of $950,100 specifically for the purpose of maintaining 100% of the total
tax levy and the Market Value Homestead Credit (MVHC) given the continued
uncertainty as to whether the State would actually make the 2007 MVHC cash
payment to the City. This action was taken after a great deal of research,
discussion, and consideration and included an understanding that, if the State
actually paid the 2007 MVHC, the dollars would be directed to a specific one-
time use and would not become part of the financing base for on-going
operations.
?
The highest priority item considered, as a one-time use of the MVHC dollars, if
received, has been the City?s obligation to the Dakota Communications Center
(DCC) for capital items. (Formal consideration of that designation is presented
as Agenda Item IV c)
?
The City?s final 2007 budget document shows the levy in the category of
MVHC/DCC Capital to clearly demonstrate its potential use. The City is
accounting for the levy in the Equipment Revolving Fund.
?
The City has exercised the discretion to ?levy back? the non-paid MVHC in
previous years to the extent permitted by the State. That action has had no
impact on the fund balance of the General Fund or any other City fund, since
the dollars were received only from the taxes and the State did not pay the
MVHC.
?
For 2006, the fund balance for the City?s General Fund increased by $612,623,
resulting from operations. As noted above, the ?levy back? of MVHC had no
impact on that increase, since the State did not pay MVHC to the City in 2006.
ATTACHMENTS:
(None)
Agenda Information Memo
October 16, 2007, Finance Committee Meeting
IV. COMMUNITY INVESTMENT FUND (CIF)
a. Civic Arena Improvements
ACTION TO BE CONSIDERED:
To provide direction to staff regarding potential acoustical improvements at the Civic
Arena.
FACTS:
?
Councilmember Carlson has asked and the City Council has directed that the
Finance Committee meet to consider improvements to the Eagan Civic Arena.
?
Staff has researched and compiled background information regarding potential
acoustical improvements to the Civic Arena.
?
Use of the CIF as afunding source for these improvements may require a
change to the CIF policy, unless dollars are only being advanced and will be
repaid to the CIF.
?
The December 31, 2006 financial report for the Civic Arena Enterprise Fund
shows a cash balance of approximately $594,000 with $353,000 of that in the
Capital Replacement Account and $241,000 not reserved. Consequently, there
is some flexibility to finance priority improvements at the Civic Arena without
additional funds from the CIF or from outside operations.
ATTACHMENTS:
?
Enclosed on pages ______ and ______ is a copy of a memo from Director of
Parks and Recreation Seydell Johnson providing historical background, a
current review, and public policy questions related to consideration of a new
sound system at the Civic Arena.
?
Enclosed on pages ______ through ______ is a copy of a July 6, 2007 memo
from Director of Administrative Services VanOverbeke covering the current
financial status of the CIF, the City?s policy for its use, historical background,
and a list of long-range capital needs as determined by Department Directors for
current or future resources of the CIF.
Agenda Information Memo
October 16, 2007, Finance Committee Meeting
IV. COMMUNITY INVESTMENT FUND (CIF)
b. Fire Apparatus?Ladder Truck
ACTION TO BE CONSIDERED:
To provide direction to staff regarding a recommendation for the City Council for
financing the new fire apparatus?ladder truck.
FACTS:
?
The replacement ladder truck has been received by the City and placed into
service.
?
The contract price for the ladder truck was $589,100; with that cost being
financed as follows:
Contract Price$ 589,100.00
Financed by:
Non-cash:
Trade in value of old unit$ 130,000.00
Chassis prepayment discount 5,900.00
Aerial prepayment discount 3,100.00
Interest on $130,000 payment 2,778.08
Cash payments 447,411.92
Total$ 589,190.00
?
The City also has an additional obligation of $38,006.80 for equipment related
to the ladder truck. $33,896.80 has been paid and $4,110 will be invoiced for
equipment bringing the out of pocket cost to $485,418.72 ($447,411.92 +
$38,006.80).
?
Use of the CIF asfunding source per the staff suggestion may require a change
to the CIF policy.
ATTACHMENTS:
Enclosed on pages ______ and _______ is a copy of a memo from Director of
Administrative Services VanOverbeke providing information regarding the financing of
the Fire Ladder Replacement.
Agenda Information Memo
October 16, 2007, Finance Committee Meeting
V. COMMUNITY INVESTMENT FUND (CIF)
c. DCC Capital Funding
ACTION TO BE CONSIDERED:
To provide direction to staff regarding a recommendation for the City Council for
financing the City?s DCC capital obligation.
FACTS:
?
In the spring of 2007, the DCC issued $7,435,000 of Public Safety Revenue
Bonds to finance the acquisition of capital equipment for its operations.
?
The bonds are payable over a seven year period, 2008 through 2014.
?
Eagan?s principal share is $1,315,000 based upon the agreed upon allocation
for DCC funding. Eagan?s total future cost is $1,542,706.25 including principal
and interest.
?
The City will have an available balance of enhanced 9-1-1 funds of
approximately $200,000 for eligible expenditures including certain of the capital
items that the DCC has included in the bonding.
?
Staff is suggesting that the 2007 MVHC levy of $950,100 and the 9-1-1 funds of
$200,000 be placed in a designated account in the Equipment Revolving Fund
and used to meet the City?s DCC debt service requirements for its capital
obligation. A formal defeasance of the debt would significantly increase the
City?s costs and is not being recommended.
?
Use of those two funding sources leaves a principal funding obligation or
$164,900 as follows:
Eagan Capital Bonding Obligation$ 1,315,000.00
Minus Funding Sources:
2007 MVHC Levy (950,100.00)
Enhanced 9-1-1 Balance (200,000.00)
Balance$ 164,900.00
?
Following the same logic as outlined earlier for the ladder truck funding, staff is
recommending the CIF be used to provide for the balance to designate 100% of
the principal amount to be placed in the reserved account in the Equipment
Revolving Fund and used along with accrued interest to meet the City?s DCC
debt service obligation.
ATTACHMENTS:
(None)
Meeting Notes
Finance Committee Meeting
October 16, 2007
Attendance:
Mayor Maguire, Councilmember Carlson, City Administrator
Hedges, Fire Chief Scott, Superintendent of Operations Mesko, and Director of
Administrative Services VanOverbeke.
I. Agenda
The meeting began at 9:00 a.m. with no changes to the agenda.
II. 2007 Payable Market Value Homestead Credit
City Administrator Hedges and Director of Administrative Services VanOverbeke
reviewed the packet information and answered questions regarding the historical
market value homestead credit levies and the impact of those levies on the fund
balance of the City?s General Fund.
III. Status of Fund Balances
The memo included in the packet regarding the status of the various City funds
was discussed. The Finance Committee asked that this type of information be
provided to the City Council on a more regular basis and especially in
circumstances where fund balances and/or cash reserves are being allocated to
specific uses.
IV. Community Investment Fund
a. Civic Arena Improvements
A discussion was held concerning potential acoustical improvements at the Civic
Arena including historical consideration of needs and the installation and use of
the existing systems. A differentiation was made between improving what is
currently in place and used primarily for announcements versus actual acoustical
improvements, which would improve sound quality through methods that are
more sophisticated. Improvements that are more substantial would allow for use
of the arena(s) for concerts and public speaking. The Finance Committee
directed staff to prepare preliminary specifications for sound system/acoustical
treatments in the West Arena. Financing would be provided through a loan from
the Community Investment Fund with the understanding that the loan would be
repaid from future operating revenue. Upon receipt of bids staff is to analysis the
Civic Arena?s capacity to repay the loan during the life of the system. Current
retained earnings would be left in the Civic Arena Fund for other future potential
improvements. Staff is to place this item on the City Council Agenda for the
November 5, 2007 meeting for approval to advertise for bids.
Finance Committee Meeting Notes
October 16, 2007
b. Fire Apparatus?Ladder Truck
Director of Administrative Services VanOverbeke reviewed the background
packet information and his memo of August 10, 2007 regarding the funding of the
new ladder truck. The out of pocket cash required is $485,418.72. After
discussion regarding the various options, staff was directed to place this item on
the November 5, 2007 City Council Agenda to approve funding the purchase of
the ladder truck from the Community Investment Fund per the staff
recommendation.
c. DCC Capital Funding
Staff presented a financing plan to provide payment for the City?s DCC capital
obligation without annual tax levies including the use of the 2007 Market Value
Homestead Credit Levy, available Enhanced 9-1-1 dollars, with the balance
being transferred from the City?s Community Investment Fund. The estimated
amount to be transferred is $165,000 with the final amount being determined
upon transfer of dispatch operations to the DCC. The total allocation will be
designated in the City?s Equipment Revolving Fund and used to pay debt service
obligations as they come due. It is prohibitively expense to formally defease
Eagan?s share of the outstanding bonds. The Finance Committee directed that
this item be placed on the November 5, 2007 City Council Agenda for formal
approval.
The Finance Committee further directed that an updated summary of the status
of the Community Investment Fund also be presented at that time.
V. Fire Apparatus Funding
Fire Chief Scott presented information regarding the replacement needs for
larger and more expensive fire apparatus. A great deal of equipment was
purchased in the 1980?s during the period of rapid growth and is in need of
replacement. The use and financial limitations of the City?s Equipment Revolving
Fund and Part II CIP process were also discussed. Staff was directed to prepare
a long-term renewal and replacement plan for the fire apparatus and to present
information at the October 30, 2007 City Council Special meeting. Staff was
further directed to prepare additional information regarding the purchase and
replacement of the vehicles and equipment currently being purchased through
the City?s Part II CIP and funded in part through the Equipment Revolving Fund.
There was no other business and the meeting was adjourned.