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MEETING DATE: September 1, 2011
Council Agenda Item 6
AGENDA ITEM: Capital Improvement Plan — Requested Action: Capital Improvement
Plan Amendment 2011 -2015 Public Hearing
SUBMITTED BY: Finance
BOARD /COMMISSION /COMMITTEE RECOMMENDATION: None
PREVIOUS COUNCIL ACTION: Council authorized a public hearing to amend the 2011 -2015 Capital
Improvement Plan to include bond funding to replace the city hall roof and air handler system and
remodel the police garage.
BACKGROUND INFORMATION: Minnesota Statute §475.521 allows GO CIP bond funding for certain
capital improvements of city buildings. The statute provides strict requirements to follow to qualify a
project for GO CIP bond funding. The enclosed CIP 2011 -2015 amendment addresses the requirements
of issuing GO CIP debt for replacing the roof and air handler system at city hall, and to remodel the
police garage to be more energy efficient.
One requirement is a 14 -28 day notice must be given prior to adoption of the CIP plan amendment and
authorizing the preliminary bond issue. The initial publication did not meet the posting requirements,
but the notice had already been forwarded. Therefore, the Council should open the public hearing,
accept any testimony. The hearing should be tabled to the September 15 meeting at which time the
hearing will be closed and the Council will be requested to accept the amended CIP.
The alternative funding for the project is to add the project to the payable 2012 budget /levy - an
additional $180,000. The estimated bond and levy impacts are included on page 8 of the CIP plan
amendment.
BUDGET /FISCAL IMPACT: $200,000 bond issue
ATTACHMENTS: Request for Council Action ...................................... ..........................6:1 -2
Public Hearing Notice ............................................... ..........................6:3 -4
Five -Year Capital Improvement Plan ...................... .........................6:5 -14
REQUESTED COUNCIL ACTION: Open the public hearing to consider the 2011 -2015 capital improvement
plan amendment with potential funding through GO CIP bonds. Instead of closing the public hearing,
continue the hearing until September 15, 2011.
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.. CITY OF ST. JOSEPH
wwW.cityof stjoseph.corn
Public Hearing
City of St. Joseph
The St. Joseph City Council shall conduct a public hearing on Thursday, September 1, 2011 at
Administrator 7:00 PM at the St. Joseph City Hall. The purpose of the hearing is to adopt a capital
Judy Weyrens improvement plan with potential funding through a capital improvement bond not to
exceed $200,000 for the city hall roof replacement; city hall air handler replacement; and
police garage remodel.
Mayor
Rick Schultz All persons wishing to be heard will be heard with oral testimony limited to 5 minutes.
Written testimony may be submitted to the City Administrator, City of St. Joseph, PO Box
Councilors 668, St. Joseph, MN 56374.
Steve Frank
Bob Loso Judy Weyrens
Renee Symanietz
Administrator
Dale Vick
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zs College Avenue North • PO Box 668 • Saint Joseph, Minnesota 56374
Phone 32.o.363.7zo1 Fax 3zo.363.034z
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City of St. Joseph, Minnesota
Stearns County
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CITY OF ST. j OSI OR
Five -Year Capital Improvement Plan
City Hall Roof and Air Handler Replacement
Police Garage Remodel
2011 -2015
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Table of Contents
I. Introduction .......................................................................................... ..............................2
II. Purpose ................................................................................................. ..............................2
III. The Capital Improvement Planning Process .................................. ............................... 3
IV. Project Summary .............................................................................. ............................... 3
V. Financing the Capital Improvement Plan ...................................... ............................... 6
ProjectCosts ................................................... ...............................
Proposed CIP Bond Issues .......................... ...............................
Pre -Sale Schedule ........................................ ...............................
..... Appendix A
.............. Appendix B
..... Appendix C
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CITY OF ST. JOSEPH
FIVE -YEAR CAPITAL IMPROVEMENT PLAN
2011 THROUGH 2O1S
INTRODUCTION
In 2003, the Minnesota State Legislature enacted legislation that authorized municipalities
to issue debt for projects identified in the City's Capital Improvement Plan (CIP) without first
requesting voter approval through a referendum. Before this legislation, issuance of debt
for projects such as City Hall, libraries and public safety facilities would require voter
authorization by means of referendum.
11. PURPOSE
A capital improvement is a major expenditure of City funds for the acquisition or
improvement to public lands, buildings, such as a city hall, libraries, public safety, or public
works facility, which has a useful life of five years or more.
For the purposes of Minnesota Statutes, Section 475.521, capital improvements do not
include light rail transit or related activities, parks, road /bridges, administrative buildings
other than city hall, or land for those facilities. However, this plan includes certain
additional capital improvements beyond the scope of this statute. A Capital Improvement
Plan (CIP) is a document designed to anticipate capital improvement expenditures and
schedule them over a five -year period so that they may be completed in the most efficient
and cost effective method possible. A CIP allows the matching of expenditures with
anticipated income. As potential expenditures are reviewed, the City considers the benefits,
costs, alternatives and impact on operating expenditures.
The City of St. Joseph, Minnesota (the "City ") believes the capital improvement process is an
important element of responsible fiscal management. Major capital expenditures can be
anticipated and coordinated so as to minimize potentially adverse financial impacts caused
by the timing and magnitude of capital outlays. This coordination of capital expenditures is
important to the City in achieving its goals of adequate physical assets and sound fiscal
management. In these financially difficult times, good planning is essential for the wise use
of limited financial resources.
The CIP is designed to be updated on an annual basis. In this manner, it becomes an
ongoing fiscal planning tool that continually anticipates future capital expenditures and
funding sources.
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III. THE CAPITAL IMPROVEMENT PLANNING PROCESS
The City adopted the first Capital Improvement Plan in 2004. When the plan was developed
the Council and staff participated in a Planning Workshop to discuss the existing
infrastructure, staffing needs and the future landscape for the City. Form this workshop a
Capital improvement Plan was developed. The CIP was presented to the City Council who
reviewed the projects, prioritized, and considered fiscal impact, and available funding. At
this time the final plan was prepared and a public hearing was conducted to solicit public
comments. Adoption of the capital improvement plan will followed the public hearing.
The City Council prepares a plan based on the available funding sources. If general
obligation bonding is necessary, the City works with its financial advisor to prepare a bond
sale and repayment schedule. Over the life of the CIP, once the funding, including proceeds
from the bond sales, becomes available the individual capital expenditures can be
completed.
In subsequent years, the CIP is reviewed and amended as the City grows and needs change
and expand. To help assure that the City is prepared for future needs, the CIP encapsulates
five years.
For a City to use its authority to finance expenditures under Section 475.521, it must meet
the requirements provided therein, including publication of hearing notice. In addition, the
City Council must approve the sale of capital improvement bonds by a three -fifth majority
vote of all members. The City Council approves bond issuance following the public hearing.
Although a referendum is not required, a reverse referendum is allowable. If a petition
bearing the signatures of at least five percent of the votes cast in the last general election
requesting a vote on the issuance of bonds is received by the municipal clerk within thirty
days after the public hearing, a referendum vote on the issuance of the bonds shall be
called.
IV. PROJECT SUMMARY
The expenditures to be undertaken with this CIP are limited to those listed below. All other
foreseeable capital expenditures within the City government will come through other
means. The following expenditures have been submitted for inclusion in this CIP:
2011 Expenditures
Replace the City Hall roof and air handler, and remodel the police garage.
Any additional expenditures for 2011 and expenditures for 2012 through 2015 can be found
in the City's existing capital improvement plan.
The statute has established certain criteria that must be met. Under these criteria, the City
has considered the following eight points:
1. Condition of the City's infrastructure and need for the project.
2. Demand for the improvement.
3. Cost of the improvement.
4. Availability of public resources.
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5. Level of overlapping debt.
6. Cost /benefits of alternative uses of funds.
7. Operating costs of the proposed improvements.
8. Options for shared facilities with other cities or local governments.
The City has analyzed the eight points required per statute for the project. Their findings
are as follows:
Project: Replace the roof and air handier system of the city hall building and remodel the
police garage.
Description: The existing roof and HVAC system for the City Hall were installed in the 1970's.
Since that time the roof has been repaired based on leaking and the HVAC system has been
repaired and serviced as needed. When the City purchased the facility in 2000, the HVAC
system was in need of repair and McDowall Company was hired to service the system and
make any necessary repairs. This same company installed the initial unit. To keep the
system operating efficiently in a cost effective manner, the City entered into a service
agreement with McDowall to include all parts and labor. McDowall Company has indicated
to the City they can no longer offer the annual contract at the current rate making the
annual agreement ineffective. The parts and service need to keep the system operating are
cost prohibitive and the City would be converted a fee per call. The costs of service calls will
be potentially high due to the age and condition of the roof and air handler system.
The Police facility was constructed in the mid 1960's and was constructed as the Fire Hall
storing all the vehicles. In 1997 the City constructed a new fire facility and the existing
structure was transferred to the Police Department for storage of police vehicles and
evidence. Although the use of the original fire facility was converted, physical changes to
the building were not made. The garage still includes a hose tower with a vent opening at
the top of the tower and lacks insulation in the north wall. The garage maintains a 65 -70
degree temperature in the winter to keep the police squad equipment operating. The
proposed remodel will include closing the hose tower and roof louver and insulating the
north wall to provide a more energy efficient building.
The City intends make the necessary repairs on the city hall and police garage building
through the issuance of approximately $200,000 General Obligation Capital Improvement
Plan Bonds, Series 20111).
Conditions of City Infrastructure and Need for the Project
The existing HVAC system and roof has surpassed the industry useful life and is over 30
years old. The age of system is evidenced by the frequent service and repairs by McDowall
system. Through a maintenance agreement the City has been able to keep the system
operating with a minimal financial commitment.
The City offices and the police department moved into the existing facility in 2000 and are
expected to continue to operate in the current facility. The police garage is a separate
facility that is over 40 years old and was initially constructed for the Fire Department.
The City envisions utilizing this property long term as the water filtration plant is attached to
the same facility. Since the building will be maintained long term, the project includes
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upgrading the heating system and closing /insulating the space once used for a hose tower.
Based on conservative estimates, adding the insulation and closing the hose tower will
provide energy efficiency that will more than pay for itself over the next ten years.
Demand for the Project
The city hall and police garage represent the only facilities for city administration, police
department and squad /police evidence storage. The McDowall Company has indicated a
need to change the billing schedule for repairs and maintenance due to the age of the roof
and air handler system.
Estimated Cost of the Project
The project improvements will not exceed the par bond amount less issuance costs. The
total bond amount is estimated to be not more than $200,000.
City Hall Roof
$ 50,000
City Hall Air Handler System
$ 80,000
Police Garage Remodel
$ 50,000
Issuance Cost
N. 000
Total Par Amount
$ 200,000
Availability of Public Resources
The project will be funded by a general property tax levy.
Relative Costs and Benefits of Alternative Uses of the Funds
There are no significant alternatives for funds designated for this project.
Operating Costs of the Proposed Improvements
The operating costs are reviewed annually through the City's budget cycle.
Options for Shared Facilities with Other Cities or Local Governments
The city hall and police garage facilities are owned by the City of St. Joseph. The facilities
are used only for the City's administration, police administration, and police vehicles. Other
local governments do not use the facility.
Level of Overlapping Debt
Issuer
Stearns County
ISD No. 742, St. Cloud
Stearns County HRA
Taxpayers'
Share
Indirect Debt o De t
$135,670,629 $3,675,356 .2.71% $22,760,000 $ 616,796
78,833,469 3,675,356 4.66 38,030,000 1,772,198
94,216,313 3,675,356 3.90 935,000 36.465
Net Indirect Debt: $2,425,459
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201012011
201012011
Net Tax
Net Tax
Capacity Percentage
Capacity
Value Applicable
Value
in Ci in i
Taxpayers'
Share
Indirect Debt o De t
$135,670,629 $3,675,356 .2.71% $22,760,000 $ 616,796
78,833,469 3,675,356 4.66 38,030,000 1,772,198
94,216,313 3,675,356 3.90 935,000 36.465
Net Indirect Debt: $2,425,459
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V. FINANCING THE CAPITAL IMPROVEMENT PLAN
In the financing of the CIP, two statutory limitations apply. Under Chapter 475, with few
exceptions, cities cannot incur debt in excess of 3% of the assessor's Taxable Market Value
(TMV) for the City. In the City the TMV is $319,772,893. Therefore, the total amount of
outstanding debt cannot exceed $9,593,187. As of September 1, 2011, the City had
$635,000 of debt subject to the legal debt limit leaving a debt margin of approximately
$8,958,187.
Another limitation on bonding under the CIP Statute (475.521) is that without referendum,
the total amount that can be used for principal and interest in any one year for CIP debt
cannot exceed 0.16% of the TMV for the City. For the City, the limit of CIP debt is
$511,636.63 ($319,772,893 x.0016).
The principal and interest payments for the Series 2011D Bonds will have a maximum
annual payment of approximately $25,688.
Under the CIP, the City will secure approximately $200,000 in ten -year general obligation
bonds in the year 2011 to finance the city hall roof and air handler system replacement and
remodel the police garage. The par amount of the Series 2011D Bond is based on the
amounts listed in Appendix A.
Continuation of the Capital Improvement Plan
The City Council acknowledges the importance of financial management and therefore
reviews the CIP annually as part of the budget process. The review of the CIP provides the
City Council with an overview of infrastructure and development allowing for prioritization
of projects, placing funding where it is most beneficial. Occasionally a need will arise that
has not been included in the CIP causing the City Council to amend the CIP.
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APPENDIX A
PROJECT COSTS
(Capital Expenditures to be Funded with Bond Proceeds)
2011 Expenditures
• Replace city hall roof - $50,000.
• Replace city hall air handling system - $80,000.
• Remodel police garage - $50,000
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Proposed Debt Service Schedule
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APPENDIX C
Proposed Five -Year City Capital Improvement Plan /Bond Issuance
City of St. Joseph, Minnesota
The City Council must take the following actions before bonds can be issued:
City Council authorizes the preparation of a five -year Capital Improvement Plan
City Council conducts a public hearing on the issuance of bonds and the Capital
Improvement Plan
City Council approves the bonds and Capital Improvement Plan by at least a three -fifths vote
of the Council membership
The table below lists the steps in issuing process:
Aug. 18, 2011 City Council authorizes staff to prepare a five -year Capital Improvement Plan
Aug. 30, 2011 Close date to get Notice of Public Hearing on the Capital Improvement Plan with
consideration of bond funding
Aug. 26, 2011 Publish Notice of Public Hearing on the Capital improvement Plan with consideration of
bond funding
Aug. 31, 2011 Publish Notice of Public Hearing on the adoption of the Capital Improvement Plan and
approval of the preliminary issuance of the 2011D General Obligation Capital
Improvement Bonds
Sept. 1, 2011 City Council holds a public hearing on the Capital Improvement Plan with consideration
of bond funding. Public hearing is continued until September 15, 2011. Close date to
get Notice of Public Hearing on the adopted of the Capital Improvement Plan and
approval of the preliminary issuance of the 2011D General Obligation Capital
Improvement Bonds.
Sept. 15, 2011 City Council re -opens the public hearing from September 1, 2011 to issue the 2011D
General Obligation Capital Improvement Bonds. City Council provides preliminary
approval of the 2011D GO CIP Bonds by at least a three - fifths vote of the Council and
requests funding via bond issue.
Oct. 17, 2011 Reverse referendum period ends
October Bond closing/receipt of funds
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