5.4. SR 11-30-1998ity of
River
MEMORANDUM
Item 5.4.
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City Adm~or
November 30, 1998
East Elk River
The trunk sewer and water bids have been received and are being evaluated.
The bids are higher than the engineer's estimate as included in the July 1997
feasibility report. The trunk sewer and water assessment public hearing is
scheduled for a special city council meeting on Thursday, December 3, 1998,
at 6 p.m. in the City Council Chambers. On December 3 it is expected that
the City Council will assess the benefited property owners in the trunk sewer
and water project area $6,000 per acre, and other City Council action (on the
bid award) is possible.
The purpose of this November 30 agenda item it to try to get everyone
prepared for the 12/3 assessment public hearing. In this regard, on Monday
evening, staff plans to review the bids with the Council, discuss the shortage
between the bids and the assessment amountsl review funding options for
the shortage, and most importantly, discuss cash flow issues with making
bond payments. Additionally, we will discuss the anticipated property owner
comments, requests, and assessment appeals. The agenda and background
material for the assessment public hearing will be distributed Monday
evening.
The trunk sewer and water project is only part of the entire eastern Elk
River public improvement project. In order to adequately prepare for the
12/3 meeting, the Council also needs to look at the other components of the
east Elk River project. After federal grant paper work is completed, the city
anticipates bidding out the street and storm sewer components of the east
Elk River project. There are less financial shortage concerns related to the
street project because of the number of funding sources available (grant,
developer payments, TIF, MSA funds, etc.). However, there are significant
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
East Elk River
November 30, 1998
Page 2
concerns about the shortage in the storm drainage component of the project
and the lack of funding sources to eliminate this shortage. Additionally,
when we look at the big picture out east, we also have to take into
consideration the anticipated acquisition of the Brown and Kirkeide
properties, along with the city assuming the Brown assessments.
Last July, when staff met with the City Council to review this project, I noted
that the trunk sewer and water numbers were getting closer and that this
project was less of a financial concern than previously indicated. These
comments were based in part on the TIF redevelopment project financing the
sanitary sewer lift station. Now that the bids have been opened, we have a
different situation to discuss with the City Council. The funding shortage
has gotten larger as the low bid is about 10 percent above the July 1997
estimate. After financing the lift station with TIF 19 funds, and after
assessments are levied, the water and sewer components are underfunded by
about $1 million. We knew the trunk sewer and water project was
underfunded, but we did not know it would be to this extent. (Inflation and
demand are part of the reason for higher bids. Additionally, the city is still
working on obtaining the trunk utility easements and necessary right-of-way
so there may be some additional costs.) TIF 19 could finance all of the trunk
water and sewer shortage as it is an eligible activity, but a more likely source
of funds is for the water department and sewek department to each fund
their shortages. This is based on the goal of keeping the total number of
years in TIF District No. 19 as small as possible, along with the fact that the
city has some other needs for TIF 19 funds such as financing as much of the
storm drainage component as possible.
In spite of reviewing a $1 million shortage in the trunk utility project after
TIF 19 fund finances the lift station, I need to indicate to the City Council
that the biggest concern with the trunk sewer and water project is the cash
flow of receiving assessments in order to make bond payments. How to
structure the bond repayment schedule when considering assessment and/or
interest deferrals is the issue. Dave MacGillivray, the city's bond consultant
from Springsted, will present information on this issue on Monday.
As previously noted, the trunk sewer and water project at a cost of about $6
million, is only part of the total east Elk River proposal. The other two
components of the overall proposal are the street and storm drainage
improvements. Also as previously noted, the street improvement is not as big
of a financial concern as the storm drainage improvement, due mainly to the
East Elk River
November 30, 1998
Page 3
federal grants that have been obtained. Additionally, we have municipal
state aid funds which are eligible to be used on this street project, some TIF
money that can be used ff necessary, and some developer participation from
the Trott Brook Farms project is anticipated.
Based on the July 1997 feasibility study, the most underfunded improvement
in this project is the storm drainage component. There are limited funding
resources that can be used for this improvement and we are concerned about
depending heavily on the surface water management (SWM) tax levy. This
is because the SWM tax levy available for new debt is very limited, and also
there will be future SWM projects that are not'known at this time.
Accordingly, it is most appropriate to try to have TIF 19 finance as much of
the storm drainage improvements as possible. However, this is in conflict
with the goal of keeping the TIF 19 total years small.
Additional financial issues related to the overall project include a desire to
acquire the Brown property and the Kirkeide property and, ff this takes
place, then the city has to deal with financing the assessments associated
with the Brown property. Two other financial considerations that everyone
needs to keep in mind are the grant matching requirements placed upon the
city and the TIF penalty or participation requirement. At this time staff
believes there are viable options for the TIF penalty or participation and also
the grant matching requirement, but these are additional pieces of the puzzle
that need to be put into place, and with any puzzle, these pieces are
interrelated with the whole.
On Monday evening we will visit with the City Council about the options for
funding this project, the goal of keeping the TIF District as short as possible
while at the same time not depleting all of our other funding sources (i.e.
MSA funds, SWM funds, development funds), and the issue of meeting all of
our bonding debt and cash flow requirements.
EAST ELK RIVER PROJECT
Proiect Costs
Construction
Overhead
Total Costs
November 17 Bid
Water Sewer Lift Station Total
1,929,269 2,623,684 492,201 5,045,153
540,195 734,631 137,816 1,412,643
2,469,464 3,358,315 630,017 6,457,796
Revenues
Trunk Assessments
Hohlen Lateral Assmts
Trott Brook Oversizing Cr.
Trott Brook Addl Trunk Assmt.
Total Identified Revenues
1,395,460 2,790,920 4,186,380
103,500 103,500 207,000
(99,000) (176,000) (275,000)
270,887 436,088 706,975
1,670,847 3,154,508 4,825,355
798,617 203,807 630,017 1,632,441
Balance to be Funded
3ther Financin,q Sources
TIF 19
Water Fund
Sewer Fund
XXX XXX 630,017 630,017
XXX
XXX
Financing to be Identified
(amounts from above sources
not yet determined)
1,002,424
July estimated shortfall (without TIF for Liftstation) was $964,745.
November bid shortfall (without TIF for Liftstation) is $1,632,441
Budget
Actual
(Less Trott Brook Request)
Adjusted Actual
Variance (Over Budget)
Budget vs Actual
Construction
Water Sewer Lift Station Total Only
1,809,313 2,473,206 800,606 5,083,125 3,971,191
2,469,464 3,358,315 630,017 6,457,796 5,045,153
165,120 541,775 706,895 552,262
2,304,344 2,816,540 630,017 5,750,901 4,492,891
(495,030) (343,334) 170,588 (667,775) (521,700)
11/24/98 Page 1
EAST ELK RIVER PROJECT
July 1998 Construction Estimates
Storm
Proiect Costs
Construction
Overhead
Land Acquisition
South of CR 12
North of CR 12
Railroad Crossing
Total Costs
Revenues
High Priority Project $
TEA 21
Trott Brook Farms Assessment
MSA Funds (Land N of 12)
Total Identified Revenues
Balance to be Funded
Other Financin.q Sources
TIF 18
TIF 19
SWM Tax Levy
Tax Levy
Other
Financing to be identified
(amount from above sources
not yet determined)
Streets Sewer TOTAL
1,976,598 1,621,527 3,598,126
553,448 454,028 1,007,475
458,500 458,500
300,000 300,000
508,992 508,992
3,797,538 2,075,555 5,873,093
2,400,000 2,400,000
264,320 183,680 448,000
295,764 264,457 560,220
300,000 300,000
3,260,084 448,137 3,708,220
(537,454) (1,627,418) (2,164,873)
508,992 508,992
(1,65S,881)
11/24/98 Page 2
EAST ELK RIVER PROJECT
PROJECT SUMMARY
Projected Shortfall
Other Funding Sources
TIF
FUNDING TO BE IDENTIFIED
Water Sewer Lift Station Streets* Storm Sewer* TOTAL
798,617 203,807 630,017 537,454 1,627,4'18 3,797,313
630,017 508,992 1,139,009
798,6'17 203,807 28,462 1,627,4'18 2,658,304
Possible Sources include:
Additional TIF 19'*
Tax Levy
SWM Tax Levy
Water and Sewer Funds
MSA
Other
*Based on July Estimates
**TIF 19 projections assume including some City costs.
11/24/98 Page 3