6.1. SR 08-21-2006
City of Elk River
REQUEST FOR COUNCIL ACTION
Agenda Section Meeting Dete
_A.dministration Au ust 21, 2006
Item Description
Resolution Giving Preliminary Approval for the Issuance of
General Obligation Capital Improvement Plan Bonds in an
_Amount not to Exceed $5 million and Adopting the City of Elk
Ri'ler Ivfinnesota Ca ital 1m rovement Plan, Public Hearin
Item Number
6.1.
Prepared by
Lori ohnson, Ci T ...A.dministrator
Reviewed by
Introduction
.1.\ public hearing has been called to consider the city's Capital Improvement Plan for the purpose of
issuing Capital Impro\Tement Plan Bonds for construction of a new library. This is a public hearing to
provide an opportunity for the public to comment on the municipal facility improvements included in the
Capital Improvement Plan.
Discussion
The modification to the fi.\Te-year Capital Improvement Plan for the City of Elk Ri\Ter relating to the
expansion of municipal facilities includes the possibility of issuing up to $5,000,000 for expansion of the
libraly beginning in 2006 with completion in 2007. The City Council approved a budget of $4,300,000
for the consnuction of the library. Bonds "Will be issued only in the amount necessary to cov"'er the actual
costs. The bond "Will be less than $4,300,000 as up to $1,500,000 is being funded through reser,\res.
The Capital ImprO\Tement Plan modification also includes $3,000,000 for the consuuction of a public
,-vorks facility in 2008. This number "vas included as an estimate only and the actual cost for the
expansion and the time frame \\till be identified through the preparation of a Public Works Master Plan
being prepared by Oertel Architects. However, including it now allows the city to issue bonds in 2008 for
the public \V~orks facility v:rithout another public hearing if the project cost is less than $3,000,000.
The city has considered and commented on the eight items required by statute to be discussed as part of
the Capital Impro\Tement Plan. Issuance of bonds is subject to a thirty da;r re\Terse referendum after the
public hearing. Bonds for this project "Will not be issued until after the Council awards the construction
bids.
Financial Impact
-L\doption of the resolution authorizes the city to issue $5,000,000 of bonds for the library. l\. property
tax may be levied for the payment of the bonds.
s: \ Council \Lori \2006 \ elP Public Hearing. doc
Attachments
· Resolution Giving Preliminary _Approval for the Issuance of General Obligation Capital Improvement
Plan Bonds in an _A.mount not to Exceed $5,000,000 and Adopting the City of Elk Ri,Ter 11innesota
Capital Improvement Plan Therefore
· 2006 through 2010 modifications to the five-year Capital Improvement Plan for the City of Elk River,
:Minnesota relating to the eArpansion of municipal facilities
Action Reauested
· Hold public hearing on adoption of the Capital Improvement Plan.
· Consider Resolution Giving Preliminary Approval for the Issuance of General Obligation Capital
Improvement Plan Bonds in an _Amount not to Exceed $5,000,000 and Adopting the City of Elk
River IVlinnesota Capital Improv~ement Plan Therefore
Council Action
Motion by _
Second by _
"\Tote
Follow Up
S:\Council\Lori\2006\CIP Public Hearing.doc
2006 through 2010
Modification to the
Five-Year Capital Improvement Plan for the
City of Elk River, Minnesota
Relating to the Expansion of Municipal Facilities
July 24, 2006
Prepared by:
City of Ell(River
and
Ehlers & Associates, Inc.
3060 Centre Pointe Drive
Roseville, MN 55113
I ~A~O~I~O~I~
Table of Contents
I . INTR 0 Due TI ON ...................................................................... 3
II. P URP 0 S E.. · · · · · · · · · · · · · · · · · · · · · · · · · . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 4
III. PR OJECT S ~ Y ....................................................................... 6
IV. FINANCING THE CAPITAL IIv1PROVE1vIENT PLAN ................... 9
Ehlers & Associates, Inc.
Page 2
Modification to the Five-Year Capital Improvement Plan for the
City of Elk River, Minnesota
Relating to the Construction of a New Library and Expansion of a
Public Works Facility
2006 through 20 1 0
I. INTRODUCTION
In 2003, the Minnesota State Legislature adopted a statute that generally
exempts municipal bonds issued under a capital imprO\Tement program from
the referendulTI requirements usually required for city halls, public \\Torks,
and public safety facilities. The 2005 Legislature added towns to the
meaning of a lTIunicipality and to\\'11 halls and libraries to the meaning of a
capital improvement.
Ehlers & Associates, Inc.
Page 3
II. PURPOSE
A capital improvement is a major expenditure of municipal funds for the
acquisition or betterment to public lands, buildings, or other improvements
used as a city hall, toV\'ll hall, library, public safety, or public works facility,
which has a useful life of 5 years or more. F or the purposes of Minnesota
Statutes, Section 475.521, capital improvements do not include light rail
transit or related activities, parks, roadlbridges, administrative buildings
other than city or town hall, or land for those facilities. The City of Elk
River, Minnesota (the "City") has previously adopted a five year capital plan
for major expenditures, including a new library.
For a municipality to use its authority to finance expenditures under Section
475.521, it must meet the requirelnents provided therein. Specifically, the
city council must adopt a 5-year capital improvement plan that meats certain
statutory requirements, after holding a hearing on the plan. The council
must also approve the sale of capital ilnprovement bonds by a 3/5ths
majority of its membership. In addition, it Inust hold a public hearing for
public input regarding sale of the bonds. Notice of such hearing Intist be
published in the official newspaper of the lTIunicipality at least 14, but not
Inore than 28 days prior to the date of the public hearing. In addition, the
notice lTIUSt be posted on the City's official web site. The City is holding a
hearing on August 21, 2006 to consider this capital improvelnent plan and
the issuance of up to $5,000,000 of general obligations bonds for the
Library. Another public hearing \\Till be held at a later date to consider the
issuance of bonds, if any, for the future public worl(s facility.
The bonds must be approved by the voters only if the conditions for a
"reverse referendum" are met. If a petition signed by voters equal to at least
5 percent of the votes cast in the last general city election requesting a vote
on the issuance of bonds is received by the lTIunicipal clerk within 30 days
after the public hearing (by September 20, 2006), then the bonds Inay not be
issued unless approved by the voters at an election. If a vote is taken and the
referendum passes, the taxes would be levied on market value rather than tax
capacity .
The statute has established certain criteria that Intist be met. Under these
criteria, the City has considered the following eight points:
Ehlers & Associates, Inc.
Page 4
1. Condition of the City's infrastructure and need for the project
2. Demand for the impro'vement
3. Cost of the improvement
4. Availability of public resources
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 purpose of this lTIodification is to consider statutory criteria listed above
as they relate to the proposed construction and expansion to municipal
facilities (the "Projects").
Ehlers & Associates, Inc.
Page 5
Ill. PROJECTSS~Y
This Modification to the Capital Improvement Plan ("Modification") is
intended to describe and analyze the need for the Projects in accordance with
Minnesota Statutes, Section 475.521. Nothing in this Modification
otherwise affects the existing Capital Improvement Plan or the
improvements to be constructed under that Plan.
Following is a summary of estimated Projects expenditures funded from
debt:
2006 Expenditures $.5 million
. Design costs and site preparation for Library
2007 Expenditures $4.5 million
. Construction of Library building and necessary fixtures and
equipment
2008 Expenditures $3.0 million
. Construction and furnishing costs of public \\forks facility expansion
including additional office space, equipment storage and mechanics
bays.
2009 Expenditures -0-
2010 Expenditures -0-
Ehlers & Associates, Inc. Page 6
The City has analyzed the eight points required per statute for each project
on an individual basis and as a \vhole. Their findings are as follows:
Conditions of City Infrastructure and Need for the Project
Significant community growth in recent years has placed serious demands
on EII( River's existing municipal facilities. The City has approximately
doubled its population in the last 16 years from 11 ,20 1 in 1990 to over
21,000 in 2006. The City will continue to grow over the next m'o decades.
The existing library v\'as build 20 years ago and is located in an undersized
building \vhich lacks the capacity for demands of programs and current
technological demands of a modem library.
The public V\Torks facility is planned to be expanded on its existing site to
service the city's growing streets, sewer, water and parIes infrastructure. The
City has averaged over 500 new single family and multi-family housing unit
building permits in past three years. Staff and space to maintain the
additional infrastructure is diminishing the City's effectiveness and
efficiency.
Demand for Projects
The City has a responsibility to deliver services that provide for the safety,
health, and \velfare of residents and their property. The City has already
expanded city hall and public safety facilities in the past three )'ears. Public
works and the library, also essential governmental functions, are the next
logical step for the City. To serve residents and to do their jobs efficiently
and safely, City employees need adequate facilities. The City had
previously purchased adequate land at the public worlcs site, anticipating this
gro,vth.
.......,
An added benefit of the new library construction and location is that the
former library building will be convelted into a senior center, which is also
a growing percentage of the City's population.
Estimated Cost of the Projects
See Project Summary for details of all project costs.
Ehlers & Associates, Inc.
Page 7
Availability of Public Resources
The City plans to fund up to $1.5 million from cash and other resources to
the library. For purposes of this plan, the entire costs of the Projects are
estimated to be funded with debt.
Level of Overlapping Debt
The City's share of the Sherburne County debt, spread on the basis of
proportional tax capacity, is $6.25 million. The City's share of the Elk River
School District debt is $76.5 million. The City's outstanding general
obligation debt prior to the issuance of the capital improvement bonds is
approximately $16.5. The increased level of debtis not expected to cause
the City any financial stress. Growth also means additional tax base to pay
for additional facilities. The City has alternative revenue sources to assist
with capitals costs as well as non-tax levy income from enterprise funds.
The City's bond rating from Moody's Investor's Service has been upgraded
twice in the last five years. A copy of the Moody's report is available upon
request froIn the City Clerk.
Relative Costs and Benefits of Alternative Uses of the Funds
The proj ect will provide for a safer and more efficient work environment for
City public works employees. The library and senior center built on the
former library site will enhance the attractiveness of the City of Elk River as
a place for people to live and to work.
Operating Costs of the Proposed Improvements
The City is responsible for the operation and maintenance of the library
building. The Great River Regional Library system pays for staff, computer
equipment, and books and other media inventory for the library. The City's
annual operating costs for current library is approximately $40,000. The
operating costs are expected to increase to $75,000. The utility costs
associated with a larger building will be mitigated by energy efficient
construction including geothermal heating and passive heating through
window. The lights in the facility will dim with increased natural light.
Other energy saving efficiencies in the building are contemplated in the
current design.
Ehlers & Associates, Inc.
Page 8
The new public works expansion is expected to increase by approximately
$40,000. These costs will be absorbed into the City's general fund and
enterprise funds in the future.
Options for Shared Facilities with Other Cities or Local Government
The City's library currently is and the new facility will continue to be
operated by a multi-jurisdictional system which serves much of central
Minnesota. The City of Elk River's library is staffed and supplied by the
Great River Regional Library system. GRRL serves a population of over
350,000 residents, with over 115,000 registered borrovlers in a 5,000 square
mile area of central Minnesota. Other counties also served by GRRL
include Benton, Morrison, Sherburne, Stearns, Todd, and Wright counties.
GRRL has branch libraries in 4 cities in Sherburne County including Becl<er,
Big Lake, Elk River, and St. Cloud.
The City does not plan to share public works space with other local
governments. In the past, the City has co-located public works facilities
with the Ell< River School District. The school district has chosen to
construct its own facility in another location. Sherburne County has chosen
to relocated its public works facility from Elk River to the City of Becker.
IV. FINANCING THE CAPITAL IMPROVEMENT PLAN
The total amount of requested general obligation debt to be fInanced under
this Modification is $8 million. If these expenditures are to be funded, that
amount of money is anticipated to be generated through the tax levy and
utility funds.
The total amount of debt service on all bonds issued under Minnesota
Statutes, Section 475.521 cannot exceed .16% of the total market value in
the City. Cun-ently, the maximum debt service amount for the City is
$2,888,000 ($1,805,000,000 x .0016).
Under this Modification, the City will secure up to $8 million in general
obligation capital improvement bonds in the year 2006 through 2008 to
finance the Projects. The bond issue is estimated to be repaid over a 15 to
20-year period. Even at a 15 year level, the annual debt service is expected
Ehlers & Associates, Inc.
Page 9
to be $784,000 when both facilities are funded, which is approximately 25%
of the statutory maximum.
The City has not issued any prior bonds under Section 475.521, and
expected debt service on the proposed bonds for the Project is within the
statutory limits.
Ehlers & Associates, Inc.
Page 10
RESOLUTION 06- 101
EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA
HELD: August 21,2006
Pursuant to due call and notice thereof, a regular or special meeting of the City Council of
the City of Elk River, Minnesota, was duly called and held at the City Hall in Elk River, Minnesota
on August 21,2006, at 6:30 p.m. for the purpose, in part, of giving preliminary approval to the
issuance of general obligation capital improvement plan bonds and adopting the capital
improvement plan.
The following members were present:
Mayor.Klinzing, Councilmembers Motin, Dietz, Farber, and
Gumphrey
and the following were absent:
None
Member Motin
introduced the following resolution and moved its adoption:
RESOLUTION GIVING PRELIMINARY APPROVAL FOR THE ISSUANCE OF
GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS IN AN
AMOUNT NOT TO EXCEED $5,000,000 AND ADOPTING THE CITY OF ELK
RIVER, MINNESOTA, CAPITAL IMPROVEMENT PLAN THEREFOR
A. WHEREAS, the City Council of the City of Elk River, Minnesota (the "City")
proposes to issue its general obligation capital improvement plan bonds (the "Bonds") and adopt
the 2006 through 2010 Modification to the Five-Year Capital Improvement Plan for the City of Elk
River, Minnesota Relating to the Expansion of Municipal Facilities (the "Plan"); and
B. WHEREAS, the City has caused notice of the public hearing on the intention to
issue the Bonds and on the proposed adoption of the Plan to be published pursuant to and in
accordance with Minnesota Statutes, Section 475.521; and
C. WHEREAS, a public hearing on the intention to issue the Bonds and on the
proposed Plan has been held on this date, following published notice of the public hearing as
required by law; and
D. WHEREAS, in approving the Plan, the City Council considered for each project and
for the overall Plan:
1. The condition of the City's existing infrastructure, including the projected
need for repair and replacement;
2. The likely demand for the improvement;
1
3. The estimated cost of the improvement;
4. The available public resources;
5. The level of overlapping debt in the City;
6. The relative benefits and costs of alternative uses of the funds;
7. Operating costs of the proposed improvements; and
8. Alternatives for providing services more efficiently through shared facilities
with other local governmental units; and
E. WHEREAS, the City Council has determined that the issuance of general obligation
capital improvement plan bonds in the aggregate principal amount of $5,000,000, is the best way to
finance those portions of Plan eligible under Minnesota Statutes, Section 475.521.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River,
Minnesota, that the City hereby adopts the Capital Improvement Plan and authorizes the issuance
of up to $5,000,000 aggregate principal amount of general obligation capital improvement plan
bonds.
The motion for the adoption of the foregoing resolution was duly seconded by Member
Dietz and, after full discussion thereof and upon a vote being taken thereon, the
following voted in favor thereof:
Mayor Klinzing, Councilmember Motin, Farber, Dietz, and Gumphrey
and the following voted against the same:
None
Whereupon the resolution was declared duly passed and adopted.
ATTEST:
~ ~,aek
JO~~idt, City Clerk
2