5.2. SR 12-10-2007Item• 5.2.
city of
fiver
MEMORANDUM
TO: City Council
FROM: Lori Johnson, City Administrator
DATE: December 10, 2007
SUBJECT: Ice Arena Financing
The Council directed staff to look at options to fund a $2.5 million dollar ice arena
improvement project including expansion of the lobby and various improvements and
repairs to the existing arena. The proposed improvements would greatly enhance the arena,
particularly the lobby expansion. In order to address the specific financing of this project,
we must look at it in the context of all of the other city building obligations and priorities
since all of the projects utilize the same funding sources. This memo gives a brief summary
of the overall financing picture for all building projects and discusses in specific the
proposed ice arena improvements. At Monday's meeting, staff will be prepared to discuss
this in greater detail.
Before discussing the ice arena improvements, it is helpful to have some background on how
city facilities are typically financed. As you know, city facilities are financed generally either
through reserve funds or bonds. The bonds, either lease purchase or capital improvement,
authorize a tax levy, but the debt may be paid through a combination of tax levies and
reserve funds as approved by the Council. Currently, the city has ongoing debt payments or
financial obligations for the following buildings: library, public safety building, city hall,
YMCA, and ice arena. The library was funded by capital improvement bonds and the debt
service is currently being funded through reserves; however, as you can see from the
attached Building Reserve Cash Flow spreadsheet, in the future it may be placed on the tax
rolls. The YMCA was approved by voter referendum and is being paid for through a tax
levy (with the Sherburne County Landfill Legacy Grant reducing the first six years of tax
levies). The public safety building was constructed with lease revenue bonds paid by tax
levies. The city hall debt is being paid through reserves.
In addition to these completed projects, a future high priority project that has not yet been
funded is the public works expansion project. This project has been discussed for the past
several years and it is very evident that there is a need for space because temporary office
facilities have been secured to meet the office space needs until the expansion takes place.
Funds for this project were set aside in the government buildings reserve as part of the CIP
that will be approved in December. Because reserves are not available to fund the entire
project, the balance would be funded through either lease revenue or capital improvement
bonds with a tax levy to fund the debt.
Now, with an understanding of current building financial obligations and future needs, the
Council can better decide how and when to address the needs at the ice arena. The ice arena
currently has debt outstanding on the 1996 bond issued to construct the Olympic rink; the
final payment is due in 2013. That debt is paid from operating revenues; however, as you
know, ice arena revenues axe not sufficient to cover all of the operating and debt costs so the
General Fund subsidizes ice arena operations and funds all shortfalls. Additionally, capital
expenditures are usually paid from other reserve funds or the liquor fund.
If the ice arena improvements are authorized now, fiznding would most likely come through
a tax levy because operating revenues are not sufficient and available reserve funds have
been programmed fox the public works project. Attached is an estimated amortization
schedule showing the approximate levy impact of this project. If the project is constructed
in 2012 or 2013 so the first debt payment is due in 2014, it could replace the existing debt
with little or no additional tax levy needed assuming the subsidies from the General Fund
continue.
Finally, it is possible to fund the ice arena improvements whenever the Council approves the
project; however, that may mean increasing taxes to pay for it. Depending upon how the
Council prioritizes the ice arena project in relation to the public works project and when it is
authorized determine whether it will be funded through a tax levy or through other sources
that will not add to the tax levy.
12mzoo7
CITY OF ELK RIVER
Building Reserve Capital Budget
2006 2007 2008 2009 2010 2011 2012 2013 2014
Beginning Cash Balance 1,115,218 1,477,390 1,975,909 2,557,575 441,782 215,822 (77,201) (409,226)
Sources of Funds
Revenues 957,563 962,894 962,894 62,894 62,894 5,214 - -
Bond Proceeds - - - 3,100,000 - - - 2,250,000
Transferln
Liquor Funds 2,000,000 - - - -
Interest earnings 44,609 59,096 79,036 102,303 17,671 8,633
Total Sources of Funds 1,002,172 1,021,990 1,041,930 5,265,197 80,565 13,847 - 2,250,000
Expenditures
Fire Station Expansion #3 - - - - - - 2,250,000
Public Works Facility Expansion - 50,000 50,000 7,000,000 - -
Library Project 550,000 - - - - -
Old Library (Cooling system & Condenser) 26,000 - - - -
Mobile Offices (Streets & PW) 15,000 5,000 5,000 - - -
Floor in cold storage building 20,000 - - - -
Chiller 70,000 - - - -
Boiler Replacement (City Hall) - 25,000 - - -
2water heaters 8,500 - - - -
ITexpansion an 2nd Floor 10,000 - - - -
Miscellaenous projects (future building repairs) - 50,000 75,000 75,000 75,000 75,000 100,000 100,000
2006C Bonds (Library Debt) - 208,970 230,265 230,990 231 525 231.870 232,025 231 P90
~-
1997 Bonds (City Hall Debt) 75,000 75,000 75 000 75,000 ~-
Total Building Reserve Uses of Funds - - 640,000 523,470 460,265 7,380,990 306,525 306,x70 332,025 2,531,990
Ending Cash Balance 1,115,218 1,477,390." 1,975,909 Y,55T575 441,782 215,822 (77,201) (409,226) (741,216).
Debt Service (estimated payments for public works building)
Rate Term
2007 Debt 4.00% 25 0 0 0 0 0 0 0
2008 Debt 5.00% 25 0 0 0 0 0 0
2009 Debt 5.00% 25 0 0 0 0 0
2010 Debt 5.00% 25 (219,953) (219,953) (219,953) (219,953}
2011 Debt 5.00% 25 0 0 0
2012 Debt 5.00% 25 0 0
2013 Debt 5.00% 25 0
2014 Debt 5.00 % 25
2015 Debt 5.00% 25
Total Debt Service 0 0 0 0 0 (219,953) (219,953) (219,953) (219,953)
City of Elk River, MN
Series 2009 Lease Revenue Bond Options
Option 5
Lease Revenue Bonds, Series 2009
15 Year Term -Level Debt
$2,500,000 Net Project Costs
Par Amount of Bonds 2,860,000
Total Sources 2,860,000
Total Underwriter's Discount (1 .500%) .42,900
Costs of Issuance 35,000
Deposit to Debt Service Reserve Fund (DSRF) 280,908
Deposit to Project Construction Fund 2,500,000
Rounding Amount 1,193
Total Uses 2,860,000
3.50°/°
Payment DSR Net Annual
Date .Principal Rate Interest Earnings P 8~ 1 P & I
10/1 /2009
2/1/2010 (3,277) (3,277) (3,277)
8/1/2010 115,415 (4,916} 110,499
2/1/2011 95,000 4.40% 69,249 (4,916} 159,333 269,832
8/1/2011 - 67,159 (4,916) 62,243
2/1/201
2 145 000 4.45% 67 159 (4 916 207,243
~ 269,486
_
8/1/2012 `~~~ ___ - 63,933 (4,916) 59,017
2/1/2013 150,000 4.50% 63,933 (4,916) 209,017 268,033
8/1/2013 - 60,558 (4,916) 55,642
2/1/2014 155,000 4.60% 60,558 (4,916) 210,642 266,283
8/1/2014 - 56,993 (4,916) 52,077
2/1/2015 165,000 4.65%
_..., w 56,993
.,...,.._._....~........._ X4,916) ~
_........_ ~217,077 269,153
.._....,.....~..........,...__.~..,._
8/1/2015 .._.,....,...___....._ ,_._,~..,_.
- 53,156 (4,916) 48,240
2/1/2016 170,000 4.70% 53,156 (4,916) 218,240 266,481
8/1/2016 - 49,161 (4,916) 44,245
2/1/2017 180,000 4.75% 49,161 (4,916) 224,245 268,491
8/1/2017 - 44,886 (4,916) 39,970
2/1/2018 190,000 4.80°/a 44,886
...
. (4,916)
........... 229,970 269,941
_
8/1/201.8.....__ ..............___. ..............._.._.._. .._
_..40,326 (4,916) 35,410
2/1/2019 200,000 4.85% 40,326 (4,916) 235,410 270,821
8/1/2019 - 35,476 (4,916) 30,560
2/1/2020 205,000 4.90% 35,476 {4,916) 235,560 266,121
8/1/2020 - 30,454 {4,916) 25,538
2/1/2021 220,000 4.95% 30,454
..
.. (4,916)
....._ 245,538 271,076
.....8/1/2021........ ..........:.,......._ _.._ ............ ..
25,009 4,916) 20,093
2/1/2022 230,000 5.00% 25,009 (4,916) 250,093 270,186
8/1/2022 - 19,259 (4,916} 14,343
2!1/2023 240,000 5.05% 19,259 (4,916) 254,343 268,686
8/1/2023 - 13,199 (4,916) 8,283
2/1!2024 250,000 5.10°k
. 13,199
.
__. (4,916)
..... . 258,283 266,566
....8/1/2024. _.,.._ ....-_..........._...... 6,824 _4,916) 1,908
2/1/2025 265,000 5.15°k 6,824 (285,823) (14,000) (12,092)
2,860,000 1,317,446 431,661 3,745,785 3,745,785