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VII.5. 2024 – 2028 Capital Improvement & Equipment Replacement Plans; Bishop CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: August 8, 2023 Subject: 2024 – 2028 Capital Improvement & Equipment Replacement Plans _____________________________________________________________________ PURPOSE To provide input and guidance for the 2024 – 2028 Capital Improvement & Equipment Replacement Plans (focusing on 2024 and 2025). INFORMATION The City Council reviewed a draft of the 2024 General Fund Budget and Tax Levy on July 18th. The Draft Tax Levy included amounts for capital improvements, the Pavilion, equipment replacements and permanent improvements. City Council directed staff to review the levy and put together proposals with a 9%, 7% and 5% increase when compared to the 2023 levy. The 2024-2025 projected cash flows on pages two through six align with a tax levy increase of 7%. Projects requested for 2024 were reviewed and deferred when possible. The projects are still needed and would be included as projects for 2025 or later. A tax levy with a 9% increase could have additional projects funded in 2024, while a 5% would see additional projects deferred to later years. Finance Department 2 Capital Improvement Fund This fund accounts for capital improvements at the Activity Center, City Hall/Police Station, Fire Station, Public Works Building and portions of the Arts Center. Its two funding sources are franchise fees from gas and electric utilities and a property tax levy. In 2024, the Capital Improvement Fund has projected revenues of $566,860 and projected expenditures of $996,500. The fund is projected to decrease its fund balance by $430,140 and end 2024 with a fund balance of $102,004. The decrease in fund balance was planned in the 2023-2027 CIP and related to the transfer in of 2021 general fund surplus. 2023 2024 2025 Beginning Fund Balance 101,504 531,644 102,004 Revenues & Other Financing Sources Tax Levy - 200,000 358,000 Franchise Fees 361,500 361,500 361,500 Interest Earnings 990 5,360 1,040 Transfer In 427,650 - - Total Revenue & Other Financing Sources 790,140 566,860 720,540 Expenditures & Other Financing Uses Current Expenditures Capital Projects 907 Mainstreet - Windows & Front/Back Door - - 105,000 Activity Center - Tuckpointing & Brick Repair - 120,000 - Activity Center - Roof Replacement & Flashing - 250,000 - Activity Center - Floor Covering for Entry, Common & Dining A - 39,500 - Activity Center - Counter Tops - - 10,000 Activity Center - Main Interior Door Replacement - - 18,500 City Hall - Building Automation System - 22,000 - Fire Station - Building Automation System - 14,000 - Fire Station - Replace 25 Ton Air Handling Unit - 92,000 - Parking Ramp - Roof Replacement - 75,000 - Police Station - Roof Replacement - - 240,000 Police Station - Building Automation System - 24,000 - Debt Service Transfers - City Hall 360,000 360,000 360,000 Total Expenditures and Other Financing Sources 360,000 996,500 1,091,500 Increase (Decrease) in Fund Balance 430,140 (429,640) (370,960) Projected Ending Fund Balance 531,644 102,004 (268,956) Capital Improvement Fund - Projected Cash Flows 3 Permanent Improvement Revolving Fund The Permanent Improvement Revolving Fund is used to account for street improvements, which can include streets, walkways, trails, traffic signs, traffic signals, vehicular parking and street lighting. The primary funding sources are debt and special assessments. Previous projects have received grants or funding from other governmental entities. In, 2024, the Permanent Improvement Revolving Fund is projected to receive $4,258,000 of bond proceeds for the start of the Central Avenues Street Improvement Project. All the underlying utilities are replaced during each street reconstruction project and related costs and bond proceeds are recorded in those funds. City Council approved the preparation of the feasibility report in May. Ordering the feasibility report does not authorize the project. City Council would still need to conduct a public improvement hearing and approve ordering final plans for the project to proceed. Projects related to street lighting upgrades, Mainstreet banner pole installation and fencing along Excelsior Boulevard have all been delayed to 2025. The fund balance decrease of $480,006 was planned in the 2023-2027 CIP. It is caused by issuing 2023A bonds for 2024 street rehabilitation projects. 2023 2024 2025 Beginning Fund Balance 994,413 1,499,357 1,019,351 Revenues & Other Financing Sources Tax Levy - - 510,000 Special Assessments (Prepaid)210,000 162,000 120,000 Interest Earnings 9,944 14,994 10,194 Bond Proceeds 3,975,000 4,258,000 3,995,000 Transfer In 290,000 - Total Revenue & Other Financing Sources 4,484,944 4,434,994 4,635,194 Expenditures & Other Financing Uses Capital Projects West Central Avenues 3,220,000 - - Central Avenues (2024-2027)- 4,420,000 3,640,000 Pedestrian & Bicycle Access Improvements 25,000 25,000 100,000 Street Rehabilitation (Mill & Overlay)425,000 450,000 475,000 Street Sign Management 20,000 20,000 20,000 Street Lighting Upgrades 190,000 - 200,000 Central Business District Lighting Upgrades 100,000 - 40,000 Mainstreet Banner Pole Installation - - 130,000 Excelsior Fencing - - 50,000 Total Expenditures and Other Financing Sources 3,980,000 4,915,000 4,655,000 Increase (Decrease) in Fund Balance 504,944 (480,006) (19,806) Projected Ending Fund Balance 1,499,357 1,019,351 999,545 Permanent Improvement Revolving - Projected Cash Flows 4 Equipment Replacement Fund This fund accounts for the purchase of machinery and equipment. The two sources of revenue are a tax levy and equipment charges. Equipment charges are billed to various City departments and are over 99% in the General Fund. Equipment replacement has also been accomplished through the issuance of equipment certificates (debt). In 2024, the Equipment Replacement Fund has projected revenues of $1,158,669, including a tax levy of $360,000. The projected expenditures are $1,528,310. The most significant purchase proposed for 2024 is a Police Records Management System for $500,000. The Police Department is looking for a partner agency to join and reduce costs. The fund is projected to decrease its net position by $369,641 and end 2024 with a net position of $743,627. 2023 2024 2025 Beginning Fund Balance 1,339,514 1,113,268 743,627 Revenues & Other Financing Sources Tax Levy 250,000 360,000 250,000 Equipment Charges 709,940 752,536 797,688 Sale of Equipment 50,000 35,000 35,000 Interest Earnings 13,395 11,133 7,436 Equipment Certificates (Bonds)100,800 - 136,400 Transfer In 220,564 - - Total Revenue & Other Financing Sources 1,344,699 1,158,669 1,226,524 Expenditures & Other Financing Uses Current Expenditures 35,600 35,956 36,316 Capital Projects Community Services - Activity Center - - Community Services - Information Technology 416,085 255,954 666,324 Community Services - Inspections - - 16,231 Fire Vehicles & Equipment 156,000 22,100 893,600 Police Vehicles & Equipment 748,160 431,500 217,500 Police Records Management System - 500,000 - Public Works: Parks/Forestry 151,200 172,200 - Public Works: Streets/Traffic 63,900 110,600 136,400 Total Expenditures and Other Financing Sources 1,570,945 1,528,310 1,966,371 Increase (Decrease) in Fund Balance (226,246) (369,641) (739,847) Projected Ending Fund Balance 1,113,268 743,627 3,780 Equipment Replacement Fund - Projected Cash Flows 5 Park Improvement Fund The main sources of revenue for park improvements are franchise fees and park dedication fees. The City has received approximately $305,000 in gas and electric franchise fees annually, with a fee increase of $50,000 being projected in 2024 and 2025. The fee can be used for any purpose. Park dedication fees are received from developers as land is platted for development. They can provide a significant source of revenue for the fund, but are also uncertain and outside the direct control of the City. Their use is limited to acquisition, development or improvement activities. In 2024, the Park Improvement Fund has projected revenues of $2,019,682 and projected expenditures of $614,700. The fund is projected to increase its fund balance by $1,404,982 and end 2024 with a fund balance of $2,451,106. The City is nearing completion of a Park System Master Plan, establishing a 20-year vision for Hopkins parks, open and public spaces. The CIP includes a Central Park Master Plan at a cost of $150,000 based on preliminary information in the plan. 2023 2024 2025 Beginning Fund Balance 912,656 1,046,124 2,451,106 Revenues & Other Financing Sources Franchise Fees 305,000 355,000 355,000 Park Dedication Fees - 1,638,000 - Interest Earnings 8,468 26,682 - Total Revenue & Other Financing Sources 313,468 2,019,682 355,000 Expenditures & Other Financing Uses Current Expenditures 15,000 15,000 15,000 Capital Projects Shady Oak Beach Improvements 5,000 29,700 6,600 Central Park Picnic Shelters Rehab - - - Central Park East Play Equipment Replacement - - - Improve Courts at Oakes, Cottageville and Interlachen Park - 230,000 - Repair Valley Park Volleyball Court - 70,000 - Repair Burnes Park Tennis Courts - - 130,000 Central Park Master Plan - 150,000 - Debt Service Transfers Cottageville Park Bonds 110,000 120,000 120,000 Burnes Park Bonds 50,000 - - Total Expenditures and Other Financing Sources 180,000 614,700 271,600 Increase (Decrease) in Fund Balance 133,468 1,404,982 83,400 Projected Ending Fund Balance Restricted for Park Dedication Costs 548,853 1,806,853 1,806,853 Committed for Park Improvements & Maintenance 497,271 644,253 727,653 Total Projected Ending Fund Balance 1,046,124 2,451,106 2,534,506 Park Improvement Fund - Projected Cash Flows 6 Pavilion Requests The Pavilion Fund requests total $98,000 for items in need of replacement. The Pavilion Fund budget is currently being completed. The operating budget may not be able to fund this projects. Staff is proposing tax levy as a funding source. Project Amount Water Heater Replacement 50,000$ Mezzanine Flooring Replacement 25,000$ Door Replacement 23,000$ Total Projects Requested 98,000.00$ Summary of Tax Impacts The projected cashflows and pavilion requests information above are based on a tax levy increase of 7% when compared to 2023. Staff is currently, compiling 9%, 7% and 5% increase proposals which will include use of fund balance, capital request deferrals and reductions to non-capital expenditures. 9% Levy Increase Staff is comfortable with the capital deferrals included in this memo. However, a 9% levy increase would include up to $210,000 of additional expenditures or use less reserves. Deferred projects that could be considered for 2024 are listed below. Note: Some projects were deferred for the Draft Tax Levy presented on 7/18/2023. Project Amount A ctivity Center Counter Tops 10,000.00 Activity Center Interior Door Replacement 18,500.00 Pavilion Roof Replacement 100,000.00 Pavilion Door Replacement 23,000.00 Pavilion Window Blinds 14,000.00 Street Lighting Upgrades 240,000.00 Mainstreet Banner Poles 130,000.00 Excelsior Blvd. Fencing 50,000.00 5% Levy Increase A 5% increase would include deferring additional projects and use of franchise fees not included above. Activity Center projects have been delayed a number of years and feel they must be done by 2025 to avoid the possibility of interior damage. Project/Use Activity Center Tuckpointing & Repair of Brick 120,000.00 Activity Center Roof Replacement & Flashing 250,000.00 Franchise Fees for Burnes Park Debt Levy 50,000.00