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CR 91-252 Capital Improvements Plan3 November 13, 1991 Thomas K. Harme Community Devel•pment ►irector 1992 -1996 CAPITAL IMPROVEMENTS PLAN Council Report 91 -252 Proposed Action. Staff recommends adoption of the following motion: Move to approve the 1992 -1996 Capital Improvements Plan for the City of Hopkins. Approval of this motion will conclude the review and adoption process for the Capital Improvements Plan. Ov rview. Since July, City staff has been working on the preparation of the 1992 -1996 Capital Improvements Plan for the City of Hopkins. During this period, the Capital Improvements Plan has been reviewed by the Planning Commission, Parks Board, and was discussed by the City Council during a public hearing on November 5 and during the City Council worksession on November 12. During this review process, several changes have been made to the Capital Improvements Plan to reflect budgetary considerations. The attached Capital Improvements Plan reflects these changes. Certain maps and other graphics are not included in the attached plan, but will be prepared and incorporated as a part of the final adopted plan. Primary Issues to Consider. o What is the purpose of a Capital Improvements Plan? o What are the highlights of the proposed plan? o What are the financial implications of the proposed plan? o What changes were made to the Capital Improvements Plan during the review process? o How was public input solicited for the Capital Improvements Plan? Supporting Information. o Staff analysis of issues o Finance Department analysis o Alternatives o Revised draft of 1992 -1996 Capital Improvements Plan Analysis of Issu s. o What is the purpose of a Capital Improvements Plan? The Capital Improvements Plan is a five -year forecast of project and equipment needs in the City of Hopkins. It is intended to alert the Council and citizens to the major capital needs on the horizon. The Capital Improvements Plan is intended to be a planning tool and is structured to present a meaningful, long - range perspective of the City's capital programming needs. At the same time, sufficient program details are provided to enable those who review the information to make informed decisions on the program projects over the next five years. The first year of the plan presumes an adopted capital budget. The remaining four years represent an estimate of project needs and funding capabilities of the City. In the past, the four years after the first year were proposed without specific consideration to the ability for the City to financially undertake the projects. The proposed capital improvements plan differs in that the plan was compiled in a manner that is more financially realistic. o What are the highlights of the proposed plan? The proposed five-year Capital Improvements Plan outlines projects totalling $14,488,100 over the 1992 -1996 period. This compares with total projects amounting to over $22 million in the previous Capital Improvements Plan. (1991- 1995) For 1992, $4,382,100 in projects and equipment are proposed. This compares with $6,975,000 proposed for 1992 in the previous five -year Capital Improvements Plan. Major projects within the Capital Improvements Plan for 1992 include: o ST -5 and ST -6'- Knollwood reconstruction - $851,000 o ST -7 and ST -8 - Reconstruction of Mainstreet between 11th Avenue and Shady Oak Road - $1,725,000 o ST -9 - CBD alley improvement - $500,000 CF-5 - Purchase and development of Maetzold Field - $280,000 o CE -4 - Purchase of a pumper truck - $232,500 o CE -19 - Purchase of a front -end loader - $80,000 o What are the financial implications of the proposed Capital Improvements Plan? Attached is a memo from John Schedler, Finance Director, which provides an analysis of the effect of the various funds which will be used to support the Capital Improvements Plan. o What changes were made to the Capital Improvements Plan during the r vi w proc ss? Since its original submission to the City Council, changes to the plan include: o MF -11 Fire station remodel - $71,500 was proposed to be spent in 1992 using current revenues to undertake remodeling to the fire station. This item has been deleted from the Capital Improvements Plan for 1992 and rescheduled for 1993. o TS -1 Trail systems - $15,000 was proposed to be spent in 1992 using current revenues for trail system improvements. Although this item is still in the Capital Improvements Plan, the revenue source is proposed to be grants rather than current revenues. MF -7 Activity Center renovation - $10,700 was proposed to be spent in 1992 using current revenues for improvements to the Activity Center. This amount has been reduced to $7,700. o How was public input solicited during the CIP review process? A public hearing notice was published in the Sailor which indicated that a draft CIP had been prepared for 1992 -1996. The public hearing notice also informed the public of the City Council's scheduled review of the CIP. In addition to the public hearing notice, staff sent a copy of the proposed Capital Improvements Plan to each of the neighborhood and business presidents within the City of Hopkins. In addition, a letter was sent along with the CIP specifically outlining projects which a specific neighborhood may be interested in, or projects which the Business Council may desire to examine further. As a result of this effort, staff did receive a couple of phone calls requesting clarification on projects within the CIP. Alternatives. 1. Approve staff's recommendation regarding the adoption of the Capital Improvements Plan. 2. Adopt the Capital Improvements Plan with modifications. 3. Continue this matter for further discussion at the Council's December 3 meeting. SUMMARY OF IMPACTS ON MAJOR FUNDING SOURCES CURRENT REVENUES /GENERAL RESERVES All of the 1992 projects can be funded without a reduction in other areas of the 1992 budget. For 1993 -1996, unless the tax levy and /or LGA formula is revised to allow the City greater flexibility, it may be difficult for some of these projects to be funded through the use of this source. SPECIAL LEVY /SPECIAL ASSESSMENT Some projects listed in 1992 and 1993 are designated to be funded from the 1990 bond issue in the amount of $448,500. Funding for the remaining projects would require issuing $3,750,000 in bonds. Year of Issue Special Assessment Repayment Net Cost to City TAX INCREMENT FINANCING SANITARY SEWER FUND Interest and Principal Issuance Cost (20 Year Bonds) Life of Issue 1992 $1,350,000 $1,040,000 1993 1,400,000 1,200,000 1995 1,000,000 850,000 3,750,000 3,090,000 2,800,000 2,200,000 $ 950,000 $ 890,000 This would result in an additional $92,000 average annual levy over 20 years to repay principal and interest. MUNICIPAL STATE AID The large projects in 1991 and 1992 will cause a two -year moratorium on projects funded by this source. The CIP takes this situation into account, and funding is sufficient for the projects listed. Cash on hand and increments above debt service are sufficient to cover these projects and private sector assistance. After scaling back and rescheduling projects as shown in the original CIP plus budgeting use of TIF funds for the sanitary sewers in segment 3 of Mainstreet in 1991, the need for several siginificant rate increases is reduced and delayed beyond the current CIP plan. However, this assumes an increase in 1992 rates to $2.50 per 1,000 gallons. EQUIPMENT REPLACEMENT FUND The continued issuance of $400,000 debt annually has and is providing a steady cash flow to maintain the variable cost of equipment purchases in a given year. Beginning in 1991, the plan is to shift debt instruments from bonds to internal Certificates of Indebtedness. The City is then able to continue levying taxes outside the levy limit, but this change of debt instruments will avoid issuance costs for legal, bond consultant and rating agency fees. STORM SEWER FUND The heavy construction of sewers in 1990 and 1991 and the low key projects over the next five years continue a negative cash flow. Just the debt service and the two annual maintenance projects - systems and alleys - will continue to increase the negative cash position at the present rate. It is likely that an increase in storm sewer rates will be necessary. WATER FUND A revision to the original CIP, by which needed projects are spread over a greater period of time, also reduces the frequency of projected rate increases. No rate increase is budgeted for 1992, but will require a close analysis in 1993 or 1994. REFUSE FUND After several years of struggle, working capital (cash) is in a healthy position for this fund. Grants have been most helpful. Cash is available now for the purchase of projected trucks.