CITY GARAGE PROJECT
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Date: April 8, 1983
TO: Mayor and Council
-I FROM: William P. Craig, City Manager
SUBJECT: City Garage Project
At the time the city garage improvement project was recommended and approved, it
was presented as a multi-year program.......not because it was desired that way by the
operating departments, but in order to keep the rate of expenditure within our level
of income, and avoid any necessity to borrow. Any portion of the project which could
be delayed for one, two, or three years, was split out and targeted for 1983-85.
Specifically, the shortcomings needing correction are:
1) Insulate (heated portion only) and sprinkle 1938 building
(immediately north of new garage structure). Heat is
needed in a water/sewer work area and in the stalls for
equipment which carry water. Insulation will save operating
money. Sprinklers protect against possible catastrophic loss
of specialized equipment, which (although insured) would
take time to replace......not to mention the improvement in
safety for personnel.
2) The diesel fuel tank is undersize, and we pay a premium price
to have it filled with "tankwagon" rather than "transport"
deliveries. New heavy equipment is diesel-powered to save
operating cost, thus the tank is too small for current
operations.
3) Old "Barn" building is in extremely poor condition, although
structurally sound. A steel frame holds up the roof, but
the brickwork has deteriorated to the point that you can
pluck bricks from the wall in places. The appearance is quite
poor. The most cost-effective correction is thought to be
an application of stucco cement sprayed over metal screening
(the same exterior method used on Taits, Bucks Unpainted
Furniture, etc.).
4) Our new garage building doesn't have the bridge crane designed
for it. The mechanic is making do with a portable crane, but
it has neither the capacity nor the versatility needed.
;.'
5) The old main garage building, now used for unheated vehicle
storage, has no sprinklers. The replacement value of the
vehicles in there is sometimes upwards of $500,000, and they
each have a fuel tank which can leak. As noted above. the
wait for replacements can be painful; also there is a
difference between what insurance pays and the replacement
cost. Good practice nowadays requires sprinklered protection.
6) The old main garage building has developed a number of roof
leaks. Although this is not critical. we must schedule roof
replacement before the roof structure itself gets rotted out
and the replacement is excessively expensive.
.4.
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Resources available to correct shortcomings:
.i
There are two logical sources of funds to use for the completion of the city garage
project. The first is the Real Estate Sales Fund, which was used to build the new
garage building. This fund is derived from the proceeds of land sold by the city,
and thus is not self-generating. It currently has a balance of approximately $120,000
and a liability of around $20.000(retained payment on new garage). thus an available
balance of approximately $100,000.
The second source is the one used to payoff the City Hall (constructed in 1964), the
interest on the capital sum wi~hin the P. I. R. (Permanent Improvement Revolving)
Fund, which is $58,100 per year. The P. I. R. Fund can best be described by an example
of how it works. When residents of a particular block petition for curb and gutter,
or concrete alley, or any improvement, they assume it will be put in, the contractor
will be paid, and they will get a small annual addition to their property tax for
a period of years in order to pay for it. They are not required to put up the money
at the beginning of the project--yet the contractor must be paid in cash. The
answer of course, is that the city government must borrow the money. However, small
borrowings are extremely expensive in terms of issuing expense, and (today)interest
rates. So the city borrowed a large sum at once (and put up some capital many years
ago), and keeps lending the money out (at a small 7% rate of interest, slightly higher
than what we pay for the borrowed money). Contractors are promptly paid, citizens
get a break on interest rates, and there are no nickel-and-dime bond issues., The
1964 bond issue will be paid off next year. and the total owed (principal and interest)
at the end of this year will be $586,750, from the $2,500,000 originally borrowed by
the city.
Plainly. the interest earned on special assessments goes to pay the interest on the
bond issues. But what about the 7% interest on the original capital sum of $830,000?
This money can be directed anywhere Council chooses. It was used to payoff the
debt on the City Hall. At the time I came, it was being used to subsidize the General
Fund. That was stopped at the end of 1981. I would recommend that it be dedicated
to capital projects on an annual basis.
The P. I. R. Fund is currently in excellent condition. As you can see from the balance
sheet attached (an excerpt from your 1982 audit), the fund has a balance of $1,013,427,
sufficient to not only cover working capital and debt service, but to have an undesignated
balance of $47,402. That balance is recommended to remain in the fund.
ACTION NEEDED
I recommend that Council pass a Resolution applying the interest on the P.I.R. capital
sum for a specified period (1983-5) to the completion of the city garage project. I
would further recommend the following schedule:
1983 -
Landscaping/Painting
Insulate 1938 building
Sprinkle 1938 building
Diesel Fuel Tank & Pump
Repair Exterior/Interior "Barn"
1,000
9,000
12.000
12,000
19 .000
53,000
1984 -
Bridge Crane
Sprinkle large building
40,000
17.000
57,000
1985 -
Re-roof large building
?
Respectfully submitted.
\~~ ~
William P. Craig~Manager
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Form F
I'
SPECIAL ASSESSMENT
PERMANENT IMPROVEMENT REVOLVING FUND
COMPARATIVE BALANCE SHEET
December 31, 1982
With Comparative Totals for December 31, 1981
ASSETS
1982
1981
Current Assets:
Cash-Treasurer's balance
Investments, at cost
Special assessments receivable:
Delinquent
Deferred
$ 872
75,000
$ 957
38,235
l,516,495
26,909
1,629,342
Total Assets
$ l,630,602
$ 1,657,208
LIABILITIES AND ~UND BALANCE
Current Liabilities:
Contracts payable
Due to other funds
Total Current Liabilities
$ 7,175 $ 7,175
373,000
7,175 380,175
610,000 765,000
136,025 l72,210
830,000 83<>,000
47,402 (490,177)
1,013,427 512,033
$ 1,630,602 $ 1,657,208
Bonds payable
Fund Balance:
Reserved for debt service
Unreserved:
Designated for permanent working capital
Undesignated
Total Fund Balance--Form F-l
Total Liabilities and Fund
Balance
CITY OF HOPKINS, MINNESOTA
66
ANNUAL FINANCIAL REPORT