06-10-2019 Council Packet - Laserfiche WebLink

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To: Mayor and Council From: Ron Olson, Finance Director Subject: Pavement Management Fund Date: March 18, 2019 Attachments: 1. Funding Summary The major funding for the 2019 Street Maintenance Project ($1,179,255) is from the Pavement Management Fund (PMP). As the Council is aware, the City has been working for towards fully funding the City's PMP for a number of years. Prior to 2016, the funding was through the sale of bonds and fund balance transfers. In 2016, in order to bring more stability to pavement funding, a property tax in the amount of $183,000 was levied. This amount has been increasing annually and in 2019 the Pavement Management Levy is $544,450. In 2018, the annual lease revenue received from telecommunication companies leasing space for antenna on the city water towers was redirected from the Water Fund to the PMP fund. In 2019, this is estimated to be $120,000. Current estimates are that the annual amount needed for fully funding the PMP is $1,000,000. The difference between the amount required and the tax levy has been being made up through the transfer of fund balances that exceed the balances required by the City's fund balance policy. Funding of the 2019 street projects will also require fund balance transfers. The fund currently has a negative balance as road projects have been being approved with the understanding that fund balance transfers would be made. In October of 2018 the Council set a fund balance maximum for the Insurance Fund at $300,000. The current balance is $610,000 and the excess is required to be transferred to another fund. Staff's recommendation would be to transfer the balance to the Pavement Management Fund for the 2019 projects. As indicated in the attached funding summary, the transfers required for the 2019 projects are: • 2017 General Fund transfer $450,000 • 2018 General Fund transfer $550,000 • 2018 Insurance Fund transfer $310,000 The balance of the funding will be from funds budgeted in the 2019 budget. It is anticipated that the long term funding of the Pavement Management Fund will be achieved in the near future. In 2023, with the final payment of the 2016 GO Refunding Bonds, there will be $300,000 of property tax levy freed up. With the continuation of reasonable annual increases of the Pavement Management Levy, and the availability of the additional levy funds in 2023, the Pavement Management Fund can be fully funded. This will eliminate the need to depend on fund balance transfers and provide a stable funding source for the City's road infrastructure.