03-27-2000 Council Packet - Laserfiche WebLink

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REQUEST FOR COUNCIL ACTION cniiwrii MW 2 7 2000 qvvy oh orono DATE: March 23,2000 ITEM NO: ^ Department Approval: Name Ron Moorse Title City Administrator Administrator Reviewed:Agenda Section: City Administrator ’s Report Item Description: Adoption of an Ordinance to Create a Community Investment Fund Attachment: Ordinance Creating a Community Investment Fund Background In the years prior to the construction of the new City facilities, the City annually set aside General Fund surplus amounts to reduce the need to bond for the City facilities project. When the facilities project was approved, the City determined that due to the City’s excellent credit rating, it would be more advantageous to bond for the entire cost of the facilities rather than using the Building Fund reserves to reduce the need for bonding. The Bui.ding Fund reserves have increased over the years through interest earnings and through transfers to the fund from other sources. The Council has recently discussed putting in place an ordinance to ensure the principal amount of the fund is preser\ ed and grows over the long term, while the interest earned is available for priority capital projects. Current Status of the Building Outlay Fund The resolution establishing the Building Outlay Fund indicates the fund was established to reduce the need to bond for City facilities. The current Building Outlay Fund balance is $2.4 million. However, $400,000 of this fund balance is encumbered as an internal loan to the Water Fund to pay a portion of the costs of the Navarre Water Plant Rehabilitation Project. This is a 15-year loan that will be fully paid in 2013. Approximately 90% of the interest earnings in the fund ($130,000) is used to pay a portion of the debt service on the City facilities bonds. When the City initially proposed the funding for the City facilities, the City indicated the tax levy for the facilities project would be limited to 1.75% of the City’s tax capacity. This was approximately $250,000 in 1992. The interesteamings in the Building Outlay Fund are needed to bridge the gap bemeen the amount of the tax levy for debt service and the total debt service payment. It is important the principal amount in the Building Outlay Fund be preserved, and that the interest earnings be dedicated toward the City facilities debt service until the bonds are retired in 2007. If the interest earnings available for the debt serv ice were to be reduced significantly, the City would have a difficult time finding an alternative source of funding tor the debt service.