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r <br />t[ <br />TO; <br />FROM: <br />DATE: <br />Mayor and City Council <br />Ron Moorse, City Administrator <br />August 23,2000 <br />SUBJECT: 1989 Water and Sewer Bonds - Connection Charges <br />From 1994 to 2000, the City levied an average of $89,000 peryearto supplement special assessment <br />revenues to pay the debt service on the 1989 water and sewer bonds. T^is was necessary because <br />expected development along Highway 12, which was to pay connection charges as a significant <br />source of revenue for f .e debt service, did not occur. <br />With the construction of the Middle School and the 25-unit Willow View subdivision, the City <br />received the first substantial connection charges related to the 1989 water and sewer project. This <br />enabled the tax levy for debt service on the water and sewer bonds to be eliminated in 2001. <br />Staff estimates that as the commercial area along the north side of Highway 12 and the medium- <br />density residential area to the north of the commercial area both develop, the City will receive an <br />additional $741,000 in connection charges. <br />At the August 7 budget work session. Council Member Kelley suggested that rather than being <br />placed into the Sewer and Water Funds, these additional connection charges be placed into a levy- <br />supported fund so that at least indirectly the taxpayers who subsidized the 1989 water and sewer <br />project will be repaid. <br />Staff’s first priority regarding the use of these connection charges is that they be used for capital <br />expenditures versus operating expenditures. Because these are one-time revenues, they should be <br />matched with one-time expenditures. Staffs priorities for specific uses are as follows: <br />A. Capital Expenditures in the Water Fund. Although water rates have been increasing, <br />and will continue to increase, the debt service on the Navarre water plant <br />rehabilitation project and the upcoming need to repaint the Navarre water tower will <br />not allow the Water Fund to move to a stronger financial position. It would be <br />beneficial to keep a portion of the future connection charges in the Water Fund. <br />However, this would not be a benefit to those taxpayers who are not City water <br />customers. <br />B. It is certain that the City will have substantial expenditures regarding the Long Lake <br />fire equipment replacement and the Long Lake fire station replacement. This would <br />be an excellent use of the future connection charge revenue. <br />Page 7