06-28-2010 Council Minutes - Laserfiche WebLink

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Y MINUTES OF THE ORONO CITY COUNCIL MEETING Monday, June 28, 2010 7:00 o'clock p.m. (10. STREET CIP —SCHEDULE AND FUNDING OPTIONS, Continued) Murphy asked if the improvements to Watertown Road have been discussed with Long Lake so that the stretch of road from Willow to the east can also be improved at the same time. Kellogg indicated it is his understanding that Jessica has spoken with Long Lake staff regarding the Watertown Road improvements. Kellogg noted that section in Long Lake would not be covered with state aid dollars. Murphy stated as it relates to Old Crystal Bay Road, he would like to work with the schools as much as possible to make sure that the road is as safe as possible. Olson stated under current state law, MSA allows the City to sell bonds and to use 90 percent of the money to pay principal and interest on those bonds, which should not impact the City's tax levy significantly. Staff is estimating that the City would need to sell $1.4 million in bonds to fund the Old Crystal Bay Road project. That estimate could be less depending upon the contribution by MSA. Kellogg noted they still have to finalize the agreement. Olson stated $1.4 million is perhaps the worst case scenario. The City would sell the bonds under the pavement management plan. Orono Orchard Road is currently on the schedule for 2012. Olson stated in his opinion the City can complete the work on Orono Orchard Road and Old Crystal Bay Road in 2011 without straining the City's levy. is Olson stated as it relates to the City's tax capacity rate, if the $1.4 million is bonded this year, it would impact it by .41 percent. It is projected to be at 15.13 next year, which would raise it to 15.54. Olson stated he also does not believe that the tax capacity rate tells people whether they are taxing enough to pay for various infrastructure improvements. U Olson noted that bids are currently coming in 25 percent under estimate. By moving ahead with the projects now, the City can capitalize on historically low bond rates and take advantage of a very good bidding environment. Olson commented he is not sure how long that situation will last. Franchot asked what the impact would be on interest payments if the interest rates were one percent higher between 2013 and 2016. Franchot commented it does not sound like there is a significant difference between Options 2 and 3 and that it might be better to go ahead with all the work rather than to do some now and some later. Olson stated a one percent higher interest rate would mean approximately $2 million more in bonds. Olson pointed out the City would not be getting enough money from MSA to pay the debt service and that it would impact the levy. Loftus stated the difference between Schedules 3 and 4 is the extra interest of approximately $150,000, so the City would end up paying an extra $150,000 in interest. Franchot stated he would not be opposed to moving some of the projects up and doing them all at one time in order to take advantage of the lower interest rates. Page 5 of 10