04-14-2014 Council Minutes - Laserfiche WebLink

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MINUTES OF THE ORONO CITY COUNCIL MEETING Monday, April 14, 2014 7:00 o’clock p.m. _____________________________________________________________________________________ Page 26 of 30 (18. POLICE GARAGE AND ADDITION PROJECT, 2750 KELLEY PARKWAY, Continued) (b) Supplemental Capital Improvement Plan and Confirm Intent to Issue Bonds - (Public Hearing) – RESOLUTION NO. 6385, Continued Kimmel stated there are some arbitrage date requirements that specify the bond proceeds should be used within a three-year period. Kimmel stated that is basically a requirement to avoid arbitrage restrictions, but in today’s market, since it is difficult to invest bond proceeds at yields above the bond yield, it becomes more of an academic issue. Ron Olson, Finance Director, stated one of the purposes of tonight’s hearing is to establish the need for the improvements to the police department, which was covered in depth earlier. The other purpose is to determine whether bonding should be used to finance this project. Olson stated if the City is interested in pursuing this project, bonding is the only way the City can finance it. Olson stated the graph on the overhead depicts the bond repayment schedule and is also available on the City’s website. Olson stated one of the reasons Staff is comfortable with the bond sale is when the Mound police service contract is included the City’s revenue, the City receives more in revenue than what it costs to provide the service. Olson stated the second graph demonstrates the amount of revenue the City expects to receive from Mound going into the future. Olson stated the amount received in 2013 was $330,000, which has already been transferred out of the General Fund for this particular project. In 2014, there is an additional $160,000 budgeted to be transferred for use in this project. Olson stated after two years of the Mound contract, the City has $490,000 of funds available for the project. Olson stated in 2015, Staff is estimating receiving $125,000, and from 2016 and on, that number is estimated at $100,000. Olson stated the numbers are conservative and that he does not anticipate it dropping below $100,000. Based on the estimated figures, the City will have $1.315 million in money received from the service contract to help fund this project. Olson stated the next graph depicts the actual interest and principal payments that will be made by the City on the bond issue. Olson stated when the City sets the tax levy for debt service on bonds, state law requires the City to levy for 105 percent of the debt service, which is designed to offset tax delinquencies. Olson stated in Orono’s case, they collect between 98 and 99 percent, and when delinquent tax payments are included, the City is over 100 percent. Olson stated the fourth column depicts the Mound service contract, with those monies being applied to the debt service payments to help keep the debt levy flat. Olson noted it was important to the Council that the debt levy will not spike as a result of this project. Olson noted the majority of the revenues received from the service contract will be applied toward the bond debt in the later years. Olson stated $1.315 million is anticipated being used from those service contract revenues.