08-25-2020 CCM Workshop (CIP)HUTCHINSON CITY COUNCIL
REVIEW OF 2021 PRELIMINARY CAPITAL IMPROVEMENT PLAN
MINUTES
TUESDAY, AUGUST 25, 2020, AT 4:00 PM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Mayor Forcier called the workshop to order at 4:00 p.m. Members present included Mary
Christensen, Steve Cook, Dave Sebesta and Chad Czmowski. Others present were Matt Jaunich,
City Administrator and other city directors.
REVIEW OF 2021 PRELIMINARY CAPITAL IMPROVEMENT PLAN
2. 2021 Preliminary Capital Improvement Plan
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich reviewed the
purpose of a capital improvement plan and the planning that goes into it. A CIP is a document
that realistically projects city needs, outlines means by which those needs can be met and
provides prioritization of those needs. The planning process provides city staff and Council with
a framework to make decisions regarding current and future city needs considering the city's
financial capability. The CIP commits the City to a long term capital plan that ensures that
expenditures can be made to add or replace capital items when needed, without significant
fluctuations in the property tax levy. Capital planning enables the City to maintain a stable
property tax rate, prevent peaks and valleys in its debt retirement program and establish and
thereafter improve its credit rating. The CIP establishes a comprehensive development program
that is used to maximize outside revenue sources and effectively plan for the growth and
maintenance of the city's infrastructure. The plan should be used as a goal, priority and vision -
setting tool. Mr. Jaunich also reviewed how the CIP Plan is built which includes individual City
Council goals and collective Council goals; citizens/business/user feedback to elected officials
(needs, wants, desires of the community); City staff long-term maintenance and replacement
schedules; and state/federal mandates.
Mr. Jaunich began an overview of the five year capital plan document. The proposed plan is
estimated at $57.17 million. The Plan is approximately $2.1 million larger than last year's five-
year plan. The plan has an average CIP cost of $11.4 million. 2021's $14.95 million CIP cost
currently accounts for approximately 30-35% of all budgeted expenses. For comparison
purposes, this year's (2020) general fund budget is $13.45 million. This plan includes costs for a
new police station in 2021/2022.
Mr. Jaunich reviewed that the plan is divided into infrastructure at $18.65 million; Park & Rec at
$3.74 million; Enterprise Funds at $16.86 million; Public Works at $5.92 million; Public Safety
at $10.89 million and General Government at $1.11 million. The make-up of the CIP includes:
New Debt: $18.48 million (amount of money that we need to borrow to pay for capital projects);
Aid/Grants (state aid, federal/state grants, bridge funds, donations): $5.58 million; Enterprise
Funds (Creekside, Liquor Store, Refuse, Water, Sewer, Wastewater, Stormwater): $17.59
million; Taxes (money from our tax levy that gets designated towards capital projects): $11.30
million; Special Assessments (direct costs that will be assigned to property owners adjacent to
projects): $4.09 million; Special Funds/Reserves (rural fire department, cooperative agreements):
$129,392. CIP funding sources for general fund projects include the General Fund from the
Facility Improvements (Capital Projects Fund and $750,000 of LGA is dedicated annually); Fleet
& Equipment (Equipment Replacement Fund, General Fund — annual transfer of $275,000,
current funding is not adequate for "small" and "heavy" fleet needs, additional funding source of
about $327,000/year is needed); and Other Capital Needs — capital expenditures that are not
facility or fleet related (department budgets — tax levy, grants or donations, and other city
funding). Enterprise fund projects are covered by cash flow from operations driven by user
revenue and cash reserves — annually budget approximately 75% of annual net cash flow for
capital expenditures. Debt service payments are funded by revenue from operations.
Infrastructure improvements debt are covered by GO special assessment improvements bonds,
special assessment, municipal state aid for streets, grants, enterprise fund contributions and other
city funding from Capital Projects and Community Improvement. Capital project costs and
funding is reviewed by the Resource Allocation Committee. The Capital Projects Fund funding
sources come from LGA, bonding dollars and grants. The use of these funds are for general fund
capital improvements included in the Facility Plan, miscellaneous infrastructure maintenance
such as trails, sidewalks, parking lots, street lights, sealcoating, etc., and other projects approved
by the City Council. The 2019 year-end unreserved cash balance is $983,219 from this fund.
The Community Improvement Fund funding sources come from retired debt service funds and
donations. The use of these funds are for City Council approved projects and Public Arts
Commission & other public arts projects. The 2019 year-end unreserved cash balance is
$2,256,033 from this fund. The Public Sites Fund funding sources come from park dedication
fees, donations, grants and rent on agricultural land. The use of these funds are for parkland
improvements, tree development, arts, and City Council approved projects. The 2019 year-end
unreserved cash balance is $167,225 from this fund.
Mr. Jaunich noted where the proposed 2021 CIP monies are going to. They include $2.75 million
for infrastructure (Harrington Street SW, Merrill Street SW, Clinton Avenue SW, Church Street
SW, Lyndale Avenue SW, LED light retrofits and other miscellaneous streets); $1.16 million for
Park & Rec (vehicles, East Rink roof, playgrounds); $5.82 million for Enterprise Funds
(Creekside facility/equipment, water/sewer/wastewater/storm water improvements and
equipment); $525,100 for Public Works (interior shop painting, cemetery and street
vehicles/equipment); $4.51 million for Public Safety (new police station, police/fire vehicles,
radio replacements); $177,675 for General Government (Dakota Trail and general facility/IT
upgrades). Mr. Jaunich then reviewed where the proposed 2021 CIP monies are coming from.
They include $3.98 million from New Debt (amount of money that we are planning to borrow to
pay for capital projects next year); $89,600 from Aid/Grants; $5.91 million from Enterprise
Funds; $4.37 million from Taxes (money from our tax levy that is helping to pay for capital
projects next year); and $516,920 from Special Assessments (direct costs that will be assigned to
property owners adjacent to projects).
Mr. Jaunich reviewed the five components of the Plan which include the fleet committee,
facilities committee, Creekside, Resource Allocation Committee and General. Mr. Jaunich
provided an overview of fleet. With regard to light duty fleet there are currently 89 pieces of
light duty equipment such as cars, pickups, skid loaders, etc. Currently $275,000 of CIP funds
are allocated annually for light duty fleet, funded by the general fund. The unreserved fund
balance at the end of 2019 acquisitions is $706,000. In 2020, seven vehicles/equipment have
been recommended for replacement at an estimated gross cost of $228,700. With regard to heavy
duty fleet, the City currently has 21 pieces of heavy duty equipment which are made up of fire
apparatuses, snow equipment, frontend loaders, etc. In 2020, a Zambom and wheel loader have
been recommended for replacement at an estimated gross cost of $348,891, less a $60,000
donation received for the Zamboni. The City took a significant step in meeting its demand of this
in 2016 with bonding for several large pieces of equipment with a 5-year debt expiring February
1, 2022 and potential capacity to add new debt in 2021 with first principal repayment February 1,
2023. The light duty and heavy duty fleet program is still currently not sustainable with this plan.
The current plan has an annual shortage of roughly $327,000. The Fleet Committee is looking at
bondingiborrowing for future heavy duty fleet and looking at making policy changes in 2020 with
more focus on the Vehicle Condition Index and less focus on expected life, although service is a
major component of the VCI.
Mr. Jaunich provided an update on the facility committee. Overall, the facility planning
concept/funding model with a facility manager has been working well. Construction costs were
increasing, but staff believes we are entering a competitive bidding season. A small project
building repair fund has been established with $50,000 per year set aside to address smaller
facility items such as lighting upgrades, small roof projects, tuck pointing/joint repair, etc.
Facility Committee staff continue to assess condition ratings and develop a project list based on
needs.
Mr. Jaunich reviewed projects that have been completed in 2020 or are near completion. Those
projects include a new roof at the recreation center, City Center ADA sidewalk improvements
and access controls and COVID-19 related improvements. Mr. Jaunich then reviewed a draft
project list for 2021-2025.
Mr. Jaunich also reviewed the 5 Year CIP for both the compost and refuse funds which is just
over $3.7 million. The Compost Fund is about $600,000 cheaper than the previous year's five
year CIP. The walking floor trailers have been removed and the screener replacement was placed
in 2020. No major changes to the Refuse Fund from last year's 5-Year CIP. There is currently
an analysis being completed by a consultant that will help lead discussions for future expenses
and the CIP. This analysis will look at a potentially a new way to run the system and a review of
the source separated organic material curbside program. In addition, staff is planning to renew
the garbage contract in October.
Public Works projects included in the 2021 plan are: Pavement Management Program which
includes Clinton Avenue SW and Lyndale Avenue SW (Harrington to Merrill), Merrill Street
SW/Church Street/Harrington Street SW (South Grade Road to Linden), and Keith Street (South
Grade Road to Neal Avenue); LED Streetlight Retrofits; South Central Storm work; Southfork
Storm Pond; Preliminary Treatment Redesign & EQ System at Wastewater; additional upgrades
to water and wastewater facilities; facility painting and vehicle and equipment replacements. Mr.
Jaunich then noted Public Works CIP highlights slated for 2021-2025.
Mr. Jaunich reviewed project funding limitations/concerns. These include $1.9 million bonding
target limitations; dedicated street sealcoating funding at $125,000/year; infrastructure
maintenance needs at $275,000/year; construction costs; utility funds capacity; municipal state &
federal aid utilization; environmental & infrastructure grant possibilities. Other items to keep in
consideration are long-term funding needs, funding plan for the new police station, funding of
infrastructure improvements, the Compost fund study, funding of water/wastewater/storm sewer
and the impact on rate study; LGA allocation between the general fund and CIP and other
projects/Council needs.
Mr. Jaunich also provided an updated 2020 financial forecast and an update on the current budget
situation. The April projected deficit of $212,000 has turned into a projected surplus of
approximately $157,000 due to approximately $150,000 of CARES funding allocated to the
general fund, Liquor transfer expected to be approximately $100,000 higher, building permit fees
expected to be approximately $26,000 higher, some recreational programming came back online
increasing revenue projections, and reduced employment costs by delaying hirings and
eliminating seasonal hires. Current revenues are expected to be under budget by about $658,000
but will be offset with expenditures being under budget by about $815,000. So far sales tax
revenue hasn't really been affected, but it is still early and a lot can happen between now and
December 31". Mr. Jaunich noted that the state situation is likely to have more of an impact than
the City's local one and the potential impact on LGA later this year and more likely next year.
3. Adjournment
Motion by Christensen, second by Sebesta, to adjourn the workshop at 5:10 p.m. Roll call vote:
Cook — aye; Christensen — aye; Sebesta — aye; Czmowski — aye; Forcier — aye. Motion carried
unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator