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08-24-21 CCM Workshop (CIP Review)HUTCHINSON CITY COUNCIL REVIEW OF 2022 PRELIMINARY CAPITAL IMPROVEMENT PLAN MINUTES TUESDAY, AUGUST 24, 2021, 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, Pat May, Dave Sebesta and Chad Czmowski. Others present were Matt Jaunich, City Administrator and other city directors. REVIEW OF 2022 PRELIMINARY CAPITAL IMPROVEMENT PLAN 2. 2022 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 for large capital items within the city. 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 can and 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 $50.08 million. The Plan is approximately $7.01 million lower than last year's five- year plan. The plan has an average CIP cost of $10.02 million. 2022's $17.66 million CIP cost currently accounts for approximately 30-35% of all budgeted expenses. For comparison purposes, this year's (2021) general fund budget is $13.70 million. This plan includes the second half costs for a new police station in 2022. Mr. Jaunich reviewed that the plan is divided into infrastructure at $20.43 million; Park & Rec at $4.89 million; Enterprise Funds at $11.58 million; Public Works at $5.42 million; Public Safety at $6.76 million and General Government at $990,531. The make-up of the CIP includes: New Debt: $16.91 million (amount of money that we need to borrow to pay for capital projects); Aid/Grants (state aid, federal/state grants, bridge funds, donations): $6.14 million; Enterprise Funds (Creekside, Liquor Store, Refuse, Water, Sewer, Wastewater, Stormwater): $12.43 million; Taxes (money from our tax levy that gets designated towards capital projects): $9.64 million; Special Assessments (direct costs that will be assigned to property owners adjacent to projects): $4.41 million; Special Funds/Reserves (rural fire department, cooperative agreements): $558,245. Mr. Jaunich reviewed the CIP funding sources for various funds. Within the general fund, facility improvements are funded by the capital projects fund. $750,000 of LGA is dedicated annually and $50,000 is dedicated for playgrounds. Fleet & Equipment is funded by the Equipment Replacement Fund. There is an annual transfer of $325,000 from the general fund as the current funding is not adequate for the "small" and "heavy" fleet needs. An additional funding source of about $326,000/year is needed. Other Capital Needs are funded by departmental budgets through the tax levy, grants/donations and/or other city funding. Within the enterprise funds, the funding comes from cash flow from operations and is driven by user revenue. Cash reserves are also used for funding. 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 2020 year-end unreserved cash balance is $886,727 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 2020 year-end unreserved cash balance is $2,161,0004 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 2020 year-end unreserved cash balance is $187,675 from this fund. Mr. Jaunich noted where the proposed 2022 CIP monies are going to. They include $2.87 million for infrastructure (School Road, Century Avenue, Linden Avenue, Sunset Street, Neal Avenue, LED light retrofits and seal coating); $2.23 million for Park & Rec (vehicles, East Rink roof, splash pad and playgrounds); $3.32 million for Enterprise Funds (Creekside facility/equipment, water/sewer/wastewater/storm water improvements and equipment); $3.10 million for Public Works (HATS facility, cemetery and street vehicles/equipment); $6.07 million for Public Safety (new police station, building inspections vehicle and new police vehicle); $75,000 for General Government (signage, election equipment and City Center improvements). Mr. Jaunich then reviewed where the proposed 2022 CIP monies are coming from. They include $7.82 million from New Debt (amount of money that we are planning to borrow to pay for capital projects next year); $2.85 million from Aid/Grants; $3.43 million from Enterprise Funds; $3.20 million from Taxes (money from our tax levy that is helping to pay for capital projects next year); and $368,991 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 90 pieces of light duty equipment such as cars, pickups, skid loaders, etc. Currently $325,000 of CIP funds are allocated annually for light duty fleet, funded by the general fund. The unreserved fund balance at the end of 2020 acquisitions is $906,000. In 2021, seven vehicles/equipment have been recommended for replacement at an estimated gross cost of $284,100. With regard to heavy duty fleet, the City currently has 20 pieces of heavy duty equipment which are made up of fire apparatuses, snow equipment, frontend loaders, etc. In 2021, a wheel loader has been recommended for replacement at an estimated gross cost of $205,000. 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 $326,000. The Fleet Committee is looking at bonding/borrowing for future heavy duty fleet. There is at least one replacement in excess of $200,000 in each of the next five years. A fire ladder truck is in need of major refurbishment or replacement in 2026/2027. Policy changes were made 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 2021 or are near completion. Those projects include finishing up a new roof at the recreation center, Civic Arena and Rec Center parking lot improvements and a City Center boiler. Mr. Jaunich also reviewed the 5 Year CIP for both the compost and refuse funds which is just over $2.6 million. The site is currently in a holding pattern on the SSOM processing/operation project. CIP costs for this project are around $950,000. Public Works projects included in the 2022 plan are: School Road (Golf Course Road to North High Drive); Century Avenue SW (Dale Street to Boston Street); Linden Avenue SW, Sunset Street SW and Neal Avenue SW; LED street retrofits; seal coating; HATS storage building and fuel site; pond improvements; additional upgrades to water and wastewater facilities; water meter replacement sand vehicle/equipment replacements. Mr. Jaunich then noted Public Works CIP highlights slated for 2023-2026. 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 $325,000/year; construction costs/inflation; utility funds capacity; municipal state & federal aid utilization; environmental & infrastructure grant possibilities. Other items to keep in consideration are long-term funding needs for heavy and light fleet, funding plan for the new police station, funding of infrastructure improvements, and Creekside operations. Mr. Jaunich also provided an update on American Rescue Plan funding. Mr. Jaunich explained that nearly $4.97 billion will be coming to Minnesota governments. Hutchinson is considered a "non -entitlement" unit of local government. Approximately $377 million has been allocated to non -entitlement units of government. The City is set to receive $1,479,639.42 over the next two years. Eligible uses for these funds include responding to the public health emergency, addressing negative economic impacts, serving the hardest hit and improving access to infrastructure. Guidance that has been provided for eligible uses include supporting urgent COVID-19 response efforts to continue to decrease spread of the virus and bring the pandemic under control; replacing lost public sector revenue to strengthen support for vital public services and help retain jobs; supporting immediate economic stabilization for households and businesses; and addressing systemic public health and economic challenges that have contributed to the inequal impact of the pandemic on certain populations. Ineligible expenses include offsetting a tax cut; depositing in pension funds; bolstering rain day reserves; and making past debt service payments. Mr. Jaunich explained the difference between ARP funds and CARES funds. He noted that staff will be working to determine eligible expenses and determining what the community needs are. Mr. Jaunich also provided an update/follow-up on providing funding to local historical societies. Mr. Jaunich explained that state law allows for cities to appropriate money to commemorate the anniversary of any important and outstanding event in the city's history. State law allows for cities to spend money on the following: to collect data and material pertaining to the history of the city; to preserve, store and house data and material pertaining to the history of the city; to print, publish, distribute and exhibit data and material pertaining to the history of the city; and to preserve historic data for future generations. State law allows for a city to annually appropriate, from its general fund, an amount not to exceed .02418% of the estimated market value of the city to the historic society of its respective city, town or county to further the promotion of historical work and to aid in defraying the expenses of carrying on the historical work in the city, town or county. However, the city can only do this if the historical society is affiliated with and approved by the Minnesota Historical Society. Mr. Jaunich further spoke about cost -savings the city will see with the consolidating of the dispatch center with McLeod County. In addition, the City will be selling the current police facility and garages when the new police facility is fully operational. 3. Adjournment Motion by Christensen, second by Czmowski, to adjourn the workshop at 5:05 p.m. Motion carried unanimously. ATTEST: Gary T. Forcier Mayor Matthew Jaunich City Administrator