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HomeMy WebLinkAbout08-25-2026 (Workshop - CIP)HUTCHINSON CITY COUNCIL REVIEW OF 2027 PRELIMINARY CAPITAL IMPROVEMENT PLAN MINUTES TUESDAY, AUGUST 25, 2026, 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 Pat May, Dave Sebesta and Chad Czmowski. Member absent was Tim Burley. Others present were Matt Jaunich, City Administrator and other city directors. REVIEW OF 2027 PRELIMINARY CAPITAL IMPROVEMENT PLAN 2. 2027 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 $64.40 million. The Plan is approximately $8.25 million lower than last year's five- year plan. The plan has an annual average CIP cost of $12.88 million. 2027's $17.08 million CIP cost currently accounts for approximately 25-30% of all budgeted expenses. For comparison purposes, this year's (2026) general fund budget is $16.55 million. Large projects included in the plan are the City Center remodel ($2.27 million) in 2027; ladder truck ($825,000); outdoor basketball courts ($400,000) and a new storm water pond ($2 million) in 2027; City Center garage ($290,000) and Rec Center floor ($250,000) in 2028; Roberts Park improvements ($450,000) in 2029; Campground expansion ($500,000) and pool resurfacing ($450,000) in 2030; and a new fire engine ($1.2 million) and ice arena floor replacements ($2.9 million) in 2031. Mr. Jaunich reviewed that the plan is divided into infrastructure at $24.24 million; Park & Rec at $7.44 million; Enterprise Funds at $23.17 million; Public Works at $3.63 million; Public Safety at $2.98 million and General Government at $2.93 million. The make-up of the CIP includes: New Debt: $14.79 million (amount of money that we need to borrow to pay for capital projects); Aid/Grants/Donations (state aid, federal/state/county grants, bonding dollars, donations): $11.14 million; Enterprise Funds (Creekside, Liquor Store, Refuse, Water, Sewer, Wastewater, Stormwater): $21.20 million; Taxes (money from our tax levy that gets designated towards capital projects): $9.45 million; Special Assessments (direct costs that will be assigned to property owners adjacent to projects): $3.50 million; Special Funds/Reserves (rural fire department, cooperative agreements, special funds): $965,500. Mr. Jaunich reviewed the CIP funding sources for various funds. Within the general fund, facility improvements are funded by the capital projects fund. $850,000 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 $450,000 from the general fund and $50,000 from the LGA fund as the current funding is not adequate for the "small" and "heavy" fleet needs. An additional funding source of about $296,000/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 G.O. special assessment improvements bonds, G.O. Bonds for police facility, special assessments, municipal state aid for streets and federal aid, grants, enterprise fund contributions and other city funding from Capital Projects and Community Improvement. 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 2025 year-end unreserved cash balance is $1,290,000 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 2025 year-end unreserved cash balance is $2,330,000 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 2025 year-end unreserved cash balance is $300,000 from this fund. Mr. Jaunich noted where the proposed 2027 CIP monies are going to. They include $5.09 million for infrastructure (Montreal/Edmonton Avenue RAB; Hilltop/Lindy Lane/Pawls Road/Mark Drive/Morningside/Lakeview Lane, etc.; trails, Festival Street); $1.06 million for Park & Rec (pool repairs/features, vehicles/equipment, playgrounds, signage, and outdoor basketball courts); $6.76 million for Enterprise Funds (liquor store improvements, Creekside equipment/facility, water and wastewater improvements and equipment, biosolids project, water meters and storm water improvements); $636,000 for Public Works (vehicles/equipment, Water Street garage); $1.20 million for Public Safety (fire ladder truck, fire garage, squad cars/handguns, live house); $2.3 million for General Government (City Center). Mr. Jaunich then reviewed where the proposed 2027 CIP monies are coming from. They include $5.556 million from New Debt (amount of money that we are planning to borrow to pay for capital projects next year); $1.88 million from Aid/Grants; $6.00 million from Enterprise Funds; $2.80 million from Taxes (money from our tax levy that is helping to pay for capital projects next year); $489,933 from Special Assessments (direct costs that will be assigned to property owners adjacent to projects); and $348,000 from Special Funds/Reserves. 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 $500,000 of CIP funds are allocated annually for light duty fleet, funded by the general fund and LGA. The unreserved fund balance at the end of 2025 acquisitions is $470,000. In 2027, five vehicles/equipment have been recommended for replacement at an estimated gross cost of $382,600. With regard to heavy duty fleet, the City currently has 22 pieces of heavy-duty equipment which are made up of fire apparatuses, snow equipment, frontend loaders, etc. The current plan includes the final payment of $824,841 in 2027 to replace the fire ladder truck. The plan assumes that $800,000 will be funded by debt and other reserve funds. In 2025, a snow plow truck was purchased at a total cost of $287,381. In 2027 a single -axle dump truck has been recommended for replacement at a total estimated cost of $240,000. The Wastewater fund will cover 50% of the cost as the truck will be used to haul biosolids for either field application or to the landfill. Fire Engine 7 is being planned for a 2031 replacement at an estimated total cost of $1.2 million. This is a shared truck with the rural fire fund and the cost will be split 50150 between the City and the rural townships. The Fleet Committee has begun setting aside fund balance each year to avoid future debt for the purchase. The City took a significant step in meeting its demand for heavy equipment in 2016 with bonded debt for several large pieces of equipment — the five-year debt expired in February 2022, the 10-year debt issued in 2026 for the new fire ladder truck, and noting that future debt for heavy equipment would increase the City's debt tax levy. 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 $240,000 mostly attributed to heavy fleet. Policy focus of the City is to put more focus on the Vehicle Condition Index and less focus on expected life, although service age 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 continues to work well. Construction costs have increased significantly and lead times for equipment/supply can run as long as 35 weeks making things difficult. Park and Recreation facilities are taking up the majority of the City's facility funds. 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 then reviewed the major projects in 2026 which included design work for the City Center remodel, finishing of Robert Park lighting project, West ice rink rubber floor and HVAC, Rec Center RTU/office space work, parks garage HVAC and City Center server room HVAC. Mr. Jaunich also reviewed the current facility plan budget. Mr. Jaunich reviewed the preliminary 5-Year CIP for both the compost and refuse funds which is just over $1.97 million. Items include equipment and vehicles, office expansion, scale improvements, bagging line improvements, screening plant and other facility/equipment upgrades. The previous five-year CIP wasjust under $1.59 million. Public Works projects included in the 2027 plan are: Montreal/Edmonton Avenue roundabout; Hilltop Drive reclaim; Lindy Lane/Garden Road/Pauls Road/Mark Drive/Morningside Drive/Genes Driver/Waller Drive reclaim; utility extension off of Technology Drive; trail project for The Landing/Festival Street/2nd Avenue and Franklin Street closure; sewer lining; storm water improvements; commercial water meter replacements; additional upgrades to water and wastewater facilities and vehicle/equipment replacements/building updates. 2027-2030 Public Works projects were also reviewed. Parks & Recreation projects included in the 2027 plan are: aquatic center repairs and pool feature upgrades; East rink elevator replacement and floor scrubber at Burtch Arena; Northwoods Park playground equipment; outdoor basketball court; two new wide -area mowers; park signage and vehicle/equipment replacements. Mr. Jaunich then noted Parks & Recreation CIP projects slated for 2028-2031. 2027 Public Safety Projects include the last payment on the fire ladder truck; fire department floor improvements; handgun replacements; Live Fire House panel replacement; and vehicle/equipment replacements for Fire and Police. Mr. Jaunich then noted Public Safety CIP projects slated for 2028-2031. Mr. Jaunich reviewed two projects that do not have a funding source which include pool resurfacing in 2030 and East/West Rink floor replacements at Burtch Arena in 2031. He noted that the Lakes/River basin improvements project has funding from state dollars which started in 2024 and is ongoing. There are long-term funding needs for heavy and light fleet. There is nothing set aside for funding for infrastructure for new development. City Center remodel estimated at $2.27 million is currently planned for 2027. Staff is holding on the Event Center sale as there is no plan for the Senior Center. He further noted that there is no direction on a local sales tax and perhaps a Council Committee should be established to work on this. Mr. Jaunich reviewed project funding limitations/concerns. These include costs to fund infrastructure; $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; local sales tax is still a big question; impact of legislative changes to water/wastewater and costs associated with it. Mr. Jaunich also noted that non -staff requests need to be addressed on how they should be handled. The Council also needs to identify the priorities. Mr. Jaunich spoke about other potential funding options: one-time public safety aid; new housing aid; sale of Event Center; capital projects fund; community improvement fund and public sites (parkland dedication) fund. Mr. Jaunich further reviewed how the Public Safety Aid and Affordable Housing Aid funds have been allocated. Mr. Jaunich lastly spoke about the future of the city sales tax option. The local sales tax went into effect in 2012 and the City is currently collecting approximately $2 million per year. These funds help cover debt payments associated with the water and wastewater systems and help assist with funding options for capital improvements in the water and wastewater system. The local option sales tax expires at the end of 2029 or when revenues are sufficient to pay for the projects and associated bond costs (3-31-27). The previous two-year moratorium has ended with no new law changes on sales tax with the previous process being put back in place. The City does need to notify the State Commissioner at least 90 days before terminating the sales tax through an ordinance. Mr. Jaunich also noted that currently staff is looking at a 12% preliminary tax levy increase. More information will be presented at the budget workshop on September 8, 2026. Mayor Forcier noted that this is a plan only — each project comes before the Council for approval to proceed. Mr. Jaunich noted that the CIP plan is really a priority list of the Council. 3. Adjournment Motion by May, second by Sebesta , to adjourn the workshop at 5:15 p.m. Motion carried unanimously. ATTEST: Gary T. Forcier Mayor Matthew Jaunich City Administrator