City of Lino Lakes, Minnesota Financing Plan Highlights Citizens’ Charter Review Task Force March...

City of Lino Lakes, Minnesota Financing Plan Highlights

Citizens’ Charter ReviewTask Force

March 29,2007

Pavement Management ReportFinancing Plan

Presenter: Terri Heaton, Senior Vice President

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Background

• TKDA hired during 2004 to complete an overall pavement management analysis including:

– An evaluation of the condition of the current streets and

– The costs to maintain / reconstruct them in order to maximize the useful life of these investments

• The outcome was a Pavement Management Report (“PMR”)

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• Determine a financing plan that is sustainable over the long-term

• Allocate the costs of the PMR in a fair and equitable manner – Spread evenly all taxpayers– Specific costs to certain property owners– Spread based on utility usage

• Identify non-tax revenues to finance the PMR

• Maximize use of appropriate external financing sources

• Minimize the utilization of City property taxes

Purpose of PMR Financing Plan

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• Maintenance– Costs related to the sealcoating and overlay of streets

whose pavement life can be extended through on-going maintenance

• Reconstruction– Costs related to those streets that have outlived their

useful life so that pavement is in need of removal and replacement;

Two Primary Cost Components

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Year Maintenance Reconstruct Total

2005 $ 230,000 $ 0 $ 230,000

2006 347,500 0 347,500

2007 365,000 1,435,000 1,800,000

2008 385,000 2,750,000 3,135,000

2009 402,500 3,035,000 3,437,500

2010 422,500 3,485,000 3,907,500

2011 445,000 1,577,500 2,022,500

2012 467,500 1,655,000 2,122,500

2013 490,000 1,737,500 2,227,500

2014 515,000 1,825,000 2,340,000

Total Estimated Cost $4,070,000 $17,500,000 $21,570,000

Total Estimated Cost of the Plan

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• Tax Levy on a pay-as-you-go basis

• General Obligation bonds repaid from property taxes

• General Obligation bonds repaid from special assessments

• General Obligation Street Reconstruction bonds repaid from tax levies

• Storm Water Utility to finance the portion related to storm water

Financial Tools Considered

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• Tax Increment / Tax Abatement

• Special Service District

• Economic Development Authority

• Capital Projects funds

• Storm Water Improvement District

• State and Federal Transportation Grants

• Anoka County

• Municipal State Aids (MSA)

Additional Financial Tools Considered

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• Maintenance Portion of PMR

– Annual property tax levy for the maintenance portion of the PMR

• Ongoing costs with ongoing revenues

• Not capital in nature-not appropriate to bond

• $330,000 estimated for 2005 with an average annual cost of $407,000

Recommended Financing Sources

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• Reconstruction Portion of PMR

– General Obligation Improvement Bonds

• Repaid by special assessments for reconstruction projects where the existing street width is inadequate

• No less than 20% of the costs must be assessed to benefiting properties (not to exceed the special benefit to their properties)

• Remaining amount would be repaid from a property tax levy


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– General Obligation Street Reconstruction Bonds for reconstruction projects where the existing street width is adequate and where other elements not currently existing do not need to be added

• Benefiting properties would be assessed an amount equal to the special benefit they receive

• Remaining amount would be repaid from a property tax levy

• Referendum is not required

• Unanimous vote by City Council required and subject to reverse referendum


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– Storm water utility to pay for those costs of the PMR related to storm water

– Tax Increment Financing, Tax Abatement, EDA Levy and HRA Levy

• Use is consistent with the City’s statutory authority

• Rational nexus between the use of these funding tools and a development or redevelopment project


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– M.S.A. should be used to maintain and reconstruct those streets designated as part of the City’s M.S.A. system

– Pursue cost sharing opportunities with Anoka County for the reconstruction of C.S.A.H. routes within the City

– Pursue State and Federal Grants


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• Annual property tax levies for maintenance costs of the PMR (sealcoating and overlays)

• No reconstruction projects meet the requirements for 100% financing with a G.O. Street Reconstruction Bond (all of the reconstructed streets will require widening)

• The City specially assess benefiting properties 20% of the costs of reconstruction projects

• The City establishes a storm water utility to pay for the storm water related costs of reconstruction projects

Recommendations Assumed the Following

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Property taxes for maintenance

Storm Water Utility

G.O. Improvement Bonds:

Principal repaid from Special AssessmentsPrincipal repaid from property tax levy

Total

$4,077,038

$4,200,000

$3,500,000

$9,800,000

$21,577,038

Total Funding Sources 2005-2014Maintenance and Reconstruction

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Gross Less SpecialTotal Bond Average Annual Assessments

Year Issue Amount Debt Service (20%) Net Levy2005 - - - - 2006 - - - - 2007 1,090,000 103,000 24,300 78,700 2008 2,090,000 299,750 70,830 228,920 2009 2,305,000 516,750 122,145 394,605 2010 2,650,000 766,750 181,145 585,605 2011 1,200,000 880,750 207,860 672,890 2012 1,260,000 999,500 235,910 763,590 2013 1,320,000 1,123,900 265,295 858,605 2014 1,385,000 1,254,420 296,130 958,290

Projected G.O. Improvement Bonds

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Projected Projected ProjectedTotal Tax Capacity Tax Rate Tax Capacity Tax Rate Tax Capacity Tax Rate

Year Levy (5% Growth) Impact (7.5% Growth) Impact (10% Growth) Impact2005 236,538 15,468,021 1.529% 15,468,021 1.529% 15,468,021 1.529%2006 347,500 16,241,422 2.140% 16,628,123 2.090% 17,014,823 2.042%2007 444,200 17,053,493 2.605% 17,875,232 2.485% 18,716,305 2.373%2008 613,920 17,906,168 3.429% 19,215,874 3.195% 20,587,936 2.982%2009 797,105 18,801,476 4.240% 20,657,065 3.859% 22,646,730 3.520%2010 1,008,105 19,741,550 5.107% 22,206,345 4.540% 24,911,403 4.047%2011 1,117,890 20,728,628 5.393% 23,871,820 4.683% 27,402,543 4.080%2012 1,231,090 21,765,059 5.656% 25,662,207 4.797% 30,142,797 4.084%2013 1,348,605 22,853,312 5.901% 27,586,872 4.889% 33,157,077 4.067%2014 1,473,290 23,995,977 6.140% 29,655,888 4.968% 36,472,784 4.039%

Projected Tax Rate Impacts

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City of Lino Lakes, MinnesotaPMP Financing Plan - Projected Tax Rate Impacts

0.000%

1.000%

2.000%

3.000%

4.000%

5.000%

6.000%

7.000%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Projected Tax Rate Impact (5% Growth) Projected Tax Rate Impact (7.5% Growth)

Projected Tax Rate Impact (10% Growth)

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Projected Projected ProjectedTax Rate Impact Annual Tax Rate Impact Annual Tax Rate Impact Annual

Year (5% Growth) Impact (7.5% Growth) Impact (10% Growth) Impact2005 1.529% 34.93$ 1.529% 34.93$ 1.529% 34.93$ 2006 2.140% 48.87$ 2.090% 47.73$ 2.042% 46.65$ 2007 2.605% 59.49$ 2.485% 56.76$ 2.373% 54.21$ 2008 3.429% 78.31$ 3.195% 72.97$ 2.982% 68.11$ 2009 4.240% 96.83$ 3.859% 88.13$ 3.520% 80.39$ 2010 5.107% 116.63$ 4.540% 103.69$ 4.047% 92.43$ 2011 5.393% 123.18$ 4.683% 106.96$ 4.080% 93.18$ 2012 5.656% 129.19$ 4.797% 109.57$ 4.084% 93.28$ 2013 5.901% 134.78$ 4.889% 111.66$ 4.067% 92.90$ 2014 6.140% 140.23$ 4.968% 113.47$ 4.039% 92.26$

Projected Property Tax Impacts –$228,400 Residential Homestead

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City of Lino Lakes, Minnesota PMP Financing PlanProperty Tax Impacts On A Home Valued At $228,400

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Annual Impact 5% Growth Annual Impact 7.5% Growth Annual Impact 10% Growth

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• Impact of utility fee not projected because of unknowns:

– Make up of the customer classes

– Basis of utility charges (i.e. impervious area versus customer classes)

– Operational costs attributable to the storm water utility

– Storm water credit system for on-site detention/treatment

Storm Water Utility

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• Charter requires each PMR reconstruction project funded by our recommended sources would need to be approved by a vote of the citizens

• Creates an additional requirement the City of Lino Lakes must follow if the PMR is to be implemented – limits ability to ensure implementation of PMR

• Unique charter requirement that we have not found in previous similar studies

Relationship of Financial Recommendations to City Charter

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• Where exceptions are made, allowing certain properties to be specially assessed without referendum, bonds are taxable as they provide a private benefit to those homeowners

• Taxable bonds result in interest rates of 160 basis points higher than tax-exempt bonds – For example, 4.00% becomes 5.6% if the bonds are

taxable– On $3 million bond issue, this costs an extra

$465,645, assuming 15 year payback

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• Funding sources recommended provide a method of financing widely used by most other cities in Minnesota

• Implementing the PMR is in the City’s best interest

– Increasing pavement maintenance and reconstruction spending to amounts we have recommended projected to result in net savings of $11 million over the next ten years


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City of Lino Lakes, MinnesotaComparison of Financing Alternative At 5% Growth In Tax Base

0.000%

5.000%

10.000%

15.000%

20.000%

25.000%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Annual Property Tax Levy Only

Annual Tax Levy For Maintenance, G.O. Bonds For Reconstruction (no special assessments)

Annual Tax Levy For Maintenance, G.O. Improvement Bonds For Reconstruction (inc. special assessments)

Annual Tax Levy For Maintenance, G.O. Improvement Bonds For Reconstruction and Storm Water Utility

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City of Lino Lakes, MinnesotaComparison of Financing Alternative At 7.5% Growth In Tax Base

0.000%

5.000%

10.000%

15.000%

20.000%

25.000%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014





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City of Lino Lakes, MinnesotaComparison of Financing Alternative At 10% Growth In Tax Base

0.000%

5.000%

10.000%

15.000%

20.000%

25.000%

1 2 3 4 5 6 7 8 9 10





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• The PMR, if implemented, would save $11,000,000 according to TKDA

• Separate maintenance costs from reconstruction costs and identifies appropriate sources of funding for each

• The financing plan recommended provides widely used municipal financing practices for implementing a PMR

–Sustainable over the long term–Subject to voter approval

Conclusions

City of Lino Lakes, Minnesota Financing Plan Highlights Citizens’ Charter Review Task Force March...

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