Agenda - Council - 12/11/2012 - Laserfiche WebLink

Home

Finance Director Lund continued presentation of the 2013 Levy and General Fund budget by reviewing the 2013 notable budget items. Mayor Ramsey noted the preliminary budget had included 16 police officers. Finance Director Lund indicated that information had been updated in the budget book. Councilmember Backous asked about the Engineering Department budget for personnel, noting it is shown as a reduction. Finance Director Lund explained that the consulting engineering contract is supposed to go away and one engineering position is to be filled. She stated if the Council would like to issue capital equipment certificates to fund capital items, it would be at a 1.7% interest rate and increase the levy starting in 2014 by about $255,000. If levying, it allows the City to take advantage of the all time lowest interest rates and leaves the fund to use when interest rates go higher. She asked for direction if the Council supported issuing capital certificates in 2013 for those items and possibly becoming a levy in 2014 or the City could use the Capital Equipment Fund to pay the levy portion. Councilmember McGlone stated when the Council discussed this previously, he had raised the option of leasing. Finance Director Lund stated the Council had previously discussed the mower. The lease would be $20,000 a year for four years, which equaled the total cost of the mower. The option of capital equipment certificates would spread the cost over ten years. Public Works Superintendent Riemer stated the lease would be for five years with a one-year warranty and a one-year extended warranty. The cost for the equipment is divided into four years and the fifth year is $1. The interest rate would be 2.5%. Councilmember McGlone noted this results in paying off the machine in four years instead of ten and the City would have an asset at that point that may be worth 50-60%. Public Works Superintendent Riemer estimated the City will get $10,500 on the mower it has had for eight years so it may be able to get between $12-15,000 after five years. Councilmember Elvig asked if it is a lease to own or straight lease. Public Works Superintendent Riemer answered it is a lease to own. Finance Director Lund asked the Council if it was comfortable with using equipment certificates. Councilmember Strommen stated she is comfortable with it, noting the worse -case scenario is to make the payments from this fund if the Council does not want to use the levy. She felt equipment certificates would provide flexibility and take advantage of low interest rates. City Council Work Session / November 27, 2012 Page 2 of 8