Agenda - Council - 11/28/1989 - Laserfiche WebLink

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c^s SPACE NEEDS FOR 1990 By: David R. Hartley, City Administrator Background: In 1990, the City of Ramsey has budgeted funds for establishing an engineering function consisting of four additional personnel. Additionally, the Public Works Department has been experiencing an on-going need for additional space and improved facilities. For some time now, the Cily Council and City Staff have been discussing this matter and exploring alternatives, It would appear lhat there are some short term solutions to lhe space needs as well as the longer term solutions. The short term solutions involve finding space to accommodate the upcoming staffing changes and the long term solutions involve the construction of a Public Works facility and additional space to meet future staffing needs. In addition to the brick and mortar solutions, we also need to look at the financing solutions. The Legislature, in its last session, amended the Minnesota Statutes to allow cities to finance capital purchases through installment purchase contracts which are obligations of the issuer and which need not be subject to annual appropriation. This amendment will now permit a wide variety of projects to be financed which may have been impossible in the past. Historically, most public buildings were financed by general obligation bonds issued under the authority of Minnesota Statute 475. This type of bond issue requires voter referendum approval and is limited by the net debt limitation to 2% of the City's market value. In the early 80's, municipal lease purchase financings began to be used as an alternative to G.O. Bonds. Because leases are not general obligation bonds, projects could be undertaken without prior vote of approval and with price tags above the net debt limit. Lease financings, however, have three major shortcomings. The first is that they cannot carry the City's general obligation pledge and requires a slightly higher interest rate. The second is that they must be subject to annual appropriation where the City Council can annually decide to renew the lease or to walk away from the project. (This makes lease financings workable for only essential purpose projects like city halls and fire stations, where the likelihood of abandoning the building is remote.) Finally, since leases are not bonds, levies to pay this debt are limited by levy limits. Installment purchase financings avoid the first two limitations. As obligations of the City, the inlerest rates will be comparable to the City's G.O. Bonds. Since projects can no longer be abandoned by non-appropriation, less essential projects like recreation centers, public works facilities or meeting halls become possible. The levy limit constraint is overcome by having the City's economic development authority issue revenue bonds for the project and then selling the project to the City through an installment purchase contract. Since taxes are levied to pay principal and interest on bonded indebtedness paid to another political subdivision of the State (the EDA in this case), levies can be special levies and are not subject to levy limitations. In conclusion, the City now has the financial tools to make the needed improvements to facilities