Capital Improvement Plan presented to council
By Bert Lehman
The Clintonville City Council heard on Monday, July 27, a presentation from Ehlers regarding a Capital Improvement Plan and Impact Analysis.
Ehlers is the financial advisor for the city.
Prior to the presentation, interim City Administrator Chuck Kell, advised the council to listen carefully to the presentation and ask questions.
“This is intended to be more of an educational opportunity for you than anything,” Kell said. “I want each of you to better understand how the city’s financial picture looks, how things works, and what options we have with dealing financially with some of the financial issues that we both discovered and discussed over the past six months or so.”
Kell also advised council members to consider the impact on tax rates and utility rates.
Council members were provided a list of projects in the plan so they would have an idea of what projects are out there. Kell told the council it wasn’t being asked to adopt a plan yet.
“Tonight is not a time to debate what projects are in there because I know there are projects in there that some of you are probably going to disagree with,” Kell said.
The city’s outdoor swimming pool is a project not addressed in the plan, Kell said.
Kell said he tried to address some of the infrastructure needs the city has, such as water and sewer replacement and street replacements.
“Those types of things in the past have not really shown up in your capital improvement program,” Kell said. “The capital improvement Program (CIP) in the past was mostly a thing to purchase land, buy equipment, and that type of thing. I’m trying to give this program a little bit stronger look at improving some of your infrastructure over time.”
Ehlers incorporated all the needs of the city into the analysis to show the impact it will have on the community, Kell said.
“I didn’t expect that we’d go through this and that you’d all be in agreement and that you would all decide that you could necessarily afford to even do that,” Kell said. “Those are some of the hard choices you’re going to have to make at a later date, once you see how they impact your financial situation in the community.”
Kell said future steps of the council involve taking this information and deciding what it thinks citizens can afford.
Funding summary
Todd Taves, senior municipal advisor/principal for Ehlers, said the Capital Improvement Plan is for five years, running through 2020.
Taves said all the capital projects amounted to almost $20 million. These include general projects, as well as water, wastewater, and electric projects. After considering projected revenue over that timeframe, the city would have to borrow a little more than $16 million to complete all the projects.
Of that $16 million, wastewater projects needed the largest amount, followed by general projects, electric projects, water projects, and the WRS unfunded pension liability.
Taves said based on the state constitution, the city currently has the capacity to borrow $4.8 million.
“Obviously when we’re faced with $16 million in potential projects and we have only $4.8 million in GO (general obligation) debt capacity, that means we’ll have to look at other ways of financing other than GO debt,” Taves said.
He said he would look to finance with GO debt, projects that are not utility related, as the city has in the past. GO debt is secured by property taxes.
For utility projects, he said the city should look at utility revenue bond financing. Utility revenue bond financing is secured by the operating revenues of the utilities.
Taves also said the city should be able to close tax increment districts 3, 4 and 7 in 2017.
That will increase the projected equalized value in the city by almost $40 million.
Debt plan
Taves recommended a strategy for non-utility projects and the pension liability that included three parts.
First, he recommended the city issue a state trust fund loan of $856,239. This would take care of the WRS unfunded pension liability the city has. Funds from the electric utility and water utility would also be used to retire their portions of the unfunded pension liability.
He said the sooner this is done, the better. Currently the city is being charged more in interest than it is paying each year, so the total amount keeps growing.
Second, would be issuing $1.9 million in general obligation promissory notes in 2016. This would fund projects listed in the CIP in 2016 and 2017. Other funds would also contribute to this portion.
Third, would be issuing $1.8 million in general obligation promissory notes in 2018. This would fund projects listed in the CIP in 2018, 2019 and 2020.
Taves said borrowing funds to pay the unfunded pension liability wouldn’t have a negative impact on the city’s credit rating.
“They’re going to look at it as an overall positive thing because even though you are adding more debt, you’re taking an affirmative step in taking a growing liability and making an action plan to resolve that,” Taves said.
This plan would also take the payments out of the levy limits.
Kell said the city had the opportunity to raise the levy this year but the council voted not to do that because there was a tax increase associated with that.
“While it gives you capacity, it doesn’t mean necessarily you can do it without raising taxes,” Kell said.
Kell added that the plan would allow the city to have some flexibility which it doesn’t have now.
Summary
“In general, this plan kind of keeps you where you are at now, because you have the TIDs closing and you can bite off some additional projects” Taves said.
Taves did say the city is viewed negatively for bond ratings because of its debt.
“The city has a comparatively high debt incurred as compared to other communities that have a similar A+ rating,” Taves said.
He recommended the city keep that in mind when deciding on what projects to pursue.
See next week’s Tribune-Gazette for information about the Capital Improvement Plan for the city’s utilities.