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HomeMy WebLinkAbout03/06/2018 13B Capital Project Funding StrategiesITEM TITLE: SUBMITTED BY: BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDASTATEMENT 1 Item No. 13.B. For Meeting of: March 6, 2018 Council discussion on possible capital project funding strategies Cliff Moore, City Manager SUMMARY EXPLANATION: See attached. ITEM BUDGETED: STRATEGIC PRIORITY: APPROVED FOR SUBMITTAL: STAFF RECOMMENDATION: BOARD/COMMITTEE RECOMMENDATION: ATTACHMENTS: Description Upload Date d memo 3/6/2018 Type Coker Memo 2 • To: The Hon. . le Mayor and Members of City Council Cliff Moore, City Manager From: Tara Lewis, Financial Services Manager Date: March 1, 2018 Re: Martin Luther King Jr. Pool At the Council Business Meeting on February 6, 2018, staff was directed to determine estimated expenses and identify possible funding sources for Council's consideration for a pool to be located at Martin Luther King Jr. Park. It is estimated that a basic pool can be constructed on the property for approximately $4 million. Extra amenities to enhance the project might be considered at initial construction or included in initial plans for later addition. For example, a lazy river might be a feature that would benefit the public and increase utilization. An energy efficient project might attract grant dollars or favorable lending terms. Solar modules would add to the initial cost of construction, but would produce ongoing long-term cost savings in return. Assuming a $4 million starting point, annual debt service would be approximately $235,000 over a 25 year bond at 325% rate of interest. If other amenities are added, the debt service can be held down by lengthening the term of the bond. For instance, if enhancements cost an additional $500,000 beyond any available grants, the debt service on $4.5 million over 30 years is just $236,000. The interest rate might be a bit higher with a longer term, but a 25 basis point jump from 3.25% to 3.50% is just another $6,450 per year. This kind of variation is fairly small and will not distress the budget with moderate changes as the project moves forward. Using Franklin Pool as a model, the operational costs contributed by General Fund (in other words, the operational deficit) will amount to approximately $170,000 per year. That brings total cash needed to support the pool on an annual basis to about $405,000. There could possibly be some energy savings should the solar panel idea be implemented. However, in early stages of planning, the $405,000 number is appropriate to use as a target. Due to the condition of our General Fund Reserves and other uncertain initiatives that await resolution, Council would need to review funding options and provide direction. A pool project would be eligible to use the Parks Charter funding as a source. Ongoing debt service on the Sozo fields will continue to use $400,000 of that set aside through 2032. The 2015 agreement with the YMCA calls for combined debt service and capital contribution of $280,000 annually. The Charter set aside grows each year with the CPI. In 2021 it will be approximately $840,000. That leaves $160,000 available in 2021 for debt service on a new pool. The gap of $75,000 could be budgeted or borrowed from 3 General Fund or REET until such time as the Charter set aside catches up to fund the full debt service in 2025. A notable consideration in the General Fund budget is the expiration of several debts that occur over the next several years. In 2019 the final payment of $876,000 for the Police Vehicle and Fire Air Pack debt will be made. The priorities for that newly available money in the 2020 budget will be determined by Council as part of the annual budget process. Staff can prepare a 2019 Policy Issue for both the construction and the operations of the pool to be included in the budget process for Council consideration and potential action. Since the funding doesn't become available until 2020, the recommendation would likely be to carry forward the request to 2020 and fund only the engineering studies in 2019 to arrive at a more definite cost for the 2020 budget. The City's regular budget process could serve as an effective mechanism for proposing a funding package for this project for Council consideration. The 2019 budget process begins in July. Detailed citywide financial information will be presented to Council during the budget development process and final decisions will be made by Council during budget adoption in December 2018. Staff presents this information as requested and seeks Council direction.