Adopt Resolution #15-05-130 Providing for the Issuance and Sale of $1,235,000 GO Street Reconstruction Bonds, Series 2015B, and Levying a Tax for the Payment Thereof

Purpose:  To provide funding for road reconstruction and bituminous overlays via the issuance of Road Reconstruction Plan Bonds. Background:  Over the past several years, much discussion has taken place over the financing of road improvements.  These needed improvements:  Sealcoats, Overlays and Reconstructions are based on the 60-year Long-Term Street Maintenance Program that the engineering department had compiled on all of the city's streets based on a PASER rating (the lower the PASER rating, the worse the road).  Based on the Long-Term Street Maintenance Program, it was estimated that the highest priority projects averaged $2.2M over the first five years and increased after that.  Of the estimated $2.2M, $500,000 would be funded from the General Fund and the remainder from the issuance of debt.  The payment of said debt would be paid from an annual tax levy and assessment to benefiting parties.     As the city will not be assessing 20% of the total bonded debt, the city cannot issue Special Assessment Bonds to fund road construction.  Another alternative that was put in place in 2002 (for road reconstruction only) was the Street Reconstruction bond.  Not until 2013 was the use of Street Reconstruction bonds allowed for overlays. Thus, the city is looking at issuing Road Reconstruction Debt for those projects (Garnet Street and overlay projects) as outlined for 2015 under the street maintenance plan and included in the City's 2015-2019 Capital Improvement Plan (CIP).   There are requirements that need to be followed if the City desires to issue Road Reconstruction Plan Bonds.  The requirements are:  1.  A Five-Year Street Reconstruction and Overlay Plan (SROP) must be prepared.  The City's five-year plan as presented, is based on the highest priority street projects that Engineering had outlined in their Long-Term Street Maintenance Program and which are also outlined in the City's 2015-2019 Capital Improvement Plan (CIP).  2.  City Council must hold a public hearing on the issuance of the bonds and Street Reconstruction and Overlay Plan.  Public Hearing was held on March 10, 2015.  The major requirement to allow the city to issue this debt, is that the City Council must approve the sale of the street reconstruction bonds by an unanimous vote of its membership present. Like a Capital Improvement bond, the Street Reconstruction bond is not required to have a referendum, but a reverse referendum is allowable.  If a petition bearing the signatures of at least 5 percent of the votes cast in the last general election is filed with the City Clerk within 30 days after the public hearing regarding the bonds (March 10, 2015), the bonds may not be issued unless approved by voters.  No petition was filed by the April 9, 2015 deadline. The issuance of General Obligation Street Reconstruction Bonds will be used to fund the street reconstruction portion only of the project.  The sidewalk and any utility improvements are not and cannot be included in this bonding request as Road Reconstruction bonds cannot be used for those items that did not previously exist prior to reconstruction.  The only exception to the possible inclusion of non-prior existing items is if the city could justify that that the improvement has a substantial public safety function.  At its regular meeting of March 10, 2015 City Council passed resolution #15-03-061 authorizing the issuance of GO Street Reconstruction Bonds . Stacie Kvilvang from Ehler's and Associates, the city's financial consultant, will present the bid results on the night of May 26, 2015, as the GO Street Reconstruction bonds will be bid on earlier that afternoon by prospective bond buyers.  The total bonded request is $1,235,000 which remains constant with the original request in March.

Ehlers and Associates prepared a Five-Year Street Reconstruction Overlay Plan (SROP) based on the Long-Term Street Maintenance Program prepared by the engineering department and also depicted in the city's 2015-2019 Capital Improvement Plan (CIP) and a presale report that are attached.  As stated, the GO Street Reconstruction bond issue would be $1,235,000 which covers a majority of the construction costs needed and underwriting and issuance costs ($410,000 of project costs will come from city funds held in the Public Improvement Revolving Fund (PIR) from 2013 unspent road funds).

Observations:
The Five-Year Street Reconstruction and Overlay Plan 2015-2019 shows bonding schedules for each of these respective years.  Statute states that a Five-Year plan must be produced outlining projects and costs for the next five years.  If the city does not wish to follow this schedule (with the projects that are listed) over the next five years a new five-year plan will need to be devised.  For example, if projects A-E are included in the five-year plan and the city wishes to do project F instead of B, the plan needs to be amended and the public hearing process will need to be undertaken again on the revised plan.  The city is proposing to bond annually as years 2016-2019 in the plan are based on current engineer cost estimates and an annual inflationary factor.

Alternatives:

#1.  Motion to Adopt Resolution #15-05-130 authorizing approval of the sale of $1,235,000 GO Street Reconstruction Bonds, Series 2015B.

#2.  Motion to not Adopt Resolution #15-05-130 which would be rejecting the bids of the bond sale.

The issuance of Street Reconstruction Bonds (and a small percentage from special assessments) will fund the Garnet Street and overlay improvements as outlined in the Long-Term Street Maintenance Program and the 2015-2019 CIP.

Staff recommends Alternative #1 as the issuance of debt follows the direction that City Council authorized as the funding mechanism of how road reconstruction projects were to be funded (with a small portion funded via special assessments).

Motion to Adopt Resolution #15-03-061 Providing for the Issuance and Sale of $1,235,000 GO Street Reconstruction Bonds, Series 2015B, and Levying a Tax for the Payment Thereof