Adopt Resolution #16-05-092 Approving the Issuance of General Obligation Street Reconstruction Bonds

Purpose:  To provide funding for road reconstruction and bituminous overlays via the issuance of Street 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.     2015 was the first year that the City issued road reconstruction debt to fund the first road reconstruction project (Garnet and 168th Avenue) as outlined in the Long-Term Street Maintenance Program. and the 2015-2019 Capital Improvement Plan (5-Year Road Plan that was adopted in 2015 and that outlined the respective projects and costs for years 2015-2019).  The City issued a total of $1,205,000 GO Street Reconstruction bonds in 2015 for Garnet/168th Avenue reconstruction and overlay projects. The second road reconstruction project to be undertaken per the Street Maintenance Program and the 2015-2019 Capital Improvement Plan is Andrie Street and 164th Lane.  Again, the proposed funding is to come from the issuance of Street Reconstruction Plan Bonds.  The City Council case prior was to accept the construction bid for Andrie Street/164th Lane in the amount of $1,568,162.65 with an authorization request coming  to City Council in late July for the acceptance of bids for the Sunwood Drive Overlay project (approximately $300,000).  The total bonding amount required for both projects (hard & soft costs) is estimated at approximately $1.735M. The issuance of General Obligation Street Reconstruction Bonds will be used to fund the street reconstruction portion only of the project.  The costs related to over-sizing Andrie Street and 164th Lane (widening the street and increasing the pavement load carrying capacity) is 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.  The funding for the road widening will come from the excess road funds remaining from 2013 and currently held in the Road Reconstruction Fund.  The balance of this account is approximately $350,000 as approximately $60,000 of this account was used on the Garnet Street Project for a sidewalk that did not qualify for road reconstruction debt last year.  If authorized, The GO Street Reconstruction Plan Bonds are scheduled to be sold the morning of June 28, 2016, with approval of the sale and terms brought forward to the City Council for their approval that same evening (June 28, 2016).

Ehlers and Associates, the City's financial consultant, has prepared a Presale Report of the Bond issue which is attached.  The Presale Report reflects the bond issuance in the amount of $1,735,000 with an all inclusive interest rate of 2.27%.  The term of the bond is for 10 years with the annual debt service of approximately $190,000.  The payment of this debt will be funded via the annual property tax levy and a 25% assessment on benefitting properties.  The first year of this levy will be for 2017 payable.

#1.  Motion to Adopt Resolution #16-05-092 Approving the Issuance of General Obligation Street Reconstruction Bonds

#2.  Motion to not Adopt Resolution #16-05-092 at this time

The issuance of Street Reconstruction Bonds (and a percentage from special assessments) will fund the Andrie Street / 164th Lane Reconstruction and overlay improvements as outlined in the Long-Term Street Maintenance Program and the 2015-2019 CIP.

Staff recommends Alternative #1 as this is the authorization to issue debt with final approval of the acceptance of the bond sale terms at the City Council's regular June 28, 2016 meeting.  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 portion funded via special assessments).

Motion to Adopt Resolution #16-05-092 Approving the Issuance of General Obligation Street Reconstruction Bonds