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11-21-22 Special City Council Meeting MinutesSPECIAL TSEGO CITY COUNCIL MEETING MONDAY, NOVEMBER 21, 2022 5:30 PM OTSEGO PRAIRIE CENTER Call to Order. Mayor Stockamp called the meeting to order at 5233 PM. Roll Call: Mayor Jessica Stockamp; Councilmembers: Tom Darkenwald, Tina Goede, Brittany Moores, and Jeff Dahl. City Staff: City Administrator/Finance Director Adam Flaherty, Assistant City Administrator/Human Resource Director Sabrina Hille, Streets Operation Manager Kevin Lamson, and City Clerk Audra Etzel. 1. Progress Report: Public Works &City Hall Facility Stud City Administrator/Finance Director Flaherty reviewed the materials that were included in the packet. Wold Architects and Engineers representatives Jordan Medeiros and Jonathan Loose gave an overview, reviewed the PowerPoint slides, and are looking for discussion and direction on how to move forward. CM Darkenwald noted the current City Hall was never intended to be the City Hall, instead it was a temporary fix. Jessica Green with Northland Securities, Inc. reviewed the financing for Option A and Option B in the packet. Staff has done a lot of modeling to develop an estimated annual tax related to the projects comparing 20 years vs. 25 years amortization. Ms. Green noted that there !are savings of the total debt service when comparing Option B to Option A, for both 20 and 25 year amortizations. However, she noted that the property tax impacts will be more immediate rather than phased in over time when comparing the two options. CM Darkenwald noted the flexibility of the 25 year amortization and inquired about the ability to pay off sooner. Ms. Green said there are standard call dates, usually 10 years, but there is the ability to customize call dates, however, they may impact the interest rates. The issue for paying off the bond early is the tax levy; the bonds could be called or restructured. Ms. Green said advanced refunding is no longer available. City Administrator/Finance Director Flaherty reviewed the total debt services on the schedule and compared Option A vs. Option B. CM Darkenwald asked about the assumption used. Ms. Green stated they used an assumption of 4% growth. CM Darkenwald asked about the difference of borrowing $16 million vs. $30 million and will that factor into the bond rating? Ms. Green said the City has done some great financial planning and explained the different options that would come into play; noting the tax rate will stay low with strong growth. She does not see this being an issue with the rating agency. CM Darkenwald asked if Option B being a more significant project will have an impact on construction feasibility? Ms. Mederios said the project would still be staggered with City Hall being completed first, allowing more flexibility with the Public Works space being available to start work on the vacant space. Streets Operation Manager Lamson said Option B works best to have City Hall removed from their space so the project can move ahead with the Public Works space needs. CM Goede asked when the new equipment will arrive? City Administrator/Finance Director Flaherty said the equipment is staggered throughout 2023, due to demand some items are taking more than a year. Streets Operation Manager Lamson said their space is full,today without any additional equipment, moving forward, vehicles and equipment will need to be parked or stored outside. Mayor Stockamp said this confirms the space needs study and that the current City Hall was just a temporary location. Mayor Stockamp said Wold has completed their job defining the space needs and the finance tools. Page 1 of 4 MINUTES OF THE CITY OF OTSEGO SPECIAL CITY COUNCIL MEETING NOVEMBER 21, 2022 Mayor Stockamp asked about the financing options. City Administrator/Finance Director Flaherty said if any cash on hand was used, it would decrease the bonding needs and lower the tax levy and debt service payment. City Administrator/Finance Director Flaherty noted with the franchise fees implementation and factoring in a 4% growth, together have a positive impact. Ms. Green said the bonds could be structured to be stepped in for principal payments, looking at the tax levy. If you push out principal (20 vs. 25 years) there is more interest that would be paid. City Administrator/Finance Director Flaherty noted there is a debt levy falling off in 2025 and the tax impact could be stepped into match the existing schedule as the debt falls off. CM Darkenwald asked how soon the project could go out for bonds. Ms. Green explained the process to issue capital improvement bonds, the City would need to have a draft capital improvement plan and a public hearing process. There is a 14 day notice for a public hearing, and then 30 days to allow for voters to petition and take to an election. The other option of lease revenue bonds is less common for essential services bonds and carry higher interest rates. For purposes of the information being reviewed tonight, it has been assumed the City would pursue capital improvement bonds. CM Darkenwald asked about the interest rates. Mr. Loose said some of the other cities they have worked with have pursued bonds now to avoid the increased interest rates. Ms. Green said they have seen this more on short term financing. If passed without a petition and an election is not needed, this part of the process could be out of the way. Ms. Green said the rate is not locked in, just the authority allowing the bonds. Mr. Loose noted Wold was brought on in March of 2021 to start the process to evaluate and confirm the needs. CM Darkenwald said the data confirms the need to move forward, his only reservation is the two phasing options. CM Darkenwald feels the current bonds falling off within two years and the debt service savings over the long term, Option B would be a good choice. CM Moores is in favor. Mayor Stockamp noted Otsego is a growing community. CM Goede said it is a big spend that has been in the works before her times and the City is growing and the City is ready to move forward. CM Goede is in favor of Option B, which seems to be the best option. Mayor Stockamp said she would like financing to be consistent. CM Darkenwald said with Option B, the tax rate changes would not be that significant. City Administrator/Finance Director Flaherty said the timing of issuance of bonds can affect the tax levy, there are a lot of scenarios that can be adjusted. CM Darkenwald said if the City is going to continue to grow, it is a no brainer to move forward. The City Council thanked Wold, Northland Securities, and the Core Planning Group for all their hard work to prepare the information. The City Council may discuss further following Item 2. 2. Progress Report: Emergency Services Study: City Administrator/Finance Director said Mr. Streich has been with the City Council on multiple occasions dating back to May 2021 and is here tonight to review the final report as included in the packet. Jerry Streich with Capstone Public Sector Solutions presented the emergency services findings and facts slideshow, as included in the packet. Mr. Streich said he has prepared his final report and that his work is complete, unless City Council gives direction on a service model. Mr. Streich has prepared a recommendation for the City Council to review. Page 2 of 4 MINUTES OF THE CITY OF OTSEGO SPECIAL CITY COUNCIL MEETING NOVEMBER 21, 2022 City Administrator/Finance Director Flaherty restated the draft document presented tonight is intended to be the official document from this study and staff needs City Council to confirm the data in the document is accurate. Mayor Stockamp stated this document is created on past meetings and documents that tell the story of how the City Council has progressed through the study. CM Darkenwald agreed with Mayor Stockamp regarding the documents and meetings. Additionally, CM Darkenwald feels an Emergency Management Director and fire station are needed for either service model option. The City Council all agree they have enough information to move forward with a decision. Mayor Stockamp asked if the City Council were to move forward with one of the options how it would impact the budget for 2023? City Administrator/Finance Director Flaherty said the City Council has set a preliminary levy and the amount of that levy cannot increase. The City Council does have the option to reassign preliminary levy dollars to fund a staff position or use the fire reserve fund and phase in the salary in future budgets; but recommended including within the general fund budget and adjusting the levy allocations accordingly. CM Darkenwald asked if there were any grant funds available for hiring? Mr. Streich said once the fire department is established there would be funding options available but until that happens funding would be difficult to obtain. Mayor Stockamp asked about getting the fire department identification number and the fire relief funds that the contracted fire departments are currently receiving. Mr. Streich said there is a process for the City to receive the fire relief funds that would happen once the City Council voted to move forward. Mayor Stockamp asked how Mr. Streich would be involved going forward? Mr. Streich said there would be a new contract written and he would work with the City to hire the correct person; then, he would work with the new staff person to develop the department with milestone timelines. Eventually, the contracted Fire Departments would run parallel with the Otsego Fire Department until the City is ready to take over the service areas. CM Dahl motioned to create a job description for afull-time Emergency Services Director, seconded by CM Goede. CM Darkenwald asked about the process after the job description is developed. City Administrator/Finance Director Flaherty said staff would create a job description, the City Council would review and approve, staff would advertise the position and a qualified candidate would be hired; this is a high -profile position and will take time to recruit, most likely mid -year in 2023. Motion carried 5-0. CM Darkenwald motioned to go with option 5, to create the City of Otsego Fire &Rescue Department, seconded by CM Goede. Motion carried 5-0 The City Council thanked Mr. Streich for all his hard work. Streets Operation Manager Lamson said staff is looking forward to having a dedicated staff member to fill the position. The City Council all agreed with having the dedicated staff member in the role of emergency services. Page 3 of 4 MINUTES OF THE CITY OF OTSEGO SPECIAL CITY COUNCIL MEETING NOVEMBER 21, 2022 Continuation of Item 1. Progress Report: Public Works & City Hall Facility Study: Mayor Stockamp said she appreciated the financial figures for the facility study. CM Darkenwald asked about the amount of the bonds 2020A Series falling off. City Administrator/Finance Director Flaherty said about $1.9 million, the levy goes through 2025 and the debt services through 2028. There'are some options to stretch the levy beyond 2025 to align with the debt service payments in 2028 that would lessen the impact on the tax rate. CM Darkenwald asked about having unique payback structures. City Administrator/Finance Director Flaherty said this may have a cost to structure, but this is more of a question for Ms. Green. CM Dahl asked if a motion is required to get the project started. City Administrator/Finance Director Flaherty said the next step would be to hire Wold to start the design. The City Council all agreed on the needs as outlined in the report prepared and discussed over the past 18 months, noting this is a tough decision due to the amount of funds needed. Mayor Stockamp asked about using the ARPA funds of about $1.9 towards the Fire Station. City Administrator/Finance Director Flaherty said the funds would not be available for the building, but would beteligible for equipment needs. ARPA funds need to be obligated by the end of 2024 and spent by the end of 2026. CM Darkenwald said it's hard to turn down $12 million in savings for Option B when the additional projects are going to be built in 4-5 years. City Administrator/Finance Director Flaherty said they are not committing to the project, just the design phase at this time. The City would adopt a resolution and expenses would be incurred and expensed against future bonding. The City Council all agreed with going with Option B for the design phase. City Administrator/Finance Director Flaherty was able to gather other cities Truth and Taxation ratings and Otsego is very comparable for the 2023 proposed tax rates. This chart will be included in the next update. There was discussion about the quantity of new homes for 2022, 296 are budgeted for 2023, which will be a good estimate. Next Monday, November 28, 2022 will be the Utility Budget meeting at 5:30 PM. 3. Adjournment. CM Darkenwald motioned to adjourn at 8:49 PM, seconded by CM Moores. Motion carried 5-o. ATTEST: f t Audra Etzel, City Clerk ' ,des ica Stockamp, Mayor Page 4 of 4