04-16-08 WSMemo
To: City Council
From: Gary Groen
Date: April 9, 2008
Re: Fire station Information for April 16 workshop
The fire station information was assembled with the assistance of Bruce West, Fire
Chief of Elk River, Paul Donna, Fiscal Consultant with Northland Securities and the
City staff.
The capital costs for building and equipping a fire station were outlined in a memo
from Bruce West dated March 18, 2008. The memo is attached described a new
station with three bays, offices, training room, etc. costing an estimated $1.75 to $2.0
million. In the financing of the fire station, we have assumed the cost is $2 million.
The building is expected to be financed by lease revenue bonds over a 20 year
period.
The same memo from Bruce West also describes the capital equipment required for
the station including a rescue/pumper truck, a tanker truck, grass truck and
equipment for the trucks and 5 firefighters. The total cost of this equipment is
estimated at $850,000. The equipment is projected to be financed over 10 years.
The combined financing of the fire station and equipment was prepared by Paul
Donna of Northland Securities. The annual debt service required for financing is
included as one total in column one of the Summary that has been prepared.
Bruce West has also prepared an operating budget for the annual operation of the
fire station. The budget is based on a full year of operation beginning in 2012. The
estimated costs in 2010 and 2011 are my estimates of costs incurred as new
firefighters are hired and trained. The $100,000 for each of the first 2 years also
includes a payment due to the Fire Relief Association of $60,000.
0 Page 1
Page Two
Bruce West has estimated the lead time to build and start the operation is 18 — 24
months. In the Summary in column 2,1 have assumed a 4% increase in the annual
operating costs for the fire station.
Column 3 on the Summary includes and estimated capital equipment reserve
estimated at $850,000 over 17 years. Not coincidentally the $850,000 total
equipment replacement is the same total as the original cost of the equipment to
furnish the station. The Summary assumes the annual amount set aside will be
$50,000.
The Elk River Fire District will have an estimated $200,000 on hand to be used to
finance some of the 2010 and 2011 costs and is presented as a reduction of the first
2 years costs.
The total annual cost of the fire station in the Elk River service area is presented in
column 5. The total cost includes the debt service cost to finance the fire station and
equipment, finance the annual operating costs and finance the capital reserve
requirements.
Column 6 on the Summary is a computation of the average cost per parcel based
on the 2,919 parcels. The 2,919 parcels include both commercial and residential
parcels. We are currently getting information on the break down between
commercial and residential parcels for the meeting on Wednesday.
The estimated annual operating cost for the Other Fire Districts is presented in
Column 7. This cost is based on the actual cost of contracts for 2008, which is
$148,150, plus a four percent annual increase. The annual contract cost beginning
in 2010 is estimated at $160,240 for the Rogers, Albertville and Monticello fire
districts.
Column 8 represents the total fire service cost for the City of Otsego for all four
service areas. Beginning with 2012, the total cost increases from $605,778 by about
$15 - $20,000 annually thereafter.
If the City Council decides the costs of fire service should be included as part of the
overall city tax levy, I have included the last two columns. The tax capacity
valuation in Column 9 assumes the current valuation increases at 4% annually
throughout the years included in the analysis. Column 10 is a computation of the
increase in the tax capacity rate required to finance fire service costs via a tax levy
rather than a per parcel assessment, as is the current practice.
0 Page 2
Page Three
The second page of the Summary is an attempt to measure the effect of the per
parcel cost versus the cost of rolling the fire service cost into the city tax capacity rate
for four different properties. Three of the properties are residential homesteaded
properties and the fourth is a commercial property. The tax capacity valuation
generated from the commercial development like GRC should reduce the average
homeowner's costs. However, there is a limit to the residential properties where the
fire service cost based on tax capacity rates will exceed the cost of the per parcel
charge.
I believe this will be a very good workshop discussion and hopefully this information
will provide some valuable background for the meeting.
9 Page 3
City of Otsego
SUMMARY - PAGE 1
Analysis of Projected Fire Costs
To Build, Equip and Operate a Fire Station At 85th and Park
And Finance Other Fire Districts As Well
Elk River Fire District
Other Fire
Projected
Annual
Annual
(ER S Rogers
Fire District
Currently
Districts
Projected
All
Districts
Tax
Capacity
Tax
Debt
Operating
Costs
Capital
Money on
Hand)
2919 Parcels
Costs
Total
Valuation
Capacity
Service
Assumes
Assumes
Equipment
Finance
Total
Estimated
Assumes
4% Annual
City Fire
Service
Assumes
4% Annual
Rate
Required
Lease
4% Annual
Replacement
Costs From
Annual
Cost
Cost Per
Parcel
Increases
Cost
Increases
To Finance
Year
Financing
Increases
Reserve
Reserves
2010
$ 253,147
$ 100,000
$ -
$ (100,000)
$253,147
86.72
$ 160,240
166,650
$413,387
400,477
$ 13,420,347
13,957,161
3.080%
2.869%
2011
233,827
100,000
-
(100,000)
233,827
432,462
80.11
148.15
173,316
605,778
14,515,448
4.173%
2012 First Year
230,617
151,845
50,000
50,000
440,101
150.77
180,248
620,349
15,096,065
4.109%
2013
232,182
233,404
157,919
164,236
50,000
447,640
153.35
187,458
635,098
15,699,908
4.045%
3.951
2014
2015
229,284
170,805
50,000
450,089
154.19
194,956
202,755
645,045
660,426
16,327,904
16,981,021
3.889%
2016
230,034
177,637
50,000
50,000
457,671
465,165
156.79
159.36
210,865
676,030
17,660,261
3.828%
2017
230,422
230,502
184,743
192,132
50,000
472,634
161.92
219,300
691,934
18,366,672
3.767%
3.707%
2018
2019
230,249
199,818
50,000
480,067
164.46
228,071
237,194
708,138
724,329
19,101,339
19,865,392
3.646%
2020
229,324
207,810
50,000
487,134
499,247
166.88
171.03
246,682
745,929
20,660,008
3.610%
2021
233,124
216,123
50,000
50,000
506,127
173.39
256,549
762,676
21,486,408
3.550%
2022
231,359
234,304
224,768
233,758
50,000
518,062
177.48
266,811
784,874
22,345,865
3.512%
3.474%
2023
2024
236,744
243,109
50,000
529,853
181.52
185.48
277,484
288,583
807,337
829,990
23,239,699
24,169,287
3.434%
2025
238,574
252,833
50,000
50,000
541,407
547,820
187.67
300,127
847,947
25,136,059
3.373%
2026
234,874
235,854
262,946
273,464
50,000
559,318
191.61
312,132
871,450
26,141,501
3.334%
3.300%
2027
2028
238,287
284,403
50,000
572,690
196.19
324,617
897,307
27,187,161
Column Numbers
1
2
3
4
5
6
7
8
9
10
City of Otsego
SUMMARY - PAGE TWO
Analysis of Projected Fire Costs
To Build, Equip and Operate a Fire Station At 85th and Park
And Finance Other Fire Districts As Well
ER Assm't
118-015-001140 Residential Homestead 268,800
118-015-001140 Residential Homestead 268,800
118-190-012140 Residential Homestead 584,000
118-190-012140 Residential Homestead 584,000
118-038-001040 Commercial 879,300
118-038-001040 Commercial 879,300
2,688
2,688
6,050
6,050
16,926
16,926
675.17 $ 37.15 $ 712.32 26.500% $ 148.15 $ 860.47 32.012%
$ 824.46 30.672%
1603.31 $ - $ 1,603.31 26.501% $ 148.15 $1,751.46 28.950%
$1,855.66 30.672%
4461.71 $ 4,461.71 26.360% 148.15 $ 4,609.86 27.235%
$ 5,191.54 30.672%
Property
Estimated
Projected
Total
& Taxes
Tax
Tax
Portion of
Tax including
Computed
ER
Taxes
Effective
Market
Capacity
Amount
Homestead
Homestead
Tax
Fire
and Fire
Tax
Parcel Property Classification
Valuation
Value
(Dollars)
Credit
Credit
Rate
Assm't
Assm't
Rate
118-049-002020 Residential Homestead
222,900
2,229
541.76
$ 48.93
$ 590.69
26.500%
$ 148.15
$ 738.84
33.147%
118-049-002020 Residential Homestead
222,900
2,229
$ 683.68
30.672%
118-015-001140 Residential Homestead 268,800
118-015-001140 Residential Homestead 268,800
118-190-012140 Residential Homestead 584,000
118-190-012140 Residential Homestead 584,000
118-038-001040 Commercial 879,300
118-038-001040 Commercial 879,300
2,688
2,688
6,050
6,050
16,926
16,926
675.17 $ 37.15 $ 712.32 26.500% $ 148.15 $ 860.47 32.012%
$ 824.46 30.672%
1603.31 $ - $ 1,603.31 26.501% $ 148.15 $1,751.46 28.950%
$1,855.66 30.672%
4461.71 $ 4,461.71 26.360% 148.15 $ 4,609.86 27.235%
$ 5,191.54 30.672%