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3. Motion - Financing for City Hall Remodel_ Kalispell . . C..::. . ... . ... .. i'ty of =-_- --_ = - _ - -77 s __ = 4 7 --7000 Fax 44� 758 5 99� -1997 Telephone afi 58 =- __-_ - 1997 Kalispell, ell Montana 5 3 P off Office Box _ ___ ___ Post 3 P } January 11, 2007 To: Jim Patrick, City Manager From: Amy Robertson, Finance Director R.E: City Debt and Financing City Hall Remodel At Council work session on January 2, 2007, Council discussed the financing for the remodel of City Hall. Specifically, last year the City borrowed $1.1 million for the purchase of the wells Fargo Bank Building. The cost is being shared with the Building department roughly based on square footage occupancy. The balance on that loan today is $1,050,782 which has been allocated to the building department 3 8% - $410,697 and General Fund 62%-$640,08 5. The annual debt service is about $150,000 — the rate is a variable (4.75% this year) ten year loan. The General fund's share of the annual debt payment is $93,000. This will be offset by reduced rents once the move is made. The Remodel and move will cost approximately $1,500,000. The City budgeted $300,000 from the building department. Several proposals were made on January 2, 2007. The final direction to staff was to prepare several possible motions for Council to consider. Below are four motions for Council's consideration. 1. Move to use Board of Investment loan for the purchase and remodeling and taking $300,000 from the Armory sale cash proceeds for the projected shortfall. 2. Move to refinance the purchase of the Wells Fargo Bank and the financing of the remodeling through Municipal Services Group for a period of fifteen years at a fixed interest rate of 4.45 % and take $300,000 from the Armory sale cash proceeds for the projected shortfall. 3. Move to refinance the purchase of the wells Fargo Bank through Municipal Services Group for a period of fifteen years at a fixed rate of approximately 4.5% and financing the remodel by using the proceeds from the sale of the Armory and placing $100,000 a year back into the Capital Projects account as well as the interest it would earn for future capital projects as designated by City Council. 4. Move to continue the purchase of the Wells Fargo Bank through the Board of Investments for a period of ten years with a variable rate currently at 4.75% and funding the remodel by using the proceeds from the sale of the Armory and placing $ 100,000 a year back into the Capital Projects account as well as the interest it would earn for future capital projects as designated by City Council. Recommendations: Council select a funding option as presented above. Fiscal Effects: City growth has been averaging 7% a year and generated approximately $350,000 in new tax revenue this year. Since the General Fund has over $6,000,000 in salaries even a COLA uses a good portion of that increase. There is not a lot left for capital purchases. We reduced our reserves this year by $500,000 to facilitate hiring the needed firemen for the new fire station. The City is approaching its limit for borrowing without a vote of the public. Other long term priorities for financing must also be considered such as a ladder truck. Additional debt service needs to be minimized in the near future. The debt payment for the two loans will be approximately $280,000. If option three or four is selected, it will impact on the near term funding of a Community Center. Money returned to a Capital fund would replenish the fund. Alternatives: As suggested by Council. Respectfully submitted: X7 Amy Robertson Finance Director J es H. Patrick City Manager