2014.01.07 Work Session Packet4141 Douglas Drive North • Crystal, Minnesota 55422-1696
Tel: (763) 531-1000 • Fax: (763) 531-1188 • www.crystalmn.gov
AL
CRYSTAL CITY COUNCIL
WORK SESSION AGENDA
Tuesday, January 7, 2014
6:15 p.m.
Conference Room A
Posted: January 3, 2014
Pursuant to due call and notice given in the manner prescribed by Section 3.01 of the City
Charter, the work session of the Crystal City Council was held at p.m. on Tuesday,
January 7, 2014 in Conference Room A located at 4141 Douglas Drive, Crystal, Minnesota.
I. Attendance
Council members Staff
Hoffmann Norris
Libby Therres
Peak Mathisen
Selton Hansen
Adams Revering
Budziszewski Norton
Deshler Serres
II. Agenda
The purpose of the work session is to discuss the following agenda item:
• Public Works Site Acquisition
• Joint Water Commission (JWC) financing plan
III. Adjournment
The work session adjourned at p.m.
Auxiliary aids are available upon request to individuals with disabilities by calling the City Clerk at (763)
531-1145 at least 96 hours in advance. TTY users may call Minnesota Relay at 711 or 1-800-627-3529.
Memorandum
C�n
DATE: January 2, 2014
TO: Mayor and City Council
Anne Norris, City Manager
FROM: Charles Hansen, Finance Director
SUBJECT: Discuss Financing Options for JWC Emergency Water Supply
Background:
The Joint Water Commission (JWC) is planning to add wells as an emergency water
supply backup. Currently the JWC purchases all of its water from the City of
Minneapolis Water Department.
We have known for some time that the emergency water supply project and some other
significant capital projects will impact the Water Fund budget for the next five years, but
only had rough estimates of the cost. The JWC is now updating its capital improvement
program which has firmed up the cost estimates. Current cost estimates are higher
than the cost estimates we used in the 2014 Water Fund budget.
Crystal will pay a share of the capital costs based on the water used by Crystal
customers compared to the total water used by all JWC customers. This share
fluctuates from year to year since water usage changes over time. For the 2014
adopted budget, 27.4% was used as Crystal's share.
Capital Improvement Plan
The emergency water supply project is expected to cost the Joint Water Commission
$4,000,000 in 2014. Some smaller projects have also been added to the CIP and
some projects moved from one year to another.
Financing the CIP using Golden Valley Bonds, Alternative #1
The City of Golden Valley is prepared to issue $4,605,000 of bonds on behalf of the
JWC to help finance the emergency water supply and other projects in the CIP. These
bonds will have principal and interest payments running for 20 years with estimated
annual debt service costs of $350,000.
If the City of Crystal relies on these bonds to finance its share of the projects, it will be
responsible for about 27% of the annual debt service costs. This scenario is depicted
in the Alternative #1 budget. Debt service isn't listed separately, but is included in the
annual JWC — Capital line.
In this scenario, Crystal's water rates can increase at the same pace over the next five
years as proposed in the 2014 Adopted Budget. However, cash and investments will
be about $322,000 at the end of 2018, compared to about $1,068,000 in the 2014
Adopted Budget.
Financing the CIP using cash to pay Crystal's share up -front, Alternative #2
The City Council had reservations about issuing bonds to pay for the Public Works
Facility and many of the same arguments could be made regarding issuing bonds to
pay for the JWC capital improvements. Crystal could use the Water Fund's cash on
hand to pay its share (about $1,215,000) of the bonds. In this case, Golden Valley
would issue about $3,390,000 in bonds and the debt service costs would be paid by
Golden Valley and New Hope. Since Crystal wouldn't need to support the annual debt
payments, its JWC — Capital cost would be about $94,500 less per year than in the
Alternative #1 budget.
The cash on hand scenario is shown in the Alternative #2 budget. The JWC — Capital
line is $1,215,000 higher in 2014 to reflect paying up -front. In the years 2015 onward,
the JWC — Capital line is $94,500 lower since Crystal doesn't have to support annual
debt service payments. Impact on the cash & investments is substantial. Even with
faster rate increases in 2016 through 2018, cash & investments fall to about zero at the
end of 2018.
Conclusion:
Financing options are only one consideration in the emergency water supply project.
The two alternatives presented are the ones that seemed to me to be most viable. If
there are other ideas the City Council would like to investigate, I will work on them for
presentation at a future meeting.
2014 Adopted
Budget
Alternative #1 Budget
Alternative #2 Budget
Rate
Increase
from prior
year
Estimated
Year-end
Cash
Balance
Rate
Increase
from prior
year
Estimated
Year-end
Cash
Balance
Rate
Increase
from prior
year
Estimated
Year-end
Cash
Balance
2014
5.15%
$2,306,030
5.15%
$2,256,955
5.15%
$1,041,955
2015
3.92%
$1,916,023
3.92%
$1,839,211
3.92%
$700,486
2016
0.00%
$1,923,890
0.00%
$1,230,483
3.77%
$283,484
2017
2.83%
$1,482,436
2.83%
$779,793
3.64%
$53,619
2018
0.92%
$1,068,192
0.92%
$321,721
6.14%
-$1,739
Conclusion:
Financing options are only one consideration in the emergency water supply project.
The two alternatives presented are the ones that seemed to me to be most viable. If
there are other ideas the City Council would like to investigate, I will work on them for
presentation at a future meeting.
WATER UTILITY RATE STUDY
2014 Adopted Budget
PROFIT & LOSS
2013
2014
2015
2016
2017
2018
REVENUES
Water usage charges
2,600,000
2,760,000
2,880,000
2,880,000
2,970,000
3,000,000
Fixed service charges
150,000
150,000
150,000
150,000
150,000
150,000
Penalties
57,000
60,000
60,000
60,000
60,000
60,000
Special Assessments
60,000
60,000
60,000
60,000
60,000
60,000
JWC reimbursement
12,000
12,000
12,000
12,000
12,000
12,000
Investment Income
27,000
23,300
34,590
38,320
48,097
44,473
Miscellaneous
57,000
57,000
59,000
59,000
59,000
59,000
State testing fee billed
50,000
50,000
50,000
50,000
50,000
50,000
3,013,000
3,172,300
3,305,590
3,309,320
3,409,097
3,435,473
TOTAL REVENUES
EXPENSES
Salaries & Wages
230,449
235,494
241,381
247,416
253,601
259,941
Fringe Benefits
81,183
89,084
93,538
98,215
103,126
108,282
JWC - Operations
1,908,730
2,013,304
2,069,677
2,127,627
2,187,201
2,248,443
JWC - Capital
229,500
309,150
432,000
205,200
193,050
200,000
JWC 2 cents/1,000 gal. fee
12,000
12,000
12,000
12,000
12,000
12,000
Professional/Contractual
94,568
97,755
100,688
103,708
106,820
110,024
Utilities
4,200
4,140
4,264
4,392
4,524
4,660
Repair & Maintenance
38,100
37,800
38,934
40,102
41,305
42,544
Supplies
50,500
50,500
52,015
53,575
55,183
56,838
Communications & Printing
7,600
3,500
3,605
3,713
3,825
3,939
Insurance & Training
16,265
12,703
13,084
13,477
13,881
14,297
Depreciation
183,676
183,470
190,000
195,000
200,000
210,000
Admin, Service Charge
117,472
118,451
121,412
124,448
127,559
130,748
2,974,243
3,167,351
3,372,598
3,228,874
3,302,074
3,401,717
TOTAL EXPENSES
NET INCOME or -LOSS
38,757
4,949
-67,008
80,447
107,024
33,756
ENDING FUND BALANCE
77494,888
7,499,837
7,432,830
7,513,276
7,620,300
7,654,056
2,163,732
2,262,611
2,306,030
1,916,023
1,923,890
1,482,436
CASH FLOW
Cash & Investments, Beg. of Year
Net income
38,757
4,949
-67,008
80,447
107,024
33,756
Add back Depreciation
183,676
183,470
190,000
195,000
200,000
210,000
Deduct Capital Outlay
123,554
145,000
513,0001
267,5791
748,478
658,000
2,262,611
2,306,030
1,916,0231
1,923,89011,482,4361
1,068,192
Cash & Investments, End of Year
Retail Rate per 1,000 gallons, Tier 1
4.05
$4.30
$4.50
$4.50
$4.65
$4.70
Retail Rate per 1,000 gallons, Tier 2
4.45
$4.70
$4.90
$4.90
$5.05
$5.10
Retail Rate per 1,000 gallons, Tier 3
4.85
$5.10
$5.30
$5.30
$5.45
$5.50
Rate increase from prior year
_ 2.11%
5.15%
3.92%
0.00%
2.83%
0.92%
WATER UTILITY RATE STUDY
2014 Adopted Budget, Alternative #1
Participate in Golden Valley Bond Issue
PROFIT & LOSS
2013
2014
2015
2016
2017
2018
REVENUES
Water usage charges
2,600,000
2,760,000
2,880,000
2,880,000
2,970,000
3,000,000
Fixed service charges
150,000
150,000
150,000
150,000
150,000
150,000
Penalties
57,000
60,000
60,000
60,000
60,000
60,000
Special Assessments
60,000
60,000
60,000
60,000
60,000
60,000
JWC reimbursement
12,000
12,000
12,000
12,000
12,000
12,000
Investment Income
27,000
23,300
33,854
36,784
30,762
23,394
Miscellaneous
57,000
57,000
59,000
59,000
59,000
59,000
State testing fee billed
50,000
50,000
50,000
50,000
50,000
50,000
3,013,000
3,172,300
3,304,854
3,307,7843,391,762
3,414,394
TOTAL REVENUES
EXPENSES
Salaries & Wages
230,449
235,494
241,381
247,416
253,601
259,941
Fringe Benefits
JWC - Operations
JWC - Capital
81,183
1,908,730
229,500
89,084
2,013,304
358,225
93,538
2,069,677
459,000
98,215
2,127,627
820,260
103,126
2,187,201
184,950
108,282
2,248,443
222,750
JWC 2 cents/1,000 gal. fee
12,000
12,000
12,000
12,000
12,000
12,000
Professional/Contractual
94,568
97,755
100,688
103,708
106,820
110,024
Utilities
4,200
4,140
4,264
4,392
4,524
4,660
Repair & Maintenance
Supplies
Communications & Printing
38,100
50,500
7,600
37,800
50,500
3,500
38,934
52,015
3,605
40,102
53,575
3,713
41,305
55,183
3,825
42,544
56,838
3,939
Insurance & Training
16,265
12,703
13,084
13,477
13,881
14,297
Depreciation
Admin. Service Charge
183,676
117,472
183,470
118,451
190,000
121,412
195,000
124,448
200,000
127,559
210,000
130,748
2,974,243
3,216,426
3,399,598
3,843,934
3,293,974
3,424,467
TOTAL EXPENSES
NET INCOME or -LOSS
38,757
-44,126
-94,744
-536,149
97,788
-10,073
ENDING FUND BALANCE
7,494,888
7,450,762
7,356,018
6,819,869
6,917,657
6,907,585
2,163,732
2,262,611
2,256,955
1,839,211
1,230,483
779,793
CASH FLOW
Cash & Investments, Beg. of Year
Net income
38,757
-44,126
-94,744
-536,149
97,788
-10,073
Add back Depreciation
Deduct Capital Outlay
Cash & Investments, End of Year
183,676
123,554
183,470
145,000
190,000
513,000
195,000
267,579
200,000
748,478
210,000
658,000
2,262,611
2,256,955
1,839,211
1,230,483
779,793
321,721
Retail Rate per 1,000 gallons, Tier 1
Retail Rate per 1,000 gallons, Tier 2
Retail Rate per 1,000 gallons, Tier 3
Rate increase from prior year
4.05
4.45
4.85
2.11%
$4.30
$4.70
$5.10
5,15%
$4.50
$4.90
$5.30
3.92%
$4.50
$4.90
$5.30
0.00%
$4.65
$5.05
$5.45
2.83%
$4.70
$5.10
$5.50
0.92%
WATER UTILITY RATE STUDY
2014 Adopted Budget, Alternative #2
Pay Emergency Water Supply Share Up -front
PROFIT & LOSS
2013
2014
2015
2016
2017
2018
REVENUES
Water usage charges
2,600,000
2,760,000
2,880,000
3,000,000
3,120,000
3,330,000
Fixed service charges
150,000
150,000
150,000
150,000
150,000
150,000
Penalties
57,000
60,000
60,000
60,000
60,000
60,000
Special Assessments
60,000
60,000
60,000
60,000
60,000
60,000
JWC reimbursement
12,000
12,000
12,000
12,000
12,000
12,000
Investment Income
27,000
23,300
15,629
14,010
7,087
1,609
Miscellaneous
57,000
57,000
59,000
59,000
59,000
59,000
State testing fee billed
50,000
50,000
50,000
50,000
50,000
50,000
3,013,000
3,172,300
3,286,629
3,405,010
3,518,087
3,722,609
TOTAL REVENUES
EXPENSES
Salaries & Wages
230,449
235,494
241,381
247,416
253,601
259,941
Fringe Benefits
81,183
89,084
93,538
98,215
103,126
108,282
JWC - Operations
1,908,730
2,013,304
2,069,677
2,127,627
2,187,201
2,248,443
JWC - Capital
229,500
1,573,225
364,500
725,760
90,450
128,250
JWC 2 cents/1,000 gal. fee
12,000
12,000
12,000
12,000
12,000
12,000
Professional/Contractual
94,568
97,755
100,688
103,708
106,820
110,024
Utilities
4,200
4,140
4,264
4,392
4,524
4,660
Repair& Maintenance
38,100
37,800
38,934
40,102
41,305
42,544
Supplies
50,500
50,500
52,015
53,575
55,183
56,838
Communications & Printing
7,600
3,500
3,605
3,713
3,825
3,939
Insurance & Training
16,265
12,703
13,084
13,477
13,881
14,297
Depreciation
183,676
183,470
190,000
195,000
200,000
210,000
Admin. Service Charge
117,472
118,451
121,412
124,448
127,559
130,748
2,974,243
4,431,426
3,305,098
3,749,434
3,199,474
3,329,967
TOTAL EXPENSES
NET INCOME or -LOSS
38,757
-1,259,126
-18,469
-344,424
318,613
392,642
ENDING FUND BALANCE
7,494,8881..6,235,76216,2-17,293,
5,872,870
6,191,483
6,584,125
2,163,732
2,262,611
1,041,955
700,486
283,484
53,619
CASH FLOW
Cash & Investments, Beg. of Year
Net income
38,757
-1,259,126
-18,469
-344,424
318,613
392,642
Add back Depreciation
183,676
183,470
190,000
195,000
200,000
210,000
Deduct Capital Outlay
123,554
145,000
513,000
267,579
748,478
658,000
2,262,611
1,041,955
700,486
283,484
53,619
-1,739
Cash & Investments, End of Year
Retail Rate per 1,000 gallons, Tier 1
4.05
$4.30
$4.50
$4.70
$4.90
$5.25
Retail Rate per 1,000 gallons, Tier 2
4.45
$4.70
$4.90
$5.10
$5.30
$5.65
Retail Rate per 1,000 gallons, Tier 3
4.85
$5.10
$5.30
$5.50
$5.70
$6.05
Rate increase from prior year
2,11%
5.15%
3.92%
3.77%
3.64%
6.14%
Utility Funds (Funds 505, 510, 515 and 520)
Multi -Year Capital Improvement Plan
2014 Adopted Budget
Project Description 2014 2015 2016 2017 2018
1 Water (100%) !
----._......_........_.._.._.._._._._.._._.__... _._._._._..-._._._...._....................... .......
450,000
T
300 000
450,000
--._................._.._._-_..._.._.._.�
450 000
------ ...
Sensus meter servers _._.._._._........_.._._-_--
_ 70,000
- -
t
144,947
217,006
......... ...... .
658,000
Water Main replacement/relining
20,000
980 110
_
600,000
600,000
_-
Water mains & hydrants in street reconstruction projects _
__._.._.._._.....---..._
Gate valve replacement
:Replace #436 - 1996 portable streamer - -
Replace 9447 - 2002 tandem dump truck
.._-_ ._ _...........-._.._.....--
75 000
1 --
i 38,000
75000
-
1
49,079
_ 8,500
i 210,000
, 73,478
'......75,000
1
1
:Replace #427_ 2004 Chevy 3/4 ton truck
-
_
20,000
__-1
40,000
:Replace #434 - 1996 air compressor _ -{
1
130,000
30,000
_
;
55,000
1 18,000
Water Total _I
- 145,000
_ 113,000
267,579
748,478
658,000
'Sewer (100%1
----- -- -- - .. _._ . ---
Reline deteriorated sanitary sewers i
450,000
T
300 000
450,000
300,000
_. _..-I
450 000
------ ...
......- --....... _ _.... - __ .... _,.
South Lift #9 - force main lining - _
Replace sewer mains within street reconstruction rojects
Truck mounted manhole lifter
.. ........
650,000 '
__.
1 8,000
_.- _ ..
1 -105,110
t
144,947
217,006
......... ...... .
658,000
:Total Sewer Fund
20,000
980 110
777,447
572,006
1 695,000
Sanitary sewer maintenance software
Relace truck #449 - 2000 televising van
lace .._......__. - ---- -,
_
------ -- -
i
175,000
-
2500
._.._._._...._.-----_-_---__
1,135,376
---
:Replace computer and printer ---
Replace aryland lift Pumps.._...__...__.__..................__............___._.___
I
_-
!
20,000
�___...._...._..._..
: -_... _.... ......
�......__._..._._...._......_.
;Replace #426 - 1996 trailer mounted vactor
Replace 4439 - 1991 trailer mounted generator
1eplace1/429_ 2003 Chevy 1 ton truck
1,435,000
130,000
30,000
_
;
55,000
Re lace #430 - 1994 sewer rodder
--p -...............-------._._..___._....._.._.__._.._._....................._.._------------
-
---
i -
---...__............-........................_._
25,000
Replace #43,1, - 2004 Sreco sewer jetter ---_
......._._.......... ..............................._
1
1
220,000
Sewer Total
1 1,128,0001
__580,1101
777,447572,006
695,000
Total Utilities - - _ _ 1,435,000 i 2,164,644 1 1,679,362 1 2,467,860 1 1,365,000
----------------------
Allocation By By rand -
.............................. .............._._..__._.....
-
i
------------------------
Total Water Fund
--
145,000
�- -
513,000
- --
267,579
-----4...
748,478
......... ...... .
658,000
:Total Sewer Fund
1,128,000
980 110
777,447
572,006
1 695,000
'Total Storm Drainage Fund
150,000
659,534
_ 622,336_
._.._._._...._.-----_-_---__
1,135,376
0
... _....._... __-
-- --g -- - _._.. .. . - __--- ...-- -- -
,Total Street Lights Fund _ _
12,000
12,000
12,000
12,000
12,000
:Notal Utilities
1,435,000
2,164,644
1,679,362
2,467,860
1,365,000