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Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Chris Kukulski, City Manager
SUBJECT: Library Purchase
MEETING DATE: May 8, 2006
BACKGROUND: On March 27, 2006 Rob Pertzborn of Intrinsic Design presented
information to the City Commission regarding the future re-use of the current city library
property. Generally speaking, the Commission agreed with the direction that we should NOT
sell the current library. The City has serious deficiencies in work space in several departments
and a city re-use of the current library is the most cost effective way to meet current and
projected space needs. We estimate renovation costs for the structure to be approximately $30
per square foot vs. $200 per square foot for new construction. Intrinsic Design has been
contracted to analyze whether the space would be best suited for the police station or city hall.
We need to confirm our intent to retain ownership of the library property and to identify where
the money will come from to make the purchase. The most recent appraisal (late 2005), valued
the library at $2.5 million, up from just over $2.0 million in 2003. Thus, it is in the best interest
of the City to finalize the purchase of the property sooner rather than later. Additionally, the
cash flow spreadsheet for the new library construction project anticipates that the sale of the
current library will take place in the current fiscal year. Therefore, if the property is not sold
soon, we will have to increase the bridge loan by $2.5 million and interest payments will
continue to be incurred by the library.
Potential sources of revenue to purchase the property include:
1) The Solid Waste Landfill fund – the fund currently has a balance of $4.2 million +
$1.9 million that must be set aside for post closure costs.
2) The General Fund is estimated to have a cash reserve of $3.1 million as of 6/30/06.
This is equal to approximately 18% of revenues. We could utilize $1.0 million which
would drop the cash reserve to $2.1 or approximately 12%. In order to meet total
cash flow, the General Fund reserve needs to be 20%; we accomplish cash flow by
pooling ALL of our cash reserve funds and not just the General Fund.
a. Story Mansion was purchased for $1.3 million out of the General Fund. Upon
the sale of the building we could replenish the General Fund reserve or any
other fund the city chooses to borrow from.
3) The Valley Unit cash account has a balance of $717,000. In the proposed 06/07
budget, this fund is being utilized to fund the renovation cost of the current library
and current city hall.
4) Approximately 3 mills NOT levied in 2005. – The City has access to $174,000 per
year under the State cap that in 2005 was equal to 3 mills. Through Intercap
(typically the city’s best access to borrowing) we could borrow approximately $1.4
million over 10 years with the loan payment made from increased mills levied.
RECOMMENDATION: Instruct the City Manager to bring back the appropriate documents
to purchase the existing library and to utilize the $2.5 million in funds from the solid waste
reserve account.
FISCAL EFFECTS: $2.5 million will be transferred from the solid waste fund and into
the library construction account.
ALTERNATIVES: As suggested by the City Commission.
Respectfully submitted,
____________________________
Chris A. Kukulski, City Manager
Report compiled on May 4, 2006