Funding for Asbury Plaza Lift StationTHE CITY OF
DuB E MEMORANDUM
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March 13, 2007 c ~ ---
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TO: The Honorable Mayor and City Council Members ro N
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Funding for the Asbury Plaza Area Lift Station and Force Main Project
(CIP #7101350)
City Engineer Gus Psihoyos is recommending that the funding source for Asbury Plaza
Area Lift Station and Force Main Project be changed to keep the project on schedule for
the private developer.
The funding source would be changed from Iowa Department of Natural Resources
(IDNR) State Revolving Loan Funds (SRF) at 3.25% interest to General Obligation
(G.O.) Bonds at an estimated 4.5% interest.
The requirements of using the special financing would have slowed the project down to
the detriment of the private developer. The City was not aware of this special funding
source when the annexation agreements were negotiated, so there was no reference to
the developer being required to wait for the steps needed to use this special source of
funding.
In this case, I believe the developer's request is fair and reasonable.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
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Michael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Gus Psihoyos, City Engineer
THE ~ITY ~F M E M O R A N D U M
Dub E
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March 13, 2007
TO: Michael C. Van Milligan, City Manag
FROM: Gus Psihoyos, City Engineer
SUBJECT: Funding for the Asbury Plaza Area Lift Station and Force Main project
(CIP#7101350)
INTRODUCTION
The purpose of this memorandum is to request authorization to utilize General
Obligation Bonds to fund the Asbury Plaza Area Lift Station and Force Main project
(CIP#7101350).
BACKGROUND
In February of 2006, IIW Engineers (Dubuque, IA) completed the Northwest Asbury
Plaza Area Wastewater Pumping Feasibility Report (Report). It outlined the
recommended sanitary sewer system collection system to serve property north of
Asbury Plaza. The specific properties that could be served by the proposed system are
owned by:
Motor City LLC; John Herrig; Grand View United Methodist Church; Dean and Patricia
Butler; Leo and Arlene Dietz*; Clement and Jeannine Hilby*; Douglas and Eileen
Coates*; and Laverne and Marlene Brimeyer~`.
(* Currently not within City limits)
The voluntary annexation of the Motor City (Corey) property and the Herrig property
were approved by the City Council in June and July of 2006 respectively. The pre-
annexation agreement calls for the City to "construct a lift station and force main
sanitary sewer to serve the property."
With the adoption of the Fiscal Year 2007 Capital Improvement Budget, the City Council
established funding (CIP#7101350) for City participation in the extension of sanitary
sewers into new development areas or recently-annexed areas as part of pre-
annexation agreements.
On August 9, 2006, Engineering released an RFP to consulting engineers to design and
prepare construction documents for the Asbury Plaza Area Lift Station and Force Main
project, the sanitary sewer system to serve the Herrig and Corey properties.
City staff concluded that of the three firms that responded, IIW best responded to the
objectives outlined in the RFP. Their strength included their familiarity and
understanding of the complexities of the proposed system and the survey and
engineering work they had already performed in the area. In August of 2006, IIW was
hired to perform the engineering for $49,000.
On September 29, 2006, the City of Dubuque submitted an application to the Iowa
Department of Natural Resources (DNR) requesting State Revolving Loan Funds (SRF)
to complete construction for six (6) projects, including the Asbury Plaza Area Lift Station
and Force Main project. The FY07 budget identified the use of General Obligation (GO)
bond financing at estimated interest costs of 4.5% for 20 years. The terms of SRF would
be 3% interest plus a .25% annual servicing fee for 20 years.
On November 6, 2006 the City Council approved the application for the State Revolving
Loan funds and the use the funds in place of GO Bond financing.
DISCUSSION
The use of State Revolving Funds comes with several project requirements. One of
these is that an archeological study must be performed. This study is performed by the
DNR, or a firm they hire, and does not add to the cost of the City's project.
Unfortunately, the archeological study cannot be performed when there is frost or snow
cover. IDNR anticipates that they could start the study in mid-March. The most
optimistic schedule to complete the process is outlined below.
Initiate archeological study March 19, 2007
Complete archeological study May 2, 2007
SHPO complete review of findings** April 25, 2007
IDNR issue finding of no significant impact (FONSI) May 2, 2007
End FONSI 30 day comment period June 1, 2007
Final construction clearance granted by IDNR June 4, 2007
*'~SHPO may find that additional studies are warranted depending on what the
archeological study reveals. This will delay the project well past the June 4, 2007 date.
No construction activity can take place until the archeological study and ensuing
process has run its course.
Usually, the archeological study would look at the property to be disturbed by the City's
Asbury Plaza Area Lift Station and Force Main project. However, the IDNR recently
informed us that the State Historical Preservation Office is requiring that the
archeological study include both the Herrig and Corey properties. This is new to the
IDNR; they argued against this requirement but lost. This will significantly impact the
Herrig and Corey developments.
Based on the schedule outlined above, we believe that June 4, 2007 is the earliest date
that they could resume/begin construction on their property. Due to SHPO's ruling, the
use of SRF will mean that neither Herrig nor Corey would be allowed to construct
improvements on their properties until the archeological study process runs its course.
Mr. Herrig has indicated that he would like to begin construction activity on his property
sometime in May. Use of SRF may delay his development by a month or more.
The development/annexation agreement between the City and Mr. Corey requires that
Mr. Corey construct a road to Mr. Herrig's property by July 1, 2007. This work includes a
significant amount of excavation to bring the proposed roadway to grade prior to paving.
At best, Mr. Corey would have 27 calendar days to construct the road. While this might
be feasible, the delay in its construction will delay the construction of the City's Asbury
Plaza Area Lift Station and Force Main project. The pump station designed to serve the
east portion of Herrig's property cannot be constructed until Corey grades for the
roadway to the Herrig property. In addition to the road, Mr. Corey hoped to resume
construction in early April to allow for the sale of property in early July. Mr. Corey
asserts that delaying his construction from early April to early June as predicated by the
SRF process explained above "would have devastating effects on (his) project."
Although it would be spread over the twenty year bonding period, the estimated cost to
finance the project with GO Bonds instead of SRF is $189,500. The SRF interest rate is
3.25% and the projected GO bond rate is 4.5%. The additional 1.25% in interest on
$1,260,000 project is $169,485. There would also be a GO Bond issuance cost of
approximately $20,000 for PFM, Moody's, etc. This will mean that there will be $189,500
less available to spend on sanitary sewer projects over the next twenty years, about
$9,500 less each year.
RECOMMENDATION
I recommend the use of General Obligation Bonds to fund the Asbury Plaza Area Lift
Station and Force Main project (CIP#7101350).
BUDGET IMPACT
The estimated cost to finance the project with GO Bonds is $189,500 more than the
cost to finance it with SRF. The $189,500 will be financed over 20 years, the life of the
bonds. As a result, the use of GO Bonds will not delay any projects. But it will mean that
there will be $9,500 less each year available in the general sanitary sewer construction
fund. For FY08 through FY12, there is $850,000 established for General Sanitary Sewer
Repairs (CIP7101289). These funds will be used to cover the $9,500 annually from
FY08 through FY12 that totals $47,500. Budgets beyond FY12 will be prepared
accordingly to reflect the $9,500 reduction in available sanitary sewer construction
funds.
ACTION REQUESTED
I respectfully request authorization to utilize General Obligation Bonds to fund the
Asbury Plaza Area Lift Station and Force Main project (CIP#7101350).
Prepared by Deron Muehring
cc: Jenny Larson, Budget Director
Ken TeKippe, Finance Director
Deron Muehring, Civil Engineer II