Council continues cash flow talk

by HANNAH BROADBENT
[email protected]

Earlier in the month the Watertown City Council and city staff came back together to discuss updates to their debt management plan and capital investment plan. The discussion comes from a series of meetings that began last month, referring to city money and how it will affect the future of Watertown.

City administrator Shane Fineran told the council that the big thing to take from the debt study is what it means for the city going forward and how does it affect the CIP.

“We’ve had peaks and valleys over the last few years over how our debt was structured, now we’re in a positive place,” Fineran said. “We need to start strategically thinking about when we want to time out some of these projects.”

In 2022 the city will start to retire its outstanding debt. This year, 2017, is a peak year for the property tax levy at $554,000 according to Fineran. In the following years the tax levy for debt service will decrease, he calls where Watertown is now to where they will be then “a gap”.

That gap is something the city can take advantage of to help pay for other things. Fineran said a negative would be to utilize the gap because then they are not creating tax decrease.

“That’s not creating tax relief, if we don’t levy for it that’s essentially a tax decrease,” Fineran said.

The city councilmen varied in opinions on tax increase. Councilman Adam Pawelk said in this day and age it is unrealistic to expect anything lower than a 3 to 5 percent increase while councilman Michael Walters prefers to keep an increase flat as possible. Councilwoman Lindsay Guetzkow said she doesn’t feel a huge pressure to lower, her concern is with project prioritization.

“The strategy of using debt and property tax for operating type costs makes a lot of sense and would allow us to respond quickly,” Guetzkow said.

Other councilors and Mayor Steve Washburn had the same mindset. To focus on growth without spending to much in Watertown.

“I want to continue to grow and limit taxes,” Washburn said.

Washburn brought up the Highway 25 urbanization plan. A plan that is a way to leverage funds from the Minnesota Department of Transportation, according to Fineran. The project would add turn lanes, sidewalks and walking trails to the highway – totalling $2.2 million. Washburn questions the necessity of that.

“I’m still not very interested in this project – I still believe our community would not be getting the bang for its buck on this project,” Washburn said.

Councilwomen Everson and Guetzkow pointed possible negatives of not going through with some projects like this one.

“But we also need to make sure we are staying progressive, we need to stay on par with Waconia and Delano,” Guetzkow said.

Everson questioned the city’s vision, wondering if a lack of vision in that area could hinder Watertown’s growth.

“Do we as a council need to have a better vision of what we want over there to make these decisions better,” Everson said.

Councilman Walters reminded the council of a plan that was more pertinent to the immediate health of the residents.

“We need to start thinking in terms of the water facility,” he said. “We do know it’s going to have some major repairs and that’s something we need to think about.”
Pawelk suggested shifting money out of luxury items like parks, and focus it on the facility as well.

The meeting ended an hour later, with no tangible solution for the councilors or staff to walk away with. Though they say they benefit from every conversation.

“We have some big purchases in the next five years, but we’re going to have some of that flexibility come back to us in the next year,” Pawelk said. “There are so many moving pieces I don’t have a definitive answer.”

DEBT MANAGEMENT

In early July the Watertown City Council approved their 2017 management plan unanimously. The plan looks at the debt payable through 2036 and projected levy amount through 2024.

Tammy Omdal with Northland Securities, the municipal advisor on the topic presented the council with a few key points from the plan. The plan is focused on the debt for the debt services fund and utilities fund.

“It is intended to serve as a guide for ongoing management,” she said.

The first time the city used the plan was in 2013, it was then updated in 2015. Omdal noted that since this plan has been followed for the last four years the city’s debt services are in key condition.

“This is the first year there is really no key recommendations, it just looks at what they levy’s need is to be going forward,” she said.

Omdal projected that 2017 and 2018 are peak years for the property tax levy as it is payable to debt service. According to her, current estimates show the peak will be at $530,000 and will be as low as slightly over $200,000 by 2024.

As debt is retired and the tax increment district begins to gain revenue the levy drops. Omdal also said that the utilities fund has been sufficient to cover some of the debt as well. Once the levy is lower, then the council can take on new debt according to Omdal. She said future plans can be made around the levy.

Council member Deborah Everson used this plan to talk more about the wastewater treatment facility. She asked if this is something that can help plan for that project.

“Right now this is just looking at existing data not new data,” Omdal said.

Omdal did say that for projects to be successful they must be planned and budgeted for starting almost five years in advance. She said that is something that Watertown does well.

The treatment facility would be an example of that. The city is starting heavy maintenance on the facility now, knowing that they will have a much larger project in 2022. Staff believes that the $140,000 project will be enough to get the ball rolling for what will be need to be done in five years.

“This helps us look at where those future opportunities exist to issue more debt without much impact,” said city administrator Shane Fineran.

Fineran said that as for the treatment plant, the question now is how do we time that appropriately for when we can issue debt.

“We really need to prioritize those important pieces and look at, what are the needs and what are the wants we have,” said Mayor Steve Washburn at the end of the meeting.

CAPITAL INVESTMENT

Early July marked the beginning of the 2018 budget season according to city administrator Shane Fineran. The city kicked it off with their first review of the Capital Improvement Plan or CIP.

A CIP is a short-range plan, in Watertown’s case ranging from 2017 to 2026. It identifies capital projects and equipment purchases, as well as provides a planning schedule and lays out different sources of income. Fineran said the plan should be close to finalized around the end of September.

There are several highlights of the CIP. One is the improvement to a 1999 sterling Dump Truck with a plow. The maintenance on the estimated $25,000 truck will cost about $50,000. Other large projects are street mill and overlays for the next nine years, the urbanization of Highway 25 at $2.2 million, almost $319,000 in playgrounds over the next five years and $176,000 into Evergreen Park through various projects. Those projects are not included in the Park Capital Fund.

Fineran said this plan is based on a budget structure that is primarily cash based. He also mentions that this plan accounts for 3 percent inflation in future years.

“This plan changes, the gaps change – right now we’re just showing cash or primarily grant type sources,” he said.

The urbanization of Highway 25 is a potential project to coincide with planned maintenance efforts by the Minnesota Department of Transportation (MNDOT) according to staff. The plan includes curb, gutter, storm water collection, grade separation and turn lanes. Staff says there are multiple funding sources possible for the $2.2 million project. The urbanization is planned to start in 2020 and would be complemented by a $147 thousand White Trail connection to downtown alongside the highway.

There are four parts to the CIP: Capital Improvements Fund, Fire Capital Fund, Parks Capital Fund and the Utilities Capital Fund. Each section lists revenues and sources, followed by expenditures.

Council Member Michael Walters was concerned with the park fund and the projects planned for the year 2020. There are over a million dollars in improvements planned which would send the fund over $800,000 into the red.

“My question is how did those get put on in the year 2020, I’m sure those will take more conversation to prioritize those,” Walters said. “Maybe it should take eight to ten years.”

“I’m a little uneasy with a lot of the things that are listed, I don’t mind making one big ticket purchase a year but I don’t like making two,” Washburn said.

“It’s not my intention to bring plans to you that are completely unrealistic, it’s more to try and spur conversation,” Fineran said.

Fineran said the council needs to think about what their plans and strategy are going forward. He encouraged them to think about issuing debt, saying then the conversations could be very different.

Councilor Lindsay Guetzkow asked if the council could see numbers back to 2015.She said it would be helpful to look at the numbers and see what sort of projects the city has postponed and projects have come up.

Washburn reminded staff and the council that is the first draft and they have many more conversations to come.

“This is conversation one and that’s typically how they go,” he said