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Options for financing Preston’s 2014 street project

Fri, Mar 8th, 2013
Posted in Preston Government

City Administrator Joe Hoffman at the council’s March 4 meeting detailed the pros and cons of combining the estimated $4 million worth of street improvements into one project. In early February councilman Robert Maust had suggested it may be cost effective to take advantage of current historically low interest rates and do the work as one large project rather than in two parts. He also questioned whether there would be a cost advantage by issuing the bonds early to get the unusually low interest rate.

Hoffman explained that to prefinance the project would be a gamble and raise the interest rate by about .3 percent. Also, this type of financing is rarely done.

Hoffman said the city of Kasson has the same AA- rating and has bonded for 2 percent on a 15 year debt. He added that financing the debt in one lump sum in 2014 would put Preston in the moderate to high range of debt compared to capital assets.

At the February meeting Hoffman had presented a scenario for street improvements which would be done in two parts, half in 2014 and half in 2018 with each $2 million bond being paid over 15 years. The city’s existing bond debt payments will end in 2016 and 2019.

Hoffman explained the $4 million one time project could be feasible. Seven to ten percent could be saved. Project areas could be tied together more easily. A larger portion of the community will be assessed at once.

Maust suggested that the streets will surely be good for twenty years and asked why not bond for 20 years instead. Hoffman noted that with a longer term, the interest rate would be a little higher.

The negatives or cons for one large project include difficulty in staging so residents can maintain access, about twice the residents will be affected at once, a greater demand on city resources (engineering and public works), and the size of a $4 million project could eliminate some contractors. Hoffman said that limiting the pool of possible contractors could in the end affect the quality of work.

Both the option of one large project and the option of two smaller projects will be kept open. Hoffman reported that they will have a staff meeting this week to start prioritization and to identify utility work. The $4 million figure does not include utility work. No decisions were made at this time.

Veterans Cemetery

Fillmore County had applied for the rezoning of a parcel owned by the city that is to be part of the proposed Veterans Cemetery. The parcel is currently zoned Industrial (I-1) and is located north and west of the county highway shop. The rezoning of the parcel to Agricultural-Residential (R-1) will allow for it to be used for a cemetery. Planning and Zoning recommended the rezoning after a public hearing. There was no comment from the public.

Commissioner Duane Bakke reported that the cemetery is expected to serve veterans in a 75 mile radius including Wisconsin and Iowa residents. He said the cemetery will be developed in phases. The cemetery will be a model for others across the country as it will be unique due to its hilly terrain. Many veterans cemeteries are laid out on relatively flat fields.

The project has slowly moved forward over the past three years. The application is in Washington D.C. and at this point hasn’t been officially signed. The rezoning request was approved.

Other Business In Brief

•Jim Bakken, Public Works, described work that needed to be done at the brush dump. He said it has been burned every year, but over the last seven years dirt, stumps, and other materials have piled up. He recommended hiring Scheevel and Sons to do dozer work to level off the site and make it more usable. He estimated it will cost about $3,000 to open it up and another $1,000 to add road rock. Each year the city budgets $1,000 for this kind of maintenance work, but has only expended $143 since early 2009. The brush dump work was approved.

Bakken proposed a bunker style storage area be built east of the city shop. The divided bunker would store road rock, bituminous,and so on. He proposed a unit that would cost about $8,130 for materials. There would be no outside labor cost. The cost would be split between the city and the utility. Maust asked about the distance the structure would be from the trout stream. Also, were there plans to put an apron in front of the structure? Bakken will get more information and bring it back to the next meeting.

•The city has had a franchise agreement for 25 years with Minnesota Energy Resources to provide natural gas to the city. As a regulated utility Minnesota Energy must seek approval from the state Public Utilities Commission to reset rates. The agreement is for “construction, maintenance and relocation of the gas distribution system within Preston.” The city attorney and staff recommended approval of the agreement. Approval was given to sign the new agreement.

•The council approved advertising to hire a summer helper to do maintenance work including cutting grass and weeds, painting curbs and filling pot holes. In 2012 the three month position cost the city $5,000 for wages.

•A resolution was unanimously approved in support of the State Legislature authorizing a user fee increase in the year 2013. The increase will more fully cover operational costs to maintain deputy registrar offices for local driver license and state I.D. services. Preston has the only deputy registrar in Fillmore County. Councilman Charles Sparks said it is important to keep this service here.

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