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17-Capital Needs and Bond SaleItem No. 17 memorandum TO: Mayor & City Council FROM: John Godwin, City Manager SUBJECT: CAPITAL NEEDS & BOND SALE DATE: December 5, 2016 BACKGROUND: In 2013 we identified approximately $26 million in road replacement needs, as well as needed improvements for several aging city parks. We have kept that list of streets prioritized as part of the CIP submitted to the council with each annual budget, and recently updated estimated costs. Funding for these projects will have to come from some sort of bond sale. Based on current evaluations, a single cent on the tax rate equals almost $150,000 per year in revenue. That revenue would in turn fund approximately $2 million per year in debt. STATUS OF ISSUE: Because of the recent Paris Junior College election, this might be a good time to consider a rate increase for this purpose. PJC's tax rate is 18.75 cents per $100 of value, but is anticipated to decrease to eight cents per hundred. This means the city could raise its rate by five cents, thereby funding about $10 million in debt while leaving the net rate paid by Paris property owners below what it is now. A ranked list of recommended streets is attached, with estimated cost, location by district, and a running total. As you can see, these streets exceed the amount we would have available, so the council will need to decide if it wishes to change our rankings, and/or add other streets. I would also ask that the council consider including $400,000 for park improvements. BUDGET: A $10 million bond sale would be bank qualified, allowing us to receive the lowest possible interest rate. RECOMMENDATION: Provide direction to staff regarding the sale of certificates of obligation in the amount of $10 million. 4 V Denotes that repair and/or replacement will be needed and included in the project ■ Natural gas cost will be Atmos' responsbility and must be done before or in conjunction with project when scheduled STATUS OF CITY ROADS ■ Over the years the roads in city of Paris have deteriorated and not a clear cut plan has been formulated so far towards redoing these roads. ■ Part of this is because we have not had enough finances to support it and part of it because we have been concentrating on other important things that were being done in the city.(Water and Sewer Bond Project etc) ■ If we continue to ignore this very serious issue over the course of time the roads will get worse and worse and then we will finally reach a point that a huge bond will be needed to address this problem. ■ If we were to try to fixthe almost 3z4 miles of streets in the city it will take millions of dollars and the city with its current finances can't afford it. ■ Currently with the water and sewer bond project, some roads are going to be redone only to the extent of the amount of damage that is caused or if the damage is extensive then the entire street will be replaced as per our bond language This still leaves an enormous number of streets that are in really bad shape. ■ Currently the city and other taxing authority structure is as follows: ■ CurrentTax Rate: • Tax Rate City of Paris 0.50195 • PJC currently was 0.1773 • Tax Rate PISD 1.455 • Tax Rate Lamar County 0.4066 ■ With the approval of PJC Taxing annexation, the following rate will be levied: ■ City of Paris tax Rate .50195 ■ _Tax Rate falls down t ■ Tax Rate PISID 1.455 ■ Tax Rate Lamar Countyo-4o66 In other words the city of Paris residents will be paying almost .08 cents less in taxes. How Does It Effect Us Average Home Value at 7630 dollars currently pays total yearly tax of 1938.72 ■ The same Home Value at 76302dollars will now be paying 1864.48 cents from 2017 forward. ■ Suppose that out of the .08 cent decrease that we have from PJC, if we were to add .05 cents to the city tax we will still be paying lower taxes than we have been. ■ An average home of 76302 will in that case be paying a tax of 1.902.63 cents instead of what we currently pay which is 1938.7 cents. ■ So in actuality, we will pay less taxes than we have been paying. Do Nothing ■ In summary, we have a choice: • At the Current Rate 1938.72. • Do nothing and see taxes down to 1864-48. • Share the drop and see taxes at l.902.63. • Which shows that our taxes will still be lower then ever before. What Does It Really Do ■ If we were to share the drop in taxes among ourselves, for the betterment of our badly needed roads we would generate almost 11 million dollars in revenue while our taxes go down by about 36 dollars a year. ■ 3 dollars a month is about what it costs us and it would result in redoing our badly needed roads. ■ Remember, it still is a decrease in the amount of money that you pay as property tax. ■ Now I have been told by many not to present this in my last few months as the Mayor since why do you want to take the heat on any subject and my answer is ■ "Don't go into the Kitchen If you cant take the Heat" ■ So here is my presentation and it is for you as residents of this community to decide that while your actual payments go down in property taxes would you be willing to improve the streets in yourtown. ■ If you feel that the 3 dollar a month is worth it, support the idea and say Yes, fully realizing that your actual payment of taxes goes down not up. ■ If you like the status quo and want the streets to remain the same, say NO. ■ No one is here to force more taxes on anyone. It is your choice as a community member, if you want to want to share and reap the benefits of our success with the PJC vote. The City Is All One ■ We will try our best to identify and take consideration from citizens as to what streets they want done first and which ones the city feels are most important, and then come to a conclusion. • A list of city streets that require work now is listed but can be changed based on what residents want. • One should remember that we are all one city and so any improvement anywhere in any district should betaken as an improvement in the city. You Know What your Sharing Does It generates almost ii million dollars that can be used for improvement of your streets while you pay less taxes than you have been paying in the past.