HomeMy WebLinkAboutRes2010-130 FAILED Failed Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -130
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SEWARD, ALASKA, ESTABLISHING A 1 MILL INCREASE IN
PROPERTY TAX TO GENERATE A REVENUE SOURCE FOR
REPAYMENT OF THE $3.73M GENERAL OBLIGATION BOND FOR
THE CONSTRUCTION OF THE SEWARD COMMUNITY LIBRARY
MUSEUM
WHEREAS, the City of Seward and the Seward Community Library Museum Building
Committee have been working since 2003 to obtain funding and design a new library museum;
and
WHEREAS, the Seward Community Library Museum Building Committee and the City
of Seward have secured $5.1 Million in state and private foundation funding and $1.1 Million in
grant applications are pending; and
WHEREAS, in October 2009 voters approved a General Obligation bond in an amount
of not to exceed $5 Million for construction of the library museum; and
i.• WHEREAS, in a report to City Council on November 29, 2010, RISE Alaska and
ECI /flyer estimated the remaining capital construction costs for the library museum project to be
$10,294,560.City Administration and project managers have estimated that $3.73 Million of
additional funding in the form of general obligation bonds will be needed to complete the project
as currently projected; and
WHEREAS, the annual debt service for a 25 -year $3.73 Million General Obligation
Bond at an interest rate of 4.5% is approximately $249 Thousand per year; and
WHEREAS, a revenue source is necessary to establish and pay the debt service of a
General Obligation Bond; and
WHEREAS, a property tax is a revenue source where property owners in the City of
Seward contribute to the construction and operations costs of the new library museum; and
WHEREAS, the current City of Seward property tax mill rate is 3.12; and
WHEREAS, increasing the current City of Seward property tax mill rate from 3.12 to
4.12 for approximately 600 property owners within the city limits will generate an estimated
$300 Thousand annually; and
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -130
WHEREAS, an increase in the City of Seward property tax mill rate to 4.12 is expected
to provide sufficient revenue to repay a 25 year $3.73 Million General Obligation Bond, allow
completion of the new library museum project, and provide approximately $51 Thousand to
assist in paying for the increases in personnel and operating costs for the new library museum;
and
WHEREAS, a one mill increase in property tax rate will equate to an annual increase in
tax of $200 on a home valued at $200,000; and
WHEREAS, the current City Council of the City of Seward recommends to a future City
Council that this mill rate increase should sunset when the $3.73 Million General Obligation
Bond is paid in full.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
Section 1.The rate of levy on the 2011 real and personal property tax rolls shall be and is
hereby levied at the rate of 4.12 mills per dollar of assessed valuation in Municipal Service
Zones One (Borough designation TCA 40) and Two (Borough designation TCA 41).
Section 2. The total assessed valuation as determined by the Kenai Peninsula Borough
Assessor, and any supplemental assessment rolls for said period which may be certified by the
Borough Assessor at a future date, shall be the basis for computing estimated property tax
revenues for the City of Seward, Alaska.
Section 3.The additional funds realized from the increased tax levy adopted by this
resolution are intended for repayment of general obligation bonds issued pursuant to Resolution
2010 -129.
Section 4. This resolution shall take effect immediately upon adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this
24 day of January, 2011.
THE CITY OF SEWARD, ALASKA
FAILED
Willard E. Dunham, Mayor
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -130
L
AYES: Valdatta, Dunham
NOES: Bardarson, Keil, Shafer,Casagranda
ABSENT: Smith
ABSTAIN: None
ATTEST:
Johanna Kinney, CMC
City Clerk
(City Seal)
Council Agenda Statement
Meeting Date: December 13, 2010
of sFty9
From: Phillip Oates, City Manager ti > 1
Agenda Item: A resolution of the City Council of the City of 11.4-16.1*
Seward, Alaska, establishing a 1 mill increase in
property tax to generate a revenue source for
repayment of the $3.73M General Obligation Bond
for the construction of the Seward Community
Library Museum.
BACKGROUND & JUSTIFICATION:
Since 2003, the City of Seward has been working on a plan to build a new library museum. As
of November, architects completed design documents to 65% with a goal of completing
construction documents in January, ground breaking in April -May 2011, and completion of the
project in August 2012. Project and construction management have been hired.
The Seward Community Library Museum Building Committee (SCLMBC) has spearheaded
project predevelopment activities and fundraising efforts. SCLMBC and City Administration
have presented over thirty Resolutions to Council since 2003 that either supported, funded or
authorized the project progress. As a result, the City received an appropriation of $4.7M from the
State of Alaska in July 2010. The Rasmuson Foundation committed $500,000 in November 2010
and $1.1M in grant applications has been submitted.
In October 2009 voters approved a General Obligation (GO) bond in an amount to $5 Million for
construction of the library museum. Since that approval, City Administration and project
managers have estimated that as currently projected $3.73 Million will be needed to complete the
project. The annual debt service for a 25 -year $3.73 Million General Obligation Bond at an
interest rate of 4.5% is approximately $249,000 per year.
This resolution requests that the City Council increase the mill rate from 3.12 to 4.12 for
approximately 600 property owners within the city limits. The estimated revenue increase from
this 1 mill increase in property tax is approximately $300,000 per year. The 1 mill increase
would provide sufficient revenue to repay principal and interest on a 25 year $3.73 Million
General Obligation Bond, allow completion of the new library museum project, and provide
approximately $51,000 annually to assist in paying the approximate $260,000 annual increase in
personnel, maintenance, and operating costs for the new library museum. The proposed
resolution also establishes a recommendation from the current City Council to a future City
Council that this 1 mill increase should sunset when the $3.73 Million General Obligation Bond
is paid in full.
CONSISTENCY CHECKLIST:
Where applicable, this resolution is consistent with the Seward City Code, Charter,
Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures.
1 1�
INTENT:
This resolution requests that the City Council increase the property tax mill rate from 3.12 to
4.12 to repay principal and interest on a 25 year $3.73 Million General Obligation Bond, allow
completion of the new library museum project, and provide approximately $51,000 annually to
assist in paying the approximate $260,000 annual increase in personnel, maintenance, and
operating costs for the new library museum.
ATTORNEY REVIEW: Yes
FISCAL NOTE:
The 1 mill increase will cover capital debt annual payments and provide approximately $51,000
per year for increased personnel, maintenance, and operating costs of the new library museum.
Estimated additional annual personnel, maintenance, and operating costs - as noted in the
business plan are $260,000. This leaves a shortfall of approximately $209,000 dollars each year
since annual funding to cover the remainder of these costs has not been identified. The City
Council intends to address this matter during the preparation of the biennial budget. To cover
costs of this magnitude would require, for example, an increase in the mill rate of 0.7 mills equal
to $139 per year on a house valued at $200,000 or, alternatively, a 0.23 percent increase in the
sales tax rate.
There are two primary issues to take note of on this action. First, because the requested increase
in the mill rate is not limited to the amount needed to cover debt service costs only, the mill rate
increase of 1 mill necessarily subjects this increase to referendum by the voters. Second,
because the increase in mill rate is not sufficient to cover both the increase in annual debt service
costs and annual operating costs associated with the project, it is likely that the Alaska Municipal
Bond Bank will have difficulty supporting this request until a revenue source is found to cover
the shortfall. The potential failure of the Bond Bank to approve our financing application will at
the very least, cause further delay in the project
Approved by Finance Department . - iu-1 -,
RECOMMENDATION:
Approve Resolution 2010 -130 to establish a 1 mill increase in the annual mill rate as a revenue
source to pay the debt service of a $3.73M GO Bond for the library museum project.
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