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East Elk River <br />November 30, 1998 <br />Page 2 <br /> <br />concerns about the shortage in the storm drainage component of the project <br />and the lack of funding sources to eliminate this shortage. Additionally, <br />when we look at the big picture out east, we also have to take into <br />consideration the anticipated acquisition of the Brown and Kirkeide <br />properties, along with the city assuming the Brown assessments. <br /> <br />Last July, when staff met with the City Council to review this project, I noted <br />that the trunk sewer and water numbers were getting closer and that this <br />project was less of a financial concern than previously indicated. These <br />comments were based in part on the TIF redevelopment project financing the <br />sanitary sewer lift station. Now that the bids have been opened, we have a <br />different situation to discuss with the City Council. The funding shortage <br />has gotten larger as the low bid is about 10 percent above the July 1997 <br />estimate. After financing the lift station with TIF 19 funds, and after <br />assessments are levied, the water and sewer components are underfunded by <br />about $1 million. We knew the trunk sewer and water project was <br />underfunded, but we did not know it would be to this extent. (Inflation and <br />demand are part of the reason for higher bids. Additionally, the city is still <br />working on obtaining the trunk utility easements and necessary right-of-way <br />so there may be some additional costs.) TIF 19 could finance all of the trunk <br />water and sewer shortage as it is an eligible activity, but a more likely source <br />of funds is for the water department and sewek department to each fund <br />their shortages. This is based on the goal of keeping the total number of <br />years in TIF District No. 19 as small as possible, along with the fact that the <br />city has some other needs for TIF 19 funds such as financing as much of the <br />storm drainage component as possible. <br /> <br />In spite of reviewing a $1 million shortage in the trunk utility project after <br />TIF 19 fund finances the lift station, I need to indicate to the City Council <br />that the biggest concern with the trunk sewer and water project is the cash <br />flow of receiving assessments in order to make bond payments. How to <br />structure the bond repayment schedule when considering assessment and/or <br />interest deferrals is the issue. Dave MacGillivray, the city's bond consultant <br />from Springsted, will present information on this issue on Monday. <br /> <br />As previously noted, the trunk sewer and water project at a cost of about $6 <br />million, is only part of the total east Elk River proposal. The other two <br />components of the overall proposal are the street and storm drainage <br />improvements. Also as previously noted, the street improvement is not as big <br />of a financial concern as the storm drainage improvement, due mainly to the <br /> <br /> <br />