McMinnville officials are moving forward with capital improvement plans that will be funded with local option sales tax money recovered from the county.
A meeting to determine which projects will be done in fiscal year 2013-14 ended with several items making the list, including Park Theatre.
Also making the list were pool resurfacing, upgrades to Riverfront Park and Sallys Alley, two new fire engines, fire equipment truck, fire extrication equipment, geothermal fluid coolers, a backhoe, and upgrades to parking lots.
The list was generated by Finance Committee chairman Ken Smith using the city’s current capital improvement plan.
Park Theatre restoration is estimated to cost $2 million, with financing by 20-year bonds. The remainder of the projects are estimated at $2.3 million and will be paid for using capital outlay notes or Tennessee Municipal League funding.
Smith says the combined cost of the projects will be approximately $4.2 million. Annual debt service to repay the loans will come from current debt being paid off and sales tax recovery money.
Gilley Pool will be paid off in August 2014, freeing up $166,667 a year. The city’s geothermal system at the Civic Center will be paid off in October 2014, freeing up $71,428 a year.
“Other than water and sewer, there is not a tremendous amount of debt I can see,” said Smith.
Also, per the 25-year agreement with the county, the city has projected it will receive $80,000 in fiscal year 2012-13 in local option sales tax recovery money. Compounded annually, $160,000 is projected in the next fiscal year, and $240,000 the following year.
Additional money will be needed from the general fund to pay debt service initially. Smith says $50,000 will be needed in 2015 and $25,000 in 2016, but as the amount of sales tax received increases that will end.
“As we go along it will get easier because the amount of sales tax recovery goes up,” said Smith. “By the year 2021, eight years from now, we will need $832,000 in debt service. If the numbers are right, we will bring in $980,000.”
When the sales tax received surpasses debt service payments, a reserve will be created says Smith.
“Not only will the sales tax recovery pay for all these projects, it will recreate a reserve that a future board, if they don’t want to use it for capital improvement projects, can use for something else,” he said.
Being put on hold until fiscal year 2014-15 was approximately $3 million in additional capital improvements projects, with half going to a new fire department and half to a new police department.
After outlining his plan for capital improvements, Smith asked for input from fellow Finance Committee members Vice Mayor Ben Newman and Alderman Mike Neal.
“It seems like a lot of these numbers are based on underlying projections of what the sales tax recovery will be,” said Newman. “If it goes down, we are in trouble. If it goes up, that’s wonderful. If it goes down, what percentage do we want to plan for that?”
The projected number of $80,000 being returned annually is conservative. City administrator David Rutherford says he feels comfortable with the numbers.
“I feel very conformable with it,” Rutherford said. “What bothers me is the unknown, like the added expense of the Blue Building. Ken has done a good job at working the numbers, but you throw another $3 to $4 million expenditure in there, that is when there will be a problem.”
The Blue Building was not included in the capital improvement projects. However, renovating the Blue Building was not removed from consideration as officials recently authorized an inspection of the building by a structural engineer and an asbestos abatement specialist.
Mayor Jimmy Haley informed the committee the inspection was done last week and will cost approximately $12,000. The inspection results are still pending.
Newman says there is also hidden cost associated with some of the items, such as the need for more employees and future upkeep.
“Every time we expand one of our parks or expand any area, it adds budget costs onto each department. If we put bathrooms in at Pepper Branch Park, that’s a one-time expense. However, there will be recurring expenses that have to go into the budget. It’s not just the debt service, but the yearly expense.”
Smith says officials will have to keep that in mind as projects are done.