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Council Discussion Staff is seeking direction from the City Council regarding debt service and franchise fees adoption for the Lake Johanna Fire Department new station. CIP Funding Update —Debt Service & Franchise Fees Included in the 2025-2029 CIP budget are franchise fee assumptions of $375,000 annually, estimated to start in 2025 to offset debt service for the new fire station. Per the August 19 budget work session, Council directed staff to work with the City's financial advisor, Ehler's, to determine the timing and structure of a bond issuance to occur in the spring of 2025, in order to align with the anticipated development of the new fire station. Staff and Ehler's recommend that the City issue bonds independently of one overarching project bond, as this will allow the City to take advantage of more favorable interest rates through the issuance of Bank Qualified (BQ) bonds (less than $10 million of tax-exempt bonds). Attachment A are the preliminary Series 2025 general obligation CIP bond schedules provided by Ehler's, highlighting one scenario at current market bank qualified (BQ) AAA rates and the second scenario at current market BQ AAA rates with a 75 basis points cushion. The scenarios assume the City will issue bonds at a par value between $4,645,000 and $4,690,000, of which $4,425,000 would be directed to the project construction fund, with remaining funds to cover the costs of issuance, underwriter fees, and interest. Each scenario assumes the bonds would settle on May 15, 2025 at different maturity dates of 10 years, 15 years, and 20 years. At the September 23 Worksession, Council discussed at length, the cost of the new fire station in conjunction with debt service and franchise fees. As a follow-up to that discussion, Council had inquired as to whether the debt service schedule accounts for construction costs at $20 million or $25 million. Staff confirmed that the $4.425M project estimate (per Attachment A, Page 2, Deposit to project construction fund) accounts for an estimated $24M of construction cost, less an estimated $6M in state funding, and the City's 25% proportionate share. Staff also confirmed the bonds would be callable but it would come at an additional cost or refinancing could also be an option. What term or debt service schedule does Council want to move forward with? This direction is needed in order to finalize the franchise fee rate structure. Attachment B contains nine electric franchise fee rate structure scenarios provided by Xcel Energy. The scenarios assume three revenue targets of a) $330,000, b) $395,000, and c) $542,000, which aligns with the Series 2025 general obligation CIP bond schedules at current market BQ AAA rates. The fee rate structures assume Residential properties are assessed a monthly fee between $2.50 and $4.25, Small C&I Non -Demand properties are assessed a monthly fee between $3.25 and $5.75, and other property rates varying slightly. For comparative purposes, Attachment C provides a comparative analysis of a franchise fee and/or property tax increase and the impact to residential, manufactured homes, apartments, and commercial properties under the $395,000 revenue target. If construction bids come back differently, Council could amend ordinances to change the rates or the City could find other funding mechanisms to cover any differences. With the debt service payments expected to occur in February 2026, staff recommends adoption of the franchise fee rate structure no later than November 2024. This timing is crucial to allow Xcel Energy time to meet the Public Utilities Commission's requirements. Below is a timeline of key dates to ensure proper implementation of franchise fees in order to meet the City's bonding need in the spring of 2025. Page 2 of 3