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f�, C-,l -1 Memo Tv: Mayor and City Council Bill Malinen, City Manager From: Chris Miller, Finance Director Date: May 19, 2008 Re: Financing the Ice Arena Refrigeration System Attachment B Introduction In a memo dated November 19, 2007 and in a Request for Council Action dated February 25, 2008, Staff submitted the following funding recommendations regarding the replacement of the Arena refrigeration system: 1} As a primary funding source, the City should seek non -local grants or other funding sources to offset the incremental costs of forgoing a conventional refrigeration system in favor of a geothermal system. To the extent that non -local monies are insufficient to pay for the project costs, the City should use all available funds in the Building Replacement Fund. 2) As a secondary funding source, the City should temporarily borrow monies from the Street Infrastructure Replacement Fund sufficient to pay for any remaining costs 3) Beginning in 2009, the City Council should establish a dedicated property tax levy to repay all borrowed monies to the Street Replacement Fund within a 3 -year period At the time the earlier recommendation was made, the estimated project costs were $025,000 - $1.1 million, as measured in 2000 dollars. Since then, the project cost has increased to an estimated $1.5 - $2.2 million in today's dollars. The Building Replacement Fund has a current balance of $300,000, and while the city did seek a State appropriation for the geothermal system, it was not approved in the Bonding Bill. As a result, the City will have to secure approximately $1.2 - $1.9 million dollars above and beyond what is available in the Building Replacement Fund. Given current project estimates and the added uncertainty of City's ability to sufficiently increase the operating levy to repay the internal loan, the City may have to rely on the use of general obligation bonds or equipment certificates to pay for the improvements.