2025 10 13 Work Session Packet

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FINANCE DEPARTMENT

MEMORANDUM

TO: Randy Dowling, City Manager
FROM: Mike Keith, Director of Finance
DATE: September 6, 2025

SUBJECT: Financing Fire Station Number 3 and City Hall Improvements

You requested that | provide various information for financing the construction of fire station 3,
financing City Hall renovations and funding the $800,000 annual operation costs for the new fire
station. This included borrowing $3,900,000 for station 3 construction and $8,300,000 for City
Hall, which totals $12,200,000 to be borrowed and be repaid over 15 years. The request included
how much the property tax would need to be increased in order to fund these three items.

| have looked at current interest rates for general obligation bonds and what issuers are
anticipating rates will be for debt issued over the next year. | have used 5% for my calculations
but | am confident, based upon current market conditions, that the rates will be in the range of
4.25% to 4.5%. The difference in the interest rates will make a very small difference (less than
1.25 cents) in the tax rate needed to repay the debt, so using 5% is the more conservative

approach. Each penny of the property tax rate brings in $65,000 annually, so this will be used to
calculate any increase in the tax rate needed.

If we borrow $3,900,000 for the new fire station for 15 years, it will require $375,000 annually to

service the debt. This will require an increase of 5.77.cents in the tax rate (taking the current rate
of 1.0078 to 1.0655, which is a 5.72% increase).

As was stated previously at the August work session, $800,000 for the operating costs of the new
station can not be covered by normal revenue growth in our budget. It will require a property

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