The council unanimously passed a resolution Monday night approving construction and funding of a new city hall that will have a total area of approximately 31,000 square feet.
City Finance Officer Mike Carlson explained the several components of the resolution that needed approval.
"The resolution is for the city hall project, it authorizes the construction of a city hall, the execution of the documents for the ground lease, the easement agreements, lease purchase agreements and approving the authorization for the lease purchase agreement for the debt," Carlson said. "The city council has, at a previous meeting reviewed the options for debt financing with Ray Woodsend of Dougherty and Company."
The resolution has been reviewed by city administrators and the city attorney, Carlson said, and they recommended that the city council approve it.
"The approval of this resolution will authorize the issuance of not in excess of $4 million in bonds for the construction of a new city hall, and sets for the timeline for the repayment of them," he said.
It has been estimated that the new city hall will cost between $5.2 and $5.4 million.
During a special meeting March 12 with Ray Woodsend of Dougherty and Company, the city council agreed to use certificates of participation, along with a second penny sales tax reserve fund, to finance the project.
Aldermen entered into a discussion with Woodsend after concerns were raised regarding the future debt capacity of the city. The state has imposed a debt limit for municipalities of 5 percent of its total assessed valuation, and the state's limit does not take into account the ability of a municipality to pay for debt.
As of Dec. 31, 2006, the city's total outstanding debt was just over $4.1 million.
Aldermen learned earlier this month that the proposed city hall bond issue would use most of the remaining debt according to the state's 5 percent limit, thus restricting the ability of the city to incur additional debt if needed in the future.
Woodsend suggested the city finance the building with certificates of participation, which are sometimes referred to as lease purchase agreements.
This method has been used numerous times in South Dakota, he told the council March 12, particularly in cases where debt limit is a problem.
It would be to Vermillion�s advantage to issue certificates of participation, he said, because they do not count against the city as debt.
�A debt is something that you have an obligation to repay – a set amount of money over a set amount of time,� Woodsend said. �In this case, the city has the right on an annual basis to terminate the lease (with a trustee) and walk away, and say the property is yours (the trustee�s). There is not a debt, there is not a promise to pay. There is an intent to pay.�
�This has really been an exciting project,� Alderman Mary Edelen said after thanking fellow city council members and citizens who served on the planning committee for the building project. �With the vote tonight, we�re going to tell our citizens that we truly believe in a new city hall for our community, and we�re going to build this to last for the next 75 to 100 years.�
Before the council voted on the resolution, Alderman Roger Jeck noted that he planned to support it.
�I think it�s important though, for everyone to know that if we build it as we�ve estimated right now, it�s going to be $7.7 million including interest and the whole deal,� he said. �Once this is published Friday, that�s when the 20 days for petitions (to refer the action) starts if people are so interested. I think this is a lot of money we�re spending and I think it�s important the citizens know those two things.�
�I also think it�s important for the citizens to know this will not raise their taxes in any way,� Alderman Jere Chapman said. �This will be coming out of the second penny sales tax and property taxes will not be affected. It�s all part of the ongoing budget.�
Christopherson noted that the city will use approximately 26 percent of the city�s second penny sales tax revenue stream annually over a 18-to-20-year period to pay for the new city hall.
�We still have 74 percent of this capital construction account for other projects,� he said. �This is not strapping us in this account.
�For a legacy project that�s going to last for 100 years or more, the 26 percent of an existing revenue source without raising new taxes,� he added, �is a very worthwhile way to spend that second penny sales tax for a project we can all be proud of.�
City hall committee member Bob Fuller thanked the city council, former mayor Roger Kozak and current Christopherson for their work. He also thanked the community members who served on the city hall committee and city residents who showed patience with the process.
�I think you have a very good plan. If you (council members) vote unanimously, you will send a message to the community,� Fuller said before their vote. �You truly are making a decision affecting this community for years.