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May 30, 2019 Work Session Minutes - Department of Public Works Building

Department of Public Works Facility – Pearson Construction
Thursday, May 30, 2019

A Work Session of the City Commission for the City of Buchanan was scheduled at City Hall, 302 N. Redbud Trail, Buchanan, Michigan Thursday, May 30, 2019 at 5:00 p.m.  Manager Marx called the meeting to order at 5:00 p.m. 

Members present:  Commissioners Downey and Denison – Commissioner Toerne arrived at 5:20 p.m.
Members absent:  Mayor Moore, Commissioner Weedon
Staff present:  City Manager Bill Marx, City Treasurer Juli O’Bryant, Director of Public Services J.T. Adkerson, and City Clerk Brenda Hess
Guests/Visitors present: Trace Volpe and Rob Swem, Pearson Construction, and resident Norma Ferris 

Manager Marx called the meeting to order and introduced Trace Volpe and Rob Swem from Pearson.  Project binders were distributed.  

Two options were presented for a Department of Public Works (DPW) facility on City property on River Street: 
•    Option one - 150’ x 160’ = 24,000 square foot with no cold storage
•    Option two - 150’ x ‘220 = 33,000 square foot which includes 9,000 square feet of cold storage

Current construction costs are approximately $83.00 per square foot.  

Needs include a heated bay for vehicle maintenance. Cold storage would be utilized for off season equipment such as plows, mowers, etc. Mezzanine available for extra storage. Vehicle wash bay included which is primarily an undercarriage wash for increased longevity of vehicles due to removal of salt. City has 3 new vehicles. Question regarding location of wash bay in relation to plumbing.  Question regarding the possibility of adding in future if needed. Swem noted proposed facility is highly customizable; present rendering is a suggestion. Truck bay will be “drive through” with pull off spots for parking.  

Alternatives to cold storage addition at new facility were discussed. Possibility presented that current DPW building could be torn down and cold storage pole barn style structure could be built on remaining slab. Noted present salt barn cannot be utilized for storage as it has moisture and structural issues. Adkerson recommended taking the salt barn down as well. Flood plain at current site has changed since removal of Duck Pond damn resulting in reduced flooding at the present DPW location.  Common Stage is currently being utilized for storage which presents problems.  Questions regarding property left once current DPW building is removed.  

Comments favoring building a smaller building with option for future growth. City stores many items and has lots of seasonal supplies and equipment to care for.  Present DPW has moisture issue which is affecting equipment. 

New Building height would be 20’ to 24’ with 16’ overhead doors. Mezzanine will be 15’ to 16’. Wash bay is drive through as well.  Question regarding moving building closer to River and add an addition on back.  Because the City is considering locating additional municipal facilities the same site in the future, the DPW will need to be located towards the back of the property.  Noted City is considering selling the frontage along as smaller “out lots” for potential private businesses.  

Amount of concrete was discussed versus asphalt.  Addition of Fire Department was discussed. Noted price of a fire department facility is much more costly than a DPW facility. Existing DPW building is 162’ long and 80’ wide. 

Concerns were expressed regarding the existing storm drain at the River Street location and the retention pond for stormwater runoff.  Toerne inquired if costs have risen due to tariff issues. Swem commented that has not happened yet. 

Group agreed that Option One would be the preferred option. Options of building over the winter were discussed.  Multiple cold storage options were discussed.

Swem will update plans with changes and suggestions made. Pricing of the project has begun. He will need three to four weeks to resketch plans and contact additional contractors for supporting information. At that point “ballpark price” available. Swem noted there are many variables and the budget numbers should be taken with a “grain of salt”.  Many small decisions affect price.

Volpe noted final product completion depends upon whether City goes out for an RFP for design/build services. That would be an approximate 6-week process.  Once hired there would be a 40 to 90-day design period and construction could begin.  Construction estimated to take 5 to 7 months. Volpe has started on RFP and distributed copies.

Ferris noted that she supports idea of a storage facility to improve the view and appearance of the present DPW building from the Trail. 

Swem and Volpe departed meeting at 6:01.  

O’Bryant reviewed financing for new facility. Reported she and Marx met with Bob Burch of Chemical bank on May 1 to discuss financing options. City would borrow $2 million or $2.5 million.

Three financing options…

Option 1 Local Bank – Local banks have 15-year maximum term.  Some costs would be avoided by utilizing this option. There would be no need to put bond out for bid. City would save money on professional charges. Chemical Bank could issue the following way(s):

15 Year Bond at 2.95%
$2,000,000 Bond    $165,163 Annual Payments    $2,477,445 Total Cost        $447,445 Interest
$2,500,000Bond    $206,460 Annual Payments    $3,096,900 Total Cost        $596,900 Interest

Working directly with Chemical Bank would save the City between 25,000 and $35,000.  Bond council fees would still be approximately $30,000.

Option 2 Open Market Bond – Andy Campbell of Baker Tilley was consulted. Baker-Tilly is current Bond Financial counsel for City’s Wastewater Treatment Plant project. Campbell reported to Marx and O’Bryant bond rates are currently between 3% and 3.25% for 20 years and would require 4 months to acquire.  Baker-Tilley could issue the following way(s):

20 Year Bond at 3% 
$2,000,000 Bond    $135,000 Annual Payments    $2,690,000 Total Cost        $690,000 Interest
$2,500,000 Bond    $168,000 Annual Payments    $3,362,000 Total Cost        $860,000 Interest

20 Year Bond at 3.25%
$2,000,000 Bond    $138,000 Annual Payments    $2,752,000 Total Cost        $752,000 Interest
$2,500,000 Bond    $172,000 Annual Payments    $3,438,000 Total Cost        $938,000 Interest

Option 3 United States Department of Agriculture (USDA) Bond – General Obligation Bond – Paul Bristol from the USDA was consulted on May 9. A USDA Bond is bought by the United States Government under a promissory note and is long-term, fixed rate, with not feeds excepted an estimated $30,000 bond council fee. Higher interest, but lower annual payments helping with budgeting. Bristol reported that it does not take long to acquire USDA bond. A USDA Bond would be issued the following way(s):

30 Year Bond at 4.25%
$2,000,000 Bond    $119,196 Annual Payments     $3,604,878 Total Cost        $1,604,878 Interest
$2,500,000 Bond    $148,996 Annual Payments    $4,505,993 Total Cost        $2,005,993 Interest

40 Year Bond at 4.25%
$2,000,000 Bond    $104,837 Annual Payments    $4,189,133 Total Cost        $2,189,133 Interest
$2,500,000 Bond    $131,046 Annual Payments    $5,242,123 Total Cost        $2,742,123 Interest

Payment for project was discussed.  Unknown increased revenue amounts from taxes due to new construction of medical marijuana facilities, increased housing activity, and new fitness center. General Fund does not currently generate enough money to support an additional bond payment.  Medical marijuana sales tax revenue from State also unknown.

The Water Department can possibly relocate to new facility meaning that Water Department Funds could be used to pay for financing in a 70/30 split as suggested by Campbell of Baker-Tilley.

O’Bryant reviewed established savings for this project. City has reserved $62,000 past two years for project. August 2019 reserves will contain $194,000 for project. City to consider continued collection of .50 mills to be applied to project. City also could increase tax millage to 19.259 mills without public vote. Comments were shared about all options.

Being no further discussion, the meeting adjourned at 6:34 p.m.

Brenda J. Hess, City Clerk                        

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