Colfax has $1 million remaining on debt capacity
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By LeAnn R. Ralph
COLFAX — The village of Colfax has now reached the point where 50 percent remains on the village’s debt capacity, meaning the village could borrow up to another $1 million if necessary.
State law limits a municipality’s ability to borrow money to 5 percent of the equalized value in the municipality, said Sean Lentz of Ehlers Inc. at the Colfax Village Board’s September 23 meeting.
Colfax’s debt limit is $2.7 million, and as of January 1, 2020, the village will have outstanding debt of $1.3 million, Lentz said.
The remaining amount of money the village could borrow, according to state law, is $1.1 million, he said.
The $635,000 line of credit the village has taken out for the Red Cedar River/lagoon bank project is interim financing and will be paid back when the village is reimbursed by Community Development Block Grant funds, Lentz said.
If the village had to pay for the $635,000 by tax levy and without grant funding, the debt limit would be reduced to about a half million dollars.
If the village is planning any large projects, such as projects related to the municipal building or the public works building, now would be the time to start thinking about it so “we can run the numbers,” Lentz said.
The project to stabilize the banks of the Red Cedar River so the river does not wash out the wastewater treatment lagoons is expected to cost approximately $1.6 million.
The CDBG funds and the U.S. Army Corps of Engineers will cover all but about $38,000.
The remaining $38,000 will be covered the village’s sewer utility.
Right now, the village’s debt levy “looks pretty solid,” Lentz said.
The debt levy for 2020 will be about $81,000 and will decrease to about $60,000 from 2024 to 2028.
TIF 3
Tax Increment Finance District 3 is doing well, Lentz said.
TIF 3 has an increment value of $3.2 million, according to information Lentz provided to the village board.
If the village does not take on more expenditures to be covered by TIF 3, the district is expected to have a cumulative balance of $770,000 by 2030.
The debt on TIF 3 could be paid off as early as 2024, Lentz said.
When TIF 3 is closed, the $3.2 million in value will come back and be part of the tax base for the village and the other taxing jurisdictions, he said.
“Big-picture wise, the district is doing very well,” Lentz said.
TIF 4
TIF 4 has an increment value of $1.23 million.
The revenue generated by TIF 4 of $33,000 through 2026 will be shared with TIF 3 to help pay TIF 3’s expenses, Lentz said.
TIF 3 has paid off all of the original expenses, he noted.
Timber Tech
The expansion at Timber Technologies will be expected to add property value of $700,000, and the tax revenue that is expected to be generated is $18,984, Lentz said.
The Colfax Village Board discussed ways to help Timber Technologies with the expansion project in February of this year, and one possibility would be to refund half of the property tax Timber Tech would pay on the expansion.
Returning half of the taxes would be an acceptable way for the village to help Timber Technologies, Lentz said.
Refunding some of the property tax would be a better solution than the village paying for some of the upfront costs, he said.
Lentz suggested the village board have a development agreement with Timber Technologies in regard to refunding half of the property taxes.
Keith Burcham, village trustee, asked how many years the village board should or could agree to refund half of the new property taxes to Timber Technologies.
Lentz suggested the village find out what Timber Tech wants to be reimbursed for and said he would talk to representatives of Timber Technologies to help generate a list of items that they want to be funded.
He also suggested the village ask for copies of invoices to verify the expenses.
TIF extension
A provision exists in the Tax Increment Financing District law that when all of the costs have been paid back, before the TIF is closed out, a municipality can pass a resolution to keep the TIF open for one additional year and then put the money into an affordable housing fund, Lentz said.
The money can then be used for affordable housing grants to help with developing more housing in the village, he said.
“I’m seeing more municipalities keep the TID open for one additional year,” Lentz said, adding that the money does not have to all be spent in the first year.
If the village board decides to keep the TIF districts open for one additional year, TIF 3 would be expected to generate $80,000, and TIF 4 would be expected to generate $33,000.
Colfax would then have $110,000 to $120,000 in an affordable housing funding, Lentz noted.
Affordable housing is a state-wide issue, he said.
Utilities
Lentz commended the village board for procuring CDBG funding and U.S. Army Corps of Engineers funding for the $1.6 million lagoon bank project, leaving the village with an expense of $38,000.
“That’s quite an achievement,” he said.
The $38,000 could be paid from a cash fund balance or the village could do a debt issue for general obligation bonds, he said.
In either case, the $38,000 is “much smaller” than the amount anticipated a year ago when the village did not know if there would be funding available to help pay for the project, he said.
Lynn Niggemann, village administrator-clerk-treasurer, said the $38,000 would come from the utilities fund balance.
The sewer utility will be expected to have about $66,000 available for debt service until 2026, and total debt service payments of about $50,000 until 2025, with the payment dropping to $15,000 in 2026, according to information Lentz provided to the village board.
The combined utilities of sewer and water are expected to have about $172,000 available for debt service until 2027, with debt service payments of around $125,000 until 2023, payments of around $115,000 in 2024 and 2025, and payments of $79,000 in 2026 and $62,000 in 2027, according to the information Lentz provided to the village board.
New projects
Lentz asked if the village were planning any new projects related to the sewer and water utilities beyond the lagoon bank project.
The village is in the preliminary stages of looking into using irrigation instead of discharging the wastewater treatment lagoon to the Red Cedar River, Niggemann said.
When numbers are available for the irrigation project, Lentz said he would put the numbers into the sewer and water utility model to see how it would change the cash flow and whether it would be feasible for the village to proceed with the project.
General fund
At the end of 2018, the village had an assigned fund balance of $592,784 and an unassigned general fund balance of $655,586, according to information Lentz provided to the village board.
The Roosevelt Street project with an estimated cost of $259,000 is expected to be paid with $148,000 from the general fund balance, $65,100 from the water utility and $46,000 from the sewer utility.
The remaining general fund balance will be $507,586, which is a reasonable balance to have for cash flow, Lentz said.
