‘Too much too soon’ was the prevailing sentiment of the Boyne City Commission when it scrapped plans to ask voters for a $5 million millage—1.95 mills initially—on the Nov. 4 ballot.
The funds are needed to help pay for an estimated $7.5 million project that would result in new facilities for Boyne City Hall, fire and police departments, EMS, DPW and more.
“I question whether it’s asking for too much too soon, and maybe too much, period, as far as the bonding at this point,” said Boyne City Mayor Ron Grunch, who asked if it was prudent to go for a millage without having time to hold public hearings on final building details and the funding of the project.
Boyne City Manager Michael Cain gave the Boyne City Commission an update on the city facilities design and funding matter during the commission’s regular Tuesday July 22 meeting.
Cain discussed financial considerations with the commission, including its cash-on-hand that has been earmarked for the project.
“We budgeted, for the last couple of years, a million dollars out of our budget—that’s a million dollars total,” Cain said. “We carried that over from year to year. I think we could probably increase that to probably two to two-and-a-half-million-dollars. We’re waiting to get the results from our audit… That will give us a true picture of where we are with all of our funds.”
He added, “Assuming about a seven-and-a-half-million-dollar project, that would mean we would need to raise about $5 million, and due to misreading the reports that we had, the amount of millage that we’d need to raise $2 million is much closer to two mills versus the one mill previously reported.”
Boyne City Commissioner Derek Gaylord said the more the city pays for the project with cash the more money the taxpayers will save, adding that city facilities could be constructed in phases to help limit the amount of millage moneys necessary. He also said it would be wise to take more time to make the best decisions possible for the taxpayers.
Proposed project phases
• Phase I could involve reconstructing the DPW facility at the city’s North Boyne property.
“That comes the closest to something we could finance,” said Cain.
• Phase II would be to construct a new city hall.
“That can be done with the existing DPW facility remaining,” Cain said.
• Phase III would be to construct the fire department.
Gaylord and Boyne City Commissioner Delbert “Gene” Towne both advocated reworking the DPW plan in order to save funds, then moving the EMS to city facilities to save the money currently spent on renting a private facility, then going to the taxpayers to ask for a millage to fund the rest of the project.
In order to get this matter on the Nov. 4 ballot, the city would have had to have its paperwork filed with the Charlevoix County Clerk by 4 p.m. on Tuesday Aug. 12.
Boyne City Commissioner Tom Neidhamer said he believed the project could be done both right and right away, and asked when details like color schemes and other fine details would be dealt with if the matter ended up on the Nov. 4 ballot. Cain said those issues should be dealt with between now and the November election.
“I talked, last month, about the sense of urgency, and we’ve talked about it for 16 years and it is time, probably, to say go for one-and-a-half or two mills,” said Neidhamer… “The time-line doesn’t scare me. We can get the details done between August and November so I don’t want to back down from my goal of doing it right, doing it once and asking for the money.”
However, Neidhamer said he saw merit in paying for the DPW with cash and going for a lesser millage in another year.
“I don’t want to back away from a time-line for fear that we can’t do our homework,” he said.
Cain detailed the city’s options for funding and said his discussions with a financial consultant revealed that the city’s best course would be to secure a 20-year bond to fund the project.
“They gave us two scenarios for $5 million: one would be a 20-year bonding. They’re assuming that they’re using an estimated interest rate of 4.25 percent, which is a little bit higher than the number that Cindy (Grice, City Clerk) and I used at four percent,” Cain said. “The first year of the millage being levied, they anticipate that it would have to be levied at 1.95 mills … then over the 20-year life of it, assuming some modest taxable value growth, and no big hits with regards to personal property taxes and things of that nature, that that would average of 1.65 mills over the life of that 20-year bond.”
Cain said if the bond life was to be lengthened to 25 years, still trying to raise $5, the interest rate would increase to 4.5 percent and the millage rate would begin at 1.79 mills and average, over the 25-year life of the bond, 1.4 mills.
“Both our financial consultant and our bond consultant felt that a 30-year bond is just too long because they don’t think it would be well-received on the bond market,” Cain said. “They’re not saying it’s impossible but they’re just saying that they think it’s not a good idea.”
Cain said the bond experts said the norm is 20 years because, by the end of the bond life, structural repairs generally become necessary and more money is then needed.
“They felt that 25 years was a stretch and indicated that, by adding on five years, it would increase our carrying costs by $1 million,” Cain said. “For a 20-year bond, they are estimating the interest costs would be $2.6 million, and over the 25 years it would be just over $3.5 million.”
Overall, the city has four options to pay for such a sizable project.
“One is pay cash, pay as you go… Option two is this city commission has the ability to increase taxes on its own without a vote of the people by .91 mills,” Cain said…. “The other two options require votes of the people: one is to go back to the people and say under our charter we have the ability to levy up to 20 mills (the city is currently at 15.51 mills) if you give us permission to do that…. And, the fourth option is … if you want to go out for a voted bond millage.”
Cain said a fifth element is to seek grants and donations.
Cain said at this time there are no grants available to help fund the EMS portion of the facility but that he will keep looking for grant opportunities.
Boyne City Commissioner Laura Sansom asked if the $7.5 million price tag for the city’s facility upgrades was a firm number. Cain said it takes into account the designer’s rough estimate of $7.3 million and leaves room for the recently discussed museum space and a second floor on city hall with meeting space.
“That’s still a rough number at this point and we will want to hone that down because, once we put something on the ballot, whatever that number is, you can’t go any more than that,” Cain said.
Neidhamer asked if any of the other commissioners were interested in raising the .91 mills the city could legally levy without permission of the citizenry. The overall consensus of the rest of the commission was that it would not be prudent at this time and without a specific plan on how the rest of the project would be funded.
The commission ultimately directed city staff to proceed with finalization of plans to construct the new DPW facility at the North Boyne property as funds allow, to hold off on a millage proposal until 2015 at the earliest, and to continue finalizing the rest of the city facilities plans for future consideration.