City Council has been considering three major capital projects over the past years. During the past few months, we have moved forward with more detailed study of these projects. Armed with conceptual designs, identified sites and data, the time has come to consider the impact that these projects would have on citizens in terms of tax and utility rates. This report is intended to provide an overview of these costs and allow Council to determine which, if any, projects should be taken to the next level of design. The next steps, if Council should choose, would be to award a contract for final design, begin preparations for seeking bids on the projects and issuing debt to pay for them.

As a part of the budget process, Council is presented with a five year projection that ties the Capital Improvements Plan, Equipment Replacement Plan and financial projections for operating revenues and expenses. This five year plan is intended to give Council and the citizens of Radford a broad context for the impact of budget decisions. This report uses the projections developed with the 2008-9 budget as a foundation to reflect how the major projects under consideration will impact future utility and tax rates.

Three projects have received significant attention from Council; 1) improvements to the water storage system, 2) improvements to second avenue and 3) construction of a new public safety facility.

Water Tank Improvement

Description - A one million gallon water tank replacing the Harvey tank would be constructed near Tyler Avenue with new water mains in the area to promote development and improve service. The project would also include a new line from Inglewood to Jordan Avenue to improve pressure and allow for the removal of the west end tank.

Project construction cost - $3,500,000.

Engineering - $ 387,000 Cost to complete the design, bid the project and administer the contract.

Financing - $700,000 residual from the 2006 utility improvement bond; $2,800,000 revenue bond for 20 years at 5.3% interest rate.

Debt Service – Annual principle and interest $227,352

Impact on rates – Approximate 5% increase in total water / sewer rates.

The table above reflects the impact of the additional debt on water and sewer rates of taking on this project. The projected cost is the monthly bill for a customer using 5,000 gallons of water based on the five year plan adopted by the City Council as a part of the 2008-9 budget process. The new debt shows the additional cost of debt service for the tank project.

Justification – The project would improve water pressure in the west end of the City and improve water quality by better turnover of water in the Inglewood tank. The project would also open significant areas in the City which have been identified as having potential for residential development.

The height of the proposed tank would increase our ability to serve water to Montgomery County and would allow for the elimination of the independent water system in High Meadows.

Comment – Should we determine not to move forward with this project, the $700,000 residual from the 2006 utility improvement bond will be spent on several smaller water system improvements throughout town. These improvements will improve service quality in the areas affected, but will have little or no impact on potential development.

Should a development project in the area(s) to be served by the proposed tank come forward, Council would need to consider borrowing the full cost of the project at that time or require the developer to make the system improvements needed to serve the project.

Second Avenue Improvement
Option 1 – Full Project

Description - Park Road and Second Avenue would be rebuilt from Walker Street to Windstream Court. The improvements would include safety improvements, bike lanes, sidewalks, curb and gutter, turn-lanes, storm drainage, relocation of electrical lines and replacement of a water line. The highly traveled road is an east-west connector and accesses the City Schools and Recreation Center.

Project construction cost – $5,650,000

Engineering - $470,000 Cost to complete the design, bid the project and administer the contract.

Financing – $1,000,000 VDOT grant, $5,120,000 bond with a 30 year term at 5.3% interest.

Debt Service – Annual principle and interest $ 341,184

Impact on tax rates – 4.26 cents on the real estate tax rate

Justification – This is an important transportation connection between the High School, Recreation Center and the new Elementary School. This project is also an integral part of the City’s long term transportation plan to improve east – west traffic flow and to open areas for development.

Significant safety concerns exist for pedestrian traffic in this area; safety would be enhanced by construction of a sidewalk / path connecting to the existing path network.

Comment – It should be noted that construction of the project will include storm drainage improvements and will require the addition of a storm water facility.

This project has been deferred by Council on numerous occasions over a period of nearly 30 years. Each deferral has resulted in significant increases in the cost of construction. One should expect that if the project is not constructed at this time, construction costs will continue to increase.

Although there is a potential for a second VDOT grant with this project, we have not assumed any further assistance for this report.

Option 2 – Drop Underground Power

Description – This project would be identical to option 1, with the exception that power would not be placed underground. The lines would be relocated, but they would be reconstructed overhead. This would save $400,000

Project construction cost – $5,250,000

Engineering - $470,000 Cost to complete the design, bid the project and administer the contract.

Financing – $1,000,000 VDOT grant, $4,720,000 bond with a 30 year term at 5.3% interest.

Debt Service – Annual principle and interest $ 314,520

Impact on tax rates – 3.93 cents on the real estate tax rate

Justification – Same as option 1

Comment – The savings from dropping underground electric service are minimal.

Public Safety Building
Option 1 – Full Build

Description – The former Colony Box Factory building would be remodeled to replace the aging Police/Public Safety building located on West Main Street and Wadsworth Street. Space in the current building is inadequate and it does not meet Americans with Disabilities Act specifications. A conceptual design has been prepared that would provide for Police, Emergency Dispatch, City Administration and City Council chambers in the facility. Several offices including the Commonwealth Attorney, and Registrar would be moved from their current rental space into space vacated in the Municipal Building.

Project construction cost – $6,260,000

Engineering - $ 443,000 Cost to complete design, bid the project and administer the contract.

Financing – $6,703,000 bond with a 30 year term at 5.3% interest.

Debt Service – Annual principle and interest $ 413,554 (Note the City will realize some savings by no longer having to rent facilities for the Registrar, Commonwealth Attorney, Emergency Dispatch or the VHDA office.)

Impact on tax rates – 5.08 cents on the tax rate

Justification – The current police facility does not meet the needs of the department and hampers their ability to serve the public. The problems with the building make renovation cost prohibitive.

Moving the administrative offices to the new facility will allow the City to eliminate all but one rented office space for City operations. The benefit of moving the Commonwealth Attorney closer to the Courts is clear.

Provision of a modern Council Chambers rather than continuing to share space with the Court system allows for greater flexibility in the use of space and better audio visual systems to allow citizens to better participate in community meetings.

Option 2 – Police Only

Description – Same as option 1, but would eliminate offices for City Administration and City Council chambers.

Project construction cost – $5,050,000

Engineering - $ 443,000 Cost to complete design, bid the project and administer the contract.

Financing – $ 5,493,000 bond with a 30 year term at 5.3% interest.

Debt Service – Annual principle and interest $ 357,036 (Note the City will realize some savings by no longer having to rent facilities for Emergency Dispatch.)

Impact on tax rates – 4.46 cents on the tax rate

Justification – Elimination of the Administration and Council functions is the only way to significantly reduce the cost of the project.

Comment – Since the proposed project is a renovation of an existing structure, reducing the amount of finished space does not reduce the cost as much as it would if the project were new construction. Even if the Administrative offices and Council Chambers are eliminated, the cost of mechanical systems and roof repairs will still need to be made with the plan of eventually renovating this additional space.

Consolidated Impact of Projects

The preceding discussion attempts of show various options and the impact of each on the tax rate. While the water tank project is supported by utility fees and can be reasonably considered on its own, the Police facility and Second Avenue will both be financed through property taxes. Council must consider the cumulative impact of the projects on the taxpayer.

The following table shows the impact of various options before the Council and the impact on tax rates in the 200-11 fiscal year. As a point of reference, the impact of the elementary school is shown; although the decision to build the school has been resolved for some time, the cost of repaying the debt for the project has not yet been felt by taxpayers. The table reflects the tax rate impact of each project, its scaled back alternative (indicated by the 2), and all combinations of each. As can be seen, there is little variation in the cost of projects regardless of the options chosen. Should Council chose to move forward with only one project, tax payers will see a 4 to 5 cent increase in the tax rate, with the Public Safety Building (PSB) being the slightly most costly alternative. Should Council elect to move forward with both the projects, taxpayers will see a tax rate of 86 to 87 cents. The cost reduction options for these projects make only small differences in the tax rate required to pay for them.