HomeMy WebLinkAboutOrdinance No. 2397-2009.z E
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AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, INCREASING
ESTIMATED REVENUES AND APPROPRIATIONS BY $65,750 IN THE AIRPORT
SPECIAL REVENUE FUND AND THE COURTHOUSE PRRK?NG CAPITAL PROJECT
FUND FOR CONSTRUCTION.
WHEREAS, the State of Alaska has requested the City of Kenai to construct a parking
lot on City property adjacent to the Kenai Courthouse; and,
WHEREAS, the City previously appropriated $225,500 for design and engineering and
construction for the project via Ordinances No. 2330-2008 and 2377-2009.
WHEREAS, bids received for construction of the parking lot have exceeded original
estimates and funds available to complete the project by $65,750; and,
WHEREAS, the State of Alaska intends to lease the parking lot from the City on a long
term lease; and,
WHEREAS, at the increased project cost of $291,250, it is estimated the rate of return
earned by the Airport Special Revenue Fund over the 20-year life of the lease will be
approximately 6.08%; and,
WHEREAS, a return of 6.08% far exceeds the current rate of return being earned and
is a reasonable rate of return for the life of the investment; and,
WHEREAS, it is in the best interest of the City of Kenai to construct the parking lot at
this time; and,
WHEREAS, funds are available in the fund balance of the Airport Fund.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI,
ALASKA that estimated revenues and appropriations be increased as follows:
Airport Special Revenue Fund
Increase Estimated Revenues:
Appropriation of Fund Balance $65,750
Increase Appropriations:
Transfer to Capital Project Fund $65,750
Courthouse Parkine Capital Proiect Fund
Increase Estimated Revenues:
_/ Transfer from Airport Special Revenue Fund $65,750
Suggested by: Administration
CITY ®F KENAI
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Ordinance No. 2397-2009
Page 2 of 2
Courthouse Parking Capital Proiect Fund -Continued
Increase Appropriations:
Construction $65,750
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this sixth day of May,
2009.
~~. C.r~ ~~-x._-.
CHAI~RD A. ROSS, VICE MAYOR
ATTEST: t~
Carol L. Freas, City Clerk
Approved by Finance } ~:e~+x~ u~~~ ~~-
Introduced: April 15, 2009
Adopted: May 6, 2009
Effective: May 6, 2009
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KENAA~ SKA
To: Rick Koch, City Manager
"V tfa~e wit~t a Past, Ge`ty wit~i a Fr~tr~~°e"
FINANCE DEPARTMENT
210 Fidalgo Avenue, Kenai, Alaska 99611-7794
Telephone: 907-283-7535 ext 221 /FAX: 907-283-3014
From: Terry Eubank, Finance Director
Date: April 9, 2009
Re: Ordinance 2397-2009 Investment returns for Cotiuthouse Parking Lot Construction
Project.
The following is an analysis of the return on investment to the Airport Fund for construction of
the Kenai Cotiuthouse Parking Lot. In order to complete the analysis the following assumptions
were made:
• Total Construction Cost $269,250 winch does not include contingency of $22,000.
• Estimated value of improvements at lease termination $544,590
• Annual lease starting at $25,700 comprised of $13,100 for
improvements and $12,600 based upon value of land.
• Land assumed to increase in value by 15% between 2009-
2015, 2016-2020, and 2021-2025.
Utilizing these assumptions the annual rate of return for the project is 6.08%. Meaning an
investment by the Airport of $243,550 (construction costs less the first years lease payment) for
twenty years that earns a rate of return equal to 6.08% over its entire life would be equivalent to
the proposed construction project and long-term lease with the State of Alaska.
The current rate of return for the City's and the Airport Fund is 2.41°/u. While T will not attempt
to predict interest rates, I am comfortable saying there are no indications our investment retun
would reach or surpass the rate of return for the project in the near future. Based upon the
disparity between our current rate of return and the credit worthiness of the leasee, I believe
investment in the project is in the best interest of the Airport Fiord.