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Capital Improvements Committee
Minutes
February 26, 2010
10:00 a.m.
Chernick Conference Room
Present: Trustee Petri, Chair
Trustee Czarnik, Member
Trustee Feichter, Member
Staff: Village Manager
Finance Director
Director of Public Works
Capital Improvement Proiects and Build America Bond Financing
The Committee discussed a proposal from the Director of Public Works for the funding of a list
of capital projects through Build America Bonds (BABS). Build America Bonds arose out of the
Federal Stimulus program and are only available in 2010.
The Village Manager noted that he spoke with a financial advisor regarding the bonds. BABS
are taxable bonds and carry a slightly higher interest rate; however, the Federal Government
will reimburse 35% of the interest on the bonds which lowers the interest rate. General
Obligation bonds are tax exempt and currently carry a low interest rate. Overall, interest rates
are running in the 3% range for AA 1 rated communities like Elk Grove. The interest rate is
higher with a lower bond rating.
The IRS is providing final guidelines on the use of BABS. The IRS has ruled that projects must
be bid and under contract by December 31, 2010 for BABS eligibility. It is nearly impossible for
all of Elk Grove's projects to be bid and awarded by December 31, 2010. The Financial
Consultant recommends letting them analyze a mix of both BABS and General Obligation (GO)
bonds and waiting to time the market to obtain the lowest interest rates. In any event, the bonds
would not be available for 60 days after the Village Board decides to pursue the funding.
The Finance Director indicated that water/sewer/storm sewer projects can be funded with BABS
but the cost must be paid by the ratepayers of the water system. The general taxpayers cannot
fund those projects.
The Committee noted that now is a tremendous time to undertake capital improvement projects:
First, bid pricing is highly competitive with quality work obtained at a very low price. Second,
the cost to borrow money to fund the projects is at a historically low level.
CIC Minutes 2 February 26, 2010
The consensus of the Committee was that all of the projects are worth funding; especially the
reconstruction of the 2 residential pozz based streets and the resurfacing of Tonne Boulevard and
relining of sewers. However, the Committee requested that Village staff review what the cost
would be for an average homeowner and water user respectively to fund these projects.
The Committee will meet again on March 12, 2010 in the Chermck Conference Room at 10:00
a.m. to ascertain the findings of the Finance Director regarding the cost on an average
homeowner.
Expansion of MFT Streets Maintenance Program
The Public Works Director discussed adding curb and patching work throughout the Village to
the MFT program at a budget cost of 5150,000. The 5150,000 for the program was a remaining
fund from last year's program. The consensus of the Committee was to include the additional
curb and patching work into the MFT program to be adopted by the Village Board on the
March 9, 2010 Village Board consent agenda.
The meeting adjourned at 10:45 am.
c: Mayor, Board of Trustees, Village Manager, Deputy Village Manager,
Assistant Village Manager, Director of Public Works, Director of Finance,
Director of Engineering & Community Development, Village Clerk