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Council directs staff to pursue $3.5 million bond gap to finish public safety building; staff proposes fund-balance shift
Summary
Harrisville staff told the council the city needs about $3.5 million more to complete a $12.5 million public-safety building and asked permission to pursue an additional bond issue while reassigning part of the city's fund balance to avoid a tax increase.
HARRISVILLE — City staff asked the council on Tuesday for direction to pursue a roughly $3.5 million addition to previously authorized bonds so the city can complete a $12.5 million public safety building without raising property taxes.
City staff and the city's bond consultant described the financing gap and the options. Staff described a proposal in which Bank of Utah, the city's existing bond purchaser, would grant a one-time waiver of an internal additional-debt test (the city had promised more than two times coverage when issuing earlier bonds) on two conditions: the new issuance would include a three-year call-protection period and any future refinancing would require refunding all outstanding series together. Staff reported indicative pricing at just under 5 percent on a 20-year deal and estimated additional annual debt service of roughly $280,000 over 20 years for the $3.5 million gap.
Jenny, city finance/planning staff, outlined a plan staff said would avoid a property-tax increase: reduce the city's target general-fund year-end balance from the current practiced maximum of 35 percent down to about 20 percent and reassign the 15 percentage-point difference as available capacity to absorb the additional annual debt service. Jenny said the city's fund-balance maximum had been accumulating since a 2022 property-tax decision and that the reduction would not constitute a tax rate change.
City staff said the architectural design is nearly complete and that the additional $3.5 million would allow the design to be built with a limited list of alternates removed (for example, the sally port for police would be one alternative). Staff emphasized the project team's goal to limit scope changes and noted risks from continuing price inflation if the city delayed.
Council members asked questions about timing, call-protection terms, the possibility of a refunding trigger, and the risk of being required to pay off existing lower-rate bonds if the city later refinanced. Staff said Bank of Utah requested that any future refunding would need to include all outstanding series rather than only the newest tranche, and that staff would seek contractual language (a 'kill switch') to protect the city if construction bids came back materially higher than projected.
Council did not take a formal roll-call vote on the financing package at the meeting. Council members gave unanimous verbal support for staff to proceed to a parameters meeting and public hearings in the next month and asked staff to return with the bond parameters and any required protective language. Staff said the earliest practical schedule would be a parameters meeting in April, a public hearing in May, and a close in late May or early June if markets and bond counsel align.
Staff said the total project budget is $12.5 million; the city already has $9 million in prior-authorized bonds and seeks the remaining $3.5 million to finish construction. Staff also said the ordinance would be a sales-and-franchise-tax revenue bond, consistent with the city's 2022 and 2023 bond series, not a local building authority issuance.
The council provided direction to pursue the additional issuance and related budget adjustments; staff will return with bond parameters, proposed contract language, and a recommended schedule for public meetings and required disclosures.
