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Dexter council reviews $8.4M public-safety bond, considers land sale and small bond to close $1.7–2M gap
Summary
Council staff reported an $8.4 million bond and other revenues for a new public safety facility but said pending change orders and contingencies leave a roughly $1.7–2 million shortfall; options discussed include selling city land, a smaller supplemental bond, using road funds where eligible, or dipping into reserves.
Chair opened the discussion by summarizing the project financing: the bond proceeds total about $8.4 million and the city has committed a little over $1 million from the general fund, with additional anticipated bond investment revenue.
"We have obligated through the change order about $10.3 million," the Chair said, adding that difference between obligated amounts and final spend leaves a funding gap staff is tracking. Staff identified three principal additional costs under review: permit fees (about $70,000), a sidewalk-to-park switchback estimated at $45,000–$65,000, and a contingent allowance for possible contaminated soils (up to $75,000 not-to-exceed as quoted by the contractor). Together with other estimates these items reduce contingency and increase the projected shortfall.
Council and staff ran through IRS arbitrage concerns tied to bond proceeds and asked staff to confirm reporting obligations and milestone rules; staff reported standard staged spending benchmarks and said they would consult the city auditor and bond counsel. "We should learn the rule," the Chair said, asking who will prepare a definitive memo on arbitrage and reporting.
To close the shortfall the council discussed several nonexclusive options: selling a city-owned parcel (an appraisal was requested), reallocating eligible right-of-way or road-fund expenses, issuing a small supplemental general-fund bond, or using reserves while protecting minimum fund-balance policy targets. Staff estimated the worst-case gap near $1.9–2.0 million; owner contingency of $400,000 has not been allocated as of the report.
Council members also flagged timing constraints for bond spending and the benefit of maximizing lawful investment earnings on bond proceeds, balanced against the need to avoid arbitrage penalties. Staff said they would provide an updated gap analysis, a clear explanation of arbitrage thresholds and reporting forms, and options that preserve core reserves.
The council did not vote on financing at the session; members directed staff to return with firm figures and legal/financial guidance ahead of future budget discussions and before any decision to sell city property or seek additional voter-authorized debt.
