By Nick Anhut, Senior Municipal Advisor

In 2021, The City of Chanhassen initiated a comprehensive facility study to assess the conditions of its municipal buildings and their sufficiency for future needs.  Originally built in 1981, the City Hall facility was identified to be in critical condition and suffered from an inefficient layout that did not adequately serve the existing population of the City.  Rather than piecemeal renovations to address deferred maintenance items like a new furnace/ventilation system, roof replacement, and elevator which were estimated to carry an $18 million price tag, the study identified the probable cost of a new replacement facility with upgraded features only moderately higher at $20-24 million.  A new building offered a chance to upgrade to higher-efficiency plumbing, lighting and HVAC systems; and could also set the standard for future development and redevelopment in downtown Chanhassen. The City Council recognized this as an opportunity to revitalize its facility and enhance the City’s downtown as emblematic of a “Community For Life” with amenities for all ages.

Civic Campus Project

The Civic Campus Project was born.  The City partnered with HKGi to fine tune the concept plan for the campus layout through a facilitated planning and engagement process with the City Council, Planning Commission, and public.  The City also surveyed the public to inform the concept and prioritize amenity options.  A re-imagined city hall facility would provide community gathering spaces; connect with the Library; expand the Senior Center; and integrate outdoor park amenities for all ages including pickleball courts, skate park, splash pad, playground, a park pavilion and room for the farmer’s market.  The downtown focal point would also enhance pedestrian connections and retain the City’s Veteran’s Monument as a prominent feature of the campus.

“This project is about far more than replacing an aging City Hall; it’s about reimagining our entire civic campus as the heart of the community. By thinking generationally rather than investing in short-term fixes, the city is creating an integrated destination for government, gathering, and recreation that serves residents of all ages and helps catalyze long-term vibrancy and investment in downtown Chanhassen.”
 — Laurie Hokkanen, City Manager

BKV Group was selected to complete the design of the new City Hall and parks buildings.  The project was planned for two phases.  Phase I would initiate construction of a new City Hall building and associated site and parking improvements on a cleared portion of the existing campus site.  Once the new building was ready for occupancy, Phase II would commence demolition of the existing municipal building to allow for construction of the new park pavilion, outdoor amenities, parking and site improvements.  All of it aimed at completion in 2026.

Capital Planning & Bond Issuance

Chanhassen’s financial planning began right away with the conclusion of the facility study in 2022.  A project budget range of $33 to $35 million was identified for both phases of the construction.  The City engaged with Ehlers to devise a funding plan for the project, inclusive of the contemplated phased approach.  Debt would be necessary to preserve operating resources and spread out the cost impact over time as the City’s residents benefit from the facility’s use.  The City Finance Department maintains a 10-year, long-term financial plan to forecast future levy needs.  Using this dynamic tool, the City modelled scenarios by which it could gradually build funding capacity to support the future debt repayment in concert with existing obligations.  New debt payments could be structured to coincide with the timing of an expiring Public Works Facility debt levy to potentially lessen the impact on the City’s taxpayers.  The City’s long-term financial plan also proved useful during credit rating discussions with Standard and Poor’s leading up to the bond offerings.  Citing the presence of financial policies and practices indicative of strong financial management, Standard & Poor’s affirmed the city’s “AAA” credit rating based upon confidence the city could support the anticipated increase in debt.

“For several years, the City has prioritized financial planning. The City’s strategic plan includes five priorities, including Financial Stability. For our council it is important that the City achieves financial stability for all funds but without placing too much of a burden on taxpayers. The financing plan for the Civic Campus has enabled the City to continue to meet that priority.
— Kelly Grinnell, City Finance Director

 Chanhassen engaged Kraus-Anderson Construction as the primary contractor/construction manager.  In early 2024, the overall project budget was established at $35.5 million.  The City obtained statutory authorization for the issuance of General Obligation Capital Improvement Plan (CIP) Bonds to provide the funding for the city hall facility portion of the campus project, while adopting a tax abatement program to fund Phase II’s park and site improvements.  Rather than issue bonds to fund both phases at once, the City decided to split up its debt issuance over 2024 and 2025 to better align with the anticipated project draws and limit the need for capitalized interest.  $24.25 million in General Obligation CIP Bonds were issued to fund the initial construction in the summer of 2024 through a competitive sale process.  The City obtained eight bids for the purchase of its bonds, an excellent turnout from the market indicating its vote of confidence in the City’s financial profile.

Ehlers’ team of Investment Advisors worked closely with City Finance Director, Kelly Grinnell to design an investment portfolio for the tax-exempt bond proceeds that mirrored the cashflow needs of the ongoing construction draw schedule.  Along the way, the City was able to earn over $737,000 in net investment proceeds to help provide funding to support the project’s budget.  Through thoughtful planning that included Ehlers’ arbitrage consultants at the initial phases of the multi-year financing strategy and construction partners that were able to meet deadlines, the City retained 100% of its net investment earnings as it was able to meet exceptions to arbitrage rebate.

The second tranche of financing, a $10.2 million issuance of General Obligation Bonds, followed in September 2025 to provide proceeds to support the cash flow requirements for the upcoming demolition, construction and site improvement draws of phase 2 of the project.  The 2025 Bonds were similarly sold through a competitive sale and attracted nine bids.  The debt payments of this second series of Bonds were structured to comply with the adopted tax abatement program and layered onto the adopted levies from the 2024 CIP Bonds in alignment with goals of the City’s long-term financial plan.  The tax-exempt proceeds of the 2025 Bonds were similarly invested into a program established in collaboration with Ehlers’ investment and arbitrage teams, which have generated net investment earnings of over $56,000, to date.

City Hall Opens its Doors

With Phase I complete, City staff have relocated to their new spaces, and an official open house was held November 1^st to allow public to experience the new building.  Phase 2 is underway with demolition of the old facility and ongoing grading and site preparations.  Next year brings additional exterior improvements for the multi-use City Center park amenities.  Phase 2 is expected to wrap up this coming summer.  A visit to downtown Chanhassen and the completed Civic Campus Project will surely be a must-see event in 2026!

Important Disclosures: Please Read

Ehlers is the joint marketing name of the following affiliated businesses (collectively, the “Affiliates”): Ehlers & Associates, Inc. (“EA”), a municipal advisor registered with the Municipal Securities Rulemaking Board (“MSRB”) and the Securities and Exchange Commission (“SEC”); Ehlers Investment Partners, LLC (“EIP”), an investment adviser registered with the SEC; and Bond Trust Services Corporation (“BTS”), holder of a limited banking charter issued by the State of Minnesota.

This communication does not constitute an offer or solicitation for the purchase or sale of any investment (including without limitation, any municipal financial product, municipal security, or other security) or agreement with respect to any investment strategy or program. This communication is offered without charge to clients, friends, and prospective clients of the Affiliates as a source of general information about the services Ehlers provides. This communication is neither advice nor a recommendation by any Affiliate to any person with respect to any municipal financial product, municipal security, or other security, as such terms are defined pursuant to Section 15B of the Exchange Act of 1934 and rules of the MSRB. This communication does not constitute investment advice by any Affiliate that purports to meet the objectives or needs of any person pursuant to the Investment Advisers Act of 1940 or applicable state law. In providing this information, The Affiliates are not acting as an advisor to you and do not owe you a fiduciary duty pursuant to Section 15B of the Securities Exchange Act of 1934. You should discuss the information contained herein with any and all internal or external advisors and experts you deem appropriate before acting on the information.