By Nick Anhut, Senior Municipal Advisor

The City of St. Francis Builds New Joint City Hall & Fire Station

The City of St. Francis had been in discussions over building a new City Hall for over 20 years, only to find it was never quite “the right time.”   Repeated investments of staff time, studies and community engagement had been lost in several attempts to find the right project for the right space. As a community of more than 8,000 residents that had grown by over 66% over the prior two decades, St. Francis found its existing City Hall space overly constrained when compared to today’s standards. This challenge was compounded by the need to replace a Fire Station that was originally built as a garage in 1965.

In 2022, the City Council decided to forge ahead on the project, recognizing the investments that had already been made and realizing it may never be “the right time” to move forward. Using a thoughtful and well-planned process, the City and its project team successfully designed, financed, and built a joint City Hall and Fire Station facility that opened late last year.

Council and staff attributed much of this initiative’s success to a dedicated professional project team, along with a three-pronged approach that included long-range capital planning, sustainable financing, and consistent community engagement. Ultimately, The City aimed to develop a facility that was cost-effective, high-quality, and multi-functional so it could serve residents’ needs while ensuring the safety and well-being of staff and the public. As Fire Chief Dave Schmidt put it, “the facility needed to be built not just for today’s needs, but for the next 25-30 years, especially given continued population growth and evolving emergency services needs.”  Here’s how the project team did just that!

Long-Range Capital Project Planning

Specified by City Charter, St. Francis engages in an annual Capital Improvement Planning (or CIP) process to forecast proposed capital improvement needs over a five-year period. City staff prepares a CIP each year for public discussion and City Council consideration. The CIP identifies anticipated expenditures for the City’s various equipment and facility needs, including public buildings, infrastructure, and parks, as well as the sources of funding to meet them. By revisiting the process annually, the city can re-prioritize capital projects as annual budgets are refined and community needs and resources change.

As part of this process, the City established a Building Fund levy in 2018 to provide for major maintenance projects within city buildings. This levy was gradually increased over 2020-2022 to set aside funds to evaluate future needs and gradually create funding capacity to support future debt repayment for the potential new facility project. Staff compiled the City’s historical space needs findings and reviewed site availability as they began a formal process to study the viability of designing a multi-use facility to reduce the City’s footprint and annual operating expenses. In 2022, the City engaged Brunton Architects to conduct a Feasibility Study to review needs assessments, analyze site layout, and estimate probable costs for the facility with parking to support it. Brunton Project Manager Ginnie Schneider stated “By combining these essential services under one roof, the City could maximize efficiency—reducing overall square footage through shared spaces and optimizing site and infrastructure costs. This strategic approach would result in long-term operational savings by streamlining systems and maintenance.”

Sustainable Approach to Financing

Using the refined costs identified in Brunton’s study, St. Francis worked with Ehlers to devise a funding plan for the potential facility. Estimated to cost $13 million, the City  needed to issue debt so it could preserve crucial operating resources and spread the cost impact over a window of time that matched with the anticipated use of the facility. The City identified the use of its Building Fund capital reserves to cashflow initial expenditures, along with the issuance of General Obligation CIP Bonds to provide the financing. City Council adopted a Reimbursement Resolution to formally declare its intent to reimburse the up-front design and initial construction costs from the proceeds of an intended future issue of tax-exempt bonds. A required public hearing was held in July of 2022 to preliminarily authorize the issuance of up to $13 million in General Obligation Capital Improvement Plan Bonds for the planned project. Upon completion of the public hearing, the City Council voted to give its preliminary approval which opened a statutorily mandated 30-day petition period by which city voters could submit a petition with sufficient signatures that would trigger permissive referendum approval of any financing. That period expired with no petition and the Council proactively adopted an updated tax levy amount to move the project and the associated financing forward.

By 2023, the City had finalized the project design for the new 35,000 square foot facility and completed a formal Request for Proposals to select Stahl Construction as its Construction Manager. While the team refined and rebid certain components of the facility to meet its budget, Ehlers prepared a project draw schedule to verify the timing of anticipated expenditures and inform the final  bond sizing and estimated gross proceeds, inclusive of interest earnings on the project funds during construction. In August of that same year, the City issued $13 million in General Obligation CIP bonds through a competitive sale, achieving a true interest cost of 4.10%. Citing very strong liquidity, reserves, and a good financial management assessment indicative of strong management, S & P Global affirmed the city’s “AA” credit rating despite the increase in debt load.

It’s important to note that the financing plan didn’t begin and end with the Building Fund levy and debt issuance. Closing of the Bonds was followed by a robust post-issuance program that included a rigorous approach to investment and arbitrage management. It was fully expected investment yields would surpass the arbitrage yield for the Bonds, which meant closely monitoring progress towards meeting a spending exception to rebate. Ultimately, through a team approach to overall project management and effective use of its financing team, the City was able to capture over $490,000 of net interest earnings – more than $200,000 than the initial projections and with no rebate liability, to boot. These dollars serve as additional resources for the project or can be applied to interest cost for levy management purposes.

Consistent  Internal & Community Engagement

St. Francis discovered that effective communication is the foundation of a successful project. “We engaged with residents through print, web media, and community events to share our needs and gather their input on a project of this scale,” noted City Administrator Kate Thunstrom. “By inviting them to see firsthand the building’s deficiencies, we demonstrated the necessity of the new facility. Internally, structured, and ongoing meetings ensured organization and kept the project on track.”

While there never seemed to be “the right time” to bring this important initiative to fruition, the City’s meticulous planning, collaborative project approach, and transparent and frequent communication resulted in generational benefits to the entire St. Francis community that will most certainly stand the test of time.

Required 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.