Marysville City Council’s Finance Committee is recommending using earnings on interest to help pay for the city’s paving program this year.
At the committee meeting Monday, City Engineer Kyle Hoyng explained that council budgeted $1.3 million from the street capital improvement budget and $225,000 from the water capital improvement fund to pay for the 2024 city paving program.
The city planned to pave 2.78 miles of city streets, about 2.74% of the city’s street total, including all or portions of Eagle Court, Sorensen Drive, Brookstone Drive, Monteclair Court, Springwood Lane, Creekview Drive, Palm Drive, Milridge Drive, Millington Way, Damos Way, Tarragon Drive, North Walnut Street, East Fourth Street and an alley between Main and Plum streets known as Alley E. Additionally the city said it would improve a portion of West Third Street using the money from the water capital improvement fund because it would be part of a larger water line replacement project.
Hoyng explained that when the project bids were opened earlier this month, the bid totaled about $1.64 million. He said that bid included Park Avenue, which has been pushed back to 2025 because of a proposed water line replacement project. Hoyng said that by removing the $121,000 Park Avenue, the new bid would be about $1.52 million.
He explained that while that total is within the amount budgeted, it isn’t that simple.
First, Hoyng said money from the water capital improvement fund can only be used to pay for improvements on West Third Street. The bid for that street came in at about $157,718. He said any excess cannot be moved over to help pay for the other projects.
He then explained bids for the projects coming from the street capital improvement budget totaled about $1.36 million.
The engineer also explained that while the contract will be awarded based on the estimate, he does not anticipate that being the final cost.
“We know during construction things are going to come up,” Hoyng said.
He said it is important to estimate between 5% and 10% to cover contingency costs.
Finance Committee member Zack Bordner asked why the city would be responsible for cost overruns.
Hoyng said the bids are based on information and estimates the city provides. He said that if the city underestimates how much asphalt would be required for a certain project, it would be the city’s responsibility to pay for the additional asphalt needed to complete the job. Hoyng said that by line item bidding based on city estimates, contractors need to eliminate “fluff” that can be built into lump sum bids.
Hoyng offered a pair of options: remove Tarragon Drive and Alley E from the program to come in at $1.3 million with the contingency or move forward with all the streets and ask council for a $200,000 supplemental appropriation to have sufficient funds for an overrun.
Hoyng called Tarragon Drive and Alley E “the best of the worst” and noted that if they were not paved in 2024, they would need paved in 2025 and that would likely mean some streets needing paved in 2025 would get bumped to 2026, and so on.
Council member Mark Reams, who sits on the finance committee, said he prefers not doing that. He added that $200,000 “is not all that much in the grand scheme of things.”
Council and committee member Zack Bordner asked where that extra money would come from.
City Finance Director Brad Lutz told the committee that the 2024 budget is the tightest he has ever done. He said most of his revenue projections are “on track” but not ahead. He said earnings on investments is “the one area we are ahead.”
During the budget process, Lutz projected the city would earn $1 million on investments. Through the first three months, the city has earned about $339,000. He said that is “due to the utilization of new investment opportunities and higher interest rates compared to a year ago.”
“I feel comfortable saying we are going to exceed that estimate on earnings on investments,” Lutz said, adding that he believes the investments will earn $1.2 million “at least.”
Council member and finance committee chair Henk Berbee said he wants to be cautious using money that isn’t guaranteed, but feels the paving project is worth it.
“Paving has always been one of my key things, starting from when I got on council,” Berbee said.
He said that when the city increased the income tax from 1% to 1.5%, officials said the increased revenue would go to support safety services and the paving program.
“I want to see that the money is spent on these two items,” Berbee said.
He said that if the finance director says money will be available, “then I am always going to be in favor (of paving as many streets as possible).”
Bordner said that by funding the full program, “we are not kicking the can down the road.”
City Manager Terry Emery said the city could use proceeds from the sale of property in Innovation Park to pay for paving. In 2023, city council opted to add money earned off the sale of property in Innovation Park to the paving program mid-year.
Berbee said he is reluctant to do that and would rather use sale proceeds to pay down outstanding debt.
“If you sell assets, you have to reduce debts,” Berbee said.
Bordner agreed with that philosophy.
Reams said he was comfortable recommending council pass a supplemental appropriation based on the anticipated increase in investment earnings.
Lutz suggested a first reading at the council work session May 6 and then waive the third reading after the second reading May 13.
Hoyng said he would reach out to Strawser Paving, which provided the lowest bid. He said he would explain what’s happening and the process, letting the company know it is “likely” the city will move forward with paving all the streets
City officials have said the goal is to allocate at least $1.5 million a year for paving, with the intent to be to repave about 4% of city streets each year. Typically $1.5 million will do that. Officials have said that if a street is built to last about 25 years, the city needs to replace about 4% of streets, about 4 miles, each year to stay on a maintenance schedule.