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Why did the cost of the Atkins Fire Station grow so large over the last couple of years?
The Fire Station project throughout design from 2021-2024 has generally maintained the same square footage, but it has been noted that the cost has not done the same. The architects, Solum Lang, in early 2024 put a quick recap of the last few years together in a presentation that can be located by clicking HERE. A few highlights of the chronology is that a cost opinion of the project in May 2022 is $4,570,000, then in May 2023 it is $5,973,628. The final cost estimate is from late 2023 at $6,626,328.
Solum Lang has a few similar projects in the region over the past few years that demonstrate this jump in cost related primarily to inflation. Here are a few of those projects:
How many sites were considered prior to choosing the current building site of the City Hall/Library?
Nine sites were considered as possible locations for the fire station. The proposed site was selected because it is the most cost-efficient. The site takes advantage of existing infrastructure, existing city-owned property, and the funding opportunities associated with the use of TIF dollars. (TIF=Tax Increment Financing.)
What is Tax Increment Financing (TIF) and how does it help the fire station project?
Tax Increment Financing (TIF) is a widely-used tool for local governments to invest in their communities by expanding their tax base without increased property taxes on the entire community. The building site for the fire station is located in one of the City’s TIF districts, allowing the fire station project to be funded with TIF funds. TIF funds allow taxable growth generated in the community to be generated and spent on financing projects like this one. In this case, TIF funds for the next fifteen years would be targeted to the annual payments on the debt (like a mortgage) of the fire station.
In TIF districts, the city, county and schools continue to receive property taxes generated on the original value of the property, and the increased taxes generated due to investment is pooled toward improvements.
How much of the cost of the Fire Station will be covered by FEMA and Insurance proceeds?
As a disaster-related project, the City of Atkins has and will receive funds from both FEMA and our insurance carrier to assist with the costs related to the damage. A total of $1,404,037.27 has been committed to the fire station project as follows:
- Insurance proceeds: $760,368.49. This amount has been paid to the City and is being held for this purpose.
- FEMA/Iowa Department of Homeland Security will pay a total of $643,671.78
- FEMA pays a 90% share of $579,301.91
- State of Iowa pays a 10% share of $64,366.87
How will the rest of the cost of the Fire Station get paid for?
Speer Financial, the City’s financial advisors, has generated funding scenarios for how to make fifteen annual payments that would pay for the fire station. In the case of the $6.1-6.6 million design, Speer has developed this spreadsheet that represents the need to borrow the maximum approved by the City Council of $4.5 million via Resolution 970 dated June 28, 2022, toward the cost of the project. While this is a complex document, it can be summarized with a couple of columns:
- The total annual payments on the fire station are shown in the “total” column. The payment ranges from about $300,000 to $475,000 each year.
- An annual contribution from the Rural Fire District is shown at $40,000 per year.
- After the first few years, $365,000 is paid using TIF revenue.
- The balance each year is made up in property taxes, shown as “debt service.” The amount in blue in the last column is the actual dollar amount per year that would be paid on a $200,000 assessed value home. The average tax impact per month for a $200,000 assessed value home is $6.03. The Atkins City Council has voted twice (in April 2023 and April 2024) to begin generating property tax revenue toward these payments. These payments are pre-levies, and are shown as FY24 $162,763, and $139,737 in FY25 which begins July 1.
Should the City Council approve a lower-cost option in the $5.4-5.58 million range, the amount needed to borrow would reduce to $4.0 million, based on payments received and expected from FEMA and insurance proceeds, resulting in this spreadsheet. The changes noted in this document include:
- The total annual payments in the “total” column are reduced to range from about $275,00 to $410,00 each year.
- The annual contribution from the Rural Fire District is maintained at $40,000 per year.
- The same $365,000 of TIF revenue applies to the payment, and
- After the first three years, the amount needing to be generated from property taxes is nearly zero. With the existing pre-levy in place, the current property tax levy already is generating the amount of taxes to cover these payments. In this $4M bonding scenario, the average tax impact per month for a $200,000 assessed value home is $2.06.
Can the City get additional funds in the future to help pay for the Fire Station?
Yes. In addition to the multiple sources of funds that will be contributing to the fire station project, including toward the annual payments on the bond (loan) that will be paid back over 15 years, the City and the community may continue to fundraise from other sources to make those future payments. Private fundraising, applying for grants, and accepting donations are all eligible sources of funds to receive to put toward future debt payments.