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5. Memo - Discussion of Reallocation of Road Reconstruction FundsPage 1 of 2 City of Scandia 14727 209 th St. N. PO Box 128, Scandia, Minnesota 55073 Phone (651) 433 -2274 Fax (651) 433 -5112 http://www.ci.scandia.mn.us DATE: April 1, 2021 TO: Honorable Mayor and City Council FROM: Ken Cammilleri, City Administrator RE: Discussion of Reallocation of Road Reconstruction Funds INTRODUCTION The 2021 Road Improvement Project bid was received for $602,418.45 this year, but $845,000 was budgeted for the project. Including the typical 10% reserve for project contingency, this leaves $182,000 for use this year for infrastructure buildout for roads and internet. The City Engineer and our recently retired Public Works Director have both recommended that the additional savings be used to complete portions of Pomroy Avenue North to maximize saving on mobilization and to potentially get the contractor to agree to the same cost per foot for construction. They also recommended that remaining unused funds for the year be put towards road preservation efforts such as crack filling and chip sealing. The project alternates have been included in your packet for consideration should the Council wish to proceed with expanding the road buildout scope to Pomroy Avenue. Conversely, City Council Member Ray and members of the Internet Action Committee recommend consideration of reallocating the $182,000 or a portion of it for use towards additional internet service buildout with Midco. EXISTING BROADBAND BUILDOUT BUDGET Currently the following is in the City’s Capital Improvement Plan for Broadband Expansion: 2020 2021* 2022 2023 2024 $165,000 250,000 170,000 175,000 180,300 *In 2021, the City has earmarked $165,000 ($160,085 is the finalized commitment) as a matching grant for the 2020 Border-to-Border Broadband Grant which is slated for buildout this year. An additional $85,000 was earmarked for additional internet expansion projects. CURRENT PROGRESS The City has set a goal to complete internet buildout to approximately 200 homes per a year. Last year, in 2020, the buildout with Midco extended service to 255 households. Page 2 of 2 City of Scandia 14727 209 th St. N. PO Box 128, Scandia, Minnesota 55073 Phone (651) 433 -2274 Fax (651) 433 -5112 http://www.ci.scandia.mn.us This year’s grant arrangement has not been finalized for an exact cost or total buildout due to the State introduction of rules not to overlap funding with the Federal Rural Digital Opportunity Fund (RDOF). The committed amount for this year by the City was $165,000. The project is currently estimated to have a buildout with the state’s grant opportunity of approximately 94 households. In addition, Midco is completing a separate buildout outside of the state grant this year which will reach approximately 62 households. Although the approximate buildout number is currently at approximately 158 households, the Internet Action Committee is arranging an additional buildout. These numbers are still being finalized, so these estimates are not final. This additional, a possible project for buildout 2021 or 2022, in cooperation with Midco, would complete a buildout to Quality Trail N and the nearby area along St. Croix Trail N to approximately 65 households. The total projected project cost for the buildout is $254,000. The City share would be $85,000 and Midco’s tentative share would be $169,000. If all of these projects come together, this would allow us to complete 220 households in 2021. The costs of internet buildout per household connection will see an increase each year as the areas that are remaining underserved or unserved will have the lowest density and the greatest distances for construction. In other words, the dollars we allocate towards expansion will produce new connections over time. RECOMMENDATION The City Council is recommended to make a decision on the allocation of these funds to either proceed with accepting a project alternate for road construction or earmark these funds for a proposed internet buildout project. A decision must be made soon with regards to road preservation, if the City is to take advantage of this savings opportunity to complete roads at the rate that was bided. Here are the follow the decision options for the City Council to consider: - Do nothing, allow cost savings to stay in the fund to go to future road construction costs. - Proceed with the $125,000 or $100,000 options to complete Pomroy Avenue and use the cost savings towards the funding of road preservation. - Authorize the transfer of all cost savings of $182,000 from the road project to the General Capital Fund (401) and earmark it for internet expansion. - (Tentative) Staff recommendation - Proceed with the $125,000 or $100,000 options to complete Pomroy Avenue and transfer the approximately $50,000 or $75,000 in cost savings towards the General Capital Fund 401 earmarked for internet expansion. Please let me know if you have any questions.