City hires construction manager, OKs bond notice for rec center

Apr. 13—The Crossville City Council voted Tuesday to move forward with the next steps in development of an indoor recreation center, approving publishing notice of intent to issue bonds up to $55 million and hiring a construction manager for the project.

"This does not obligate us, correct?" asked Council member Mike Turner during the meeting.

"It does not obligate us," said Crossville Mayor R.J. Crawford. "We're letting the public make the decision that they can come back on their own through public comment, or potentially petition for a referendum."

The move requires publishing a notice the city intends to take on debt up to the listed amount and provides an opportunity for a petition of 10% of the registered voters to file their objection, forcing a referendum.

Council member Scot Shanks moved to approve the bond resolution for a maximum of $55 million, less than the estimated cost of construction for the most expensive options presented. The motion was supported by Council member Art Gernt.

"I'm going to go ahead and make the motion that we start the process," Shanks said.

"We don't know the exact cost this is going to be. But this secures the interest rate we can get now. The longer we wait, we're taking risk there."

Shanks added the council doesn't know the final cost for the project, which is still being designed.

"We don't know the amount, but we do have the fund balance or other variable rate funds out there," said Shanks. "That will be two-three years down the road. We'll know a lot more then, too — how much sales tax has increased and other things going on in the city."

The council also unanimously voted to hire American Constructors as the construction manager/general contractor for the project. Council member Rob Harrison made the motion, supported by Shanks.

"We will pay them as long as we are continuing to move forward with this process, but we are not obligated to move forward," Harrison said.

Recreation program

Earlier that day, the council discussed the budget the rec center during its quarterly retreat held at the Crossville Depot. That included a discussion of how to pay for the long-discussed facility planned for downtown Crossville.

Estimated cost to build and furnish an indoor recreation center range from $60.5 million to $65.8 million. The preliminary plans include two gymnasiums, a multi-purpose court, indoor walking track, cardio and strength training areas, group exercise areas and an indoor aquatics center.

The three proposals vary in the type of pools offered: an indoor leisure pool; an indoor leisure pool and indoor competition pool; an indoor competition pool, indoor instructional pool and outdoor leisure pool.

"We are to the point we need you to let us know where you want to go from here," Kim Chamberlin, with Upland Design architectural firm, told the council during their retreat.

Chamberlin said the council could determine what amenities to include or it could set a budget for the design to work within. There could also be alternate plans that could be incorporated as funding allowed or phased in later.

"We need a target," Chamberlin said. "We need that to get started on design."

Crawford asked how much it would cost to get a "decent" recreation center. Chamberlin responded, "Tell me what it needs?"

Crawford prioritized gym areas and indoor aquatics.

Ethan Medley, director of the city's park's and recreation department, said the multi-purpose court would allow for a greater variety of activities, like indoor soccer, than could be done on a traditional wood gym floor.

Chamberlin said if the council gave him a target number, he could provide a program.

"We would look at our conversations with you about what your priorities are," Chamberlin said. "We'd make some assumptions with that, but it will be a back-and-forth.

"But we need somewhere to start."

Turner asked what could be delivered for $30 million.

Chamberlin responded, "You're getting a lot less."

Members of the council have discussed a newly built recreation center in Morristown built for $35 million. However, Chamberlin said the project was bid before the pandemic. If bid in today's market, he estimated it would be $45 million to $50 million project. Shanks said a contractor on the project told him he would have bid $55 million.

"You could not build that facility," Chamberlin said.

As discussion continued, members of the council pointed to the third option, but asked for alternatives regarding the multi-purpose court and phasing in the outdoor pool at a later time, but building indoor pools for competition and instruction.

Chamberlin said it would be easy to carve out those items for bid alternatives and add ons.

The council also agreed to bring the construction manager, American Constructors of Nashville, onto the project. Derek Martin, with American Constructors, explained he would assist Upland Design with estimating the cost for the project, which is still fluctuating with the current market conditions and the unknown design elements.

Funding options

The city is considering taking out debt to pay for the facility, but it has strong reserves council members have eyed for absorbing some of the cost. The city's current fund balance is about $22 million.

Financial adviser Larry Kidwell noted treasury bonds are currently offering more than 5% interest earnings for six-month and one-year terms. The interest on debt would likely be under 4% at this time, he said.

"You get better by 34% by keeping your money and using debt proceeds to finance improvements. That's a significant draw," Kidwell said.

Those interest rates also offer an opportunity to defray some of the cost of borrowing money. Because the city would not need the entire amount borrowed immediately, some funds could be invested, earning the city more in interest over the short term than it has to pay.

City Manager Greg Wood noted there are other capital projects needed in the city, as well. Those include a new fire station and fire trucks, new hangars at the airport, and equipment for the street department. The five-year capital plan calls for $8 million in spending in 2023 and $6.3 million next year.

"You may want to keep some of the fund balance for some of those," Wood said.

But borrowing money will require the city to increase revenue to pay for the debt. City Finance Director Fred Houston has estimated the annual debt payments for amounts from $10 million to $60 million. A $55 million loan at 4% interest would cost about $4 million.

That would require a 71-cent increase on the city's property tax rate, currently at 60.59 cents per $100 of assessed value.

Shanks said the property tax estimates assumed no increase in sales tax revenue, which makes up the bulk of the city's budget. Sales tax revenues have been on the rise in recent years, from $8.3 million in the 2018-'19 fiscal year to $10.7 million last year.

The city budgeted $9.8 million in sales tax revenue for the 2022-'23 fiscal year.

Houston said, "We're assuming the sales tax is used to run the city. I'm assuming you're using additional property tax to pay this. It has to have its own income stream."

He added the city would have operational costs with the new facility.

Shanks said, "I think we're adding, conservatively, about $1.5 million to the reserves every year."

Houston said the city's increasing fund balance is due to both increased revenues over budgeted amounts and projects being pushed from one budget year to the next — like the downtown sidewalk project.

"Downtown for instance, we're going to have to spend $400,000-$500,000 there even though we do have a grant that will pay for most of it," Houston said. "That's the big job we're looking at right now in the general fund."

Gernt said he also believes sales tax revenue will increase over the next four or five years.

"You can't show me this video [Flatrock Motorsports Park under development in Westel], and me knowing what's happened the four years I've been on the council and tell me that's not going to go up fairly substantially," Gernt said.

Harrison said if revenue increases, debt could be paid off more quickly. Kidwell said the bonds would have periods where they could be paid off or refinanced, depending on the financial situation at the time, beginning at about 5 years.

Harrison said, "At that point you could lower the property tax rate, if we do see a surge in sales tax."

Crawford continued to encourage the council to set a budget they were comfortable supporting to help the project move forward.

"We need a price point so we know what they can do," he said.

Shanks urged the council to consider moving forward to authorize the bond issue — which does not obligate the city to take on the debt but moves the process forward.

Heather Mullinix is editor of the Crossville Chronicle. She covers schools and education in Cumberland County. She may be reached at hmullinix@crossville-chronicle.com.