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Jim Proce - 2018 Capital Improvement Planning Process CPM Class

The document outlines a comprehensive approach to capital improvement planning, emphasizing the need to establish a community investment program for sustainable infrastructure development. It addresses the political challenges, stakeholder involvement, and financial forecasting needed to draft effective capital improvement plans (CIPs) while highlighting past bond election experiences. Key elements include prioritizing projects, engaging citizens, and ensuring transparency to enhance public support and manage budget constraints.

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Capital Improvement Planning Developing a Process for a Community Investment Program Rebuilding Infrastructure One Step at a Time! Looking to the future! Jim Proce ICMA-CM, APWA-PWLF, MBA Proce Municipal Management Services 1
Why are you here today? What would you like to talk about today? What is your involvement in your organization with regard to Capital Programs? Do you know your City’s programs, processes, or values? What questions do you have? 2
Objectives Implement successful capital programs in your communities Navigate the political hurdles and obstacles often associated with Capital Improvement Planning Draft and implement a Capital Improvement plan for your community that will be sustainable through changes in leadership Understand all of the moving parts recognizing that this is a team effort with varying complexities 3
CIP Presentation Agenda Background on CIP Noting Typical Issues Define CIP in Terms that are Finite Discuss the Benefits of a CIP Planning Process Identify the Many Elements Required for a Successful CIP Organizing the Stakeholder's, Committees and City Council Support Discuss Infrastructure Inventory Assets and Identify Needs Preparing Financial Forecasts, Bond Elections and Project Estimates Compile Project Requests and Develop Criteria for Ranking Projects Drafting the CIP Documents; Which are Living Documents Identify & Discuss Various Public Outreach Methods Program Implementation, Financing and Other Considerations So What Else is There? You May Have Others? 4
2006 Bond Election and Subsequent Bond Sale 6
2006 Bond Election and Subsequent Bond Sale On 5-13-06, City held a bond election for 4 projects totaling $31.5M Every item on the list failed 46 days later, on June 27, 2006, the City issued $38.3M in certificates of obligation, and over a 3 year period issued $107M The Bonds issued were not for those projects on the May ballot; however, many residents believed they were and were absolutely incensed Many residents felt disenfranchised by that election and hold residual resentment with the City This history comes up every time debt is considered 7
City still had $100M as the bond programs were just getting kicked off New Council significantly reallocated the dollars to other priorities Seriously? Can Council reallocate dollars from past bond sales to new projects? Yes. If you issue debt other than general obligation bonds, you may not have the same level of commitment In 2011 there was still $50M and no CIP New Council Elected in 2007
9 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett Debt Service Schedule-Existing @ 12-31-13 Tax Rate Golf Refuse Drainage New City can use future freed-up tax rate to build a leveraged bond program
Background (General) Local governments often make significant capital expenditures including the issuing bonds Without first analyzing the impact such expenditures may have on future operations and expenditures for other important capital projects
Background (General) A capital plan is intended to assist in making choices Which projects should be implemented, how they should be financed and when
CIP Defined Capital planning and budgeting is a complex process characterized by uncertain long term projections, political pressures, shortage of resources, demands on a wide range of expertise that requires both operational and financial know how Capital funds are: always limited, and the future is never certain. Structuring a balanced capital plan requires coordination of information, analysis of alternatives, and building consensus. Capital Projects are often categorized by projects/items with a cost of $XX dollars, have a lifespan of XX years or greater, and result in a long-term asset, typically buildings, infrastructure, and major equipment. 12
CIP Benefits Allows for a systematic evaluation of all potential projects at the same time. Provides ability to stabilize debt and consolidate projects to reduce borrowing costs. Serves as a public relations and economic development tool. Focus on preserving infrastructure while ensuring the efficient use of public funds. An opportunity to foster cooperation among departments and an ability to inform other units of government of the entity's priorities. It is not uncommon for a neighboring city to incorporate into its CIP the capital needs of a special district, parks and recreation department, or some other partnership. 13
CIP Benefits Terminates the ad hoc policy of allocating resources to capital projects without regard to long-term impact on the government's available reserves and resources. Assures that the most important projects obtain funding. Integrates budgeting for day-to-day services and activities with budgeting for capital improvements. This insures that construction, acquisition, and operational needs are addressed. Assures that the most appropriate method of funding is selected (e.g. pay-as-you go or bonds. Also insures that when bonds are used the most appropriate type is selected.) Improves project planning and timing sequence. (e.g. Allows sufficient time to arrange and promote bond or tax referenda. Allows sufficient time to accumulate cash for pay-as-you go projects.) 14
Important Elements of a CIP 1 Projects and their phases - Design, construction, ROW purchase, etc 2 Project budgets 3 Funding sources - Bonds, grants, general fund, etc. 4 Assigned resources - Engineer, project manager, inspector, etc. 5 Project coordination and sequencing 6 Project and expenditure timelines 7 Financial Impacts - Operational, implementatio n (construction management), staffing 8 INTEGRITY
Stakeholders and more… Identify stakeholders •Citizens •Departments •Public Works staff •Management •Council liaison •Committees •Boards and Commissions •Other partners Establish public process •Solicit public input •Achieve public support •Establish task force •Transparent process Task Force/Committee •CIP is a “Community Investment Program” •Education process •Specific duration •Specific focus •Provides recommendation Establish internal CIP committee •Establish duties of committee •Refine tracking process •Establish/improve weekly updates •Improve the schedules & estimates
CIP Task Force/Committee Citizens Diversity Council input/approval Ground rules/agenda/minutes Alignment Naysayers Education/choices Transparency
Internal CIP Committee Duties Establish a Capital Planning Committee/Task Force Take Inventory of Existing Capital Assets Evaluate Previously Approved, Unimplemented or Incomplete Projects Assess Financial Capacity Solicit, Compile, and Evaluate New Project Requests Prioritize Projects Develop a Financing Plan Adopt a Capital Improvements Program Monitor and Manage Approved Projects within the CIP Update Existing/Ongoing Capital Programs
Two+ Year Bond Election Calendar 24-36 months out Start talking about it during budget process and Council retreats TEST THE WATERS 24 months out - Engage Council on policy issues - Decide process to get citizen input on capital needs 12-24 months out - Educate on Council financial projections - Present strategic decisions - Identify conceptual needs - Create ad-hoc citizen committee 18 months out - Develop citizen input - Develop education and media plan - Choose and design input methods 12 months out - Finalize conceptual list ready for committee and citizen input - Conduct physical tours where possible 8-10 months out - Educate on public needs - Seek citizen input and educate public on needs 8 months out - Conduct citizen input - Execute chosen survey methods 5-6 months out - Finalize and adopt list of projects and ballot structure 3-4 Months Out - Call ballot - DETERMINE THESE DATES WELL IN ADVANCE! 2 months out - Continue to educate on issues - NEVER STOP TALKING! Election Day Get ready to implement! A successful bond election/referendum takes time! 19
Utilize exist knowledge base Survey staff for inputs on needs Utilize GIS hot spot identification Utilize citizen contact data Review existing master plans Review existing CIP Solicit public input through task force and other media available Inventory Assets & Identify Needs 20 Utilize exist knowledge base Survey staff for inputs on needs Utilize GIS hot spot identification Utilize citizen contact data Review existing master plans Review existing CIP Solicit public input through task force and other media available
Project Needs Utilities • AC lines replacements • Clay tile line replacements • Lift stations • Manholes • Pressure plane • Force main under lake • Looping systems • Fiber-optic network Streets • Alleys • Subdivisions • Sidewalks • Trails • Thoroughfares • Traffic improvements • Traffic signals • Stormwater • Bridges • Integrated Transportation Systems Equipment & Software • Replacement analysis • Additional equipment • Technology needs • GIS integration • HRIS • Fleet • Fire apparatus • Fiber-optic network lines Future facilities needs • Future locations • Storage needs • Inventory analysis • Integration of divisions • Current space allocation • Parks/open space • Fire facilities • Training facilities FAILING INFRASTRUCTURE & FUTURE NEEDS 21
22 Where is all that stuff? Providing all of the key stakeholder’s a physical tour of the all of infrastructure is a key investment of your time and efforts to ensure that they see and experience what the residents experience each and every day!
2015 Project Needs The initial round of evaluations yielded 55 projects The total of these projects was over $117 Million In addition to the identified projects to be reviewed the staff identified: • $27M in alleys • $45M in roads • $42M in drainage projects • $12M in parks projects • $9M in public safety projects • $20M in public facilities The target for this initiative was $25M - $27M through potential bond Obviously the needs far outweigh the resources TODAY THE NUMBERS ARE YET EVEN BIGGER! 23 Total of $155 Million Unfunded Projects
Community Investment Advisory Board (CIAB) Title Amount Roads $TBD Alleys TBD Parks TBD Facilities TBD Total Amount Requested AS MUCH AS $250,000,000 The duties and responsibilities of the Community Investment Advisory Board include: • Providing recommendations to City Council on capital project priorities and project selection; • Providing guidance on strategic recommendations to the City Council with regard to capital projects; • Providing recommendations to City Council on guiding values for planning of capital projects; • Acts as an oversight committee and liaison to City Council regarding capital projects • Represents the City at public meetings and public outreach campaigns on the subject of capital projects. As much as $250M in needs may be identified – the current debt capacity without a tax increase can yield $75M proceeds – BUT it would take over 30 cents on the current tax rate to bond $250M! The CIAB has identified, reviewed, prioritized projects for: • Potential 2018 Bond Election • CIP Recommendations (5 year planning process) • Budget planning The CIAB has established: • Prioritization and ranking process for projects • Reporting processes for projects • Targets: $60M in 2018 2018? 24
2018 Bond Election Projections 25
26 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett Debt Service Schedule-Existing @ 12-31-13 Tax Rate Golf Refuse Drainage New City can use future freed-up tax rate to build a leveraged bond program
$0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett Current Tax Related Debt Service and Future Bonding Capacity Current Tax Supported Debt New Issue Series 2017 Future Capacity Growth Capacity CIP Bonding Capacity Additional tax value from future development also adds capacity in future years. Together, this means that Rowlett has the ability to seriously address infrastructure and facility needs in the future while keeping the tax rate steady at 22.6 cents. From Declining Debt From Future Growth
$0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett Hypothetical Leveraged Bond Packages Current Tax Supported Debt New Issue Series 2017 New¹ New² New³ New⁴ Leveraged Bond Packages The City could best leverage the freed up bond capacity in a series of bond packages. Targeting off election years 2018, 2021, etc. 28
Community Values – Setting CIP Priorities 1. CORE BUSINESS FUNCTIONS SUPPORTS FOUNDATION PROGRAMS NO CHOICE - LEGALLY BOUND - MUST DO 2. CORE BUSINESS FUNCTIONS CHOICES IN LEVELS OF SERVICES DELIVERY SUPPORTS PROACTIVE PROGRAMS HIGH EXPECTATIONS FOR SERVICE DELIVERY 3. QUALITY OF LIFE ISSUES SOME COMMUNITY CHOICES 4. COMMUNITY ADD-ON PROGRAMS THINGS WE LIKE TO DO! Community Expectations & Values defines what service is and what the level of that service is for our City! 4. Equipment Supporting Community Events, Landscaping & Irrigation Environmental 3. Libraries, Recreation, Parks, Playgrounds, Open Space 2. Public Safety Equipment, Infrastructure, Solid Waste 1. Mandates, Debt Service, Water & Sewer
(On-Going) Strategy for Success GOALS 2015 $27 Million 2018 $60 Million 3 Year Implementation and Project Delivery NO TAX INCREASE FOUNDATION Financial Stewardship Sound Planning Citizen Engagement Communications Community Goodwill Balanced Priorities Innovative Solutions Leveraging Opportunities Results Oriented Accountability to the Community PRIORITIES Transportation & Circulation Public Safety Existing Infrastructure Revitalization & Balanced Growth Quality of Life Regulatory Compliance External Funding Impact on Operational Budget Timing/Location Special Considerations 2015RESULTS Proposition 1 – Streets - $18.9 Million Proposition 2 – Parks - $4.2 Million Proposition 3 – Public Safety & Facilities - $2.6 Million The May 5, 2018 election passed using the same strategies which yielded $60M for public improvements!
Establish Ranking Criteria Criteria must be established which will be used as a guideline for prioritizing project funding. The criteria should be put in writing and distributed to each party involved in the capital planning process. The criteria established should facilitate ranking projects on a scaled priority basis with a strategic overview, based on core service needs vs. quality of life issues. 31
Establish Ranking Criteria •Required by law or specific court order •Required by contract •Improve public health and safety •Reduce current operating, maintenance or contractual expenses •Increase revenues •Contribute to job retention •Benefit all or a majority of the residents •Leverage other people’s money High priority projects may be those which are •Prevent deterioration of assets •Improve delivery of services to the public •Contribute to job creation •Project readiness •Public benefit •Operational benefit •May be non-essential but have a high degree of public support Medium priority projects may include those which •Support delivery of a service for which there is a declining demand •Enable the provision of a new service not currently provided •Improve the quality of life but are non-essential •Unique facilities •Community add-ons •Not a core service Low priority projects may include those which
Weighted Ranking Criteria • Select & define criteria • Simple weighting (% of whole) • Scoring scale (1 to 10) (or whatever scoring you choose) 33 CRITERIA % Score (1 – 10) Points Quality of Life 20% 7 1.40 Infrastructure 15% 8 1.20 Economic Development 15% 7 1.05 Health & Public Safety 15% 6 0.90 Impact on Operational Budget 10% 5 0.50 Regulatory Compliance 10% 6 0.60 Timing & Location 10% 7 0.70 Special Considerations 5% 5 0.25 TOTAL PROJECT SCORE 6.60
So what did we do? 34
Projects Requests WHERE DO THEY ALL COME FROM??? Staff, Citizens, Council, Master Plans, Comp Plans, Other Departments, other sources… Involves the preparation of forms to request capital funding for the repair, renovation, upgrading or replacement of assets identified through the inventory process. Requests are also made for the construction or acquisition of new capital assets. The staff committee reviews the requests for completeness. The requests provide an opportunity to present to the governing body (or task force) all capital projects deemed by departments to be desirable. Since project requests represent all projects desired, without consideration for financial capacity, compilation of the requests is often similar to a wish list. 35
Projects Requests The information included in the requests should facilitate the prioritizing of projects. Accordingly, the requests should include the following information: • Project Description: A description of the proposed construction project or the asset to be acquired. • Existing Condition: A description of the existing condition to be alleviated by the project. • Goals And Benefits: The goals and benefits to be derived through the construction or acquisition project. • Funding Schedule: The estimated cost of the project and the timing for funding. Project timing is based on the assessment of need by the department manager and may be changed through the prioritizing process. • Project Funding: Should identify whether the project will be funded by the governing body's own resources, through an intergovernmental grant or loan, or a combination of such sources.
Projects Requests Additional considerations that must be identified include: • Annual operation or maintenance costs • Annual reductions in current operation and maintenance costs • Additional staffing, particularly when a new service is involved • Implementation costs; engineering, construction management, other internal impacts
Projects Requests Additional considerations that must be identified include: • Annual operation or maintenance costs • Annual reductions in current operation and maintenance costs • Additional staffing, particularly when a new service is involved • Implementation costs; engineering, construction management, other internal impacts
Project Request Form(s) 39
Drafting and Maintaining the Plan This entire process requires continuous monitoring and revisions Living document subject to frequent change Revisions to plan to be published and brought before council Periodic reports, review financials, exceptions and top issues only Website enhancement to provide transparent information
Evaluation of Your Program • If you don’t have a process in place then start here: Debriefing at the end of projects, programs, or incidents is a powerful tool. A simple model can look like this… 1. What went well? 2. What went poorly? 3. What could we do better? 4. What did we learn? 5. Actions for follow-up? • There are many other models out there and some more formal models or requirements may exist in your agencies 41
42 The Plan, the Forms, the Reports…
44
Public Outreach Outreach Efforts • http://www.mindmixer.com/ • http://www.politically-direct.com/ • http://www.granicus.com/solutions/citizen- participation/ • http://yournorthport.com/ • http://www.engagedenton.com/ • http://telephonetownhallmeeting.com/ • Branding Efforts • Marketing Plans • Communication Plans • Social Media, Website Development 45
CIP Public Outreach Informational Newsletter Mailed to Everyone Something for Everyone Numerous Info Meetings and a Telephone Town Hall Meeting Website with Informational Videos Interactive Map with Detailed Information on Every Project
47 74% 16% 10% 2015 BOND ELECTION PROJECT BREAKDOWN PROPOSITION 1 - STREETS - $18,932,340 PROPOSITION 2 - PARKS - $4,206,110 PROPOSITION 3 - PUBLIC SAFETY - $2,631,050 TOTAL = $25,769,500
48
Funding Options? • Revenue Bonds • Stormwater • Other people’s money • Leveraging • Smaller projects • Items that are not long term assets • Multiple types of debt instruments Bonds & Debt Out of Pocket; Cash Special Funds; Enterprise; Utilities Grants; Donations 49
Financing Capital Improvement Programs How do we pay for it? What tools do we have at our disposal? What partnerships will you need? What policies will you need to have in place? How many of you know the answers to these questions in your organization?
DEBT Debt is not a 4 letter word… well it is but… What are the benefits of issuing debt? 51 WARNING: POLICY ISSUE
There are several options available to cities for financing capital projects. These include: Pay-as-you-go – These are typically for “maintenance” projects, e.g. concrete panel replacement Certificates of Obligation – Council approval needed General Obligation bonds – Require voter approval through a bond election. Revenue bonds – Usually for Enterprise Funds, e.g. Water and Sewer systems – Council approval Financing Alternatives
GOs – General Obligation Bonds Requires bond election for authorization Issued for any public purpose • Real Property • Personal Property • Legal Judgment • Land Acquisition Amortization not to exceed 40 years Secured by issuer’s ad valorem taxing power • Viewed as City’s most secure obligation • Texas General Law City (under 5,000 population) -up to $1.50 tax ($1.00 I&S) • Texas Home Rule City (over 5,000 population) -up to $2.50 tax ($1.50 I&S) as determined by City Charter Attracts lowest interest rate I&S tax rate to pay back debt service is not subject to rollback
COs – Certificates of Obligation Requires no voter authorization •A petition signed by 5% of the registered (Texas) voters can force an election Notice of Intent to Issue is required •Published in the local paper on the same day of two consecutive weeks •First publication must be at least 30 days prior to sale date When secured solely by ad valorem taxes available purposes are limited to land acquisition, judgment funding, or purchase of heavy equipment When secured by an ad valorem tax and are venue pledge, they can be issued for the same lawful purposes as GOs Sell at interest rates similar to GO bonds I&S tax rate to pay debt service is not subject to rollback
Some Financing Mechanisms • Uses the taxes collected on the incremental increase in property value caused by the development to repay the debt. • TIF district needs to be established by Council action. Best to coordinate with other taxing entities to maximize revenue. Tax Increment Financing (TIF) • MMD’s are created by the State Legislature at the request of cities. • They are allowed to establish a tax rate on top of the current city tax rate. • They use that additional tax revenue to repay debt. Municipal Management Districts (MMD)
Some Financing Mechanisms • Defined area within the City or it extraterritorial jurisdiction created by a Council action • Created to provide specific services or infrastructure into that area without the obligation of the community as a whole • Not based on assessed value • Not tax deductible Public Improvement Districts (PIDs) • Based on measured growth performance, incremental tax value increase, sales tax receipts, or other economic benefit for the incentive as payment to the developer Economic Development Incentives (380 Agreements)
Some of Your Key Partners • Cities can select a firm through an RFP/RFQ process. • Your financial advisors will coordinate the process for the bond sale. • They provide financial analysis, coordinate the meetings with the bond rating agencies, and collect, analyze and rank the bids from prospective bidders when you sell bonds. • They can also serve as your agent if you decide to do a negotiated sale. Financial Advisors • Cities require a legal counsel that specializes in the sale of municipal debt. • This service can also be selected through an RFP process, or the financial advisor may provide a list of qualified bond counsels to choose from. Bond Counsel
The Role of the Rating Agencies Three rating agencies – Standard and Poors, Moody’s, and Fitch. Typically for most sales cities obtain ratings from two of the agencies. The job of the rating agencies is to determine the quality of investment someone would make if they purchased your bonds. AAA is the highest rating followed by AA+, AA, AA- and so forth (Moody’s). (S&P uses Aaa, Aa+, Aa, etc.) Sometimes the rating agency will also include a comment regarding your city, e.g. Stable or Negative.
The Role of the Rating Agencies Rating agencies rate the quality of a city’s debt by evaluating the financial position of the city including fund balance history, looking at economic development activity and reviewing demographic/economic data about the community, e.g. per capita income, housing valuation trends, building permits. The rating then gives potential investors a sense of the level of risk involved in buying that city’s bonds. The higher the rating, the lower the risk, the lower the interest paid. Don’t try to hide anything from the bond rating agencies! They are looking for sound financial management practices. They want you to identify the challenges facing your city, but more important, they want to know you have a plan for addressing those challenges.
Where is your agency? 60
WARNING! • Are you aware of the rating agencies criteria? 61
True or False Test • CIP stands for Capital Improvement Plan 62 FALSE (and TRUE) • Don’t think of the CIP as a plan. • Look at it as a Capital Improvement PROGRAM. • A plan is just a schedule of projects. • A program can encompass many essential components to capital project construction: • funding sources • overall project schedules and sequencing • resource availability • project coordination
True or False Test • If a consultant is used to manage capital projects, there will be no drain on internal staff 63 FALSE • Hired professionals can relieve the work load on government staff compared to performing those same functions completely in-house. • However, someone still needs to manage the external consultants. • progress meetings to attend • invoices to review • change orders to consider
True or False Test • The CIP should just focus on a year’s worth of projects 64 False • Looking at a one-year window for any series of projects is misleading because very few capital projects can be completed within a single year. • Even those that can will extend across 2 years if initiated anytime after the start of the year. • A suggested way of developing the CIP is over a 5-year period (though some agencies may choose to go much further into the future). • Beyond the 5-year horizon, a “bullpen” of out-year projects that fall outside that window can be maintained. • Each year, as the CIP is updated, year 2 shifts into becoming the new year 1 with the rest of the CIP moving forward as well. • Projects from the out years are then brought forward to populate the new 5th year. • As the CIP is updated each year, projects can be moved back and forth and in and out of the program based on changes in priorities, funding, needs and so on.
True or False Test • All projects within a CIP must be fully funded to maintain the integrity of the program 65 FALSE • For a CIP that extends beyond a single year, typically funds have been ensured for the projects over the life of the program. • This will often lead to the CIP being referred to as “fully funded”. • Agency budgets are based on revenue projections. • Therefore, to refer to a 5+ year CIP as being fully funded is incorrect. • Instead, it is best of think of the CIP as being fiscally balanced. • According to the best estimates and projections of funds to be available, it is anticipated that there will be adequate money to cover all of the costs of the projects contained in the CIP.
True or False Test • The CIP should only include future construction projects to have any real value 66 FALSE • There can be value in the inclusion of other capital investments beyond just construction projects. • This is particularly helpful when you consider that these other investments compete for the same funds as construction projects. • It is advisable to establish a fiscal threshold for projects and expenditures that will be included in the CIP. A threshold in the range of $20,000 - $100,000 is a reasonable place to start. • Once this figure is established, the CIP can then include new purchases of equipment and vehicles that also fall above this established threshold. • fire trucks • backhoes • computer systems • You don’t necessarily want every new car purchase included in the CIP which is why setting the threshold is important.
True or False Test • The CIP should include all construction projects to have any real value 67 FALSE • To keep the CIP manageable, it is ideal to differentiate maintenance-related projects from new construction. • There is often separate funding set aside for O&M work vs. new projects. • Maintenance can often be performed with in-house staff rather than being contracted out, which again impacts operating funds rather than capital funds. • This theory of keeping the CIP dedicated to new construction can be applied to capital expenditures as well. • Rather than including the purchase of replacement vehicles and equipment in the CIP, it is best to limit it to new purchases that expand the current fleet or assets.
True or False Test • The CIP is just a “wish list” of projects that are desired without any real expectation of whether they will be completed or not 68 FALSE • Nothing could be further from the truth. • Too often, a CIP is considered a random list of projects that an agency “hopes” will be constructed…eventually. • Elected officials and constituents must be able to depend on the expected results of the CIP. • How much confidence will they have in the agency or its staff if projects are left in a state of uncertainty? • Our own staff must be able to plan and coordinate their efforts around a solid program that they can count on. • The CIP should be viewed as a road map to be followed each year, providing surety and predictability for all involved. • Though the map is redrawn each year as part of the update process, it should never lose its integrity.
Homework • Map out your capital improvement planning process and include everyone in the mapping process, use a facilitator if you wish • Write a practice with the resulting map that lays it all out so everyone on the team knows their roles and the associated timelines for each step • Evaluate the results after your next big initiative and do it again! 69
Reference Materials • CIP Spreadsheet • TPWA Presentation • Project Info Form • CIP Monthly Report • CIP Ranking System • GFOA Documents (2) 71 Contact Jim at jimproce@gmail.com

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Jim Proce - 2018 Capital Improvement Planning Process CPM Class

  • 1.
    Capital Improvement Planning Developinga Process for a Community Investment Program Rebuilding Infrastructure One Step at a Time! Looking to the future! Jim Proce ICMA-CM, APWA-PWLF, MBA Proce Municipal Management Services 1
  • 2.
    Why are youhere today? What would you like to talk about today? What is your involvement in your organization with regard to Capital Programs? Do you know your City’s programs, processes, or values? What questions do you have? 2
  • 3.
    Objectives Implement successful capital programsin your communities Navigate the political hurdles and obstacles often associated with Capital Improvement Planning Draft and implement a Capital Improvement plan for your community that will be sustainable through changes in leadership Understand all of the moving parts recognizing that this is a team effort with varying complexities 3
  • 4.
    CIP Presentation Agenda Backgroundon CIP Noting Typical Issues Define CIP in Terms that are Finite Discuss the Benefits of a CIP Planning Process Identify the Many Elements Required for a Successful CIP Organizing the Stakeholder's, Committees and City Council Support Discuss Infrastructure Inventory Assets and Identify Needs Preparing Financial Forecasts, Bond Elections and Project Estimates Compile Project Requests and Develop Criteria for Ranking Projects Drafting the CIP Documents; Which are Living Documents Identify & Discuss Various Public Outreach Methods Program Implementation, Financing and Other Considerations So What Else is There? You May Have Others? 4
  • 6.
  • 7.
    2006 Bond Electionand Subsequent Bond Sale On 5-13-06, City held a bond election for 4 projects totaling $31.5M Every item on the list failed 46 days later, on June 27, 2006, the City issued $38.3M in certificates of obligation, and over a 3 year period issued $107M The Bonds issued were not for those projects on the May ballot; however, many residents believed they were and were absolutely incensed Many residents felt disenfranchised by that election and hold residual resentment with the City This history comes up every time debt is considered 7
  • 8.
    City still had$100M as the bond programs were just getting kicked off New Council significantly reallocated the dollars to other priorities Seriously? Can Council reallocate dollars from past bond sales to new projects? Yes. If you issue debt other than general obligation bonds, you may not have the same level of commitment In 2011 there was still $50M and no CIP New Council Elected in 2007
  • 9.
    9 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 2014 2015 20162017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett Debt Service Schedule-Existing @ 12-31-13 Tax Rate Golf Refuse Drainage New City can use future freed-up tax rate to build a leveraged bond program
  • 10.
    Background (General) Local governmentsoften make significant capital expenditures including the issuing bonds Without first analyzing the impact such expenditures may have on future operations and expenditures for other important capital projects
  • 11.
    Background (General) A capitalplan is intended to assist in making choices Which projects should be implemented, how they should be financed and when
  • 12.
    CIP Defined Capital planningand budgeting is a complex process characterized by uncertain long term projections, political pressures, shortage of resources, demands on a wide range of expertise that requires both operational and financial know how Capital funds are: always limited, and the future is never certain. Structuring a balanced capital plan requires coordination of information, analysis of alternatives, and building consensus. Capital Projects are often categorized by projects/items with a cost of $XX dollars, have a lifespan of XX years or greater, and result in a long-term asset, typically buildings, infrastructure, and major equipment. 12
  • 13.
    CIP Benefits Allows for asystematic evaluation of all potential projects at the same time. Provides ability to stabilize debt and consolidate projects to reduce borrowing costs. Serves as a public relations and economic development tool. Focus on preserving infrastructure while ensuring the efficient use of public funds. An opportunity to foster cooperation among departments and an ability to inform other units of government of the entity's priorities. It is not uncommon for a neighboring city to incorporate into its CIP the capital needs of a special district, parks and recreation department, or some other partnership. 13
  • 14.
    CIP Benefits Terminates the adhoc policy of allocating resources to capital projects without regard to long-term impact on the government's available reserves and resources. Assures that the most important projects obtain funding. Integrates budgeting for day-to-day services and activities with budgeting for capital improvements. This insures that construction, acquisition, and operational needs are addressed. Assures that the most appropriate method of funding is selected (e.g. pay-as-you go or bonds. Also insures that when bonds are used the most appropriate type is selected.) Improves project planning and timing sequence. (e.g. Allows sufficient time to arrange and promote bond or tax referenda. Allows sufficient time to accumulate cash for pay-as-you go projects.) 14
  • 15.
    Important Elements ofa CIP 1 Projects and their phases - Design, construction, ROW purchase, etc 2 Project budgets 3 Funding sources - Bonds, grants, general fund, etc. 4 Assigned resources - Engineer, project manager, inspector, etc. 5 Project coordination and sequencing 6 Project and expenditure timelines 7 Financial Impacts - Operational, implementatio n (construction management), staffing 8 INTEGRITY
  • 16.
    Stakeholders and more… Identify stakeholders •Citizens •Departments •PublicWorks staff •Management •Council liaison •Committees •Boards and Commissions •Other partners Establish public process •Solicit public input •Achieve public support •Establish task force •Transparent process Task Force/Committee •CIP is a “Community Investment Program” •Education process •Specific duration •Specific focus •Provides recommendation Establish internal CIP committee •Establish duties of committee •Refine tracking process •Establish/improve weekly updates •Improve the schedules & estimates
  • 17.
    CIP Task Force/Committee Citizens Diversity Councilinput/approval Ground rules/agenda/minutes Alignment Naysayers Education/choices Transparency
  • 18.
    Internal CIP CommitteeDuties Establish a Capital Planning Committee/Task Force Take Inventory of Existing Capital Assets Evaluate Previously Approved, Unimplemented or Incomplete Projects Assess Financial Capacity Solicit, Compile, and Evaluate New Project Requests Prioritize Projects Develop a Financing Plan Adopt a Capital Improvements Program Monitor and Manage Approved Projects within the CIP Update Existing/Ongoing Capital Programs
  • 19.
    Two+ Year BondElection Calendar 24-36 months out Start talking about it during budget process and Council retreats TEST THE WATERS 24 months out - Engage Council on policy issues - Decide process to get citizen input on capital needs 12-24 months out - Educate on Council financial projections - Present strategic decisions - Identify conceptual needs - Create ad-hoc citizen committee 18 months out - Develop citizen input - Develop education and media plan - Choose and design input methods 12 months out - Finalize conceptual list ready for committee and citizen input - Conduct physical tours where possible 8-10 months out - Educate on public needs - Seek citizen input and educate public on needs 8 months out - Conduct citizen input - Execute chosen survey methods 5-6 months out - Finalize and adopt list of projects and ballot structure 3-4 Months Out - Call ballot - DETERMINE THESE DATES WELL IN ADVANCE! 2 months out - Continue to educate on issues - NEVER STOP TALKING! Election Day Get ready to implement! A successful bond election/referendum takes time! 19
  • 20.
    Utilize exist knowledge base Surveystaff for inputs on needs Utilize GIS hot spot identification Utilize citizen contact data Review existing master plans Review existing CIP Solicit public input through task force and other media available Inventory Assets & Identify Needs 20 Utilize exist knowledge base Survey staff for inputs on needs Utilize GIS hot spot identification Utilize citizen contact data Review existing master plans Review existing CIP Solicit public input through task force and other media available
  • 21.
    Project Needs Utilities • AClines replacements • Clay tile line replacements • Lift stations • Manholes • Pressure plane • Force main under lake • Looping systems • Fiber-optic network Streets • Alleys • Subdivisions • Sidewalks • Trails • Thoroughfares • Traffic improvements • Traffic signals • Stormwater • Bridges • Integrated Transportation Systems Equipment & Software • Replacement analysis • Additional equipment • Technology needs • GIS integration • HRIS • Fleet • Fire apparatus • Fiber-optic network lines Future facilities needs • Future locations • Storage needs • Inventory analysis • Integration of divisions • Current space allocation • Parks/open space • Fire facilities • Training facilities FAILING INFRASTRUCTURE & FUTURE NEEDS 21
  • 22.
    22 Where is all thatstuff? Providing all of the key stakeholder’s a physical tour of the all of infrastructure is a key investment of your time and efforts to ensure that they see and experience what the residents experience each and every day!
  • 23.
    2015 Project Needs Theinitial round of evaluations yielded 55 projects The total of these projects was over $117 Million In addition to the identified projects to be reviewed the staff identified: • $27M in alleys • $45M in roads • $42M in drainage projects • $12M in parks projects • $9M in public safety projects • $20M in public facilities The target for this initiative was $25M - $27M through potential bond Obviously the needs far outweigh the resources TODAY THE NUMBERS ARE YET EVEN BIGGER! 23 Total of $155 Million Unfunded Projects
  • 24.
    Community Investment AdvisoryBoard (CIAB) Title Amount Roads $TBD Alleys TBD Parks TBD Facilities TBD Total Amount Requested AS MUCH AS $250,000,000 The duties and responsibilities of the Community Investment Advisory Board include: • Providing recommendations to City Council on capital project priorities and project selection; • Providing guidance on strategic recommendations to the City Council with regard to capital projects; • Providing recommendations to City Council on guiding values for planning of capital projects; • Acts as an oversight committee and liaison to City Council regarding capital projects • Represents the City at public meetings and public outreach campaigns on the subject of capital projects. As much as $250M in needs may be identified – the current debt capacity without a tax increase can yield $75M proceeds – BUT it would take over 30 cents on the current tax rate to bond $250M! The CIAB has identified, reviewed, prioritized projects for: • Potential 2018 Bond Election • CIP Recommendations (5 year planning process) • Budget planning The CIAB has established: • Prioritization and ranking process for projects • Reporting processes for projects • Targets: $60M in 2018 2018? 24
  • 25.
    2018 Bond ElectionProjections 25
  • 26.
    26 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 2014 2015 20162017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett Debt Service Schedule-Existing @ 12-31-13 Tax Rate Golf Refuse Drainage New City can use future freed-up tax rate to build a leveraged bond program
  • 27.
    $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett CurrentTax Related Debt Service and Future Bonding Capacity Current Tax Supported Debt New Issue Series 2017 Future Capacity Growth Capacity CIP Bonding Capacity Additional tax value from future development also adds capacity in future years. Together, this means that Rowlett has the ability to seriously address infrastructure and facility needs in the future while keeping the tax rate steady at 22.6 cents. From Declining Debt From Future Growth
  • 28.
    $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 City of Rowlett HypotheticalLeveraged Bond Packages Current Tax Supported Debt New Issue Series 2017 New¹ New² New³ New⁴ Leveraged Bond Packages The City could best leverage the freed up bond capacity in a series of bond packages. Targeting off election years 2018, 2021, etc. 28
  • 29.
    Community Values – SettingCIP Priorities 1. CORE BUSINESS FUNCTIONS SUPPORTS FOUNDATION PROGRAMS NO CHOICE - LEGALLY BOUND - MUST DO 2. CORE BUSINESS FUNCTIONS CHOICES IN LEVELS OF SERVICES DELIVERY SUPPORTS PROACTIVE PROGRAMS HIGH EXPECTATIONS FOR SERVICE DELIVERY 3. QUALITY OF LIFE ISSUES SOME COMMUNITY CHOICES 4. COMMUNITY ADD-ON PROGRAMS THINGS WE LIKE TO DO! Community Expectations & Values defines what service is and what the level of that service is for our City! 4. Equipment Supporting Community Events, Landscaping & Irrigation Environmental 3. Libraries, Recreation, Parks, Playgrounds, Open Space 2. Public Safety Equipment, Infrastructure, Solid Waste 1. Mandates, Debt Service, Water & Sewer
  • 30.
    (On-Going) Strategy for Success GOALS 2015$27 Million 2018 $60 Million 3 Year Implementation and Project Delivery NO TAX INCREASE FOUNDATION Financial Stewardship Sound Planning Citizen Engagement Communications Community Goodwill Balanced Priorities Innovative Solutions Leveraging Opportunities Results Oriented Accountability to the Community PRIORITIES Transportation & Circulation Public Safety Existing Infrastructure Revitalization & Balanced Growth Quality of Life Regulatory Compliance External Funding Impact on Operational Budget Timing/Location Special Considerations 2015RESULTS Proposition 1 – Streets - $18.9 Million Proposition 2 – Parks - $4.2 Million Proposition 3 – Public Safety & Facilities - $2.6 Million The May 5, 2018 election passed using the same strategies which yielded $60M for public improvements!
  • 31.
    Establish Ranking Criteria Criteriamust be established which will be used as a guideline for prioritizing project funding. The criteria should be put in writing and distributed to each party involved in the capital planning process. The criteria established should facilitate ranking projects on a scaled priority basis with a strategic overview, based on core service needs vs. quality of life issues. 31
  • 32.
    Establish Ranking Criteria •Required by lawor specific court order •Required by contract •Improve public health and safety •Reduce current operating, maintenance or contractual expenses •Increase revenues •Contribute to job retention •Benefit all or a majority of the residents •Leverage other people’s money High priority projects may be those which are •Prevent deterioration of assets •Improve delivery of services to the public •Contribute to job creation •Project readiness •Public benefit •Operational benefit •May be non-essential but have a high degree of public support Medium priority projects may include those which •Support delivery of a service for which there is a declining demand •Enable the provision of a new service not currently provided •Improve the quality of life but are non-essential •Unique facilities •Community add-ons •Not a core service Low priority projects may include those which
  • 33.
    Weighted Ranking Criteria •Select & define criteria • Simple weighting (% of whole) • Scoring scale (1 to 10) (or whatever scoring you choose) 33 CRITERIA % Score (1 – 10) Points Quality of Life 20% 7 1.40 Infrastructure 15% 8 1.20 Economic Development 15% 7 1.05 Health & Public Safety 15% 6 0.90 Impact on Operational Budget 10% 5 0.50 Regulatory Compliance 10% 6 0.60 Timing & Location 10% 7 0.70 Special Considerations 5% 5 0.25 TOTAL PROJECT SCORE 6.60
  • 34.
  • 35.
    Projects Requests WHERE DO THEYALL COME FROM??? Staff, Citizens, Council, Master Plans, Comp Plans, Other Departments, other sources… Involves the preparation of forms to request capital funding for the repair, renovation, upgrading or replacement of assets identified through the inventory process. Requests are also made for the construction or acquisition of new capital assets. The staff committee reviews the requests for completeness. The requests provide an opportunity to present to the governing body (or task force) all capital projects deemed by departments to be desirable. Since project requests represent all projects desired, without consideration for financial capacity, compilation of the requests is often similar to a wish list. 35
  • 36.
    Projects Requests The informationincluded in the requests should facilitate the prioritizing of projects. Accordingly, the requests should include the following information: • Project Description: A description of the proposed construction project or the asset to be acquired. • Existing Condition: A description of the existing condition to be alleviated by the project. • Goals And Benefits: The goals and benefits to be derived through the construction or acquisition project. • Funding Schedule: The estimated cost of the project and the timing for funding. Project timing is based on the assessment of need by the department manager and may be changed through the prioritizing process. • Project Funding: Should identify whether the project will be funded by the governing body's own resources, through an intergovernmental grant or loan, or a combination of such sources.
  • 37.
    Projects Requests Additional considerationsthat must be identified include: • Annual operation or maintenance costs • Annual reductions in current operation and maintenance costs • Additional staffing, particularly when a new service is involved • Implementation costs; engineering, construction management, other internal impacts
  • 38.
    Projects Requests Additional considerationsthat must be identified include: • Annual operation or maintenance costs • Annual reductions in current operation and maintenance costs • Additional staffing, particularly when a new service is involved • Implementation costs; engineering, construction management, other internal impacts
  • 39.
  • 40.
    Drafting and Maintainingthe Plan This entire process requires continuous monitoring and revisions Living document subject to frequent change Revisions to plan to be published and brought before council Periodic reports, review financials, exceptions and top issues only Website enhancement to provide transparent information
  • 41.
    Evaluation of YourProgram • If you don’t have a process in place then start here: Debriefing at the end of projects, programs, or incidents is a powerful tool. A simple model can look like this… 1. What went well? 2. What went poorly? 3. What could we do better? 4. What did we learn? 5. Actions for follow-up? • There are many other models out there and some more formal models or requirements may exist in your agencies 41
  • 42.
    42 The Plan, theForms, the Reports…
  • 44.
  • 45.
    Public Outreach Outreach Efforts • http://www.mindmixer.com/ •http://www.politically-direct.com/ • http://www.granicus.com/solutions/citizen- participation/ • http://yournorthport.com/ • http://www.engagedenton.com/ • http://telephonetownhallmeeting.com/ • Branding Efforts • Marketing Plans • Communication Plans • Social Media, Website Development 45
  • 46.
    CIP Public Outreach InformationalNewsletter Mailed to Everyone Something for Everyone Numerous Info Meetings and a Telephone Town Hall Meeting Website with Informational Videos Interactive Map with Detailed Information on Every Project
  • 47.
    47 74% 16% 10% 2015 BOND ELECTIONPROJECT BREAKDOWN PROPOSITION 1 - STREETS - $18,932,340 PROPOSITION 2 - PARKS - $4,206,110 PROPOSITION 3 - PUBLIC SAFETY - $2,631,050 TOTAL = $25,769,500
  • 48.
  • 49.
    Funding Options? • RevenueBonds • Stormwater • Other people’s money • Leveraging • Smaller projects • Items that are not long term assets • Multiple types of debt instruments Bonds & Debt Out of Pocket; Cash Special Funds; Enterprise; Utilities Grants; Donations 49
  • 50.
    Financing Capital Improvement Programs How do wepay for it? What tools do we have at our disposal? What partnerships will you need? What policies will you need to have in place? How many of you know the answers to these questions in your organization?
  • 51.
    DEBT Debt is nota 4 letter word… well it is but… What are the benefits of issuing debt? 51 WARNING: POLICY ISSUE
  • 52.
    There are severaloptions available to cities for financing capital projects. These include: Pay-as-you-go – These are typically for “maintenance” projects, e.g. concrete panel replacement Certificates of Obligation – Council approval needed General Obligation bonds – Require voter approval through a bond election. Revenue bonds – Usually for Enterprise Funds, e.g. Water and Sewer systems – Council approval Financing Alternatives
  • 53.
    GOs – GeneralObligation Bonds Requires bond election for authorization Issued for any public purpose • Real Property • Personal Property • Legal Judgment • Land Acquisition Amortization not to exceed 40 years Secured by issuer’s ad valorem taxing power • Viewed as City’s most secure obligation • Texas General Law City (under 5,000 population) -up to $1.50 tax ($1.00 I&S) • Texas Home Rule City (over 5,000 population) -up to $2.50 tax ($1.50 I&S) as determined by City Charter Attracts lowest interest rate I&S tax rate to pay back debt service is not subject to rollback
  • 54.
    COs – Certificatesof Obligation Requires no voter authorization •A petition signed by 5% of the registered (Texas) voters can force an election Notice of Intent to Issue is required •Published in the local paper on the same day of two consecutive weeks •First publication must be at least 30 days prior to sale date When secured solely by ad valorem taxes available purposes are limited to land acquisition, judgment funding, or purchase of heavy equipment When secured by an ad valorem tax and are venue pledge, they can be issued for the same lawful purposes as GOs Sell at interest rates similar to GO bonds I&S tax rate to pay debt service is not subject to rollback
  • 55.
    Some Financing Mechanisms •Uses the taxes collected on the incremental increase in property value caused by the development to repay the debt. • TIF district needs to be established by Council action. Best to coordinate with other taxing entities to maximize revenue. Tax Increment Financing (TIF) • MMD’s are created by the State Legislature at the request of cities. • They are allowed to establish a tax rate on top of the current city tax rate. • They use that additional tax revenue to repay debt. Municipal Management Districts (MMD)
  • 56.
    Some Financing Mechanisms •Defined area within the City or it extraterritorial jurisdiction created by a Council action • Created to provide specific services or infrastructure into that area without the obligation of the community as a whole • Not based on assessed value • Not tax deductible Public Improvement Districts (PIDs) • Based on measured growth performance, incremental tax value increase, sales tax receipts, or other economic benefit for the incentive as payment to the developer Economic Development Incentives (380 Agreements)
  • 57.
    Some of Your Key Partners •Cities can select a firm through an RFP/RFQ process. • Your financial advisors will coordinate the process for the bond sale. • They provide financial analysis, coordinate the meetings with the bond rating agencies, and collect, analyze and rank the bids from prospective bidders when you sell bonds. • They can also serve as your agent if you decide to do a negotiated sale. Financial Advisors • Cities require a legal counsel that specializes in the sale of municipal debt. • This service can also be selected through an RFP process, or the financial advisor may provide a list of qualified bond counsels to choose from. Bond Counsel
  • 58.
    The Role ofthe Rating Agencies Three rating agencies – Standard and Poors, Moody’s, and Fitch. Typically for most sales cities obtain ratings from two of the agencies. The job of the rating agencies is to determine the quality of investment someone would make if they purchased your bonds. AAA is the highest rating followed by AA+, AA, AA- and so forth (Moody’s). (S&P uses Aaa, Aa+, Aa, etc.) Sometimes the rating agency will also include a comment regarding your city, e.g. Stable or Negative.
  • 59.
    The Role ofthe Rating Agencies Rating agencies rate the quality of a city’s debt by evaluating the financial position of the city including fund balance history, looking at economic development activity and reviewing demographic/economic data about the community, e.g. per capita income, housing valuation trends, building permits. The rating then gives potential investors a sense of the level of risk involved in buying that city’s bonds. The higher the rating, the lower the risk, the lower the interest paid. Don’t try to hide anything from the bond rating agencies! They are looking for sound financial management practices. They want you to identify the challenges facing your city, but more important, they want to know you have a plan for addressing those challenges.
  • 60.
    Where is youragency? 60
  • 61.
    WARNING! • Are youaware of the rating agencies criteria? 61
  • 62.
    True or FalseTest • CIP stands for Capital Improvement Plan 62 FALSE (and TRUE) • Don’t think of the CIP as a plan. • Look at it as a Capital Improvement PROGRAM. • A plan is just a schedule of projects. • A program can encompass many essential components to capital project construction: • funding sources • overall project schedules and sequencing • resource availability • project coordination
  • 63.
    True or FalseTest • If a consultant is used to manage capital projects, there will be no drain on internal staff 63 FALSE • Hired professionals can relieve the work load on government staff compared to performing those same functions completely in-house. • However, someone still needs to manage the external consultants. • progress meetings to attend • invoices to review • change orders to consider
  • 64.
    True or FalseTest • The CIP should just focus on a year’s worth of projects 64 False • Looking at a one-year window for any series of projects is misleading because very few capital projects can be completed within a single year. • Even those that can will extend across 2 years if initiated anytime after the start of the year. • A suggested way of developing the CIP is over a 5-year period (though some agencies may choose to go much further into the future). • Beyond the 5-year horizon, a “bullpen” of out-year projects that fall outside that window can be maintained. • Each year, as the CIP is updated, year 2 shifts into becoming the new year 1 with the rest of the CIP moving forward as well. • Projects from the out years are then brought forward to populate the new 5th year. • As the CIP is updated each year, projects can be moved back and forth and in and out of the program based on changes in priorities, funding, needs and so on.
  • 65.
    True or FalseTest • All projects within a CIP must be fully funded to maintain the integrity of the program 65 FALSE • For a CIP that extends beyond a single year, typically funds have been ensured for the projects over the life of the program. • This will often lead to the CIP being referred to as “fully funded”. • Agency budgets are based on revenue projections. • Therefore, to refer to a 5+ year CIP as being fully funded is incorrect. • Instead, it is best of think of the CIP as being fiscally balanced. • According to the best estimates and projections of funds to be available, it is anticipated that there will be adequate money to cover all of the costs of the projects contained in the CIP.
  • 66.
    True or FalseTest • The CIP should only include future construction projects to have any real value 66 FALSE • There can be value in the inclusion of other capital investments beyond just construction projects. • This is particularly helpful when you consider that these other investments compete for the same funds as construction projects. • It is advisable to establish a fiscal threshold for projects and expenditures that will be included in the CIP. A threshold in the range of $20,000 - $100,000 is a reasonable place to start. • Once this figure is established, the CIP can then include new purchases of equipment and vehicles that also fall above this established threshold. • fire trucks • backhoes • computer systems • You don’t necessarily want every new car purchase included in the CIP which is why setting the threshold is important.
  • 67.
    True or FalseTest • The CIP should include all construction projects to have any real value 67 FALSE • To keep the CIP manageable, it is ideal to differentiate maintenance-related projects from new construction. • There is often separate funding set aside for O&M work vs. new projects. • Maintenance can often be performed with in-house staff rather than being contracted out, which again impacts operating funds rather than capital funds. • This theory of keeping the CIP dedicated to new construction can be applied to capital expenditures as well. • Rather than including the purchase of replacement vehicles and equipment in the CIP, it is best to limit it to new purchases that expand the current fleet or assets.
  • 68.
    True or FalseTest • The CIP is just a “wish list” of projects that are desired without any real expectation of whether they will be completed or not 68 FALSE • Nothing could be further from the truth. • Too often, a CIP is considered a random list of projects that an agency “hopes” will be constructed…eventually. • Elected officials and constituents must be able to depend on the expected results of the CIP. • How much confidence will they have in the agency or its staff if projects are left in a state of uncertainty? • Our own staff must be able to plan and coordinate their efforts around a solid program that they can count on. • The CIP should be viewed as a road map to be followed each year, providing surety and predictability for all involved. • Though the map is redrawn each year as part of the update process, it should never lose its integrity.
  • 69.
    Homework • Map outyour capital improvement planning process and include everyone in the mapping process, use a facilitator if you wish • Write a practice with the resulting map that lays it all out so everyone on the team knows their roles and the associated timelines for each step • Evaluate the results after your next big initiative and do it again! 69
  • 71.
    Reference Materials • CIPSpreadsheet • TPWA Presentation • Project Info Form • CIP Monthly Report • CIP Ranking System • GFOA Documents (2) 71 Contact Jim at jimproce@gmail.com