Staff concurs with the Financial Advisory committee's recommendation that it would be fiscally prudent to establish a funding methodology for the CIP program. Staff recommends the following CIP funding practices:
1. An evaluation of long-term financial
commitments of new projects or initiatives should be performed. The evaluation
should include initial capital costs for acquisition and construction, as
well as the impact on operating costs. The evaluation of operating costs should
include the changes in operating and maintenance costs, additional workforce
requirements, productivity and risk management considerations.
2. Designate no more than three cents of the tax rate for CIP funding each
year. This would have generated approximately $1.1 million in FY2003. The
City's FY2003 Adopted Budget included a transfer of $1.17 million for funding
of the CIP program.
The following graph illustrates the amounts transferred from the General Fund
to the Capital Projects Fund since FY1993. The average amount transferred
during the time period of FY1993 through FY2003 was $2,034,000. The Senior
Center and Gymnasium were built during FY2000 and FY2001 and required significant
transfers from the General Fund for their construction.
3. General Fund reserves in excess
of the 25% fund balance policy are available, if needed, for CIP funding purposes.
The amount of the reserves used would be in addition to the designated 3 cents
of the tax rate.
4. One-time revenues would be used for CIP funding purposes. Examples of one-time
revenues include: proceeds from land sales, capital grants and other infrequent,
non-recurring revenues. The "Recommended Practices for State and Local
Governments" approved by the Government Finance Officers Association
discourages the use of one-time revenues for ongoing expenditures.
5. Continue to use a "pay-as-you-go" philosophy to fund CIP projects.
6. Establish maintenance and replacement schedules for the inevitable aging
and obsolescence of public facilities and set aside funds on an annual basis
for the eventual repairs or replacements. Examples of major maintenance items
include: roof replacements, heating ventilation and air conditioning system
replacements, electrical improvements, and other major rehabilitations to
City facilities. The City's Equipment Acquisition and Replacement Fund currently
serves this same purpose for equipment.
7. Use debt sparingly.
(B.) Process for early identification/discussion/prioritization, requiring
super majority for deviation
Some municipalities conduct budget retreats between Council and staff. These
retreats are usually held prior to the budget process. These meetings allow
the organization to review current priorities and long-term plans and commitments.
Staff recommends conducting a budget retreat with Council in November of each year. The budget calendar listed in the Adopted Budget includes a November roundtable meeting between Council and staff. However, this meeting was not held this year. The budget retreat would provide for discussion of the factors that may affect the ensuing budget cycle, such as the current economic climate, revenue outlook, community expectations and program requirements. Also, the retreat would provide an opportunity to review the current CIP and reaffirm the City's commitment towards the projects listed. Staff would present a prioritized list of the current capital projects to Council at this time. Suggested revisions to the current CIP could be proposed by Council or staff.
The FAC had suggested requiring a super majority vote of the members of Council for deviation to the CIP program. Hopefully, the additional time provided for review will reduce the number of revisions made to the CIP during the April and May budget work sessions. Implementation of a super majority process for the CIP would be a precedent setting procedure for Council and, if approved, has the potential of being applied in a much broader scope. It could be argued that other important actions taken by the Council should also be held to this same super majority requirement.
The City Charter requires a majority vote by members of Council for all City actions with the exception of two provisions. Section 12. Procedure for enacting ordinances, of the City Charter includes one provision that allows for a unanimous vote of Council to suspend the normal waiting period requirement for enactment of an ordinance and a second provision that, upon the two-thirds vote of Council, provides for an emergency ordinance to take effect on a date earlier than the normal 30 day requirement. Enactment of a super majority voting requirement for deviations to the CIP program may require a Charter amendment. This would need to be referred to the City Attorney if Council desires to pursue.
(C.) Criteria for alternative voter
input (surveys - referenda)
It may be helpful to review the many ways in which voters' input is incorporated
into the budget and CIP process:
1. Direct telephone and email contact between the residents and Council or staff is available.
2. City committees' are requested for their input prior to the formulation of the budget and CIP. On occasion, various City committees have conducted surveys and polls when it was determined to be necessary.
3. City personnel work very closely with the committees and other residents. Many suggestions for the capital projects are the result of discussions between residents and staff.
4. The City budget is presented to Council between the 10th and 15th of April each year. There are typically at least five budget work sessions held. The work sessions are open to the public and are televised live and rebroadcast later in the same week. Public hearings are held during the next five weeks which provide for additional citizen and committee input. The proposed budget is available to the general public via several media, including printed copies, CD format and electronically on the City's website. Budget meeting notices are advertised in the local newspapers and on the City's cable television station. The local newspapers cover each budget meeting during this time period also.
In the past, the City has conducted surveys and held advisory referenda, when determined appropriate. Staff recommends that this procedure be followed in the future and believes that additional expenditures for referendums, surveys and polls would not significantly increase the amount of voter input into the CIP process.
Furthermore, the adoption of the previously stated staff recommended practices for Capital Improvement Program funding will automatically result in prioritization and analysis currently not performed. It is felt that these additional steps will address many of the Financial Advisory Committee's concerns.
Staff submits these recommendations for Council's consideration and stands ready to assist in the deliberations of this topic. Since the preparation of the Proposed FY2004 Budget is nearing completion, all of the suggestions contained in this report are prospective, and to the extent that policies and/or procedures are altered, most of those changes would not be effective until the FY2005 budget process.
DJD/RSP/lbg