Loading...
HomeMy WebLinkAbout23. 22-111MARCH 8, 2022 22-111 RESOLUTION (CARRIED___7-0____LOST_______LAID OVER_______WITHDRAWN_______) PURPOSE: APPROVE THE REVISED CAPITAL IMPROVEMENT PLANNING PROCESS POLICY AND CAPITAL IMPROVEMENT BUDGET POLICY INITIATED BY: FINANCE DEPARTMENT WHEREAS, the Long Range Finance Committee reviewed the current Capital Improvement Planning Process and Policy and determined the need for the current policy to be updated; and WHEREAS, the Long Range Finance Committee recommends that in addition to the Capital Improvement Planning Process and Policy, that a Capital Improvement Budget Policy be adopted; and WHEREAS, the proposed policies ensure that the City maintains a process to create and adopt a Capital Improvement Plan in an effective and efficient manner. NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Oshkosh that the attached "Capital Improvement Planning Process and Policy" along with the attached “Capital Improvement Budget Policy” are hereby approved and the proper City officials are hereby authorized and directed to take those steps necessary to carry out the City's responsibilities under the Policies as adopted. Finance Department City Hall, 215 Church Avenue P.O. Box 1130 Oshkosh, WI 54903-1130 920.236.5005 http://www.ci.oshkosh.wi.us TO: Honorable Mayor and Members of the Common Council FROM: Russ Van Gompel, Director of Finance DATE: March 1, 2022 RE: Approve the Revised Capital Improvement Planning Process and Policy and Capital Improvement Budget Policy BACKGROUND As part of its mission to research, study, and address the capital improvement process of the City, the Long Range Finance Committee has been reviewing and updating the current Capital Improvement Planning Process and Policy. The Long Range Finance Committee also reviewed and is recommending the addition of a Capital Improvement Budget Policy. The Long Range Finance Committee initiated their review in July 2021 and concluded its review at their August 4, 2021 meeting. ANALYSIS The Committee determined the need for updating the current Capital Improvement Planning Process and Policy and reviewed the format of the current policy and the format of other recent financial policies. The main components, including the useful life of assets were not changed. The purpose of the attached policy is to acknowledge and formalize current practices and ensure the administration and the continuity of responsible capital improvement planning. This policy ensures that the City maintains a process to create and adopt a Capital Improvement Plan in an effective and efficient manner. It also provides written guidelines so that all stakeholders, both internally and externally, understand the Capital Improvement Planning process. RECOMMENDATION The Long Range Finance Committee recommends the Council adopt the attached Investment Policy. Respectfully Submitted, Approved: Russ Van Gompel John Fitzpatrick Director of Finance Assistant City Manager SUBJECT: CAPITAL IMPROVEMENT PLANNING PROCESS & POLICY General: The intent of the capital improvement planning process and policy is to insure that the City of Oshkosh has set in place a long-term plan regarding improvements and replacement of buildings, equipment, parks, and public infrastructure, including its utilities. It is prudent that management have a process where these items are reviewed and scheduled to be replaced outside of and prior to the annual budget process. A formally adopted policy will provide a decision making process based on evaluation, selection, and multi-year scheduling of capital projects. Policy Management: • The City Council must approve a ten-year capital improvement plan that is updated annually. • The ten (10) year capital improvement plan will include consideration of major equipment replacement needs as well as any other projects or future capital expenditures. • The City Council will hold at least one Capital planning workshop. The meeting is an open meeting under Wisconsin Statutes and the Council shall provide the opportunity for public input at this meeting. • The Capital Improvement Planning process will begin at a staff level in March and the Capital Planning workshop(s) should be expected to occur in June. • The first year of the ten-year capital improvement plan with consideration of any changes will be rolled into the current year capital improvement budget during the annual operating budget process. Strategic Plan The City of Oshkosh adopts a new Strategic Plan every two years that provides a “roadmap” for the City’s future. Depending on internal and external circumstances, the Strategic Plan contains several priority goals for the City to undertake. Each goal is intended to support the larger vision for the City and to point the way of progress toward that vision. The goals of the Strategic Plan are incorporated in the annual Capital Improvement Program development process, providing City staff the framework in which to allocate resources to meet the goals. Definitions Capital Outlay – Individual items with minimum value of at least $5,000 and life greater than one year (Included in operations budget). Capital Project – Individual items with minimum value of at least $10,000 and has expected life of at least ten years. (Not included in operations budget). Capital Improvement Plan (CIP) – A comprehensive schedule or program of approved capital improvement projects. The plan shall be for a ten-year period. The plan shall be annually revised and shall meet borrowing guidelines provided by the Common Council for the first two years of the plan. The remaining seven years will provide an estimate of the financial resources needed to complete the plan. Capital Improvement Budget – The first year or current planned expenditures of the ten-year CIP which will; be funded as part of the operating budget for the City for capital outlays. Useful Life Policy All City assets will be assigned a useful life as a means to plan for capital project expenditures, as well as meet Governmental Accounting Standards Board’s (GASB) Statement 34 which requires state and local governments to depreciate their exhaustible capital assets, including infrastructure. The term “useful life” will be determined by either accepted standards & practices and/or best estimate based on industry or prior experience(s). Recommended estimates for “useful life” are as follows: Buildings and Building Improvements Buildings Found/Frame/Structure 40 years Building Improvements 20 years Infrastructure Roads & Highways (includes curb & gutter) Sealcoats 3 years Asphalt (Cold-Mixed) 5 years Asphalt (Hot-Mixed) 12 years Concrete Pavement 25 years Sewer Mains, Lift Stations 50 years Sanitary Mains 50 years Storm Mains 40 years Sidewalks 20 years Street Lights 30 years Water Mains 75 years Water System 40 years Wells & Pump Houses 30 years Land/Land Improvements Land No Depreciation Athletic Fields, Bleachers 15 years Benches, Tables, Grills 5 years Fencing, Gates 20 years Landscaping, Ball Park 25 years Outdoor Equipment 20 years Outdoor Lighting 20 years Parking Lots 25 years Paths and Trails 25 years Retaining Walls 20 years Tennis & Basketball Courts 20 years Machinery and Equipment Business/Office Equipment 8 years Custodial Equipment 5 years Fire Department Equipment 7 years Furniture 15 years Grounds Equipment – Mowers 7 years Kitchen Equipment – Appliances 10 years Mounted Equip w/Truck Chassis 8 years Outdoor Equipment – Playgrounds 20 years Plazas and Pavilions 40 years Radio Communications 7 years Water Meters 20 years Vehicles Squad Cars 4 years Transit Buses 10 years Cars, Light Trucks & Vans 10 years Heavy trucks (more than 13,000lbs) 10 years Fire Trucks 15 years Heavy Equipment-Loaders, Graders 10 years Funding Plan: Delaying capital maintenance and replacement of equipment results in higher future costs and decreased resident service and quality of life. The City recognizes that large increases to property taxes are not desirable and has adopted this Policy and the Capital Improvement Budget Policy to provide for annual review of buildings and equipment to allow for planned expenditures. • As part of the annual capital improvement plan process, the Finance Director will develop for consideration by the City Council a target for changes in the property tax levy necessary for debt service in subsequent budget years. Such target will be used to develop guidelines for the level of borrowing to be used in supporting the annual capital improvement budget. The target will be based on a combination of factors including, but not limited to, expected growth in tax base, inflation rates, or similar factors. The borrowing target may be exceeded with the approval of a 2/3 majority of the City Council. • The City desires to fund items that are not financed by debt through annual operating revenues. o The City designed a ten-year funding plan, which shows how the desire above can be reached. o The plan uses a combination of reserves on hand, incremental tax levy increases of 3% and debt service tax levy that will become available in future years to fund annually recurring purchase requests. o The ten-year plan calls for these funds to be relied on over the next several years, then builds the reserve balance back up slightly. The use of these reserves will allow the City to gradually increase the tax levy to fund these purchases rather than including large one-time jumps. Procedures: 1. The City begins the capital planning process by summarizing all existing capital assets including equipment, buildings, and infrastructure assets purchased with an individual value more than $5,000. This inventory listing includes the year the asset was purchased, estimated life, and estimated replacement year. 2. A review of the CIP policy and the analysis of available and acceptable funding levels for projects in the CIP will be conducted in January and February prior to the distribution of the Budget Preparation Calendar. 3. Department heads then complete a capital needs assessment. Departments will be provided with a listing of capital assets for their review and updates. One part of that assessment is to review their existing asset inventory and ensure that assets needing replacement during the next ten years are requested. Departments can also consider requests from their respective Board or Commissions. 4. The Budget Preparation Calendar will be prepared by the Finance Department and distributed to the City Manager, City Council, and Department Heads in March of each year. 5. Submission of project requests covering a ten-year period are delivered to the Finance Director by the middle of May. The Finance Department will assemble the requests for internal meeting by the end of May. The preliminary or Draft CIP is created. The Plan Commission will review the Draft CIP to assure it is consistent with the City’s Comprehensive Plan. 6. Once all capital purchase requests are received by the Finance Director, they are split into three groups. Non-Debt Financed Purchase Requests: Non-debt financed purchase requests can be thought of as falling into one of three categories: annually recurring, smaller dollar purchases or shorter-lived assets. The City desires to finance those purchases which recur annually through annual revenues rather than borrowed funds. This method allows for tax rate stabilization and lower debt service payments due to fewer borrowings. The City also desires not to borrow for lower cost assets as the cost of financing can become too high in comparison to the asset’s overall value. In some cases, it is the combination of dollar amount and asset life that results in the asset being shown within this category. Debt Financed Purchase Requests: Debt financed purchase requests are higher cost, more infrequent purchase requests. Due to the infrequency of purchase, paying for these assets with annual operating funds would lead to a tax rate which may fluctuate significantly from one year to the next. In order to maintain tax levy stability, the City plans to finance these purchases with long-term debt. Stormwater, Sanitary Sewer, and Water Utility Purchase Requests: These requests are primarily for infrastructure improvement that relate to one of the City’s utilities. The costs of these assets may be financed through user fees and funds on hand or the issuance of long-term debt. If debt financing is used the debt will be repaid through user fees of that utility, rather than through the general tax levy. 7. The Finance Director and City Manager will meet with the Department Heads to review project requests to verify that they are in line with the City’s overall goals and prioritize or rank the projects to meet the City goals and Strategic Plan. These meeting will occur during the month of June 8. The Finance Director and City Manager then present a draft ten year Capital Improvement Plan to the City Council for their consideration at a Capital Planning workshop held at the end of June or early July. 9. The ten-year Capital Improvement Plan will be presented to the Plan Commission in August to ensure that the plan aligns with the City’s Comprehensive Plan. 10. The Capital Improvement Plan will be scheduled for Council approval at the second meeting in August. 11. Once the Capital Plan has been approved, the first year of the Capital Improvement Plan will be rolled into the Capital Improvement Budget and with will go through further review during the annual operating budget process. CIP Ranking Process Thirteen evaluation criteria have been developed to assist with prioritizing initial project requests. Each project included in the CIP will be evaluated against this criterion. This ensures the most objective process possible and leads to consistent decision making. The scoring which is derived from the tools below will assist the City Manager in prioritizing and preparing the final CIP plan. Every project is evaluated against each criterion and assigned points on a scale of 15, 10, 5, or 0. The project review criterion consists of the following categories:  Conformity to Approved City Strategic Plan or Department Plan(s)  Financial Commitments and Leverage of Outside Funding  Mandates  Public Health and Safety  Implementation Feasibility  Operating Budget Impact  Percentage of Population Served  Project/Item Life  Estimated Frequency of Use (Ave Per Year)  Service Level  Linkages to Other CIP Projects or Other Organization Projects  Infrastructure Investment/ Protection  Encouragement of Economic Development The City Manager also reserves the right to assess an extra 5 points per project. SUBJECT: CAPITAL IMPROVEMENT BUDGET POLICY General: The City of Oshkosh has a substantial investment in buildings, equipment, parks and public infrastructure, including its utilities. Prudent management of these investments is the responsibility of City government. In order to fulfill this responsibility but remain within fiscally prudent parameters, the City has enacted this policy for development of the Capital Improvement Budget. This policy applies to all capital budgets of the City, including general City functions (tax-funded debt) and utility funds. Procedures: A. Budget Considerations 1. The City will enact an annual Capital Improvement Budget based upon a ten-year Capital Improvement Plan. 2. The City will coordinate development of the annual Capital Improvement Budget with the development of the operating budget. Future operating costs associated with new capital improvements or major equipment purchases will be projected and included in the operating budget. Approval of the annual Capital Improvement Budget shall take place at the same time as approval of the annual operating budget. 3. As part of the annual capital improvement plan process, the Finance Director will develop for consideration by the City Council a target for changes in the property tax levy necessary for debt service in subsequent budget years. Such target will be used to develop guidelines for the level of borrowing to be used in supporting the annual Capital Improvement Budget. The target will be based on a combination of factors including, but not limited to, expected growth in tax base, inflation rates, or similar factors. The borrowing target may be exceeded with the approval of a 2/3 majority of the City Council. 4. Utility projects not funded via special assessments, grants, or similar funding sources other than utility rates will be analyzed for future rate impacts as part of the annual capital improvement plan process. Utility projects will be coordinated with City projects to minimize costs and inconvenience to the residents. 5. Development-related projects for which tax incremental financing might be considered will be considered outside of the borrowing targets noted above due to the dedicated revenue stream (tax increments or other sources) used to pay the debt. 6. Each Department Head will develop the annual capital improvement plan for his or her respective department. The projects approved for the current year in the Ten Year Capital Improvement Plan will be rolled into the Capital Improvement Budget. 7. To meet the targets established by the City Council, projects, particularly those to be funded via borrowing, will be reviewed and prioritized by the City Manager, and coordinated by the Finance Director prior to being presented to the City Council for approval. 8. Capital improvement expenditures shall include any amounts expended for equipment or other assets with a useful life of five years or more and/or which involve amounts more than $5,000. Expenditures not meeting these criteria, or which have a useful life of less than the payback period of the funds to be borrowed, shall be included in the City’s annual operating budget as applicable. 9. Facility improvement projects are subject to the dollar and useful life thresholds indicated above. In addition, facility projects to be included in the capital improvement budget should involve major renovations that change the floor plan, wall locations, modifications to the structure, or modifications to building mechanical systems. Items that do not meet these criteria should be included in department operating budgets. 10. The City will make all capital improvements in accordance with the approved annual Capital Improvement Budget. Any variance from the approved budget that would require a supplemental appropriation, or to add, delete or substitute projects, requires the approval of the City Council. B. Financing Considerations 1. The City will utilize the least costly advantageous financing method for all new projects. 2. Each department will identify the estimated costs and potential alternate funding sources for each capital improvement project proposal. 3. The City will utilize available grant funds and other intergovernmental assistance to finance those capital improvements that are consistent with the Capital Improvement Plan and the City’s priorities. C. Other Considerations 1. The City will maintain all of its assets at a level adequate to protect the City’s capital investment and to minimize future maintenance or replacement costs. 2. The City will maintain adequate equipment utilization and maintenance records to support its Capital Improvement Plan and to assure proper maintenance of equipment.