3aiii - Debt PresentationCapital Planning
Joint Use Operations Facility
Presented by:
EJ Walsh, PE
Public Works Director
2023-2024 Biennial Budget
Presentation Overview
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2023-2024 Biennial Budget
Overall Process and schedule
Review of Costs
Funding
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2023-2024 Biennial Budget
Overall Task Schedule
Site Selection:
Identify and analyze potential sites, financial analysis, mitigation requirements
Design:
Environmental, Site Design, Building Design, Mitigation Design
Construction:
Construction of mitigation and facility
Occupancy
Preferred Site
Selection
Today
Adoption of Site
Selection Criteria
Overlapped Timeline
Review of Costs
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2023-2024 Biennial Budget
Base Cost (includes functions provided today): $34,000,000
Includes:
Design and Permitting costs
Onsite Construction costs
Mitigation costs
Excludes:
Incorporation of Fueling, Fleet Operations, Sign Maintenance and Signal Maintenance
Purchase of land
Review of Costs
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2023-2024 Biennial Budget
Expanded items:
Fueling $750,000
Permitting, Site Improvements
and Infrastructure $484,150
Tanks, Pumps, Controls $177,850
Control System $88,000
Fleet Operations $4,201,000
Permitting, Site Improvements $3,360,800
Infrastructure $840,200
Sign Maintenance $755,000
Permitting, Site Improvements $151,000
Infrastructure $604,000
Signal Maintenance $755,000
Permitting, Site Improvements $151,000
Infrastructure $604,000
Review of Costs
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2023-2024 Biennial Budget
Land Costs:
Purchase of land was not included within presented costs
Original assumption was to surplus the existing property (valued at $6,000,000)
Ongoing discussion about retaining that property for Park use
Parks would need to ‘buy-out’ SWM and Streets (valued at $4,000,000)
Funding analysis has been prepared with both options
No decision is currently needed to keep or surplus
Review of Costs - Summary
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2023-2024 Biennial Budget
Base Cost (includes functions provided today): $34,000,000
Fueling: $750,000
Fleet Operations: $4,201,000
Total: $38,951,000
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2023-2024 Biennial Budget
Funding – Base Functions
Funding – Base Functions
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2023-2024 Biennial Budget
Difference in cost is surplus of existing property
Payment from Parks to convert existing facility to a Park
Payment to SWM / Streets
Funding – Bonds
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2023-2024 Biennial Budget
Bond Assumptions:
Term 20 year
Rate 3.5%
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2023-2024 Biennial Budget
Fueling Capital Cost: $750,000
City pays $85,000+ per year in fuel surcharge fees
10 year payback AND added security and redundancy
Fleet Operations: $4,201,000
City pays $220,000+ per year in overhead fees
Payback is 17 years AND increase in level of service in fleet maintenance
Additionally capability and responsiveness during emergency operations
Funding – Fueling & Fleet Operations
Funding – Fueling & Fleet Operations
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2023-2024 Biennial Budget
Fleet Bond:
Funding – Bond Summary
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2023-2024 Biennial Budget
Preferred Site 2 - Sell Existing Shop Property:
Preferred Site 2 - Keep Existing Property
for Future Park use:
No decision needed at this time
Budget Summary
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Project is included within Fund 306 (page 59)
Project ID #610
Planning and Design funds included in 2022 and 2023
Shown as budgeted with bonds for construction starting in 2024
Budget Summary – Future Steps
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2023-2024 Biennial Budget
Council will need to authorize procurement of bonds (future action)
Council will need to determine if the City should keep or surplus the existing facility site (future action)
Council will need to authorize bidding of the project (future action)
2023-24 Budget
Debt
2023-2024 Biennial Budget
Debt capacity
Budgeted debt service
Avoiding unnecessary debt
Infrastructure financing plan
I’d like to widen the discussion on debt for the maintenance shop to the city’s debt picture in general
I want to look at these four things [ read bullets and advance ]
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Debt Status
Legal Debt Capacity is quite large (p. 52), $186.6 million councilmanic (limited GO), the real limiting factor is our budget
Clear – Reliable – Trustworthy
On page 52 of our Budget, we have provided the formal calculation of debt capacity
Two things to point out. 1) there is a total of $1 billion available in debt capacity, but really $186 million is what is most readily available, and
2) the 2021 Total Assessed Value was the last one available to us and preliminary estimates show that 2022’s is going to be increasing to $17 billion, so he $186 million available for
non-voter debt, or councilmanic, is going to be higher in any next calculation.
Budget is our real life limit
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Debt Status
Legal Debt Capacity is quite large (p. 52), $186.6 million councilmanic (limited GO), the real limiting factor is our budget
Existing debt for long-lived assets (Community Center, PAEC, SCORE jail)
We currently have four debt issues, two of them pertain to the Perfrmaing Arts center, one for the Community Center, and one for the SCORE jail.
All of these are for buildings, facilities, long-lived assets that will far outlast the debt, but the debt to a great degree spreads the cost borne ultimately by our taxpayers over the
years so that taxpayers who benefit even in future years do bear their share of the cost in those years
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Debt Status
Legal Debt Capacity is quite large (p. 52), $186.6 million councilmanic (limited GO), the real limiting factor is our budget
Existing debt for long-lived assets (Community Center, PAEC, SCORE jail)
Payments are budgeted straight out of debt amortization schedules
Budgeting is simple and budgeting is non-discretionary, there’s nothing to debate, we just plug in the numbers of principal and interest straight out of amortization schedules and put
it into our budget.
Our city policy is to budget the current two years’ payments in our debt service fund so it is appropriated and spendable straight out of debt service, but it’s primarily REET revenue
that funds the debt service fund.
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Infrastructure (Capital Budget)
Three ways to pay for Infrastructure
Save
Debt
Pay as we go
Unspent revenue
(fund balance)
Obligate future revenue
Budgeted revenue
Clear – Reliable – Trustworthy
This is textbook stuff, but this is what we need to keep in mind long-term as we budget for the biennium.
If we’re “putting away money to spend in the future, we have to budget revenue and not spend it. By building up fund balances, it can be spent in future. We do this to a degree when
we budget our capital accounts, to the extent some of the spending in 2023 could have been budgeted and received in revenue in 2022, then carried forward.
As EJ just pointed out, most of our capital spending is intended to be Pay as we Go, not debt. By perpetually scheduling projects and taking care of one fraction of the infrastructure
every year, if we can eliminate interest expense, we maximize the bang for our buck
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Future Planning
Maintenance & Operations Facility
Bond Issuance pays for construction
Debt payments from:
Re-assign on-going expense savings from fuel and fleet operations
On-going budgeted debt service expense
SWM revenue
REET
General Fund
Clear – Reliable – Trustworthy
This slide maybe should be deleted, certainly skipped over
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Future Planning
Avoiding Unnecessary Debt
Perpetual Vehicle Financing as the model for all long-term Infrastructure *
The flaw in “Reserves”
Extending the life of an asset
Inflation
Tight budget years
How we’ve always done it
If adding to reserves = purchases . . . ?
Turning a corner
Clear – Reliable – Trustworthy
Let’s talk a bit more about avoiding debt, and specifically I want you all to have a hand at the policy level in joining staff in our efforts to finance assets without debt
I have worked for four cities, three out of four have had vehicle replacement funds, none of the four have had a replacement fund that works, and we attend finance association conferences
on the subject because it’s a chronic problem.
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Vehicles – Where we Want to Be
Total number of vehicles: 242
Replacement $ / Year = $1.4M
Vehicles in service beyond depreciation - $3M
Clear – Reliable – Trustworthy
Budgeting for reserves has resulted in a backlog
Using the fixed assets records in Accounting that tie to our Audit, we have 242 vehicles on our books, our depreciation says we should be depreciating at $1.4M per year on average, but
we also see that we have $3M worth, at cost, of vehicles that are still in use apparently that should have been replaced.
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Vehicles – Where we Are
Clear – Reliable – Trustworthy
Budgeting for reserves has resulted in uneven purchasing
Because of the reasons mentioned, staff in CD, PW, Parks and PD work very hard to stretch the useful lives, and when given the choice to fund vehicles or do other things being asked
of them, subordinate their vehicles. Some years they have not had the choice and eventually that becomes what happened to the system?
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What we don’t have yet
Staff research and work:
Vehicle database review –
Actual vehicles currently in service
Current condition
Update estimated lives
Budget purchasing, not reserves
Clear – Reliable – Trustworthy
This is where we’ve started to turn the corner
We’re turning the corner
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Next Steps
Starting with FY2023-24 Budget
Budget increasing pay-as-we-go replacements
Identify vehicles scheduled to be replaced
Budget continuous spending
*Perpetual Vehicle pay-as-we-go the model for infrastructure financing
Clear – Reliable – Trustworthy
I didn’t type it into the slide, but the Debt Policy language that we always adopt as part of the Financial Policies that are in the back of your budget book, page 67-68 have not served
us well, and
I for one would like to bring FEDRAC a stand-alone debt policy and vehicle replacement policy that you could kick the tires on and have a say in the city’s management of infrastructure
and be a lot more directive on when and how debt is used, how we avoid debt, and also how we avoid just plain deferring our longterm assets
We have a viable plan to finance the maintenance facility, we are working on rethinking how we replace, perpetually, our vehicles and that needs to be a model for our we replace our
parks infrastructure, our public works equipment, our IT servers and components, and our major software systems such as the City’s Management System software coming due in 5 years.
I could direct staff to bring us a better policy but I’m trying to beat you to it and I’d love to make this a better city together.
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QUESTIONS
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2023-2024 Biennial Budget
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Adjustments for Final Budget
Discussion:
Adjustments that have consensus or near-consensus support to amend Mayor’s Budget in final Adopted Budget document
In 2022, after the Finance Director had been here about 6 months and had assessed how the department was organized, Steve decided to reduce the budgeted FTEs permanently, filling 1 vacant
position and eliminating the other vacant position.
The department is highly focused on excellent customer service and internal training twice a month reflects it.
I think you all know that the department has a new investment program and training multiple people is a key feature of guaranteeing new revenue becomes permanent.
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