Mayor
McAlister and Members of Council:
The
capital improvements budget for the fiscal year of
The Capital Improvements
Budget/Plan Process
Each
year, staff prepares a capital improvements budget and a long range capital
improvements plan for Town Council’s consideration. The capital improvements budget (CIB) and ten
year plan (CIP) are recommendations to meet your policy direction in the areas
of service delivery, infrastructure maintenance and development, regulatory
compliance, facilities planning and development, and projects needed to further
enhance the quality of life in Cary.
The
CIB also identifies revenue sources and recommendations for project
funding. Projects included in the
CIB/CIP are typically assets with a value of more than $25,000 and a useful life
of over three years. Exceptions have
been made to this rule on occasion for practical reasons.
The
CIB contains revenue and expenditure budget amounts for each FY 2008 project
and sets forth funding needs for fiscal years 2009 through 2018. Figures noted for fiscal years 2009 through
2018 are planning figures only and are not appropriations for those years. All amounts beyond FY 2008 are staff’s best
estimate of future project needs and cost.
Projects will be adjusted, and in some cases deleted, as situations and
needs change throughout the course of the ten year planning period.
Capital
projects are grouped under the following categories:
·
Water
·
Sewer
·
Transportation
·
Fire
·
Parks, Recreation and Cultural Resources
(PRCR)
·
General Government (General Gov’t)
Fiscal
Year 2008 marks the eighth year in the development of a rolling ten year capital
improvements document. A ten year
planning tool of this magnitude has two significant benefits. First, it assists the Town in identifying
potential projects necessary to meet the long-term goals of the community. Second, it gives Town Council and staff a
view of future infrastructure needs and assists them in understanding the level
of funding necessary to fulfill those needs.
The
farther out into the future one examines the ten year capital improvements
plan, the more question there is as to whether specific projects will actually
occur. Staff annually evaluates each
project and makes recommendations during the CIB/CIP development process
regarding the necessity of future projects.
Actual project funding decisions are only made for the upcoming budget
year. Projects in the FY 2008 CIB are
adopted into the applicable project ordinance.
This distinction means that any project-related contract entered into by
the Town is considered a continuing contract for which funds are considered
obligated throughout the term of the project.
The
capital budgeting process occurs prior to the development of the operating
budget. Formulating the capital
improvements budget and plan prior to the operating budget allows
project-related operating impacts to be incorporated into the annual operating
budget. The capital improvements budget
process also includes an itemization of the impacts of staffing, operating,
maintenance and start-up costs for all projects within the CIP, not just for
those projects with operating impacts expected in the coming fiscal year. These techniques provide information to staff
and Council regarding recurring costs and estimated total resource needs
throughout the multi-year forecast.
The
capital improvements budget and plan is a well orchestrated process that melds
Town goals, infrastructure needs and funding mechanisms into a course of action
for the future. Projects selected for
the Town of
Town of Cary
·
Achieve a well-planned community using
innovative and proactive planning approaches and techniques
·
Ensure that roads, water and wastewater
facilities, parks, and other infrastructure exists for the existing citizens
and for the future needs identified in the comprehensive plan
·
Achieve a stable and strong financial
position by accurately estimating, prudently allocating and managing financial
resources
·
Achieve a high level of service to the
citizens in a prompt, reliable, responsive, and cost effective manner
Each
project category (water, sewer, transportation, fire, PRCR, and general government)
also has specific goals that enhance those set for the Town as a whole. These goals are presented in the specific
category discussions appearing in the latter portion of this message.
Capital Improvements Funding
Goals
The
following strategies are employed when making project funding decisions.
·
Develop a ten year plan to anticipate
future funding needs and provide a basis for development fees to quantify
growth’s impact on the system while generating revenue to help offset the
impact of new development
·
Provide for inflationary increases by
adding a minimum of 5% per year to project costs
·
Develop staffing, operating and
maintenance budget impacts for all applicable capital projects
·
Provide general fund contributions when
needed to targeted areas (i.e. fire, PRCR,
general government projects)
·
Achieve a healthy balance of funding by
utilizing restricted revenues before unrestricted revenues whenever
possible
·
Choose the type of debt funding for
financed projects that:
- provides the most
advantageous interest rates
- has the lowest
issuance cost
- best matches
the type of debt to the type of project
- meets the overall
needs of the debt plan
·
Issue debt when funds are needed for
project spending, not before
·
Use debt or development fees for projects
(or portions thereof) that provide value to future citizens
·
Combine debt sales to minimize issuance
costs
·
Maintain a reasonable debt burden to
ensure that the Town has debt capacity for future needs
Setting
the Stage for FY 2008: A Brief Look at
the Town of
Capital
budgeting methods for the Town of
During
the period between Fiscal Years 2000 and 2004, the Town appropriated $109 million
in cash to develop parks and recreational facilities and purchase open space, including
two major regional parks and a number of special facilities. During this same period, $150 million was
appropriated, primarily via debt funding, to address transportation issues such
as the widening of critical thoroughfares and the creation of new and expanded transportation
programs and services requiring significant capital investment (e.g. traffic
signalization; C-Tran – the Town’s public transportation service). Additionally, the Town committed $40 million
to fund roads and utilities infrastructure necessary to serve new residential developments
and $32 million for expansion of the Town Hall campus facilities.
Funding
these capital investments required an aggressive approach. During FYs 2000 – 2008, the Town’s outstanding
general fund debt has grown from $30 million to $139 million. Annual debt service payments have risen from $1.6 million in FY 2000 to $13.4 million in FY
2008 with a peak of $18.4 million anticipated in FY 2011.
Operating
costs associated with many of these improvements also proved considerable. From FY 2000 to FY 2008, the Town’s general
fund total operating expenses have grown by $59 million, or 128%. These additional expenses have addressed not
only the operation and maintenance of new facilities and their programs, but
also the provision of existing levels of service to an expanded number of
customers.
As
the Town worked to address its infrastructure needs, it also began to determine
the best method of curbing the rate of growth it was experiencing. Various growth management measures were
implemented throughout the late 1990’s and early 2000’s. These initiatives, combined with the impact
of a slowing economy, dropped the growth rate from an average of 11% during
FYs 1994 – 1998 to 1.2% in FY 2005.
Unfortunately, the impact of such a dramatic drop in the growth rate
negatively impacted the Town’s ability to generate additional revenue for
capital initiatives through growth dependent sources such as development fees,
vehicle license fees, Powell Bill funding and new tax base (in the form of
operating fund transfers and funds available for debt service).
All
of these factors intersected in FY 2005 culminating in a fiscal environment that
made supporting aggressive capital budgeting difficult. Limited operating margin within the general fund
(dropping from $24 million in FY 2000 to $7 million in FY 2005) translated into
limited ability to utilize “pay-as-you-go” financing to fund capital
projects. While debt authority remained
available as a funding source for streets and parks projects, the effects of
additional debt on the General Fund made debt a less attractive funding option. Dedicated capital revenue sources, many of
which are population dependent, waned and investment earnings declined due to a
combination of fewer invested funds and lower interest rates. Given these realities, the FY 2005 capital
improvements budget, totaling $26,915,894 at adoption, was 56% less than the FY
2004 adopted CIB and funded only projects that were previously committed to or
deemed to be essential to the maintenance of existing facilities and
infrastructure.
The
trends, factors and issues that shaped the FY 2005 CIB/CIP also played
significant roles in the development of the FY 2006 CIB/CIP which totaled
$50,299,751 at adoption. While this
represented an 87% increase over adopted FY 2005, the primary drivers behind
the increase were a number of capital needs that due to mandates, agreements,
prior commitments or practicality could not be postponed any further.
Although
an improving local economy and upward trends in development provided some
funding flexibility, the scope of the FY 2007 capital improvements budget was
highly influenced by increasing debt service levels and limited capital project
restricted funding. Totaling $84 million
at adoption, FY 2007 capital appropriations were 66% greater than the adopted
FY 2006 capital improvements budget. Factors
contributing to this increase included: the
appropriation of $17M in one-time reimbursement funds from the State of North
Carolina toward transportation projects; the one-time appropriation of $10
million in general obligation bonds for the purchase of open space; water and
sewer projects resulting from the merger of the Town of Morrisville’s utility
system with Cary’s in April 2006 and continued work on the Western Wake
Regional Wastewater Management Facility (WWRWMF). Each of these factors was either one-time in
nature, or driven by agreements with local municipal partners.
Continued
improvement in the local economy and increased development activity again provided
more capital improvement funding opportunities for FY 2008 than have been
available in recent years. Nonetheless, factors
such as increasing debt service obligations and limited funding restricted only
to capital projects continue to impact the Town’s capital improvements
budget/plan.
FY 2008 Capital Improvements Budget/Plan Overview
Factors
Influencing the Development of the FY 2008 Capital Improvements Budget/Plan
The
$226,105,367 million Fiscal Year 2008 capital improvements budget reflects a 170%
increase from the FY 2007 CIB. FY
2008 CIB appropriations increased in three of six project categories when
compared to FY 2007. The basis for these
increases is the fact that the Town continues to face a number of capital
issues that due to mandates, agreements, prior commitments or practicality
cannot be postponed. Further explanation
of these issues appears below. More
detailed discussions related to each also appear within the general capital and
utility capital segments of this message.
·
The Town’s participation in the Western
Wake Regional Wastewater Management Facility (WWRWMF) initiative.
The
Town of
The
FY 2008 capital improvements budget includes a total appropriation of $127 million
toward the WWRWMF. This appropriation
represents 55% of the total FY 2008 capital improvements budget. Approximately $44 million of the $127 million
will be reimbursed to the Town by its project partners. The remaining $83 million represents
·
Significant Improvements to the Cary/Apex
Water Treatment Plant
Construction
of residuals and chemical feed facilities at the Cary/Apex Water Treatment
Plant (C/A WTP) is the most significant improvement slated for the facility in
FY 2008. This project was first funded
in FY 2007 with $1.4 million for design.
The FY 2008 capital improvements budget appropriates an additional $13.2
million for construction. All aspects of this project are designed to
accommodate flows of up to 63 million gallons per day (MGD). As current plant expansion plans take the
plant to 56 MGD, this work addresses capacity well beyond the plant’s next
planned expansion (currently anticipated to begin in FY 2013). Total project cost is estimated to be $14.6
million. The C/A WTP is jointly owned
and operated by the towns of
The FY 2008 water CIB
also appropriates $200,000 for regulatory and permitting requirements
associated with the future expansion of the C/A WTP. The expansion will allow the facility to
accommodate flows of 56 MGD versus current flow capacity of 40 MGD. Total project cost is estimated at $74.9
million. While initial funding occurs in
FY 2008, funds for construction will not be necessary until FY 2013 where a $7
million need has been identified. An
additional $33 million will be needed in FY 2014 with another $34.7
million necessary in FY 2015. The Town’s
77% share of this total project will be $57.7 million while Apex’s portion will
total $17.5 million.
·
The merging of the Town of
The
utility systems of the towns of Morrisville and Cary officially merged into one
Town of
The
FY 2008 capital improvements budget includes merger-related appropriations
totaling $3.1 million. $281,000 of
these appropriations is related to water related infrastructure, while the
remaining $2.8 million is related to sewer infrastructure. The capital improvements plan (FYs 2009
– 2018) identifies an additional $3.6 million in related sewer needs and no
additional water capital improvements associated with the system merger.
Each
of the factors noted above involves a considerable FY 2008 appropriation and some
also identifies substantial future funding needs within the capital
improvements plan. Some, such as the
WWRWMF, bring with them sizeable operating costs. The Town is keenly aware of the current and
future impacts of these necessary initiatives on the capital and operating
funds. As we progress through the
planning period outlined in the CIP, we will continue to assess our financial condition
and how additional commitments may impact the community.
Revenue
Generation and Funding Methods
For
the most part, capital reserve fund revenue projections are 3% greater than
anticipated FY 2007 earnings. These
estimates are supported by the fact that many capital revenue sources are tied
to population growth.
With
funding needs rapidly outpacing the Town’s ability to generate enough funding
from existing sources, the Town has appropriated from capital reserve fund
balances for several fiscal years to support needed capital improvements. This approach was taken again in FY 2008. $28.3 million, or 13% of the $226 million FY
2008 capital improvements budget, is funded with utility or general capital
reserve fund balance dollars.
The
FY 2008 capital improvements budget also includes $7.5 million in cash transfers
from the Town’s operating funds. This
represents a 3% increase over FY 2007 operating fund transfers. $3.2 million of the FY 2008 total
represents transfers from the general fund in support of general capital projects. The remaining $4.3 million represents
transfers from the utility fund. $3.3
million of the utility fund transfers represent the movement of funds received
from the Town of
Debt
is the most significant funding source of the FY 2008 CIB. A total of $141 million in debt funding is
appropriated in FY 2008. $81.3 million of
this appropriation, or 58%, is directed to the Western Wake Regional Wastewater
Management Facility, while another $31 million is directed to other water and
sewer needs. The remaining $28.8 million
funds general capital needs with $22.4 million of that figure directed
specifically to transportation projects.
General Capital Debt $28.8 million
$22.4
million transportation general obligation debt (supports road maintenance and
improvements)
$5.6
million parks general obligation debt (supports renovations and new facilities)
$765
thousand installment purchase debt (supports replacement/upgrade of a service
ladder truck)
Utility Capital Debt: $112.2 million
$81.3
million WWRWMF general obligation debt (supports design/construction of WWRWMF)
$16.7
million revenue bonds – sewer (supports sewer infrastructure projects)
$ 7.4 million water general obligation bonds
(supports improvements to Cary/Apex WTP)
$ 6.8 million revenue bonds – water (supports
water infrastructure projects)
The
Town of