Discussion:
The beginning of the budget process involves the preparation of the 5-year Capital Improvement Plan (CIP). Capital improvements are the projects that require the expenditure of public funds for the acquisition, construction or replacement of infrastructure and capital assets necessary for the community. The creation and update of a multi-year capital plan allows the city to plan for its current and long-term needs. Project areas within the CIP include buildings, equipment replacement, information technology, parks, streets, tree replacement, sanitary sewer and storm drainage.
Typically, the CIP is reviewed earlier in the summer, but due to the recent conclusion of the parks master plan and its impact on the CIP we delayed its preparation by about a month.
The CIP is part of the budget process, but it is not a budget, it is a plan. It is also a plan that changes often. Once the CIP is officially adopted by council, the 2020 projects will then be added to the 2020 budget for final approval in December. All future years' projects (2021 and beyond) are plans at this point that are subject to change and will be updated in future CIP's.
The city has a finite amount of resources, so prioritizing projects and then being able to finance projects is crucial for ensuring the city's long-term sustainability and being responsible stewards of the city's investments. Staff has been working diligently the last couple years to try and better estimate project costs to ensure more accurate forecasting of available fund balances. In addition, staff is continually working to find outside funding solutions to limit the impact on the tax levy.
Within many of the funds are pending or future projects. These project pages are located towards the end of each fund's respective section. These projects can be pending for a number of reasons such as the project is dependent upon outside funding, the need is not warranted at this time, or to simply keep the project on our radar.
The plan for the workshop is to have a general overview of each fund and then review various projects within each fund. Staff is seeking the council's input in regards to project direction and priority. Below are a few highlights from various funds.
Park Development Fund
- We are in the process of renaming the Park Asset fund to the Park Development fund. This name change makes it abundantly clear and more transparent the purpose of the fund.
- A majority of the projects within this fund were put on hold in last year's CIP in order to allow time for the Parks Master Plan to be completed. That plan was just recently completed and the projects from that plan have been incorporated into the CIP. A few of the larger projects are still years away and will require additional planning sessions down the road to determine appropriate financing options.
- A property tax levy of $200,000 annually is being proposed for the Park Development fund. Traditionally, this fund is primarily supported by park dedication fees. That will remain a primary source, but there are also projects that need additional funding beyond the park dedication means. It is also anticipated that future park dedication fees will curtail as developers have the option to contribute land in lieu of fees.
Capital Improvement Fund
- Street related projects are seeing increasing bid costs this past year due to material increases and a tight labor market. There is a definite need to stay on top of street improvement projects to ensure streets reach their useful lives and don't require costly premature full reconstructions. Several areas of the city are reaching those crucial ages that significant outlay is needed to ensure the long-term vitality of the streets.
- A property tax levy of $700,000 is being proposed for 2020, which is an increase of $500,000. The CIP calls for additional annual increases of $100,000, but in reality larger increases will likely be required.
- The city has about $164 million of streets and trails. Estimating the useful life of these assets at 30 years would require an investment of about $5.5 million annually. The 2020 funding sources of the tax levy, franchise fees, Municipal State-Aid and special assessments account for about $4.3 million. This gap in the CIP fluctuates from year-to-year, but will need to be addressed over the next couple years.
- One change staff is proposing is to begin bonding for the special assessment portion of street projects. The city has been able to self-finance the special assessment portion the past many years. However, with the cost of these projects increasing we can no longer afford to tie up valuable city resources.
Park Asset Fund
- Earlier this summer the council approved transferring the community center, ice arena and SandVenture facilities and their respective rent accumulations to the Building fund from the Park Asset fund. The Park Asset fund now strictly accounts for just park and trail improvements.
A final 2020-2024 CIP will be prepared after receiving council input and direction. The goal is to have it officially adopted on September 17. As mentioned earlier, the 2020 projects will then be incorporated into the 2020 operating budget for further consideration in the adoption of the overall 2020 budget.