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2. Capital Improvement Plan backgroundINTRODUCTION The Capital Improvement Program (CIP) for the five-year period of 2018 through 2022 is the eighth such document prepared by the City of Scandia. It would amend the CIP included in the March, 2009 Comprehensive Plan (as amended through December 17, 2014) replacing Appendix F of the plan in its entirety. What is a CIP? A capital improvement plan (CIP) is a multi-year plan identifying capital projects to be funded during the planning period. The CIP identifies each proposed capital project to be undertaken, the year the assets will be acquired or the project started, the amount of funds expected to be expended in each year of the CIP and the means of funding the expenditures. A CIP is not a static document. It should be reviewed at an appropriate cycle to reflect changing priorities, unexpected events and opportunities. The CIP should include the maintenance, repair and rehabilitation of existing infrastructure as well as the construction of new infrastructure. Including a project in a CIP does not commit the city to that project. The City Council must specifically authorize each one, and the associated funding, before any project may proceed. The basic function of a CIP is to provide a formal mechanism for decision making, a link to long range plans, a financial management tool and a reporting document. The Minnesota Land Planning Act requires that the implementation plan portion of the Comprehensive Plan include a CIP for major infrastructure needs (transportation, wastewater, water supply, parks and open space) for a five-year time period. Cities often expand the scope of their CIPs to include other capital needs (major equipment replacements, for example) and sometimes look beyond the five-year time period, up to 20 years in the future for some projects. Such projects represent more of a "wish -list" that can be evaluated each time the plan is updated. As a part of the Comprehensive Plan, the CIP has some legal standing. Minnesota Statutes Chapter 473.865 provides that "a local governmental unit shall not adopt any official control or fiscal device which is in conflict with its comprehensive plan." A fiscal device includes a budget or bond issue; so it is important that the plan and CIP be kept up to date and in synch with city budgets. Once the CIP has been completed, it will be reviewed by the Planning Commission for consistency with the Comprehensive Plan Scope of the CIP Scandia's CIP includes all capital projects that cost at least $10,000 and have a useful life span of five years or longer. Projects include all capital needs including major repairs to buildings and equipment purchases and replacements. Any projects not meeting these parameters would be reviewed as part of the annual operating budget, but would not be included in the CIP. Funding Sources The CIP identifies a possible funding source(s) for each project listed. The various funding sources are as follows: Capital Improvement Fund Equipment Replacement Fund General Fund The City has been levying $30,000 per year in property tax to fund these general capital projects. At 12/31/2016 the fund had a balance of $384,832. Most major equipment purchases are funded through the issuance off debt which is then repaid with property taxes, and potentially special assessments depending upon the characteristics of the project. Other sources of funding include the sale of unused assets and transfers from General Fund operating budgets. At 12/31/2016 the fund had a balance of $501,061 Annual operating budget, primarily funded by property tax revenues. Park Improvement Fund The primary sources of funds are from park dedication fees paid by developers as a part of any subdivision, revenues generated by the park facilities such as advertising revenues, and grant revenues. At 12/31/2016 the fund had a negative balance of $11,559 due to expenditures that were funds through a loan from the Capital Improvement Fund. Local Road Improvement This fund was established in 2014 to segregate funds Fund for major road improvement projects. The property taxes levy is the primary source of funds. Additionally the City adopted a fund balance policy that provides for the transfer of any general fund balance in excess of 50% of budgeted expenditures to this fund. At 12/31/2016 the fund had a balance of $374,020. 201 Sewer Funds come from fees paid by users on the 201 Wastewater System which serves the Anderson Erickson and Bliss subdivisions. Uptown Sewer Funds come from fees paid by users on the Uptown Wastewater System N In addition to these sources, it is possible that future projects could be funded from donations, grants, user fees or other sources not listed. Projects benefiting the utility funds, which are intended to operate as stand-alone businesses supported by user fees, would be paid from the appropriate fund. Project Priorities Capital improvement projects should be prioritized in some way so that limited funding can be allocated to those which are most important. This is difficult because the varying nature of the projects and their benefits and objectives are so disparate as to be essentially not comparable. Some public agencies have developed elaborate rating and ranking systems to try to set priorities. Complicated scoring systems may have some disadvantages because they may give a false sense of objectivity or precision to the priority setting process. Others use simpler systems, or simply do not try to compare projects that are like "apples and oranges." There is no accepted system or "industry standard" for prioritizing projects. The Capital Improvement Committee developed the following priority rating system in 2008, which was also used for the 2009 and subsequent updates: 1 Critical or urgent, high-priority projects that should be done if at all possible; a special effort should be made to find sufficient funding for all of the projects in this group. 2 Very important, high-priority projects that should be done as funding becomes available. 3 Important and worthwhile projects to be considered if funding is available; may be deferred to a subsequent year. 4 Less important, low -priority projects; desirable but not essential. N/A Used for replacements of existing equipment. The following are other commonly used capital project evaluation criteria , Legal Mandates Fiscal and Budget Impacts Health and Safety Impacts Environmental. Aesthetic and Is the project needed to meet state or federal regulations? What is the total capital cost? Impact on operating budget? Impact on tax base, tax rate and user fees? Is there any state or federal funding available? Will the project improve the health and/or safety of the residents in a measurable way? Does the vroiect reduce pollution levels? 3 Social Effects Improve the appearance of neighborhoods? Ensure community values are achieved? Economic Development Impacts Does the project promote the economic vitality of the community (job creation or business Project Feasibility _development)? Does the project demonstrate that it can be implemented as planned? Is the timing, phasing and proposed funding reasonable? Is there public support for the project? Distributional Effects Who benefits from the proposed projects? Is the distribution of projects balanced? Disruption/Inconvenience How much disruption or inconvenience is caused by the project? Impact of Deferral What are the implications of deferring the project? Uncertainty of Risk What degree of risk or uncertainty is inherent in acquiring the facility (demand, obsolescence)? What are the effects on inter -municipal Inter -municipal Effects relationships? Is there an opportunity for inter -municipal cooperation? Relationship to Other Projects Are there advantages from this project accruing to other projects? 4