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3.1 CIP orientation1[,131:1o]19149101,11_ The Capital Improvement Program (CIP) for the five-year period of 2020 through 2024 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 project 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 The City has been levying $30,000 per year in property tax to fund these general capital projects. Equipment Replacement Most major equipment purchases are funded through Fund the issuance off debt which is then repaid with property taxes. Other sources of funding include the sale of unused assets and transfers from General Fund operating budgets. General Fund 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. 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 with a base levy in 2016 of $581,000. Pursuant to the City's fund balance policy any general fund balance in excess of 50% of budgeted expenditures can be transferred to this fund. The 2017 transfer to this fund totaled $523,200. Additionally any special assessments on the 2007 road improvement projects received after the associated debt was retired are transferred to this fund. 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 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. iN 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 following priority rating system was identified in 2008 and have been used in 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. In reviewing the 2020 — 2024 plan the Committee identified a scored evaluation criteria to be used if evaluating projects if sufficient funding is not available: • Does the project help meet the goals of the Comprehensive Plan or City Priorities? • Does the project eliminate or prevent an existing health, environmental, or safety hazard? • Does the project protect and preserve the City's infrastructure? • Does the project will have a positive, neutral, or negative impact on the City's operational finances? • Does the project leverage outside funding? • Does the project tie into other projects? • Can the project be completed in partnership with another organization? • Is the project mandated to comply with environmental standards? • Does the project support the City's Green Cities efforts? • Project directly the allows the City to meet environmental compliance standards or meet sustainability goals, where applicable? • Does the project help stimulate development or redevelopment of properties and/or encourage economic development in the City corridors? 0 Does the project improve and/or increase the level of service provided by the City? 2020-2024 CIP OVERVIEW For 2020 through 2024, the draft CIP includes projects with a total estimated cost of $11,186,200. All cost estimates are preliminary and based on current dollars. No assumptions have been made about inflation. Project costs will need to be updated annually, especially for projects in the first year or two of the plan. Some projects beyond the five-year planning period are also included in the CIP. Most of these projects are replacements for existing equipment and vehicles at the end of their expected useful life. Just as for other capital projects, the decision whether or not to replace a particular piece of equipment, and what to replace it with, will need to be made by the City Council at the time of the purchase. The City could decide to keep some equipment longer than planned. Or, equipment could wear out more quickly than expected. It is likely that some items will not be replaced, or that new technology or equipment could alter plans to replace a particular item. The breakdown of recommended projects is shown by fund below: Fund 766,050 ! $ 2018 2019 2020 2021 2022 Capital Improvement Fund $ 139,300 $ 100,000 $ 30,000 $ - $ - i Equipment Replacement Fund $ 118,500 $ 43,000 $ 100,000 $ 25,500 $ 240,000 Park Improvement Fund $ 17,260 ; $ 2,320 ; $ 22,390 ; $ 2,460 ; $ 47,530 ; Local Road Improvement fund $ 6,500,000 , $ - $ 620,000 , $ 450,000 , $ 320,000 , $ 6,775,060 $ 145,320 $ 772,390 $ 477,960 $ 607,530 The revenue sources for the projects shown below do not include the use of accumulated fund balances: 2018 2019 2020 2021 2022 Property Tax Levy ! $ 766,050 ! $ 388,208 ! $ 420,340 ! $ 459,429 ! $ 492,220 Issuance of Debt I $ 4,400,000 I $ - I $ - I $ - I $ 200,000 I j Park Dedication Fees j $ 6,000 j $ 6,000 j $ 6,000 j $ 6,000 j $ 6,000 j Grants & Donations $ 85,000 ; $ 42,900 ; $ 51,900 ; $ 23,900 ; $ 30,900 $ 5,257,050 $ 437,108 $ 478,240 $ 489,329 $ 729,120 A primary consideration in the review of the projects was the impact on the property tax levy, particularly the funds needed to finance the local road improvement projects. A breakdown of the revenue sources based on the Committee recommendation is shown below: Fund 2017 2018 2019 2020 2021 2022 General Fund $ 1,545,600 ' $ 1,430,600 ' $ 1,430,600 ' $1,430,600 $1,430,600 ' $ 1,430,600 ' Debt Service Fund $ 116,739 $ 152,542 $ 559,375 $ 558,578 $ 505,161 $ 505,824 Capital Improvement Fund ; $ 30,000 - Park Capital Improvement $ - $ 11,0001 $ 11,000 , $ 11,000 , $ 11,000 , $ 11,000 , Equipment Replacement I $ - I $ 30,000 I $ 30,000 I $ 30,000 I $ 30,000 I $ 30,000 Local Road Improvement j $ 560,533 j $ 725,050 j $ 347,208 j $ 379,340 j $ 418,429 j $ 451,220 j Economic Development Authority $ 5,000 ' $ 5,000 ' $ 5,000 ' $ 5,000 ' $ 5,000 ' $ 5,000 ' Total Levy $ 2,257,872 $ 2,354,192 $ 2,383,182 $2,414,519 $2,400,190 $ 2,433,644 M CAPITAL IMPROVEMENT FUND The Capital Improvement Fund is utilized to fund projects that are not equipment related, do not have a dedicated funding source, or rely on donations or grants to be funded. The projects recommended from 2020 - 2024 are as follows: 2018 2019 2020 2021 2022 Community Building CAPITAL IMPROVEMENT FUND LED lighting conversion $ 33,300 Tennis court replacement $ 40,000 Skateboard rams $ 12,000 Cha i r rept a cement $ 11,000 Playground equipment $600,000 $ 60,000 HVAC replacement $ 30,000 Fire $500,000 Emergency enerator $ 66,000 Roof replacement $ 100,000 HVAC replacement $ 15,000 $ 15,000 Warning sirens $ 30,000 $ 139,300 $ 127,000 $ 41,000 $ 75,000 $ 30,000 The projected balance in the fund as of December 31, 2017 is $345,536. Previously the City has levied $30,000 per year for the Capital Improvement Fund. It is recommended that no funds be levied with the levy amount being redirected to the equipment replacement fund. It is further recommended that grant funding be obtained for at a minimum 75% of the emergency generator, 50% of the cost of the skateboard equipment, 100% of the warning sirens, and 25% of the playground equipment. It is also proposed that the conversation to LED lighting be repaid in the future based on actual energy savings. If approved as recommended the fund balance is projected to decrease to $230,832 by December 31, 2024. 5 CAPITAL IMPROVEMENT FUND $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ 2016 proj2017 17 2018 2019 2020 2021 2022 Actual d Budget Budget Budget Budget Budget Fund Balance $384,832 $394,927 $708,627 $618,727 $622,827 $641,927 $646,027 Revenue $31,144 $30,500 $453,000 $10,100 $34,100 $19,100 $4,100 Expenditures $2,370 $20,405 $139,300 $100,000 $30,000 $- $- 5