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7.a) Staff Report-2016-2020 CIP STAFF REPORT Date of Meeting: May 4, 2015 To: Parks and Recreation Committee From: Judi Negus, Office Assistant Re: 2016-2020 Capital Improvement Program (CIP) Background: A Capital Improvement Program (CIP) is a multi-year (typically 5 years) capital expenditure plan for the City’s infrastructure (such as streets, parks and utility systems), vehicles, equipment and public buildings. It identifies the major projects needed and desired by the community, their potential costs and how they would be financed. 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. When the CIP is reviewed (ideally annually, in conjunction with the budgeting process) projects may go forward as planned, advance ahead of schedule, be removed entirely, or new projects may be added, depending upon changes in circumstances and priorities. 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. The primary benefit of a CIP is as a financial planning tool, to help the City plan for the impact of capital needs on future budgets and property taxes, and to help forecast the need for borrowing to undertake major projects. The information developed as part of the capital planning process can help document the need for various projects and help the City Council sort out competing priorities. 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 Existing City fund, primarily from property tax levy, set aside for capital projects. Debt Service Fund Projects financed by borrowing, later to be repaid with property taxes, and potentially special assessments depending upon the characteristics of the project. Equipment Replacement Fund Internal service fund used to segregate funds set aside for planned replacements of existing major equipment. Funds are transferred from operating budgets (primarily property tax revenues.) The fund may also receive funds realized through debt financing. General Fund Annual operating budget, primarily funded by property tax revenues. Park Improvement Fund Erickson Ball field Fund Lilleskogen Park Fund Local Road Improvement Fund Existing City fund, receipts from cash-in-lieu of land park dedication fees paid by developers and others who subdivide their land. Fund created in 2014 to go specifically towards improvements to the Erickson lighted ball field. Fund created in 2014 to go specifically towards improvements at Lilleskogen park. New fund created in 2014 funded with unrestricted fund balance and property tax revenues. To be used mainly to fund mill and overlay and other similar street construction projects. 201 Sewer Funds come from fees paid by users on the 201 Wastewater System 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 . Funding sources unique to Parks and Recreation include Erickson Ball Field signage revenue. 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 City 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. Issue: What parks projects should be included in the 2016-2020 CIP? When? Should any cost estimates be changed? Are there any projects to add to the CIP? (Must be a capital project that costs over $10,000 with a useful life of 5 years or more.) Proposal Details: Included in your packet are two lists. The first, “Projects By Department,” lists all active projects over the next ten years for parks and cost estimates. The second, “Projects By Funding Source,” lists the revenue sources for the projects. Also included in your packet are project detail reports for each proposal. Ice Rink/Parks and Recreation: Staff is recommending the following changes to the CIP: 1. Push Zamboni Replacement ($40,000) out to 2020 (from 2016). This expense is to be funded by Grants/Donations. 2. Include the recommended annual improvements to Lilleskogen Park Improvements ($83,000) as presented by the Friends of Scandia Parks and Trails committee member Karen Schik in a proposed 7-year plan. These expenses are to be funded by the Park Improvement Fund. However, projected revenues do not meet projected expenses; alternatives need to be determined by the Committee. 3. Keep Tennis Court Reconstruction ($60,000) in for 2018. This expense is to be funded by the General Fund. Fiscal Impact: Included in your packet is a handout titled “Funding Source Summary.” By the end of 2015, the following balances are projected for the funds: Other/TBD (Erickson ball field fund): $5,800 Park Capital Improvement: $0 (Assuming the parking lot at Lilleskogen is completed.) Committee members will need to review the expenses for Lilleskogen Park Improvements that total $83,000. The current balance in the Park Capital Improvements Fund is $7,000. There is a balance of $2,054 in the dedicated fund reserved for Lilleskogen improvements. If the parking lot gets completed in 2015, there will be a zero balance in the Park Capital Improvement Fund. Even if the Committee would request an additional $30,000 advance, as proposed by Borg in the meeting materials, there would not be sufficient funding to support this project. Options: 1) Make changes 2) Make no changes Direction provided at this time will inform Staff on how to compose the draft 2016 budget to be reviewed by the Council beginning in August.