Capital Improvement Planning and Prioritizing

1. Capital Improvement Planning and Prioritizing

2. Capital Improvement Planning Bradley D. Viegut, Director bviegut@rwbaird.com800-792-2473 / 414-298-7354 Fax

3. Introduction to Long-Range Financial Planning • Long Range Planning is a vital tool for any Organization • Allows room for forward thought and discussion • Better prepares an organization for change • Creates opportunities that may otherwise be overlooked • Wisconsin Municipalities are faced with increasing Expenditures and limitations on Revenues • Creative solutions must be developed to meet these demands • Long-range planning is the key to success • Operational vs. Capital Improvement Planning • OPERATIONAL – Staffing, organizational structure, systems • CAPITAL – Infrastructure, maintenance and equipment

4. Benefits of Capital ImprovementPlanning • Provides a disciplined approach to spending • Focuses on community needs and capabilities • Obtains community support • More efficient administration • Allows for sufficient lead time • Facilitates the planning of the funding of the program • Maintains a stable financial program

5. Benefits of Capital Planning • Public document that keeps citizens informed on current needs and future projects • Focuses attention on objectives and financial capabilities • Identifies most economical means of financing capital projects • Good planning to avoid drastic changes in debt service payments • Positive rating factor

6. Limitations of Capital Planning • One improvement may precipitate a demand for other improvements • Practicality to project too far into the future • Raising expectations and uncertainty of funding • Subjectivity in prioritizing and ranking of capital projects • Risk of creating a “wish list”

7. Capital Improvement Planning • Capital Improvement Project • Significant one-time dollar value physical asset that has a multi-year life span • Dollar value threshold will depend in each municipality • Capital improvement • Capital outlay • Capital Improvement Program (CIP) • Comprehensive list or a schedule of capital projects for five or more years • Specifically identifies and details each capital project, estimated cost and proposal source of funding

8. PickupTrucks Disposal Sites & Equipment Street & Road Repairs Airports Police Cars Major Buildings Additions & Remodeling Hospitals / Healthcare Sewer & Water Mains Jails Park Land & Development Tennis Courts Playground Equipment City Halls Schools Parking Meters Capital Improvement Projects Police & Fire Radio Systems Fire and Police Facilities Swimming Pools Minor Building Remodeling or Additions Libraries Land Purchases Storm Sewers Courthouses Street Lighting Systems Recreation Buildings Computer Systems Streets, Roads & Buildings Fire Trucks Water & Sewerage Treatment Plants Trash Compactor Trucks Possible Capital Improvements are highlighted in the brown boxes

9. Capital Improvement Planning Sample Capital Improvements Program (CIP) – “Barbell”

10. Capital Improvement Planning Sample Capital Improvements Program (CIP)

11. Funds 2011-12 CIP Funds 2013-14 CIP Funds 2015 CIP $5,080,000 $2,710,000 $1,035,000 G.O. Notes G.O. Notes G.O. Notes Dated: October 1, 2011 Dated: October 1, 2013 Dated: October 1, 2015 LEVY YEAR EXISTING PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST COMBINED COMBINED YEAR DUE DEBT (4/1) (4/1 & 10/1) (4/1) (4/1 & 10/1) (4/1) (4/1 & 10/1) DEBT SERVICE MILL RATE SERVICE AVG= AVG= AVG= (A) 4.25% 4.50% 4.75% $0.54 $857,823 $2.26 2008 2009 $857,823 Increase $1,113,410 $2.80 2009 2010 $863,254 $35,000 $215,156 $1,168,626 $2.79 2010 2011 $430,582 $535,000 $203,044 $1,227,213 $2.80 2011 2012 $429,125 $480,000 $181,475 $15,000 $121,613 $1,259,031 $2.73 2012 2013 $227,837 $505,000 $160,544 $250,000 $115,650 $1,319,476 $2.73 Final Impact Year 2013 2014 $227,838 $525,000 $138,656 $260,000 $104,175 $15,000 $48,806 $1,387,331 $2.73 of 5-Year CIP 2014 2015 $227,837 $550,000 $115,813 $270,000 $92,250 $85,000 $46,431 $1,245,274 $2.33 2015 2016 $71,568 $575,000 $91,906 $285,000 $79,763 $100,000 $42,038 $1,165,931 $2.08 2016 2017 $595,000 $67,044 $300,000 $66,600 $100,000 $37,288 $1,171,294 $1.99 2017 2018 $625,000 $41,119 $310,000 $52,875 $110,000 $32,300 $1,174,463 $1.90 2018 2019 $655,000 $13,919 $325,000 $38,588 $115,000 $26,956 $505,000 $0.78 2019 2020 $340,000 $23,625 $120,000 $21,375 $503,544 $0.74 2020 2021 $355,000 $7,988 $125,000 $15,556 $139,500 $0.20 2021 2022 $130,000 $9,500 $138,206 $0.18 2022 2023 $135,000 $3,206 $3,335,864 $5,080,000 $1,228,675 $2,710,000 $703,125 $1,035,000 $283,456 $14,376,120 (A) Mill rate based on 2010 Equalized Valuation (TID-OUT) of $379,267,900 with annual growth 5%. Sample Borrowing Schedule

12. WORKING TOGETHER…LEADING THE WAY Capital Improvement Planning & Prioritizing(and Managing Impacts to the Operating Budget) Governmental Finance Officers Association Winter Conference December 2, 2010 Manitowoc, WI Norm Cummings Director of Administration Waukesha County (WI) ncummings@waukeshacounty.gov

13. Capital Budget: What’s Included Waukesha County policy: An active or proposed non-recurring expenditure in one or more specified plan years, more than $100,000 (including non-County funding sources) for a fixed asset (building, equipment, land or technology improvement) which has or extends the useful life of fixed asset, usually in excess of seven years.

14. Generally Excluded from Capital Plan

15. Generally Excluded from Capital Plan A. End User Technology (Fund) Plan • Funds items that do not meet capital projects definition: desk top/laptop computers, printers, servers, etc. (unless part of larger capital project)

16. Generally Excluded from Capital Plan

17. Generally Excluded from Capital Plan B. DPW Building and Parks Maintenance Projects (under $100,000) • E.G.: Carpeting, painting, roof repairs, tuck pointing and pavement repairs

18. Generally Excluded from Capital Plan

19. Generally Excluded from Capital Plan C. Vehicle/Equipment Replacement Plan • Funds vehicles and contractor type equipment that has greater than two years useful life. • Department charged annually similar to operating lease rates on depreciated life. Replacements funded with payments made plus investment income earned.

20. Capital Improvement Plan Projects A. Maintains Infrastructure

21. Capital Improvement Plan Projects • Pavement Management Plan (15-20 miles /year) • Culvert Replacement Program (2/year avg.) • Intersection/Traffic Signal Program (2-3/year)

22. Pavement Management Plan

23. Pavement Management Plan Rating of below 35 is poor rating. In early 1990’s average rating about 42.

24. Capital Improvement Plan Projects A. Maintains Infrastructure

25. Capital Improvement Plan Projects • Pavement Management Plan (15-20 miles /year) • Culvert Replacement Program (2/year avg.) • Intersection/Traffic Signal Program (2-3/year)

26. Capital Improvement Plan Projects A. Maintains Infrastructure

27. Capital Improvement Plan B. ROI Projects • IT Projects: Server Virtualization, Workforce Management System • Heating/Cooling/Lighting: LED lighting, heat pump installation, Ice arena waste heat (from chiller refrigeration system) to dehumidify the arena

28. Capital Project Funding A. Current Cash Asset Funding • Long range goal to manage overall debt service is to use cash balances from tax levy and governmental fund balances to fund capital projects @ 20% minimum of net expenditures B. At Risk Revenue • Utilize State revenue not tied to mandates in first year of capital plan consistent with current State budget (e.g. Shared Revenues, State Computer Exemption payment, General Transportation Aids)

29. Capital Project Funding Less Revenues and Proprietary Fund Balances Applied: (Excludes investment income earned on debt issue)

30. Capital Project Funding Less Revenues and Proprietary Fund Balances Applied: (Excludes investment income earned on debt issue)

31. Capital Project Funding Less Revenues and Proprietary Fund Balances Applied: (Excludes investment income earned on debt issue)

32. Capital Project Funding C. Debt Service Policy • No greater than 10% of governmental operating expenditures • Capital project funding plan must be consistent to meet debt policy goal *Excludes proprietary fund operating expenditures. **Does not include refunding and debt redemption activity.