AGENDA #1c
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Preliminary Report on the 2002-2017 Capital Improvements Program
DATE: March 26, 2002
REDISTRIBUTED: APRIL 3, 2002
The attached resolution would refer the Preliminary Report on the 2002-2017 Capital Improvements Program to the Town’s Bicycle and Pedestrian Advisory Board, Community Design Commission, Greenways Commission, Historic District Commission, Housing and Community Development Advisory Board, Library Board, Parks and Recreation Commission, Planning Board, Public Arts Commission and Transportation Board for their review and recommendations. Recommendations from these advisory boards would be included in the Council’s materials for the May 8, 2002 public hearing.
INTRODUCTION
The presentation of this preliminary report is the first of several steps in the Council’s annual adoption of a 15 year capital spending plan.
This preliminary report is unusual in that the expenditures discussed for 2002-03 are extremely low, reflecting the unusual budget situation caused by the State’s withholding local funds along with other reductions caused by the slow economy. However, later years include significantly higher expenditures, reflecting the maintenance and repair needs identified in the Facility Condition Assessment completed in 2000. Even though funding these needs will be difficult, we believe that the Town has little choice if it wishes to maintain its past investment in public buildings.
The schedule for adoption of a Capital Improvements Program includes the presentation of the Town Manager’s recommendation on April 22 and Council consideration on June 24.
DISCUSSION
What is a Capital Improvements Program?
The Capital Improvements Program is a 15-year financial plan for the Town’s major capital and infrastructure needs. The Capital Improvements Program identifies capital needs, establishes priorities, identifies potential funding sources, and includes needs for which sources of funding have not been identified. Key sources for identifying capital needs include the 2000 Facility Condition Assessment, special studies, the Comprehensive Plan, and ideas from the Council, citizens and staff.
The Capital Improvements Program is comprehensive in scope: it includes all identified capital projects and a range of funding sources, as well as projects that have been identified but for which funding is not available. It includes projects that are funded through the Town’s Capital Repair and Maintenance fund, and also those projects that are funded through bonds, State and federal grants, and other sources. However, the Capital Improvements Program does not include the capital needs of the Chapel Hill-Carrboro City School System, the Orange Water and Sewer Authority, or the Orange Regional Landfill, which was transferred to Orange County in 2000.
The Capital Repair and Maintenance Fund generally is funded by annual transfers from the Town’s General Fund. In addition, the program includes projects for which Town bond funds will be used (please see Tables 1 and 2), and projects for which grant or other funds will be used (please see Table 3).
Why is this an unusual year?
This Preliminary Capital Improvements Plan is unusual in two aspects: the preliminary Capital Repair and Maintenance Fund budget for 2002-03 is only $438,000 and the preliminary budgets for the subsequent years are proposed to increase beyond what has been contemplated in the past. The reasons are two-fold: the unprecedentedly constrained financial situation in which local governments in North Carolina find themselves now; and the very significant needs for extraordinary and routine maintenance identified in the 2000 Facility Condition Assessment on the three dozen facilities belonging to the Town of Chapel Hill. While it will be a major challenge to identify funding for the needs included in this preliminary 15-year plan, we believe that it is crucial that this community protect its very considerable investment in buildings and facilities.
Summary of First Year
In 2002-03, we suggest using the Capital Repair and Maintenance Fund to pay for six projects:
· An annual payment on 10-year installment debt on the 2001 purchase of a site for relocating the public works compound, $131,000;
· An annual payment on 10-year installment debt on major repairs at the A.D. Clark Pool/Hargraves Center ($180,000);
· An annual payment on 10-year installment debt on major repairs at the InterFaith Council Shelter ($52,000);
· An annual payment on 10-year installment debt on major roof repairs at the Chapel Hill Museum ($9,000);
· The second-to-last $28,000 annual payment on a contract to purchase infrared rescue cameras; and,
· A $38,000 payment to the Chapel Hill-Carrboro school system as part of an agreement providing the Town access to the gym at the Meadowmont Elementary School.
Except for the three installment debt projects mentioned above, the program would allocate no Capital Repair and Maintenance Fund resources for the maintenance of Town buildings and none to parks in 2002-03. No funding is provided for the construction of new sidewalks, greenways or bicycle facilities in 2002-03.
Based on our on-going inspections of properties, we believe the Town must not delay work on the three building maintenance projects listed above because of the deteriorating condition of each of those facilities. The Hargraves project will begin this spring and run through the winter. The roof repair of the museum would proceed later in the year. The work on the shelter will begin in 2002-03; the Town will act as general contractor over the course of the year.
In addition, Library gift funds would pay for repairs of the Library’s mechanical system, and the Parking Fund would enable continued maintenance at the James C. Wallace Parking Facility.
We note that Council policy and practice has been to use revenue from cell tower leases, which in 2001-02 totaled $55,000, for greenways. However, in 2002-03 no funding is included for greenways, and it is not until 2006-07 that the amount approaches the $107,000 that had been budgeted in 2001-02 This departure is being considered because of the severe general budget constraints and the equally intense needs for maintenance of the Town’s buildings.
Payments for community gym at Meadowmont elementary school
A new expense which also will affect the budget for 2003-04 and 2004-05 is the addition of an annual $238,000 payment to Chapel Hill-Carrboro City Schools as part of an agreement providing the Town access to the gym at the Meadowmont school. In 2001, the Town Council agreed to pay $750,000 over three years to the Chapel Hill-Carrboro City Schools to ensure that a community gymnasium would be built at the new elementary school planned for the Meadowmont development and that the Town would have access to the facility. The Town Council’s waiver of development fees for the elementary school reduces the total owed from $750,000 to $714,000. A $200,000 payment by the Meadowmont developer in lieu of building a softball field and restrooms for the Meadowmont Park will offset much of the Town’s cost in 2002-03. The Capital Repair and Maintenance Fund will be needed to make the full payment of $238,000 in each of the subsequent two years.
New Public Works Facility
The Chapel Hill Public Works Facility has been located on the University’s Horace Williams tract since 1977. The lease expires on December 31, 2006, and the University has declined more than once to extend the term.
A site for a new Public Works facility was purchased in 2001 on an undeveloped tract north of Eubanks Road. The acquisition was financed for 10 years, with the 2002-03 payment being $131,000. The first annual payment last year was included in the budget in the General Fund, but it has been moved to the more appropriate Capital Improvements Program along with other short-term debt funding of capital projects. Funding from the Capital Repair and Maintenance Fund is shown beginning in 2003-04 for planning, design and site development work prior to construction of the new facility. Initial site analysis work been completed, and the remaining 1996 Public Works bonds will allow it to continue in 2002-03.
Because we do not have a program yet for what will be needed for a public works facility in 2007 and decades into the future, we do not have a firm cost estimate. However, based on early and general estimates of various types and amounts of space needed, we believe that the facility could cost in the range of $15,000,000 to build. We would anticipate that general obligation bonds or another type of 20-year financing would be needed to raise this sum. Table 1 includes the estimated financing costs for this facility for the 11 years included in the program.
New Transit Operations Facility
The Transit Operations Facility is currently based on the Horace Williams tract, next to Public Works. Therefore, its lease will also expire on December 31, 2006, and a site search is underway. The Transportation capital fund now includes funds to purchase a site. We believe that federal funds will be available for 90% of the cost of developing the new operations facility and that the land could be used to cover part of the local share.
As with the public works facility, we do not have a firm cost estimate. Based on newly built facilities for systems of about the same size as Chapel Hill Transit, we think that the cost could be in the range of $15 million. Even if federal funds are available for 90% of that cost, and even if the land covers half of the local share, we estimate that about $800,000 will be needed. Of this, Chapel Hill is responsible for $376,000 and Carrboro and the University of North Carolina are responsible for the remainder. Costs for financing that $376,000 over 20 years are included in Table 1.
Structure of the Preliminary Capital Improvements Program
The Preliminary Capital Improvements Program for the years 2002-2017 was developed using a set of priority ranking criteria to evaluate projects (please see Attachment 1). The highest priorities are given to those projects for which the Town has executed a contract, those that have a Council mandate for funding, those which are needed to meet a legal requirement, and those that would repair existing facilities.
Attachment 2 describes the categories of projects.
The Capital Improvements Program consists of four tables:
· Table 1: Preliminary 2002-2017 Capital Improvements Program – Capital Repair and Maintenance Fund and Debt Financed Projects. Table 1 includes a preliminary funding level of $438,000 for 2002-03, $1,438,000 for 2003-04, and ranges to a high of $3,189,000 over the remainder of the fifteen year period. We have assigned priorities to each project, and have identified whether each project is a Maintenance, Improvement, or Expansion item. The annual totals of expenditures include two new and large projects which are anticipated to be funded with 20-year financing, the new public works facility and the new transit facility
· Table 1A. Worksheet to Determine Reserve for Facility Maintenance (Remaining Needs Identified in Facility Conditions Assessment). This table lists the building maintenance projects identified in the 2000 Facility Condition Assessment report that remain after accounting for installment-financed projects and individual projects included in Table 1. These include some deferred maintenance projects as well as routine cyclic maintenance, such as repainting and reproofing needs. Funding included in the Reserve for Facility Maintenance (Reference Number 28 in Table 1) would enable the Town to make these repairs over time.
· Table 1B: Preliminary Installment Financing Summary: Facility Maintenance Projects. This table lists extraordinary maintenance projects which are large enough to be financed for 10-years.
· Table 2: Preliminary 2002-2017 Capital Improvements Program – Bonds. Table 2 lists projects being funded by the 1996 bond projects, with a bond sale schedule adopted by the Council on September 8, 1997 and updated on February 25, 2002.
· Table 3: Proposed 2002-2017 Capital Improvement Projects - Other Funds. Table 3 lists capital projects funded by grants or other sources for which funding is available or anticipated with confidence.
· Table 4:Preliminary Unfunded 2002-2017 Projects. Table 4 lists other capital repair and maintenance projects listed in the 2000 Facility Condition Assessment, or submitted by Departments, which are not included for funding. We also identify for each project its priority rating, and whether each project is a Maintenance, Improvement, or Expansion item. This table includes projects which may well be funded with grant sources; unless funding approval has been received, we have considered projects to be unfunded.
After the very restrained preliminary capital budget for 2002-03, we have expanded the future annual allocations from the Capital Repair and Maintenance Fund beyond what has previously been considered. Nevertheless, Table 4 contains approximately $40 million in more than 100 unfunded projects needed over the fifteen-year planning period.
Facility Maintenance
Two new items this year relate to facility maintenance over the 15-year scope of the Preliminary Plan: Table 1A: Worksheet to Determine Reserve for Facility Maintenance, mentioned above, and the Reserve for Facility Maintenance line item (see Reference Number 28 in Table 1).
Table 1A summarizes the costs of building maintenance projects identified in the Facility Condition Assessment completed in August 2000. These costs, which are adjusted for inflation to 2002-03 dollars, are detailed in the two-volume Facility Condition Assessment. The buildings at the Public Works/Transportation compound on the Horace Williams tract are not included in this table, because of the impending move of those facilities to a new location by 2007. Housing administration offices and maintenance facilities also are omitted from the list with the assumption that federal funds can be used for repairs at the facilities. These costs are included in Table 4 as unfunded projects.
The funding sources for addressing the maintenance needs identified in Table 1A include installment financing, individual Capital Repair and Maintenance Fund expenditures, and allocation of other sources such as library gift funds. The remainder of the facility maintenance costs are used as a basis for a new line item in Table 1, Reserve for Facility Maintenance.
The Reserve for Facility Maintenance sets aside funds for maintenance needs that have been identified in the Facility Condition Assessment. These needs are in addition to the installment financing projects and other specific maintenance items already included in Table 1. This Reserve for Facility Maintenance would provide the resources to complete maintenance projects ranging in cost from under $10,000 to about $250,000. Individual project costs may be low, but still too large and irregular in timing to be accommodated in a department’s operating budget. We would expect that larger projects would probably be financed.
By grouping projected maintenance expenditures into a single line item, the Town would have the flexibility to determine which among the list of individual maintenance needs to address in a given year. We anticipate that priorities and needs will change, because 15-year projections cannot remain accurate. Although the amount of funding of this reserve is based on the cost projections of the Facility Condition Assessment, a determination as to the timing of these projects would likely change from year to year.
As an example of how the funding could be used, in year 2003-04 the Reserve for Facility Maintenance provides $300,000 which could pay for many small maintenance projects. Table 1A shows that the Facility Condition Assessment identifies a cumulative backlog of projects totaling more than $900,000 by 2003-04 that have not been included in Table 1 for funding. Based on on-going field analysis, the Town would decide which projects to complete with the funding available.
You will note that funding for the Reserve for Facility Maintenance declines after about 10 years, reflecting the fact that most of the deferred maintenance projects and their financing will have been completed. Although additional projects will be identified in later facility condition assessments, we believe that the funding of maintenance on a steady basis will reduce overall maintenance costs significantly.
(The Preliminary Plan proposes continuing funding for the general category of Extraordinary Maintenance: Emergency Repairs, as provided in previous years, and should not be confused with the Reserve for Facility Maintenance. The Extraordinary Maintenance line is meant to provide funding to address unanticipated problems such as storm damage, and needs such as a failing roof or telephone system that appear earlier than the 2000 Building Assessment forecast. A good example is the Museum roof project which is Reference Number 12 on Table 1. The Facility Assessment had scheduled that roof replacement for 2010-11, but the roof began to fail significantly this year. Because we had no cash reserves, we had no choice but to consider 10-year installment financing.)
Installment Financing
To address deferred maintenance needs as much as possible, we have relied on installment financing with ten year terms to pay for immediately needed capital maintenance projects. We believe installment financing is an efficient method of capital financing. Its use can prevent further deterioration, facilitate one efficiently organized project instead of several small ones and reduce the need for future deferred maintenance. It also is an equitable means, because it allows future beneficiaries of the projects to contribute to the cost.
By undertaking these projects in the Plan, we hope to reduce or eliminate the accumulation of deferred maintenance needed in future years. If we can follow the programmed cyclic capital maintenance items each year, we believe that we can prolong the useful lives of the community’s public facilities and minimize cost of doing so.
Table 1B lists the facility maintenance projects which could be appropriately addressed by 10-year installment financing. Five-year installment financing for replacing the generator at the Police Headquarters and purchasing a new generator for Town Hall, with an expected principal cost of $100,000 and $120,000, respectively, is included in 2002-03 in Table 1.
Public Forum Comments
On January 29, 2002, the Council held a public forum on the budget and capital program needs. Advisory Board representatives and other citizens made project requests. All of their comments are summarized in Attachment 3.
FUTURE STEPS
On Tuesday, March 26, 2002, a public hearing will be held to receive citizen comments on the Capital Improvements Program. The Manager’s Recommended Capital Improvements Program will be submitted to the Council on Monday, April 22, 2002. On Wednesday, May 8, 2002, a public hearing will be held to receive citizen comments on the Recommended Capital Improvements Program. The Public Arts Commission will study the Manager’s Recommended Capital Improvements Program and make recommendations regarding the Percent for Art Program during May. The Town Council is scheduled to consider adopting the Budget and Capital Improvements Program on Monday, June 24, 2002.
We recommend the Council adopt the attached resolution referring this document to Town advisory boards.
ATTACHMENTS
1. Priorities for Selecting Projects for Capital Improvements Funding (p. 10).
2. Description of Project Categories (p. 11).
3. Public Forum Comments p. 12).
4. January 29, 2002 memorandum forwarding comments from Advisory Boards on the 2002-2017 Capital Improvements Program (p. 14).
5. January 22, 2002, Bicycle and Pedestrian Preliminary Comments on Capital Improvements Program (p. 15).
6. January 23, 2002 Greenways Commission memorandum on Capital Improvements Program (p. 16).
7. January 15, 2002 Historic District Commission memorandum (p. 17).
8. Library Board comments submitted January 29, 2002 (p. 18).
9. Memorandum of January 18, 2002 Parks and Recreation Commission on Capital Improvements Program (p. 19).
10. January 15, 2002 Planning Board memorandum on Capital Improvements Program (p. 20).
11. Summary of Transportation Board Action, February 5, 2002 (p. 21).
1. Preliminary 2002-2017 Capital Improvements Program: Capital Repair Fund and Debt Finance Projects (p. 22).
1A Worksheet to Determine Reserve for Facility Maintenance (Remaining Needs
Identified in Facility Condition Assessment (p. 23).
1B Preliminary Installment Financing Summary: Facility Maintenance Projects (p. 24).
2. Preliminary 2002-2017 Capital Improvements Program: Bonds (p. 25).
3. Preliminary 2002-2017 Capital Improvements Program: Other Funds (p. 26).
4. Preliminary Unfunded 2002-2017 Projects (p. 27).
A RESOLUTION REFERRING THE PRELIMINARY REPORT ON THE CAPITAL IMPROVEMENTS PROGRAM (2002-03-25/R-1))
WHEREAS, the Council of the Town of Chapel Hill has received a Preliminary Report on developing a 2002-2017 Capital Improvements Program;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council hereby refers the Preliminary Report for comment and recommendations to the following advisory boards:
· Bicycle and Pedestrian Advisory Board;
· Community Design Commission;
· Greenways Commission;
· Historic District Commission;
· Housing and Community Development Advisory Board;
· Library Board;
· Parks and Recreation Commission;
· Planning Board;
· Public Arts Commission; and
· Transportation Board.
BE IT FURTHER RESOLVED that the Council requests that the advisory boards complete their review and recommendations for consideration at the Council Public Hearing on Wednesday, May 8, 2002, regarding the Budget and Capital Improvements Program.
This the 26th day of March, 2002.
ATTACHMENT 1
PRIORITIES FOR SELECTING PROJECTS FOR CAPITAL IMPROVEMENTS FUNDING
PRIORITY 1 Council-authorized contracts.
PRIORITY 2 Projects that have a Council mandate.
PRIORITY 3 Projects that we have a legal requirement to perform or complete.
PRIORITY 4 Projects that would repair or maintain existing Town facilities/infrastructure above and beyond ordinary maintenance.
PRIORITY 5 Project involving public safety.
PRIORITY 6 Projects which are part of an adopted master plan.
PRIORITY 7 Other projects.
ATTACHMENT 2
Following is a description of each project category included in the Preliminary Capital Improvements Program:
Town Facilities Leased by Others: This category includes improvements to buildings which the Town owns and leases to other entities, such as the IFC Shelter, public housing apartments and the Chapel Hill Museum.
Infrastructure: This category deals with improvements to Town infrastructure, such as bridges, sidewalks, drainage, bike paths, and cemeteries.
Communications and Technology: This category includes projects which support the communications, technology, and information functions of the Town.
Parks and Other Public Use Facilities: This category includes projects which relate to buildings or facilities which are used by the public, such as parks, greenways and the library.
ATTACHMENT 3
On January 29, 2002, the Council held a public forum on the budget and capital program needs. Advisory Board representatives and other citizens made project requests. Their comments are summarized below. See Attachments 2, 3, 4 and 5 for written Advisory Board comments submitted.
Advisory Board Comments
This year we invited comments from Advisory Boards early in the process to provide an opportunity for input before the first forum on the Capital Improvements Program, being conducted tonight. Advisory Boards will have a second opportunity to comment on the Capital Improvements Program, from March 26 to April 19, beginning after the Preliminary Capital Improvements Program is submitted to Council on March 25. In prior years, the Advisory Board comment period began only after the Preliminary Capital Improvements Program was submitted to Council. Please see Attachment 2 for written comments submitted by Advisory Boards prior to the January 29 forum.
At the forum, the following comments were made by Advisory Board representatives:
· Library. The Library Board of Trustees requested that the Town include the expansion of the library in the 15-year program, begin to identify funding sources, and fund a consultant report on the project.
· Sidewalks and pedestrian improvements. The Bicycle-Pedestrian Advisory Board requested increased funding for sidewalks and crosswalks in the first five years of the program.
· Greenways. The Greenways Commission asked that the 2001-16 Capital Improvements Program funding for greenways projects be maintained, and that the Town use additional funding sources such as the County bond issue and State funding.
· Parks. The Parks and Recreation Commission, citing safety concerns, requested that funding in 2002-03 for small park improvements continue at $50,000, or be increased to $75,000 if possible, and recommended that the Town continue to fund ongoing maintenance projects at facilities to prevent more expensive repairs in the future.
Citizen Comments
Comments from individual citizens included the following:
· Grants for Rogers Road neighborhood. A citizen requested grant money to pay for sewer lines connecting houses on Rogers Road, and transportation grant funding for transit improvements in that area.
· Sykes Street improvements. A citizen requested funding for an intersection realignment, and other traffic and safety improvements for Sykes Street.