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).
Goals
Key
sources for identifying capital needs include the Comprehensive Plan, the 2000
Facility Condition Assessment, special studies, and ideas from the Council,
citizens and staff.
The
Chapel Hill Comprehensive Plan serves as the basis for many of the Town’s
policy decisions related to a wide range of issues. Decisions related to
capital projects also are tied to the Comprehensive Plan, which is organized
around 12 major themes, “each growing out of the community values that have
been identified and which, taken together, form a strategy for Chapel Hill’s future.”
Comprehensive Plan themes related to the Capital Improvements Program include:
·
Provide
quality community facilities and services. These include police protection, fire
protection, library services, parks and recreation, transportation facilities,
and municipal operations. The Plan also cites schools, water and sewer, and
solid waste management, but these are services provided by others.
·
Complete
the bikeway / greenway / sidewalk systems. The Comprehensive Plan reflects a high
citizen Council priority on providing these facilities.
·
Create
and preserve affordable housing opportunities. The Town’s Community
Development Block Grant funding and other sources help the Town achieve housing
goals.
·
Work
toward a balanced transportation system. Transit, bicycle, sidewalk and greenway
projects funded in the Capital Improvements Program enhance opportunities for
citizens to use modes of transportation other than the automobile.
Other
Comprehensive Plan components, such as the Downtown Small Area Plan, and the
Greenways Master Plan help determine capital facility needs. The proposed Parks
and Recreation Master Plan, 2002, will help determine capital project
priorities in the future, such as investments in new parks in certain areas of
Town. Other current capital planning efforts include:
·
Library Master Plan
·
Municipal Operations, including a
new transit facility and public works site.
The
2000 Facility Condition Assessment provides the Town the documentation needed
to budget for current deficiencies at Town facilities as well as anticipate
future needs, such as the replacement of a roof 10 years from now. The Town
also conducts an annual analysis of all facilities to determine whether any
projects must be addressed immediately. The next intensive Facility Condition
Assessment by a consultant is scheduled for 2005-06.
Process
The
development of the Capital Improvements Program provides for significant input
from the public, Town Advisory Boards and Town Departments. The process for
developing the 2002-17 Capital Improvements Program is outlined in Figure 1
(below), beginning with the distribution of project request forms in November
2001 and concluding with the Council’s consideration of the Capital
Improvements Program in June.
At
several stages in the development of the Capital Improvements Program, the Town
provides the public and Advisory Boards an opportunity to comment. Advisory
Boards are provided an opportunity to submit comments prior to the January 29
public forum and the upcoming May 8 public hearing on the Recommended Capital
Improvements Program.
For
the 2002-17 program, Town Departments submitted more than 100 project requests
for funding in the 15-year Plan. In order to identify which projects to
recommend for funding in a given year, we have proposed criteria to determine a
project’s priority level. These priority levels are listed in Figure 2, below.
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. On March 26, the Council held a second public forum and referred the
Preliminary Capital Improvements Program to Advisory Boards for comment. Citizen
comments are summarized in Appendix 1. Written comments submitted by Advisory
Boards are summarized in Appendix 2.
On
Wednesday, May 8, 2002, Council will hold a public hearing 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.
Why
Is This an Unusual Year?
This
Recommended Capital Improvements Plan reflects the current economic environment
and budget conditions stemming from the State’s budget crisis and projected
deficit next year. The restricted funding recommended for the Capital Improvements
Program for next year limits funding primarily to current contractual debt
payments, new contractual debt for the Hargraves Center and A. D. Clarke Pool
renovations project currently underway, and new contractual debt payments for
the Chapel Hill Museum roof replacement project.
The Program is unusual in two aspects:
the Recommended Capital Repair and Maintenance Fund budget for 2002-03 is only
$478,000 and the projections for future years are proposed to increase beyond
what has been contemplated in the past. While it will be a major challenge to
identify funding for the needs included in this recommended 15-year plan, we
believe that it is crucial that this community protect its investment in
buildings and facilities.
Summary
In
2002-03, we recommend 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 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;
·
The last payment of $40,000 as
part of an existing contract to update the Town’s aerial photography;
·
An annual payment on 10-year
installment debt on major repairs at the A.D. Clark Pool/Hargraves Center
($180,000); 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 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 would 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 would 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
and State 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 and State 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. We estimate that Chapel Hill would be
responsible for 47 percent, or $376,000 based on the estimated $800,000 local
share, with Carrboro and the University of North Carolina responsible for the
remainder. Costs for financing that $376,000 over 20 years at 5 percent
interest are included in Table 1.
Structure of the
Recommended Capital Improvements Program
The
Recommended Capital Improvements Program for the years 2002-2017 was developed
using a set of priority ranking criteria to evaluate projects (please see
Appendix 3). 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.
Appendix
4 describes the categories of projects. Appendix 5 describes funding sources.
The
Capital Improvements Program consists of four tables:
·
Table 1: Recommended 2002-2017
Capital Improvements Program – Capital Repair and Maintenance Fund and Debt
Financed Projects. Table 1 includes a
funding level of $478,000 for 2002-03, $1,438,000 for 2003-04, and ranges to a
high of $3,187,000 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. Comparison of Identified Needs to Scheduled
Funding. 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 re-roofing needs.
Funding included in the Allocation for Facility Maintenance
(Reference Number 28 in Table 1) would enable the Town to make these
repairs over time. These needs are subject to change based on on-going inspections
by staff. In addition, we propose funding an intensive study by consultants
every five years.
·
Table 1B: Installment Financing
Summary: Facility Maintenance Projects. This
table lists extraordinary maintenance projects which are large enough to be
financed for 10 years.
·
Table 2: 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: 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: 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
2002-03, we have expanded the future annual allocations from the Capital Repair
and Maintenance Fund. Nevertheless, Table 4 contains about $40 million in about
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 Recommended Plan: Table 1A: Comparison of
Identified Needs to Scheduled Funding, mentioned above, and the Allocation 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 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, Allocation for Facility Maintenance.
The Allocation 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 Allocation 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 of
such items cannot remain accurate. Although the amount of funding of this allocation
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.
Table 1A also shows the cumulative deferred cyclical
maintenance needed over time and compares that to the cumulative allocation for
facility maintenance. The difference between these two numbers shows the extent
of unfunded cumulative deferred maintenance. For example, in 2003-04 there is
$905,000 in cumulative maintenance needs and a $300,000 annual allocation for
facility maintenance. The resulting $605,000 of unfunded projects is carried
forward to 2004-05 and added to the cumulative total for that year.
You will note that funding for the Allocation 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 Recommended 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 Allocation 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. An 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, we believe, 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 the 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 buying a new Town Hall generator, with an expected
principal cost of $100,000 and $120,000, respectively, is included in 2003-04
in Table 1.
Future Steps
May 8 Public hearing on
Recommended Capital Improvements Program
June 24 Council consideration of
the Capital Improvements Program
Conclusion
Each year we refine and update our list of potential Capital
Improvements Program projects and their timing. We look forward to receiving
more input from citizens and staff as we continue to plan for the capital needs
of the Town.
