AGENDA #6
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Potential Green Infrastructure Bond
DATE: May 28, 2003
This memorandum responds to the April 28, 2003, Council request for information about the feasibility and financial aspects of a “Green Infrastructure Bond.” Our preliminary estimate is that a $15.6 million bond would be needed to fund the projects described in the Council action of April 28, and that the first year’s debt service would be about $1,560,000.
BACKGROUND
On April 28, 2003, the Council received a petition from the Council’s Committee on Sustainability, Energy and Environment and directed the Town Manager to develop a report for tonight’s meeting about the feasibility and financial aspects of a 2003 “Green Infrastructure Bond” (please see Attachment 1). The petition requested a cost estimate and amortization schedule for a bond funding these projects:
· Construction costs for 50% of sidewalks listed on the current sidewalk plan within five years.
· Construction costs for 50% of the greenways listed in the Greenway Master Plan within five years.
· Sufficient funds to establish an Energy Bank in the Town budget, and for an Energy Coordinator in 2004.
· Upgrades in pedestrian amenities to five intersections.
· Open space purchases.
· Neighborhood, pedestrian and bicycle safety improvements.
DISCUSSION
Our preliminary estimate is that approximately $15.6 million would be needed to fund the projects described in the Council’s Committee on Sustainability, Energy and Environment petition of April 28, 2003. The majority of the total, $8 million, relates to greenways projects.
The cost estimates provided in this memorandum are working estimates only and would require further study and design work to attain construction estimate accuracy.
1. Construction costs for 50% of sidewalks in current sidewalk plan: $2.6 million
The Sidewalk Plan contains 48 unfunded projects totaling 80,800 linear feet. We estimate that constructing half of the total linear feet, (40,400), would cost roughly $2.6 million ($50 per linear foot, plus 25 percent).
Approximately 40,000 linear feet of sidewalks have been built by contractors since 1994 in Chapel Hill, with an average cost of $50. The average linear foot cost of projects by Town crews came to about $28 per linear foot, excluding labor costs, but we would expect that the majority of bond-funded sidewalk projects would need to be constructed by outside contractors. The cost of sidewalks can vary greatly, depending on the topography, drainage, landscaping and the need to purchase right of way. We have added a contingency factor of 25% to reflect these variables and the cost of inflation.
Therefore, we estimate that the cost of building about half of the sidewalks on the Council’s list of pending sidewalk projects, by using $50 per linear foot cost and adding 25%.
|
|
Unfunded Projects |
Linear Feet |
Cost (@$50/l.ft.) |
+25% Contingency |
|
TOTAL: Unfunded Projects |
48 |
80,800 |
$4,040,000 |
$5,050,000 |
|
TOTAL: Top 25-Ranked Projects |
25 |
37,500 |
$1,875,000 |
$2,343,750 |
|
Half of Total Linear Feet |
na |
40,400 |
$ 2,020,000 |
$2,525,000 |
2. Construction costs for 50% of projects in the Greenway Master Plan: $8 million
We are able to offer only an approximate estimate for constructing 50 percent of the greenway segments remaining in the Town’s Master Plan. Even a rough cost estimate should be based on preliminary design work, and we have none for the greenway segments involved. However, we relied on our experience to date with a variety of greenways; and reviewed the terrain, types and lengths of trails, numbers and types of bridges, retaining walls, boardwalks and drainage improvements potentially needed in the greenways yet to be built, and tried to develop cost estimates for each greenway segment included in the Greenways Comprehensive Master Plan. Based on this approach, our very rough working estimate is $8 million.
These cost estimates refer only to construction; they do not include the cost of any land or easements that may need to be acquired. Land acquisition expenses, unknown at this time, would increase the total amount of funding required for expanding the greenways network.
The table in Attachment 2 lists the greenway projects identified in the Town’s adopted 1998 Greenways Comprehensive Master Plan, with preliminary construction cost estimates. The table also includes information on land needs, trail type and other issues.
3. Sufficient funds to establish an Energy Bank or other source of capital funding: $1 million
For example, initial capital funds could be used to fund the replacement of lighting with high efficient fluorescent bulbs. The cost of energy usage in the building during the year preceding replacement would be compared with the cost of energy in the year after replacement. Assuming all other factors were held constant, the difference in energy costs from one year to the next would be considered the “savings” to be placed in the energy bank. That amount could then be used to pay part of the costs of replacing an HVAC system or other project. Perhaps a standard system would cost $150,000, and a more energy efficient system would cost 20% more. The $30,000 increment would be paid for from the energy bank.
The source of the original capital funding for the first energy efficient projects could come from a bond issue. The City of Ann Arbor issued $1.4 million in bond funds. Ann Arbor staff now report $100,000 per year in energy cost savings, but we were unable to determine the total investment in energy saving projects that was necessary to produce that level of savings.
The logic of using “energy cost savings” to fund the energy efficient increment of a new system is difficult to apply in the Town of Chapel Hill. The Council’s already established policy is to routinely meet high standards of energy efficiency, and to incorporate energy efficiency improvements whenever capital funds are spent on major building renovations. Therefore, new systems and equipment would ordinarily be specified as highly energy efficient as required by the Council. New buildings and major renovations would also specify energy efficient design and equipment. Given this standard of specifications, a somewhat arbitrary delineation would be required to distinguish the portion of a project cost that is the “energy efficient part.” It would be impossible to distinguish the energy savings made in new buildings, because there would be no previous base line against which to measure and because the Council already is committed to very high standards for new construction.
We believe the principal use of energy funds would be to speed up the replacement of outdated equipment, systems and materials beyond what is currently funded and scheduled in the Capital Improvements Program. We believe that $1 million in bond funds would pay for a substantial amount of energy efficiency improvements at Town facilities. We could set up a means of accounting for energy usage that could result in a mechanism for identifying funds to be used for subsequent energy efficiency projects. [Discussion of Energy Officer follows.]
4. Upgrades in pedestrian amenities at five intersections: $340,000
The cost of upgrading pedestrian amenities at five intersections would depend on the types of improvements. Our list includes projects costing an estimated $310,000, plus a 10 percent contingency. These improvements are as follows:
· Installing pedestrian crossing signals would cost about $50,000 per intersection, or a cost total of $250,000 for five locations
· Signal system timing studies to accommodate pedestrian phasing for five corridors would cost $6,000 each, or $30,000
· Other improvements, such as pedestrian heads with countdown displays, improved markings and signage
5. Open space purchases: $3 million
The Town has been acquiring additional open space since the 1996 Open Space Bonds were approved. We have purchased about a dozen properties of various sizes totaling about 90 acres, at a cost of $1,588,000. Another property is close to closing for about $194,000, and negotiations are on-going for others. We have found that there are very few large undeveloped parcels in the Chapel Hill Town Limits and Planning Area, and there are considerably fewer owned by willing sellers. Our estimate is that a $3,000,000 reserve would probably be sufficient for small tracts and easements as well as some larger tracts if they could be acquired. Depending on the actual acreage cost, this amount would be sufficient to purchase between 70 and 120 acres.
6. Neighborhood, pedestrian and bicycle safety improvements: $650,000
Below we list several types of neighborhood, pedestrian and bicycle safety improvements projects, with preliminary cost estimates.
Project Number Cost Per Item Total
Traffic Calming Projects
· Speed Humps 100 $3,000 $300,000
· Semi-Diverters 10 $6,000 $60,000
· Raised Crosswalks 25 $3,000 $75,000
· Traffic Circles 5 $10,000 $50,000
· Traffic Calming Signage 100 $100 $10,000
Install In-Roadway 2 $25,000 $50,000
Crosswalk Lighting System
Changing Signal Lenses
at remaining locations 10 $1,500 $15,000
to L.E.D Lenses (Town streets)
Pedestrian Signage 200 $ 100 $20,000
(Watch / Yield and
pedestrian warning signs)
Bicycle Improvements 100 $ 100 $10,000
(Improve Signage)
Subtotal $590,000
10 % Contingency $60,000
Total $650,000
NON-BOND COSTS: ENERGY COORDINATOR POSITION
The Council action of April 28 also requested information on the cost of establishing an energy coordinator position.
Bond funds cannot be used for personnel costs. However, an energy coordinator position would be needed to implement the energy management projects to be funded by a Green Infrastructure bond and subsequent energy management improvements and programs.
We estimate that this position would cost in the range of $60,000 to $80,000 a year, including benefits. Potential responsibilities of an energy coordinator could include analyzing energy usage and how it can be minimized, identifying and installing the most effective energy conservation measures in new and existing municipal facilities, monitoring and reporting results, and providing training to departments on addressing energy issues. In addition, an energy coordinator could provide civic and business education services if desired by the Council.
AMORTIZATION SCHEDULE
Our preliminary and very approximate cost estimates for a Green Infrastructure Bond are summarized as follows:
|
Project |
Preliminary Cost Estimate |
|
Construction Costs for 50% of Sidewalk Priorities |
$2,600,000 |
|
Construction Costs for 50% of Greenway Plans |
$8,000,000 |
|
Funds to Establish an Energy Bank |
$1,000,000 |
|
Upgrades in Pedestrian Amenities |
$340,000 |
|
Open Space Purchases |
$3,000,000 |
|
Neighborhood, Pedestrian and Bicycle Safety Improvements. |
$650,000 |
|
TOTAL |
$15,590,000 |
The cost estimates are very rough working estimates which would require further study and design work to improve their accuracy.
Amortization of a $15.6 million general obligation bond, assuming 20-year maturity and a 5 percent interest rate, would require $1.56 million in debt service in the first year ($100,000 per million of bond issued), declining slightly each year thereafter. This amount equates to about 3 cents on the tax rate now; each penny generates about $426,000 in 2003-04.
THE BROADER DEBT OUTLOOK
We believe that this potential bond program should be considered in the context of other major debt that the Council has had under discussion, and we will present a broader report for the Council’s consideration at the June 9 meeting.
1. Town Operations Center – Transit: A cost projection is anticipated in late June; our current very broad estimate is in the range of $15,000,000 – $16,000,000. Federal and state funding could pay for up to 90% of the design and construction cost of this project, but we do not now know how much will be available, when it might be available or when we might know either item. Construction must begin as soon as possible, probably in late 2004 or early 2005, so that the present site can be vacated by the end of 2006. Therefore, short-term financing may be necessary before grant funds are received, and an unknown amount of long-term financing may be necessary to fill any gap left by the grant funding.
2. Town Operations Center – Public Works: A cost projection is anticipated in late June; our current very broad estimate is in the range of $15,000,000. This project will be fully integrated with the transit portion of the Town Operations Center, so it will follow the same schedule. However, with the exception of minimal funding from the Department of Housing and Urban Development for the Housing Maintenance Facility, the full cost will need to be financed by the Town. We anticipate a 20-year term, beginning in 2005-06. First year debt service is estimated at $1,520,000
3. Library Expansion: The Master Plan cost projection is approximately $16,000,000 for an expansion that would add about 48,000 square feet to the 27,000 square foot current building. If the expansion is accomplished in two equal phases, first year debt service would be $800,000. Three years later, when the second phase begins library debt service would be about $1,540,000.
4. Capital Maintenance and Renovations: Major repair and renovations of Town facilities have been programmed based on a Facilities Condition Assessment Study performed in 2000. At least three major projects need to be implemented in the next two or three years, with the first year debt service together totaling about $438,000: IFC Shelter ($68,000), Old Post Office ($225,000) and Community Center ($145,000).
NEXT STEPS
At the June 9, 2003 Council meeting, we will provide more information about major projects that will need to be financed, including potential schedules of debt service and potential tax rate implications. We recommend that the Council consider the topic of a green infrastructure bond further at that time.
ATTACHMENTS
1. April 28, 2003 Petition for Report on Green Infrastructure Bond (p. 8).
2. Greenway Master Plan Projects (p. 9).