Attachment A

 

FY 2008 to 2017 Capital Planning Process Overview

 

 

The 5-Year Capital Improvements Program (CIP) and the 10-Year Capital Needs Assessment serve as the planning guides for County expenditures on major capital facilities and equipment needs over the next 5- and 10- year periods respectively, and represent a process designed to balance between finite resources and an ever increasing number of competing County priorities and needs, including capital facilities.

 

The overall capital planning cycle operates on a 2-year time frame.  The first year of the cycle involves the assessment of all capital projects and development of the complete 10-year Capital Needs Assessment/CIP; while the second year of the cycle addresses only amendments and refinements of the currently approved CIP needed to accommodate urgent or emergency projects and updated cost estimates.

 

What is the Capital Needs Assessment?

As part of the redesigned Capital Improvements Program process, the 10-Year Capital Needs Assessment was initiated to help identify County capital needs that are beyond the traditional 5-year CIP period. This 10-year assessment, which is updated every other year, helps to form the basis of the 5-year CIP as projects are brought forward into the CIP from the Needs Assessment, in addition to helping to improve the long-range forecasting of future capital needs for both planning and financing purposes.

 

What is the CIP?

The CIP is the planning guide for County expenditures for major capital facilities and equipment over the upcoming 5-year period. It is based for the most part on the “physical needs” of the County as identified in the Capital Facilities Plan, which is a section of the County’s Comprehensive Plan, and other established planning documents that have been prepared.

 

What is the Capital Budget?

The current budget year of the Capital Improvements Program is called the Capital Budget, and funds are appropriated each year to fund those capital projects in the budget year of the CIP (i.e., the first fiscal year in the CIP) in the same manner as funds are appropriated for the County's annual operating budget. Those projects scheduled in the CIP for subsequent years are approved for planning purposes only and do not receive expenditure authority until they become part of the annual capital budget.

 

What is a Capital Project?

A capital project is a planned expense for a facility or physical item requiring a minimum expenditure of $20,000 by the County, having a useful life span of 10 years or more (except for technology projects), and meeting one or more of the following definitions:

 

·         Involves the acquisition or construction of any physical facility for the community;

 

·         Involves the acquisition of land or an interest in land for the community;

 

·         Involves the acquisition or construction of public utilities;

 

·         Involves the ongoing acquisition of major equipment or physical systems, i.e., computer technology, radio systems, major specialized vehicles, etc.;

 

·         Involves modifications to facilities, including additions to existing facilities, which increase the square footage, useful life, or value of the facility; and/or

 

·         Capital maintenance or replacement projects on existing facilities, as defined below.

 

Capital Project Costs include all expenses directly related to the acquisition or construction of any physical facility, land parcel or major system, such as consultant or professional services for planning, design, survey, engineering, and construction; permit fees; site preparation; installation of utilities and infrastructure; and acquisition of capital equipment and durable commodities required in order for the constructed or acquired facility to be opened and become initially operational.

 

A Capital Maintenance or Replacement Project is a non-recurring project to repair, maintain or replace existing capital facilities for the purpose of protecting the County’s investment in a facility and minimizing future maintenance and replacement costs. To be classified as a capital maintenance project, a project must have an interval between expenditures of at least 5 years. Individual maintenance projects may have a minimum value of less than $20,000.

 

Since Information Technology Purchases are durable products but typically may have a useful life of only 3 to 5 years, these purchases are planned in the CIP, but generally funded in the Capital Budget on a “pay-as-you-go” basis from either current revenues, other non-borrowed sources of funding, such as state revenues (when available), or other local non-General Fund revenues.

 

Evolution of the CIP Process

In the spring of 2000, the Board of Supervisors held a number of work sessions on long-range capital needs. These work sessions identified some of the significant capital needs facing the County over the next 10 years, in light of on-going revenue limitations within the Capital Improvements Program. As a result of these discussions, the Board approved a staff recommendation that a strategic planning process be developed that: a) identifies the long-range capital needs facing the County; b) solicits guidance from the Board on funding priorities; and c) addresses options for financing the County’s capital project priorities.

 

In support of the objective recommended by the Board, a financial advisor, Davenport and Company, was retained to assist the County in developing a financing strategy for capital projects. Additionally, the budgeting process for capital projects was re-designed to incorporate a long-range capital needs assessment and a multi-year planning process.

 

Changes to the County’s capital budget process have been made to implement a streamlined, 2-year capital planning process that begins in Year One with a detailed review of the County's anticipated capital project needs for the upcoming 10-year period and the preparation of a complete capital improvements program for the first 5 years of that period.  Year Two is a streamlined review of the existing CIP to address amendments needed to provide for emergency or unanticipated urgent needs.

 

Capital Planning Cycle Phases by Year

This current cycle of the County’s capital planning process for FY 07/08 through FY 16/17 projects begins in the summer of calendar year 2006 and runs through the spring of calendar year 2007. FY08 is Year One of the next 2-year capital planning cycle and involves the development of both the long-range 10-year Capital Needs Assessment for FY 13-17 and the 5-year CIP for FY 08-12. In Year One, new projects can be requested and existing projects are reviewed and updated as necessary.  The Board of Supervisors reviewed and approved the final FY 08-12 CIP & FY 13-17 Capital Needs Assessment and adopted the FY 07/08 annual Capital Budget in June 2007.

 

Year 2: The latter half of calendar year 2007 and the winter-spring of 2008 are Year 2 of the 2-year capital planning cycle and will involve only a streamlined review of urgent or emergency project needs and updated cost estimates for projects included in the FY 08-12 CIP. During Year Two of the CIP cycle, no changes will be made to the 10-year capital needs assessment. Changes in the first four years of the approved CIP will be made only for emergency needs, or projects meeting clearly identified critical needs that cannot wait until the next full planning cycle.

 

How are Capital Project Requests Reviewed?

The complete 10-year plan of proposed capital projects is first reviewed and approved by the CIP Technical Review Team (TRT).  During the FY07 budget process, the Technical Review Committee was split into two committees; the Technical Review Team (TRT) and CIP Oversight Committee.  The Technical Review Team is comprised of County staff and is tasked with reviewing the detailed, technical aspects of project requests and project status.  The CIP Oversight Committee, comprised of executive level staff members, one Planning Commission member, two Board of Supervisors members, two School Board members, and one citizen member is tasked with conducting an overall review of the 10 year CIP plan. It is then reviewed by the County’s Planning Commission, and finally by the Board of Supervisors as recommended to them by the County Executive for their approval. The Board of Supervisors subsequently approves both the CIP and the annual Capital Budget for projects to be funded in the upcoming fiscal year during the annual budget review process.

 

 

What are the Established Evaluation Criteria?

Project evaluation criteria have been established and are used by the committees to review and evaluate all capital projects and their cost estimates. All projects are evaluated against various factors which the submitting department/agency is asked to address on each of the applicable CIP Forms, such as the Project Request Form, and the basis of cost estimates provided on the Project Cost Summary Form, and the several Project Cost Detail Forms, all of which are fully described in these instructions.

 

The TRT also ranks new capital projects, based on staff analyses done by the General Services Department, and the County Office of Management and Budget (OMB) staff. Mandated, committed, and non-discretionary maintenance/replacement projects are not ranked, but are automatically funded as number one priorities.

 

Committed Projects are defined as those ongoing projects that already have received funding in a prior year, but which require additional funding for completion. Projects in the CIP plan that have not received any prior year funding are not considered committed projects. 

 

Consistent with the policy of restricting the addition of new projects to the period of the Capital Needs Assessment (Years 6-10) or the fifth year of the CIP (unless there is an unusual, well-justified, urgent priority need of the County to be met by entering the project in the second, third or fourth year), most projects in the first four years of the CIP will already have been evaluated under these same criteria.  If there are no significant changes in driving factors, the projects in the first four years will receive the same previous ranking. 

 

It also is the County’s goal to ensure that non-discretionary maintenance and repair projects are funded before new projects are undertaken, which is why they are considered a higher priority than new projects. As stated in the County’s financial policies, the goal is to fund the maintenance and repair projects as much as possible with current revenues, rather than through borrowed funds.

 

School Division Capital Projects follow the same 2-year capital planning process and procedures as all other County projects, with some additional steps added by the School division to meet their special needs. The School Board prioritizes and approves future school capital projects and submits them to the County Executive’s Office and CIP TRT as requested capital projects in the 10-year Needs Assessment and 5-year CIP to be addressed and balanced within anticipated available revenues and County-wide debt management policies and capacity.

 

The CIP review schedule provides for a two week review period for any new project in the CIP requiring construction. However, departments and agencies are encouraged to consult with the General Services Department as early as possible in the capital planning cycle regarding the engineering requirements for new projects under consideration or being proposed for the capital plan, and for any significant revisions to existing projects. Consultation should continue throughout the CIP preparation and review process.

 

Relationship to Approved Financial Policies

The CIP is developed in a manner consistent with approved County financial policies that set guidelines for the CIP and for the funding of maintenance and replacement projects:

 

·         Coordinating Capital Budget with Operating Budget.  In alignment with the approved policies, the Capital Improvements Program continues to be coordinated with the operating budget process.

 

·         Asset Maintenance and Replacement.  The CIP also reflects the County’s dedication to maintaining and enhancing its capital stock by increasing the ongoing funding for maintenance and repair projects in both General Government and School Division capital improvement programs. School Division roof replacements, HVAC system replacements and paving projects continue to be funded with 20-year VPSA bonds.

 

·         Financing Capital Projects with Current Revenues.  The financial policies state that “… the County … will … increase incrementally the percentage of its capital improvements financed by current revenues.  The County’s goal will be to dedicate a minimum of 5% of the annual General Fund revenues … to the Capital Improvements Program.”

 

Projections of Revenues and Debt Service

To implement a more realistic plan of projects in the next 5-year period, the County staff provides the review committees with a forecast of revenues anticipated to be available and expected debt service costs needed to support CIP projects over the next five years.  Although revenue estimates may vary in either direction, the general revenue parameters and debt service requirements are used by the review teams to help prioritize and stage projects over the 5-year planning and the 10-year assessment periods.  Local revenues, bond proceeds and debt service costs are projected for the full 10-year assessment period, although the difficulty of accurately projecting revenues and economic conditions over such a long period of time will make these out-year revenue estimates highly variable and subject to biennial revision.

 

CIP Funding Capability

The County’s capital funding capability is the direct result of the Board of Supervisors increasing the commitment of tax revenues and one-time funds to a long-term capital investment strategy.  This strategy provides funding to the CIP in three ways:

 

·         Increases the General Fund transfer to the capital program inclusive of debt each year by the rate of revenue growth;

 

·         Sets aside an additional one-half of percentage point of total operating budget growth to the capital fund;

 

·         Dedicated two cent of the tax rate to the capital/debt reserve each year.

 

Debt Capacity

One of the County’s approved financial policies pertaining to debt capacity was amended in October, 2000. The former policy “The ratio of Debt Service Expenditures to General Fund Revenues should not exceed 10%” was amended to read: “The ratio of Debt Service Expenditures to General Fund and School Fund Revenues should not exceed 10%.” This amended policy is more consistent with generally accepted financial policies from other localities that use both school and general operating revenues as the basis of the debt capacity ratio.

 

The amended County Financial Policies recommend that long-term debt and associated debt service levels remain within certain target limits as follows: 2% of the assessed value of taxable property, or 10% of General Fund and School Fund revenues for debt service. 

 

Contingency Reserve

The CIP and the Capital Budget include a Contingency Reserve amount to be used for maintaining a reliable base of funding over the 5-year CIP period or to help meet unanticipated capital needs in the outlying years of the CIP. This reserve may be used to offset unanticipated increases in construction costs for funded projects or the fluctuating amounts of annual debt service payments required for existing projects, to provide a source of funding for unanticipated emergency projects, to offset any downward fluctuations in the 5-year revenue projections, and/or to provide a source of funding for additional infrastructure improvements which may be approved by the Board of Supervisors. 

 


 

 

FY 08-12 CIP and 13-17 Needs Assessment

FY08/09 Budget Year Calendar

 

 

June 

15        Post CIP Instructions and Forms to CIP Team Services Site

           

August

20        Department and Agency Project Justifications & Cost Data Due to OMB

             

September

4          Send CIP Request Forms to Facilities Development for Review     

24        Facilities Development Sends Evaluations of CIP Project Requests to OMB

27        All CIP Forms and Facilities Development's Evaluations Posted to Team Services Site

 

October         

4          CIP Project Requests and Facilities Development Evaluations Sent to the CIP Technical Review Team (TRT)

18        Meeting #1 - CIP TRT Meeting to review CIP Project Requests and 10 Year Assessments

19 - 24 Departments and Agencies Respond to TRT Questions and Comments

25        Meeting #2 - CIP TRT Meeting to Review Project Analyses, Department/Agency Response

31        School Division Project Cost Data Posted To Team Services and Approved School Board Document to OMB 

           

November

5          Meeting #3 - CIP TRT Meeting (Schools Projects and CIP Revenue Overview)

8          CIP Project Requests and Information sent to CIP Oversight Committee

19        Meeting #1 - CIP Oversight Committee Meeting 

26        Meeting #2 - CIP Oversight Committee Meeting (School Projects) and CIP Revenues Overview

29        Meeting #3 - CIP Oversight Committee Meeting (if needed)

 

December     

3          County Executive Staff Preliminary Review of Recommended CIP

5          Joint Meeting of Board of Supervisors and School Board to Review CIP Recommendations

10        Final Recommended CIP Document Prepared

18        Planning Commission Presentation for Comment

 

January         

7          County Executive Review/Approve Recommended CIP

 

February       

29        County Executive's Recommended Budget & CIP Document to Board of Supervisors (BOS)

           

March

17        Board Work Session - CIP Budget

 

April   

2          Public Hearing on the FY 08/09 Proposed Operating and Capital Budgets

9          BOS Adopts FY 08/09 Budget & FY 09-17 CIP

           

 

Go to next attachment

Return to exec summary