July 25, Members of City Council City of League City, Texas

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1 Mark Rohr City Manager 300 W Walker League City, TX Main: Direct: July 25, 2016 Members of City Council City of League City, Texas Transmitted herewith is the Proposed Capital Improvement Program (CIP) for Fiscal Years 2017 through This five year plan includes projects to repair, build and strengthen League City s infrastructure while looking forward to address anticipated growth. The Proposed FY Capital Improvement Plan (CIP) includes $408.9 million in projects expected to be implemented over the next five fiscal years. Tax supported programs provide $232.4 million, or 57 percent of the total, and water and wastewater revenue supported programs provide the $176.4 million, or 43 percent of the total, balance of the five year program. Tax supported programs in the FY period are primarily composed of core infrastructure and essential functions including reinvestment in streets, drainage, and facilities ($87.6 million or 38 percent of tax supported total); streets and traffic ($83.8 million or 36 percent), and drainage ($5.3 million, 2 percent). Economic Development, which includes potential debt carried by the private sector rather than the City, is 5 percent ($11 million) of the total and Parks represents another 4 percent, ($10.2 million). The revitalization of downtown totals $11.6 million (5 percent). Future facilities to meet the needs of a growing community are planned in the Fire program of $9.3 (4 percent), the Police program which includes funding for a future Animal Shelter at $7.5 million (3 percent), and the Facilities program of $6.1 million (3 percent). On the revenue supported side, water is the City's single largest program in the five years covered by this CIP. With a proposed five year investment of $176.4 million, water projects are $141.5 million and make up 80 percent of the revenue supported program total. Wastewater s $35 million program is the other 20 percent of the total. A pie chart depicting the proposed spending by program over the FY time frame is included on the next page.

2 As a result of strategic planning on January 24, 2015, a Roadmap to the Future was created. The following are short term priorities (1 3 years): economic development, development of central historic / business district with a revitalization of Main Street, debt management, a community Facilities master plan, and improvements to traffic. All of these priorities are reflected in the FY CIP. The first two priorities have been reflected with the following three projects: Downtown Revitalization Plan, Westside Economic Development Initiatives, and Land purchase for City Initiatives. A community Facilities master plan has been addressed with the inclusion for funding a facility need studies in the following areas: Library, Fire, and Municipal Court. Improvements to Traffic has been addressed with the addition of street reconstruction project to address streets such as Kansas Ave, St. Christopher, improvements to Calder Road south of Ervin to Cross Colony, and Dickinson Ave. Also included to improve traffic is additional funding for new traffic signal and rehabilitation of old signals. Debt management, the second highest short term priority, is directly affected by the Capital program. Not only the size of the program but utilization of other funding (general revenue, capital recovery fees, grants, county, state, park fees, etc.), partnerships with developers (Jag Hollow Extension phase 2), and future revenue generating projects are critical in reducing the long term debt required to fund the program. Page 2 of 3

3 The major difference in the FY plan from last year s plan is the focus on the Roadmap to the Future priorities while continuing to invest in the City s infrastructure maintenance. A new approach in this plan is the highlight of projects that upgrade and replace existing infrastructure. Reinvestment is an area that has historically been underfunded in the CIP and the FY takes a step in addressing this issue. The initiative totals $87.57 million over the five year period with funding in FY 2017 of $9.1 million. Reinvestment projects in FY2017 Capital Budget include sidewalk repair and replacement, street reconstruction with drainage improvements, traffic signal reconstruction, stormwater improvements, asphalt road rehabilitation, and reinvestment in facilities. Additional Infrastructure improvements include an upsized replacement of the 42 inch waterline along State Highway 3 that provides 69 percent of League City s current surface water supply and west side projects in anticipation of the City s growth. I thank the Council for the trust you have placed in me and appreciate the opportunity you have provided me. I see many avenues to pursue for the enhancement of our great City, some of which have been incorporated into this document, and others that I have recognized, but will take time to fully develop. I am confident, that working as a team, we can greatly benefit the citizens of League City and fulfill the vast potential of our fine city. League City First, R. Mark Rohr City Manager Page 3 of 3

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5 CAPITAL IMPROVEMENT PLAN FY OVERVIEW PLAN FORMAT The FY Capital Improvement Plan (CIP) is organized by major funding source (e.g. Tax Supported or Revenue Supported), program within major funding source (for instance, Police, Streets and Drainage within Tax Supported), and individual projects within the program. Each project funded in the CIP has its own detailed description page organized as follows: Project title, department, contact person, and program priority; Cost by fiscal year and project phase; Funding source by fiscal year to correspond with phase; Project description with justification; and Additional considerations, including the amount of recurring Maintenance and Operating Cost that would be incurred when construction is complete. Also included in the CIP are: Reconciliation schedules for each existing funding source; Descriptions of each funding source, including the legally required use of bond funds as provided by bond covenants and official statements; Projected debt service schedules and projections for General Fund and Utility Fund that show anticipated income, current and planned debt service; Maps for each funded project; Citywide maps for each program that show the projects color-coded by fiscal year; A single chart showing all projects according to the fiscal year planned for construction to commence; and The budgetary rules for administration and management of the CIP that will be part of the ordinance adopting the plan. PROGRAM FUNDING OVERVIEW The FY Capital Improvement Plan (CIP) includes $408.9 million in projects expected to be implemented over the next five fiscal years. Tax supported programs provide $232.5 million, or 57 percent of the total, and water and wastewater revenue supported programs provide the $176.4 million, or 43 percent of the total, balance of the five-year program. Tax supported programs in the FY period are primarily composed of core infrastructure and essential functions including reinvestment in streets, drainage, and facilities ($87.6 million or 38 percent of tax supported total); streets and traffic ($83.8 million or 36 percent), and drainage ($5.3 million, 2 percent). Economic Development, which includes potential debt carried by the private sector rather than the City, is 5 percent ($11 million) of the total and Parks represents another 4 percent, ($10.2 million). The revitalization of downtown totals $11.6 million (5 percent). Future facilities to meet the needs of a growing community are planned in the Fire program of $9.3 (4 percent), the Police program which includes funding for a future Animal Shelter at $7.5 million (3 percent), and the Facilities program of $6.1 million (3 percent). 1

6 On the revenue supported side, water is the City's single largest program in the five years covered by this CIP. With a proposed five-year investment of $176.4 million, water projects are $141.5 million and make up 80 percent of the revenue supported program total. Wastewater s $35 million program is the other 20 percent of the total. TABLE 1 CIP TOTALS BY PROGRAM PROGRAM FY2017 FY2018 FY2019 FY2020 FY2021 FY TOTAL Reinvestment 9,095,500 14,000,000 20,000,000 20,475,000 24,000,000 $ 87,570,500 Streets/Traffic 8,323,536 8,923,800 8,543,250 35,472,766 22,555,000 $ 83,818,352 Drainage 4,234, , ,000 $ 5,275,667 Police 650,000 6,850, $ 7,500,000 Fire 495,650 4,636, ,300 3,805,500 - $ 9,328,450 Facilities 1,545,725 25, ,000 4,000,000 - $ 6,070,725 Parks 2,552,986 3,455, ,600 1,920,085 1,526,704 $ 10,294,845 Economic Development 200,000 1,627,300 4,595,325 4,595,325 - $ 11,017,950 Downtown Revitalization 6,005,916 5,322, , $ 11,649,406 Subtotal Tax Supported Programs 33,103,981 44,840,060 35,879,475 70,268,676 48,433,704 $ 232,525,896 Water 24,281,054 20,760,750 28,086,008 41,742,925 26,592,920 $ 141,463,657 Wastewater 6,953,145 3,987,060 5,267,777 6,169,284 12,602,769 $ 34,980,034 Subtotal Revenue Supported Programs 31,234,199 24,747,809 33,353,785 47,912,209 39,195,689 $ 176,443,691 TOTAL $ 64,338,180 $ 69,587,869 $ 69,233,260 $ 118,180,885 $ 87,629,393 $ 408,969,587 CIP PRIORITIES As a result of strategic planning on January 24, 2015, a Roadmap to the Future was created. The following are short-term priorities: economic development, development of central historic / business district with a revitalization of Main Street, debt management, a community Facilities master plan, and improvements to traffic. These priorities guided the formulation of the five-year plan which is detailed by program in Table 1 below. 2

7 CIP HIGHLIGHTS BY PROGRAM Water Water system improvements represent the single largest program category with $141.5 million in projects to be funded during the FY period. These projects focus on improvements to the distribution and renewal of the existing water system and address obtaining new supply and its distribution. New bond financing backed by utility revenues over five years is required for $101.2 million of this total. Adopted in the FY 2017 Capital Budget is nearly $24.3 million for water projects. Key projects in FY 2017, include design of a 60-inch water line to replace the current 42-inch line along SH3, construction of 36-inch waterline from SH3 booster station to South Shore Harbour booster station, annual waterline upgrades and replacements, construction of the final segments of the Southeast Service Area Trunk lines and design of new water lines to the west side of the city and annual water system improvements. Reinvestment A new approach in the FY plan is the highlight of projects that upgrade and replace existing infrastructure. Reinvestment is an area that has historically been underfunded in the CIP and the FY takes a step in addressing this issue. The initiative totals $87.57 million over the five year period with funding in FY 2017 of $9.1 million. Projects in FY2017 Capital Budget include: Sidewalk repair and replacement - $1,000,000 Street reconstruction and drainage improvements - $2,960,000 Traffic signal reconstruction - $320,000 Stormwater improvements $2,010,000 Asphalt road rehabilitation - $2,000,000 Facilities reinvestment - $275,000 Parks Facilities renewal - $155,000 Limited renovation of 500 and 600 W Walker - $350,000 Fire Training Room Expansion - $25,000 Streets/Traffic The Streets program totals $83.8 million over the five year period with 52 percent from Grant funds, 6 percent funded from prior bond proceeds or dedicated funds, and 42 percent from future bond sales. Adopted in the FY 2017 Capital Budget is $8.3 million for street and traffic projects. The FY 2017 projects include $2.8 million right-of-way purchase and construction of the Five Corners Realignment project, nearly $900,000 in right-of-way for Calder Rd (Ervin to League City Parkway), $681,000 for intersection improvements at SH96 and South Shore Blvd, $320,000 for design and construction of a new traffic signal. Also included in FY 2017 is $800,000 for final design of the North Landing Extension and $2.14 million for right-of-way for construction of the Ervin/Hobbs Connector. FY of the five-year plan includes the completion of the north Landing extension, annual funding for sidewalk repairs, funding for a new traffic signal annually, construction of the Ervin/Hobbs connector, and widening of FM270 from FM518 south to FM646. 3

8 Drainage While drainage improvements are part of most street projects, there are other projects that are intended solely to address drainage issues. Adopted in the FY 2017 Capital Budget is $4.2 million for drainage projects. FY 2017 has funding for right-of-way for the grant-funded project for Shellside Stormwater Management System which will provide detention for the area, construction of Nottingham Ditch Improvements, and the aeration of the Genco Canal to address seasonal odor and algae growth issues. Police The Police program comprises $7.5 million in FY for the design and construction of a new animal shelter. A feasibility study was completed during FY 2016 which provided an evaluation of our animal services facility as we continue to grow. Fire Adopted in the FY 2017 Capital Budget is $495,000 to design a new Public Safety Annex Station 6. FY includes construction of Fire Station 6 and design and construction of a new Station 3. Facilities This program in the CIP addresses new facility needs across the City. Adopted in the FY 2017 Capital Budget is $1.5 million for land purchases for City initiatives including a future expansion of the Public Works facilities. Parks Adopted in the FY 2017 Capital Budget is nearly $2.5 million which provides funding for the construction of the right turn lane into the SH96 entrance to the Sportsplex, $1.3 million for the TxDOT Bike Trail and Sidewalk project, $150,000 for a Dog Park, way-finding signage for hike and bike trails, a sound wall at Heritage Park, funding for the Claremont Connector Hike and Bike trail, the Calder Connector trail segment, and design of two Tall Grass Prairie Trail segments. FY includes additional hike and bike trails throughout the city and funding for a Hometown Heroes Park 5K Loop. Economic Development Funding of $200,000 was adopted in the FY 2017 Capital Budget for beginning design of the west side economic development initiatives. Also included in this program is funding in FY 2018 for construction of phase 2 of Jag Hollow. Downtown Revitalization From the Roadmap to the Future, the Downtown Revitalization plan is part of the FY 2017 Capital Budget in the amount of $5.9 million for utility relocates, design and construction of League Park and Park Ave improvements. Also included in FY 2017 is the design of trails that complement the Downtown Revitalization initiative. In FY funding is programmed to complete the Main Street improvements as part of the revitalization plan and complete a total of two trails as well. 4

9 Wastewater Wastewater s total program for the five year CIP period totals nearly $35 million for lines and lift station improvements and expansion in the re-use system. Adopted in the FY 2017 Capital Budget is $6.95 million in funding for the construction of Dallas Salmon Effluent Discharge improvements, continued annual Sanitary Sewer Rehab, design of sewer improvements on the west side of the city, annual lift station improvements and an update to the wastewater master plan. The FY program is mainly comprised of anticipated growth on the west side of the City and continued annual sanitary sewer rehabilitation. Other Identified Unfunded Projects Certain projects are shown as eligible for Future Years funding. This includes projects whose current disposition and timing is yet to be determined for funding or implementation reasons. See Table 2 on the next page for a complete list. Please note that listed projects are not included in the funded CIP but have been identified as those that may be worthy of consideration for funding as community needs, priorities, and circumstances are reviewed annually. There is no representation, nor obligation by the City of League City to fund these projects at any time in the future; however, the listing of these projects is important for the purposes of communicating to the public that the projects have been identified and discussed by City Council. By necessity, some projects (i.e., water line replacements) may be moved up to the current fiscal year capital budget due to faster than anticipated deterioration or failure to achieve full life expectancy. Remainder of page left blank intentionally. 5

10 OTHER IDENTIFIED UNFUNDED PROJECTS Streets Drainage Police Fire Facilities Parks Economic Development Water Wastewater - Butler (South of Turner) Improvements (concrete curb & gutter due to width of road) - League City Parkway Drainage Enclosure - W. Galveston - Interurban to SH3 - Webster St - Ervin Expansion from Hobbs to Calder (add 2 lanes) - Ervin Extension from Calder Rd to Brookport (4 lanes) - Magnolia Creek & Cedar Gully - Landing Ditch - Robinson's Bayou - Benson's Bayou (capacity) - Alternate Pond B (Galveston County) - Indoor Firing Range - Driving Track - Remodel Fire Station 4 (add sleeping quarters) - Land for Public Safety Annex Station 7 - New Helen Hall Library Building - Nature Center Shoreline Enhancements - Land for Western Regional Park - Dick Benoit LC Prairie Preserve - Heritage Park - Ghirardi House - Williams/Myrtle Park (PK0203) - Clear Creek Nature Park, Phase 2 - Davis/Kilgore Tract - Big League Dreams Parkway Widening - Amphitheater - SH 3 Pump Station Improvements - additional ground storage (WT1108) - Waterline on Grissom Rd - Dickinson Pump Station improvements - TxDOT FM646 Widening - SH3 to SH146 (2025) - Water Main Rehab on Main Street from SH3 to I45 - Trunk Lines along Bay Area Blvd - Water Line Upgrades South of Main St - Water Line Upgrades North of Main St - North Service Area Phase 2.1 GS/FM/LS - North Service Area Phase 2.2 GS/FM/LS - 15" Gravity Sewer Trunk Extending South from SWWRF to FW6 6

11 FUNDING SOURCES CIP funding sources are detailed in Table 3 for Tax Supported programs and projects, while Table 4 lists all funding sources for the Revenue Supported projects and programs. Both tables show funds required to support the 5 year program considering (1) cash balances and (2) unspent appropriations by City Council for specific contracts or project expenditures. TABLE 3 TAX SUPPORTED TOTALS FUNDING SOURCE BY FISCAL YEAR FUNDING SOURCE FY2017 FY2018 FY2019 FY2020 FY2021 TOTAL Existing City Funds Previously Sold Certificates of Obligations 5,850, ,850,779 Existing Misc Capital Projects Cash Fund , , , ,852 Annual Transfer to Misc Capital Project Fund ,000,000 14,000,000 20,320,000 20,795,000 24,350,000 90,465,000 Park Facilities & Maint Fees Fund 071 1,304, ,304,545 Right-of-Way Fund , ,331 Walker St Bridge Fund , ,000 MUD Fund , ,700 HOT Cash Public Access Channel Funds , ,000 Subtotal Existing City Funds 19,555,607 14,353,900 20,820,000 20,795,000 24,571, ,096,208 Other Funding Sources 4B Corporation 1,567,231 3,393,234 1,160,600 1,521, ,520 7,883,522 CDBG 640, , Loan 1,600, ,600,000 Potential Grant Funding 3,612, , ,280,361 14,901,483 47,602,163 Subtotal Other Funding 7,419,724 4,201,060 1,160,600 29,802,298 15,142,003 57,725,685 Subtotal of Existing City Funds & Other Funding Sources 26,975,331 18,554,960 21,980,600 50,597,298 39,713, ,821,893 Future COs / Bonds Needed Future COs / Bonds Needed 5,467,350 22,480,100 13,148,875 18,921,378 8,720,000 68,737,703 Future TIRZ Financed Bonds 0 2,500, ,500,000 Future HOT Bonds 661, , ,014,300 Future Development Financed Bonds 0 952, , , ,452,000 Subtotal Future COs / Bonds Needed 6,128,650 26,285,100 13,898,875 19,671,378 8,720,000 74,704,003 TOTAL PROPOSED FUNDING 33,103,981 44,840,060 35,879,475 70,268,676 48,433, ,525,896 The Tax Supported FY 2017 CIP funding sources include $33.1 million: $5.85 million in available Certificate of Obligation funds, $373,251 in miscellaneous capital project funds remaining from previous years and $11 million adopted in the FY 2017 Capital Budget to be transferred from the General Fund, $6.16 million of dedicated funds (Park fees, 4B, Galveston Co, etc), $3.6 million of anticipated grant funds, $661,300 in HOT bonds, and $5.5 million of new bond funds. 7

12 The remaining $199.5 million to fully fund the tax supported programs requires: $79.5 million from an annual transfer from the General Fund for FY , $7.4 million of dedicated funds (Park fees, 4B, Galveston Co, etc), $44 million of anticipated grant funds, $2.5 million of development financed bonds for Economic Development projects, $2.5 million in TIRZ bonds, $353,000 in HOT bonds, and $63.2 million new bond funds FY TABLE 4 REVENUE SUPPORTED TOTALS FUNDING SOURCE BY FISCAL YEAR FUNDING SOURCE FY2017 FY2018 FY2019 FY2020 FY2021 TOTAL Existing City Funds Previously Sold COs / Revenue Bonds 13,785, ,785,399 Existing Capital Project Fund 084 2,195,322 36, ,232,247 Annual Transfer Capital Project Fund 084 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 15,000,000 Water CRF Funds 4,676,768 2,796,322 1,868,700 3,298,994 1,078,433 13,719,217 Wastewater CRF Funds 250,125 1,762, ,423 2,183,455 3,283,050 7,774,504 Subtotal of Existing City Funds 23,907,614 7,595,699 5,164,123 8,482,449 7,361,483 52,511,367 Other Funding Sources Potential Developer Contribution 0 853,363 1,646, ,500,000 Subtotal Other Funding 0 853,363 1,646, ,500,000 Subtotal of Existing City Funds & Other Funding Sources 23,907,614 8,449,062 6,810,760 8,482,449 7,361,483 55,011,367 Future COs / Bonds Needed 7,326,586 16,298,748 26,543,025 39,429,760 31,834, ,432,324 TOTAL PROPOSED FUNDING 31,234,199 24,747,809 33,353,785 47,912,209 39,195, ,443,691 The Revenue Supported FY 2017 CIP funding sources include $31.2 million as follows: $13.8 million in available bond funds, $4.9 million in Capital Recovery fees, $5.2 million in miscellaneous capital project funds set aside from the Utility Fund, which includes $3 million proposed in the FY 2017 Capital Budget to be transferred from the Utility Fund reserves, and $7.3 million of new bond funds. The remaining $145.2 million to fully fund the revenue supported programs requires: Future transfers from the Utility Fund to the water and wastewater Capital Project Fund are projected to bring in an additional $12 million based on $3 million per fiscal year, $16.6 million in Capital Recovery fees, $2.5 million potential developer contribution, and $114.1 million new debt issuance between FY (See project financing for a further discussion of future bonds.) 8

13 Tables 5 and 6 include the required legal use of bond proceeds for each tax-supported and revenuesupported sale as provided by the covenants that are a part of the Official Statements approved for each bond issue. TABLE 5 LEGAL PURPOSE OF TAX SUPPORTED FUNDS Previously Sold Certificates of Obligations 2008A Cert of Obligation Fund 237 improvements to streets and drainage 2009 Cert of Obligation Fund 238 improvements to streets and drainage for design, construction, and general improvements including a new police station, renovation of City Hall, park facilities including the 2011 Cert of Obligation Fund 239 Eastern Regional Park, drainage facilities, streets and roads, and firefighting equipment and facilities. 2012A Cert of Obligation Fund Cert of Obligation Fund Cert of Obligation Miscellaneous Capital Project Fund 075 Park Dedication Fees Fund 071 Right-of-Way Fund 272 Magnolia Creek TIRZ 1 Fund 062 Public Access Channel Fund Walker Street Bridge CD to finance the construction of public works, including public safety buildings, street and traffic improvements, drainage improvements, and for the purchase of materials, supplies, equipment, machinery, building, land and rights-of-way related thereto for the construction of public works, including street, roadway, traffic improvements and related drainage improvements, and for the purchase of materials, supplies, equipment, machinery, building, land and rights-of-way related thereto for the construction of public works, including street, traffic, and drainage improvements, and for the purchase of materials, supplies, equipment, machinery, building, land and rights-of-way related thereto to cash fund GF CIP projects as needed park facilities and maintenance to purchase Right-of-Way to complete Magnolia Creek TIRZ 1 projects to improve the city's public access channel to contribute to construction of bridge over Magnolia Bayou TABLE 6 LEGAL PURPOSE OF REVENUE SUPPORTED FUNDS Previously Sold Revenue Bonds 2008 Revenue Bonds Fund 122 improvements and extensions to the waterworks and sewer system 2009 Revenue Bonds Fund 123 improvements and extensions to the waterworks and sewer system 2011 Revenue Bonds Fund 124 improvements and extensions to the waterworks and sewer system 2011A Certificate of Obligation Fund 125 improvements and extensions to the waterworks and sewer system 2012B Certificate of Obligation Fund 126 improvements and extensions to the waterworks and sewer system 2015 Certificate of Obligation improvements and extensions to the waterworks and sewer system 2016 Certificate of Obligation improvements and extensions to the waterworks and sewer system Capital Project Fund 084 to cash fund selected Line Repair, Water and Wastewater projects Water Capital Improvement - CRF Fund 023 Water Improvement projects qualified through 2005 CRF study Wastewater Capital Improvement - CRF Fund 024 Wastewater Improvement projects qualified through 2005 CRF study Bayridge Utility District Fund 027 projects benefiting Bayridge Utility District 9

14 As the tables illustrate, bond proceeds are available for a diverse menu of projects, including many highlighted in this CIP. This allows City Council the flexibility to allocate funds annually to priority projects that are eligible to receive previously issued bonds. TAX SUPPORTED PROJECT FINANCING Property tax collections are the primary means of financing capital improvements; these are the security against which bonds are issued, allowing the City to spread the cost of long-life projects over time and among users. The CIP anticipates that bonds whether certificates of obligation approved by Council or general obligation bonds approved by voters will need to be sold to support the FY CIP, including $74.7 million in property tax supported bonds. The schedule included below demonstrates the affordability of $74.7 million in bonds between FY using key assumptions from the FY 2017 Adopted Budget and the Long Range Financial Forecast. Proposed Sales The five year CIP includes future tax supported bonds to be sold as follows: FY $ 6,128,650 FY $ 26,285,100 FY $ 13,898,875 FY $ 19,671,378 FY $ 8,720,000 TOTAL $ 74,704,003 GENERAL DEBT SERVICE FUND PROJECTION ASSUMES $74.7 MILLION TOTAL BONDS OVER PERIOD FY2017 FY2018 FY2019 FY2020 FY2021 REVENUE Property Taxes $11,507 $12,299 $14,413 $15,510 $16,846 Interest Income $5 $7 $8 $9 $9 TOTAL REVENUE $11,512 $12,306 $14,421 $15,519 $16,855 EXPENSE Transfers MUD Property Tax Rebates $1,062 $738 $738 $738 $738 TIRZ Property Tax Increment $815 $988 $1,119 $1,213 $999 Subtotal MUD's/TIRZ's $1,877 $1,726 $1,857 $1,951 $1,737 Current Debt Service Interest $3,650 $3,432 $3,219 $2,968 $2,703 Principal $5,750 $6,216 $6,183 $6,084 $5,895 Paying Agent Fees $5 $5 $5 $5 $5 Subtotal Current Debt Service $9,405 $9,653 $9,407 $9,057 $8,603 Subtotal Current Expense $11,282 $11,379 $11,264 $11,008 $10,340 Projected Future Bonds Debt Service Interest $0 $252 $1,469 $2,150 $3,170 Principal $0 $306 $1,620 $2,315 $3,299 Subtotal Future Bonds Debt Service $0 $558 $3,089 $4,465 $6,469 Subtotal Future Debt Service $0 $558 $3,089 $4,465 $6,469 TOTAL EXPENSE $11,282 $11,937 $14,353 $15,473 $16,809 Revenue Over/(Under) Expense $230 $369 $68 $46 $46 Beginning Fund Balance $4,411 $4,641 $5,010 $5,078 $5,124 Ending Fund Balance $4,641 $5,010 $5,078 $5,124 $5,170 10

15 REVENUE SUPPORTED PROJECT FINANCING FORECAST SUMMARY UTILITY FUND PROJECTIONS ($THOUSANDS) FY2017 Budget FY2018 Forecast FY2019 Forecast FY2020 Forecast FY2021 Forecast Beginning Balance $9,306 $9,773 $12,133 $13,979 $13,941 Revenue Current Revenue $35,242 $37,011 $38,095 $39,181 $40,266 Subtotal Revenues $35,242 $37,011 $38,095 $39,181 $40,266 Expenditures Operating Expenditures $18,472 $18,421 $18,714 $19,012 $19,319 Current Debt Service $13,303 $12,562 $12,296 $12,292 $12,325 Future Debt Service $0 $669 $2,239 $4,915 $8,862 Transfer to CIP $3,000 $3,000 $3,000 $3,000 $3,000 Subtotal Expenditures $34,774 $34,652 $36,248 $39,219 $43,506 Revenue Over/(Under) Expenditures $467 $2,359 $1,847 ($39) ($3,240) Ending Balance $9,773 $12,133 $13,979 $13,941 $10,701 Utility Fund Reserves 90 Days of Operating Expenditures as Working Capital $4,555 $4,542 $4,614 $4,688 $4,764 Excess Working Capital $5,218 $7,591 $9,365 $9,253 $5,937 Days Working Capital Over 90 Days Proposed Sales The five year CIP includes future revenue supported bonds to be sold in support of water and wastewater projects as follows: FY $ 7,326,586 FY $ 16,298,748 FY $ 26,543,025 FY $ 39,429,760 FY $ 31,834,206 TOTAL $121,432,324 The Long Range Financial Forecast projection below reflects $121.4 million total bonds between FY Using simple level payments for each sale, the resulting debt structure is depicted in the chart below. This approach involves lower principal payments on the front end of each bond issue s repayment schedule, with higher payments each year for principal and lower payments for interest similar to a home mortgage. 11

16 CIP ADOPTION AND MANAGEMENT The CIP is intended to enable project financing and planning on an annual basis. The CIP is prepared and updated annually to reflect changing project estimates and schedules, as well as different economic and financial assumptions. After review by City Council, an ordinance will be passed adopting the CIP with the following control provisions: 1. The first fiscal year of the CIP shall serve as the City s Capital Budget for FY Bond sales for FY 2017 will be conducted and proceeds there from will be appropriated in accordance with and in the furtherance of the FY 2017 Capital Budget. 3. Reports will be provided to City Council quarterly on the status of each project that is a part of the FY 2017 Capital Budget including financial, design, and construction status information. 4. City Council approval is required to add or delete projects from the Capital Budget through passage of an ordinance amending the FY 2017 Capital Budget. 5. Contracts and expenditures for individual projects shall be approved as provided by State law, the City Charter and the City s purchasing policies. 6. Expenditures of capital funds shall be for projects included in the approved and/or amended FY 2017 Capital Budget. 7. Funds shall be allocated based on the legal purpose of the capital funds; the Finance Department shall be authorized to charge expenditures of current projects to older capital funds which expenditures meet the legal purpose of those older capital funds in order to close them out. 12

17 HOW THE PLAN IS ADMINISTERED Capital funds are appropriated at the fund level at the start of the fiscal year, and then applied to fund project costs included in the first year of the FY 2017 Capital Improvement Plan which comprises the FY 2017 Capital Budget. This ensures full disclosure of the City s available, unencumbered capital funds at the start of the fiscal year. The individual fund schedules in the Capital Funds Reconciliation section of the CIP provide the basis for this appropriation action. As budgeted projects are placed under contract or incur expenses, the City s procurement rules apply. Contracts or expenses under $50,000 may be approved by the City Manager or his designee. Contracts over $50,000 are placed on the Council Agenda for City Council approval. Funds are applied on a first-need, first-fund basis for projects that meet the test of legal purpose as provided by each bond sale s official statement (see Table 5 / 6, Legal Purpose of Bond Funds ). Most importantly, with few exceptions, bond funds will not be held in reserve for future years appropriations because a particular project is not yet ready to go under construction. Instead, existing funds will be exhausted before new bonds are sold. Projects will continue to be funded by project phase according to the approved Capital Improvement Plan in order to maximize the efficient use of funds. This practice has been utilized since FY2011. Project costs and schedules will be reviewed annually and included in the CIP. Once the CIP is adopted, the specific phases of projects that are ready for implementation in the first year of the five year CIP become the City s capital budget for the year. And the total amount of funds needed for project phases in the first year of the CIP become the basis for bond sales made in that fiscal year. This will rarely include all of the funds necessary to cover design and construction for the same project in a single year because design usually takes a year to complete. This proposed approach will reduce the amount of idle borrowed cash balances on hand and cut the City s interest costs on idle funds significantly. Currently available funds will be allocated to projects based on priority and project phase. This will ensure that new bond issuances will be for those project phases that must commence in the current fiscal year. It also ensures that project funding decisions can be made as a part of the annual CIP process and amended only by City Council as provided in the ordinance that will adopt the CIP. All current project funds have been reconciled and are a part of this CIP. Operating budget impact will be considered when the CIP is reviewed and approved and before a project is under design. Recurring maintenance and operating costs are included in the CIP by dollar amount and are a part of the City s Long Range Financial Forecast. This is to identify the impact of new facilities and infrastructure on the City s operating budget. 13

18 Project funding is being approached in a comprehensive manner, with strategic use of existing funding sources, capacity to issue future debt, and excess working capital. The two basic principles applied in the CIP are to (1) include all funding sources and (2) use the most restricted source of funds first in funding projects and the most flexible source of funds last. Also, if a project is CIP-worthy, but has a shorter useful life, it is preferable to fund such a project with excess working capital from the General and Utility funds, if possible. The purpose is to make best use of all of the City s resources in its capital planning. MAINTENANCE AND OPERATIONS IMPACT OF CIP Construction of major city facilities has a direct, continuing impact on the maintenance and operating budget of the City. In some cases, replacing or renovating an existing facility with more modern design and energy-saving materials and features can reduce costs. Most of the time, however, construction of a facility involves permanent additions to the City s annual operating costs. This should be a factor considered when planning and including a project in the CIP. Remainder of page left blank intentionally. 14