Capital Improvements Plan (CIP) Overview
Capital Improvements Plan (CIP or Plan)
The Capital Improvements Plan (CIP or Plan) serves as an effective guide for the efficient and effective provision of public facilities, outlining timing and financing schedules of capital and infrastructure projects for a five-year planning period, and for the next fiscal year capital budget.
The CIP identifies capital needs, establishes priorities and identifies potential funding sources. Key sources of identifying capital requirements include the City of Windsor Heights Comprehensive Plan, as well as professional studies of facilities, transportation, utilities, and stormwater needs.
The CIP neither appropriates funds nor authorizes projects. The City Council must act to initiate each project. Proceedings to initiate capital improvements are presented when sources of funding are available.
The capital budget is a significant part of the 2017-2018 Budget. It represents costs associated with capital projects in the first year of the 2017-2021 Capital Improvements Plan.
Capital projects may include land acquisitions, the construction of new buildings, additions to or renovations of existing buildings, construction or reconstruction of street and utility infrastructure, and major equipment purchases. Because of the size and magnitude of these projects, bond funds are a major source of financing for projects including utility projects.
Staff performs a systematic evaluation of capital project requirements, identifies any project changes, incorporates recommended changes and submits the revised Plan to the City Council for consideration, modification and adoption as a part of the annual budget process.
During the preparation and review of the recommended Capital Improvements Plan, city management staff employed experience-based judgment to identify which projects can be accomplished within a given year, within the limit of the City’s control. As would be expected, project expenditure and revenue estimates for the earlier years are more precise than in the late years of the plan.
Numerous sources are drawn upon to develop the expenditures included within this document including plans and/or studies completed or currently in process.
Capital Improvement Plan projects scheduled for completion during each year for the next five-year period are summarized herein.
The annual capital improvement process is a process created for the purpose of developing a five-year capital improvement Plan. The five-year capital improvement process is for projects occurring in calendar years 2017-2021. The CIP process is intended to provide a format for departments and utilities to submit projects to the City Administrator and to the City Council, while providing an objective means for reviewing and ranking capital projects.
As a part of the process, capital projects are evaluated based on if it meets legal mandates, removes or reduces hazards, advances a Council goal, improves efficiency, maintains standard of service, supports economic development, improves service, facilitates new services, improves the Quality of Life or Aesthetic Values and offers a convenience.
These urgency-of-need criteria are used as general guidelines that point to, rather than determine, priorities among capital project requests. In evaluating the urgency-of-need, affordability is given strong consideration.
Once the projects are evaluated using the above criteria, they will then be ordered based upon their fund source and project year.
The first year of the capital improvement Plan will be included as part of the budget submitted for Council approval next March. The first three (3) years of the Plan also determines the amount of bond issues and other debt instruments that will be issued over the upcoming year(s).
The capital improvement process includes a Master Plan prepared by the City Engineer. Each street was objectively rated or scored by pavement surface through CTRE, scored by Des Moines Water Works as a priority, scored by the Public Works Director, Walkability Connectivity, utility needs, scored by the City Engineer and input from the walkability task force.
These factors will be combined with other factors, such as relevance to City Council goals, method of financing and whether or not it is new or replacement work. Evaluation criteria will be applied to the relevant factors to provide each project with a score that will be used to rank and prioritize each project.
Since the financing for the first three (3) years of projects will be issued through a bond in early 2017 and the expenditures for these projects will also become part of the adopted budget, the emphasis in the capital improvement process will be on the first three years of the Capital Improvement Plan. The projects for the remaining two years of the Plan will become part of the City’s long-term financial plan and five-year capital improvement plan, and will not have debt issued for them until future years. These projects are still an important part of the capital improvements Plan as they help shape the debt issues and debt service levy into the future.
All documentation is then reviewed by the City Administrator and organized for presentation to the City Council.
The Capital Improvements Plan for 2017-2021 totals $13,196,202. Of this total:
- 57% for infrastructure reinvestment and transportation projects
- 19% for parks facilities
- 17% for utility projects
- 8% for safe routes to schools/sidewalks
- Less than 1% is for public works facilities
Capital Budget requirements for 2017 total approximately $2,922,020. Capital spending authorizations by year/project/category for the upcoming year include:
- $1,140,444 for utility projects
- $707,676 for infrastructure reinvestment and transportation projects
- $993,900 for safe routes to schools/sidewalks
- $50,000 for public works facilities
- $30,000 for trails/parks facilities
This Plan represents a concerted effort to ensure that needed capital projects and infrastructure are in place in a timely manner to accommodate continued growth and development in the community.
The capital improvement Plan provides an organized timeline and objective grading criteria for the purpose of scheduling capital projects and planning long-term debt. The annual Plan calendar starts in August or September and culminates in late December or early January so that next year’s capital expenditures and debt issues are finalized and ready to be included in the City’s budget for the next fiscal year.
October 24 and December 12, 2016
Council Budget Committee meets. City Administrator, Treasurer, Public Works Director and Financial Advisor reviews capital budget process overview, capital planning, project ranking/priority list for the calendar year, and review financial plan and debt service requirements for proposed 2017-2021 CIP.
November 7, 2016
Council Public Works Committee meets. City Administrator, Treasurer, and Public Works Director reviews capital budget process overview, capital planning, project ranking/priority list for the calendar year, and review financial plan and debt service requirements for proposed 2017-2021 CIP.
November 11 and December 13, 2016
Council Trail Hub Committee meets. City Administrator reviews capital budget process overview, capital planning, project ranking/priority list for the calendar year, and reviews financial plan and debt service requirements for proposed 2017-2021 CIP.
December 13, 2016
City Administrator meets with Des Moines Water Works to review proposed 2017-2021 CIP.
December 20, 2016
City Administrator meets with Urbandale Windsor Heights Sanitary District to review proposed 2017-2021 CIP.
December 21, 2016
City Council sets the Public Hearing on the proposed 2017-2021 CIP for January 16, 2017.
January 16, 2017
Following a public hearing, City Council approves the 2017-2021 Capital Improvements Plan.
March 6, 2017
Following public hearing, City Council considers FY 2018 Budget for adoption, including Debt Service Fund appropriation and 2017 capital project expenditures.
Financial Plan - Capital Improvements Plan (CIP)
Annually, the city undertakes a wide variety of infrastructure projects ranging from water/sewer pipe installation to paving of city streets. The same goes for the funding of those projects, with an assortment of funding sources from levying of property taxes to federal appropriations. A constant challenge for the city staff is trying to find resources beyond property taxes to help with maintaining and enhancing the city’s infrastructure while lessening the burden on Windsor Heights’ taxpayers.
The financial plan for the proposed 2017-2021 looks to leverage resources in excess of $13 million.
When discussing a financial plan for a CIP, the issuing of debt to cover project obligations is always a critical factor. The financial plan uses a method of 3 & 8 year infrastructure bonds for permanent financing. The following summary provides a breakdown for each major funding category the city uses to provide resources for projects. Following the summary please refer to the attachments for a detailed view of financing for each CIP project, followed by an analysis from Independent Public Advisors on the impact of the financial plan on the City’s debt service levy.
Property taxes, specifically those collected via the city’s debt service levy, is the largest source of traditional revenue for the proposed CIP, representing about $4.46 million or 34% of the overall financial plan. Property tax revenue is used to make the principal and interest payments for any general obligation (GO) debt issued by the city to pay for infrastructure projects. There are five types of GO debt issued by the city, with all types backed by the full faith and credit of the city’s taxing authority:
1) Regular GO debt – debt service levy only
2) Water-abated GO debt – reimbursement received from city’s water fund
3) Sewer-abated GO debt – reimbursement received from city’s sewer fund
4) Storm-abated GO debt – reimbursement received from city’s stormwater fund
5) Tax increment financing-abated GO debt – reimbursement received from capturing taxes paid to all taxing authorities on certain new commercial & industrial properties
6) Referendum approved GO debt – additional debt service levy authority for capital projects approved by a vote of a super-majority (60%) of Windsor Heights’ taxpayers.
The proposed CIP contains more reliance on regular GO debt in the later years of the plan and less in the earlier years. The City’s current debt service tax rate of $1.48 is not sufficient for projects currently identified to receive GO Debt funding. The new debt service levy rate proposed is $3.00. If the City’s taxable valuation projections were to drastically change, then the debt service levy would need to be reassessed.
Assessment of property taxes is being recommended for those streets who will receive new sidewalks in the Plan. $390,000 or 3% can be collected to assist with 50% of the new sidewalks being constructed to provide for safer routes to schools.
Tax Increment Financing (TIF)
The use of tax increment financing (TIF) to abate some of the GO debt issued by the City, is a way for the City to allow for growth, specifically commercial & industrial growth, and pay for itself. The City is expecting to finance $5.22 million or 40% by utilizing TIF for various infrastructure projects in the Urban Renewal Area.
Road Use Tax
Road Use Taxes, specifically collected for the maintenance, repair and construction of roads, is a traditional source of revenue used for the proposed CIP. This source represents $380,000 or 3% pf the overall financial plan. If more RUT funds become available, there is a potential to increase the amount of repair, such as crack and seat/overlay work that can be done during the duration of this plan.
Municipal Utility Revenues
The city’s municipal utilities (water, sewer, storm water) help support numerous infrastructure projects to ensure each utility can adequately provide service to Windsor Heights’s utility customers. Resources from the utility funds make up around $2.22 million, or 14%, of the proposed CIP financial plan. Funds from the utilities go to pay for abatements of the GO issued debt discussed above. Another option is for the utilities to issue debt directly and pay principal and interest payments based on the revenues of the utility. These debt instruments are called Revenue Bonds, and unlike GO Bonds, are not backed by the full faith and credit of the city’s taxing authority. Instead, the Bonds are supported by the amount of revenue each utility generates. One additional debt instrument is a loan from the State Revolving Fund (SRF). Iowa’s SRF provides low-interest loans to communities looking to provide enhanced sewer/water service to its residents. Currently, the City is only utilizing utility resources for GO bond abatements. There is no outstanding SRF or Revenue Bonds for the City. In addition, annual cash transfers are planned from the Water, Sewer, and Stormwater Funds to pay for the annual maintenance Plans identified in the CIP.
The fees supporting the utilities are analyzed on an annual basis by the city’s financial adviser, from Independent Public Advisors. Due to increases from the City’s water supplier, Des Moines Water Works, Windsor Heights has made substantial increases to its water rates over the past few years, with no change in the rate last year. Multiple water infrastructure projects are planned in the near future and the water utility cash flow has planned for these projects to minimize any impacts of future water rate increases.
Grants & Intergovernmental
Every year city staff looks for opportunities outside of the normal funding mechanisms (property tax and utility rates) to assist with the construction of infrastructure projects. These opportunities can include awards of federal and state grants, regional resources or assistance from other taxing bodies. The proposed CIP financial plan identifies opportunities to receive grant awards or intergovernmental assistance; however at this time the City staff cannot rely on the revenue source. Grants will undoubtedly be explored and if grants have either been applied for already and we are waiting on award announcements, or the city anticipates making future applications for the funding, future CIP’s may identify this as a more reliable source. The City works with neighboring jurisdictions on multiple projects. In the proposed CIP, the City is working with Urbandale on traffic signal improvements to the Hickman Road corridor and West Des Moines on trail connections.
The financial plan relies on a few miscellaneous revenue sources to support CIP projects totaling $737,000 and 6% of all revenue sources. In 2017 existing capital funds are supporting a number of projects, with these funds being previously bonded. Additionally, cash available in project funds are utilized for small elements of some CIP projects, particularly at the design phase of the project. For some specific projects, developer contributions are accounted for and included under this revenue category.
Financial Plan Overview
The financial plan presents a diversified approach to funding the proposed 2017-2021 capital improvements Plan from many sources. The plan focuses on finding non-traditional revenue sources to lessen the burden on Windsor Heights’ taxpayers and aggressively seeks partnerships for enhancing the city’s infrastructure. This CIP financial plan includes heavy reliance on GO debt through a proposed bond referendum, with substantial investments in infrastructure rehabilitation through TIF and utility user fees. Below is a quick summary of the funding sources.
Funding Source Revenue ($) % of Overall for FY17-28
Tax increment Financing (TIF) 40%
Property Taxes $4,625,000 37%
Municipal Utility Revenues $2,220,000 14%
Road Use Tax $380,000 3%
Miscellaneous Revenues $737,000 6%
The financial plan section completes the submittal of the proposed 2017-2021 Capital Improvements Plan for the City Council’s consideration. If any adjustments in project expenditures are made by the Council, similar adjustments will be made to the financial plan. The Council is scheduled to hold a public hearing on the CIP and approve the final draft of the 2017-2021 Capital Improvements Plan during the January 16 Council meeting.