Agenda “Finalize discussions on the capital budget and consider recommendations to the Mayor for the 2016 Executive Capital Budget and CIP.” No further info available to the public. Let’s see what they have to say.
In attendance, Zellers (not a member), Kemble (not a member), Verveer, Ahrens (not a member), Cheeks, DeMarb, Eskrich. And police, lots of police (they needed 4 staff for this). Staff from Finance, the Library and Mayor’s office also here (3 staffers). And me, “the public”. oo, and I was joined by Margaret Bergamini, also “the public”!
This is a live (ish) blog of the meeting. 2016 Capital Budget Discussion and Wrap-Up is on the screen. It’s very noisy in the room. Very hard to hear. No disclosures and recusals.
Presentation
David Schmidicke handed out summary sheets on the three nights, no handouts for staff and the public. The also have the SIP sheet, the capital improvement plan, by agency, general obligation borrowing by year. There is also some reauthoriztions, the total of the GO borrowing is $53M by project, by agency. He says as they go through the projects with agencies and their needs for cash, that will inform the borrowing. He says the requthorization will probably change and the cash needs may be larger than this. They used a lot of cash management in 2014 and they may have to borrow more this year. There are significant amounts in some projects (can’t hear). He is going to look at some models and tax and borrowing affects and walk through options.
Goal of the Series
– Develop understanding for agency planning process surrounding capital budget development.
– Use additional context to make informed decisions about funding and timing of projects
– Establish process to ????? (he flipped the screen)
The next slide is the projects they covered
Issues they have are
– Rate of increase in taxes, revenue options
– Rate of increase in debt service, debt levels
– Prioritization of infrastructure needs
– – Existing building vs. new facilities
– – Economic development opportunities
– – Land use goals.
– Prioritization of operating needs
– – Existing vs new staff
– – Pay increases, wages vs benefits
– – Reallocation of resources/results oriented budgets
(Schmiedicke was talking the whole time this slide was up, but I could type what he was saying and what was on his slide) He talked about levy limits and he talked about how capital budget impacts the operating budget. He talks about the scarce amount of resources, are they getting the results from investments, its 10s of millions of dollars, we probably could do more with if we had goals and measured them.
He shows graphs of debt service and the budget, including the dragon chart. I missed discussion here.
He shows another graph of 10 yr vs 20 year debt. We usually do 10 years, its very conservative, other municipalities and the state does. They do that because under state law they don’t have to go to referendum. Also, that is was gets us our AAA bond rating, we pay off the date quickly. They stared with 20 years on the central library issue. He says the ramifications are that the debt service doesn’t ramp up quickly, but you have more debt over time, so that is the trade off. Zellers asks a question I couldn’t hear, Schmiedicke says that our borrowing is moderate. Schmiedicke says that if we went to all 20 year borrowing that would impact our AAA rating.
For case model options (less to more painful, the easiest ones are first)
1. $4 Million annual re offering premium – they have gotten this over the last 10 years, the up front payments get us lowest cost borrowing and we have cash up front and we have to apply that to debt service. He shows that dragon chart, if they would do everything in the CIP, he also shows taxes on average value home. The highest was about $100 in 2011, it would be $160ish in 2016 if they did everything, a 9% increase. It’s been as low as $30ish in 2014. The average home is $240,000. He says that the SIP is front loaded to deal with a lot of projects in te next few years. He says that the levy would go up $20M, the levy increase is from the debt service. He runs the model live for them to see different ipacts. If they add the $4m the taxes on the average value home it drops just slightly.
2. Large projects will take longer to complete the CIP – that brings the dragon form 22% to 19% and the taxes on the average value home drop over $40. These are items in the budget, but they do take some time, the pace for the MMB project is the pace that we have gotten from facilities. Larger road projects have been taking more time and might need to borrow, so this reflects more of reality.
3. They also have project “buckets” that is a large amount of money that they do smaller projects with, the next piece is to spend only 2/3 of that money and that brings it down further, they are only at $140 in 2018 and the dragon is at 18 – 19%
4. THe next step is to look at 20 year borrowing, they would have to go to referendum on MMB and Fire Admin, so they aren’t in this, but if they do 20 year debt on other projects, then they would shift $60 million to 20 year debt, that will start to impact ratings, it is relatively painless, but it pushes the dragon to 18% and it gets the average value home to $120
Those were the easy things, now if they look at specific projects, Projects delays
Pinney – 1 year delay – very little change
Monroe St – 2 years delay – a little more change
Biodigester – 5 year delay – a little more change
Public Market – 5 year delay
Police Evidence – 5 year delay
Mid-town and Fire Station 14 – 2 year delay
They push it down to 17%.
The final change is to eliminate projects from the CIP, he looked at new projects
– Removing affordable housing, neighborhood centers and doing nothing but streets and maintenance. The brings it down to 16% and around $100.
They continue to borrow for TIF because that doesn’t impact the taxes.
Barbara McKinney and Marsha Rummel arrived a bit ago, along with another reporter.
He has another chart that shows the impact of the current plans and modified plans.
Discussion and Questions
Verveer asks what projects were not included in the 20 year borrowing, MMB, Fire Admin and Pinney Branch library.
Rummel asks how Judge Doyle Square is impacted. He says this is all G.O. borrowing, TIF borrowing is outside of that and if you use TID 25, you won’t have to borrow, just spend the balance of the TID.
Ahrens asks the threshold for the referendum. Schmiedicke says it is a type of project, anything bonded is in the law, but there is a list of exceptions, but administrative facilities are not exceptions. If they did it directly for MMB they would need a referendum.
Zellers again asked a question I couldn’t hear. The only limit on total borrow is 5% of the equalized value which is a constitutional issue, but we are only at 30% of that 5%. Missed the rest of this answer/question because I couldn’t hear.
Verveer asked about the AAA rating, were there any cautionary flags. Schmiedicke says things that could move it down is dramatic change in economy or shrinkage of liquidity. Verveer asks about the 20 year borrowing on the library, did that come to their attention. Schmiedicke says no since it was such a small portion of our portfolio.
Rummel asks about the rainy day fund. Schmiedicke says there is a General Fund balance, this is our assets and liabilities when they close out the year, they try to have 15% of expenditures. Ours is a little over $40M and its 14.6%. We don’t really have a rainy day fund, this hasn’t been appropriated to build up a reserve. What we do have is our contingent reserve of $1.2M which is 1/2 of 1%, that is spent on things like snow removal if its a bad year.
I missed a bunch here, I really, really can’t hear and am about to give up and go to the TPC meeting. Ok – moved instead to try to hear better but I’m just closer to another noisy air conditioner.
Verveer asks about the Senate budget provisions passed related to Room Tax and how that impacts this and if we can use any of the changes. Schmiedicke explains what they can spend the money on. Verveer asked how this would impact Overture, would that be considered tourism related, Schmiedicke says they are still researching that.
DeMarb says this is really sobering, she says it is important to paint this picture instead of holding up $10M items. She says we don’t need to discuss why we are here, its there because it is important, but it is inflated and as the BOE, we owe it to the council and the people that we represent to understand this and keep the city in good financial standing. DeMarb asked Anne Monks to give the list of tools, it way adopted by the council, it is a little outdated, it would be a good place to start. They are waiting for her to send it.
Wrapping Up
– Utilize information to guide decisions as part of the 2016 capital budget process. And he talks about prioritizing. Potential criteria would be for the CIP – Hold debt service ration below 16% and allow no greater than $100 increase on average value home (about 4% increase)
He talks about the Capital Budget and CIP = hold actual borrowing to $90M, it was around $57. Reduce the CIP to accommodate reauthoirzation due to actual timing of projects.
Focus on existing infrastructure first, service expansions later, non-infrastructure (e.g. grants) has lowest priority. There are projects staking up, that are large $30M for MMB and $10 Pinney Branch and ??, you can’t do these all in 3 years. Might want to fix infrastructure first, then service expansions and then non-infrastructure (grants and programs)
They look at what Anne sent them – Schmiedicke projects it on the screen.
Verveer laughs that it was adopted before he was on the council. It was passed in 1994. Denise reads it out loud at that point.
Growth Management: Madison must be economically, socially and culturally vibrant for the City and the region to thrive. To be vibrant and to maintain its vitality, Madison should share in the growth that is occurring in Dane County. This growth must be managed in such a way to balance our economic, social and environmental health to maintain a sustainable City.
Neighborhoods: Madison should be a series of quality neighborhoods in which people will want to work, to recreate and, most importantly, to live now and in the future. Residents, City government, property owners, employers and other government institutions have shared responsibility for achieving this goal.
For purposes of this goal a neighborhood is an area in the City whose character is defined by boundaries, common issues, design elements and transportation connections. Each neighborhood offers a sense of local identity and place, yet contributes to the health of the community. (The downtown is included in this goal.)
Valuing Family, Youth and Diversity: Madison will build a community where people feel safe, get along with each other, wish to stay and involve themselves in improving their community. (The strategies for this goal focus on equity.)
Organizational Strength and Effectiveness: The City should make the best use of the internal resources it has available in order to improve the delivery of City services. These internal resources are comprised of employees, tools and technology and methods of operation.
City Financial Position: Madison will maintain the ability to finance basic municipal services, strive to meet customer service demands created by a growing City, and meet state and federal mandates while retaining our strong financial position and minimizing the adverse impact on property tax payers.
Denise asks what the intention of the council was when they adopted this, she worked in the Mayor’s office at the time. There was a strong team mentality when Paul came back in office in 1989, there was a lot of emphasis on teams and data analysis. In the report there was a strong management team that led the process. Tom Mosgellar and George Austin led this, there was no amendment. She thinks that there is probably more agreement than we know, this document is probably still relevant to the work they are doing now.
McKinney says these are laudable goals but the challenge is going to be how to move toward this in 2016 budget, these are great and I would love to say we are moving towards this, but I’m not feeling it. There’s nothing to measure it.
DeMarb says “this is really hard work”.
Verveer says “tough decisions”
long pause.
DeMarb asks for which new projects are out. Schmiedicke has some more charts, I can’t type fast enough, but basically all new projects get taken out.. Libraries, Fire, Police, Neighborhood Centers, Affordable Housing. She doesn’t see these projects coming out, so she asks him to put it back in.
They are taking a 5 minute recess and I”m going downstairs to TPC.
And guess what, Alders Schmidt, Kemble, Zellers, Ahrens and Verveer are all down here at TPC.
