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HomeMy WebLinkAboutAgenda - 12-02-1996 - 14c a 1 ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No.- ACTION AGENDA ITEM ABSTRACT Meeting Date: December 2, 1996 SUBJECT: Revised Capital Funding Policy for School and County Capital Projects DEPARTMENT: County Manager/Budget PUBLIC HEARING: YES: NO: x BUDGET AMENDMENT: YES: NO: x ATTACHMENT(S): INFORMATION CONTACT: Revised Policy (1) John Link, ext 2300 Sally Kost, ext 2151 Current Capital Policy (2) TELEPHONE NUMBERS: Hillsborough -732-8181 Chapel Hill -968-4501. Durham -688-7331 Mebane -227-2031 PURPOSE To adopt a revised capital funding policy for School and County Capital Projects. BACKGROUND At the November 19 Board meeting,the Commissioners discussed the revised capital funding policy, which outlines the capital policy used in developing the Ten Year Capital Improvements Plan. This policy implements the funding approach as presented in Option 5B of the long range school capital funding plan,approved by the Board of Commissioners at their October 15, 1996 meeting. This option includes a combination of sales tax and property tax revenue for capital projects. The current policy (Attachment 2) provides that 80 percent of the Article 40 one half cent sales tax revenue and 60 percent of the Article 42 one half cent sales tax revenue is dedicated to School projects, with the balance of this revenue dedicated to County projects. The Board of Commissioners asked Staff to make certain revisions to the draft policy presented at the November 19 meeting. These revisions are: 1. Include in the policy,reference to the required uses (as stated in the General Statutes) of the Half Cent Sales Tax Revenue. • This information is included under Al of the policy. 2' r 2. Provide the information that was shown in Number 10 of the old policy (see Attachment 2). This includes reference to the planning period of the Capital Improvements Plan(ten years) and states the minimum project amounts for School and County projects. (See H on the revised policy at Attachment 1) Staff recommends no change in the minimum project amounts with one exception . County projects remain at a minimum of$30,000 and School projects remain at $50,000. Staff recommends that equipment be excluded from these minimum levels, and that equipment costing $1,000 or more,be considered as part of the Capital Improvements Plan. The intent of this change is to allow automation equipment/systems, vehicles,heating/cooling systems,to be part of the Capital Improvements Plan. The Manager has been in contact with the Superintendents of both school systems concerning the proposed capital funding policy, and will be prepared to respond verbally to the Board's questions. RECOMMENDATION The Manager recommends that the Board adopt the revised capital funding policy. 3 k ' Attachment 1 Summary of Capital Policy (Note changes made to the November 19 draft are shown in bold print) A. Sources of Funds The following sources of funds will be allocated for Capital Projects and Debt Service: 1. All proceeds from the Article 40 and Article 42 one half sales tax The North Carolina General Statutes require that 30 percent of the Article 40 and 60 percent of the Article 42 sales tax revenue be earmarked for school capital projects or debt service on debt issued for school capital projects. 2. Revenue from the property tax as follows: • $800,000 • The equivalent of 2.7 cents on the tax rate based on valuation as of 1996-97. This earmarking will be adjusted each revaluation cycle. • The amount necessary to retire the 1992 School Bonds. (In 1997-98 this amount is $4.7 million.) • The amount of the reduction in the Human Services function of the County budget (equivalent of one half of one percent of the budget or $50,000) in 1994-95 for automation projects in Human Services. • Utilities Extension Fund - This amount may vary in that it based on the increase in property tax base as a result of expenditures in the Utilities Extension Capital project. The amount currently planned is $35,000 for 1997-98 and $25,000 for each year thereafter. 3. Impact Fees for each school system. 4. Public School Building Fund 5. Other revenues that are restricted including, payment-in-lieu, grant funds, rental revenue and inmate fees as a result of the new jail addition. B. Debt Service Prior to funds being allocated for specific projects, all debt service, including private placement financing will be subtracted from the unrestricted funding sources. C. Allocation All sources of unrestricted revenue, less debt service is then allocated between County and School projects based on 50 percent of the net amount for School projects and 50 percent of the net amount for County projects. Funding between 4 Attachment 1 the two school systems will be allocated based on the 10' day enrollment adjusted each year. For example, the 10`' day enrollment as of September 1996 will be the basis of the 1997-2007 Capital Improvements Plan. These percentages will be rounded to one decimal place. Impact fees will be projected and allocated to each school system, although these fees may be used to pay debt service. When impact fees are used to pay debt service, the equivalent amount of the projected impact fee will be allocated to each school system. For the first three years of the planning period (1997-98, 1998-99 and 1999-2000) impact fees are dedicated to the cost of the new schools. D. Funding Levels It is the intent of the Board of Commissioners to "hold harmless" School projects and County projects as identified by the amount of funding projected in the 1996- 2006 Capital Improvements Plan. To achieve this intention, the following funding options will be used: • The difference between the amount of general obligation debt service payments at the peak year of the debt schedule and the actual debt service payment will be earmarked for the Orange County Schools until the time that any shortfall that would have been realized by that system is made up. • For County projects, beginning in 1998-99 the equivalent of one cent on the general fund property tax rate will be necessary. The Board of Commissioners may at that time consider shifting the one cent capital reserve fund to be dedicated to County projects (see Capital Reserve section below). E. Capital Reserve The capital reserve fund, established by the Board of Commissioners in 1995-96 is equivalent to one cent on the General Fund Property Tax Rate (not adjusted for the 1997 revaluation of property but adjusted for revaluation of real property beyond the 1997 revaluation.) This reserve will accumulate during 1996-97 and 1997-98 with these funds used for site acquisition for schools and or recreation, or the combination of both. The Board of Commissioners will evaluate this reserve fund during 1998-99 to determine if this one cent reserve should continue. F. School/Parks/Recreation It is the intent of the Board of County Commissioners to evaluate each new proposed school in both School Districts for joint use to include park and recreation use. { 5 Attachment 1 G. Recurring Capital Recurring capital for each School System will be based on the equivalent of three cents on the General Fund Property Tax Rate (not adjusted for the 1997 revaluation of real property but adjusted each revaluation thereafter.) Funds will be allocated to each school system based on the State Department of Public Instruction planning allocation which is the same method used to allocate current expense appropriation. H. Planning Period During each fiscal year, the Board of Commissioners shall adopt a ten year Capital Improvements Plan. The ten year plan shall include anticipated County capital expenditures costing $30,000 or more excluding equipment and anticipated school capital expenditures costing$50,000 or more, excluding equipment. Equipment, costing $1,000 or more can be considered as part of the Capital Improvements Plan. The first year of the adopted Ten Year Capital Improvements Plan shall be incorporated into the next annual operating budget recommended by the County Manager. 6 Attachment 2 POLICY FOR INSERTION INTO THE POLICY MANUAL MEETING DATE: September 22 , 1987 NUMBER: P: 0290 EFFECTIVE DATE: September 22 , 1987 REVISIONS : POLICY: ORANGE COUNTY CAPITAL POLICIES 1. Eighty percent (80%) of the original half-cent sales tax revenue and sixty percent (60%) of the additional half- cent sales tax revenues shall be dedicated to school capital expenditures. Such expenditures shall be limited to acquisitions of or improvements to land, buildings, and equipment costing $50, 000 or more. Any year in which such revenues exceed such expenditures, the excess shall be transferred to the School Capital Reserve Fund. 2 . Twenty percent (20%) of the original half-cent sales tax revenue and forty percent (40%) of the additional half- cent sales tax revenue shall be dedicated to county capital expenditures. Such expenditures shall be limited to acquisitions of or improvements to land, buildings, and equipment costing $30,000 or more. Any year in which such revenues exceed such expenditures, the excess shall be transferred to the County Capital Reserve Fund. 3 . The School Capital Reserve Fund shall be used to accumulate funds for acquisitions of or improvements to land, buildings, and equipment for school purposes costing $50, 000 or more. 4 . The County Reserve Fund shall be used to accumulate funds for acquisitions of or improvements to land, buildings, and equipment for county purposes costing $30, 000 or more. 5 . A vehicle Capital Reserve Fund shall be established and used to accumulate funds for the acquisitions of county vehicles. 6 . Each year, an amount equal to $800, 000 minus the amount required for that year's debt service on school, bonds issued prior to the 1987-88 fiscal year shall be appropriated in the General Fund budget and transferred to the School Capital Reserve Fund. 4 Attachment 2 7 . Debt incurred under the "two-thirds net debt reduction" rule shall be limited to instances where the health and safety of Orange County citizens are threatened. 8 . The amount to be appropriated to each school system for recurring capital expenditures shall be $750 , 000 . This appropriation shall be in effect for a period of at, least five years and includes funds for roof repairs. 9 . County capital expenditures w7th a cost of $30, 000 or more and useful life of at least five years shall be considered capital projects and accounted for in capital project funds. 10 . During each fiscal year, the Board shall Adopt a Five- Year Capital Improvements Program. The FZV-e-Year Program shall include anticipated county capital expenditures costing $30, 000 or more and anticipated school capital expenditures costing $50, 000 or more, as well as available financing sources. The first year of the dopted -Year Capital Improvements Program shall �e` i ccrporate into the .next annual operating budget :10 en 3ed 4,o the County Manager.