HomeMy WebLinkAboutAgenda - 04-30-2007-cORANGE COUNTY
Meeting Date: April 24, 2007
Action Agenda
Item No.
SUBJECT: Approval of County Cap itaI Funding Poli
DEPARTMENT: Budget PUBLIC HEARING: (YIN) No
ATTACHMENT(S):
County Capital Funding Policy
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INFO TION CONTA CT .
Donna Coffey, (919) 245 -2151
PURPOSE: To approve the County's Capital Funding Policy to include use of the anticipated. futue
NC Education Lottery proceeds intent for funding for recurring capital and presentation
Capital Investment Plans.
BACKGROUND: Over the last few months, staff has provided the Board with a number of
items of interest that may potentially 'affect the development of the upcoming 2007 -17 County
Capital Investment (CIP) Plan, the 2007 -08 Annual Operating Budget, or future years' budgets.
Examples of recent updates include discussions related to the anticipated decrease in projected
revenues from the North Carolina Education Lottery along with the General Assembly's interest
in providing local property tax assistance to taxpayers throughout the State. Both of those items
would have negative impacts on the County's budget.
On April 10,.2007, the Board took a number of actions related to the. County's Capital Funding
Policy and Capital Investment Plan (CIP) process. The items below summarize actions taken
by the Board:
1) Amend the County's Capital Funding Policy with the following changes:
(a) Beginning in fiscal year 2007 -08, the County will budget NC Education Lottery
proceeds "in arrears" meaning that funds will be budgeted in the year after
the State distributes them. For example, lottery proceeds distributed to the
County during the upcoming 2007 -08 fiscal year would be budgeted the
following fiscal year, 2008-09;
(b) Each school district will have the option to dedicate its share of the annual NC
Education Lottery monies either (1) to repay debt service for debt issued after
fiscal year 2006 -07 to address school facility renovation needs or (2) as an
additional revenue to the districts pay -as- you -go funding to address . school
facility renovation needs.* if either district chooses to dedicate Lottery proceeds
to repay debt service, Lottery proceeds, sufficient to cover annual debt
payments for principal and interest, will be dedicated for the life of the
financing.
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(c) It is the intent of the Board of County Commissioners to dedicate the equivalent
of four cents on the annual ad valorem property tax to funding recurring capital
expenditures for schools (three cents) and county ( 1 cent). However, there will.
be times when the County will be bound fiscally and unable to achieve depart
fundingce
. During those times, Commissioners may find it necessary P
from the Policy. During the 2008 -18 Capital investment n the additional development' process, the Board will consider a timetable for phasing
cents necessary to fully the recurring capital component of this policy.
(d) During October of each fiscal year, the County Manager shall present, to the
Board, ten -year County and School capital needs and funding plans in the form
of a Capital Investment Plan. Each year, the Board of Commissioners shall
conduct a public hearing on the Manager's Recommended CIP during
November and subsequently adopt a ten -year Capital Investment Plan (CIP).
(e) The first year of the adopted ten-year Capital Investment Plan shall become
the basis for the annual capital budget and in�� oaraeed into the next annual
operating budget recommended by the County 9
fa Ili
2) Request that the CHCCS and OCS Boards of Educarnti n Group ting school o revew
needs and present those 'needs with the School Colla
during Summer 2007. Based on the outcome of the Collaboration Work, Group's review and
recommendations: .
(a) Direct County staff to analyze how the school facility needs can be
accommodated in the County's debt issuance plans for fiscal year 2007 -08 and
beyond.
(b) Present the outcomes of these recommendations at the September 2007 Joint
Meeting of the Boards of Education and County Commissioners.
3) Commissioners also directed staff to:
(a) Prepare an interim County and School pay -as- you -go capital budget for fiscal
year 2007 -08 to be presented to Commissioners in conjunction with the
County's annual operation budget in. May 2007.
(b) Present, in October 2007, ten -year Capital Investment Plan that includes the
outcomes of the School - Collaboration Work Group as outlined in item 2
(above).
During the April 10 meeting, Commissioner Gordon requested staff to contact state officials to
see if there was a way for the County to request Lottery NC Department of Public Instruction
prior to them being expended
by the County. Budget Director Donna Coffey spoke
and was advised that the County can request Lottery�reds�before e actually expending
nd (2) there are
long as (1) the County anticipates making the expend
funds in the account to request. It is important to note that
nto in
the accordance
ool construction account
the Lottery Commission is required to make a deposit
This year, for
times per year. The Statute is silent on specific dates or timing on a of those
dep sits one in October
example, the Lottery Commission has made two deposits quarterly
of
2006 and the other in February 2007. However, according to staff-
fo consecutive days at
Public Instruction, if the Commission chose to make four deposits
the end of the fiscal year, they would comply with the statute.
To that end, it is suggested that an additional amendment to the County's Capital Funding
Policy be made:
3
® Beginning in fiscal year 2008 -09, during the first quarter of each year, County staff will
request, from the State, the amount of monies accumulated in the Lottery fund for both
school districts with the intent of expending those funds during the fiscal year for either
debt service payments or individual School capital projects as identified by each districts
during their annual update of their ten -year capital plan.
ion
FINANCIAL IMPACT: For fiscal year 2006 -07, the County anticipates receiving e$ d debt
Lottery proceeds and intends to expend those funds for debt service on school
incurred after January 1, 2003. Anticipated future years proceeds from year 200711
be in accordance with item 1 a in the Background section above beg inning in fiscal
08, the County will budget NC Education Lottery proceeds "in arrears° — meaning that funds will
be budgeted in the year after the State distributes them. gear would, be budgeted the
distributed to the County during the upcoming 2007 -08 Y
following fiscal year, 2008 -09.
RECOMMENDATION( S): The Manager recommends that the Board of County Commissioners
approve the County Capital Funding Policy.
Adopted o424/2om 4
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Proposed
Capital Funding Policy
Preamble
This capital funding policy is the product of extensive analysis and deliberation. The intent
of this policy is to reflect greater priority than there has been historically on providing
funding for County projects, with particular emphasis directed at enhanced upkeep of
existing County facilities. The policy reflects the implementation of the Board of
Commissioners' resolution of November 16, 2004 that the Board "does hereby adopt in
principle a policy of allocating a target of 60 percent of capital expenditures. for school
projects and 40 percent of capital expenditures for county projects over the decade
beginning in calendar year 2005' This policy continues the County's principle and
historical practice of funding all School and County related debt service obligations before
allocating any other School or County capital funds for other purposes.
Long Range Capital Investment Plan
During October of each fiscal year the County Manager shall present, to the Board, ten-
year County and School capital needs and funding plans -in the form of a Capital
Investment Plan. Each year, . the Board of Commissioners shall conduct a public hearing
on the Manager's Recommended CIP during November and subsequently adopt a ten -
year Capital Investment Plan (CIP).
The first year of the adopted ten -year Capital Investment Plan shall become the basis for
the annual capital budget and incorporated into the next annual, operating budget
recommended by the County Manager.
County and School recurring capital needs will be identified and reviewed during each
annual operating budget cycle, and recurring capital appropriations will be approved by the
Board of Commissioners as an element of each annual Orange County Budget Ordinance.
The ten -year plan for long -range capital funding shall include:
• Anticipated County capital expenditures costing $25,000 or more (excluding
equipment)
• Anticipated school capital expenditures costing $50,000 or more (excluding equipment)
• Equipment costing $5,000 or more
Sources of Funds
The County will allocate the following sources of funds for County and School debt service
and long -range and recurring capital:
•. All proceeds from the Article 40 and Article 42 half -cent sales taxes.
(The North Carolina General Statutes require that 30 percent of the Article 40
(NCGS §905- 487(a)) and 60 percent of the Article 42 (NCGS §105- 502(a)) sales tax
Adopted 04/24/2007 5
revenue be earmarked for public school capital outlay as defined in NCGS §105 -426M
or to refire any indebtedness incurred by the county for these purposes)
• School Construction Impact Fees for each school system.
• Public School Building Capital Fund monies
• Property tax revenue sufficient to pay all debt service on remaining 1988, 1992, 1997,
or 2001 bonds, or refinancings thereof, as well as alternative financing programmed in
the debt issuance schedule approved by the Board on May 5, 2004 and any
subsequent updates to that schedule as the Board may approve.
• It is the intent of the Board of County Commissioners to dedicate the equivalent of four
cents on the annual ad valorem property tax to funding recurring capital expenditures
for schools (three cents) and county (1 cent). However, there will be times when the
County will.be bound .fiscally and unable to achieve full funding. During those times,
Commissioners may find it necessary to depart from the Policy. During the 2008 -18
Capital Investment Plan development process, the Board will consider a timetable for
phasing in the additional two -cents necessary to fully the recurring capital component
of this policy.
(This 4-cent rate may, but need not, be adjusted with each quadrennial revaluation to a
revenue neutraF earmarking)
• Beginning in fiscal year 2007 -08, the County will budget NC Education Lottery
proceeds "in arrears" - meaning that funds will be budgeted in the year after• the State
distributes them. For example, lottery proceeds distributed to the County during the
upcoming 2007 -08 fiscal year would be budgeted the following fiscal year, 2008 -09.
Debt Service
All County and School related debt service- obligations would be funded prior to allocation
of programmed funding for any other capital purposes.
All proceeds from annual allocations of North Carolina Public School Building Capital
Funds will be earmarked explicitly to pay for eligible school debt service.
Orange County Schools' impact fees will be earmarked explicitly to pay for debt service on
projects that involved the construction of new school space in the Orange County Schools
system. Chapel Hill - Carrboro City Schools' impact fees will be earmarked explicitly to pay
for debt service on projects that involved the construction of new school space in the
Chapel Hill - Carrboro City Schools system.
NC Education Lottery Proceeds
Beginning in fiscal year 2008 -09, each school district will have the option to dedicate its
share of the annual NC Education Lottery monies either (1) to repay debt service for debt
issued after fiscal year 2006 -07 to address school facility renovation needs or (2) as an
additional revenue to the districts pay -as- you -go funding to address school facility
renovation needs. If either district chooses to dedicate Lottery proceeds to repay debt
service,. Lottery proceeds, sufficient to cover annual debt payments for principal and
interest, will be dedicated for the life of the financing.
Adopted 04/24!2007 6 .,
Beginning in fiscal year 2008 -09, during the first quarter of each year, County staff will
request, from the State, the amount of monies accumulated in the Lottery fund for both
school districts with the intent of expending those funds during the fiscal year for either
debt service payments or individual School capital projects as identified by each districts
during their annual update of their ten -year capital plan.
Allocation
With the exception of the revenues earmarked for School and County recurring capital and
the Construction Management function, the net proceeds of all programmed revenue
sources after debt service obligations have been satisfied will be allocated on the basis of
60% to schools and 40% to the County.
Capital funding for each ten -year capital planning period will be. allocated between the two
school systems based on certified student membership as of November 15 each year.
Capital Project Ordinances — Form and Purpose
All funds allocated to capital projects are to be accounted for in a Capital Project Fund as
authorized by a Board of County Commissioner approved Capital Project Ordinance.
The Capital Project Ordinance will include a detailed break down of each major cost
category related to the project.
In accordance with the Board of County Commissioners November 2000 adopted 4Policy
on Planning and Funding School Capital Projects', whenever School capital project bids
are either higher or lower than originally projected, or any other factor affecting the project
budget occurs, the affected school system is expected to work with County Management
and Budget staff to present revised capital project ordinances for adoption by the Board of
Commissioners. The same expectations shall be applicable for changes to County Capital
project budgets.
Community Use of Schools
It is the intent of the Board of County Commissioners to evaluate each new proposed
school in both School Districts for joint community use opportunities, including, but not
limited to, park and recreation use.
.Recurring Capital
As outlined in the "Sources of Funds" section of this policy, recurring capital funding for the
Schools and County will be based on the estimated proceeds of 4 cents on the annual
General Fund property tax rate. The proceeds from 3 cents will be earmarked for schools,
with funds allocated to each school system for the next fiscal year based on each system's
respective share of the student membership as of November 15 immediately preceding the
next fiscal year. Proceeds from 1 cent on the tax rate will be earmarked for County
recurring capital needs.
With regard to County Equipment and Vehicle acquisitions accomplished using third party
financing, the Board of County Commissioners will determine the source of funding to
repay the associated debt service 'at the point that -the Board approves the financing
arrangement.
Adopted 04/24!2007 7
Construction Management Function
Beginning with the 2005-06 fiscal year, the Board of Commissioners will appropriate
funding to establish a Construction Management function to oversee County and School
capital projects. In fiscal years 2005 -06 through 2007 -08, $100,000 will be allocated
annually to fund this function. The source of funding for the Construction Management
function will be split on a 60/40 basis with each school district sharing 'the schools porrion
of funding (60 %) in accordance with certified student membership as of November 15 each
year. Each entity's share of this function will be deducted from its share of long -range
capital funding prior to allocating capital funds.
Schools Adequate Public Facilities Ordinance
Orange County's Schools Adequate Public Facilities Ordinance ( SAPFO) and Memoranda
of Understanding (MOUs) between the County and its municipal and school partners
establish the machinery to assure that, to the extent possible, new development will take
place only when there are adequate public school facilities available, or planned, which will
accommodate such new development. The Board of County Commissioners is committed
to the principle that new school space documented as needed through the annual SAPFO
technical review process will be reflected in the next adopted CIP, and will be funded so as
to be constructed to be available before the relevant level of service threshold is exceeded.
Rescission
This policy rescinds the Orange County Board of Commissioners Capital Funding Policy,
as originally approved on December 7, 1996 and as amended on February 3, 1998 and
June 23, 2005.
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