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FY07 CIP PRESENTATION
Introduction
We are pleased to submit a balanced Capital Improvement Program Budget for the five fiscal years 2007 – 2011. While not presented today, we do have a Ten-year Capital Improvement Program for the Marco Island Utilities. Funds for capital improvements are severely limited over the next five years for several reasons. These include the constraints of the City’s Charter Spending Cap; the use of $1 million annually from Collier County grants over the next four years for the North Collier Boulevard Project; and the requirement to fund that service on bonds issued for the purchase of Veterans Community Park within the Spending Cap. Over the next five years $21.8 million will be available for infrastructure repairs and improvements.
On August 8th Council is scheduled to review the Operating Budget for FY2007. Budget public hearings and adoption are scheduled for September.
Most of the projects shown in the General Government CIP have appeared in the prior five-year plan, although new ones have been added and some have been deleted. A significant variable in the five-year plan is bridge repairs. A number of bridges sustained damage from Hurricane Wilma. The CIP Budget has been amended from prior years to reallocate and reprioritize bridge repairs. Because FEMA determined that most of the damage was due to deterioration, there will be minimum reimbursement.
The upcoming 2007 budget and the five-year plan are subject to the Spending Cap as required by the City Charter. The Spending Cap has been calculated at $17.7 million and each year is within the Spending Cap based upon current estimated costs of both operating and capital expenditures.
City Council has adopted a zero net debt policy. This policy allows and encourages the unrestricted reserves to accumulate until the amount of reserves will offset the outstanding debt. When the unrestricted reserves match the outstanding debt or any time before, City Council may decide whether to pay off the outstanding debt obligations with the Unrestricted Reserve Fund. The total outstanding debt is $20.4 million. The total unrestricted reserves will be in the range of $1 million at the end of the current year, reduced significantly from last year. The current property tax mil levy provides approximately $1 million annually into unrestricted reserves for the next several years.
The unrestricted reserve projections are reduced substantially from the prior year projections and the goal to attain the zero net debt policy cannot be reached within the five-year period. Unrestricted reserves have dropped from $6.3 million to $1.8 million. There are several reasons. The first is a decision to fund the East Winterberry Bridge replacement with reserves. The second was the decision to lower the property tax millage rate at the final budget hearing to a level less than that originally agreed to by City Council. The third reason was the use of reserves due to damages caused by Hurricane Wilma.
Assuming that taxable values increase by 11% this year and 7% annually thereafter, and assuming that the ad valorem tax levy decreases by 3% annually to ensure that homesteaded property owners pay no more in property tax than in prior years, the unrestricted reserves will be less than $5 million, or about 25% of outstanding debt.
You have been provided another hand out with a five-year revenue and expense summary. This summary also assumes taxable values will increase by 11% this year and 7% annually thereafter, but the millage rate set for FY06 will remain constant through the five-year period at 1.3875 mils. If the millage rate remains constant, the unrestricted reserves will go from $1.8 million to $9.5 million by the fifth year.
After the presentation for each of the General Government Capital Projects, I will return to the podium to summarize the Septic Tank Replacement Program. This summary will include the cost of the program, the assessment process, the capacity and construction cost, the fairness and equity options, the funding options, and the future districts. We will respond to any questions and seek affirmation as to the fairness and equity options and funding options. We will also advise of a recommended change in priority for
the construction of future districts. That will be followed by the five-year capital projects for the Water and Wastewater Utilities and a brief discussion on a reprioritization for the underground power line project. Before this meeting is concluded we hope the City Council can reach a general consensus on the Five-Year Capital Improvement Program. We will then proceed to develop the FY07 Operating Budget for all funds in preparation for your August 8, 2006 workshop meeting.
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