Ever wonder what is in the capital budget and why . . . here’s a start.
Guidelines for Projects to Include in the Capital Budget
The City of Madison has established a policy to remove from the Capital Budget those items with a useful life of less than the repayment term of General Obligation Debt (usually ten years). Those items should be considered in the Operating Budget under MGO 4.02(6)(c)(3). The City of Madison will use the following minimum
guidelines for projects included in the Capital Budget:
1. Land purchases and improvements in excess of three thousand dollars ($3,000);
2. All projects requiring the borrowing of money including, but not limited to construction or reconstruction
of public utilities, streets, sidewalks, storm and sanitary drainage facilities;
3. New construction and construction of buildings in excess of five thousand dollars ($5,000);
4. Major alterations to buildings and facilities which are not routine repairs and which substantially enhance the value of a structure or change its use;
5. Original equipment or motor vehicle purchases exceeding twenty thousand dollars ($20,000) in cost and having a life expectancy of ten (10) years or more.Savings Resulting from Use of General Debt Reserves
In December 2012, the Common Council created MGO 4.17 to prohibit the use of unused balances in the debt service fund for operating expenses. The Ordinance states: “In any year when general debt reserves are applied to reduce general fund debt service, an amount at least equal to the general debt reserves applied must be directly appropriated from the general fund for capital projects, unless the Common Council, by a separate vote of two-thirds (2/3) of all members during approval of the budget, votes to do otherwise.”Budget Requests: Target and Supplemental Requests
Agencies were instructed to submit a 2014 budget request that did not exceed the amount shown for 2014 in the 2013 adopted Capital Improvement Program (CIP). Agencies could submit supplemental requests for projects that were not included in the CIP or were entirely removed to meet the adopted CIP. In addition, agency requests for new borrowing for the years 2014-2018 (exclusive of reauthorizations) could not exceed the cumulative amount for those years in the 2013 CIP.Reauthorizations and Cancellations
The 2014 Capital Budget includes a report of project funding which is reauthorized, as well as a report of projects that are cancelled or postponed to a future year in the CIP.Amounts appropriated to each project in the Capital Budget reflect both the anticipated cost and the source of funding to meet those costs (e.g., general obligation debt). In most instances, proceeds from issuance of general obligation notes and bonds are deposited in the City’s Capital Projects Fund for expenditure on the related projects. The most notable exception is debt issued for developer assistance in tax increment districts (TIDs). Proceeds from the issuance of debt for these projects are deposited to an account established for each TID.
Reauthorizations are made to both reflect the actual timing of project expenditures as well as the actual cash needs in the Capital Projects Fund. As such, some projects that are reauthorized may be completed in the current year, with the costs carried in the balance of the Capital Projects Fund until replenished by proceeds from the issuance of debt in a subsequent year.
With this in mind, reauthorizations in the 2014 Capital Budget are included for the following reasons:
1. Projects anticipated to begin in the most recent adopted capital budget are not yet underway due to delays in the implementation timetable;
2. Multi-year projects are expending funds at a different pace than originally anticipated;
3. Projects are underway but did not reach completion in the current year and are expected to incur expenditures in the subsequent year;
4. Projects will be completed in a prior year or the current year with the costs carried in the cash balance of the Capital Projects Fund until the reauthorized debt is issued in a subsequent year.Cancellations and postponements in the 2014 Capital Budget address the following conditions: the project cost less than budgeted, is not expected to occur, may be delayed more than one future year, may not occur until a future condition is met, or is funded from a different source.
