CA Review GH
Meeting Date: May 7, 2024
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Paz Gomez, Deputy City Manager, Public Works [email protected], 442-339-2751
Zach Korach, Finance Director
[email protected], 442-339-2127
Craddock Stropes, Senior Management Analyst
[email protected], 442-339-2726
Subject: New Approach to Prioritizing and Funding Infrastructure, Parks and Other Major Construction Projects
Districts: All
Reco
mmended Action
Receive an update on changes to how the city manages its Capital Improvement Program, a 15- year plan for how the city develops, schedules, phases and requests funding for major city infrastructure projects, new parks, city buildings and other public improvements.
Executive Summar y
Projects to build and maintain major city infrastructure, facilities and parks require a significant investment of time and money. The city has historically set aside money for projects as they are added to the 15-year Capital Improvement Program. That way, when it comes time to build the project, money is available.
Today, the city is on the tail end of three decades of growth and development and entering a new phase focused on maintaining what has been built. In addition to a commitment to infrastructure maintenance, the City Council has prioritized projects that help ensure Carlsbad continues to provide an excellent quality of life.
As a result, the number of projects in the city’s Capital Improvement Program has grown and become more diverse. This coincides with a time when funding sources typically used to pay for Capital Improvement Program projects are becoming more constrained.
The City Council’s 5-Year Strategic Plan emphasizes organizational excellence and fiscal health, which includes a continual effort to assess and improve city processes and budgeting practices.
This report describes changes that have been made to how the Capital Improvement Program is managed to address these changing conditions and address a desire for greater transparency and more City Council involvement in how projects are prioritized.
May 7, 2024
Item #9 Page 1 of 4
Explanation & Analysis
Overview
The Capital Improvement Program reflects the city's ongoing commitment to maintaining the high standard of quality facilities for our community today and in the future. The program outlines the expenditure plan for future capital projects and the corresponding revenues to pay for those expenditures.
Projects that are shown in the program are generally defined as any construction, rehabilitation or replacement of major infrastructure such as streets, libraries, parks, fire stations and administrative facilities, water, sewer and drainage facilities, and other facilities that are located on or in the ground. In most cases, the total construction cost of each of these assets is recorded and tracked as part of the city's inventory of capital infrastructure assets and other city-owned property.
Administrative Order No. 50, Capital Improvement Program - Project initiation, Prioritization, Budgeting and Adoption Procedure – specifies the timeline for developing the upcoming fiscal year's Capital Improvement Program. Based on infrastructure needs and City Council priorities, city staff recommend new projects in December for the upcoming fiscal year. Project requests are evaluated initially by an internal steering committee in January and finalized in April. This evaluation includes project prioritization and scoring, followed by the determination of project timing as forecasted funds are available. Based on funding availability and priority level, proposed projects are then incorporated into the preliminary Capital Improvement Program budget for City Council consideration.
When the City Council adopts the annual Capital Improvement Program Budget, it also authorizes that year’s project spending. City staff include the estimated budget for all projects in the 15-years of the program in the budget. The 15-year plan is not a commitment to spend those funds, rather is it there so the City Council and the public are aware of projects planned and the funding that will be needed in the future. “Just in time” Capital Improvement Program process
City staff have made changes to the Capital Improvement Program process for fiscal year 2024-25 to accomplish the following:
• Release funding only when each project phase is complete, freeing up money that was previously allocated to projects that were early in the planning process or not needed until a future date.
• Provide more accurate cost estimates by applying an automatic annual escalator and updating the cost estimates as each phase is completed and more information is known about the scope, design and other factors affecting cost. • Provide more realistic timelines for projects by focusing on fewer projects and a shorter planning horizon.
• Increase opportunities for the City Council to evaluate projects in light of current needs and priorities.
• Increase transparency of funding options and decision-making process
May 7, 2024
Item #9 Page 2 of 4
• Continue to comply with the Government Finance Officers Association, San Diego Association of Governments, and other reporting requirements by showing where funds are allocated for future spending.
What’s changing
The following changes have been made to how city staff manage the program:
Planning horizon
The city budget will now include detailed information about projects planned in the next five years rather than the next 15 years. The budget appendices will still include the 15-year plan, but no funding will be allocated to those projects.
Instead, the budget will show a 15-year forecast of how much money will be available for future projects.
Project categories
Projects will be grouped by the following four categories:
1. Strategic plan (City Council priority)
2. Critical need
3. Maintenance
4. Closeout
When funds are requested
Rather than having the city budget for the entire cost of a project well in advance of when the project is scheduled to begin, the City Council will be asked to consider appropriating money phase by phase. Phases typically include:
1. Scoping: feasibility studies and needs assessments
2. Conceptual design: 30% of the design, environmental review and permitting, preliminary engineering/design
3. Final design: 100% of the engineering/design completion and the final engineer’s cost estimate
4. Construction
For example, as part of the annual budget process, city staff will request appropriations for a new project, starting with the initial scoping. This typically involves early planning work and a feasibility analysis. When that work is completed, staff will return to the City Council to request appropriation for conceptual design. When that is done, staff will return to the City Council to request funding for final design, and so on.
When the City Council considers appropriating money for project construction, staff will be able to provide an up-to-date cost estimate based on the actual project design and timing. Previously, the Capital Improvement Program would include original estimates, that were out of date by the time the project was ready to proceed to construction.
Staff will also provide the current 15-year funding forecast, showing how much money is available for projects over the next 15 years, as well as a list of other projects planned in the next five years.
May 7, 2024
Item #9 Page 3 of 4
These changes will provide the City Council with a greater ability to direct the pace and funding of the city’s major Capital Improvement Program projects, while increasing transparency around projects that are planned and underway.
Community Engagement
The City Council’s 5-Year Strategic Plan was developed with significant input from the community about their priorities for the future. The five goals in the strategic plan reflect this input, and CIP projects have been developed and prioritized based on these goals.
The city provides ongoing opportunities for community engagement on Capital Improvement Program projects through public meetings, online surveys, interviews with project stakeholders and other outreach. The community also provides input throughout the year by providing comments, in person and via email, at City Council meetings and meetings of city boards and commissions.
The community can learn about what is proposed in the Capital Improvement Program for fiscal year 2024-25 at three upcoming public meetings:
May 21, 5 p.m. Preliminary budget presentation to the City Council May 23, 6 p.m. Community budget workshop
June 18, 5 p.m. Public hearing, final budget adoption
Fiscal Analysis
The new approach to managing the Capital Improvement Program does not require more funding; rather, it changes how and when funding for projects will be requested.
Next Steps
The preliminary Capital Improvement Program Budget will be presented at the May 21, 2024, City Council meeting.
Environmental Ev aluation
This action does not require environmental review because it does not constitute a project within the meaning of the California Environmental Quality Act under California Public Resources Code Section 21065 in that it has no potential to cause either a direct physical change or a reasonably foreseeable indirect physical change in the environment.
Exhibits
None
May 7, 2024
Item #9 Page 4 of 4
May 7, 2024
Planning, Prioritizing and Funding
CAPITAL PROJECTS
A New Approach to
1 {city of
Carlsbad
Receive a report on a new approach to managing the
city’s Capital Improvement Program designed to
increase efficient use of city funds while being more
responsive to community and City Council priorities.
RECOMMENDED ACTION
2 {city of
Carlsbad
KEY DATES
June 18
Public hearing to adopt budget
and master fee schedule
July 1
New fiscal year begins
Preliminary budget
Capital Improvement Program
Strategic Digital Investment Program
Master fee schedule
May 21
3 Community budget workshop
May 23
Capital Improvement Program
New approach
May 7
0 0
0 0
0 { City of
Carlsbad
CAPITAL PROJECTS
4 CAPITAL PROJECTS
1. Significant investment required
2. Lengthy planning and design process
3. Different funding sources
5 PROJECT LIFE CYCLE
Idea/Need Scoping/Planning Preliminary Design Final Design Construction 6 _,o•., ,_
, ' ---
[·. ·]
[·•·I I·•·]
• Spirit of continuous improvement
• Organizational Excellence & Fiscal Health goal
• Took a fresh look at the process, top to bottom
• Considered city’s current life stage, economic
re
alities, changing community needs
PROCESS REVIEW
7 STRATEGIC PLAN
2023 - 2027
(City of
Carlsbad
{city of
Carlsbad
BEFORE NOW
15-year focus 5-year focus
Funding set aside annually
with the budget
Only set aside annual funding for projects
ready for the next phase
Construction funding set
aside in advance
Construction funding requested
when project is ready
More projects than
resources to do them
Only include projects that will be
ready to be worked on in next 5 years
8 WHAT’S CHANGING
• More accurate cost estimates and timelines
• Frees up money for current needs
• Increases opportunities for City Council to
pr
ioritize projects
• Increases transparency of funding options and
dec
ision-making process
BENEFITS
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TIME ~,
{city of
Carlsbad
Idea/Need Scoping/Planning Preliminary Design Final Design Construction 10 PROJECT LIFE CYCLE
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2024 2039
MONEY ALLOCATED TO PROJECTS
11 FREEING UP FUNDING
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2024 2039
FREEING UP FUNDING
MONEY ALLOCATED TO PROJECTS
12 COST ESCALATOR
• Construction costs can be volatile
• Recommend applying Engineering News-
R
ecord Construction Cost Index, Los Angeles
• Adjust amounts in forecast annually
13 FUNDING REQUESTS Funding requests before
Funding requests now
120.0
100.0
80.0 60.0
40.0 20.0
0.0 97.7
84.8 FY 2024 FY 2025
76.7 57.7
FY 2026 FY 2027 FY 2028
EXAMPLE
New park project is ready for construction
City Council will receive:
Estimated construction cost
based on detailed plans
Funds available Other planned projects
15 • No action required for tonight’s item
• New approach will increase opportunities for City Council to
prioritize projects
• Funding option and decision-makin g process will be more transparent
• Funding as project phases are completed
• More accurate cost estimates and timelines
• Frees up money for current / emerging needs
RECAP
16 ------~IJ'. JLJST,N -
TIME ~,
{city of
Carlsbad
May 7, 2024
Planning, Prioritizing and Funding
CAPITAL
PROJECTS
A New Approach to
17 {city of
Carlsbad