City of Montpelier, Vermont

- The Smallest Capital City in the United States -

Mayor John Hollar City Council: Tom Golonka Thierry Guerlain Andy Hooper Angela Timpone Anne Watson Alan Weiss

William Fraser, City Manager

MEMORANDUM To: From: Re: Date: Mayor Hollar & City Council Members William Fraser, City Manager Budget and Infrastructure September 7, 2012

The Mayor has asked for an early discussion consistent with the Councils goals of balancing and controlling the municipal budget and maintaining city infrastructure. For this discussion, we have focused on the general fund which is primarily supported by property taxes. This report is based on the following activities that staff has completed: Taken the existing overall municipal budget and projected initial costs for doing the same thing next year. Finance Director Sandra Gallups memo detailing this projection is included. Hired a consultant to complete a Capital Needs Assessment of city owned facilities in 2011. The CNA proposed a level of annual funding and work for each city building. That overall summary is included. Hired a consultant in 2012 to conduct a Road Surface Management System review of all city streets and develop a priority plan, with cost estimates, for improving and maintaining the streets over a ten year period. The proposed budget, priority ranking and overall street condition index is included. Developed a draft preliminary 10 year Capital Plan model which incorporates all recommended funding from the CNA and RSMS studies, estimates funding needs in other infrastructure categories, includes equipment funding, complies with the citys debt policy and attempts to moderate cost increases over time. Reviewed and updated the citys debt policy guidelines to assure that the preliminary plan complies. A copy of the guidelines and their related numbers is included.
39 Main Street, Montpelier, Vt 05602 www.montpelier-vt.org (802)-223-9519, Fax

(802)-223-9502, Telephone

Budget: The projection developed is consistent with the initial budget work done each year. The present budget is used as a point of reference with known cost and revenue changes calculated. Because are projecting numbers for a budget which does not start until next July 1st and runs through June 30th of 2014 nearly 22 months from now the more information we receive about costs the more accurate the projection becomes. Working from the base budget, we then factor in any changes such as new services, reduced services, additional revenue, new requirements, new requests, funding no longer needed. This helps shape the formal budget proposal which is made in early December which is reflects the recommendation for what is needed next year, not necessarily what we are doing this year although there certainly exists a definite link from one year to another. A key guiding factor in budget development is the policy guidance provided by the city council an acceptable tax rate or budget level, programs or funding that should be added or increased, programs or funding that could be decreased or eliminated. This guidance is then applied to the numbers and a recommended budget is produced. As you can see from the Finance Directors memo, the initial projection indicates that present budget expenses would grow by $380,000 or 3.4% - assuming that capital and equipment expenses, heating costs and operating supplies remained steady. We do not have any basis to project additional non-tax revenue at this point, therefore this projection assumes that all revenues remain even and that we will not utilize $74,500 in fund balance to offset the budget in FY14. The combination of increased expenditure projections and decreased fund balance revenue use indicate an initial need for $454,500 in property tax revenue which is 5.47 cents on the tax rate. With no other changes in cost/revenue projections or in budget decisions, any additional funding for infrastructure would need to be added to this amount. Before anyone gets overly concerned, I will note that while this is earlier than we usually do these projections, these numbers are consistent with prior years. Many years, in fact, have started with much higher projected increases. The budget challenge will be directly connected with the amount of funding we wish to add to address infrastructure and the upper limit of total funding we are willing to consider. Infrastructure: The citys infrastructure has been a longstanding concern. The Capital Needs Assessment for buildings and Road Surface Management System assessment for streets have helped define the extent of the need. Other needs have been projected based on prior capital plans. What is the need? The Buildings CNA report provides year by year maintenance and repair projects. Over the course of the next 10 years, these average $105,000 per year for city buildings and an additional $20,000 per year for cemetery and parks. Rather than build in wildly fluctuating costs, I have allotted this $125,000 per year each year.
(802)-223-9502, Telephone 39 Main Street, Montpelier, Vt 05602 www.montpelier-vt.org (802)-223-9519, Fax

The RSMS report, not surprisingly, outlines significantly larger costs. They recommend $172,000 to $185,000 per year in road maintenance and preventive care work. The funds are based on specific work on specific roads in specific years. For the budget purposes, I have included $185,000 per year for all ten years. More expensively, they detail $7,073,636 in road reconstruction work. The report lays this work out in priority sequence to be done in six consecutive years at a cost of about $1.18 to $1.19 M per year. Obviously this will not be affordable to simply pay for this from annual funding. We believe that most, if not all, of this work will have a 20 year expected life and therefore could be financed through bonds. I am preparing a draft detailed capital plan for illustration purposes. The Capital Projects committee should meet to review this information in detail and recommend an approach.

(802)-223-9502, Telephone

39 Main Street, Montpelier, Vt 05602 www.montpelier-vt.org

(802)-223-9519, Fax