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Capital Improvement Program

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1. What is a Capital Improvements Program?

A Capital Improvements Program (CIP) is a five-year plan for the purchase, construction or replacement of the city's physical assets. City staff budgets the CIP for a five-year period but also identifies a number of projects that cannot be addressed due to funding limitations. These projects are shown in out-years, but no plans are in place to address them as projected revenues will not accommodate their construction within the specified time frame.

2. Why is it important to have a CIP?

With time, public facilities need major repair, replacement or expansion. Maintaining and upgrading a community's capital stock requires significant financial investment. This investment must be weighed against other community needs and analyzed in light of community goals.

The City of Southlake, like many cities, is under pressure to make efficient use of capital resources and must make difficult choices. There are more needs than can be satisfied at once, and the selection of one investment over another may shape the development of the City for years to come.

Capital improvements programming is a valuable tool to ensure that choices are made wisely. The City's development goals are implemented, in part, by the careful provision of capital facilities. The benefits of this systematic approach to planning capital projects include the following:

•Focuses attention on community goals, needs, and capabilities.
Through capital improvements programming, capital projects can be brought into line with the City's long-range plans by balancing identified needs with financial capacities. Considered individually, a new park, water system improvements, and street widening may be great ideas; however, each project may look quite different when, in the course of the Capital Improvements Program process, it is forced to compete directly with other projects for limited funds.
•Optimizes use of the taxpayer's dollar.
The Capital Improvements Program helps the City Council and City Manager make sound annual budget decisions. Careful planning of capital improvements helps prevent costly mistakes. In addition, capital planning allows the City to save money in several other ways. For example, investors in municipal bonds tend to look more favorably on communities that have a Capital Improvements Program; if bond financing is selected for a capital improvement project, the City may realize significant savings on interest.
•Guides future growth and development.
The location and capacity of capital improvements shape the growth and redevelopment of the City. City decision makers can use the Capital Improvements Program to develop well thought-out policies to guide future land use and economic development.
•Encourages efficient government.
Interdepartmental coordination of capital improvements programming can reduce scheduling conflicts and ensure that no single function receives more than its fair share of resources. In addition, the Capital Improvements Program can be used to promote innovative management techniques and improve governmental efficiency and effectiveness.
•Improves the basis for intergovernmental and regional cooperation.
Capital improvements programming offers public officials of all governmental units (City of Southlake, Tarrant and Denton Counties, and local school districts) an opportunity to plan the location, timing, and financing of improvements in the interest of the community as a whole.
•Maintains a sound and stable financial program.
Having to make large or frequent unplanned expenditures can endanger the financial well-being of the City. Sharp changes in the tax structure or bonded indebtedness may be avoided when construction projects are planned in advance and scheduled at intervals over a number of years. When there is ample time for planning, the most economical means of financing each project can be selected in advance. Furthermore, a Capital Improvements Program can help the City avoid commitments and debts that would prevent the initiation of other important projects at a later date.
•Enhances opportunities for participation in federal or state grant programs.
Preparing a CIP improves the City's chance of obtaining aid through federal and state programs that provide funds for planning, construction and financing of capital improvements. The CIP is considered a "public works shelf" that contains projects that can be started quickly by having construction or bid documents ready should any grants become available.

3. What is the relationship between the CIP and the Annual Budget?

The City's annual budget itemizes and appropriates the funds needed for all municipal purposes during the next fiscal year, and is comprised of two separate budgets - the Operating Budget and the Capital Projects Budget. The Operating Budget includes the day-to-day operational expenses of the City, such as salaries, supplies and expenses for programmatic activities.The first year of projects contained in the CIP becomes the basis for formulating the Capital Projects Budget.

4. What is the relationship between the CIP and the City's planning process?

Comprehensive plans are official public documents adopted by local governments as policy guides to making decisions about physical development of the community in the next 20 years. The City of Southlake's current comprehensive plan, the Southlake 2030 Plan, includes a number of citywide plans that prioritize the development of thoroughfares, sidewalks and trails, and parks.

The Park, Recreation and Open Space Master Plan, the Mobility and Master Thoroughfare Plan, and the Southlake Pathways Plan (Trail Master Plan) all provide implementation recommendations that link the future vision of the community to relatively short-term actions.

Recognizing the importance of the link between the Capital Improvements Plan and implementation of the master plan, all proposed projects are required to demonstrate linkage to one of the City's master plans. By using the Capital Improvements Program process to reinforce the desired master plan priorities, the City's physical future can be better shaped.

5. How is a CIP created?

The CIP Technical Committee, comprised of the Assistant City Managers and Department Directors, begins the process of evaluating the various CIP project requests in April of each year. The methodology involves a presentation of each project by a staff member of the requesting department, and the use of the CIP project evaluation form. Each CIP project request is scored.

Once scored, the project is ranked in the appropriate funding category (i.e. General Fund, Utility Fund, SPDC, Crime Control) based on the score received. The resulting ranked project list is then reviewed by the Technical Committee to ensure that there were no obvious flaws in the ranking system. The Technical Committee then reviews the dollar amount available in each fund and recommends the projects to be funded in the upcoming fiscal year and/or the other four out years.

Once the Technical Committee completes its review, the list is presented to the City Manager who then meets with the Technical Committee regarding needed changes or additions. The Technical Committee inputs any needed revisions and holds additional meetings with department heads to ensure the proposed plan is comprehensive.

Prior to the City Manager's submission of the Capital Budget, the Crime Control and Prevention District Board (CCPD) as well as the Southlake Parks Development Corporation (SPDC) and the Parks Board also meet to review and recommend their respective portions of the budget and five-year plan.

6. How is a CIP funded?

The City of Southlake uses both cash and proceeds from bond sales to fund CIP projects. Here is more information on bonds:

When the City sells bonds, purchasers are, in effect, lending the City money. The money is repaid, with interest, from taxes or fees over the years. The logic behind issuing bonds for capital projects is that the citizens who benefit from the capital improvements over a period of time should help the City pay for them. The City can issue bonds in these forms:

•Certificates of Obligation (C.O.) Bonds
Similar to general obligation bonds except the certificates require no voter approval. Combination tax and revenue certificates of obligation are issued for both governmental and business type activities. General obligation bonds, governmental revenue bonds and tax notes pledge the full faith and credit of the City. Combination tax and revenue certificates of obligation are payable from the net revenues of the water and sewer system and general debt service tax.
•General Obligation (G.O.) Bonds
Perhaps the most flexible of all capital funding sources, G.O. bonds can be used for the design or construction of any capital project. These bonds are financed through property taxes. In financing through this method, the taxing power of the City is pledged to pay interest and principal to retire the debt. Voter approval is required if the City wants to increase the taxes that it levies and the amount is included in the City’s state-imposed debt limits. To minimize the need for property tax increases, the City makes every effort to coordinate new bond issues with the retirement of previous bonds.
•Revenue Bonds
Revenue bonds are sold for projects that produce revenues, such as water and sewer system projects. Revenue bonds depend on user charges and other project-related income to cover their costs.