Workshop Item Alison Bong, Deputy Finance Director
Title
Title
2023 Facilities Fund Budget and Capital Improvement Plan
end
Background
In 2019, as part of the city’s efforts to stabilize its general levy and provide a mechanism for ensuring long-term funding of facilities improvements, the city council authorized the creation of an internal service fund to account for facilities management. Internal service funds are used to account for the financing of goods and services provided by one department or activity to other departments or activities of the government on a cost reimbursement basis. To fund facilities, charges are assessed to each department based on the square footage used by each operation.
The facilities managed under this fund include city hall and attached garages, public works (PW) and the PW cold storage facility, the police training facility, Mary Ann Young Center, and old fire station #5.
As the city facilities have been evaluated, a history of deferred maintenance has been identified. The facilities team is working towards remedying the impacts of deferred maintenance and performing regular preventative maintenance, but is struggling with insufficient staffing, inflationary costs, and a departmental chargeback system that has not yet caught up to the increased needs of the facilities program.
The facilities fund has received several transfers from the General Fund since 2019 to provide the fund with working capital. The startup transfer in 2019 was $250,000, $75,000 was transferred in 2021 for an LED light project, and $1 million was authorized to be transferred in 2022. The long-term goal is to have facilities be sustained through departmental charges; however, rightsizing the fees is a work in progress. Once chargeback fees are stabilized and the fund becomes self-sustaining, a fund balance to pay for emergency or unforeseen repairs should be maintained with the ideal target fund balance around $400,000.
Revenue
The primary funding source for the internal service fund comes from charges assessed to each of the departments in the city’s general and utilities funds. The charges are split between two different categories: maintenance and replacement. The maintenance chargeback is intended to be used for operational expenses and any repairs to the facilities maintained in this fund, while the replacement charge assists in funding capital replacement items.
The proposed budget includes a 25% increase to department charges, increasing the fund’s revenues by $264,520. The total revenue change from the 2022 budget is $263,020. The 2023 department charges are approximately $18,000 short of funding the 2023 operating costs meaning that the remaining $18,000 of operating expenditures as well as all capital expenditures are being paid for through the facilities fund balance.
Operating Expenditures
The facilities fund accounts for operational costs for facility staff wages and benefits, facility utilities, and contracted services related to facility maintenance.
The proposed expenditure budget includes an increase of $389,590 (40.9%) in operating costs. Of the total increase:
• Personal services are increasing $126,390 and includes the addition of a Facilities Maintenance Coordinator position as well as a 3% cost of living adjustment to staff wages and a $50/month increase to the cafeteria benefits
• Supplies are increasing $15,000 to accommodate inflationary costs related to replacement of aging office equipment and carpet
• Contractual services are increasing $248,200 with $115,000 related to utility cost increases and the remainder is to adjust the building maintenance budget closer to actual
2023-2027 Capital Improvement Plan
The initial 2023 capital requests from facilities were $751,688. As the health of the facilities fund was evaluated staff determined that the fund could not support those requests. The adjusted 2023 requests are $435,660. One hundred percent of the capital expenditures for 2023 will be funded through fund balance reserves of the Facilities Fund.
The 2023-2027 five-year plan includes $1.2 million in capital improvements, with an additional $201,000 beyond 2027.
Capital Improvement Plan Summary:
|
|
2023 |
2024 |
2025 |
2026 |
2027 |
Beyond |
Total |
|
Equipment |
$85,500 |
- |
- |
- |
- |
- |
$85,500 |
|
Improvements |
$350,160 |
$473,375 |
$171,865 |
$105,776 |
$41,200 |
$200,960 |
$1,343,336 |
|
Total |
$435,660 |
$473,375 |
$171,865 |
$105,776 |
$41,200 |
$200,960 |
$1,428,836 |
Five-Year Outlook
Staff continues work in identifying the facilities fund’s scope. A policy to establish the ideal scope of the fund will be worked on in 2023. Additionally, while a five-year capital plan was created for 2023-2027, capital needs are still evolving as city facilities are evaluated.
The facilities fund will need to further increase the department charges in the next five years to preserve and improve city facilities as well as maintain a healthy fund balance. The fund balance is projected to be around $460,000 at the end of 2023 which aligns with the ideal fund balance of $400,000.
Staff Recommendation
Staff is requesting council’s review and input on the 2023 facilities budget and 2023-2027 capital improvement plan.
Attachment List
2023 Proposed Facilities Fund Budget
2023-2027 Facilities Capital Improvement Plan
Presentation - 2023 Facilities Budget & CIP