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2004-25697 Reso RESOLUTION NO. 2004-25697 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ESTABLISHING A CAPITAL RENEWAL AND REPLACEMENT FUND TO PROVIDE A DEDICATED SOURCE OF FUNDING FOR CITY CAPITAL RENEWAL AND REPLACEMENT PROJECTS THAT EXTEND THE USEFUL LIFE OF GENERAL FUND ASSETS; ESTABLISHING A PROCEDURE FOR ANNUAL APPROPRIATION OF FUNDS; ESTABLISHING A PROCEDURE FOR THEIR USE; AND ADOPTING THE FISCAL YEAR (FY) 2004/05 BUDGET FOR THE FUND, IN THE AMOUNT OF $1,347,070. WHEREAS, the City has a significant infrastructure investment that includes 322 buildings, structures and facilities; 472 acres of recreational open space; over 25 miles of inland canals, oceanfront beaches, City-owned seawalls; and 140 miles of paved streets; with associated swales landscaped medians, street and landscape lights, and curbs and gutters; and WHEREAS, despite $27.4 million budgeted in the Fiscal Year (FY) 2004/05 General Fund Operating Budget for general ongoing maintenance, as well as $4.25 million in potential funding from the proposed Miami-Dade County General Obligation Bond issue for Old City Hall; the Sixth Street Community Center; Flagler Monument; and Scott Rakow Youth Center improvements (carpets, ADA, pressure cleaning, ceiling tile, electrical, Ale), there remains $1,816,000 in immediate renewal and replacement needs without funding; and WHEREAS, the City is procuring a consultant to develop a proactive schedule of renewal and replacement needs for the City's existing infrastructure that will require additional funding in future years; and WHEREAS, as a result of the City's ongoing $400 million Capital Improvement Program, there will be a significant additional increase in renewal and replacement needs; and WHEREAS, annual capital renewal and replacement needs compete for General Fund resources with other needs, such as public safety, with the result that capital renewal and replacement needs may be deferred; and WHEREAS, bond rating agencies, (Fitch, Moody's, and Standard & Poor's) view renewal and replacement policies as a significant criteria in assessing a government's credit worthiness; and WHEREAS, the Mayor and City Commission recognize the need to establish a dedicated source of funding to ensure annual renewal and replacement of the City's General Fund capital assets on an ongoing basis; and WHEREAS, on September 9 2004, the Mayor and City Commission tentatively adopted the proposed millage rate of 7.425 mills, which included 0.126 mills dedicated for capital renewal and replacement. NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, as follows: 1. A permanent Capital Renewal and Replacement Fund is hereby established to be used for capital projects that extend the useful life of the City's General Fund assets. 2. The Capital Renewal and Replacement Fund shall be funded annually, commencing in Fiscal Year 2004/05, through a transfer from the General Fund. 3. The initial annual transfer from the General Fund to the Capital Renewal and Replacement Fund, for Fiscal Year 2004/05, shall be the amount of $1 ,347,070. 4. In subsequent fiscal years, the Fund will be increased by, at a minimum, the amount which would represent the value of the debt service millage reduction resulting from growth in the assessment value of the tax base. It is expected that this increase should not result in a total combined millage rate greater than in the preceding fiscal year. 5. Appropriation of project specific expenditures from the Capital Renewal and Replacement Fund shall be included in the City Manager's annual proposed budget, and shall be adopted by the Mayor and City Commission annually during the City's second public hearing on the budget. 6. Interest earnings that accrue in the Capital Renewal and Replacement Fund shall be included in the appropriation for the Fund in the following fiscal year. 7. Changes among project specific appropriations may be authorized by the City Manager to the extent that no new projects be added and the total annual allocation is not exceeded. 8. Changes to project specific appropriations may be authorized by the City Manager to the extent needed to replace $4.25 million in potential funding from the proposed Miami-Dade County General Obligation Bond issue for Old City Hall; Sixth Street Community Center; Flagler Monument; and Scott Rakow Youth Center improvements. 9. During a fiscal year, changes to the total allocation and changes to the list of projects to be funded from the Capital Renewal and Replacement Fund shall require prior approval and authorization by a majority of the City Commission. Excess project specific appropriations not required will be available for re- appropriation the following year. 10. Project specific appropriations that are not expended in a given fiscal year shall remain in the Capital Renewal and Replacement Fund for the life of the project. 11. The City of Miami Beach hereby adopts the FY 2004/05 Capital Renewal and Replacement Fund Budget, in the amount of $1,347,070, as provided in Attachment A. PASSED AND ADOPTED THIS 28th DAY OF Se te :t!b~ r M~ CITY CLERK APPROVED AS TO FORM & LANGUAGE & FOR EXECUTION At! ~ 0; ~ '-:::.::-r City Attom~ Date ATTACHMENT A Re lace Floors at Fire Stations 1 and 3 Reserves TOTAL CITY OF MIAMI BEACH COMMISSION ITEM SUMMARY m Condensed Title: Resolution establishing a Capital Renewal And Replacement Fund to provide a dedicated source of funding for capital renewal and replacement projects that extend the useful life of General Fund assets; establishing a procedure for annual appropriation of funds; establishing a procedure for their use; and adopting the Fiscal Year (FY) 2004/05 budget for the Fund, in the amount of $1,347,070. Issue: Shall the Mayor and City Commission adopt the attached resolution which establishes a dedicated source of funding, budget and a procedure for the use of a Capital Renewal And Replacement Fund? Item Summary/Recommendation: Adopt the Resolution. Advisory Board Recommendation: I Financial Information: Amount to be expended: Source of Ambunt Account Approved Funds: 1 liJpI $1 ,347,070 General Fund millage 0.126 2 3 4 Total Si n-Offs: Department Director AGENDA ITEM .]1 C DATE q-d.Z-tJ'{ CITY OF MIAMI BEACH CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139 hltp:\\cLmiami-beach. fl. us COMMISSION MEMORANDUM TO: Mayor David Dermer and Members of the City Commission DATE: September 28, 2004 FROM: Jorge M. GOnZaleZ~7AIt . City Manager SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ESTABLISHING A CAPITAL RENEWAL AND REPLACEMENT FUND TO PROVIDE A DEDICATED SOURCE OF FUNDING FOR CITY CAPITAL RENEWAL AND REPLACEMENT PROJECTS THAT EXTEND THE USEFUL LIFE OF GENERAL FUND ASSETS; ESTABLISHING A PROCEDURE FOR ANNUAL APPROPRIATION OF FUNDS; ESTABLISHING A PROCEDURE FOR THEIR USE; AND ADOPTING THE FISCAL YEAR (FY) 2004/05 BUDGET FOR THE FUND, IN THE AMOUNT OF $1,347,070. ADMINISTRATION RECOMMENDATION Adopt the Resolution. ANALYSIS The City has and continues to make significant investment in the routine maintenance of its assets and has earmarked approximately $27.4 million in FY 2004/05 for this effort. However, this funding typically does not provide for major capital renewals and replacements. Capital renewal and replacement projects are therefore often deferred beyond the useful life of the capital component requiring replacement or renewal in some cases until the point where bond financing is required for major improvements~ On September 9, 2004, the Mayor and City Commission tentatively adopted the proposed millage rate of 7.425 mills and the tentative budget for the General Fund in the amount of $168,169,878. The General Fund millage of 7.425 mills includes 0.126 mills ($1 ,347,070) dedicated for capital renewal and replacement. The Administration is proposing the following restrictions and guidelines to ensure the funds are appropriated exclusively for capital renewal and replacement to supplement existing General Fund maintenance expenditures: · Establishment of a permanent Capital Renewal and Replacement Fund to be used for capital projects that extend the useful life of the City's General Fund assets. The Capital Renewal and Replacement Fund shall be funded annually, commencing in Fiscal Year 2004/05, through a transfer from the General Fund. The initial transfer, for Fiscal Year 2004105, from the General Fund to the Capital Renewal and Replacement Fund shall be the amount of $1,347,070. · In subsequent years, the Fund will be increased by, at a minimum, the amount which would represent the value of the debt seNice millage reduction resulting from growth in the assessment value of the tax base. It is expected that this increase should not result in a total combined millage rate greater than in the preceding fiscal year. · Appropriation of project specific expenditures from the Capital Renewal and Replacement Fund shall be included in the City Manager's annual proposed budget, to be approved by the Mayor and City Commission annually during the City's second public hearing on the budget. · Interest earnings that accrue in the Capital Renewal and Replacement Fund shall be included in the appropriation for the Fund in the following fiscal year. · Changes among project specific appropriations may be authorized by the City Manager to the extent that no new projects be added and the total annual allocation is not exceeded. · Changes to project specific appropriations may be authorized by the City Manager to the extent needed to replace $4.25 million in potential funding from the proposed Miami-Dade County General Obligation Bond issue for Old City Hall; Sixth Street Community Center; Flagler Monument; and Scott Rakow Youth Center improvements. · During a fiscal year, changes to the total allocation and changes to the list of projects to be funded from the Capital Renewal a nd Replacement Fund shall require prior approval and authorization by a majority of the City Commission. Excess project specific appropriations not required will be available for re- appropriation the following year. · Project specific appropriations that are not expended in a given fiscal year shall remain in the Capital Renewal and Replacement Fund for the life of the project. BACKGROUND Miami Beach has continued to expand its facilities and infrastructure in response to the desire of so many who wish to live, work, and play in our vibrant, tropical, and historic community. The City currently maintains a vast number and variety of buildings, structures and facilities, hundreds of acres of recreational and open space, and hundreds of miles of streets, sidewalks and alleys. However, existing funding levels do not provide for major capital renewal and replacement projects and these projects often are deferred many years beyond their useful life. Further, as a result of the current $400 million capital improvement program, there will be a significant increase in additional maintenance needs. Over the next couple of years, we will be bringing on line approximately 15 additional miles of sidewalks and 22 miles of curbing; 1,924 additional streetlights and 1,043 additional up- lights (a 30% increase combined); new parks still to be designed (Flamingo, South Pointe, Collins, Altos Del Mar, the Garden Center, Fairway, Muss and Washington parks) - all of which will be competing with general fund seNices as well as with rising costs due to such factors as union contracts, personnel costs and the cost for contractual seNices. To ensure that these projects are funded and addressed when needed, it is essential to establish a separate capital renewal and replacement fund with a dedicated source of funding. The FY 2004/05 proposed budget recommends the establishment ofthis reserve with first year funding in the amount of $1.347 million to be used exclusively to provide for renewal and replacement of capital items related to our general fund facilities and infrastructure over and above the $27.4 million for maintenance already included in the City's Proposed FY 2004/05 Budget. The intent of the fund would be to supplement the existing maintenance funding to address major capital renewal and replacement needs for general fund departments. The proposed funding of this restricted account shall be accomplished by adding the amount of the FY 2004/05 Debt Service Millage reduction (0.874 - 0.748 = 0.126 mills) to the FY 2004/05 General Operating Millage (7.299 + 0.126 = 7.425). Therefore, the overall City millage will not increase but will remain at 8.173 as it was in FY 2003/04. City property owners will pay the same total tax millage for FY2004/05 as they did in FY 2003/04. .. Dedicated Millage For Capital Renewal and Replacement" Tax Levy FY 2003/04 FY 2004/05 Inc/(Dec) General Operating 7.299 7.425 0.126 Debt Service 0.874 0.748 (0.126) TOTAL 8.173 8.173 (0.000) As assessed values in the City continue to rise over the upcoming years, the cost of debt service on outstanding general obligation bonds will be spread over a larger value resulting in a decrease in debt service millage each year. If the City were to continue this process, thereby, adding the decrease in debt service millage each year to the general operating millage until the amount of the millage associated with maintenance reached 0.5 mills, it would generate (based on today's value of a mill) approximately $6.75 million for additional infrastructure maintenance each year. Once this level is reached, the total millage will continue to decrease providing room for future GO bond issuances should the Commission and the community wish to pursue future issues. The millage usage would be reviewed and approved each year by the City Commission as part of the budget process. JMG