Capital Improvement Program Amended 11 05 2012 · Einstein:Users:John:Desktop:policies:Capital...

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City of Saco, Maine

Capital Improvement Program June 2010, Amended November 5, 2012

The Capital Improvement Program replaces the Capital Improvement Program Policy adopted November 15, 1999

Einstein:Users:John:Desktop:policies:Capital Improvement Program Amended 11 05 2012.doc 3/19/2014

Table of Contents

Introduction......................................................................................................................................... 5 Background ......................................................................................................................................... 5 What is a Capital Improvement Project? .............................................................................................. 5 What Can Capital Improvement Funds Be Used For? .......................................................................... 6 Capital Facilities Needs Assessment .................................................................................................... 6 Existing Fiscal Conditions ................................................................................................................... 6 Infrastructure Maintenance GASB 34 – Modified Approach................................................................ 9 Capital Improvement Funding Mechanisms....................................................................................... 11 Capital Improvement Plan Process and Calendar ............................................................................... 12 Capital Facilities Standards and Guidelines ....................................................................................... 13 Capital Budget and Replacement Schedules....................................................................................... 14 Fixed Asset Worksheet ...................................................................................................................... 14 Overall Capital Improvements Standards and Guidelines................................................................... 16 Appendix I……………………………………………………………………………………………...22 Glossary…………………………………………………………………..…………………………….24


City of Saco, Maine Capital Improvement Program

Introduction

The Capital Improvement Program (CIP) provides a basis for prioritizing and implementing the short and long term plans for city acquisitions and projects. The CIP is intended to be a planning document for the departments and coordination and scheduling document for the entire city organization. It assists in coordinating the schedule of large expenditures over a period of years both for better fund management and for cash management purposes. The CIP serves as a link between the following plans and their implementation: the Comprehensive Plan, Combined Sewer Overflow Plan, Downtown Plan, Storm Water Management Plan, Beach Management Plan, Landfill Recreation and Reuse Plan. The CIP helps to reconcile the timing of projects with the availability of financial, manpower and equipment resources. The CIP also serves to enhance the city's credit ratings and helps reduce fluctuation in the tax rate and debt service requirement.

The Capital Improvement Program summarizes Saco, Maine’s “themes for action” and “strategies” as they relate to the needed infrastructure and community services. The CIP outlines a series of standards and guidelines for infrastructure investments, assesses current conditions and needs, and establishes priorities for the city to fiscally meet the infrastructure demands. Areas covered by the capital improvement element include: transportation; open space; parks, trails and recreation; wastewater; drainage; and police and fire protection. In order to support the themes for action and strategies, the city should maintain an up-to-date; five-year Capital Improvement Program. A five-year CIP is a needed planning tool to provide guidance and some predictability for future years’ budgeting. The CIP prioritizes each of the capital improvement projects based on the findings and recommendations in the CIP, and should be updated every three years to reflect completed projects and emerging needs.

Background The Charter for the City of Saco, Article VI. Financial Procedures Section 6.05 Capital Program requires the City Administrator to prepare and submit to the City Council a five-year Capital Improvement Program in March of each year. The Charter further provides that the Council will, after hearing, adopt a capital program on or before the first regular meeting in June. This policy furthers these charter requirements.

What is a Capital Improvement Project?

As used in the Capital Improvement Program, a capital improvement project or capital expenditure is a major, nonrecurring expenditure that has a useful life of 10 years or more and costs in excess of $10,000 that includes one or more of the following:

• Acquisition of land for a public purpose;


• Construction of a new facility (e.g. a public building, sewer lines, playfields etc.) or an addition to, or extension of, such a facility

• Purchase of major equipment or groups of major equipment (i.e. items with a cost – individually or in total – of $10,000 or more and, which have a useful life of 10 years or more)

• Any planning, feasibility, engineering, or design study related to an individual capital improvement project or to a program that is implemented through individual capital improvements.

• Prior year carryovers or designations of fund balance for prior year projects, which for one reason or another were not completed prior to the end of the fiscal year.

• A nonrecurring rehabilitation (i.e. something which is infrequent and would not be considered annual or other recurrent maintenance) or repairs of all or part of a building, its grounds, or a facility, or of equipment, provided that the cost is $10,000 or more and the improvement will have a useful life of 10 years or more; (otherwise the project would be considered to be a recurring expenditure)

What Can Capital Improvement Funds Be Used For?

Capital improvement funds are earmarked for such projects as road improvements, bridge repair or replacement, or new police vehicles. City capital improvement funds whether from city accumulated surpluses or bonds can also be used for the purchase of public open space, enhancement of park facilities, or other public amenities, such as City Hall.

Capital Facilities Needs Assessment Identified infrastructure needs and deficiencies are based on the recommendations of each city department head. Capital improvement concerns may be brought to the attention of the department with which the concerns are related by council members or the public. Generally, capital improvement requests are submitted to the City Administrator annually for review and recommendation during the budget process. At that time, the five-year CIP is reviewed and updated. Once all recommendations are received from each department, the City Administrator develops a recommended five-year CIP including revenues and projected appropriations for review by the City Council. The City Council approves capital expenditures annually based on the recommendations of the City Administrator and department heads. The requests are prioritized based on perceived need, budget availability, and related planning documents.

Existing Fiscal Conditions This section describes the fiscal implications of providing the public facilities and infrastructure required to meet the needs of both future and existing development. The City of Saco, Maine’s overall budget is divided into several categories of funds. Each fund is considered a separate accounting entity with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Generally, expenditures in all funds are expected to increase over the next five years due to inflation, expanding population and the operation of services and infrastructure necessary to serve that population. These increased expenditures are anticipated to be funded with non-property tax revenues such as intergovernmental revenues, charges for services, licenses and permits, general obligation bond


debt and other miscellaneous sources. Services and programs not funded in this manner would require an increase in property taxes or an allocation of increasing tax revenue. The financial condition of the city can be described as stable due to a growing population and tax base, which partially offsets increasing service and facility costs. The city currently has long-term debt of $23,214,912, which is the principal of outstanding general obligation bonds and capital lease obligations at June 30, 2009. According to state regulation, a municipality may bond up to 15% of its total valuation. Based on Saco’s valuation which is approximately $2.07 billion, the city could bond up to $310,549,050. Most current city debt obligations are funded with tax dollars. It appears the city should have no difficulty satisfying its debt obligations. The city currently earmarks most of its existing revenue sources for either operating costs and debt service, or capital expenses. Those revenues earmarked for capital expenses are generally those restricted to capital projects by legislative mandate, those of a nonrecurring nature such as grants or bond proceeds. The funds are grouped in the following manner: Governmental Funds Governmental funds are used to account for most governmental functions, and consist of the General Fund, Special Revenue Funds, and Capital Projects Funds. The general fund is the general operating fund of the city, and it accounts for all of the city’s financial resources except those accounted for in another fund. Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The city’s Special Revenue Funds include;

The Ambulance Fund, Economic Development Fund, Saco Housing Agency, Camp Ellis, Pepperell Park Cemetery, Jump Start Grant, Tree Growth, Front Street Park, Police Arrest Forfeiture Funds, Wellness Grant, Ruth Taylor Bequest, Planning Board Improvements, MEMA/FEMA Grants, Tri-community sewer camera, Parks and Recreation restricted donations, Conservation Committee-Saco Trails, Joe Riley Memorial Park, Community Policing Grant, Opportunity Center for Learning, Flood Mitigation Assistance Program, Saco Skate Park, All Hazard Plan, Section 404 Grant, OUI Emphasis Grant, Watershed Grant, Lucia Kimball Deering Trust, Recreation Impact Fees.

The city also creates Capital Projects Funds that are used to account for grants and other transfers in for special projects and include;

The Public Works Recycling Project, Sewer Improvements, Landfill SRF, Landfill Reimbursement, Landfill PRP, City Infrastructure, Saco Island Tax Incremental Financing (TIF) District, First Light TIF District, Police Station Building Improvements, Saco Plaza TIF District, Landfill DEP Reimbursement, Municipal Facilities, Greater Downtown Improvements, Transparent Audio TIF District, Amtrak Station Project and Route 1 Sewer Project.

Proprietary Funds Proprietary funds are used to account for certain services provided by the City of Saco, Maine that are funded primarily by fees for services. The proprietary funds consist of the Enterprise Funds and the Permanent Funds.


The Enterprise Funds are used to account for: (a) operations that are financed and operated in a manner similar to private business enterprises where the intent of the city is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or (b) where the governing body had decided that periodic termination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The city has one Enterprise Fund for its wastewater treatment facility. The Wastewater Treatment Facility Enterprise Funds accounts for the provision of basic utility service to Saco residents. The utility funds are financed and operated in a manner similar to a private business enterprise where operating and capital costs are financed or recovered primarily through user charges. The city reviews the fees being charged each year. With the city’s creation of the Combined Sewer Overflow (CSO) Master Plan and the establishment of impact fees for both this purpose and for sewer impact purposes, these funds are being accumulated to cover long-term growth and replacement in both these areas. A conservative sinking fund (reserve) has also been established in which minimal reserves are budgeted each year and carried forward cumulatively as designations of fund balance each year.

Permanent Funds are used to account for assets held by the city in a trustee capacity or as an agent for individuals, private organizations, other governments and/or other funds. The city’s only Permanent Fund is the Landfill superfund which was established to support the mediation efforts taking place at The Saco Municipal Landfill Superfund Site. The effort, which encompasses Landfill Area’s 1, 2 and 3 started in 1976, when an EPA investigation found that leachate from Landfill Area 1 was potentially impacting nearby surface and ground water. Since that time, the City of Saco has used the Landfill superfund to install environmental protection caps and passive gas venting systems, create wetlands to compensate for the wetlands impacted by the construction of the caps, and establish land use restrictions.

Infrastructure Maintenance GASB 34 – Modified Approach In accordance with Governmental Accounting Standards Board (GASB) Statement No. 34, the City is required to account for and report infrastructure capital assets. The city defines infrastructure as the basic physical assets including the street system; water purification and distribution system; sewer collection and treatment system; park and recreation lands and improvement system; storm water conveyance system; and buildings combined with site amenities such as parking and landscaped areas used by the City in the conduct of its business. Each major infrastructure system can be divided into subsystems. For example, the street system can be divided into concrete and asphalt pavements, concrete curbing, sidewalks, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land. Subsystem detail is not presented in the city’s basic financial statements; however, the city maintains detailed information on these subsystems. The city has elected to use the “Modified Approach” as defined by GASB Statement No. 34 for infrastructure reporting for its infrastructure assets. Under GASB Statement No. 34, eligible infrastructure capital assets are not required to be depreciated under the following requirements:

1- The city manages the eligible infrastructure capital assets using an asset management system with characteristics of (1) an up-to-date inventory; (2) perform condition assessments and summarize the results using a measurement scale; and (3) estimate annual amount to maintain and preserve at the established condition assessment level.

2- The city documents that the eligible infrastructure capital assets are being preserved approximately at or above the established and disclosed assessment level.


In 2000, the city commissioned a physical condition assessment of the streets, which was completed and dated February, 2001. These streets, primarily concrete, were defined as all physical features associated with the operation of motorized vehicles that exist within the limits of right of way. This condition assessment will be performed every three years. Each street was assigned a physical condition cased on 17 potential defects. A pavement condition index (PCI), a nationally recognized index, was assigned to each street and expressed in a continuous scale from 1 to 100, where 0 is assigned to the lease acceptable physical condition and 100 is assigned the physical characteristics of a new street. The following conditions were defined and associated to a rating within our asset management system: Condition Rating Asset Management System Rating Good 100-80 1 Fair 79-65 2 Poor 64-50 3 The city policy will be to achieve a minimum rating of 70 for all streets, which is a 2 rating, within our city established asset management system. This rating allows minor cracking and raveling of the pavement along with minor roughness that could be noticeable to drivers traveling at the posted speeds. As of June 30, 2001, the city’s street system was rated at a PCI index of 72 on the average with the detail condition as follows: Condition % of Streets Excellent to Good 35% Fair 26% Poor to Substandard 39% The City’s Public Works Department has been conducting condition assessments of each road in the fall of each year since 2001. Based on there research and an analysis of the data compiled over the last 8 years, the City has determined that a road needs to be overlaid, on average, every 12 years. The frequency and extent of the maintenance will depend on factors such as traffic volume, the amount of truck traffic, road base materials, and drainage conditions. Based on a 12 year maintenance schedule the Public Works has determined that the paving needs will be approximately 13,900 tons per year. Using asphalt prices from June 30, 2009 this would translate to a sustainable funding allocation of $861,800 pre year. In 2001, the City subcontracted with an independent engineering firm to inventory and perform a condition assessment on all other city infrastructure assets. These condition assessments were then reviewed and updated again in fiscal year 2004 and 2008 These other infrastructure assets, sewer pipe, catch basins and manholes, storm drainage, sidewalks, traffic lights and signage, were then combined with the streets on the city’s asset management system. Per the rating system noted above, each infrastructure asset was assigned a condition assessment based on a visual inspection conducted on each asset.


The city policy is to achieve a minimum rating of 2 for all other infrastructure assets, which is consistent with that for the streets. From June 30, 2001 through June 30, 2009, the City’s other infrastructure assets had established conditions assessments levels as follows:

As of June 30, 2009 a slightly larger percentage has fallen to poor to substandard even though a larger percentage are rated as excellent to good. Those segments that have fallen are mostly sidewalks and traffic signals. The City is continuously taking actions to arrest the deterioration of the other infrastructure assets through short-term maintenance activities. The City has over the last year:

• Eliminated 1 Combined Sewer Overflow Structure on Hobson Lane • Replace 700 feet of sewer on Beach Street • Finished replacing all street name signs in the City • Improved radius geometry on James & Beach and Main & Beach streets • Upgraded the traffic signals at Water Street for video actuation • Replaced brick east and west sidewalk on Main Street between Beach and Cutts • Replaced overhead utilities and installed new underground services and street lights on Main

Street near Joe Riley Park • Began construction of a new 5M control building at the Wastewater plant to replace a failed

building • Installed a $400,000 in erosion control measures on Surf Street to protect City infrastructure

from coastal erosion • Slip-lined 1,100 feet of failing storm drainage on Main Street on Factory Island • 750 feet of Sewer replacement along Franklin Street.

As of June 30, 2009, the City had approximately 351,523 feet of sewer pipe with a carrying amount of $14,918,272 and an estimated replacement cost of $32,080,875; 3,088 catch basins and manholes with a carrying amount of $2,308,565 and an estimated replacement cost of $6,450,689; 266,639 feet of storm drainage with a carrying amount of $17,839,300 and a replacement cost of $27,127,105; 711,650 square feet of sidewalks with a carrying amount of $1,630,130 and a replacement cost of $2,445,932; 148 traffic signals with a carrying amount of $795,155 and a replacement cost of $1,260,00; and 991 street signs with a carrying amount of $44,818 and a replacement cost of $69,370.

Capital Improvement Plan Process and Calendar The first step in the city review process calls for the department heads or the first line supervisors to review their plans for capital purchases and to prepare estimates for the cost involved. The review shall


include consideration of capital improvement needs expressed by the public and/or municipal officials. The estimates that are submitted to the City Administrator shall include:

1. A clear general summary of contents; 2. A list of all capital improvements which are proposed to be undertaken during the five fiscal

years next ensuing, with appropriate supporting information as to the need for such improvements;

3. Cost estimates, method of financing and recommended time schedules for each improvement; and

4. The plan shall describe if and to what extent each capital improvement will impact the City’s current and future operating budget. The focus is on reasonably quantifiable additional costs and savings (direct or indirect) or other service impacts that result from capital spending. If there are not or nominal impacts, this needs to be stated in the plan.

The next step involves a review by the City Administrator of all department requests to assess the projects, or proposed capital expenditure items both technically and financially. At this time the project should be tentatively scheduled for funding. The Administrator must then prepare a Capital Improvement Plan for presentation to the City Councilors. The Administrator may want to recommend financing options at this time also.

Next, the Councilors should hold a public hearing to obtain public input into their plan. Once the public input is obtained the Councilors should review the document and either sends it back for additional work by the Administrator and department heads or adopt it as presented. Once the Plan has been approved it will serve as a guide for future budgets.

Capital Facilities Standards and Guidelines In order to reasonably and responsibly identify and prioritize capital improvements, the city has established the following capital improvements fixed asset worksheet with corresponding standards and guidelines for its completion. This worksheet is taken from the city’s MUNIS financial software package and contains all the pertinent information to keep current the city’s capital improvement program. The standards and guidelines establish the policy for prioritizing capital improvement expenditures and outline a fiscally responsible plan for recovering the infrastructure costs associated with new development. They also establish priorities for using infrastructure capacity wisely and as an incentive for furthering community goals. The standards and guidelines are provided as basis for judging expenditures and implementing the Saco, Maine Comprehensive Plan. These standards include a ranking of each project by purpose and priority according to:

Purpose:

A. Required item - ordered by higher authority. B. Service Improvement Expenditure - to provide better service. C. Cost reduction Project - decrease operating cost. D. Expansion items - create facilities and operations expenses for new services. E. Strategic investment - acquisition or improvement of land. F. Social Benefits G. Investment - done as investment to get money back


Priority: 1. Urgent - project cannot be reasonably postponed 2. Necessary - project that should be carried out within a few years. 3. Desirable - project needed for a proper expansion of a department program 4. Deferrable - project that would be needed for ideal operation

Capital Budget and Replacement Schedules

1. Fire Department: a. Replace apparatus after 20 years of use b. Replace rescue after every 8 years of use;

2. Equipment replacement a. Small 6-wheel patrol truck after 7 - 10 years use, depending upon overall

condition and maintenance costs; b. Large 10 wheel trucks after 7 - 10 years use, depending upon overall condition

and maintenance costs; c. Heavy equipment loader, grader, excavator, etc., after 20 years use or when

maintenance costs get too extreme; d. Dump bodies and plows are to be replaced after 20 years of use; e. Pickups: to be replaced after 10 years of use; f. Ambulances are replaced after 12 years of use. i. Infrastructure: Preserve existing roads and sidewalks by continual

improvements to balance normal deterioration. j. Garage: continue to decrease energy requirements. More energies efficient

overhead doors, more insulation and better use of heating system. k. Piers, wharfs and floats to be replaced as needed.

3. Buildings: a. Decrease energy requirements of buildings, and b. Minimize functional and economic obsolesces of facilities

4. Parks: a. Tractors: to be replaced after 10 years b. Mowers: to be replaced after 10 years

5. New buildings 6. Evaluate financing capital projects, estimated costs in excess of $50,000 and give

consideration to life of asset, its cost and its uniqueness.

Sources of Revenue for Capital Improvements Specific revenue sources are described in the following sections Property Tax


Property Tax is levied upon the assessed value of real and personal property within the community and made up 65% of Saco’s total revenue during FY09. In order to ensure that property owners receive fair assessments, the State of Maine performs yearly tests based off of two minimum assessment standards which measure the performance of municipality’s assessments. These standards are the Assessment Level or Assessment ratio and the Assessment Equity. The assessment level is measured by how close a municipalities assessment values are to the current true market values. The State of Maine calls for the assessment level to be no lower than 70% and no higher than 110% of the fair market value. This means that for an assessed value of $100,000, the assessment should be no lower than $70,000 and no higher than $110,000. As of April 1, 2009, Saco has an assessment level of 99%. The Assessment Equity or full value quality rating measures the accuracy of assessments within a municipality. This means that two properties with the same value should be assessed the same. The State of Maine’s standard for assessment equity is a maximum variation of 20%. The lower the assessment equity, the fairer the assessment is. As of April 1, 2009, the City of Saco has assessment equity of 9. Fund Balance The Fund Balance is the difference between the City’s assets (what is has) and its liabilities (what is owed). In times when the revenue collected exceeds revenue estimates and municipal expenditures are below appropriations, the City could potentially designate a portion of this fund to capital expenditures. The Fund Balance can be broken down into Designated funds and Undesignated Funds. The City’s Designated Fund Balance (DFB) is the portion of the fund balance which represents the intended uses of the funds.

The City’s Undesignated Fund Balance (UDFB) are funds that are held in reserve to cover unexpected expenditure needs and emergencies, revenue shortfalls and seasonal cash flow variations. The City Council has determined that the UDFB should be 8.33% to 10% of the following year's City general fund budget as adopted by the City Council. Any surplus in the UDFB, that is anytime the fund exceeds the 10% maximum target, is made available for Council appropriation. When allocating these funds, the City Council shall give priority to:

A. Economic development projects, such as industrial park land acquisition, establishment of economic development loan fund programs or the development of infrastructure improvements associated with industrial park priorities.

B. Replacement of aging capital equipment that carries unusually high costs and has a utility life of 10 years or more.

C. Specifically targeted infrastructure projects

Capital Reserves Capital Reserves are the City’s way of saving for projects. A municipality may raise revenues and set them aside to finance capital needs. Capital Reserves can be either separate or part of the general fund and can be funded by the dedications of one-time revenues or by recurring revenues, such as property taxes or user fees. A capital reserve is often used to fund a portion of a project, while other methods fund the rest.

Dedicated Funding are funds allocated for specific programs or projects which are devoted at their source rather than through an allocation of funds from the general fund. These funds are set aside


for a specific use. The Economic Development fund which is used to build business parks is an example in Saco.

Undedicated Funding are funds allocated from unreserved sources. User Fees User fees are direct charges to people using public services. User fees support Saco’s proprietary Waste Water Treatment Plant Fund (also referred to as Enterprise Funds). On-going renewal and replacement activities are also generally funded with pay-as-you-go user revenues whenever possible. The City of Saco’s Waste Water Treatment Plant was supported by a sewer user fee rate of $3.60 per unit or 100 cubic feet. At the rate of $3.60 per unit, an annual average of 100 customers was $270.00 per year. The City decided to increase this fee for FY2011 by increasing the user fee rate from $3.60 to $4.05 per unit. At the rate of $4.05 per unit, an annual average of 100 customers will be $299.70 per year, an increase of 11%. Impact Fees Impact fees are charges to new developments by the city based on the need to either expand or construct local infrastructure or capital facilities either on or off-site to serve the new development. Impact fees paid by a new development do not necessarily have to be used to finance the specific infrastructure and facilities which would serve the new development. However, Impact fees must be spent on the same types of infrastructure and facilities for which the new development was charged. As a result, impact fees may provide either a direct or indirect benefit to the development paying the fee and may be helpful in financing general community infrastructure and facilities such as: Arterial roads, water and sewer mains or treatment plants, parks, public safety centers, municipal centers, etc. The City of Saco currently uses several impact fees descriptions can be found in the City Code. There is the Combined Sewer Overflow (CSO) impact fee which can be found in Chapter 176 Article XXI and the Subsurface Disposal Impact fee which can be found in Chapter 176 Article XXII. There is also the Recreational Facilities and Open Space Impact Fee which can be found in Article 16 Section 1602 of the zoning ordinance. Parks and Recreation have recently used two impact fees to help fund improvements to the Community Center. A Recreation Impact Fee for facilities which consisted of a $1,200 charge for a single family and a Recreation Impact fee for open Space which consisted of a $499.20 charge for a single family. These fees were used to generate $875,000 in revenue which was used to fund the improvements. The Waste Water treatment Plant uses the revenue it generates from impact fees to support its projects. Exactions Exactions, not to be confused with Impact fees are charges to developers seeking to develop new properties or are planning on large improvements to existing properties. The zoning ordinance requires that developers pay for all or a portion of the costs required to provide the community with services. These improvements are often located off-site. Exactions may require that developers build the supporting infrastructure to local standards and then dedicate it to the municipality or if there is an existing infrastructure in place, the municipality may require that the developer buy in to the existing infrastructure. Exactions may also come in the form of a land donation for parks, greenways or other public facilities. The City of Saco uses exactions in the creation of subdivisions to ensure that road infrastructure is built to city standards and then dedicated as a public way. This ensures that in the future the city will not be responsible for bringing a dilapidated road up to code. The City code allows the Planning Board to place exactions as part of site plan review and for subdivisions as well as allowing the City Council to places them as part of contract zoning.


Special Assessment Fees Special Assessment fees are charges to properties which receive a direct benefit from a specific infrastructure project located on-site or nearby. Examples of improvements for which Special Assessment fees are changed are street construction, sidewalks or curbs, roads, water collector lines and mains, sewer collector lines and mains, storm-water and erosion control facilities, beach replenishment, street lighting, community parks and recreation facilities. Unlike Impact Fees, the benefits to the property(s) are generally clear and the revenue generated from these fees are used to finance the project benefiting the property. Special Assessment Fees have been used in connection with the 1996 and 2008 Sewer line extensions along Route 1. Excise Tax Excise tax is another source of income for capital improvements. Excise tax is levied annually for the privilege of operating a motor vehicle or camper trailer on the public ways based on the age of the vehicle and the manufactured suggested retail price. Typically, this revenue is spent on local road maintenance, construction and repair but it can also be used as revenue towards the annual city budget. Intergovernmental Revenues Intergovernmental revenues are an important part of the city’s revenue sources and as of 2009 accounted for 29% of Saco’s total revenues. The revenue sources are made up of those amounts received from the federal and state government as well as from other local municipalities. The major categories include various grants, both federal and state, state municipal allocations for revenue sharing, aid to education and the property tax homestead exemption. Intergovernmental revenues have increased slightly in the last five years, growing from $10,591,461 in fiscal year 2004 to 15,235,297 in fiscal year 2009. The city has been very successful in obtaining grants to help supplement the budget for needed capital improvements or planning efforts. However, the State of Maine is experiencing a financially difficult time and has cut back on their municipal allocations in the last year and is proposing to continue to do so in the year to come. Grants Grants are gifts of money from Federal, State or local sources which can be used to help finance capital projects. Unlike bonds and debt, Grants do not need to be paid back. The City of Saco currently has various grants which help it fund its capital improvement projects. Examples of these are the Community Development Block Grants (CDBG), the Federal Emergency Management Administration (FEMA) and the Small Business Administration (SBA). A list of grants used by the City of Saco can be found in Appendix I of this document. Inter-local agreements Inter-Local agreements allow municipalities to cooperate with each other in jointly providing programs and services to their residents. (E.g. joint operation of recreation programs) By jointly funding and operating programs and services, Saco is able to combine resources with its neighbors and ensure its residents receive quality services. Saco has engaged in inter-local agreements with the City Biddeford and the Town of Old Orchard Beach to provide joint funding for harbor river patrols, training for employees, combined purchasing to take advantage of economics of scale, and combined negotiations of cable franchise agreement. Inter-local agreements are also in place for fire, police, and emergency management services. The Saco-Biddeford-Old Orchard Beach transit committee operates a public mass transit passenger bus services


within and between the municipalities. The city of Saco has contributed $64,000 on voluntary bases as of June 30, 2010. Public Private Partnerships Public Private Partnerships (P3’s) are contractual relationships between a municipality and a private sector entity to provide services or facilities to the general public. There is a wide range of P3’s varying from services being provided entirely by the public sector to services being provided entirely by the private sector with the municipality as the enabler or regulator. An example of a P3 is the traditional public contract in which the municipality pays a private entity to provide a serves for the community. Solid waste disposal is frequently done in this manner. Bond Funding The city has relied on bonds and other forms of borrowing to fund some of its infrastructure requirements. By borrowing, the city may spread the costs of an improvement over its useful life, which also ensures that those using the improvement share in its costs. The city may contract indebtedness by borrowing money or issuing the bonds of the municipality for any public purpose of the municipality, including but not limited to the following purposes: supplying water, gas, heating and cooling, and electricity; purchasing land; and purchasing, constructing, extending, and improving public streets, buildings, facilities, and equipment; and for the purpose of supplying a temporary deficiency in the revenue for defraying the current expenses of the municipality. Bonds require voter approval The following summarizes the types of bonds and financing tools the city has utilized in the past. General Obligation Bonds General Obligation (GO) Bonds or Full-Faith-and-Credit bonds are secured by the City's pledge to use legally available resources, including tax revenue, to repay bond holders. GO bonds typically have lower interest rates then other types of long term debt and tend to cost less to issue than other types of bonds. All general obligation bonds must obtain voter approval. Revenue Bonds The city has relied on user fees and other revenue supported bonds to provide infrastructure whenever pay-as-you-go revenues are not sufficient or appropriate and whenever user fees or dedicated revenue is available. Revenue bonds require voter approval. The City Council may issue revenue bonds for its wastewater treatment plant proprietary fund. Although there are specific limits imposed by statute, it is difficult to determine how much the city could bond for since various refunding and revenue funded bonds are not considered debt for the purpose of calculating debt limitation. However, the annual bond payments should not exceed 10% of the revenues generated by any fund and should not impact the services and annual costs of operation. Industrial Revenue Bonds Industrial revenue bonds (IRB) are bonds used by the City of Saco to help encourage the relocation and expansion of companies in the municipality. IRB’s allow private industrial firms to borrow at the same low rates as municipalities. The revenue is then used to build or buy a facility or equipment. With IRB’s the city issues the bond but is not making the loan. The investor buying the bond makes the loan and the company must find its own bond purchaser. Industrial Revenue Bonds do not require voter


approval. The City has used this method in the past, issuing an IRB in conjunction with the Sterling Rope project in 2001, although the company backed out of the venture. Tax Increment Debt Also known as economic development bonds are secured by the expected growth of the property tax base and resulting revenues in a tax increment district (TID) Tax increment debt is used to finance public infrastructure and facilities which support the private development or redevelopment in the TID this is also known as Tax Increment Financing (TIF). Non-property tax debt Non-property tax debt and non-local tax debt are secured by all legally available revenue except local property tax and locally levied taxes. This type of debt does not have to be approved by a voter referendum. Moral obligation debt Moral Obligation debt is secured by the moral but not a legal pledge of a government. The primary security is typically special revenue sources (e.g. rental payments) combined with the municipalities pledge that it will use other sources of revenue to pay the debt if the primary sources of revenue pledged are insufficient. Moral obligation debt does not require a voter referendum. Operational Leases When a municipality wishes to use property (e.g. equipment) and does not wish to purchases it, it may enter into an operational lease. In an operational lease, a municipality makes periodic lease payments for the use of property without taking ownership. A purchase option may be included in the contract which would allow the municipality to purchase the leased property. The City of Saco currently uses operational leases in conjunction with streetlights. The lights, which are owned by Central Maine Power (CMP), are leased by the city which pays a fee for their use. The leasing agreement with CMP allows the city to lease the light or the pole or may include both. The City owns 109 of the 1,610 lights. Capital Leases Capital Leases, like Operational Leases, are used when municipalities wish to use property without purchasing it. However a lease is only considered a Capital Lease if it meets one or more of the following:

• It transfers ownership of the leased property to the lessee

• Contains a bargain or nominal purchase option

• Its term equals 75% or more of the estimated economic life of the leased property

• The present values of the lease payment equals or exceeds 90% of the fair value of the property at the inception of the lease

Leases are not subject to voter approval even if the lease obligates the city to a multi-year obligation that is irrevocable by future City Council members. The city has used lease purchases as a means of acquiring needed equipment including solid waste and recycling bins, fire apparatus, and road equipment and vehicles, as well as for fleet replacement. Loans


Loans are another source of capital improvement dollars. Loans allow municipalities to borrow money and then pay it back with interest. There are state agencies that offer low or no interest loans to aid municipalities in funding capital projects. In most cases, these loans are not considered long-term debt, but rather behave similarly to capital leases, and require annual payments. The City currently uses Tax Anticipation Notes (TAN) as a source of short-term funding. TAN’s allow the city to borrow money against revenue that will be brought in from future tax collection. Saco has two tax collection dates; with each tax collection, the city takes in revenue. In instances when the City requires more funding, a TAN may be used to borrow money against the anticipated revenue from the upcoming tax collection. Pay-as-you-go Pay-as-you-go financing allows the city to use cash rather than some form of debt to fund all or a portion of its capital improvement projects. It is the policy of the City of Saco to Bond anything over $50,000; amounts under $50,000 are paid for using Pay-as-you-go financing. Tax Incremental Financing District (TIF) Tax Incremental Financing Districts are another method to fund capital improvement projects. In most cases, special districts are established to pay off a bond or credit enhancement agreement for a particular improvement project. The property taxes raised from within the designated district are not included with the general fund for budgetary purposes but are transferred into the separate TIF fund in order to provide funding for projects within the designated district. The city of Saco has several tax incremental financing districts which aid in financing capital projects. These are The Spring Hill TIF, First light TIF, Transparent Audio TIF, Saco Plaza TIF, Incon/Franklin Fuels TIF, Park North TIF, Industrial Park Road TIF Inter-fund Borrowing Inter-fund Borrowing is the movement of revenue from one fund into another. This generally takes place when a fund is nearing a zero cash balance but still has expenses to pay. Revenue is borrowed from another fund to meet short-term cash flow needs. Generally, inter-fund borrowing is tied to TIF’s, impact fees or lot sales. Transfers from other funds made up 1% of Saco’s total revenue during FY09. The City has used Inter-fund Borrowing to finance the Community Center, the Spring Hill Industrial Park, the Mill Brook Industrial Park, and the Transportation Center. In the case of the Spring Hill Industrial Park, revenue was borrowed from the general fund and moved to the development fund in order to construct the industrial park. The general fund was then paid back using the revenue generated from selling the lots. In the case of the Community Center, funds were borrowed from the general fund and paid back using recreation impact fees.

Fixed Asset Worksheet

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CITY OF SACO, MAINE

MUNIS

FIXED ASSET WORKSHEET

ASSET # (1) DESCRIPTION (13)

CLASS (2) FUND SOURCE (14)

SUB CL (3) ACQUIS METH (15) MAIN CONT INSURED

COMMODITY (4) VENDOR DESC CARRIER

DEPT (5) ACQUIS DATE TYPE INSURED VAL

LOC CODE (6) ACQUIS COST EXPIRE DATE EXPIRE DATE

LOC MEMO (7) ACRES ANNUAL COST POLICY COST

ROOM (8) QTY MEMO (17) MEMO

STORAGE LOC (9) UNIT PRICE

PURCH MEMO

STATUS (10)

CONDITION (11) SOY BOOK DEPRECIATE

CUSTODIAN (12) CURRENT BOOK DEPREC PRIN

CAPITALIZED EST SALVAGE FIRST YR/MO

TITLEHOLDER City of Saco, Maine REPL COST (18) EST LIFE (16)

TAG # LAST INVENT PERIODS TAKEN

SERIAL # IMPROVE MEMO ACCUM DEPREC

MANUFACTURER

MODEL RETIRE DATE

MODEL YEAR DISP CODE

LICENSE # SELL PRICE


Overall Capital Improvements Standards and Guidelines As referenced on worksheet: (1) = fixed asset number - system will automatically assign

(2) = Class Code - BI = Building and Improvements

IN = Infrastructure

ME = Machinery & Equipment

VH = Vehicles

(3) = Sub Class - CB = City Building

CI = City Improvements

(4) = Commodity Code - NONE (5) = Department Codes- 0001 = General Government - Legislative

0002 = General Government - City Administration

0003 = General Government - Finance

0004 = General Government - City Clerk

0005 = General Government - Assessor

0006 = General Government - Maintenance

0007 = General Government - Legal

0008 = General Government - Building Inspection

0009 = General Government - Planning/Economic Development

0020 = Public Safety - Police

0021 = Public Safety - Fire/Ambulance

0030 = Public Works - Administration/Maintenance

0031 = Public Works - Sewers/Drains

0041 = Health, Sanitation & Welfare - General Assistance

0051 = Culture & Recreation


4000 = Waste Water Treatment Plant

9090 = Technology

(6) = Location Codes- CH = City Hall

CTY = City Wide Assets

FD = Fire Department

INF = Infrastructure throughout city

PO = Police Department

PR = Parks & Recreation

PW = Public Works

TP = Treatment Plant

CO = Central Office

DW = District Wide

(7) = Location Memo - More explicit direction as to location - NOT REQUIRED

(8) = Room - room within the Location code where it is stored

(9) = Storage Location - Not Necessary as we have location Codes

(10) = Status Code - H= Hold, A= Active, R= Retired

(11) = Condition Code - FR= Fair Condition, GD= Good Condition, PR= Poor Condition,

SB= Substandard Condition

(12) = Custodian - Department Head where asset is located

(13) = Description of the asset

(14) = Funding Source - BUD = Budgeted

GF = Grant Funding

BP = Bond Proceeds


(15) = Acquisition Method- CS = Constructed New Asset

DO = Donated Asset

LS = Leased Asset

PR = Purchased Asset

(16) = Estimated Useful Life of the Asset

(17) = Purpose & Priority Codes-

Purpose- A= Required items - ordered by higher authority

B= Service improvement expenditures - to provide better service

C= Cost reduction projects - decrease operating cost

D= Expansion items - create facilities and operating expenses for new

services caused by growth

E= Strategic investment - acquisition of land for construction or

conservation

F= Social Benefit

G= Investment - done as investment to get back money

Priority- 1 = Urgent - Project which cannot be reasonably postponed

2 = Necessary - Project which should be carried out within a few years

3 = Desirable - Project needed for a proper expansion of a departmental program

4 = Deferrable - Project which would be needed for ideal operation but have not

yet been recommended for action

(18) = Replacement Cost - Cost

To replace asset at end of life


Appendix I Fire Department Grants 2003 $154,980 for airpoacks 2004 $87,210 for plymovent exhaust capture systems 2005 $20,063 for traffic preemption 2007 $46,648 for fire alarm for Central and new emergency generator 2008 $26,200 for power stretchers for the rescues

Homeland Security Grants $27,000 for portable radios $10,000 for hazmat air bottles $16,000 to upgrade airpacks with new technology $8,000 for fit testing equipment $1,500 for binoculars $4,800 for laptops

Coast Guard $103,000 LSO program for a boat State Forestry $4,700 for forestry equipment

Maine Municipal Association Grants 2003 $1,300 for One Mitsubishi training projector $1,100 for Six-sets of flotation jackets with strobe lights

$733 for four technical rescue harnesses 2005 $241 for Two 70 gallons spill containment platforms

$184 for four shock absorbing lanyards Planning Grants 2003 $800,000 EDA, to construct Mill Brook Business Park 2004 $500,000 MITF Main Street reconstruction and lighting 2005 $100,000 CDBG, elevator and access at Community Center (With Parks Dept.) $7,561 CLG Main Street trail 2006 $300,000 CDBG for Pleasant Temple Green street reconstruction (With PWD) $8,340 Historic survey 2007 $38,500 Preserve America, history exhibit at Station, schools, museum $8,700 CLG historic survey 2008 $10,000 Maine Humanities Council, same (for DLA) $475,000 Riverfront Bond, Riverwalk and Saco Island $8,000 CDBG Planning grant: Housing $7,000 CLG historic design manual for historic commission standards 2009 $499,800 CDBG, Country Village sewer


$52,000 Save America’s Treasures (W/Museum) Parks and Recreation Grants 1993 SBA grant for Trees (1994, 1995) 1997 Urban and Community Forestry Grant 1998 Maine Forest Service - Ice Storm reimbursement grant 2003 CDBG, Community Development Block Grant for the Elevator at the Franklin Street Community Center 2007 $10,000 Project Canopy 2010 $50,000 Cascade Falls Trail Grant

Waste Water Treatment Plant 2002 $450,000 STAG for Cutts ave separation project and the Storm King project.

Glossary Assessment Equity is a measurement of the accuracy of a municipality’s assessment. Meaning that when two properties of the same values are assessed, their assessments should be the same.i Assessment Level is the measurement of how close municipality’s assessment values are to the current true market valuesii Bond A written promise to repay debt on a specific date in the future, along with payment of a specified amount of interest at predetermined intervals while the debt is outstanding. Capital Improvement Program (CIP) A multiyear forecast of major capital building, infrastructure and equipment needs A CIP identifies not only future capital needs but also the capital appropriations or estimated spending required to address those needs, sources of capital financing and their impact on future operating budgets Capital Leases According to the Governmental Accounting Standards Board (GASB), a lease that meets at least one of the following:

• It transfers ownership of the leased property to the lessee

• Contains a bargain or nominal purchase option

• Its term equals 75% or more of the estimated economic life of the leased property

• The present values of the lease payment equals or exceeds 90% of the fair value of he property at the inception of the lease

Capital Projects Funds Fund’s used to account for grants and other transfers in for special projects and include. See Governmental Funds


Capital Reserves A city’s way of saving for projects by raising revenues and setting them aside to finance capital needs The Enterprise Fund Fund’s used to account for: (a) operations that are financed and operated in a manner similar to private business enterprises where the intent of the city is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or (b) where the governing body had decided that periodic termination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. See Proprietary Fund Dedicated Funding Funds allocated for specific programs or projects which are dedicated at their source rather then through an allocation of funds from the general fund. Designated Fund Balance is the portion of the fund balance which represents the intended uses of the fund balance. See Fund Balance Exactions Contributions of money or other property by a developer that a local government uses to provide infrastructure, amenities, or services to a development being built by the developer. Excise Tax An annual tax that must be paid prior to vehicle registration which his levied for the privilege of operating a motor vehicle or camper trailer on the public ways. The amount taxed is based off the age of the vehicle and the manufactured suggested retail price (MSRP)iii Fund An accounting entity with consists of cash or other assets, related liabilities, revenue, expenditures or expenses, and residual equities or fund balances Fund Balance The difference between a municipalities assets (what is has) and a municipalities liabilities (what is owed) Governmental Accounting Standards Board (GASB) The board that sets accounting and financial reporting standards for state and local governments. General Fund The general operating fund of the city, and it accounts for all of the city’s financial resources except those accounted for in another fund. See Governmental Funds General Obligation Bonds also known as Full-Faith-and-Credit bonds are bonds backed by the credit and taxing power of a municipality. See Bond Grants A gift of money from one government to another. Governmental Funds Used to account for most governmental functions, and consist of the General Fund, Special Revenue Funds, and Capital Projects Funds. See Fund Impact Fees charges to new developments by the city based on the need to either expand or construct local infrastructure or capital facilities either on or off-site to serve the new


development. Impact fees paid by a new development do not necessarily have to be used to finance the specific infrastructure and facilities which would serve the new development. Industrial Revenue Bonds Bond’s used by municipalities to help encourage the relocation and expansion of companies in their municipalities. See Bond Inter-fund Borrowing The movement of revenue from one fund into another Inter-governmental Revenues Funds received from the federal or state government as well as other local municipalities. Inter-local Agreements Cooperation between municipalities to provide services to their residents (e.g. joint operation of recreation programs) Moral obligation debt Debt secured by the moral but not legal pledge of a government. The primary security is typically special revenue sources (e.g. rental payments) combined with the municipalities pledge that it will use other sources of revenue to pay the debt if the primary sources if revenue pledged is insufficient Non-property tax debt Also known as non-local tax debt is debt secured by all legally available revenue except local property tax and locally levied taxes. This type of debt does not have to be approved by a voter referendum. Operational Leases When a municipality makes periodic payments for the use but not ownership of equipment. Pay-as-you-go Pay-as-you-go financing allows the city to use cash rather then some from of debt to fund all of a portion of its capital improvement projects. The Permanent Funds Fund’s used to account for assets held by the city in a trustee capacity or as an agent for individuals, private organizations, other governments and/or other funds. See Proprietary fund Public Private Partnerships (P3’s) A contractual agreement between a municipality and a private sector entity for providing services or facility to the general public. Proprietary Funds Fund’s used to account for certain services provided by the City that are funded primarily by fees for services. See Fund Revenue Bonds A bond secured by and repaid from specific and limited revenues. The pledged revenues are most often net revenue earnings from a self-supporting utility or enterprise. Other revenue bonds secured by and repaid from revenues are derived from special or limited taxes. See Bond. Special Assessment Fees Charges that are assessed on properties within a special benefit district formed to fund the construction of improvements that benefit the property in that district


Special Revenue Funds Fund’s used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. See Governmental Funds Tax Anticipation Notes Short-term debt obligations used by municipalities and back by the future revenue generated from tax collection. Tax Increment debt Also known as economic development bonds are secured by the expected growth of the property tax base and resulting revenues in a tax increment district (TID) Tax increment debt is used to finance public infrastructure and facilities which support the private development or redevelopment in the TID. See Special Obligation Bonds Tax Incremental Financing District (TIF) Special districts which are established to payoff a bond or credit enhancement agreement for a particular improvement project Undedicated Funding the portion of the fund balance which is available for appropriation. User Fees Direct charges to people using public services All definitions in accordance with Marlowe, Justin, William Rivenbark C., and John Vogt A. Capital Budgeting and Finance. 2nd ed. International City/County Manegement Association, 2004. Print. Where not otherwise specified.


i Sanborn, Dan. "Keeping Tax Values Current." Pepperrell Post Archives April, 2009: n. pag. Web. 8 Jun 2010. <http://www.sacomaine.org/news/pparchives/0904assessing_values.shtml ii Sanborn, Dan iii State of Maine. Excise Tax. , Web. 8 Jun 2010. <http://www.maine.gov/revenue/propertytax/sidebar/excisetax

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