EXECUTIVE SUMMARY AND ACTION PLAN by cus77764

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									              I. EXECUTIVE SUMMARY AND ACTION PLAN

        This report presents the results of Citygate Associates’ analysis of Salt Lake
City’s General Fund Capital Improvement Program (CIP). As defined by the City’s
Request for Proposals (RFP), the City Council wished to retain a consultant to examine
the deferred maintenance needs of City-owned facilities including streets, parks, and
public buildings. In addition, the objectives of the study included a variety of related
issues such as an assessment of the City’s current capital programming practices and
policies, a review of Salt Lake’s 1996 Inventory of Capital Needs report, and the
identification of CIP best practices.

       The organization of Citygate’s report, outlined below, generally follows the
sequence of scope objectives outlined in the City’s RFP. Citygate conducted the on-site
field work for this study between late October and mid-December, 1998.

       Members of the Salt Lake City Council were interviewed during the initial stage
of this project. Working closely with the Council’s staff, we then refined our
understanding of the project’s scope and emphasis.

A. ORGANIZATION OF THIS REPORT

        Citygate’s report on the Capital Improvement Program is organized in a total of
ten sections, as follows:

Section I    Executive Summary and Action Plan
Section II   Introduction to Study
Section III  Assessment of Inventory of Capital Needs
Section IV   Assessment of Capital Project Cost Estimation Process and
             Operational Cost Estimation Process
Section V    Capital Planning, Programming and Budgeting Process
Section VI   Deferred Maintenance and Maintenance Strategies
Section VII Analysis of CIP Funding Alternatives
Section VIII Assessment of Maintenance of Public Rights of Way
Section IX   Best Practices Survey
Appendix

      This Executive Summary presents a brief overview of our findings and
recommendations. It is suggested that this report be read in its entirety to obtain a
complete understanding of Citygate’s analysis.




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B. THE 1996 INVENTORY OF CAPITAL NEEDS

        Sensing that Salt Lake City was falling further behind in addressing the
infrastructure needs of the City, the Administration undertook a 1996 study to build a
twenty-year, comprehensive listing of its future Capital Improvement Needs. The
resulting report, issued in November 1996, included both the Enterprise Departments and
departments supported through the General Fund.

       The magnitude of the Citywide “Inventory of Needs” was significant. A total of
287 projects spread over twenty years amounted to $1.27 billion. The General Fund
portion alone amounted to $547.3 million for 154 projects. It would take $27.4 million
per year (in 1996 dollars) to fund the General Fund portion of this Inventory.

       In the 1996 report, the General Fund CIP Inventory was divided into four broad
groups, roughly parallel to the City Department structures:

                                                                  $ millions   % of Total
            a.    Street Rehabilitation/Capacity Additions          $ 367.2        68 %
            b.    Transportation Facilities, Signaling, Signage         22.5         4
            c.    Parks and Open Spaces                                 84.6       15
            d.    Buildings, New and Upgrades (Police, Fire)            73.0       13
                                                                    $ 547.3       100 %

         The first two years of implementation experience proved the difficulty of actually
fulfilling the expectations of the original 1996 Capital Needs review. The first two years
were valued among the largest, with General Fund Needs at $34.7 million in Fiscal 1997-
98, and $72.2 million in 1998-99. In these two initial years, only $17.7 million was
actually budgeted for General Fund CIP dollars. In all, $52.9 million was authorized, but
the bulk of that amount was from Federal and State funding and grant options, and
through portions of agreements with developers in the area. Only the $12.0 million for
the Ice Sheet at Steiner was funded through issuance of debt. Of the remainder, $25.7
million in proposed projects were dropped or indefinitely deferred, and a little over one-
fourth had to be delayed to future years as “deferred” projects.

                 CIP Project Disposition for Fiscal 1997-98 and 1998-99

                  Adopted for General Fund CIP Projects               $ 17,719,233
                  New Adopted Projects, not in Inventory                 2,030,045
                  State Funded (C Class) Street Projects                 5,275,000
                  Other Outside Funded Projects                         27,928,000
                           Authorized Projects – Sub-total            $ 52,952,278
                  Projects Dropped or Indefinitely Deferred           $ 25,700,000
                  Projects Delayed or Temporarily Deferred            $ 28,241,888




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       A portion of those projects deferred from prior years are now re-emerging in the
CIP budget applications being processed at the present time. Drawn from a combination
of sources, the initial pool of projects for Fiscal 1999-2000 is valued at $69.6 million.

Project Characteristics

        Within the Inventory of Needs there are a number of distinctive characteristics.
Among them are the distinction between what projects are for totally new or capacity-
expanding work, and what portion represents either rehabilitation or replacement of
existing facilities. For the 1996 Inventory of Needs, the split was 42 percent New or
Expand and 58 percent Rehab or Replace. The breakdown was as follows:

                      Characteristics of 1996 Inventory of Needs

                                                   Rehab/Replace       Build New/Expand
               Streets                             $ 258,865,000           $ 108,294,000
               Transportation/Traffic                 12,434,000              10,050,000
               Parks                                  20,140,000              64,530,000
               Public Buildings                       26,973,000              46,046,000
                                Sub-Totals         $ 318,412,000           $ 228,920,000
                                Total                                      $ 547,332,000

       Even as this report is being written, the staffs of the Departments involved in the
General Fund CIP are pulling together the necessary information to complete an Update
in time to include it with the study materials for the upcoming budget cycle. Citygate’s
consultants have worked closely with the CIP Technical Team as well as with the
Citizen’s CIP Board to gain assurance that the processes will yield a beneficial product.

        As Citygate Associates reviewed the 1996 Inventory of Capital Needs, we found
the report to be a useful tool in understanding the potential scope and cost of future
capital projects. At the same time, many other processes, systems, and practices should
be put into place so that the actual dollar value of the City’s deferred maintenance can be
rigorously and accurately determined. Our report recommendations, itemized below, are
designed to build upon the existing City CIP approach in order to both definitively
quantify the extent of the City’s deferred maintenance, and to improve the analysis and
selection of new CIP projects.

C. OVERVIEW OF RECOMMENDATIONS

        The highlights of Citygate Associates’ recommendations to enhance Salt Lake
City’s CIP processes and policies are presented below. Recommendations which
specifically affect discrete elements of the capital planning programming and budgeting
process, along with their corresponding anticipated benefits, follow:



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Capital Project Definition

Recommendations focus on:

             Establishing a standard definition for capital projects.

The implementation of this recommendation should:

             Promote consistency in distinguishing capital from operating expenditures.
             Establish criteria for including projects in the capital and operating
              budgets.

Capital Program

Recommendations focus on:

             Establishing a formal multi-year capital program.
             Defining the basic elements of the capital program.
             Identifying the benefits of a capital program.

The implementation of these recommendations should result in:

             Establishing a disciplined planning and programming process which links
              the 20 year needs list and the annual capital budget.
             Providing adequate time to refine project costs and examine financing
              options.
             Informing the public of the City’s commitment to meeting capital needs
              over a multi-year period.

Capital Policies

Recommendations focus on:

             Examining, updating and consolidating capital policies.
             Adopting capital policy statements.

The implementation of these recommendations should result in:

             Establishing guidelines for the development of the capital process.
             Setting parameters for identifying and prioritizing projects and financing
              options.
             Developing implementation strategies.

Capital Program and Budget Calendar



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Recommendation focuses on:

             Submitting the capital program to City Council no later than March 1.

The implementation of this recommendation should result in:

             Enabling the City Council to focus its attention on capital needs and a
              multi-year program to meet the needs.
             Providing City Council direction for preparation of the capital budget.

Condition Assessment

Recommendations focus on:

             Improving the collection, tracking, analysis and use of information on the
              condition of City facilities.
             Establishing a comprehensive condition assessment system.
             Identifying the extent and cost of deferred maintenance.
             Utilizing condition information to select and prioritize capital projects.

The implementation of these recommendations should result in:

             Providing accurate information to identify the extent of deferred
              maintenance.
             Establishing a baseline for determining capital needs.
             Assisting in setting project priorities.
             Selecting the most appropriate repair/replace strategy.

Project Request Information

Recommendations focus on:

             Improving the quality of project request information.
             Identifying the kinds of information to be provided.
             Integrating the information into the priority setting system.


The implementation of these recommendations should result in:

             Providing guidance to those preparing project requests and setting project
              priorities.
             Enhancing the accuracy and completeness of project information.
             Improving the evaluation of project requests.




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Priority Setting

Recommendations focus on:

             Redesigning the project evaluation and priority setting system to improve
              its objectivity and effectiveness.
             Identifying the elements of an effective priority rating system.
             Developing City Council priority setting guidelines.
             Simplifying the priority setting process.
             Establishing criteria to facilitate City Council evaluation of project
              requests.

The implementation of these recommendations should result in:

             Developing comprehensive priority setting criteria.
             Establishing City Council guidelines for preparing project requests.
             Enhancing the system for rating projects.
             Facilitating City Council evaluation of projects.

Financial Analysis and Forecasting

Recommendations focus on:

             Preparing multi-year revenue and expenditure forecasts.
             Analyzing financial data to determine the City’s capacity to finance capital
              projects.
             Establishing fiscal parameters to guide the capital process.

The implementation of these recommendations should result in:

             Focusing attention on the long term implications of capital decisions.
             Facilitating the preparation of various economic and policy scenarios.
             Identifying future financial condition.
             Selecting the most appropriate financing alternative.


Operating Impact of Capital Projects

Recommendations focus on:

             Developing and implementing procedures to calculate the operating
              impact of capital projects.
             Identifying the elements of a sound system for determining operating
              impact.
             Verifying the accuracy and completeness of the operating impact data.


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The implementation of these recommendations should result in:

             Improving the evaluation and prioritization of capital projects.
             Identifying future demands for operating programs or service delivery
              expansion resulting from capital projects.
             Providing a framework for evaluating alternatives other than capital
              projects for meeting needs.
             Identifying full life cycle project costs.

Citizen Involvement

Recommendations focus on:

             Strengthening and expanding the role of the Capital Improvement Citizen
              Board.
             Enhancing citizen involvement in the capital planning process.
             Eliminating constraints on the Citizen Board.
             Identifying and implementing methods to increase citizen awareness of
              capital needs and to obtain citizen input.

The implementation of these recommendations should result in:

             Enhancing the role of the Citizen Board.
             Improving the level of citizen input into the capital process.
             Developing a comprehensive citizen information program.

Debt Management Plan

Recommendations focus on:

             Developing a comprehensive debt management plan.
             Identifying the components of the plan.
             Creating a road map for the promulgation of debt policies.

The implementation of these recommendations should result in:

             Facilitating the preparation of a debt management plan.
             Demonstrating a commitment to sound debt financing.
             Establishing debt policies to guide the capital process.

Capital Financing

Recommendations focus on:



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             Developing a capital financing plan and strategy.
             Setting capital financing objectives.
             Preparing a handbook on capital financing sources.
             Establishing criteria for evaluating capital financing options.
             Identifying the elements of a capital financing strategy.
             Reexamining the City’s focus on pay-as-you-go financing.

The implementation of these recommendations should result in:

             Setting capital financing objectives.
             Implementing a capital financing plan and strategy.
             Preparing a comprehensive capital financing sourcebook.
             Aiding City Council review and selection of capital financing options.
             Identifying new potential sources of capital financing.

Deferred Maintenance

Recommendations focus on:

             Defining deferred maintenance.
             Measuring the extent of deferred maintenance and unfunded costs.
             Identifying repair/replace strategies.
             Preparing a plan for stabilizing and eliminating deferred maintenance.

The implementation of these recommendations should result in:

             Improving the quality of information on the size and costs of deferred
              maintenance.
             Ensuring that the full range of maintenance options are considered.
             Optimizing the use of scarce resources for the preservation of existing
              capital assets.
             Building public support for financing the stabilization and elimination of
              deferred maintenance.

Project Monitoring

Recommendations are focused on:

             Implementing a comprehensive project monitoring system.
             Establishing monitoring guidelines.
             Utilizing monitoring techniques to control and enhance reporting.

The implementation of these recommendations should result in:

             Improving project monitoring.


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             Increasing accountability.
             Reducing project costs.

Inventory of Capital Improvement Needs

Recommendations are focused on:

             Continuing the periodic development of a twenty-year forecast of Capital
              Needs.
             Setting the length of time in number of years between plan updates.
             Establishing the use of consistent reference numbers for the Inventory.
             Defining the kinds of information that are relevant to a twenty-year list.

The implementation of these recommendations should result in:

             Establishing a disciplined planning process that provides a 20-year
              reference for current budgeting decisions.
             Simplifying the process of assembling an adequate Inventory of Needs.
             Providing the base of information as to the City’s commitment to meeting
              capital needs over a multi-year period.
             Fostering a greater appreciation for the extent of long-term infrastructure
              needs.

Long-Range Program and Project Evaluation

       Recommendations are focused on:

             Establishing decision-assisting tools for setting priorities, schedules and
              funding choices for the projects within the twenty-year forecast.
             Clarifying the effects of delay or deferment of proposed capital
              improvements through the use of inflation factors.
             Recognizing the differences between a listing of true “Needs” and the
              establishment of a “Wish List.”

The implementation of these recommendations should result in:

             Establishing a reference list that more adequately reflects the City’s ability
              and commitment to implementation.
             Simplifying the process of evaluating and prioritizing a credible Inventory
              of Needs.

D. ACTION PLAN

       A listing of our recommendations and a blueprint for their implementation are
presented in the following Action Plan. This Plan contains:


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             the priority of each recommendation;
             the suggested implementation time frame;
             the anticipated benefits of each recommendation; and
             the responsible organization.

        The legend at the bottom of each page of the Action Plan defines the level of each
priority indicated by the letters “A” through “D”. It is important to note that priorities
have been established independent of the suggested time-frame. For example, a
recommendation may have the highest priority (indicated by the letter “A”) but may
require an estimated six months to implement. Conversely, a recommendation with the
letter “C” priority, which indicates that the recommendation is not critical but will
improve operations, may have a two month time-frame, since the estimated
implementation effort would not require an extended period of time. Time-frames are
intended to provide a range of duration, and various recommendations can be worked on
concurrently. Also, in some instances discrete elements of a single recommendation may
be completed at different times.

        It is also important to note that an “A” priority, which indicates that the
recommendation is deemed “mandatory or critical,” should not be interpreted to mean
that the recommendation is “mandated” by a statute or regulation--it is simply an “urgent”
recommendation of the highest priority.

        The time-frames indicated in the Action Plan do not necessarily define the
anticipated completion dates for the implementation of each recommendation. The
response from Administration may indicate how much implementation progress can be
made within the indicated time-frames. We recommend that the Council be provided
with regular progress reports regarding implementation status of recommendations listed
in the following Action Plan.

        Recommendations in the following Action Plan are numbered to correspond to the
report section in which they appear.




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