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Capital Improvement Program – Summary A capital improvement program (CIP) is a blueprint for planning a community’s capital expenditures. A CIP is typically a multi-year plan identifying capital projects and equipment to be funded during the planning period. A CIP is composed of two parts, a capital program and a capital budget. The capital program is a plan for capital expenditures that extends out past the capital budget. The capital budget is the upcoming year’s spending plan for capital items. Capital items are tangible assets or projects that cost at least $25,000 and have a useful life of at least five years. Typical examples of capital items would be a new fire truck, roof replacement, water and sewer infrastructure, and DPW equipment. Developing a CIP that will ensure sound financial and capital planning requires effective leadership and the involvement and cooperation of all municipal departments. A properly developed CIP will help the City in many ways such as enhancing a community’s credit rating, stabilizing debt service payments, and identifying the most economical means of financing capital projects. It will also help increase opportunities to obtain federal and state aid and help avoid duplication by overlapping governmental units. The City has several ways to finance its CIP, including state and federal grants, appropriations from the City’s CIP account, capital leases, and long-term borrowing to name a few. Depending on the cost and the useful life, the Finance Director will make recommendations to the Mayor for funding. Capital leases are often three years or less and are built into the operating budget. Capital items under $25,000 are often funded by an appropriation from the CIP fund by the City Council upon recommendation of the Mayor. Most other capital items over $25,000 would require long-term borrowing as authorized by a 2/3rd vote of the City Council upon recommendation of the Mayor. The CIP dovetails into the City’s five-year financial forecast for planning purposes. The CIP has to be worked into the operational part of the budget so that both the operational and capital needs of the municipal departments are met on a year-to-year basis. Oftentimes the CIP suffers as fixed costs such as health insurance and retirement assessments continue to rise. However, it is incumbent upon the Mayor and finance director to ensure that both the operating budget and the CIP are reasonable and attainable to ensure fiscal stability as well as within the limitations of Proposition 2 ½. Sec 9 - 1 ---PAGE BREAK--- Sec 9 - 2 ---PAGE BREAK--- Sec 9 - 3 ---PAGE BREAK--- Sec 9 - 4 ---PAGE BREAK--- Sec 9 - 5 ---PAGE BREAK--- Sec 9 - 6 ---PAGE BREAK--- Sec 9 - 7 ---PAGE BREAK--- Sec 9 - 8 ---PAGE BREAK--- Sec 9 - 9 ---PAGE BREAK--- Sec 9 - 10 ---PAGE BREAK--- Sec 9 - 11 ---PAGE BREAK--- FY09 CIP – Executive Summary • The City Council has approved loan orders for the following amounts: o $9,500,000 Refunding Bonds, authorized under Council Loan Order #281 duly adopted by the City Council May 22, 2008 and approved by the Mayor on May 28, 2008, pursuant to Chapter 44, Section 21A and Chapter 44A; o $1,000,000 Deficit Funding Bonds, authorized under Council Loan Order #282 duly adopted by the City Council on May 22, 2008, pursuant to Chapter 15 of the Massachusetts Acts of 2008, Chapter 44 and Chapter 44A; maximum term: seven years; and o $12,985,000 Various Purpose Bonds, authorized under Council Loan Order #280 duly adopted by the City Council on May 22, 2008 and approved by the Mayor on May 28th, 2008, up to $12,685,000 pursuant to Chapter 44A of the General Laws, as amended and supplemented, or up to $12,985,000 pursuant to Chapter 44, of the General Laws, as amended and supplemented as follows: Dates of Authorization Purpose Total Authorization 5/28/2008 Water Meters 3,000,000 5/28/2008 Water Transmission Main 2,500,000 5/28/2008 Sewer Pump Station Upgrade 400,000 5/28/2008 South River Basin Upgrade 4,350,000 5/28/2008 Sewer Drain Improvements 300,000 5/28/2008 Elec. Dept. Fire Alarm Receiver 30,000 5/28/2008 Traffic Signal 100,000 5/28/2008 Fire Pumper Truck 375,000 5/28/2008 Fire Equipment 35,000 5/28/2008 Golf Course Equipment 100,000 5/28/2008 Witch House Roof 50,000 5/28/2008 Rec. Dept. Equipment 50,000 5/28/2008 Forrest River Park Pool 165,000 5/28/2008 Forrest River Park 50,000 5/28/2008 Willows Bathroom 100,000 5/28/2008 Parking Meters 50,000 5/28/2008 Police Vehicle 70,000 5/28/2008 Police Equipment 50,000 Sec 9 - 12 ---PAGE BREAK--- 5/28/2008 Police Equipment - Radar 25,000 5/28/2008 Police - Range Repair 40,000 5/28/2008 Dump Truck 65,000 5/28/2008 Utility Truck 65,000 5/28/2008 DPW Equipment 65,000 5/28/2008 Engineering - Infrastructure 150,000 5/28/2008 Engineering - Seawalls 50,000 5/28/2008 School - Fire Alarm Sys. 130,000 5/28/2008 School Buses 135,000 5/28/2008 School - Infrastructure 75,000 5/28/2008 School - Infrastructure 75,000 5/28/2008 School - Equipment 35,000 12,685,000 . • Of the $12,685,000 above, the City will be issuing Bond Anticipation Notes of $4,900,000. We intend to go out for permanent bonding in FY10 so long as the projects in the water and sewer department have progressed as planned. • Of the $12,685,000 of debt listed above, the only non routine debt would be the water transmission main and the South River Basin upgrade. The water transmission main is one of the three main water supplies to the City. It runs through the City of Beverly and since Beverly is reconstructing Rantoul St next year, we want to replace the transmission main at that time to take advantage of the cost savings of not having to open up the street. The South River Basin upgrade is a storm water conveyance improvement project, which includes the planning, permitting, design and construction of moving water that is currently flooding neighborhoods and causing property damage to the water sheds so that it properly drains into the harbor. These two projects are intended to last 40+ years and are non routine in nature. The projects do not require any additional labor or resources once finalized, as they will just become part of the City’s infrastructure. We hope that the projects will actually save the City manpower hours on flooding issues and water main breaks, but how much manpower it would save is difficult to quantify. • The remaining projects are routine in nature. Replacing equipment, upgrading existing capital assets, and building improvements are considered part of preserving and/or replacing the capital assets needed to run City government. Sec 9 - 13