To: Honorable Mayor and Members of Town Council
From: Trish Muller, Finance Director
Title
Ordinance Approving the Fourth Amendment to the 2016 Budget and Authorizing Changes in Appropriations for Year 2016 (Second Reading)
Body
________________________________________________________________________________
Executive Summary
Town Council approved the Ordinance on First Reading on August 2, 2016 by a vote of 5-0.
Within this Fourth Budget Amendment for 2016, there are significant requested items largely attributable to the required accounting entries associated with recording the activity for the recent Sales and Use Tax Bonds and the Water Certificates of Participation (COP) refundings. Other significant requested items will accommodate infrastructure needs for long term water and transportation for the Castle Rock community.
The changes of expenditure appropriation in this proposed Fourth Amendment to the 2016 Budget include the majority of items to be considered for supplemental appropriation:
• Accounting transaction incorporating revenue and expense accommodations for the Water COP Refunding; the expense appropriation requested amount totals $65.8M; $60.2M is correspondingly requested to recognized revenue for the accounting transaction
• Accounting transaction incorporating revenue and expense accommodations for the Sales and Use Tax Bond Refunding, resulting in a zero cost; the expense appropriation request amount totals $8.8M; revenue in the same amount, $8.8M is also requested to be recognized for this accounting transaction
• Significant Water Resources projects were previously planned to be pursued in 2017, however, recent developments mean that opportunities to participate in these important partnerships now exist in 2016:
o Alternative Source of Supply initiatives including the purchase and sale agreement for the PV,LLC water rights for $7.4M, the associated Keenesburg Pipeline $2.4M and Box Elder Option Agreement at $7.7M
o WISE initiatives including the Canyons Intergovernmental agreement with Parker Water and Sanitation District for additional funds of $1M and an estimated $21.2M to implement the construction of the 5.2 miles of the outer marker pipeline to convey water from the canyons facility to the Ray Waterman Water Treatment Facility in Castle Rock
• Development Services enterprise fund office space Townhall expansion for $2.6M to accommodate for anticipated construction and contingency funding
• Transportation projects including:
o Design costs for future improvements at Highway 86 and Crowfoot, $650k
o Design costs for future improvements at Highway 86 and Allen Way, $400k
o Traffic Signal program costs to accelerate this initiative, $200k
o Repair costs for the 6th Street Alley retaining wall, $200k
o Design costs for traffic control improvements at 3rd street and Perry street, $150k
o Planning costs for the 2017 Meadows Parkway Reconstruction project, $90k
• Repairs needed as a result of storm damage, in order to protect a critical water main along East Plum Creek near Meadows Parkway, $620k
• Adjustments to reflect the settlement agreement for infrastructure near Mesa Middle School, $322k
• Repair costs for the slide tower at the Recreation Center, $79k
(Attachment B) includes the supplemental appropriation items and (Attachment C) details estimated ending funds available for 2016.
Discussion
Excellent results were achieved in two recent debt refinancing initiatives undertaken by the Town; the 2008 Transportation Sales & Use Tax Bonds were refunded and the 2008 Water Resources variable interest COP was issued as a 2016 Revenue Bond to secure a fixed interest rate. Results were highly favorable for both efforts with significant savings over the life of the debt. The accounting transactions associated with these two items are incorporated into this budget amendment and are significant in total recorded revenue of $69M and expense of $74.6M related to these efforts. These initiatives were not planned originally within the adopted 2016 budget and were undertaken due to the opportunities that recent market conditions facilitated and both resulted favorably.
The accounting transaction associated with the Sales and Use Tax Bonds for Transportation records the same amount of $8.8M in both revenue and expenditures which results in no change to the Transportation fund balance. The Water Resources COP transaction is similar; however, because the variable interest rate no longer exists, and is now fixed, the previously held debt service reserve is relieved. The Utilities department opted to apply the amount of previous reserve, to the Principal of the 2016 Revenue Bond in order to reduce the overall life of the debt. As a result, the requested revenue amount for this transaction is $60.2M and the expense is $65.8M, the expense is greater than the revenue since funds are planned to be used to pay down part of the principal on this debt. The transaction amounts identified for these debt related expenditure amounts are the majority of the requested amounts within this Fourth Budget Amendment of 2016; about $74.6M in total.
Other significant items not included as part of the adopted 2016 budget are requested due to recent opportunities associated with the Town’s long term water initiatives. These requests total approximately $40M and are able to be funded with capital reserves that have been set aside in the Water Resources Fund for these identified purposes. As identified in previous Council presentations by Utilities staff, the PV LLC water rights agreement within the Alternative Source of Supply initiatives to purchase a minimum of 1,000 acre feet of water rights in Weld County is requested for approximately $7.4M. There are two requests that are included as a result of the PV LLC agreement that total $10M; the Box Elder Option Agreement is able to be pursued with the PV LLC in place and would save approximately $1.1M if entered into in 2016.
Funds are also requested to accommodate the Keenesburg Pipeline, which would be used, in part, for the conveyance of water from the PV wells, to Box Elder Creek to augment well pumping that occurs at the Box Elder well field. Funds are also requested to continue long term water initiatives within the WISE project. $21.2M is requested to be appropriated to begin the process of constructing a 5.2 mile stretch of pipeline that will deliver water as planned with the WISE project. This pipeline was planned for the conveyance of WISE water and other future water supplies from the Canyons infrastructure, managed by the Parker Water and Sanitation District, to the Ray Waterman Water Treatment Facility. This project is challenging, from a construction perspective, due to the topography and soil and rock conditions. Funds are also requested to accommodate participation in the Canyons Intergovernmental Agreement with Parker Water and Sanitation District. Funds were budgeted for this purpose and now that participation costs are known, about $1.1M is requested to facilitate this agreement. Funds of $240k are also requested for the purchase of an incremental 34 acre feet of storage shares annually within the Chatfield Reallocation Project in order to eventually achieve the goal of 2000 acre feet of storage space in the project.
It is important to identify that the Water Resources Capital Reserve amount will be greatly reduced in 2016 as the above initiatives are pursued. Funds have been accrued for long term water initiatives for several years and these are appropriate uses of these reserves.
At the July 19 meeting, Council heard the continuing progress of efforts to expand Townhall office space using Development Services Enterprise funds and $2.6M is included in this Budget Amendment to pursue that effort. Funds were included in the 2016 adopted budget as a placeholder until further information could be gathered and a cost estimate could be generated. As indicated at the July 19 meeting, due to soil conditions, site constraints and coordination of floodplain issues associated with the Festival Park project, estimates of approximately $4.6M have resulted and an additional $500k is requested for contingency purposes. Within the 2016 adopted budget $2.5M was included, therefore the Development Services Department requests the remaining $2.6M to be appropriated for this purpose.
There are a number of Transportation initiatives that are also included in this Fourth Budget Amendment, in total, about $1.8M in requested projects are incorporated. The majority of projects are requested to accelerate projects that were previously planned to occur, or begin, in a later year in order to address traffic congestion issues in Town. Funds are requested to be appropriated in the Transportation Capital Projects Fund to begin planning process for improvements to two significant intersections in Town; at Highway 86 and Crowfoot Valley Road and at Highway 86 and Allen Way. These projects were previously planned to be constructed in 2019 and with this requested change, could facilitate construction starting in 2018.
Other Traffic improvements in this Budget Amendment include $200k to accelerate completion of an upgrade to the Town’s traffic signal software system to address congestion issues. Funds are also requested to repair damage to the Sixth Street Alley retaining wall. Funds are requested to accommodate improvements to the intersection at Third and Perry Streets. This Budget Amendment also includes a request to allocate $90k to begin the planning processes associated with the future initiative to reconstruct a portion of Meadows Parkway due to increased deterioration of this roadway.
The Finance Department has included a request to appropriate an expense in four funds to accommodate the recent settlement agreement that Council was briefed on by the Town Attorney. The total request of $322k accommodates the difference from the value of the Town’s investments in infrastructure near Mesa Middle School in 2006. Council was briefed on this agreement at the June 14 meeting.
The Parks and Recreation Department requests that $77k be allocated from the capital reserve in the Community Center Fund to address needed repairs to the slide tower stair structure at the Recreation Center due to deterioration of the structure that has occurred.
The changes of appropriation in this proposed Fourth Budget Amendment include items requested for consideration for supplemental appropriation. (Attachment B) includes the supplemental appropriation request.
Budget Impact
As presented in (Attachment C), the Finance Department has ensured that funding is available within the fund balance of each fund. A summary of the proposed total change in 2016 expenditure appropriation changes by fund is shown in the following table:
Transportation Fund |
$ 9,558,813 |
Transportation Capital Fund |
1,050,000 |
Water Fund |
562,726 |
Water Resources Fund |
105,785,641 |
Stormwater Fund |
432,144 |
Wastewater Fund |
142,361 |
Development Services Fund |
2,600,722 |
Community Center Fund |
76,868 |
TOTAL |
$ 120,209,275 |
Staff Recommendation
Staff recommends that Town Council approve the Ordinance on first reading. Staff plans to bring the second reading of the Ordinance to the August 16, 2016 Council meeting.
Proposed Motion
“I move to approve an Ordinance approving the Fourth Amendment to the 2016 Budget, First Reading”
Attachments
Attachment A: Ordinance
Attachment B: Requests for Supplemental Appropriation
Attachment C: Estimated Ending Funds Available for 2016