Capital Projects - 2010 Budget Message

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The Township sets forth its Capital Improvement Program (CIP) annually for the next six-year period. Projects to be undertaken during the first year (2010) of the next six years (2010 - 2015) are included in the Township's Capital Budget, with the remaining five years (2011 - 2015) comprising the Capital Plan.

The 2009 Capital Budget provided appropriations for 75 projects totaling $27.1 million, which included a number of 2008 projects that required funding in 2009 for completion. The Capital Projects Fund’s portion, supported by bond issues and grants, called for an appropriation of nearly $24.3 million. The Sanitary Sewer Fund’s portion is supported by bond issues and assessments and called for an appropriation of $2.8 million.

This capital spending plan underwent more analysis and oversight than any in recent memory. In recognition of the significant budgetary impact of the Township’s capital plans, Board President Reed appointed an Ad Hoc CIP Committee (AHCC) in 2008 to oversee the preparation of the 2009-2014 CIP. Led by Commissioner McElhaney, the AHCC examined and scrutinized every one of the 101 proposed capital projects, project-by-project, sub-project-by-sub-project, with a goal of finding ways to reduce, postpone or eliminate capital spending.

The AHCC categorized the proposed projects into four categories (A, B, C, and D) in order to focus the analysis. Net spending by the Township (not costs supported by grants or other funding sources) was carefully examined. “A” projects were considered ones that were nearly completed or essential toward meeting core basic capital needs within the Township and had funding needs in 2009 and/or 2010. “A” projects include basic infrastructure needs, such as roof replacement. “B” projects were viewed as possibly non-essential, but desirable, with funding needs in 2009 and/or 2010. “C” projects were viewed as able to be postponed or already scheduled to begin in 2011 or thereafter. “D” projects represented the major capital plans to upgrade and renovate the six Township libraries.

The AHCC helped the Township reduce or delay millions of dollars from initial plans for 2009 and 2010. This resulted last year in a two-year Township capital spending plan of approximately $26.3 million ($11.4 million in 2009 and $14.9 million in 2010).

The Township typically finances the CIP by issuing General Obligation Bonds. The funds for repayment of these bonds and associated debt service interest costs are provided for in the Township’s GF Operating Budget.

A $10 million new money bond issue was budgeted to be needed in 2009; however, through careful analysis and prioritization, this amount was reduced to $7 million in new bonds that were sold on April 7, 2009, along with the refunding (refinancing) of approximately $19.8 million in prior year bonds. $1.1 million in savings from lower interest rates from the refunding were applied to the 2009 and 2010 debt payment schedules. The Township again received reconfirmation of its Triple A bond credit rating from both Moody’s Investor Services and Standard & Poor’s, allowing Lower Merion to remain one of three Townships in the nation with a Triple A credit rating from the two premier rating agencies.

Since only $7 million was borrowed in 2009, an estimated $15 million bond issue is forecasted to be needed in early 2010, with possibly approximately $10 million annual bond issues needed in 2011, 2012, 2013 and 2014.

Significant efforts continued throughout 2009 to carefully evaluate the Township’s capital spending plan. A new debt management policy was drafted by staff and approved by the Board at mid-year, which is now contained within this proposed budget document. The policy research demonstrated that the Township’s various key debt ratios compared favorably to the other 29 similarly-sized municipalities throughout the nation rated as Triple A by Standard and Poor’s. A public, televised CIP workshop was held in June to review CIP plans and priorities. Additional budget workshops on September 30th and October 7th also addressed preliminary capital spending plans. As a result of these efforts, over $8 million in capital spending that otherwise would have likely occurred in 2008-2010 has been delayed to 2011 and beyond.

Significant analysis and discussion also occurred throughout 2009 to review and evaluate the major, $20+ million renovation and building addition plan, commenced in 2002, for the Township’s six libraries. A major capital fund raising campaign aimed at attaining $5 to $7 million in outside donations is well underway, with favorable initial results, despite the difficult economy. In May, the Board authorized the competitive bidding for the first and largest of the projects, an estimated $9 million project for Ludington Library. Due to the excellent current bidding environment, project cost estimates had decreased from the previous estimate of $11 million. Bids were opened in late October, and reflected the significant competition of over 50 bids received. A recommendation to award the bids will be presented to the Board on November 18th. The Ludington project will require nearly half of the estimated $15 million in new bonds proposed to be issued in 2010.

The other major capital project underway is the Ardmore Transit Center project. The Township has partnered with Dranoff Properties to create a proposed $100 million mixed-use transit oriented development in the center of Ardmore. Major grant funding has been secured, and the Township, Dranoff, SEPTA, Amtrak, PaDOT and local businesses await word of a $32 million high speed rail stimulus grant request that will enable this long-anticipated revitalization of Ardmore to become a reality.

The 2010 - 2015 Proposed CIP (excluding the positive impact of grants to be received) proposes $161 million in spending for 97 projects for the six-year period. Of this amount, $57.4 million is anticipated from the Capital Project Fund, and $10.6 million from the Sanitary Sewer Fund, for a total of $68.0 million, or approximately 42% of the six-year costs. The anticipated $93 million from reimbursements and grants from County, State, Federal, and other sources demonstrates the significant leveraging of Township capital spending with other funding sources to address local infrastructure needs.

The Proposed 2010 Capital Project Fund Budget is $28.8 million. Another $2.5 million is budgeted from the Sanitary Sewer Fund for a total capital spending budget of $31.3 million. Of this amount, $13.8 million (or over 44%) is budgeted to be received from grants and other reimbursements.

On an appropriation basis, a bond issue of approximately $15.6 million is shown for 2010 ($13.5 million for capital projects, $2.1 million for sanitary sewer projects) to provide a source of funding for any remaining 2009 projects and the start-up of the 2010 projects.

2010 CIP Budgeted Funding Sources
 
Capital Projects
Fund
Sanitary Sewer
Fund
Total Capital
Budget
 
2010 PROJECTS
$28,812,000
$2,451,000
$31,263,000
 
SOURCE OF FUNDS:
Grants, reimbursements, other
13,479,000
351,000
13,830,000
Existing Fund Balance
1,800,235
1,800,000
2010 Bond Issue
13,532,765
2,100,000
15,632,765
TOTAL
$28,812,000
$2,451,000
$31,263,000

Major 2010 Budgeted CIP Projects
CIP Project (all revenue sources)
CIP Job
Number
2010 Capital
Budgets
Ludington Library Renovations
4084
$ 7,250,000
Ardmore Transit Center
4021
4,750,000
Union Avenue Bridge Reconstruction
4203
3,244,000
Cynwyd Trail
4495
2,179,000
Five-Points Intersection Improvements
4231
1,190,000
Rotomilling and Road Reconstruction
4210
1,000,000
Belmont Pumping Station Force Main Improvements
4713
1,000,000
Anderson Avenue Underpass Improvements
4229
900,000
Closed-loop Traffic Signal System/Montgomery Avenue
4207
818,000
Parking Meter Replacement
4235
675,000
Ashbridge Memorial Park Master Plan Implementation
4489
420,000
Philadelphia Capital Contributions
4708
352,000
Bala Avenue Streetscape Improvements
4054
330,000
Construction of Public Sanitary Sewers/Righters Ferry Road
4701
326,000
Montgomery County Open Space Program
4475
325,000
Linwood and Athens Avenue Park Development
4494
290,000
Information Services Master Plan
4461
260,000
Fire Companies Facility Project
4405
250,000
Sanitary Sewer Replacement Fund
4707
250,000
Comfort Station Replacement and Renovation
4455
235,000
Material Storage Area
4490
235,000
Pennswood Road Bridge Reconstruction
4204
230,000
 
Subtotal 
$27,968,000
All other projects
 
3,295,000
 
Total 
$31,263,000

In summary, maintenance of infrastructure has long been a key priority of the Township. The Township’s six-year CIP has undergone more evaluation in the past two years than ever before. It still represents an ambitious plan that will need to be carefully and continually reevaluated in the months and years ahead in order to ensure that the proposed projects are necessary and affordable to the taxpayers of Lower Merion. The Proposed 2010-2015 CIP serves as a road map to strategically plan for the Township’s future infrastructure needs and ensure quality public services are provided for today and in the future. With an aging infrastructure and the demand for high quality services, the Township will be faced with finding ways to finance its infrastructure needs including seeking out Federal, State and County grant funding and partnering with the business community.

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