CAPITAL IMPROVEMENTS COMMITTEE

200 E. Wells Street City of Milwaukee Milwaukee, Wisconsin 53202 Meeting Minutes CAPITAL IMPROVEMENTS COMMITTEE ALD. JOSEPH DUDZIK, CHAIR Ald. Robert Bauman, Ald. Michael Murphy, Ghassan Korban, Martin Matson, Mark Nicolini, and Mariano Schifalacqua Staff Assistant: Tobie Black, 286-2231; Fax: 286-3456, tblack@milwaukee.gov Fiscal Planning Specialist: Kathleen Brengosz, 286-3926, kbreng@milwaukee.gov Thursday, September 6, 2012 9:00 AM Room 301-B, City Hall Meeting called to order at 9:02 a.m. Present: Froh, Korban, Dudzik, Egan, Bauman, Nicolini Excused: Schifalacqua Also in attendance: Kathy Brengosz, Fiscal Planning Specialist 1. Review and approval of the minutes of the July 25th meeting. The minutes were approved as written. 2. Presentation of the Port of Milwaukee Condition Report. Individuals appearing: Larry Sullivan, Port of Milwaukee Sean Schutten, DPW-Facilities Mr. Sullivan appeared representing the Port of Milwaukee Director who has retired. He announced that the Port has a new staff member, Paul Vornholt, the Trade, Development and Operations Director. Mr. Sullivan provided an overview of the Port. This was followed by the condition report presented by Mr. Schutten from the Department of Public Works (DPW). Mr. Sullivan said that The Port of Milwaukee is part of the transportation and distribution system of the City of Milwaukee and is critical to southeast Wisconsin. Its mission is to enhance the overall economic and social environment of the region by stimulating trade and employment. He added that shippers save $60 million annually on direct transportation costs by moving cargo through the Port. Mr. Sullivan said that the 2012 Budget had $50,000 for a study to plan for future capital development. The Port chose to use DPW as a consultant to complete the study. The budget also included $83,000 for a financial strategic plan. John Martin & Associates was awarded the project. They are looking at the Port’s business lines City of Milwaukee Page 1 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE and facilities and evaluating the revenue streams from each line. Capital and management costs will be factored into the plan. Mr. Sullivan said that the City has been very successful in getting grants. A grant funded ind turbine project went online this year. The turbine has generated 76,000 KW hours of electricity with a value of $10,000. The turbine is capable of generating all of the power needed for the building including the welders and shop, and excess power is sold to the power company. Turbine activity can be viewed online. Mr. Sullivan said the Port received a $1 million grant for a new work boat. Unlike most patrol boats this boat is capable of winter operations. There is room on deck to put emergency equipment, side scanning sonar and remotely operated vehicles. He also said that the Port received a $1.5 million grant to rehabilitate the liquid cargo pier. Work will be done on that project late this year or next year. Mr. Sullivan said that the Port has 16 miles of railroad tracks. Two 1st class railroads serve the Port. The Port had a double stack container yard with direct service to Montreal and Vancouver. The railroad, Chicago Pacific (CP), has announced that they will close this terminal, but the Port is working with other railroads to preserve this service for area shippers. Mr. Nicolini asked if the user of the railroad container service expressed concerns about the quality or the functionality of the railroad tracks at the Port. Mr. Sullivan said no. He said that CP Rail had two terminals in Chicago, one in Milwaukee and a number of others in states around the nation. CP Rail was bought out by firm that wanted to consolidate operations. The company has closed all of the smaller intermodal facilities nationwide. The Mayor, the Governor and some Congressmen are lobbying to keep it open at least for a few months while we look at alternative, but so far the railroad hasn’t responded. Mr. Sullivan said that the federal government does most of the dredging in the channel. The City is responsible for dredging the slips. The new confined disposal area will take the dredging from the federally maintained channel for the next 20 years. Then the land will be given back to the City for its use. Mr. Sullivan said that the Port has been involved in some cruise business. The Christopher Columbus is in the lakes this season but has chosen not to call at Milwaukee. Smaller ships like the Grand Mariner are calling at Discovery World. There have been four or five sailings this year. Mr. Sullivan said that the Corps of Engineers tracks historic high and low water levels and projects future levels. Right now, the water is a little bit below low water datum and is projected to go below the all time low, which means that the Port will have to re-evaluate its dredging plans. Mr. Schutten, DPW’s Facility Project Coordinator, said that he has been working with the Port to evaluate its facilities, of which it has an enormous amount. He said that DPW Facilities generally works with buildings doing asset inventories, condition assessments and capital budgeting. The various types of infrastructure at the Port gave DPW the opportunity to expand on its existing system to include other Port assets and capital activities such as dredging, railroads, boats and water distribution system. The Port provided lists of components and DPW did on-site evaluations. DPW will begin modeling capital improvements in the next few months. Budgetary estimates and reporting are nearly complete for buildings. Other facilities and infrastructure will follow. Mr. Schutten presented the findings for various buildings including the Boiler and Tank Building, the Dock Office, the Ferry Terminal Building, Cargo Terminals 1, 2, 3 and 4, the Milwaukee Bulk Terminal, the North American Salt Co. Building, and the City of Milwaukee Page 2 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE Sea Scout Building, noting that because of the industrial character of the Port’s location and activities, the condition of the buildings may be different than you would expect to see at other City buildings. Mr. Schutten said that the occupants of the Ferry Terminal Building expressed concerns about building settlement. DPW documented the settlement and will continue to monitor it. Ald. Bauman asked how old the building is. Mr. Schutten replied that it was built in 2000. Mr. Sullivan said that the building was constructed on piles over an abandoned landfill. The Port has been monitoring it very closely and has had to re-level an area in one of the bathrooms, but otherwise the building has been doing pretty well. He added that the site has methane monitoring. Mr. Schutten said that external issues discovered at Terminal 3 and Terminal 4 and documented in the photos were remediated this summer. The interior of Terminal 3 has not been remediated. Mr. Schutten said that during the electrical survey at the North American Salt Co. building, cardboard was found over the circuit boards. Mr. Sullivan said that the City inherited many of the buildings at the Port and it is often the tenants who are directly responsible for building maintenance. He said he did not know if that situation had been corrected but that he would look into it. Mr. Sullivan said that the Dock Office Building, which was built in the 1950’s, sits on a valuable location on a dock that has been dredged to seaway draft. The Port staff is evaluating whether it should demolish the building to allow a better use for the site. The Port has deferred maintenance on the building until a final decision is made. Ald. Dudzik acknowledged that the future of this building is uncertain but pointed out that the deferred maintenance is a long standing issue. Mr. Schutten said that at Terminal 1, which is used for salt storage before it is transported to various tenant’s salt piles, has differential settlement in the pavement which makes it difficult for operators to transfer salt. Mr. Schutten said that the service drive that goes east and west between Lincoln Memorial and Harbor Drive is in poor condition. Ald. Dudzik noted that most of the roadways in and around the Port are asphalt. Mr. Sullivan said that because of the soft, organic nature of the soils at the Port flexible pavements tend to perform better. When a tenant insisted on a concrete roadway to service their operations, it only lasted about five years. The American Association of Port Authorities evaluates facilities and their current guidance recommends flexible pavements. Mr. Schutten said DPW will continue to make budgetary estimates, complete the component inventory, populate the spread sheets, send information to the Port for review and evaluate and prioritize expenditures. He estimated that the process should be done in time for the Port to submit its 2014 capital budget request. Mr. Sullivan added that some of the recommended improvements may be necessary, but depending on the terms of the leases, may not be the City’s responsibility. Mr. Nicolini suggested involving the Comptroller’s office in the Port planning. The marketing analysis combined with this condition report may find some potential re-use of the container yard that can generate revenue as well as economic development. He said there may be potential for some use of RACM revenue bond financing. Ald. Dudzik said even though this is a primarily industrial area it still needs to be maintained to an acceptable level. He said the City should put pressure on lessees to City of Milwaukee Page 3 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE maintain their buildings but the City also needs to do its part and maintain its own buildings as well. Ms Brengosz asked if DPW would adjust the Facility Condition Index (FCI) scale to reflect the industrial nature of the Port and its facilities. Mr. Schutten said it was possible. He said it would depend on the tenant’s needs and the location and age of the facility. When the Port’s assessment is complete DPW will decide whether an adjustment of the FCI scale is necessary. 3. Discussion of the progress of the Residential Street Paving audit recommendations. Individuals appearing: Clark Wantoch, Department of Public Works Michael Daun, Consultant Mr. Wantoch said that 4 years ago the Comptroller did an audit of the local paving program. It was a thorough evaluation of paving project scheduling, and the systems relative to selecting types of street pavements. There were five programmatic recommendations and 28 further sub-recommendations. Mr. Wantoch said that one recommendation was to establish an accurate total for residential street miles. DPW’s RoadLife database, which contains intersections, length of segments, pavement types and other information, was downloaded into a pavement management system. When that was done, the pavement management system double-counted the intersections. This resulted in reported miles in the pavement management system and reported miles in the RoadLife system being different. Mr. Wantoch said that DPW has refined how lengths are calculated within the RoadLife database and is confident that these are the actual miles that exist. The next update of the pavement management system will use the revised miles so the pavement management system and the RoadLife system will have the same total miles of streets. The audit recommended the expanded use of pavement management analysis. Mr. Wantoch said DPW is currently implementing this recommendation. DPW purchased the Road Matrix component for its pavement management system in February 2012. The Comptroller’s report on the progress of the audit recommendations was as of December 2011, so the purchase of this component was not included. Mr. Wantoch added that DPW and the Comptroller’s Office are in agreement that it should be implemented and they are working on it. The audit recommended the implementation of a paving performance monitoring and reporting process. Mr. Wantoch said the department is working towards that goal. Each year DPW will come before the committee to provide a report. The committee has the opportunity to make recommendations about how the reporting can be better. Last year it was suggested that DPW report on square yards of pavement in addition to miles of streets. Mr. Wantoch said that next time DPW comes before the committee the department will be reporting on both of those. Mr. Wantoch described how DPW projects the annual funding needed for local and collector streets using the number of miles of each pavement type, estimated useful life and a sixty ear replacement cycle. The same system is used for the Major Street Paving Program. Mr. Wantoch said that there was confusion during the audit regarding the “preserve City of Milwaukee Page 4 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE first” pavement management strategy. He said that DPW has a preserve first pavement strategy in place and had one at the time of the audit. The strategy employed crack filling, sealing, patching, and minimum overlay project. As a result of the audit those programs are being expanding now. Mr. Wantoch added that DPW has always reviewed new strategies for preserving roadways. The department recently let a contract for recycled asphalt pavement. It will review that project to see what kind of useful life is obtained from that type of pavement. Mr. Nicolini asked if the pavement preservation treatments are capital funded or O&M funded. Mr. Wantoch replied that they are capital maintenance items. Mr. Wantoch said that the existing pavement management system has set of survivor curves. There is a different curve for each distinct pavement type based on its thickness, traffic volume, and subgrade strength. A roadway is assigned a rating based on, among other things, the percentage of cracks or pothole patches. Using the appropriate survivor curve the system would estimate at what point in the future that roadway would need to be resurfaced or reconstructed. Mr. Wantoch said that DPW is now adding a maintenance component, which means that maintenance data will be incorporated into the decision tree and new curves will be developed which will recommend the type and timing of maintenance activities. He said the department is in the process of developing those maintenance curves. Ms. Brengosz asked if the new MATRIX system will incorporate older field data so the department can see how a segment actually aged as opposed to how the model said it would theoretically age. Mr. Wantoch said he was not sure if the software had that capability. He said that in 2006 and 2007 the department compared the survey data to what DPW expected the ratings would be and found a good correlation. He added that Milwaukee was fortunate because our survivor curves are based on our own RoadLife data. Many communities do not have comprehensive data that is specific to their infrastructure. Mr. Wantoch said the new component has a number of powerful graphing and reporting tools. It has a GIS component so one can arc map and Google map to get the survey PQI and the year it was surveyed. Mr. Wantoch said that there were two audit recommendations that DPW disagreed with. The first was the four-year cycle for non-destructive testing. In 2000, the testing cost $150,000; in 2006 it was $160,000; and in 2013 it is expected to be $200,000. Because our survivor curves match what we would expect to happen, the department does not see the cost benefit of moving from a seven-year cycle to a four-year cycle. The other disputed recommendation is to have equal segment lengths. Mr. Wantoch said that the department identifies segments from intersection to intersection. For east-west streets the length is 300 feet. For north-south streets the typical length is 600 feet. If a roadway doesn’t have intersections, data is collected every 600 feet. Ms. Brengosz asked if all the data points for a longer segment are averaged to give a single PQI for the segment. Mr. Wantoch said yes. Mr. Korban said there are very few segments that don’t contain intersections. Ms. Brengosz said that the number of long segments is very small, but they represent enough of the length of the system to affect the system’s overall PQI. Mr. Wantoch disagreed. Ald. Dudzik asked what effect increasing or decreasing the wheel tax (MVR) would have on the overall condition report. Mr. Nicolini replied that there are about 300,000 vehicles registered in the City. A one dollar increase will generate about $300,000. Each five dollar increase will generate $1.5 million. He said that the existing $20 fee generates approximately $6.5 million in annual revenue. Approximately one half of that is offset by the reduction in special assessments. With special assessments City of Milwaukee Page 5 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE essentially gone, each dollar increase would have a proportionally larger impact on increasing net revenue available. He added that the City has been able to support a steadily increasing capital program and he thinks initiatives like this could be most helpful in supporting maintenance programs. Mr. Nicolini also said that state transportation aids, which are basically intended to offset the costs of maintaining the local transportation network, has seen a $4.5 million (16%) decline since 2011. The state policy is removing a significant amount of the partnership approach with respect to aiding local efforts to maintain the transportation network. Mr. Froh asked if the state transportation aids were gas tax revenues. Mr. Nicolini responded that about 61% of DOT funds are gas tax-based and the remainder is registration fee based. Fuel tax revenue is projected to be essentially flat in part because the fuel tax is not indexed to inflation and improvements in fuel efficiency have reduced the taxes collected for the same amount of driving. He added that registration fees in Milwaukee, even with the MVR fee, are lower than the Midwest state average. Mr. Froh asked if state transportation aid is prorated based on the mileage of streets. Mr. Nicolini replied that the reduction in the state transportation aid formula has a mileage basis and a cost basis. Historically, the distribution has been based on which type of formula favors the community the most. Rural type communities benefit from the mileage formula. Larger, denser areas benefit from the cost formula. In the most recent budget, reductions to state aid were focused on the cost based component. Almost the entire impact was directed toward more developed urban areas of the state while preserving aid amounts for sprawl inducing townships and new suburbs. Mr. Wantoch said that for every budgeted dollar of maintenance, the City gets money back because it is based on how much the City reports that it spent. He added that the state uses a six year average. Mr. Daun said he thinks this is a timely review. The focus of the audit is on local streets and for that reason it’s a bigger challenge for local governments and a test of local government’s stewardship of assets. He said that the focal point of the audit was the database and acknowledged that there have been substantial corrections made to the database in the past four years. Mr. Daun said that he thought the key point from the audit were that 21% of our local streets were in poor condition; overall, the condition of the streets was deteriorating; there was an excessively long replacement cycle; and the City’s consultant, RW Block, concluded that instead of paving between 5 and 12 miles per year, the City would need to pave between 25 and 30 miles per year in 2013 and 2014, and more than 40 miles per year from 2016 through 2020. Mr. Daun said that DPW recently provided data to the Comptroller’s office which showed that the number of streets in poor condition had been reduced to 13%. He said that a decline of 8% is a big accomplishment not only because of the size of the system but because of the fiscal environment. Mr. Daun said that when the Capital Improvements Committee was abolished in 1990, what was lost was a comprehensive report on the condition and, more importantly, the trends in condition of the City’s infrastructure assets. It was an easily understandable way to evaluate the quality of our stewardship as a city. He said that the committee today has many more reporting options available and DPW has engaged in a massive and detailed effort to gather sophisticated data. The challenge for the committee is to sort through detailed engineering analyses to determine the adequacy of the City’s efforts and to determine what kind of roll up information will be City of Milwaukee Page 6 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE most useful to the Common Council and to the public. That information can inform policy decisions and objectives. Mr. Daun said that there is no question that this committee, the Common Council, the Mayor and DPW have accomplished a lot. There is much to be proud of as a city that in this fiscal environment, we have found a way to improve local streets to the extent that we have over the last four years. Ald. Dudzik asked why the Comptroller recommended a four-year interval for the non-destructive testing. Mr. Daun replied that RW Block thought the interval of three to five years was the maximum the City should consider to update PQI scores. The accuracy of the data and therefore the maintenance strategy is driven by the non-destructive testing. He said ensuring that policy and budgeting decisions are made using sufficiently accurate data is critical, and a discussion of the cost benefit of longer or shorter testing intervals would be worth pursuing. Mr. Froh said that if the data is going to drive maintenance activities, once every seven years probably isn’t frequent enough. Ms. Brengosz said that while the appropriate interval could be discussed and determined at a later date, she felt that it was critical to get a complete set of non-destructive testing data as soon as possible. She said that the many changes and corrections to the pavement management system database that DPW has made over the last four years have made it difficult to accurately identify and monitor condition trends. Mr. Wantoch said that the department intends to survey the entire system in 2013 and a final decision about the testing interval does not need to be made right now. He added that spending $200,000 to do the survey will take away from the $1.3 million the department has available to spend on maintenance. Mr. Nicolini said each week of seasonal street maintenance crews costs around $85,000 so spending $200,000 would reduce seasonal maintenance by about 21/2 weeks. 4. Discussion of the Department of Public Works' ODB/Capital Project Management System. Individual appearing: Clark Wantoch, DPW-Infrastructure Mr. Wantoch gave an overview of the Oracle Database (ODB) system. Mr. Wantoch said that the ODB was developed in house to control and track projects. The ODB is a tool the department uses to do programming, estimating, design, and construction management from the start of the project through property owner billing. He said the system is linked to FMIS and a project management tool called Primavera 6 (P6) which manages the timing, critical path and tracking of projects. ODB is used for both the local and the major street programs. Mr. Wantoch said that in the past each department created and maintained individual databases or Excel spreadsheets to track projects. The ODB is a shared system; all internal project information is accessible to everyone. It eliminates multiple data entries and ensures consistent project information across functional groups. Mr. Wantoch explained how the system can be used to quickly generate cost estimates using historic data from similar projects. He also explained how the system can be used to ensure that the City has enough appropriate resources to complete proposed projects. City of Milwaukee Page 7 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE Mr. Wantoch said the P6 system creates Gantt charts and using ODB data generates start and end dates for tasks. He added that the integration between P6 and ODB is electronic, not manual, so staff has no control over the due dates they are given. This eliminates the opportunity for date manipulation. Mr. Wantoch explained how the system is used to generate the monthly status reports that are required by WisDOT for state and federally funded projects. Ald. Dudzik said he was hoping that this system would reduce the number of pay codes in the payroll system. Mr. Wantoch said that DPW uses industry standards relative to job titles, but it is conducting a review to see if some job titles can be combined. Mr. Korban said that the multiple codes help refine the evaluation process. Mr. Froh asked if the City still uses City Time for timecard data. Mr. Wantoch and Mr. Egan both said yes. Mr. Froh asked if data was finalized once every two weeks when it is uploaded to the payroll system. Mr. Wantoch said that was correct. He said the City has negotiated with the state to allow the City to report approximately three weeks later than it would otherwise be required to allow for the delay that is inherent in our payroll system. Mr. Wantoch explained how the ODB is used for bidding projects and for electronically processing approvals and payments. He said that Sewers currently does all its bidding using ODB and the department is working to add the engineering side of their projects to the system. Mr. Wantoch explained how ODB is linked to MapMilwaukee. He said that one can go into MapMilwaukee, select an area and it will bring up projects on the three year program with a link to the ODB. There is a series of five screens depending on the status of the project. It shows all Common Council resolutions and reports on the costs of various improvements including sewers, water, street lighting, traffic signals and signs. Ald. Dudzik asked if it is available to citizens. Mr. Wantoch said yes. He said that the interface is a little cumbersome to use, but ITMD is planning to upgrade MapMilwaukee to make it more user friendly. 5. Discussion of the City’s 3 Year Financial Outlook. Mr. Nicolini gave a presentation that identified the primary expenditure and revenue challenges in the next three years and identified positive financial developments and opportunities. He indicated that there are opportunities, especially with respect to the capital budget. He said that the goal is to manage long term obligations in a manner that avoids excessive transfer of funding obligations to future generations or excessive deferred maintenance of capital stock. Mr. Nicolini said that a key expenditure challenge over the next three years, as well as the next six years, is the employer contribution to the pension fund. He said the Administration’s proposal to change the funding policy reduced the 2010 contribution from more than $100 million to $49 million. The mayor will also propose a stable contribution policy that will reduce the hypersensitivity of contributions to annual investment return fluctuations, but there is still a considerable on-going commitment. Mr. Nicolini said that while the trend in the growth of the health care benefits budget has slowed, it remains a major program and a pressure on the budget. He said that considerable changes were made to the cost sharing structure for health care benefits that had a major impact on the 2012 budget as well as the future growth rate. However, even with the changes, our 2013 projected amount is still higher than our 2009 experience. City of Milwaukee Page 8 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE Mr. Nicolini said that a 3rd item is more of a political issue than a strict economic challenge. He said that the Police and Fire departments make up three quarters of the fungible operating salary amounts. As the City moves more of DPW’s operating costs to user charges, there is a less direct relationship between controlling their costs and addressing the property tax and state shared revenue challenges. Because of the considerable number of positions in DPW and the Department of Neighborhood Services that are offset by a non property tax source such as the Solid Waste Charge, there is a proportionally modest amount of overall salary budget available for reallocation. Mr. Nicolini added said that from a political standpoint there are fewer and fewer places to look for direct property tax savings from budget cuts except in the Police and Fire departments. Regarding the employer pension contribution, Mr. Nicolini said that from 1996 to 2009, there was zero employer contribution made or required. The tax levy contribution in 2010 was $47 million. In 2011 and 2012, voluntary tax levy contributions were made to the pension reserve. He said that those contributions totaled about $42 million. Combined with existing reserve of $2 million from the parking fund, the City now has about $56 million in the pension reserve. He said that will make the transition to higher contributions in 2013 through 2015 less disruptive. Mr. Nicolini added that the Pension Board has adopted an evaluation which calls for a $59 million contribution in 2013 and proposed contributions of about $68 million in the out years. Mr. Nicolini said that state shared revenue, which historically was the City’s largest revenue source, has seen an inflation adjusted decline of almost $79 million since 2003. In nominal terms, it’s about $23 million. State transportation aids have seen inflation adjusted decline of $7.2 million. Mr. Nicolini said that the City operates under a statutorily imposed debt limit for general obligation debt or 5% of equalized value, as do all local governments in Wisconsin. A recent Comptroller’s report suggests that using up to 80% of the limit is acceptable. Using that as a guide, the City could increase its net borrowing by a maximum of $180 million. Mr. Nicolini said that the City retires about $60 million each year so there really isn’t a lot of room for large annual net increases to General Obligation Debt. He said that the City is currently using around 69% or 70% of its debt limit. Prior to the bursting of the housing bubble, the City was using over 50%. Very little of the movement upward is the result of net new borrowing; it’s the result of the steep decline our property values. Mr. Nicolini said that while it’s a relatively small overall revenue item, interest earnings since 2006 have declined from $9.3 million to $670,000. He said that this revenue, which didn’t come from the tax payer or the service user, has virtually disappeared as a result of the interest rate environment. He acknowledged that there are some benefits on the borrowing side. Regarding state shared revenue, Mr. Nicolini said that it’s fair to discuss it in nominal and inflation adjusted terms. Until the recent changes in Act 10, the City’s labor relations environment was governed almost entirely by state law. That tended to produce growth in total compensation that exceeded the rate of inflation. Just to keep pace with headline inflation the City would need $78 million more in the 2013 appropriation than it is expecting to receive. In addition to the stable contribution policy for the pension fund, Mr. Nicolini identified other positive financial developments that may assist the committee and policy makers in upcoming capital budgets. He said the City has been able to maintain an City of Milwaukee Page 9 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE essentially level amount of new borrowing authority in recent budgets, and our debt management policies have stabilized debt service levy. Mr. Nicolini said the City’s reserves are in good condition and the pension reserve will help with the transition to higher contributions. The Tax Stabilization Fund is approaching 5% of general budget, which is generally seen as a bench mark standard, and the City has strong debt reserves. Mr. Nicolini also said that revenue diversification has been an important factor for the sewer program. The Storm Water Management charge has added $23.8 million in annual revenue in a manner that fairly distributes costs across all property classifications including tax exempt. It helps to fund storm water management programs both in the operating and the capital budget. Summarizing the three year outlook, Mr. Nicolini said that projections for increases to pension contribution and health care benefits for 2013 through 2015 relative to 2012 are at least $152 million. Projected revenue grown for the same period is $12 million. He said the implications for the capital improvement program may be less severe than for the operating budget. Mr. Nicolini believes the City can maintain about $74 million in annual levy supported debt. He added that any kind of emergency or out of plan projects will be more difficult to manage. There may be some additional repayment capacity if policy makers choose a less moderate levy control objective. Regarding potential opportunities, Mr. Nicolini said that the Comptroller has been recommending greater use of revenue bonds, especially for sewers. He also said there may be some opportunity to aggregate better performing TIDs and reduce the City’s General Obligation debt. Mr. Nicolini added that it may be possible to move some of our current levy supported debt financing for certain of our programs onto user charge finance. He gave the example of Major Fleet Equipment, much of which is used for performing solid waste services or snow and ice operations. He said a portion of those costs could be moved to user charges without having explosive increases to the user charge rate. Mr. Nicolini said that certain facility and technical improvements might be able to be moved to the enterprises that are using those facilities. He mentioned the facilities at N. 35th St. & W. Hayes and S. 35th St. & W. Lincoln Avenue. Mr. Nicolini said it may be beneficial because there is more flexibility in enterprise and user charge finance than in the property tax levy. He said he could potentially identify as much as $6 million to $8 million of annual baseline debt that could moved to user charge finance. He said that it is a departure from current practice, but the current fiscal environment requires city staff to consider all the reasonable options that are available. Regarding the 2013 Budget, Mr. Nicolini said that the Mayor will propose an increase significantly above the budget request and the CIC recommendation for the local street program. The Budget will propose a $500,000 transfer storm water management charges from the SMF to offset the cost of curb and gutter. 6. Set next agenda. Ms. Brengosz said that the regularly schedule meeting for October 17 conflicts with the Finance & Personnel budget hearings and proposed moving the meeting to Tuesday, October 23 at 1:30pm. She also said the two meetings in October would be for discussions relating to the 2013 Proposed Budget. Meeting adjourned at 11:23 a.m. Staff Assistant Tobie Black City of Milwaukee Page 10 CAPITAL IMPROVEMENTS Meeting Minutes September 6, 2012 COMMITTEE This meeting can be viewed in its entirety through the City's Legislative Research Center at http://milwaukee.legistar.com/calendar. City of Milwaukee Page 11