CAPITAL IMPROVEMENTS COMMITTEE

200 E. Wells Street City of Milwaukee Milwaukee, Wisconsin 53202 Meeting Minutes CAPITAL IMPROVEMENTS COMMITTEE ALD. NIK KOVAC, CHAIR Ald. Robert Bauman, Ald. Michael Murphy, Ghassan Korban, Martin Matson, Mark Nicolini, and Mariano Schifalacqua Staff Assistant: Linda Elmer, 286-2231 Fax: 286-3456, lelmer@milwaukee.gov Fiscal Planning Specialist: Kathleen Brengosz, 286-3926, kbreng@milwaukee.gov Friday, October 4, 2013 9:00 AM City Hall, Room 301-B Meeting convened: 9:11 A.M. All members present, except Mr. Froh. Member Mark Nicolini on the other side of the table presenting item #2 on the agenda. 1. Review and approval of the minutes of the September 5, 2013 Meeting This matter was taken up after item #2. Mr. Schifalacqua moved for approval of the minutes of September 5, 2013. There were no objections. 2. Discussion relating to the Mayor's Proposed 2014 Budget Ald. Kovac noted that department heads were not required to be present for this hearing as they had appeared in the spring, although they are welcome to attend. Other committee members concured. Mark Nicolini and Aaron Szopinski, Budget Office, present at the table. Mr. Nicolini reported that the Mayor's Office approaches the capital budget in the same manner in which is approaches the operating budget, with objectives that it wishes to achieve. Mr. Nicolini noted that with the financial performance measures the city needs to ensure that it doesn't take on an amount of borrowing that it wouldn't be able to manage in the future. Mr. Szopinski noted that the 2014 Proposed Budget total is $233.2 million (Exhibit 1 contained in file 121406) and also went through general budget numbers contained in Exhibit 1. The major component of the capital budget is a debt levy reduction of $6 million. Mr. Nicolini thanked Mr. Matson, the Comptroller, and his office for their assistance in reviewing the overall debt level of the city. The tax levy reduction will not be sustainable in the future, but it enables the city to take care of some of the issues relating to the Strong Neighborhoods Investment Plan and core infrastructure programs without adding to the total debt amount. The debt amount is a little higher than the Budget Office would prefer, per Mr. Nicolini. The Budget Office conservatively budgets for debt as that is the first legal obligation. Mr. Nicolini thinks that the city can safely cut back on the level of its cash fund in future years, while managing total borrowing. The Office would advise strongly to maintain a cash commitment and not shift it to an operating cost to avoid building up a larger City of Milwaukee Page 1 CAPITAL IMPROVEMENTS Meeting Minutes October 4, 2013 COMMITTEE debt load than is proposed. As the debt levy decreases, the city can manage the operating budget better. This is not intended to get back to a cash conversion policy that the city had prior to 2004. In 2004, when Mayor Barrett took office, a cash conversion policy was being followed, which caused some financial problems for the city, particularly in its infrastructure programs. Other than a two-year blip to borrow for the City Hall renovation, until this year, the city has been very, very close to the level of borrowing in the 2004 budget, although the city terminated the long-standing program of borrowing for Milwaukee Public School's capital programs by, in effect, moving that borrowing capacity into city programs. Some items have been moved from the capital budget account to the enterprise cash program, so the annual-cost calculations also include costs to replace equipment. Mr. Szobinski presented a Powerpoint (Exhibit 1 contained in file 121406 ). The $7 million in cash goes to reduce the debt level directly, it's revenues from the debt service fund. Mr. Nicolini noted that the city reduced withdrawal from the public debt amortization fund by half a million relative to last year. Roughly speaking, the city is borrowing more and spending more, but is also taking short-term cash resources and putting them into high-impact streets short-term investments for the Strong Neighborhoods Investment Plan, to avoid adding more long-term debt. The recycling facility will need to be addressed in terms of how this will be funded if that facility is fully rehabilited, as that would not generally be a one-year funded project. There are also a number of information technology facilties to which cash was added as they don't really fall into 15-year funding cycles. The city is making normal debt payments on the anticipated schedule, or even at a faster rate, per Mr Szopinski. Mr. Nicolini anticipates that the increased use of tax levy cash will only be for 2014, not annually. The local street replacement cycle is at 57-58 years, while in 2004 it had been at 108 years, per Mr. Nicolini. Right now the program has $14 million, but there is still a backlog of streets that need to be resurfaced. The 2014 budget is anticipated to be beginning a 7-8-year focus on replacing high-traffic streets. Anecdotally, Ald Kovac has noticed more street constuction occurring, while Ald Bauman has seen that downtown as well. There is also an increase in street lighting, with the anticipation of completion of a closed circuit problem, which will allow the Department of Public Works (DPW) to respond more quickly to street lighting issues. Paving increases street lighting work, since the belief is that as the paving work is being done, the street lighting may as well be done as part of the same project. Tthe bridge program capital fund is also increasing and is another area that hadn't been maintained in the past. Both the federal and state funds have decreased in bridge funding, so that has added more financial stress at the local level. Ald Kovac asked about how the federal shutdown would affect freeways. Mr. Nicolini pointed out that currently the operating funds are affected. Ms. Brengosz pointed out that her document (Exhibit 2 in file 121406 ) does address the public funding sources for bridges. The federal stimulus funds provided a major funding source for bridges. Sewer manintenance and capital improvement allocation are also increasing for 2014 which should help the city long term with having a well-functioning sewer system. In 2006, with the creation of the Stormwater Maintenance Charge, the city was able to diverse funding for sewer services away from a single water-consumption base. The city is currently replacing, rather than re-lining, as the number of sewers that can be re-lined are decreasing in number. Per Mr. Korban, the re-lining of sewers, which is done using a hardened foam with Styrene, has been checked after being in place for City of Milwaukee Page 2 CAPITAL IMPROVEMENTS Meeting Minutes October 4, 2013 COMMITTEE 26 years and still looks untouched, per Mr. Schifalacqua. The Strong Neighborhoods Investment Plan is a three-year plan and in 2014 is heavy in demolition the first year, then will be focusing on rehabiliation and reconstruction after 2014. The Dept. of Neighborhood Services will be able to contract for the demoliition of about 200 properties that are bank-foreclosed, privately held properties There is also $770,000 for DPW demolition and equipment for city owned properties and $4.4 million in various Dept. of City Development accounts for rehabiliation of properties and vacant lot beautification. Federal funds, HOME and community development grant funds, could add an additional 80-100 homes to that total. [For more details relating to this, please see the Special Joint Committtee on the Redevelopment of Abandoned and Foreclosed Homes minutes of 9/30/13. ] Mr. Nicolini also wants to look at what extent we can set our future charge revenues to offset costs while mantaining a good service level. Another concern for DPW is how to update the aging infrastructure while still funding operating needs. One ultimate question for DPW is what is the best payback for investing in private infrastructure versus public infrastructure for the sewer program, as well as the city's approach to its aging buildings, and managing the transition to a larger share of costs for local government. In regards to the Housing Trust Fund and its anticipated funding for 2014, the Council passed legislation to extend tax incremental districts (TID) for an additional year, with those additional funds to be used for affordable housing initiatives throughout the city. A new change in state law gives the city the authority to do this , but the state Department of Revenue must certify these funds. Per Mr. Schifalacqua, there seems to be a lot of room for negotiation with the state, so that will be looked at more for the 2015 budget. For 2014, it just is impractical to get all the details hammered out in order to include these funds in the 2014 budget. Ald. Bauman would definitely want any TID money to be used for the Housing Trust Fund (HTF). The HTF is dedicated primarily to supportive housing for homeless verterans and also funds a lot of new housing, primarily multi-units, with a few exceptions, per Ald. Bauman. Per Ald Kovac, the city owns 10 times more housing stock than it is used to, and he questions where the former residents are currently living. Are they doubling up? Moving to other homes in the city? Per Mr. Nicolini, the housing crisis was fueled by speculation and fraudulent banking practices. The use of TID revenues for affordable housing would provide a short-term influx of money without additional borrowing. There are $200,000 in additional projects to be funded under the HTF. Ald Murphy has done a great job, per Mr. Szobinski, at leveraging private funds and using small amounts of public money for projects. Ald. Kovac said that $25,000 in the proposed budget for the municipal art fund might be adequate for this year, but may need to be increased, or even doubled, next year as there will be components of public art in the new or restructed libraries. Mr. Froh questioned the personal computer (PC) replacement cycle, which, per Mr. Nicolini, will be handled through the operating budget, rather than the capital budget in the future. There are still some loose ends in terms of what the replacement cycle should be (3 years versus 5 years) and also to have these costs budgeted through a central account in the future. Currently it is the individual deprtment which determines the replacement cycle and its requested as part of a capital budget, but it may not be that way next year. Mr. Schifalacqua questioned the remodelling of the 809 buildng. Remodeling has been begun, and this is the second year of funding, with current funds sufficient to City of Milwaukee Page 3 CAPITAL IMPROVEMENTS Meeting Minutes October 4, 2013 COMMITTEE address critical needs. Mr. Niclolini can provide an update on what has been accomplished so far. Breakdown by various departments: City Attorney's Office - The original $1.5 million cost was an estimate for heating, ventilation and air conditioning (HVAC) and electrical costs that need to be performed. Per Mr. Korban, the scope ofwork hasn't changed, but the estimated cost is now $2 million due to inceased costs since the original estimate. The Budget Office will double-check the HVAC and electrical costs. Common Council-City Clerk's Office - The proposed renovation work wasn't funded, but the digital conversion for the city channel was. Dept. of City Development - For the in-rem properties category, that is calculated as capital work on any ciy-owned property, inluding occupied property. Some of those funds are for rent-to-own or rehab programs, and includes federal HOME and CDBG funds. Ald. Bauman is concerned that the Housing Trust Fund is being decreased from $600,000 to $300,000. This Fund has a 58% resident-preference leve and a 75% Emerging Business Enterprises participation level. The HTF is also the only source of local money that can be used to save larger homes that are in intact neighbohoods that are in danger of demolition. He will be bringing this issue up during the budget hearings. The expenditure limit for each property is $50,000, unless separate Council action were taken on a specific property. He is concerned that this low limit will result in political decisions being made and pit districts against each other. His district has a large number of these older homes that are in danger of being lost. The Budget Office is merely trying to set the amount at a level at which the property is protected fom the elements versus getting them into condition for sale. Ald. Bauman wants to emphasize the job-creation aspect of this program. Fire Department - this department has a strong reserve fleet, so no vehicles are set for replacement in the 2014 proposed budget. Ald. Bauman questioned if the city had looked at the use of miniature fire trucks. Mr. Nicolini said that was looked at, but was felt they wouldn't work in our environment. Overall, the city is trying to move equipment replacement costs into the operating budget, rather than have those costs in the capital budget. Library - it is anticipated that the current plan of building new libraries as part of mixed-use developments will continue rather than building freestanding neighborhood libraries, which are costly to construct and would result in one library for every current two libraries. The Forest Home and Mill Road libraries will be the next libraries to be looked at for mixed-use development There is money in the budget for both libraries, but the question is who will be the best partners for these libraries. The HVAC system in Tippecano Library has also been budgeted for replacement . By the end of next week, a 6-year-capital progam should be available from the Budget Office. Ms. Brengosz is concerned with the merging of the accounts for new libraries and also for maintenance costs for existing libraries. Mr. Nicolin said this was done just because it is easier to work with one account rather than two. Dept. of Neighborhood Services - This department's capital account is heavy in concentrated blight eliminatinon (demo) and the 10th floor will not be remodeled. These demolition costs are for privately owned, bank-foreclosed properties - $1.2 million. Ald. Kovac asked why the city isn't using DPW staff to demo these properties, rather than private City of Milwaukee Page 4 CAPITAL IMPROVEMENTS Meeting Minutes October 4, 2013 COMMITTEE contractors. Demoliition of 100 homes alone would be a challenge for the new DPW crew, so the other demos will be contracted out. As DPW becomes operational, the city may no longer contract for demolition, which would result in faster response times for demo. The city is receiving $2 million fom the state for demoliition efforts and has a backlog of 650 properties on the raze list. The city hopes to sell some of its city-owned proeprerties. Ald. Kovac said that he and Ald. Bauman toured Detroit a few years ago and there are clear cases where demo needs to be performe, such as fire-damaged buildings that are still standing, but it should not be over done as was the case in some parts of Detroit, where entire blocks and neighborhoods were razed. Ald. Kovac noted that the city needs to retain its population, unlike Detroit, which lost 25% of its population over a 10-year period. Police Departmentt - The proposed budget incldues an upgrade to the radio and communication system to reduce the number of calls that are being dropped. There is still some previously authorized funding and this amount should get the department through this year. Port - all of the projects are being put into the operating budget. The purchase of a new crane will be done off-budget through revenue borrowing as some procurement work is needed. The Port currently generates a million dollar surplus. If money is used for the purchase of a crane, it wouldn't be available for the Tax Stabilization Fund. However, if a crane is purchased, there will be no need to lease one, as is currently done. Ald. Kovac noted that the port is being funded through the 2014 proposed budget, it's just being funded differently. Ms. Brengosz noted that the port is able to partner with other city departments and get work done, such as sewer work through the DPW, so it may not be reflected in its budget. DPW- Sanitation - hinges on the future use of the recycling agency, whether that facility will function as a recycling vehicle or a transfer agency. $100,000 was authorized for a system plan for all the facilities. DPW - Forestry - hazardoud tree removal was put in to a capital account DPW - Fleet - $7.5 miion commitment ($300,00 for staff plus $700,000 for demoliition equipment) Ald. Bauman said that the budget was decreased by $700,000 as the Committee recommended $7.5 milion, which the department has budgeted, but that $7.5 million now includes $700,000 for new equipment. Ms. Brengosz said the department may not purchase the equipment, but may lease instead. Mr. Nicolini said that a decision had been made to purchase, rather than lease. DPW is currently training its staff with the contractors who do demo work, so they will be able to hit the ground runnng. [For additional information on the city plan to use city staff for demolition work, please see the Special Joint Committee on the Redevelopment of Abandoned and Foreclosed Homes minutes of September 30, 2013.] Overall, it is believed that having DPW do demos should be cheaper than hiring private contractors. Ald. Bauman is excited if DPW does this because it gives the city more freedom in terms of deconstructon and increased jobs. Mr. Szopinski noted that construction in old homes is valuable and there are potential sales of items removed from these homes. Ald. Bauman and Ald. Kovac both enocuraged saving old wood from the older buildngs. DPW - Infastructure - projects are spread throughout the city and the focus is on the City of Milwaukee Page 5 CAPITAL IMPROVEMENTS Meeting Minutes October 4, 2013 COMMITTEE high-impact street program, with a $2 million increase. Street improvements will result from the Northwestern Mutual Life project and the gateway project. DPW - Streets - The fund was decreased by $1 million, but the sidewalk and alley fund was increased. Ald. Kovac noted that this committee likes sidewalks and alleys. DPW - Traffic Control - $1.9 million; the fund was increased from $700,000 in 2008 and a lot of the proposed increase is for improved circuitry work coming in at $800,000. A big change is in the underground conduit, whiich is not to add capacity, but to just go with absolutely essential projects this year. The city will pay 10% of the zoo interchange costs. Bill Christianson, Budget Office, came to the table in case there were any questions. DPW - Northwest garage - roof and exterior repairs are scheduled and will cost a little over a million dollars. City Hall remodelng - $191,000 of work (including some work at the Development Center) Playground Improvement Challenge Fund- commitment was made for matching funds, so that fund continues at $60,000. Decreased Funds: Municipal garage and outlying facilities - removed an automated truck wash at Northwest Garage and and a vehicle maintenance repair bay at central garage. DPW - Facilty Systems - budgeted at $1.8 million -- committed to phase 2 of an eletrical upgrade at Lincoln garage, digital controls for buiiding controls at City Hall, mainframe upgrade, security and access control upgrades. Not funded: computer maintenance management system for the police department, stormwater management initiative, Parking Fund - didn't fund a joint dispatch center Water Works - no changes, as the department requested. They are doing more in the mains in the capital budget, rather than in the Water Works facilitiies. 3. Set next meeting agenda City of Milwaukee Page 6 CAPITAL IMPROVEMENTS Meeting Minutes October 4, 2013 COMMITTEE The Budget Office will provide updated information on the 809 building renovation, as well as the City Attorney Office's estimated HVAC. Meeing adjourned: 10:58 A.M. LInda M. Elmer Staff Assistant This meeting will be webcast live at www.milwaukee.gov/channel25. Members of the Common Council and its standing committees who are not members of this committee may attend this meeting to participate or to gather information. Notice is given that this meeting may constitute a meeting of the Common Council or any of its standing committees, although they will not take any formal action at this meeting. Upon reasonable notice, efforts will be made to accommodate the needs of persons with disabilities through sign language interpreters or auxiliary aids. For additional information or to request this service, contact the City Clerk's Office ADA Coordinator at 286-2998, (FAX)286-3456, (TDD)286-2025 or by writing to the Coordinator at Room 205, City Hall, 200 E. Wells Street, Milwaukee, WI 53202. Limited parking for persons attending meetings in City Hall is available at reduced rates (5 hour limit) at the Milwaukee Center on the southwest corner of East Kilbourn and North Water Street. Parking tickets must be validated in Room 205, (City Clerk's Office) or the first floor Information Booth in City Hall. Persons engaged in lobbying as defined in s. 305-43-4 of the Milwaukee Code of Ordinances are required to register with the City Clerk's Office License Division. Registered lobbyists appearing before a Common Council committee are required to identify themselves as such. More information is available at www.milwaukee.gov/lobby. City of Milwaukee Page 7