File Name: 2011-12 BUILDING BETTER COMMUNITIES GOB PROGRAM
Agenda Date: 12/6/2011
Agenda Item Number: 6B1
DISCUSSION RE: 2011-12 BUILDING BETTER COMMUNITIES GENERAL OBLIGATION BOND PROGRAM PROJECTS
GENERAL OBLIGATION BOND PROGRAM
Dennis C. Moss, Prime Sponsor
Board of County Commissioners
Commissioner Moss noted he intended for this discussion to help members of the Board reach a consensus on a standardized process for moving Building Better Communities-Government Obligation Bond (BBC-GOB) Projects forward, and to provide the County Administration with direction on how to proceed with this process. He noted during this year’s budget process, the Mayor vowed not to move forward with GOB projects, except those already tied to a contract. Commissioner Moss asked Budget Director Glazer-Moon to explain the current process for prioritizing funding recommendations, and which projects were already obligated.
Budget Director Jennifer Glazer-Moon, Office of Management and Budget, noted members of the Commission were provided a list of GOB projects sorted by Commission District, the funding amount and Fiscal Year (FY) the projects would be funded during the program. She advised that the millage rate would need to be increased if more projects were expedited. Ms. Moon provided a Power Point Presentation on the BBC-GOB program, along with the background of each project and the funding availability, as follows:
Ms. Moon noted the $2.9 billion BBC-GOB program was a long-term, capital improvement program that would span 15 to 20 years. This program was overwhelmingly approved by the voters, and originally structured to fund projects with a “pay as you go” plan, and backloaded so that more projects would be funded near the end of the program when most of the debt service was paid. However, the County was ahead of schedule, Ms. Moon pointed out. Initially, the Administration consciously funded only a portion of the projects identified as priority infrastructure projects because they always assumed that more projects would be funded in future years. She explained that the total amount for projects in the first list was $7 billion; however, that amount was reduced to $2.9 billion because staff could not identify sufficient funding to cover that cost.
Ms. Moon provided a breakdown of funds spent on GOB projects to date, noting over 150 projects were completed and $814 million was spent as of Fiscal Year 2010-11. She advised that the County would borrow $2.9 billion to fund 300 GOB projects over the next 15 years, and pay it off over the next 30 to 40 years. Ms. Moon pointed out that revenues generated from the debt service millage must be used to pay down the debt service on existing bonds issued for projects already completed; however, these revenues could not be used for new projects. She explained that even if the County discontinued the program, members of the Board would still be obligated to set a millage rate high enough to generate enough revenues to cover the current annual debt service payment, which was $72 million.
Ms. Moon said the GOB money cycle could be defined as revenues generated by multiplying the property tax roll value with the debt service millage rate, which was used to pay the debt service on existing bonds. She noted additional revenues could be used to issue more bonds, commercial paper, and other financing mechanisms to generate additional revenues to pay for projects. She pointed out that an adjustment to the millage rate directly correlated with the amount of money needed to cover the existing debt service payments, rather than the amount needed to issue new debt.
Ms. Moon advised that the following assumptions were made: 1) the growth rate in the property tax roll would be zero percent in FY 2013; three percent in FYs 2014, 2015 and 2016; and five percent in FY 2017; 2) the annual interest rate on long-term debt would be 5.25 percent; 3) the projected expenditures on GOB projects would be approximately $7.5 million per month; and 4) extraordinary expenditures would be approximately $16 million in some upcoming months to reimburse the cost of work associated with County-owned museums and the Bicentennial Park, which were projects that had cash flow schedules in place. She pointed out that the projected growth rates of the property tax rolls listed above were the same as the rates assumed in the five-year forecast for the operating budget.
Ms. Moon stressed that the County was obligated to set the annual debt service millage rate high enough to generate sufficient revenue to cover the existing debt service payments and keep the Bond program operating; and could not adjust the rate any higher to generate extra monies for projects outside this program. She noted this was one of the simplest and cleanest transactions in the budget process.
Ms. Moon pointed out that the GOB was only 8 percent of the County’s total outstanding debt. She also pointed out that the annual millage rate (.285 this year) was not only tied to the current GOB program, but also to older GOB programs approved by the voters in the 1980s and 1990s, such as the Criminal Justice Bond Program and the Safe Neighborhood Parks Program, which supported various municipal projects.
Ms. Moon explained that the original plan to backload the BBC-GOB program heavily and issue $1.7 billion in debt in 2017 was unreasonable; however, in recent years, the County was able to take advantage of the increased performance in the tax roll beyond what was projected to accelerate projects and issue more debt. The County also took advantage of lower construction prices and adjusted the millage rate downward in years when the tax rolls decreased, which allowed some GOB multi-phased projects to be funded sooner than projected in the program, she added.
Ms. Moon noted it was originally assumed that the property tax rolls would increase continually over time; however, since the property tax roll performance never reached the level projected in the pro forma report, the millage rate would need to be increased above .390 at some point to generate the level of revenues needed to fund the current debt service payments.
Ms. Moon said it was more difficult to forecast capital expenditures than to forecast operational expenditures because capital expenditures were not fixed expenses paid at regular intervals, but larger sums paid on a reimbursement basis. She explained the steps for capital planning and noted, in determining which projects would be included in the budget, members of the Administration reviewed the available revenues from bond proceeds and commercial papers; 2) reviewed projected monthly construction schedules and projected extraordinary costs; and 3) reviewed those projects ready to proceed, based on whether contractors had obtained the requisite plan approval, permitting, and financing. Ms. Moon advised that for every bond issue, staff issued a multi-year forecast to determine the estimated revenues and the millage rate needed to cover outstanding debt.
Using various scenarios and estimates, Ms. Moon illustrated how changes made to the GOB program could impact the millage rate. She explained that if the Commission stayed within the current plan, the millage rate next year would be .285, and the following year it would be .445. On the other hand, if a project was funded for each Commission District that had not spent all of its affordable housing monies, the millage rate would increase to .334, she added. Ms. Moon indicated that some commissioners asked that projects be added or that changes be made to their district allocations. Others asked that their entire affordable housing allocation be exhausted. She noted it would be impossible to add projects in every Commission District and not raise the millage rate. She noted the Administration spent approximately $14 million this year on projects and promised to continue only those projects that had already started. Consequently, any new start-up projects would be delayed, pending the Board’s direction on how the Administration should proceed.
Ms. Moon defined commercial paper upon Commissioner Moss’ request. She noted “commercial paper” was a financing mechanism that was similar to a line of credit. The proceeds were used “as needed,” thus allowing the County to take advantage of short-term interest rates and to pay interest only on the amount borrowed, Ms. Moon noted. She also noted the Board authorized commercial paper when it adopted the budget and probably should have considered it all along, since it was a good financing mechanism for multi-year capital improvement plans. Ms. Moon advised that $180 million in bond proceeds from the prior issuances were available to spend on projects at a rate of $7 to $10 million per month. She noted members of the Administration anticipated the County would need to enter the market in August or September 2012 to issue more debt to replenish cash and continue projects. The Administration would issue commercial paper in the interim, to generate revenue until more bonds were issued.
Commissioner Moss referred to the attached list of GOB projects sorted by Commission District and asked how the funding recommendations were determined, which projects were ready to proceed, and what options were available to the Board for using funds earmarked for projects scheduled for funding, but not ready to proceed yet.
Ms. Moon responded that all projects funded in FY 2011/12 were either ready to proceed immediately or had begun already. She added that some projects scheduled for future years were ready to start sooner; however, the Administration had to make some difficult budget decisions in terms of prioritizing projects. She noted the drainage improvements projects were slated for completion over a period of 15 to 17 years because the County had limited capacity to do this type of work. She indicated that in the original plan an allocation was made each year for a certain number of projects; thus the Administration looked for projects ready to proceed and the most critical each year, and then determined which of those projects would be included in the budget, based on priority. When larger projects were scheduled to proceed, the Administration plugged smaller projects around them, Ms. Moon explained.
Commissioner Moss inquired about the Quality Neighborhood Improvements Program (QNIP), how it was funded in the past, whether it was possible to reinstate the QNIP program in the future, and whether the Administration would explore other funding opportunities for future projects.
Ms. Moon explained that the QNIP was not part of the GOB program, and its annual debt service payment was budgeted as a capital outlay reserve paid from the non-Ad Valorem revenues in the Unincorporated Municipality Service Area (UMSA) General Fund. She pointed out that the Administration had to reduce the operating budget significantly and make difficult decisions concerning departments, like Code Enforcement, Media Maintenance and Parks and Recreation; and because both the operating budget and the QNIP were funded from the same source, the priority was to maintain County operations rather than fund the QNIP.
Commissioner Moss noted it was important for the community to understand that the reason for eliminating certain park programs and discontinuing maintenance was to balance the budget, and not because the commissioners decided to eliminate them. Referring to larger allocations budgeted for museums, Commissioner Moss inquired whether any funding was available in FY2011-12 or other opportunities existed to move other projects forward, since many of the museums were not ready to proceed.
Ms. Moon explained that the Administration received a status report and evaluated projects every month to determine which projects were on schedule, in progress or ready to proceed. She pointed out that funding allocations may not be exhausted in one budget year, and contracts could be delayed for various reasons. She noted she could not say at this point, whether projects would move forward as anticipated or whether a significant amount of funding would be available to fund other unscheduled projects.
Commissioner Suarez commended members of the Administration for reaching an agreement with Fair Child Tropical Gardens, and noted he was concerned that the Coconut Grove Play House Project was scheduled so far out. He also noted his concern about the lack of funding for the Marine Stadium, noting the City of Miami wanted to ensure that $3 million was available in next year’s budget for this project.
Ms. Moon advised that the Tourist and Convention Development Tax (CDT) and other funding was available to start the Coconut Grove Play House project, and confirmed that GOB funding would be used for this project in future years. Regarding the Marine Stadium, she noted the former commissioner of District 7 made sure the agreement between the County and the City of Miami stated the $3 million GOB allocation would be the last payment for this project. She asked if the City had obtained the rest of the monies for the Marine Stadium project.
Commissioner Suarez responded that the City had not obtained those funds yet, and stressed that the City wanted to ensure the $3 million GOB funding was available next year.
Mayor Gimenez explained that the funding was contingent upon the City of Miami complying with certain conditions, within a given timeframe. He said he would do everything possible to ensure the City received the funding once they complied with the agreement; however, he had not heard from the City regarding the status of this project. He reiterated that the $3 million funding would be the last payment, once the City complied with the agreement.
Commissioner Suarez asked why the Marine Stadium was not listed in the list of GOB projects provided to the Commission today. He said he was told it was a joint project with the municipality.
Ms. Moon clarified that it was listed as a Historic Preservation project in Commission District 7, under the heading Municipality-Miami in Attachment C, page 4, and funded in FY2016/17. She explained that when the Administration developed the yearly budgets, it considered the projects anticipated to move forward, those delayed, and those not scheduled to move forward, but ready to proceed and which could be bumped up.
Responding to Commissioner Suarez’ inquiry, Ms. Moon confirmed that if the City complied with the conditions of the agreement, the Marine Stadium project could be expedited.
Vice Chairwoman Edmonson asked members of the Commission to limit their questions to the intent of this discussion, which was to direct the Administration on how to proceed with administering the GOB funding, rather than discussing district projects.
Commissioner Diaz stated that he was not opposed to this discussion, but would invoke the 4-Day Rule if it required the Board to take action, since several members of the Commission were not present in chambers. He added that he needed to research the issues further, and that some of the issues discussed might impact other commissioners’ districts, and it was not fair to be deciding them in their absence.
Vice Chairwoman Edmonson concurred with Commissioner Diaz’ comments, and said this matter should be considered in a separate workshop with all commissioners present.
Commissioner Bell suggested each commissioner submit their top priorities for GOB projects to the Mayor’s Office, and the BCC Chairman call a workshop to discuss funding allocations for these projects.
Commissioner Bovo commended Ms. Moon for providing a good presentation; however, he said he did not understand why this item was being heard so late in the day. He questioned what occurred to change the $15.3 million allocation approved on October 12, 2011 in the FY2011/12 budget for projects currently under construction in District 13, to a $1.4 million allocation as noted in the list provided today. He noted this issue was relatively new to him and he expressed the view that it would be preferable to discuss it separately and exclusively in a workshop.
Vice Chairwoman Edmonson concurred that a separate workshop was needed, and pointed out that the Chair attempted to schedule one on three occasions, but not every commissioner was available. She requested that members of the Board decide if they wanted to act on this item tonight or consider it at a separate workshop.
Commissioner Moss noted he recalled the Chair tried to call a Special Workshop to address this matter, but not all commissioners were available. He explained that today was the third time this item had been placed on an agenda with no results, and he requested it be placed on today’s agenda because he felt the issue needed to be resolved. He suggested this discussion item be deferred and placed on the next Commission meeting agenda as the first order of the day, when most of the commissioners would be available.
Pursuant to Chairman Martinez’ question, Ms. Moon replied that staff met with each commissioner at various times to provide them with information and update them on this issue. She pointed out that the main concern was how to reprioritize projects when less funding was available.
Chairman Martinez suggested this discussion be deferred to the December 08, 2012 BCC meeting and heard at the conclusion of the Zoning meeting on that day. He noted he would join Commissioner Diaz on invoking the 4-Day Rule if any motion was made to take action on this matter tonight.
Vice Chairwoman Edmonson stated she would join in on invoking the 4-Day Rule as well, if a motion was made.
Commissioner Jordan stressed that this matter should be considered at a workshop soon or placed on the next BCC meeting agenda as the first order of the day, pointing out that staff needed direction on how to proceed on projects that were already obligated. She suggested each commissioner submit their priorities, and staff prepare a matrix indicating where each project would be placed relative to the criteria needed to make each project ready to proceed, and provide it at the BCC meeting or workshop.
Vice Chairwoman Edmonson pointed out that the next BCC meeting was the last one for this year and its agenda would be full; thus, she believed the Chair should call a Special Meeting or a workshop on this issue.
Commissioner Heyman pointed out that recipients of GOB funding tied to matched funds, worked off a different schedule than the Commission Districts did, and could lose their matched funds if they were not used within a given timeframe. Commissioner Heyman asked the Office of Management and Budget Director to provide the County Commission with a detailed report listing the recipients of the BBC-GOB grant funding that were in jeopardy of losing matching funds, including the deadlines for using the matching funds.
Commissioner Heyman suggested the project to retrofit the existing Animal Services shelter be reprioritized since it had a County-wide impact and was scheduled to begin next year.
Ms. Moon advised that the Animal Services project would not be held up by the availability of funding, but would proceed and be funded on an as needed basis.
Commissioner Heyman noted there should be an understanding that certain categories of projects, such as those having County-wide impact, those with funding tied to matching funds, or those involving an ownership dispute or constituting an environmental threat would be expedited as much as possible. Commissioner Heyman suggested this matter be placed on the December 19, 2011 BCC agenda as a time certain item.
Following Commissioner Barreiro’s suggestion that the Chair call a Special Meeting, Chairman Martinez advised that a Special Meeting was necessary in order for the Board to take action, and he would send out the appropriate memorandum calling for one.
Commissioner Moss noted projects in his district (District 9) needed funding. He pointed out that attendance at Zoo Miami this year was the largest in its history, largely due to the Amazon project. He stressed that funds were needed to begin the design work of the front entrance, but he would hold off discussing it until the workshop. He suggested placing this matter on the December 19, 2011 BCC meeting agenda as a time certain item, in the event a workshop did not take place.
Chairman Martinez noted today’s discussion was intended to determine a process for moving GOB projects and was initiated by Commissioner Moss, whose desire was to start a project that was thwarted by the absence of a process. He said he had no issues with the original plan until he saw the list circulated today, which reflected the only project (the Grand Via) proposed for his district (District 11) would be delayed.
Ms. Moon clarified that the date reflected in the subject memorandum was the date of cash availability and when payment was due, and not the date the project was scheduled to start. She noted the project in District 11 could start as early as March 2012, but the funding needed to be available by June 2012.
Commissioner Barreiro commented that he attended a magnificent wedding at Zoo Miami this past weekend, and that the public needed to be aware of this project’s progress.
Board of County Commissioners
The Board deferred the foregoing discussion item to the next Board meeting scheduled for December 6, 2011.
Board of County Commissioners
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