Town Manager: Capital Plan Has Been Underfunded for Years

The Town Council created a policy in 2005 stating capital improvements should be funded at 2.5% of the budget. Since then, the policy has been met twice.

Town Manager Kathy Eagen cautioned the Town Council Tuesday to follow its policy concerning capital improvements.

Eagen told the council that only twice in seven years has it followed its policy adopted in 2005 to fund the town’s capital projects at 2.5 percent of the total budget.

“It's continually underfunded,” Eagen said of the town’s capital planned, compring projects defined as infrastructure, equipment or construction resulting in a value of at least $25,000 or a useful life of at least five years.

It includes things like road repair and repaving, maintenance for the town’s buildings, replacement of highway department equipment and of police cruisers as they reach the end of their useful lives.

And many of the items are scheduled along the town’s five-year plan. But in the strain of the current financial climate and the desire to keep tax increases to a minimum, the council has chosen to abandon the policy and allocate only a small amount of funding the capital plan.

Eagen showed that since 2005, funding has been erratic – from $2.5 million in 2008 (when the town paid for two school roofs), to $635,000 in 2010 and $1.8 million of the 2012 budget.

“The funding levels have been all over the board,” Eagen said. “It has been used as a budget-balancing tool or a place to take from when a lower tax rate is desired.”

Eagen showed that though town department heads put together five-year plans for capital improvements, they’re usually not followed and items are continually rolled over from one year to the next. 

The council is not directly responsible for all the cuts, however. Eagen makes many of the cuts before recommending her budget to the council in order to bring her budget in at the target, set by the council at the beginning of the budget process.

On top of that, she pointed out that the town’s infrastructure – with roads, parks, open space, the new police department and community center, as well as West Woods Upper Elementary School – have increased while town staff who can perform maintenance has decreased.

“We’re deferring things we feel we can defer because of the economic times, but eventually you get to the point where you have to do it and it costs more,” Eagen explained.

Higher costs of eventual – or at times emergency – replacement is just one of the impacts Eagen said follow reduced funding of the capital plan.

Another is possibly jeopardizing the town’s Aaa bond rating from Moody’s. Eagen showed a quote from the financial rating firm pointing out that the town’s capital improvement policy, which also requires pay-as-you-go financing when possible, makes for financial strength but that it abandoned it in 2009 and 2010.

“We have been very successful in meeting the pay-as-you-go financing requirement,” Eagen said. “Since 2005, we’ve only bonded two things: road improvements and fire apparatus.” 

Wants or Needs?

Following the discussion, council members generally endorsed the idea of following the policy, while Charlie Keniston asked Eagen whether the capital plan encompassed wants or needs.

“What’s in this Capital Improvement Plan now is long-term needs, equipment,” she said.

At the beginning of the five-year plan are always immediate needs, while year five might have more wants. Eagen identified only a few wants that were raised but not funded: a spray pad to replace the town pool, an exercise area at the senior center and turf fields. Farther down on the list are items she said the council could classify.

“Is replacing playground equipment a want or a need? We’ve been deferring it like it’s a want.” 

In addition, she said sidewalk repairs and replacement have all but ceased and little maintenance has been done to the town’s new buildings – now 10 years old. While town staff struggle to get all the fields mowed so ball games can be played, mulching and weeding have been cast aside.

Smaller items traditionally paid for out of the town's operating budget, including some fire safety equipment, have been pushed over to the capital budget, further limiting funds and clouding the picture of how much the town spends on capital items, Eagen said.

“The policy is endorsed by Moodys. That’s huge to us when we look at the refinancing of our debt we’ve done in the past few years,” said council Chairman Jeff Hogan. “We have a responsibility to focus on this more. It’s a difficult issue for everyone and I think we’re doing a good job.”


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