Impact Fee Analysis: Maintaining the Public’s Trust.

Impact Fee Analysis:Maintaining the Public’s Trust

Continuation of a Process that is related to all other financial issues

Unfortunate Situation during a Hectic time Lack of Structure, Accountability,

Experience, and Trust Long Lasting Implications

Interfund Loans New Impact Fee Law

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CFO Perspective

Impact Fee Fund Deficits and No Interfund Loans Recorded Fire Impact Fee Fund Deficit = $4+M

Transfers instead of Loans FY 2010 Budget showed a $4M+ Transfer

Out from the Library Impact Fee Fund

“Paid Cash for City Hall” Limited Discussions of Financing

Decisions with City Council3

Warning Signs

Scope of Work Verify accuracy and consistency with

current Impact Fee study Project Funding (Growth vs. Non-Growth) Accuracy of project costs, scope, etc.

Verify Accounting and Budget Practices Use of “Home Fund” Transfers between funds

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Consultant Analysis

Outcomes Preserve Integrity of Impact Fee Program Accurately report the City’s Financial

Condition Document the Priorities and Strategies of the

Current City Council

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Consultant Analysis

Project Evaluation Steps

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Examples City Hall Public Safety Headquarters 2003 MPC Debt Service Allocation

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Consultant Analysis

Flow of Funds-Development Activity

11 Impact Fees (Growth Projects)

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Police

General CIP FundGeneral CIP FundNon-Growth Projects Non-Growth Projects

Fire

PublicWorks

Wastewater

General Gov’t

Library

Parks Rec

Water Production

WaterResource

Reclaimed Water

Roads

General FundGeneral Fund

One-Time One-Time Revenues: Revenues:

Permits,Permits,ConstructionConstructionSales Tax, etc.Sales Tax, etc.

Portion of One-Time Revenues

$61M City Hall-Should Have Been

General General GovernmentGovernmentImpact Fee Impact Fee

Fund Fund

City Hall: -$35MCity Hall: -$35M

City Hall’s growth costs (future needs) of

$35M, or 57%

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General CIP FundGeneral CIP Fund

City Hall: -$26MCity Hall: -$26M

City Hall’s non-growth costs (existing needs) of

$26M, or 43%

$61M City Hall-Actually Recorded


Fund Fund

City Hall: $0MCity Hall: $0M

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City Hall Costs:City Hall Costs:Non-Growth -$26MNon-Growth -$26MGrowth Growth -$35M -$35MTotal -Total -$61M$61M

Because incorrectly recorded in General CIP Fund, the fact there were insufficient funds in the General Government Impact Fee Fund as masked.

$61M City Hall-Proposed Action


Fund Fund

City Hall: $0MCity Hall: $0M

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City Hall Costs:City Hall Costs:Non-Growth -$26MNon-Growth -$26MGrowth Growth -$35M -$35MTotal -Total -$61M$61M

InterfundLoan



Fund Fund Growth -$35MGrowth -$35MLoan From $35MLoan From $35M

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City Hall Costs:City Hall Costs:Non-Growth -$26MNon-Growth -$26MLoan RepaymentLoan Repayment +$35M +$35M*** OPPORTUNITY ****** OPPORTUNITY ***

Repayment of Loan

Example – Public Safety Building

Fee Area Square Feet Percent Components

Fire 16,500 17.2% Fire Admin / Training Center

Police 46,000 47.9% Police Admin / Shooting Range / Training Center

Gen. Gov. 33,500 34.9% Court / Prosecution / Broadcast Center

Total 96,000 100.%

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Example – Public Safety Building

Service Units Percent Allocation

Fee Area Units Existing Future Total Growth Non-Growth

Fire Res. / Emp. Pop 133,065 174,778 307,843 56.8% 43.2%

Police Trip Ends 260,888 202,264 463,152 43.7% 56.3%

Gen. Gov Res. / Emp. Pop 133,065 174,778 307,843 56.8% 43.2%

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Example – Public Safety HQ

Fee AreaNet Funded

– $ M (1)

Growth % Growth - $ M Within

Fund (2)Due (to) /

from Fund

Fire $2.56 56.8% $1.45 $0 ($1.45) Gen. Capital

Police $7.13 43.7% $3.11 $0 ($3.11) Gen. Capital

Gen. Gov $5.19 56.8% $2.95 $0 ($2.95) Gen. Capital

Subtotal $14.87 $7.51 ($7.51)

Funded in single fund with multiple funding sources

(1) Total expenditures all sources less any MPC debt funding which is addressed through debt service repayment.

(2) Amounts funded within the separate development fee funds.

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Results– 2003 MPC Debt Service

Fee Area Actual 07 - 10 Corrected 07 - 10 Difference

Fire $ 794,800 $ 485,571 ($ 309,229)

Police 1,896,109 982,217 (913,892)

Parks & Rec 7,639,422 3,174,741 (4,464,681)

Gen Gov 0 2,664,877 2,664,877

Sewer Sys. SPA 1 6,932,718 5,828,627 (1,104,091)

Gen. Fund (1) 2,004,602 6,131,618 4,127,016

Total $ 19,260,650 $ 19,260,650 $ 0

(1) Remaining debt service not related to growth-related development fee projects are allocated to the general fund.

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Interfund Loans: Opportunities and Challenges

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Fund Advances From Advances To Net Impact

1. General $2.7M -$6.8M -$4.1M2. General CIP $45.1 -$7.1 $383. Fire and EMS $0.3 -$4.3 -4.04. Police $3.4 $3.45. Parks and Rec $4.5 -$4.7 -$0.26. General Gov -$38.7 -$38.77. Public Works $4.6 $4.68. Water Replen. $2.0 -$0.1 $1.99. Water System $1.5 $1.510. Water Ops -$1.6 -$1.611. Sewer System $1.1 -$9.5 -$8.412. Sewer Ops $7.6 $7.6

$72.8M -$72.8M $0

$38M net Due From Other Funds Owes Police SDF fund $2.5 million and Public Works SDF

fund $4.6 million because growth portion of facility was overstated

General Govt. SDF fund owes General Capital $36.0 million due to charging growth portion of City Hall and other facilities to this fund

Parks & Rec. SDF fund owes $4.7 million due to transfers exceeding non-growth portion of various projects charged to Gen. Capital

Fire/EMS SDF fund owes $4.3 million due to funds transferred from General Capital to cover deficit.

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Summary: General Capital Fund

1. No Money is Missing

2. Impact Fees were Used to Construct Growth Related Projects

3. Timing of funding-not usage causing $73 million disconnect!

4. Growth projects budgeted vs. spent

Consultant Report Findings

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5. JE’s lacked supporting documentation, explanation of intent, and approvals

6. Significant number of correcting journal entries

7. Three MPC Bond Issues were all recorded in the same fund1. $3.4 M Deficit in 2000 MPC Bond Const. Fund

2. $4.0 M Excess in 2007 MPC Bond Const. Fund

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8. Bond Reserve requirements were not met

9. Restatement of $971K on financials

10. $3.9M bond issuance to cover a shortfall in pooled operating cash

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Consultant Recommendations

1. Record $73M of Interfund Loans and other correcting entries

2. Journal entries should always be approved by appropriate staff and contain good supporting documentation including explanation of intent and outcome (e.g. transfers and loans)

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Consultant Recommendations

3. The City should transfer funds into the 2007 Bond Reserve account to bring the balance up to the required $5M

4. Update the Impact Fee Study and fee calculations

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1. Who was responsible? ALL involved could have done a better job

2. What does this mean to the City?1. Growth pays for growth

2. General Fund’s Fund Balance $4.1M Reduction

3. $1M+ Increase in Debt Payments in General Fund

4. Bond Rating?

5. CIP: Opportunities and Challenges

Questions

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How did SB 1525 effect Surprise? After January 1, 2012, cannot charge or collect

fees for specific projects defined in new statute Limitation on fees collected and pledged for

repayment of debt service for projects not allowed under the new legislation

Debt must be issued before June 1, 2011 Surprise “pledged” impact fees for interfund loan

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New Development Fee Legislation

How did SB 1525 effect Surprise?

Dev. Fee schedules will need to be revised Funds collected up to Jan.1, 2012 must be spent

in same fee category by January 1, 2020 Surprise will be impacted by this portion of the

law---i.e. City Hall

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New Development Fee Legislation

Major Policy Change regarding Funding and Financing Infrastructure More Narrowly Defines “Necessary Public Services” Unclear, Unproven Language Cities are Impacted Differently Difficult for cities to issue new debt with impact fees as

repayment pledge Specific project types are not allowed to be paid by

impact fees starting January 1, 2012

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Major Changes in SB 1525

Fees under new statute must be adopted by August 1, 2014

New requirements for Infrastructure Improvement Plan (IIP)Includes existing infrastructure and available capacityIdentify service areas for “necessary public services”Includes “land use assumptions”Must be prepared by “qualified professionals”Must be updated every 5 years

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New timelines for adoptions Advisory committee vs. biennial audits Additional reporting requirements Required to demonstrate need to service new

growth by “service unit” and “service area” requirements

Forecast growth related revenues to offset costs of new infrastructure/facilities

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New growth projects allowedMust have a 3 or more year life

expectancyMust be owned or operated on behalf

of municipalityFinancing costs are allowed for growth

related projects

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What is not allowedGeneral government facilitiesAdministrative, operating and maintenance

costsLimits projects for police, fire, parks and libraryIncreased level of serviceParks over 30 acres that do not show a direct

benefit to new development

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Capacity can be reserved Development fees MUST be assessed to all customer

classifications and burden on new growth Provides additional language for

credits/reimbursements Define time period for projects to be completed for

new growthExcept for water & sewer, cannot exceed 10 yearsWater and Sewer is 15 years

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On or after June 1, 2011 – No adoption or increase in TPT rate for construction or similar excise tax

Remains in place until July 31, 2010 On or after August 1, 2014 – Excess TPT above

average TPT rate has to offset development fee calcs

Potentially could impact future development agreements

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Most important upcoming dates: January 1, 2012 August 1, 2014 January 1, 2020

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Summary of SB 1525

Comments and Questions

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Impact Fee Analysis: Maintaining the Public’s Trust.

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Transcript of Impact Fee Analysis: Maintaining the Public’s Trust.