FY 2021 Capital Budget OFFICE of the COUNTY AUDITOR
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Auditor’s Summary of the Proposed Howard County FY 2021 Capital Budget OFFICE OF THE COUNTY AUDITOR Craig Glendenning, CPA County Auditor M E M O R A N D U M April 18, 2020 MEMO TO: Council Members FROM: Craig Glendenning County Auditor SUBJECT: EXECUTIVE’S PROPOSED FISCAL YEAR 2021 CAPITAL BUDGET The Executive’s Proposed Fiscal Year 2021 Capital Budget (excluding the Water and Sewer projects) is $242.2 million, which represents an increase of $69.6 million (or 40.3 percent) more than the FY 2020 Approved Capital Budget of $172.6 million. New Funding Sources: One of the reasons for the large increase in the FY 2021 Capital Budget request are new funding sources: Other General Obligation Bonds (Other GO): These are General Obligation bonds that are supported by 4 dedicated revenue streams, totaling $82.3 million of FY 2021 requested appropriation. Attachment 14 provides the projects that have proposed appropriation of Other GO bonds, as well as the revenue stream that will fund the debt service. NOTE: Per the Administration, “all GO bonds are backed by the full faith and credit of the County. All loans, borrowings, and liabilities are reported to the credit agencies.” George Howard Building, 3430 Court House Drive, Ellicott City, Maryland 21043-4392 (410) 313-2005 TTY Number: (410) 313-6401 Fax Number: (410) 313-3287 https://cc.howardcountymd.gov/ 1 Other GO Bonds - Columbia TIF Second Set-Aside Incremental Tax Revenues: This is a revenue stream that is a result of incremental tax revenue from the Downtown Columbia TIF District. It’s the “second set-aside” and, according to the November 2016 agreement between the County and Howard Research and Development Corporation, it “shall go into the County’s general fund and may be used for any legal purpose.” The Executive is requesting to utilize this revenue source to pay debt service on $33.7 million of the new Other GO bonds being requested in FY 2021 for the New Cultural Center project. NOTE: Without debt service, Municap (the County’s TIF Consultant) estimates $235.2 million of general fund revenue generated over the next 30 years. Other GO Bonds - Recreation and Parks Programming: Although there has always been program revenue in the County’s Operating Budget to partially offset the cost to run the programs, this is the first time it is being requested to be utilized in the Capital Budget. The Executive is requesting to earmark the program revenue resulting from programs held at the proposed New Cultural Center to fund the debt service of $28 million of the Other GO bonds being requested as a funding source for the new center. Education Excise Tax: As a result of Council Bill 42-2019, the School Surcharge Tax was increased from $1.32/sq. ft. to $7.50/sq. ft. phased in over 3 years. Prior revenue was used as a dedicated revenue stream to fund the debt service of the Education Excise Bonds. The requested appropriation in FY 2021 is $3 million. This is the first year it is proposed to be used as Excise Tax PayGo. TIF Bond: These bonds are intended to be issued to fund 50 percent ($9.7 million) of the garage at the New Cultural Center. If approved, they will be the second issuance in the Downtown Columbia Taxing District. The revenue source for the debt service will be real property tax incremental revenue in the taxing district. 2 Funding Changes: General Obligation Bonds: The Proposed FY 2021 Capital Budget includes $98 million of new General Obligation bond appropriation and de-appropriates $3.5 million. This amount is $5.9 million (6.5 percent) more than the FY 2020 Capital Budget and exceeds the Spending Affordability Committee recommendation of $70 million by $28 million. Stormwater Protection and Restoration Fee: There is a proposed fee “adjustment” that will result in additional revenues. The proposal will assess the fee on the amount of impervious surface with multiple tiers. The resulting revenue is being proposed for stormwater projects. This adjustment will be discussed more during the operating budget review. Transfer Tax: A proposed tax increase will change the rate from 1 percent to 1.5 percent. The distribution of the transfer tax revenue has changed per State enabling legislation to primarily provide additional funding to Howard County School System (HCSS) capital projects. This will increase transfer tax PayGo and support debt service on the new Other GO bonds. Significant New Project: New Cultural Center (C0364): This proposed project is to design and build a cultural center in Downtown Columbia. It would include 180 total residential units (50 percent affordable) and corresponding parking garage spaces for the residents. The residential portion of the project will be funded by the Housing Commission. The $78.2 million non-residential portion of the project is proposed to be funded as follows: A $33.7 million Other GO bonds backed by the second set-aside of TIF incremental revenue; A $28 million Other GO bonds backed by Department of Recreation and Parks program revenue; A $9.7 million Downtown Columbia TIF bond (funding 50 percent of the garage); A $1 million developer contribution; and A $500,000 grant. NOTE: We have outstanding questions and will provide more details when this project is discussed in the General County section at the April 25th work session. 3 Revenue Projections: We reviewed the Administrations Special Revenue Cash Flow projections (other than for the Ag Preservation Fund and Ad Valorem which we have not received) and have the following comment: School Transfer Tax: The Cash Flow Projections we received include the FY 2021 appropriation of $12 million of Transfer Tax and $19.7 million of Other GO bonds. We noted that the fund balance dipped to $117,862 in FY 2024. However, we believe the year-end balance includes an aggressive assumption of revenues. From FY 2023 though FY 2026, the Administration is projecting a 66 percent increase over what they projected in the Post APFO cash flow we received. 4 ATTACHMENT TABLE OF CONTENTS AUDITOR’S SUMMARY Attachment 1 – Chart - FY 2021 Executive’s Proposed Capital Budget by Program (excludes Water & Sewer Projects) Attachment 2 – Comparison of the FY 2021 Executive’s Proposed Capital Budget to the FY 2020 Approved Capital Budget by Program Attachment 3 – Chart - FY 2021 Executive’s Proposed Capital Budget Request by Funding Source (excludes Water & Sewer Projects) Attachment 4 – Comparison of the FY 2020 Approved Capital Budget to the FY 2021 Executive’s Proposed Capital Budget by Funding Source Attachment 5 – FY 2021 Other Sources of Revenue Used to Fund FY 2021 Capital Projects Attachment 6 – Comparison of FY 2021 Funding for Projects Contained in the FY 2020 Approved Capital Budget to the FY 2021 Executive’s Proposed Capital Budget by Program Attachment 7 – FY 2021 Executive’s Proposed Capital Budget - Significant Capital Projects Attachment 8 – Bond Funding in Out Years of $4 Million or More from the FY 2021 Executive’s Proposed Capital Budget Attachment 9 – Open FY 2020 Approved Capital Projects not in the FY 2021 Executive’s Proposed Capital Budget Attachment 10 – Comparison of the Board of Education FY 2021 Budget Request to the FY 2021 Executive’s Proposed Capital Budget Request by Project Attachment 11 – Capital Projects in FY 2021 Abandoned Due to No Activity for Three Years Attachment 12 – State Capital Funds Directed to Howard County in FY 2021 Attachment 13 – Capital Projects with Land Acquisition Issues Attachment 14 – Other GO Bond Appropriation Requested in FY 2021 Attachment 1 FY 2021 Proposed Capital Budget By Program (excludes Water and Sewer Projects) Police Road Construction Library Fire 1.4% 0.7% 0.9% 0.2% Road Intersections Resurfacing Bridges 1.2% 2.5% 0.2% Sidewalks 2.5% Rec and Parks 3.0% Community College 6.1% Education-School Construction 38.3% Storm Drainage 6.9% General County 36.0% Capital Budget - FY 2020 Approved and Attachment 2 FY 2021 Proposed By Program (In Thousands) FY 2020 FY 2021 Change % Change Council Executive from from Program Summary Approved Proposed Prior Year Prior Year General County $ 39,603 $ 87,298 $ 47,695 120% Bridge Improvements 7,800 500 (7,300) -94% Storm Drainage 28,200 16,808 (11,392) -40% Education - School Construction 54,615 92,652 38,037 70% Fire and Rescue 17,498 1,600 (15,898) -91% Road Resurfacing 6,500 6,045 (455) -7% Road Construction 3,808 3,347 (461) -12% Sidewalk/Curb Projects 3,335 6,070 2,735 82% Library 488 550 62 13% Community College 4,824 14,874 10,050 208% Recreation and Parks 4,459 7,323 2,864 64% Police - 2,130 2,130 100% Traffic/Intersections 1,420 3,025 1,605 113% TOTALS$ 172,550 $ 242,222 $ 69,672 40% (In Thousands) FY 2020 FY 2021 Change % Change Council Executive from from Program Summary Approved Proposed Prior Year Prior Year Water$ 9,975 $ (11,350) $ (21,325) -214% Sewer 23,780 19,485 (4,295) -18% TOTALS$ 33,755 $ 8,135 $ (25,620) -76% Attachment 3 FY 2021 Proposed Capital Budget By Funding Source (excludes Water & Sewer projects and Defunded: TIF Bonds, Water Quality Bonds, and Master Lease ) Excise Tax Backed Stormwater Bonds, 1.1% Bonds, 1.0% Developer Contributions, 0.2% Other, 1.6% Pay As You Go, 4.2% Watershed Protection Cash, 4.7% Transfer Tax, 6.1% General Obligation Bonds, 34.3% Grants, 8.4% Maryland School, 8.7% OTHER General Obligation Bonds, 29.8% Comparison of Capital Budget Funding Sources Attachment 4 FY 2020 versus FY 2021 (In Thousands) FY 2020 Council FY 2021 Executive FUNDING SOURCE Approved Proposed $ Change GO Bonds General Obligation New$ 92,131 $ 98,116 $ 5,985 Other General Obligation