Analysis of the Proposed Capital Program 1
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SUFFOLK COUNTY LEGISLATURE Robert Lipp BUDGET REVIEW OFFICE Director May 10, 2013 William J. Lindsay, Presiding Officer and Members of the Suffolk County Legislature Dear Legislators: Accompanying this letter is the Budget Review Office Review of the 2014-2016 Proposed Capital Program and 2014 Capital Budget. We have maintained the same format as last year’s report. One new front end write up was added that summarizes a new funding source, FEMA aid, in the Proposed 2014-2016 Capital Program. Highlights of this report can be found in the Introduction immediately following the Table of Contents. Among other things, recommendations made in this report reflect what the Budget Review Office believes are needed changes, but exclude additional funding we would want to recommend in better times. On a personal note, this is the first Budget Review Office report following my permanent appointment as Director. I would like to thank each and every Legislator for your vote of confidence in appointing me. I promise to work hard to maintain that trust and confidence. I would also like to thank the entire staff of the Budget Review Office for their hard work and long hours in preparation of this report. I am confident you will find the quality of this report up to Budget Review Office standards. The credit for our work effort goes to each and every member of the Budget Review Office. My staff and I remain ready to provide whatever assistance the Legislature may require during the capital program and budget evaluation and amending process. Sincerely, Robert Lipp, Director Mailing Address: P. O. Box 6100, Hauppauge, NY 11788-0099 (631) 853-4100 FAX: (631) 853-5496 e-mail: [email protected] SUFFOLK COUNTY LEGISLATURE William J. Lindsay, Presiding Officer Wayne R. Horsley, Deputy Presiding Officer District 1 Al Krupski 2 Jay H. Schneiderman 3 Kate M. Browning 4 Thomas Muratore 5 Kara Hahn 6 Sarah S. Anker 7 Robert Calarco 8 William J. Lindsay 9 Ricardo Montano 10 Thomas Cilmi 11 Thomas F. Barraga 12 John M. Kennedy, Jr. 13 Lynne C. Nowick 14 Wayne W. Horsley 15 DuWayne Gregory 16 Steven H. Stern 17 Lou D’Amaro 18 William Spencer Clerk of the Legislature Tim Laube Counsel to the Legislature George Nolan SUFFOLK COUNTY LEGISLATURE The Budget Review Office Robert Lipp, Ph.D. Director Rosalind Gazes Assistant Director Allen Fung Director of Information Mgmt. Joseph Schroeder Energy Specialist Diane Dono Senior Legislative Analyst Craig Freas Senior Legislative Analyst John Ortiz Senior Legislative Analyst Robert Doering Legislative Analyst Jill Moss Legislative Analyst Cary Flack Office Systems Analyst III Laura Halloran Assistant Legislative Analyst Joseph Muncey Assistant Legislative Analyst Benny Pernice Assistant Legislative Analyst Anthony Oliveto Office Systems Analyst I Laura Provenzano Office Systems Analyst I Sharen Wagner Principal Clerk TABLE OF CONTENTS Section Page Introduction I-II Analysis of the Proposed Capital Program 1 Suffolk County Land Acquisition Programs and Policies 10 New Funding Source Code (FE) 20 Capital Projects Included in the Proposed Capital Program and Budget As Previously Adopted and Requested by Departments 22 Select Project Status Updates 25 Debt Service Impact 30 Index of Capital Projects 31 Individual Capital Project Reviews 40 2014-2016 Proposed Capital Program Schedule 476 Introduction “We must consult our means rather than our wishes.” George Washington The dilemma facing the County is that our many needs are constrained by the current large operating budget deficit that is exacerbated by a significant increase in capital related debt service costs. That being said, the focus of this review has not been to impose a debt policy on the Legislature without first coming to a consensus on how to proceed. Recommendations that this office has made in the past have recognized there are no easy solutions to address rising debt service payments in the short run. Once current operating budget problems ease, we believe long term fixes that should be considered are: (1) returning to a more aggressive debt repayment schedule, (2) incorporating pay-as-you-go financing in the operating budget, and (3) establishing a policy or guideline to restrict bond authorizations. Should deficits continue to persist, we may be forced to make even more difficult decisions, including only funding capital projects that meet very restrictive criteria or, in the extreme, possibly declaring a moratorium for one or more years on the capital program (adopting zero local funding). If we focus our analysis on capital projects for countywide purposes that are financed by issuing debt, the good news is that in the first year of the program, the Proposed 2014 Capital Budget is $21.5 million less than the Adopted 2013 Capital Budget. The bad news is the proposed three year program (2014-2016) is almost $132.8 million more than last year’s adopted three year program. In fact, the three year increase for projects funded with serial bond debt would be even larger if not for a new funding source (FE), FEMA aid, included in the proposed capital program. The three year proposed increase in the capital program is partially offset by a recent downward trend in pipeline debt. Compared to this time last year, authorization to borrow for countywide projects is down $47.4 million. In addition, the most important year of the proposed program is the 2014 capital budget, which is the only year that can be acted on by resolution in 2014. That’s the good news from a fiscal perspective. The bad news is the considerable upward pressure on future borrowing proposed for 2015 and 2016. The County has until next year’s 2015-2017 Capital Program to determine if these proposed increases are affordable. It is important to note that the increase in the capital program is not meant to be a criticism. In fact, the Budget Review Office recognizes the many needs facing Suffolk County, with several recommendations being made in this report to either advance or increase funding. To be more specific, this report recommends advancing $8.5 million in funding to 2014 for various projects that in our estimation should not be delayed. We also recommend reducing funding in 2015 by $38.4 and increasing it by $61.3 million in 2016. The large recommended changes for 2015 and 2016 are explained by our treatment of Phase II of the jail (CP 3008), where we recommend reducing 2015 by $50 million and increasing 2016 by $63.8 million. Netting out the jail, our recommendations would call for an increase of $11.6 million in 2015 and a decrease of $2.5 million in 2016. Finally, we recommend reducing funding in SY by $14.2 million. Some of the project highlights implicit in our recommendations include the following: In 2014 Defer $5 million from 2014 to 2015 for Jumpstart Suffolk (CP 6424). Advance $2.5 million from 2015 to 2014 and add an additional $1 million for Bridges (CP 5806). I Advance $2 million from 2015 to 2014 for Surrogates Court (CP 1133). Advance $1.9 million from SY to 2014 for Telecommunications (CP 1814). Advance $1,011,000 from SY to 2014 for Energy (CP 1664). Other changes include recommendations made for highways, the ballpark, bulkheads, and Riverhead Power Plant projects. In 2015 Defer $50 million for Phase II of the jail (CP 3008) from 2015 to 2016 in order to have all construction funds in one year. Decrease funding associated with the advancements noted for 2014. Increase of $5 million from deferring funding in 2014 to 2015 for Jumpstart Suffolk (CP 6424). Advance $4 million from SY to 2015 for CR 39 (CP 5528). In 2016 Increase of $50 million from deferring funding in 2015 to 2016 for Phase II of the jail (CP 3008) to have all construction funds in one year and add $13 million to reflect a more realistic cost estimate. In SY Remove funding for Southwest sewer CP 8110 from the budget ($1.97 million). Decrease of $5.75 million for Bulkheads (CP 5375) in SY resulting from (1) advancing $2 million to earlier years and (2) removing $3.75 million in FEMA aid. Decrease of $4 million for CR 39 (CP 5528) in SY resulting from advancing funding to 2015. Other changes include decreases associated with advancing funding for various projects noted above. Turning to the operating budget impact of the capital program, the County can expect a significant increase in 2014 General Fund serial bond and bond anticipation note debt service costs of $31.9 million. Higher costs are attributed to the loss of debt service relief from off-budget tobacco bonds. This increase is implicit in the $250 million 2012-2014 projected operating budget shortfall presented at the March 12, 2013 Budget and Finance Committee. There is reason for some optimism in a few years – General Fund debt service is projected to fall by $6.6 million in 2017 and another $10.2 million in 2019. The drop off is mainly due to a decrease in 2017 associated with principal and interest payments on previously issued bonds and a decrease in 2019 from the expiration of repayment of borrowing for Correction Officers' retro pay. In closing, the County’s large operating budget deficit monopolizes much of our attention. The impact that the capital program has on the operating budget is indirect with a long lead time. As such, changes to the capital program will not have as much of an impact in the short run on reducing the operating budget deficit. With this in mind, the recommendations made in this report reflect what the Budget Review Office believes are needed changes, but exclude additional funding we would want to recommend in better times.