Analysis of the Proposed Capital Program 23
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SUFFOLK COUNTY LEGISLATURE Gail Vizzini BUDGET REVIEW OFFICE Director May 15, 2009 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 Proposed 2010-2012 Capital Program and 2010 Capital Budget. Although smaller than last year’s capital program and budget, the Legislature has the opportunity to determine whether the proposed program sufficiently plans for the County’s long-term needs. Among the policy issues for your consideration in the adoption of the 2010-2012 Capital Program and Budget are: What are the County’s options in terms of a long-term debt management policy? How do we manage escalating debt service costs due to prior authorizations for general fund projects and the fact that we will be bonding for the replacement jail in 2009 and 2010? Are we ready for the impact on general fund property taxes, especially considering the decline in sales tax revenue due to the economy and the significant two year operating budget shortfall? How to plan for and sufficiently fund the needs of the Southwest Sewer District including the replacement of the Outfall pipe, expansion in sewer capacity, on going maintenance and repair and the development of the scavenger waste facility? What is the proper level of capital funding to promote energy conservation and reduce the County’s energy consumption and operating costs? What is the appropriate level of current and future commitment to the capital needs of the Suffolk County Community College, to maximize state aid and coincide with the state five year aid plan for community colleges? This year the summary includes findings, recommendations and project status updates for many projects that do not appear in the project-by-project section. 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, Gail Vizzini, 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 Vivian Viloria-Fisher, Deputy Presiding Officer District 1 Edward P. Romaine 2 Jay H. Schneiderman 3 Kate M. Browning 4 Brian Beedenbender 5 Vivian Viloria-Fisher 6 Daniel P. Losquadro 7 Jack Eddington 8 William J. Lindsay 9 Ricardo Montano 10 Cameron Alden 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 Jon Cooper Clerk of the Legislature Tim Laube Counsel to the Legislature George Nolan SUFFOLK COUNTY LEGISLATURE The Budget Review Office Gail Vizzini Director Robert Lipp, Ph.D. Deputy Director Lance Reinheimer Assistant Director Allen Fung Director of Information Mgmt. Rosalind Gazes Chief Legislative Analyst Joseph Schroeder Energy Specialist Diane Dono Senior Legislative Analyst Kevin Duffy Senior Legislative Analyst John Ortiz Senior Legislative Analyst Craig Freas Legislative Analyst Jill Moss Legislative Analyst Cary Flack Office Systems Analyst III Robert Doering Assistant Legislative Analyst Joseph Muncey Assistant Legislative Analyst Louise Ancona Head Clerk Benny Pernice Legislative Technician Anthony Oliveto Office Systems Technician Laura Provenzano Office Systems Technician Sharen Wagner Principal Clerk TABLE OF CONTENTS Section Page Introduction I-III Summary: Findings, Recommendations and Project Status Updates 1 Analysis of the Proposed Capital Program 23 The Economy 35 American Recovery and Reinvestment Act 43 Energy Outlook 46 Pay-As-You-Go Financing 57 Suffolk County Land Acquisition Programs 60 Index of Capital Projects 74 Capital Projects Included as Previously Adopted 79 Individual Capital Project Reviews 81 2010-2012 Proposed Capital Program Schedule 441 Introduction “If you don’t know where you are going, you will windup somewhere else.” Yogi Berra 1925 - Little has changed in the Proposed 2010-2012 Capital Program and Budget as compared to last year’s presentation. Similar to last year, the proposed Capital Improvement Plan is smaller than the previous year and is once again overshadowed by yet another operating budget shortfall. The proposed three-year program is $83.6 million less than last year and the five-year program, including subsequent years, is $128 million less. On the other hand, the 2009 modified capital budget is $55 million more than adopted. This increase reflects anticipated federal aid for highway, transit, alternative fuel infrastructure, vehicles and sanitation projects in 2009. Also, the County Executive’s Office advised us that the County is pursuing over $372,694,851 in Federal Stimulus funding. The majority of these funds will take the form of acceptance by legislative resolution amending the capital program in 2009 and 2010. The charter stipulates that projects may be added to the capital program without an offset, provided the projects are 50% or more aided. Should the County be successful in securing even a modest amount of this aid, the capital program will not be smaller, but to the contrary significantly more than last year. We fully support leveraging local dollars with such federal aid. That being said, with application for numerous capital projects based on Federal fiscal stimulus dollars not included in the proposed Capital Program, a clear picture of the County’s Capital Improvement Plan is not portrayed by the proposed document. It appears that the proposed smaller capital program will eventually lead to a reduction in debt service costs. That probably will not happen. This is due in part to the likelihood that the local share of capital projects expected to be supplemented with Federal fiscal stimulus dollars promises to keep debt service costs high. Furthermore, even without additional projects from the Federal fiscal stimulus, the County can expect several years of increasing operating budget debt service cost in the General Fund through at least 2014. Higher costs relate to substantial increases in authorizations to borrow, and the largest single project being construction of the new jail. This rising pipeline debt has contributed to General Fund bond issues that have exceeded $100 million in each year since 2005. As of March 2009, the Legislature has approved $628.8 million in bond authorizations, of which 79% or $497.5 million are for General Fund related projects. Over the course of this decade (2000-2008), the County has borrowed an average of $103 million for all funds of which $91 million annually is for the General Fund. Starting in 2011, there should be a decline in borrowing as the issuance of debt for the jail slows and funding for land acquisitions continues to shift from the General Fund to the quarter-cent sales tax program. There are several highlights of the capital program that the Legislature should be aware of. First, funding for ten previously adopted projects is discontinued. One of these projects is the Gymnasium Health Fitness Center at the Eastern Campus, with a project cost of $17.75 million in subsequent years. It is necessary for the local County sponsor to demonstrate support for capital projects in order for the County to be eligible for 50% aid in the State’s next five year (2008-09 to 2013-14) Capital Aid Plan for Community Colleges. In addition, although commitments to Sanitation are substantially similar to last year, the Budget Review Office has concerns regarding the schedule for the replacement of the deficient outfall pipe and the absence of $65 million in funding for the Sludge Treatment and Disposal Project at the Southwest Sewer District. In terms of land acquisitions, proposed funding in the multifaceted program is reduced to $4.5 million for each year of the program as compared to prior levels of $13.3 million annually. Finally, the Legislature should be aware that the Legacy program will expire as expected after 2009. The Legislature should also be aware that the proposed capital program is $356 million less than requested by the departments, indicating a need for capital improvements that is far greater than the three-year horizon included in the plan. In addition, it is our opinion that the fiscal commitment to Energy Conservation is not sufficient to maximize operating budget savings and provide the local share for Federal Stimulus dollars. Additional staff may be necessary to achieve the savings associated with enhanced efforts toward energy conservation and efficiencies. Similarly, the aggressive pursuit of Federal Stimulus dollars will likely require vacancies to be filled in Public Works to assure sufficient staffing resources to spend the federal dollars within the guidelines of the respective federal program timeframes. If we are not fortunate enough to receive the Federal Stimulus dollars, many of these projects still have considerable merit and should be undertaken regardless. Filling the need for staff and continued borrowing will place pressure on the operating budget. In terms of the operating budget, General Fund serial bond debt service is budgeted at only $51.27 million in 2009, the lowest level in 21-years, since 1988. The reason is that the budget excludes $48.48 million in off-budgeted General Fund debt service paid with the proceeds of tobacco bonds. A true picture of the County’s debt service costs requires that this legitimate expense be included, bringing the cost in 2009 up to a record $99.75 million. The amount of General Fund gross budgetary relief from tobacco bonds will fall from $68.5 million in 2008/2009 to $46.1 million in 2010, $39.4 million in 2011, $35.6 million in 2012, and $19.5 million in the final year, 2013. For 2009, actual debt service costs in the General Fund are projected to be slightly less than the adopted amount. Thereafter, we estimate borrowing costs will escalate and exceed the 2009 adopted amount by over $8 million in 2010 and by almost $13 million in each of 2011 and 2012.