HomeMy WebLinkAbout2013-6-18Minutes for June 18, 2013, adopted July 10
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Capital Program Committee
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Members: Phil Stambaugh (Chair), Carol Dunton (Vice - chair),
Linda Williams, John Tiffany, Joseph Grause, Tobias (
Tuesday, June 18, 2013 m coo m
4 Fairgrounds Road, Training Room — 8:00 am 9
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Staff: Diane O'Neil, Project Manager /CPO; Libby Gibson, Town Man*r; IRartiP
Anguelov, Budget Analyst; Terry Norton, Town Minutes Taker o Cc
Attending Members: Stambaugh, Morrison, Tiffany, Grause, Glidden R+
Absent Members: Donlon, Williams A
Late arrival times: None
Earlier departures: O'Neil 8:49 a.m.; Gibson 9:22 a.m.
Called to order at 8:00 a.m.
June 11, 2013 Held — Discussion about the need for a recording secretary to
is no; the recording secretary's job is to take minutes.
Sitting Stambaugh, Morrison, Tiffany, Grause
DISCUSSION:
Stambaugh — Everything that was discussed has been assembled by Mr. Morrison into a single document.
Discussion about whether this committee is CPC or CapCom. Ms Gibson suggested CapCom as the
Community Preservation Committee is called CPC
Tiffany — Stated that he thought the definition for Capital Project was going to be left as it was as a project in
excess of $50,000; besides it is in the bylaw. Stated he believes the document is an excellent product.
Stambaugh — Read an email excerpt from Ms Williams in regards to the document, "On the face of it, I find
little to argue about as drafted."
Section I. Purpose/Objectives of Capital Planning Process:
Grause — Stated his opinion that this section is well written; however he wondered where financial targets
would be added. It comes up later in the document, but this committee has an objective in regards to the
tax levy. Asked if there will be a percentage allowed for debt service and a percentage of free cash. The
three sources of funds is a significant guideline. Someone on the Board of Selectmen (BOS) should have
a picture of how much is being spent on debt service and a general guideline for capital projects.
Stambaugh — Could move the numbers included in the Section D( to the beginning.
Tiffany — Believes as an introductory paragraph, it serves that purpose.
Grause — Someone at the top of the pyramid has to decide on which resources will be devoted to capital
projects. Our guidelines are these numbers.
Gibson — Other than the 1 percent minimum, there's the Free Cash policy which says something about
capital.
Glidden — Read the statement on the Free Cash policy from Section VI.
Gibson — Reiterated that by changing 1 percent to 2 or 5 percent, the general fund will have less revenue for
operations.
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Minutes for Jane 18, 2013, adopted July 10
Tiffany — Stated his opinion that when a committee starts to develop objectives, it needs the recording
structure to be in place. After a couple of years, the numbers start to fit in. To come up with numbers
now would be premature.
Stambaugh — Should change to read that the guidelines would be a percentage of prior year's tax revenue, a
percentage of free cash, and a percentage of the debt revenue.
Glidden — Offered to look up the capital projects and create a spread sheet. That would provide a better idea
of the percentage per department.
Gibson — Capital projects are in their own articles on the warrants. Compiling information on how much
was spent on capital projects in relation to the annual budget is something Finance could do.
Morrison — Suggested that Section I is for broad purposes and objectives, "To establish explicit policies,
prudent financial policies, and sources of funding regarding capital improvements ... Policies will
define what constitutes capital improvement projects, how such projects are to be evaluated, prioritized
and how to be financed in order to maintain targeted financial ratios and bond ratings over time."
Suggested adding a sentence saying that guidelines have to do with this or that.
Section II. Role of the Capital Planning Committee:
Tiffany — Bottom of In page, it says, "Each year the CPC (CapCom) will apply and revise its..." A similar
occurrence is in the 3' paragraph of page 2.
Glidden — Made similar notes; it is the BOS or Finance Committee (FinCom) that will make the final
decisions.
Morrison— Suggested using in paragraph 5 of Section II, "Will provide, will offer or will suggest."
Consensus is to use "recommend."
Section III. Relevant Definitions:
Stambaugh —Noted a typographical error.
Grause — Under Capital Asset, the "... useful life of at least five years. ..° asked if it is a definition thing.
Gibson — It is in the bylaw.
Grause — Under sources of funding, thought there were three sources: general revenue, debt service, and free
cash. Asked if use of free cash is dictated by a policy.
Tiffany — Nantucket uses free cash all the time. It is standard operating procedure and should be included.
Stambaugh — It needs to be revised to read, general tax revenue, free cash then debt service (bonds).
Gibson — Free cash is considered a one -time source of funds and can't be relied upon every year. Towns that
have policies tend to devote a portion of free cash. There should be some thought about using Free Cash,
it should not be random.
Stambaugh — A capital reserve fund could be set up at some time in the future.
Gibson — Suggested this committee make that a recommendation. There is a special regulation about
capital reserve funds.
Tiffany — Stated his opinion that the Town needs to start developing a capital reserve fund.
Review of the order of the sources of funding for the final draft.
Gibson — Suggested adding a separate paragraph for Enterprise Funds; because as a rule, they pay for their
own projects out of their own budgets or retained earnings. Reviewed some special exceptions where the
General Fund is funding enterprise projects.
Discussion about wording of a paragraph for funding of enterprise fund capital projects and the Town's
responsibility.
Morrison — Will break Sources of funding into two subheadings: General Fund and Enterprise Funds.
Further discussion on the wording of the Enterprise Fund subheading.
Glidden — Talked about maintenance at last meeting; there should be some mention of that in this document.
Tiffany — Referred back to the discussion at the June 11 meeting about setting a percentage aside for routine
maintenance. Routine maintenance and major maintenance need to be separated to help keep the capital
and operating budgets apart.
Glidden — Suggested tracking routine maintenance over a couple of months then making a
recommendation to the BOS that there be a line item for routine maintenance.
Page 2 of 4
Minutes for lane 18, 2013, adopted July 10
Morrison — Asked if there should be an overall gross or a percentage set aside for routine maintenance.
Glidden — Suggested asking the department heads what they expect the maintenance cost to be in the
upcoming years. That would provide a baseline.
Morrison — Maintenance cost information from each department should be aggregated then in the future
develop a single parameter. This creates an incentive to be truthful about maintenance costs.
Tiffany — The issue of having number for anything is it provides a point to work from. Suggested that a way
to get that total starting number is by looking at the operating budget of each department.
Stambaugh — Asked if it was true that a capital project budget put together with the operating budget, does
that equal the town budget. FinCom is looking at the operating budget and CapCom is looking at the
capital budget.
Gibson — Explained that it is the Administration that puts things together and that capital expenses other
than debt service is not part of the operating budget. Maintenance would be part of the operating budget.
Section IV. The Annual Capital Planning Process:
No discussion.
Section V. Existing Priorities:
Grause — Asked if Sections V & Dt are the same thing.
Morrison — Described Section IX as a parking lot of material and details. It is available if the members want
to move it.
Stambaugh — Does not believe "Existing Priorities" is a better title for Section IX. This section should be
"Prioritizing Capital Projects."
Review of grammatical and semantic corrections in Section V.
Section VI. Proposed Policies Regarding Capital Improvements:
Tiffany — Section VI doesn't deal at all with is the over -ride process at Town Meeting. Those projects come
to CapCom. Over -ride should have a separate paragraph.
Stambaugh — Need to decide on the percentage. Asked whether or not there have been problems with the 1
percent.
Glidden — No, 1 percent has worked fine.
Gibson — In recent years, the Town has been stricter with capital funding projects. In the past that was not
so. Thought at the last meeting it was decided to leave it at 1% to see how it goes.
Tiffany — Over time, we might want to change that.
Stambaugh — Remove "the" from "the Free Cash policy," in the last sentence of page 4.
Tiffany — Recommend this committee look for a target percentage for Free Cash.
Glidden — There will be a number of huge projects coming along; and there might be a year when the Town
is saving for those projects. Suggested adding a paragraph to that affect.
Tiffany — We're going to need some free cash every yea.
Grause — In the 2 "a paragraph, took the I% not to include debt service. That should be made clear.
Tiffany — Thinks that paragraph should be deleted as it has nothing to do with debt.
Grause — Suggested an opening paragraph for Section VI that points out that maintaining the Town's bond
rating is a prime goal.
Discussion about capital improvement program in conjunction with capital planning.
Grause — Volunteered to rewrite Section VI.
Gibson — Suggested the committee consider making a recommendation in regards to the Stabilization Fund.
The Free Cash policy is available on line for anyone who wants to review it.
Section VII. Proposed Policy to Integrate Debt Service in Capital Planning:
Tiffany — Suggested removing any definition in regards to exempt and non- exempt.
Morrison — first sentence should be changed to an affirming statement.
Stambaugh — The title is not accurate. Change to "Integrating Debt Service in Capital Planning." Other than
that, it is well written.
Gibson — Suggested revising "Debt is issued on behalf of Enterprise Funds.. ` Ordinarily enterprise funds
are supposed to cover 100% of their debt service; but sometimes that is not possible.
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Minutes for Jane 18, 2013, adopted July 10
Stambaugh — Last sentence of the section, Nantucket's target is 12% of the general budget, asked if that is
out of line.
Glidden — Going over that is not a bad thing. However, there is a point at which the Town can get better
debt service.
Tiffany — The reason Nantucket hasn't been penalized for going over is because of the investment in
infrastructure and rating agencies look at that. Stated his belief that to manage the town at 5 to 10
percent is not realistic. Would like to see it left at 12 percent.
Glidden — Interested in lowering that percentage in time.
Section VIII. Foreseeing Impacts on Capital Improvements on Future Operating Budgets:
Morrison — Explained his reason for including this section.
Tiffany — Suggested deleting this section and moving the wording to Section V.
Section IX: Prioritizing Capital Projects/Proposed Guiding Principles:
Stambaugh — Asked if the information should be incorporated into other areas of the document.
Tiffany — It is more of a glossary.
Stambaugh — Suggested keeping it as a glossary and put into CapCom's own words.
Discussion about changing the title to include the word "glossary".
Glidden — CPC gets funding out of the operating budget for improving preservations projects. Thought it
might be useful to have them talk to CapCom about what they are doing.
Tiffany — CPC's projects are looked at intensely by FinCom. That would enlarge the CapCom process
significantly.
Stambaugh - Asked if Town department heads consider possible CPC funding when they come to CapCom.
Tiffany — Department projects do not get funded by the CPC. CPC has three elements: preservation, open
spaces and affordable housing.
Glidden — In here is a $2,000 per capita debt and 6 percent per capita income for debt, asked about that.
Tiffany — At this point, the 6 percent has no meaning for Nantucket. Stated his opinion that Nantucket is not
ready to tighten that.
Stambaugh — Asked Mr. Glidden to suggest that the BOS determine what the debt per capita is.
111. NEXT STEPS
Different members have tasks that will be forwarded to Mr. Anguelov for compilation. Stambaugh to send
the document in word to those working on sections.
Stambaugh stated he would like to see a list of looming capital projects.
To be announced pending compilation of changes to the document.
\ Ill, U).101 12NMENT
Motion to A
Submitted by:
Terry L. Norton
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