1. Common Sense Steps Towards Strong Financial Planning
By: Michael Thompson
Public Works Director
Plymouth, MN

2. Overview Public Works Focus Where to Start? Garbage In, Garbage Out!
Asset Management
Capital Improvement Plan vs. Operations
Capital Improvement Planning and Financing
Operations Budget (different funds)
Case Study Example on Additional Revenue Source Identification

3. Start Where? What Do You Have?
Asset Management (AM)?

4. Start Here! Asset Management (AM)
Collect quality information on your assets
What is it? Storm water pipe.
Condition? Rating of 5 out of 10.
Life cycle? Replace at 3 or below.
Asset Management must correlate to identified policies/guidelines
Rating system, trigger for replacement, etc.

5. What Do You Have? Identify what you have
Assets need to be maintained and placed on a replacement schedule
Asset Management (AM)?
MN 2050 Initiative
Office of the State Auditor: Infrastructure Stress Transparency Tool

6. What Assets to Track?
Streets, pipes, buildings, vehicles, lift stations, manholes, sidewalks, etc...

7. Why Track Assets? Preventative Maintenance (PM) Inspections
Track Maintenance Activities
Proactive vs. Reactive Decisions
Repairs
Replacement
Life Cycle Expectations
Budgeting
Financial Reporting

8. Why Track Assets?
State Auditor Website… “ The goal is to better inform the decision making process at all levels of government to improve the long term financial planning for our civil infrastructure needs.”
Not only for financial planning, but bringing transparency to the public. Where’s the money going?

9. Cities: On Why Track Assets?
MN2050/Wilder Research Survey 2016

10. Who Currently Tracks Assets?
MN2050/Wilder Research Survey: 529 respondents including 316 small cities

11. How Cities Track Individual Assets?
492 – No Official Asset Management System
100 – Cartegraph
96 – Icon
81 - MnDOT SIMS
34 - Simple Signs
29 – CityWorks
*MN2050/Wilder Research Survey 2016

12. I Started Tracking Assets… Now What?
Planning and Budgeting
Assets need to be annually maintained and also placed on a replacement schedule
Operating Budget “to maintain” and Capital Improvement Plan/Budgeting to “replace or rehabilitate”. Capital projects are large expenditures that require advanced planning and identified funding sources.

13. Operations vs. Capital Budget?
Operations - include maintenance type activities:
General fund (street maintenance & engineering)
Enterprise funds (water, sewer, storm, recycling)
Internal service (facilities, fleet)
Capital – large fixed asset projects such as road reconstruction, water tower rehab, facility remodel or lift station replacement

14. Operations (patching and pothole filling) vs. Capital (Rebuild road)

15. Creating a Capital Improvement Plan (CIP)
Know what assets you have & condition (AM)
Replacement cost in proper year (account for inflation)
Identify where you want to be
Pavement Condition for Roads as an example
Understand your fiscal constraints
Needs will always outweigh resources
A CIP project may be comprised of many funds
Sewer fund, franchise fees, general fund, etc…

17. Long Term Planning Allows for Better Decisions

18. Capital Improvement Planning
If possible, projecting longer term can assist in understanding future needs and ensuring reserves exist to complete large CIP projects.
Example: A rate study understanding both operations and long term capital needs can allow for incremental increases over time to build capital reserves
Be sure you are building a reserve that properly allows asset replacement

19. Operations Budget Operations funds for Plymouth Public Works include:
General fund (street maintenance & engineering)
Enterprise funds (water, sewer, storm, recycling)
Internal service (facilities, fleet)

20. Operations Budget General fund Funded through the general tax levy
Street maintenance
Engineering
Funded through the general tax levy

21. Operations Budget Enterprise funds
Water
Sanitary Sewer
Storm Sewer
Recycling
Fees/Rates charged to users and should be self supporting

22. Operations Budget Internal service
Facilities
Fleet
Internal allocation charged against divisions that receive goods or services (allocation based on prior year look back)
Example: An annual allocation is charged to the Water Fund for fleet maintenance and future replacements (capital reserves)

23. Supplemental Revenue Source
Case Study – Franchise Fees
Funding Local Streets

24. Franchise Fee
Quick Review
City’s are struggling to fund local street maintenance such as mill and overlays
Cannot continue to raise property taxes and increase special assessments
Need a sustainable source of revenue that is dedicated for specific “street repair” purpose

25. Franchise Fee Why consider it now?
Quick Review
Why consider it now?
Extreme pressure from citizens about pavement stripping issues as shown on the first slide
Brooklyn Park, Woodbury, Burnsville, and many others are dealing with premature pavement failure

26. Franchise Fee
What is it?
Cities authorized by State Statute to adopt franchise fees to raise revenue
Utility (Xcel, etc) collects fee with electric/gas utility billing
Dozens of cities such as Elk River, Edina, Brooklyn Center, Richfield, Minnetonka, Maplewood have used this tool
Revenue for specific use such as street maintenance (mill & overlay, crack seal, fog seal)

27. Franchise Fee
Case Study
Dozens of complaints and interactions with residents on street conditions
Open house
Mailers
Citizens groups
Council meeting workshops

28. Franchise Fee Some residents in favor but with conditions Case Study
Specific use
Possible sunset date
It must fund additional work only
Dedicated for street repairs only (no transfers)

29. Gas Franchise Fee Case Study
Pros
Local control
Easy to administer
More streets fixed
Dedicated for specific use
Sustainable revenue source
Transparency through fund accounting

30. Franchise Fee Cons Case Study
Raises utility cost by franchise fee amount
Potential opposition from non-profits, tax exempt parcels… churches, etc…
Opposition from residents where streets are in good condition
Looked at as another government fee/tax

31. Franchise Fee Case Study
Fees and total revenue?
Revenue target of $470,000 to allow fixing additional 2 miles per year
What about the fee?
Residential -> $2.50/month
Commercial -> $6.00/month
Other types -> Varies
*City of Maplewood, MN (gas franchise)

32. Franchise Fee – Case Study
82 miles, 90 miles, 99 miles

33. Franchise Revenues
Additional Projects

34. Franchise Fee
Case Study
An option to consider as additional revenue towards capital projects
Public outreach project important
If support, bring back report of public outreach, proposed ordinance language, fee schedule, and continued coordination with Xcel Energy

35. Franchise Fee Case Study
QUESTIONS OR COMMENTS?