May 27, 2015

CIP Overview

What is the Arlington County CIP?

• Ten year plan for investment in Arlington’s physical assets totaling $2.7 billion

• Capital investments generally have useful life of three or more years, minimum $100k value, and extend the usability of an asset

• Covers all areas of infrastructure• Largely driven by service delivery demands

• Balanced between “maintaining what we have” and new investments

• CIP is flexible and can be adjusted based on changing circumstances• Bond referenda authorization is firm

• Financially sustainable & maintain County’s triple-AAA bond ratings

County Capital Needs

$2.7 Billion

FY 2015-2024

10-Year Plan

(Excluding APS)

County

Facilities

Stormwater & Utilities

Technology

Metro (WMATA)

Crystal City & Columbia

Pike Initiatives

Transportation

& Roads

Maintenance

Capital

Parks & Recreation

Where Do We Spend CIP Dollars?

Excludes APS

Program FY 15 - FY % of Total

Transportation 863,353 33%

Crystal City Streetcar 217,431 8%

Columbia Pike Streetcar 268,121 10%

Metro 210,650 8%

Parks and Recreation 183,182 7%

Public/Government Facilities 243,648 9%

Information Technology & Public Safety 146,665 6%

Regional Partnerships & Contingencies 45,942 2%Community Conservation & Economic

Development 97,148 4%

Subtotal County Capital 2,276,140

Water and Sewer Infrastructure 317,734 12%

Stormwater Management 61,280 2%

Total County Capital 2,655,154 100%

Transportation32%

Crystal City Streetcar

8%

Columbia Pike

Streetcar10%

Metro8%

Parks and Recreation

7%Public/Govern

ment Facilities

9%

Information Technology & Public Safety

6%Regional

Partnerships &

Contingencies2%

Community Conservation & Economic

Development4%

Water and Sewer

Infrastructure12%

Stormwater Management

2%

CIP Funds Investments In Service Delivery

• Livable neighborhoods

• Safe community

• Helping those in need

• Environmental sustainability

• Core infrastructure

• Economic competitiveness

• Robust quality of life

Investments in Livable NeighborhoodsProposed New Investments

Neighborhood Conservation - $93.5 M

N. Piedmont Street – 5th St N. to 6th St North

Before After

Investments in Livable NeighborhoodsProposed New Investments

Paving Program - $128 MWalkArlington - $12.8 M

Safe Routes to School - $1.1 M

BikeArlington - $14.2 M

Neighborhood Complete

Streets - $9.7 M

Investments in A Safe CommunityHistorical Investments

Fire Station 3 (2011)

Computer Aided Dispatch work stations (2012)

Fire Apparatus Replacements (5 in 10 years)

Police & Sheriff Mobile Computers (2012, 2013)

Investments in a Safe CommunityProposed New Investments

New North Side Fire Station • Planning begins in next year• Based on response time/coverage study

Public Safety Technology - $69.0 M over 10 years

• Radios and Systems - $15.9 M• Fire Station Alerting System - $3.2 M• Records Management Systems

Homeless Services Center Mary Marshall Assisted Living Center

Investments to Help Those in NeedHistorical Investments

Sullivan House- $0.45 M

Replace roof, FFE, and flooring.

Residential Program Center - $1.6 M HVAC, FFE, building automation

DHS Consolidation, $11.6 M

Investments to Help Those in NeedProposed New Investments

Investments in Arlington’s Core InfrastructureProposed New Investments

Water Distribution - $34.7 M

Water/Sewer Infrastructure

$318 M over 10 years

Water Pollution Control Plant - $86.7 M

W/S Maintenance Capital - $170.0 MSanitary Sewer System - $26.5 M

Investments in Service DeliveryProposed New Investments

Investments in Enterprise IT - $72.2 M over 10 years

• IT infrastructure - $44.7 M • Incl. Wireless Sustainment and Expansion

• System maintenance/improvements – $16.8 M• ACE/CAPP (Payment System)

• Security - $5.5 M

Investments in Operations

• Trades Center parking structure

Investments to Support Our Economic Competitiveness

WMATA - $226 M

Metro Stations

Access

Improvements

- $178 M

ART - $80 M

Investments to Support Economic Competitiveness

ConnectArlington / Intelligent

Transportation Systems

How Do We Pay for the CIP?

Funding Sources

Fund Sources FY15-24 % of Total

New Funding

State/Federal Funding 338,584 13%

Developer Contributions 95,502 4%

General Fund GO Bond 586,090 22%

Utilities GO Bond 14,000 1%

Utilities PAYG 174,494 7%

General PAYG 300,930 11%

Master Lease 76,938 3%

Sanitary District Tax 42,440 2%

Other Funding 104,346 4%

Transportation Capital Fund (TCF)-C&I 178,959 7%

TCF - HB2313 Local 126,711 5%

TCF - HB2313 Regional 147,504 6%

TCF Bonds 114,123 4%

Tax Increment Financing (TIF) 29,282 1%

TIF Bonds 22,616 1%

Subtotal New Funding 2,352,519

Previously Approved Funding

Authorized but Unissued Bonds 17,064 1%

Issued but Unspent Bonds 34,534 1%

Other Previously Approved Funds 251,037 9%

Subtotal Previously Approved Funding 302,635

Total Funding Sources 2,655,154 100%

State/Federal Funding

13%Developer Contributions

4%

General Fund GO Bond

22%

Utilities GO Bond1%

Utilities PAYG7%

General PAYG11%

Master Lease3%

Sanitary District Tax2%Other Funding

4%Transportation

Capital Fund (TCF)-C&I

7% TCF - HB2313 Local5%

TCF - HB2313 Regional

6%

TCF Bonds4%

Tax Increment Financing (TIF)

1%

TIF Bonds1%

Authorized but Unissued Bonds

1%

Issued but Unspent Bonds

1%

Other Previously Approved Funds

9%

Excludes APS

How can CIP funding sources be used?

• Any capital asset with governmental purposes – some state / fed limitations

• Longer useful life assets – must at least be equal to average life of bonds

• GO bonds require voter approval

• Examples – facilities, paving, parks, WMATA

Bonds

• Any capital asset with governmental purpose

• Financed by General Fund cash contributions

• More flexible in useful life limits

• Examples – technology, maintenance capital, planning studies

PAYG

• Capital assets with useful life of 3-10 years

• Bank has security interest in asset

• Examples – technology, rolling stock (fleet, fire trucks)Master Lease

• Legally restricted in use for specific purposes

• Examples include Transportation (only enhancements); Utilities; Stormwater; Ballston Garage

• Federal / state grants for specific purpose of grant

Dedicated / Restricted Funding

ABC’s of General Obligation (GO) Bonds

• Primary financing source used by County for major general government infrastructure

• In Virginia, GO bonds issued by counties require voter approval• Cannot reallocate between referenda questions

• Carry full faith and credit of Arlington County

• Lowest cost of capital available, especially given Arlington’s bond ratings• Generally interest is tax-exempt to the investor

• Arlington’s GO bonds typically have 20 year maturity

• Limited by debt capacity guidelines

Debt Capacity Guidelines & Best Practices

• Formally in place since 2002; re-confirmed by the County Board in July 2014

• Serve as guidance for debt affordability

• Considered best practice in public finance and an essential practice by the bond rating agencies

• County’s debt capacity guidelines are very similar to other triple-Aaa’s in the region and in line with rating agency criteria

• All ratios measure affordability against key “wealth” indicators of the County

• Rating agencies consider County & Schools as “one” for debt capacity & guideline compliance

Outstanding Debt As % of Market Value of Real Property

• Key measure of debt burden given budgetary reliance on real property taxes

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Debt to Assessed Value Not To Exceed 3%3% Limit

Debt Per Capita As % of Per Capita Income

• Measures debt burden relative to income / wealth levels

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Debt To Income Not To Exceed 6%6% Limit

Debt Service as % of General Government Expenditures

• How much of budget is consumed by FIXED debt service costs

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Debt Service as a % of General Expenditures10% Limit

Existing DS / GenEx New DS / GenEx

10% Limit

Existing debt as of 5/1/2015

Where Do County Budget Dollars Get Spent?

Personnel - Salary, 22%

Personnel -Benefits, 12%

Contractual Services, 10%

Internal Services, 1%

Transfer to Schools (excluding debt),

35%

County & School Debt Service, 9%

Capital Outlay, 1%

Metro, 3%

AHIF, 1%

Other Operating Expenses, 6%

Where Do County Budget Dollars Get Spent?

Management & Administration, 4% Courts &

Constitutionals, 6%

Public Safety, 11%

Environmental Services, 7%

Human Services, 11%

Community Services, 5%

Planning & Development, 2%

Non-Departmental, Regionals, Metro,

9%

County & School Debt, 9%

Capital, 1%

School Transfer (excluding schools

debt), 35%

Future County Budget Pressures In Addition to Debt / Capital Reinvestment

• WMATA’s needs – both operating & capital

• Health care

• Compensation competitiveness

• Impacts of population growth on services

• Specific service delivery needs:• Public safety staffing

• Economic development

• New innovations and services – technology; environmental sustainability

Other Public Finance Best Practices

• Formal debt management policies – in addition to debt affordability measures

• Variable rate debt & derivatives guidance

• Amortization guidance

• Reserve and pension policies

• Multi-year financial plans that integrate CIP, operating impacts of new projects, and other operating budget pressures

• Capital project budget & scope management practices

Other Public Finance Tools

• Revenue Bonds• Lower bond ratings than GO bonds and thus higher interest rates

• Issued for specific projects

• Often require a conduit issuer (Industrial Development Authority, state entity)

• Typically paid for and secured by project revenues (e.g., water-sewer revenues; parking revenues)

• Occasionally County has issued for general government purposes with repayment from General Fund

• Where GO bonds are not permitted or when timing does not allow for referendum

• Will count against debt capacity in this case

• Moral obligation bonds – where County provides credit support to a project

• Tax increment financing & special district tools

CIP Inputs and Process

CIP Process Background

• Biennial process• Aligns with schedule of bond referenda for even-numbered calendar years

which corresponds to the bond sale in odd-number fiscal years.

• Ten year time horizon• Reflects longer-term nature of major infrastructure projects

• Shifted from six year horizon in 2013

• Planning document – can and will change based on changing conditions

CIP Inputs & Development Process

• Starting point is most recent adopted CIP

• Factors in CIP update – results in an iterative process:

• Updated economic and revenue projections impacting debt capacity

• Commercial development activity

• Construction market conditions impacting cost estimates

• Project cost estimates change due to natural discovery of design process, community process, site conditions, etc.

• Board direction on specific projects or initiatives

• External impacts of regional partnerships (e.g., WMATA)

• Federal and state regulatory changes

• Population changes (e.g., enrollment) or service delivery demands

• Opportunistic events (land acquisition)

Other Inputs into CIP

Reinvestment projects:• Maintenance capital condition / inventory assessments• Paving condition index

Residential Satisfaction Survey

Near-Term Impacts of Various Plans:• Master Transportation Plan• Transit Development Plan• Public Spaces Master Plan• Various Sector Plans • Project-Specific Plans – Long Bridge• Stormwater Master Plan• Chesapeake Bay Preservation Plan• Water Master Plan• Water Pollution Control Plant Master Plan (“MP01”)• Sanitary Sewer Master Plan• Community Energy Plan

• Special service delivery studies – public safety

• Economic development

CIP Process & Timeline

Key Takeaways

• The CIP strives to balance between reinvestment vs. new projects

• The CIP covers the entire spectrum of County infrastructure, facilities, and technology and is largely based on service delivery demands

• The CIP is flexible, responding to changing priorities & external factors

• The CIP is financially sustainable• Debt ratios are moderate and consistent with triple-AAA bond rating

standards

• Debt levels are balanced against other operating budget needs

Questions?