A RESOLUTION adopting updated capital and major maintenance planning and funding policies for the City of Seattle and superceding Resolution 28947.

WHEREAS, as a result of the Citizen's Capital Investment Committee's work on planning and funding for the City's capital infrastructure, the Council adopted Resolution 28947 on August 8, 1994, outlining a strategic capital investment process for the City's capital assets; and

WHEREAS, on August 8, 1994, the Council passed Ordinance 117255 related to capital projects funding and establishing a requirement that a fiscal note be prepared to accompany the funding proposal for any major new or expanded capital project; and

WHEREAS, on September 20, 1999, the Council adopted Resolution 30025 adopting a Strategic Capital Agenda for the period 1999-2004; and

WHEREAS, on November 22, 1999, the Council adopted Resolution 30072 approving general guidelines for improving public knowledge of City partnerships with private and public entities; and

WHEREAS, on December 13, 1999, the Council adopted Resolution 30096, concurring with the Mayor's Standard Operating Procedure regarding notice and hearing procedures for certain major capital projects; and

WHEREAS, on February 14, 2000, the Council adopted Resolution 30121, endorsing the City of Seattle Environmental Management Program's Sustainable Building Policy; and

WHEREAS, the City Council and the Mayor are committed to high standards of financial management; and

WHEREAS, adopting and periodically updating and revising financial policies are important steps towards assuring consistent and rational financial management; and

WHEREAS, capital and major maintenance planning and funding policies are essential components of financial policies; and

WHEREAS, the City Council and Mayor have reviewed the City's capital and major maintenance planning and funding policies and wish to update, clarify, and in certain instances, change the policies;

NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEATTLE, THE MAYOR CONCURRING, THAT

Section 1. Resolution 28947 is hereby superceded in its entirety, and the policies attached to this resolution (as Exhibit A) are hereby adopted. The Council finds that these attached policies maintain the spirit of the recommendations of the Citizen's Capital Investment Committee (CIC) as embodied in Resolution 28947, but update them in the following ways:

a) The CIC's recommendation for major maintenance funding of $17 million per year (beginning in 1998) is revised to 2001 dollars adjusted for the effects of inflation on the buying power of the dollar.

b) The CIC's recommendations regarding capital planning are clarified and updated to reflect the City's current planning processes, and to incorporate more recent processes such as the Strategic Capital Agenda and the neighborhood planning process, into the current financial policies

c) The CIC's recommendations for fiscal analysis are updated to reflect the special analysis demands of public-private partnerships, as embodied in Resolution 30025.

d) Consistent with the CIC's recommendations, the policies state that decisions regarding the prioritization of specific major maintenance projects will be decentralized, with autonomy and accountability at the individual operating department level.

Section 2. The policies attached to this resolution do not apply to the City's utilities. The City's utilities are excluded from these policies because they have separate funding sources for their capital programs, and decisions about utility capital projects are made through the rate setting process.

Section 3. The Council expresses its continued concurrence with the Mayor's Standard Operating Procedure regarding notice and hearing procedures for certain major capital projects, previously adopted via Resolution 30096, and included as Exhibit B to this Resolution.

Section 4. By August 2002, the Executive will review the City's major maintenance demands and propose an annual funding level that reflects this updated assessment of the City's capital infrastructure.

ADOPTED by the City Council of the City of Seattle the ______ day of ______________, 2001, and signed by me in open session in authentication of its adoption this _____ day of _______________, 2001. ______________________________________ President ______________of the City Council

THE MAYOR CONCURRING: ________________________ Paul Schell, Mayor

Filed by me this __________ day of _________________, 2001. ______________________________________ City Clerk

Attachments:

Exhibit A: Capital and Major Maintenance Planning and Funding Policies dated July 27, 2001 Exhibit A1: City Partnership Review Process dated 11/22/99 Exhibit A2: Technology Investment Business Case dated 9/9/97

Exhibit B: Mayor's Standard Operating Procedures for Certain Major Capital Projects (approved 12/8/99)

July 27, 2001 version 5

Exhibit A

CITY OF SEATTLE CAPITAL AND MAJOR MAINTENANCE PLANNING AND FUNDING POLICIES

Introduction

The purposes of the City's Capital and Major Maintenance Planning and Funding Policies are threefold. First, the policies state the principles and other relevant factors that will guide the City's capital funding decisions. Second, the policies describe a general planning process in which decision-making will occur. Finally, for major maintenance needs, the level of annual funding is specified. The City's utilities are excluded from these policies because they have separate funding sources for their capital programs, and decisions about utility capital projects are made through the rate setting process.

These policies have been adopted by the City Council through Resolution. They will be reviewed and updated on a five-year cycle, with the next update scheduled for 2006.

Definitions

A major maintenance project is defined as a capital investment that preserves a facility's ability to provide the services for which it was originally intended. Examples of major maintenance projects include the following:

a) Structural repairs, such as major roof repairs.

b) Replacement of facility subsystems (HVAC, electrical systems, irrigation systems) when the subsystem has failed, is obsolete beyond repair, or when subsystem replacement is a more costeffective long-run option than continued maintenance.

c) Replacement of the facility when replacement is a more costeffective long-run option than continued maintenance.

d) Facility modifications required to maintain employee or user safety in an existing building (removing asbestos, installing security lighting, installing fire alarms).

e) Facility modifications required by federal, state, county, or City law.

A facility improvement project is defined as a capital investment in an existing facility that falls outside the major maintenance definition and makes improvements to a facility without expanding its capacity. Examples of facility improvement projects include cost-saving investments such as energy efficient lighting, and improvements undertaken to maintain the revenue generating capacity of a service or facility.

A new or expanded facility project is defined as a capital investment that expands existing capital infrastructure or creates new capital infrastructure either to carry out existing City services or to perform new services.

Basic Principles Underlying Strategic Capital Planning

Policy 1. Preserve and maintain existing infrastructure. While building new infrastructure is often seen as more glamorous, maintaining existing infrastructure is critical to ensuring continued service and protection of previous capital investments. Thus, the City is committed to investing at least $18.7 million per year (stated in 2001 dollars) to maintain and make non-expansion improvements to existing infrastructure (excluding utility and transportation infrastructure which are governed by separate policies). The City intends to make these investments in a costeffective manner, recognizing that in some cases facility replacement is a better long-run option than continued maintenance. In general, major maintenance projects will be given higher funding priority than facility improvement projects. In 2002, the Executive will review the City's demands for major maintenance and facility improvement projects and propose an annual funding level that reflects this updated assessment of the City's capital infrastructure.

Policy 2. Support the goals of the City's functional plans. Capital investments will be targeted to support the goals of the Comprehensive Plan, recognized neighborhood plans, adopted facility, department, or sub-area Master Plans, and other adopted City functional plans. The City is committed to focus much of its capital effort in those areas targeted for additional growth in the Comprehensive Plan. In addition, the City is committed to supporting the neighborhood planning process, the Parks Comprehensive Plan, the Transportation Strategic Plan, and other City functional master plans, and will ensure that its overall capital strategy is informed by these plans.

Policy 3. Support economic development. The City's ability to fund major maintenance and capital development in the long run depends on the strength of the City's economy and tax base. Therefore, the City will continue to consider economic development effects when setting capital priorities.

Other Capital Planning Factors

Policy 4. Consider external funding possibilities. External funding possibilities should be considered when choosing among projects. Some capital projects are eligible for external support such as grants or private donations. These funding sources may make such projects more cost-effective and preserve City money for other uses.

Policy 5. Consider revenue-generating possibilities. Revenue generating possibilities should be considered when choosing among projects. Some capital projects generate funds directly, such as through admissions tax revenues, which may make a project more cost-effective. Investment in facility renewal may be required to maintain a competitive position in revenue generating facilities or to enhance revenue opportunities.

Policy 6. Seek regional funding for regional projects. Regional funding should be sought for regional projects. The City provides many facilities that are of benefit to the entire region, including the Woodland Park Zoo, the Aquarium, and Seattle Center. To the extent possible, the City will seek regional support for these facilities' capital priorities. Funding from County, State, or Special Purpose districts, as appropriate, for these facility investments will be a City priority in formulating legislative and intergovernmental agendas.

Policy 7. Pursue cost-saving investments. The City is committed to pursuing cost-saving investments in its infrastructure. Proposals for such investments will include an analysis of the costs and benefits, and the payback period. Other things equal, funding priority will be given to investments with a shorter payback period.

Policy 8. Pursue conservation and sustainability investments. The City is committed to investing in conservation of natural resources, and to being a leader in investments that promote environmental sustainability, including meeting the LEED Silver standard in all facilities and buildings with over 5,000 gross square feet of occupied space. It is recognized that some investments in sustainable design and construction methods and materials may not easily demonstrate a direct financial payback.

Process for Strategic Capital Investment Planning and Funding

Policy 9. Planning for large capital projects. The Executive will develop a proposed Strategic Capital Agenda by no later than June of the second year of each biennium. The purpose of the Strategic Capital Agenda (Agenda) is to outline the most important capital issues facing the City over the next six years, explore options for financing, and describe possible capital projects that will be submitted to the voters for funding. The Agenda's scope is limited to the capital activities of the general City government, including transportation, libraries, public safety, parks and recreation, cultural facilities, and City office buildings and shops. The Agenda is informed and guided by the City's adopted functional plans, and is intended to support the City's objective that citizens get their money's worth from City government by explaining options and priorities for capital activities. Periodically, because of timing issues, there will be big ticket new or expanded capital projects for the Mayor and City Council to consider that were not included in the Strategic Capital Agenda. Review of these will occur through the appropriate Council committees.

Policy 10. Planning for major maintenance projects and smaller new, expanded, or improvement capital projects. Planning for major maintenance projects and smaller new or expanded capital projects will occur via the City's Six-Year Capital Improvement Program (CIP). In addition, the CIP will comprehensively list the capital projects that have been added/funded since the adoption of the previous CIP. Major maintenance planning in the CIP will be guided by periodic citywide reviews of the City's major maintenance demands. However, once departmental funding is established, the decisions regarding priority of specific major maintenance projects will be decentralized, with autonomy and accountability at the individual operating department level.

Policy 11. Funding for major maintenance and capital projects. Funding decisions for major maintenance and capital projects are generally made as part of the City's annual budget and CIP cycle, or through legislation passed outside the regular budget process. Funding may occur outside the regular budget process because a project responds to an emergency or to a regulatory requirement, because it is time-sensitive or presents unique opportunities for the leveraging of City funds, or for other reasons deemed appropriate by the Mayor or City Council.

Policy 12. Fiscal analysis requirements for new or expanded capital projects. For capital projects with public-private elements, the public-private partnership protocol described in Resolution 30072 (as may be amended from time to time) will be the template for the fiscal analysis required (attached here as Exhibit A1). For information technology investments, the business case format described in Exhibit A to Resolution 29627 will be the template for the fiscal analysis required (attached here as Exhibit A2). For other capital projects, the Executive will prepare the information noted below. If the project is funded via the annual budget and CIP cycle, this fiscal note information will be provided through the CIP. If the project is funded outside the annual budget and CIP cycle, this information will be provided in the form of a separate fiscal note. If a particular subsection is not relevant to the proposed new or expanded capital project, it will be answered "not applicable." If a proposed new or expanded capital project has several possible options for implementation, each option will be included for analysis in the fiscal note.

a) Basic project information. This item will include the project's name, sponsoring organization, and a brief description of the proposed project.

b) Project schedule. This item will describe the project's proposed implementation schedule, the underlying assumptions, and any timing issues.

c) Estimated design life of project. This item will list the estimated number of years the project will be used.

d) Total capital cost for the project. This item will list the total estimated capital cost for the project, including the projected costs of meeting the LEED Silver standard in all facilities and buildings with over 5,000 gross square feet of occupied space, and the underlying assumptions.

e) Estimated operating and maintenance costs for the project. This item will list the estimated annual operating and maintenance expenses, including any annual preventive maintenance and the annual savings of implementing the LEED Silver standard, as well as any underlying assumptions.

f) Estimated ongoing major maintenance costs for the project. This item will list any periodic major maintenance costs for the project and the underlying assumptions.

g) Funding sources available to the project. This item will list the funding sources available to the project, and the expected level of funding from each source; both for the capital costs and the ongoing operating and major maintenance costs.

h) Expected revenue from the project. For projects that are expected to generate revenue, this item will list the estimated annual revenue the City will receive directly from the project, and the underlying assumptions.

i) Funding sources for replacement of project. This item will list the possible and recommended methods of financing the project replacement costs for projects with a life expectancy of 15 years or less.

j) The financial cost of not implementing the project. For projects that are intended to replace existing facilities, and where there is a cost to the City to continue operating and/or maintaining the existing facility, this item will include the estimated costs to the City of not implementing the project, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the project is not implemented.

k) Possible alternatives to the project which could achieve the same or similar objectives. For projects that have viable alternatives, including using an existing facility to fulfill the uses envisioned by the proposed project, or contracting with an outside organization to provide the services the proposed project would fill, this item will include descriptions of the potential alternatives. This item will also include a present worth comparison of the life cycle costs of the alternatives, including estimated capital costs, annual operating and maintenance costs, major maintenance costs, and revenues.

July 27, 2001