Page 348 - City of Westlake FY20 Budget

Section 10 Capital Improvement Plan
CIP Impact to Operating Budget

The Town of Westlake’s operating budget is directly affected by the Capital Improvement Program (CIP)
budget. CIP projects can often increase or decrease costs. CIP investments in technology or significant
improvements to existing maintenance intensive assets can reduce operating budget costs. However,
new facilities and land acquisitions typically increase operating expenditures.

Operating costs are carefully considered in deciding which projects move forward in the CIP budget. It is
typically impossible to absorb many large increases in operating costs at once; therefore, projects are
programmed to prevent shocks to operating budgets. Several projects are currently included in the
Adopted CIP and could have future impacts on the operating budget.

OVERVIEW

The Capital Improvement Program (CIP) guides new construction and improvements to the Town’s
infrastructure and facilities, ranging from road expansion to repairs on publicly owned buildings, to
acquisition of new water sources.

The CIP requires a sound operating budget and a solid financial base to allow for debt or cash financing of
capital projects. A well prepared operating budget assists in raising or maintaining the bond rating of the
Town. A higher bond rating means that the Town pays a lower interest rate for the bonds sold to finance
capital projects. The annual budget process takes into account requirements of funding infrastructure,
maintenance, and related operational costs.

REVENUE SOURCES AND PROJECTIONS

Development of the CIP has two phases.
1. The first phase is revenue projections. Like revenue projections for the operating budget, trends
are studied, and performance assumptions are generated. From these assumptions, expenditure
estimates are developed. Since the CIP involves long term planning, revenue projections must be
made further into the future than those required for the operating budget. Components of
revenue funding for the CIP are:
o Sales tax revenue
o Interest earnings on the fund balance and current revenues contribute to CIP
o Transfers from other funds, such as the General Fund are considered in revenue
estimating.
o Other parts of CIP financing are budgeted as debt service in proprietary funds.

2. The second phase is existing debt service obligations. Existing debt is considered when estimating
the additional amount of debt that can be assumed under the Town’s policy.

After the new debt for proposed projects is calculated and all revenue sources are identified, projects are
prioritized, and funds are allocated for long range planning. The revenues and debt service expenditures
are managed through the two Debt Service Funds of the Town.

PROJECT REVIEW
The second phase of developing the CIP involves the project requests. Through a series of meetings,
project plans are developed, studied and ranked according to criteria set forth by the Town Council.
Projects proposed for the CIP are reviewed, evaluated, and recommended under the following guidelines:

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