capital budgeting for 2030: achieving the goals of … · capital budgeting for 2030: achieving the...

Capital Budgeting for 2030: Achieving the Goals

of PLANYC

Citizens Budget Commission December 18, 2007

Overview Why does infrastructure matter? Capital Assets in New York City Four Challenges to Achieving

PLANYC Recommendations Expanding PLANYC Achieving state of good repair Employing replacement cycles Justifying expansion projects

Why does infrastructure matter? New York City is large and growing

8.2 million people 18 million in the region 44 million tourists in FY2006

Foundation of daily activity, government operation, commercial enterprise and public safety

Critical to Citys ability to remain competitive and attract residents, business, and visitors

Neglect of infrastructure can lead to delays, damages and catastrophic results: Grand Central Station steam pipe explosion Minnesota bridge collapse Subway service suspended due to flooding Energy blackouts in 2003 and 2005

Capital Assets in New York City

NYC has a vast and complex system of capital assets

20,000 miles of streets and highways 2,027 bridges and tunnels 3 million miles of fiber optic networking 29,000 acres of parkland 130,000 energy lines 324,000 street lights 29,000 public vehicles 6,600 sewer and 6,200 water main miles 6,200 subway cars and 4,500 buses 1,000 public school buildings 90 colleges & universities 2 airports

Not All Assets Owned By NYC The State, State authorities, the Federal govt. and the private sector all own major assets in

virtually all functions

Non-City Control of Capital Assets in New York City Federal State Port Other Private

Govt. Govt. Authority MTA Authorities Sector

Transportation

Transit

Education

Housing

Public Protection

Health

Parks & Culturals

Sanitation

Energy

Telecommunciations

New York City Government $60.5 Billion in Capital Assets

Parks, Libraries

and Culturals, $2,581

Water and Sewer

System, $18,436

Social services,

$763 Education, $11,904

Sanitation, $760

Housing, $5,220

Transportation, $6,454

Public Protection,

$3,840

Land and

construction, $4,694

General Government,

$2,935Health, $2,878

How does the City plan and budget for these assets?

Ten-Year Capital Strategy Released every two years by the

Office of Management and Budget Describes citywide goals, priorities,

policy constraints, financing mechanisms and other assumptions Overviews agency capital programs Is the basis for the capital budget and

capital commitment plans

PLANYC Plan to improve quality of life in NYC in

anticipation of 1 million more people by 2030 10 broad goals to improve infrastructure, air

and water quality, and sustainability Scope includes non-city entities, most notably

the MTA 127 specific initiatives with milestones and

benchmarks 6 month progress report indicated 104 of 127

initiatives launched Overseen by new mayoral office, Office of

Long-Term Planning and Sustainability

Challenges to Achieving the Goals of PLANYC

PLANYC is a strategic planning process that is broad, long-term and

visionary, but does not include all the Citys capital assets.

One:

Weaknesses of Ten-Year Strategy Ten-Year Strategy is not well-integrated

with other strategic planning initiatives Does not link to Department of City

Plannings Master Plan or Strategic Policy Statement

Does not establish broad strategy goals itself

Does not address assets not under City control

Ten-year time frame is ineffective Too short for some infrastructure systems

Example: Water and Sewer system Too long for credible financial planning

Agencies tend to focus on four-year plan

Weaknesses of Ten-Year Strategy Where the first four years are generally on target, out-year commitments are dramatically underestimated

Four-Year Total Six-Year Total Ten-Year Total1996-1999 2000-2005 1996-2005

1996-2005 Capital Strategy $15,400 $25,163 $40,562Actual Commitments $16,743 $35,562 $52,305Difference ($1,343) ($10,399) ($11,743)

1998-2001 2002-2007 1998-20071998-2007 Capital Strategy $19,776 $26,900 $46,677Actual Commitments $18,700 $41,861 $60,561Difference $1,076 ($14,961) ($13,884)

2000-2003 2004-2009 2000-20092000-2009 Capital Strategy $22,983 $25,140 $48,123Actual Commitments* $22,759 $58,474 $81,233Difference $224 ($33,334) ($33,110)

Planned vs. Actual Commitments for Ten-Year Capital Strategies(dollars in millions)

PLANYC: Improvement Upon Current Process

Ten-Year Strategy PLANYC Strategic Goals

Not clearly linked to broader strategic goals Ten clear strategic goals

Time Frame

Ineffective: Too short for long-term infrastructure planning

Longer-term: 25-year plan for water and sewer, transit and transportation systems

Coverage Not comprehensive: Focuses only on City-controlled assets

More comprehensive: Addresses assets owned by MTA, Port Authority, others

SOGR Plan

No timetable or plan for achieving SOGR

SOGR timetable for transit, roads and bridges

PLANYC does not capture all of the Citys assets

PLANYC Spending in the Ten-Year Strategy (dollars in millions)

SPENDING PERCENT PLANYC Agencies $39,012 47% Environmental Protection $19,485 Transportation 11,106 Housing 4,713 Parks and Recreation 2,653 Transit Authority 767 Education 287 All Other Agencies $44, 653 53%

TOTAL CAPITAL STRATEGY $83,665 100%

Notably absent: Largest capital program $28 billion in spending on schools

Effective capital planning is hindered by a lack of important information on capital assets

and clear goals for achieving a state of good repair.

Two:

Three: Many assets are not on regular replacement cycles, and ad hoc

repairs are funded through borrowing in the budget.

How does the City determine the condition of its assets?

City assesses assets in two ways: Agency Evaluations Schools, Bridges and Tunnels, Water and

Sewer System Asset Information Management

System (AIMS) Engineers survey some agency assets on

a four-year rolling basis Recommends capital and expense budget

spending necessary to bring assets to a state of good repair

Agency evaluations reveal improved conditions

WATER AND SEWER ENGINEER EVALUATION Adequate condition: no major deterioration Will address high priorities in FY2008 BUT need more comprehensive assessments for

major facilities so upgrades can occur on an orderly basis

BRIDGES AND TUNNELS ANNUAL REPORT Based on State standards Very Good to Poor A bridge that is continually well maintained should

never fall below good CY2006: 328 good or very good bridges; 456 fair

bridges; 3 poor bridges SCHOOLS Building Condition and Assessment

Architectural, mechanical, electrical inspections Rated Good to Poor

FY2006 Less than 1% poor; 69% fair; 28% fair to good

but AIMS Report Shows City Has Not Achieved SOGR

Change in Funding of AIMS Recommendations, Fiscal Years 2000-2008(dollars in millions)

70% 72%66%

58%

41%

48% 46% 49% 49%

Total Recomm. $5,440

Total Funding $2,642

$

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY20080%

10%

20%

30%

40%

50%

60%

70%

80%

Percent Funded Total Recommendation Total Funding Reported

Source: New York City Office of Management and Budget, Asset Information Management System, Fiscal Years 2000-2008.

CALCS

Agency Reconciliation: Funding for Expense Budget Recommendations ($ in millions)

FY2007FY2006FY2005FY2004FY2003FY2002

INFRASTRUCTURE TOTAL$63.7$62.5$60.9$56.6$53.3$46.1

Transportation

Bridges28.613.212.413.89.712.2

Facilities and Ferries2.40.72.91.123.3

Street and Traffic Lighting47.747.645.641.741.632

Streets and Highways000000

NON-INFRASTRUCTURE$54.7$48.7$57.7$53.5$63.6$45.3

All Libraries1.20.41.30.81.91.2

Education12.812.715.914.813.511.2

City University4.84.84.64.84.74.4

Police Department7.26.96.27.26.12.9

Fire Department0.80.9.2.1.1.0

Children's Services0.10.1.0.1.1.1

Homeless Services5.44.65.85.34.82.7

Correction2.22.65.44.24.43.4

Human Resources0.30.80.50.40.30.2

Cultural Affairs

Juvenile Justice0.30.20.10.10.10.1

Small Business Services1.41.23.31.71.50.8

Health & Mental Hygeine1.71.41.31.20.50.5

Health & Hospitals Corp.1144.76.410.57.9

Sanitation0.60.50.60.50.50.4

Parks and Recreation2.44.34.43.112.76.1

Citywide Administrative2.53.23.42.923.5

ALL TOTAL$118.3$111.2$118.6$110.1$116.9$91.5

Source: Asset Information Management System (AIMS) Report, and AIMS Agency Reconciliation, Fiscal Years 2001-2006

Agency Reconciliation: Funding for Capital Budget Recommendations ($ in millions)

FY2007-2010FY2006-2009FY2005-2008FY2004-2007FY2003-2006FY2002-2005

INFRASTRUCTURE TOTAL$1,880.6$1,776.9$1,558.6$1,425.3$2,016.1$2,034.6

Transportation

Bridges943.8915.7856.8803.11,192.71,103


Street and Traffic Lighting

Streets and Highways892.6822.2652.9580.8792.4900.7

NON-INFRASTRUCTURE TOTAL$528.6$512.3$560.5$324.8$744.2$1,078.5

All Libraries6.12.72.11.14.58.3

Education191.7215.4229.90394.5622.6

City University2.22.9910.718.123.3



Children's Services0.910.61.10.30.2


Correction30.834.419.925.39.323


Cultural Affairs28.628.930.727.435.831.5


Small Business Services19.1222819.315.845.6

Health & Mental Hygeine9.99.67.782.22.1

Health & Hospitals Corp.65.550.864.244.767.386.8

Sanitation9.38.915.59.613.317.9

Parks and Recreation4222.427.42723.340.4

Citywide Administrative61.157.565.192.986.491.4

ALL TOTAL$2,409.2$2,289.3$2,119.0$1,750.1$2,760.3$3,113.1


NOT UPDATED WITH '08

Table 8: Shortfall in Funding for AIMS Recommendations for State of Good Repair ($ in millions)

FY2000FY2001FY2002FY2003FY2004FY2005FY2006FY2007

Total Recommendation$4,200$4,397$4,845$4,941$4,534$4,682$5,192$5,210

Total Funding Reported$2,958$3,173$3,205$2,877$1,860$2,238$2,400$2,528

Total Shortfall in Funding($1,242)($1,224)($1,640)($2,064)($2,674)($2,444)($2,791)($2,682)

Percent Funded70%72%66%58%41%48%46%49%

Source: Asset Information Management System (AIMS) Report, and AIMS Agency Reconciliation, FY2001-2006

FY2007-2010FY2006-2009FY2005-2008FY2004-2007FY2003-2006FY2002-2005

Funding Provided

Transportation Infrastructure$1,944$1,839$1,619$1,482$2,069$2,081

All others (Non-infrastructure)$583$561$618$378$808$1,124

Total$2,528$2,400$2,238$1,860$2,877$3,205

Funding as a Percent of Total Recommendation

Transportation Infrastructure68%65%64%62%83%90%

All others (Non-infrastructure)25%24%29%18%33%44%

Total49%46%48%41%58%66%

Funding Shortfall

Transportation Infrastructure($897)($987)($921)($905)($426)

All others (Non-infrastructure)($1,785)($1,805)($1,524)($1,769)($1,638)

Total($2,682)($2,791)($2,444)($2,674)($2,064)


INFRASTRUCTURE TOTAL2841.7962825.9462539.9852386.7562495.3792310.308

NON-INFRASTRUCTURE TOTAL2368.0962365.9952142.0352147.2582445.8312534.442

20072006200520042003200220012000

CAPITAL RECOMMENDATION$4,912.8$4,878.64,362$4,245.1$4,680.9$4,672.0

EXPENSE RECOMMENDATION$297.1$313.3320$288.9$260.3$172.74

TOTAL RECOMMENDATIONS$5,209.9$5,191.9$4,682.0$4,534.1$4,941.2$4,844.84396.748$4,200.1

SHORTFALLS TABLE

Agency Reconciliation: Funding for Expense Budget Recommendations ($ in millions)

FY2007FY2006FY2005FY2004FY2003FY2002

INFRASTRUCTURE TOTAL$63.7$62.5$60.9$56.6$53.3$46.1

Transportation

Bridges28.613.212.413.89.712.2


Street and Traffic Lighting47.747.645.641.741.632

Streets and Highways000000

NON-INFRASTRUCTURE$54.7$48.7$57.7$53.5$63.6$45.3

All Libraries1.20.41.30.81.91.2

Education12.812.715.914.813.511.2

City University4.84.84.64.84.74.4



Children's Services0.10.1.0.1.1.1


Correction2.22.65.44.24.43.4


Cultural Affairs


Small Business Services1.41.23.31.71.50.8

Health & Mental Hygeine1.71.41.31.20.50.5

Health & Hospitals Corp.1144.76.410.57.9

Sanitation0.60.50.60.50.50.4

Parks and Recreation2.44.34.43.112.76.1

Citywide Administrative2.53.23.42.923.5

ALL TOTAL$118.3$111.2$118.6$110.1$116.9$91.5


Agency Reconciliation: Funding for Capital Budget Recommendations ($ in millions)

FY2007-2010FY2006-2009FY2005-2008FY2004-2007FY2003-2006FY2002-2005

INFRASTRUCTURE TOTAL$1,880.6$1,776.9$1,558.6$1,425.3$2,016.1$2,034.6

Transportation

Bridges943.8915.7856.8803.11,192.71,103


Street and Traffic Lighting

Streets and Highways892.6822.2652.9580.8792.4900.7

NON-INFRASTRUCTURE TOTAL$528.6$512.3$560.5$324.8$744.2$1,078.5

All Libraries6.12.72.11.14.58.3

Education191.7215.4229.90394.5622.6

City University2.22.9910.718.123.3



Children's Services0.910.61.10.30.2


Correction30.834.419.925.39.323


Cultural Affairs28.628.930.727.435.831.5


Small Business Services19.1222819.315.845.6

Health & Mental Hygeine9.99.67.782.22.1

Health & Hospitals Corp.65.550.864.244.767.386.8

Sanitation9.38.915.59.613.317.9

Parks and Recreation4222.427.42723.340.4

Citywide Administrative61.157.565.192.986.491.4

ALL TOTAL$2,409.2$2,289.3$2,119.0$1,750.1$2,760.3$3,113.1


Table 8: Shortfall in Funding for AIMS Recommendations for State of Good Repair ($ in millions)

FY2000FY2001FY2002FY2003FY2004FY2005FY2006FY2007FY2008

Total Recommendation$4,200$4,397$4,845$4,941$4,534$4,682$5,192$5,210$5,440

Total Funding Reported$2,958$3,173$3,205$2,877$1,860$2,238$2,400$2,528$2,642

Total Shortfall in Funding($1,242)($1,224)($1,640)($2,064)($2,674)($2,444)($2,791)($2,682)($2,798)

Percent Funded70%72%66%58%41%48%46%49%49%

Source: Asset Information Management System (AIMS) Report, and AIMS Agency Reconciliation, FY2001-2006

FY2000FY2001FY2002FY2003FY2004FY2005FY2006FY2007FY2008

Total Recommendation$4,200$4,397$4,845$4,941$4,534$4,682$5,192$5,210$5,440

Total Funding Reported$2,958$3,173$3,205$2,877$1,860$2,238$2,400$2,528$2,642

Percent Funded70%72%66%58%41%48%46%49%49%

fy00-07

4200.1242957.791340.7042152422

4396.7483172.73340.7216091075

4844.753204.5190.6614415605

4941.2112877.1410.5822744667

4534.0631860.1910.4102702146

4682.0222237.6480.4779234271

5191.9412400.4630.4623440444

5209.8922527.5930.4851526673

&A

Page &P

Total Recommendation

Total Funding Reported

Percent Funded

Change in Funding of AIMS Recommendations,FY2000-2007

fy00-08

4200.1242957.791340.7042152422

4396.7483172.73340.7216091075

4844.753204.5190.6614415605

4941.2112877.1410.5822744667

4534.0631860.1910.4102702146

4682.0222237.6480.4779234271

5191.9412400.4630.4623440444

5209.8922527.5930.4851526673

5440.0032641.6170.4855910925

&A

Page &P




Percent Funded

Chart 2Change in Funding of AIMS Recommendations, Fiscal Years 2000-2008

fy00-08 for PPT

4200.1242957.791340.7042152422

4396.7483172.73340.7216091075

4844.753204.5190.6614415605

4941.2112877.1410.5822744667

4534.0631860.1910.4102702146

4682.0222237.6480.4779234271

5191.9412400.4630.4623440444

5209.8922527.5930.4851526673

5440.0032641.6170.4855910925

&A

Page &P




Percent Funded

Change in Funding of AIMS Recommendations, Fiscal Years 2000-2008(dollars in millions)

Total Recomm. $5,440

Total Funding $2,642

Agencies dont fully fund AIMS recommendations

This indicates there is no clear policy for funding maintenance and repairs and no plan for achieving SOGR

Regular replacement cycles do not guide asset replacement; instead, assets tend to be repaired when they malfunction

Why havent we achieved State of Good Repair?

Weak ties between AIMS and Ten-Year Strategy

Ten-Year Strategy does not appear to be firmly rooted in needs assessments Information is limited:

For City-owned assets, AIMS does not include: Housing, water and sewer assets Piers and bulkheads and the East River Bridges Smaller assets with a replacement cost of less

than $10 million For assets not owned by the City, little is known

about their condition Where good information exists, it does not

always guide investment decisions Demonstrated by shortfalls in AIMS funding No goal, timetable, or plan for achieving SOGR

An example of where needs are tied clearly to the capital plan: Bridges and Tunnels

The Citys rationale for pursuing many

expansion projects is unclear or unstated.

Four:

Expansion Projects: $23 billion 26 percent of the $86.7 billion in planned

investments will be for new capital projects, including Hudson Yards

PLANYC includes major expansions in Transportation, Environmental Protection, Housing, Parks and Energy

Ten-Year Strategy includes additional expansions in schools and economic development

Little or no justification provided for new projects based on data or economic analysis (such as the kind done for Hudson Yards)

PLANYC does a slightly better job at explaining why projects should be pursued or what improvement in service can be anticipated

Recommendations

Recommendation: Institutionalize and Expand PLANYC

Institutionalize and expand PLANYC in the context of a tiered planning process Pass City Council bill establishing Office of

Long-term Planning & Sustainability Include PLANYC process in City Charter Expand planning to cover education and all

other agencies Tiered planning process: Longer-term strategic document that can

vary by agency Shorter-term budgetary document for

realizing strategy through specific goals and benchmarks

Recommendations Achieve SOGR

Develop a systematic plan to bring all City-owned assets to a state of good repair Conduct a fuller assessment of needs Produce a plan or timetable to

achieve SOGR Tie capital plans to this SOGR plan Assess non-City owned assets and

work with other owners to achieve SOGR for those assets

Recommendation Fund Regular Replacement

Place assets on appropriate replacement cycles and fund their depreciation with operating revenues, not debt Replacement Cycles

Impose greater discipline on capital planning Provides incentives for upkeep and maintenance

Funding from Operating Revenues Steady stream of funds available for replacement Will mitigate debt service costs in the long-run

Recommendations Justify Expansions

Pursue expansion projects based on clearly explained priorities that reflect better provision of services or high rate of return Economic analysis should clearly

demonstrate anticipated benefits Example: Hudson Yards

Capital Budgeting for 2030:Achieving the Goals of PLANYCOverviewWhy does infrastructure matter?Capital Assets in New York CityNYC has a vast and complex system of capital assetsNot All Assets Owned By NYCNew York City Government$60.5 Billion in Capital AssetsHow does the City plan and budget for these assets?PLANYCChallenges to Achieving the Goals of PLANYCOne:Weaknesses of Ten-Year StrategyWeaknesses of Ten-Year StrategyPLANYC: Improvement Upon Current ProcessPLANYC does not capture all of the Citys assetsTwo:How does the City determine the condition of its assets?Agency evaluations reveal improved conditionsbut AIMS Report Shows City Has Not Achieved SOGRWhy havent we achieved State of Good Repair?Weak ties between AIMS and Ten-Year StrategyFour:Expansion Projects: $23 billionRecommendationsRecommendation:Institutionalize and Expand PLANYCRecommendationsAchieve SOGRRecommendationFund Regular ReplacementRecommendationsJustify ExpansionsSlide Number 29

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