Finance

  Mayor Fraser, Members of the Petoskey City Council, and Citizens of Petoskey: I am pleased to submit to you the 2013 - 2017 Capital Improvements Program (CIP) for the City of Petoskey. This document serves as an instrument to identify needs and financing sources for public infrastructure improvements. It also informs city residents how the City plans to address significant capital needs over the next five years. This document gives significant direction to the City on funding priorities. However, only those programs scheduled during the first year are financed and adopted as part of the Annual Budget. Programs slated for construction in subsequent years may be adjusted to reflect priority changes or funding constraints. The effects of the economic recession continue to create significant fiscal challenges for the City of Petoskey. Because of this, some capital projects shown in 2013 CIP have been scaled back, removed completely, or become dependent upon grant funding in the 2013-2017 CIP. This issue is particularly acute with the General Fund, where capital projects and maintenance items are being deferred as general property tax receipts decline. At the direction of City Council, which requested a forecast of infrastructure needs beyond the five year horizon of the CIP budgeting process, the 2013 - 2017 CIP contains nearly $8.2M in identified, long-term infrastructure needs for which no funding mechanism currently exists. Most of these infrastructure needs exist today, or have already been deferred in recent years as a result of declining revenues. Under current Michigan law, which limits increases in taxable values to the rate of inflation or 5%, whichever is less, it could be many years before the City's taxable values return to peak levels reached in 2009. Consequently, within service areas that are primarily supported by property tax revenues, such as Public Safety, Parks and Recreation, and street maintenance, the list of capital needs is likely to grow longer in coming years as infrastructure continues to age and need replacement. Looking forward, identifying additional revenues will be critical in order for the City to maintain its infrastructure in good condition. As always, we will review all projects every year to evaluate any changes in scope, and to update all of our financing opportunities whether it be with tax revenues, bonds, grants or other outside funding sources. The CIP is a flexible plan that can be altered as conditions and regulations change. As we move into an era of slower growth and lower assessed values in housing, it is imperative that we plan to use our dollars wisely to complete this plan and ultimately benefit all citizens of the City of Petoskey. The 2013-2017 CIP totals $20.5 million. However, the proposed 2013 CIP totals only $3.9M, of which $1.3M is projected to come from grants or other outside sources. City staff anticipates that in or around 2016 there will be a large number of water and sewer improvements, currently projected at approximately $3.5M that will likely necessitate bonding if they are pursued. The chart below compares the capital spending in previous years with the proposed 2013-2017 CIP, and highlights the proposed increased level of 2016 spending. As noted above, however, lower rates of proposed capital spending in other years of the 2013-2017 CIP is evidence of contracting funding sources, not declining infrastructure needs. 2010 - 2017 CIP Spending by Year Preparation of the CIP is a result of considerable efforts from staff in all departments of the City. I am especially grateful for the work of Department Heads, as well as Supervisors in each division who worked diligently to try and prioritize infrastructure needs within the context of ever tightening budgets. My thanks for their hard work and dedication. Respectfully Submitted, Dan Ralley City Manager