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Resolution No. 2022-10 Establishing City Facilities Maintenance Capital Replacement and Reconstruction Policy - Approved 041222Page 1 of 2 RESOLUTION NO. 2022-10 A RESOLUTION of the City Council of Bainbridge Island, Washington, Establishing the City’s Municipal Facilities Maintenance, Replacement and Reconstruction Policy. WHEREAS, the City Council (“Council”) is responsible for setting financial policy for the City of Bainbridge Island (“City”); and WHEREAS, state law, including Chapter 35A.33 RCW, provides guidance for budgets in Code Cities; and WHEREAS, in accordance with Chapter 35A.34 RCW and Chapter 2.82 BIMC, the City prepares a biennial budget with a mid-biennial review; and WHEREAS, the City Administration (“Administration”) requested, as part of the 2023- 2024 biennial budget process, that the Council update the financial and budgetary policies that were adopted by the City prior to 2022; and WHEREAS, in 2018 the City completed a Facilities Condition Assessment that identified significant deficiencies in City-owned facilities and developed cost estimates for documented issues, and used cost models to predict future capital costs over a 20-year horizon; and WHEREAS, the City owns and operates a variety of municipal facility assets that must be properly maintained, replaced or reconstructed to ensure that they remain safe, that financial and service level investments are maintained, and that they provide a welcoming and usable space to serve their intended purposes; and WHEREAS, adequate budget appropriation levels are needed to provide resources for asset management, planning and major maintenance costs of existing City-owned facilities; and WHEREAS, the City desires to establish a Municipal Facilities Maintenance, Replacement and Reconstruction Policy to provide sufficient planning and funding to meet the City’s demands related to maintenance, upgrades, replacement, reconstruction and mitigation needs of facility assets throughout the useful life of such assets; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND DOES RESOLVE AS FOLLOWS: Section 1. The City Municipal Facilities Maintenance, Replacement and Reconstruction policy as shown in Exhibit A, which is attached hereto and incorporated herein by this reference, is established, and set forth in full. Page 2 of 2 Section 2. Severability. If any one or more sections, subsections, or sentences of this resolution are held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this resolution and the same shall remain in full force and effect. Section 3. This resolution shall take effect and be in force immediately upon its passage. PASSED by the City Council this 12th day of April 2022. APPROVED by the Mayor this this 12th day of April 2022. By: ______________________________ Joe Deets, Mayor April 8, 2022 April 12, 2022 ATTEST/AUTHENTICATE: By: _________________________ Christine Brown, MMC, City Clerk FILED WITH THE CITY CLERK: PASSED BY THE CITY COUNCIL: RESOLUTION NO. 2022-10 Exhibit A to Resolution No. 2022-10 p. 1 of 4 City Municipal Facilities Maintenance, Replacement and Reconstruction Policy Department of Finance and Administrative Services Prepared by Finance Director DeWayne Pitts Initial Development: 4/12/2022 Table of Contents Policy Statement.................................................................................................................................................................... 2 Purpose ................................................................................................................................................................................... 2 Scope ....................................................................................................................................................................................... 2 Goals ........................................................................................................................................................................................ 2 Funding .................................................................................................................................................................................... 2 Authoritative Guidance ....................................................................................................................................................... 3 Procedures ............................................................................................................................................................................. 3 Condition Assessment of Existing Municipal Facilities ............................................................................................. 3 Budget appropriation funding ......................................................................................................................................... 4 Major Facility Replacement or Reconstruction ......................................................................................................... 4 Exhibit A to Resolution No. 2022-10 p. 2 of 4 Policy Statement The City owns and operates a variety of municipal facility assets including City Hall, the Police and Court facility, the Senior Center Commons building and various storage, park, farm, and other investments that must be properly maintained and eventually replaced or reconstructed to ensure they remain safe, that financial and service level investments are maintained, and that they provide a welcoming and usable space to serve their intended purposes. Purpose This policy supports the City in asset management and budgeting efforts and is established to fund the planned replacement, reconstruction, and major maintenance costs of existing City-owned facilities. A separate fund will be created and established by the City Council to account for projects contemplated by this policy. Adequate budget appropriations will be calculated and included in budgets to provide resources for planned projects. Scope This policy applies to the City’s existing general government municipal facility assets. It includes all facility structures such as City Hall, the Police and Court Facility, the Senior Center Commons building, and various storage, park, farm, and other investments that have an estimated useful life of at least 25 years. It does not include the City’s utility owned assets or new planned purchases, land or leased assets. It includes funding for facility replacement or reconstruction and major maintenance as defined under the City’s capital asset policy. Goals Effective asset management is comprised of several components including: • Assets need to be regularly assessed so there is up-to-date information on condition and status. • Assessment information is used to determine maintenance, upgrades, replacement, reconstruction, and mitigation issues. • Facility asset management includes a plan to address asset lifecycle needs, including replacement, reconstruction, inspections, and maintenance • A system in place to prioritize asset care and the allocation of limited resources. It is the intention of this policy to adequately fund major maintenance projects of City-owned facilities to include an additional reserve amount for unforeseen or catastrophic events, plus an additional amount to set aside for eventual replacement or reconstruction of City-owned facilities. Funding The municipal facilities renewal and replacement policy may incorporate several available funding sources to pay for major maintenance. These sources vary in legal, grant and other restrictions. This policy will also incorporate and follow an existing financial policy that states when an expenditure is incurred, the City will first consider and target the more restricted funding sources where possible. The following sources, at a minimum, may be considered for allocation to the City Facilities Capital and Maintenance fund: Exhibit A to Resolution No. 2022-10 p. 3 of 4 • Real Estate Excise Tax • Grants • General fund reserve transfers • One-time revenue transfers • Other sources as appropriate and allowed by policy or legal authority Authoritative Guidance Government Finance Officers Association (GFOA) The Government Finance Officers Association represents public finance officials throughout the United States and Canada. GFOA's mission is to advance excellence in public finance and includes best practices in governmental finance. The following link provides best practices for establishing capital asset renewal and replacement. Strategies for Establishing Capital Asset Renewal and Replacement Reserve Policies (gfoa.org) City of Bainbridge Island – Capital Asset Policy The capital asset policy provides guidance on acquisition, inventories, maintenance and the disposal of capital assets. City of Bainbridge Island – 2018 Facility Condition Assessment A facility condition assessment was performed in 2018 that will serve as a minimum target consideration to meet funding obligation for major maintenance projects. An updated condition assessment will need to be completed periodically as outlined below under “Procedures” but no less than once every five years. Roles and Responsibilities Facility asset management is a shared function between the Public Works Department and the Finance and Administrative Services Department. Public Works is responsible for the asset life cycle process including acquisition, condition assessment, maintenance, cost estimates and the disposal of assets. Finance is responsible for the budgeting, recording, depreciation, physical inventory, and update of a physical asset list. Finance will also oversee the administration of the municipal facilities fund and calculate an annual budget appropriation. The final appropriation of funds is the responsibility of the City Council. Procedures Condition Assessment of Existing Municipal Facilities The City will conduct a systematic condition review of all facility assets no more than every five years. The assessment will include scoring criteria, asset useful lives used for assessments, project justification and estimated cost to replace or repair. Major repairs may be capitalized following the City’s Capital asset policy. Operating project costs that are not capitalized will follow the procedures of this policy for determining appropriation into the fund as outlined in “Budget appropriation funding” below. Cost estimates from the assessment will be used to determine an estimate for adequate funding for needed asset improvements. Exhibit A to Resolution No. 2022-10 p. 4 of 4 Budget appropriation funding The budget appropriation for funding the Municipal Facilities Maintenance, Replacement, and Reconstruction fund each year shall be calculated using the following components: • Six year planned Facilities Operating projects planned in the City operating budget plus; • An amount to be calculated for existing building replacement or reconstruction such as current depreciation or some other reasonable method of calculation that will support projects such as facility replacement or reconstruction over the estimated useful life. *Note that any 6-year Facilities Capital Improvement Plan projects that meet City capitalization thresholds will be funded separately in the Capital Construction Fund and identified in the 6-year Capital Improvement plan and will not directly affect this fund. If there is a purchase of a new City facility, it will be factored into future consideration once it has been placed into service. Major Facility Replacement or Reconstruction The future replacement or reconstruction of major facilities may be initially funded using an amount equal to the annual depreciation expense or some other reasonable method of calculation of major facility buildings over their expected useful lives. Utilizing depreciation to fund major facility replacement or reconstruction should be considered a starting point and will not typically generate enough funds for capital replacement needs because the cost of replacing or reconstructing facility assets generally increases over time and may exceed the original cost. Periodic review and the facility condition assessment will be used to determine if additional replacement funds are needed and if funds accumulated are reasonable in amount. If replacement revenue received over the life of an asset is insufficient to cover the facility replacement or reconstruction, the funding decision for the incremental difference may be made on a case-by-case basis depending on the nature and extent of the difference and the short- and long-term impact on the fund balance, operating budget, and future asset replacement schedules. Conversely, if funds accumulated in the fund are determined to be excessive, an adjustment to future rates may be considered.