Capital Plan Methodology
Under direction of the City Administrator, department staff annually assesses facility conditions, determines cost projections for renewal projects and proposed enhancements, and analyzes available funding resources to prepare a 10-year capital plan.
Through a series of meetings the Capital Planning Committee reviews proposals, staff recommendations, and documents toward the development of the Capital Plan. These reviews do not, and are not meant to, replace the authority of department commissions’ or other oversight bodies under the City Charter and other codes. Rather, the 10-year plan is meant to provide a forum that examines capital needs from a citywide perspective and to foster a dialogue on those needs between stakeholders, commissions, the Mayor, and the Board of Supervisors.
Staff uses two approaches to collect data for the Plan. The Facilities Renewal Resource Model (FRRM) is used to collect information on the state of repair for major facility and infrastructure subsystems (also known as renewals) for all of the General Fund departments. The Airport, Port, and MTA have implemented this model for their facilities as well. In addition, General Fund departments submit enhancement requests using the Capital Planning and Reporting system (CPRs). Each proposal is reviewed by professional staff (e.g., architects, engineers, analysts etc.) and categorized as a funded, deferred, or emerging need.
Facilities Renewal Resource Model (FRRM)
The City uses the facility life-cycle model to predict annual funding requirements for General Fund department facilities. The objectives of the facility modeling effort are listed below:
- Develop a budget model to predict relative annual funding requirements for facilities renewal and document the existing backlog of deferred maintenance in a consistent way for all departments.
- Provide a basis for a funding plan that will first address adequate resources for renewal and then a reduction of the deferred maintenance backlog.
- Create consistent and comparative data among departments for determining funding allocations and targets for addressing renewal as a part of operating or capital budgets.
- Deliver a cost model to each department with associated staff training so that facilities renewal and deferred maintenance needs can be updated annually and progress in meeting those needs can be measured.
- Provide a planning tool for departmental use which provides a useful life “systems” profile of each building as a way of predicting future funding needs or packaging projects to leverage fund sources.
- Develop a credible model to assess needs consistently and to focus on total funding needs and strategies.
The model uses building information (gross square feet, construction date, facility subsystem type, etc.) and an approach based on subsystem life cycles and replacement costs to estimate the backlog of deferred maintenance and future capital reinvestment needs. Shown here is an example of the 10-year renewal forecast report generated by FRRM for a particular facility. This report, one of dozens available, shows subsystems within the building that need to be replaced during the next 10 years and the corresponding cost (in thousands). A variety of other reports are available for further analysis.
Each department maintains the model, with the capability of summarizing information at both the department and citywide level. The model has a great deal of built-in flexibility that allows the City to enter new data and even change the underlying assumptions in future years.
The FY 2020-29 Capital Plan reflects renewal data collected from August through December 2018 and includes detailed information for each General Fund department. These findings are summarized in the renewal graphs and the renewal line of the financial summary schedules for each of the General Fund service areas found throughout the Plan.
|Building Name: 1 SOUTH VAN NESS OFFICE BLDG, CRV(000's): $286,418 Building No.: RE-000 GSF: 560,000 Year Built: 1960 FCI: 0.00|
|Backlog and 10 Year Renewal Forecast by Building (000's)|
|b.1. Building Exteriors (Hard)||-||315||-||-||-||-||-||-||-||-||-||315|
|c.1. Elevators and
|d.1. HVAC - Equipment||-||15,789||-||-||-||-||-||-||-||-||-||15,789|
|d.2. HVAC - Controls||-||-||-||-||-||-||-||-||4,926||-||$4,395||4,926|
|g.2. Plumbing Rough-in||-||14,894||-||-||-||-||-||-||-||-||-||14,894|
|i.1. Fire Protection Systems||-||2,291||2,291||-||-||-||-||-||-||-||-||4,583|
|i.2. Fire Detection Systems||-||-||2,864||-||-||-||-||-||-||-||-||2,864|
|k.1. Built-in Equipment and Specialties||-||-||2,578||-||-||-||-||-||-||-||2,578|
|l.2. Interior Finishes||-||11,457||-||-||-||-||-||-||-||-||-||11,457|
|TOTAL BY BUILDING||-||48,039||8,363||-||-||-||-||-||4,926||-||-||61,329|
Capital Plan Assumptions
- The FY2020-29 Capital Plan uses the Annual Infrastructure Construction Cost Inflation Estimate (AICCIE) of 6% as the escalation rate for the first 2 years, followed by 5% for the remainder of the Plan.
- Fiscal years (FY) in the Plan refer to the calendar year in which the City’s July 1 to June 30 budget cycle ends. For example, FY2020 refers to calendar year dates from July 1, 2019 to June 30, 2020.
- Dollars are listed in thousands for all financial schedules unless otherwise noted.
- For all planned General Obligation Bonds, the financial schedules show the total bond amount in the fiscal year during which the bond is to be approved by voters. For example, a G.O. Bond proposal on the November 2018 ballot will appear in FY2019 of the financial schedule.
- The General Obligation Bond Program assumes growth in Net Assessed Value of 6.49% in FY2020, 4.51% in FY2021, 4.31% in FY2022, 4.03% in FY2023, 4.03% in FY2024, and 3.50% annually thereafter.
- When issued, G.O. Bonds proposed by this Plan will not increase voters’ long-term property tax rates above FY2006 levels. In other words, new G.O. Bonds will only be used as funding source when existing approved and issued debt is retired and/or the property tax base grows.
- The General Fund Debt Program assumes that General Fund discretionary revenues grow 4.50% in FY2020, 3.79% in FY2021, 3.15% in FY2022, 2.97% in FY2023, 3.19% in FY2024, and 3.50% annually thereafter. In addition, the General Fund Debt Program assumes that the amount of General Fund revenues spent on debt service will not exceed 3.25%.
- The Pay-As-You-Go Program assumes General Fund and Senate Bill 1 Street Repaving as revenue sources.
Jobs Creation Estimation Methodology
In an effort to better evaluate and prioritize capital projects, local governments are examining not only upfront financial costs but also their contributions of direct and indirect jobs generated by the capital investment. The City and County of San Francisco’s FY 2020-29 Capital Plan estimates almost $39 billion in capital projects during the next ten years, which will create as many as 230,000 San Francisco jobs. A job is defined as one job year of full-time work. For example, five people employed for four years equals 20 job years. This jobs estimate is based on the REMI Policy Insight model which attributes 5.93 San Francisco jobs per million dollars in construction spending. This is exclusive of the additional jobs created outside
of the City and County as workers and materials migrate in from surrounding areas.
Customized for San Francisco, REMI has the unique ability to determine the effects of taxes and other variables on the local economy. As a result, the Controller’s Office of Economic Analysis uses this model for analyzing the economic impact of pending legislation. The table below summarizes the number of job years from the REMI model based on $1 million of construction spending in San Francisco.
Estimated Jobs Created from Construction Spending in San Francisco
|Sectors||Industry||Employment per $M of
|Professional, Scientific, and Technical Services||0.209|
|Health Care and Social Assistance||0.199|
|Administrative and Waste Management Services||0.138|
|Other Services, except Public Administration||0.133|
|Real Estate and Rental and Leasing||0.092|
|Finance and Insurance||0.079|
|Transportation and Warehousing||0.047|
|Educational services; private||0.043|
|Arts, Entertainment, and Recreation||0.041|
|Accommodation and Food Services||0.041|
|Management of Companies and Enterprises||0.025|
|Forestry, Fishing, and Related Activities||0.000|
|Government||Government (State & Local) Jobs||0.155|
Infrastructure Finance Districts Criteria
The following threshold and strategic criteria to guide the use of future Infrastructure Finance Districts (IFDs) in San Francisco were adopted by the Board of Supervisors (BOS) on February 18, 2011. These criteria are in addition to those in IFD law (CA Government Code section 53395 et. seq.)
The Guidelines are organized into two sets of criteria: (1) minimum “Threshold Criteria” that must be satisfied for an IFD to be formed by the BOS and (2) “Strategic Criteria” that may be considered when deciding whether to form a future IFD. These policy guidelines would not apply to any existing Redevelopment Area (IFD law prohibits it) or to any property owned or managed by the Port of San Francisco.
- Limit to areas that are rezoned as part of an Area Plan or Development Agreement approved by the Board of Supervisors (BOS) and also adopted as a Planned Priority Development Area (PDA) by the Association of Bay Area Governments (ABAG). Priority Development Areas (PDAs) are locally-identified, infill development opportunity areas within existing communities. They are generally areas of at least 100 acres where there is local commitment to developing more housing along with amenities and services to meet the day-to-day needs of residents in a pedestrian-friendly environment served by transit. To be eligible to become a PDA, an area has to be within an existing community, near existing or planned fixed transit or served by comparable bus service, and planned for more housing. Designation of PDAs expresses the region’s growth priorities and informs regional agencies, like the Metropolitan Transportation Commission (MTC), which jurisdictions want and need assistance. Planned PDAs are eligible for capital infrastructure funds, planning grants, and technical assistance. Linking creation of future IFDs to areas designated as PDAs will allow the City to leverage the increment generated by an IFD to increase its chances to receive matching regional, state, or federal infrastructure and transportation grants.
- Limit to areas where a rezoning results in a net fiscal benefit to the General Fund as determined by the Controller’s Office. Specifically, the City must demonstrate that any added General Fund costs generated by the new service population projected to result from the growth supported by a rezoning are offset by greater General Fund revenues, resulting in a net fiscal benefit or surplus. As a general rule, this would mean that use of IFDs would be limited to areas that received substantial & quantifiable upzoning, based on actual net increases in height, bulk, density that result in greater developable FAR than the previous “baseline” zoning, or through liberalization of land use and permitting provisions that increase the certainty of entitlements and the value of property.
- In general, restrict the maximum increment available to an annual average of 33-50% over the 30-year term of the IFD, and in no event allow the annual average increment over the life of the IFD to exceed the projected net fiscal benefit over the life of the IFD. This maximum average cap would include annual pay-as-you-go monies and bond service payments or some combination of both. The maximum average increment cap may be increased to 50% to fund neighborhood infrastructure that also provides clear citywide benefits, like an extension or upgrade of a MUNI light rail line or the development of a City-serving park. In any event, this policy would guarantee that an IFD diversion should always be less than the net fiscal benefit, guaranteeing that there is at least some again to the General Fund in all circumstances. This policy would not prevent the “front-loading” of increment in the beginning years of an IFD to allow for bonding and the acceleration of construction of neighborhood-serving infrastructure, especially since accelerating delivery of infrastructure should have a correspondingly positive effect on property tax revenues for the General Fund.
- Limit to areas with documented existing infrastructure deficiencies. Because the City has not developed universally-applied and objective citywide standards for assessing the sufficiency (or deficiency) of existing neighborhood-serving infrastructure, BOS-adopted planning documents (like Area Plans) that qualitatively and/or quantitatively describe such deficiencies will suffice until new citywide standards are adopted at a later date. After the adoption of a new IFD policy, the Capital Planning Committee should be tasked with developing a systematic and quantitative set of criteria or standards for assessing existing neighborhood infrastructure deficiencies in the following areas: (i) neighborhood parks & open space improvements; (ii) “Better Streets” streetscape & pedestrian safety improvements; (iii) bicycle network improvements; (iv) transit-supportive improvements; (v) publicly-owned community center and/or child-care facilities. Furthermore, the CPC would need to adopt citywide standards to avoid the use of IFD funds for “gold-plated park benches” or facilities that far exceed citywide norms for cost and quality.
- Limit use of IFD monies to individual infrastructure projects where a source of long term maintenance funding is identified. Within an IFD, limit expenditure of IFD monies to projects that have identified a separate source of funding for ongoing maintenance and operations. In some cases this could be through public-private agreements, such as a Master HOA agreeing to maintain a public park or a Community Benefit District agreeing to fund long-term maintenance, or via the creation of a new supplemental property tax assessment district, like a Mello-Roos Community Facilities District.
- In general, limit IFDs to parcels without any occupied residential use. The City may want to exclude parcels that contain existing occupied residential structures. This is because IFD law requires an actual voter-based election if there are 12 or more registered voters within the proposed boundaries of an IFD. If there are less than 12 registered voters, the law only requires a weighted vote of the property owners, which, in general, should reduce the complexity and time required for forming a district. On the other hand, there may be circumstances where a voter-based election may be both desirable and manageable.
- Use IFDs as a strategy to leverage additional non-City resources. As noted in Threshold Criteria #1 above, IFDs should be used as a tool to leverage additional regional, state, and federal funds, thereby serving a purpose beyond earmarking General Fund resources for needed infrastructure. In particular, IFDs may prove instrumental in securing matching federal or state dollars for transportation projects.
- Consider adopting a limited policy of “overriding considerations” for situations where the BOS may have adopted zoning that purposely restricts or limits the economic “highest and best” use of a given area, thereby limiting or reducing the net General Fund benefit derived from a rezoning, but where other social policy objectives might dictate that some IFD revenues be spent on supportive infrastructure.