What's the Money For? |
Who Picks the Projects? |
Sale of the Bonds |
Status of the Funding |
Status of the Projects |
Project Management |
Findings and Observations |
Conclusions |
Recommendations |
This report is the first in a new series of publications which continue BGR’s governmental oversight and monitoring of Orleans Parish governments but in a new format. The primary purpose of the project is to continue to produce information for citizens on the performance of various local governments in Orleans Parish, while complementing the subjects dealt with in the Jefferson series.
This first report provides a status report on the city capital improvements program approved by voters in 1995.
BGR gratefully acknowledges the support that has made this series possible. BGR also acknowledges the cooperation and assistance of City of New Orleans and Board of Liquidation, City Debt officials in the provision of information for this report.
In July 1995, voters in New Orleans approved a $172 million, five-year capital improvements program, the largest single bond-financed capital program in the city’s history. The purpose of this report is to provide a brief status report on the capital program, its funding, and its implementation, and to highlight matters of concern to BGR, both at the time of its endorsement and now.
In short, the City is delivering on promises made to citizens at the time the capital program was proposed. The phased-in sale of the bonds is essentially on target, work on projects is proceeding at a careful but more rapid rate than in the past, and the increase in city millage rates has been below what was originally projected.
BGR’s support of the program in 1995 was conditioned on a number of commitments: (1) the city’s seeking of "changes on the state level to provide more equitable funding options and greater flexibility for local governments in meeting their long-term capital needs;" (2) the city’s not spending the proposed $50 million for minor street improvements "until there is an objective set of standards and criteria for selecting the streets to be rebuilt or repaired;" (3) a phased-in, multi-year sale of the bonds; and (4) the city’s commitment to establish a process to assess and analyze the long-term capital needs of all local tax-levying agencies in Orleans Parish. (See BGR Report of June 30, 1995.) Two of these conditions have been met; the other two have not.
Criteria for rating the conditions of streets in need of repair have been established, though BGR would like to see money for repairs allocated according to need on a citywide basis, not a council-district basis. The sale of bonds is being carried out over several years.
The City still needs to make—and solicit the support of other governing bodies for—a concentrated effort at the state level to secure greater flexibility for local governments to meet long-term capital needs.
The City also still needs to take the lead in developing a method for carrying out a consolidated analysis of long-term capital needs of all local-tax-levying bodies in Orleans Parish, not just those agencies under the jurisdiction of city government. A consolidated statement of capital needs parishwide is desired so that all capital needs of local government can be seen and evaluated in relation to each other, not in isolation or on a piecemeal basis.
Finally, BGR continues to be concerned about:
the need to improve coordination and communication between the City and the Sewerage and Water Board on their respective construction programs;
BGR would like to see the Infrastructure Task Force reconvened, both to function in an oversight role for the 1995 capital program and to explore options for meeting a larger portion of the city’s capital needs.
While the scope of this report did not include a review of the actual implementation and results of the city’s policies for selecting professional services contractors, BGR continues to be concerned about the adequacy of the city’s policies as written to ensure open, competitive selection of these contractors.
The $172 million, five-year capital improvements program approved by voters in New Orleans in July 1995 is the largest single bond-financed capital program in the city’s history. The 1995 plan called for the sale of the bonds to be phased in over a multi-year period, in order to provide a more timely expenditure of funds in accordance with the borrowing schedule and to avoid a large backlog of unspent bond funds.
As of October 1997, $75 million in general obligation bonds and $15.8 million in limited tax bonds have been sold. While 64 percent of the bond funds sold to date remain unspent, the city is on target with the sale of bonds and is accelerating the design and construction of projects. Seventy-two percent of the 1995 and 1996 bond funds have been spent or encumbered.
Voters in 1995 approved the issuance of $147.4 million in general obligation bonds to be spent for street improvements; improvements to Audubon and City Parks; improvements to criminal and municipal traffic court buildings, the House of Detention, and Central Lockup; and acquisition, construction, improvements, and renovations to other public buildings. The general obligation bonds were to be financed by an increase in the property millage.
Voters also approved the rededication of a 2.5 millage to fund $15.8 million in ten-year limited tax bonds, to be used for repairs, renovations, and improvements to parks, playgrounds, and recreation facilities and for the acquisition of fire-fighting, sanitation, and mosquito control equipment.
Part of the 1995 capital program, $8.8 million from ten-year certificates of indebtedness backed by $1.25 million annual payments from the developer of the casino, was not subject to voter approval. This revenue is not available, since the developer of the land-based casino filed for bankruptcy and stopped construction prior to completion of the casino. It is unclear at this point whether the $172 million capital program will be reduced accordingly, or whether the difference will be made up in some other way.
The projects included in the city’s capital program were selected in a process that involves the City Planning Commission, the Chief Administrative Office, the Mayor, and the City Council.
The City Planning Commission initiates the process through the development of a five-year capital improvements plan. The projects are prioritized based on ranking of criteria that were initially recommended by BGR in a previous study on the city’s capital planning process.
Although there have been some minor modifications over the last 10 years, the current criteria still emphasize life, health, and safety issues as the top priorities.
After review by the Chief Administrative Office, the CPC submits a five-year capital improvements program to the Mayor. The Mayor then recommends to the City Council, on or before November 1 of each year, a capital program for the next five years and a capital budget for the first year of the program. The City Council is obligated to approve a capital program and adopt a capital budget before it adopts the annual operating budget on or before December 1 of each year.
The first $25 million in general obligation bonds were sold in October of 1995 and delivered in November. In this issue, $14.7 million was for improvements to major streets; $7.4 million for the acquisition of, construction of, and improvements and renovations to public buildings; $2 million for improvements to minor streets; and $.9 million for improvements to court buildings, the house of detention, and central lockup.
Another $50 million in general obligation bonds for 1996 were sold in December of that year and dated January 1, 1997. This issuance dedicates $11.7 million to major street improvements; $16 million to minor street improvements; $6 million to the convention center expansion; $2.4 million for closure of the Gentilly Landfill; $2.2 million for improvements to the juvenile center; $1 million to Audubon and City Park improvements; and $10.6 million to the acquisition of, construction of, and improvements or renovations to either city or court buildings.
The $40 million issuance of general obligation bonds slated for 1997, which was expected to occur in October, has been delayed, probably till later in the year.
In January 1996, the $15.8 million in limited tax bonds were sold and dated March 1996.
See Table A for a summary of bonds sold as of October 1997.
Most non-street projects were funded in 1996 and 1997.
Thirty-seven projects were funded in 1996 and a total of 31 in
1997. Another 20 projects are expected to be funded in 1998 and
1999. See Table B.
The largest portion of the funding that has already occurred, 43.8 percent, was for recreational facilities, at $10.3 million. These projects included repairs and improvements to seven area pools, five playgrounds, two stadiums, and four neighborhood centers. Six million dollars was for Phase III of the Ernest N. Morial Convention Center expansion. This $6 million payment represents half of the city’s total contribution of $12 million for the convention center expansion. Other uses funded included citywide lighting, fencing, roofing, painting, and new playground equipment.
In 1997, project funding will total $22.3 million. The convention center expansion will again account for the largest single expenditure, $6 million. Property management project funding will be the second largest use and will go for upgrades to mechanical, electrical, and plumbing systems in city buildings, as well as various repairs to the House of Detention, Gallier Hall, City Hall, municipal and traffic court, and criminal court.
Property management projects will continue to be the highest funded in 1998 and in 1999. In 1998, most property management projects will be ongoing efforts. Only one, the upgrade to the city hall annex elevators, will be newly funded that year. In 1999, newly-funded property management projects will be for the House of Detention, the DA’s office, criminal court, and City Hall.
Bond funding for major and minor street improvements will total $91.2 million. Major street improvements will account for $41.2 million and minor street improvements, $50 million. See Table C.
Over $14 million of major street improvements were funded in 1996. In 1997, $10.2 million are slated for funding and in 1998, $12.1 million. The remaining $4.2 million will be funded in 1999. Minor street funding was $2 million in 1996. The remaining $48 million will be disbursed equally over the next three years.
Of the 37 projects funded for 1996, three are completed, twelve are under construction, and 22 are under design as of October 1997.
Equipment purchases for fire and sanitation purposes are underway, and new fire trucks and other related fire-equipment are being purchased. The cost of this equipment will total $3.1 million. Sanitation equipment is expected to be purchased the end of this year at a cost of $500,000.
Construction is underway for five projects: the convention center expansion, criminal court roof and fire alarm improvements, museum street lighting, and the central library renovations. These projects total $7.1 million for 1996, with $6 million of that going for the first of two payments for the convention center expansion.
Of the 24 new projects slotted for 1997, well over half were in development stages at last report, with one new project under construction at a cost of $925,000 (criminal district court heating and air conditioning improvements). The convention center will receive a second and last payment of $6 million.
Nine major street projects broke ground in August 1997. These
projects will take 3 to 10 months each to complete, according to
the city’s schedule, at a cost of $16.2 million. Another
four are set for groundbreaking in October 1997. The cost for
these projects is $5.5 million. Five projects totaling $11.3
million do not yet have a groundbreaking date, and construction
has yet to be scheduled for another four projects amounting to
$12.3 million. See Table D.
The first batch of minor street construction contracts are expected to be put out to bid by December 1997 and a second round by spring. Minor street funding will be added quarterly until the $50 million is exhausted. Twelve minor street projects should begin in January and February.
Three other street projects, not in the major or minor street packages but funded under the publics works budget, include work on Intracoastal Drive, Industrial Drive, and Michoud Boulevard. The renovations to Intracoastal Drive have been completed, and the extension of Michoud Boulevard is being designed.
The City of New Orleans is responsible for managing nearly all the capital projects included in the $172 million program. The only exceptions are: $12 million for the expansion of the convention center, which is managed by the New Orleans Exhibition Hall Authority; and $2.33 million for park improvements, managed by the Audubon Park Commission and the Board of City Park.
All of the city’s capital program—both streets and
non-street projects—are under the supervision of the Deputy
Chief Administrative Officer in the CAO’s office. The Deputy
CAO supervises a staff of 10 in the Capital Projects Division of
the CAO’s office and a staff of 32 in the Department of
Public Works (formerly called the Department of Streets). The
funding level for the two departments is shown in Table E.
All budgeted positions in both departments are filled. According to the Deputy CAO for Capital Projects, no additional positions are planned for 1998 in either department.
The city’s in-house planning, architectural, and engineering staff are supplemented with private contractors on a project-by-project basis. The outside contractors are selected in accordance with Policy Memorandum No. 8(R) of the Chief Administrative Office on Professional Services Contracts and Executive Order MHM 96-020 on Competitive Selection Procedures for Contractual Professional Services.
All contracts in excess of $15,000 require the issuance of a Request for Proposals (RFP) and evaluation of the responses by the Chief Administrative Officer, the Deputy Chief Administrative Officer, the departmental director or agency head, the City Attorney (if the services are to be performed by a lawyer), and such other persons with specialized knowledge or expertise as the Chief Administrative Officer may deem necessary. The Mayor makes the final selection of all contractors from the three best proposals submitted by the rating group.
Sample criteria for evaluating professional service proposals, which may be supplemented in the RFPs for specific projects, include the following:
| Points | |
| Relevant specialized experience and technical competence | 30 |
| Proposal quality | 15 |
| Fee quotation | 10 |
| Willingness to promote full and equal business opportunities | 5 |
| Performance history, including cost control | 10 |
| Work quality | 5 |
| Ability to meet schedule and deadlines | 10 |
| Current workload | 10 |
| Maintenance of an office, residence or domicile within Orleans Parish | 5 |
| TOTAL | 100 |
The establishment of uniform criteria for evaluating proposals is a step in the right direction. Unfortunately, the core staff performing the evaluations are appointed by an elected official (the Mayor), so the selection process does not provide adequate protection from possible political favoritism or possible influence of campaign contributions by prospective contractors.
As indicated earlier in this report, while 64 percent of the funds from bonds sold to date remain unspent, the City is accelerating the design and construction of projects. In most cases, the design phase has now been reduced from 12 months to 6 months. While it still will take an average of three to four years to complete a major project, this is less time than in the past. The improvements in project scheduling and management are attributed to:
Based on BGR’s review, there has thus far been no deviation from the capital program approved by voters in July 1995. The projects specified in the ballot proposition are proceeding in accordance with the budget adopted by the City Council.
The City is considering a modification to one of the major street projects—the project for Magazine Street. Prompted by concerns about business disruption, the City may decide to repair the street surface rather than completely reconstruct the street and underground drainage and utilities. The decision will be made when the street survey work is completed (anticipated in November 1997). If the City decides to do only surface repair, it would mean that several million dollars in construction funds would be available for work on another major street.
In June 1995, a total millage increase of approximately 10.6
mills was estimated to be required to finance the bond portion of
the capital improvements program. The first millage increase of
2.5 mills was expected to occur in 1997, with subsequent
increases of 2.5 mills 1998 and 5.6 mills in 1999. As the
situation has developed, it now appears that no millage increase
will be needed until 1999 — and then for only 3.4 mills. See
Figure 1.
The reason the city millage increases were avoided was a 1995 refinancing of the city’s bonded indebtedness. The Board of Liquidation City Debt in 1995 authorized the City to refinance approximately half of its then-current bonded indebtedness, and projected savings from the refinancing was used to lower the millage requirements. As a result, the total city millage for 1997 was 100.04, or 2.5 mills less than anticipated.
The parishwide millage for 1997 went up .3 mills because of
the Orleans Parish School Board debt service millage (also
approved in July 1995). The parishwide millage rate is expected
to increase an additional 3.4 mills in 1998, again for the school
board debt service. By 1999, the city millage is expected to be
103.44 mills and the parishwide, 170.74, still below the total
millage needs projected in 1995. See Table F.
There has been clear improvement in the management and scheduling of the city’s capital projects. The lack of coordination and communication between the City and the Sewerage and Water Board on their respective construction programs, however, continues to result in one agency’s re-digging and re-repairing streets and sidewalks recently worked on by the other agency, a process that increases costs and inconvenience to citizens. BGR hopes that the Commission on Government Reorganization established recently to offer recommendations for restructuring local government will closely examine this problem and suggest ways to improve coordination between the City and the Sewerage and Water Board.
When voters approved the city’s capital improvement plan in 1995, the Mayor indicated that the Infrastructure Task Force he had named to develop the city’s capital plan would continue to meet and function in an oversight role. The Infrastructure Task Force has not met since the election in 1995, but the Deputy CAO for Capital Projects indicated that he plans to reconvene the Task Force in the near future.
In the interim since the July 1995 election, there has been ongoing monitoring and oversight of the city’s capital improvements plan.
When the Task Force is reconvened, BGR thinks that in addition to providing oversight, it could provide a valuable role in developing a long-range plan for meeting the capital needs of the City. Despite being the largest single bond-financed capital program in the city’s history, the $172 million program funds only 17 percent of the city’s capital needs, so does not come close to meeting current needs, much less providing for the future. The City Planning Commission had estimated in 1995 that the city needed a total of $1 billion in improvements to streets, playgrounds, fire stations, courts, and public safety facilities.
In contrast to the $172 million allocated for all of the city’s needs, the New Orleans Aviation Board has a capital budget of $850 million for airport renovations alone. Another indicator of additional capital needs is the fact that, except for the $12 million that made possible the beginning of Phase III of the Morial Convention Center, the $172 million approved in 1995 was not earmarked for big new projects. It was designated mostly for major repairs, code compliance, and items that are a result of deferred maintenance. Adequate ongoing maintenance and repair is needed in order to keep what should be routine maintenance and repair projects from expanding into costly capital projects.
BGR would support strongly a reactivation of the Infrastructure Task Force to explore options for meeting a larger portion of the city’s capital needs.
When the 1995 bond program was presented for voter consideration, BGR was concerned that there were no standards or objective criteria for the allocation of $50 million in minor street improvements. BGR suggested that a rating system be developed to direct the funding to the areas of greatest need irrespective of council districts.
Since 1995, minor streets have been surveyed and ranked according to criteria developed by the American Public Works Association System. The ratings and standards system is a vast improvement over past practice. An objective basis for decision-making has now been provided to the district councilmembers. Not withstanding this improvement, however, BGR would still like to see minor streets funds allocated on a citywide basis, rather than evenly divided among the council districts.
BGR’s support of the 1995 bond issue was also conditioned on the city’s commitment to aggressively pursue more equitable, long-range funding sources for meeting the city’s additional capital needs. This commitment would include a strong pursuit of fiscal reform on the state level as well as other funding sources that could be used by local government.
Based on our review, there has been no movement at the state level to secure more equitable, long-range funding sources. According to city sources, Governor Foster’s position in support of raising the homestead exemption has stymied any attempt by the City to lower the homestead exemption or to exempt certain millage levies from the homestead exemption.
BGR’s recommendation to support the 1995 bond issue was based in part on the city’s commitment to establish a process to assess and analyze the capital needs of all the local-tax-levying agencies in Orleans Parish. The city’s plan was to direct the City Planning Commission to initiate a process through which the capital needs of all the local-tax-levying agencies, including the City, the Sewerage and Water Board, the Orleans Levee District, the Orleans Law Enforcement District, the Downtown Development District, the New Orleans Business and Industrial District, the Orleans Parish School Board, and the Regional Transit Authority, are analyzed and evaluated.
The City has not moved forward with this plan. BGR would again urge the City to establish a cooperative planning framework that would include all local-tax-levying governing authorities in Orleans Parish.
This review by BGR has shown that the City is delivering on promises made to citizens at the time the capital program approved in 1995 was proposed.
As of October 1997, $75 million in general obligation bonds and $15.8 million in limited tax bonds have been sold. The projects specified in the ballot proposition are proceeding in accordance with the budget adopted by the City Council, with the possible exception of a modification to the major street project for Magazine Street. Work on projects is going forward at a careful but more rapid rate than with past capital programs.
The increase in city millage rates has been considerably less than what was projected in June 1995, due to some debt refinancing later that year. When proposed, the city’s capital program was projected to require an increase of 2.5 mills in 1997, another 2.5 mills in 1998, and another 5.6 mills in 1999, for a total increase of 10.6 mills by 1999. It now appears that no millage increase will be needed until 1999—and then for only 3.4 mills.
BGR’s support of the program in 1995 was conditioned on a number of commitments: the city’s pursuit of fiscal reform, objective criteria for minor streets to be repaired, a phased-in sale of the bonds, and the city’s pursuit of a consolidated analysis of all the capital needs of local governmental agencies in the city.
The City still needs to pursue fiscal reform at the state level in order to secure more equitable funding options and greater flexibility for local governments in meeting their long-term capital needs.
Objective criteria have been developed for the selection of minor streets to be repaired. Since 1995, minor streets have been surveyed and rated according to criteria developed by the American Public Works Association. This rating system is a vast improvement over past practice, though BGR would still like to see the minor streets funds allocated on a citywide rather than a council-district needs basis.
The sale of the bonds to finance the capital program is being phased in over a five-year schedule, thus providing for a more timely expenditure of funds in accordance with the borrowing schedule and avoiding a new backlog of unspent bond funds as had developed in 1992. While 64 percent of the bond funds sold to date remain unspent, the City is on target with the sale of bonds and is accelerating the design and construction of projects.
The City has not yet established a process for assessing and analyzing the long-term capital needs of all local-tax-levying bodies in Orleans Parish.
Finally, the Mayor has not reconvened the Infrastructure Task Force that helped to develop the city’s capital improvement plan in 1995.
While the scope of this review did not include the city’s procurement process for professional services, BGR continues to be concerned about the inadequacy of the city’s policy as written to insure open, competitive selection of providers of these services.
Presented in order from the most general to the most specific in terms of what parties would need to be involved, BGR’s recommendations based on this review follow.
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