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BUDGET
the governing body, the year in which it will be purchased or started, the amount to be spent in each year, and
the proposed method of financing. The CIP includes future projects for which financing has not been secured or
legally authorized. As a result, the “out-years” (future years) of the CIP are subject to change.
Like the operating budget, City Council’s strategic priorities guide the CIP process. The City Manager must
submit to Council a multi-year Capital Improvements Plan that is consistent with the policies established by the
Council for such programs by November 1 each year.31
By approving the multi-year CIP, Council authorizes the first year of the plan to be implemented. Appropriations
are then made on a project-by-project basis.
Capital Project Financing
Financing strategies for capital projects differ from those of ongoing operating expenses because of the sizable
one-time costs and prolonged life cycles typical of capital projects. Accordingly, the capital budget cannot be
fully funded with current revenues. A key element of the capital budget is a financing plan that spells out how the
projects will be funded.
Most projects in the CIP are funded by 20-year General Obligation (GO) Bonds issued by the City with level
annual principal payments. Debt financing is typically used for expensive capital facilities with long, useful lives,
so that bond repayment occurs over the period during which the facility will be used.32 The annual principal and
interest payments (debt service) are included in the City’s annual operating budget. The General, Wastewater,
Stormwater, and Solid Waste funds each pay for a proportionate share of principal and interest payments. The
Waterworks Fund pays all of the debt service related to its capital projects. Capital projects may also be funded
using current resources (cash capital) or through Federal or State grant funds.
The types of debt commonly issued by the City include the following:
General Obligation Bonds
These bonds are instruments of indebtedness issued by the City and secured by the full faith and credit and
general taxing power of the issuer. They are frequently used to finance the costs of non-revenue-producing
projects, such as schools, courthouses, government office buildings, jails, libraries, parks, and roads. The City is
required by law to levy taxes on all property of the locality subject to taxation sufficient to pay the principal and
interest on general obligation bonds.
31
City Code Sec. 2-16
32
VML
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