Infrastructure is the backbone of our community.  It affects our productivity, economic growth, prosperity and standard of living.  Due to decrease in funding over the years at both the federal and state levels, the City is facing a significant infrastructure deficit.  To effectively address this growing deficit, a comprehensive framework is needed to establish funding strategies for critical infrastructures.

The proposed Infrastructure Funding Policy sets a framework for policy standards and provides directions on future actions.  The Policy calls out three important financial management and planning tools:

•  A Capital Asset Renewal and Replacement Reserves Policy – the Government Finance Officers Association (GFOA) issued a Best Practice titled “Capital Asset Assessment, Maintenance, and Replacement Policy” in 2010.  Among the many guidelines, a written policy addressing capital asset reserve for renewal and replacement is highly recommended.  The Capital Asset Renewal and Replacement Reserves Policy demonstrates financial commitment to long-term sustainable capital investments, and promulgates shared vision towards asset management.  The policy will set targeted reserve levels for each major capital asset type of the City and the corresponding funding mechanism.

• A Comprehensive Infrastructure Plan – the plan serves three important purposes: 1) it sets standard criteria to prioritize infrastructure investment across all departments to ensure a fair and transparent funding effort is achieved; 2) it serves as a guideline for the development of the City’s five-year Capital Improvement Plan (CIP) budget, by prioritizing projects that represent the most value to the City based on cost and benefits; 3) it enforces accountability by setting measureable benchmarks on each investment/project.  The development of this plan is a collaborative effort among all City departments.  It also ensures when making decisions on investing in new infrastructure, all associated costs are considered to ensure sustainability and maximize return on investment.

• Asset Management Plans – each major infrastructure type will have its own Asset Management Plan (AMP).  An AMP starts with creating a standard condition matrix for the infrastructure, then an assessment of the infrastructure’s current condition is to be conducted, last but not least AMP identifies the necessary funding to maintain at or improve the infrastructure to certain condition. AMPs are to be updated periodically to accurately reflect the asset condition and funding needs.  AMP enables a systematic process that facilitates decision-making in regards not only to the construction, acquisition, but also operation, maintenance and eventually replacement of capital assets in the most effective manner.  AMP also helps to establish stewardship by enforcing the application of lifecycle cost assessment approach when making asset investment decisions.

The Policy is made of three components:

Definition of Infrastructure

Infrastructure is broadly defined for the purpose of this policy, which covers Citywide assets including but not limited to roads (arterial and local), storm drainage, buildings and structures, parks and medians, technology, and water and sewer systems.

Funding Strategies

Three directions were provided under the Funding Strategies section, which include maximize the use of existing financial tools, adopt best practices, and pursue innovative strategies.

Action Plans

Ten detailed actionable items are identified in the policy in accordance to the funding strategies outlined:

1.  Establish a Capital Asset Renewal and Replacement Reserves Policy to demonstrate financial commitment;
2.  Update the City’s Debt Administration Policy to set clear capital financing criteria and grant evaluation process;
3.  Periodically update the City’s Master Fee Schedule to ensure full cost accounting is applied and true costs in relations to the use of capital assets in service delivery is captured;
4. Augment infrastructure budgets to provide for annual increase equivalent to the rate of inflation and population growth unless during budget deficit years;
5.  Establish a Comprehensive Infrastructure Plan to formalize prioritization for infrastructure investment and assess new investment with lifecycle cost approach to ensure ongoing maintenance and replacement costs are fully considered;
6.  Adopt measurable benchmarks for each infrastructure type base on the criteria identified in the planning phase;
7.  Develop Asset Management Plans at the City and Department levels to document multi-disciplinary management techniques through the lifecycle of the capital assets;
8.  Create an infrastructure subcommittee to ensure the proper implementation of the Comprehensive Infrastructure Plan.
9. Incorporate public-private partnership and inter-agency development options into the capital infrastructure planning; and
10.  Establish criteria and performance standards of Public-Private Partnerships and develop standards/templates of formal arrangement between local governments to jointly share costs of infrastructure improvement.

These action plans will be carried out in phases.  Many plan documents require collaboration among various City departments, and are specific for certain infrastructure types.  Staff will be providing Council periodic updates on the implementation of this proposed Policy.

There is no financial impact to adopt the proposed Infrastructure Funding Policy.  The Policy calls out several fiscal and management policies which will require funding.  Staff will bring those policies to the City Council and request corresponding funding at that time.

It is recommended that the City Council:

•  Adopt the attached resolution establishing the City of Garden Grove Infrastructure Funding Policy.