Planning After PLANYC: A Framework for Developing New York Citys Next Ten-Year Capital Strategy 1 The Most Important Economic and Fiscal Decisions Facing.

Planning After PLANYC:A Framework for Developing New York City’s Next Ten-Year Capital Strategy

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The Most Important Economic and Fiscal Decisions Facing the Next MayorA Citizens Budget Commission ConferenceDecember 6, 2013

Overview

• Legacy of the Bloomberg Administration• Implications for What We do Next

Unprecedented Level of Capital Investment During the Bloomberg

Administration

3Note: Fiscal Year 2014 total commitments planned as of September 2013; all other years actuals.

70% of Capital Commitments for Education, Water & Sewer, Transportation, Parks &

Culturals

4Note: Fiscal Year 2014 total commitments planned as of September 2013.

Outcomes of Investment Mixed

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Insufficient Funding for State of Good Repair Work

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Contracting and Management Challenges Contributed to Delays

and Cost Overruns• Restrictive State laws– Construction contracts must be awarded to the lowest

bidder; cannot let “best value” contracts– Pay and scheduling of workers dictated by prevailing

wage laws– Wicks law mandates several subcontractors on

building projects greater than $3 million

• Poor project scoping and management lead to costly change orders, which doubled in value and number since FY2006

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Heavy Reliance on Debt to Fund Capital Spending; No Allocation of Resources from

Operating Budget

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NYC Debt Outstanding More than $100 Billion

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Debt Burden Is HighAccording to Metrics Used by Rating

AgenciesDebt Outstanding, FY2013 Debt Service, FY2013

10Note: Does not include debt of the New York City Municipal Water Finance Authority.

Improve Asset Management and Capital Planning

• Perform routine maintenance and regular replacement of assets to keep state of good repair backlog from growing

• Undertake a comprehensive needs assessment that includes all agencies and component units

• Use the needs assessment to develop a plan to achieve state of good repair

• Publish progress reports on SOGR goals and on major capital projects

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Develop a Two-Pronged Investment Standard

• Develop an affordability standard for debt• Develop criteria for paying some capital

expenses from the operating budget; for example:– Regular replacement of vehicles and equipment;

approximately $300 million a year, less than 1% of operating budget

– Tied to annual depreciation expense– Tied to budget growth or surplus revenues

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Use Clear Guidelines to Establish Priorities

• A portion of the plan will be for mandated projects, ongoing projects, and those backed by state/federal funds (e.g. resiliency and recovery efforts)

• “Fix it first” strategy: SOGR projects receive highest priority

• Second priority: Regular replacement of assets that ensures service levels are maintained or improved

• Finally: Expansion projects justified by rigorous cost-benefit analysis

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Adopt More Cost-Effective Contract and Construction Management

• Better project scoping to improve design process and reduce change orders

• Renegotiate Project-Labor Agreements • Pursue State legislation that:– Repeals Wicks Law– Expands contracting powers to include “best

value” standards– Expands authority for design-build and public-

private partnerships

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Planning After PLANYC:A Framework for Developing New York City’s Next Ten-Year Capital Strategy

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The Most Important Economic and Fiscal Decisions Facing the Next MayorA Citizens Budget Commission ConferenceDecember 6, 2013