Board RetreatAugust 31, 2016

Capital Plan 2022Begin with End in Mind

Agenda

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• Today’s Objectives– Define Success for our Capital Execution Plan– Review challenges associated with budgeting /

scheduling a five-year capital plan– Agree upon givens and assumptions used to

develop an execution schedule– Present and dialog draft prioritization criteria– Discuss next steps

• Taxpayers approve referendum by 77.1%

• Capital Plan 2022 outlined the “what”

• The five(six)-year journey begins – next step, pass a Capital Plan 2022 Budget to includeo Project budgets (how much)o Schedule / cash flows (when)o Delivery model (how)

First Success!

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Define Success for Capital Execution

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ex·pec·ta·tionˌekspekˈtāSH(ə)n/nounnoun: expectation; plural noun: expectationso a strong belief that something will happen

or be the case in the future.

suc·cesssəkˈses/nounnoun: success; plural noun: successeso the accomplishment of an aim or purpose.o the attainment of popularity or profito a person or thing that achieves desired

aims or attains prosperity

This…

Not This…

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By November 2016, the Board of Education will approve the initial five-year capital budget, cash flow, and schedule. The Capital Budget will…

o Align to the promises within plans shared during the Information Campaign,o Contain an execution schedule based upon a shared assumptions and

defined priorities,o Be balanced (revenue = expenditures),o Include a five-year capital cash flow that does not create significant risk to

the general fund,o Make every effort to maximize state capital outlay within the schedule,o Utilize a budget structure that will ensure transparency,o Be reported each month to the Board, ando Be reviewed and revised annually based upon changing assumptions

Define Success / the Top Step

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$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

$220.00

F Y 1 2 F Y 1 3 F Y 1 4 F Y 1 5 F Y 1 6 F Y 1 7 F Y 1 8 F Y 1 9 F Y 2 0 F Y 2 1 F Y 2 2

MIL

LIO

NS

GSU PROJECTION (FALL 2015) VS CURRENT TREND

GSU Projection Current Trend

Challenges – Changing Revenue Trend

Revenue Assumption for Initial Budget = $870MM

This is $81MM less than the low GSU Projection used for planning in Fall of 2015

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Challenges – Balanced Execution

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• Fulton County Schools uses a pay-go system for funding its capital program…

o A balanced execution schedule is like thinking of filling glass jars with rocks, pebbles, and sand:

o Analogy - Jars = Fiscal Year- Rocks = Big Projects- Pebbles = Small Projects- Sand = Ongoing Work

Challenges – Pay-go System

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Spending will not be balanced every year. Tax Anticipation Notes (TANs) may be used to manage cash flows…

o Jars do not need to be all the same size, but the total amount volume cannot exceed revenue

o Total revenue at the beginning of a program is unknown (projections)

o Jars too large at the beginning can create significant risk

o Timing of projects can maximize revenue

Challenges – Rocks cannot fit in the first jar

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Large Construction Projects (Alphabetic Order)Conley Hills ES ReplacementCrabapple Middle School ReplacementHigh School Programs (selected)McClarin High SchoolNew South Elementary SchoolRiverwood Phase IISTEM Campus North and SouthUndesignated Classroom Construction

Large Information Technology Projects (Alphabetic Order)Device ReplacementEnterprise Resource Planning Software (ERP)Student Information System (SIS)

OtherDebt Service

Givens – Sand & Pebbles Balanced

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Building Renovations (relatively balanced) Too many renovations in one year…

Impacts Instruction Cannot be supported by the market

Staffing / Program ManagementOngoing Information Technology WorkSafety and Security - Camera ProgramTransportation - Fleet RenewalProperty & Equipment Not a replacement of all furniture New furniture / equipment provided at the time of replacement Furniture will include flexible options / may be instructional driven

Capital Seed Fund Balanced

Givens / Assumptions –

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• Debt service through 2022• STEM and Open Campuses

o Non-prototypeo Process includes…

Planning/programming Land acquisition (Open Campus) Design Procurement Construction

o Process will permit rocks to be broken up over Fiscal Years

Prototype

Non-Prototype

Prototype

Land Acquisition (if needed) Pre-Design Design Procurement Construction

Assumptions –

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? Prioritize key Information Technology projectso Device replacement (begins in FY19, over three years)o ERP high priority based upon critical business needso SIS high priority based upon critical instructional needs

? Continue outsourced program management? Use existing RFQ / performance for architect

procurement on non-prototype construction? Evaluate the middle school prototype? Make no major change to the elementary prototype? Use Design-Bid-Build as the delivery model except when

phasing lends itself to Construction Manager-at-Risk? Leverage bulk procurement / district buying power

Prioritization Criteria

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Capacity needs / regional enrollment drives new constructionLength and severity of overcrowding may increase priorityCombined facility condition and educational adequacy index drives renovation and replacement prioritieso Outlined in our Facility Master Plan Documento Criticality of building systems may require prioritization

Student / staff safety risksLearning and teaching priorities / instructional programs

• Other Considerationso Predesign needs to start early on complex projectso Schedule to maximize capital outlay fundingo Continuity of construction projects shall be factored to minimize expenditures

2016 Day 1 6 11 16 21 26 31 36 41 2016

Finalize PlanOct 8

Draft Capital Execution Plan (Cabinet Review)Oct 3

Day 20 Count / Capacity Analysis / Regional ForecastsSep 12

Preview Capital Execution Plan with CAMTAug 25

Oct 3 - Oct 7

1:1 BOE Engagements

Sep 24 - Oct 2

Reconcile Preliminary Budget (CAMT)

Sep 20 - Sep 23

Consolidate Capital Budgets (Financial Svcs)

Aug 25 - Sep 19Staff Finalizes Preliminary Cash flows (w/ new Assumptions)

Next Steps

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Questions