Purpose
The purpose of this procedure is to provide information concerning how projects are funded. Funding is required for the Bureau to do any work on a project.
References
N/A
Responsibilities
Project Manager (PM): The PM is responsible for identifying, defining, and securing funding for the project.
Program Oversight Committee: A committee composed of various Departments, Bureaus, and public officials that review and advise on the scope and funding for proposed and amended projects in a specific Program. In the Wastewater and Stormwater Programs, this committee is called the Program Review Committee (PRC).
City Administrative Officer (CAO): The CAO works with the Program Manager in identifying various sources of funding for the project.
Administration Division (ADM): Staff in ADM can provide advice on who to contact in the CAO for information on funding.
Procedure
Project Funding - City Budget Process
Projects are typically funded for construction through the City Budget. Each Capital Program annually prepares and submits a prioritized list of capital improvement projects to the CAO for inclusion in the tentative (draft) Capital Improvement Expenditure Program (CIEP) for the next fiscal year.
It is important that the Project Manager prepare detailed budget documentation on the costs of various elements of the project. Additional information related to managing project funds (Attachment 3.3-5), is provided through the PM Training Course.
Once the cost of project elements has been calculated, it is customary to apply an estimating contingency to account for unknowns and other factors that will affect the project. Estimating contingencies may vary from 30% to 50% for a Class O estimate and decrease as the estimate class level increases from C (Attachment 3.3-4), through B, to A. It is customary to have 0% estimating contingency in the Class A and City Engineer estimates.
Once the estimating contingency has been applied, the next step is to escalate the costs to the midpoint of construction. This is done in an attempt to predict what a contractor will actually bid once the project is advertised. A budget contingency should then be added to account for change order work anticipated once the project is underway in the field. A 5% budget contingency is often used on larger projects and a 20% contingency on smaller ones.
Finally, all project delivery costs should be added to the estimate. These may be based on template values or more detailed workups based on actual staffing plans. The sum of all the above becomes the total project budget. Depending on the Program, it may be advisable to state the source or sources of the funding available for the duration of the project by fiscal year.
The budget summary and all supporting documentation must be included in the project file for future reference.
A prioritization system may be used by the Program Oversight Committee to determine the relative priority of a specific project within a specific Program and to assist in preparation of the CIEP submittal to the CAO. A prioritization system utilizes project information to rank it according to other existing and proposed projects. Program funding being limited, projects with the highest priority are the ones that receive funding.
Through their Oversight Committee, each Program should submit a Program specific Project Initiation Form for each project to the CAO, if required. This form describes the project, justification, estimated design and construction cost, and proposed construction schedule. The PM is responsible for a Project Initiation Form being prepared for each project. In the Wastewater Program, this form is known as the Project Capital Business Case (Attachment 3.3-1). For a completed sample, see Attachment 3.3-2.
The draft CIEP is presented by the CAO to the Public Works Committee of the City Council for consideration and possible revision. After this, the CIEP is submitted to the City Council with recommendations of final priorities for street, storm drain, municipal facilities and wastewater projects for inclusion in the budget.
Different kinds of infrastructure are funded with different types of City funds: new municipal facilities (buildings) are usually funded by bond funds; maintenance and renovation of existing buildings are funded by the General Fund and sometimes by bond funds; street work is funded by Gas Tax, Prop A and Prop C funds; bridge improvements are funded by Prop G funds; wastewater projects are funded from the Sewer Construction and Maintenance (SCM) Fund; and stormwater facilities are funded from the Stormwater Pollution Abatement Fund. General Funds can usually be used everywhere but are very scarce. Check with the CAO Analysts in the Facilities, Physical Infrastructure Physical Plant Section for additional information.
Project Funding - Unprogrammed Work
There are occasions where a deficiency or need is determined or identified with such urgency that work on a project must commence “outside” of the Budget Process. In such instances, a Council Motion is prepared which authorizes the Bureau of Engineering (BOE) to proceed with the design of the project, transfers the necessary funds from specific accounts, and provides any other pertinent information or requirements. Typical projects in this category include Emergency or Urgent Necessity projects and projects added by City Council members. The typical method for funding unprogrammed projects is to request that the Board of Public Works (BPW) declare the project to be an Urgent Necessity and then request the City Council to transfer funds into the new project’s account. Only the City Council can transfer funds for a new project. Once funding has been established, the Program Manager must be consulted to determine how and where the project schedule will be added to coincide with the other projects in the Program. Funding must be approved by Council prior to placing the project on the Master Schedule.
Funding for the construction can then proceed through the regular budgetary process. The construction of unprogrammed projects can be funded through the transfer of funds from existing project accounts or through a transfer from special fund accounts. A Council Motion is required to transfer funds from one account into another. The Client should approve and identify funding sources for unprogrammed projects. The PM, in coordination with the Technical Team, prepares the required Council Motion and submits it for review and approval. The PM works with the BOE Council and Board Liaisons, Office of Accounting, CAO, City Council Office, and the Client to complete the documents and have them approved. The PM and/or other Project staff, as appropriate, should attend the Board and Council meetings and be prepared to discuss the proposed actions.
Once approved by the BPW, the Urgent Necessity Report will generate a Council Motion to approve the BPW’s action related to the Declaration of Urgent Necessity and to transfer funds for the construction of the project.
Bond Funded Programs
Several of the Bureau’s Programs are funded through the sale of General Obligation Bonds approved by the voters. These Programs are:
Animal Facilities Program (Prop F)
Fire Facilities Program (Prop F)
Library Facilities Program
Public Safety Program (Prop Q)
Recreation and Parks Facilities (Prop K)
Seismic Bond Program (Prop G)
Zoo Facilities Program
Funding authority for these projects is initially worked out between the Program Manager, the Owner/Client Department, and the CAO and continues on with the Oversight Committee. The majority of the funding for the projects comes from the sale of the General Obligation Bonds that were approved by the voters. Additional funding can come from:
Council Approved Housing and Community Development Block Grant funds
Donations from friends and supporters of the Owner/Client Departments (e.g. Friends of the Observatory – FOTO, Greater Los Angeles Zoo Association – GLAZA)
Projected interest earnings, reimbursements, and/or other funds (i.e., Seismic or CRA)
Prop K Competitive Grant Funding (Recreational & Cultural Facilities Program)
Prop K funds are available to non-profit organizations and City agencies for the purpose of land acquisition, improvements, and construction and maintenance of parks and recreation facilities through a “Call for Projects” competition.
The City Council has designated the Committee for Children, Youth and their Families to administer the open competitive bid process. The Committee reviews each applicant for eligibility, and rates their proposals according to a specified set of criteria. The Committee rates every applicant on their demonstration of need, project design, service(s) to be provided, justification, and administrative experience. If a candidate’s proposal is deemed eligible by the Committee, it is forwarded to the “L.A. for Kids Steering Committee” and the City Council for further approval.
The BOE has been given the responsibility (along with some funding) for the preparation, negotiation, processing, and administration of contracts with competitive grant awardees for design, construction, and maintenance. The BOE is also responsible for monitoring and assisting grantees with design and construction, environmental, and other technical aspects of the grant program, as well as acting as staff to assist the Steering Committee.
Wastewater Funded Programs
The BOE’s Wastewater Program is funded by the SCM fund. The largest revenue source for this fund is the sewer service charge which is collected as part of the water bill. The Wastewater Program also has bonding authority approved by the voters through different bond measures. The BOE is responsible for delivering the Wastewater Program CIP which includes sewage conveyance, treatment, pumping, water reclamation, and other sewage related infrastructure improvements.
Funding authority for these projects is initially worked out between the BOE Program Manager and the Program Review Committee (PRC). Attachment 3.3-3 outlines the operation and procedures of the PRC and gives the guidelines for submittals. At the beginning of the fiscal year, the Bureau of Sanitation management and the BOE Program Manager review and assess each project and create and update the ten-year Capital Improvement Program. Projects may be added by the PRC. The PRC reviews the scope of work, evaluates the urgency of the project, and determines the funding source. Each PM is required to present their request in writing and in person at the monthly PRC meeting. No Council Motion is necessary for wastewater related projects.
Creative Financing (How to Find Money for Your Project)
On occasion, the PM will be presented with a desired outcome from a Council District but no definite source of funding. When this type of unfunded request comes in, the PM must discuss this request with the Program Manager and the City Engineer. The PM may be directed to discuss this with the CAO, CLA, City Council staff, and the BOE’s Council and Board Liaison Offices. The CAO has Fund Managers overseeing various revenue sources and if the project description fits the designated revenue source and funds are available, the PM may be able to transfer funds through a Council Motion.
After receiving the CAO’s and CLA’s approval, a Council Motion can be drafted with the City Council Office, CAO, and BOE Liaison staff. Liaison staff should brief affected Council members before the motion is heard by the Council and consider using expedited procedures if time is critical. After adoption by the Council, the work can proceed.
Sometimes, the most difficult task is getting the Fund Manager’s permission to use the funds. Also, other City Council Districts may take exception to using the funding source for an unapproved budgetary project and want to know more about the process.
Related Procedures
LINKS / ATTACHMENTS
Links
N/A
Comments