Capital Projects: Why Does the City Issue Bonds?
The City of Sugar Land uses bonds as a funding source for capital projects, which are improvements or additions to the City's physical assets. Capital projects can be further categorized into land, buildings, improvements other than buildings, and infrastructure, which includes roads, sidewalks, bridges, utility lines, etc. Capital costs typically consist of preliminary design, final design, and construction, and may involve the acquisition of land or rights-of-way (easements).
The City Charter charges the City Manager with recommending a multi-year Capital Improvement Program (CIP) to the City Council as part of the annual budget. The proposed annual budget and multi-year CIP must be presented to the City Council by the end of July. The CIP is a long range plan that identifies capital projects, provides a planning schedule, and identifies options for financing the plan. The program provides a link between the City’s comprehensive plan, various master plans, the annual budget, and the five‐year financial forecast. The City seeks involvement of various stakeholders during the CIP development process because the City recognizes the invested interest in maintaining Sugar Land as a “great place to live and work.” The City considers input from citizens, the Planning and Zoning Commission, City Council and City staff members in the CIP preparation. The Five Year CIP is limited by City Council policy to the affordability limits identified in the long range financial plan of the City.
There are three basic methods of financing capital requirements: Funding from current revenues (general, utility, economic development and airport funds); funding from fund balance/working capital as allowed by the Fund Balance/Working Capital Policy; or funding through the issuance of debt. When possible, the City uses cash for capital improvements within the financial affordability of each fund rather than issuing debt. Debt financing is used when the capital assets or projects cannot be funded prudently from current revenues or fund balances. Debt financing is also utilized to better ensure inter-generational equity by spreading payments for assets and infrastructure over their useful lives. This is similar to taking out a mortgage to purchase a home that you intend to live in for a long time rather than emptying your savings to pay cash. Debt is not used to fund operating expenses.
Capital Improvement Process
How does the City decide what projects are included in the Capital Improvement Program? An overview of the development process can be found on the Engineering Department's website.