Annual Capital Improvement Program Process
The County’s Capital Improvement Program (CIP) is a six-year plan authorizing the funding for capital improvements such as roads, sewers, parks and schools. The CIP is also known as the capital budget program because it consists of the capital budget for the current fiscal year plus the plan for the next five years. The CIP is reviewed annually following a process required by the County’s Charter.
Article VII of the Baltimore County Charter establishes the procedures for the preparation of the county’s budget and other fiscal matters. Section 705 relates specifically to the Capital Improvement Program (CIP).
Citizen Input Meeting
The CIP process begins in October, with a citizen input meeting held by the Baltimore County Planning Board. Directors from each of the agencies that have a capital budget are also in attendance. Citizens are invited to speak before the board and agency heads, expressing their opinions on specific capital projects and needs. Having the citizen input meeting at the beginning of the process allows each agency to consider citizen requests before they formulate their recommendations for the CIP.
The Director of the Office of Budget and Finance sets target limits for capital projects. At the direction of the County’s Administrative Officer, each agency submits project requests for the next six years to the Director of Budget and Finance. After ascertaining that the requests are within the budget office’s parameters, a preliminary CIP is forwarded to the Department of Planning.
Planning Board Review and Approval
The Planning Department distributes the CIP to the Planning Board in January. All requesting agencies come before the Planning Board to present their capital project requests. A subcommittee is then formed to consider the requests and make recommendations to the full board.
The committee presents its recommendations to the full Planning Board in early March for vote. An opportunity for public comment is a regularly scheduled part of Planning Board meetings.
After approval by the Planning Board, the Director of Planning submits the CIP to the Director of Budget and Finance.
County Executive Recommendations
The Director of Budget and Finance reviews the CIP recommendations with the County Administrative Officer. The CIP, along with the current expense budget (or operating budget), is forwarded to the County Executive.
On or before April 16 (75 days prior to the end of the fiscal year), the County Executive submits the operating budget and the capital budget and program to the County Council. The County Executive must also submit a budget message to the County Council which includes a description of the differences between the Planning Board’s and the County Executive’s CIP.
County Council Review and Adoption
The County Council reviews the budget and holds a public hearing between seven and 20 days after receiving it from the County Executive. The County Council has the authority to decrease or delete any item in the budget but cannot increase project amounts or add new projects.
On or before June 1, the County Council adopts the current expense budget and the capital budget for the next fiscal year. The adoption of the budget is known as the Annual Budget and Appropriation Ordinance of Baltimore County. The fiscal year begins on July 1 and ends on June 30.
The CIP approval process is a biennial one, because of the need for voter approval of general obligation bonds, which is the primary source of funding for capital projects. In even calendar years, when general elections are held, the Planning Board recommends general obligation bond items to be placed on the ballot for referendum as Borrowing Ordinances in the upcoming November election. The results of the referendum set the budget funding levels for the following two fiscal years. In odd calendar years, the board reviews only requests for changes to the program due to emergencies or other compelling reasons.
County Funding Sources
- General Funds: These funds are derived from tax revenues and are included in both the current expense budget and the capital budget.
- Reallocated General Funds: These are General Funds reallocated from one project to another due to schedule changes, changes in priorities, or projects coming in under budget.
- Metropolitan Construction Funds: In 1924, by an Act of the General Assembly of Maryland, the Metropolitan District was established to supply water and to provide sewerage and drainage systems to the residents of Baltimore County. These funds are from various charges assessed against customers of the Metropolitan District.
- Reallocated Metropolitan Funds: These are Metropolitan Construction Funds reallocated from one project to another because of schedule changes, changes in priorities, or projects coming in under budget.
- General Obligation Bonds: Bonds are borrowed funds. “General Obligation” means that the redemption of bonds and payment of interest is guaranteed by the full faith and credit and unlimited taxing power of the County. Before these bonds may be issued, they must be approved at a referendum held in each election year, approved by County Council as a funding source in the budget year and further approved at the time of actual issuance by a bond ordinance. Bonds are the primary source of capital financing.
- Metropolitan Bonds: Metropolitan District Bonds are the same as General Obligation Bonds except that they are not required to be approved at referendum. Repayment of principal and interest comes from Metropolitan District funds.
Outside Funding Sources
- Community Development Block Grant (CDBG): Federal legislation enacted in 1974 combines six previous grant programs (urban renewal, model cities, neighborhood facilities, open space, historical preservation, and water and sewer) into a single block grant. The block grant can be used at the discretion of the local government for broad community development programs, with priorities and funding levels established by the local governments.
- Program Open Space: These funds are to support recreation opportunities and come from the State of Maryland through the collection of the State Transfer Tax on real property.
- State Waterway Improvement Fund: Funds provided by Department of Natural Resources for improvements related to storm water and waterways.
- State Aid: State funds to assist Baltimore County in the financing of various capital projects.
- Developer’s Responsibility: Developer’s contributions that are applied to projects that provide facilities in approved subdivisions. The developer’s contributions represent the developer’s portion of the cost of the project.
- Petitioner’s Responsibility: This fund is the contributions made by the petitioner who request a project be done by Baltimore County.
- County Agricultural Preservation Tax: The County’s share of the state agricultural transfer tax that is assessed on an agriculturally used property when the use is changed to non-agricultural.
- Local Open Space Waiver Fees: Fees paid by developers to Baltimore County during the development process when the amount of required open space is less than one half an acre and not adjacent to existing parkland.
- Other: There are various other outside funding sources which may become available from time to time. When amounts are material, identifiable, and predictable, they will be cited as sources of funding in the capital budget.
Baltimore County performs an annual evaluation of debt capacity and control analysis to preserve and enhance its general obligation debt ratings (currently triple A at all three major bond rating agencies). This evaluation serves as the basis for structuring future debt issuances. To ensure that the issuance of debt will not impair Baltimore County’s high credit ratings, formal debt management policies were established and related guidelines were identified, as described below.
In 1993, Baltimore County established a formalized fund balance policy by instituting a Revenue Stabilization Reserve Account. The Revenue Stabilization Reserve Account is funded each year from unexpended and unencumbered appropriations. The target fund level is presently five percent of the general fund budget.
Baltimore County establishes other financial targets to be met by June of each year. These include a debt-per-capita level and an unreserved general fund balance at five percent of general fund revenues (which includes the Revenue Stabilization Reserve Account Balance).
• Baltimore County does not intend to issue tax or revenue anticipation notes to fund governmental operations.
• Baltimore County does not intend to have any fixed rate bond anticipation notes outstanding for a period of longer than two years.
• Baltimore County will update is debt affordability study each year in conjunction with its capital budget process.
• Baltimore County will budget contributions to Pay-As-You-Go (current expense) financing in each fiscal year.
• Baltimore County will ensure that the ratio of unreserved General Fund balance (including Revenue Stabilization Reserve Account balance) to General Fund revenues does not fall to the floor level (three percent) for two consecutive years.
• Baltimore County will ensure that the rapidity of debt repayment on new net tax-supported debt does not fall below 25 percent retired in five years and 50 percent retired in 10 years.
In evaluating the merit of a capital project request, the following questions can be asked.
• Does this project fit within the guidelines of the Baltimore County Master Plan and its amendments?
• Does this project fit within the guidelines of the State’s Smart Growth initiative?
• Is this project necessary to continue or improve public safety and the health of Baltimore County residents?
• Will the impacted community be supportive of this project?
• Does this project serve to protect or enhance the environment?
• Is the timing for this project appropriate?
• Will this project help to leverage non-County funds, thus increasing the efficiency of local government services?
• Is this project necessary to comply with federal and state mandates?
• Does this project enhance or strengthen communities and neighborhoods?
• Does this project serve to repair or replace an existing deteriorated facility?
• Is this project part of a systematic replacement strategy that will provide a long-term upgrade of public facilities?
• Will this project improve the operating efficiency of a County agency, perhaps by reducing future operating budgets?
• Is this project coordinated in its scheduling with other related capital projects?
• Does this project support or strengthen Baltimore County's economy?
Revised October 7, 2013