FAS-005 - Capital Budget Policy_2025
City of Saint John
Capital BudgetPolicy
Title:Capital BudgetPolicy
Subject:Capital Budget Policy Category:Finance and AdministrativeServices
PolicyNo.:FAS-005 M&CReportNo.:2025-101
EffectiveDate:April 07, 2025NextReviewDate:
Area(s)thispolicyappliesto:Cross Corporate OfficeResponsibleforreviewofthisPolicy:
Fianance and Administrative Services
RelatedInstruments:PolicySponsors:
Chief Financial Officer
FAS-001 Asset Management Policy
FAS-002 Investment Management Policy
FAS-003 Reserves Policy
FAS-004 Operating Budget Policy
FAS-006Debt ManagementPolicy
DocumentPages:
Thisdocumentconsistsof7pages.
RevisionHistory:
CityClerk's Annotation for Official Record
Date of Passage of Current Framework: April 07,2025
I certify that this Policy was adopted by Common Council as indicated
above.
_______April 10, 2025_
CityClerkDate
DateCreated: CommonCouncilApprovalDate: Contact:
Strategic Services
April 07, 2025
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City of Saint John
Capital Budget Policy
TABLE OF CONTENTS
1. POLICY STATEMENT ........................................................................................................ 3
2. PRINCIPALS AND STRATEGIES ......................................................................................... 3
3. CAPITAL PRIORITIZATION ................................................................................................ 4
4. CARRY OVER OF PREVIOUS YEAR APPROVED CAPITAL BUDGET .................................... 5
5. INTER-GOVERNMENTAL CAPITAL GRANTS ..................................................................... 5
6. CAPITAL BUDGET SHORTFALLS AND SURPLUSES ........................................................... 5
7. APPENDIX GROWTH RELATED INVESTMENTS COST SHARING FORMULA ......... 5
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City of Saint John
Capital Budget Policy
1. POLICY STATEMENT
1.1. This Policy applies to budgeting by the Municipality for capital funds.
1.2. Each council shall adopt a Capital Budget for each calendar year.
1.3. Capital budget shall align with the Council approved Long Term Financial Plan which
includes a 5 Year Capital Investment Plan and a 10 Year Debt Plan.
1.4. Finance Committee will review the 5-year Capital Investment Plan Annually and
recommend any major amendments to the Plan to Council for approval.
1.5. The Capital Budget Policy supports the City to achieve its current and future goals in
a fiscally responsible and sustainable manner.
1.6. Capital Budget Investment decisions shall be evidence based and conform with the
Asset Management Policy.
1.7. The Capital Budget Policy shall comply with all relevant provisions of the Local
Governance Act and all other applicable legislation.
2. PRINCIPALS AND STRATEGIES
2.1 Affordability - Capital Budget shall reflect the level of infrastructure investment
required to achieve agreed upon service and taxation objectives in the Council
approved Long Term Financial Plan.
2.2 Ownership - Only City owned assets, which meet the definition of asset pursuant to
Generally Accepted Accounting Principles, shall be funded in the Capital Budget.
Funding agreements prior to the approved Capital Budget Policy Council approval
date are exempted from the policy.
2.3 Fiscal Responsibility - The City shall reduce its reliance on debt and address the
infrastructure deficit by increasingly funding Reserves and Pay-As-You-Go to fund
infrastructure renewal.
2.4 Asset Management - The Capital Budget shall consider the full life-cycle cost based
on asset management best practices and adhere to the Asset Management Policy.
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City of Saint John
Capital Budget Policy
3. CAPITAL PRIORITIZATION
3.1 To strategically manage the City's debt and infrastructure deficit, the General Fund
Capital Budget shall comprise of 80% Capital Renewal and 20% for New Capital and
shall align with the City's Long Term Financial Plan and the City's Strategic Plan. The
Utility Fund shall comprise of 90% Capital Renewal and 10% for New Capital.
3.2 For the purpose of this policy, Capital Renewal is defined as assets that are at the
end of its useful life and contribute to the City's infrastructure deficit.
3.3 As a pre-requisite to share Capital Investments between the General Fund and Utility
Fund, the proposed investment must have a primary purpose to grow the tax base
(asset management secondary as existing infrastructure is not at the end of its useful
life), the project must have a positive business case with a payback period of 10 years
or less, the business case be approved by the Finance Committee and be approved
in the Capital Budget to qualify for cost sharing in accordance with the Capital
Budget Policy.
If the project meets the above criteria, the cost of the growth capital investment
shall be allocated between the General Fund and Utility Fund in accordance with
each funds proportionate share of net present value of net revenue generated by
each fund as per the formula set forth in Appendix A of this policy.
3.4 Proposed Capital Budget Projects will be prioritized in the following order.
a. Mandatory - Must be completed due to legal or regulatory requirements.
b. Risk - Required to mitigate liability associated with health and safety, mitigate liability
or to mitigate sudden asset failure.
c. Priority of Council - As stipulated in the 5 Year Capital Investment Plan (Long Term
Financial Plan) and supported by evidence-based asset management
recommendations and are part of the City's strategic plans.
d. Positive Financial Impact - The Capital request not included in the 5-year Capital
Investment Plan but can be supported by a business case that demonstrates a
positive financial impact for taxpayers - would require a Council approved
adjustment to the Capital Investment Plan and Capital Budget.
e. Discretionary - New asset which aim to increase or enhance service level to the
residents and taxpayers. Requires amendment to the Long-Term Financial Plan, the
City strategic plans, and supported by a business case.
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City of Saint John
Capital Budget Policy
4. CARRY OVER OF PREVIOUS YEAR APPROVED CAPITAL BUDGET
Approved capital budget projects must be started by the end of the second year after approval.
5. INTER-GOVERNMENTAL CAPITAL GRANTS
Inter-Governmental capital grants shall only be pursued for Capital projects in line with
Council priorities, the approved Capital Budget, and the approved 5 Year Capital Investment
Plan.
6. CAPITAL BUDGET SHORTFALLS AND SURPLUSES
6.1 Common Council must approve any adjustments to the Capital Budget for additional
funding to cover Capital
authority level.
6.2 Capital Budget surpluses that exceed the authority level,
where budgeted Capital funds exceed actual capital, shall be, with Council approval.
a. Realized as savings resulting in reduced debt financing.
b. Used to offset deficits in other approved Capital Budget shortfalls.
c. Leveraged to address the infrastructure deficits identified in the Asset
Management Plan and the 5 Year Capital Investment Plan.
7. APPENDIX GROWTH RELATED INVESTMENTS COST SHARING FORMULA
Assumption:
Life of the Project is capped equal to number of years of debt amortization period.
Formulas:
1) Cost Allocation:
General Fund = C * (NPVNGFR / (NPVNGFR + NPVNUFR))
Utility Fund = C * (NPVNUFR / (NPVNGFR + NPVNUFR))
2)
3)
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City of Saint John
Capital Budget Policy
Where:
NPVNGFR = Net Present Value of Net General Fund Revenue
NPVNUFR = Net Present Value of Net Utility Fund Revenue
NGFR = PT + BP -IC - EX
NGFR = Net General Fund Revenue
PT = Property Tax Revenue to General Fund
BP = Building Permit Fees Revenue
IC = Incentives Given for The Project
EX = Other Project Specific Expenses
NUFR = WR EX + NI
NUFR = Net Utility Fund Revenue
WR = Water Billing Revenue (Fixed/Metered)
EX = Other project specific expenses
NI = Net Investment = New Utility Infrastructure Investment less Current
Depreciated Value of Infrastructure
I = Current Borrowing Rate
C = Cost of the Project
N = Life of Project
NPV = Net Present Value of Net Revenue/Cost
NGFR1 = Net General Fund Revenue in year 1, NGFR2 = Net General Fund Revenue in year 2 and
so on up to life of the project
NUFR1 = Net Utility Fund Revenue in year 1, NUFR2 = Net Utility Fund Revenue in year 2 and so
on up to life of the project
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City of Saint John
Capital Budget Policy
Example:
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