CITY of ALBUQUERQUE
TWENTY SEVENTH COUNCIL
COUNCIL BILL NO. C/S O-26-03 ENACTMENT NO. ________________________
SPONSORED BY: Joaquín Baca, Nichole Rogers, Dan Champine, Brook Bassan
ORDINANCE
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C/S Amending Chapter 2, Article 11 Of The Revised Ordinances Of Albuquerque, New Mexico (ROA 1994), To Add A New Section Regulating Indirect Overhead (IDOH) Charges To Capital Funds Establishing An IDOH Rate Calculation; Requiring Reporting And Transparency; And Aligning Eligible Uses With Capital Delivery Standards (Baca, Rogers, Champine, Bassan)
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AMENDING CHAPTER 2, ARTICLE 11 OF THE REVISED ORDINANCES OF ALBUQUERQUE, NEW MEXICO (ROA 1994), TO ADD A NEW SECTION REGULATING INDIRECT OVERHEAD (IDOH) CHARGES TO CAPITAL FUNDS ESTABLISHING AN IDOH RATE CALCULATION; REQUIRING REPORTING AND TRANSPARENCY; AND ALIGNING ELIGIBLE USES WITH CAPITAL DELIVERY STANDARDS.
WHEREAS, the Capital Implementation Program Division (CIP) of the Department of Municipal Development (DMD), including certain fiscal agents in the Fiscal Division of DMD, administers the planning, adoption and implementation of voter-approved General Obligation Bonds (GO Bonds) and other capital sources; and
WHEREAS, to offset administrative and project management costs, the City of Albuquerque (City) assesses an Indirect Overhead (IDOH) rate to GO Bonds and other capital funds; and
WHEREAS, General Obligation Bonds are Tax-exempt municipal bonds subject to federal and state guidelines; and
WHEREAS, Federal guidelines disallow the use of GO Bond funds for general operating or maintenance costs; and
WHEREAS, the purpose of IDOH is to recover actual, allowable indirect costs that support capital project delivery, but not to subsidize general city government departmental administration, maintenance or operational expenses; and
WHEREAS, the City Council seeks to formalize the process for calculating, assessing, and reporting IDOH to ensure appropriate use of capital funds and to maintain public confidence in capital project budgeting and implementation.
BE IT ORDAINED BY THE COUNCIL, THE GOVERNING BODY OF THE CITY OF ALBUQUERQUE:
SECTION 1. A new Section 21 is hereby adopted in Chapter 2, Article 11 of the Revised Ordinances of Albuquerque, 1994 as follows:
§ 2-11-21 Indirect Overhead Charges to Capital Funds.
(A) PURPOSE AND FINDINGS.
(1) In FY15 the rate of IDOH was 1.93%. In FY19 & FY20 the IDOH rate rose to 2.26%. In FY24 the IDOH rate dropped to 1.04%. In FY25 the rate was calculated at least twice, once at 2.75%, then later at 4.75%. In FY26 the rate of IDOH is 8%. The criteria for calculation of IDOH for FY25 and FY26 have not been disclosed raising concerns about compliance with state and federal guidance and the appropriate use of capital dollars.
(2) In June 2019 the City Office of Internal Audit released a Strategic Review (Report 19-304) that examined Capital Implementation Plan Labor Recovery and recommended that the City “Review labor recovery recorded to projects funded by bond proceeds to ensure use is appropriate relative to the cost associated with providing the service.”
(3) The City Council hereby finds that because criteria for the calculation of IDOH have not been publicly disclosed and questions remain regarding the allocation, calculation, and recording of labor costs for capital projects, it is necessary to establish policies to govern the processes of both the IDOH rate calculation and the cost allocation of labor to capital projects.
(B) DEFINITIONS.
CIP: The Capital Implementation Division of the Department of Municipal
Development (DMD) which includes individuals assigned to the DMD Fiscal Division who are tasked with the accounting and oversight of the use of capital funds.
CAPITAL IMPROVEMENTS/PROJECTS: Projects that design, construct,
renovate, rehabilitate, or otherwise improve facilities. These facilities, and improvements shall last or exceed the life of the associated bond.
CIP RECOVERED LABOR COSTS or LABOR: The documented cost of
labor that is attributed directly to the design and/or construction of CIP capital projects.
GENERAL OBLIGATION BONDS (GO BONDS): Tax exempt municipal bonds authorized by the US Congress, voted for by the public, and adopted by the Albuquerque City Council for the purpose of financing capital improvements that will last at least the length of the bond repayment schedule. The City plans, votes, and implements the general obligation bond program of capital improvements in a two-year cycle, not in a fiscal year cycle.
CAPITAL PROGRAM (CIP) INDIRECT OVERHEAD (IDOH): Limited necessary costs associated with the administration and implementation of capital projects (e.g., project management, procurement, and fiscal oversight).
IDOH CALCULATION: IDOH calculated in the year following the bond election and applied to the two-year cycle. The calculated rate of IDOH shall be applied to all eligible capital projects regardless of funding source for the entire bond cycle. Since IDOH calculations are estimates, estimated actuals from the previous cycle should be produced to inform the new IDOH calculations.
IDOH CRITERIA: Administrative functions and/or costs that may be used to calculate IDOH.
(C) IDOH RATE CALCULATION.
(1) It is the policy of the City of Albuquerque that the Indirect Overhead (IDOH) rate applied to capital improvements/projects shall be set at a baseline rate of 2.75 percent (2.75%), unless an alternative rate is justified pursuant to the criteria established in this section and approved by the City Council.
(2) If the Administration determines that an alternative IDOH rate is necessary, the City’s Department of Finance, Treasury, and DMD/CIP shall calculate the proposed rate using the criteria established in this section. The proposed rate and supporting documentation shall be submitted to the City Council by Executive Communication for review and approval.
(3) If the City Council rejects the proposed IDOH rate submitted pursuant to this section, the Administration shall submit a revised calculation to the City Council within thirty (30) days. Until such time as a revised rate is approved by the City Council, the IDOH rate applied to capital projects shall not exceed 2.75 percent (2.75%).
(4) Beginning in 2026, the FY26 IDOH shall be recalculated within 60 days of the enactment date of this Ordinance. Beginning with the 2027 bond cycle, the rate of IDOH shall be calculated by January 31 of the year following every bond election. The calculated rate shall apply to the two-year bond cycle. The rate shall be calculated solely based on the criteria below related to costs associated with administration of the capital program.
(5) IDOH Criteria shall include:
(a) The cost of the entire DMD CIP Division.
(b) Verified labor hours for DMD Fiscal Division staff assigned to accounting and oversight of capital improvement funds.
(c) Verified labor hours for Parks and Recreation Department construction crews assigned to construct, or inspect the construction of, approved and adopted capital projects.
(d) Both DMD and the Parks and Recreation Department employ professional engineers, architects, and landscape architects. Verified labor hours may be recovered for these professionals provided they are responsible for oversight of design or construction of capital projects, or for direct supervision of contracted design professionals working on capital projects.
(e) Verified labor hours for the City’s attorney(s) assigned to negotiate, review, and recommend capital improvement related contracts, including attorneys in the City Legal department and any outside counsel contract attorneys.
(f) Verified labor hours for the Purchasing Division staff for processing capital improvement purchase orders.
(g) Costs associated with preparation and sale of the voter approved and adopted bonds.
(6) Criteria that shall not be included:
(a) DMD Construction Services staff or inspectors shall not be included in the IDOH calculation criteria unless an inspector is assigned full-time as a professionally experienced construction inspector on a voter approved and adopted capital project.
(b) Human Resources, Legal, or Payroll, unless directly assigned to the CIP or Fiscal Division of DMD or described in Subsection (C)(5) above.
(c) Executive administrative functions regardless of relationship to CIP Capital projects.
(d) Fiscal or Financial staff supporting non-CIP capital projects.
(e) General departmental planning or policy roles not directly associated with specific capital projects.
(f) Equipment, furnishings, and vehicles shall not be included, nor shall they be recovered from the capital project regardless of whether such items are associated with or used in support of a capital project.
(g) Routine maintenance or general operating costs regardless of whether the work is associated with or used in support of a capital project.
(D) OVERSIGHT. The City Council retains authority to reject the proposed IDOH rate. The Office of Internal Audit shall conduct an annual audit of IDOH practices to ensure compliance with this section, including review of the calculation of the IDOH rate, allocation of costs, adherence to the criteria and requirements established herein, and whether costs charged are consistent with the approved scope of capital projects, and shall report its findings to the City Council.
(E) Application of Indirect Overhead.
(1) IDOH may only be applied to eligible capital project costs as defined in this Ordinance section § 2-11-21. IDOH shall not be automatically applied based solely on the use of a capital fund and shall not be applied to ineligible costs, including equipment purchases. For purposes of this section, the application of IDOH includes any charge or reservation of funds, whether by expenditure, encumbrance, or other accounting entry.
(2) IDOH associated with a capital project shall be calculated and applied based on the IDOH rate determined by January 31 of the year following the bond election.
(3) New calculated IDOH rates shall not be applied retroactively to previous bond cycles.
(F) CONTROLS ON DEPARTMENT CHARGES TO COUNCILOR CAPITAL ACTIVITIES.
(1) No expenditure that would cause a project to exceed its approved budget shall be incurred or processed without prior approval from the appropriate Councilor or designated Council Services staff. Departments shall provide Council Services with timely notice of project expenditures and remaining balances for all Councilor-initiated and funded capital activities.
(2) No department may submit any instrument that recovers labor or transfers cost to any Councilor’s capital activity account (Fund 305 or otherwise) without:
(a) Prior written approval from the Council Services Financial Manager or their designee confirming the request is appropriate and within the budgeted scope of the project as approved by the Councilor’s office; and
(b) Final approval from Council Services staff within the City’s financial system of record (e.g., PeopleSoft or any successor platform) before the transaction is processed.
(3) No additional administrative, indirect, or overhead costs, including but not limited to labor recovery, supervisory, or coordination outside of the calculated CIP IDOH rate for the applicable bond cycle shall be charged, transferred, or otherwise applied to Councilor approved GO Bond or State Capital Outlay activities, and all costs charged shall be directly related to and consistent with the approved scope of the capital project.
(4) Any such charges made without prior approval or that are in violation of this section shall be reversed within 30 days of notice from the Council Services Financial Manager, or their designee.
(G) REPORTING. No later than January 31 of the year following the bond election, the City’s DMD/CIP Division shall provide to the City Council via Executive Communication, per Subsection (C)(2) above:
(1) A detailed IDOH rate calculation;
(2) A list of IDOH funded positions across all departments and their percentage allocations to voter-approved and City-adopted capital improvements;
(3) A reconciliation of prior year projections to actual expenditures; and
(4) The final IDOH rate and supporting documentation shall be published on the City’s capital transparency website.
SECTION 2. SEVERABILITY. If any section, paragraph, sentence, clause, word or phrase of this Ordinance is for any reason held to be invalid or
unenforceable by any court of competent jurisdiction, such decision shall
not affect the validity of the remaining provisions of this Ordinance. The
Council hereby declares that it would have passed this Ordinance and each
section, paragraph, sentence, clause, word or phrase thereof irrespective
of any provision being declared unconstitutional or otherwise invalid.
SECTION 3. COMPILATION. SECTION 1 of this Ordinance amends, is incorporated in, and is to be compiled as part of the Revised Ordinances of Albuquerque, New Mexico, 1994.
SECTION 4. EFFECTIVE DATE. This Ordinance takes effect five days after
publication by title and general summary.
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