{"MatterId":14656,"MatterGuid":"CA785037-56A0-49B1-831A-42F50F036483","MatterLastModifiedUtc":"2026-07-13T16:06:41.4","MatterRowVersion":"AAAAAADOkbM=","MatterFile":"O-26-3","MatterName":null,"MatterTitle":"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)","MatterTypeId":1,"MatterTypeName":"Ordinance","MatterStatusId":20,"MatterStatusName":"Enacted","MatterBodyId":1,"MatterBodyName":"City Council","MatterIntroDate":"2026-01-05T00:00:00","MatterAgendaDate":null,"MatterPassedDate":"2026-04-06T00:00:00","MatterEnactmentDate":"2026-04-21T00:00:00","MatterEnactmentNumber":"O-2026-010","MatterRequester":null,"MatterNotes":null,"MatterVersion":"3","MatterCost":null,"MatterText1":null,"MatterText2":null,"MatterText3":null,"MatterText4":null,"MatterText5":null,"MatterDate1":"2026-05-01T00:00:00","MatterDate2":"2026-05-06T00:00:00","MatterEXText1":"CC 4/6/26 (lr)\r\n\r\nBrief Summary: This bill proposes to amend Chapter 2, Article 11 of the Revised Ordinances of Albuquerque (ROA 1994) by adding a new section (§ 2-11-18) to regulate Indirect Overhead (IDOH) charges assessed to capital funds. Approval of this bill would establish a framework for calculating the City’s IDOH for voter-approved capital projects. \r\n\r\nAnalysis: The bill adds a new regulatory framework governing Indirect Overhead charges to capital funds. The Capital Program’s IDOH is the limited necessary costs associated with the administration and implementation of capital projects, such as project management and fiscal oversight. Under current practice, IDOH rates are applied to recover indirect administrative and project delivery costs associated with capital projects; however, the City Code does not establish a formal rate, standardized eligibility criteria, or reporting requirements.\r\nThe Committee Substitute has several changes from the original proposal. The Committee Substitute establishes a baseline IDOH rate of 2.75% applied to capital improvements/projects. The ordinance states that it is the policy of the City that IDOH be maintained at this baseline unless an alternative rate is justified based on criteria established in the ordinance and approved by the City Council.\r\n\r\nIf the Administration determines that an alternative rate is necessary, the Department of Finance, Treasury, and DMD/CIP must calculate the proposed rate using the defined criteria and submit the proposal to the City Council via Executive Communication.\r\n\r\nIf the City Council rejects the proposed rate, the Administration must submit a revised calculation within thirty days. Until a revised rate is approved, the IDOH rate applied to capital projects may not exceed 2.75%.\r\n\r\nThe Committee Substitute clarifies that IDOH may only be applied to eligible capital project costs and may not be automatically applied solely based on the use of a capital fund. The ordinance also states that newly calculated rates cannot be applied retroactively to previous bond cycles.\r\n\r\nThe Committee Substitute establishes procedures governing how departments may charge costs to Councilor-initiated capital accounts, including Fund 305. Key oversight controls include:\r\n•\tDepartments may not exceed project budgets without prior approval from the relevant \r\nCouncilor or Council Services staff.\r\n•\tDepartments must obtain written approval from the Council Services Financial \r\nManager before transferring costs or recovering labor charges from Councilor capital accounts.\r\n•\tFinal approval of such transactions must occur within the City’s financial system prior \r\nto processing.\r\n•\tCharges made in violation of these requirements must be reversed within thirty days \r\nof notice from Council Services.\r\n\r\nSummary of C/S Changes:\r\nAdditions:\r\n•\tPurpose and Findings section\r\n•\tDefinitions (Capital Improvements/Projects, GO Bonds, CIP Recovered Labor Costs, \r\nIDOH Calculation and IDOH Criteria)\r\n•\tCity Policy baseline IDOH rate of 2.75%\r\n•\tCriteria for calculating the IDOH, in detail\r\n•\tRate changes must be presented to Council via EC. Rejected ECs will result in the \r\ndefault baseline of 2.75% with 30 days allowed for resubmission\r\n•\tIDOH rate will be reviewed and calculated by January 31 of the year following every \r\nbond election.\r\n•\tExcludes non-CIP fiscal staff and most DMD Construction Services staff/inspectors \r\nunless fully assigned to CIP project\r\n•\tFinance, Treasury, DMD/CIP and CIP Fiscal responsible for the IDOH rate \r\ncalculation\r\n•\tFY26 recalculation of IDOH within 60 days of approval of the bill\r\n•\tBond-cycle timing for communications and reports\r\n•\tRegular review by the Internal Auditor\r\n•\tRequires prior approval before expenditures exceed project budget from Council \r\nFiscal staff\r\n\r\nRemovals:\r\n•\tThe maximum IDOH rate equal to the lesser of 4.75 percent or a rate reflecting the \r\nannual percentage change in the Consumer Price Index for All Urban Consumers (CPI-U)\r\n•\tCriteria that shall not be included in the rate, in detail\r\n•\tDocumentation of positions whose functions, time percentages, and operating tasks \r\nwere directly dedicated to CIP\r\n•\tPublic Safety prohibition\r\n•\tBioPark 5% carveout\r\n•\tMulti-year application policy\r\n•\tCost-Recovery Methodology \r\n•\tGovernment Inspector review\r\n•\tRetroactivity\r\n\r\nFiscal Impact: The bill affects the operating and capital budgeting practices related to the Capital Implementation Program and other capital funds. It does not appropriate funds but may reduce or limit indirect overhead recoveries to departments. \r\n\r\nKey Dates:\r\n•\tEffective Date: Five days after publication\r\n•\tRecalculation of FY26 IDOH Rate: Within 60 days of the ordinance’s enactment\r\n•\tSubmission of IDOH Rate for Bond Cycles: Beginning with the 2027 bond cycle, the \r\nAdministration must calculate the IDOH rate and submit an EC no later than January 31 of the year following each bond election\r\n\r\nComments: The Department of Municipal Development, through the Capital Implementation Program, administers voter-approved GO Bond projects and other capital improvements. To recover administrative costs associated with managing capital projects, the City applies an IDOH rate to capital funds.\r\n\r\nIDOH rates have fluctuated significantly in recent years. Ranging from approximately 1.04% to 12%. Concerns raised by the City Council include:\r\n•\tLack of publicly disclosed criteria used to calculate the rate\r\n•\tUncertainty regarding which positions and functions are included\r\n•\tQuestions regarding the allocation and recovery of labor costs to capital projects\r\n\r\nA 2019 Strategic Review by the City’s Office of Internal Audit recommended reviewing labor recovery charged to bond-funded projects to ensure such costs were appropriate relative to the services provided.\r\n\r\nDuring FY25, Council fiscal staff became aware that the IDOH rate applied to capital projects had changed from 2.75 percent to 4.25 percent, as reflected in the FY25–FY29 Five-Year Forecast. The change was not directly communicated to Council fiscal staff responsible for overseeing Councilor capital activity adjustments. Council staff observed unusually large IDOH deductions from Council CIP activity in October 2024 and received clarification regarding the rate change only after initiating inquiries.\r\n\r\nFor FY26, the IDOH rate applied to CIP increased to 8.0 percent, as reflected in the FY26 Approved Budget.\r\n\r\nCurrently, IDOH practices are governed administratively by Administrative Instruction (AI) No. 2-1, Assessment of Indirect Overhead. Under this AI, the Department of Finance and Administrative Services (DFAS) is responsible for calculating and overseeing capital overhead rates. AI No. 2-1 provides that capital overhead rates are calculated by the DFAS Director and may be adjusted during the fiscal year. The AI allows rates to be based on estimated central service costs associated with the capital program relative to estimated capital project expenditures and identifies eligible central service cost areas, including DMD Construction in Process (CIP) Fiscal, the DFAS Director’s Office, Accounting, Budget, Purchasing, and Legal, subject to federal limitations for tax-exempt bonds. The AI further provides that all capital projects are assessed a capital overhead charge at the applicable rate unless an exemption is approved by the DFAS Director.\r\n\r\nThis bill would establish IDOH requirements in City ordinance, including rate limitations, eligibility criteria, reporting requirements, and Council oversight provisions, which would supersede or limit certain discretionary authorities currently exercised under AI No. 2-1.\r\n\r\nCommittee Update: During discussion, the Chief Financial Officer expressed concerns about the timing of the proposed rate in relation to the FY27 budget development process, potential impacts to revenue projections, and the additional administrative effort required to implement the ordinance.\r\n\r\nDuring discussion, Council staff noted that historically the IDOH rate has generally been around 2%, with the proposed 2.75% baseline reflecting modest increases based on recent inflationary pressures.\r\n\r\nThe ordinance, as substituted, passed with a recommendation of a Do Pass 5:0.\r\n\r\nFGO 3/9/26 (lr)\r\n\r\nSame as 1/12/26 write-up.\r\n\r\nFGO 2/9/26 (lr)\r\n\r\nSame as write-up below. \r\n\r\nFGO 1/12/26 (lr)\r\n\r\nBrief Summary: This bill proposes to amend Chapter 2, Article 11 of the Revised Ordinances of Albuquerque (ROA 1994) by adding a new section (§ 2-11-18) to regulate Indirect Overhead (IDOH) charges assessed to capital funds. Approval of this bill would establish a cap on IDOH rates charged to capital projects, define allowable and prohibited uses of IDOH, require annual reporting and public transparency, and clarify the application of IDOH to capital expenditures. The ordinance applies to capital projects administered through the City’s Capital Implementation Program (CIP) and other capital funds, including Councilor-sponsored capital activities. The bill adds a new section and affects the Department of Finance and Administrative Services (DFAS), the Department of Municipal Development (DMD), Council Services, and departments that assess or recover costs from capital funds.\r\n\r\nAnalysis: The bill adds a new regulatory framework governing Indirect Overhead charges to capital funds. Under current practice, IDOH rates are applied to recover indirect administrative and project delivery costs associated with capital projects, but the City Code does not establish a formal rate cap, standardized eligibility criteria, or reporting requirements. This ordinance formalizes those elements.\r\n\r\nThe bill establishes a maximum IDOH rate equal to the lesser of 4.75 percent or a rate reflecting the annual percentage change in the Consumer Price Index for All Urban Consumers (CPI-U). A higher rate may only be applied if City Council receives written justification, a cost allocation plan, and approves the rate during the annual budget adoption process.\r\n\r\nThe ordinance defines allowable IDOH charges as those directly related to capital project planning, design, implementation, execution, and construction oversight. It explicitly excludes general administrative functions, executive administration, and departmental planning or policy roles not tied to specific projects. The ordinance prohibits IDOH charges from being assessed to support the operations, personnel, or administrative overhead of public safety departments. The bill also prohibits IDOH from being applied to the acquisition of equipment, vehicles, materials, or furnishings, regardless of their association with a capital project.\r\n\r\nThe bill establishes detailed eligibility requirements for fiscal and financial management positions to be included in IDOH, including documentation of CIP-related duties and time allocation. It further requires DFAS and/or DMD to submit an annual IDOH report to the City Council by March 1 of each fiscal year, including rate calculations, IDOH-funded positions, and reconciliation of projected versus actual expenditures, and to publish the final rate on the City’s capital transparency website.\r\n\r\nAdditional provisions regulate departmental charges to Councilor capital activities, requiring prior approval from Council Services fiscal staff before costs may be transferred and mandating reversals of unapproved or improper charges. The ordinance also clarifies how IDOH rates are applied over time, including restrictions on retroactive application and specific treatment of multi-year capital projects.\r\n\r\nThe bill includes a specific exemption for the BioPark GRT Fund, limiting indirect overhead to no more than five percent through Fiscal Year 2031, consistent with an existing Memorandum of Understanding.\r\n\r\nFiscal Impact: The bill affects the operating and capital budgeting practices related to the Capital Implementation Program and other capital funds. It does not appropriate funds but may reduce or limit indirect overhead recoveries to departments by capping IDOH rates and restricting eligible costs. \r\n\r\nThe bill requires reversal or refund of IDOH amounts charged in excess of the allowable cap beginning July 1, 2025. \r\n\r\nKey Dates: The ordinance becomes effective immediately upon publication. Its provisions apply retroactively to July 1, 2025, the beginning of Fiscal Year 2026. Any IDOH charges exceeding the allowable cap must be reversed or refunded through a budget adjustment and reported to the City Council no later than February 1, 2026. Annual IDOH reporting is required by March 1st of each fiscal year.\r\n\r\nComments: During FY25, Council fiscal staff became aware that the IDOH rate applied to capital projects had changed from 2.75 percent to 4.25 percent, as reflected in the FY25–FY29 Five-Year Forecast. The change was not directly communicated to Council fiscal staff responsible for overseeing Councilor capital activity adjustments. Council staff observed unusually large IDOH deductions from Council CIP activity in October 2024 and received clarification regarding the rate change only after initiating inquiries.\r\nFor FY26, the IDOH rate applied to CIP increased to 8.0 percent, as reflected in the FY26 Approved Budget.\r\n\r\nCurrently, IDOH practices are governed administratively by Administrative Instruction (AI) No. 2-1, Assessment of Indirect Overhead. Under this AI, the Department of Finance and Administrative Services (DFAS) is responsible for calculating and overseeing capital overhead rates. AI No. 2-1 provides that capital overhead rates are calculated by the DFAS Director and may be adjusted during the fiscal year. The AI allows rates to be based on estimated central service costs associated with the capital program relative to estimated capital project expenditures and identifies eligible central service cost areas, including DMD Construction in Process (CIP) Fiscal, the DFAS Director’s Office, Accounting, Budget, Purchasing, and Legal, subject to federal limitations for tax-exempt bonds. The AI further provides that all capital projects are assessed a capital overhead charge at the applicable rate unless an exemption is approved by the DFAS Director.\r\n\r\nThis bill would establish IDOH requirements in City ordinance, including rate limitations, eligibility criteria, reporting requirements, and Council oversight provisions, which would supersede or limit certain discretionary authorities currently exercised under AI No. 2","MatterEXText2":"Laura Rummler","MatterEXText3":null,"MatterEXText4":null,"MatterEXText5":null,"MatterEXText6":null,"MatterEXText7":null,"MatterEXText8":null,"MatterEXText9":null,"MatterEXText10":null,"MatterEXText11":null,"MatterEXDate1":null,"MatterEXDate2":null,"MatterEXDate3":null,"MatterEXDate4":null,"MatterEXDate5":null,"MatterEXDate6":null,"MatterEXDate7":null,"MatterEXDate8":null,"MatterEXDate9":null,"MatterEXDate10":null,"MatterAgiloftId":0,"MatterReference":"27","MatterRestrictViewViaWeb":false,"MatterReports":[]}