Item No. 1
Town of Atherton
CITY COUNCIL STAFF REPORT – STUDY SESSION
TO: HONORABLE MAYOR AND CITY COUNCIL
GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT BARRON III, FINANCE DIRECTOR
ROBERT OVADIA, DIRECTOR OF PUBLIC WORKS
DATE: MAY 1, 2024
SUBJECT: REVIEW OF THE FY 2024/25 SPECIAL REVENUE, INTERNAL SERVICE
FUNDS AND CAPITAL IMPROVEMENT PROGRAM
RECOMMENDATION
Review, discuss, and provide feedback Special Revenue, Internal Service Funds and Capital Improvement Program (CIP) for FY 2024/25.
BACKGROUND
This is the third item of the Town’s Budget Meeting Calendar for the FY 2024/25 Budget – Special Revenue Funds, Internal Service Funds, and the Town’s 5-Year CIP.
The Town maintains a variety of Special Revenue and Internal Service Funds that are “restricted funds” designated for a specific purpose. Special Revenue Funds are used to account for revenues derived from specific sources. Revenue to Internal Service Funds comes from the various departmental operational budgets based on allocated charges to those departments. Special Revenue and Internal Service Funds include the Library Fund, Tennis Fund, COPS Grant fund, Equipment Replacement Fund, Workers’ Compensation Fund, General Liability Fund, and Employee Benefit Fund.
The Town’s Capital Improvement Program (CIP) is a five-year program that proposes projects to analyze, repair or improve Town infrastructure, and the funding for those projects. The Town is focusing on capital project needs in the community. The Holbrook Palmer Park Access and Circulation Project is nearing completion by the end of the fiscal year as well as the Atherton Station remodel. The General Fund continues to new funding capacity in the next several years for project priorities within the CIP Master Plans. Priority projects are derived from the Bicycle Pedestrian Master Plan, Drainage Master Plan, Green Infrastructure Plan, and Road Improvement Plan.
The CIP program consists of (6) six capital improvement fund sources that the Town uses for capital improvement/infrastructure needs. The capital improvement fund sources include:
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
• Atherton General Fund
• Measure M – County Congestion Management Fee on vehicle registration • Measure A – County ½-cent Transportation Sales Tax
• Measure W- County ½-cent tax Congestion Relief Plan
• Gas Tax
• Atherton Channel Fund
ANALYSIS
This section is a fund-by-fund analysis of the various Town Funds.
LIBRARY FUND
REVENUES
The Town is a member of the San Mateo County Library JPA system. The Library is funded through property taxes that are collected and allocated to library services. Under the JPA, jurisdictions are permitted to retain excess funds generated from the local property taxes as long as the basic library services are met. The Town most recent use of all excess funds have been for the Town Center Project – Library – as well as extended library hours of daily operation, utilities, and maintenance costs. With the completion of the new Atherton Library, annual excess funds minus amounts needed for yearly operation of the Library will be retained by the Library JPA until the total advancement amount is reimbursed. Once the advancement of funds is reimbursed, any remaining funds will be evenly split between the Library and the Town for library-related activities.
The projected FY 2023/24 ending balance for the Library Fund is $2,502,142. This includes the SMCL funds held in trust retained by the Library JPA. The County holds all future excess funds.
During the agreement on advancement of Library funds, it was estimated that the projected Library Fund Revenue would be in the range of approximately $1,600,000. It is estimated that it will take approximately 3 years for reimbursement of the advancement of Library JPA funds. The estimated ending fund balance for FY 2024/25 Library Trust funds is $2,518,142.
EXPENDITURES
The FY 2024/25 projected expenditures for the Library are $650,902 for operations, utilities, maintenance costs and development of spaces. There is an increase in utilities costs of $9,000 for electricity and water. Maintenance costs for facility contracts for Library increased $5,000 for systems maintenance on new facilities. These amounts are based on the building needs and operations, campus wide. There is Building Maintenance manager allocation of $18,852 of Town personnel to oversee management of Library facility and systems. There is an allocation for Other Supplies and Materials of $300,000 for Town programming and needs around the Library and outdoor spaces. These include purchases of various items for the development of spaces such as FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
tables, canopies, umbrellas, café benches, community room furniture and community programs for an estimate of $100,000. Also includes an allocation of $200,000 toward a facilities replacement and improvement fund.
OTHER RESTRICTED FUNDS
The Town maintains a variety of Special Revenue and Internal Service funds that are “restricted funds” for specific purposes beyond basic capital improvement. Revenue to internal service funds are in the form of General Fund department charges based on allocations by department and uses.
EQUIPMENT REPLACEMENT FUND
The Equipment Replacement Fund is an internal depreciation fund for the replacement of large assets. The Fund is the Town’s set aside accumulation account to replace large equipment assets over time – such as computer equipment, software assets, vehicles, trailers, emergency equipment, etc. Annual depreciation-style departmental allocations to this Fund reduces the impact to the Town’s Operational year funding to replace the equipment. There continues to remain sufficient funds in the fund to accommodate emergency replacement needs as well as planned needs.
The FY 2024/25, departmental allocations (revenues) total $431,758 and the expenditures total $724,620. The largest allocation charge is $363,658 in the Police Department for FY 2024/25.
This allocaton reflects the purchase of 2 vehicles each year as part of the regular maintenance and replacement schedule for vehicles and for replacement for portable radios. The Department is anticipating the purchase of 2 Tahoe patrol vehicles as part of its regular equipment replacement schedule. These are replacement vehicles to the patrol fleet and the Town uses the State and Federal Multiple-Award Schedule pricing to purchase vehicles from the Equipment Replacement Fund.
In FY 2024/25 the Police Department will also purchase $469,120 in other miscellaneous equipment assets. These supplemental items include the remaining purchase of Red Dot pistols for sworn staff $5,658, drug detection mobile test system $6,000, Equipment CCTV installation in the bike storage, garage, and evidence room to monitor activity $20,000, a property and evidence audit contract $17,000, and new quality communication equipment radios (30) APX NEXT all band portable radios $420,462. The majority of the $420K purchase of radios is coming from the Equipment Replacement Fund. There is a $125,000 allocation expense to the replacement fund in Police Department operations budget for these radios as a portion of the expense is covered by a donation previously accepted by the Council. These were noted in the General Fund Budget presentation. Public Works aniticpates replacing an older vehicle in the fleet with a hybrid vehicle alternative.
WORKERS’ COMPENSATION FUND
The Workers’ Compensation Fund accounts for the cost and expense of managing the Workers’ Compensation Program through the Town’s self-insurance risk pool, Cities Group Joint Powers FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
Authority. This Fund includes costs related to risk management and prevention – safety training, educational materials, and accident prevention programs. As a member of a JPA, the Town contributes an annual assessment to the JPA based on all recognized and potential liabilities. These assessments or contribution rates are calculated annually based on claims history and any increases in loss recovery due to excessive claims losses.
The Town maintains an active Workers’ Compensation Risk Management Program. There are approximately thirteen (13) open claims (down from 15) that incur a reserve claims cost of approximately $937,052 in the current year. This is an increase of $357,426 in reserve claims from the previous fiscal year. Claim costs and reserves are established for each claim; however, these amounts are not indicative of the actual claim paid. The three-year average claim loss/expense is approximately $316,070, an increase of $118,955.
The Workers’ Compensation Fund tracks expenditures for related expenses across the various departments. Each department is responsible for an allocated cost for Workers’ Compensation.
Allocations vary based on the risk assessed for each department (by type) and the number of employees. For the FY 2023/24 budget the Workers’ Compensation charge for the Police Department was reduced to 1% from 7% of salary costs and other departments charges reduced from 3% to 1%. This produced total savings of approximately $245,000 in the General Fund operating departments. The reduction was due to the Workers’ Compensation Fund maintaining enough reserves for future allocations of equity replenishments. The FY 2024/25 budget maintains the 1% charge of salary costs for all departments. Staff will continue to monitor this expense and may need to increase the allocation in future years to maintain adequate reserves.
The Town maintains an equity reserve designed to keep overall operational rates low. If the equity reserve is not maintained, annual operational rates are subject to increase due to a “special assessment” imposed by the Cities Group JPA. The current year assessment is $141,568 and is expected to increase to $188,709 in FY 2024/25. The increase is due to the Town equity reserve share is at ($191,556) and the Town needs to make a replenishment of $263,798 to maintain its equity reserve requirement of $72,242. Currently, there are enough reserves in the Town’s Worker’s Compensation Fund for equity replenishment and current reserve claims. The FY 2024/25 expense is $458,287 in the fund.
GENERAL LIABILITY FUND
The General Liability Fund accounts for the insurance cost of general liability claims and property losses. The Town is part of an insurance pool administered by PLAN JPA. The activities within this Fund provide for expenses related to general liability insurance, employment practice insurance and self-insured retention claims. Total internal service charges from the General Fund for FY 2024/25 are estimated at $614,432. The total FY 2024/25 projected expenditures for this fund are $714,432. This includes the self-insurance retention expense of $100,000 that allows the payout of four (4) claims at $25,000 per claim. The Town does not anticipate expending retention expenses of 4 claims in the fiscal year, however, the amount is a requirement established by PLAN JPA. Average retention claims are about 2 per year.
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
EMPLOYEE BENEFITS FUND
The Employee Benefits Fund tracks expenditures across various departments for employment, unemployment, retirement, and healthcare benefits. The Fund also represents an audit compliant set aside for compensated absences (time earned) – vacation, sick leave, holiday, compensatory time, etc.). Revenue to the fund comes through charges allocated back to each departmental budget based on number and type of personnel within each department. Revenue to the Fund for FY 2024/25 is $413,664. Expenditures for FY 2024/25 are $345,000. The expenditure includes $79,735 for the Town contribution of the minimum retiree health PEMHCA amount to CalPERS.
These costs are included and charged to the respective departments based on retiree health and allocated to the Employee Benefits Fund. The Town is no longer budgeting the “pay as you go” retiree health benefit contribution as an operation expense as the retiree benefits are now funded through the OPEB Trust.
Within this fund is also the employee benefits charge of $258,447. This is a charge of 3% to 4% of the General Fund Operational Departments salary expense that is allocated for personal leave contributions of sick, vacation, and holiday pay. The Police Department allocation is 4% and all other departments 3%. The Town has a total compensated absences balance of $1,096,373.
Compensated absences comprise of accrued time-off, vacation, and holiday pay for all employees and are recorded as a liability. These are amounts that would be liquidated or mature due to the termination of Town staff.
Included within this fund are also unemployment insurance charges if there are any future claims charged to the Town. Any claims would be paid out of this fund. The total budgeted charge is $70,982.
TENNIS FUND
The Tennis Fund projected revenues are $69,500. The majority of this revenue comes through the facility management servies contract with Player Capital. During the fiscal year the contract amount was amended and increased by $10,000. The contract provides yearly revenue of $50,000 to the Park. Keys are sold on an annual basis to any person (resident or non-resident) that wishes to use the Tennis courts. The standard key for residents is $100 and includes clay court key, and the non-resident key increased is $275 and clay court access of $30/ hour.
Every year the Town attempts to resurface and maintain the courts as needed. The tennis court resurfacing treatment includes crack filling and taping, followed by a new surface coating and striping. This is done on approximately every 3-5 years on a cyclical basis on each of the five (5) non-clay tennis courts. The previous two fiscal years the Town performed comprehensive repairs at the facility that inlcuded overlay and urgent rehabilitation needs of the courts. There was also maintenance and reconditioning of the clay court. During the current fiscal year, the Town embarked on a pilot program and added pickleball capabilities at one of the tennis courts.
Maintenance and facility enhancements were made to allow for pickleball play. Reservations and use of this court for pickleball will be monitored as the Town observes if permanent enhancements are warranted. A report will be provided to the Council after a 6-month trial period.
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
The FY 2024/25 budget includes the purchase of tennis keys by residents and non-residents providing annual revenue of approximately $18,300. Each January, new tennis keys go on sale for the new court locks that get installed in February.
For FY 2024/25, the Town anticipates expenditures of $57,500. This includes $10,000 for contract maintenance services for MCE, general court maintenance and facility repairs needs of $45,000 and $2,500 for building security court gates upkeep.
COPS - CITIZEN’S OPTION FOR PUBLIC SAFETY
The COPS Office was created as a result of the Violent Crime Control and Law Enforcement Act of 1994. As a component of the Department of Justice, the mission of the COPS Office is to advance community policing in jurisdictions of all sizes across the nation. Community policing focuses on crime and social disorder through the delivery of police services that includes aspects of traditional law enforcement, as well as prevention, problem-solving, community engagement, and partnerships. In FY 1996/97, the California State Legislature created the Citizen’s Option for Public Safety (COPS) Program. Funds have been available through the State of California to local entities in the form of Citizen’s Option for Public Safety (COPS) Grant. The Town in recent years has received approximately $165,000 per year from the grant. Funds must be used for front-line law enforcement only. The Town anticipates receipt of this funding on an annual basis and funds are used for sworn personnel salary related expenditures.
CAPITAL IMPROVEMENT FUND
The five-year CIP proposes projects to analyze, repair or improve Town infrastructure, and the funding for those projects. Major capital projects are categorized into three areas:
• Streets & Transportation
• Drainage
• Town Buildings, Park, and Facilities
Projects have been developed based on needs identified by City Council, residents, staff, and adopted master plans.
The 1st year (FY 2024/25) of the CIP is incorporated into the Town’s Budget and is the only year for which the City Council applies available funding. The remaining four (4) years of the CIP reflect proposed projects and funding. These “out years” are revised annually to reflect changes in City Council priorities, direction, needs and funding availability. The CIP is reviewed by the Town’s Planning Commission each year for consistency with the Town’s General Plan. This year’s CIP will be reviewed by the Planning Commission at their May 22 meeting. The Commission will send their comments in writing to the City Council prior to the Council’s June 19 meeting at which the Council is scheduled to adopt the budget, inclusive of the CIP.
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
ANALYSIS
The 5-year CIP is presented to City Council tonight in the Study Session workshop format to allow for questions and discussion of individual projects, general discussion about broader objectives to be considered for future proposed projects and priorities for allocating funds. It is important to remember that in many cases, costs shown are projections based on high-level estimates. Actual project costs will depend on market-driven bids at the time the project is undertaken.
In broad areas of the five largest CIP expenditures, this year’s CIP recommends:
• $5.3 million for Drainage Improvements Program ($11.38 million over 5 years); • $2 million for Park Improvements Program ($3.55 million over 5 years); • $1.4 million for the Road Maintenance Program ($7.275 million over 5 years); • $0.6 million for the Traffic Safety Improvements Program ($0.76 million over 5 years); and
• $0.5 million for Bicycle & Pedestrian Program; ($5.38 million over 5 years); The total proposed allocation for the Fiscal Year 2024/25 Capital Improvement Program is $10.13.
The 5-year Capital Improvement Program projection for FY 2024/25 through FY 2028/29 totals nearly $29.24 million – the largest expenditures attributable drainage improvement project.
Following the workshop, staff will implement changes directed by the Council and present the CIP to the City Council for consideration at the June Council meeting.
POLICY FOCUS
There are a number of issues inherent in the selection of proposed projects, project schedules and project funding. The Town has a number of Master Plans that identify a variety of projects to be completed. Based on critical needs, recommendations from Town committees, and goals set by the City Council, staff has compiled the proposed CIP.
As staff reviews the CIP with the Council at the Study Session, staff will articulate where some projects were shifted from the 5-Year Financial Outlook to address funding availability, project timing, and project design. Larger projects will often require that project design occur in the fiscal year prior to actual project construction.
Clear priorities include: the Annual Road Maintenance Program, Traffic and Safety Improvements, the completion of identified projects within the Drainage Master Plan, Bike/Ped Master Plan and the Neighborhood Traffic Management Action Plan and Park Master Plan improvements. Funding for the CIP consists of a variety of sources, some of which are restricted, such as Measures A, Measure M and Measure W funds, as well as funds from Gas Taxes, and the General Fund.
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
The CIP includes a number of basic maintenance improvement projects that are routine in nature and occur year over year, projects that are carried over from the previous fiscal year, as well as projects that are funded over several years.
Current projects that are anticipated to be completed by the end of the current fiscal year (FY 2023/24) include:
• Holbrook-Palmer Park Access and Circulation Improvements • Atherton Station Remodel
• Alameda de las Pulgas / Stockbridge Avenue Pedestrian Improvements Projects that have been awarded to a contractor and anticipated to be completed in the upcoming fiscal year, include:
• Fair Oaks Lane / Lloyden Drive Intersection Improvements • Pavement Maintenance projects
For these projects, budgeted funds are “encumbered” as part of the FY 2023/24 budget spent into FY 2024/25.
Projects that are currently under design and are anticipated to move into construction in the upcoming fiscal year include:
• Alameda de las Pulgas Traffic and Safety Improvements • Atherton Channel Relining – west of Alameda de las Pulgas • Holbrook-Palmer Park Playground Improvements
The construction portion of these projects have either been allocated in the FY2023/24 CIP Budget and/or will be included in the FY 2024/25 CIP Budget.
Other projects such as the El Camino Real Complete Streets Gap Closure Project and the El Camino Real Long-Term Drainage Assessment are multi-year projects that have just initiated or will soon initiate the planning efforts to outline improvement needs.
The proposed CIP also includes several projects that may require policy feedback from the City Council. Specific projects for which staff anticipates Council policy feedback are:
• Bicycle Pedestrian Master Plan Implementation Program – Page 15, #56059 o This program includes $250,000 for an update of the Town’s Bicycle and Pedestrian Master Plan. Previously programmed projects including the design of Class II bike lanes on Atherton Avenue and evaluation of a walkway along Watkins Avenue from the Dinkelspiel Station Lane to El Camino Real have been deferred to allow for the Bicycle and Pedestrian Master Plan to provide guidance and prioritization of the projects.
• Drainage Improvements Program – Page 21, #56034
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
o Staff is working on securing the Grant funding allocated with the efforts of Congresswoman Anna Eshoo for the Atherton Channel Culvert and Detention System project through the Community Funding Project program. The grant funding allocation was $1.38 million, while the initial request was $2,250,000.
Though the proposed CIP includes allocations consistent with the previous CIP outlook, it is anticipated that additional funds will be required to complete the project. Such funds have not been forecasted in the CIP outyears pending securing of the grant funds and design development. As the project proposes detention facilities at Las Lomitas Elementary School, coordination with the school, their consultants and the State Architect’s Office will be required. It is anticipated that a joint maintenance agreement will be required to outline long-term maintenance responsibilities for the facilities will be required. There may be an opportunity to request support from the School District to fund the project. o Funding to initiate evaluation of long-term drainage improvements along El Camino Real was approved in FY 2023/24 at $250,000, with funding for programmed for potential implementation in the amount of $2.75 million in FY 2024/25. The design proposal received was significantly higher than the available budget. Should the Town proceed with the proposal received or decide to solicit additional proposals, additional funds will be needed for the evaluation/design and construction will likely be pushed out beyond FY2024/25. • Park Master Plan Implementation Program – Page 27, #56063 o $1,000,000 is proposed in FY 2024/25 for construction of a new playground at Holbrook-Palmer Park. During the public outreach effort, significant input was received regarding the condition of the restrooms near the playground. The Park and Recreation Committee has recommended that the restrooms be replaced. A request in the amount of $800,000 has been included in the FY 2024/25 CIP for construction – selection and design associated with a prefabricated restroom is included in the design scope for the playground project. o As major projects at the park are completed, there may be a need to refresh the Park Master Plan. The CIP forecast includes a potential refresh of the master plan in FY 2025/26.
• Traffic Safety Improvement Program – Page 13, #56064
o As the Alameda de las Pulgas Traffic and Safety Improvements project moves through design and into construction, input on future projects is desired, including potential traffic signals, HAWK beacons or other major traffic improvements for planning purposes.
FISCAL IMPACT
There is no fiscal impact of the review and discussion of the CIP. Upon Council approval of the projects and funding for FY 2024/25, those approved projects will be incorporated into the Town’s Budget and their approved amounts will be reflected in the Budget and in remaining fund balances.
PUBLIC NOTICE
FY 2024/25 Special Revenue, Internal Service Funds & CIP May 1, 2024
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,400 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders – to include, but be not limited to, media outlets, school districts, Menlo Park Fire District, service provides (water, power, and sewer), and regional elected officials.
The Town maintains a Fiscal Transparency web portal and includes all budget information on its website. Links to these various areas are below:
Fiscal Transparency Web Page:
http://www.ci.atherton.ca.us/index.aspx?NID=269
Archive of Town Budgets:
http://www.ci.atherton.ca.us/index.aspx?nid=273
Financial Data Portal (OpenGov):
http://www.ci.atherton.ca.us/index.aspx?nid=361
Financial Audit Archive:
http://www.ci.atherton.ca.us/Archive.aspx?AMID=39&Type=&ADID= Actuarial Valuations Archive:
http://www.ci.atherton.ca.us/Archive.aspx?AMID=61&Type=&ADID= Labor Contracts, Agreements, and Salary/Benefit Information:
http://www.ci.atherton.ca.us/index.aspx?nid=192
ATTACHMENTS
1. FY 2024/25 Internal Service, Library, Tennis Funds & Other Special Revenue
2. FY 2024/25 Capital Improvement Program
3. 5-Year Fiscal Outlook Spreadsheet and Project list
4. Out Year Financial Planning Tool
5. Project Description Tool