Agenda packet — Capitola City Council, May 16, 2024

REVISED 5/16/2024 4:30 PM
City of Capitola
Special City Council Meeting Agenda
Thursday, May 16, 2024 – 6:00 PM
City Council Chambers
420 Capitola Avenue, Capitola, CA 95010
Mayor: Kristen Brown
Vice Mayor: Yvette Brooks
Council Members: Joe Clarke, Margaux Morgan, Alexander Pedersen Special Meeting of the Capitola City Council – 6 PM
All correspondence received prior to 5:00 p.m. on the Wednesday preceding a Council Meeting will be distributed to Councilmembers to review prior to the meeting. Information submitted after 5 p.m. on that Wednesday may not have time to reach Councilmembers, nor be read by them prior to consideration of an item.

1. Roll Call and Pledge of Allegiance
Council Members Joe Clarke, Margaux Morgan, Alexander Pedersen, Yvette Brooks, and Mayor Kristen Brown.

2. Additions and Deletions to the Agenda

3. Additional Materials
Additional information submitted to the City after distribution of the agenda packet.

A. Item 6A - Correspondence Received

4. Oral Communications by Members of the Public
Oral Communications allows time for members of the Public to address the City Council on any “Consent Item” on tonight’s agenda, or on any topic within the jurisdiction of the City that is not on the “General Government/Public Hearings” section of the Agenda. Members of the public may speak for up to three minutes, unless otherwise specified by the Mayor. Individuals may not speak more than once during Oral Communications. All speakers must address the entire legislative body and will not be permitted to engage in dialogue. A maximum of 30 minutes is set aside for Oral Communications.

5. Staff / City Council Comments
Comments are limited to three minutes.

6. General Government / Public Hearings
All items listed in “General Government / Public Hearings” are intended to provide an opportunity for public discussion of each item listed. The following procedure pertains to each General Government item: 1) Staff explanation; 2) Council questions; 3) Public comment; 4) Council deliberation; 5) Decision.

A. Proposed Fiscal Year 2024-25 Budget
Recommended Action: Receive the proposed budget, provide direction to staff, and continue budget deliberations to the next joint budget hearing scheduled on May 30, 2024. 1 Special City Council Meeting Agenda – May 16, 2024
City of Capitola Page 2

7. Adjournment - The next regularly scheduled City Council meeting is on May 23, 2024 at 6:00 PM.
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How to View the Meeting
Meetings are open to the public for in-person attendance at the Capitola City Council Chambers located at 420 Capitola Avenue, Capitola, California, 95010.

Other ways to Watch:

Spectrum Cable Television channel 8
City of Capitola, California YouTube Channel
To Join Zoom Application or Call in to Zoom:

Meeting
link: https://us02web.zoom.us/j/83328173113?pwd=aVRwcWN3RU03Zzc2dkNpQzRWVXAydz09 Or dial one of these phone numbers: 1 (669) 900 6833, 1 (408) 638 0968, 1 (346) 248 7799 Meeting ID: 833 2817 3113
Meeting Passcode: 678550
How to Provide Comments to the City Council
Members of the public may provide public comments to the City Council in-person during the meeting.

If you are unable to attend in-person, please email your comments to [email protected] and they will be included as a part of the record for the meeting. Please be aware that the City Council will not accept comments via Zoom.

Notice regarding City Council: The City Council meets on the 2nd and 4th Thursday of each month at 6:00 p.m. in the City Hall Council Chambers located at 420 Capitola Avenue, Capitola.

Agenda and Agenda Packet Materials: The City Council Agenda and the complete Agenda Packet are available for review on the City’s website and at Capitola City Hall prior to the meeting. Need more information? Contact the City Clerk’s office at 831-475-7300.

Agenda Materials Distributed after Distribution of the Agenda Packet: Pursuant to Government Code §54957.5, materials related to an agenda item submitted after distribution of the agenda packet are available for public inspection at the Reception Office at City Hall, 420 Capitola Avenue, Capitola, California, during normal business hours.

Americans with Disabilities Act: Disability-related aids or services are available to enable persons with a disability to participate in this meeting consistent with the Federal Americans with Disabilities Act of 1990. Assisted listening devices are available for individuals with hearing impairments at the meeting in the City Council Chambers. Should you require special accommodations to participate in the meeting due to a disability, please contact the City Clerk’s office at least 24 hours in advance of the meeting at 831-475-7300. In an effort to accommodate individuals with environmental sensitivities, attendees are requested to refrain from wearing perfumes and other scented products.

Si desea asistir a esta reunión pública y necesita ayuda - como un intérprete de lenguaje de señas americano, español u otro equipo especial - favor de llamar al Departamento de la Secretaría de la Ciudad al 831-475-7300 al menos tres días antes para que podamos coordinar dicha asistencia especial o envié un correo electrónico a [email protected].

Televised Meetings: City Council meetings are cablecast “Live” on Charter Communications Cable TV Channel 8 and are recorded to be rebroadcasted at 8:00 a.m. on the Wednesday 2 Special City Council Meeting Agenda – May 16, 2024
City of Capitola Page 3
following the meetings and at 1:00 p.m. on Saturday following the first rebroadcast on Community Television of Santa Cruz County (Charter Channel 71 and Comcast Channel 25). Meetings are streamed “Live” on the City’s website at by clicking on the Home Page link “Meeting Agendas/Videos.” Archived meetings can be viewed from the website at any time. 3 1
Gautho, Julia
From: michael routh <[email protected]>
Sent: Monday, May 13, 2024 9:55 AM
To: City Council
Subject: 24-25 Budget,
Follow Up Flag: Follow up
Flag Status: Flagged
Mayor and Council members,
AŌer reviewing the proposed Fiscal year 24-25 budget, I would hope the Council would give a higher priority to street maintenance. The proposed budget gives street maintenance a "low" priority. Capitola streets are literally falling apart, parƟcularly Monterey Ave going up the hill from Capitola Ave to the railroad tracks, and 41st Ave north bound from Capitola Rd to the freeway.

Capitola used to give street maintenance, including street landscaping, a high priority. Now the medians are filled with weeds, sidewalks on the south side of Wharf road from the trestle to Cliff Dr are filled with weeds growing In every joint.

It seems there has been a blind eye turned to community beauƟficaƟon and upkeep.

Capitola is a beauƟful community, but it is starƟng to look run down. We should do beƩer.

Mick Routh
Sent from my iPad
4 Item 3 A.
1 Gautho, Julia
From: John <[email protected]>
Sent: Monday, May 13, 2024 4:52 PM
To: City Council; Gautho, Julia
Subject: Item 6A
Follow Up Flag: Follow up
Flag Status: Flagged
Hey folks
As y'all know I find too many parts of our budget quesƟonable and/or outdated but in parƟcular the lack of investment in essenƟal city infrastructure. Maintaining our main arterials is long overdo on the 41st interchange to Capitola Rd (that intersecƟon geƫng fixed was huge), and Monterrey Ave between Capitola Ave and Park Ave(the UlƟmate Trail as it is now defined) is in atrocious condiƟon. The leak that starts on Escalona Drive and remains steady down Monterey Ave all rainy season long is not going away and that street even in perfect condiƟon will possibly be the most dangerous bike path in the country once it becomes the rail trail.

I am significantly more concerned that again liƩle to nothing is being dedicated in our Budget to Vision Zero, Complete Streets, or any serious mulƟmodal transportaƟon projects.

We should do beƩer. JM
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Capitola City Council
Agenda Report
Meeting: May 16, 2024
From: Finance Department
Subject: Proposed Fiscal Year 2024-25 Budget
Recommended Action: Receive the proposed budget, provide direction to staff, and continue budget deliberations to the next joint budget hearing scheduled on May 30, 2024.

Discussion: The City of Capitola proposed Fiscal Year (FY) 2024-25 and FY 2025-26 Budget is a two-year financial plan. This plan incorporates the use of available resources programmed toward City Council goals and key projects. The proposed budget was prepared based on a combination of known factors, such as increases in CalPERS (Public Employees’ Retirement System) costs, and conservative estimates for both revenues and expenditures.

The budget is the City’s operating plan and a primary mechanism by which the City Council’s goals and vision for the City are transmitted to staff for implementation.

The document is organized to present information in several ways. General Fund revenues and expenditures provide information about longer-term patterns and overall fiscal stability, and revenues and expenditures for the City’s various departments provide additional detail and information about the City’s programs and projects.

Overall, the FY 2024-25 proposed budget is structurally balanced as well as projections for FY 2025-26 and 2026-27. However, current financial forecasts show that with the expiration of Measure F in December 2027 the budget becomes unbalanced beginning in FY 2027-28. The FY 2024-25 budget maintains services for residents of Capitola while simultaneously providing resources to address City Council Goals & Priorities. Nevertheless, the City must also remain focused on the long-term budget picture, which includes unpredictable CalPERS costs, and a potentially challenging economy in coming years.

Staff is presenting a Proposed FY 2024-25 Budget that is structurally balanced and forecasted to remain so for the next fiscal year. During this first budget hearing some of the key discussion points are as follows:
 The proposed budget includes the proposed creation of the Community Services and Recreation Department. The reorganization of the Recreation Division into a full-fledged Department is estimated to increase personnel costs by approximately $78,000 annually, not including cost of living adjustments included in the proposed budget.  The proposed budget does not include $67,000 for Phase 2 of the City Hall Needs Assessment which was identified as an unfunded City Council Goal during the March 6th special meeting, due to both funding constraints and workload challenges in Community Development.
 During the City Council goal setting, the LAFCO Sphere of Influence study, which had been funded at $30,000, was postponed until fall 2024. Since that time the City has received $15,000 from LAFCO to assist in moving the study forward. In addition, Council 12 Item 6 A.
agreed to defer the long-range strategic planning project till Fall, potentially freeing up staff resources for the LAFCO Sphere Study.
 The City has received a $30,000 donation for improvements to the bike track at McGregor Park. Staff looked into paving the track, however the cost is estimated to be $80,000. Staff has followed up with potential donors for the pump track, who have committed to seeking to raise the additional $50,000 needed to pave the pump track. Paved pump tracks are far more durable than dirt tracks and can be utilized nearly year-round.  Staff estimates the General Fund balance on June 30, 2024, will be approximately $827,000 with $100,000 designated for the employee downpayment assistance program. This estimated balance is subject to change depending upon the results of ongoing labor negotiations with all employee labor groups.

The table below shows general funds allocated to the FY 2024-25 City Council goals:

Project Funding
Employee Downpayment Assistance Program $ 100,000
Lifeguard Equipment Storage 25,000
PD Facility Improvements 65,000
Crosswalk Daylighting Citywide 10,000
Citywide digital applications 5,000
Employee engagement 6,000
Elections Outreach 4,000
Translation services 5,000
Website updates 7,000
Portable stage for events 7,000
Art & Cultural – funding in PW for Public Art
maintenance
5,0001
Total $ 239,000
 Additional FY 2024-25 and ongoing City Council Goals of approximately $2.1 million, which utilize prior-year general fund budget allocations and special revenue funds are detailed in the City Manager’s budget message, which is included with the FY 2024-25 Proposed Budget.
 The FY 2024-25 Proposed Budget includes additional ongoing revenue above the prior year of approximately $658,000 and additional ongoing expenditures of $821,000.

The draft budget (Attachment 1) has been distributed and is available for public review on the City’s website.

Attachments:

1. Proposed FY 2024-25 Budget
Report Prepared By: Jim Malberg, Finance Director

1 The draft budget includes $13,000 in Art and Cultural, which will be corrected in the second draft 13 Item 6 A.

Reviewed By: Julia Gautho, City Clerk
Approved By: Jamie Goldstein, City Manager
14 Item 6 A.
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15 Item 6 A.

CITY COUNCIL
Kristen Brown, Mayor
Yvette Brooks, Vice Mayor
Joe Clarke
Margaux Morgan
Alexander Pedersen
Jamie Goldstein, City Manager
Andy Dally, Chief of Police
Jessica Kahn, Public Works Director
Jim Malberg, Finance Director / Treasurer
Katie Herlihy, Community Development Director
Nikki Bryant LeBlond, Community Services & Recreation Director (Proposed) Chloe Woodmansee, Assistant to the City Manager
Julia Gautho, City Clerk
16 Item 6 A.

TABLE OF CONTENTS
Mission Statement ............................................................................................................. 1 City Manager’s Budget Message ..................................................................................... .2 Summary Information ……………………………………………… ............................ …….12 General Fund Revenues ................................................................................................. 23 General Fund Expenditures…………… .......................................................................... 32 Department Overview ................................................................................................... 50 City Council ......................................................................................................... 51 City Attorney ........................................................................................................ 52 City Manager ....................................................................................................... 53 Finance………………………………………………………………………………….57
Police……………………………………………………………………………………59
Public Works…………………………………………………………………………...64
Community Development……………………………………………………………. 71
Proposed Community Services and Recreation………….………………………...73 Capitola Museum ................................................................................................. 75 Capitola Art & Cultural Commission .................................................................... 77 Internal Service Funds .................................................................................................. 78 Stores Fund ......................................................................................................... 80 Information Technology Fund .............................................................................. 81 Equipment Replacement Fund ........................................................................... 82 Self-Insurance Liability Fund ............................................................................... 83 Workers’ Compensation Fund ............................................................................. 84 Compensated Absences Fund ............................................................................ 85 Special Revenue Funds ................................................................................................ 86 Supplemental Law Enforcement Services ........................................................... 89 Restricted Transient Occupancy Tax (TOT) ........................................................ 90 Road Maintenance & Rehabilitation Act (SB1). ................................................... 91 RTC Streets………………………………………………………………………….…92
Gas Tax……………………………………….………………………… ............... .…93
Wharf ………. ...................................................................................................... 94 General Plan Update and Maintenance .............................................................. 95 Green Building Education ................................................................................... 96 Public Art ............................................................................................................. 97 Parking Reserve … ............................................................................................ .98 Technology Fee .................................................................................................. 99 Public Education & Government Cable TV Access ........................................... 100 Capitola Village & Wharf BIA ............................................................................ 101 Community Development Block Grants (CDBG) .............................................. 102 CDBG Program Income. .................................................................................... 103 Library………….………………………………………………………………...…….104
HOME Program Reuse .................................................................................... 105 Housing Trust ................................................................................................... 106 Permanent Local Housing Allocation (PLHA)……………………………………..107 Capitola Housing Successor… .......................................................................... 108

17 Item 6 A.

Reserves……. .............................................................................................................. 109 Emergency Reserves ........................................................................................ 111 Contingency Reserves ...................................................................................... 112 PERS Contingency Reserves ............................................................................ 113 Facility Reserves ............................................................................................... 114 Multi-Year Assets & Obligations ................................................................................ 115 City and Joint Powers Authority ......................................................................... 118 Pacific Cove Lease Financing ........................................................................... 119 Beach and Village Lot II Lease Financing ......................................................... 121 Capital Improvement Program ................................................................................... 123 18 Item 6 A.

MISSION STATEMENT

MISSION
Our mission, as the employees of the City of Capitola, is to provide high quality service for our residents, visitors, businesses & employees.

VISION
Our vision is to be recognized as a model organization that provides excellent and responsive public service that values the people it employs and the community we serve and to always perpetuate a strong work ethic that fosters pride in the work that we do. We will maintain the highest trust and confidence of our City Council and our Community.

VALUES
 We believe in being open, honest and ethical.
 We believe in treating everyone with respect, courtesy and dignity.  We believe in being responsive to all the people we work with and serve, and to act in a timely and sensitive manner.
 We believe in participatory management and teamwork. We are united in our belief to support, respect and encourage individual talents and contributions.  We value innovation and creativity and believe in taking reasonable risks.  We believe in a philosophy of constantly improving the services we provide.  We believe in working with our residents & businesses to prepare for and resolve community issues.
 We believe in the vital nature of planning as a continuing process, to achieve the matching of expectations and resources.

In performing our mission, attaining our vision and adhering to our values, we will first look to our core values: Upholding the Public Trust, Practicing Sound Financial Management and Maintaining a Safe & Healthy Environment.
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Item 6 A.

TO: City Council
FROM: City Manager
SUBJECT: FY 2024-25 Proposed and FY 2025-26 Planned Budget.

CITY MANAGER’S MESSAGE - STATE OF THE CITY
On behalf of City staff, I am pleased to submit the proposed budget for Fiscal Year (FY) 2024-25.

Staff was tasked with developing a budget that continues to deliver the high quality of services the community is accustomed to while also allocating available resources to City Council goals.

The result is a balanced budget that maintains the minimum target general fund balance of more than $500,000 as well as the $100,000 designated for employee downpayment assistance. The proposed budget projects to end the year with a general fund balance of approximately $727,400, contingent on the outcome of ongoing labor negotiations, as designated above.

The fund balance in the General Fund is projected to remain positive for the next fiscal year, however, based on known increases related to CalPERS pension costs and current assumptions regarding inflation, the General Fund will become structurally imbalanced in FY 2027-28 upon the sunset of Measure F. The budget provides ample resources to maintain a high level of services for Capitola residents this coming fiscal year. Nevertheless, the City must also remain focused on the long-term budget picture, which not only includes a great deal of uncertainty around general fund revenues but must continue to address increasing pension costs. The erratic revenue data, expiration of Measure F, and increasing pension costs will likely result in very challenging budgetary decisions for several years. In the coming fiscal year staff will continue to closely monitor general fund revenues, paying extra attention to sales and transient occupancy tax performance, and continue to report to the City Council on a regular basis. Additionally, staff will develop options for Council consideration to balance the near- and longer-term budgets as well as focus on the long-term structural budget issues.

During 2023 the City was heavily impacted by major storm events. Those events resulted in approximately $3.5 million in damage to public infrastructure and significant impacts to private development adjacent to the ocean. In response, the City, State and Federal government declared a state of emergency, which enables the City to utilize Federal Emergency Management Agency (FEMA) and State disaster funding (Cal OES).

Strom damages were categorized into fourteen projects of which FEMA and Cal OES have approved ten for reimbursement totaling $262,000 with the City responsible for matching funds of $7,400. To date, we have received $208,000 with $54,000 still outstanding. 2 20
Item 6 A.

The remaining four projects and estimated damage amounts include:
 The Wharf - $1 million – currently under review by FEMA  Noble Gulch/Soquel Park - $89,000
 Hoopers Ramp - $15,000 – seeking mitigation to make ramp more resilient, under review by Cal OES
 Grand Ave. fence - $7,500 – once all projects are approved, a credit for donated resources will be calculated and applied as City matching funds.

The Capitola Mall remains a major funding source for the City, however long-term national and local trends have put significant pressure on existing brick-and-mortar retailers to remain competitive with internet options. The Mall was purchased in 2016 by Merlone Geier Partners, which also acquired the old Sears building in 2018. In FY 2019-20 the new owners initiated a public process, including a public meeting and regional survey of residents to begin evaluating options to redevelop the Mall.

City staff remains actively engaged with Mall ownership to help them navigate the development review processes, however, the pandemic put the project on pause for the near term. Obviously, the long-term fiscal health of the City is closely related to a successful Mall that meets the community’s needs. As the outcome of any potential Mall redevelopment is unknown at this time, the site remains a major opportunity, and challenge, as the City evaluates its long-term fiscal position.

In 2016 voters passed Measure F to extend a temporary quarter percent local sales tax for an additional 10 years. The City is committed to using this funding source to protect the wharf and beach from storms and rising sea levels, maintain police services, and improve sidewalks, parks, and bike safety. Staff anticipates Measure F revenues in FY 2024-25 to slightly increase and the proposed budget continues to implement these commitments.

The first major Measure F projects completed were renovations to the City’s jetty and flume in 2020. Improvements to the jetty and rebuilding the flume that conveys water from the seasonal lagoon to the ocean, allows the City to maintain a world-class beach during the summer. The jetty sustained damages during the Jan. 5, 2023, storm which has been repaired and FEMA has approved reimbursement for those repairs.

The Wharf renovation project is the second important focus for the Measure F funding. Capitola’s Wharf is a historic icon for the City, allowing countless residents and visitors to experience the Monterey Bay Marine Sanctuary in a unique way. The Wharf renovation project will focus on improving the Wharf’s long-term resilience in the face of rising sea levels and powerful winter storms. The City completed environmental review in 2020 and began construction last summer with completion currently targeted for late summer / early fall 2024.

The $10.5 million wharf project is funded with a $3.5 million federal grant, $2.4 million in state grants, $3.0 million of Measure F funding, $400,000 of local fund raising, and $250,000 general fund. In addition, the wharf suffered approximately $1 million in damages during the Jan. 5, 2023, storm. It is anticipated that those costs will be funded with a combination of insurance and FEMA reimbursements.
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Item 6 A.

BUDGETARY GOALS AND PRINCIPLES
The FY 2024-25 General Fund budget was developed with an emphasis on financial stability and maintaining core programs and services for Capitola residents and visitors. As a first step in developing the Budget, the City Council identified its budget principles as well as key projects and programs for FY 2024-25. Those key projects and programs provide a tool for the City to clearly articulate its priorities to the community and to evaluate performance on an annual basis.

The following tables include the Council’s identified budget principles and a workplan for key projects and programs.

Budget Principles
Fiscal Policy Public Service Public Improvements
Maintain a balanced budget
that ensures ongoing
expenditures can be met with
ongoing revenues
Maintain, and improve upon, the
transparency of City operations and
accessibility of government
Maintain the City's infrastructure
by providing maximum funding for
the pavement management
system

Use one-time revenues for
one-time expenditures
Recognize the high priority the
community places on the public's
safety
Maintain and improve Capitola's
natural resources and sustainable
green programs

Ensure the budget plans for
future cost increases and
attainable revenue estimates
Analyze future service level
increases with their long-term
financial impacts to ensure financial
stability
Ensure maintenance and
cleanliness of City facilities,
sidewalks, and streets
Key Projects/Programs - Workplan
The City Council also proposed General fund allocations to the following projects:

Additional FY 2024-25 and ongoing City Council Goals are listed below. Items shaded in gray are not funded or planned for in the FY 2024-25 Proposed Budget.

Department
Assigned   Project Staff Requirement
Potential
FY24/25
General
Fund
Potential
FY24/25
Non‐Gen
Fund
Current
Status
PW Wharf Resiliency Project Very High Funded    In Progress PW Jade Street UA Playground Project Very High       In Design PW Community Center Renovation Project Very High       In Design PW Update Climate Action Plan High    $50,000 Not Started PW Stockton Bridge Debris Mitigation Project High Funded    In Progress PW Cliff Drive Resiliency Project High Funded    In Progress PW 41st Ave Median imprvmts. (Esplanade Park) Medium $50,000    Not Started PW Complete/Additional Peery Bridge Repairs Medium Funded    In Progress PW 2023 FEMA Projects (Stockton Bridge, Noble
Gulch, Hooper's Stairs) Medium Funded    In Progress PW Upper lot eastern access pedestrian path   Medium Funded    Not Started PW Bay Avenue Corridor Traffic Study Medium Funded    In Progress PW Finish the Park at Rispin Mansion Project Medium Funded    Finalizing Contract
PW 41st Ave pavement rehabilitation &
multimodal improvements Medium    1,000,000 Multi‐Year Project PW Complete Streets Safety Assessments Medium Funded    Not Started PW Peery Park Bridge Maintenance Project Medium TBD
PW Storage solutions for Rec ‐ lifeguard
equipment Medium $25,000      Not Started
PW PD facility improvements (lockers, restrooms,
meeting area) Medium $65,000      Not Started
PW Daylighting ‐ Village and elsewhere
(parking/pedestrian requirement) Medium $10,000      In Progress PW Noble Gulch Pipeline Repairs Low Funded    In Progress PW Park Ave. traffic calming Low Funded    In Progress PW 2025 Pavement Maintenance Project Low    $500,000 In Design PW Pump Track Renovation Project Low Funded    Not Started PW Esplanade Park improvements (moved to
41st) Medium Unfunded
($50,000)    Not Started
PW Depot Hill encroachments Very High None    Not Started PW Storage solutions for Rec – softball shed Low $10,000      Not Started PW PD motor shed Low $20,000      Not Started
PW Village Resiliency Study (circulation and sea
level rise ) Very High $500,000      Not Started
Total Potential FY 24/25 Dept Budget
Allocation    $100,000   $1,550,000

Department
Assigned Project Staff Requirement
Potential
FY24/25
General
Fund
Potential
FY24/25
Non‐Gen
Fund
Current
Status
CD Wharf Re‐Envisioning Plan & public outreach
process & temporary structure CDPs Very High $75,000 Not Started CD Complete Housing Element Very High Funded In Progress 5 23
Item 6 A.

CD Update 41st Ave. Visioning Plan Very High    $100,000 Not Started CD Create a Housing Rehab Grant/Loan Program Very High    $225,000 Not Started CD Code Update ‐ Housing Element action item High    $65,000 Ongoing CD Create Homebuyer Assistance Program High    $150,000 Not Started CD City Hall Phase 2 ‐ goal setting and
alternatives analysis Very High $67,000    Not Started CD Update tree ordinance High    $30,000 Not Started CD Historical guidelines High $75,000    Not Started Total Potential FY 24/25 Dept Budget
Allocation    $75,000   $540,000

Department
Assigned   Project Staff Requirement
Potential
FY24/25
General
Fund
Potential
FY24/25
Non‐Gen
Fund
Current
Status
CM 5‐Year Strategic Plan Project management Very High Funded    Paused until Fall 2024
CM Employee contract negotiations Very High       In Progress CM Citywide digital applications High $5,000      Not Started CM UA Playground fundraising coordination Medium       In Progress CM Risk Management & HR Policy updates Medium    $2,000 In Progress CM Revenue Tax Measure ‐ Polling Research
Project management and public information   Medium Funded    In Progress CM Update Employee Downpayment Assistance
Program Low Funded    Completed
CM Employee engagement Low $6,000      Ongoing
CM Elections outreach Low $4,000      Not Started
CM Translation services Low $5,000      Not Started
CM Website updates Low $7,000      Not Started
CM Technology updates to improve hybrid
meetings Medium    $25,000 Not Started
CM Increase public outreach and information
services Medium Funded      Budgeted annually
CM Annexation/City Sphere Study Medium Funded    In Progress CM Memorial plaque program update High Unfunded    Not Started Total Potential FY 24/25 Dept Budget
Allocation    $27,000   $2,000

Department
Assigned   Project Staff Requirement
Potential
FY24/25
General
Fund
Potential
FY24/25
Non‐Gen
Fund
Current
Status
Rec Pilot "rapid wedding" event High       Not Started Rec Equity Swim & Public Safety Outreach
Program Medium    $20,000 Ongoing
Rec Implementation of Park Use Permit Program Medium $0      Not Started A&C Public Art Maintenance: 41st Ave. median art
& utility box murals Medium $10,000
Rec Purchase of portable stage for events Low $7,000      Not Started A&C Banners for streetlights Low $3,000      Not Started 6 24
Item 6 A.

Rec Lifeguard Equipment (PWC) Low $10,000 Not started Total Potential FY 24/25 Dept Budget
Allocation $20,000 $20,000

Department
Assigned   Project Staff Requirement
Potential
FY24/25
General
Fund
Potential
FY24/25
Non‐Gen
Fund
Current
Status
PD FLOCK Cameras High    $35,000 Not Started
PD   High Surf Thresholds/Response Checklist Medium
PD Electronic/online Police reporting Medium    $25,000 Not Started PD E‐Citations Medium    $10,000 Not Started
Total Potential FY 24/25 Dept Budget
Allocation    $0   $70,000

Department
Assigned   Project Staff Requirement
Potential
FY24/25
General
Fund
Potential
FY24/25
Non‐Gen
Fund
Current
Status
Finance Updates to TOT Ordinance & outreach to
operators High $0      In Progress
Finance City banking RFP Medium $0      In Progress
Finance Implementation of fee study
recommendations Medium $0      Not Started
Total Potential FY 24/25 Dept Budget
Allocation    $0   $0

Total Potential FY 24/25 Budget
Allocations $222,000 $2,112,000
Remaining FY 2023-24 Council Goals
The table below shows the funding allocated to the remaining FY 2023-24 City Council goals:

Project Funding
LAFCO Sphere Study ($15,000 match from LAFCO) $ 30,000
Long-term strategic plan 50,000
Community Center Renovation 1,650,000
41st Ave. Medians (transferred from Esplanade Park midyear) 50,000 Total $ 1,780,000
The City has successfully navigated the fiscal impacts from COVID-19 and is not only positioned to continue to deliver a high level of services to City residents, but also provide resources to multiple key projects city-wide.
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Item 6 A.

OTHER BUGETARY HIGHLIGHTS AND PROPOSED CHANGES
While the budget was largely prepared to maintain core services and keep expenditures at the lowest level possible, several changes are identified in this budget.

New Community Services and Recreation Department
Following extensive community engagement, in 2019 the City adopted a comprehensive five-year strategic plan for the Capitola Recreation Division. Scheduled to conclude next Fiscal Year, this strategic roadmap has undergone refinement and adaptation, particularly in response to the challenges posed by the COVID-19 pandemic.

Prior to the implementation of this strategic plan, the Recreation Division's offerings included:

Adult Classes, the Junior Guard Program, Camp Capitola, a softball league, and facility rentals.

Today, the Division manages these same programs but has significantly expanded its portfolio to include:
• Serving more than 2,000 youth through the Junior Guard, Camp, After School, Parents Night Out and School Break Camps and Equity Swim programs. • Offering over 135 classes to 1,400 youth and adults three times a year • Coordinating all public art projects throughout the City and serving as staff to the Art and Cultural Committee.
• Protecting the public with the City’s USLA-Certified Lifeguard Service through nearly 7,000 public interactions, including 84 rescues in their first season. • Providing over $35,000 in youth scholarship partially funded by Early Childhood and Youth Program funds.
• Maintaining two National Certifications for high quality professional standards in programs.
• Producing over 25 high quality community events annually including the Twilight Concert series, Food Truck Fridays, and single productions such as the Beyond the Flood Benefit Concert.

With these changes, the Division has grown from 3.75 FTE to 5.5 FTE and now supervises over 50 temporary seasonal staff each year. The program revenue remains strong and covers the direct cost of programs. Further the Division now supports numerous equity and accessibility initiatives for the community.

Given the scope and growth of the Division, I am recommending the establishment of the Capitola Community Services and Recreation Department. This proposed change will ensure the sustainability of the current programing by establishing a Director of Community Services and Recreation, developing the proposed organizational chart which delineates a clear chain of command, with program staff reporting to coordinators, who in turn report to the Director.

Furthermore, the integration of the Art & Cultural program Administrative Assistant into the new departmental structure as a Recreation Specialist II aims to centralize operational responsibilities for Art & Cultural events. These structural adjustments are intended to yield long-term benefits by fostering sustainability and efficiency across the Department's program areas. The change will solidify the City’s long-term commitment to providing these services to our residents, maintaining public safety on our beaches, and continuing to build community through affordable, intergenerational and fun activities that support safety and personal well-being. 8 26
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Youth Funding and Business Group Funding
With the passage of Measure J in 2018, Capitola became one of the first cities in the state to establish a children’s fund that is supported by a dedicated tax measure. Transient Occupancy Tax (TOT) revenues perform well, and the proposed budget includes an allocation of $65,000 from the children’s fund to support early childhood and youth programming. The budget also includes approximately $74,000 of funding for the Chamber of Commerce and the Village Business Improvement District, also using the restricted Measure J funding.

General Fund Balance
The general fund balance is estimated to end FY 2023-24 to be slightly below the minimum target of $500,000. Additionally, both the Contingency and Emergency reserves are projected to be below their target balance amounts. This is primarily due to increased wharf project costs associated with the storm damage sustained in 2023. The FY 2024-24 Proposed Budget returns the general fund to the $500,000 target balance while maintaining $100,000 for the employee downpayment assistance program. Staff is still awaiting FEMA’s determination of the damage cost reimbursement amount and once those funds are received it is proposed they are used to fund the reserves to their target balance amounts.

Current revenue and expenditure projections show revenues not keeping pace with expenditures, requiring usage of Measure F revenues to structurally balance the budget in the 5-year forecast.

Staff will continue to closely monitor revenues, expenditures, and fund balance throughout FY 2024-25 and will report to Council during the mid-year budget report.

PRIOR YEAR ACCOMPLISHMENTS
In FY 2023-24 the City completed several significant projects, which provided residents and visitors with increased recreational and public art opportunities, while continuing to strengthen public safety and community development activities. Some of the City’s accomplishments include:
 Implemented a new Council Chambers meeting video and audio system .  Began city-wide comprehensive fee study.
 Upgraded Radio System to include a second radio channel for emergency operations and for seasonal lifeguard services.
 Upgraded Axon equipment to include Body Cameras, Tasers, and storage infrastructure.  Conducted multiple bicycle safety and informational presentations at New Brighton Middle School and other locations.
 Introduced an Unmanned Aircraft Systems (UAS) drone program.  Introduced the Flock Safety Program
 Upgraded Village pay stations with a new payment interface.  Establish a computerized maintenance management system  Completed Capitola Road Pavement Rehabilitation Project  Completed Kennedy Drive Sidewalk Project
 Completed Bay/Hill Intersection Pedestrian Safety Quick Build  Substantially completed the Wharf Resiliency and Public Access Project  Substantially completed repairs from the January 2023 storms  Adopt Housing Element update with a focus on public outreach, public hearings, adoptions, and working toward State of California Department of Housing and Community Development certification.
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 Administered CDBG Grant of $500,000 to provide food and transit services to lowincome families through local nonprofits.  Applied for CDBG Grant of $3.3 million for renovation of the Jade Street Community Center.
 Implemented a 5-year Contract for a Regional Bikeshare Program with BCycle.  City operated Lifeguard Service achieved United States Lifesaving Association (USLA) Certification as an Open Water Lifesaving Agency and hosted the California Surf Lifesaving Association (CSLSA) Spring Board of Directors Meeting.  Recertified Camp Capitola as an American Camp Association (ACA) Accredited program and promoted from a 3-year cycle to a 5-year cycle.
 Expanded the learn to swim program for under resourced youth by doubling attendance for Spring 2024 and successfully enrolled Spring 2023 group in the Junior Guard Summer 2023 program.
 Provided, for the first time, School Break Camps and other Family Support programs.  Installed 2024 annual exhibition “Little City Under Canvas” – The 150th Anniversary of Camp Capitola - March 2024.
 Installed three rotating exhibits at the Capitola Library.

CONCLUSION
The development of the annual budget takes a great amount of staff time and effort and must be completed in a compressed timeline. I sincerely appreciate all the department directors and departmental budget liaisons for their contributions. Special recognition is extended to the Finance Department for its efforts in coordinating the budget process and preparing the annual budget document.

As the new fiscal year approaches, I wish to express my thanks and appreciation to the Mayor, and members of the City Council for their leadership and support in planning and conducting the financial operations of the City in a responsible and progressive manner. I know that with continued citizen participation, City Council leadership, and ongoing efforts of dedicated employees, Capitola will continue to be a great place to live, work, and enjoy. 10 28
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SUMMARY INFORMATION
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Budget Process Overview
Each year the City of Capitola prepares an Operating Budget, a Successor Agency Budget, and a fiveyear Capital Improvement Program (CIP) budget. The Operating Budget contains the summary and detail information for revenue and expenditure appropriations for the fiscal year (beginning July 1st and ending June 30th) for several funds as well as a projection for the second fiscal year. The information from the CIP is incorporated, in summary form, in the City’s annual budget. The Successor Agency budget is included in its entirety in the City’s annual budget.

Capitola municipal code (3.200.010 E.) defines a balanced budget as one in which “financing uses including expenditures, inter-fund transfers out, reserves and contingencies should equal financing sources including beginning available fund balance, revenues and inter-fund transfers in.” A key concept in the developmental process for the General Fund Budget revolves around City fiscal policy that current year expenditures are balanced with current year revenue.

The City’s budget process continues throughout the year, with quarterly financial updates published on the Finance Department website and at weekly department head meetings with the City Manager. An outline of the on-going budget process is listed below:

Month Responsibility Budget Function
December Finance Budget Cycle Begins
Finance Finance prepares mid-year calculations
January City Manager / Departments Review accomplishments related to prior year Budget Principles Finance / Departments Provides year-end estimates
Finance Publishes quarterly reports for October - December Finance / City Manager Presents mid-year report to Council and FAC February City Council Establishes Budget Principles
Finance Projects non-departmental revenues and position costs Departments Prepares budget and CIP
March Finance / Departments Continue budget projections Finance Advisory Committee FAC discusses elements of the budget City Manager Reviews departments budget requests
April Finance Adjusts proposed budget based on City Manager review Planning Commission Reviews CIP
Finance Publishes quarterly reports for January - March Finance Advisory Committee Distributes proposed budget
May Finance / City Manager Presents proposed budget and CIP to City Council Finance Advisory Committee Provides recommendations to Council Community Organizations Provides funding request information to Council June City Council Deliberates
City Council Adopts Budget
July Finance Publishes quarterly reports for April - June October Finance Publishes quarterly reports for July - September 13 31
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Financial Policies
Basis of Accounting
The City’s operating budget consists of governmental funds that include the General Fund, Special Revenue Funds, Internal Service Funds, Debt Service Funds and Capital Project Funds for both the City and the Successor Agency. Governmental fund types and agency fund budgets are developed using the modified accrual basis of accounting. This method is consistent with the presentation of the City’s Annual Financial Statements. Under this basis, revenues are estimated for the fiscal year under the condition that they are identifiable and will be collected within sixty (60) days, and sales tax within ninety (90) days, of the close of the fiscal year. Principal and interest on general long-term debt are budgeted as expenditures when due, whereas other expenditures are budgeted for liabilities expected to be incurred during the current period or shortly thereafter.

Level of Budget Control
Both the City and the Successor Agency appropriate (control) the budget at the Budget Unit level. The Budget Unit level is defined as “department, fund, or other organizational unit whose financial activities are accounted for separately.”
Expenditures for the General Fund are considered a Budget Unit at the Department level, with Community Grants controlled at the grantee level. The Successor Agency are considered Budget Units to be at the category level as defined in the budget document.

Budget Adjustments
After the budget is adopted, any supplemental appropriations of fund balance, or budget transfers over $25,000 within a Budget Unit will require Council approval. Budget adjustments that are less than $25,000 and within the same Budget Unit may be approved by the City Manager.

All requests for budget adjustments will include an explanation for the change along with a discussion of fiscal impact. This information will also be documented on a Budget Adjustment Form, which will be reviewed by the Finance Department for fiscal impact, correct account coding, and policy consistency prior to receiving City Council or City Manager approval.

Financial Committees and Boards
The following committees and boards assist the City in the budget review and development process:

Finance Advisory Committee
The Finance Advisory Committee (FAC) works closely with the Finance Director/Treasurer to make recommendations on financial projections or policies identified by the City Council or City Manager. The Committee consists of four Council-appointed members, the Mayor, and a Council Member. The FAC meets several times throughout the year and operates in an advisory capacity with the overall fiscal wellbeing of the City serving as its guiding principle. 14 32
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General Fund Summary
The General Fund balance decreased as planned in FY 2023-24 due to implementation of City Council goals. The projected General Fund FY 2023-24 ending budgetary fund balance totals $600,000. The FY 2024-25 Proposed Budget maintains the General Fund balance at the minimum target of $500,000 while maintaining $100,000 for the employee downpayment assistance program.

The chart below summarizes projected and historical General Fund revenues, expenditures, and fund balances. The table illustrates the effects the improving local economy has had on general fund revenue.

Revenue variances primarily include an increase in sales and property tax revenues.

An overview of district taxes (Measure O and F), reserves, and internal service funds are provided within this summary section.
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Revenue Summary
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Expenditure Summary
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Emergency, PERS Contingency and Contingency Reserves
In 2000 the City adopted Financial Management policies, establishing a fifteen percent Contingency and a ten percent Emergency Reserve Fund. The Contingency Reserve provides a prudent level of financial resources to protect against temporary revenue shortfalls or unanticipated operating costs, and/or to meet short-term cash flow requirements. The Emergency Reserve protects against significant one-time costs, which might arise from major unpredictable emergency events.

As the 2011 pipe failure demonstrated, a sufficient Emergency Reserve Fund is needed to respond quickly to local disasters, as well as sustain low debt ratios. Due to the City’s location in an active geologic region, adjacency to the ocean, and proximity to a major creek and highway, the City chose to also increase the Emergency Reserve funding level to ten percent of operating expenditures. In FY 15/16 the City implemented a PERS Contingency Reserve Fund to ensure future funding availability for potential CalPERS contribution increases.

The City was able to navigate the fiscal impacts associated the COVID-19 Pandemic without utilizing reserve funds, however, the atmospheric river storms on Jan. 5, 2023, has caused the City to utilize funds from the Emergency Reserve to make emergency repairs. Additionally, as the City continues to make storm damage repairs the general fund balance has been drawn down and therefore the FY 2024- 25 Proposed Budget does not include any general fund transfers into the reserves. As storm damage repair costs are reimbursed through FEMA and Cal OES the City anticipates returning reserves to minimum target balances.
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OPEB and PERS Trust Funds
The City has been proactive in planning for future liabilities. The City has established two trust funds for future retirement costs. The two trust funds are the OPEB (Other Post-Employment Benefits) Trust Fund, which is used for retiree health premiums, and the PERS Trust Fund, which is used for future PERS retirement costs.

OPEB Trust Fund:

Balance 6/30/2023 $645,733
FY 2022/23 Contributions 67,050
Estimated Interest Earned 5,000
Estimated Balance 6/30/2024 $717,783
FY 2023/24 Contributions 67,050
Estimated Interest Earned 5,000
Estimated Balance 6/30/2025 $789,833
PERS Trust Fund:

Balance 6/30/2023 $1,187,772
Estimated Interest Earned 10,000
FY 2022/23 Contributions 250,000
Estimated Balance 6/30/2023 $1,447,772
Estimated Interest Earned 10,000
Estimated Balance 6/30/2024 $1,457,772
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General Fund Resources
General Fund resources include reserve funds (Emergency, Contingency, PERS Contingency, Facilities) and Internal Service Funds designated for funding equipment purchases, risk management, workers’ compensation, and compensated absences. The reserve funds have specific purposes and require a vote of the Council to expend.

The following table shows the estimated General Fund available resources:

The corresponding chart and graph illustrate internal service fund expenditures and the impact of transfers on the affected funds.
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Fund Balance Summary
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Fund Balance Summary
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GENERAL FUND REVENUES
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General Fund Revenues
Revenues for the FY 2024-25 General Fund operating budget total $19.2 million, an increase of approximately $661,000 or 3.6 percent above FY 2023-24 estimated revenue. Property tax revenues remain strong as assessed values (basis for property tax levies) continue to increase with changes in ownership and an additional 2% CPI increase per Prop 13 provisions. Staff anticipates sales tax revenue to increase around 2.3% over FY 2023-24 and transient occupancy tax to increase about 1% compared to prior year as hotels, motels, and short-term rentals continue strong operations.

A summary of major revenue changes between the FY 2023-24 adopted and FY 2024-254 proposed budgets is listed below:
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General Revenue Information
The City does not receive General Fund revenues in equal monthly increments. While the City receives some revenue regularly throughout the fiscal year, some is received quarterly or annually.

The variable nature of these revenues results in an uneven cash flow. For example, the City of Capitola’s lowest cash balances occur in April and again in mid-December prior to property tax revenue being received. The City developed a cash flow model to assist with on-going cash flow variability and to identify reserve requirements. While monitoring the City’s cash flow has always been a priority, the need to identify patterns became more critical during the disaster recovery period when reserves were nearly depleted. In FY 2012-13 the City approved increasing the Contingency Reserve balance from 10 percent to 15 percent to assist in covering potential cash flow deficits.

Projections for each source of revenue include a review of historical trends, the local economy, new business development, and pending legislation. Due to significant changes, the City is closely monitoring the following five core revenues, which represent over 80 percent of the General Fund:
 Sales Tax $8,508,650
 Transient Occupancy Tax 2,222,000
 Parking Meters 1,165,940
 Parking Fines 497,500
 Property Taxes 3,277,120
$15,671,210
Additional information related to the five core revenues are detailed within this section. In addition, fiveyear trends for each revenue source are provided in the Revenue Summary.

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Sales Tax
The City of Capitola sales tax consists of one percent Bradley Burns, a quarter percent Capitola District Tax (Measure F), and a permanent quarter percent Capitola District Tax (Measure O). In FY 2023-24 annual sales tax revenue is estimated to be $8.2 million, with approximately $2.1 million in revenues contributed by Measure O, and Measure F.

The Finance Department works closely with HdL, the City’s sales tax consultant, on tax recovery, statistics, and projections. Sales tax projections are based on a combination of “most likely” estimates provided by HdL, internal quarter over quarter analyses, and the impact of one-time events. In FY 2024-25, Bradley Burns sales tax revenue is anticipated to increase by approximately 2.3 percent, or $141,000, above the FY 2023-24 estimated sales tax receipts. The City’s sales tax collections are heavily dependent on the top five generators.

The chart below illustrates sales tax performance including the sunset of Measure D and start of Measure F.
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Transient Occupancy Taxes (TOT)
Hotel tax, also known as the Transient Occupancy Tax (TOT), charges rental accommodation of less than 30 days a 12 percent tax of which 0.75% is restricted for local business groups and early childhood and youth programs. In FY 2023-24 TOT tax generally accounts for approximately 11% of General Fund operating revenues. The City’s TOT revenues come from the following sources:
 Hotels, Motels and Inns
 Other Rentals
o Bed and Breakfasts
o Vacation Rentals
TOT revenues are anticipated to increase 1% during FY 2024-25. For the last several years, hotels have experienced high occupancy rates leaving little room for increased TOT revenues. As the industry slows down a little revenues are expected to continue to grow slightly as has been the case the lst couple of years.

The following chart illustrates TOT revenues within the City. Due to Capitola’s seaside location, proximity to regional attractions, and continued signs of economic recovery, the City is continuing efforts to attract another hotel to the area.
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Parking Meters and Parking Fines
In FY 2024-25 parking meter and parking fine revenues are estimated to contribute approximately $1.6 million to the General Fund. Revenue sources include fees collected from the meters and fines resulting from expired meters and improper parking. Factors affecting these revenues include tourism and seasonal trends. The FY 2024-25 proposed budget reflects a $233,000 in parking meter revenue as a result of the parking meter rate increase effective Jan. 1, 2023.. During the summer, the City offers shuttle bus service from the parking lots to the Village, beach, and Capitola Wharf. Projected revenues for each location are estimated below:

The following chart illustrates parking meter revenue and parking citation revenue trends within the City. Overall, the revenue trend reflects the previously mentioned parking meter rate increase while showing citation revenue remaining flat. In FY 2015/16 the City implemented 3-hour parking in the Village. The change has had a positive impact on meter revenue while decreasing citations. 28 46
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Property Taxes
Property Taxes, an Ad Valorem Tax imposed on real property and tangible personal property, are levied at one percent of the assessed value of the property. The City receives 7.47 percent of each one percent, or 75 cents per $1,000, of assessed property value.

In FY 2024-25 property tax revenue is estimated to be $3.3 million, representing a six percent increase over the estimated collection amount from FY 2023-24. The City’s collections are slightly higher than the information from the County Auditor-Controller’s Office due to the increased cost in housing and a robust housing market.

In the FY 2024-25 proposed budget, base property tax revenues are projected to increase approximately six percent. The City based the projection on information from the Auditor-Controller’s Office, historical trends, and a review of the current housing market. A growth factor of six percent of the assessed property valuation was used to estimate FY 2024-25 property tax revenue.

Property taxes are received based on the following distribution schedule:
 December: 50%
 April: 45%
 June: 5%
Property Taxes in-lieu-of Vehicle License Fees
Property Tax in-lieu-of Vehicle License Fee revenue has increased an average of six percent per year over the last several years. This increase continues to be consistent with the rising property values outlined by the Auditor-Controller’s Office. Due to the relatively flat history associated with these revenues, conservative estimates of four percent have been applied to the upcoming fiscal years. 29 47
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Revenue Summary
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GENERAL FUND EXPENDITURES
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General Fund Expenditures
The total FY 2024-25 General Fund expenditure budget proposes a decrease of approximately $1.3 million from the FY 2023-24 Amended Budget as existing resources are programmed towards City Council Goals. Increases have been programed in most major categories as inflation continues to impact City expenditures. Key differences between the two fiscal years include:
o Total personnel costs (salary and benefits) are estimated to increase $853,000 from the FY 2023-24 Amended Budget due to significant increases in the annual Cal PERS Unfunded Actuarial Liability payment, estimated cost of living adjustments, scheduled step increases, and a proposed reorganization of the Recreation Division.
o Salary costs are estimated to be $435,000 higher, however labor negotiations between the City and bargaining units are still on going.
o Salary – Seasonal/Temp increased $41,000 as summer recreations programs remain at full capacity.
o Overtime is anticipated to decrease $92,000 primarily in the Police. This past year was higher than normal due to several felony crime investigations and winter storms. o Specialty Pay – increased $88,000 in part due to more bilingual employees serving the public.
o Benefits – increased $380,000, however labor negotiations between the City and bargaining units are still on going.
 Contract services decreased by $61,000 below the prior year primarily related to one-time contracts getting completed.

The following chart provides an overview of expenditures for FY 2021-22 to FY 2025-26. A complete description of major changes will follow in the related expenditure detail pages. 33 51
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The following chart provides an overview of expenditure trends, excluding transfers. Expenditures are trending down as we complete several City Council goals utilizing one-time funding.

A chart displaying the percentage of expenditures by category is also provided for reference. Personnel costs are estimated to increase $853,000 from the prior fiscal year causing the ratio of personnel services to total expenditures to increase from 66 percent to 68 percent. Other notable changes were in contract services, which decreased from 21.5 percent to 18.5 percent, and internal service charges, which decreased from 9.4 percent to 7.8 percent.
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General Fund Department Expenditures
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General Fund Expenditures

SALARIES & BENEFITS
All positions listed in the General Fund are fully funded with full benefit costing. Fully benefited positions are budgeted at their current step plus an assumption that they will move to the next step unless they are already at the top step of their classification. Specialty pays are budgeted as a separate line item.

Positions budgeted for in FY 2024-25 include the reorganization of the Recreation Division into the Proposed Community Services and Recreation Department while maintaining 68.5 full-time employees.

The table below summarizes the total FTE count by department, and the following page provides a detailed summary of the staffing budget changes.
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General Fund Expenditures

SALARIES & BENEFITS
City services are primarily staff delivered; therefore, staffing is the most significant expenditure. The FY 2024-25 proposed budget estimated staffing costs total $12.6 million. This represents a 7% increase from the prior year’s amended budget. This is primarily due to significant increases in the Cal PERS Unfunded Actuarial Liability annual payment, estimated cost of living adjustments, scheduled step increases, and a reorganization of the recreation division.
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General Fund Expenditures
Salaries & Benefits - Salary Assumptions
There are five bargaining groups in the City. Management employees are hired by the City Manager pursuant to a City Council approved compensation plan. Hourly employees are not included in any of these groups and are not represented by a union. The following table lists the different groups and the start and end dates of their current agreements.

Group Current Agreement Expiration Date
Assoc. of Capitola Employees/Gen. Govt. 06/27/2021 06/30/2024 Confidential 07/01/2021 06/30/2024
Mid-Management 06/27/2021 06/30/2024
Police Captains 08/26/2021 06/30/2024
Police Officers Association (POA) 08/26/2021 06/30/2024 Overtime
The following table provides the details for the overtime budget. The overtime budget for the Police Department increases this year in anticipation of additional special events.

Specialty Pay
The FY 2024-25 proposed budget includes the following specialty pays in the calculation of staffing costs, which are also included in overtime calculations: education, longevity, bilingual, motorcycle, detective pay, senior officer, canine, and shift differential pay.

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General Fund Expenditures
Salaries & Benefits – Retirement Assumptions
Benefits – Post Retirement Medical Benefit
The City of Capitola contributes the minimum amount toward retired employees’ health insurance premiums in accordance with Government Code Section 22892 of the Public Employees’ Medical and Hospital Care Act (PEMHCA). This expenditure is accounted for in the City Manager’s personnel department budget. Below is a table showing the PEMHCA minimum over the last 10 years.  January 1, 2015 $122
 January 1, 2016 $125
 January 1, 2017 $128
 January 1, 2018 $133
 January 1, 2019 $136
 January 1, 2020 $139
 January 1, 2021 $143
 January 1, 2022 $149
 January 1, 2023 $151
 January 1, 2024 $157
Benefits – Public Employee Retirement System (PERS)
The City offers various defined benefit retirement plans to safety and miscellaneous employees. These retirement plans are administered by the California Public Employee Retirement System (“CalPERS” or “PERS”). The safety plan benefit formula is 3% @ 50 and the miscellaneous plan is 2.5% @ 55 for “classic” PERS members. For employees hired after January 1, 2013, who are subject to the Public Employees’ Pension Reform Act (PEPRA), the safety benefit formula is 2.7% @ 57 and the miscellaneous plan is 2% @ 62. A CalPERS member becomes eligible for retirement benefits upon reaching the age of 50 with at least 5 years of service credit (total service across all CalPERS employers).

The City’s retirement costs are defined as a percentage of payroll, along with a fixed dollar amount to address the City’s Unfunded Actuarial Liability (UAL), which is actuarially determined annually by CalPERS. The UAL in FY 2023-24 was $2,139,191 and is increasing to $2,552,124 (19.3%) in FY 2024-25. The most recent CalPERS actuarial reports estimate the UAL through FY 2029-30 at an amount of $3,505,000 which equates to an increase of approximately 137% over ten years from FY 2019-20.

PERS Rates. The FY 2024-25 PERS total rate for classic safety members is 36.3%, with employees paying 15% and the city 21.3%. Safety PEPRA members are responsible for 13.75% and the city pays

13.76%. For classic miscellaneous members, the total contribution rate is 22.1%, with employees paying 13.4% and the city 8.7%. Miscellaneous PEPRA employees pay 7.75% and the city pays 7.87%.

The FY 2023-24 PERS total rate for classic safety members was 36.1%, with employees paying 15% and the city 21.1%. Safety PEPRA members are responsible for 13.0% and the city pays 14.25%. For classic miscellaneous members, the total contribution rate was 20.0%, with employees paying 13.4% and the city 8.6%. Miscellaneous PEPRA employees pay 6.75% and the city pays 8.7%.

Public Employees’ Pension Reform Act (PEPRA). On September 12, 2012, Governor Brown signed the California Public Employees' Pension Reform Act of 2013 (PEPRA) into law. PEPRA became effective on January 1, 2013, and requires all employees who are not previously members of the PERS reciprocal system to be placed in an alternate retirement plan. The City’s PEPRA plan for Safety employees is 2.7% at 57 and 2% at 62 for Miscellaneous employees. This new plan requires that the City and plan members contribute an equivalent share of retirement costs. The rates for public safety and miscellaneous employees are 13.75% and 7.75%, respectively. 39 57
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Retirement Costs Summary
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General Fund Expenditures - Contract Services (5 pages) 41 59
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Community Based Social Service Providers
Community Based Social Service Providers are funded by the General Fund and restricted Transient Occupancy Tax (TOT) revenue. Each year a determination is made regarding funds available and allocation. Due to COVID-19 the Community Grant program continues to be funded in FY 2024-25 with a combination of general fund, restricted TOT, and federal grants. The table below shows the general fund and restricted TOT funding while the federal grant funding is highlighted in the Community Development Block Grant Special Revenue funds.
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GENERAL FUND EXPENDITURES

SUPPLIES
The following table provides a history of the supply budgets by department. Additional information is available in the General Fund Department section.

TRAINING AND MEMBERSHIPS
The following table provides a history of the training and memberships budgets by department. Refer to the General Fund Department section for additional information. 48 66
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INTERNAL SERVICES
Internal Service Funds finance special activities and services performed by one City department for another on a cost and reimbursement basis. These funds share costs, designate targeted reserves levels, and allocate costs to all departments benefiting from the activities and services. The methodology for cost allocation for each Internal Service Fund is described in the Internal Service Fund section.

The FY 2024-25 proposed budget provides funding for increased insurance premiums as well as equipment purchases for equipment funded in prior years.

GENERAL FUND TRANSFERS
General Fund Transfers move funds from the General Fund to a specific fund for a designated purpose.

The CIP is detailed in a separate section and debt issuances are detailed in the Multi-Year Assets and Obligations section. Below is a summary of the transfers from the General Fund to other funds/reserves. 49 67
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DEPARTMENTAL BUDGETS

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CITY COUNCIL

GENERAL GOVERNMENT

DEPARTMENT PURPOSE
The City Council is composed of five generally elected Council Members, serving four-year staggered terms. Council members select a Mayor and Vice Mayor annually. In 2002, the voters approved a consecutive term limit of two terms for Council Members. The City's Municipal elections are held the first Tuesday of November in even-numbered years. The Council meets regularly twice monthly, on the second and fourth Thursday.

The City Council establishes local law, sets policy, approves programs, allocates funds, and provides direction to the City Manager and staff to implement its policy. Council also appoints members to local and regional committees, commissions, and boards. Capitola is a General Law City, organized under the general laws of the state. Local laws are established by ordinance, compiled in the Municipal Code, and enforceable by the City. Other directives and policies of the City Council are implemented through Council Resolutions and recorded in Council Minutes.

ESTABLISHED PRINCIPLES OF THE CITY
 Fiscal Policy – practice sound financial management
 Public Service – uphold the public trust.
 Public Improvement – maintain a safe and healthy environment.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Balanced budget while using resources for public improvements.  Provided services, staff, and equipment to ensure public safety and trust.  Approved projects and programs to maintain and enhance the quality of life in Capitola.

FISCAL YEAR GOALS – 2024-25 and 2025-26
 Provide services, staff, and equipment to ensure public safety and trust.  Develop projects and programs to maintain and enhance the quality of life in Capitola.  Finalize plans and begin construction for the Capitola Wharf Resiliency and Public Access Project (using Measure F funds)
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CITY ATTORNEY

GENERAL GOVERNMENT

DEPARTMENT PURPOSE
The City Attorney represents the City as primary Counsel in all legal matters. The City Attorney is appointed by the City Council. The City Attorney provides legal analysis and advice on interpretation and application of municipal code, State law, and Federal law, drafting legal documents, and laborrelated issues. The City Attorney is currently a contract position with the firm of Burke, Williams & Sorensen

KEY CHANGES
Samantha Zutler of Burke, Williams & Sorensen is Capitola City Attorney FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Advised City on matters associated with pending legal actions.  Advised City on legal matters related to City policies and procedures.  Represented the City in litigation.
 Assisted City in labor negotiations.

FISCAL YEAR GOALS – 2024-25 and 2025-26

FISCAL POLICY
 Advise Council on potential and pending litigation.
 Assist and advise staff on contracts, labor relations, and other legal assessments.  Resolve existing litigation.
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CITY MANAGER SUMMARY

GENERAL GOVERNMENT

MISSION STATEMENT
The City Manager serves the Council and the Community by bringing together resources to meet City needs, provide excellent customer service, and prioritize available resources.

DEPARTMENT PURPOSE
The City of Capitola is a Council-Manager form of government, under which the City Council appoints a City Manager who serves as the City's chief administrative officer and is responsible for implementing Council policies.

The City Manager Department is responsible for the overall administration of City objectives. The City Manager is the lead position within the City administrative structure and is appointed by the Council.

The City Manager provides administrative direction and leadership to all City departments, and directly oversees Human Resources, City Clerk, Information Systems, and the Assistant to the City Manager.

KEY CHANGES
Recruited and hired new a new City Clerk, Deputy City Clerk, increased HR Analyst to full-time and promoted previous City Clerk to Assistant to the City Manager.

FISCAL YEAR 2023-24 ACCOMPLISHMENTS
 Implemented a new Council Chambers meeting video and audio system .  Advised and informed the City Council on policy and action matters.  Worked to improve risk management and reduce potential liability.

FISCAL YEAR GOALS – 2023-24 and 2024-25

FISCAL POLICY
 Evaluate potential revenue ballot measures.
 Work with Capitola Mall to improve the mall facility.  Continue to work to create a safer work environment and reduce employee injuries.  Review and prioritize City services.
 Support economic development.
 Seek opportunities to partner with other agencies for greater outcome or savings.

PUBLIC SERVICE
 Encourage and improve citizen participation and communication by increasing the availability of Spanish language city resources; update and improve the City website.  Ensure programs in place to respond to public and private development projects.  Continue to improve public meeting access.
 Continue efforts to increase transparency, with the website, public records, and outreach.

Continue digitization efforts to improve transparency.
 Use dedicated children's fund for youth programming.

PUBLIC IMPROVEMENT
 Work to develop projects to protect and enhance valuable City resources.; including partnerships with outside agencies, such as the Friends of County Parks and the Capitola Wharf Enhancement Team, to facilitate the development of public spaces like Jade Street Park and the Wharf.
 Open Rispin Park to the public.
 Continue increased street and facility maintenance through use of Measure D resources. 53 71
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CITY MANAGER ADMINISTRATION

GENERAL GOVERNMENT

MISSION STATEMENT
The mission of the City Manager’s Office is to ensure that all City programs and services are provided effectively and efficiently.

DEPARTMENT PURPOSE
The purpose of this division is to implement the policies of the City Council and provide leadership and direction to the city departments. Core services of the City Manager’s Office are administrative direction and leadership for City departments, programs, and services to ensure the community receives a high level of service.

In addition, the City Manager’s administrative arm oversees the Council agenda process, oversees public records, provides staff support to the Art and Cultural Commission and Library Advisory Commission, manages sustainability programs, manages the Community Grant process, and oversees Personnel, Information Systems, and the Historical Museum. The department maintains solid waste and recycling programs, management of franchise agreements, and human resources programs including risk management, employee training, safety programs, and benefits administration. 55 73
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CITY MANAGER PERSONNEL

GENERAL GOVERNMENT

MISSION STATEMENT
To provide excellent internal and external customer service and assist departments in recruiting and retaining exceptional employees.

DEPARTMENT PURPOSE
Personnel functions are the responsibility of the City Manager. Functions include employee recruitment and selection, benefits coordination, insurance and retirement programs, labor negotiations, compensation plan maintenance, regulatory training, and risk management. 56 74
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FINANCE

GENERAL GOVERNMENT

MISSION STATEMENT
The Finance Department’s mission is to present timely, accurate and transparent financial information to the public while providing City Management with financial data to facilitate informed decision-making on the allocation of City resources. The department strives to provide excellent customer service to the public, elected officials, and all departments within the City.

DEPARTMENT PURPOSE
The Finance Department oversees all financial transactions of the City to ensure legal and accounting policies are adhered to. The Department maintains all City funds and oversees budget development, the Comprehensive Annual Financial Report, accounts payable, payroll, accounts receivable, cash receipts, banking, business licenses, and transient occupancy tax. The Department provides quarterly and annual financial reports to the City Council and the public.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Continued TOT vacation rental audit and enforcement program.  Entered 5-year agreement with new CPA firm for annual audits.  Began city-wide comprehensive fee study.
 Issued RFP for Banking Services.
 Provided analytical support to operations departments.

FISCAL YEAR GOALS – 2024-25 and 2025-26
 Prepare and maintain a balanced budget.
 Plan for and meet future PERS increases.
 Implement new Fee Schedule.
 Work with the Finance Advisory Committee to identify future revenue opportunities and address increasing costs.
 Meet regulatory financial reporting requirements and provide reports on the City website.  Develop long term financial plan for Measure F
 Continue partnerships with departments to maintain financial accountability and transparency.  Continue to improve City financial transparency to the public. 57 75
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POLICE SUMMARY
POLICE

MISSION STATEMENT
The Capitola Police Department prides itself in providing the highest level of safety and service to enhance the quality of life of our community through professional, engaged, and empowered employees.

VISION STATEMENT
The Capitola Police Department is comprised of professional and dedicated members who strive to demonstrate high character, fairness, compassion, and the non-biased delivery of policing services.

CORE VALUES
We pride ourselves on representing the City of Capitola and providing policing services based upon these values:
 Human Life - Nothing is more valuable than the preservation of life.  Loyalty - Simple loyalty to our best convictions
 Honesty - The essence of moral character
 Respect - Our success is measured by how we treat others.  Integrity - Values, and morals that represent our sincerity and commitment.  Diversity - We value differences.
 Ethics - Our commitment to principles that govern behavior.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Upgraded Radio System to include a second radio channel for emergency operations and for seasonal lifeguard services.
 Upgraded Axon equipment to include Body Cameras, Tasers, and storage infrastructure.  Conducted multiple bicycle safety and informational presentations at New Brighton Middle School and other locations.
 Replaced Lidar/Radar units for traffic enforcement efforts.  Replaced administration vehicle with EV vehicle and explored other hybrid models for fleet replacement.
 Introduced an Unmanned Aircraft Systems (UAS) drone program.  Introduced ABLE Program
 Introduced the Flock Safety Program
FISCAL YEAR GOALS – 2024-25 and 2025-26
 Purchase two patrol vehicles.
 PD locker room bathroom update/upgrade. ($75,000 provided by Council)  Electronic Citations for patrol personnel.
 Develop a program to enable a citizen to file police reports online.  Examine alternative site for PD backup yellow channel.  Research upgrades options for infrastructure, to include possible new antenna site and develop short-term plan pending larger County-wide radio project.  Bicycle and pedestrian safety will remain our traffic goals for 2024/25. Seek grant opportunities to support our traffic goals, including speed and DUI grant opportunities. 59 77
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LAW ENFORCEMENT
POLICE
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PARKING ENFORCEMENT
POLICE

DEPARTMENT PURPOSE
The Parking Enforcement Unit enforces California Vehicle Code regulations and Municipal Parking Ordinances to minimize parking problems, reduce traffic congestion, and maximize access to parking by visitors and residents alike.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Replaced nine pay stations.
 Upgraded Village pay stations with a new payment interface.  Purchased hybrid truck for parking enforcement vehicle.

FISCAL YEAR GOALS – 2024-25 and 2025-26
 Maintain existing pay stations.
 Begin upgrading pay stations with a new payment interface.  Explore hybrid vehicle options for parking enforcement vehicles. 62 80
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ANIMAL SERVICES
POLICE

DEPARTMENT PURPOSE
The Animal Services Unit (ASU) promotes and protects public safety and animal care through sheltering, pet placement programs, education, and animal law enforcement. Our purpose is to provide responsive, efficient, and quality animal control services that preserve and protect the public and promote animal safety.
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PUBLIC WORKS SUMMARY

PUBLIC WORKS

MISSION STATEMENT
The Capitola Department of Public Works, through our valued employees, develops, maintains, and operates the City’s infrastructure and natural resources and provides environmental stewardship for the benefit of our residents, businesses, and visitors.

DEPARTMENT PURPOSE
Public Works stewards Capitola’s public infrastructure. We are dedicated to providing safe, functional and sustainable systems improving the quality of life for the residents, businesses and visitors of the City of Capitola in a responsive and cost-effective manner and in accordance with local, state and federal regulations.

To provide this stewardship, the department has three divisions.

The Maintenance Division is responsible for the day-to-day operations, maintenance, and repair of the public infrastructure and facilities including streets and medians, streetlights and traffic signals, street trees, sidewalks and pathways, parks, public buildings, and maintains the City's fleet of vehicles and equipment.

The Engineering Division designs and oversees the construction of all capital improvement projects for the City’s public infrastructure systems and public buildings/facilities; prepares technical studies/reports; regulates construction activities within the public right-of-way by private entities and utility companies; and maintains infrastructure records. The Engineering Division also works closely with the Community Development Department and Building Division to perform plan review and inspection services of tract/parcel maps for subdivisions and grading and drainage improvements on private property; provides technical support to the Public Works Maintenance Division.

The Environmental Division provides environmental support services to Public Works and other City Departments to ensure compliance with federal, state, and local environmental laws, regulations, and policies. The Environmental Division also manages the City's Storm Water Management Program and Solid Waste Franchise Agreement which includes industrial, construction, and municipal activities and operations within the City; staffs the Commission on the Environment.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Establish a computerized maintenance management system  Completed Capitola Road Pavement Rehabilitation Project  Completed Kennedy Drive Sidewalk Project
 Completed Bay/Hill Intersection Pedestrian Safety Quick Build  Substantially completed the Wharf Resiliency and Public Access Project  Substantially completed repairs from the January 2023 storms 64 82
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FISCAL YEAR GOALS – 2024-25 and 2025-26
 Compete Park at Rispin Mansion Project
 Complete construction of Community Center Renovation Project  Complete design and construction of Treasure Cove Playground  Complete design of Cliff Drive Resiliency Project
 Update City Climate Action Plan
 Continue to move 15 additional funded CIP projects toward completion 65 83
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STREETS

PUBLIC WORKS
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STORMWATER

PUBLIC WORKS
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FACILITIES

PUBLIC WORKS
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FLEET

PUBLIC WORKS
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PARKS

PUBLIC WORKS

MISSION STATEMENT
The Public Works Parks Department is committed to developing and maintaining the City parks and other landscaped areas in such a manner as to allow all members of our community to enjoy these jewels. Using professional staff and technologies to maintain top rated playing surfaces, beautiful landscaping and safe facilities are top priorities for this department.

DEPARTMENT PURPOSE
To maintain City parks and landscaped areas throughout the City in a safe manner while conserving water and other resources.

KEY CHANGES
Maintaining the status quo.
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COMMUNITY DEVELOPMENT

MISSION STATEMENT
The Community Development Department (CDD) promotes safe and orderly development which provides economic vitality while preserving Capitola’s unique cultural and historic character. The Department is dedicated to providing responsive, high-quality services and programs which enhance the quality of life for the City’s residents, businesses, and visitors.

DEPARTMENT PURPOSE
The CDD administers the City's land use policies and standards adopted by the City Council including Zoning Code (Title 17), Housing and Development Administration (Title 18), General Plan, Housing Element, Local Coastal Program, and other regulations. The Department’s key functions include review of development applications, application of CEQA, maintenance of aforementioned regulatory and longrange planning documents, building plan check and inspection services, building and zoning code compliance, and administration of the affordable housing programs. The Department manages grants related to community planning, housing, economic development, and public services through regional, state, and federal opportunities. The Department provides staff support to the City Council, Planning Commission, and the Design and Development Review Committee.

KEY CHANGES
During the past fiscal year, the Department ended the shared Building Official contract with Scotts Valley. Training is a focus in the FY2024-25 within the Building Department.

FISCAL YEAR ACCOMPLISHMENTS – FY 2023-24
 Adopt Housing Element update with a focus on public outreach, public hearings, adoptions, and working toward State of California Department of Housing and Community Development certification. .
 Administered CDBG Grant of $500,000 for to provide food and transit services to low-income families through local nonprofits.
 Applied for CDBG Grant of $3.3 million for renovation of the Jade Street Community Center.  Implemented a 5-year Contract for a Regional Bikeshare Program with BCycle.  Awarded Permanent Local Housing Allocation Grant ($630,557) and utilized first year of funding toward region homeless efforts.
 Planning approval of a 52 unit 100% affordable housing development at 1098 38th Avenue.  Building permit for a 36-unit 100% affordable housing development at 4401 Capitola Road.  120 planning permit applications submitted July 1, 2023, through May 1, 2024.  286 building permit applications submitted July 1, 2023, through May 1, 2024.

FISCAL YEAR GOALS – 2024-25 and 2025-26
 Certification of the 6th Cycle Housing Element by State of California Department of Housing and Community Development.
 Issue building permits and begin construction of new hotel at 720 Hill Street and 52-unit affordable housing development at 1098 38th Avenue.
 Oversee construction and occupancy of 36-unit 100% affordable housing development at 4401 Capitola Road.
 Plan for long-term use of the Capitola Wharf with a focus on public engagement, environment, and climate resiliency.
 Initiate economic development strategy study for the 41st Avenue corridor.  Explore public/private partnership opportunities toward redevelopment of the Capitola Mall.  Administer grants to support Capitola residents with food services (CDBG) and housing production (PLHA).
 Provide training opportunities for all staff to encourage growth, job satisfaction, and longevity. 71 89
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PROPOSED COMMUNITY SERVICES AND RECREATION

CULTURE & LEISURE

MISSION
The City of Capitola Proposed Community Serviced and Recreation Departments mission is to enhance recreation, healthy lifestyles, and quality of life for Capitola and the surrounding neighbors through affordable and fun activities and opportunities. The Department has a commitment to excellence, safety and continually strives to improve its programs, procedures, and services, to best meet the needs and interests of the community.

DEPARTMENT PURPOSE
The Proposed Community Services and Recreation Department manages recreation and leisure services offered to residents of Capitola and the broader community as well as the USLA Certified Lifeguard Division which protects beach goers in the Capitola Beach area during from Memorial Day Weekend to the end of October. These services include City-staffed programs such as Junior Lifeguards, Camp Capitola, and community events, as well as over 500 classes offered by contracted instructors. Youth Programs have enrollment of over 2,000 children annually. The Department also manages the Capitola Community Center, Jade Street Park, and Monterey Park.

The Proposed Community Services and Recreation Department represents the City through Lifeguards at the beach, programs offered, class instructors selected, seasonal youth hired and trained, and condition of facilities. The department programs provide job training for young people through the Junior Lifeguard Captains Corps and Camp Capitola Junior Leader Program and provide scholarships for under resourced youth.

KEY CHANGES
Following extensive community engagement, in 2019 the City adopted a comprehensive five-year strategic plan for the Capitola Recreation Division. The division has grown from 3.75 FTE to 5.5 FTE and now supervises over 50 temporary seasonal staff each year. The program revenue remains strong and covers the direct cost of programs. Further the Division now supports numerous equity and accessibility initiatives for the community. Given the scope and growth of the Division and final key initiative of the strategic plan, the establishment of the Capitola Community Services and Recreation Department is proposed for the upcoming budget.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 City operated Lifeguard Service achieved United States Lifesaving Association (USLA) Certification as an Open Water Lifesaving Agency and hosted the California Surf Lifesaving Association (CSLSA) Spring Board of Directors Meeting.
 Recertified Camp Capitola as an American Camp Association (ACA) Accredited program and promoted from a 3-year cycle to a 5-year cycle.
 Expanded the learn to swim program for under resourced youth by doubling attendance for Spring 2024 and successfully enrolled Spring 2023 group in the Junior Guard Summer 2023 program.
 Hosted a community event for JoJo’s 80th Birthday in collaboration with other City Departments and community members.
 Provided, for the first time, School Break Camps and other Family Support programs.  Integrated Art & Cultural and Recreation program staff for efficiency in implementing events.  Coordinated a County wide public advertising for July IS Park & Rec Month Campaign FISCAL YEAR GOALS – 2024-25 and 2025-26
 Continue to provide quality recreation services with minimal program interruption during displacement due to the Community Center and Treasure Cove at Jade St Playground remodel
 Implement a Park Space Reservation Permit for small groups to host gatherings such as birthday parties in City Parks.
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 Provide programming on the Wharf during the temporary use phase of the project.  Engage Middle School age youth in ocean safety program during the school year.  Further develop county recreation agency partnerships to provide regional programs, Park Rx, Family Fun Day and other programs.
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MUSEUM

CULTURE & LEISURE

MISSION
The Capitola Historical Museum preserves and promotes the history of Capitola through creating exhibitions, maintaining a collection of historic photographs and artifacts, conducting oral histories, and participating in special events.

DEPARTMENT PURPOSE
To promote, through the establishment and maintenance of a museum and allied projects, a program that will bring a better understanding and appreciation by the Capitola community of its history, architecture, culture, technology, and its creative and natural environments.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Continued 2023 exhibition “Capitola – Signs of the Times” – July to December 2023.  Installed 2024 annual exhibition “Little City Under Canvas” – The 150th Anniversary of Camp Capitola - March 2024.
 Installed three rotating exhibits at the Capitola Library.  Community Involvement:
o Coordinated museum participation in 2023 Car Show, 2023 Art & Wine Festival (9& 10), 2023 Beach Festival, Plein Air Finale (11/5), and Laura Hecox Day at the Santa Cruz Natural History Museum (1/27). Historic Landmark Committee Blue Plaque Awards (5/11) and Santa Cruz County History Fair (5/18), and the Capitola Car Show (6/8).
o Co-sponsored the 2024 Santa Cruz County History Fair. o Coordinated building of float for the 2023 Beach Festival Lighted Nautical Parade, awarded 3rd place with trophy and check for $500.
o Funded video of JoJo Urbancic Birthday Party.
 New Landscape Project; Coordinated with:
o Eagle Scout candidate Owen Lawson on museum landscape project (January through April);
o Amah Mutsun Land Trust;
o Public Works: new ADA walkway to the Bathhouse; fumigation of historic Beach Cottage, painting, and redevising opening of Bathhouse doors; reorienting the museum sign; installing a concrete pad behind the photo-op.
 Public Outreach:
o Wrote more than 4 articles for various publications including the Capitola-Soquel Times o 55 posts on the museum Facebook page; gained 300 new followers from September 2023 to May 2024
FISCAL YEAR GOALS – 2024-25 and 2025-26
 Continue 2024 exhibition “Little City Under Canvas” The 150th Anniversary of Camp Capitola through December 2024
 Continue to recognize the 75th Anniversary of city incorporation and the 100th anniversary of the Venetian Court.
 Develop and install 2025 annual exhibition (theme – fashion – proposed title “The Naughty Surf – 19th-20th Century Resort Fashions in Capitola” by mid-March 2025.  Continue to participate in annual festivals and history events.  Write a historical essay on Capitola history – article on Olaf Palm for the MAH History Journal No. 10 in the summer of 2024.
 Initiate proposal for new book, Capitola – Then & Now with Arcadia Publishing. 75 93
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ART & CULTURE

CULTURE & LEISURE

MISSION
The mission of the Art & Cultural Commission is to foster, assist, and plan events for the City of Capitola and its residents to enhance the community’s cultural fabric, support local artists, create an interesting environment for art and cultural growth, and allow residents and visitors to experience local flavor.

DEPARTMENT PURPOSE
The first Arts Commission was created in 1984. The commission was reorganized by Ordinance #851 effective May 10, 2003, under the new title of Art & Cultural Commission. With the adopted Arts & Cultural Master Plan, the Commission develops and reviews Public Art projects and creates opportunities for a variety of art and cultural experiences for City Council approval. The Commission continues to offset nearly 50% of its budget by obtaining sponsors for the events.

FISCAL YEAR ACCOMPLISHMENTS – 2023-24
 Summer Twilight Concerts at Esplanade Park.
 Capitola Plein Air Event largest ever.
 Recommended public art project to the City Council.

FISCAL YEAR GOALS – 2024-25 and 2025-26
 Evaluate Art in the Park Event.
 Explore new Cultural events for the City.
 Continue to look at public art opportunities.
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INTERNAL SERVICE FUNDS

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INTERNAL SERVICE FUNDS
Stores (City Manager): The Stores Fund accounts for general supplies, postage, and rental of office equipment.

Information Technology (City Manager): The Information Technology Fund provides funding for the replacement and upgrade of the existing computer network. The number of personal computers, laptops, printers, and servers each department uses forms the basis for department allocations.

Equipment Replacement (Public Works): The Equipment Replacement Fund provides funding for the replacement of city vehicles, including passenger cars, parks maintenance vehicles, police vehicles and other specialty vehicles. Departments contribute to this replacement fund based on the depreciation expense of existing vehicles. This fund also receives the revenue received from the sale, or trade-in, of surplus vehicles.

Self-Insurance Liability (City Manager): The Self-Insurance Liability Fund collects funding from departments to pay for self-insured liability and property protection insurance premiums provided through the Monterey Bay Area Self Insurance Authority (MBASIA) joint powers authority.

Workers’ Compensation (City Manager): The Workers’ Compensation Fund collects funding from departments to pay for Workers’ Compensation coverage through the MBASIA.

Compensated Absences (Finance): The Compensated Absences Fund accumulates money to pay future employee benefit costs, such as vacation and sick leave payouts, at termination or retirement.

The City Council sets the policy to ensure the City can fulfill future obligations. 79 97
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STORES FUND
The Stores Fund accounts for general supplies and postage. This also includes the rental of the postage machine and the repair and maintenance of shared office equipment. 80 98
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INFORMATION TECHNOLOGY FUND
The Information Technology Fund collects and designates funds for the future replacement of citywide hardware and software. Annual on-going information technology costs are allocated based on the distribution of resources.

Contract services: on-going technology licenses
Supplies: replacement technology equipment

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EQUIPMENT REPLACEMENT FUND
The Equipment Replacement Fund is designed to provide funding for replacement of City vehicles, including passenger cars, maintenance vehicles, police vehicles and other specialty vehicles.

Departments contribute to this replacement fund based on the depreciation costs of existing vehicles.

This fund receives revenue from trade-ins and surplus equipment sales. The General Fund charges for services based on the prior year fleet depreciation costs adjusted by the CPI index. The FY 2021-22 depreciation totaled approximately $210,000 however that is anticipated to approach $300,000 as we complete previously approved purchases and add the electric street sweeper to the fleet.

During the annual budget process, the Public Works and the Police Department review the current vehicle inventory listing and make recommendations for vehicle acquisitions and replacements, considering on-going maintenance costs. In FY 2021-22, $300,000 was transferred from the General Fund to assist in restoring the Equipment Fund’s balance and to purchase an electric street sweeper.

Typically, new street sweepers are financed with gas tax revenues. However, to take advantage of a grant of $250,000, the General Fund assisted with the purchase of the equipment.

FY 2024-25 CAPITAL OUTLAY
2 PD Patrol vehicles $ 140,000
FY 2025-26 CAPITAL OUTLAY
Electric / Hybrid Fleet $ 200,000
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SELF-INSURANCE LIABILITY FUND
The Self-Insurance Liability Fund accumulates funds for deductible expenditures and excess incidents above the City’s liability coverage. The fund pays for the following expenses:
 Excess Insurance Premiums - The City belongs to the Monterey Bay Area Self Insurance Authority (MBASIA) joint powers authority. MBASIA covers all liability expenses, fire, property protection, and general liability claims up to $10,000 per occurrence.  Property Insurance – The City receives property insurance through the Public Entity Property Insurance Program and is insured by Lexington. The City’s premium is $100,000.  Vehicle and Equipment Insurance Coverage - Coverage for vehicles and equipment with a purchase value of $25,000 or more. The annual premium is $7,500 with a $2,000 deductible.  Unemployment Insurance - The California Employment Development Department (EDD) defines the City as a “State Unemployment Insurance Reimbursement Client.” The City does not pay unemployment insurance premiums to the State. When an employee files for and receives unemployment benefits from the State, the City is responsible for that benefit.

Charges for services are allocated to each General Fund department based on their percentage of the total operating budget from the prior fiscal year less the budget for unanticipated events. 83 101
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WORKERS’ COMPENSATION FUND
The Workers’ Compensation Fund satisfies the requirements of Capitola municipal code section

3.24.030, which states, “The City Manager and City Treasurer shall establish a reserve fund for purposes of paying future workers’ compensation claims and shall, hereafter, make such annual deposits into that fund as the city is advised are actually necessary to provide a suitable reserve.” This program also covers City volunteers.

The City belongs to a Joint Powers Authority (JPA), Monterey Bay Area Self Insurance Authority, composed of several local agencies: Del Rey Oaks, Gonzales, Greenfield, Hollister, King City, Marina, Sand City, Scotts Valley, and Soledad. The City retains exposure to temporary disability payments as long as the injured worker remains an employee of the City. MBASIA purchases excess coverage beyond $500,000 per occurrence up to statutory requirements.

The annual premium that is assessed to each of the participating cities in the JPA is based on three primary factors: the number of employees in each of the two major categories (Safety & Miscellaneous), the experience rate (cost incurred) of each participating agency, and debt service allocation.

When an employee files a claim, the City pays the employee’s salary portion directly from the general fund based upon the standard workers’ compensation formula, for the “temporary” claim. The formulas for employees receiving workers’ compensation are as follows:

1. Public Safety: Compensation is 100% of salary, non-taxable.

2. Miscellaneous: Compensation is 2/3 of salary with a cap of $840 per week, non-taxable.

For non-safety staff, City policy allows that accruals (i.e., sick, vacation, etc.) may be used to supplement workers’ compensation payments. If the person becomes “permanently disabled” then the JPA picks up the salary portion. The JPA pays all other costs including legal and medical. While on workers’ compensation status, the safety and non-safety staff continue to accrue sick and vacation leave balances.

Distribution to General Fund Departments:

The allocation methodology for workers’ compensation charges to the General Fund Departments corresponds closely to the cost allocation method used by the JPA. The City divides employees into three classifications: Sworn, Non-Sworn and Volunteers, with cost per FTE calculated. A fund balance accommodates future premium fluctuations, deductibles, and excess liability. 84 102
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COMPENSATED ABSENCES LIABILITY FUND
The Compensated Absences Liability Fund accumulates reserves to pay for employee cash-outs, such as accumulated sick leave and vacation, due to employees upon termination or retirement. The following is an itemized description of the various liabilities of this fund.

Vacation > 360 hours: An employee who has accumulated more than 360 hours (504 hours for POA) as of the last pay period in April of any year shall be paid in cash at a rate equal to 100% of his/her current hourly rate for hours exceeding 360 (504 for POA). The hourly rate includes specialty pays.

Vacation - Voluntary Cash Out: In accordance with various memoranda of understanding between the employee bargaining groups and the City of Capitola, employees may elect voluntary cash outs up to 80 hours of vacation.

Police Captain Cashable Sick Leave: Refer to contract.

Final Pay: Upon resignation, employees are eligible for vacation cash outs.

Severance Pay: The City provides the following severance payout packages:

City Manager 12 months
Police Chief 6 months
Public Works Director 4 months
Community Development Director 4 months
Finance Director 4 months

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SPECIAL REVENUE FUNDS

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SPECIAL REVENUE FUNDS
Supplemental Law Enforcement Services (Police): Funds provided by a State of California COPS grant to provide funding for Community Oriented Policing & Problem Solving (COPPS) programs.

Restricted Transient Occupancy Tax (TOT) (City Council): Capitola voters passed Measure J in 2018 increasing the TOT from 10% to 12% and restricting 0.4% for local business groups and 0.35% for early childhood and youth programming.

Road Maintenance and Rehabilitation Act (SB1) (Public Works): Funds received from the state and used for road maintenance, rehabilitation, and critical safety projects on local streets and roads.

Regional Transportation Commission (RTC) Streets (Public Works): Santa Cruz County voters passed a 0.5 percent user sales tax to fund local roads. The RTC Streets fund will be utilized to increase the City’s Street program.

Gas Tax (Public Works): Funds received from gasoline tax revenue from the state and used for new construction, maintenance, and the reconstruction of City streets.

Wharf (Public Works): Accounts for rental income generated from wharf operations and expended on operations and major repairs and improvements.

General Plan Update and Maintenance (Community Development): Funds received as General Plan Maintenance Fee to support future updates to the City’s General Plan, implementing ordinances and plans.

Green Building (Community Development): Green Building funds are solely for program management, training, publications, public educational purposes, incentive programs, materials, and supplies to promote sustainable development, water conservation, storm water pollution prevention, and climate action planning.

Public Art (City Manager): This fund accumulates money received as public art fees to acquire works of art to be displayed in or about public places within the city.

Parking Reserve (Public Works): In 2009 the Council authorized a special reserve fund from the Village parking meters for parking-related projects.

Technology Fee (Community Development): 5% of building permit fee funds permit processing technology.

Public Education & Government Cable TV Access (City Manager): This special revenue fund accounts for PEG cable television fees. The expenditures are restricted to PEG access-related activities.

Capitola Village & Wharf Business Improvement Area (Finance): Established to generate revenue for the exclusive purpose of promoting business in the Capitola Village and Wharf Business Improvement Area.

Community Development Block Grants (Community Development): This fund accounts for active CDBG reimbursement grants that are awarded to the City on a project-by-project basis.

Community Development Block Grant Program Income (Community Development): This fund accounts for income from housing loans that are funded with Community Development Block Grant funds. Loans and interest repaid to the fund are restricted to CDBG approved uses.

Library (City Manager): The new Capitola Branch Library opened in June 2021. The Friends off the Capitola Branch Library raised over $600,000 of donations for project enhancements with approximately $50,000 remining in the Library fund.
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Item 6 A.

HOME Program Reuse (Community Development): This fund accounts for housing loans due to the City from the recipients of previous HOME Program grants. Receipts in the Home Program Reuse Fund are restricted to affordable housing activities in accordance with the federal HOME program re-use guidelines.

Housing Trust (Community Development): The City Council adopted an Inclusionary Housing Ordinance in November 2004, which created an Affordable Housing Trust Fund. It is funded from in-lieu fees, which can be used for new affordable housing and rehabilitation of existing affordable housing.

Permanent Local Housing Allocation (PLHA): In 2017, Senate Bill 2 (SB 2) established a $75 recording fee on real estate documents and created the Permanent Local Housing Allocation Fund (PLHA). PLHA funds are allocated to local governments for eligible housing and homelessness activities and provide a permanent, on-going source of funding for housing-related projects and programs that address the unmet housing needs of communities.

Capitola Housing Successor (Community Development): When the Capitola Redevelopment Agency dissolved, the City elected to become the Housing Successor to the former Low- and Moderate-Income Housing Fund of the RDA.
88 106
Item 6 A.

SUPPLEMENTAL LAW ENFORCEMENT SERVICES
POLICE
In 1996, California's state legislature (AB 3229) established the Citizens Options for Public Safety (COPS) program, allocating $100,000,000 annually to local governments for front-line law enforcement. These funds are administered through the Supplemental Law Enforcement Services Fund (SLESF) program. The COPS program received its initial funding in the 1996-1997 California state budget and has been consistently funded since then. Section 30061 (c) (1) of the Government Code outlines the future funding details for the COPS program through SLESF.

SLESF funds are grants, and the legislation requires that each municipality receive annual funds to be used for "front-line law enforcement services." These funds cannot be used to replace existing resources but must be used to enhance them. Eligible expenses include salaries, services, supplies, equipment, and administrative costs.

Furthermore, SLESF funds cannot be redirected to a municipality's general fund but must be exclusively used for front-line law enforcement services. The total award to each recipient entity is based on population size, with a minimum annual award of $100,000 for all entities. For example, the Capitola Police Department receives an annual award of $100,000. Fund distributions are made regularly throughout the year.

Contract Services – Utility services – Gas & Electric
Supplies – Front line law enforcement – includes $5,000 for wellness grant.

Capital Outlay – Flock cameras, online report writing, electronic ticket writing. 89 107
Item 6 A.

RESTRICTED TRANSIENT OCCUPANCY TAX (TOT)

CITY COUNCIL
This fund accounts for the 0.75% of restricted Transient Occupancy Tax (TOT) as approved by Capitola voters in 2018. The Restricted TOT Fund is used to receive and distribute half of the 0.40% of restricted TOT revenues for local business groups with the other half going directly to the Capitola Village & Wharf Business Improvement Area fund and the 0.35% of restricted TOT revenue dedicated to early childhood and youth programming.

ECYP Enrichment
 Field Trips and similar activities
ECYP Scholarships
 Camp & Jr. Guard - $13,500 (year 2 of two-year $27,000 program) Community Grants – Early Childhood & Youth Community Grants - $60,000 Other financing uses – payment to Capitola-Soquel Chamber of Commerce - $37,033  Equal amount distributed directly to Capitola BIA fund. 90 108
Item 6 A.

ROAD MAINTENANCE & REHABILITATION ACT (SB1)

PUBLIC WORKS
This fund accounts for receipt and expenditure of revenue as provided by state law. The Road Maintenance & Rehabilitation Act Fund is primarily used to cover the expenses related to street maintenance and rehabilitation projects on City roads and streets.

Capital Outlay – Annual pavement management plan.
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Item 6 A.

REGIONAL TRANSPORTATION COMMISSION (RTC) STREETS

PUBLIC WORKS
This fund accounts for receipts and expenditures of money received from the Santa Cruz County Regional Transportation Commission. A description of proposed projects is listed in the summary section of this budget.

Capital Outlay – Annual pavement management plan.
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Item 6 A.

GAS TAX

PUBLIC WORKS
This fund accounts for receipt and expenditure of gasoline tax revenue as provided by state law. The Gas Tax Fund is primarily used to cover the expenses related to maintenance and operation of the City’s traffic signals and streetlights. Other Gas Tax Fund programs include street maintenance patching and striping project, street sweeper lease payments, and engineering.

The Gas Tax funds must be spent within 5 years of receipt. Future Gas Tax funds cannot be pledged for current projects with future repayment; therefore, the funds can only be spent once they have been received.

Contract Services:
 Admin & Engineering - $50,000
 Streetlights & traffic signals - $127,000
 Street & sidewalks - $35,000
 Street painting - $30,000
 Street sweeper maintenance - $30,000
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Item 6 A.

WHARF

PUBLIC WORKS
The Wharf Fund accounts for rental income generated from wharf operations and expended on operating costs as well as major repairs and improvements. The Wharf Fund accumulates these revenues in order to help meet the majority of its expenditure demands. Major repairs that tend to occur in a 3–5-year cycle require occasional general fund support in order to keep this key public facility open.

With the passage of Measure F, the City will begin to design and construct an improved wharf. The Measure F funds are accounted for in the Capital Improvement Fund (CIP). The Wharf Funds are for maintenance and repair of the current Wharf.

Contract Services:
 Wharf Revisioning Plan - $75,000
 Utilities - $6,750
 Janitorial services - $7,000
 Property & Equipment repairs & maintenance - $4,500
 Rentals (portable toilets) - $8,000
Capital – Buildings & Improvements
 Temporary Office - $15,000
 Fuel storage - $10,000

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Item 6 A.

GENERAL PLAN UPDATE & MAINTENANCE

COMMUNITY DEVELOPMENT
In 2002, the State Legislature passed AB 2936 to enable cities to collect fees “reasonably necessary to prepare and revise the plans and policies that a local agency is required to adopt before it can make any necessary findings and determinations”. The General Plan Maintenance Fee is currently 0.5% of the total building valuation with a cap of $100,000 to cover the cost of a future comprehensive update of the City’s General Plan.

Valuation is calculated on a cost per square foot basis. The City of Capitola uses $200/square foot valuation for the average house, and $300/square foot for houses with increased values.

The City adopted a comprehensive update to the Zoning Code which was certified by the California Coastal Commission in 2021. The City is currently working on the final stage of 6th Cycle Housing Element Update pending certification by the state. The adopted budget provides adequate resources to fund consultant contracts and staff time to finalize the Housing Element efforts and initiate implementation efforts in FY 24/25.

Contract services:
 Ben Noble - $64,375 – Housing Element
 RRM design – Housing Element - Rollover prior year encumbrance - $150,000  City Staff time – Housing Element - $25,000

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Item 6 A.

GREEN BUILDING

COMMUNITY DEVELOPMENT

The Community Development Block Grant (CDBG) program is a flexible program that provides communities with resources to address a wide range of unique community development needs. The program is funded though the Federal Department of Housing and Urban Development (HUD) and Capitola participates in the competitive Small Cities Grant Program administered by the California Department of Housing and Community Development.

In recent years, the City has been awarded CDBG grants to fund the City’s Local Hazard Mitigation Plan (LHMP), Safety Element of the General Plan Update, and CARES Act funding in response to the pandemic.

In 2021, the City was awarded with a $497,000 CDBG grant for public food assistance and transit including funds for Second Harvest Food Bank ($119,840), Meals on Wheels/Lift Line ($299,720), Grey Bears ($52,950), and administration of the grant. The City has an active application submitted to HCD for $3.3 million to assist in the rehabilitation of the Jade Street Community Center.

Contract services: Update Green Building Code
.
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Item 6 A.

PUBLIC ART

CITY MANAGER
The City established a Public Arts fee in 2004. The purpose is to ensure that 2% of the cost of eligible municipal capital improvement, renovation, or restoration projects funded in whole or in part by the City of Capitola or any private, non-residential development project with a total building permit valuation of $250,000 or more is set aside for the acquisition of works of art to be displayed in or about public places within the City.

For a private development, there is an in-lieu option to contribute 1% of the total budget to the Public Art Program. As part of the program expenses, up to 20% of the art allocations may be expended on program administration, project management and community outreach activities.

Works in progress
- Cypress Tree Stump Project
- Monterey Ave Railing Project
- Begonia Commemorative Art Project
Contract services: Contracts with artists on various projects - $65,500 97 115
Item 6 A.

PARKING RESERVE

PUBLIC WORKS
In 2009, as part of a parking meter rate increase, the City Council established the Parking Reserve Fund.

Revenues deposited into this fund represent 16% of parking meter revenues from the Village area (Parking Meter Zone A1). The fund was established to fund parking improvement projects throughout the Village. As part of the FY 2023-24 City Council Goals this debt was paid off. 98 116
Item 6 A.

TECHNOLOGY FEE

COMMUNITY DEVELOPMENT
On November 12, 2009, the City of Capitola adopted a resolution establishing the Technology Fee. The fee is 5% of the Community Development and Public Works permit fees. The City has updated building, planning, and public works permitting software. The system better coordinates plan review activities among departments and will allow the public to inquire and search records and monitor progress of applications through the internet. The City will continue to make changes to the system in order to provide better service to the public and to improve internal processes. The zoning update process and its implementation will also benefit from the system’s data resources and enhanced reporting capabilities.

Contract Services:
 iWorQ annual fee – Public Works - $3,500
 iWorQ annual fee – Community Development - $9,750
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Item 6 A.

PUBLIC EDUCATION/GOVERNMENT CABLE TV ACCESS (PEG)

CITY MANAGER
This Special Revenue Fund accounts for Public, Education & Government (PEG) cable television fees. The PEG Access fee from all cable service providers is 64 cents per subscriber and is due to the City concurrent with the Franchise Fee Payments. The City is required to segregate PEG access fees and related purchases.

The funds received through PEG fees are retained by the City and utilized for capital equipment purchases in support of PEG access only. PEG channels are set aside for the following purposes:
- Public - available for use by the public
- Education - available for use by educational institutions for educational programming - Government – available for programming by local governments Capitola Outlay – Technology upgrades – City Council Chambers 100
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Item 6 A.

CAPITOLA VILLAGE/WHARF BUSINESS IMPROVEMENT AREA (BIA)

FINANCE
In June 2005, the City of Capitola adopted Ordinance No. 889, which added Chapter 5.10 to the Capitola Municipal Code establishing the Capitola Village and Wharf Business Improvement Area (BIA). It was established to generate revenue for the sole purpose of promoting business in Capitola village and on the wharf. State law requires certain annual actions and public hearing to continue this assessment district. The program is run with the assistance of a BIA Board of Directors, which provides city council with an annual budget proposal.

Contract services and supplies: Capitola Village & Wharf Business Improvement Area annual report to be submitted to the Capitola City Council in late May or early June.

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Item 6 A.

COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)

COMMUNITY DEVELOPMENT
The Community Development Block Grant (CDBG) program is a flexible program that provides communities with resources to address a wide range of unique community development needs. The program is funded though the Federal Department of Housing and Urban Development (HUD) and Capitola participates in the competitive Small Cities Grant Program administered by the California Department of Housing and Community Development.

Contract Services – CDBG Preliminary Award
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COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM INCOME

COMMUNITY DEVELOPMENT
This special revenue fund accounts for issuance and repayment of CDBG-funded housing loans made by the City to income-qualifying households. These funds are referred to as CDBG Program Income. CDBG Program Income must be used for CDBG-approved purposes. The three primary sources of CDBG Program Income are the payoff of Loma Vista Mobile Home Park resident loans, CDBG-funded First Time Homebuyer Program loans, and CDBG-funded Rehabilitation Program loans.

If the total amount of Program Income received in any fiscal year is less than $25,000, the funds received are not subject to Federal CDBG regulations. If the amount exceeds $25,000, all Program Income received during that fiscal year is restricted to CDBG-approved Federal spending guidelines. Since the FY 2022-23 Program Income had no loan payoffs, there are no funds to reallocate in the current budget cycle. The adopted budget provides adequate resources to fund consultant services to apply for future CDBG grants.

Contract Services – Future applications
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Item 6 A.

LIBRARY

CITY MANAGER
This special revenue fund accounts for revenue and expenses related to the design and construction of the new Capitola Branch Library. The former Redevelopment Agency contributed $2.6 million to the County of Santa Cruz which was held in a trust fund for the future construction of a new branch library.

The Voters of Santa Cruz County authorized the Santa Cruz Libraries Facilities Financing Authority to issue general obligation bonds in an aggregate principal amount not exceeding $67 million. The City of Capitola will receive $10.0 million from the bonds to be used towards the construction of the new branch library, bringing the City’s total available funds to $12.6 million.

The City started utilizing the County Trust Fund money in FY 2016/17 to hire a project manager to oversee the development of plans and ultimately the construction of the Library. Under the trust fund agreement, the City can utilize 15 percent of the funds for pre-construction activities.

In addition to the funding sources mentioned above, the Friends of the Capitola Branch Library (Friends) conducted a fundraising campaign raising over $600,000. The funds donated to the Friends were utilized for enhancement projects throughout the Library. The City completed construction of the new Library in June 2021, however, there remains approximately $50,000 of donated funds that the Friends are evaluating for the best use of those remaining funds.
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Item 6 A.

HOME PROGRAM REUSE

COMMUNITY DEVELOPMENT
This special revenue fund accounts for revenue from the repayment of Federal Home Investments Partnership Program (HOME) loans. Expenditures in this fund must be used for affordable housing activities in accordance with the Federal HOME Program Reuse Guidelines, including first-time homebuyer loans, owner-occupied rehabilitation projects, and affordable housing assistance projects. As loans are paid off, those funds are returned to the Home Program Reuse Fund and become available for affordable housing activities.

Annual revenue represents principal and interest payments on the 30-year $238,000 Wharf Road Manor Mobile Homeowners Association Acquisition and Rehabilitation Project loan from 2004 as well as other HOME loan payoffs.

In January 2009, the City of Capitola entered a Standard Agreement with the California Department of Housing and Community Development for a HOME grant in the amount of $2,000,000 for rehabilitation expenses related to the 109-unit Bay Avenue Senior Apartments Project. Construction of the project was completed in May 2011. The grant was provided to First Community Housing, the Bay Avenue Senior Apartments project developer, as a residual receipts loan at 3% interest. In May 2011, the HOME program increased the grant award by $1.2 million dollars to cover additional costs related to required rent level revisions, which are lower than estimated in the original pro-forma. The grant funds have been received and dispersed. In recent years, multiple loans have been paid off creating a healthy fund balance for future HOME projects.

The adopted budget provides adequate resources to apply for a larger rehabilitation project for the Dakota Apartments in FY24/25. The 25-unit, 100% affordable housing development is approaching 30 years in age and in need of upgrades for the roof, heating system, and main lobby area. The budget also covers longterm monitoring of the Bay Avenue Senior Apartments.

Contract Services: HOME Program long-term monitoring – Bay Avenue Senior Apartments 105
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Item 6 A.

HOUSING TRUST

COMMUNITY DEVELOPMENT
In November 2004, the City Council adopted an inclusionary housing ordinance as part of the City’s ongoing efforts to provide affordable housing. This ordinance created the Affordable Housing Trust Fund to use as a flexible local source of funding for the creation of new affordable housing, rehabilitation of existing affordable housing, funding of local programs to assist lower and moderate-income buyers purchase affordable housing, or as leverage of local funds for larger State and Federal grants. This housing activity is funded through inlieu fees collected from development projects and does not impact the General Fund.

The Affordable Inclusionary Housing Ordinance refers to a City Municipal Code Section that requires that fifteen percent (15%) of the units in a new for-sale residential construction project be made available to low or moderate-income buyers. Condominium conversion projects are also covered under this ordinance. As outlined in the ordinance, project developers provide affordable set-aside units or under certain conditions can pay an in-lieu fee.

The City’s Housing Trust Fund allows for up to $75,000 per year to be spent on affordable housing program administration. This includes working with developers on fee collection, administration of the Housing Trust Fund, and implementation of the Inclusionary Ordinance.

The adopted budget provides adequate resources to initiate a new down payment assistance program.

Contract Services:
 $25,000 to create program and $25,000 per household. 5 household’s total. $150,000 in 8-year period - Down Payment Assistance
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Item 6 A.

PERMANENT LOCAL HOUSING ALLOCATION

COMMUNITY DEVELOPMENT
In 2017, Senate Bill 2 (SB 2) established a $75 recording fee on real estate documents and created the Permanent Local Housing Allocation Fund (PLHA). PLHA funds are allocated to local governments for eligible housing and homelessness activities and provide a permanent, on-going source of funding for housing-related projects and programs that address the unmet housing needs of communities.

On May 10, 2023, the City of Capitola was awarded $481,732 in PLHA funds for the first three years of the allocation (2019-2021) and a total five-year estimate of $630,557. The City anticipates additional funding on an annual basis. The first PLHA activity approved is for predevelopment cost related to affordable housing developments. The second activity is to fund the very low income homeless through an annual contribution of $35,000 to the Housing for Health Partnership to support year-round emergency shelter operations in Santa Cruz County. A portion of the funding will cover administrative expenses.

The Adopted budget proved adequate resources to support the development of the 52-unit 100% affordable housing development project at 1098 38th Avenue.

Contract services: Affordable housing and homelessness program development and activities. 107
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Item 6 A.

CAPITOLA HOUSING SUCCESSOR

COMMUNITY DEVELOPMENT
In 2011, the California State Legislature passed ABX1 26 to dissolve redevelopment agencies. The legislation was contested and upheld by the California Supreme Court. It requires a number of actions to be taken by the city in the winding down of the RDA. Among other things, it allows cities to elect to retain the former RDA Low- and Moderate-Income Housing Fund. The Capitola City Council elected to retain the former RDA Housing with the following new city special revenue fund, the Capitola Housing Successor.

A further requirement of the legislation is the establishment of a program income fund to segregate loan payoffs received by the Housing Successor after the dissolution of the Redevelopment Agency. These funds were initially restricted in their use, repayment, and reuse and the Housing Successor continues this restriction. As payments are received on loans associated with the original RDA Low- and Moderate-Income Housing Fund or the Capitola Housing Successor it will be applied to the Capitola Housing Successor.

Newly implemented SB341 requires annual reporting on the Housing Successor Assets to be included with the Annual Financial Statements and the Housing and Community Development (HCD) Annual Progress Report on the Housing Element of the General Plan.

The Adopted budget provides adequate resources to continue supporting security deposit assistance, emergency rental assistance, administration of the City’s affordable housing program, and the MidPen loan to help fund the preconstruction for the 52-unit 100% affordable development at 1098 38th Avenue. New to the FY 24/25 will be the creation of a Housing Rehab program for city residents . Staff also anticipates a construction loan to further assist the development at 1098 38th Avenue in FY24/25 following future discussions with the developer and City Council.

Contract Services:
 $25,000 to create program and $25,000 per household. 5 household’s total. $150,000 in 8-year period - Down Payment Assistance
 MidPen funding – preconstruction - $1,000,000
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Item 6 A.

RESERVES
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Item 6 A.

RESERVES
Emergency Reserves (Finance Department): The City Council established the Emergency Reserve Fund to accumulate funds to meet future unanticipated needs. The City of Capitola Administrative Policy III-3, Financial Management Policy, amended on February 28, 2013, to increase the required level of emergency reserves from five to ten percent of operating expenditures.

Contingency Reserve (Finance Department): The City Council established the Contingency Reserve Fund to accumulate a prudent level of financial resources to protect the City against temporary revenue shortfalls or unanticipated operating costs, and/or to meet short-term cash flow requirements. The City of Capitola Administrative Policy III-3, Financial Management Policy, amended on February 28, 2013, to increase the level of contingency reserves from 10 to 15 percent of operating expenditures.

PERS Contingency Reserve (Finance Department): The City Council established the PERS Contingency Reserve Fund in FY 2015/16. The Council discussed possible uses of a General Fund positive ending balance and wanted to set aside funds for future PERS increases. In FY 2022-13 an additional $500,000 was deposited into the Trust to add to the previously deposited $800,000.

Facilities Reserve (Finance Department): The City Council established the Facilities Reserve Fund to serve as a resource to fund capital improvements and major repairs on City facilities. Based on the National Research Council Stewardship of Federal Facility guidelines, the City’s goal is to provide annual contributions equal to two percent of the facility replacement values. This annual contribution will be determined each budget year.

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Item 6 A.

EMERGENCY RESERVES
The City of Capitola adopted an Emergency Reserve Policy as part of the City’s Financial Management Policies. This reserve protects against significant one-time costs that arise from major unpredictable emergency events. In FY 2012/13, the City amended the Financial Management Policies to increase the funding level of Emergency Reserves from five to ten percent of the General Fund budgeted expenditures, or approximately $1.6 million in FY 2024-25.

The Emergency Reserve fund was nearly depleted in March of 2011 due to an underground storm drain failure that flooded Capitola Village and the surrounding area. The City was required to recognize a $1.4 million extraordinary loss on the FY 2010/11 and FY 2011/12 financial statements. An additional $200,000 was needed to fund a related retaining wall project. In FY 2012/13, a settlement was reached with the City’s insurance carrier to pay $1.35 million in damages to the City.

The March 2011 pipe failure repairs were paid from the City’s Emergency Reserve Fund. As funding in the Emergency Reserve Fund fell short of the flood-related costs, additional funding to respond to the flood event was provided through interfund loans from the Contingency Reserve Fund and Capital Improvement Fund. In FY 2011/12, the Emergency Reserve Fund balance was $410,000 lower than the targeted balance. In FY 2012/13, funds were transferred from the internal service funds, Measure O revenue receipts, and the General Fund operating balance to assist in replenishing the reserves.

In FY 2014/15 and FY 2015/16, $465,100 and $213,000, respectively, were budgeted for transfer to the fund to prepare for any unforeseeable emergencies and to meet the new Emergency Reserve targeted levels. As the chart below shows, the reserve balance is currently below the target level for FY 2024-25 in part due to the transfer of $80,000 for damages from the Jan. 2023 storms. The City anticipates receiving reimbursements from FEMA and Cal OES and plans to fund reserves to target balances once received.
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Item 6 A.

CONTINGENCY RESERVES
The City of Capitola adopted a Contingency Reserve Policy as part of the City’s Financial Management Policies. This reserve was established to provide a prudent level of financial resources to protect against temporary revenue shortfalls, unanticipated operating costs, and/or to meet short-term cash flow requirements. In FY 2012/13, the City amended the Financial Management Policies to increase the Contingency Reserve target from 10 to 15 percent of General Fund budgeted expenditures, or approximately $2.6 million in FY 2024-25.

Due to the expenses associated with the March 2011 pipe failure, a loan was made from the Contingency Reserves Fund to the Emergency Reserves Fund. As a result, Contingency Reserves were $727,000 below their Financial Management Policy funding goal in FY 2011/12. In FY 2012/13, funds were transferred from the Internal Service Funds, Measure O revenue receipts, and the General Fund operating balance to assist in replenishing and building the reserves.

In FY 2014/15 and FY 2015/16, a total of $182,600 and $89,400 were transferred to the fund to meet the new Contingency Reserve targeted levels. As the chart below shows, the reserve balance is currently estimated to be below the target level for FY 2024-25. The City anticipates receiving reimbursements from FEMA and Cal OES and plans to fund reserves to target balances once received. 112
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Item 6 A.

PERS CONTINGENCY RESERVES
The City of Capitola established a PERS Contingency Reserve as part of the FY 2015/16 Budget process. The fund was set up to help stabilize the City’s finances and help manage future increases in PERS contributions.

The PERS Contingency Fund was initially funded with a $300,000 transfer from the General Fund. The $300,000 allows for two years of PERS projected increases and time to evaluate options to address the larger unfunded liability and yearly obligations.

In December 2016, $300,000 was invested in a moderately conservative trust fund with Public Agency Retirement Services (PARS). The FY 17/18 budget transferred an additional $500,000 into the PERS trust fund to offset rising pension costs. During the FY 2022-23 goal setting session the City Council allocated $500,000 of existing fund balance to the PERS Trust reserve. 113
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Item 6 A.

FACILITIES RESERVES
The Facilities Reserve Fund was established in FY 2014-15 to serve as a resource to fund capital improvements and major repairs on City facilities. The National Research Council Stewardship of Federal Facilities recommends setting aside two to four percent of building replacement costs to preserve or extend the life of facilities. The estimated replacement value of the City’s facilities is $17.5 million.

The Facilities Reserve is used to fund future facility needs of the City. The Proposed FY 2024-25 Budget does not include nay funding for the Facilities Reserve. 114
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Item 6 A.

MULTI-YEAR ASSETS & OBLIGATIONS

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Item 6 A.

MULTI-YEAR ASSETS & OBLIGATIONS
City & Joint Powers Authority (JPA) Multi-Year Obligations: The City of Capitola has six multiyear obligations, two of which are part of a Joint Powers Authority. The obligations are paid from various funding sources.

Pacific Cove Lease Financing: In March 2011, a pipe failure flooded the City-owned Pacific Cove Mobile Home Park. The City of Capitola entered into a $2,390,000 lease/sublease agreement to finance the relocation of mobile home residents and close the park.

Beach and Village Parking Lot II: The City of Capitola initiated a $1,372,500 California Infrastructure and Economic Development Bank (I-Bank) loan to fund the development of a parking lot and related improvements at the site of the former Pacific Cove Mobile Home Park. 117
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Item 6 A.

CITY/JOINT POWERS AUTHORITY MULTI-YEAR ASSETS & OBLIGATIONS

GENERAL GOVERNMENT
The City of Capitola has seven multi-year obligations, three of which are part of a Joint Powers Authority. The obligations are paid from various funding sources. All obligations are shown in the budgets of the applicable funds and all payments are current.

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Item 6 A.

PACIFIC COVE LEASE FINANCING

DEBT SERVICE
The City of Capitola owns 426 Capitola Avenue, which formerly housed the 41 mobile home Pacific Cove Mobile Home Park. On March 24, 2011, a 72” storm drain that carries Noble Gulch Creek water from Bay Avenue to Soquel Creek catastrophically failed following a heavy rain storm. This resulted in flooding of the Pacific Cove Mobile Home Park, City Hall and village residences and businesses.

The initial estimate to bring the park up to code was $1.33 million. Due to the high cost and potential for future liability, Capitola City Council approved a Relocation Impact Report (RIR) for the closure of Pacific Cove Mobile Home Park in January 2012. The RIR provided a cost estimate for relocating residents and professional relocation consultants to help displaced residents find suitable replacement housing. The City executed a $2.39 million lease/sublease agreement using the existing City Hall site and adjacent upper parking lot as the pledged property. The City verified income status as part of the relocation process and determined that a percentage of Housing Trust Fund monies could be used to repay the debt service at a proportion no greater than the number of low income mobile home occupants that were relocated. The funding sources for debt service payments will be determined annually. Any General Fund monies for the share of allowable costs from other funding sources may be reimbursed in subsequent years as funds become available.

At the time the loan was issued, there was some uncertainty as to whether the property would be developed for public or private use. This resulted in the City entering into a 20–year taxable lease/sublease agreement at an interest rate of 5.14%. In FY 12/13, the City determined that the site would be converted to a public parking lot, now named Beach & Village Parking Lot II (BVPL II). This public use allows the City to refinance the existing debt at a 3.25% tax-exempt interest rate with a 10- year Treasury Bill reset + 1.5% in year 10. As a result of the refinancing, annual loan payments were reduced by approximately $28,000, with an estimated nine-year interest savings of approximately $350,000. In FY 12/13 the City reached a $1.35 million insurance settlement related to the pipe failure. This resulted in a principal reduction of $476,200, with a prepayment penalty of $23,800.

During the FY 2023-24 City Council Goal setting the Council allocated $725,000 to pay off the outstanding balance saving approximately $150,000 of interest costs over the next several years. 119
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Item 6 A.

Payment
Date Principal
Interest
/Prepmt
penalty Total Fiscal Year
9/1/2012 30,815 $ 53,893$ 84,708$
3/1/2013 35,871 60,632 96,503
6/28/2013 476,200 23,810 500,010 $ 681,221
9/1/2013 42,440 22,843 65,283
3/1/2014 53,207 29,326 82,533 147,816
9/1/2014 46,196 36,337 82,533
3/1/2015 46,947 35,586 82,533 165,066
9/1/2015 47,710 34,823 82,533
3/1/2016 48,485 34,048 82,533 165,066
9/1/2016 49,273 33,260 82,533
3/1/2017 50,074 32,459 82,533 165,066
9/1/2017 50,887 31,645 82,533
3/1/2018 51,714 30,819 82,533 165,066
9/1/2018 52,555 29,978 82,533
3/1/2019 53,409 29,124 82,533 165,066
9/1/2019 54,277 28,256 82,533
3/1/2020 55,159 27,374 82,533 165,066
9/1/2020 56,055 26,478 82,533
3/1/2021 56,966 25,567 82,533 165,066
9/1/2021 57,891 24,641 82,533
3/1/2022 58,832 23,701 82,533 165,066
9/1/2022 59,788 22,745 82,533
3/1/2023 60,760 21,773 82,533 165,066
9/1/2023 61,747 20,786 82,533
3/1/2024 62,751 19,782 82,533 165,066
9/1/2024 63,770 18,763 82,533
3/1/2025 64,807 17,726 82,533 165,066
9/1/2025 65,860 16,673 82,533
3/1/2026 66,930 15,603 82,533 165,066
9/1/2026 68,017 14,515 82,533
3/1/2027 69,123 13,410 82,533 165,066
9/1/2027 70,246 12,287 82,533
3/1/2028 71,387 11,145 82,533 165,066
9/1/2028 72,548 9,985 82,533
3/1/2029 57,304 7,887 65,191 147,724
9/1/2029 - - -
3/1/2030 - - - -
9/1/2030 - - -
3/1/2031 - - - -
9/1/2031 - - -
3/1/2032 - - - -
TOTAL 2,390,000 $ 897,681$ 3,287,681$ $ 3,287,681
Pacific Cove Financing Lease Debt Service
120
138
Item 6 A.

BEACH & VILLAGE PARKING II – LEASE FINANCING

DEBT SERVICE
In April 2013, the City of Capitola received $1,372,000 in funding from the California Infrastructure and Economic Development Bank (I-Bank) for development of a parking lot on the former Pacific Cove Mobile Home Park site. The funding was used to create the 226 space Beach & Village Parking Lot II. The project included grading, pay station installation, shuttle bus stops, landscaping, pedestrian walkways, and pay stations for the upper parking lot. The I-Bank loan is 2.26% tax exempt reimbursement financing.

This project improved parking capacity for Capitola Village, Capitola Beach, and Capitola Wharf, and is especially helpful during peak seasons. The additional parking spaces are also anticipated to facilitate the development of a hotel. The parking lot contributes about $44,000 annual revenue to the General Fund and the I-Bank annual debt service of $87,568 is paid with funds transferred from the General Fund.
121
139
Item 6 A.

Payment
Dates Principal Interest Total
Fiscal
Year
8/1/2014 55,040 $ 15,922 70,962
2/1/2015 14,887 14,887 $ 85,849
8/1/2015 56,284 18,840 75,124
2/1/2016 14,251 14,251 89,375
8/1/2016 57,556 18,035 75,591
2/1/2017 13,601 13,601 89,192
8/1/2017 58,857 17,212 76,069
2/1/2018 12,936 12,936 89,004
8/1/2018 60,187 16,370 76,557
2/1/2019 12,256 12,256 88,812
8/1/2019 61,547 15,509 77,056
2/1/2020 11,560 11,560 88,616
8/1/2020 62,938 14,629 77,567
2/1/2021 10,849 10,849 88,416
8/1/2021 64,360 13,729 78,089
2/1/2022 10,122 10,122 88,211
8/1/2022 65,815 12,809 78,624
2/1/2023 9,378 9,378 88,002
8/1/2023 67,302 11,868 79,170
2/1/2024 8,618 8,618 87,788
8/1/2024 68,823 10,905 79,728
2/1/2025 7,840 7,840 87,568
8/1/2025 70,379 9,921 80,300
2/1/2026 7,045 7,045 87,344
8/1/2026 71,969 8,915 80,884
2/1/2027 6,231 6,231 87,116
8/1/2027 73,596 7,886 81,482
2/1/2028 5,400 5,400 86,881
8/1/2028 75,259 6,833 82,092
2/1/2029 4,549 4,549 86,641
8/1/2029 76,960 5,757 82,717
2/1/2030 3,680 3,680 86,396
8/1/2030 78,699 4,657 83,356
2/1/2031 2,790 2,790 86,146
8/1/2031 80,478 3,531 84,009
2/1/2032 1,881 1,881 85,890
8/1/2032 82,297 2,380 84,677
2/1/2033 951 951 85,627
8/1/2033 84,156 1,204 85,360 85,360
Total $ 375,736 1,372,500 $ 1,748,236 $ 1,748,236 $
Beach & Village Parking Lot II Lease Financing
Debt Service
122
140
Item 6 A.

CAPITAL IMPROVEMENT PROGRAM
123
141
Item 6 A.

THIS PAGE INTENTIONALLY LEFT BLANK
124
142
Item 6 A.

CAPITAL IMPROVEMENT PROGRAM

PUBLIC WORKS
The City of Capitola’s Capital Improvement Program oversees planning, design, and construction of the City’s improvement projects. The CIP program is broken into facilities, parks, streets, creek enhancement, and neighborhood traffic projects. The projects are prioritized through the collaborative effort of City staff, City Council, and the community. Maintaining the City infrastructure requires long range planning and prioritizing to plan for necessary improvements, funding needs, and funding availability.

The City’s facilities include City Hall, Police Station, Corporation Yard, Jade Street Park Community Center, Upper and Lower Pacific Cove Park Parking Lots, Capitola Municipal Wharf, and the Library. Parks include McGregor Park complex (dog, skate, pump track), Monterey Park, Rispin/Peery Park, Cortez Park, Esplanade Park, Nobel Gulch Park, Soquel Creek Park, Library Tot-lot, Hihn Park, and multiple City medians, streetscapes, and public art displays.

The Street system includes 9.3 miles of arterial roads, 3.4 miles of collector roads, and 13.5 miles of local roads. The City utilizes a Pavement Management Program to track pavement conditions and plan maintenance efforts on 112 individual roads.

The City currently has the Wharf Rehabilitation project as well as several other projects including the Community Center and Universal Design playground that will be rolled forward into FY 2024-25. 125
143
Item 6 A.

CAPITAL IMPROVEMENT PROJECTS
2024-25 Capital Improvement Budget Report
Prior Project Appropriations and Status
Project General Fund Measure F Grants & Other Transportation Grant RTC Measure D State SB 1 Total Other Funding Sources Total Prior Year Appropriations Expenses to Date Existing Fund Balance Estimated Construction Cost Estimated Fund Balance Status On-going Projects
Monterey & Park Pedestrian Pathway $ 50,000 $ 200,000 $ 200,000 $ 250,000 $ 105,580 $ 144,420 $ In re-design 144,420Rispin Park $ 814,000 $ 177,952 $ 177,952 $ 991,952 $ 397,785 $ 594,167 $ Bid out 594,167Roundabout Capitola Ave and Bay Ave Public Outreach $ 165,000 $ 18,842 $ 18,842 $ 183,842 $ 57,735 $ 126,107 $ To follo 126,107 w undergrounding Utility Undergrounding $ 137,400 $ - $ 137,400 $ 34,750 $ 102,650 $ 100,000 $ PG&E project. 2,650 Emergency Power at City Hall Complex $ 90,000 $ 300,000 $ 300,000 $ 390,000 $ 106,400 $ 283,600 $ 283,600 $ Delivery anticipated in Aug. -Jade Street Park Universal Design Project $ 475,000 $ 475,000 $ 475,000 $ 34,822 $ 440,178 See below Community Center $ 1,650,000 $ 150,000 $ 1,800,000 $ 1,800,000 $ 2,433 $ 1,797,568 See below Stockton Bridge Protection Project $ 350,000 $ 350,000 $ 350,000 $ - $ Unknown 350,000 New Project Pavement Management $ - $ 386,802 $ 500,000 $ 886,802 $ 886,802 $ 638,329 $ 248,473 Ongoing Measure F Projects
Capitola Wharf Improvements $ 750,000 $ 3,350,000 6,400,000 $ 9,750,000 $ 10,500,000 $ 1,600,000 $ 8,900,000 $ 8,900,000 $ Out for Bid - 2024-25 Recommended Appropriations
Project General Fund / Measure F Measure F Facility Fund Transportation Grant RTC Measure D State SB 1 Total 2023 Funding Total Prior
Project
Available
Funding
Total Project
Appropriation
Estimated
Construction Cost
Funding
Balance
New Project Allocations $ -
Pavement Management 369,000$ $ 252,000 $ 621,000 $ - $ 621,000 $ 621,000 -$ Ongoing Status
126
144
Item 6 A.

Fiscal Year 2024-25
Proposed Budget
May 16, 2024
145
Item 6 A.

Budget
Summary
Local economy showing signs of
leveling off
• Property tax growth remains above avg.

Estimated $228,000 of additional
ongoing revenue
• Anticipate impact from ongoing labor
negotiations
Approximately $1.2 million
expenditures reduction
• Due to use of one-time funding in prior year
$2.3 million programed for City Council
Goals (includes all funding sources)
• Includes $239,000 general fund 146
Item 6 A.

Budget
Summary
(cont.)
Proposed General Fund budget structurally
balanced
• Estimated fund balance June 30, 2024 – $727,000
• Additional $100,000 set aside employee downpayment
assistance program
• Ongoing labor negotiations anticipated to impact est. balance
Ongoing PERS costs remain a major threat to City
resources
• Estimated PERS Contingency reserve balance $1.5 million • Unfunded Actuarial Liability (UAL) increased from $21 to $33 million
• Annual payment increased from $2.1 to $2.5 million
Heavy reliance on Sales & Transient Occupancy Tax
• Measure F expiring in 2027
Reserves below target balances
• Anticipate storm damage reimbursements
147
Item 6 A.

Multiyear Budget Projection
148
Item 6 A.

Multiyear Budget Projection
149
Item 6 A.

Estimated Ending
Fund Balance
Balanced Budget Employee
Downpayment
Assistance
150
Item 6 A.

Revenue Forecast
Key Revenue
Sources
Budget Change
$
Notes
Property Tax $185,000 County estimate
Sales Tax (1%) 141,000 Consistent with HdL
Sales Tax (District) 51,000 Measure O & F
TOT 22,000 1% increase
Charges for Services 148,000 Increased parking revenue
Other revenues 114,000 Licenses/Permit/Franchise Tax
Total $661,000
151
Item 6 A.

Revenue
Notes
Total General Fund revenues
• Expected to increase $661,000 from prior year
TOT projected to end FY 23-24 at $2.1 million
• Slightly above prior year receipts
• TOT remains strong in the village
Sales tax (44%) & TOT (12%) represent
approximately 56% of general fund revenues
• Top 25 sales tax generators represent 70% of total
• Top 5 generators represent 38% of total
• Village represents 6.2% of total
Property tax
• 6% growth rate due to increased property prices
Charges for Services
• 1
st full year with new parking rates 152
Item 6 A.

Revenues by Category

153
Item 6 A.

Proposed Tax Revenues

154
Item 6 A.

Restricted TOT

155
Item 6 A.

Expenditure Forecast
Expenditure Budget Change $ Notes
Personnel $843,000 COL ’ , ,
CalPERS UAL, Rec Reorg
All others (32,000)
Total $811,000
• Personnel - $843,000
• Salary – full-time - $415,000
• Including $69,000 for Recreation reorganization
• Salary – part-time/seasonal - $41,000
• Overtime – reduced $92,000
• Specialty pay - $88,000
• Benefits – $381,000
• Due to increase in CalPERS UAL
156
Item 6 A.

Expenditure Summary (cont.)

157
Item 6 A.

Expenditure Summary (cont.)

158
Item 6 A.

Staffing
159
Item 6 A.

Early Childhood &
Youth Program
(ECYP) Restricted
Funds
• $60,000 programed for
ECYP community
grants
Estimated
revenue
$65,000
• Approximately $13,500
previously designated
for scholarships
Scholarships
• $8,600
• Inc. $1,300 for YAN
Enrichment
Programs
• $5,000
June 30, 2025
estimated
balance
160
Item 6 A.

FY2024-25
Capital
Improvement
Program
161
Item 6 A.
•10 Projects
•$16.6M
Prior Year Appropriations
•1 Project
•$621k
Recommended 24/25 Appropriations
•Storm Damage Repairs
•2 Individual Projects $400k
•Council Goals
•2 Projects FY24-25 $110k
Not Inclusive of
Proposed FY
2024-25
Capital
Improvement
Program
162
Item 6 A.

Project Status Project Costs
Emergency Power at City Hall Complex
NOC Issued
$390,000
Capitola Road Rehabilitation
$2,100,000
Kennedy Drive Sidewalk $220,000
Bay Avenue and Hill Street Quick Build Completion in June 2024 $50,000
Storm Damage Repairs 8 Individual Projects $120,000
TOTAL $2,880,000
Capital Improvements Program
FY2023-2024 Completed Projects
163
Item 6 A.
prior year appropriations – major/priority?
projects
Project Status Total Prior Year
Appropriations
Capitola Wharf Improvements Under Construction $10,650,000 Rispin Park Under Construction $990,000
Jade Street Park UA Playground Under Final Design $475,000 Community Center Renovation Construction Fall 2023 $1,800,000 Cliff Drive Resiliency In Design $1,200,000
TOTAL $15,115,000
Capital Improvements Program
Prior Year Appropriations – Priority Projects
164
Item 6 A.

Project Status Total Prior Year
Appropriations
Stockton Bridge Protection Project In Design $850,000
Monterey & Park Pedestrian Pathway Out to bid $250,000
Bay Avenue Corridor Study In Design $180,000
Utility Undergrounding Coordination with PG&E and
other Utilities $140,000
Park Avenue Traffic Calming In Final Design $100,000
TOTAL $1,520,000
prior year appropriations – major/priority?
projects
Capital Improvements Program
Prior Year Appropriations –Additional Projects
165
Item 6 A.

Project Status Recommended
Appropriations
Pavement Management
Construction Spring ‘25
with Park Avenue Traffic
Calming
$621,000
TOTAL $621,000
prior year appropriations – major/priority?
projects
Capital Improvements Program
FY2025-2026 Recommended Appropriations
166
Item 6 A.
• What is PCI?
• Pavement Deterioration Curve
• Pavement Management Strategies
• Adopted Pavement Management Program
• 2024-2025 Pavement Management Project
prior year appropriations – major/priority?
projects
Capital Improvements Program
Pavement Management Program Overview
167
Item 6 A.

PMP Overview –
Pavement Condition
Index
PCI 100
PCI 28
168
Item 6 A.
169
Item 6 A.

PMP Overview -
Management
Strategies
• Best-First “Top Down” Management
• Worst-First “Bottom Up” Management
• Critical-Point Management
170
Item 6 A.

Adopted June 2022
Pavement Management
Program • Evaluated all public
streets • PCI 51
• Adopted Critical-Point
Management
• Utilizes budget from SB1
and Measure D
restricted funding
• Details a 5-year plan of
specific street segments
to address
• Maintains PCI in low-
mid 50s
171
Item 6 A.
• Generally preventive maintenance
• Removed Cliff Drive
Street segments from 2022 adopted PMP
• Better bid prices
• Spring and summer construction
Modify bid cycle to late winter 2025
• San Jose Avenue (Cherry to Capitola)
• Reposa Avenue at 38th
Immediate rehabilitation work summer 2024
prior year appropriations – major/priority?
projects
Capital Improvements Program
2024-2025 Pavement Management
172
Item 6 A.

Road Name
42ND AV
47TH AV

ALMA LN

BEVERLY AV

CARL LN

CHERRY AV

FRANCESCO CR

HILL ST
OAK DR

PLUM ST

RIVERVIEW AV

ROSEDALE AV

SAN JOSE AV

STOCKTON AV
SUNSET DR 173
Item 6 A.

Recently completed
street projects
• FY 2020 • Park Ave. sidewalk
- $978,000
• FY 2021 • Brommer Street
- $666,000
• FY 2022 • Pavement management
- $194,000
• Park Ave. storm damage repair -
$377,000
• FY 2023 • Kennedy sidewalk
- $181,000
• Clares- $1,312,000
• Pavement management - $444,000
• FY 2024 • Capitola Rd.
- $1,695,000
174
Item 6 A.

City Council
Goals
175
Item 6 A.

FY 2024-25 City Council Goals
General Fund
Project Funding
Employee Downpayment Assistance Program $ 100,000
Lifeguard Equipment Storage 25,000
PD Facility Improvements 65,000
Crosswalk Daylighting Citywide 10,000
Citywide digital applications 5,000
Employee engagement 6,000
Elections Outreach 4,000
Translation services 5,000
Website updates 7,000
Portable stage for events 7,000
Art & Cultural for PW to maintain art 5,0001
Total $ 239,000
1 – Draft budget includes $13,000 for Art & Cultural which will be corrected in next draft. 176
Item 6 A.

Public Works
Department
w ’
public infrastructure to
ensure safety,
functionality, and
sustainability
177
Item 6 A.

Public Works
Ongoing and Upcoming Potential Projects
Project Staff
Requirement
FY 24-25 General
Fund Notes
Wharf Resiliency Project Very High Multiple sub-projects: CWEP, interpretive panels
Jade Street UA
Playground Project Very High Fundraising through 2024, potentially short ~$300k Community Center
Renovation Project Very High
Other projects to be deferred
if granted. $2.65m secured
$3.2m pending CDBG
Update Climate Action
Plan High $50,000 Heavy public process
Stockton Bridge Debris
Mitigation Project High Funded Prior Council goal $350k $500k from State Cliff Drive Resiliency
Project High Funded On a tight timeline by FHWA178
Item 6 A.

Public Works
Ongoing and Upcoming Potential Projects
Project Staff
Requirement
FY 24-25
General Fund Notes
41st Ave Median
Improvements Medium Funded Lower 41st Ave
Complete/Additional
Peery Bridge Repairs Medium Funded Currently evaluating 2023 FEMA Projects
(Stockton Bridge, Soquel
Creek, Hooper's Stairs)
Medium Funded
Construction dependent on
site conditions and final
approvals
Upper lot eastern access
pedestrian path Medium Funded RTC Funding
Bay Avenue Corridor
Traffic Study Medium Funded Will identify future major CIP Finish the Park at Rispin
Mansion Project Medium Funded Phase I fundedConstruction Spring 2024 179 Item 6 A.

Public Works
Ongoing and Upcoming Potential Projects
Project Staff
Requirement
FY 24-25
General Fund Notes
41st Ave Improvements
(Clares to N City Limits) Medium
Design FY24/25
Construction in FY 25/26.

External funding $1M
Complete Streets Safety
Assessments Medium Grant resources secured
Lifeguard Equipment
Storage Medium $25,000 Significant need; current infrastructure failure.

PD facility improvements Medium $65,000 Improvements to locker room/restrooms
Daylighting Citywide Medium $10,000
State law requires removing
parking within 20' of
intersections/crosswalks
180
Item 6 A.

Public Works
Ongoing and Upcoming Potential Projects
Project Staff
Requirement
FY 24-25
General Fund Notes
Noble Gulch Pipeline
Repairs Low Funded Repairs identified in assessment
Park Avenue Traffic
Calming Low Funded Council approval FY23/24Construction FY24/25 2025 Pavement
Maintenance Project Low
Streets as identified in PMP.

External funding $500,000
Pump Track Renovation
Project Low Partially funded $30k Monte donation
181
Item 6 A.

McGregor
Pump Track • Current a dirt pump track
constructed around 2016
• Requires consistent
maintenance
• Asphalt pump track require
less maintenance, all
weather.
182
Item 6 A.

Public Works
Excluded Projects
Project Staff
Requirement
FY 24-25 General
Fund Notes
Review Parking around new
development High Unfunded PC requested project
Depot Hill Pathway
Encroachments Very High Unfunded CIP once encroachments are removed Village Resiliency Study
circulation and sea level rise Very High $500,000 Potential grant funding Esplanade Park
Improvements Medium Unfunded $50k allocated FY23/24 moved to 41st Ave. medians Softball Storage at Jade
Street Park Low $10,000 Current structure failed
PD Motor Shed Low $20,000
183
Item 6 A.

Building &
Planning
Providing
economic
vitality while
preserving
’
unique history,
culture, and
natural setting.

Community
Development
Department
184
Item 6 A.

Community Development
Ongoing and Upcoming Potential Projects
Project Staff
Requirement FY 24-25 Notes
Wharf Re-Envisioning Plan &
Public Outreach process &
temporary structure CDPs
Very High $75,000 Special revenue
(Wharf fund)
Complete Housing Element Very High Funded In progress
Update 41st Avenue Visioning Plan Very High $100,000 Special revenue (General Plan fund)
Create Housing Rehab Grant/Loan
Program Very High $225,000 Special revenue (RDA Successor Agency) Code Update – Housing Element
action item High $65,000 Special revenue (REAP 2.0)
Create Homebuyer Assistance
Program High $150,000 Special revenue (RDA Successor Agency) 185
Item 6 A.

Community Development
Excluded Projects
Project Staff
Requirement
FY 24-25 General
Fund Notes
City Hall Phase 2 – goal
setting & alternatives
analysis
Very High $67,000 Not currently funded
Update tree ordinance High $30,000 Special revenue
(Tree fund)
Historical guidelines High $75,000
186
Item 6 A.

City Manager
Department
Serving the City
Council and the
community by
bringing together
resources to meet
needs while
prioritizing customer
service.
187
Item 6 A.

City Manager Department
Ongoing and Upcoming Potential Projects
Project Staff
Requirement
FY 24-25 General
Fund Notes
5-Year Strategic Plan Project
Management Very High Funded Deferred till Fall
Employee Contract Negotiations Very High Unknown Cost will be incurred FY 23-24
Citywide digital applications High $5,000
UA Playground fundraising
coordination Medium
Risk Management & HR Policy
Updates Medium $2,000 in external funding (ERMA)
Revenue Tax Measure – polling
research & public information Medium Funded In progress 188 Item 6 A.

City Manager Department
Ongoing and Upcoming Potential Projects
Project Staff
Requirement
FY 24-25 General
Fund Notes
Update Employee
Downpayment Assistance
Program
Low $100,000 from last FYInterest from employees &
need to modernize program
Employee Engagement Low $6,000
Elections Outreach Low $4,000
Increased Outreach and
Translation services Low $10,000
Website Updates Low $7,000
Technology updates to
improve hybrid meetings Medium Funded PEG funding $15k
189
Item 6 A.

City Manager Department
Excluded Projects
Project Staff
Requirement
FY 24-25 General
Fund Notes
Annexation/City Sphere
Study High Funded $15,000 additional from LAFCO
Memorial Plaque Program
Update High Unknown
190
Item 6 A.
191
Item 6 A.

Recreation Division
Ongoing and Upcoming Projects
Project Staff
Requirement
FY 24-25
General Fund Notes
Pilot Rapid Wedding Event High
Equity Swim and Public Safety
Outreach Program Medium Funded $20k Special revenue fund (EYCP) Implementation of Park Use
Permit program Medium
Purchase portable stage for
events
Low $7,000
Lifeguard Equipment (PWC) Low $10,000
Pickleball Courts Very High $1,000-$500,000
Public Works co-project.

Community engagement
necessary. Range of options.
192
Item 6 A.

Recreation Division – Art & Cultural
Ongoing and Upcoming Projects
Project Staff
Requirement
FY 24-25
General Fund Notes
Public Art Maintenance:
41st Avenue median art &
utility box murals
Medium $5,000 A&C Goals, in PW Budget
Banners for Village
Streetlights Low Funded $3k Special revenue(Public Art fund) SUESD Park Ave &
Washburn Student Art
Project
Low Will be completed in the FY
23/24 Budget
No change in programs
provided Low Funded 12 Concerts, 2 Movies, 4 Art Fairs, Plein Air No change in Public Art
projects Low Funded
Begonia Commemorative
Art Project
Monterey Railing Art Project
193
Item 6 A.

Police Department
Providing the highest
level of safety and
service to enhance our
’ q
life.
194
Item 6 A.

Police Department
Ongoing and Upcoming Projects
Project Staff
Requirement
FY 24-25
Funding Notes
FLOCK Cameras High $35,000 Special Revenue Fund
(SLESF)
High Surf
Thresholds/Response
Checklist
Medium Coordination with NOAA,
Potential grant funding
Electronic/online Police
reporting Medium $25,000
Special Revenue Fund
(SLESF)
E-Citations Medium $10,000
Special Revenue Fund
(SLESF)
195
Item 6 A.

Key Points
• Creation of Community Services and Recreation
Department
• Establishes sustainability
• Delineates clear chain of command
• Establishes Director of Community Services & Recreation • Expands roles of Recreation Coordinators
• Centralize Art & Cultural operations
• Estimated personnel cost increase - $69,000
196
Item 6 A.

Key Points
• LAFCO Sphere of Influence study
• $30,000 funded in 2024, was postponed until fall 2024 • City has since received $15,000 from LAFCO to assist
• Council agreed to defer long-range strategic planning project till Fall, potentially freeing up staff resources for Sphere Study • McGregor Pump Track
• Asphalt track cost estimate $80,000
• Private donations of $50,000 committed
• Staff seeking additional funds
• Phase 2 of City Hall Needs Assessment
• Estimated cost $67,000, unfunded due to both funding constraints and workload challenges in Community Development 197
Item 6 A.

Additional Items
• Pavement Management
• $621,000 special revenue (SB1 & RTC)
• Road repairs on Raposa & San Jose between Capitola Ave. and Cherry Ave. prior to winter
• Estimated cost $50,000
• Late summer/ fall 2024
• Remaining $571,000
• Bid in Jan. 2025
• Better pricing, less weather
• Question at FAC about “ v Defense Collaborative
C b ”
• $5,000 - $10,000
• Staff to follow-up with more info next hearing 198
Item 6 A.

Recommendations
Identify:
• Budget questions
• Additional details for
presentation at next hearing
Preliminary feedback on:
• Draft Budget
• Key points
Next Steps:
• Special meeting May 30th
• Minor budget adjustments
• Response to any questions or
requestions for additional detail
199
Item 6 A.

Wharf Re-Envisioning Plan
Public Outreach & Temporary Use/Structures
Spring Summer Fall Winter
Publish Request for Proposal
Community Survey on Temporary
Use of Wharf
Community Meeting
Public Outreach Results
Temporary Permits
Activate Temporary Use
Recommendation on long-term use
of Capitola Wharf
200
Item 6 A.

Capitola City CouncilMay 16, 2024

Capitola City Council
May 16, 2024