Agenda Item 8.2
DATE: April 18, 2023
TO: Honorable Mayor and City Councilmembers
FROM: Linda Smith, City Manager
SUBJECT: Preliminary Fiscal Year 2023-24 General Fund Budget Prepared by: Lisa Hisatomi, Director of Administrative Services EXECUTIVE SUMMARY:
The City Council will review the Preliminary Fiscal Year 2023-24 Budget, focusing on the General Fund. As this is the second year of the City's two-year budget, this information will supplement the budget document adopted by the City Council in June 2022. The updated Capital Improvement Program is presented under a separate item.
STAFF RECOMMENDATION:
Receive the report and provide direction to Staff related to the budget adoption scheduled for May 16, 2023.
FINANCIAL IMPACT:
The Preliminary Budget results in an increase to revenues of $3,679,531 and an increase to operating expenditures of $2,351,368 in the General Fund from the Amended Fiscal Year 2022-23 Budget. After transfers out, total General Fund reserves are projected at $194,231,544, a decrease of $3,504,655 from Fiscal Year 2022-23.
DESCRIPTION:
The City of Dublin utilizes a biennial budget process, in which a comprehensive budget document is prepared that establishes high-level priorities and specific departmental goals for a two-year period. The second year of the cycle is the "update year", in which projections are revised and significant changes highlighted, while the original document continues to serve as the guiding financial plan.
As in prior years, this report focuses on the General Fund, as there are no major budgetary changes in other funds. This report discusses updates to the City's major revenue categories and refines expenditure projections, reflecting the most recent information. The analysis compares the Preliminary Fiscal Year 2023-24 Budget to the Amended Fiscal Year 2022-23 Budget. 275
Summary
The Preliminary Budget (Table 1 and included as Attachments 1 and 2) projects an operating surplus in the General Fund (ongoing revenues less ongoing expenditures) of $16,318,637 After transfers, total reserves are projected at $194,231,544, a decrease of $3,504,655 from the prior year, the decrease is primarily due to the planned spending down of Committed and Assigned Reserves on capital projects, and the use of $7,167,382 in Unassigned Reserves for an advance to the Dublin Boulevard Extension project.
As shown in Table 1, revenues in Fiscal Year 2023-24 are increasing a net $3,679,531 (+3.3%) over the prior year, due primarily to higher property tax revenue. Expenditures are increasing $2,351,368 (+2.4%) over the prior year. Changes by categories are explained in the section below.
Table 1: Operating Budget Impact & Reserve
FY 2022-23
Amended
FY 2023-24
Projected
$
Change
%
Change
Revenues $112,212,330 $115,891,861 $3,679,531 3.3%
Expenditures 97,221,855 99,573,224 2,351,368 2.4%
Net Operating Budget Impact $14,990,475 $16,318,637 $1,328,162 8.9% Transfers In $142,900 $56,600 ($86,300) -60.4%
Transfers Out/Contribution to Other 41,254,681 19,879,893 (21,374,789) -51.8% Total Reserves, End of Year $197,736,199 $194,231,544 ($3,504,655) -1.8% The following is a summary of the net changes reflected in the Preliminary Budget as compared to the Fiscal Year Amended Budget (+/-$200,000):
Revenue Changes
Property Tax Revenue – increase of $3,433,000 (+6.1%)
The following factors affected the net impact:
An increase of $2.2 million or 4.6% to secured and unsecured property taxes, reflecting an adjustment of 2.0% to the assessed property value (the maximum allowable by Prop 13) and an increase in valuation due to home sales and new construction. An increase of $0.9 million in Motor Vehicle In-lieu Fees (the state’s replacement funding for Vehicle License Fees that were reduced in 2004), as this is tied to the change from the prior year in the City’s gross assessed valuation of taxable property. A budgeted delinquency rate of 1%.
Sales Tax Revenue – decrease of $400,000 (-1.5%)
It is projected the City’s Sales Tax will decrease slightly, primarily in Auto & Transportation and Business to Business categories. The contributing factors include inflation and interest rate increases, which trickle over into weaker consumer confidence and lower household discretionary 276
spending. Fuel prices are also declining from historic highs experienced in the 2022 calendar year.
Development Revenue – decrease of $277,526 (-3.8%)
Development revenue includes permitting fees and payments for planning and engineering services provided by the City. Revenue projections are based on the timing of development projects, and the receipt of revenues and corresponding services (i.e., City cost) do not happen simultaneously. Plan check costs are typically incurred approximately 12 months after revenue has been received, meaning that as development decreases, the associated decrease in costs will lag. In anticipation of this, the City has maintained the Service Continuity reserve (currently at $3.2 million) to cover costs during that lag.
Other Taxes – increase of $220,500 (+3.4%)
Other Taxes include Property Transfer Taxes, and multiple Franchise Taxes (electric, gas, garbage, cable). The increase is primarily due to the incorporation of the annual rate adjustment as part of the garbage franchise agreement.
Charges for Services – net increase of $439,488 (+6.3%) Charges for Services include revenue primarily from Parks and Community Services programs, which are returning to pre-pandemic participation levels in most programs, except for the closure of two after-school program sites due to low enrollment. This category also includes administrative fees collected from the City’s contracted garbage collector (Amador Valley Industries), and Santa Rita reimbursement revenue, whereby the County pays the City for costs incurred when responding to emergency calls at the Santa Rita Jail.
Interest – increase of $200,000 (+8.7%)
The City is experiencing higher returns on its investments, and Staff has transferred additional funds to Chandler Asset Management’s investment portfolio to take advantage of better performance that the local pools.
Expenditure Changes
Salaries – increase of $618,782 (+4.6%)
The increase in the Preliminary Budget is attributed to the net impact of the following:
Addition of two new positions in the General Fund:
o Public Works Inspector in the Public Works Department – this position will work on capital improvement projects; the salary is included in the General Fund but will be allocated to CIP funds accordingly.
o Recreation Coordinator in the Parks and Community Services Department Transfer Special Projects Manager from City Manager’s Office (General Fund) to Information Services (Information Technology Fund), resulting in a decrease in General Fund personnel costs offset by an increase in Internal Service Charges (IT Fund charges the General Fund back).
Inclusion of full-year salaries for positions new in the current year - GIS Coordinator and Senior Office Assistant in the Public Works Department. 277
Benefits – decrease of $181,205 (-3.3%)
The decrease in benefit costs is primarily attributed to a decrease in retirement costs, partly due to shifting of employees from Classic to PEPRA with new hires, a less costly retirement plan, and a decrease in City’s allocated share of pension payment to Dougherty Regional Fire Authority. The City Council has approved a one-time additional lump sum payment of $3.46 million to the City’s allocated share of the closed pension plan, from Committed Reserve for Fire Services Pension/OPEB.
Services & Supplies – increase of $804,578 (+14.8%)
During the budget process, Staff were asked to hold the line on operating supplies and services expenditures. The net increase in this category is tied to higher insurance premiums through PLANJPA, the City’s insurance pool. Premiums are impacted by several factors: 1) claims experience of the pool in general, which is seeing an increase in settlement costs of claims related to dangerous conditions (e.g., roads and intersections); 2) property insurance increases which are higher as a direct result of across-the-board inflation, real estate pricing escalation, supply chain disruptions, and natural disasters; 3) impacts of ransomware attacks and data breaches on cyber insurance; and 4) a three-year past look at claims experience.
Internal Service Fund Charges – increase of $511,176 (+10.4%) Internal Service Charges include the allocation to the General Fund of replacement costs of facilities, vehicles, and equipment. In addition, the Information Services operating budget is allocated to citywide departments based on a specified formula. The Fiscal Year 2023-24 preliminary budget increase is in IT service charges, primarily due to the addition of three new positions: the Special Projects Manager; the Audio-Video Specialist (both added in the current year); and a Senior Office Assistant (added in Fiscal Year 2023-24). These new positions, respectively, will address and reduce the City’s vulnerability to cybersecurity threats, provide a dedicated resource to support citywide AV facilities, and assist with the administrative function of Information Services.
Contract Services Expenditures – increase of $906,568 (+1.5%) The Fiscal Year 2022-23 Amended Budget includes a contract services budget carryover of $1,507,299 from Fiscal Year 2021-22. Excluding the carryover, the Preliminary Budget projects a net increase of $2,413,867, as illustrated in Table 2:
278
Table 2: Contract Services Changes
FY 22-23
Amended
Carryover
from
FY 21-22
FY 22-23
Net of
Carryover
FY 23-24
Update
$
Change
%
Change
Police Services $24,085,730 $100,000 $23,985,730 $24,835,923 $850,193 3.5% Fire Services 15,471,310 15,471,310 16,313,430 842,120 5.4% Maint. Services (MCE) 7,220,710 7,220,710 7,925,056 704,346 9.8% Development Services 4,630,128 336,156 4,293,972 3,606,108 (687,864) -16.0% Other 10,463,978 1,071,142 9,325,855 10,097,906 705,071 7.8% Total $61,871,855 $1,507,299 $60,364,557 $62,778,423 $2,413,867 4.0% Police and Fire Services budget increases are due primarily to annual COLA and benefit cost increases. Maintenance services increases are due to the addition of Fallon Sports Park Phase 3, additional street landscaping, and an adjustment in labor rates. Development contract services, like development revenues, are based on the timing of development projects.
Other contract services include Library Services, Crossing Guards, City Attorney, and Animal Services, in addition to other operating contracts services such as Parks and Recreation instructor and program contracts, non-MCE street maintenance contracts, and finance and administration consulting services. The increase is attributed to contracts for ongoing street sweeping, a community survey, an update of 2012 Economic Development Strategy and Economic Development Element to the General Plan, drainage maintenance services for the stormwater program, staff augmentation for disaster preparedness, and estimated expenditures for the 2024 March election.
Capital Outlay – decrease of $506,362 (-80.8%)
Capital Outlay items are typically one-time expenditures. The Fiscal Year 2022-23 Budget includes the purchase of vehicles for Police Services and the Public Works maintenance division, equipment and capital assets for Parks and Recreation special events and The Wave, and furniture for City facilities. There are no major capital asset purchases planned in Fiscal Year 2023-24.
Transfers Out
The Preliminary Budget includes transfers out of $2.0 million to the Internal Services Fund – Facilities for preventive maintenance, $1.0 million to the pension unfunded liability reserve, and $16,879,893 to capital improvement projects. Of the amount for capital projects, $7,195,281 comes from Committed/Assigned reserves and $9,684,612 from Unassigned reserves. CIP projects funded by the General Fund in Fiscal Year 2023-24 are shown in Table 3 below. 279
Table 3: Transfers Out to the Capital Improvement Program, FY 2023-24 Reserves / Projects Amount
Committed/Assigned $7,195,281
Civic Center Rehabilitation 687,840
Dublin Boulevard Extension 6,257,441
Village Parkway Reconstruction 250,000
Unassigned $9,684,612
Audio Visual System Upgrade 314,000
Citywide Bicycle and Pedestrian Improvements 105,000
Citywide Storm Drain Improvements 30,000
Downtown Dublin Street Grid Network 8,990
Downtown Dublin Town Square Park 4,680
Dublin Boulevard Extension 7,167,382
Kolb Park Renovation 450,000
Marquee Signs 495,000
Parks Playground Replacement 1,109,560
Total $16,879,893
In addition, $9.5 million will be utilized from the Committed reserve as an advance to the Public Facility Fee program for the construction of Jordan Ranch Neighborhood Square, Wallis Ranch Community Park, and the Library Tenant Improvements. The advance is for cash flow purpose, due to the timing of the receipt of revenues and project constructions. The General Fund will be reimbursed by the Fee program.
10-Year Forecast and Next Steps
Staff will provide an update to the 10-Year General Fund Forecast along with a discussion of the assumptions used in the Forecast with the final budget proposal scheduled for May 16, 2023. This will include the General Fund reserve changes needed to advance $63 million for the Dublin Boulevard Extension project, which will eventually be paid for by the Eastern Dublin Transportation Impact Fee. The City Council approved Staff’s funding plan to use reserves over a three-year period for this purpose. Final General Fund reserve designations will be made by the City Council at the second meeting in June 2023.
Staff is seeking direction from the City Council on other items it wishes to include in the Fiscal Year 2023-24 Budget.
STRATEGIC PLAN INITIATIVE:
The Preliminary General Fund budget is a reflection of priorities established in the City’s Two- Year Strategic Plan.
280
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
The City Council Agenda was posted.
ATTACHMENTS:
1) Preliminary Fiscal Year 2023-24 General Fund Summary 2) Preliminary Fiscal Year 2023-24 General Fund Reserves 281
Attachment 1PRELIMINARY GENERAL FUND SUMMARY
-
Actual
2021-22
Adopted
Budget
2022-23
Amended
Budget
2022-23
2023-24
Update
Revenues
Property Tax $55,186,388 $55,163,000 $56,463,000 59,896,000 3,433,000 6.1% Sales Tax 26,456,903 26,400,000 27,400,000 27,000,000 (400,000) -1.5% Sales Tax Reimbursements (346,696) (405,555) (405,555) (375,000) 30,555 -7.5% Development Revenue 9,803,444 7,702,334 7,387,355 7,109,829 (277,526) -3.8% Transient Occupancy Tax 1,255,575 1,400,000 1,400,000 1,500,000 100,000 7.1% Other Taxes 7,025,567 6,560,000 6,560,000 6,780,500 220,500 3.4% Licenses & Permits 354,643 351,373 351,373 286,417 (64,956) -18.5% Fines & Penalties 70,714 85,000 65,000 50,000 (15,000) -23.1% Interest Earnings 2,269,289 1,510,000 2,310,000 2,510,000 200,000 8.7% Rentals and Leases 1,647,882 1,477,330 1,653,427 1,648,021 (5,406) -0.3% Intergovernmental 324,519 290,000 290,000 290,000
Charges for Services 8,022,099 6,496,124 6,950,194 7,389,682 439,488 6.3% Community Benefit Payments 50,000 -
Other Revenue 2,452,034 1,680,156 1,787,536 1,806,412 18,876 1.1% Subtotal Revenues - Operating $114,572,363 $108,709,762 $112,212,330 $115,891,861 $3,679,531 3.3% Transfers In $312,874 $77,900 $142,900 56,600 ($86,300) Unrealized Gains/Losses (15,525,055) -
Total Revenues $99,360,182 $108,787,662 $112,355,230 $115,948,461 $3,593,231 3.2% Expenditures
Salaries & Wages $11,670,597 $13,249,383 $13,531,615 14,150,396 $618,782 4.6% Benefits 4,728,716 5,488,704 5,567,488 5,386,283 (181,205) -3.3% Services & Supplies 3,894,567 5,178,309 5,434,414 6,238,992 804,578 14.8% Internal Service Fund Charges 3,907,323 4,932,571 4,932,571 5,443,747 511,176 10.4% Utilities 2,511,166 3,485,435 3,720,435 3,898,997 178,562 4.8% Contracted Services 52,920,629 59,695,219 61,871,855 62,778,423 906,568 1.5% Capital Outlay 339,943 432,737 626,987 120,625 (506,362) -80.8% Debt Service Payment - 1,333,050 1,333,050 1,331,850 (1,200) -0.1% Contingency & Miscellaneous 958,117 223,440 203,440 223,910 20,470 10.1% Subtotal Expenditures - Operating $80,931,058 $94,018,847 $97,221,855 $99,573,224 $2,351,368 2.4% Operating Impact (REV-EXP) $33,641,305 $14,690,915 $14,990,475 $16,318,637 $1,328,162 8.9% Transfer Outs & Contributions to Other Funds
Transfers Out (CIPs) - Com./Assig. Reserve 2,803,478 2,291,645 27,217,469 7,195,281 (20,022,188) -73.6% Transfers Out (CIPs) - Undesignated 532,636 2,316,170 7,553,834 9,684,612 $2,130,778 28.2% Contribution to OPEB/PERS 4,460,000 4,460,000 1,000,000 (3,460,000) -77.6% Contribution to ISF & Other 1,000,000 2,000,000 2,023,378 2,000,000 (23,378) -1.2% Subtotal - Transfers Out & Contributions (2)4,336,114 11,067,815 41,254,681 19,879,893 (21,374,789) -51.8% Total Expenditures $85,267,172 $105,086,662 $138,476,536 $119,453,116 ($19,023,420) -13.7% GF Impact (Include CIP & Transfers) $14,093,010 $3,701,000 ($26,121,306) ($3,504,655) TOTAL GENERAL FUND BALANCE $223,857,505 $227,558,505 $197,736,199 $194,231,544 ($3,504,655) -1.8% Contracted Services Detail
Actual
2021-22
Adopted
Budget
2022-23
Amended
Budget
2022-23
2023-24
Update
Police Services $21,437,403 $23,985,730 $24,085,730 24,835,923 $750,193 3.1% Fire Services 14,699,226 15,311,310 15,471,310 16,313,430 842,120 5.4% Maintenance Services (MCE) 5,875,493 7,220,710 7,220,710 7,925,056 704,346 9.8% Development (CDD and PW) 3,858,842 4,312,851 4,630,128 3,606,108 (1,024,020) -22.1% Other Contracted Services 7,049,665 8,864,618 10,463,978 10,097,906 (366,072) -3.5% Total Contracted Services $52,920,629 $59,695,219 $61,871,855 62,778,423$ $906,568 1.5% (1) Amended budget for operating expenditures includes $1,856,112 carryover from FY 21-22 (3) Police and Fire liability insurance amounts are not included above, they are included in Services & Supplies.
Change
FY24 vs
FY23 Amend)
Change
FY24 vs
FY23 Amend)
(2) Amended Budget for Transfers Out to CIP reflects the $12,510,109 carryover from FY 21-22 282
Attachment 2PRELIMINARY GENERAL FUND RESERVES
RESERVE DESCRIPTION
Actual
2021-22
Net
Change
Projected
2022-23
Net
Change
Projected
2023-24
Non-Spendable $10,541 $10,541 $10,541
Prepaid Expenses 10,541 10,541 10,541
Restricted $4,261,640 $4,261,640 $4,261,640
Cemetery Endowment 60,000 60,000 60,000
Developer Contribution - Downtown 1,490,000 1,490,000 1,490,000 Developer Contr - Heritage Park 19,000 19,000 19,000
Developer Contr - Nature Park 60,000 60,000 60,000
Section 115 Trust - Pension 1,882,640 1,882,640 1,882,640 Heritage Park Maintenance 750,000 750,000 750,000
Committed $73,346,367 ($22,769,786) $50,576,582 $50,576,582 Advance to Public Facility Fee 9,523,096 (9,523,096)
Downtown Public Improvement 15,176,230 (426,221) 14,750,009 14,750,009 Economic Stability 8,000,000 8,000,000 8,000,000
Emergency Communications 532,113 532,113 532,113
Fire Svcs Pension/OPEB 5,671,094 (3,460,000) 2,211,094 2,211,094 Innovations & New Opportunity 1,026,591 (132,093) 894,498 894,498 One-Time Initiative - Capital 6,419,657 (1,420,149) 4,999,508 4,999,508 One-Time Initiative - Operating 503,860 503,860 503,860 Public Safety Reserve 2,600,000 2,600,000 2,600,000
Specific Committed Reserves
Cemetery Expansion (CIP) 13,748 (13,748)
Contribution to Public Facility Fee 6,000,000 6,000,000 6,000,000 Cultural Arts Center (CIP) 7,139,197 (6,964,197) 175,000 175,000 Don Biddle Park (CIP) 675,193 (675,193)
Fallon Sports Park III Contingency 510,500 (100,000) 410,500 410,500 Lease Revenue Bond Payoff 6,000,000 6,000,000 6,000,000 Maintenance Facility (CIP) 55,089 (55,089)
Utility Undergrounding (CIP) 3,500,000 3,500,000 3,500,000 Assigned $93,266,322 ($22,375,736) $70,890,586 ($6,635,281) $64,255,305 Accrued Leave 1,308,044 1,308,044 1,308,044
Catastrophic Loss 17,710,320 17,710,320 17,710,320
CIP Carryovers 4,088,843 (4,088,843)
Fiscally Responsible Adjustment 325,000 325,000 325,000 Municipal Regional Permit 2,209,778 (2,182,419) 27,359 27,359 Non-Streets CIP Commitments 3,276,777 (4,277) 3,272,500 3,272,500 Operating Carryovers 1,600,546 (1,600,546)
Parks and Streets Contingency 201,270 201,270 201,270
Pension & OPEB 17,000,000 1,000,000 18,000,000 1,000,000 19,000,000 Relocate Parks Dept 500,000 500,000 500,000
Service Continuity 3,150,000 3,150,000 3,150,000
Dublin Blvd Extension 20,000,000 (13,742,559) 6,257,441 (6,257,441) Specific Assigned Reserves
ARPA Revenue Replacement 665,878 665,878 665,878
Climate Action Plan 3,000,000 (62,000) 2,938,000 (440,000) 2,498,000 Contribution to ISF 1,500,000 1,500,000 1,500,000
Façade Improvement Grants 364,256 364,256 364,256
HVAC Replace. & Civic Ctr Improv. (CIP) 3,278,409 (1,307,892) 1,970,517 (687,840) 1,282,677 Pavement Management 2,000,000 2,000,000 2,000,000
Public Safety Complex (CIP) 87,200 (87,200)
Village Pkwy Pavement Reconstruction 11,000,000 (300,000) 10,700,000 (250,000) 10,450,000 Unassigned $52,972,635 $19,024,216 $71,996,851 $3,130,626 $75,127,476 Unassigned-Unrealized Gains (11,008,294) (11,008,294) (11,008,294) Unassigned (Available) 63,980,929 83,005,145 86,135,771 TOTAL RESERVES $223,857,505 ($26,121,306) $197,736,199 ($3,504,655) $194,231,544 283
Preliminary General Fund
FY 2023-24 Budget
April 18, 2023
284
Background
• Biennial budget process
• FY 23-24 is an Update Y ear
• Comparison to FY 22-23 Amended Budget
• Focus on General Fund operating budget
285
GF Revenues
Net Increase $3.7M (+3.3%)
• Property T ax +$3.4M (+6.1%)
o 2.0% CPI adjustment
o New construction & change in ownership
o Increase in Motor Vehicle In-lieu Fee
o 1% delinquency rate
• Sales T ax -$400K (-1.5%)
o Slight decrease in Auto, Business to Business
o Inflation and interest rate increases
o Decline in fuel price
286
GF Revenues
• Development Revenue -$278K (-3.8%)
o Timing of development projects
o Revenues and expenditures timing not aligned
o Service continuity reserve
• Charges for Services +$439K (+6.3%)
o Recreation programs return to pre-pandemic levels
o Waste management admin fees
o Fire calls reimbursement
287
GF Revenues
• Other T axes +$221K (+3.4%)
o Property transfer tax
o Franchise taxes
o Increase in Garbage Franchise tax
• Interest +$200K (+8.7%)
o Higher return on investment portfolio
o Additional funds to investment consultant managed portfolio 288
GF Expenditures
Net Increase $2.4M (+2.4%)
• Personnel Costs +$438K (+2.3%)
o Position changes
o Decrease in retirement costs
• Services & Supplies +$805K (+14.8%)
o Hold the line in operating expenditures
o Increase in insurance premiums
289
GF Expenditures
• ISF Charges +$511K (+10.4%)
o Allocation of replacement cost of facilities, vehicles, and equipment, IT services
o Increase in IT service charges
• Contract Services +$907K (+1.5%)
o FY 22-23 budget carryover $1.5M = +$2.4M (+4.0%)
o Increase in Police & Fire services
o Increase in maintenance contract cost
o Decrease in development contract cost
o Increase in other general City contract costs
290
Transfers Out
• ISF Facilities $2.0M
o Preventative Maintenance
• Pension unfunded liability $1.0M
o Contribution to stabilize CalPERS discount rate change • CIP $16.9M
291
Transfers Out
Committed/Assigned $7.2M
• Civic Center Rehabilitation
• Dublin Boulevard Extension
• Village Parkway Reconstruction
Unassigned $9.7M
• Audio Visual System Upgrade
• Citywide Bicycle & Pedestrian Improv.
• Citywide Storm Drain Improvements
• Downtown Dublin Street Grid Network
• Downtown T own Square Park
• Dublin Boulevard Extension
• Kolb Park Renovation
• Marquee Signs
• Parks Playground Replacement
292
GF Reserves
FY 2022-23
Amended
FY 2023-24
Projected
$
Change
%
Change
Revenues $112,212,330 $115,891,861 $3,679,531 3.3%
Expenditures 97,221,855 99,573,224 2,351,368 2.4%
Net Operating Budget Impact $14,990,475 $16,318,637 $1,328,162 8.9% Transfers In $142,900 $56,600 ($86,300) -60.4%
Transfers Out/Contribution to Other 41,254,681 19,879,893 (21,374,789) -51.8% Total Reserves, End of Year $197,736,199 $194,231,544 ($3,504,655) -1.8%
Operating Surplus $16.3M
Decrease in GF Reserve $3.5M
293
Next Steps
• Budget Adoption May 16, 2023
• Other items or additional information to include
in the FY 23-24 Budget?
294
STAFF REPORT
CITY COUNCIL
Agenda Item 8.3
DATE: April 18, 2023
TO: Honorable Mayor and City Councilmembers
FROM: Linda Smith, City Manager
SUBJECT: East Ranch Inclusionary Housing and Community Facilities District Proposals Prepared by: Amy Million, Principal Planner and Kan Xu, Senior Civil Engineer
EXECUTIVE SUMMARY:
The Applicant, TH East Ranch Dublin, LLC (Trumark Homes), submitted a request for the City Council’s consideration of an alternative method of complying with the Inclusionary Zoning Regulations and the formation of a Facilities Community Facilities District (CFD) to finance the construction of public improvements within the East Ranch development project. The City Council will receive a presentation from the Applicant and provide feedback regarding the affordable housing proposal and formation of a Facilities CFD for improvements. No formal action will be taken, nor will approvals be granted, for the project at this meeting.
STAFF RECOMMENDATION:
Receive the presentation and provide feedback on the Applicant’s proposal to satisfy the requirements of the Inclusionary Zoning Regulations and formation of a Community Facilities District to fund the construction of public facilities.
FINANCIAL IMPACT:
All costs associated with preparing this report are borne by the Applicant. The Applicant’s inclusionary housing proposal includes the payment of in-lieu fees for 25 units to satisfy 35% of the affordable requirement. Based on the current in-lieu fee of $228,994.42/unit this payment would be $5,724,860.50. In addition, as a part of the implementation of the East Ranch development project, a Facilities Community Facilities District (CFD) is proposed for the purpose of financing the acquisition and construction of public improvements within the development, including two neighborhood parks.
295
DESCRIPTION:
Background
The 165.5-acre East Ranch development project site is an undeveloped parcel located within the Fallon Village area of the Eastern Dublin Specific Plan (EDSP). The site is located north of Interstate 580, east of Fallon Road and the Jordan Ranch development, south of the Positano development, and adjacent to the City’s eastern boundary, as shown in Figure 1 below. The project site generally increases in elevation from south to north with knolls and hilly terrain in the northeastern portion of the site.
Figure 1. Vicinity Map
On December 7, 2021, the City Council introduced a Planned Development Ordinance, approved Vesting Tentative Tract Map No. 8563, and approved a Heritage Tree Removal Permit (Resolution No. 140-21). On December 21, 2021, the City Council approved a Planned Development Zoning Stage 2 Development Plan (Ordinance No. 11-21).
On December 23, 2021, pursuant to Elections Code Section 9238, subd. (b)(2)(B), a proposed summary of a referendum against Planned Development Zoning Ordinance No. 11-21 was submitted. To qualify, the referendum petition needed to contain signatures of at least 10% of the registered Dublin voters or a minimum of 3,439 signatures. The referendum petition was determined to be sufficient for filing and was delivered to the Alameda County Registrar of Voters on January 27, 2022 for signature examination. The Registrar of Voters determined that the petition contained the minimum number of valid signatures necessary to qualify the referendum for consideration by the City Council.
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On March 1, 2022, the City Council accepted the City Clerk’s Certificate of Petition certifying the sufficiency of the referendum petition. At the request of TH East Ranch Dublin, LLC, the Applicant, the City Council also repealed Ordinance No. 11-21 (Ordinance No. 02-22). The City Council took this action instead of asking the voters to consider Ordinance No. 11-21.
The Applicant has correctly pointed out that the Housing Accountability Act (HAA) (Government Code Section 65589.5) expressly precludes the City from requiring a rezone when a project is consistent with the General Plan. This rule applies even when the existing zoning is inconsistent with the General Plan, as is the case here.
The Vesting Tentative Tract Map No. 8563 was not subject to the referendum and, therefore, remains in effect. On May 3, 2022, the City Council approved modifications to Condition of Approval Nos. 6 and 7 of the Vesting Tentative Map (Resolution No. 40-22). The request was submitted by the Applicant pursuant to the HAA and amended the two conditions of approval to comply with the objective standards of the City’s Inclusionary Zoning Regulations. As a result, the applicant is able to pursue a project that fully complies with all objective City standards to be processed under the HAA.
On March 14, 2023, the Planning Commission approved the Site Development Review Permit for six neighborhoods that includes the construction of 459 conventional single-family homes, 14 zero-lot-line single-family homes, 100 townhomes, and a landscape master plan.
Project’s Relationship to State Housing Laws and Policy The Applicant designed the project under state housing laws which limit the City’s discretion on the project. The HAA, the Housing Crisis Act of 2019 (Senate Bill 330), and various other state laws prevent or restrict the ability to deny projects that are consistent with applicable, objective standards in effect at the time when the application is deemed complete. The Applicant designed the East Ranch development project to be consistent with the applicable objective standards of the General Plan and Eastern Dublin Specific Plan, the existing Planned Development Zoning Stage 1 Development Plan (Ordinance No. 32-05 and Ordinance No. 45-08), and other policies, as a means of limiting the City’s discretion.
The HAA prohibits the City from denying applications for such projects absent an immediate threat to public health or safety that cannot be mitigated, as determined by objective standards that were in place when the application was submitted. In essence, the HAA provides that once a city designates a site for housing in its General Plan, it must allow that housing to be developed except in very limited circumstances involving immediate threats to public health and safety.
Current Request
The Applicant requests the City Council consider an alternative method of compliance with the Inclusionary Zoning Regulations and the formation of a Community Facilities District (CFD) for the purpose of financing the acquisition and construction of public improvements within the development (Attachment 1). The Applicant’s requests are exceptions to the objective standards of the City and therefore do not have to be approved under the HAA. These requests are subject to discretion of the City Council.
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Analysis
Inclusionary Zoning
The City’s Inclusionary Zoning Regulations (DMC Chapter 8.68) require all new residential projects of 20 units or more to construct 12.5% of the total number of units as affordable units.
The units shall reflect the range of number of bedrooms provided in the project as a whole but may be smaller in size. The proposed East Ranch project generates a requirement to provide 72 affordable units (i.e., 573 units x 12.5% = 72 units).
The East Ranch project is currently required to comply with the Inclusionary Zoning Regulations by conforming to the objective standards in that Ordinance summarized as follows:
In-Lieu Fee: 40% of the total number of affordable units within the development (29 units) may be satisfied via payment of an “In-Lieu Fee” as provided by the City’s Impact Fee Schedule.
On-site Below-Market-Rate Units: 60% of the total number of affordable units within the development (43 units) shall be developed on site, with 40% of those (17 units) for low- income households and 60% of those (26 units) for moderate-income households. Below-Market-Rate Units shall be dispersed throughout all the neighborhoods, in rough proportion to the number of market rate units in each neighborhood and constructed concurrently with the market rate units in the same neighborhood. Execution of an agreement imposing appropriate resale controls and/or rental restrictions on the affordable units shall be required in accordance with DMC Chapter 8.68. The Applicant/Developer shall implement and conform to all objective requirements of DMC Chapter 8.68.
Pursuant to DMC Section 8.68.040.E, a developer may request an exception to the construction of
12.5% of the total number of dwelling units as affordable units. All exceptions require City Council approval, which shall be obtained at or prior to the last discretionary approval for the project, in this case the formation of a CFD.
The Applicant has proposed an alternate method of compliance with the Inclusionary Zoning Regulations. This alternate approach to affordable housing is an exception to the objective standards of the Inclusionary Zoning Regulations, and thus the HAA does not restrict the City Council’s discretion when considering this exception. The proposed alternate affordable housing approach is similar to the alternate method of compliance previously reviewed and approved by the City Council with the adoption of Ordinance No. 11-21 in December 2021. The Applicant affordable housing proposal is summarized as follows:
Payment of in-lieu fees for 18 units (to satisfy 35% of the affordable requirement). Based on the current in-lieu fee of $228,994.42/unit, this payment would be $5,724,860.50. Construction of 18 deed-restricted units at the moderate-income level. These units would consist of 14 zero-lot-line single-family units and 4 townhomes (to satisfy 25% of the affordable requirement).
Dedication of the two-acre Semi-Public site for a future affordable housing project to satisfy the requirement for 36 units (to satisfy 40% of the affordable requirement). 298
Construction of 50 deed-restricted accessory dwelling units at the low-income level.
Staff had recommended approval of the similar proposal in December 2021.
Community Facilities District
A CFD is a special financing district that provides a mechanism for funding specific facilities and services as authorized through the Mello-Roos Community Facilities Act of 1982 (Gov. Code, Section 53311 et seq.). The Act allows any county, city, special district, school district, or joint powers authority to establish a CFD in order to levy special taxes for the purpose of financing public facilities and services. The special taxes can then be used to pay off any bonds issued to fund facilities and improvements, or as an ongoing revenue source to pay for certain services.
A “Facilities CFD” can be used to fund a range of public facilities and is generally applicable for any real or other tangible property with an expected useful life of five or more years that will be owned and operated by the local agency. Examples of authorized improvements include but are not limited to parks, roads, bridges, and utility systems. A Facilities CFD is typically financed through the issuance of bonds, which are repaid over time by the property owners within the district.
A “Services CFD” can be used (even in conjunction with a Facilities CFD) to fund certain ongoing services like police protection, fire protection and suppression, ambulance and paramedics, maintenance and lighting of parks, parkways, roads, and open space, flood and storm protection, and environmental cleanup and remediation. The creation of both CFDs requires approval of the local agency. Revenue to operate a Services CFD is generated through assessments levied on the properties within the district.
The Vesting Tentative Tract Map Condition of Approval No. 127 (Resolution No. 140-21) notes that the Applicant cannot object to the formation of any CFD. The Applicant is now seeking approval of the first final map and has started the Services CFD formation process by providing an initial financing proposal for Staff review. The Services CFD will fund maintenance of the public streets, two public parks, and the storm drain systems within the East Ranch development. Based on the City’s current maintenance costs for similar items throughout the City, a contingency, and administration costs, the proposed assessment on each unit within the district is approximately $1,119 per year for maintenance of public infrastructure (Attachment 2). The adjusted property tax to include the Services CFD will equal approximately 1.43% of the estimated home price.
The Applicant is requesting the City Council’s consideration of the formation of a Facilities CFD to fund construction of certain public infrastructure and development impact fees associated with the project, including grading, street improvements, storm drain, water, and sewer facilities. The inclusion of water and sewer facilities within the Facilities CFD will require a separate Joint Community Facilities Agreement between the Applicant, the City, and Dublin San Ramon Services District. The Applicant’s proposed annual CFD special tax rate (Services CFD and Facilities CFD), when combined with all other property taxes would, on average, equal approximately 1.70% of the estimated home price. The bonding capacity of the Facilities CFD is estimated to yield approximately $38.5 million in net proceeds based on the special tax rate, assuming annual escalation of 2% per year and an interest rate on the bonds of 5.50% (net of typical costs for underwriter discount, reserve funds, capitalized interest, and incidental expenses). The proposed 299
Facilities CFD would be structured to consist of six special tax zones, one for each of the various lot/product types, as shown in the following table.
Zone # Product Type Annual Special Tax (per unit)
Zone 1 65’ x 100’ lots $7,955
Zone 2 55’ x 95’ lots $6,039
Zone 3 50’ x 110’ lots $6,388
Zone 4 49.5’ x 80’ lots $4,776
Zone 5 Cluster lots $3,959
Zone 6 Townhome units $1,904
For additional context, the City of Dublin currently has two CFDs, Dublin Crossing CFD No. 2015-1 and Dublin Crossing CFD No. 2017-1, which were established as part of the Boulevard development to fund the acquisition and construction of infrastructure and to fund the maintenance of a portion of the infrastructure costs constructed in the development. The Dublin Crossing Facilities CFD (No. 2015-1) is funding eligible improvements constructed by the developer, including backbone street improvements, storm drain improvements, sewer and water improvements, landscaping, fencing, as signage, as well as various development-related fees. The Dublin Crossing Services CFD (No. 2017-1), on the other hand, is limited to only maintenance of landscaping within public street medians and maintenance of streetlights within the public street rights-of-way in the Boulevard development. Typical per-unit assessments for Fiscal Year 2022-23 for the Dublin Crossing Facilities CFD range from $3,760 to $5,603, and for the Dublin Crossing Services CFD range from $46.24 to $69.34, depending on product type and unit square footage. It is difficult to compare CFD tax rates between projects as a variety of factors can impact this rate, such as property value, property type, use of property, number of units within the district boundary, capital improvement scope, maintenance scope, duration of tax, and changes to tax rates over time, which all come together to determine assessment rates within a district.
Conclusion
The City Council is asked to receive a presentation and provide feedback regarding the Applicant’s proposal for an alternative method to satisfy the requirements of the Inclusionary Zoning Regulations and the formation of a Facilities Community Facilities District for the construction and acquisition of improvements.
ENVIRONMENTAL REVIEW:
The City Council is receiving a presentation and providing feedback on the Applicant’s affordable housing proposal and the formation of a Facilities CFD and no formal action will be taken at this time. This discussion is not subject to the requirements of the California Environmental Quality Act (CEQA) as it does not have the potential to result in a direct physical change in the environment or a reasonably foreseeable indirect change in the environment and, thus, does not meet the definition of a project under CEQA Guidelines Section 15378.
STRATEGIC PLAN INITIATIVE:
None.
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NOTICING REQUIREMENTS/PUBLIC OUTREACH:
A copy of this Staff Report was provided to the Applicant and the City Council Agenda was posted.
ATTACHMENTS:
1) Trumark Letter dated March 31, 2023
2) Maintenance Cost Estimate
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3001 Bishop Drive, #100
San Ramon, CA 94583
P 925.999.3951
F 925.648.3130
March 31, 2023
Linda Smith
City Manager
City of Dublin
100 Civic Plaza
Dublin, CA 94568
Re: Croak (Francis Ranch) Project
Items for Consideration: Maximum Tax Rate for Formation of Community Facilities District (CFD) & Affordable Housing Proposal Dear Ms. Smith:
Trumark would like to request the City’s consideration at a study session for the following two items:
1.) Community Facilities District (CFD)
2.) Affordable Housing: Alternate Approach
ITEMS FOR CONSIDERATION
1.) Community Facilities District (CFD): Condition of Approval 127 in Resolution 140-21 provided a guideline to the mechanism of a potential formation of an improvement and maintenance CFD.
Trumark has been diligently working with the City to derive a total tax rate ana lysis that contemplates installation of public improvements and maintenance of over 5 miles of City right of way, over 1 million square feet of street repair , 11.5 acres of open space/parks . The tax rate analysis for consideration is commensurate with recent CFD approvals of neighboring masterplans such as Dublin Crossing. The installation of facilities by Trumark would provide a critical infrastructure and life safety benefit to not only the Croak project but to that of Jordan Ranch and Positano housing developments.
2.) Affordable Housing: Trumark would also like to propose an alternate affordable housing approach consistent with a previously approved program by City Council in December 2021, created as a result of numerous studies in addition to public study sessions held on October 15, 2019, and May 4, 2021. The alternate affordable housing approach is a response to the concerns noted by Mayor and Council at the study sessions, and derived as such to satisfy Chapter 8.68 Inclusionary Zoning Regulations as follows:
• In-Lieu Fee: 35% to be satisfied via payment of the “In-Lieu Fee”. The In-Lieu Fee amount is currently $228,994.42 per unit (25 units x $228,994.42 = $5,724,860.50). • Onsite Below Market Rate Units: 25% (18 Units) to be satisfied by providing 18 “moderate” AMI units (14 zero-lot single family and 4 townhomes) with a portion dispersed throughout the various neighborhoods
• Land Contribution: 40% to be satisfied by providing (2 acres) of stand-alone land to allow 77 units of affordable rental housing by Eden/Sunflower.
Onsite Accessory Dwelling Units/Second Units: 50 deed restricted attached ADU’S with projected rents at low 80% AMI (low income category).
Attachment 1
302
3001 Bishop Drive, #100
San Ramon, CA 94583
P 925.999.3951
F 925.648.3130
Trumark looks forward to working with City on the aforementioned items of consideration.
Sincerely,
TRUMARK
Pamela (Salas) Nieting
cc: Tony Bosowski, Trumark, Division President
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Maintenance Item Description of Use Unit Quantity Unit Price2 3 Estimate Parcel D Northern Park Acres 4.50 $30,970 139,366 $
Parcel D - Light Maintenance Hillside1
Northern Park Acres 1.00 $3,000 3,000$
Parcel O Southern Park Acres 6.01 $30,970 186,132 $
Street A Public Road Miles 0.3404 $5,158 1,756$
Street B Public Road Miles 0.3775 $5,158 1,947$
Neighborhood 1 - Streets Public Road Miles 0.7426 $5,158 3,830$ Neighborhood 2 - Streets Public Road Miles 0.7853 $5,158 4,050$ Neighborhood 3 - Streets Public Road Miles 0.4652 $5,158 2,400$ Neighborhood 4 - Streets Public Road Miles 0.6210 $5,158 3,203$ Neighborhood 5 - Streets Public Road Miles 0.4750 $5,158 2,450$ Neighborhood 6 - Streets Public Road Miles 0.4680 $5,158 2,414$ Croak Rd Public Road Miles 0.6100 $5,158 3,146$
Central-Croak Intersection to Kevin St Public Road Miles 0.2400 $5,158 1,238$ Current Central terminus to Central-Croak Public Road Miles 0.0800 $6,000 480$ Slurry & Base Repair Public Road SF 1,003,420 $0.21 208,210$ 563,623$
Contingency and Administration Costs
Contingency and Repair/Replacement (10%) 35,541$
City Administration 15,000$
County Administration (1.7%) 6,646$
Subtotal Contingency and Admin Costs 57,188$
Total Project Annual Maintenance Cost Summary
Subtotal Annual Maintenance 563,623$
Subtotal Contingency and Admin Costs 57,188$
Total Annual Maintenance Costs 620,810$
Per Unit4 1,119$
Footnotes:
[1] A
ssumes one net acre of Parcel D is hillside, of which, less maintenance will be required. [2] U
nit price per acre comparable to other DPFG projects for the greater Bay Area. [3] U
nit price per mile comparable to other DPFG projects for the greater Bay Area. [4] Pe
r Unit estimate does not include AMI units.
Exhibit C
Croak Property - Trumark
Maintenance Cost Estimates
Development Maintenance Areas
Per City of Dublin 3.17.23
Subtotal
Prepared by DPFG 3/17/2023
Attachment 2
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EAST RANCH
AFFORDABLE HOUSING AND COMMUNITY FACILITIES
DISTRICT PROPOSALS
APRIL 18, 2023
305
Project Location
• 165.5 acres
• 573 Units
• 6 Neighborhoods
• 2 Public Parks
• 2-acre Public/Semi-
Public Site
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Background
• December 7, 2021 - Resolution No. 140-21
– Planned Development Rezone
– Vesting T entative Tract Map
– Heritage Tree Removal Permit
• December 21, 2021 Ordinance No. 11-21
• March 1, 2022 Ordinance No. 02-22 (repealing No. 11-21) • March 14, 2023 Resolution No. 23-02
– Site Development Review Permit
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Proposed Request
• Affordable Housing Proposal
• Formation of Community Facilities District
– Maintenance
– Improvements
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Affordable Housing Proposal
• In-Lieu Fee
– 25 units ($5,724,860.50)
• Onsite Below Market Rate Units
– 18 deed restricted (moderate income category)
• Land Contribution
– Two-acre Public/Semi-Public site
• Onsite ADUs
– 50 deed restricted (low-income category)
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Community Facilities District
• What is a CFD?
– Special financing district that provides a mechanism for funding specific facilities and services as authorized through Mello-Roos Community Facilities Act of 1982.
– Mello-Roos Act allows the local jurisdiction to establish a CFD in order to levy special taxes to finance public facilities and services. 310
Community Facilities District
• Facilities CFD
– Fund construction or acquisition of public facilities which includes any real or other tangible property with an expected useful life of five or more years that will be owned and operated by the local agency.
– Parks, roads, bridges and utilities.
– Financed through various methods, one of which is issuance of bonds which are repaid over time by property owners within the district.
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Community Facilities District
• Services CFD
– Fund on going services: police, fire protection, ambulance and paramedics, maintenance of parks, roads and open space, flood and storm protection, and environmental cleanup and remediation. – Revenues are generated through assessments levied on the properties within the district.
– Consistent with Strategic Plan Objective 3D: Explore use of funding mechanisms like CFD for capital and on-going maintenance needs. 312
Community Facilities District
• East Ranch Services CFD
– Trumark has started working with staff on initial steps on the formation of the Services CFD.
– Services CFD will fund maintenance of public streets, two public parks and the storm drain system within the project.
– Approximate assessment on each unit within the district will be $1,119 per year.
– Base tax rate (Ad Valorem)1.26%; adjusted tax rate including the Services CFD and other special assessments 1.43%.
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Community Facilities District
• East Ranch Facilities CFD
– Trumark is requesting City Council’s consideration of the formation of a Facilities CFD.
– Facilities CFD will fund construction of public infrastructure and development impact fees associated with the project including grading, street improvements, storm drain, water and sewer facilities.
– CFD special tax rate to include both Services and Facilities CFD will be capped at 1.70%.
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Community Facilities District
• East Ranch Facilities CFD
– Bonding capacity of the Facilities CFD is estimated to yield $38.5 million in net proceeds; 2% annual escalation; interest rate 5.50%. – Special Assessments vary between lot/product types and range from $1,904 - $7,955 (Facilities CFD only).
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Community Facilities District
• Dublin Crossing CFDs
– Dublin Crossing CFD No. 2015-1 (Facilities) and No. 2017-1 (Services). – Facilities CFD includes backbone street improvements, storm drain improvements, sewer and water improvements, landscaping and development related fees.
– Services CFD includes maintenance of median landscaping and streetlights within the public right-of-way.
– For FY 2022-23, Facilities CFD assessments are between $3,760-$5,603 and Services CFD assessments are between $46.24 - $69.34. 316
Recommendation
Receive the Applicant’s presentation and provide
feedback on the proposal to satisfy the
requirements of the Inclusionary Zoning
Regulations and formation of a Facilities
Community Facilities District to fund the
construction of public facilities
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