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7 DATE: March 25, 2024
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Andrew Brozyna, Public Works Director/City Engineer Derek Schweigart, Parks and Recreation Director
Edmund Suen, Finance Director
DEPARTMENT: Public Works
Parks and Recreation
Finance
SUBJECT: FIFTEEN YEAR GENERAL FUND CAPITAL IMPROVEMENT
PROJECTS PROGRAM AND FUNDING PLAN FOR THE
PREPARATION OF THE CITY’S FISCAL YEAR 2024-2025
BUDGET AND FIVE-YEAR FINANCIAL PLAN
RECOMMENDATION
It is recommended that the City Council receive and accept the City’s 15-year General Fund Capital Improvement Projects Program and its funding plan for the preparation of the City’s Fiscal Year 2024-2025 budget and 5-year financial plan.
EXECUTIVE SUMMARY
In 2010, the City Council approved a funding strategy for its capital improvement projects (CIP) in the form of a Long-Term CIP Funding program. The current model uses a 15- year capital expenditure forecast and funds those forecasted needs on an annual basis.
The City also generally refrains from using debt to finance its capital projects unless it is necessary because of the magnitude of the project (e.g., CIP 327-657 Levee Protection Planning and Improvements Project).
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7 Over these years, the prudent accumulation of CIP Fund resources is expected to yield an approximate $12.85 million of undesignated Reserve Balance (inclusive of a $2 million emergency reserve) by June 30, 2024. Based on the annual forecasted CIP costs in the 15-year CIP, annual General Fund transfers of $5.75 million to the City CIP Fund will be needed to support these City CIP projects for the City 5-year Financial Plan.
To prepare the recommended CIP, City staff performed an annual long-term review and made modifications, as appropriate, to the funding amounts and timing of future projects.
Projects have been analyzed in primarily two categories based on their separate funding sources:
•City Capital Projects Fund (City CIP Fund) – includes projects such as bridges, lagoon structures, levees, parks, and buildings, which are funded from General Fund sources.
•Streets-Related Funding – includes streets and traffic signal projects, which are funded first through sources from Measure A, Gas Tax §2103, Measure M, SB 1 (Road Maintenance and Rehabilitation Account), and Measure W funds.
The analysis for City CIP Fund projects and Street-Related projects takes into consideration the existing fund balance resources projected to be available as of June 30, 2024, based on the latest estimates of CIP activity through the end of the current fiscal year and projected revenues available from applicable revenue sources. The analysis for the City CIP Fund ensures that the reserve balances stay above the minimum $2 million emergency reserve level while the Streets-Related Funding analysis has no established minimum reserve level, since City CIP Funds can be drawn for those purposes in the case of an emergency.
Total City CIP projects over the 15-year time horizon are increasing from $98.73 million to $107.40 million with parks projects accounting for $47.78 million of the total. These park projects include $3.86 million in ancillary funding from Park In Lieu and Park Facility Infrastructure fees and $8.15 million from the City’s Internal Service Funds. Street projects total $24.61 million, of which $28.70 million are from Special Revenue Funds.
Storm Water and Lagoon projects total $20.50 million from the City CIP fund.
The Streets-Related Funding plan, which is based on a Pavement Management Technical Assistance Program (P-TAP) analysis, maintains a $1,500,000 annual expenditure for the next three years. Staff is recommending to then increase the expenditure to $1,800,000 in years four and five due to the rising cost of projects and in order to bring the City’s current 79 Pavement Condition Index (PCI) to 83 and maintain it at that level.
BACKGROUND
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7 The City Council has made it a priority to ensure that the City’s infrastructure is well- maintained on an ongoing basis. Such proactive maintenance, repair, and replacement of infrastructure ensures that key systems are operating at peak levels, promotes safety, provides for a continuity of services to the community, maintains property values, and maintains the quality of life that the community has come to expect.
When the City was newer, capital improvement efforts focused heavily on the construction of new infrastructure. Now that the City is at build-out and over 50 years old, there has been a transition from new construction to proactive preventative infrastructure maintenance, which affects the types of projects and how those future CIP programs are funded to prioritize minimizing the potential for emergency repair situations.
Maintenance vs. CIP
Managing the City’s infrastructure manifests itself in the following ways:
•Proactive Maintenance – The preventative maintenance efforts of Public Works and Parks Maintenance crews on an ongoing basis reduce the overall future costs of City infrastructure. These ongoing operating costs offset the magnitude and expense of future infrastructure replacement projects. •New Infrastructure or Significant Infrastructure Replacement Projects – In some cases, there may be CIP projects that would create new infrastructure or projects that are considered so significant in nature that the entire infrastructure is replaced or built anew.
•Recurring Capital Improvement Projects – Some CIPs are considered “recurring” and amount to significant repair work, such as street overlays, park turf replacement, and levee maintenance. The underlying infrastructure is still usable, but these larger maintenance efforts help extend the useful lives of that infrastructure.
The first category, Proactive Maintenance Activities, is budgeted in the Public Works and Parks and Recreation Departments' annual operating budgets in the General Fund.
In September 2012, the City Council approved Resolution 2012-75, establishing a new Capital Asset Acquisition and Replacement Fund (CAARF), funded from the sale of the 11-acre site of the North Peninsula Jewish Campus and subsequent sale of the 15-acre site of the Foster Square project (Attachment 9). The CAARF may be used to fund the second category, major capital asset acquisition, construction and/or replacement, thus providing funding for the second category. In fact, the City Council provided direction in FY 2022-2023 to use $36 million from CAARF for the Recreation Center project.
Projects in the third category, Recurring Capital Improvement Projects, are funded from either recurring revenue sources (e.g., Measure A, Gas Tax, Measure M, SB1, Measure W), or are otherwise funded from the City’s General Fund resources as transfers out to the City CIP Fund.
Exclusion of Enterprise Fund Assets
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7 This report excludes the long-term CIP funding of Water and Wastewater system related projects for two primary reasons: (1) such projects are analyzed as part of the 15-year rate model process for each enterprise fund; and (2) the District Board has the opportunity to include such replacements when establishing water and wastewater rates. A separate report addresses the Water and Wastewater CIPs and capital funding.
ANALYSIS
Approach
Staff has updated the Long-Term CIP Funding analysis in light of current maintenance efforts, assessment of replacement requirements, and replacement costs in the following seven (7) categories:
•Streets – including pavement management efforts (e.g., arterial and collector street overlays) and sidewalks, curbs, and gutters
•Bridges – including bridges and approaches owned by the City, and only bridge approaches for overcrossings not owned by the City (i.e., E. Hillsdale Boulevard/Marina Lagoon overcrossing, Foster City Boulevard/92 Overpass, Vintage Park/92 Overpass)
•Lagoon and Storm Water Structures – including bulkheads, dredging, boat ramps, culverts, inlets, storm water pumps, and the pump station building •Levee – including the levee infrastructure
•Parks – Park infrastructure including hardscapes, landscaping, restrooms, lighting, irrigation systems, and permanent park structures such as tennis and basketball courts. It also includes the medians and cul-de-sacs maintained throughout the City
•Street Lights, Traffic Signal, and Crosswalk Systems – physical light and signal structures, controllers, and systems
•Buildings – including the Government Center campus, Recreation Center campus, and the Corporation Yard (structures associated with parks are included in Parks above)
15-Year CIP Capital Improvement Projects Program and Key Changes from the Prior Year (Attachment 4)
The Capital Improvement Plan has been updated to best reflect the recommended projects needed in the 15-year term. Some key changes include the addition of new projects not previously included in the plan, removal of projects that are not anticipated to require additional funding in future years, and cost updates based on the significant inflationary increases currently being observed in the construction market.
Detailed information, summaries and calculations and listings of the 15-year projects are found in Attachments 1 to 8 to this report.
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7 Assumptions
Funding Sources
In each category, initial assumptions were made as to the funding sources of various assets. Funding of asset components from other sources (e.g. developer fees) were excluded from the analysis. If an asset replacement value was considered so significant that the only effective financing option was to use debt financing (e.g., replacement of City Hall or the voter approved G.O. Bond funding of the Levee Improvement Project), those assets were also excluded. Assets excluded in each category (including the assumed alternate funding source in parentheses) were as follows:
•Streets – LED signal faces and signal controllers, pedestrian LED and appurtenances, backlit street signs (ERF), and traffic improvements as part of the Multi-Project Traffic Improvements Project (fully funded by developers of the respective projects)
•Bridges – None
•Lagoon – Lagoon itself, shorelines, rip-rap, and retaining walls (debt financing); pump stations, gates, trash racks and flappers (Equipment Replacement Fund) •Levee – Complete rebuild or raising of Levee infrastructure to address sea level rise (debt financing)
•Parks – Complete park rebuilds “from the ground up” (potential debt financing) •Buildings – Minor replacement projects (Building Maintenance Fund) Expenditure Assumptions
Replacement values were reviewed and updated from the prior year’s analysis as necessary. All values were expressed in terms of future replacement, taking into consideration factors such as inflation, project size, timing and construction contingency funding.
Revenue Assumptions
Key revenue assumptions that affect funding sources are as follows:
City Capital Projects Funding (Attachment 1)
•Park-In-Lieu and Park Facilities Infrastructure Fees – $2.80 million is designated from the Park-In-Lieu Fund Balance for the Boothbay Park improvements and the Recreation Center Rebuild. An additional $1.06 is designated for the Recreation Center Rebuild from Park Facilities Infrastructure Fees.
•Donations from Youth Sports Groups – $208,250 of donation reimbursements over the next five years from various sports groups for the Sea Cloud Park projects are included in the 15-year CIP plan.
•Grants – The Public Works and Parks Department routinely seek grants to supplement funding of its projects. Until grant funds are identified for various 5 8
7 projects and are reasonably expected to be available, additional grant funds are excluded from this analysis. This year’s analysis includes $500,000 from Gilead for sustainability measures for the Recreation Center Rebuild project.
Streets-Related Funding (Attachment 2)
•Measure A – This is a sales tax-based allocation. A revenue projection of $936,400 is included in FY 2024-2025 with 5% annual growth thereafter. •Gas Tax Section 2103 Funding – Revised estimates are based on the Gas Tax Swap legislation approved by the State in 2010, which swapped Prop 42 funding into the Gas Tax funding stream. Gas Tax (Sections 2105-2107) revenues are used to fund Public Works street maintenance operations, but Section 2103 funds must be used for roadway improvements and other transportation initiatives. Revenues for FY 2024-2025 are estimated to be $299,200 based on forecasts from the State and projected to increase 2% annually thereafter.
•Measure M – This measure, passed by voters in San Mateo County in November 2010, implemented a $10 fee added to vehicle license registrations of County residents for 25 years starting April 2011. Staff is projecting to receive $121,700 in FY 2024-2025 and an additional 2% annually thereafter.
Funds are administered by C/CAG and are provided on a reimbursement- basis. These funds may be used for such things as pavement resurfacing, pothole repair, signs and striping, traffic signals, street sweeping, storm-inlet cleaning, and local shuttles.
•SB 1 (Road Maintenance and Rehabilitation Account) – In 2017, the State passed the Road Repair and Accountability Act providing funding for local streets, roads, and other transportation uses. The funding was through a 12- cent per gallon increase to the gasoline excise tax and an additional 20-cent per gallon increase to the diesel excise tax, both of which took effect on November 1, 2017. An additional vehicle registration tax called “Transportation Improvement Fee” with rates based on the value of motor vehicles took effect on January 1, 2018. FY 2024-2025 SB1 revenues to the City are estimated at $862,400 with projected annual growth of 5% thereafter. •Measure W – Measure W was passed by the voters of San Mateo County in November 2018. The measure took effect on July 2019 and is estimated to bring approximately $454,100 to Foster City in FY 2024-2024 with projected annual growth of 5% thereafter and can be used to support traffic and traffic congestion relief related initiatives.
•Transportation Impact Fees – Development fees related to transportation are programmed into the CIP in the years in which they are anticipated to be received. Estimated amounts and timing are provided by the Building Division. •Grants – Until such time grant funds are identified for various projects and are reasonably expected to be available, grant revenues are excluded from this analysis.
15-Year Cash Flow Methodology
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7 Foster City uses a funding methodology that looks at the total replacement value of assets which are scheduled to be replaced in the next 15-years, and then averages the replacement amount over the 15-year window. The funding amounts are then compared to the available fund balance reserves and anticipated future revenues.
For the City CIP Fund, a minimum emergency reserve requirement for capital improvement projects is $2 million. There is no such reserve requirement for Street- Related Funding. The analysis also takes into consideration the projected Fund Balance in the Park-In-Lieu Fund to ensure that those funds are only spent on projects related to new parks or projects that increase the capacity of park amenities.
To the extent that there are not sufficient resources available from reserves and projected future revenues to maintain minimum reserves in the respected funding analysis, a transfer is identified from the City’s General Fund to ensure that the minimum fund balance reserve is met each year.
City Capital Projects Funding
Public Works, in consultation with the Parks and Recreation Department, prepared the 15-year project list considering replacement value, timing, and necessity. As indicated in the attached analysis, City staff recommends $5.75 million of annual General Fund transfers to the City Capital Projects Fund through FY 2030-2031, followed by $3.50 million annually thereafter for the remaining eight (8) years of the 15-year forecast. This approach allows the City to maintain the minimum $2 million reserve and provide capacity for additional CIP projects.
CEQA
Not Applicable
FISCAL ANALYSIS
The CIP funding plan includes $5.75 million of annual transfers from the General Fund to the City CIP Fund for the preparation of the City’s Fiscal Year 2024-2025 budget and 5-year financial plan.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Sustainability
ATTACHMENTS:
Attachment 1 - 15-Year Fund Balance Analysis
Attachment 2 – Streets Related Funding
Attachment 3 - 15-Year CIP Costs
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7 Attachment 4 - 15-Year CIP Comparison
Attachment 5 - Summary of Funding Sources and City CIP Fund Balance Attachment 6 – Capital Improvement Program Fiscal Year 2024-25 through Fiscal Year 2038-39 (Buildings, Storm Water and Lagoon Projects)
Attachment 7 - Capital Improvement Program Fiscal Year 2024-25 through Fiscal Year 2038-39 (Parks Projects)
Attachment 8 - Capital Improvement Program Fiscal Year 2024-25 through Fiscal Year 2038-39 (Street Projects)
Attachment 9 - City Resolution 2012-75