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7 DATE: March 23, 2026
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
Nate Cruz, 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 2026-2027 AND
2027-2028 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 2026-2027 and 2027-2028 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.
Over these years, the prudent accumulation of CIP Fund resources is expected to yield approximately $22.8 million of undesignated Reserve Balance (inclusive of a $2 million emergency reserve) by June 30, 2026. Based on the annual forecasted CIP costs in the 15-year CIP, annual General Fund transfers to the City CIP Fund starting at $5.65 million and increasing by $150,000 per year will be needed to support these City CIP projects for the City 5-year Financial Plan.
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7 To prepare the recommended CIP, staff reviewed 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, 2026, 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 if needed.
Total City CIP projects over the 15-year time horizon are increasing from $108.37 million to $113.2 million. Of the $113.2 million total, parks projects account for $47.7 million of the total, which includes $2 million in ancillary funding from Park In Lieu and Park Facility Infrastructure fees and $2.3 million from the City’s Internal Service Funds. Street projects total $39.43 million, of which $35.8 million are from Special Revenue Funds and $.48 million is from the Equipment Replacement Fund. Storm Water and Lagoon projects total $18.50 million from the City CIP fund. Building Projects total $7.5 million from City CIP and the City’s Internal Service Funds.
The Streets-Related Funding plan, which is based on a Pavement Management Technical Assistance Program (P-TAP) analysis, includes a $2.0 million annual expenditure over the 15-year plan in an effort to bring the City’s current 78 Pavement Condition Index (PCI) to 83 and maintain it at that level.
BACKGROUND
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. 5 8
7 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 City Resolution No. 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. The City Council provided direction in FY 2022-2023 to use $36 million from CAARF for the Community Center Rebuild 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
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 can include such replacements when establishing water and wastewater rates. A separate report addresses the Water and Wastewater CIPs and capital funding.
ANALYSIS
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7 Approach
Staff has updated the Long-Term CIP Funding analysis considering 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. The Bicycle and Pedestrian Master Plan will inform possible additional projects. The draft 15- year CIP includes a placeholder for future Bicycle and Pedestrian improvements. 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. Some of the projects that were identified in the Parks Master Plan that was approved by the City Council in December 2025 have been included in the Long-Term Funding analysis but will require further scope and approval at a future date.
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 were based on increases being observed in the construction market.
Detailed information, summaries and calculations and listings of the 15-year projects are found in the attachments to this report.
Assumptions
Funding Sources
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7 For each asset category, staff identified the appropriate funding source for major replacement and rehabilitation costs and assigned projects by type. Streets and traffic- related projects are programmed to Streets-Related revenue sources (e.g., Measure A, Gas Tax, Measure M, SB 1, and Measure W), while other facility, parks, lagoon, levee, and building projects are programmed to the City CIP Fund supported by General Fund transfers where no other funding source is available. When a CIP project includes components covered by dedicated internal service programs, such as the Building Maintenance Fund or the Equipment Replacement Fund, those component costs are reflected under the applicable funding source to align with established replacement schedules and avoid double counting. Projects with replacement values of a magnitude that would typically require debt financing (e.g., full facility rebuilds or major levee improvements) are excluded from this pay-as-you-go funding analysis and would be evaluated separately if pursued.
Expenditure Assumptions
Project cost estimates are based on the best information available at the time of estimation, recent experience on similar comparable projects, inflation, and staff judgement.
Revenue Assumptions
Key revenue assumptions that affect funding sources are as follows:
City Capital Projects Funding (Attachment 1)
Park-In-Lieu – $2.05 million is reserved from the Park-In-Lieu Fund Balance for improvements are recommended in the Park System Master Plan. Donations from Youth Sports Groups – $78,750 of donation reimbursements are included in revenue estimates 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, and Public Works staff have been actively engaged in discussions with the City’s lobbyist to identify funding sources and eligible projects for funding. Until grant funds are identified for various projects and are reasonably expected to be available, additional grant funds are excluded from this analysis.
Streets-Related Funding (Attachment 2)
Measure A – This is a sales tax-based allocation. A revenue projection of $ 968,300 for FY 2026-2027 and $997,300 for FY 2027-2028 are included, with 3% annual growth for the first five years and then held at the five-year average 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) 5 8
7 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 2026-2027 are estimated to be $315,900 and $323,800 in FY 2027-2028 based on forecasts from the State and projected to increase 2.5% per year for the first five years and then held at the five-year average 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 $130,400 in FY 2026-2027 and $133,000 in FY 2027-2028 and projected to increase 2.0% per year for the first five years and then held at the five-year average 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 2026-2027 SB1 revenues to the City are estimated at $840,000 and $882,000 in FY 2027-2028, with projected annual growth of 5% for the first five years of the plan and then held at the five-year average 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 $434,700 to Foster City in FY 2026-2027 and $452,100 in FY 2027-2028 with projected annual growth of 4% for the first five years, 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 Community Development Department.
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
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. 5 8
7 For the City CIP Fund, a minimum emergency reserve requirement for capital improvement projects is $2 million. There is no 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 annual transfers to the City Capital Projects Fund starting at $5.65 million and increasing by $150,000 per year until stabilizing at $6.55 million in FY 2032-33. This approach allows the City to maintain the minimum $2.0 million reserve and provide capacity for additional CIP projects.
CEQA
Not Applicable
FISCAL ANALYSIS
The CIP funding plan includes annual transfers starting at $5.65 million from the General Fund to the City CIP Fund for the preparation of the City’s Fiscal Year 2026-2027 and 2027-2028 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
Attachment 4 – 15-Year CIP Comparison
Attachment 5 – Capital Improvement Program Fiscal Year 2025-26 through Fiscal Year 2039-40 (Buildings, Storm Water/ Lagoon and Levee Projects) Attachment 6 – Capital Improvement Program Fiscal Year 2025-26 through Fiscal Year 2039-40 (Parks Projects)
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7 Attachment 7 – Capital Improvement Program Fiscal Year 2025-26 through Fiscal Year 2039-40 (Street Projects)
Attachment 8 – City Resolution No. 2012-75