Fremont City Council Meeting: 06/07/22 07:00 PM
3300 Capitol Avenue Div/Dept: Finance Department
Fremont, CA 94538 Category: Budget
SCHEDULED
Sponsors:
STAFF REPORT (ID # 4625) DOC ID: 4625
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 1 FIRST PUBLIC HEARING ON FY 2022/23 PROPOSED OPERATING BUDGET - First Public Hearing (Published Notice) on FY 2022/23 Proposed Operating Budget Contact Persons:
Name: David Persselin
Title: Finance Director
Div/Dept: Finance Department
Phone: 510-494-4631
E-Mail: [email protected]
Executive Summary: The purpose of this report is to recommend that the City Council hold a public hearing on the FY 2022/23 Proposed Operating Budget. The second public hearing and adoption are scheduled for June 14, 2022.
BACKGROUND: The following information has been extracted from the Budget Overview section of the FY 2022/23 Proposed Operating Budget document. It sets the context for the proposed budget by describing the challenges and opportunities the City will address and the major initiatives underway.
As a result of prudent policy decisions, support from City employees and the community, and a recovering economy, the City’s financial condition continues to improve. With guidance from the City Council on priorities and community values, and a focus on fiscal sustainability, we present the Fiscal Year 2022/23 Proposed Operating Budget.
Including American Rescue Plan Act (ARPA) fiscal recovery funds, total General Fund budgeted resources in the coming fiscal year are estimated to be adequate to support total budgeted expenditures of $249.3 million. Reflecting improvement in the local economy, ongoing General Fund resources are estimated to increase by 4.1% in FY 2022/23.
The ARPA fiscal recovery funds will continue to be used over the next several years to provide support for core City services, while growth in our revenue base will provide the means for expanding or enhancing critical services.
The proposed budget incorporates the City Council’s and community’s highest priorities:
enhancing public safety, addressing and preventing homelessness, and improving the City’s neighborhoods and business districts, while improving service delivery to residents and businesses.
The following are highlighted in this overview:
• FY 2022/23 Fiscal Outlook
• Economic Update
• Key Budget Assumptions
• Discussion of Unmet Needs
• Major City Initiatives
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 2
FY 2022/23 Fiscal Outlook
The current fiscal year began with the lifting of many COVID-19 public health restrictions on businesses and consumers, saw a re-imposition of those restrictions as infections surged in the Summer and again in the Fall of 2021, and now appears to be ending with few impediments to life as we knew it before the pandemic. We were able to restore services to pre-pandemic levels thanks to the first installment of ARPA fiscal recovery funds and are seeing most of our revenue streams responding well to increased economic activity.
Looking ahead to FY 2022/23, staff anticipates that growth in the national economy wi ll slow to a more moderate pace. Although the use of ARPA fiscal recovery funds to maintain pre-pandemic service levels is projected to continue, our improved revenue performance is giving us some additional ongoing service capacity. Following the City’s sustainable budgeting principles, we will be limiting any proposed service enhancements or staffing increases to levels that can be supported on an ongoing basis.
Property tax and sales tax are the City’s most significant revenue sources. Property tax revenues are estimated to total $117.6 million in FY 2021/22, and staff projects those revenues will increase to $126.0 million in FY 2022/23, an increase of 7.2%. Under Proposition 13, assessed values of all real property adjust with the California Consumer Price Index (CCPI), with a 2% limit, unless there is a change in ownership or new construction. The CCPI adjustment for the FY 2022/23 tax roll is an increase of 2%. An estimated increase in value from changes in ownership of 5% is based on property transfe r tax data for calendar year 2021 and preliminary information from the County Assessor. An additional estimated increase of 1% for the value of new construction reflects the continuing development activity in Warm Springs and other areas of the City.
Sales tax revenues are estimated to total $78.0 million in FY 2021/22, decreasing to $68.8 million in FY 2022/23. The projected strong performance in FY 2021/22 and subsequent decline stems from $10.8 million of one-time new auto sales revenue and online retail activity. Without those one-time distortions, sales tax revenues would be estimated to grow approximately 2.2% from the prior year. The largest contributions to sales tax growth continue to come from auto sales and online sales transactions allocated through the County sales tax pool.
Business taxes are projected to yield $12.6 million in FY 2021/22, an increase of 16.6% from the prior year. To aid local businesses impacted by the pandemic, the City waived penalties and interest on delinquent business taxes during calendar years 2020 and 2021.
As a result, a portion of the current year revenue consists of delinquent prior year business taxes that are now being paid to avoid accruing penalties and interest. The FY 2022/23 business tax estimate is $12.9 million, an increase of 2.2%.
The source of General Fund revenue most heavily impacted by the COVID-19 pandemic is hotel tax. With occupancy rates increasing to the 60% range, the estimate for FY 2021/22 hotel/motel tax revenue has increased to $4.3 million, a 51.9% jump from the prior year actual amount of $2.8 million. FY 2022/23 hotel/motel tax revenues are estimated to reach $5.5 million, an increase of 26.0% from the prior year level, but still less than 2/3 of pre - pandemic revenues.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 3 The FY 2022/23 Proposed Operating Budget maintains the General Fund Contingency Reserve at 16.7% of budgeted expenditures and transfers out, or $41.6 million, a level consistent with City Council policy and the recommended practice of the Government Finance Officers Association of the United States and Canada. The General Fund Budget Uncertainty Reserve is projected to end FY 2021/22 at its current level of $10.0 million and will be available to address unanticipated revenue shortfalls in FY 2022/23.
Economic Update
The national economy continues to recover from the pandemic-related recession, but high inflation, the Russian invasion of Ukraine, and public health restrictions overseas are creating uncertainty for businesses and consumers. Growth near 3% is projected for 2022 , slowing into the mid-2% range for 2023. While the labor market has fully recovered to its pre-pandemic level of unemployment, consumer confidence has drifted down from its post - recession high in mid-2021.
Illustrating the degree of uncertainty we’re facing, the advance estimate for the first quarter of 2022 reports that gross domestic product (GDP) declined by 1.4%, but that follows on a
6.9% increase in the fourth quarter of 2021. The seasonally adjusted unemployment rate remained at 3.6% in April 2022, returning us to essentially the same level reported for February 2020 before the impact of the COVID-19 pandemic began to be felt.
The press release from the most recent meeting of the Federal Reserve Open Market Committee on May 4 notes that “Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong. Job gains have been robust in recent months, and the unemployment rate has declined substantially.” However, the press release goes on to caution that “Inflation remains elevated …” and that “The invasion of Ukraine by Russia … and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID - related lockdowns in China are likely to exacerbate supply chain disruptions.”
According to Lynn Franco, Director of The Conference Board Consumer Research Center, “Consumer confidence fell slightly in April, after a modest increase in March . . . purchasing intentions are down overall from recent levels as interest rates have begun rising.
Meanwhile, concerns about inflation retreated from an all-time high in March but remained elevated. Looking ahead, inflation and the war in Ukraine will continue to pose downside risks to confidence and may further curb consumer spending this year.”
Key Budget Assumptions
Based on the data we have at this time and economic forecasts from a range of sources, we are making the following key assumptions for the FY 2022/23 proposed budget:
1. The local economy will continue to recover during FY 2022/23, resulting in total General Fund ongoing resources (revenues and transfers in) increasing by 4.1% over estimated actual resources in FY 2021/22.
2. Total General Fund use of resources (expenditures and transfers out) is proposed to be 10.9% higher than the estimated actual amounts for FY 2021/22 after adjusting for $32.7 million of one-time transfers to the CIP and retiree healthcare trust.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 4
3. The costs of the FY 2022/23 proposed budget will be covered by projected ongoing resources and fiscal recovery funds held as unreserved fund balance, without requiring the use of reserves to balance the budget.
4. As the City is currently engaged in a collective bargaining process with its employee groups, the FY 2022/23 proposed budget includes a placeholder salary adjustment of 3.0%.
5. In accordance with City Council policy, an additional pension contribution of $3.2 million to more rapidly pay down the City’s unfunded liability has been incorporated into the proposed General Fund budget.
6. Total expenditures in the FY 2022/23 proposed budget include a savings assumption of $8.0 million (approximately 3.1% of total budgeted expenditures and transfers out in FY 2022/23) to reflect the City’s historical experience of under-spending total allocated resources, primarily due to salary savings from vacant positions.
7. The FY 2022/23 proposed budget includes funding for streets, sidewalks, and facilities maintenance, parks and street medians capital replacement, and capital improvements to achieve compliance with ADA standards.
8. The General Fund Contingency Reserve will be maintained at 16.7% of total budgeted expenditures and transfers out, the minimum level recommended by the Government Finance Officers Association of the United States and Canada (GFOA).
9. The General Fund Budget Uncertainty Reserve, restored and increased in FY 2021/22, will remain at its current balance of $10.0 million.
10. The proposed budget estimates approximately $29.9 million of FY 2021/22 ending unreserved fund balance, including $22.1 million of fiscal recovery funds.
11. As part of the FY 2021/22 Year-End Report in Fall 2022, staff will bring forward recommendations for allocating any remaining available ending unreserved fund balance to address one-time priority projects, programs, or reserve augmentation.
Unmet Needs
Fremont is a great place to live, work and do business. However, like many cities throughout California, our City faces long-term fiscal challenges that impact the City’s ability to maintain quality of life services at the level residents want and deserve. Important quality of life services we must continue to protect, maintain and improve include:
• Police/Fire protection and emergency response services • Garbage and recycling services
• Maintaining public parks
• Streets/Roads repair
• Protecting the safety of drivers, bikers, and pedestrians.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 5 As we begin to emerge from the period of budget cuts and then the restoration of basic services we’ve experienced over the last two years, we continue to grapple with increa sing needs for public safety services and the growing cost of maintaining Fremont’s roads and other infrastructure. The construction of 4,000 new residential units in Warm Springs, as well as other development throughout the City, are necessitating increased police staffing and the addition of a new fire truck company to protect public safety. The majority of Fremont’s public infrastructure was constructed many years ago and now requires either an increased level or increased frequency of repairs, compounded by not having had adequate resources to spend on maintenance in the past. The Building Facilities Condition Assessment, completed in 2019, identified over $37 million of funding needs over the three - year forecast period ending June 2025. Moreover, as Fremont continues to grow, additional infrastructure is added that must be maintained, further stretching the City’s limited maintenance resources.
Finally, new requirements result in increased costs. Some of these requirements are voluntary, such as the City’s commitment to improving traffic and pedestrian safety and traffic congestion, and encouraging alternative forms of transportation, through implementation of the Mobility Action Plan. Components of the Mobility Action Plan, such as completion of the Safe Routes to Schools program ($25 million), traffic signal modernization ($31 million), and construction of major bicycle and pedestrian infrastructure ($200 million) are costly and will necessitate development of enhanced funding sources. Similarly, components of the Climate Action Plan including electric vehicle charging infrastructure for City vehicles ($7 million) and converting City buildings from gas to electric heating ($ 21 million) call for major investments. Other new requirements, which are regulat ory in nature, have increased dramatically over the last few years, and have added significant costs to City operations. The City’s Americans with Disabilities Act (ADA) Transition Plan is projected to need $107 million over the next 25 years.
The inability to adequately fund ongoing maintenance and recapitalization of the City’s infrastructure is a major concern, but the FY 2022/23 proposed budget includes doubling the General Fund allocations for parks and building maintenance activities. The proposed budget also addresses pressing needs in other areas of the organization and the community, including the addition of public safety staffing and services, funding to develop a Citywide homeless strategy and pursue establishment of a business improvement distr ict, and increased allocations to fully open the new Age Well Center at South Fremont and the Downtown Event Center.
Major City Initiatives
While the City has had to continue to adapt how it operates and provides services in response to the COVID-19 pandemic and changing economic conditions, there are many important, strategic initiatives still underway. These initiatives are important elements of our tax diversification strategy and will position the City well for long -term growth and stability as we look ahead.
Development: There are several significant development areas in Fremont that will help bolster the Fremont economy and position the City for long term growth. These include the Warm Springs Innovation District, Bayside Industrial Park, Ardenwood Technology Park, and Downtown/City Center. Fremont’s broad geography and multiple development areas provide a diverse array of investment opportunities, with supportive land use regulations Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 6 established and capital investments provided by the City that will serve as catalysts to much greater private sector investment.
Warm Springs Innovation District
The Warm Springs Innovation District is critically important to the City because of a unique convergence of forces, centered around the Warm Springs/South Fremont BART station, which opened for service on March 25, 2017. Immediately adjacent to the Warm Springs BART station is the Tesla Factory, which is the City’s largest employer. The station enhances intermodal access to local bike routes and bus lines that serve the entire Bay Area (VTA and AC Transit) and provides critical connectivity to the City’s existing and future employment centers in the general Warm Springs area. In February, the City celebrated the completion of the new West Access Bridge, connecting pedestrians and cyclists from the BART station to new residential and major commercial areas, including the Tesla factory. The development of the West Access Bridge also included an urban plaza that can be used to hold outdoor events.
Several master plan developments are entitled for Warm Springs, with many already well under development. These projects collectively provide extensive public benefits, including a new network of complete streets, a new elementary school, urban plaza, and 4,000 residential units (of which 524 are deed-restricted, affordable rental units). Over 1.7 million square feet of new commercial space has been entitled, including Class A office space, advanced manufacturing space, and a new business-class hotel. While the pandemic has slowed development of the office and hotel projects, new manufacturing, and R&D projects, which have remained in high demand during the pandemic, have been proposed on several key development sites. These include a 150,000 square foot flex manufacturing/R &D building on Prune Avenue, a 90,000 square foot flex building on Warm Springs Boulevard, and two new industrial projects on Kato Road totaling 206,000 and 110,000 square feet, respectively.
Tesla has also expanded its business activities in Warm Springs to include the development and manufacture of innovative energy storage products and the latest cutting-edge advancements in battery technology – a fast-growing sector for Fremont, which has become recognized as a hotbed for this technology. The City continues to facilitate the expansion of Tesla, including the addition of new technologies and production activities that comprise it, as part of the comprehensive strategy for ensuring the City's long-term economic and fiscal stability.
To support marketing the commercial/employment development opportunities, efforts are underway to enhance the Warms Springs brand as an innovation district. Successes in attracting advanced technology tenants to the district include Resilience, a biopharmaceutical manufacturer; Raxium, a manufacturer of holographic displays that was recently acquired by Google; as well as the expansion of Zoox, Seagate and Underwriters Laboratories (UL), who have significantly expanded their footprint in the last few years.
Downtown/Capitol Avenue
With its ideal Silicon Valley location, Downtown Fremont is poised to become a vibrant, mixed-use district that will serve as a destination for the City and the region. This 110 -acre centrally located district is bounded by Fremont Boulevard, Mowry Avenue, Paseo Padre Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 7 Parkway, and Walnut Avenue. Land use designations and revenue-neutral incentives are in place for new development that will help create an exciting new Downtown for Fremont.
Following the City’s investment in Downtown’s main street extension and multimodal improvement project for Capitol Avenue, the thoroughfare now serves as the district’s “retail spine,” connecting two major east-west shopping centers along a well-designed, pedestrian-oriented mixed-use corridor. This provides a focal point and community gathering space – a more sustainable, pedestrian-friendly, public realm activated with street-level commercial, retail, and civic uses, and public open spaces that has stimulated economic activity and attracted high-quality, vibrant development to the district. The corridor is punctuated by the recent addition of the Downtown Event Center, which was opened in October 2021 and can accommodate events of up to 1,200 participants onsite.
The Downtown Event Center represents Phase 1 of a longer-term Civic Center Complex project, located in the heart of the Downtown on Capitol Avenue.
The Downtown Community Plan and associated environmental and planning documents provide a foundation for development to expand over time from approximately 1.25 million square feet to 5.2 million square feet of higher density multifamily residences, offices, and retail, along with entertainment, open space, and cultural arts organized around the main street, Capitol Avenue. Some elements of the plan have been completed; for example, Locale @ State Street, a public-private partnership between the City, TMG Partners, Sares Regis and SummerHill. The project includes 157 ownership housing units, including condos, stacked flats, and row homes, as well as 21,000 square feet of critical ground floor retail space that will set the tone for a vibrant pedestrian environment. Leasing of this retail space is actively underway with the first five leases confirmed: SLIVER Pizzeria, RawASF, Banter Bookshop, Din Ding Dumpling House, and Deka Lash. While leasing activity was slowed by the pandemic, the pace has begun accelerating, and more additions are expected to be announced in the coming months.
The completion of Downtown’s new main street has become a catalyst for attracting additional private investment as several projects in the immediate area are under construction by a variety of developers, including Fore Properties, MIG Real Estate and Fremont Bank. The 275-unit mixed-use apartment project by Fore Properties is nearing completion, and the approximately 250-unit apartment mixed-use project by MIG Real Estate and six-story, approximately 30,000-square-foot new Fremont Bank office headquarters are under development. The latter two projects will punctuate the gateway to Downtown at the corner of Capitol Avenue and Fremont Boulevard.
In addition to the City and private sector-led investment, Fremont’s Downtown has also been designated as a federal opportunity zone. As one of only a few Bay Area cities to receive such a designation, the associated federal tax benefits – which are revenue neutral to the City – will make investment in Downtown even more compelling. MIG Real Estate is the first developer to take advantage of this program, purchasing a project site that had previously been entitled by Bay Rock Development.
Business Development: Building on the success of Fremont’s robust Advanced Industry profile is critical to maintaining a diverse tax base that provides resiliency to disruptive events such as the COVID-19 pandemic. Important initiatives and accomplishments related to this effort are outlined below.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 8 Sector Highlights
Fremont’s largest sector, biotechnology, continues to be an important source of growth.
The fact that most of Fremont’s biomedical research companies also manufacture products in Fremont is of particular importance given the ripple effects in the larger economy – encompassing job creation and a growing supply chain concentration. Pharmaceutical manufacturer Boehringer Ingelheim has invested nearly $1 billion over the past decade to expand its Ardenwood operation and now employs more than 800 people. In the Warm Springs Innovation District, National Resilience is building out a large pharmaceutical manufacturing operation that will employ 200 people when completed.
Fremont also welcomed the major expansion of Bionova Scientific, a biotherapeutic development and manufacturing services company that will serve as a beacon for more life sciences companies to locate in Fremont. Other recent additions include pharmaceutical manufacturer Sana Biotechnology, medical equipment maker Cepheid, device manufacturer Alexza Pharmaceuticals, and personalized cancer genomics company Personalis, all of which are under permit review or building out their new facilities in Fremont. Over the last two years, the number of life sciences companies in Fremont has grown from 125 to 140, providing a resilient source of tax base expansion during the pandemic. The importance of this essential business sector cannot be understated as it diversifies Fremont’s jobs and tax base and is less susceptible to economic impact.
The City continues to be a top location choice for the clean technology sector as well, both at the early stage and for companies beginning to scale. The City has recently welcomed several new cleantech firms such as Lyten, an advanced materials company that developed 3D Graphene for energy storage advancement, and EnerVenue, a manufacturer of utility - scale energy storage systems that is in the process of building out a 100 Megawatt manufacturing plant in Fremont. With the assistance of Fremont Economic Development staff, EnerVenue secured the California Competes Tax Credit from the State of California.
This performance-based award, revenue-neutral to the City, credits up to $25 million in future State tax liability to EnerVenue on the condition that it invests over $400 million and creates 1,700 jobs in California by 2025. Additionally, Enovix, a lithium-ion battery technology company, completed construction on a production-volume battery factory in Fremont, making the City home to the only two battery production-volume manufacturing operations in the entire State.
Fremont’s continued success in the clean technology sector stems from its workforce expertise in electrical and mechanical engineering and a longstanding economic development strategy of industry partnerships that has positioned the City as a thought leader. This includes a partnership with the Cleantech Open, a national organization that accelerates the market readiness of clean tech startups. Economic development staff have also worked closely with East Bay Community Energy to support its efforts in advancing microgrid technology demonstrations and expanding commercial fleet electrification at Fremont companies, building off the momentum and interest surrounding the City’s fire station microgrid public private partnership projects.
Fremont’s biomedical and cleantech sectors are lifted by the City’s long-standing leadership in advanced manufacturing. In addition to these sectors, the City has experienced rapid growth in technologies related to network computing equipment such as Synnex, Hyve Solutions, Penguin Computing, ASI, Quanta Computer, and ASA Computer. Fremont Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 9 is also home to over a half dozen companies working on the development of autonomous vehicles (AVs), including Waymo, Zoox, and Pony.ai.
At the center of Fremont’s advanced manufacturing ecosystem is Tesla. As the largest manufacturer in the state of California (and the largest employer in Fremont), Tesla is an economic engine unto itself. The City’s development services team continues to work closely with Tesla as they scale up their vehicle production lines and expand their facilities to accommodate battery development and other new products. Tesla’s master plan ultimately allows for several million square feet to be added to what is already one of the largest manufacturing facilities and the highest volume vehicle manufacturing plant in North America.
With a heightened focus on the future of the workforce in advanced manufacturing, the City has increased its own efforts on this topic. This includes the City’s very successful Manufacturing Day program that connects education and industry, exposing students to the prospect of a career in advanced manufacturing. For six years in a row, Fremont has organized this effort, coordinating students and teachers from Mission Valley ROP, Fremont Unified School District, Ohlone College, and the public at-large on tours of manufacturing facilities in Fremont. Economic Development staff continue to serve on the Alameda County Workforce Investment Board (AC WIB) and are taking a leadership role in strengthening existing relationships with workforce partners.
This year, the City supported the launch of Ohlone College’s Smart Manufacturing Technology Back to Work (B2W) program. B2W provides free online training in advanced manufacturing technologies and paid in-person internships for dislocated workers in the Tri- City area, with the first 8-week cohort starting April 25th. The program builds from the successful Earn and Learn Fremont (ELF) pilot program last year. City staff supported B2W's grant application by gathering letters of commitment from five Fremont manufacturing employers including Tesla, Lam Research, and Evolve Manufacturing. Graduates of the cohort will have the chance of continued employment at their assigned company and will receive an industry-recognized certificate.
Business Growth and Real Estate Development
Strong business growth and a robust real estate market also continue to drive demand for new commercial/industrial space in Fremont. Pacific Commons South, one of the largest industrial developments in Bay Area history, is well underway with its second phase of development, with the project expected to be completed early next year. A joint development by Overton Moore Properties and Conor Commercial, the project includes approximately 2.7 million square feet of Class A industrial space in a series of buildings, along with two new sites for auto dealership development. Nearly 2 million square feet of the project has already been leased, including 800,000 square feet by UPS which is currently building out a state-of-the-art distribution hub. Other tenants include Facebook, Cepheid, Bloom Energy, and Amazon.
Last year was again a very strong year for business expansion and new business growth, resulting in significant leasing activity and driving commercial vacancy rates to unprecedented lows. The historically low vacancy rates and higher rents in R&D have led to investments in both existing commercial real estate assets and new development projects in Fremont’s Innovation District. This includes the March 2020 purchase of a building leased Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 10 by Tesla, 901 Page Avenue, by Morgan Stanley for $110 million, showcasing the strength of Fremont’s industrial building assets. In the Bayside Industrial Park area, Duke Realty recently completed construction of a Class A industrial project on a site it purchased in 2019. Each of these examples represents a substantial increase in property tax assessment, benefiting the City’s General Fund.
Ardenwood Technology Park is also benefiting from the strength of the region’s real estate market with a significant increase in business activity resulting from tenant ‘spillover’ from areas to the west. Recognizing the opportunity, new and expanding tenants are establishing operations in the district, such as Personalis, Inc.’s expansion from Menlo Park.
Most notably, Facebook is nearing completion on its renovations to a technology campus referred to as “the Farm,” with employees already occupying several buildings. At full buildout the campus will host up to 10,000 employees. Meanwhile, as mentioned previously, existing Ardenwood biotech tenant Boehringer Ingelheim has continued to invest in expanding its manufacturing operations.
Small Business
Supporting small businesses and commercial districts in the City is some of the most important work of the City’s economic development program. A variety of engagement occurs on an ongoing basis to support this sector, including permit assistance through our Business Ally program, and educational workshops/seminars in collaboration with SBDC, the California and National Main Street Associations, Small Business Majority, and other partners.
The social and financial impacts of COVID-19 have affected the livelihood of Fremont’s businesses and their employees for over a year. Nowhere are these impacts more immediately visible than in the City’s small business retailers and main street busines ses.
City Economic Development staff continue to maintain a hotline for Fremont businesses and share information and resources with small businesses as they become available. The City also continues partnerships with the Fremont Chamber of Commerce and representatives of local business districts to respond to business needs and share timely updates.
The City continues to assist businesses with enhanced digital marketing, including through an online gift card marketplace specifically for businesses in Fremont known as Gift Fremont. The marketplace provides incentives to community members to support participating retailers and provides retailers with enhanced digital marketing. In addition to the City’s initial matching contribution, several corporations also provided matching funds for the program, including Facebook, Seagate, Pacific Commons, and Crossroads Shopping Centers. Other Staff efforts include promoting Small Business Week on City platforms and providing individual marketing assistance to businesses. Accomplishments related to these efforts are detailed in the Economic Development Department budget narrative.
In addition to direct assistance to businesses, the City has passed several ordinances aimed at lowering the financial impact to small and medium businesses, including a commercial eviction moratorium, a delivery fee cap ordinance for restaurants and third-party app providers, and the waiving of late fees and interest on Fremont business taxes. To better understand the broader economic impact that COVID-19 is having on Fremont’s jobs and tax base, staff continue to engage key business groups including small business owners, commercial property managers, auto dealerships, manufacturers, real estate developers.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 11
Staff were engaged in several regional economic recovery discussions, including through the East Bay Economic Development Alliance, and the Silicon Valley Recovery Roundtable, leading to many local, regional, and state policy recommendations. Within Fremont, Economic Development staff partnered with the Chamber and business district representatives to co-lead a Small Business Task Force.
Business and Economic Opportunity Recovery Framework
The Economic Development Department has developed a Business and Economic Recovery Framework comprised of three focus areas: small business support, workforce development, and jobs and tax base recovery. Staff shared the recovery strategy with the City Council at a special work session in the spring of 2021 and are implementing the strategies based on the guiding principles of equity and economic resiliency. The strategies include
1. Supporting Small Business Recovery
o Enhanced communications and engagement with the small business community o Increased technical assistance from the city and partners to small businesses o Continued collaboration with partners
o Evaluation of emergency small business support programs for long term implementation
2. Leveraging Inclusive Workforce Development Opportunities o Focus on employer workforce needs
o Raise awareness of manufacturing jobs among the current and future workforce o Advice on inclusive strategies
o Expand on existing partnerships
o Identify and leverage funding sources
3. Helping to Rebuild a Resilient Tax Base for the City o Continue to advise on the fiscal impact of major development permits and land use change decisions
o Promote key industry sectors through strategic policies, marketing, and streamlined processes
o Establish fees and regulatory processes so they encourage investment o Cultivate and expand external partnerships to further strengthen Fremont’s economy
o Support growth of existing Fremont businesses while assisting new ones who choose to locate in Fremont
o Generate awareness and promote Fremont as a place to invest and do business
As Fremont looks forward, the City will continue to focus on these three strategic priorities to create a more equitable and resilient economic base that supports vibrant commercial districts, economic advancement opportunities for residents, and a strong tax base for delivering City services.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 12 Capital Projects: The City has an ongoing Capital Improvement Program (CIP) that provides investments to improve infrastructure related to the City’s transportation system, parks, and building facilities. Primary funding for these investments comes from development impact fees, as well as through grants from federal, State, and regional sources and ongoing transfers from the General Fund. The new $1.2 trillion federal Infrastructure Investment and Jobs Act (IIJA) approved in November 2021 is expected to provide additional capital funding to Fremont over the coming years.
In March 2022, the City Council approved a supplemental transfer of $21 million from the General Fund to the CIP to support future funding allocations that could address City needs related to the Park Master Plan, Climate Action Plan, traffic signal modernization, deteriorating Central Park facilities, and technology upgrades.
This past year several significant new projects were completed, which included the Downtown Event Center, the Age-Well Center at South Fremont, and the West Access Bridge and Plaza at the Warm Springs BART Station.
Looking ahead, the City’s current five-year CIP (FY 2021/22 through FY 2025/26) includes projects and programs valued at $189 million. The highlights of the CIP are as follows:
• Capital Maintenance. Preservation and maintenance of existing City assets is a primary focus of the CIP and includes a five-year investment totaling over $92 million. The highest level of funding in Capital Maintenance is allocated to ongoin g annual projects to repave City streets, repair sidewalks, curbs and gutters in the worst condition, and build ADA curb ramps. This also includes maintenance and capital replacement funding for parks, landscaped median islands, and buildings, as well as a 50/50 grant program to assist residents with sidewalk repairs and street tree replacements.
• Transportation. The Transportation CIP includes investments (totaling over $32 million) for traffic operations and signal system improvement, bicycle and pedestria n facilities, and major projects. All of the projects are implemented in a manner consistent with the City’s policies related to safety (Vision Zero), complete streets, and the Mobility Action Plan.
o Investments in traffic operations and signal projects includes annual expenditures to maintain existing traffic signals, modernize equipment for more efficient operations, construct new traffic signals at priority locations to improve safety, and to respond to community interests/concerns related to traffic operations. A notable grant-funded project now under construction is the “Fremont Boulevard Safe and Smart Corridor” project ($9 million) which will modernize 38 traffic signals.
o The City receives dedicated funds from the County Measure BB program and State grants for improvements to bicycle and pedestrian facilities. This program helps deliver priority projects identified in the City’s Bicycle and Pedestrian Master Plan, Vision Zero program, and Safe Routes to Schools program. New projects funded with federal grants include the construction of pedestrian flashing beacons in the Irvington area, as well as intersection modifications along Fremont Boulevard at Country Drive, Walnut Avenue and Grimmer Boulevard. In the Centerville area, a “complete streets” project is planned to Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 13 start construction in 2023 along the Fremont Boulevard corridor (Thornton to Central) and a new project is underway to pursue a railroad corridor quiet zone. o A significant element of the City’s Transportation CIP is oriented toward major and regional projects. This includes the City’s support for upgrading the State Route 262 corridor and developing the new Irvington BART Station; projects led by Alameda CTC and BART respectively. Additionally, the City is leading the planning and design for modernizing freeway interchanges at 680/Mission and 880/Decoto, as well as developing new bridges for bicycling and walking across freeways at 680/Sabercat Trail and 880/Innovation District. Other “major projects” include three new regional trails: Dumbarton to Quarry Lakes, East Bay Greenway, and Niles Canyon Trail.
• Parks and Recreation. The Parks CIP includes investments (totaling $52 million) to continue funding for existing major projects underway, provide upgrades to play areas, expand trail and pedestrian facilities, and construct new outdoor roofed community spaces. Significant themes in the proposed CIP include the following:
o Major Park Improvements – Ongoing major park projects including California Nursery Historical Park, Dusterberry Neighborhood Park, Centerville Community Park, and Palm Avenue Community Park.
o Upgrades to Play Areas throughout Park System – Upgrades are planned at Marshall, Booster, Buena Vista, Azevada, Northgate, Los Cerritos, Centerville, and Northgate Parks.
o Trail and Pedestrian Improvements throughout Park System – New and expanded trails are proposed at Buena Vista and Sylvester Harvey Parks, and four new trails at Central Park. This CIP also includes funding to negotiate, assess feasibility, and design bicycle and pedestrian paths on San Francisco Public Utility Commission/Hetch Hetchy easements to link City parks and neighborhoods.
o New Outdoor Closed Roof Community Spaces – New outdoor gathering and community spaces are proposed for Old Mission San Jose Community Park and Northgate Community Park.
Legislative Advocacy: The City has continued to be proactive with its legislative advocacy efforts and has forged ahead with building partnerships at the federal, State, and regional levels to ensure the interests and concerns of Fremont and the region are preserved. In April, the City Council reviewed and approved Fremont’s 2022 Legislative Guiding Principles and Priorities – which serves as a foundation for pursuing major initiatives and funding opportunities. Adopting legislative guidelines and priorities enables City staff and lobbyists to actively advocate for, influence, and monitor State and federal legislation that best represents Fremont’s interests.
At its Annual Retreat held in February of 2022, the Fremont City Council confirmed financial health and sustainability is the foundational principle for the City. The City Council also reached consensus on three top priority areas for the coming year. The priority areas include:
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 14 • Continue to innovate and find solutions to address homelessness; Work with non-profit organizations to establish practical locations for safe overnight host parking sites, expand utilization of the Housing Navigation Center beyond 50% when pandemic conditions allow, mitigate negative impacts on neighborhoods, support affordable housing projects that include units for the homeless and those at the highest risk of becoming homeless, and expand enforcement combined with abatement in targeted areas.
• Increase the vitality of commercial corridors; Prioritize efforts to support neighborhood commercial vibrancy and health, continue to support downtown vibrancy including the exploration of establishing a Business Improvement District, support and provide technical assistance to small businesses, resume in-person neighborhood business district walks, identify opportunities for placemaking and re - establish the shop local campaign.
• Enhance public safety; Prioritize crime prevention, increase visibility, incorporate mental health strategies, address police staffing, work with County fire and EMS partners on emergency medical transportation issues, and provide tools, technology, and resources to be responsive and efficient.
Staff is in the process of developing a work plan for the upcoming year that includes advocating for legislation, regulations, and funding that supports these priorities, as well as other Council adopted policies and plans including but not limited to the City’s General Plan and Housing Element, Climate Action Plan, Mobility Action Plan, and the Parks a nd Recreation Master Plan.
Fremont is fortunate to work with lobbyist representatives who continue to be instrumental in helping the City to be aware of funding opportunities and service programs at the State and federal level. Last year, Congress reinstated an earmark process, providing local governments and nonprofits the opportunity to submit projects under the Community Project Funding process. As a result, the City received support from Congressional representatives in Districts 15 and 17 on two requests. Through appropriations, Fremont’s Housing Navigation Center received $500,000 in federal funding and the Fremont Police dispatch center CAD/RMS project received $250,000. Additionally, at the State level, with the support of Fremont’s Senate (10th) and Assembly (20th) District representatives, the City was awarded $7.2 million in December, as part of the California Senate’s ‘Build Back Boldly’ Budget. The funding will support Fremont’s Interstate 680 Interchange Modernization Project at North Mission Boulevard.
In April, the City submitted several new Community Project Funding requests through our federal representative offices for Fiscal Year 2023. Staff is also currently working with our State representatives and regional transportation partners on future infrastructure funding needs. The relationships we’ve built with our federal and State representatives will serve us well as we prepare to apply for upcoming competitive funding opportunities provided by the federal Infrastructure Investment and Jobs Act.
Over the next year, staff will continue to work with our legislative advocates at the State and federal level to prioritize and track legislation, while continuously evaluating the legislative climate to identify new areas of legislative concern and funding opportunities, Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 15 with the overarching goal of improving quality of life and creating an equitable future for all consistent with the City’s vision, goals, and policies.
Staff Report (ID # 4625) Meeting of June 7, 2022
Updated: 6/1/2022 12:11 PM by Alberto Quintanilla Page 16 Conclusion
This proposed budget combines our recovering ongoing revenues with federal fiscal recovery funds to not only maintain essential services but also make targeted improvements that focus on City Council and community priorities. Additionally, the service level enhancements included in the proposed budget are consistent with the City Council’s stated foundational principle of fiscal sustainability.
Our ability to improve on the current level of services and invest in the City’s future will depend on continued revenue growth and sustained fiscal discipline by the City’s collective leadership.
FISCAL IMPACT: The City Council is not being asked to take action tonight on the FY 2022/23 Proposed Operating Budget other than to hold a public hearing and provide comments to staff. A second public hearing and adoption of the budget are scheduled for June 14, 2022.
ENVIRONMENTAL REVIEW: N/A
LINK: The FY 2022/23 Proposed Operating Budget is posted on the City’s website at:
https://www.fremont.gov/1593/Financial-Reports.
RECOMMENDATIONS:
1. Hold a public hearing.
2. Provide direction to staff on issues pertaining to the FY 2022/23 Proposed Operating Budget.