Fremont City Council Meeting: 06/06/23 07:00 PM
3300 Capitol Avenue Div/Dept: Finance Department
Fremont, CA 94538 Category: Budget
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 4923) DOC ID: 4923
Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 1 FIRST PUBLIC HEARING ON FY 2023/24 PROPOSED OPERATING BUDGET - First Public Hearing (Published Notice) on FY 2023/24 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 2023/24 Proposed Operating Budget. The second public hearing and adoption are scheduled for June 13, 2023.
BACKGROUND: The following information has been extracted from the Budget Overview section of the FY 2023/24 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 growing local 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 2023/24 Proposed Operating Budget.
Total General Fund budgeted resources in the coming fiscal year are estimated to be more than adequate to support total budgeted expenditures of $278.1 million. Reflecting continued improvement in the local economy, ongoing General Fund resources are estimated to increase by 4.9% in FY 2023/24.
The proposed budget incorporates the City Council’s and community’s highest priorities:
enhancing public safety, addressing and preventing homelessness, and supporting the City’s neighborhoods and business districts, while improving service delivery to residents and businesses.
The following are highlighted in this overview:
• FY 2023/24 Fiscal Outlook
• Economic Update
• Key Budget Assumptions
• Discussion of Unmet Needs
• Major City Initiatives
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 2 FY 2023/24 Fiscal Outlook
Staff anticipates that growth in the national economy will slow during FY 2023/24. Because some of the City’s largest revenues - property tax and business tax - are based on prior- year activity, the impact of a slowdown might not be fully felt until FY 2024/25. Following the City’s sustainable budgeting principles, we have limited 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 $128.8 million in FY 2022/23, and staff projects those revenues will increase to $135.7 million in FY 2023/24, an increase of 5.4%.
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 2023/24 tax roll is an increase of 2%. An estimated increase in value from changes in ownership of 3.7% is based on property transfer tax data for calendar year 2022 and preliminary information from the County Assessor. An additional estimated increase of 0.5% for the value of new construction reflects the continuing development activity in Warm Springs and other areas of the City.
Sales tax revenue is anticipated to total $106.4 million in FY 2022/23, decreasing to $100.9 million in FY 2023/24. The projected strong performance in FY 2022/23 and subsequent decline stems from an estimated $10.3 million of one-time sales tax revenue. Without that one-time distortion, sales tax revenue would be estimated to grow approximately 5% from the prior year.
Business tax is projected to yield $13.4 million in FY 2022/23, a decrease of 3.7% from the prior year. The current year drop reflects unusually high collections in FY 2021/22. 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 prior year revenue consisted of delinquent prior year business taxes being paid to avoid accruing penalties and interest. The FY 2023/24 business tax estimate is $13.9 million, an increase of 3.6%.
The source of General Fund revenue most heavily impacted by the COVID-19 pandemic is hotel tax. With more rooms available, occupancy rates and room rates have risen over the past year but are still well below their pre-pandemic levels. The estimate for FY 2022/23 hotel/motel tax revenue has increased to $6.4 million, a 35.2% jump from the prior year actual amount of $4.7 million. FY 2023/24 hotel/motel tax revenues are estimated to reac h $7.3 million, an increase of 15% from the current year.
The FY 2023/24 proposed operating budget maintains the General Fund Contingency Reserve at 16.7% of budgeted expenditures and transfers out, or $46.4 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 2022/23 at its current level of $12.5 million. Reflecting both the increasing contribution of volatile sales tax revenue to General Fund resources and the heightened possibility of an economic slowdown Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 3 or recession, the proposed budget includes increasing the Budget Uncertainty Reserve to $20.0 million.
Economic Update
The national economy, while currently continuing to expand and create new jobs, is expected to slow over the next year or possibly even dip into a recession. A slowdown in growth to less than 1% is projected for 2023, picking up to just over 1% for 2024. While the labor market has remained resilient in the face of increasing interest rates and recession concerns, the persistently lower level of consumer confidence suggests households are anticipating more challenging times ahead.
Reflecting the impact of higher interest rates, the advance estimate for the first quarter of 2023 reports that gross domestic product (GDP) increased by 1.1%, slowing from the 2.6% increase in the fourth quarter of 2022. The seasonally adjusted unemployment rate dropped slightly to 3.4% in April 2023, continuing at the historically low level we’ve seen over the past year.
The press release from the most recent meeting of the Federal Reserve Open Market Committee on May 3rd notes that “Economic activity expanded at a modest pace in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low.” However, the press release goes on to caution that “Inflation remains elevated …” and that “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.”
According to The Conference Board Consumer Research Center, “While consumers’ relatively favorable assessment of the current business environment improved somewhat in April, their expectations fell and remained below the level which often signals a recession looming in the short-term.”
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 2023/24 proposed budget:
1. The local economy will experience slower growth during FY 2023/24. Total General Fund ongoing resources (revenues and transfers in) are projected to increase by
4.9% over estimated actual ongoing resources in FY 2022/23.
2. The costs of the FY 2023/24 proposed budget will be covered by projected ongoing resources without requiring the use of reserves to balance the budget. Following the City’s sustainable budgeting principles, service enhancements or staffing increases for FY 2023/24 are limited to levels that can be supported on an ongoing basis.
3. In accordance with City Council policy, an additional pension contribution of $8.2 million to pay down the City’s unfunded liability more rapidly has been incorporated into the proposed General Fund budget.
4. Total expenditures in the FY 2023/24 proposed budget include a savings assumption of $17.8 million (approximately 6.5% of total budgeted expenditures in FY 2023/24) Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 4 to reflect the City’s historical experience of under-spending total allocated resources, primarily due to salary savings from vacant positions.
5. The FY 2023/24 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.
6. 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).
7. Reflecting both the increasing contribution of sales tax revenue to General Fund resources and the heightened possibility of an economic slowdown or recession, the General Fund Budget Uncertainty Reserve is proposed to increase from its current balance of $12.5 million to $20.0 million.
8. The adopted budget estimates approximately $13.9 million of FY 2022/23 ending unreserved fund balance. As part of the FY 2022/23 Year-End Report in Fall 2023, staff will bring forward recommendations for allocating any remaining available ending unreserved fund balance to address one-time priority projects, programs, unfunded liabilities, 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.
We continue to grapple with increasing 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.
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 Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 5 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 ($5 million) and converting City buildings from gas to electric heating ($16 million) call for major investments. Other new requirements, which are regulatory 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 proj ected 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 2023/24 proposed budget includes increasing the ongoing General Fund allocations for street, park, and building maintenance activities.
The proposed budget also addresses pressing needs in other areas of the organization and the community, including additional police officers, a firefighter recruit academy to prepare for activation of the new fire truck company, a community service officer for the mobile evaluation team, a new street maintenance crew, and staff and funding to expand Citywide marketing efforts to promote downtown and neighborhood business district vitality.
Major City Initiatives
The City of Fremont continues to support and invest in major strategic initiatives while navigating an operating environment that has been fundamentally reshaped by the COVID - 19 pandemic and changing macroeconomic conditions. These initiatives are important elements of our diversified tax base strategy and will position the City well for long -term economic growth and fiscal stability.
Development: There are four key development areas in Fremont that are critical to Fremont’s economic growth. These include the Warm Springs Innovation District, Bayside Technology Park, Ardenwood Technology Park, and Downtown/City Center. Fremont’s broad geography and multiple growth areas provide a diverse array of investment and infill redevelopment opportunities. Investment in these growth areas is supported by favorable land use policies and capital investments by the City that serve as catalysts toward generating 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 infrastructure, its central location, and an expanding employer base. This includes the Warm Springs/South Fremont BART station and adjacent Tesla Factory, which is the City’s largest employer. The station enhances intermodal access to local bike routes and provides critical connectivity to the City’s existing and future employment centers in the greater Warm Springs area.
In February 2022, 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 provided an urban plaza that can be used to hold outdoor events and a trail that will eventually connect to a planned bicycle and pedestrian bridge crossing over Interstate 880.
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 6
Several master plan developments are entitled for Warm Springs, with several under active development. Collectively, these projects provide extensive public benefits, including a new network of complete streets, a new elementary school, public plaza space, 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, advanced manufacturing space, and a new business-class hotel.
While the pandemic has greatly slowed new office and hotel projects, Fremont’s industrial market has remained a high performing class of commercial real estate, with multiple projects in various stages of the development pipeline. These include four projects under review totaling approximately 550,000 square feet (SF), an approved approximately 53,000 SF flex manufacturing/R&D project, one development under construction totaling approximately 209,000 SF, and a 110,000 SF project completed in early 2023 that has been leased to autonomous vehicle company Zoox.
Tesla has also expanded its business activities within the Warm Springs area to include the development and manufacture of cutting-edge advancements in battery technology. The City continues to facilitate the expansion of Tesla, including the addition of new technologies and production activities, as part of the comprehensive strategy for ensuring the City’s long- term economic and fiscal health. Tesla’s master plan ultimately allows for several million square feet to be added to what is already one of the country’s largest manufacturing facilities and the highest volume vehicle manufacturing plant in North America.
To support marketing the commercial/employment opportunities, Warm Springs has been branded as an Innovation District. Successes in attracting advanced technology tenants to the district include Raxium, a manufacturer of holographic displays that was recently acquired by Google; Zoox, a manufacturer of autonomous vehicles; and Underwriters Laboratories (UL), a provider of advanced technology testing and certification services which has significantly expanded its Warm Springs footprint in the last few years.
Downtown/Capitol Avenue
With its centralized, transit-rich location, Downtown Fremont is poised to become a vibrant, mixed-use district that will serve as a gathering hub for the entire community. Boun ded by Fremont Boulevard, Mowry Avenue, Paseo Padre Parkway, and Walnut Avenue, Downtown’s 110-acre district is surrounded by the broader City Center area, which includes major shopping centers like the Hub and Gateway Plaza. Downtown is also encompassed b y Washington Healthcare, Kaiser, and Sutter medical campuses, which collectively employ thousands of skilled workers in the area. Supportive land use regulations and tax revenue - neutral development incentives are in place to spur new investment that will h elp create an exciting new Downtown for Fremont.
Following the City’s investment in Downtown’s street extension and multimodal improvements for Capitol Avenue, the thoroughfare now serves as the district’s envisioned “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 to stimulate economic activity and enhance the vibrancy of the district. Capitol Avenue is punctuated by the Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 7 Downtown Event Center, which opened in October 2021 and can accommodate events of up to 1,200 attendees. The venue represents Phase 1 of a long-term Civic Center Complex plan.
The Downtown Community Plan and associated environmental and planning documents provide a foundation for development to expand over time from approximately 1.25 million SF of current building floor area to over 5 million SF of 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 Locale project includes 157 ownership multifamily housing units, including condos, stacked flats, and row homes, as well as 21,000 square feet of ground floor retail space that will set the tone for a vibrant pedestrian environment. As a bellwether to the Downtown vision, initial leases-up of this first-generation retail space has been strong, with ten of the twelve commercial spaces already leased to locally owned restaurants, shops, and services.
The substantial public investment and City planning efforts for Downtown have 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. A 275-unit mixed-use apartment project by Fore Properties was completed in late 2022 and an approximately 250-unit mixed-use project and a new six- story headquarters office for Fremont Bank are under development, with the latter of the two projects punctuating the gateway to Downtown at the corner of Capitol Avenue and Fremont Boulevard.
Bayside Technology Park and Pacific Commons
Fremont’s Bayside Technology Park and Pacific Commons function as the City’s largest employment area, with approximately two-thirds of Fremont’s over 50 million square feet of industrial and R&D space. Major employers include Lam Research, Bloom Energy, Stryker, Bionova Scientific, UPS, Delta Electronics, and Siemens. While employment in Bayside skews heavily to technology and biomedical-related manufacturing, the district also includes the Pacific Commons Shopping Center, a regional retail mega-center spanning 840 acres.
The center ranked at the seventh most visited shopping center in the country in 2022.
Major development activity in the area includes Pacific Commons South (PCS), an approximately 2.5 million SF Class A industrial project, that was recently completed through a joint venture. Nearly two million SF 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 parent company Meta, biomedical company Cepheid, cleantech manufacturer Bloom Energy, and Amazon. Next door to PCS, Enterprise Holdings is planning a new auto rental center and dealership that will serve to further bolster the City’s Auto Mall sales tax base.
In December 2022, the City approved the Campus at Bayside, a six building, 473,250 SF advanced manufacturing campus on previously undeveloped infill property. The project is expected to break ground in the first half of 2023. Once complete, Campus at Bayside will provide state-of-the-art manufacturing and technology development space at multiple Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 8 building footprints, allowing existing Fremont companies to remain and grow within the area.
Ardenwood Technology Park
The Ardenwood Technology Park is located just off Highway 84 and Interstate 880, offering a shorter or reverse commute from most parts of the region compared to other employment hubs in Silicon Valley. The centrality of Ardenwood, along with competitive rents, better proximity to the bulk of the region’s workforce, and its idyllic suburban office park setting make the district a sought-after location for business expansion and relocation for businesses along the San Francisco Peninsula.
Recent business development wins include life science companies Alexza Pharmaceuticals and Personalis, which relocated and expanded their operations from mid-Peninsula cities to move closer to their existing workforce. Most notably, Facebook parent company Meta recently completed its renovations to its sprawling Fremont Ardenwood campus spanning approximately 20 buildings, with the capacity to support the company’s long-term growth in the region.
In anticipation of Ardenwood's growth, the City re-zoned this district in 2016 to allow for greater building heights and development intensification. The rezoning led to re gional developers The Sobrato Organization and Peery-Arrillaga to propose five new office buildings to be able to accommodate marquee technology employers expanding into Ardenwood. In addition, the district has also experienced several life science buildin g conversion projects, including a facility that formerly served as a vocational college campus that is now fully leased by Personalis.
Business Development: Building on the success of Fremont’s industry base is critical to maintaining a diverse tax base that provides resiliency to disruptive events such as the COVID-19 pandemic and helps to alleviate rising costs for City services. Important initiatives and accomplishments related to this effort are outlined below.
Sector Highlights
Fremont’s biomedical industry, its largest industry by number of firms, continues to be an important growth source. The fact that most of Fremont’s biomedical research companies also manufacture products in Fremont is of particular importance given the economic multiplying effects – providing employment at multiple levels of educational attainment and concentrating a robust supply chain in an around Fremont. For example, pharmaceutical manufacturer Boehringer Ingelheim (BI) has invested nearly $1 billion over the past decade to expand its Ardenwood operation and now employs nearly 1,000 people across four facilities. The presence of BI has served as a beacon for customers, suppliers and competitors to locate in Fremont, such as Bionova Scientific, a biopharmaceutical development services company that recently expanded into its third facility in Fremont.
Other recent additions include medical equipment maker Cepheid, device manufacturer Alexza Pharmaceuticals, and personalized cancer genomics company Personalis. Over the last three years, the number of life sciences companies in Fremont has grown from 125 to over 150, providing a resilient source of economic and tax base expansion during and coming out of the pandemic. The importance of this essential business sector cannot be Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 9 understated as it diversifies Fremont’s jobs and tax base and is less susceptible to economic impact.
Fremont has also made significant efforts to cultivate a thriving cleantech sector and now has over 50 cleantech companies. Over the years, Fremont city staff have amassed subject matter expertise in understanding the needs of advanced technology industries, including permitting their highly complex operations and providing programmatic oversight for hazardous material management. For battery technology startups, this expertise has proven particularly valuable. As a result, several growth-stage battery technology companies have recently moved to or expanded in Fremont. This includes Amprius, a lithium-ion battery technology company based in Fremont that is currently expanding its manufacturing operations and recently began shipping its first products to customers. In the past twelve months, Fremont has seen the arrival of battery companies Our Next Energy, Leap, and Radisurf and the expansion of companies such as EnerVenue and Gridscape. Collectively, these businesses contribute to Fremont being home to the largest industry cluster of battery companies nationwide.
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 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. The company has greatly expanded its manufacturing operations at its Fremont factory, which in 2022 became the most productive auto plant in North America by annual vehicle production while also passing the two millionth vehicle mark for total vehicles produced. With over 30,000 employees assigned to Fremont facilities - the vast majority of which engaged in vehicle and battery production - Tesla is far and away the largest manufacturer in the state of California and an economic engine unto itself. The City’s development services team continues to work closely with Tesla as it scales up its vehicle production lines and expands its facilities to accommodate other new products.
While unmatched in size or stature, Tesla is only one of the hundreds of advanced manufacturing companies in Fremont, often referred to as the city’s “manufacturing ecosystem.” This ecosystem is the result of focused efforts by the City to develop and maintain policies that support the industry, including modernized zoning laws that facilitate emerging industries, investments in the permit review process and staff training, and innovative workforce programs that meet businesses where they are.
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 Regional Occupational Program, Fremont Unified School District, Ohlone College, and the public at - large on tours of manufacturing facilities in Fremont.
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 10 Economic Development also engages with Ohlone College through its Smart Manufactur ing Technology program. During the COVID-19 pandemic, the department partnered with the college to launch the highly successful Earn and Learn Fremont program, providing job seekers with paid on-the-job training while also receiving free instruction in advanced manufacturing technologies. Recent participating employers include Tesla, Bloom Energy, and Evolve Manufacturing. In addition, the City has supported Tesla and Ohlone College’s successful rollout of the Manufacturing Development Program (MDP), where students receive ten weeks of paid classroom instruction and are offered full time jobs at Tesla upon completion.
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 the Silicon Valley Small Business Development Center, the California and National Main Street Associations, Small Business Majority, and other partners.
In March 2023, the City and Fremont Chamber wrapped up a highly successful inaugural Fremont Restaurant Week. The event included over 40 restaurants across the City, ranging from longstanding community anchors to some of Fremont's hottest and newest establishments. The event served to highlight Fremont’s diverse cultures and culinary offerings while providing critical support to restaurants during what is typically a slower time for their businesses. The majority of participating restaurants shared that they had attracted new customers, increased revenue, and widened their brand awareness.
In September 2022, the City partnered with the Better Block Foundation to host a two-day block party in an underutilized area of the Mission San Jose district. The effort included signing on dozens of community volunteers who showed up to paint, build, and bring the community's vision to life on Ellsworth Street. and Washington Boulevard. Their work resulted in the area transforming into a colorful, pedestrian-friendly space for the event.
Local small business Mission Coffee Roasters and the City’s Olive Hyde Art Gallery both participated with live music, and approximately three dozen Fremont-based craft vendors were able to open stalls free of charge. The event stood to show what was possible in the Mission San Jose district and provide a foundation for future events to be held in public spaces.
The COVID-19 pandemic highlighted the critical importance of providing outdoor dining and commercial space, which has led to the City adopting the new Outdoor Commercial Patio Program. This program seeks to build upon the lessons and best practices learned during the height of pandemic restrictions that limited or disallowed indoor commercial activity for extensive periods of time. With this new regulatory framework in place, applicants simply apply for a one-time, low-cost permit. To reduce the cost and time burden on small businesses, outdoor patio permit approvals are tied to the business with no requirements for annual renewal, a major differentiator between Fremont and other communities.
The City also 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 Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 11 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.
Throughout the COVID-19 State of Emergency and looking forward, Staff have remained engaged in regional economic recovery efforts, and have sought to incorporate new programs and efforts to benefit Fremont’s businesses.
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 initially shared the Framework with the City Council at a special work session in the spring of 2021 and continue to implement the strategies based on the guiding principles of economic equity and resiliency. The strategies consist of:
1. Supporting Small Business Recovery
o Enhanced communications and engagement with the small business communi ty 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
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 12 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.
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, as well as from ongoing and one-time transfers from the General Fund.
In the recent past, significant projects completed 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. The new Dusterberry Neighborhood Park is under construction and is planned to open in Summer 2023.
Looking ahead, the City’s proposed five-year CIP (FY 2023/24 through FY 2027/28) includes projects and programs valued at $295 million. The highlights of the proposed CIP are as follows.
• General Fund Special Projects. Based on City Council actions to transfer one-time General Fund revenues to the CIP, valued at $58 million, the proposed CIP includes investment for various urgent priorities which include: a new Central Park Community Center to replace the aging Fremont Community Center and Teen Center; replacement of old restrooms in City parks; replacing outdated HVAC (heating, ventilation, and air conditioning) systems at City buildings; addressing deferred maintenance at City Hall buildings; and providing charging infrastructure to support replacing City fleet vehicles with electric vehicles. • Capital Maintenance. Preservation and maintenance of existing City assets is a primary focus of the CIP. The highest level of funding in Capital Maintenance is allocated to ongoing 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 for traffic operations and signal system improvement, bicycle and pedestrian 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, including improvements to overall traffic flow.
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 nearing completion is the “Fremont Boulevard Safe and Smart Corridor” project ($9 million) which will modernize 38 traffic signals.
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 13 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. Typical projects include the construction of flashing beacons at pedestrian crossing of major streets and protected bikeways. These projects are design to improve safety and promote more “walking and rolling,” also known as “active transportation,” by community members of all ages and abilities. 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 to implement the new Parks and Recreation Master Plan approved by the City Council in March 2022.
Significant themes in both the adopted and proposed CIP include the following:
o Major Park Improvements – Ongoing major park projects including California Nursery Historical Park, Centerville Community Park, Palm Avenue Community Park, and Rix Neighborhood Park, in addition to the Dusterberry Neighborhood Park currently under construction.
o Upgrades throughout Park System – Upgrades to play areas are being installed at Marshall, Booster, Buena Vista, Azevada, Northgate, Los Cerritos, Centerville, and Northgate Parks; new dog parks are proposed at Patterson Ranch and Vallejo Mills; and new pickle ball courts are planned at Vallejo Mills and Pacific Commons.
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 continues 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. Earlier this spring, the City Council reviewed and approved Fremont’s 2023 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 Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 14 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 2023, the Fremont City Council once again confirmed financial health and sustainability as the City’s foundational principle.
Additionally, the City Council renewed consensus on three top priority areas for the coming year. The priority areas include:
• Continue 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 now that 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. • Foster the viability 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.
• Focus on 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.
A record number of bills were introduced earlier this year by State lawmakers for consideration in the 2023/24 California legislative cycle. Key issues the City will be keeping an eye on this session include the State’s budget, housing and homelessness, environment and climate change, health care, drugs (fentanyl crisis), and public safety. Staff’s work plan includes the process of reviewing and monitoring dozens of bills, advocating for legislation and regulations that affect our community, partnering with local jurisdictions, and seeking funding opportunities 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 and 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. In 2022, the City was successful in securing funding opportunities for key priority projects: (1) Under the Congressional reinstated earmark process that provides local governments and nonprofits the opportunity to submit projects under the Community Project Funding process, the City received support from Senator Alex Padilla and Congressman Ro Khanna in the amount of $1.5 million to deploy wi-fi access in several of Fremont’s business districts; (2) Through the 2022-23 California state budget process, with the support of Fremont’s Senator Bob Wieckowski and Assemblymember Alex Lee, the City was awarded $20.5 million to support the Sabercat Trail Extension project, Central Park Multi-Use Center, and the Housing Navigation Center. In March 2023, the City submitted several new Community Project Funding requests through our federal representative offices for consideration.
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 15
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, 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
Council Staff Report (ID # 4923) Meeting of June 6, 2023 Updated: 5/31/2023 1:40 PM by Alberto Quintanilla Page 16 Conclusion
This proposed budget takes advantage of our growing local revenues 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 2023/24 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 13, 2023.
ENVIRONMENTAL REVIEW: Action on the proposed operating budget is an organizational, fiscal, and administrative governmental activity that will not result in physical changes in the environment. Therefore, it is not a project subject to review under the California Environmental Quality Act (CEQA) pursuant to '"CEQA Guidelines section 15378.
LINK: The FY 2023/24 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 2023/24 Proposed Operating Budget.