Fremont City Council Meeting: 06/04/24 07:00 PM
3300 Capitol Avenue Div/Dept: Finance Department
Fremont, CA 94538 Category: Budget
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5178) DOC ID: 5178
Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 1
FIRST PUBLIC HEARING ON FY 2024/25 PROPOSED OPERATING BUDGET - First Public Hearing (Published Notice) on FY 2024/25 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 2024/25 Proposed Operating Budget. The second public hearing and adoption are scheduled for June 11, 2024.
BACKGROUND: The following information has been extracted from the Budget Overview section of the FY 2024/25 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.
This proposed budget addresses a near-term revenue shortfall brought about by the overpayment of sales tax revenue by the State to the City during FY 2022/23. We expect the State to reallocate approximately $19.5 million over the last quarter of FY 2023/24 and the first quarter of FY 2024/25. Combined with reduced ongoing sales tax revenue estimates, those reallocations will require the use of one-time funds to maintain the current level of services to the community in FY 2024/25.
Fortunately, the City Council’s prudent decisions to set aside the General Fund unreserved ending fund balance from FY 2022/23, to increase the General Fund Budget Uncertainty Reserve at the beginning of FY 2023/24, and to further augment the Budget Uncertainty Reserve at mid-year, provide us with the resources we need to offset the near-term revenue shortfall. Our General Fund forecast indicates that our ongoing revenues will again be sufficient to cover our ongoing expenditures, without the further use of reserves, beginning in FY 2025/26.
Supplemented by funding from the Budget Uncertainty Reserve, total General Fund budgeted resources in the coming fiscal year are estimated to be more than adequate to support total budgeted expenditures of $276.3 million. Reflecting moderate projected growth in the local economy, ongoing General Fund resources are estimated to increase by
3.5% in FY 2024/25.
The proposed budget continues to incorporate the City Council’s and community’s highest priorities by maintaining funding for addressing and preventing homelessness, ensuring public safety, and pursuing environmental sustainability.
Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 2
The following are highlighted in this overview:
• FY 2024/25 Fiscal Outlook
• Economic Update
• Key Budget Assumptions
• Discussion of Unmet Needs
• Major City Initiatives
FY 2024/25 Fiscal Outlook
Staff anticipates that the local economy will continue to grow at a moderate rate during FY 2024/25. Total General Fund ongoing resources (revenues and transfers in) of $261.2 million are projected to increase by 3.5% over estimated actual ongoing resources in FY 2023/24.
Property tax and sales tax are the City’s most significant revenue sources. Property tax revenues are estimated to total $141.0 million in FY 2023/24, and staff projects those revenues will increase to $147.3 million in FY 2024/25, an increase of 4.5%. 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 2024/25 tax roll is an increase of 2%. An estimated increase in value from changes in ownership of 2.6% is based on property transfer tax data for calendar year 2023 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 $55.4 million in FY 2023/24, increasing by 3.8% to $57.5 million in FY 2024/25. These estimates incorporate the $19.5 million of overpaid sales tax to be recovered by the State, as well as an additional revenue reduction of $4.3 million of Countywide pooled sales tax revenue.
Business taxes are projected to yield $14.1 million in FY 2023/24. Although that total represents a decrease of 1.1% from the prior year, all of the decrease is attributable to a significantly lower level of development-related residential construction business tax. After adjusting for approximately $600,000 of one-time prior year collections, the non- development general business tax category is expected to increase by almost 6%. The FY 2024/25 business tax estimate is $14.0 million, an increase of 3.9% from the adjusted FY 2023/24 amount.
After double-digit post-pandemic growth in the two prior years, occupancy rates and room rates appear to have plateaued. The estimate for FY 2023/24 hotel/motel tax revenue is $6.1 million, a 1.7% increase from the prior year. However, based on an acceleration in activity over the last several months, FY 2024/25 hotel/motel tax revenues are estimated to reach $6.5 million, an increase of 6.4% from the current year.
The FY 2024/25 proposed operating budget maintains the General Fund Contingency Reserve at 16.7% of budgeted expenditures and transfers out, or $46.1 million, a level consistent with City Council policy and the recommended practice of the Government Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 3
Finance Officers Association of the United States and Canada. The General Fund Budget Uncertainty Reserve is projected to end FY 2023/24 at $24.4 million.
Economic Update
The national economy is expected to continue expanding at a moderate rate. The Federal Reserve anticipates growth of approximately 2% in 2024 and 2025. Calendar year 2023 saw the national economy expand at a healthy 2.5% annual rate, with particularly high growth in the third and fourth quarters. Consistent with an economic expansion, the labor market has remained tight, with the national unemployment rate remaining close to record low levels.
The advance estimate for the first quarter of 2024 reports that gross domestic product (GDP) increased by 1.6%, slowing from the 3.4% increase in the fourth quarter of 2023.
The seasonally adjusted unemployment rate rose slightly to 3.9% in April 2024, increasing only slightly above the historically low level we’ve seen over the past two years.
To combat inflation, the Federal Reserve has raised interest rates repeatedly over the last two years, and that intervention appears to be working, with the consumer price index declining from 6.4% in January 2023 to 3.5% in March 2024. Despite that drop, the Federal Reserve does not yet appear to be ready to start reducing interest rates, so tight credit for businesses and homebuyers will continue to act as a drag on the economy as we start the new fiscal year.
The press release from the most recent meeting of the Federal Reserve Open Market Committee on May 1st notes that “… economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low.
Inflation has eased over the past year but remains elevated.”
Although the favorable labor market has been supporting strong consumer spending, high prices and borrowing rates raise concerns about the future. According to The Conference Board Consumer Confidence Survey, “Confidence retreated further in April… elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up.”
The City’s revenue forecast assumes continued increases over the next few years, but the continuation of domestic political polarization and international armed conflicts create significant economic uncertainties.
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 2024/25 proposed budget:
1. The State’s partial recovery of misallocated sales tax revenue and adjustments for the lower level of ongoing revenue will consume the $21.9 million unreserved ending fund balance from FY 2022/23 and reduce the General Fund Budget Uncertainty Reserve from $30 million to $24.4 million by the end of FY 2023/24.
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2. The local economy will grow at a moderate rate during FY 2024/25. Total General Fund ongoing resources (revenues and transfers in) are projected to increase by
3.5% over estimated actual ongoing resources in FY 2023/24.
3. The second half of the State’s sales tax revenue reallocation in FY 2024/25 will require additional use of the Budget Uncertainty Reserve to balance the proposed budget while maintaining services at the current level. The Budget Uncertainty Reserve is projected to end FY 2024/25 with a balance of $6 million.
4. In accordance with City Council policy, an additional pension contribution of $6.7 million to pay down the City’s unfunded liability more rapidly has been incorporated into the proposed General Fund budget.
5. Total expenditures in the FY 2024/25 proposed budget include a savings assumption of $21.2 million (approximately 7.5% of total budgeted expenditures in FY 2024/25) to reflect the City’s historical experience of under-spending total allocated resources, primarily due to salary savings from vacant positions.
6. The FY 2024/25 proposed budget includes continued funding for streets, sidewalks, and facilities maintenance, parks and street medians capital replacement, and capital improvements to achieve compliance with ADA standards.
7. 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).
8. The proposed budget does not include funding to restore the General Fund Budget Uncertainty Reserve but reestablishing that reserve at an appropriate level will be considered a top priority. As part of the FY 2023/24 Year-End Report in Fall 2024, staff will bring forward recommendations for allocating any 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 Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 5
residential units in Warm Springs, as well as other development throughout the City, necessitates 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 implementation of the Mobility Action Plan. Components of the Mobility Action Plan, such as completion of the Safe Routes to Schools program, traffic signal modernization, and construction of major bicycle and pedestrian infrastructure 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 and converting City buildings from gas to electric heating 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 projected to need over $100 million over the next 25 years.
As the City will be experiencing a revenue shortfall in FY 2024/25, the proposed budget includes very few General Fund service enhancements. One of the highlights of FY 2024/25 will be the activation of the City’s new fire truck company in early 2025. Additional service proposals include increased spending for business district activation throughout the City, higher funding for the special event sponsorship program to accommodate expanded events and higher fees, and a new police lieutenant position to focus on public accountability, enhanced policing standards, emergency preparedness, and support for community field operations. Outside the General Fund, integrated waste management fees will fund more frequent homeless encampment cleanups, and contracts with the County will pay for additional staff to serve youth and family services clients at the Fremont Family Resource Center.
The proposed operating budget also incorporates a cost-neutral shift of the City’s Environmental Services Division from the Community Services Department to the Community Development Department, which currently houses the City’s environmental sustainability function. The combined resources will better position the organization to pursue the City Council’s goal of prioritizing environmental sustainability.
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 Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 6
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.
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. Both the national and regional commercial real estate markets remain weak for speculative office and hotel developments, impacting the near-term viability of certain projects. However, there are several prime opportunity sites in the area that will allow for flexible commercial and mixed-use redevelopment when market conditions improve.
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 seven projects under review totaling approximately 1.3 million square feet (SF); two projects under construction totaling approximately 662,000 SF; and two projects recently completed totaling approximately 316,000 SF, including a 110,000 SF project leased entirely to autonomous vehicle company Zoox and a 206,000 SF facility leased entirely to RK Group. RK Groupis planning for what will ultimately become the largest and most state-of-the-art facility in California for handling of lithium-based batteries.
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.
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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. Bounded 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 by 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 help 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 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 have been strong, with all eleven of the commercial spaces leased to locally owned restaurants, shops, and health and beauty 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- Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 8
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 building footprints, allowing existing Fremont companies to remain and grow within the area. Currently, the project’s sponsors are finalizing building permits while waiting for financing conditions to improve.
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. While Meta has downsized its local workforce and placed several of the buildings on the market for sublease, the company has indicated that it expects to retain most of the core campus to accommodate future growth.
Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 9
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 genomics sequencing equipment maker Ultima Genomics, 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 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. Over the past two years, 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 Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 10
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.
Economic Development also engages with Ohlone College through its Smart Manufacturing 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 2024, the City and the Fremont Chamber of Commerce launched the second annual Fremont Restaurant Week. The event included 45 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.
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To help tell the stories of the people who make up Fremont’s small businesses, Economic Development launched the Shop Small series. The series features short videos profiling individual businesses to showcase the small businesses that help make Fremont unique, highlighting the stories of the business owners behind the scenes through a monthly video series on the City's social channels and YouTube channel. In a similar vein, the City also launched Small Business Saturday and Small Business Week campaigns, taking out full - page ads in the Tri-City Voice and posting across the City’s social channels.
2023 also marked a major milestone with the completed adaptive reuse of the historic Centerville Theater. The multi-year rehabilitation required facilitating extensive site improvements -- including the rebuilding of the iconic marquee sign, fire prevention, HVAC, and accessibility -- all of which will allow for numerous future commercial uses, including a basketball league space in the near-term and an envisioned public market and food hall in the longer term.
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 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
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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.
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; 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 West Access Bridge and Plaza at the Warm Springs BART Station, and the new Dusterberry Neighborhood Park.
Looking ahead, the City’s adopted five-year CIP (FY 2023/24 through FY 2027/28) includes projects and programs valued at $296 million. The highlights of the adopted CIP are as follows.
• General Fund Special Projects. The adopted 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 recently completed is the “Fremont Boulevard Safe and Smart Corridor” project ($9 million) which modernized 38 traffic signals.
Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier 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. A new Active Transportation Plan is being prepared with significant community input and the final plan is scheduled for completion in Fall 2024.
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 the adopted CIP include the following:
o Major Park Improvements – Ongoing major park projects include California Nursery Historical Park, Centerville Community Park, and Palm Avenue Community Park. Improvements to Rix Neighborhood Park were recently completed.
o Upgrades throughout Park System – Upgrades to play areas are being installed at Booster, Buena Vista, Azevada, Los Cerritos, and Centerville Parks; new dog parks are proposed at Patterson Ranch and Vallejo Mill; and new pickle ball courts are planned at Vallejo Mill and Pacific Commons. Upgrades were recently completed at Marshall Park and Northgate Park, and new pickle ball courts were completed at Central Park.
o Trail and Pedestrian Improvements throughout Park System – Trails are being upgraded at Central Park and a new trail was recently completed at Sylvester Harvey 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 Northgate Community Park. o Land Acquisition for New Neighborhood Parks – To support the adopted goal of having a park within a 10-minute walk for all Fremont residents, a parkland acquisition program is funded to purchase properties within under-served neighborhoods as opportunities become available.
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 Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 14
levels to ensure the interests and concerns of Fremont and the region are preserved. In June 2023, the City Council reviewed and approved Fremont’s Legislative Framework which establishes guiding principles and priorities and serves as the City’s foundation for pursuing major initiatives and funding opportunities. Adopting a legislative framework 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 April of 2024, the Fremont City Council once again confirmed financial health and sustainability as the City’s foundational principle. Additionally, the City Council renewed consensus on the need to continue to address homelessness and prioritize public safety as top priority areas for the coming year. Additionally, the City Council added environmental sustainability as a new priority area this year, replacing commercial corridor vibrancy and health, due to significant milestones reached over the last couple of years. • 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. • 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.
• Prioritize Environmental Sustainability; Implement the measures outlined in Fremont’s updated Climate Action Plan, Climate Ready Fremont, which leverage infrastructure, technologies, policies, programs, and public engagement to reduce community-wide greenhouse gas emissions, achieve carbon neutrality goals, address climate change, and create a more sustainable, equitable, and resilient community.
A record number of bills were introduced by State lawmakers in 2024 during the second year of California’s 2023/24 legislative cycle. Key issues the City is keeping an eye on this session include the State’s budget, housing and homelessness, environment and climate change, health care, transportation and public safety. Staff’s work plan includes the process of reviewing and monitoring dozens of bills, analyzing and advocating for legislation and regulations that affect our community, partnering with local jurisdictions, and seeking funding opportunities that support these priorities, as well as other Council adopted policies and plans including but not limited to the City’s General Plan, Housing Element, Climate Action Plan, Mobility Action Plan, and the Parks and Recreation Master Plan.
Fremont is fortunate to work with lobbyist representatives who have been instrumental in helping the City to be aware of funding opportunities and service programs at the State and federal level. In 2023, the City was successful in securing funding opportunities for key priority projects:
1. Under the Congressional earmark process that provides local governments and nonprofits the opportunity to submit projects under the Community Project Funding process, the City received support from Congressman Ro Khanna in the amount of Council Staff Report (ID # 5178) Meeting of June 4, 2024 Updated: 5/31/2024 7:36 AM by Susan Gauthier Page 15
$850,000 to revitalize the Auto Mall Parkway center median, and under Congressman Eric Swalwell, the City was awarded $500,000 for the Central Park Community Center and $963,000 for the police community camera equipment replacement/upgrade.
2. Through the 2023 California state budget process, with the support of Fremont’s State Senator Aisha Wahab and Assemblymember Alex Lee, the City was awarded $500,000 to support the Housing Navigation Center, $1 million for the Central Park Community Center, and $1.5 million for commercial district community wi -fi.
In spring of 2024, the City submitted several new funding requests through our State and federal representatives for consideration.
Over the next year, staff will continue to work with our legislative advocates 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.
Conclusion
By making use of the reserves specifically established to address temporary revenue shortfalls, this proposed budget maintains essential services focused 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 2024/25 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 11, 2024.
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 2024/25 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 2024/25 Proposed Operating Budget.