STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of March 28, 2023
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Mike Roberts, Public Works Director
Edwin Gato, Finance Director
SUBJECT: Draft Fiscal Year 2023-24 Capital Improvement Program and Ten-Year Capital Funding Plan RECOMMENDED ACTION:
City Council receive a report and the Draft Fiscal Year (FY) 2023-24 Capital Improvement Program (CIP) and Ten-Year Capital Funding Plan, discuss, and provide direction to staff as needed.
COMMISSION ACTION AND RECOMMENDATION:
The Finance Commission reviewed the draft proposed FY 23-24 and Ten-Year CIP at their regular meeting on March 15, 2023, and expressed their full support of the projects. They will conduct a final review of the FY 23-24 at their regular meeting on May 17, 2023, before the City Council adopts the budget in June.
BACKGROUND:
The CIP outlines the vision for short- and long-range project delivery and funding for the maintenance, improvement, and building of new and existing infrastructure assets to benefit our residents, businesses, property owners, and visitors. The CIP links the General Plan, various master planning documents, and available resources to provide a means for planning, scheduling, and implementing capital projects over the next ten years. In prior years, the CIP planning window was for five years, but with the pending completion of the Parks Master Plan and future Facility Master Plan, the City will be able to plan an additional five years, and so this CIP offers a longer-term approach to prioritizing and selecting new projects in the City. Although the plan document is updated annually, it allows the reader to review projects planned over the ten-year timeframe and provides an overview of works in progress.
The CIP is intended to incorporate the City’s investments in infrastructure development and maintenance (i.e., capital improvements) with other significant capital expenditures that add to or strategically invest in the City’s inventory of assets. Studies and capital expenditures of less than $25,000 are not typically included in the CIP. The chart on the following page identifies projects completed and ongoing projects in the 2022-2023 fiscal year:
Typically, procedures for developing the Multi-Year CIP take into account the City Council priorities, revenue forecasting, project evaluation, and community engagement processes. For the FY – 2023-2024 fiscal year, staff will be recommending a substantial three-pronged solution to our decades-long problem of funding larger infrastructure projects in the future, while continuing to provide our most valued services to the community. The first two prongs include "catching up" and "keeping up" on infrastructure maintenance. The third-prong will allow the City to develop a financial plan for larger projects that span multiple fiscal years, like the Hercules Hub, improvements to our sewer system, and major road repairs.
More specifically, this year's ten-year CIP focuses on continuing to reduce the backlog of ongoing capital projects (catch up), assess and address critical deferred maintenance projects before they get worse (keep up), and strategically invest in projects that meet the City's goals for the future (move ahead).
In the past, department heads would initiate requests for new CIP projects or make adjustments to existing projects. These requests, along with supporting information, would be prepared as part of the annual budget process.
For the last few years, the City invested in developing long-term infrastructure planning efforts, including the Sewer Master Plan, Parks and Recreation Master Plan, and Facilities Maintenance Plan. These planning efforts were crucial to lay the groundwork to identify and prioritize critical infrastructure needs in each topic area. Understanding our near-term and long-term needs will allow for a more strategic approach to identifying capital resource needs while still allowing the flexibility to respond to other projects or issues as they arise.
Even with the master planning efforts, projects must be further scoped and prioritized annually according to available funds and resources to successfully deliver the projects. The evaluation criteria applied to prioritize current projects include:
Council priorities and community concerns
Public health and safety
Regulatory compliance
Preservation of city assets
Improved efficiencies
Grant funding timelines
Staff capacity to deliver
ANALYSIS:
The FY 23-24 preliminary draft CIP includes 19 projects (4 for facility, 6 for Parks, 2 for Sewer, 6 for Streets, the Hercules HUB), and 10 existing (or carryover) projects. The chart on the following page incorporates new funding requests for ongoing projects with scope changes, anticipated cost escalation, and newly identified projects.
FISCAL IMPACT:
Projects with prior City Council appropriations that were not fully expended have remaining appropriation balances that are included as carryover amounts. These amounts are strictly an estimate and will be trued up at year-end close. Amounts reflected in the projected carryover column should not be construed as funds available for commitment. In many cases, the carryover estimate includes funds that have been encumbered/committed as a result of an executed contract for services or goods.
The ten-year CIP coordinates physical improvements with financial planning, allowing maximum benefits from available funding sources. It relies on funding from various sources, primarily retained in the capital and special revenue funds, with uses usually restricted to specific purposes. Funding sources are each further described in the City's adopted budget. The City also adopted a policy to set aside money for a capital reserve to utilize as a funding source for capital needs.
Staff is committed to completing the projects outlined in the CIP budget.
ATTACHMENTS:
Ten-Year CIP Summary
Ten-Year CIP – Facility Category
Ten-Year CIP – Parks Category
Ten-Year CIP – Sewer Category
Ten-Year CIP – Street Category
Ten-Year CIP – Hercules HUB Category