CITY OF LAGUNA NIGUEL
CITY COUNCIL AGENDA ITEM
To: Honorable Mayor and Council Members
FROM: Kristin Forier, Interim Finance Director
DATE: February 7, 2023
SUBJECT: Fiscal Year 2022-2023 Mid-Year Budget Review
RECOMMENDATION
Staff recommends that the City Council:
1. Approve the following FY 2022-2023 budget adjustments:
Revenues
a. Recognize grant revenue for the Trash Control Devices on Stormwater Catch Basins 2022 in the amount of $196,000 (Measure M2 grant funds).
Expenditures
b. Appropriate $300,000 for the Marina Hills Drive Resurfacing Project (Niguel Road to Golden Lantern) (Gas Tax - HUTA funds).
c. Appropriate $800,000 for the Residential Annual Resurfacing Program (Zones 3 and 4) (American Rescue Plan funds).
d. Appropriate $250,000 for the La Paz Road Evaluation (American Rescue Plan funds).
e. Appropriate $250,000 for the Citywide Sports Field Grass Turf Rehabilitation Program (American Rescue Plan funds)
f. Appropriate $250,000 for the Trash Control Devices on Stormwater Catch Basins 2022 (Measure M2 grant and Gas Tax - HUTA funds), and Provide staff direction on the appropriation of the FY 2021-2022 $2.1 million surplus.
BACKGROUND
At the June 7, 2022, City Council meeting, a balanced budget for Fiscal Year 2022-2023 was adopted. The City estimated General Fund revenues of $49.0 million and expenditures of $47.9 million, resulting in a $1.1 million surplus. Furthermore, the City directed that these funds be held in the reserve account until future action could be
taken by the City Council to appropriate the funds. At the November 1, 2022, City Council Meeting, the City Council authorized a budget appropriation to reduce the City's unfunded pension liability by $4,800,000 during Fiscal Year 2022-2023 and an additional $1,000,000 was remitted to the City's Section 115 Trust with PARS. This appropriation included the use of the $1.1 million surplus. Now that Fiscal Year 2022- 2023 is halfway complete, it is prudent to review the budget and provide updated mid- year estimates.
ANALYSIS
GENERAL FUND
Overall, the Fiscal Year 2022-2023 revenues and expenditures are tracking as projected, therefore, no budget adjustments are recommended at this time for the General Fund. As a result of the Fiscal Year 2021-2022 audit, the General Fund ended with a surplus of $2.1 million. Staff would like to present the following options to the City Council for consideration.
Option 1: Appropriate the $2.1 million Surplus for the Remaining Unfunded Pension Liability as of the June 30, 2021 Valuation
The unfunded pension liability as of the valuation date of June 30, 2021 as presented to the City Council on November 1, 2022 was $6.9 million. After the $4.8 million of previously authorized payments are completed, $2.1 million remains as the unfunded liability from the valuation period presented. Appropriating the Fiscal Year 2021-2022 surplus of $2.1 million will satisfy the unfunded liability for the June 30, 2021 valuation period; however, the liability will continue to fluctuate with each subsequent valuation year. The total savings to the City would be over $2.8 million over approximately the next 15 years. The City currently has $1,902,147 held in the Section 115 Trust with PARS.
Option 2: Surplus to be Appropriated for Future Allocations from the Deferred Maintenance, Capital Assets, and Infrastructure Replacement Reserve allocations from the Deferred Maintenance, Capital Assets, and Infrastructure allows for any remaining fund balance, after the other Council approved reserves are fulfilled, to be apportioned to this reserve, which is designated as 75% to streets and 25% to other capital assets and infrastructure. As of June 30, 2022, the Deferred Maintenance, Capital Assets, and Infrastructure Replacement Reserve has a total of $22,345,608, which is designated as $16,759,206 for Streets and $5,586,402 for Other Capital Assets/Infrastructure.
CAPITAL IMPROVEMENT PROJECTS
The Fiscal Year 2022-2023 Capital Improvement Program (CIP) includes 14 projects and a total of $9,414,316 in new funding. Staff recommends that two capital projects are added, and additional funding be provided for three existing capital projects. This will increase the funding by $1,850,000 for a total Fiscal Year 2022-2023 CIP budget of $11,264,316. A capital projects update has been included as Attachment A.
Marina Hills Drive Resurfacing Project - Niguel Road to Golden Lantern In addition to rehabilitation of the pavement of Marina Hills Drive from Niguel Road to Golden Lantern, this project includes bike lane enhancements, associated concrete improvements including curb and gutter, sidewalks and ADA access ramps and the installation of traffic signal video detection systems at two intersections providing bicycle detection capabilities. This project spans the entire length of Marina Hills (approximately
1.2 miles) and will add approximately 20 years of useful life to the roadway.
The adopted Fiscal Year 2022-23 budget provided funding for the construction phase of this project using $200,000 in Coronavirus Response and Relief Supplemental Appropriation Act of 2021 (CRRSAA) funds and $1,800,000 in Gas Tax (SB1) funds.
Due to the increased cost of materials and labor, staff is requesting additional funding of $300,000 in Gas Tax (Highway Users Tax) funds to accomplish the construction phase of this project. If approved, the total cost for this project will be $2,300,000.
Residential Annual Resurfacing Program (Zones 3 & 4)
In order to maintain City streets in good condition, the City Council adopted the Pavement Management Program, a work plan that identifies deficiencies and recommends projects to improve the Pavement Condition Index (PCI) of City streets, on June 1, 2021. The Pavement Management Program includes annual residential overlay, annual arterial overlay, and biennial residential slurry seal.
Zones 1 and 2 of the biennial residential slurry seal were completed in Fiscal Year 2021-22. This project includes the slurry seal of the residential streets in the next two zones of the program, Zones 3 and 4, which will be completed in two phases. Phase 1 includes the removal and replacement of failed sections of roadway and the sealing of minor cracks. Phase 2 includes the application of the slurry seal coating which will add 7 years of useful life to the roadway.
The adopted Fiscal Year 2022-2023 budget provided funding for this project using $3,000,000 in Measure M2 funds and $500,000 in Gas Tax (Highway Users Tax) funds.
Due to the rising materials and labor costs and after completing a thorough survey of the streets, staff is requesting additional funding of $800,000 in American Rescue Plan funds to accomplish this project. If approved, the total cost for this project will be $4,300,000.
La Paz Road Evaluation
This project is the evaluation of the earth movement on La Paz Road near Rancho Niguel Road to determine the cause and determine the solutions to correct this issue.
The southbound number two lane has been closed to through traffic since September 2021 as the roadway has distorted and the asphalt, curb and gutter, and sidewalk has deteriorated in condition. The surface of the roadway is damaged and unable to safely carry vehicular traffic.
The initial engineering analysis for this project began in Fiscal Year 2021-2022. The adopted Fiscal Year 2022-2023 budget provided funding for continued engineering evaluation including monitoring and data collection of $200,000 in American Rescue Plan funds. Staff is requesting the approval of an additional $250,000 in American Rescue Plan funds to fund ongoing monitoring, engineering support to prepare a submittal to FEMA requesting grant funding for construction, and engineering design for installation of an improved interim lane closure design. If approved, the total Fiscal Year 2022-23 cost of this project will be $450,000.
Citywide Sports Field Grass Turf Rehabilitation Program The City owns and maintains seven (7) grass sports fields. Staff uses horticultural practices such as aerification, overseeding, fertigation and extended closure periods to revitalize existing grass turf on the City-owned sports fields. Depending upon the amount of programming and use of the sports fields, the grass turf should be replaced yearly to semi-yearly in order to provide safe and aesthetically pleasing fields for the City's user groups.
The purpose of the Citywide Sports Field Grass Turf Rehabilitation Program is to provide a schedule and funding for the rehabilitation and/or replacement of the grass turf at the City-owned sports fields. In addition to replacement of the grass turf, this program includes removal of the existing grass turf, repairs to the sports field including filling of any divots and leveling along with drainage and irrigation improvements.
This initial project of the Citywide Sports Field Grass Turf Rehabilitation Program will replace the grass turf at the Crown Valley Community Park upper soccer field and the soccer field at Marina Hills Park closest to the basketball courts. Staff observations and user groups identified these two fields to be the most in need of new grass turf.
The replacement of the grass turf at these soccer fields will require a budget of $250,000 in Fiscal Year 2022-2023. The funding for this project is the American Rescue Plan funds. Grass turf replacement at the other City-owned sports fields will be programmed and funded in future Fiscal Years.
Trash Control Devices on Stormwater Catch Basins 2022
Trash discarded on land can be washed or blown onto roadways and then into stormwater catch basins and other storm drain inlets. From there, it is transported downstream to waterways and the ocean where it can adversely affect wildlife and public health. The State's trash regulation policy and water quality standards require municipalities to install trash screens on their catch basins.
The City currently has trash capture devices installed on approximately 450 of its stormwater catch basins. This project consists of the purchase and installation of Connector Pipe Screen (CPS) devices in an additional 196 municipal stormwater catch basins throughout the City. These CPS devices are fabricated from stainless steel and are installed inside a catch basin to prevent smaller-sized trash from entering the storm drain system and have a useful life of approximately 15 years. The installation of the additional 196 devices will capture approximately 2,850 gallons of trash per year.
The City has received an OCTA Measure M2 Project X Tier 1 2022 Environmental Cleanup Program grant of $196,000 that will provide a substantial portion of the project cost. Therefore, staff recommends that the City Council recognize grant revenue in the Measure M2 fund for $196,000. The City is obligated to provide a minimum of 20% matching funds, which are estimated to be $54,000 and will be funded using Gas Tax (Highway Users Tax) fund.
AMERICAN RESCUE PLAN FUNDS
The City received two allocations of $4,410,727 in May 2021 and June 2022 for a total of $8,821,454 in American Rescue Plan Funds. Through January 2023, a total of $6,196,254 of funding has been budgeted for the various projects. All funds must be contractually obligated to be expended by December 31, 2024. An American Rescue Plan funding summary of projects has been included as Attachment B, which includes the $1,300,000 in proposed projects and increases to existing projects recommended for appropriation in the Mid-Year Budget Review.
LEGAL REVIEW
No legal review is required for this report.
FISCAL IMPACT
Revenues
Staff recommends that the City Council recognize Measure M2 Project X grant revenue related to the Trash Control Devices on Stormwater Catch Basins project in the amount of $196,000 for FY 2022-2023.
Expenditures
Capital Improvement Projects
There are capital projects that staff recommends allocating American Rescue Plan Funds, Gas Tax (HUTA) funds, and a Measure M2 grant to address. The total additional appropriations for all recommended projects is $1,850,000. The recommended projects are summarized below.
Project Allocation Funding Source
Marina Hills Drive Resurfacing Project $300,000 Gas Tax - Highway Users Tax (Niguel Road to Golden Lantern)
Residential Annual Resurfacing $800,000 American Rescue Plan Program (Zones 3 and 4)
La Paz Road Evaluation $250,000 American Rescue Plan
Citywide Sports Field Grass Turf $250,000 American Rescue Plan Rehabilitation Program
Trash Control- Devices on Stormwater $250,000 $196,000 Measure M2 Grant Catch Basins $54,000 Gas Tax - Highway Users Tax
Total $1,850,000
Reserve Update
As of June 30, 2022, the City had $48.5 million in General Fund balance. This equates to approximately 105% of fund balance compared to that year's operating expenditures.
The City's policy is to keep a minimum of at least 50% for emergencies. This is a very healthy ratio, as it indicates the City has more than one year of operating expenditures in reserves. In Fiscal Year 2021-2022, the General Fund increased in fund balance by approximately $2.1 million. Based on the current budgeted revenues and expenditures for Fiscal Year 2022-2023, the General Fund estimated fund balance at June 30, 2023 is $44.0 million. This equates to approximately 90% of fund balance compared to estimated operating expenditures.
General Fund Reserves
Audited Audited Estimated
Description of Reserves/Fund Balance Balance at Balance at Balance at June 30, 2021 June 30, 2022 June 30, 2023
Non-Spendable:
Deposits and Prepaid Items $75,745 $111,990 $100,000
Restricted:
Pension Liability - 115 Trust 692,039 916,958 1,902,147 Committed:
Financial and Economic Uncertainty 19,669,430 22,996,777 24,336,824 Compensable Accrued Unused Vacation / Sick 303,597 289,278 375,000 Other Post-Employment Benefits (OPEB) 1,635,928 1,047,847 1,200,000 Deferred Maintenance, Capital Assets &
Infrastructure
75% to Streets 17,715,300 16,759,206 11,704,801
25% to Other Capital Assets 5,905,100 5,586,402 3.901,600 Assigned:
Departmental Operations 349,954 782,099 500,000
Totals 46,347,093 48,490,557 44,020,372
Staff recommends that the City Council provide direction on the designation of the $2.1 million surplus from FY2021-2022.
CONCLUSION
The City of Laguna Niguel is in excellent financial condition as the Fiscal Year 2022- 2023 budget is on track, including allocating the American Rescue Plan funds. Staff is seeking direction from the City Council on the $2.1 million General Fund surplus from Fiscal Year 2021-2022. Additionally, staff recommends allocating $1.3 million from the City's American Rescue Plan funding to move forward with critical capital projects, as well as utilizing $354,000 of Gas Tax (Highway Users Tax) funds and $196,000 in Measure M2 Project X Grant funds. The City's strong financial policies and fiscally responsible leadership since incorporation have served the City well. The City boasts of a strong tax base and plans it's spending very conservatively. The City is prospering today and is well positioned to thrive in the future.
Samas 8 Retonsean
Tamara S. Letourneau
City Manager Public Works Director
Kistin Fores
Kristin Forier
Interim Finance Director
Attachments:
A. Capital Projects Update
B. American Rescue Plan Update
ATTACHMENT A
Capital Projects Update
City of Laguna Niguel
Capital Improvement Project Details
For Fiscal Years 2022-23 (Mid-Year) through 2026-27
PROJECT NAME: Trash Control Devices on Stormwater Catch Basins 2022 EXPLANATION:
Completion of this project supports City Council Goal 4 (Infrastructure and Technology) of the City's adopted Strategic Plan
ESTIMATED COST: 250,000 GL Account: 300-76-6130 7623-01 FUNDING: FISCAL YEAR AMOUNT SOURCE
FY 22-23 250,000 Measure M2 Fund and Gas Tax (HUTA)
FY 23-24
FY 24-25
FY 25-26
FY 26-27
TOTAL 250,000
City of Laguna Niguel
Capital Improvement Project Details
For Fiscal Years 2022-23 (Mid-Year) through 2026-27
PROJECT NAME: La Paz Road Evaluation
EXPLANATION:
Completion of this project supports City Council Goal 4 (Infrastructure and Technology) of the Strategic Plan Implementation Action Plan.
ESTIMATED COST: $ 450,000 GL Account: 300-70-6130 7022-06 FUNDING: FISCAL YEAR AMOUNT SOURCE
FY 22-23 $ 450,000 American Rescue Plan
FY 23-24
FY 24-25
FY 25-26 :
FY 26-27
TOTAL $ 450,000
City of Laguna Niguel
Capital Improvement Project Details
For Fiscal Years 2022-23 (Mid-Year) through 2026-27
PROJECT NAME: Marina Hills Drive Resurfacing Project - Niguel Road to Golden Lantern EXPLANATION:
Completion of this project supports City Council Goal 4 (Infrastructure and Technology) of the City's adopted Strategic Plan.
ESTIMATED COST: $ 2,300,000 GL Account: 300-70-6130 7022-03 FUNDING: FISCAL YEAR AMOUNT SOURCE
FY 22-23 CRRSAA and Gas Tax (SB 1 and HUTA)
FY 23-24 $ 2,300,000
FY 24-25 $
FY 25-26 $
FY 26-27 $
TOTAL $ 2,300,000
City of Laguna Niguel
Capital Improvement Project Details
For Fiscal Years 2022-23 (Mid-Year) through 2026-27
PROJECT NAME: Residential Annual Resurfacing Program
EXPLANATION:
rising material and labor costs, funding needed in Fiscal Years 2024-25 and 2026-27 has been increased.
Completion of this project supports City Council Goal 4 (Infrastructure and Technology) of the ESTIMATED COST: $ 12,900,000 GL Account: 300-70-6130 7023-06 FUNDING: FISCAL YEAR AMOUNT SOURCE
FY 22-23 $ 4,300,000 Gas Tax (HUTA), Measure M2 and ARP FY 23-24 $
FY 24-25 $ 4,300,000 Gas Tax (HUTA) and Measure M2
FY 25-26 $
FY 26-27 $ 4,300,000 Gas Tax (HUTA) and Measure M2
TOTAL $ 12,900,000
City of Laguna Niguel
Capital Improvement Project Details
For Fiscal Years 2022-23 (Mid-Year) through 2026-27
PROJECT NAME: Citywide Sports Field Grass Turf Rehabilitation Program EXPLANATION:
Completion of this project supports City Council Goal 4 (Infrastructure and Technology of the City's adopted Strategic Plan
ESTIMATED COST: $ 250,000 GL Account: 300-55-6130 5523-01 FUNDING: FISCAL YEAR AMOUNT SOURCE
FY 22-23 250,000 American Rescue Plan
FY 23-24
FY 24-25
FY 25-26
FY 26-27
TOTAL $ 250,000
ATTACHMENT B
American Rescue Plan Update
City of Laguna Niguel
American Rescue Plan Act 2021 - Budget Summary
In March 2021, the federal government passed the American Rescue Plan Act. The Act provides funding to local governments to combat the negative economic effects of the pandemic. The City received $8,800,000 from the Act.
All funds must be contractually obligated to be spent by December 31, 2024 and spent by December 31, 2026. Below is a budget summary identifying the projects that will be funded by the $8,800,000.
Fiscal Year 2021-22
Project Budget Amount Status
Chapparosa Park Playground Replacement $ 1,029,000 Completed City Hall AV Equipment Upgrade Project $ 915,000 Construction Phase Citywide VolP Telephone System Upgrade $ 250,000 Completed Crown Valley Park Interim Parking Lot $ 600,000 Completed Crown Valley Westbound Widening I-5 to Oso Creek $ 750,000 Design Phase La Paz Road Evaluation (Phase 1) $ 150,000 Completed
La Plata Park Playground Replacement $ 170,627 Completed Marina Hills Park Playground Replacement $ 181,627 Completed Sub-Total $ 4,046,254
Fiscal Year 2022-23
Project Budget Amount Status
Chapparosa Park Soccer Field Synthetic Turf Replacement $ 700,000 Construction Phase City Council Chamber Improvements (Furniture & Carpet) $ 300,000 Construction Phase Citywide Sports Field Grass Turf Rehabilitation Program $ 250,000 Proposed Project Crown Valley Parkway Landscape Improvements $ 100,000 Design Phase La Paz Road Evaluation (Phase 2) $ 200,000 Completed
La Paz Road Evaluation (Phase 3) $ 250,000 Proposed Increase Marina Hills Park Improvements $ 100,000 Design Phase
Parks Modernization Project $ 750,000 Design Phase
Residential Annual Resurfacing Program (Zones 3 and 4) $ 800,000 Proposed Increase Sub-Total $ 3,450,000
Fiscal Year 2023-24
Project Budget Amount Status
Marina Hills Park Improvements (Construction) $ 800,000 Future Project Sub-Total $ 800,000
Fiscal Year 2024-25
Project Budget Amount Status
Crown Valley Parkway Landscape Improvements (Construction) $ 500,000 Future Project Sub-Total $ 500,000
Total available funds from the Act is $8,800,000 Total 8,796,254