CITY COUNCIL STAFF REPORT
Meeting Date: February 27, 2023
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-23 APPROVING MEASURE K
RESERVE & APPROPRIATING ADDITIONAL CAPITAL
IMPROVEMENT PROJECTS
SYNOPSIS
The Measure K Fund has approximately $10.2 million in total fund balance with $6.0 million that is unassigned. On February 22, 2023, staff provided proposals to the Budget Committee regarding allocation of the unassigned fund balance. The Budget Committee recommends the approval of staff proposals for additional Measure K Capital Improvement Projects and maintenance of a reserve fund balance.
DISCUSSION
Background
Pleasant Hill voters adopted Measure K, a one-half-cent transactions and use tax (TUT), in November 2016. The tax became effective on April 1, 2017, and will sunset on March 31, 2037, unless extended by Pleasant Hill voters. At the time, annual revenues to the City were estimated at $4.0 million.
During 2020, the City was confronting the health and financial impacts of the Coronavirus (COVID-19) pandemic. The assumption at the beginning of COVID-19 was that sales tax revenues would decline significantly. This was based on reduced sales since health officials’ guidance was to shelter at home and only purchase essential goods (i.e., food and medicine). The City Council was aware of this concern and reduced Measure K spending, except for the costs related to the construction of the new library.
COVID-19 caused disruptions to the economy, but sales tax revenue was an exception, as consumers continued to purchase goods online during this time. The City has seen historical highs for sales tax revenues over the last couple of years, including in the Measure K Fund. The City budgeted $3.8 million and $4.0 million, and received $4.9 million and $5.3 million in sales tax revenue for FY 20/21 and FY 21/22, respectively.
On November 30, 2022, this preliminary information was brought forward to the Budget Committee for its consideration. The Budget Committee directed staff to identify “shovel- ready” projects for the Committee’s consideration and potential recommendation to City Council assuming no financial changes due to the Measure K audit.
Analysis
On February 23, 2023, the Budget Committee was presented with the Measure K audit and confirmed the fund balance that was provided to them last November. The improved sales tax revenues and conservative spending resulted in the Measure K Fund having a fund balance of $10.2 million in FY 21/22, with $4.2 million restricted for debt proceeds for the library and $6.0 million that is unassigned.
The Budget Committee reviewed proposals from staff to allocate the unassigned fund balance.
The table below provides a summary of the Measure K Unassigned Fund Balance, appropriations approved by City Council, and identifies the proposed projects and reserves.
Description Amount
Measure K Fund Balance - July 1, 2022 (audited) $ 10,191 Approved City Council Budget Amendments:
Bicycle Pedestrian Study $ (8)
Gregory Garden Storm Drain Final Project Costs $ (85)
Budget Amendments Subtotal $ (93)
Library:
FY 2023 Capital Paid to Date & Estimated Budgeted Costs Remaining (*) $ (4,869) Library Subtotal $ (4,869)
New Projects:
Maintenance -
Pothole Repair $ (100)
Street Resurfacing Program Residential Zone 17 $ (1,000) Maintenance Subtotal $ (1,100)
Engineering -
Oak Park Sidewalk Gap Closure $ (805)
Engineering Subtotal $ (805)
Measure K Reserve $ (2,500)
Ending Estimated Fund Balance $ 824
* Final project close out payments are currently being negotiated
SUMMARY OF MEASURE K
PROPOSED & ESTIMATED USES FOR PROJECTS AND RESERVES
($ in thousands)
The Budget Committee recommends establishing an assigned fund balance reserve and allocations for the following projects that are currently unfunded or lack sufficient funding to complete.
$2.5 million assigned Measure K reserve fund balance
$1.1 million budget appropriation for the Pothole Repair and the Street Resurfacing Program Residential Zone 17 which was not originally funded $730 thousand budget appropriation for the Oak Park Boulevard Sidewalk Gap Closure (the City Council approved $75 thousand in FY 2023/2024 for design, but the additional funds will now accelerate and fully fund the total project for $805 thousand) Staff will be presenting contract approvals following this introduction so that these “shovelready” projects can move forward.
FISCAL IMPACT
The fiscal impact would be to appropriate funding for Capital Improvement Projects with Measure K funding and maintain an assigned fund balance reserve in FY 2022/2023.
PUBLIC CONTACT
Public contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt resolution approving the appropriation of additional Measure K Capital Improvement Projects and the assigned reserved fund balance.
ALTERNATIVES TO RECOMMENDED ACTION
Do no adopt the resolution approving the additional Capital Improvement Projects and the assigned reserved fund balance, and provide direction to staff.
ATTACHMENT(S):
Proposed Resolution
Prepared by: Erick Cheung, Finance Manager
Approved by: June Catalano, City Manager