Submitted On:
Sep 17, 2024, 11:35AM PDT
City Council Regular Meeting -
Submit your written public
comment
City of Pleasanton
Full Name
First Name:
ROBERT
Last Name:
LUEHRS
Email (this entry is disclosable
if included)
[email protected]
City Council Meeting Date
September 17, 2024
Meeting Type
Regular Meeting at 7 PM
Agenda Item Number
6 Comments
Good evening, City Council members, Mayor Brown, and fellow Pleasanton residents:
As a nearly lifelong resident of Pleasanton, I can say that we are all fortunate to live in such a wonderful environment full of vibrant people from all walks of life, wonderful businesses and venues, and surroundings that rival any to be found.
While I have observed the population grow and the economy prosper, it has been doing so in troubling fashion, the shiny facade masking a shaky foundation. We may soon follow other communities, driving itself inexorably towards budget crises by pursuing some "vision" as put forth by some putatively prescient "planners," hoping to realize their dream funded by a seemingly bottomless well of public funds and goodwill.
My specific experience and knowledge of the situation derives from the fact that I have been designing landscapes for the most exclusive of residences in the Bay Area, with the majority being in Pleasanton, Danville, San Ramon, Dublin, and outlying suburbs and developments. By exclusive, I mean to say that several in the design stages at this moment will cost between $1M and $2.5M just for the landscapes, several of which are in the Diamond Canyon
development. It should be understood that homes there now start at $6M, with NO YARD. These homeowners and others like them comprise much of the property tax base, and they likewise no doubt have a great deal of discretionary income to spend at local businesses.
One would think that, if the City were to think of itself as a "business" and its citizens as "customers," the City might wish to keep such customers happy. I state emphatically that such is not the case. The permitting process has continually become increasingly cumbersome, and it is no exaggeration that the time required is now tenfold what it was only twenty years ago. A defense offered by the authorities may be that "there are more regulations now." That is ironically true, with said regulations conjured by the same authorities.
My specific grievance at this time spurring me to address the Council is that the City Planning office has been unresponsive in resolving a number of issues in the Diamond Canyon project, ultimately driving several of my clients in the development to seek remedy through the City Attorney's office. Following two written attempts to schedule a meeting, my clients have yet to be extended the courtesy of a response. My general grievance, one which I am sure is shared by many, is that this municipal government seeks to continue to grow while providing solutions in search of problems.
One need only look at the proposed budget cuts, e.g., the deferral of hiring a "Chief Diversity Officer." Sure, 60% of Fortune 500 companies have one for some reason; but is Pleasanton comparable to a Fortune 500 company? A suggested downside to not having such a position may lead to "decreased employee morale." What are the current managers not doing that morale is so bad? Or a "Sustainability Manager;" really?
All can agree that the basic function of municipal government is to provide for the common safety and welfare while offering essential services such as water, sewage, and roads. The anticipated growth in prosperity of Pleasanton cannot be assured if its government continues to deviate from such foundational aspects by making it increasingly difficult to operate here. The City seems to adopt a posture that anyone should be grateful that they should be granted the privilege to live here, making increasingly onerous demands of their time and money. The fact that the City must come to realize is that it should be grateful that so many people of means wish to reside here, and should aid them in that desire rather than be an obstacle. The future desirability and popularity of Pleasanton is not guaranteed.
We are all aware of the strife facing the commercial property market, office buildings in particular. The very recent sale of the former Ken Behring estate in Blackhawk is a bellwether for the upscale residential market in the East Bay. Listed at $25M for over one year, it was recently sold at auction for $10.8 million, a startling drop in valuation for such a stunning residence. I bring this up to suggest that there are dark clouds ahead, giving the lie to any assumptions of this or any city's "revenue growth."
Ballot Measure PP is ill-advised as it evidences yet again government's notion that it can tax us to prosperity. Pleasanton must find its way back to the meaning of "essential" and "critical" services and budget for it accordingly, not by adding layers of bureaucracy funded by ever-increasing taxes.
Respectfully submitted,
Bob Luehrs
Helping Hand Landscape Design
1228 Quarry Lane, Suite E
Pleasanton, CA 94566
SUPPLEMENTAL MATERIAL
Responses to City Council Agenda Items – September 17, 2024
Agenda Item #6
1. Request for the financial forecast models with baseline and recession scenarios.
A. See attached pages.
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Budget Budget Est. Est. Est. Est. Est. Est. Est. Est.
Revenues
Property Taxes 88,396,000 91,475,000 94,677,000 97,991,000 101,421,000 104,971,000 108,645,000 112,448,000 116,384,000 120,457,000 Sales & Use Taxes 25,424,400 27,768,400 28,323,800 28,890,300 29,468,100 30,057,500 30,658,700 31,271,900 31,897,300 32,535,200 Other Taxes 11,097,000 11,585,000 11,816,700 12,053,000 12,294,100 12,540,000 12,790,800 13,046,600 13,307,500 13,573,700 Franchise Taxes 3,105,000 3,165,000 3,228,300 3,292,900 3,358,800 3,426,000 3,494,500 3,564,400 3,635,700 3,708,400 Permits 5,498,500 4,858,500 4,955,700 5,054,800 5,155,900 5,259,000 5,364,200 5,471,500 5,580,900 5,692,500 Recreation Revenues 4,572,661 4,914,484 5,061,900 5,213,800 5,370,200 5,531,300 5,697,200 5,868,100 6,044,100 6,225,400 Other Revenue 8,335,531 7,675,641 7,859,200 8,047,400 8,240,200 8,437,800 8,640,300 8,848,000 9,060,800 9,279,000 Subtotal Revenues 146,429,092 151,442,025 155,922,600 160,543,200 165,308,300 170,222,600 175,290,700 180,518,500 185,910,300 191,471,200 Transfers-In 3,743,780 3,771,780 2,325,000 2,351,250 1,391,800 1,433,600 1,476,600 1,520,900 1,566,500 1,613,500 Use of Reserves 760,000 30,000 - - - - - - - - Total Revenues 150,932,872$ 155,243,805$ 158,247,600$ 162,894,450$ 166,700,100$ 171,656,200$ 176,767,300$ 182,039,400$ 187,476,800$ 193,084,700$ Expenditures
Personnel Costs 103,357,169 108,947,440 113,670,817 118,013,585 122,193,390 127,648,874 131,317,478 135,094,774 137,707,234 140,972,554 Non-Personnel Costs
Transportation & Training 1,642,515 1,639,145 1,671,900 1,705,300 1,739,400 1,774,200 1,809,700 1,845,900 1,882,800 1,920,500 Repairs & Maintenance (Includes R&R Funds) 7,990,738 8,030,785 8,197,074 8,366,940 8,540,336 8,717,378 8,898,182 9,082,766 9,271,246 9,463,740 Materials, Supplies & Services 33,938,710 33,379,131 34,717,626 35,884,960 36,925,864 37,869,522 38,842,518 39,845,834 40,880,654 41,948,160 Capital Outlay 719,000 437,550 446,300 455,200 464,300 473,600 483,100 492,800 502,700 512,800 Lease Payment 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Total Non-Personnel Costs 44,295,963 43,491,611 45,037,900 46,417,400 47,674,900 48,839,700 50,038,500 51,272,300 52,542,400 53,850,200 Total Operating Expenditures 147,653,132 152,439,051 158,708,717 164,430,985 169,868,290 176,488,574 181,355,978 186,367,074 190,249,634 194,822,754 Operating Transfers 1,085,000 1,085,000 1,106,700 1,128,800 1,151,400 1,174,400 1,197,900 1,221,900 1,246,300 1,271,200 Debt Payments 190,628 190,628 - - - - - - - - Capital Projects Transfers 2,000,000 2,000,000 3,000,000 3,000,000 3,500,000 3,500,000 4,000,000 4,000,000 4,500,000 4,500,000 Deferred Infrastructure - - 6,221,000 6,141,000 6,060,000 5,976,000 5,892,000 5,805,000 5,717,000 5,627,000 Total Expenditures 150,928,760$ 155,714,679$ 169,036,417$ 174,700,785$ 180,579,690$ 187,138,974$ 192,445,878$ 197,393,974$ 201,712,934$ 206,220,954$ ANNUAL SURPLUS/ (SHORTFALL) 4,112$ (470,874)$ (10,788,817)$ (11,806,335)$ (13,879,590)$ (15,482,774)$ (15,678,578)$ (15,354,574)$ (14,236,134)$ (13,136,254)$ City of Pleasanton
General Fund Ten-Year Financial Forecast
Baseline Scenario
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Budget Budget Est. Est. Est. Est. Est. Est. Est. Est.
Revenues
Property Taxes 88,396,000 91,472,181 94,216,346 96,100,673 98,983,693 102,151,172 105,726,463 109,427,302 113,257,569 117,221,156 Sales & Use Taxes 25,424,400 26,380,357 25,061,340 24,560,113 25,051,315 25,552,341 26,063,388 26,584,656 27,116,349 27,658,676 Other Taxes 11,097,000 11,021,540 10,944,390 10,834,946 11,051,645 11,272,678 11,498,131 11,728,094 11,962,656 12,201,909 Franchise Taxes 3,105,000 3,164,927 3,228,225 3,292,790 3,358,645 3,425,818 3,494,335 3,564,221 3,635,506 3,708,216 Permits 5,498,500 4,858,475 4,931,352 5,029,979 5,130,578 5,233,190 5,337,854 5,444,611 5,553,503 5,664,573 Recreation Revenues 4,572,661 4,472,062 4,472,062 4,472,062 4,606,224 4,744,411 4,886,743 5,033,346 5,184,346 5,339,876 Other Revenue 8,335,531 7,675,863 7,859,419 8,047,547 8,240,366 8,437,998 8,640,567 8,848,201 9,061,033 9,279,198 Subtotal Revenues 146,429,092 149,045,405 150,713,133 152,338,110 156,422,467 160,817,607 165,647,480 170,630,431 175,770,962 181,073,604 Transfers-In 3,743,780 3,771,780 2,325,000 2,351,250 1,391,800 1,433,600 1,476,600 1,520,900 1,566,500 1,613,500 Use of Reserves 760,000 30,000 - - - - - - - - Total Revenues 150,932,872$ 152,847,185$ 153,038,133$ 154,689,360$ 157,814,267$ 162,251,207$ 167,124,080$ 172,151,331$ 177,337,462$ 182,687,104$ Expenditures
Personnel Costs 103,357,169 108,947,440 113,670,817 118,013,585 122,193,390 127,648,874 131,317,478 135,094,774 137,707,234 140,972,554 Non-Personnel Costs
Transportation & Training 1,642,515 1,639,145 1,671,900 1,705,300 1,739,400 1,774,200 1,809,700 1,845,900 1,882,800 1,920,500 Repairs & Maintenance (Includes R&R Funds) 7,990,738 8,030,785 8,197,074 8,366,940 8,540,336 8,717,378 8,898,182 9,082,766 9,271,246 9,463,740 Materials, Supplies & Services 33,938,710 33,379,131 34,717,626 35,884,960 36,925,864 37,869,522 38,842,518 39,845,834 40,880,654 41,948,160 Capital Outlay 719,000 437,550 446,300 455,200 464,300 473,600 483,100 492,800 502,700 512,800 Lease Payment 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Total Non-Personnel Costs 44,295,963 43,491,611 45,037,900 46,417,400 47,674,900 48,839,700 50,038,500 51,272,300 52,542,400 53,850,200 Total Operating Expenditures 147,653,132 152,439,051 158,708,717 164,430,985 169,868,290 176,488,574 181,355,978 186,367,074 190,249,634 194,822,754 Operating Transfers 1,085,000 1,085,000 1,106,700 1,128,800 1,151,400 1,174,400 1,197,900 1,221,900 1,246,300 1,271,200 Debt Payments 190,628 190,628 - - - - - - - - Capital Projects Transfers 2,000,000 2,000,000 3,000,000 3,000,000 3,500,000 3,500,000 4,000,000 4,000,000 4,500,000 4,500,000 Deferred Infrastructure - - 6,221,000 6,141,000 6,060,000 5,976,000 5,892,000 5,805,000 5,717,000 5,627,000 Total Expenditures 150,928,760$ 155,714,679$ 169,036,417$ 174,700,785$ 180,579,690$ 187,138,974$ 192,445,878$ 197,393,974$ 201,712,934$ 206,220,954$ ANNUAL SURPLUS/ (SHORTFALL) 4,112$ (2,867,494)$ (15,998,284)$ (20,011,426)$ (22,765,423)$ (24,887,767)$ (25,321,798)$ (25,242,642)$ (24,375,472)$ (23,533,850)$ City of Pleasanton
General Fund Ten-Year Financial Forecast
Recession Scenario
City Budget Update
September 17, 2024
Agenda
1. Overview of City Financial Challenges
2. Forecasted General Fund Structural Deficit
3. Infrastructure Funding Gap
4. Water and Sewer Program Funding Needs
5. General Fund Reserve
6. Unfunded Liabilities
2 Who is on City Finance Team?
The City has an experienced team and with diverse skills working on bringing stability to our finances:
• Susan Hsieh, MBA, CPA – Finance Director
• Chris Yi, MS – Budget, Revenue, and Treasury Manager
• Bill Zenoni, MBA – 40+ years of municipal experience – former finance director • Jim O’Leary, MBA – 40+ years of municipal experience – former finance director • Ken Nordhoff, CPA – HdL – Tax Advisor/Consultant, Revenue Projections (former finance director) • Steve Toler, MPA – Baker Tilly, Financial Forecast Model Builder • Doug Pryor, MA (Statistics and Mathematics) – Foster & Foster, Actuary Consultant 3 Ranking of Local Government Financial Health by State Auditor • The State Auditor’s Office monitored cities’ financial health for fiscal years 2016/17 through 2020/21 based on the Annual Comprehensive Financial Reports (ACFR)
• Ranking criteria:
o Financial Reserve: Does the city have sufficient financial reserves to cover unexpected costs or shortfalls in revenue?
o Debt Burden: How is the city’s level of debt compared to its income? o Cash Position/Liquidity: Is the city able to pay its bills in the coming fiscal year? o Revenue Trends: Is the city’s revenue going down over time? o Retirement Obligations: Does the city have the ability to pay for retirement benefits it committed to its employees?
4 Ranking of Pleasanton’s Financial Health
• Lower ranking means higher financial risk
• The City’s financial conditions have been
deteriorating
• Revenue trends risk is deemed to be high
5 Fiscal
Year
Overall
Rank
Number of
Cities
Ranked
Overall
Risk
Revenue Trends
Risk
FY 16/17 145 470+ Moderate MODERATE
FY 17/18 150 470+ Moderate MODERATE
FY 18/19 130 470+ Moderate MODERATE
FY 19/20 86 460+ Moderate MODERATE
FY 20/21 61 430+ Moderate HIGH
Background
• Budget update to inform challenges the City faces in the upcoming two- year budget for fiscal years 2025/26 and 2026/27
6 Key Financial Challenges
• City faces significant fiscal challenges in both the operating and capital budgets
o Forecasted General Fund structural deficit
¾$13M in projected average annual deficit
¾$ 22M in projected average annual deficit (recession scenario) o Significant infrastructure funding gap
¾$900M for both the General Fund and Enterprise Funds over 10 years
o Unfunded retiree medical and pension liabilities
¾Over $200M
7 Contributing Factors to Financial Challenges
• Slowing real estate development activity
• Declining retail sales activity, including at the Stoneridge Shopping Center • Reduced hotel tax revenue
• Phasing out of federal stimulus funds
• Increasing insurance costs
• Increasing operating supplies and materials costs
• Increasing contract service costs
• Growing number of unfunded mandates from the State
• Rising personnel costs, including pensions, competitive salaries, and benefits
8 FY 2024/25 Citywide Operating Budget
•Restricted funds cannot be
used for General Fund
operations
•Examples of restricted funds
include water, sewer, grants,
housing, special assessments,
and impact fee funds
9 FY 2024/25 General Fund Budget
• The General Fund covers both City
operations/service delivery and capital
costs
• California cities are required to adopt
a balanced budget
• The General Fund currently cannot
cover all the funding needs
• As a service organization, personnel costs
account for over 70% of the budget
• + Non-profits Funding
• + PUSD Services
• + Chamber/PDA Subsidy
• + Other
10 Forecasted General Fund Structural Deficit
• Long-range forecast helps to diagnose potential risks and causes of fiscal distress • Reasonable assumptions are used for the forecast
¾Revenue projection is conservative
¾Expenditure projection is not aggressive
• Forecasted assumptions were presented to the Council and community on March 19, 2024 • Use of one-time money such as pension trust funds will not solve the structural deficit 11 Example of Potential Variables in Financial Projection • Revenues and expenditures can
be higher or lower than projected
• City has many funding gaps,
even significant gains in some
years will not eliminate these
gaps
12 -1% growth over three years
Actions Taken to Address the Deficit
Cost Reduction Measures:
• Defunded $18.9M in General Fund supported capital projects to fund critical storm drain projects, including defunding the Skate Park and Century House renovation projects
• Abandoned $14M Downtown Park Master Plan and replaced with Development Impact Fee (developer) funded renovation project
• Reduced $2.5M from the current year’s budget
¾Vacant positions
¾Travel and training (22% reduction from FY 2023/24)
¾Professional and contract services
¾Supplies and materials
¾Equipment
13 Actions Taken to Address the Deficit (cont.)
• Limited City staff expansion: General Fund budgeted positions remained flat, and police/public safety staff is lower compared to comparable full-service cities
14 Actions Taken to Address the Deficit (cont.)
• Controlling contract service costs and new services and programs such as technical support, communications, and system implementation • Delaying projects and purchases of vehicles and equipment, such as Fire Station 2 renovation and non-essential vehicles and equipment • Developing a continency (reduction) menu for service reductions if there is no new revenue source
15 Actions Taken to Address the Deficit (cont.)
New Revenue Options:
• Analyzing and updating fee models such as development impact fees, user fees, and credit card fees
• Economic development and growth continuing to support economic development efforts to bring new businesses and jobs to Pleasanton • Revenue measure – a ½ cent sales tax (Measure PP) approved by the City Council in July 2024 to place the measure on the November 2024 ballot
¾Comprehensive community engagement
¾$10M in estimated annual new revenue
¾Sunset in 10 years
¾Subject to annual audit and oversight
16 Capital Improvement Program –
Infrastructure Funding Gap
Deferred Maintenance and Insufficient Funding:
• Aging Infrastructure: City faces a $900M funding gap over the next decade to maintain community assets like buildings, parks, roads, and pipes
• Deferred Maintenance: Many capital projects have been delayed, including repairs to parks and fire stations, leading to higher long-term costs
• Annual General Fund Contribution: $5M goal was only met in the last five years with the transfer of $5.5M from the Rainy Day Fund • Asset Management Plan: Development of a long-term asset management plan is underway to detail the overall funding gap 17 18
Aging Community Infrastructure
157 Main Street Fire Station 2 Busch Road
Examples of Programs With Insufficient Funding
• Due to limited resources, the maintenance and upkeep of community assets are severely underfunded
19 Fund Fund Balance Description
Park Renovation $600,000 Insufficient funding to re place irrigation systems, paths, benches, lighting, and playgrounds for 46 City parks
Facilities Renovation $2,500,000 Insuf ficient funding to repair and replace fire stations, police facilities, library, senior center, pool, public restrooms in parks, Alviso Adobe, city administration buildings, etc. The City has more than 100 buildings and structures
Information
Technology
$1,200,000 Insufficient funding to update and replace systems such as police communications, financial, and recreation systems in coming years Enterprise Funds (Water and Sewer Program) –
Challenges and Funding Needs
Revenue Shortfalls
• Costs outpaced revenues
due to years of low rates
• Water Fund not able to
meet debt service
coverage
• Not able to meet the 35%
reserve target
• Infrastructure investment
is behind
Rate Increases
• City Council approved
rate increases to address
the financial gap
• Rate increase allowed the
City to issue $19M in
Water Revenue Bonds to
fund certain
improvements and the
groundwater wells
project to address PFAS
Infrastructure Gaps
• In the process of
finalizing the Water and
Sewer Management
Plans
• Preliminary results
indicate significant
funding gaps
• Need to develop plans to
identify financial
resources
20 General Fund Reserve
• Government Finance Officers
Association (GFOA) recommendation:
At least 16.7% of unrestricted reserve in
the General Fund
• Pleasanton’s reserve target: 20% -
projected at $30.7M at the end of the
current fiscal year
• Reserve comparison with neighboring
cities: Pleasanton’s unrestricted reserve
is alarmingly low, making us less resilient
to emergencies and economic
uncertainties
21 Pleasanton’s reserve is 49% of Livermore’s reserve and 16% of Dublin’s reserve
What Other Programs Rely Heavily on the
General Fund?
Negative fund balance in other funds means reductions to the overall General Fund balance
• Storm Drain
¾100% reliance on the General Fund for capital projects; the General Fund also provides funding for operations
¾Defunded over $18M in General Fund supported projects to fund storm- related damage
• Workers' Compensation
¾$4.5M in negative fund balance (liability), including Pleasanton’s portion of LPFD liability
22 Unfunded Retiree Medical and Pension Liabilities
• Unfunded liabilities remain
significant at over $200M,
impacted by factors such as
CalPERS investment loss
• Balances are as of June 30,
2023
23 Total Unfunded Liability Total
Total OPEB liability 89,964,000
Plan fiduciary net position 69,186,500
Net OPEB liability 20,777,500
Funded status 77%
Total Unfunded Liability Total
Less PARS
Pension Trust
Net Pension
Liability Less
Trust Funds
Total pension liability 668,118,947 668,118,947 Plan fiduciary net position 457,472,510 46,270,093 503,742,603 Net pension liability 210,646,437 (46,270,093) 164,376,344 Funded status 68% 75%
Recommendation from the City’s
actuary consultant regarding the use
of Section 115 Pension Trust Funds:
Not to use the funds or minimum
use of the funds at this time
Conclusion
Path to Fiscal Sustainability
• Community Engagement: City will continue seeking input from residents on budgetary priorities and cost-saving measures
• New Revenue Sources: Measure PP, a proposed ½ cent sales tax, could provide critical revenue if passed by voters
• Upcoming Two-year Budget: City will develop a biennial budget, with ongoing cost reductions and revenue enhancements as priorities 24 Next Steps
• Staff will seek input from the City Council and community sooner regarding service reductions than the stated timeline if the voters do not approve the sales tax measure in November
25 January – February 2025
Mid-Year Budget Update
January – April 2025
2025-27 Budget
Development and
Community Engagement
May – June 2025
Proposed Budget
Presentation and Budget
Adoption
26 Discussion