CITY OF SAN MATEO
City Council Special Meeting
April 18, 2022
5:30 PM
COUNCIL MEMBERS
Rick Bonilla, Mayor
Diane Papan, Deputy Mayor
Joe Goethals
Amourence Lee
Eric Rodriguez
AGENDA
DUE TO THE STATE OF CALIFORNIA’S DECLARATION OF EMERGENCY – THIS MEETING IS BEING HELD PURSUANT TO AUTHORIZATION FROM GOVERNMENT CODE 54943(b)(3) / AB 361 (2021) – CITY COUNCIL AND COMMISSION MEETINGS ARE NO LONGER OPEN TO IN-PERSON ATTENDANCE.
ANYONE CAN WATCH AND PROVIDE COMMENTS REMOTELY IN THE WAYS DESCRIBED AT THE END OF THE AGENDA.
To join via Zoom – click here: Monday, April 18, 2020 Zoom Meeting To join via telephone: (408) 638-0968
Conference ID: 863 6630 2023 Passcode: 173435
CALL TO ORDER
Roll Call
STUDY SESSION
The public will have an opportunity to comment during the consideration of these items.
1. Fiscal Year 2021-22 Mid-Year Budget Update and Fiscal Year 2022-23 Budget Preview Receive an update on the fiscal year 2021-22 mid-year budget, receive a fiscal year 2022-23 budget preview, and receive information on a proposed resolution at the City Council regular meeting to follow committing $10 million dollars consisting of $5.5 million for negotiated labor cost increases and $4.5 million for additional capital improvement plan funding from the unrestricted fund balance in the General Fund.
2. Clean Water Program – Water Reuse Update
Receive information on the Clean Water Program's water reuse efforts.
ADJOURNMENT
------------------------------------------------------------------------------------------------------------------------------------------ AGENDAS: Agendas and material are posted on the City’s website on the Friday preceding each Council Meeting and can be viewed on the City's website at www.cityofsanmateo.org . Any supplemental material distributed to the Council after the posting of the agenda will be made part of the official record.
WATCHING A MEETING ON TV: City Council meetings are broadcast live on Comcast/channel 27, Wave/channel 26, or AT&T/channel 99.
For transmission problems during the broadcast, please call (650) 522-7099.
For all other broadcast comments, call (650) 522-7040, Monday-Friday, 8 a.m. - 5 p.m.
WATCHING A MEETING ON A COMPUTER: There are three ways to stream. 1) Public Meeting Portal www.cityofsanmateo.org/publicmeetings 2) City YouTube channel and stream it on YouTube: http://youtube.com/CityofSanMateo 3) Watch TV live stream: https://www.cityofsanmateo.org/193/Channel-San-Mateo-Live-Stream 1 of 8
PUBLIC COMMENTS – Can be received in the following ways (Time limits will apply) :
Prior to the meeting in writing: Send comments to: [email protected] until 4 p.m. the day of the meeting.
During the meeting by computer: Click the link at the top of the agenda and you’ll be added to the meeting. All attendees are muted by default.
When the item of interest is open for consideration, select the “Raise Your Hand” icon and you will be called on at the appropriate time.
During the meeting by telephone: Call (408) 638-0968 and enter the conference ID found at the top of the meeting agenda. When the item of interest is open for consideration, select *9 to raise your hand. When called upon, press *6 to unmute, state your name and provide your comments.
ACCESSIBILITY: In compliance with the Americans with Disabilities Act, those with disabilities requiring special accommodations to participate in this meeting may contact the City Clerk’s Office at (650) 522-7040 or [email protected]. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. 2 of 8
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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 1 Section Name: STUDY SESSION File ID: 22-6079 TO: City Council
FROM: Drew Corbett, City Manager
PREPARED BY: Finance Department
MEETING DATE: April 18, 2022
SUBJECT:
Fiscal Year 2021-22 Mid-Year Budget Update and Fiscal Year 2022-23 Budget Preview RECOMMENDATION:
Receive an update on the fiscal year 2021-22 mid-year budget, receive a fiscal year 2022-23 budget preview, and receive information on a proposed resolution at the City Council regular meeting to follow committing $10 million dollars consisting of $5.5 million for negotiated labor cost increases and $4.5 million for additional capital improvement plan funding from the unrestricted fund balance in the General Fund.
BACKGROUND:
Fiscal Year 2021-22 Update
During the most recent mid-year budget update that was presented to the City Council in January 2022, based on November 2021 year-to-date performance, the General Fund was projected to end fiscal year (FY) 2021-22 with $155.2 million in total revenues and $146.6 million in total expenditures; a projected net of $8.6 million, largely as a result of favorable property tax and real property transfer tax results.
Based on the General Fund's experience through March 2022, total revenues are projected to end FY 2021-22 at $160.2 million, and total expenditures remain unchanged from the previous year-end estimate of $146.6 million. The primary factors contributing to the additional $5.0 million in revenue are real property transfer tax (RPTT) and transient occupancy tax (TOT).
As of March 2022, the City has accounted for $9.9 million in RPTT. Based on historical performance, the revised year-end estimate is $16.0 million, or $3.0 million more than the previous estimate. The favorable variance underscores the high value of real estate, as well as a number of significant commercial property sales that have occurred in the intervening time from the last budget update.
Based on year-to-date results, General fund TOT revenues are projected to end FY 2021-22 at $3.0 million, which is $2.0 million more than the adopted 2021-22 budget, which assumed a modest recovery to the pre-pandemic baseline ($7.0 million). From July 2021 through February 2022, the City's hotels averaged close to a 60% occupancy rate. Based on the year-to-date performance, the assumptions for the General Fund Long-Term Financial Plan will be updated as a part of the next two-year business cycle.
With these additional resources available, Finance staff recommends adoption of a resolution at the City Council regular meeting to follow committing $5.5 million for the additional cost of salaries and benefits that were recently agreed upon with the City's bargaining units that had previously negotiated concessions in response to the immediate and severe impact of the COVID-19 pandemic on the City's TOT and sales tax revenues. The proposed resolution will also commit $4.5 million for additional funding support beyond the planned General Fund contribution for capital improvement projects for 3 of 8
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the proposed capital improvement plan for 2022-27.
General Fund 2022-23 Preview
GENERAL FUND REVENUES
Total General Fund revenues for FY 2022-23 are projected to be $159.1 million. The assumptions for major tax revenues are noted below:
Property Tax
Based on projections from the County of San Mateo Assessor's Office, the City's assessed value is projected to grow by
5.6%, which primarily accretes the City's secured property tax revenues, which are projected to increase by $2.4 million in comparison to the FY 2021-22 year-end estimate. In addition, the City's share of the $96.2 million county-wide shortfall Property Tax in lieu of Vehicle License Fees (VLF) of $7.5 million, which is included in the Governor's proposed 2022-23 budget for the State of California, is incorporated into the City's proposed 2022-23 budget. In total, property tax revenues are projected to be $79.6 million for 2022-23, which is $13.4 million, or 20.3%, more than the adopted 2021-22 budget.
Sales Tax
Based on the latest projections from the City's sales tax advisor, the local 1% (Bradley Burns) sales tax is projected to be $22.4 million, which is $3.1 million more than the adopted 2021-22 budget, and reflects a more accelerated recovery from prior projections, which anticipated a three to four year recovery to return to the pre-pandemic baseline ($19.9 million).
The local 1/4% (Measure S) sales tax is projected to be $7.0 million.
Of note, while the tax law under Bradley Burns and Measure S are different (Bradley Burns Uniform Sales and Use Tax compared to District Tax), the primary difference between the Bradley Burns and Measure S is that allocation of the latter is destination based. If the Bradley Burns were allocated based on destination, then the City would receive approximately $28.0 million as opposed to $22.4 million as projected for FY 2022-23. The difference of $5.6 million between these amounts also reflect:
1. The impact of dilution of the sales tax base due to the shift from point of sale transactions at physical commercial spaces to online commerce, where on average, the City only receives 10% of the sales tax due to the manner in which sales tax is allocated by the State Department of Tax and Fee Administration (CDTFA).
2. Sales tax rebate agreements between local municipalities and major retailers, which establishes the point of sale for online transactions in a municipality in exchange for the retailer receiving a refund of a percentage of the municipality's allocated sales tax generated from the specific business, typically 50%.
Real Property Transfer Tax (RPTT)
As discussed in the previous mid-year budget update, the City's long-term assumption for RPTT has been changed to $11.1 million, which represents the average RPTT for the Recovery and Growth economic period and COVID-19 economic period.
Transient Occupancy Tax (TOT)
As noted in the previous TOT narrative, TOT revenues have recovered faster than anticipated. In addition, the Hampton Inn is projected to complete construction and go into service in February 2023. As such, the proposed 2022-23 budget projected $3.2 million in TOT.
GENERAL FUND EXPENDITURES
Total General Fund expenditures for 2022-23 are projected to be $165.0 million; an increase of $18.1 million, or 12.3%.
The City's primary role is to provision services to the San Mateo community. As such, the majority of its operating budget is for employee salaries and benefits. For the proposed 2022-23 budget, salaries and benefits are projected to be $85.3 million, which is an increase of $10.5 million or 14.1%, which largely reflects:
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1. Negotiated increases for the City's bargaining units that agreed to concessions in response to the immediate and severe impact of the pandemic-driven recession on the General Fund, namely TOT and sales tax revenues.
2. Increases in the cost of healthcare. The City contracts with CalPERS Health to provide medical benefits to its employees. CalPERS Health is the second largest purchaser of public employer health benefits in the United States (the federal government is the largest), and as such, is able to command economies of scale and command competitive rates for its members. The rate increase in the Kaiser single member plan effective January 1, 2022 was a 5.3% increase compared to the prior year. The proposed 2022-23 budget assumes a 6.75% rate increase as of January 1, 2023 based on healthcare premium assumptions from the City's other post-employment benefits (OPEB) actuarial valuation.
The other primary contributing factor to the increase in General Fund expenditures for 2022-23 is in transfers out, which is projected to be $13.1 million, which consists of a $4.5 million increase for capital improvement projects assuming the City Council adopts a proposed resolution at the City Council regular meeting to follow. These additional funding resources from FY 2021-22 are largely needed largely to complete the high voltage streetlight conversion ($1.6 million), Marina Library structural improvements ($1.8 million), and the pedestrian mall construction as a part of the Downtown Phase I project ($0.6 million).
BUDGET IMPACT:
FY 2021-22 Summary
General Fund total revenues are projected to be $160.2 million, while total expenditures are projected to be $146.6 million. If these year-end estimates come to fruition, the change in fund balance would be $13.6 million.
The proposed resolution that the City Council will consider at the City Council regular meeting to follow commits $5.5 million of unrestricted fund balance for the cost of negotiated increases in employee salaries and benefits and $4.5 million of unrestricted fund balance to serve as a funding source for 2022-23 CIP projects.
FY 2022-23 Preview
General Fund total revenues are projected to be $159.1 million, while total expenditures are projected to be $165.0 million, which would result in a reduction in fund balance of $5.9 million. Absent the negotiated increases in employee compensation for 2022-23 ($2.7 of the $5.5 committed) and additional CIP funding support ($4.5 million), the General Fund would generate a net increase in fund balance of $1.4 million.
ENVIRONMENTAL DETERMINATION:
This budget update and preview is not a project subject to CEQA, because it is a government fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. Further, the capital improvement projects are exempt from CEQA review as existing facilities because they consist of the operation, repair, maintenance, permitting, leasing, licensing or minor alteration of existing public or private structures, facilities, mechanical equipment or topographical features involving negligible or no expansion of existing or former use. (CEQA Guidelines Sections 15301; 15378(b)(4).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None
STAFF CONTACT
Rich Lee, Director, Finance
[email protected]
(650) 522-7102
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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 2 Section Name: STUDY SESSION File ID: 22-6035 TO: City Council
FROM: Drew Corbett, City Manager
PREPARED BY: Public Works Department
MEETING DATE: April 18, 2022
SUBJECT:
Clean Water Program – Water Reuse Update
RECOMMENDATION:
Receive information on the Clean Water Program's water reuse efforts.
BACKGROUND:
With on-going drought conditions in the area and a growing population, there is a regional need to explore alternative water supply sources for improved resiliency. Water reuse provides an opportunity for the development of a local and reliable water supply, particularly in urban settings. California Water Code §13575, et seq., the Water Recycling Act of 1991 (Recycling Act) requires that water purveyors identify potential uses for recycled water and potential recycled water customers within their service areas to offset potable water demand. While the City is not a water purveyor, it is the City Council’s strategic priority to produce recycled water from the City’s wastewater treatment plant (WWTP) to help address the region’s water supply challenges.
California Water Service Company (Cal Water), an investor-owned water utility, retails potable drinking water within the City as part of their Bayshore District, while the Estero Municipal Improvement District (Foster City/EMID) retails in Foster City. As water purveyors, Cal Water and Foster City/EMID hold the recycled water rights in their service areas and have the responsibility of meeting demand and distributing recycled water to its drinking water customers. However, several types of partnership options between water purveyors and wastewater agencies can take form. Wastewater agencies can take the role of producers of recycled water and act as a wholesaler to water purveyors or provide the wastewater to water purveyors for them to produce the recycled water. Under the Recycling Act, a water purveyor also has the option of delegating the recycled water distribution rights to a recycled water producer.
The City’s WWTP serves an estimated population of 150,000 and is jointly owned with Foster City/EMID. An average of 10 million gallons per day (MGD) of wastewater are treated and discharged to San Francisco Bay. The City and Foster City/EMID do not currently produce recycled water. Over the past few years, however, the City has evaluated options for producing both non-potable and potable recycled water. These sources include the following:
Non-potable: Wastewater treated to meet non-potable standards can be used for irrigation, industrial uses (e.g., cooling tower makeup, boiler feed), and toilet flushing in dual-plumbed buildings. Recycled water for non-potable uses has been practiced in the area for decades. The cities of Redwood City, Palo Alto, Mountain View, and San Jose, for example, have been supplying recycled water for irrigation and commercial use for decades. Potable: With advanced processing, wastewater can be treated further to meet standards that allow for indirect and direct potable reuse. Indirect potable reuse involves discharging recycled water through an environmental buffer such as a groundwater basin or reservoir before the water is treated again through a drinking water 6 of 8
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treatment facility. Indirect potable reuse (IPR) through groundwater replenishment is a well-established method and has been practiced in California for over 50 years. Direct potable reuse (DPR) involves advanced treatment without the use of an environmental buffer. This includes introducing recycled water immediately upstream of a drinking water facility or into a public drinking water distribution system. The State Water Board’s Division of Drinking Water (DDW) is currently in the process of developing direct potable reuse standards.
In 2019, staff began working with DDW on the approval for the use of an alternative treatment method to meet non- potable recycled water criteria as part of the WWTP Upgrade and Expansion project. The alternative method will allow for the implementation of an innovative and cost-effective approach that avoided the expansion of the existing disinfection basins at the WWTP or the consideration of other disinfection technologies. While the WWTP will produce an average of 10 MGD of recycled water when the construction is completed, high salinity levels due to the inflow and infiltration of San Francisco Bay water into the sewer collection will make the water unsuitable for irrigation. Additional treatment would be required for the recycled water to be suitable for use as a non-potable source.
As the water purveyor, Cal Water would purchase the recycled water from the City at wholesale rates and build the additional treatment and distribution piping network to meet the recycled water demand in their service area. A distribution system would be built to maximize the amount of recycled water delivered to potential customers, such as those with large irrigation demand (e.g., golf courses, schools, and parks) and potential industrial users. In 2017, a study sponsored by the City and Foster City/EMID quantified the recycled water demand in both cities at 1.6 MGD (0.9 MGD from the City and 0.7 MGD from Foster City/EMID). The estimated capital costs to build the storage, pumping, and pipeline network in both cities were estimated at $65 million (2017 dollars), not including the additional treatment required to improve the water quality from the WWTP.
The City would set wholesale rates for recycled water to recover all costs required to build, operate, and maintain the facilities. However, if these rates are higher than potable charges, it is unlikely that a retailer would purchase recycled water. Retail recycled water rates to drinking water customers for non-potable uses have been typically set at a discount to be lower than potable water. Since recycled water is not subject to cutbacks during periods of droughts, however, the revenue from the sale of recycled water to drinking water customers is typically stable. Based on current potable water wholesale rates for the area, recycled water rates would likely be significantly higher. While a detailed cost-benefit analysis has not been conducted, the development of a recycled water project may not be financially viable due to the low non- potable demand in the area and the high capital costs.
As part of the Potable Reuse Exploratory Plan (PREP) effort with the San Francisco Public Utilities Commission (SFPUC), Silicon Valley Clean Water (SVCW), Redwood City, Cal Water, and the Bay Area Water Supply and Conservation Agency (BAWSCA), options for the development of a regional potable water supply have been evaluated for several years. Through Phase 3 of the PREP, all parties have supported the recommendation to proceed with a new SF-Peninsula Regional PureWater (SPRP) project, which would involve the development of preliminary engineering design drawings for an advanced water purification facility that would treat wastewater generated from the City and SVCW.
This advanced water purification facility would produce water suitable for IPR/Reservoir Water Augmentation and supply SFPUC’s Crystal Springs Reservoir. The facility would also be designed to allow for a future expansion for DPR/Treated Drinking Water Augmentation for Redwood City, Cal Water, and possibly the Mid-Peninsula Water District. The project would produce up to 12 MGD of potable water and is estimated to cost $700 million. The development of the SPRP preliminary design documents and CEQA checklist is $1 million and the City’s requested contribution for this phase is approximately $100,000. Staff will return to City Council with a Memorandum of Understanding for the continued collaboration on this effort later this year.
BUDGET IMPACT:
There is no budget impact associated with this informational item.
ENVIRONMENTAL DETERMINATION:
This is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct 7 of 8
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or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None
STAFF CONTACT
Azalea Mitch, Director of Public Works
[email protected]
(650) 522-7303
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