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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 Account Number: 10-4651 File ID: 26-11019 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Public Works Department
MEETING DATE: April 20, 2026
SUBJECT:
2026-31 Capital Improvement Program Plan — Preview
RECOMMENDATION:
Receive a preview and provide feedback on the 2026-31 Capital Improvement Plan.
BACKGROUND:
As part of the Capital Improvement Program (CIP) budget development process, City departments prepare funding requests that capture five-year capital project needs. Total project costs are developed and matched with appropriate funding sources, such as the General Fund or Measure S that can be used for any purpose, special revenues such as those restricted for transportation purposes, or enterprise funds such as the Sewer and Storm funds. New and ongoing capital project requests are prioritized and recommended for funding through review and analysis by the City Manager, Assistant City Manager, Public Works Director, Parks and Recreation Director, and Finance Director. The prioritization process includes evaluating the criticality of a project with regard to public health and safety, maintaining the viability of a City asset or facility, whether projects are already underway with existing investments, and/or whether a project can be phased to spread costs over a longer period of time.
General Fund
A significant focus of the five-year CIP budget development process is balancing available General Fund and Measure S funding with project budget needs, while exploring if future funding needs require additional revenue sources. Annually, capital project contributions from the General Fund and Measure S typically total $4.3 million and $2.1 million, respectively, for a total available contribution of about $6.4 million. In addition, when available, the City budgets Measure CC one-time funds for capital improvement projects. For Fiscal Year 2026-27, the City is proposing $2 million less in General Fund funding for capital projects to help offset some of the anticipated operating deficit. At the same time, staff is proposing $1.25 in one-time Measure CC funds to help address critical infrastructure needs and offset the lack of General Fund funding. For Measure S, staff is proposing less funding for capital improvement projects in 2026-27 because significant capital budgeting of Measure S funds over the last two years has committed much of the fund‘s balance. To allow the overall Measure S fund to build in 2026-27, staff is proposing only $0.7 million in CIP contributions. Overall, the anticipated contribution totals from the General Fund, Measure S and Measure CC are proposed at $4.2 million with $2.24 from the General Fund, $0.7 million from Measure S, and $1.25 in Measure CC.
With the projected available funding and planned contributions to the Capital Projects Fund, the five-year CIP estimates a total funding of $31.1 million from the General Fund Measure S, and Measure CC for capital projects. Staff works to balance project budget requests to match available funding over the five-year period, recognizing that needs and funding source become less certain further out in the five-year plan. When looking at projected needs, staff estimates a total of $37.8 million in project budget requests, with funding deficits throughout the five-year CIP.
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As a result of Council direction at the Study Session discussion of the Citywide Comprehensive Facilities Condition Assessment on October 20, 2025, staff is proposing $6.7 million be allocated from the Capital Investment Reserve to fund various projects identified in the key findings of the assessment. This funding is proposed to go towards project budget requests in 2026-27 for the King Recreation and Swim Center ($4 million), New Fire Station 27 ($2.2 million), Downtown Parking Analysis ($0.25 million), and Comprehensive Recreation and Aquatic Facilities Assessment ($0.25 million). This contribution of $6.7 million will leave a remaining balance of $18.3 million in the Capital Investment Reserve and cover funding gaps between the total General Fund, Measure S, and Measure CC contributions and project budget requests in 2026-27.
Special Revenues and Enterprise Funds
Special revenue and restricted funding, including Gas Tax (state gas taxes), Measures A and W (countywide transportation- focused sales taxes, Measure M (countywide vehicle license fee), and Road Maintenance and Rehabilitation Account (SB-1 state gas tax) funds, are restricted for specific purposes. For example, use of Gas Tax revenues is generally limited to public streets and highways, Measure A is typically the City’s sole non-General Fund grant-matching fund source for transportation projects. Typical projects funded via these sources include pavement maintenance/restoration and bicycle/pedestrian/safety improvements. The average annual revenue allocated to capital projects from these funding sources totals $8.7 million. The proposed project budget requests funded from these funding sources total $9.2 million for 2026-27. The five-year CIP projects a total revenue of $43.7 million from special revenue and restricted funding and a total of $47.5 million in transportation-related project budget requests.
The City also has restricted sewer and storm funding, via ongoing sewer rates and the Community Flood and Storm Protection Fee. For the sanitary sewer system, the CIP reflects the transition over the coming fiscal year from closing out the 14-year, $1 billion Clean Water Program (CWP) to the post-CWP projects focused on critical improvements to the solids processing facilities that were not upgraded as part of constructing the new liquids-processing treatment plant.
Sewer CIP projects are funded from the rate revenue, with $39.9 million proposed for 2026-27.
An estimated $4.0 million in revenue is anticipated annually from the new Community Flood and Storm Protection Fee, providing funding for both operations and maintenance and capital stormwater needs. Staff is making progress on the Storm Drain Master Plan, with a public draft made available on March 31st for community members to review, and anticipates bringing the updated plan to Council for adoption this summer. The current plan, which accounts for certain climate change impacts, is estimated at approximately $240 million in improvements, including an estimated $40 million in “Very High” priority projects. Staff plans to initiate design for a portion of these “Very High” priority projects in the upcoming fiscal year, with $2.3 million from the Community Flood and Storm Protection Fee revenue proposed to fund high-priority stormwater CIP projects coming out of the updated master plan and $1.1 million is planned for additional stormwater projects such as the Green Stormwater Infrastructure Program and Storm System Minor Repairs project. The five-year CIP includes a total of $228.5 million in Sewer funding requests and $17.6 million in Storm funding requests.
Development Impact Fees
Parks and Recreation fees, including parks and recreation tax, park impact fees, and park in-lieu fees, are utilized to fund parks and recreation related projects through a transfer to the Capital Project Fund. Various recently adopted State housing laws limit how and when the City can assess and collect fees from new housing developments, including SB 330, which vests fee formulas when a preliminary application is submitted, and SB 937, which allows housing projects to defer payment of impact fees until a project is completed. This results in a significant delay in when impact fee revenue can be collected by the City.
To overcome this funding gap, the Parks and Recreation Department proposes reallocating funds from completed projects and using the small amount of unallocated funds. The Parks and Recreation Department has positioned itself to flexibly respond to the funding source by having several projects in the development phase that can be activated depending on revenues. The proposed project budget for this funding source totals $1.0 million for 2026-27. The five-year CIP projects a total revenue of $9.6 million from Parks and Recreation Fees funding and a total of $9.9 million in project budget requests.
A similar issue is occurring within the Traffic Impact Fee (TIF) Fund, which is also dependent upon impact fees from new
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developments. The deferral of the payment of impact fees has created a timing gap in funding for the City and its transportation projects and is not helping with rebuilding the fund balance. Over the last two years, revenues have come in significantly less than budgeted and left a negative cash balance in the fund. Staff has implemented several measures to address the deficit and stabilize the Fund including releasing budgeted funds that were no longer required and suspending work on projects until new revenues are received. In addition, for FY 26-27, staff has recommended that no new projects be budgeted with TIF funds to ensure the City can rebuild the fund's balance.
Summary of Proposed Capital Improvement Projects
The following table details the five-year CIP needs, with $66.3 million proposed for 2026-27 and a total of $349.5 million in project needs over the entire five-year CIP Plan. By project type, the total five-year CIP needs can generally be broken down into $228.1 million (65.2%) for sewer-related projects, including the Clean Water Program (funded by sewer enterprise funds) and post-Clean Water Program projects, $57.1 million (16.3%) for transportation projects including street rehabilitation and bicycle/pedestrian improvements (primarily transportation-focused special revenue and restricted funding), $30.1 million (8.6%) for building- and facility-related projects (primarily General Fund and Measure S), $17.4 million (5.0%) for storm-related projects (primarily the Community Flood and Storm Protection Fee), $13.5 (3.9%) parks-related projects (primarily General Fund, Measure S, and Parks and Recreation fees), $3.1 million (0.9%) for miscellaneous/other project types, $0.4 million (0.1%) for bridge improvements. Specific projects included in the proposed five-year CIP are shown in Attachment 1.
Project Budget Requests by Project Type (All Funding Sources) Project Type 2026-27
Proposed
2027-28
Need
2028-29
Need
2029-30
Need
2030-31
Need 5-Year Total
Sewer 39,775,000 44,275,000 47,175,000 48,055,000 48,775,000 228,055,000 Streets/Transportation 11,046,236 11,248,000 11,218,000 12,568,000 10,988,000 57,068,236 Buildings/Facilities 9,520,000 6,570,000 4,170,000 4,650,000 5,150,000 30,060,000 Stormwater 3,200,000 3,550,000 3,550,000 3,550,000 3,550,000 17,400,000 Parks & Playgrounds 2,100,677 2,350,000 3,175,000 3,625,000 2,225,000 13,475,677 Miscellaneous 555,000 1,550,000 1,000,000 - - 3,105,000 Bridges 75,000 75,000 75,000 75,000 75,000 375,000
TOTAL 66,271,913 69,618,000 70,363,000 72,523,000 70,763,000 349,538,913 In addition to the proposed five-year CIP, there are many projects City staff has identified that are not included due to insufficient funds, as shown in Attachment 2. These projects have high-level cost estimates that would need to be further refined at the point of becoming a funded project. Notable projects on the unfunded list include the King Center and Fire Station 27 (funding beyond the above-proposed Capital Investment Reserve allocations), the 28th Avenue Gap Closure project (construction funding), large-scale Marina Lagoon dredging (design and construction), and future full-scale implementation of Master Plan efforts including the forthcoming Storm Drain Master Plan and long-term implementation of the Bike Master Plan.
Staff is also in the process of implementing or developing a number of planning studies that are expected to identify new capital project needs in addition to the known project needs. These efforts include:
Comprehensive Recreation and Aquatic Facilities Assessment: $250k will be requested from the Capital Reserve Fund to update the Parks Department’s 2016 study of facilities with a focus on the Beresford Park complex of facilities, the Senior Center, Joinville Pool, and the Shoreview Recreation Center, recognizing that the MLK Center/Pool is being addressed separately, the Central Recreation Center is planned for removal as part of the Central Park Master Plan, and Lakeshore is being separately studied. Lakeshore Center Feasibility Study: The City has secured $1.2 million in federal funding to support the expansion of affordable, full-day preschool for low-income families in San Mateo, including potential renovations to the Lakeshore Center. A feasibility study is currently underway to assess options for the facility, including the provision
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of licensed full-time childcare and the potential for a public-private partnership. Anticipated improvements may include upgrades to plumbing and electrical systems, expansion of administrative space, installation of air conditioning, and compliance with ADA standards. Staff anticipate presenting the findings and recommendations of the feasibility study to the City Council by Fall 2026.
Downtown Parking Study: In coordination with the Downtown Plan, which will evaluate future development and establish a long-term vision for the downtown area, the City will undertake a comprehensive parking study. The study will assess the City’s existing parking assets, including an evaluation of supply, utilization, operations, and future demand for publicly operated parking facilities. The study will also analyze the potential relocation of City Hall to a more centralized downtown site located on an existing garage property. Additional recommendations are expected to address parking rate structures, the effectiveness of nearby residential parking programs, and prioritized capital improvements for the parking garages. Potential CIP needs are currently unknown. Corporation Yard Best Use Study: The study will help the City explore future options for the existing site on Pacific Boulevard. This will cover concepts such as an improved corporation yard, a civic building, and various types of mixed-use or multi-zone subdivisions, and will serve as a basis for generating more ideas and gathering public feedback.
Storm Drain Master Plan: Currently underway and will provide a comprehensive, prioritized CIP for the City’s storm drainage/flood control infrastructure around the start of Fiscal Year 2026-27. Preliminary potential CIP needs were presented to Council in January 2026.
Citywide Bridge Assessment: The Citywide Bridge Prioritization effort is nearing completion. Staff anticipates bringing the study to Council in late Summer 2026. Potential CIP needs are currently unknown. Sewer System Master Plan: With the Clean Water Program closing out in 2027, updated flow studies and hydraulic models reflecting all the various improvements will be developed to 1) determine if any additional capacity improvements are needed within the sanitary sewer collection system and 2) calibrate the sewer hydraulic model so the City has an accurate picture of system performance which supports development and planning. In addition, an updated condition assessment of sewer pump stations and pressurized pipelines (force mains) is needed to identify improvements required to ensure reliable pump station operations and evaluate the physical condition of force mains to determine if repairs are needed to ensure reliability and proper operation. Potential CIP needs are currently unknown.
Wastewater Treatment Plant Biogas and Biosolids Evaluation: Currently underway, this study will assess ways to improve the operation and maintenance of the City’s two digesters, beneficially use biogas energy, explore potential options for producing Class A biosolids, and analyze impact on overall energy production and costs.
Additionally, it will evaluate needed upgrades to the digestion infrastructure. Potential CIP needs are currently unknown.
Main Library Master Plan Study: A study has been completed with the architectural firm, EHDD, to update the master plan that was previously conducted in 2017. The purpose of the plan is to identify underutilized spaces in the Main Library that can be renovated to meet current community needs. Spaces identified in the plan are the teen lounge, computer lab, Jobseekers space, café, periodical storage, and business library.
BUDGET IMPACT:
There is no direct budgetary impact resulting from this report. The 2026-31 CIP Preview identifies $349.5 million in capital improvement needs, predominantly reflecting sewer, building/facilities, and streets and transportation projects. The proposed budget for CIP projects in Fiscal Year 2026-27 is $66.3 million. Any feedback and/or direction received from the Council as a result of this report and supporting presentation will be incorporated into the FY 2026-31 five-year CIP Plan.
ENVIRONMENTAL DETERMINATION:
This budget 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. (CEQA Guidelines Section 15378(b)(4).)
NOTICE PROVIDED
All meeting noticing requirements were met.
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ATTACHMENTS
Att 1 – 2026-31 CIP Preview by Project Type
Att 2 – Unfunded Project Needs
STAFF CONTACT
Matt Fabry, Public Works Director
[email protected]
650-522-7309
Jamie Perez, Business Manager
[email protected]
650-522-7243