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HomeMy WebLinkAboutAgenda Packet - CC - 2018.03.14City of Burlingame Meeting Agenda - Final City Gouncil BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLINGAME, CA 94010 Wednesday, March 14, 2018 6:30 PM Council Chambers 2017-18 Mid-Year Budget Session Note: Public comment is permitted on all action ifems as noted on the agenda below and in the non-agenda public comment provided for in item 4. Speakers are asked to fill out a "requestto speak" card located on the tahle by the door and hand itto staff, although the provision of a name, address or other identifying information is optional. Speakers are limi@d to three minutes each; the Mayor may adjust the time limit in light of the number of anticipated speakers. All votes are unanimous unless separately noted for the record. 1. CALL TO ORDER - 6:30 p.m. - Council Chambers 2. PLEDGE OF ALLEGIANCE TO THE FLAG 3. ROLLCALL 4. PUBLIC GOMMENTS, NON.AGENDA Members of the public may speak about any item not on the agenda. Members of the public wishing to suggesf an item for a future Council agenda may do so during this public comment period. The Ralph M . Brown Act (the State local agency open meeting law) prohibits the City Council from acting on any matter that is not on the agenda. 5. STAFF REPORTS AND COMMUNICATIONS (Public Gomment) Adoption of a Resolution Amendinq the FY 2017-lBOperatino and Capital Budqets to Reflect the Recommended [/id-vear Adiustments Attachments: Staff RePoft Resolution Review of Draft FY 2018-l9General Fund. Gas Tax, Measure A. Measure l, l/easure M and Senate Bill(SB 1) Funded Capital lmprovement Proqram (ClP) Attachments: Staff RePort PowerPoint Presentation 6. COUNCIL DIRECTION ON BUDGET POLICY ISSUES a. b City of Burlingame Page 1 Printed on 3/9/2018 City Council Meeting Agenda " Final March 14,2018 7. ADJOURNMENT Notice: Any aftendees wishing accommodations for disabilities please contact the City Clerk at (650)558-7203 at least 24 hours before the meeting. A copy of the Agenda Packet is available fot public review at the City Clerk's office, City Hall, 501 Primrose Road, from 8:00 a.m. to 5:00 p.m. before the meeting and at the meeting. Visit the City's website at www.burlingame.org. Agendas and minutes are available at this site. NEXT CITY COUNCIL MEETING - Next regular City Council Meeting - Monday, March 19,2018 VIEW REGULAR COUNCIL MEETING ONLINE AT www.burlingame.org/video Any writings or documents provided to a majonty of the City Council regarding any item on this agenda will be made available for public inspection at the Water Office counter at City Ha at 501 Primrose Road duing normal bus,ness hours. Ciry ot Bu ingane Page 2 Pintad on 3A/201E STAFF REPORT AGENDA NO: 5a MEETING DATE: March 14,2018 To:Honorable Mayor and Gity Council Date: March 14,2018 From: Carol Augustine, Finance Director - (650) 558-7222 Subject: Adoption of a Resolution Amending the FY 2017-18 Operating and Capita! Budgets to Reflect the Recommended Mid-year Adjustments RECOMMENDATION Staff recommends that the City Council accept the FY 2017-18 [Mid-year Financial Summary and Five-Year Financial Forecast, and adopt the attached resolutions amending the FY 2017-18 Operating and Capital Budgets to reflect the recommended mid-year adjustments and further fund the Capital lnvestment Reserve in the City's Capital Projects Fund. BACKGROUND This report summarizes the City's mid-year fiscal status by providing an analysis of anticipated revenues and expenditures in comparison to the current adjusted budget for the 2017-18 fiscal year. Revised forecasts incorporate final 2016-17 fiscal year results, year-to-date cash flow, and other data points that were not available when the budget was originally developed. To the extent possible, trends or emerging items that were not included in the City's operating budget have been identified, and the budgetary impacts of these items have been assessed. ln addition, this report notes changes in activities that have very little overall impact to the budget, but allow for better alignment with Council goals and departmental directives. Although the focus of the mid-year review is the City's General Fund, this report also provides an update for other funds where fiscal changes are noted. The attached budget resolutions are recommended so that the current budget will not only provide the proper funding needed to carry out the programs and activities anticipated through June 30, 2018, but will also more accurately reflect the financial condition of the City as it enters the FY 2018-19 budget process. Having the latest projections reflected in the current budget enhances the forecasting process and allows decision makers to have greater confidence in the information provided within the budget development framework. ln addition, during this time of moderate economic growth, the City may choose to set aside further funding for an ever-growing list of unmet capital needs and other liabilities. Considering current economic conditions and this most recent analysis of operations, staff has updated the assumptions and projections incorporated in the City's five-year financial forecast for the General Fund. This long-term forecast establishes an appraisal of fiscal sustainability beyond the current budget cycle, providing important context to the annual budget process. 1 2017-1 8 Mid-Year Report March 14, 2018 DISCUSSION Economic Conditions National Economy At the time the City's FY 2017-18 budget was being prepared, the national economy was picking up momentum after a somewhat sluggish 2016. Most forecasts indicated that the economy would continue to grow at a moderate pace (2% - 3 percent), perhaps less sporadically than in recent years. U.S. real GDP had increased 1.85 percent in 2016, slightly below the rate experienced in 2015. The U.S. unemployment rate had droppedto 4.4 percent (in April 2017) - its lowest level in a decade. Despite gasoline prices that were rising after enjoying lower rates in 2016, consumer spending was increasing at a healthy clip. Mortgage rates, though also rising, remained relatively low, hovering just above the 4 percent mark. And inflation continued to be relatively stable at a very low rate. The Federal Reserve had raised the benchmark interest rate (December 2016 - 25 basis points) only once since the prior year, but indicated a willingness to make further adjustments as the economy improved. All the factors of internal growth appeared to be positive. The possibility of any significant weakening in foreign economies, which could restrain the country's economic groMh, had dissipated. However, the election of Donald Trump had caused economists to rethink their outlook: the impact of future changes in economic policies created a lot of uncertainty around the direction of the national economy going fonruard ln the end, U.S. real GDP increased 2.73percent in 2017, the highest rate since 2014, with the most acceleration seen in the third and fourth quarters. The increase in real GDP from the prior calendar year reflects solid consumer spending and an uptick in private inventory investment and in commercial fixed investment. This measure of the nation's economic growth indicates a slightly faster pace than experienced in previous years, reflecting relative strength in the global economy. According to Beacon Economics, a leading independent economic research and consulting firm, moderately low inflation and interest rates continue to support spending. As the U.S. economy continues to chug along, real GDP groMh is projected to grow in the range of 2.0-2.6 percent in upcoming years. Xeal GDP: Percent change from preceding quarter 6 5 4 3 z 1 0 -1 -2 i-:7 *3 *-3 203.4 U.S. Br:reau of Economic Analysis aaa l'-: -31 aaa a 1 2018 *2 *' ,:_?. *.t a4 20L7 Seasonalty adjusted at annual rates 2015 The U.S. unemployment rate was 4.1 percent in January 2018, which is largely accepted as full employment, as a result of a tight labor market and more fulltime hiring. This rate continues to 2 201 7-1 8 Mid-Year Report March 14, 2018 drop as job openings remain high and the number of workers available decreases, and most economists anticipate that national unemployment will remain low going into 2020. Growth in payrolls is projected to push the unemployment rate a bit lower. Lower unemployment typically pushes wages higher, so inflation is expected to move higher as well. As a result, interest rates, both on the short end of the yield curve and longer-term rates, are expected to increase. ln addition, higher wages should bolster consumer confidence, leading to potentially higher personal consumption expenditures, which will also put upward pressure on inflation. And yet, inflation is expected to stay below the 2 percent Fed target rate for the near future. Although retail sales growth in January was down slightly (mainly due to a drop in auto sales) U.S. consumers are still relatively bullish on the economy. Holiday sales rose 5.4 percent from a year ago. Since consumer spending accounts for nearly 70 percent of the U.S. economic activity, these numbers reinforce a positive start to 2018. art{Jt+w*.9{t4bzH* 177fi* 12427,8&$ 11*r*,r7A 17b$' ii 127rA.44 1144fi 1173?.12 t1sl*.2 E? =2 11e00 v3vs.n fi4*"1 fi44,* m 1t€tn ,1227.9 @m 112*n fiea, Jx".2.225 3!2.2e13 *za2*1L i*1241t 3a2417 J*2A17 Jrrr2618 ,l*&e1:"zz*zzzz-.s4er-,a.2..a.9rr€>i:uz,"4.eLz4n?!;2 The U.S. economy is in the ninth year of its current expansion. Most economists find little reason to expect that this expansion will stall or reverse in 2018; in fact, the tax reform bill enacted in December is likely to provide good momentum with short{erm fiscal stimulus. However, there are certain risks that should not be ignored in the coming year, including a worsening labor shortage that could have implications for years to come. Other potential risks to the economy include the growing federal deficit. As the huge Baby Boomer generation retires over the next decade, there will be a sharp rise in federal entitlement spending but without the corresponding revenues to pay for the increase. And the recently enacted tax overhaul bill will make a bad deficit situation worse. The new tax plan will also have an unintended consequence for the U.S. economy-higher interest rates and tighter lending markets. According to the Beacon Economics forecast, "The U.S. economy suffered badly during the past two asset bubbles and it's likely that the Fed will try to head off a third by being aggressive in 2018....Such efforts will flatten the yield curve and slow lending - and that will more than offset the modest stimulative effect of the tax cuts." So, although the economy headed into 2018 in a solid position, there is a lot of uncertainty about future economic policies and how they will influence the national economy going fonruard. 3 201 7-1 8 Mid-Year Report March 14, 2018 Av*zviet*t k*tai we €'3il8 2^6 Q,?i*S L-O 4 zBzA ? 4.2 .J tr, J -5Hm 1{W G*76t&t*als U*€tt?r*$aeat Rete laflatio* *ate lxt*lexiRale z.sa 4.ta 2"1 Wet* p*r* per* w@fi, uS* l,€llicn ry*r* 4"2. \a 1.V5 ?.} *e9a*ce of Trad*-1WD 4g3W ^W5** Gaveta**r*t Bebtis GDP 1*t"4*1**1B?t Stafe Economy Although California turned in a solid performance in 2017, the economyexhibited slowergrowth than the nation as a whole. With GDP groMh of 2.1 percent, California's economy accounts for 14.2 percent of the U.S. GDP. The unemployment rate for California fell to a record low of 4.4 percent on a seasonally adjusted basis in January 2018, down from a 5.2 percent rate in January 2017. Nearly every industry in the state continued to add jobs year-over-year, with the categories of Education and Health Services leading the way. Manufacturing continued its slight decline in jobs in 2017. Job groMh in the Leisure and Hospitality lndustry followed closely behind. With these decreases, the state's unemployment rate is moving ever closer to parity with the nation overall. U.S. and California Unemployment Rate Shaded areas indicate U.S, recessions, Source: U.S. Bureau of Labor Statistics; CA Employment Developmenl Depadment, Labor Market lnformation Division; CA Department of Finance, Governo/s Budget Forecast. Job openings across skilled and unskilled occupations alike have reached record high rates; however, the state's employers are unable to hire the workers they need to expand. Therefore, 14o/s 12% 1Oa/o 8o/o 60/o 4o/o 2o/o OVo o C\r sr (0 0 0 al r* (o .o o q.l s (E) a o c{ rt (o co !26 irt d 6 c6 6 o, ol 6 o) o o 6 o a r: !' N5 6 5 5 6 6 ot 5 o, 6 6 o o o a P I o o o q ;=-=NNNNN6I{\Nc.lNN 4 reQ6llf61pi6 ----united ,, ::4 7 \l. \, Ie h g, r{1 tl\r-\\ {,I t% '9, g,,, -ta\ \\\,"'"4T1 , r ,oF \Jv a,\\tral\E,,q.*:: 2017-1 8 Mid-Year Report March 14, 2018 unemployment should remain low, but the labor market will be unable to experience more than about 1.5o/o job growth per year. Economists expect real personal income growth in the state, estimated to be 3.1 percent in 2017, to increase in the range of 3.9 percent to 4.5 percent in each of the next two years, as a tighter labor market results in higher wages for more workers. California's minimum wage also will increase in future years under state law. Also, consumer inflation has averaged 1.9 percent in California and 1.6 percent in the nation since 2010, as measured bythe Consumer Price lndex. lnflation began to pick up in 2016 due to increasing housing costs, medical costs, and energy prices. Consumer inflation is poised to hover between 2 - 2.5 percent annually from 2018-2020. It is no coincidence that slower labor force growth has occurred as the cost of living has soared in California. Since 1990, the California median has consistentlyexceeded the US median by more than 50 percent; now it is nearly double. As long as growth in the supply of housing remains low, home prices are expected to increase at above average rates in the near future. As can be seen in the chart below, median home prices in California have been rising faster than median household income. This condition leads to more crowded conditions, especially in areas where jobs are being added. The housing constraints are assumed to lead to a slower job groMh in the governor's budget forecast. to ncome 12.0 r0.0 8.0 6.0 4.0 2.4 0.0 -f,2lifsrnig -["lnilgcl States A IJ J JJ JII II J J JI JIIf JI\l}N}N N$NtNNNN NNNNN NN(r' .!r (O (O (O (O (o (o .O aO aO (0 (o (o r0 (o (o ao (o (o o o o o o o c, o o o (3 0 0 0 () 0 (,6 6 o cb @ o @ @ s @ (c, (o (o fg to G, (E, (o (g (g c, Q c, o (t c, o o o o a a a d r - d a5 * i5 q, 5 qr or -t a tg o r N EJ 5 qr o) \a €a ((, c, * N ot,b gr gt -.a e (o o - N sr $ ut o) Median sales price of existing single-family homes / Median household income. Source: CA Association of Realtorsi U.S. Bureau of the Census; CA Department of Finance The state's ever-worsening housing shortage is a major issue according to Robert Kleinhenz, Beacon Economics' Executive Director of Research. Kleinhenz believes that the federal tax overhaul, which will cut the limit on mortgage interest deductions from $1 million to $750,000 and also impose a $10,000 limit on state and local tax deductions, will exacerbate the shortage by decreasing home ownership. "The homeownership rate in California is already considerably lower 5 2017-18 Mid-Year Report March 14, 2018 compared to the U.S. as a whole, mainly because the median home price is more than twice that of the nation," said Kleinhenz. "Historically, middle-income households in California have been able to count on the deductibility of mortgage interest and property taxes to soften the blow but this change in the tax code will put the American Dream of homeownership further out of reach for more California residents. " The Allen Matkins/UCLA Anderson Forecast - California Commercial Real Estate Survey reflects favorable changes to the California commercial real estate market, due in large part to the recent federal tax overhaul. The tax bill is expected to increase the rate of return on commercial real estate and make investment more attractive. The biannual survey projects a three-year outlook for California's commercial real estate industry and forecasts potential opportunities and challenges affecting office, multi-family, retail, and industrial sectors. The latest survey (December 2018) showed increased office developer sentiment for the Northern California office markets; with all three markets (San Francisco, East Bay and Silicon Valley) at least at the dividing line between optimism and pessimism. Similarly, the sentiment for San Diego and Orange County markets has also rebounded from the June 2017 survey. The Los Angeles market continues to have optimistic sentiment by the survey panel thanks to the entertainment and tech sectors. Keeping the state on a path to longterm fiscal stability, Governor Jerry Brown proposed a $13'1 .7 billion General Fund budget plan for FY 2018-19 that fills the state's Rainy Day Fund to its constitutional target, fully implements the state's K-12 school funding formula two years ahead of schedule, and provides $4.6 billion for the first year of a 10-year transportation improvement plan. The plan reflects a healthy one-time surplus and increases funding for education, health care, and other core priorities. But with growing uncertainty about the impacts of new federal policies, combined with a longer-than-average economic expansion, the budget continues to bank higher revenues into reserves and pay down debts and liabilities. This emphasis on long term fiscal health policies in the State budget reduces the risk of future budget gimmicks and revenue grabs that have plagued California's localgovernmental agencies in the past. Local Economy ln California there continues to be a marked difference between the coastal counties and the inland counties in employment-loss recovered. With its emphasis on the tech sector, the San Francisco Bay Area economy continued to outperform the nation in 2017, with an unemployment rate (in the nine-county Bay Area at 2.5o/o. San Mateo County unemployment as of December 31, 2017 not seasonally adjusted) was 2.1% - the lowest in the state. Then in January, the Employment Development Department (EDD) reported that the Bay Area gained an additional 11,900 jobs - onethird of all the jobs added statewide. The job surge was fueled in part by very large technology companies, such as Google, Apple, Adobe Systems, and Facebook, which are hiring employees at a rapid pace, GroMh is expected to continue through the end of the fiscal year, with the Bay Area's economy growing at a faster rate than nearly all other large metropolitan areas in the country. However, Beacon Economics anticipates job growth in San Francisco to expand at a more subdued rate of approximately 1 percent over the next year. The firm sees housing costs slowing the pace of people moving into the region. While the influx of highly educated professionals has been a 6 201 7-1 8 Mid-Year Report March 14, 2018 primary driver of groMh, the rising cost of living in the area often offsets wage advantages, and net migration is expected to decline over the next few years. The median home price in San Francisco climbed by 6.40/o between the third quarter of 2016 and the third quarter of 2017, reaching $1.3 million. Over the same period, the median price of a home in nearby Oakland increased by 12.4o/o and in San Jose by 14.0o/o. Home sales also continue to rise despite San Francisco having one of the highest median home prices in California. Between the third quarters of 2016 and 2017, sales grew by 2.3o/o, indicating steady demand from high- earners in the region. As a result of the current high demand, building permit issuance has continued to increase in the region. From the first to the third quarter of 2017, there were 3,082 multi-family permits issued, up 57.60/o compared to the same time last year. Single family permits have also jumped, totaling 69 through the first three quarters of 2017, an 81.6% increase compared to the same period in 2016. Beacon Economics is forecasting the median home price in San Francisco to continue rising over the next year, but at a slower pace. Meanwhile, sales activity will remain lively as the region continues to benefit from income gains. Rents in the area appear to have stabilized from the frenzied groMh of the last few years, or are at least increasing at a slower rate. ln an area of sky-high rents and housing prices, this is small comfort for tenants who must dig even deeper to live in the area. As job groMh exacerbates the demand for housing, there is little relief in sight for the high cost of Bay Area housing in the near future. Because the San Francisco Metropolitan area continues to be one of the United States' top tourist destinations, Burlingame continues to see strength in hotel tax revenues and consumer spending. With an 87.1 percent occupancy rate in the first six months of this fiscal year, hotels in the area are among the most occupied in the country. (The nationwide average for hotel occupancy rates in 2017 was 65.9 percent.) Revenues were up 5.9 percent from the same period last year. As noted in the General Fund Revenue analysis (Attachment A), transient occupancy (hotel) tax receipts in fiscal year 2016-17 leveled off somewhat, increasing less than one percent ($171,000) over the prior fiscal year. However, as noted in previous analyses, federally imposed travel restrictions could negatively impact tourism and the area's occupancy rates in the years to come. As in other cities in the region, spending on autos, general consumer goods, and restaurants was up through the first half of calendar year 2017. Burlingame sales tax receipts in the 3rd quarter of 2017 were 1 .6 percent higher than the same quarter of the previous year (compared to an increase of 7.0 percent county-wide, and 3.6 percent for the state as a whole). Generally, the City experienced a solid quarter for auto sales and rentals, building-construction supplies, and some categories of business related purchases. Higher fuel prices and strong restaurant patronage also contributed to the overall increase. However, the temporary closure of a major retailer within the general consumer goods group hampered growth in that business group. 7 2017-1 8 Mid-Year ReporT March 14, 2018 Q3 Q3 Q3 83 11 15 1E 1? W-w Burlingame CountY Califomia $8,000 t6,000 $4,000 i2,*os $0 Sarcs Psa C,tplr* Again, although increasing incomes and wages among local residents have helped fuel taxable sales, the high cost of housing in the region could impede growth in consumer spending in coming years. As more and more residents spend a larger portion of their income on housing, less money is left to purchase goods and services. ln short, the state and local economic outlook is expected to coincide with the national outlook of continued recovery. As the San Francisco Bay Area was previously a "hot spot" for the growing economy, it is expected to experience a stabilization effect sooner than other parts of the state. Even with the positive economic trends of recent years, budgets have been developed with a relatively conservative approach. The 2009 recession brought home the realization that some of the City's largest sources of revenue are highly volatile, inexorably linked to the health of the general economy and events that cannot be anticipated in the short term. The recovery has been tentative at times, and accompanied by increases in certain operating costs - particularly in the area of personnel benefits - that need to be considered. The General Fund five-year financial forecast is provided in the final section of this report. ln conjunction with the General Fund Reserve Policy, this long-term approach to the City's budget helps ensure that future economic downturns can be managed effectively. Although renewed emphasis on budgeting for the longer-term will provide more certainty for future budgets, the City cannot have a true budgetary "surplus" if unfunded needs continue to grow. The establishment of the Other Post-Employment Benefits (OPEB) trust account was a significant step in assessing unfunded retiree medical liabilities and systematically providing for them within the operating budget. Although pension reform has somewhat curbed the growth of these liabilities rn the long term, accrued obligations need to be addressed now lo cover the growing number of retirees claiming benefits. CaIPERS has responded by greatly increasing employer contributions through lower discount rate assumptions and decreased amortization periods for the accrued liabilities. The transaction tax that resulted from November's successful Measure l, effective April 1 ,2018, will fund additional safety services and enhanced streets and sidewalk maintenance activities, as I 2017-18 Mid-Year RePort March 14, 2018 well as provide partial support to the construction of a new Community Center, which is long overdue for replacement. Other liabilities await funding, however. The deferral of maintenance to infrastructure and facilities has resulted in an increase of projects on the City's list of "unfunded needs." Staff will strive to identify these deferrals and recommend their systematic funding within the operating budget (of the appropriate fund) whenever possible. General Fund The City's FY 2017-18 budget anticipated a moderate pace of continued economic growth, with no significant enhancement in the level of services offered by the City. With revenues expected to slightly outpace those of fiscal year 2016-17, the budget supported an aggressive contribution to the newly established $1 15 Trust for pension obligations, necessary in light of the ever-increasing employer contribution rates projected for the next 10-15 years. Now, with more than half of the fiscal year of actual transactions under analysis, the City's year- end General Fund revenues are currently projected to be over $1.5 million higher than projected in the FY 2017-18 adopted budget. lr4ost of the growth comes from increased tax revenues; a small downward adjustment in investment income offsets the revenue gains in other areas. Details of the City's General Fund Revenue analysis at mid-year are provided in Attachment A of this report. Departmental expenditure budget revisions are discussed in more detail in Attachment B of this report. The adjustments reflect an attempt to adjust certain departmental budgets to more accurately reflect current needs, in response to unanticipated events, a change in programming direction, or access to information that was not available at the time the FY 2017-18 budget was proposed. The resulting departmental budgets should provide a clearer, more transparent picture of operating needs going fonruard. This is particularly important in establishing the framework for the FY 2018-19 budget, where funds needed for continued service levels will be considered in the context of the City Council's established goals. ln addition to adjustments in departmental operating expenditures, a significant budget adjustment is needed to ce(ain transfers in/out of the General Fund. The explanation for these adjustments, largely related to the City's budgeted contributions to the $1 15 Trust for pension obligations, follows the discussion of General Fund Revenues and Expenditures, below. General Fund - Revenues The following table shows the mid-year assessment of fiscal year 2017-18 General Fund revenues. There are three columns for the 2017-18 fiscal year: The "FY17-18 Current Budget" column shows the revenue budget adopted by the City Council last June; the "FY17-18 Midyear Projection" column shows the most current projection for the fiscal year; and the final "FY17-18 Midyear Amendment" column reflects a summary of proposed revenue amendments to the FY 17-18 budget for the City Council's approval with this Mid-year Report. For comparison purposes, the table also includes the City's actual General Fund revenues in fiscal year 2016-17, as well as figures for the previous fiscal year. Year-to-date revenues are not included here as the timing variability within each different category greatly complicates the analysis and would make for a confusing presentation as a whole. However, year-to-date receipts may be discussed in the various categories of revenue as they relate to a revised FY 2017-18 projection. I 2017-18 Mid-Year Repoft March 14, 2018 CITY OF BURLINGAME, CA SUMMARY OF GENERAI FUND REVENUES FY17-18 Midyear Proiection FY17-18 Midyear Year-End Amendm ent Uo {Down} % s 20,1s0,000 s 12,205,000 27,400,000 951,000 0 s29,000 5.O% O.Oo/o 2.0% 2.4o/o 0.0% 0.0% 0.0o/o -0.6% t.0% o.o% t5% 0.0% 5.5% -tr.t% 1,669,000 994,000 62,000 360,000 88,000 910,700 16s,000 5,337,775 30,500 25L,2L6 840,000 39,000 0 0 0 (soo) 9,200 0 80,275 0 13,000 .000) s 70,463,191 s 1,525 ,975 2.2% FY15-15 Actuals FY15-17 FY17-18 Current Budset Property Tax Sales and Use Tax Transient Occupancy Tax Other Taxes Franchise Tax Business Licenses State HOPTR Real Property Transfer Tax Licenses & Permits Fines, Forfeitures and Penalties Use of Money & Property Charges for Services Other Revenue State Subventions lnterest lncome Total, General Fund Revenue L,604,758 1,633,303 1,630,000 985,568 976,307 994,000 63,710 62,669 62,000 499,5L4 352,108 350,000 86,1s4 88,069 88,500 864,393 898,184 901,500 200,196 182,216 165,000 4,470,274 6,023,353 5,257,500 35,972 74,711 30,500 146,s30 281,916 238,2t6 757,753 184,900 945,000 5 t7,64s,290 12,827,673 26,O92,240 5 L8,932,794 12,o89,288 26,262,937 s 19,189,000 t2,205,000 25,87L,000 5 o6.279,42s S ,749 s 68.937.216 The key factors that pertain to staff's recommended adjustments to each of the City's General Fund revenue categories are discussed in Affachment A of this report. The amended forecast for the City's largest revenue sources (Property Tax, Sales Tax and Transient Occupancy Tax) is not only based on the previous year's receipts, but also on the continued strength of the local economy as reflected in cash receipts for the current fiscal year. ln fact, the City's major revenue sources are generally keeping pace with the FY 2016-17 actual amounts, with most comparing favorably to the priorfiscalyear. The recommended adjustments equate toa2.2 percent increase in General Fund revenues when compared to the FY 2017-18 adopted budget, and a 3.5 percent increase over last year's revenues for the fund. Note that FY 2016-17 aclual amounts are taken from the City's Comprehensive Annual Financial Report, and therefore reflect interest income revenue adjusted for a reduction in the City's investment portfolio at the fiscal year end. The adjustment is required by governmental accounting standards, but creates large variations from year to year in the amount of interest income reported. As explained in Attachment A, the budget for this line item assumes no change in the market value of the City's portfolio, as this measure is difficult to anticipate and does not adequately reflect the City's true return on investments. Without the FY 2016-17 adjustment in interest income, the current year-over-year increase in revenues anticipated for the General Fund is approximately 2.6 percent. General Fund - Exoenditures The following table shows the mid-year assessment of FY 2017-18 General Fund expenditures by critical service area: 10 201 7-1 8 Mid-Year Report March 14, 2018 FY17-18 FY17-18 FYL7.L8 FY15-15 Actuals FYL6-L7 Actuals Adopted Midyear Midyear Year-End Uo (Downl %Bv General Fund Prosram General government Public Safety Public Works Community Development Leisure & cultural Services Budset Proiection Amendment 5 4,477,40I 24,625,077 4,693,548 7,405,794 72,257,646 5 4,874,249 25,552,359 4,456,522 1,530,975 s s,799,089 26,937,769 s,9s8,029 1,836,358 15,034,613 s s,819,089 27,033,769 6,322,729 1,861,358 15,100,496 s 2o,oo0 96,600 364,100 25,000 6s,883 o.3% 0.4% 6.1% 7.4% 0.4%5 Total, Operating Expe nditures s47.4s9.460 s49.707.480 s55,555,258 ss5.136.841 ss71.583 1.,0% Again, there are three columns for fiscal year 2017-18. The "FY17-18 Adopted Budget" column shows the budget adopted by the City Council in June 2017. Although the departmental budgets were internally adjusted for encumbrances of the prior fiscal year, the encumbrances are excluded for this mid-year analysis. The second FY 2017-18 column shows the new mid-year projection for each program area's current year expenditures. The final FY 2017-18 column shows the resulting amendments to the FY 2017-'t8 adjusted budget to reflect additional resources required (or anticipated operational savings) by departments for the remaining fiscal year. For comparison purposes, the table also includes the City's General Fund actual expenditure performance in fiscal yeat 2016-'17, as well as figures for the previous fiscal year. Budgetary savings (positive expenditure variances) within the General Fund in fiscal yeat 2016-17 were experienced in all departments, resulting in expenditures of $3.1 million (roughly 6.1 percent) less than budgeted for the fiscal year. Since local government expenditure budgets (appropriations) serve as the legal level of budgetary control, some level of savings will be realized in any fiscal year. Although departmental budgets were analyzed for both underfunded operating needs and anticipated budgetary savings, the focus was on ensuring budget adequacy for General Fund operations for the remainder of the fiscal year. There are fewer adjusting entries recommended for expenditure budgets in this analysis than recommended for the City's General Fund revenues. Most expenditure adjustments were fairly minimal in amount, or offset by operational savings elsewhere in the department. Proposed revisions to General Fund Expenditure Budgets are explained in detail in Attachment B. Again, additional budgetary savings are a certainty, because the expenditure budgets reflect the upper limit of spending levels for each department. Departments are only able to expend or commit funds up to this legal level of budgetary control. Because these budgetary controls are established within each category of departmental expenditures, budgetary savings tend to average 2-4 percent of the annual expenditure budget. Although the City experiences larger variances, especially in the area of personnel costs, in years when there are a high number of position vacancies, the number of vacancies appears to have been fairly low in recent years. For this reason, staff anticipates that the City will experience a budgetary savings in the departmental budgets in the range of $1 - $2 million in the current fiscal year. Contributions fo the $115 Trust Fund for Pensions - As previously noted, planned contributions to the pension trust fund established with Public Agency Retirement Services (PARS) were included in the adopted budget as transfers out of the City's various funds in the amount of $3.7 million. ln October of last year, an investment strategy was developed, and the funds were 11 CITY OF BURL]NGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES 2017-1 8 Mid-Year Report March 14, 2018 transferred to the trust. Although funds contributed to the trust are restricted in use solely for the City's pension obligations, per the Governmental Accounting Standards Board (GASB) implementation guidance for Statement No. 67, Financial Reporting for Pension Plans, the assets of the gl 15 Trust continue to be assets of the City. Unlike the trust fund established for the City's retiree medical obligations, the assets of the pension trust are considered to be under the control of the employer, who benefits through reduced future cash flow demands on General Fund resources. This flexibility, and the ability to manage disbursements of the funds, gives rise to the conclusion that the fund is an asset of the City. ln other words, the trust fund contributions are merely a transfer of the City's available cash to another asset (restricted cash), and contributions to the trust cannot be recorded as current-year expenditures. ln light of this determination, the transfers out from the various funds for contributions to the pension trust account must reversed. Contributions to the $115 Trust for pensions will not impact fofal fund balance, but merely be reflected as "restricted" fund balance for financial reporting purposes. For the General Fund, the adjustment is reflected as a decrease of $3.1 million in transfers out. Two additional changes (increases) in transfers out of the General Fund are made necessary due to changes in other funds. These adjustments are described in the "Other Funds" section of this mid-year report. Amendments to General Fund Transfers ln (Out) Fiscal Year z0t7-Lg Description Amount S Pension Trust Fund - Transfer Reversal Solid Waste Fund Parks &Trees CIP Fund Net Change to Transfers ln (Out) S s,rgg,gzo (28,600) (35o,ooo) 52,76L,320 General Fund Ooeratinq Summarv A summary of the impacts to the General Fund of the adjustments made as a result of this mid- year analysis is shown in the schedule below: CITY OF BURLINGAME, CA GENERAT FUND OPERATING SUMMARY FY17-18 Adopted Budget FY17-18 Midyear FY17-18 Midyear Amendment Total Revenue 5 68,042,749 S 68,937,21,6 5 70,463,19t 5 1,s2s,97s Expenditures Departmental Expenditures Transfers ln (Out) Total Expenditures (49,7O7,480], (8,041,01s) (ss,s6s,2s8) 0.2,023,7641 (s6,136,841) (s71,s83) /a .844\2.76L.320 (s7,748,49s)(67,s88,4221 7,348,794 (3,000,000) (6s,398,68s) 5,064,506 (3,000,000) 2,L89,737 Net Operating Revenue Transfer to capital lnvestment Reserve 70,294,254 (7,000,000) 3,775,712 0 Change in General Fund Balance s 54 s (1,6s1,206) s 2,064,sO6 5 3,715,7L2 12 FY16-17 Actuals 201 7-1 8 Mid-Year Report March 14, 2018 Adjusted by the recommended amendments in this report, the General Fund shows a projected surplus (positive net operating revenues) for fiscal year 2017-18 of nearly $2.1 million, which is an improvement over the $1.6 million deficit provided for in the adopted budget. This initial operating deficit was allowed in order to provide additional transfers out of the General Fund in support of the City's Capital lnvestment Reserve ($3 million) and initial funding of a $115 Trust for pension liabilities ($3.1 million). Budgetary savings were anticipated to completely offset this operating deficit. The reversal of Transfers Out for pension funding revises the General Fund fiscal year 2017-18 operating summary significantly, though there has been no great underlying shift in the City's use of resources or its financial position. General Fund Balance Once all the mid-year adjustments are posted, the General Fund shows a projected total fund balance of over $35 million at the end of the 2017-18 fiscal year. CITY OF BURLINGAME, CA CHANGES TO GENERAL FUND BATANCE FY 20Lt-r8 Midyear Projection FY 2016-L7 Beginning Fund Balance Projected Revenues & Expenditures Projected better than budgeted revenue performance Projected depa rtmenta I expenditures subtotal, Revenues Net of Expenditures S 33,0s7,408 70,463,79L (s 6,136,84 1) L4,326,350 General Fund Long-Term Debt Transfers ln (Out) of General Fund (s,s79,688) (6,682,1s 6) Projected General Fund Balance, net of transfers s 35,121,914 Although the mid-year budget projections for fiscal year 2016-17 reflected only a slight increase in fund balance, the General Fund experienced a surplus for the year, as revenues of the fund exceeded expenditures and net transfers by nearly $3.3 million. The relatively large unassigned fund balance of over $14.3 million at the beginning of the current fiscal year reflects an increase of approximately the amount of this surplus. CIW OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS FY20t6-L7 Actuals FY2OL7.L8 Midyear Proiection Uo (Downl S Uo (Down) % Economic Stability Reserve Catastrophic Reserve General Plan Reserve Contingency Reserve Subtotal, Assigned Fund Balance s 16,200,000 2,000,000 0 500,000 s 16,913,000 2,000,000 o 500,000 713,000 4.4% 0.o% o.o% o.o% 0 0 0 18,700,000 19,413,000 713,000 3.8% Add: Restricted for Pension Trust Fund (PARS) Addr Unassigned Fund Balance 0 3,139,920 3,L39,920 0.O% t4,357,4O8 L2,568,994 (7,788,4t4\ -12s% Total, Ending Fund Balance s 33,0s7,408 $ 3s,L2L,9t4 s 2.064.s05 6.2% 13 2017-18 Mid-Year RePort March 14, 2018 Once funded as approved in the General Fund Reserve Policy, the City's reserves ($19.+ million) comprise the largest portion of the General Fund's ending balance. The $3.1 million contribution to the $115 Trust Fund for pensions is now shown as a "restricted fund balance". And approximately $12.6 million remain as "unassigned fund balance", available for future appropriation. ln recognition of the City's large backlog of facility needs, staff has in recent years recommended that surpluses of the prior year be used to provide additional funding to the Capital lnvestment Reserve. However, the recent focus on the unfunded liabilities from pension benefits provided by the California Public Employees' Retirement System (CaIPERS) calls for a review and prioritization of the City's unfunded liabilities as a whole. General Fund Reserye Poticy and Capital lnvestment Reserue - ln January 2015, the City Council approved a General Fund Reserve Policy that recognized the need for adequate reserves to guard against future economic downturns, as well as to provide a hedge for catastrophic events. The policy dictates an annual review and adjustment in the Economic Stability Reserve. ln addition, in recognition of Burlingame's significant unfunded capital planning/facility needs and the continued impact of these needs on the City's financial flexibility, the Council also approved the establishment of a Capital lnvestment Reserve within the Capital lmprovement Projects (ClP) Fund. The purpose of the Capital lnvestment Reserve was to prevent further accumulation of unfunded liabilities that aging facilities represent. The reserve was initially funded with a General Fund transfer of $3 million, a reflection of the fund's operating surplus in fiscal year 2013-14. Since that time, the reserve has grown largely as a result of surpluses generated during the continued economic expansion of recent years. CIW OF BURLINGAME, CA CHANGES TO CAPITAL INVESTMENT RESERVE Begi n ni ng Bal ance Establ i she d 3 I 3Ll 15 IFY L+til Budget Transfer from General Fund in FY 2015-15 Add'l Budget Transfer from General Fund in FY 2015-16 (mid-year) Decrease in Catastrophic Reserve Fund (mid-year) Ending Balance 6lnl$ Budgeted Transfer from General Fund in FY 201G17 Add'l Budget Transfer from General Fund in FY 201,&17 (mid-year) Ending Balance 6l3oh7 Budget Transfe r f rom Gene ral Fund i n FY 201.7- 18 Budgeted Ending Balance 6l3OlLB s 3,0q),(no 3,000,000 s,000,000 2,500,000 s 13,500,m0 3,000,000 4,000,000 s 20,500,000 s 3,ooo,o00 s 23,500,m0 Note that, unlike other amounts reflected in the fund balance of the Capital Projects Fund, Capital lnvestment Reserve funding will not be appropriated to a specific project. Rather, it will accumulate for capital projects to be initiated when timing is optimal and sufficient other funding is identified. As of June 30, 2018, the General Fund's projected fund balance of $35.1 million represents 53.7 percent of General Fund operating expenditures of $65.4 million. Because $3.1 million is restricted for pension benefits through the $115 Trust Fund, a better measure of coverage may be that the unrestricted fund balance of $32 million equates to 48.9 percent of the fund's operating expenditures. The City's General Fund Reserve Policy and resulting reserve target was based on 14 2017-1 8 Mid-Year Report March 14, 2018 an assessment of the City's revenue volatility and infrastructure risks, as well as the possibility of extreme events, in establishing a reserve target specifically for the City of Burlingame. As such, the Council's reserve management strategies reflect best practices in public finance. The $19.4 million in reserves represents an amount equal to 27 .5 percent of projected General Fund revenues (excluding one-time revenues) for the year; the reserve policy calls for an Economic Stability Reserve of 24 percent of budgeted revenues, a Catastrophic Reserve of $2 million, and a $500,000 Contingency Reserve. As previously noted, this leave an unassigned fund balance of nearly $12.6 million. Other Funds All City funds were reviewed for this mid-year analysis. The recommended revenue adjustment for most funds is the result of anticipated earnings allocations from the City's investment portfolio, explained in the General Fund Revenues section of this report (Attachment A). The recommended adjustments for interest income in each of the funds are shown below: tnterest lncome Amendments FY2017-18 ?:At7-73 Fund 20t&t7 Actual Cuner* Budget Midyear Proiection Midyear Amendnent General Fund Burlingame Avenue Assessment D Gas Tax Fund Measure A Fund Water Fund Sewer Fund Solid Waste Fund Parki ng Enterprise Fund Bui ldi ng Enterprise Fund l-andfill Fund Worker's Compensation Fund ISF Facilities Services Fund ISF Equipment Services Fund ISF lnformation Services Fund lSF OPEB Retiree Medical ISF General Liability ISF Othe r Local Grants/Donati ons Public TV Access Fund Development Fees Storm Drainage Fund Debt Service Fund Tatal s 584,842 3,885 1as39 L6,1n L*,2* ]5/.,275 43,278 68,153 66,152 11,9% 61,276 3,448 60,445 6,598 674 37,8* 2,Wl 4,371 48,6?3 751,ly 5A,757 5 9x5,m 9ffi 40.385 44,614 370,5m 343,m 1A7,W 115,ffi 107,000 133,0m 7,ffi 130,m0 15 000 3,m 63,0m 5,000 &000 13,m6 x,5,m0 &m S 84o,ooo S 6 000 18,000 23,000 2?2,W 722,W 62,m 9&000 95,m 17,m0 88,000 5000 87,000 9,0m {105,0&} {3,ffi} 122,3&} {71,6t41 t148,5m) t12loml {45,0S} (17,0m) tu,oe) 17,W (45,0m) t2,m) (43,0m) (a0m) (3,0m) {&m} (3,m) {2,0m} 41,0m t18,06) 65,0m s5,000 3,m 60m 6,m 218,W 73,000 s2,&7,W s (5oe5ml The other major adjustment to the FY 2017-18 budget that affects many funds is the reversal of the "transfer out" of each fund to the $115 Trust Fund established for the City's pension obligations. 15 5t,s*,624 5z,78F,w 201 7-1 8 Mid-Year Report March 14, 2018 Again, these adjustments are necessary, as contributions to the trust remain as assets of the City, instead of expenses. These contributions will be shown as restricted fund balance in each fund. CITY OF BURLINGAME, CA coNTRTBUTION TO PENSION TRUST/RESERVE (BY FUND) FY 17-18 General Fund admin/tr Building Enterprise Facilities Fleet/Equipment Landfill Fund Parking Enterprise Sewer Enterprise Solid Waste Enterprise Water Enterprise Total s 3,139,920 5,541 82,Ott 56,212 36,669 4,752 19,122 169,791 30,101 205,573 s 3,749,792 Capitat Projects Fund - Only one adjustment was identified for the City's Capital Projects Fund. Based on the agreement with the Burlingame School District approved in June, the City will contribute $350,000 toward the resurfacing of Franklin and Osberg Fields if the work is done in the current fiscal year. (The fields were installed earlier this year.) ln addition, the City has agreed to contribute 50% toward the cost of the future resurfacing of the two turf fields; that resurfacing is anticipated to take place ten years from the date of the initial installation. A CIP project has been established in the Parks and Trees Capital lmprovement Program specifically to fund the resurfacing of the Franklin and Osberg Fields per the agreement. Although the project will not result in a capital asset for the City, it allows for an annual appropriation (currently estimated at $170,000 to $188,000 per year) in future budgets for this commitment. Measure A Fund - This fund accounts for the City's share of the special half-cent sales tax to fund transportation-related projects and programs. Based on improved sales tax revenues county-wide, the FY 2016-17 budget was set at a fairly aggressive level of $824,000. However, actual revenues for the year were well below target. Current year revenues are coming in only slightly higher than last year, so the $824,000 budget may not be achieved. However, no budget adjustment is recommended at this time. $2.2 million of Measure A Funds is appropriated for transportation- related capital programs in the current fiscal year. Description 20L+15 Actuals 2015-16 Actuals 20L6-L7 Actuals Adopted Budget Midyear Projection Midyear Amendment Measure A Gas Tax (HUTA) 789,U9 5 767 8s9,095 667 ',021 ',918 s 799,100 s 770 824,000 s 835,400 824000 s 849,100583,13,700 S 1,G48,14s 5 L,4A,9N 5 L,382,87o s 1,6s9,rrc0 s 1,673,100 s 13,700 16 20L7-L8 s 2017-1 8 Mid-Year Report March 14, 2018 Gas Tax (HUTA) and Road Repair and Accountability Act (RRAA) of 2017 - The Gas Tax is a special revenue fund used to account for the revenue received from the State of California derived from gasoline taxes. These funds may only be used for street purposes as specified in the State Streets and Highways Code, and so they have always been an important revenue source for the City's Streets Capital lmprovement Program. The projection of Highway Users Tax (HUTA) revenues is complex, with differing allocations derived from various sections of the Code, and differences in the allocation of gasoline tax revenues from diesel and fuel use tax revenues. Calculations have been further complicated by the State's gasoline sales tax/excise tax swap introduced in 2010, and formulas to ensure that cities and counties are "made whole" from impacts of the swap. Due to the nature of these allocations, this revenue source has been erratic from year to year. ln the ups and downs of the HUTA formulas, recent year allocations have reflected a reduction for a prior year over-collection of excise tax revenue, as well as a downward trend in taxable sales of gasoline. As a result, road and transit investments have not kept pace with the groMh in transportation needs across the state. Fortunately, the Road Repair and Accountability Act of 2017 (SB1) provides a significant new investment in California's transportation systems of about $5.2 billion per year over the next decade, split equally between state and local investments. The Act enhances HUTA allocations through increases in per gallon fuel excise taxes, diesel fuel sales taxes, and vehicle registration taxes; stabilization of the problematic price-based fuel tax rates; and inflationary adjustments to rates in future years. The Act will more than double local streets and road funds now allocated through the Highway Users Tax Account by also providing funds from new taxes through a new Road Maintenance and Rehabilitation Account (RMRA). The RMRA allocations include funds from the additional taxes enacted by SB1 : a 12 cent gasoline excise tax, a 20 cent dieselfuel excise tax, and transportation improvement fees (vehicle registration taxes). ln addition, the Act provides for the payment of $225 million of transportation loans to be repaid over three years. Revenues from the RMRA were included in the FY2017-18 adopted budget for the City's Gas Tax Fund; the current fiscal year is a partial year of funding from these new sources. The most recent projections indicate a light increase ($13,700) in the revenues that were initially projected. The first full year of funding will be 2018-19. SB 1 Restored Lost Purchasing Power for the Gas Tax 0.40 0.35 0.s0 0.25 0.20 0.15 0.10 0.05 0.00 -,. --t-- $0.30 trqtO ---oJ---tt'$0.18- - - * lnllation adjusted Rate Per Gallon *fislgsl Rate perGallon 1990 1995 2000 2005 20't0 2015 2020 2425 17 201 7-1 8 Mid-Year Report March 14, 2018 Storm Drainage Fund - The Storm Drainage Fund accounts for the storm drainage fees collected due to an assessment approved by parcel owners in the City at a special election in May 2009. A budget adjustment is needed to address an error in accounting for the storm drain fees that are assessed but not billed on school district properties. These fees should be subsidized by the City's General Fund, but in the past two years have not been charged as budgeted in the Streets and Storm Drain's Division budget. An additional General Fund appropriation will allow for the proper payment of the fees for fiscal years 2015-16 and 2016-17, increasing Storm Drainage Fund revenues by $87,000. Water & Sewer Funds - Due to the reduced water consumption that resulted from state mandates during the drought conditions of recent years, and increased capital and operating costs of the water system - including the cost of wholesale water purchased from the San Francisco Public Utilities Commission (SFPUC) - the City found it necessary to raise water rates. After the City completed a water rate study in 2016, the City Council approved rate increases equivalent to 9 percent in 2017,7 .5 percent in 2018, and 7.5 percent in 2019. Historical Water Billings By Fiscal Year Last Three Years c9 6boooH 17,000 14,(x)0 11,000 &m0 s,000 - 2015-16 Actual e 2016-!7 Actual -2077-taActual --,2017-74 Projected .luly August September October November December January February March April May June However, winter rains in 2017 brought an end to drought conditions in Northern California. As indicated in the graph above, water consumption in FY 2016-17 dropped to new lows when the rains began, but bounced back to higher levels during the summer months. Consumption levels have remained higher for the first eight months of the current fiscal year, and are projected to match prior-year experience for the next four months. (Note that the City's water billings are issued on a bi-monthly cycle, creating the up-and-down pattern from month to month.) As such, revenues of the fund are anticipated to be on target with the 2017-18 fiscal year budget, and no adjustment to these revenues is anticipated at this time. The City will continue to closely monitor consumption patterns in the coming months. Further information and updates will be provided to the Council as 18 2017-18 Mid-Year Report March 14, 2018 the 2018-19 fiscal year budget for the Water Fund is developed. A direct reimbursement to the Water and Sewer Funds for utility services provided to City facilities and parks based on consumption is assumed in the FY 2017-18 budget; these costs also appear to be in line with budgeted amounts. Only minor adjustments to the operating expenditure budgets of these enterprise funds are recommended for the current fiscal year. Overall, budgetary savings in the area of equipment maintenance are anticipated in these funds ($19,900 in the Water Fund and $50,000 in the Sewer Fund) for the current fiscal year. ln addition, the Wastewater Treatment Plant operating budget can be decreased by $t 4,100, which is the cost of the State Water Resources Control Board permit for the storm water system. This fee is more appropriately paid from the General Fund's Street and Storm Drainage Division budget. Sotid Waste and Landfill Funds - Although significant increases in Solid Waste rates were necessary in 2011 and 2012 to pay off a deficit position from the 2001-2010 contract for solid waste services, revenues in subsequent years have been adequate to generate surpluses within the Solid Waste Fund. The higher rates ended the need for General Fund transfers to support activities of the Solid Waste Fund; revenues became sufficient to pay the costs of all solid waste contracts and City-provided services, and they provided surplus funding of a Solid Waste Rate Stabilization Reserve. Despite increasing costs over the years, rate increases have not been required. For calendar year 2018, estimated revenues from collections for Burlingame ($10.9 million) will fall short of the costs of the City's collection contractor (Recology) of $5.8 million; disposal & processing fees of $3.5 million; franchise fees of $740,000; funding of the City's landfill post-closure costs ($465,000); and $655,000 for costs borne by the City, including street sweeping and steam cleaning and maintenance of public receptacles. A slight reduction in the utility's rate stabilization reserve is anticipated. The recommended budget adjustments reflect a $39,600 increase for additional part-time staff to augment maintenance services in the Broadway Business District as directed by the Council in November: such services include cleaning pavers, power washing concrete sidewalks, street sweeping, litter debris pickup, and the cleaning of public lots. ln the current year, these additional costs will be totally offset by anticipated savings in the fund's non-personnel operating budget. A final adjustment is recommended to decrease the budgeted transfer to the City's General Fund by $28,600, in conjunction with a decrease in the city management fee collected within the solid waste rates. Lastly, the amount collected for rate stabilization should be decreased ($65,850); tne anticipated operating deficit dictates that the amount included in the 2018 calendar year rates for this reserve will be spent on services rather than put aside for future rate increases. Current reserve levels in the Solid Waste Fund will allow the City to modulate future rate increases, and insure that it is in good fiscal position when the current franchise agreement with Recology terminates at the end of 2020. Rates will be reviewed early in fiscal year 2018-19, and may provide a multi-year approach to collecting funds sufficient for the new franchise agreement. The new agreement was reviewed by the Council in January; it allows for an extension of the services provided by Recology through the year 2035. 19 2017-1 8 Mid-Year Report March 14, 2018 CITY OF BURLINGAME, CA SOTID WASTE FUND REVENUES Descriotion FY15-16 Actuals FYI6-L7 Actuals FYLT-L8 Adopted Budeet FYLT-T8 Midyear Proiection FY17-18 Midyear Amendment Year-End l,Jo (Downl % STEAM CLEANING DOWNTOWN A8939 ADMINISTRATION STREET SWEEPING FEE CTTY MGMT FEE RATE STABIL]ZATION FEE MISCELLANEOUS REVENUE Total s 116,ss0 s 178,796 253,300 86,600 t34,202 116,500 s t74,000 263,300 86,600 112,500 160,450 s 140,000 29s,800 58,000 46,650 31,200 s 7s,000 t74,885 234,980 115,200 t74,885 32,742 5 43,950 (34,000) 3 2,s00 (28,600) (5s,8s0) 37.7% -L9.5% L23% -33.0% -585% 0.0%3 1.2 00 s 807.691 s 818.353 s 7s2.900 s 732.100 s (20.800)-2.8o/o As noted, rates include a five percent surcharge for landfill post-closure costs. The surcharge provides revenues to the Landfillfund to cover maintenance and monitoring functions at the landfill site, and will serve to reduce the $2.2 million fund deficit that results from the liability recorded for future post-closure costs. Although the surcharge rate remains the same, an increase of $30,200 in this revenue is anticipated in fiscal yeat 2017-18 based on prior year actual and year-to-date receipts. Building Enterprise Fund - Revenues in the Building Enterprise Fund (largely construction permits and building plan check fees) for the last fiscal year were significantly higher than in the previous fiscal year, due to an increase in the volume and value of permits pulled. Although the revenue and expenditure budgets of the fund were adjusted mid-year, revenues came in significantly higher ($1.3 million) than projected in the 2016-17 fiscal year budget. Because these revenues are difficult to project, and can swing significantly depending on the timing of large development projects, mid-year adjustments are typically recommended only if specific permits for large projects are on the horizon. However, in the current fiscal year the Building Division has experienced a 3 percent year-to-date increase in the volume of building permit applications. The Building Division has also seen a 7 percent increase in the number of building plan checks, but these permits are of smaller value on average than those pulled in fiscal year 2016-17. Although no large projects are expected to create a spike similar to that which occurred last year, an overall upward adjustment in these fees of $456,000 is indicated for fiscal year 2017-18. Parking Enterprise Fund - The Parking Enterprise Fund provides for the maintenance and upkeep of the City's parking lots and metering equipment, including maintenance and utility service for the new electric vehicle charging stations in Parking Lot V. Excess revenues that accumulate CITY OF BURLINGAME, CA BUILDING FUND REVENUES Description FY15-16 Actuals FY16-17 Actuals FY17-18 Adopted Budget FYlT-18 Midyear Projection FY17-18 Midyear Amendment Year-End Up (Down) % Construction Permit Fee Building Plan Check Fees Microfilm/Other Fees Total 5 1,297,s04 906,080 58,240 S 1,i.41,928 5 2,897,866 1,180,000 s 1,010,000 40,000 1,8s6,000 s 729,000 101,000 676,000 (281,000) 61,000 57.3% -27.8% 1,52.5%6 s 2.255.824 s 4,086,790 s 2,230,000 s 2.686.000 S 4s6.ooo 20.4% 20 2017-18 Mid-Year Repoft March 14, 2018 in the fund are intended to provide funding for future parking facilities and associated revenue mechanisms. The installation of 730 new smart meters in the City's downtown areas in the spring of 2017 has contributed to an increase in parking fee revenue of 2.6 percent over last fiscal year totals. However, the cost of monthly maintenance charges, meter batteries and thermal paper was also higher than anticipated - an additional $81 ,000 appropriation is recommended for the fund to cover these costs through the remainder of the fiscal year. ln addition, the increased number of meters added at the end of last year resulted in slightly higher costs for armored car services, so an additional $7,000 is indicated for the fund's contractual services budget. lnternal Seryice Funds - lnternal service funds are used to accountfor internal costs that are borne by all departments/programs of the City. Allocation of these centrally incurred costs is performed based on estimated usage or other metrics. Changes to the budget of an internal service fund do not necessarily require an offsetting change in the fund's revenues (charges to the participating departments), as each fund has a separate fund balance that can vary due to need. However, these funds are carefully monitored to ensure that departments are appropriately and adequately charged. Administration/lnformation Seryices lnternal Service Fund - The budget for this fund includes not only information services, but also the costs of maintenance for centralized printing and mailing equipment. One small ($9,800) budget enhancement is proposed for the current fiscal year to provide funding for an expansion of the new Wi-Fi system at City Hall to the Recreation Center. The network cabling installation (contractual services) for this project was considered a prudent investment, significantly improving the previous Wi-Fi system that was increasingly unreliable. Facilities Services Fund - The Facilities Services Fund is used to account for the costs of services provided by the Public Works Department in maintaining and repairing the City facilities, including custodial services, on a departmental cost-reimbursement basis. The midyear fund analysis resulted in the proposal for an increased appropriation totaling $34,059 in the area of contractual services. The additional appropriation should cover the cost of property appraisal services for City- owned properties, increased sprinkler inspectlon costs, additionaljanitorial services for the City's Main Library, and unforeseen window repairs, also at the Main Library building. The funding request is offset somewhat by anticipated savings in the Facilities Division's equipment maintenance budget. CITY OF BURIINGAME, CA PARKING FUND REVENUES Description FY15-16 Actuals FY16-17 Actuals FY17-18 Adopted Budget FY17-18 Midyear Proiection FY17-18 Midyear Year-End Amendment Up (Down) % Parking Fees Electric Vehicle Charging Station Fees Monthly Parking Permits Total s 2,4L2,s23 s 2,33s,000 s 2,47s,000 14,958 12,000 1s,000 5 2,28t,49s 1 1,6 18 356,t42 338,849 356,000 356.000 s 140,000 3,000 0 6.0% 25.0% 0.0% S 2.649.255 S 2.766.330 S 2,7o3,ooo S 2.846.000 S 143.ooo 53% 21 201 7-1 8 Mid-Year Report March 14,2018 Unfunded Needs The identification and funding of capital projects and othenvise unfunded, long-term needs of the City has been a priority of the City Council for many years. ln November 2013, staff presented the City Council with a list of unfunded needs as well as broad cost estimates for the various projects. After extensive public outreach, staff asked the City Council to prioritize the projects so that funding plans could be developed. A new downtown parking garage was ranked highest, followed by the Community Center, and City Hall. Since that time, City staff has explored various options/partnerships with private developers to build one or more parking garages at little or no cost to the City. Options to partner with developers on construction of a new City Hall were also considered. Most recently, the Council approved a Measure I spending plan that included partlal debt financing of a new Community Center. Staff is currently working with the City's financial advisor to assemble a financing team to assist in the possible lease-revenue bond issuance for this purpose. As funding options are explored, other capital needs have been identified that will compete for General Fund resources and challenge the organization's capacity to successfully undertake future projects. A large number of City buildings, in addition to the facilities previously identified, have served their original intended design life and are in need of major improvements. Though the City regularly invests in building maintenance, major building components are overdue for replacement. A Building Facilities Condition Assessment Study and Capital lmprovement Master Plan, which identify maintenance needs and capital improvements necessary to extend the lifespan of the City's existing facilities, was performed in 2016. The study concluded that the City should consider replacing older buildings before maintenance costs increase significantly. lt also concluded that, while staff is able to manage its current work load, additional resources are needed to properly maintain the buildings and manage new capital projects. Although funds are being set aside in the City's Capital lnvestment Reserve, the amount of funding seems to diminish when compared with the growing set of unfunded needs. ln addition, the reserve is being funded by annual surpluses and one-time revenues, and as such will be the first General Fund resources that will be reduced or eliminated when the economy inevitably retracts. Major projects, such as the Broadway Grade Separation project, will require a financing package of hundreds of millions of dollars, well beyond the City's budgetary or financing capacity. This project is currently undergoing environmental studies that the City partially funded ($500,000), but the grants that will provide for the actual construction of the project will require City matching funds of $12-20 million. While staff explores opportunities to obtain the external funding to advance such projects in the coming years, other, non-capital needs, such as accrued pension liabilities, present additional challenges that should be kept in mind when reviewing the current General Fund Five-Year Forecast. General Fund Five-Year Financial Forecast The five-year forecast attached to this report as Attachmenf Cwas developed using the FY 2017- 18 budget, adjusted for the recommended adjustments in this report, as a starting point for estimating revenues and expenses of future operating budgets. 22 2017-18 Mid-Year Repoft March 14, 2018 To evaluate the ongoing impact of each of the updated General Fund projections described in the City's five-year forecast, it is important to consider which adjustments reflect one-time events, and which represent a fundamental change in the City's revenue or expenditure structure. One-time revenues cannot be relied upon to augment ongoing services, just as non-reoccurring costs will not drain the General Fund on a continuing basis. Therefore, no sale of property or other General Fund assets are assumed in the five-year forecast. ln addition, revenues associated with the recently enacted Measure I % % transaction/sales tax is not included, nor are the offsetting expenditures identified in the Measure I spending plan. These revenues and expenditures will be included in future long term forecasts once more is known about the amount of additional revenues raised by the measure. The five-year forecast was prepared with careful consideration to each revenue and expenditure category. These analyses roll up to the summary forecast shown in Attachment C. General Fund revenues are monitored closely, and projections are based upon a rolling forecast model that combines actual results with smoothed, multi-year historical data. When appropriate, compound annual growth rates (CAGR) are utilized to smooth cumulative year-over-year growth, as though growth has occurred steadily over the specified period of time. Adjustments are also made for known and/or assumed financial factors such as economic and legislative changes at the national, state, and local level. Forecast assumptions may also utilize information from third-party experts, published industry indices, and/or data collected from City departments. This procedure for analysis allows a different CAGR or groMh assumption to be applied for every account within a revenue or expenditure category. For example, if solid waste franchise fees are anticipated to grow faster than electric franchise fees, these different growth rates can be part of the assumptions. However, the casual reader will not be able to determine these forecast assumptions by simply calculating a growth ratio. The rest of this report attempts to articulate major deviations from a flat growth assumption within any category; the assumptions are summarized in the tables below: Forecasted Reven ue Assum ptions The actual assessment roll growth, per the County Assessor, is based on the January 1 lien date and continuing trend of low property turnover. The housing market may cool in the next few years due to rising interest rates, but continued Bay Area insulation is expected due to high demand. ln FY 2O2O-21, the Burlingame Point project will be included in the City's assessed valuation data. Property Tax Secured 5%-7.5% 23 Revenue Description AnnualGrowth Assumption Explanatory Comments 2017-1 8 Mid-Year Report March 14, 2018 Adjustments made for Educational Revenue Augmentation Fund (ERAF) rebate, decreasing over the next five years due to growing demands on ERAF funds. The City will continue to treat largely as one-time revenue. Varies - expected to declineERAF Rebate Based upon recent Q3 2OL7 sales tax data and the HdL Companies' long-term forecast. lndications of a shift of consumer spending on services (rather than taxable goods) and statewide concerns regarding diminishing sales tax base could limit growth. Measure I not included, but willfollow same growth. t.6o/o - 2.6%Sales Tax Based upon assumption that average daily room rates will be constrained by price elasticity. lncludes an assumption for some diversion of revenue as a result of new SFO hotel in fiscalyear 2Ot9-2O. 7% -2%Transient Occupancy Tax L.0%-3.0%Based upon expected gross revenue changes for PG&E, garbage, and cable TV.Other Taxes - Franchise Tax Despite record highs in passenger traffic at SFO, minimalgrowth is expected from the long term parking business licenses tax, which is based on gross receipts. Growth will also be slow in general business license revenue, as it is based upon volume of businesses rather than gross receipts. 7.Oo/o - 3%6 Other Taxes - Business Licenses Limited to growth in the number of homeowner occupied parcels.FlatOther Taxes - State HOPTR 2.s% Based upon historical patterns and consistently low inventories of properties for sale. Other Taxes - Transfer Tax Less than 1% Based primarily on no/slight annual adjustments to fees, and a very small increase in volume. Not included here is an assumption for added parking lots or garages over the next five years due to unknown implementation date. Licenses & Permits Fines, Forfeitures & Penalties Growth based primarily on consumer price index adjustments to fees. Not included here is an assumption for increased programming at new Community Center, or decrease for current facility closure, due to unknown implementation date. Charges for Services 2% - 25% 24 Revenue Description AnnualGrowth Assumption Explanatory Comments 2017-1 8 Mid-Year Report March 14, 2018 The assumption is based upon current long- term lease information, which permits adjustments based upon consumer price indices, as well as a scheduled increase to the monthly rent for various leases. No assumptions have been made for the Golf Center lease. 2.s%Use of Money & Property No growth No growth projected due to one-time revenue.Other Revenue Flat The forecast assumes that mandated cost recoveries from past years will continue to decrease as the State makes progress in paying these liabilities. State Subventions 50% - 2018-19; 10% thereafter Based upon expected cash balances and increases in Federal Funds rate per most recent Federal Reserve policy analysis. lnterest lncome Forecasted Expenditure Assum ptions :APrOttoLvr y Lvt rrrrrrrrLJ Salaries & Wages lncludes effect of current collective bargaining agreements, including recently approved agreements with labor groups and increased wages for part-time employees effective January 1. Assumes an annual growth in salaries of 2'3% for out years, as well as normal merit step increases. Benefits lncludes an annual growth rate of 5% - 6.5% for January L changes in health care rates, per the most recent OPEB study. Also includes expected PERS contribution rate increases (1,4.4% average annually for Safety and !1.5% for Misc. employees)coupled with forecast increases in salaries & wages. Also included are employee contributions to health care and PERS in accordance with current MOUs. Operating Costs Based upon cost of living adjustments for most non-personnel costs and expected changes in utility rates. A 3% compounded annualgrowth rate is assumed for most operating costs. A 6% escalation factor for service from Central County Fire is also assumed. Operating costs include a payroll surcharge assessed on full-time employees to fund 25 Revenue Description AnnualGrowth Assumption , 2017-18 Mid-Year Report March 14, 2018 previously incurred costs associated with retiree medical benefits for former employees (implemented in fiscal year 20L4-15). Operating Costs (cont.) Based upon a 3% blended escalation factor,lnternal Services lncludes a base of $230K based upon historical use and 3% growth rate.Capital Outlay Assumes reimbursements for debt service, increasing General Fund investments in Capital Projects (with a floor of 2 of the \2%TOT tax revenue), and support of City shuttle programs Transfers ln (Out) lncludes actual debt service for all current outstanding bond issues. Assumes no refinancing of current debt and no new general obligation debt issuances. Debt Service ln the five-year forecast, property tax revenues are assumed to grow at a rate higher than inflation, but not as quickly as in recent years. Although growth in Burlingame's assessed value in fiscal yeat 2016-17 was 7.85 percent, and current-year property tax revenue was based on a roll 6.47 percent higher, groMh in the rotl so far for fiscal year 2018-19 indicates that an increase of at least 5.2 percent in property taxes can be anticipated. This rate includes an inflationary factor of slightly over 1 percent as reported by the State Board of Equalization for December 2017. The inflationary factor is capped at 2 percent annual growth. The rest of the growth is from re-assessments, usually the result of properties changing ownership. lf the economy continues to strengthen, assessed values should also increase steadily, and the inflationary factor will most likely be back to 2 percent in future years. As a result, the assumed groMh factor is 6.0 percent for secured property taxes in most fiscal years 2019-20 through 2021-22. Although a bump-up (to 7.5 percent) of these projected revenues is allowed in2020-21forthe anticipated completion of the Burlingame Point development, the potential revenue impact of other future (specific) development, is NOT included in the long- term forecast. Property tax revenues as a whole exhibit a much slower rate of growth than secured property taxes in the five-year forecast due to the possible diminishment of excess ERAF refunds. Long a part of the City's property tax revenue stream, the refunding of amounts remaining in the County's Educational Revenue Augmentation Fund (ERAF) to the subsidizing local governments is projected to diminish considerably. These ERAF refunds may even come to an end if the State's uses of ERAF are intensified. The five-year forecast assumes these ERAF refunds diminish by $400,000 by fiscal year 2022-23. The City's Transient Occupancy Tax (TOT) revenue has grown in recent years to be the City's largest General Fund revenue source. A surge in both occupancy and hotel room rates has resulted in a 22.9 percent increase in the City's TOT revenues in the past three years. The rate was last increased six years ago from 10 to 12 percent (effective January 1 , 2010), and that rate is assumed to remain unchanged in future years. 26 , ;::. " ..:;, :;;:: E!(penilitUie Explanatory Comments 201 7-1 8 Mid-Year Report March 14, 2018 Yet the revenues generated from TOT are very volatile. As noted in the risk-based analysis of the City's General Fund reserve needs, receipts are directly tied to changes in average daily room rates (ADR) of the City's 3,742 hotel rooms. As occupancy rates are already very high, and room rates show some signs of leveling off, it is unreasonable to assume these revenues will continue to grow as they have in the past few years. A groMh rate of 1.0 percent is applied to the City's base TOT revenue for most years of the forecast. A downward adjustment is included in fiscal year 2019-20 to reflect the completion of a 350-room hotel at SFO. Although the timing and impact of the new hotel on area ADRs and occupancy rates is far from certain, staff has prudently calculated that there will be a negative impact on TOT revenues sufficient to offset any gains for the first two years of operation. The City's sales tax base has continued to grow with the economic recovery of past years, but the forecast for the upcoming fiscal year and the four years beyond calls for a groMh rate of only 1.6 - 2.6 percent. Due to consumer trends that indicate a decrease in the purchase of goods and materials in favor of non-taxable transactions (i.e., services), this more conservative groMh rate is appropriate. lncome from the City's investments has increased very modestly with the growing economy. Though yields on the short-term, risk-averse investments (typical for inclusion in municipal portfolios) have languished with historically low rates for so many years, interest rates are beginning to rise and are expected to increase in the next couple of years. Any increase to the very low yield rates will result in significant groMh factors. For example, if a 1 percent investment yield grows moderately to 1.5 percent in the fifth year of the forecast, this represents a 50 percent growth over the period. Note that this revenue source has been greatly diminished in recent years and is no longer a significant contribution to General Fund revenues. However, as interest rates rise, staff will continue to optimize the portfolio's performance while balancing the priorities of safety, liquidity and yield The limited revenues received in the categories of Licenses and Fines are assumed to grow only modestly for purposes of the five-year forecast. Charges for Services are forecast to grow at a rate of 2.5 percent annually. Although increases in fees were anticipated due to the completion of the City's Cost Allocation and User Fee studies in fiscal year 2015-16, the studies did not result in measurable additional revenue. For the most popular services, the City either found its fees to be adequate to cover costs, or determined that the general public benefitted from the provision of these services. lt is appropriate that fees for services that provide a public benefit are subsidized by general revenues (i.e., taxes). Fees will be additionally discussed in detailwith the presentation of the Master Fee Schedule in April. With revenues forecasted to grow an average of 2.8 percent annually in the next five years, the examination of General Fund expenditures becomes critical in the evaluation of the City's long- term fiscal health. ln particular, assumptions regarding future personnel costs (which constitute over half of the General Fund budget) must be carefully considered. Whereas City revenues can vary widely with the economy, decisions made about employee costs have less of an immediate impact on operating budgets, but carry long-term implications that could stifle the ability to provide an appropriate level of services in the future. The trend of most concern in governmental expenditures has been anticipated for many years, and is reflected in large unfunded pension obligations. 27 201 7-1 8 Mid-Year Report March 14, 2018 Last year, the California Public Employees' Retirement System (CaIPERS) voted to reduce its investment return assumption to 7 percent from 7.5 percent over the course of three years. The action was a consequence of the weak performance in recent years of the CaIPERS investment portfolio, a prolonged low-interest rate environment, and attempts to limit future volatility in investment returns. Outside investment advisors generally believe that investment returns over the next 10 years will be well below the 7.5 percent current assumed return, and likely even below 7 percent. The annual rate of return (ROR) will decrease as follows: Valuation Date Discount Rate FiscalYear of Initial lmpact Full lmpact 6t3012016 7.375%2018119 2022123 6t3012017 7.250%2019120 2023124 613012018 7.000%2020121 2024t25 Decreasing the ROR increases the likelihood that assets set aside to fund retirement obligations will be sufficient to meet the demand of retiring workers. lnvestment returns will be relied upon less, and contributions relied upon more, in order to fund pension obligations. The resulting higher contribution rates for employers and employees will exacerbate existing pension funding challenges. As the ROR decreases, these funding levels will drop, placing the City further behind in meeting pension obligations. The City has always reflected a conservative CaIPERS rate in its five-year forecast. However, the impact of the discount rate change is severe. The rates shown below reflect rates provided by CaIPERS (through FY 2019-20); subsequent year rates are based on an actuarial study recently updated by Bartel Associates (the City's external actuary). Note that the most immediate impact of the discount rate assumed by CaIPERS will be seen in a large increase in the UAL (unfunded accrued liability) of prior years. Since personnel costs are such a large portion of the General Fund budget, these changes in employer contribution rates have a significant impact on the fund's five-year projection. Salaries and wages have been broadly projected at levels that assume all existing labor agreements are adhered to until expiration. The City's most recent labor contracts, while reflecting concern over increasing employee benefit costs, also acknowledge the improved economy and the higher cost of living in the Bay Area. The contracts provide a balance in the four major cost areas of employee compensation: salary, health premium contributions, pension obligations, and retiree Estimated CaIPERS Rate Misc. Rate Safety Rate Fiscal Year Normal Cost UAL Pavment Total Contributions Total as % of Payroll Normal Cost UAL Payment Total Contributions Total as o/o of Pavroll 2017-18 $ 1.540,000 +$ 2,004,000 $ 3,544,000 24.600/o $ 1,012,000 + : $ 1,179,000 : $ 2,'191,000 45.20o/o 201 8-1 I 1,695,000 +2,428,000 4,123,000 26.05o/o 1,091,000 +1,480,000 2.571,000 50.40o/o 2019-20 1,808,000 2,861?,000 2,013,000 + 3,173,000 4.670,000 28.60%1,170,000 +1,790,000 2,960,000 56.40% 2020-21 2021-22 5,186,000 30.90%1,305,000 +2.025,000 3,330,000 61.60% 2,035,000 +3,637,000 5,672,000 32.80%1,330,000 +2,348,000 3,678,000 66.00% 2022-23 2,092,000 + 4,042,000 6,134,000 y.40%1,374,000 + , 2,615,000 3,989,000 69.50% 28 2017-1 8 Mid-Year Report March 14, 2018 medical, though the cost to the City continues to grow in all these areas. The longterm forecast reflects growth in salaries and wages at a level of 2.5 percent once these contracts expire. Another part of the personnel cost budgets ls the pre-funding of retiree medical benefits (OPEB). Funded on a pay-as-you-go basis until the 2013-14fiscal year, the costof these benefits, largely incurred in prior years, is now being pre-funded through an (external) irrevocable trust. These costs represent a surcharge of approximately 30 percent on regular salaries and benefits. The normal cost (cost of the benefit earned by active employees for the current fiscal year) is included in all personnel cost projections, and should decrease over time because retiree medical benefits offered to new employees (since 2012) are greatly reduced in this area. An actuarial valuation as of June 30,2016 confirms the amount of the surcharge needed to continue funding these benefits for the next two fiscal years. With respect to non-personnel expenditures, it should be noted that the General Fund transfer out (expenditure) for the CIP was previously based on a set portion of the City's TOT revenues (2 of lhe 12 percentage point TOT rate) - about $4.5 million for 2017-18. The regular transfer amount was intended to reflect the annual cost of maintaining the City's current infrastructure in its current condition, and has been considered an essential part of a sustainable budget. However, due to the identification of the City's many unmet capital project needs in recent years, particularly in regards to aging City facilities, the transfer amount based on TOT revenue is now considered a minimum annual transfer amount. Although capital spending has been able to proceed at a rate higher than other General Fund expenditures, beginning with the 2016-17 fiscal year budget, staff has recommended that the budgeted transfer from the General Fund to the Capital Projects Fund be established based on the City's capital needs for the upcoming fiscal year (as opposed to a portion of TOT revenues), to the extent there is staff capacity in the organization to accomplish the identified projects. The five-year forecast shows a leveling off of this transfer in FY2019-20, since the $6.8 million transfer currently anticipated for FY2018-19 includes funding for several non-reoccurring projects, (such as the $500,000 Finance/ERP software system). After that, a 2.4 percent groMh factor is applied to this transfer for capital projects. While annual funding of $3 million for the Capital lnvestment Reserve in the Capital Projects Fund has been assumed in prior forecasts, this amount has been decreased to $2 million in FY2018-19 and beyond, due to the anticipated funding of new debt that will be issued for the Community Center. For purposes of the five-year forecast, it is assumed that the General Fund will provide $1 million annually to service this debt, and the Capital lnvestment Reserve will grow at a slower pace than in recent years. No assumptions have been made regarding the use of the current Capital lnvestment Reserve for capital spending, as these will be subject to the City Council's priorities. Although the broad assumptions that underlie the five-year forecast are considered to be conservatively realistic, any number of risk factors could result in a less positive forecast, including ineffective monetary policy by the Federal government, a major retrenchment of consumer spending, increased unemployment, escalating inflation, or an emergency event. Conversely, improved revenues from the implementation of business development strategies in progress may provide the headwind - in the form of higher revenues - for continued surplus in the future. No single strategy is assumed to succeed (and included in the five-year forecast) until the result is 29 201 7-1 8 Mid-Year Report March 14, 2018 imminent. For example, the forecast includes a slightly higherthan-normal increase in property tax revenues in the 2019-20 fiscal year in acknowledgement of the Burlingame Point development, but no other assumptions (in revenues or expenditures) were modified for the project. Nor are the revenues and accompanying expenditure increases associated with the Top Golf development included in the forecast. Staff has endeavored to provide the most realistic budgetary projections possible using the most recent data available. Analysis of the General Fund and the City as a whole will continue through the development of the fiscal yeat 2018-19 budget, and will undoubtedly provide revisions to this five-year forecast. Longer term financial planning is not limited to the General Fund. The City's other operating funds are also examined for unfunded liabilities and future vulnerabilities, and adjustments are made as needed. To the extent these funds are not self-sustaining, they can indicate a drag on the City's General Fund operations. To avoid such a condition, long-term plans are updated frequently, and any changes in the outlook of these funds are brought to the City Council's attention through the budget, mid-year analysis, and other financial reporting processes currently in place. FISGAL IMPACT Authorization of the budget amendments described in this report updates the previous allocation of City resources for the 2017-18 fiscal year, reflecting changes in economic conditions and the City's current fiscal year-to-date performance. The City Council may consider revisions to the mid-year adjustment in the attached budget resolution, and/or additional amendments to the FY 2017-18 budget. For example, the Council may want to consider the use of some portion of the General Fund's unassigned fund balance to fund specific longterm portions of the unfunded pension liability with CaIPERS. The overall goal is to provide the most accurate picture of the 2017-18 fiscal year's standings in preparation for the FY 2018-19 budget and to assist decision makers in planning for the City's needs in the long-term. Exhibit: o Mid-year Budget Amendments Resolution 30 2017-1 8 Mid-Year Report March 14, 2018 City of Burlingame FY 2017-18 Mid-year Report Attachment A - General Fund Revenues Property Taxes - The San Francisco Bay Area housing sector has been a sustaining factor in the local economy throughout the most difficult of past economic downturns. As shown in the graph below, property tax revenues leveled off in fiscal year 2010-11 and 2011-12, but have increased by 38.5 percent in the last five years. Assessed property values continue to rise, increasing 6.45 percent in the past year, after rising 7.85 percent in the prior year. The local housing market is very strong, despite a persistent lack of inventory. And though credit conditions remain relatively tight, recent years have seen a renewed interest in commercial real estate development. Property tax rolls are established prior to the beginning of the fiscal year. ln FY 2017-18, Burlingame's roll value (land and improvements) has increased 4.78 percent, including an inflationary factor of 1.02 percent applied to all California property assessments. This is similar to the groMh experienced in the rolls at this time last year. As shown in the chart below, the preponderance of the City's property tax revenues (nearly 70 percent) comes from secured property taxes, which are established by the tax rolls and diminished only through refunds on successful appeals to the County Assessor's Office. ln FY 2016-17, actual property tax revenue receipts were within Y, percent of the budget (as adjusted at mid-year), representing a 7.3 percent increase in property taxes over the prior year. Revenues from secured property taxes were expected to rise approximately 5.3 percent in FY 2017-18, but since the final assessed roll for Burlingame reflects a 6.45 percent rise over the prior year, an upward adjustment of $146,000 in the Secured Property Taxes budget is indicated. Other components of property tax revenues were conservatively budgeted. Supplemental Property tax revenues are dependent on the volume and value of property transfers and new construction, so vary significantly from year to year. Receipts to date have been lower than in the prior year, so a decrease in this revenue ($145,000) is anticipated. Property Tax in Lieu of VLF is also allocated based on growth in the County's secured property tax roll, and is projected to come in $25,000 higher than initially budgeted for 2017-18. ln addition, the City continues to expect adjustments in the County's ERAF (Educational Revenue Augmentation Fund) distributions, as these may negatively impact the City's excess ERAF reimbursement in comparison to prior years. Excess ERAF reserves are held by the County and 2015-16 Actuals aOLGL7 Actuals Adopted Budget 20L7-L8 Midyear Projection Midyear AmendmentDescription 77,946,937 s 455,228 @9,049 2,8r';9,279 1,461,327 283,469 12,942,596 456,885 681,080 3,067,794 t,490,294 294,t45 S rs,or+,ooo 54s,000 683,000 3,247,000 800,000 300,000 s 13,760,000 s 400,000 693,000 3,272,000 r,720,000 30s,000 146,000 (14s,000) 10,000 25,000 920,m0 s,000 Current Secured Property Tax Secured Supplemental Property Taxes Unsecured PropertyTax P rope rty Tax in Lieu of VLF ERAF Refund Unitary Tax Total s S 1?,645,189 S 1&932 31 2017-18 Mid-Year Repoft March 14, 2018 distributed when all other obligations of the funds have been met. The ERAF reimbursement received early in January consisted of 45 percent of the excess ERAF amount for each of the current and prior fiscal years, plus the remaining ERAF reserye balances for fiscal year 2015. Due to growing demands on the ERAF funds, these reimbursements have leveled off and are expected to decline. The County continues to warn that, as funding for education grows and other State commitments are satisfied through the ERAF funds, excess ERAF distributions could decline significantly, and even be eliminated. For fiscal year 2017-18, the City's excess ERAF distribution was nearly $23O,OOO higher than in the prior year. But these funds were very conservatively budgeted, and a $920,000 mid-year increase is proposed to bring this line item up to the actual amount received in 2017-18. The uncertain future of ERAF refunds makes this a highly unreliable revenue source, a factor that has been taken into consideration in the City's long-term projections. Even though excess ERAF distributions have contributed significantly to General Fund revenues for quite some time, these refunds should be considered as "one-time" revenues, used to fund reserves or applied to one-time expenses. Unsecured property taxes (assessed on business fixtures, business personal property, boats, aircraft, etc.) are only slightly higherthan in the priorfiscal year, and a $10,000 increase in this budget is recommended. Unitary Tax revenue was a bit short of budget in the prior fiscal year. However, a higher assessment of utility-owned properties is reflected in the County Assessor's role, so a slight ($5,OOO1 upward adjustment in the FY 2017-18 budget is proposed for this line item. Sates and Use Taxes - The table below shows the City's sales tax revenues over the past eight years, as well as a projection for the current fiscal year. The recession was obviously marked by a severe decline in consumer spending and associated taxable transactions. With the economy recovering, sales tax revenues surged upward in FY 2010-11, and continued to grow at an impressive pace. By FY 2013-14, these revenues had surpassed pre-recessionary levels. The "Triple Flip" (a State revenue swapping scheme which began in 2004) process was wrapped up in May 2016, creating a one-time bump in sales tax revenues of nearly $1 million for the 2015-16 fiscal year. But with this aberration excluded, it appears that taxable sales transactions have remained healthy for the past few years. Fiscal Year 201G.18 Sales & Use Tax Revenue (in millions) FY2018 Fy2o1o Fy2o11 Fy2ot2 Fy2o13 FY2o14 FY2o15 FY2o16 FY2ot7 (Est.)Description Sales & Use Tax Sales Tax Compensation Fund Public Safety Fund-Sales Tax Grand Total Year-over-year change 6.33 s 2.L6 0.12 6.so s 2.L7 0.13 s 8.36 s 2.59 0.1.5 s s.00 s 1,.27 0.11 6.1s S 1.89 0.11 7.48 2.51 0.L4 10.20 5 2.48 0.15 ,r-* s 0.15 12.05 0.15 6.38 -23.68% 27.74% 5.71% 6.73% rc.A% 8.87% 15.56% -5.76% 0.96% The chart below shows total sales tax receipts from the Bradley Burns (local 1 o/o) allocations from the State Board of Equalization (SBOE), the amounts received from the State's Sales and Use Tax Compensation (SUTC) Fund, and the additional Public Safety Sales Tax. ln future years, the local sales tax allocations will be received in whole, and the State's SUTC Fund will be retired. 32 2017-1 8 Mid-Year Report March 14, 2018 Historical Sales & Use Tax Revenue 8.36 FY15 s14 s12 s10 s8 5s s4 s2 $o o = 2.48 0.15 FflT FY18 Proiection 0.15 FYL2 FY13 FY14FYlOFY11 Because of the time lag in the reporting and submission of sales taxes to the California Department of Taxes and Fee Administration (CDTFA), only one quarter's data is available from which to project the City's FY 2017-18 revenues from this source. Although a review of Burlingame's 3'd quarter data for 2017 (remitted to the CDTFA in October - December 2016), indicates an improvement in taxable transactions of approximately 1.6 percent. The chart below shows that sales tax revenues continue to increase moderately, with many major industry groups reporting a positive change compared to the same quarter of 2015. 1A76 f'onro*ed'Ea !A1? 61.2W< $1,060r{3Q1S &17 $8001{ $aoa< $40ili{ $?00i{ Autoa Re6tEurSRtE Food and Drug* atzda.datzd State 5rd fur{*y ?als *u=irr*ss Gr*era/ Aufld?q C6*s*mer argj Ws Censbucticfi Fud a*d Serdce Staliefit $ox T.afi**,l.lalfu1 *4atds 3tdt:s*y 33 FY16 ffiw 2017-18 Mid-Year Repoft March 14, 2018 Revenues from transactions in the City's largest sector - Autos and Transportation - increased slightly in the comparable quarter. This is noteworthy in that the quarter marked the anticipated leveling off of auto sales state-wide. However, relatively low interest rates and more fuel-efficient drive trains continue to support the auto industry. &:le*tr<l* &a1e6 ltda<t* Grau* a1AwK ,raoE A*drraiE,W#tlt tu-sa:153 Stat* * Soonty Pocl*sl,e@K kaf,r,,,ffi^ndtl6a}& tus*t l* WEke*t'rdk,,d'6.'l1J €8trK &-d'.537 &txr*Cataumer 6oodc tus*7* *g,lagAr'd fun:trucdorr &s*: Fuel*nd &n,ha Setixtt tu-*L14 Fo&ratdbrtl,gr gzffiK tus*'.ffi $*a s6ffiK g4ffiK 2QW 15 15 3A 14 40 14 1g 15 4A 15 38 16 17 4A 1016 17 1Q 2q16 16 2Q 17 3A Growing fasterthan most other components of local sales tax receipts in recent years, the allocation of taxes from the countywide use tax pool constitutes a larger portion of total sales tax revenues than ever before. Use tax is the responsibility of the buyer rather than the seller and does not involve a California "point of sale". Therefore, the tax is coded to the county of use and then distributed to each jurisdiction in the county on a pro rata share of taxable sales. While these receipts represent only 10-12 percent of the total sales tax revenues (and are categorized by major industry group along with point-of-sale receipts), the increase reflects a continued acceleration of online shopping for merchandise shipped from out of state. This trend, along with a shift in consumer spending habits to non-taxable goods and services, puts pressure on brick-and-mortar retailers and the underlying sales tax base for local governments. The City's FY 2017-18 adopted budget assumed only moderate groMh in sales tax revenues due to the anticipated slowdown in auto sales. Year-to-date receipts indicate that sales and use tax revenue will indeed exceed those of the prior year. This revenue budget for fiscal year 2017-18 is only slightly lower than the projection provided by HdL, the City's sales tax consultant. Therefore, no budget adjustment is proposed at this time. / 34 2017-1 8 Mid-Year Report March 14, 2018 Burlingame's new Ya cenl Measure I transactions tax will go into effect on April 1. Taxpayers have 30 days at the end of the quarter to submit their returns, and the CDTFA takes six weeks to process the quarterly returns. Thus, Burlingame will not see a full quarter allocation until mid-September, although advances will begin with the June payment. Because of this timing difference, the Measure I revenues are NOT included in the FY 2017-18 General Fund budget of revenues and expenditures, and are not included in the five-year forecast. However, beginning with the 2018-19 budget, Measure I monies will be budgeted in a separate sub-fund to allow for maximum transparency and accountability, and ease of presentation and audit for the Measure I Citizens' Oversight Committee. , The new transactions tax is anticipated to have no effect on the City's regular sales and use tax receipts. The additionalY+ cent transaction tax, expected to yield more than $1.75 million annually, is levied only on tangible personal property consumed, taken possession of, registered or delivered within the jurisdiction imposing the tax. The tax is not levied on merchandise delivered to customers outside the city limits or autos registered to buyers from outside its jurisdiction. However, Burlingame will receive transactions tax on autos that residents or businesses purchase from outside the city and any merchandise that is delivered from outside the city. Because auto dealerships comprise such a large segment of taxable transactions in Burlingame, the estimated revenues from Measure I are less than afull 25o/o of the sales and use tax Transient Occupancy Taxes (TOT) - TOT revenues constitute Burlingame's largest General Fund revenue source, and are usually a good indicator of current economic activity. TOT revenues are reported and paid to the City each month (for the prior month), so results as of January 31, 2017 reflect the first six months of the fiscal year. The budget for FY 2017-18 was established based on TOT collections through March 2017, when 2016-17 fiscal year-end results were projected to be approximately $26.2 million. This projection represented a slight increase (less than Y, of one percent) from the prior fiscal year, despite the absence of any significant regional events such as Super Bowl L of 2015. Continued low vacancy rates and a steady rise in average daily room rates (ADR) supported the original fiscal year 2017-18 budget projection of nearly $26.9 million - a projected growth of 2.5 percent in TOT revenue. ln fact, the City ended the 2016-17 fiscal year with over $26.2 million in TOT revenues (see graph on the next page, where Q1 shows results for July through September of each fiscal year). And occupancy rates as reported by the City's hotels remained robust in the first half of the current fiscal year. Burlingame hotels reported an average occupancy rate of 87,1 percent between July and December 2017 and an ADR of approximately $201. This level of activity is expected to continue for the remainder of the current fiscal year. A new projection of $27.4 million is proposed at mid- year for TOT revenues, representing a 4.3 percent groMh rate in the 2017-18 fiscal year. However, TOT revenues continue to be highly vulnerable to the cyclical nature of tourism and changes in the economy. The City continues to project TOT revenues conservatively, as hotel room pricing has far outpaced local pricing indices as well as inflation; as such, it is expected that in the near term, price elasticity will constrain growth. ln addition, construction of a new on-site 350-room hotel at SFO has begun; the hotel is scheduled to open in July 2019. The impact of the additional supply of rooms in the region is considered in the City's five-year forecast. 35 2017-1 8 Mid-Year Report March 14, 2018 HistoricalTransient Occupancy Tax Revenue by Quarter 7,4 6.7 7 5.6 6.45.1 6.2 5 5.5 5.6 5 4.8 4.3 -2076-77 - 2015-16 -2074-75*2073-74 n2072-71 -20L7-72 c e 1r\ 4 3.8 3 2 1 Q1 Q2 Q3 Q4 Other Taxes - A number of other sources provide tax revenues to the City's General Fund. Although they are consolidated for reporting purposes, prior year actual amounts and the current year activity for each source have been reviewed for the most accurate projection of FY 2017-18 year-end results. Real Property Transfer Tax revenues returned to a more normal range in fiscal year 2016-17, after experiencing a number of large property sales in the prior two fiscal years. The City receives property transfer tax revenue the month following a real property transaction, splitting the 0.11 percent tax evenly with the County. Although improved home values have pushed these receipts higher with the recovering economy, property turnover in the area continues to be relatively low. Fiscal Year 2009-18 Real Propefi Transfer Tax Revenue S600,ooo Ssoo,ooo s400 000 s360,000 s347,8s5 s300,000 s280,069 9200,000 s100,000 5o 2oo9-10 2010-11 201L-12 2072-73 2013-14 2014-1s 2015-16 20L6-L7 2077-78 (Proie.ted) 36 201 7-1 8 Mid-Year Report March 14, 2018 Month to month variation in real estate sales (reflected in the chart below) makes this revenue difficult to project. Although current year receipts are slightly stronger than experienced last year, no change is recommended to the budgeted revenue projection for property transfer tax. Year-to-date Business License lax revenues are coming in at a slightly higher rate than last year. This includes the special business license tax (5 percent of revenues) assessed on airport parking enterprises, which comprises over 40 percent of this revenue line item. The budget of $994,000 for the current fiscal year represents a 2.1 percent increase over the 2016-17 fiscal year results for business license revenues. While a higher volume of licenses might be expected in an improving economy, the cost of an annual business license in Burlingame is small ($1OO for most businesses). Unless airport parking enterprises experience a significant change in operations, this remains a relatively small and somewhat fixed revenue source. Staff believes that the budgeted amount is on target for this fiscal year. The largest category of Burlingame's Franchise Fees is derived from the regionalgarbage hauler (8 percent of revenues), and is collected and remitted monthly. An $18,000 increase is indicated for garbage franchise fee; although rates remain unchanged from the prior year, service account votumes have increased. Franchise fees for the provision of gas and electric utilities were slightly over the estimated budgets in the prior fiscal year. Although the City does not receive these revenues until April, there is no indication that the current year's revenues will deviate significantly, so only minor budget adjustments are necessary. Likewise, staff proposes an upward adjustment for cable franchise fee revenues, as these came in ahead of budget last year, and current fiscal year receipts remain strong. This increase will be offset by a continued decline in demand for video Services, and the associated franchise fee revenues. City of Burlingame Fiscal Year 2OO8-L7 Real PropertyTransferTax Revenue s120,000 s100,000 s80,ooo s60,000 s4o,oo0 s20,000 so l N lf ol ol o l l l l l l I I I Iti Il I A A -@ &&%&&,' 37 2017-18 Mid-Year Repoft March 14, 2018 Franchise Taxes PAdDesc FY20t7-t8 Midyear20L7-L8 Bud 2015-16 Actuals 20L6-L7 Actuals Gas Electric Garbage Cable TV & Wave Astound AT&T Video Service Total 109,866 s 228,920 699,539 462,098 104,336 774,755 5 240,826 715,184 473,988 111,000 s 224,000 724,000 469,000 115,000 s 242,000 742,000 483,000 4,000 18,000 18,000 14,000 s 87 000758303ssS 1,669,000 Licenses and Permits - General Fund revenue in this category, consists largely of alarm and overnight parking permit fees, along with taxicab licenses. Last year, this revenue source increased only slightly compared to the previous year. With a budget of $88,500, these receipts account for a very small part of total General Fund revenues. Only slight adjustments are recommended to the various line items that comprise this revenue source, based on year-to-date activity. Fines, Forfeitures and Penalties - This category consists largely of revenue from parking citations and vehicle code violation fines. The Police Department has refined their projections to reflect a slightly higher volume of parking citations ($23,500) and fewer than anticipated vehicle code violations ($19,000). Also, code enforcement violations were projected at a minimal amount, and can be increased (based on year-to-date activity) by $4,ZOO. lnvestment lncome - Yields on municipal portfolios dropped steadily following the 2008 market downturn. Over recent years, the Federal Reserve has implemented monetary policies to keep credit affordable and inflation in check to help the economy recover from the recent recession. Similar to other cities, Burlingame invests in only the safest of securities (the highest priority of the City's investment policy is preservation of capital), and yields have continued to hover at historic lows for such investments. Ir/aintaining its focus on safety and liquidity, the City transferred $10 million from LAIF during the first quarter of fiscal year 2017-18 to invest in a similar vehicle, CAMP (California Asset Management Program). CAMP is a California Joint Powers Authority established in 1989. The CAMP pool is similar to LAIF, and is a permitted investment for all local agencies under the California Government Code 553601(p). Although both pools have similar terms and offer daily liquidity, many public agencies use both LAIF and CAMP funds in order to diversify the liquid portion of their investment holdings. Currently, CAMP offers a slight yield advantage (an incremental 0.07 percent). ln this midyear report, staff takes the opportunity to adjust the budget for interest income projections. lncome from the City's investment holdings has always been difficult to forecast due to the requirement to "mark-to-market" the portfolio at each year end. As shown in the chart below, the change in market value has a significant impact on the reported earnings of the portfolio - a yield to maturity at cost on the main portfolio of securities was 1.81o/o as of December 31,2017, compared to a "total return" of 1.14 percentwhen the change in the portfolio value is included. 38 Midyear Amendment 2017-1 8 Mid-Year Report March 14, 2018 25 4,S13 +0.40Y" lrain Furtfolio Earnings Analysis As olDecemberSl, ?017 Quarter-owr-Quarter Change in 2-Year U.S. TreasuryYield +0.017"+O.tZTo +0.ttTr {\Ales:. Pentmrce o,t tzobdate desis. g,oss f.e., 0e/ore /ees)maccodarae nrththe GE4 ,f'rsl'{a{e's Glotal ,htes},trrrt Peabmme .Standads (GIP.S). . Qlarlerly retrrns are preseded on an trsru,li*d ba.sis. . llgy rot sm tu lolal due lo ,olrd'rg. ln this and future fiscal years, staff recommends that the budget reflect investment income with the mark-to-market adjustment removedfor all funds. Such treatment recognizes that the City typically holds its investments to maturity, and removes the uncertainty of the market place from the City's revenue forecasts. Therefore, "actual" interest income received in the prior year has been restated to reflect earnings unadjusted for market value as of June 30, 2017, and budgets have been established to reflect interest earning prior to the market adjustment at year end. Budgets established for the current year were inflated by earnings of prior years and should be reduced to earnings anticipated on a regular accrual basis. The City has contracts with PFM Asset Management, LLC. for outside investment advisory services. PFM assists in the annual review of the City's ongoing cash flows and investment goals, and recommends any appropriate revisions in the investment policy. The managed portfolio's benchmark is the Bank of America Merrill Lynch 1-5 Year U.S. Treasury lndex, with a duration of 2.59 years. The market value of the portfolio as of December 31 , 2017, was $155.4 million, consisting of a $102.7 million managed pool of top-rated securities, $38.7 million in the State Local Agency lnvestment Fund (LAIF), and $14.0 million California Asset Management. The City's aggregate investments (including the very liquid investments in LAIF and CAMP) State and County investment pools) averaged a yield to maturity of 1.6 percent. This aggregate yield to maturity on the City's investments compares favorably with the 1.11 percent reported in last year's mid-year analysis. The Local Agency lnvestment Fund (LAIF), which holds the majority of the City's idle cash, is yielding 1.239 percent, up from 0.719 percent one year ago (as of December 31't). Revenues from the City's investments are therefore anticipated to be higher than in the prior fiscal year in total. However, it would not be prudent to include an assumption about the year-end "mark-to-market" adjustment in forecasting this revenue. Actual income earnings are allocated out to other City funds based on average cash balance throughout the fiscal year. As cash balances vary from year to year within the different 1,695,284 -716,7S3 ,l.1 39 tffiffi ffitr[ruIK 444,180 -69S,083 -0.26[16 lnterest Earned 401,871 4?8,821 42?,433 + Change inValue 4,32S 58,831 -80,8E1 = Fortfolir: Earnings 40r3,?0rl 485,852 341,572 9r8,501 Total Return o/u 0.4s$t 0.559t 0.379t 2017-18 Mid-Year Report March 14, 2018 funds, interest earnings by fund are difficult to project. Of the total interest earnings now projected for the 2017-18 fiscal year, $840,000 is projected to be General Fund interest revenue. Staff has proposed adjustments to the interest revenue budgets in all funds (page 15 of this staff report) that will be credited with any material interest earnings in FY 2017-18. These mid-year adjustments will provide a more accurate projection of interest earnings to the various funds for future budgets. State Subventions (lntergovernmental revenues) - Through various pieces of legislation and propositions, the State of California is required to reimburse local agencies for their costs when the State mandates that the agencies provide a new program or higher level of service. This reimbursement process is known as mandated cost claiming. Over the years, many of these state mandates have been suspended to save the state money, and receipts for prior claims were so erratic that they are no longer included in the City's budget. Other State subvention programs, such as the COPS and transportation funds allocated to cities through C/CAG, are more consistent, and make up the majority of this $250,000 budget. Receipts of State Motor Vehicle License Fees (VLF) totaled $13,300 in FY 2016-17. Following the 2011 State Budget Act, which stripped most remaining VLF allocations from cities, revenues from this source are not significant and always uncertain. Thus, the City is no longer budgeting this revenue. However, barring major changes in this state allocation, the City can expect to receive $13,000 from this revenue source in the current fiscal year. Charges for Services - As seen in the chart below, most departments generate some amount of receipts in this revenue category. With a budget of over $5.2 million, these receipts account for approximately 7.3 percent of Burlingame's total General Fund revenues. CITY OF BURIINGAME, CA CHARGES FOR SERVICES BY DEPARTMENT ent Police Parks Recreation Aquatics Planning Public Works Library Other Total, Departmental Fees FY15-16 Actuals FY15-17 Actuals FY17-18 Current 57 FY17-18 Midyear 1 FY17-18 Midyear Amendment Year-End s se,4s6 748,572 2,637,496 0 577,4t3 421,,996 6t9,507 s 91,2s8 153,03 6 2,827,667 233,L98 875,485 1,,1,92,27 4 640,982 s 66,soo 1s8,000 2,962,000 130,000 651 ,200 500,300 779,000 s 90,2s0 L67,000 2,970,L25 247,000 s36,s00 582,600 732,500 s 23,7s0 9,000 8,125 117,000 (120,700) 82,300 (46,s00) % 35.7% 5.7% 0.3% 90.0% -1,8.4% L6.5% -6.0% L62.2% 1.5o/o 7 74 General Fund revenues in this category increased considerably in FY 2016-17 compared to the previous year due largely to one-time fees for Public Works services. Several larger projects of higher structural complexity progressed through the development process. ln fact, one of the projects called for special encroachment permits for subsurface shoring systems, a permit for which a fee was first established in the FY 2016-17 Master Fee Schedule. Because the department has experienced an unanticipated increase in plan check services volume in the current fiscal year, the mid-year estimate for these services provides for a $59,300 revenue increase. ln addition, it 40 2017-18 Mid-Year Repoft March 14, 2018 appears that other public works fees for services will be $28,000 higher than initially anticipated; a slight decrease ($5,OOO; is expected in state highway maintenance fees. The Municipal Code authorizes staff to inspect industrial and commercial facilities for storm water discharge compliance as required under the Municipal Regional Stormwater NPDES Permit (MRP). The County's Environmental Health Services Division has conducted these inspections on behalf of the City since 1996, but due to budget cuts, these services have been eliminated as of December 31, 2017 . ln order to maintain compliance, City staff will conduct these inspections (anticipated to average 400 inspections annually) or have them conducted by an outside consultant. A new fee to cover the cost of these inspections will be proposed for the 2018-19 Master Fee Schedule. Receipts from recreational services in fiscal year 2016-17 were 7 .2 percenlabove that experienced in the prior fiscal year, indicating a continued demand for recreational offerings. Minor adjustments are recommended to Recreation revenue projections due to mid-year program changes: The Serve 'n Splash Park revenue ($40,000) will not be realized due to closure of the pool; a deck replacement will keep the pool closed during the summer months. A new event for the department (Muddy Mile) was planned after the fiscal year began, and provided revenues of $8,125. And registrations in after-school enrichment programs were higher than anticipated, allowing for an upward adjustment in revenues of 940,000. Projected revenue for the Aquatics program is $1 17,000 higher - the amount was underestimated at the beginning of the fiscal year, but a recent change in the billing cycle for this reimbursement from the Burlingame Aquatic Club allows for a more accurate estimate for the year-end revenue. Revenue will remain generally as budgeted for Parks. A small increase of $9,000 in Parks Special Services is supported by validated organization enrollment numbers for field use. While the volume of development remains fairly high, activity levels have subsided from the very high pace of the last two years. Revenues from development fees are running lower than initially projected for the fiscal year, and a downward adjustment for both Zoning/Sign Plan Checking ($3S,ZOO; and other Planning Fees ($85,000) is indicated. The revenue projection for Police Services should be adjusted $23,750 upward due to a review of all fees and volumes for services in the department. The revision is comprised of a range of small ($2,000-7,500) increase across five service revenues that include false alarm charges, special police services and vehicle release fees. The FY 2017-18 Burlingame Library budget included revenues from the opening of a Passport lntake Office. Since the opening of this office last year, volumes for the services offered have been lower than anticipated. The $60,000 revenue projection for the current year needs to be adjusted downward to $30,000. Other library service fee revenues came in slightly below budget last year, and a minor decrease ($4,SOO; in the current year budget is indicated for this revenue. ln addition, remuneration for the provision of library services to the Town of Hillsborough is calculated after each year-end and based on average per-capita costs (within Peninsula Library System budgets) applied to twothirds of the population of Hillsborough. The new projection is less 41 2017-18 Mid-Year Repoft March 14, 2018 than originally estimated by $12,000. This downward adjustment is also reflected in the attached FY 2017-18 mid-year budget amendment. The Finance Department receives an administrative fee from the San Mateo County Convention and Visitors Bureau of $9,300 for the processing of the Tourism Business lmprovement District. The charge was calculated to cover the cost of processing receipts from all participants/hotels of the district other than those located in Burlingame. The amount of the fee was updated for fiscal year 2016-17, but the budget did not report the revision. Therefore, an increase in this line item of $5,300 is indicated. ln addition, the City Clerk's Office received $2,000 in filing fee revenue early in the fiscal year, and an adjustment should be made for this unbudgeted amount. Other Revenues - The City receives other miscellaneous revenues from time to time. The budget for these miscellaneous revenues (unclaimed property from the State, rebates, miscellaneous reimbursements, and refunds of prior-year expenses, etc.). Such amounts average about $30,000 annually, and there is no indication that this revenue category will need adjustment in the current fiscal year. 42 2017-1 8 Mid-Year Report March 14, 2018 City of Burlingame FY 2017-18 Mid-year Report Attachment B - General Fund Expenditures The following table shows the FY 2017-18 mid-year assessment of departmental (operating) General Fund expenditures: Although many of the proposed mid-year budget amendments are off-set within each department or division, they are described in detail below to illustrate changes in operations that were not anticipated at the time the FY 2017-18 budget was adopted. General Fund Personnel Costs The challenge of any public sector agency is to provide competitive salary and benefit packages in order to recruit and retain quality talent, while keeping the cost of providing these packages at a reasonable and sustainable level. Negotiated or imposed contracts in years since the recession have resulted in significant savings and have assisted in achieving structural benefit changes that will help control future employee benefit costs. For example, Burlingame employees are CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES General Gov't (Admin Svcs) Public Safety Central County Fire (Burlingame) Police & Dispatch Public Work Community Development - Planning [eisure & Cultural Services Aquatic Center Li bra ry Parks & Recreation Total Expenditures s 4,477,40t 5 4,874,249 s s,799,089 $ s,81s,089 s 2o,o0o FY15-15 Actuals r0,966,697 13,558,374 4,693,548 L,405,794 336,689 4,385,376 47, FY16-17 r0,76r,242 L4,79t,LL7 4,456,522 L,530,975 4L9,97r 4,7L0,029 FY17-18 Adopted 10,851,669 16,085,500 s,9s8,029 1,836,3s8 5 10,500 5,790,727 FY17-18 Midyear 10,851,559 15,t82,L00 6,322,L29 1,861,358 510,500 5,78L,277 FY17-18 Midyear Amendment 96,500 354,L00 25,000 (9,4s0) Year-End 03% 0.0% 0.6o/o 6.to/o L.4% 0.0% -0.2% 0.8% CITY OF BUR[tNGAME, CA SUMMARY OF GENERAT FUND EXPENDIruRES Bv General Fund Categories Salaries & Wages Benefits Operating Costs lnternal Services Capital Outlay Total Expenditures FY15-15 Actuals FYL6-L7 Actuals FY17-18 Adopted Budset FY17-18 Midyear Proiection FY17-18 Midyear Amendment Year-End Uo (Downl % s 1s,469,014 8,767,936 19,920,557 3,747,960 q? gq? s 16,689,110 9,06s,s52 20,266,011 3,587,2s3 99,544 s 18,331,083 10,630,483 22,270,175 4,724,377 209,200 s 18,3s4,484 10,705,483 22,743,297 4,124,377 209,200 s23,401 75,000 473,787 0 0 0.7% 0.7% 2.r% 0.0% 0.0% s47.4s9.460 s49.707,480 s5s,s6s,2s8 ss6.136.841 5571.583 L.0% 43 Description I 4g.7o7.a&o: 2017-1 8 Mid-Year Report March 14, 2018 now paying a portion of the employer's retirement rate in addition to the employees' rate, as well as a larger portion of their health care premiums. Retiree medical benefits have been significantly reduced for new hires, and provisions for the payout of sick leave hours have been curtailed. Although many of these savings are evident in recent-year budgets, the savings from some of these actions will not be realized in full for many years. ln the current more favorable economic environment, compensation increases are anticipated to keep up with cost-of-living indexes. But the costs of prior-year pension obligations are anticipated to grow significantly in the next five years, and these changes will put added pressure on personnel costs beginning with the upcoming FY 2018-19 budget. Because personnel budgets are based on full occupancy (no vacancies) of permanent positions, budgetary savings will occur in most every department. However, personnel cost savings due to vacancies are difficult to estimate and vary by departments and programs, so no budget adjustments have been made on a City-wide basis. It should also be noted that most health plan rates were increased effective January 1, 2018; the increases ranged from -15.3 to +22.6 percent, depending on the plan, with an average of 2.3 percent across all plans. However, because the overall premium increase in the plans used most by the City's current employees was minimal, no adjustment is being made to the departmental budgets to cover the impact of these rate changes for the last half of the current fiscal year. Note that personnel costs (and total operating expenditures) for the General Fund have (since FY 2014-15) included contributions to the irrevocable trust fund established in October 2013 for the purpose of funding the City's retiree medical benefit obligations (OPEB). The full costs of these past and current obligations are now reflected in the departmental budgets. As best practices would dictate, the City is committed to contributing the annual required contribution to the trust fund in both good and bad financial times, using conservative, realistic assumptions that are adjusted based on bi-annual actuarial reports specific to the City's program and its participants. Unlike pension liabilities, the City's OPEB is a closed program and less susceptible to volatile swings in annual contributions. General Fund Appropriation Adjustments Totat General Fund expenditures increased 6.0 percent in the FY 2017-18 budget (not including contributions to the new pension trust fund) as compared with the prior year's adjusted budget. The increase in the operating budget is largely due to strategic increases in City-wide FTE (full time equivalent) staff positions and personnel hours needed to carry out the City's priorities. A very minor increase in the operating expenditures budget ($572,000) is recommended for the FY 2017-18 General Fund appropriations, largely due to unanticipated operational needs as described by department, below. Administrative Services - The budget for this group of departments supplies the resources that support services often referred to as "general government" activities. Although each department is bound by a separate budget, recommended adjustments are fairly minor, and they are combined in this report to give an overall context to the administrative costs of the City. 44 2017-18 Mid-Year Report March 14, 2018 Anticipating a key vacancy in Finance, management sought to add interim consultant resources to assist the department in advancing several key initiatives. The additional contract services, initiated during the recruitment process for a new Deputy Finance Director, was intended to support staff during the mid-year analyses and development of the FY2018-19 budget. The consultant will also assist in recommending improvements to the city's existing chart of accounts in preparation for a new ERP implementation in the 2018-19 fiscal year. An adjustment is also proposed to allow for a change in the City Gouncil's Meeting, Conference and Travel Expense Policy. As discussed at their November 20,2017 meeting, each Council member is appropriated a $3,000 budget (plus an additional $1,000 for the Mayor) annually. ln addition, this budget contains adequate funding for the Commissioners dinner and certain other annual regional meetings and functions. The overall estimated increase in this budget line item is $5,000. Police - Early this fiscal year, the Police Department purchased body-worn camera equipment for all police officers. Additional equipment was then requested that had not been anticipated in the original purchase. Specifically, the Council approved the purchase of additional holster signal units (sidearm units) for the body worn cameras, in order to assist the officers with operating the cameras more efficiently in the field. Staff recommended that Parking Enforcement Officers also be equipped with body-worn cameras. ln addition, an interface program that allows for the direct download of camera footage was procured. These additions to the contract cost $21,600 more than the initial procurement included in the adopted budget. A budget amendment to increase overtime, with an offsetting decrease in regularsalaries ($100,000), is also proposed. This cost- neutral amendment will allow the department to manage the impact of two unanticipated vacancies (a disability retirement and a resignation) coupled with several longterm injuries within the force. The benefits budget in the Police Department should be increased by $75,000 to fund the approximate amount of final payouts due to the retirements in the current fiscal year. Although the total liability for compensatory leave balances earned by employees is reported in the City-wide financial statements, departmental budgets only provide for the compensatory time expected to be earned by each employee during the fiscal year. The adjustment does not reflect higher expenses of the department, only increased disbursement of benefits previously earned. Offsetting revisions in the budget (an increase in the overtime budget and a decrease in the need for par-time hours) is proposed for Police Communications. This revision between parttime salaries and over-time will more clearly reflect the true distribution of overtime shifts among dispatchers for future budgets. ln addition, a reallocation of funding currently budgeted for equipment maintenance ($7,900) to increase the budget for contractual services will ensure a more accurate reflection of anticipated costs in providing dispatch services. Parks and Recreation - Several small adjustments are recommended to the 2017-18 fiscal year budget for the Parks Division. lncreased funding is needed for the Broadway Downtown area: the removal of existing pots, removal/replacement of trees, the addition of ground cover to bulb outs and corners, adjustments/improvements in the utility boxes and irrigation control system, among other maintenance activities approved by the City Council irt November will require an additional $50,000 in the Parks budget for supplies and materials. A budget increase of $9,000 for 45 2017-18 Mid-Year Report March 14, 2018 part-time salaries in the division will allow for additional trash pickup in the area on Monday mornings. Additionalfunding is also proposed to cover increased expenses ($5,SOO1to the division for the Muddy Mile event (planned after the fiscal year began), and to supply dispensaries and bags ($2,500) to encourage proper disposal of dog waste along Burlingame Avenue. Although the Recreation Division will be unable to offer five weeks of the Serve 'n Splash program due to the pool closure (saving $15,000 of anticipated contractual expenses), an increase in class offerings for after-school enrichment programs will increase contractor costs by $26,890. A budget addition of $13,833 in contractual services is requested for funding Fung Collaboratives for phases 2 and 3 of the Burlingame Community Public Art initiative. Savings totaling $17,390 in the department exist in several operating cost areas due to the under-budget completion of certain programs (specifically teen trips and Throwback Thursdays), thus minimizing additional appropriation needs within the department. Library - A decrease in the budget for parttime salaries ($9,+SO; is proposed to offset a request for additional janitorial activities, provided by the Facilities Service lnternal Service Fund, for the Main Library. These additional services, formerly tasked to a parttime employee, are not adequately covered in the current city-wide janitorial contract. The need should be resolved in the upcoming fiscal year, as these services will be included in the scope of the new janitorial contract. Community Development Department - Adjustments are recommended for both parttime salaries ($15,000) and overtime ($10,000) within the Community Development Department: The workload of the Planning Division has increased and maintained a levelthat has required additional hours by clerical staff to assist with packet preparation and distribution, and noticing for public hearing before the Planning Commission. Public Works - A budget amendment is proposed to correct the accounting for the storm drain fees, associated with school district properties, which are subsidized by the General Fund. As described earlier in the report, the Storm Drainage Fund revenues have not been adequately credited for these fees, which were intended to be funded in the Streets and Storm Drainage Division, for several years. Additional funds are needed to correct prior year Storm Drainage fee revenues ($43,085 in 2015-16 and $43,948 in 2016-17). ln the current fiscal year, the General Fund's Streets and Storm Drainage budget is short approximately $20,000 of the fees associated with the school properties ($44,829). Other adjustments are recommended to more accurately reflect the needs of operations within the division. Much of the additional maintenance work and improvements for the Broadway Business District as outlined in the October 20,2017 staff report on the subject (excerpt below) has been initiated and is expected to require approximately $243,000 in the current fiscal year. 46 201 7-1 8 Mid-Year Report March 14, 2018 Estimated CostsWork Description $145,000Re-caulk all sidewalk expansion joints for an approximate length of 1400 feet between El Camino Real and California Drive $60,000Re-caulk failed expansion joints at concrete benches located at several intersections in the Business District $40,000 lncrease power washing of the entire sidewalk between El Camino Real and California Drive from twice a year to four tlmes a year in addition to performing regular ongoing cleaning activities $15,000Replace eight existing garbage cans with new recyclelgarbage combo units $10,000Refurbish an additional 25 garbage cans by powder coating $8,000Re-paint the 12 small green fences at intersections $278,000Total PuOlic Worfs tmprov And finally, an additional $14,100 is required to provide sufficient funding for payment of the State Water Resources Control Board permit for the storm water system. The fee was previously charged to the Waste Water Treatment Plant Budget, but is more appropriately a General Fund expense. 47 201 7-1 8 Mid-Year Report March 14, 2018 City of Burlingame FY 2017-18 Mid-year Reqort Attachment C - General Fund Five-Year Forecast Revenue Categories (Revised) Budget 2077-78 Forccast 207&19 Forecast 201920 Forecost 202021 Forccost 2021-22 Forecdst 2022-23 Property Tax Sales Tax Transient Occupancy Tax OtherTaxes - Franchise Tax OtherTaxes - Business Licenses OtherTaxes - State HOPTR Other Taxes - Transfe r Tax Licenses & Permits Fines, Forfeitures & Penalties Use of Money & Property Charges for Se rvices Other Revenue State Subventions lnterest lncome Total Revenues Expenditu re Catego ries Salaries & Wages Be nefits Operating Costs lnternal Services Capital Outlay Total Expenditures Operating Revenue Transfers !n (Out) Capital I nvestment Rese rve Debt Service Change in Fund Balance before Adjustments Adjustments Pension Trust 115 Change in Fund Balance after Adjustments s 20,1s0,000 L2,205,@0 27,400,@0 1,669,000 994000 62,000 350,000 8&000 910,700 155,000 5,337,775 30,s00 251,2L6 840,000 s 20,403,000 12,561,000 27,948,0@ 1,586,000 998,000 62,000 360 000 88,000 911,000 159,000 5,445,000 31,000 234,000 1,260,000 s 21,ss2,000 t2,759,@0 27,948,@0 1,703,000 1,002,000 62,000 359,000 89,000 920,000 173,000 5,581,000 31,000 234,@O 1,386,000 s 22,830,000 12,963,000 28,227,0N L,7Y,ON 1,024000 62,000 378,000 89,000 929,000 17&000 5,720,offi 31,000 234,000 1,52s,000 5 24,720,W 13,170,000 28,510,000 1,806000 t,u1,w 52,000 388,000 90,000 938,000 182,000 5,863,000 3r.,000 234000 1.,677,N0 s 2s,499,000 13,381,000 28,79s,000 1,860,000 1,051,000 52,000 397,000 90,000 948,000 187,000 5,010,000 31,000 234,000 1,845,000 5 7o,46,z,t9t S 72,156,000 S 73,809,m0 s 75,9114,000 s 7&11&000 s 80,390,000 (78,354,484) ( 10,70s,483) (22,743,2971 (4,L24,377], (209,200) ( 19,016,000) (11,334000) (23,747,gco) (4,248,LCo], (2!s,s00) ( 19,731000) (12,430,000) (24,812,300) (437s,500) (221,900) (20,434,000) (73,427,0@) (25,919,700) (4,s06,800) (228,500) (21,101000) (14362,000) (27,074,t00l, (4642,000) (235,500) (2L,7@,Ml (1s,2ls,000) (28,278,1@) (4781,300) 1242,s@l (s5,136,841) (s8,(51.s74.8m) (64.s15.100) 167,170.276.9fi1 74,326,350 13,s94,s00 t2,234,200 11,427,9@ 10,699,400 10,113,100 (s,984,011) (3,000,000) (3,277,8331 (6,062,600) (2,000,000) (s,893,100) (2,000,000) (2,128,000) (6,027,2@) (2,000,000) (2,143,000) ( 6,166,600) (2,000,000) (6,306,300) (2,000,000) ( 1.785.000)(2,112,000)(1, s 2,064,s05 s S,ArS,goo s 2,213,100 s t.2s7.7$ s 762,800 s ZO,S00 (3,139,920)(2.264,@0\ (1,741,000) (1,000) (895.0001 s (1,07s,414) s s86,9oo s (so,goo)s (€3.300) s (s22,200) s (874200) 48 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGA IVE APPROVING ADJUSTM ENTS TO ESTIMATED REVENUES AND APPROPRIATIONS RESOLVED, by the CITY COUNCIL of the City of Burlingame, California and this Council does hereby APPROVE and AUTHORIZE the Finance Director & Treasurer to amend the current Fiscal Yeat 2017-18 Budget as outlined below to reflect actual fiscal conditions and projections outlined in the Mid-Year Report: General Fund: Property Tax Transient Occupancy Tax Other Taxes- Franchise Tax Charges for Services Fines, Forfeitures & Penalties Licenses & Permits State Subventions lnterest lncome Other Funds: Gas Tax - Highway User's Tax Gas Tax - Road Repair & Accountability Act Water - Miscellaneous Revenue Sewer - Hillsborough Sewer Charges Solid Waste - Steam Cleaning Downtown Solid Waste - AB939 Administration Solid Waste - Street Sweeping Fee Solid Waste - City Management Fee Solid Waste - Rate Stabilization Fee Solid Waste - Miscellaneous Revenue Parking Enterprise - IMonthly Parking Fees Parking Enterprise - Electric Vehicle Charging Station $ 961,000 529,000 39,000 80,275 9,200 (500) 13,000 (105,000) (192,800) 206,500 8,000 200,000 43,950 (34,000) 32,500 (28,600) (65,850) 31.200 140,000 3,000 IN THE FISCAL YEAR 2017.18 BUDGET Amendments to Estimated Revenues: Building Enterprise - Building Permit Fee Building Enterprise - Building Plan Check Fees Building Enterprise - Building lmaging Fees Burlingame Landfill - Landfill Closure Surcharge Storm Drain Fee lnterest lncome (Various) General Fund: City Council Finance Library Parks Planning Police Recreation Streets and Storm Other Funds Water Sewer Maintenance Waste Water Treatment Parking Enterprise Fund Facilities Services Fund Admin/lT Services Transfer Out from General Fund (to Capital Project Fund - Parks & Trees) Transfer ln Capital Project Fund - Parks & Trees (from General Fund) 676,000 (281,000) 61,000 30,200 87,000 (397,500) $ 5,000 15,000 (9,450) 61,500 25,000 96,600 13,833 364,100 $ (1e,e31) (s0,000) (1 4,100) 88,000 34,059 9,800 $ (350,000) 350,000 Transfer Out from Solid Waste Fund (to General Fund)(28,600) Transfer ln General Fund (from Solid Waste Fund)28,600 Transfer ln Pension Trust Fund (from General Fund)(3,139,920) Amendments to Appropriations: Revisions to Transfers ln / Out: Transfer Out from General Fund (to Pension Trust Fund) 3,139,920 Transfer ln Pension Trust Fund (from Water Fund)(205,573) Transfer Out from Water Fund (to Pension Trust Fund) Transfer ln Pension Trust Fund (from Sewer Fund)(169,791) Transfer Out from Sewer Fund (to Pension Trust Fund)169,791 Transfer ln Pension Trust Fund (from Solid Waste)(30,101 ) Transfer Out from Solid Waste Fund (to Pension Trust Fund) Transfer ln Pension Trust Fund (from Building Enterprise Fund) Transfer Out from Building Enterprise Fund (to Pension Trust Fund) 30,101 (82,01 1) 82,O11 Transfer ln Pension Trust Fund (from Landfill Fund)(4,752) 4,752 (19,122) 19,122 (56,212) 56,212 (36,669) 36,669 (5,641) 5,641 205,573 Transfer Out from Landfill Fund (to Pension Trust Fund) Transfer ln Pension Trust Fund (from Parking Enterprise Fund) Transfer Out from Parking Enterprise Fund (to Pension Trust Fund) Transfer ln Pension Trust Fund (from Facilities Services Fund) Transfer Out from Facilities Services Fund (to Pension Trust Fund) Transfer ln Pension Trust Fund (from Equipment Services Fund) Transfer Out from Equipment Services Fund (to Pension Trust Fund) Transfer ln Pension Trust Fund (from Admin/lT Services Fund ) Transfer Out from Admin/lT Services Fund (to Pension Trust Fund) lt/layor l, MEAGHAN HASSELL-SHEARER, City Clerk of the City of Burlingame, do hereby certify that the foregoing Resolution was adopted at a special meeting of the City Council held on the 14th day of March, 201 8 and was adopted thereafter by the following vote: AYES: NOES: ABSENT: COUNCILMEMBERS: COUNCILMEMBERS: COUNCILMEMBERS: City Clerk STAFF REPORT AGENDA NO:5b MEETING DATE: March 14, 2018 To:Honorable Mayor and City Council Date: March 14,2018 From: Syed Murtuza, Director of Public Works - (650) 558'7230 Subject: Review of Draft FY 2018-19 General Fund, Gas Tax, Measure A, Measure l, Measure M and Senate Bill (SB 1) Funded Capita! lmprovement Program (clP) RECOMMENDATION Staff recommends that the City Council review the proposed draft FY 2018-19 General Fund, Gas Tax, Measure A, Measure l, Measure M, and SB 1 funded ClP, and provide feedback. BACKGROUND Historically, staff has presented the City Council with a draft of the proposed General Fund CIP as part of the mid-year budget update study session in order to receive Council feedback with sufficient time to incorporate any changes prior to the adoption of the budget. The proposed draft CIP includes General Fund, Gas Tax, Measure A, Measure l, Measure M, and SB 1 funded projects. Staff will be presenting the CIP Program for the Storm Drainage System, Drinking Water System, and Sanitary Sewer System and Waste Water Treatment Plant at a future meeting as part of the overall budget presentation. DISCUSSION GENERAL FUND CIP ln developing the FY 2018-19 ClP, staff conducted a needs assessment of various infrastructure owned by the City, and identified $6.84f\4 in General Fund projects; $1.865f\4 in Gas Tax, SB 1 and Measure M funded projects; and $575,000 in lt/easure I projects, for a total of $9.280M for the next year's ClP. The proposed FY 2018-19 projects are basic and essential infrastructure needs to continue providing high quality public services to the community. Below is a summary table of each of the CIP Program areas with project descriptions and costs. Staff will be providing the City Council with a detailed presentation of these projects at the March 14th Mid-Year Budget Study Session. 1 FY2O18-19 General Fund, Gas Tax, Measure A, Measure I and Measure M funded CIP March 14,2018 PARKS AND RECREATION IMPROVEMENTS ($2.705.000) (tn f*o,,:ionds)lln *orxordxl Com munity Center Project Victoria Playground Pool Deck Replacement and Resurfacing Pathway & Landscape lmprovements Bay Trail Fitners Equipment Burlingame School District Synthetic Turf Replacement Fund Murmy Field Synthetic Turf *eplacement Fund Parks Safety & Maintenance lmprovements Playground Replacement Fund City Parks Fencing Murray Playground RemovaIand lnsta[[ation of Grass Double Batting Cage at Bayside Park Parks, Picnic Tables, Benches & Fountains P lal6rou nd Resilient Resurhcingflreatm ent Central I rrigation Contro[[er Washington Park Parking Lot Resurfacing Miils Canyon Hazard Mitigation Projea AnnualTree R lacement The above list primarily consists of infrastructure maintenance projects based on the needs assessment and replacement schedule as identified in the department's work program. ln addition, the list includes $200,000 funding for future replacement of synthetic turf at Burlingame School District facilities (BSD). Staff will be programming $200,000 annually for the full replacement of the synthetic turf at BSD facilities over the next 1O-year period. Funding for the Community Center Prolect is not identified in the above list because the final project scope and financing details are still being developed. Once the project scope and details are finalized, and Council's approval is obtained, the project will be included in the CIP Program. 600 600 t_50 204 zAA 150 LLA 100 100 100 100 70 70 50 50 50 5 2 -?zr1=;rz'- it4 "';s-a- -:e95j:j=j; z* 500 500 150 zg0 200 150 11C 100 100 100 100 70 7A 50 50 50 5 FY2018-19 General Fund, Gas Tax, Measure A, Measure I and Measure M funded CIP March 14, 2018 BUI LDI NG FACI LITIES I M PROVEM ENTS ($2. 1 25.OOO) Police Stqtion Underground luel Storage Tcnks Upgrcde Fire Stction 35 Communicslion Tower Relocalion Focilities CIP Progr*m iAancgement City Hsll Corpet Replccement Proiect City Hcll- CD' renovotion Iccilities ADA lmprovements Program Library HVAC & Et|4S {Energy ilnncgement System) upgrode Fqcilities Energy Upgrcdes Program City Hall - Acoustic lmprovements {Sound Mcsking} Prc{ecl Villcge Pcrk Oeck lmprovements Pcrks Corporction Ysrd bqthreoms & locker rooms gender seporotionr/remodel Proiect FS #35 Trcffic Signcl Upgrcdes PW corporotion Yard E/vtS Upgrede Design lYlinor Focilities {i* :ta*-*sc*ds}{in tho"rsor.:ds} 400 300 ?.54 200 200 100 't00 '100 100 75 75 75 50 50 50 4AO 300 250 200 200 lm r00 100 100 75 75 75 50 50 50 The above project list primarily consists of building maintenance projects and upgrades for various City building facilities based on needs assessment and replacement schedule. Of note, next year's CIP program includes an additional $400,000 to upgrade the fuel storage tank at the Police Station, which has been subject to regulatory non-compliance conditions, and is a high- priority project. The Council had previously provided funding for engineering design and project development. Additionally, the CIP program includes funding for Americans with Disability Act (ADA) improvements in several buildings as part of the City's proactive effort to comply with ADA regulations. 3 ffi .r;t2,% FY2018-19 General Fund, Gas Tax, Measure A, Measure I and Measure M funded CIP March 14,2018 BICYCLE. PEDESTRIANS AND TRAFFIC SAFETY IMPROVEMENTS ($1.425.000) {h ttrou*nds}(la thoasondr) Sidewalk & ADA lmprovements {***eral ?und $7***. &/f,easr}{*, -*3**t<} Bicycle and Pedestrian Master Slan Update Lyon Hoag Neighborhood Traffic Calming Study Old Sayshore Highway Streetsca?e ?roiect Study Bay Trails Gap lmprovements Design Development (Airpon Blvd & Broadway) 500 254 200 zAO ?00 500 25* 2AA 204 T,:tfic and Trans Studies annua The CIP program includes $200,000 in new General Fund and $300,000 from Measure l, for a total of $500,000 in new funding for the next fiscal year for sidewalk and associated ADA improvements. Furthermore, staff will be utilizing $1,000,000 in existing project fund balance to implement the sidewalk repairs and ADA improvements in the next fiscal year. Additionally, next year's work program includes such major projects as the development and updating of the Bicycle and Pedestrian Master Plan, Lyon Hoag Neighborhood Traffic Calming Studies, an Old Bayshore Highway Streetscape lmprovements Feasibility Study, and development of Bay Trail Gap lmprovements Plan. NEW FINANCE DEPARTMENT SOFTWARE SYSTEM ($5OO.OOO) The Finance Department's existing financial system is outdated and needs to be upgraded to bring it to current standards. The City Council had previously provided funding to develop the project scope and develop the project specifications. Based on that effort, staff believes deployment of a new system would range from $400,000 to $900,000. Currently there is $100,000 available in the project fund balance, and based on the cost reasonableness analysis, staff is requesting $500,000 in the next fiscal year's budget to implement the project. ENVI RON M ENTAL/G REEN I N FRASTRUCTU RE IM PROVEM ENTS ($2OO.OOO) Staff is proposing to study the feasibility of implementing green infrastructure improvements on Chapin Avenue between El Camino Real and Primrose Road. Chapin Avenue is a two-lane roadway with wide traffic lanes and angled parking in both directions. Staff believes the wider roadway provides an opportunity to install green infrastructure for the treatment of storm runoff, 4 ::v.r4s€'-? 3 2'Gb--.-&2-"".>"8'% 75 liY2018-19 General Fund, Gas Tax, Measure A, Measure I and Measure M funded CIP March 14, 2418 as well as pedestrian/bicycle and streetscape improvements. Additionally, the project would promote carbon sequestration, improve water quality, and enhance pedestrian safety and traffic calming. The funding request is to study the prolect feasibility, develop engineering plans, and determine cost estimates. The project scope also includes public outreach efforts to obtain input from the community. Upon completion of this phase of this work, staff will return to the City Council with next steps regarding implementation. POLICE DEP ARTMENT CAPITAL NEE (s185_000) {i* r}rctxc*dsl {i* *r+so*ds} Study to remodel loll for officer sleeping quorlers & loctotion stotion Adiusroble Height Workstsrion for Records Division 75 60 Yoice Recorder for Police Rsdio GAS TAX, SB 1, MEASURE A, MEASURE I AND MEASURE M FUNDED PROJECTS Based on condition assessment of 84 miles of existing street infrastructure, and the recommendations from the Street Pavement lt/aintenance Software Program, staff is proposing a total of $2.14M of CIP funding from a combination of Gas Tax, Measure A, Measure l, Measure M, and SB 1 funds for next year's street repairs and resurfacing program as follows: o Albemarle Way - Davis Drive to Ray Drive o Alvarado Avenue - Hillside Drive to Hillside Circle o Benito Avenue - Easton Drive to Hillside Drive o Castillo Avenue - Easton Drive to Hillside Drive . Channing Road - Burlingame Avenue to Peninsula Avenue . Clarendon Road - Burlingame Avenue to Peninsula Avenue . Columbus Avenue - Easton Drive to Hillside Drive . Corbitt Drive - Rollins Road to Winchester Avenue . Davis Drive - Valdivia Way to Quesada Way o DeSoto Avenue - Easton Drive to Hillside Drive . Hillside Circle - Alvarado Avenue to Alvarado Avenue 5 'ffi 75 60 50 %ffi FY2O18-19 General Fund, Gas Tax, Measure A, Measure I and MeasureM funded CIP March 14, 2018 o lVaple Avenue - Morrell Avenue to Park Road o Montero Avenue - Easton Drive to Hillside Drive o Murchison Drive - Sequoia Avenue to El Camino Real o Park Road - Winchester Drive to Carolan Avenue . Sequoia Avenue - Trousdale Drive to Murchison Drive . Winchester Place - Rollins Road to Cul-de-sac The above list of streets is tentative and subject to change depending on the availability of funds and construction costs. Of the total $2.14M of proposed for next year, $275,000 is from Measure l, and the rest is from a combination of Gas Tax, Measure M, and SB 1 funds. FISCAL !MPACT The estimated cost of the proposed CIP program as identified in this staff is $9.28M as follows . General Fund . Gas Tax, Measure A, Measure M and SB 1 . Measure I ($3OOk for sidewalks & $275k for streets) $6,840,000 $1,865,000 $575,000 Total Exhibit: o PowerPointPresentation $9,280,000 6 3ls/20L8 CITY COUNCIL MID.YEAR BUDGET STUDY SESSION Overview > Generol Fund Proiects > Gos Tox & Meosure A, l, & M Proiects > Summory > Council Feedbock & Direction L 'a. .: 3lel20t8 Summory of Generol Fund CIP Requests (in thoulondt){in rfio60nd, Porks & Recreotion Building Fqcilities Bicycle, Pedestrion & Troffic Sofety Finonce Environmentol f Green lnf rostructure $2,705 $2,125 $1 ,425 $5oo $200 $r 8sPolice FY 201 8-'l 9 Requests Police 1100.000 Sicycle, & Trcffic $ofely lt,42t,W Totol of Requests: $7,'140,000 2 $2,705 $2,125 $1 ,425 $soo $200 $185 -ffi ,57..:;1-4*. ,l 3le/2ot8 Porks & Recreotion Proiects Community Center Project Victoria Playground Pool Deck Replacement and Resurfacing Pathway & Landscape lmprovements Bay Trail Fitness Equipment Burlingame School District Synthetic Turf Replacement Fund Murray Field Synthetic Turf Replacement Fund Parks Safety & Maintenance lmprovements Playground Replacement Fund City Parks Fencing Murny Playground Removal and lnstallation of Grass Double Batting Cage at Bayside Park Parks, Picnic Tables, Benches & Fountains Playground Resilient Resurfacing/freatment centEl lrrigation Controller Washington Park Parking Lot Resurfacing 600 600 x50 200 200 150 x10 100 100 100 100 70 70 50 qoMills Canyon Annual Tree Haza rd Prcject Building Focilities Proiects Police Station Underground Fuel Storage Tanks Upgrade Fire station 35 Communication Tower Relocation Paving of City Facilities Parking Lots (PW corp Yard & PD) Facilities CIP ProgEm Management City Hall Carpet Replacement Prcject City Hall - CDD Renovation Facilities ADA lmprovements Program Library HVAC & Energy Management System (EMS) upgrade Facilities Energy Upgrades Program City Hall- Acoustic lmprovements (sound masking) Prcject Village Park Deck lmprovements Parks Corporation Yard bathrooms & locker rooms gender separation/remodel project FS #35 Traffic Slgnal Upgrades PW Corporation Yard EMS Upgrade ProgEm 400 300 250 200 200 100 100 100 100 75 75 50 50 400 300 250 200 200 100 100 100 100 75 15 50 50 50MinorFacilities 3 z<€%a?4 .b4 -t+a;.>;-: B>%, 600 500 15U 200 200 150 110 100 100 100 100 70 70 50 50 50 3lslzaB Bicycle, Pedestrion & Troffic Sofety FroieCts Sidewalk & ADA lmprovements (ceneral Fund $200k & Measure l -S300k) Bicycle and Pedestrian Master Plan Update Lyon Hoag Neighborhood Traffic Calming Study Old Bayshore Highway Streetscape Project Study Bay Trails Gap lmprovements DesiSn 500 250 200 200 200 75 Development (Airport Blvd & Broadway) and 7l-': ,\3e" &2, ,. 1. -..# a*9 422 0 *,t a a, 'r4 Finonce Deportment Proiect 500 500 4 500 250 200 200 200 New Finonce Deportment Soflwore ?:,:--':-tr * * )-&Qt-*-+i1 J 'rrEi *#e€oO '{ffi. user name: MS-DOS IS 3/e/2oL8 s € Police Depo rtment;lmproYements 75 60 50 Study to remodel ioil for officer sleeping quorterr & lqclqtion rlqtion 75 60 50 Adiustoble Heighi Workstotion for Records Division Voice Rodio rd* Environmento I - Green lnf rostructure lm rovements Chopin Avenue Streetscope ond Storm Woler $200,000 $200,000 Treolment lmprovemenls o Promotes corbon sequestrotion o Encouroges infiltrotion ond groundwoter rechorge o lmproves woter quolity by removing pollutonts o Reduces stormwoter runoff o Enhonces pedestrion sofety o Encouroges troffic colming o lmproves oir quolity 5 '/::l:|:. 7& i,* I .* w *1, -a ' ":, :,i iar*e, .-,,', ' V%ffi; 3lel2oL8 Gos Tox, SB-l, Meosure A, I & M Proiects o Resurfocing Proiects for FY 2018-19: o Albemorle Woy - Dovis Dr. to Roy Dr. E Alvorodo Ave. - Hillside Dr. lo Hillside Cr' o Benito Ave. - Eoston Dr to Hill:ide Dn Meosure A sB-l Gos Tox Meosure I Meosure M Costillo Woy - Eorton D( to Hillside Dr. Chonning Rd. - Burlingome Ave. to Peninrulo Ave. Clorendon Rd. - Burlingome Ave. to Penin:ulo Ave. E Columbu: Ave. - Eoston Dr. to Hill:ide Dr E Corbitl Dr. - Rollin: Rd. to winchester Dr E Dqvis Dr. - Voldivio Woy to Quesodo Woy E Desoto Ave. - Eqslon Dr. io Hillside Dr. E Hillside Cir - Alvorodo Ave. to Alvorodo Ave. E Mople Ave. - lAorrell Ave. ro Pqrk Rd. r, /vlontero Ave, - Eoston Dr to Hillside Dr. o Murchison Dr. - Sequoio Ave. to El Comino Reol o Pork Rd. - Wincherter Dr. to Corolon Ave, o Sequoio Ave. - Trousdqle Dr to Murchison Dr' tt Winchester Pl. - Rollins Rd. to end Summory of CIP Recommendotions (ia rhouronds) Porks & Recreotion Building Focilities Bicycle, Pedestrion & Troffic Sofety Finonce lmprovements Environmentol f Green lnf rostructure Police Street Resurfocing ond Rood Repoirs $2,7O5 $2,125 $ I ,425 $5oo $200 $l 85 $2,1 40 6 $800 $s3s $400 $275 $l 30 v7a{5.:%2 141,,.,1.:.,. (in rhouiqnds) -2ffi ?z///z>-.?z/B 7iz//z/4zzz,zv.v-7.L.:..-.v-2.-:-2, 4-,:*i.i.3'.2-.2.-2.2r'211j--2-i-j-,Zi j-2.- ,Io!oE .$9;/Et0- 3ls/20L8 COUNCIL FEEDBACK & DIRECTION 7