Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
Agenda Packet - CC - 2015.03.04
BURLINGAME CITY HALL • City of Burlingame 501 PRIMROSE ROAD B4IRLINGAME BURLINGAME, CA 94010 Meeting Agenda - Final City Council Wednesday, March 4, 2015 6:30 PM Council Chambers 1. CALL TO ORDER & ROLL CALL - 6:30 p.m. - Council Chambers 2. PUBLIC COMMENTS - NON -AGENDA 3. INTRODUCTORY REMARKS - Lisa Goldman, City Manager 4. STAFF REPORTS AND COMMUNICATIONS (Public Comment) a. 2014-15 Mid -Year Financial Summary and Budget Adiustments� General Fund Five Year Financial Forecast Attachments: Staff Report Attachment A - General Fund Revenues Attachment B - General Fund Expenditures Attachment C - Five -Year Forecast Resolution b. Review of Draft FY 2015-16 General Fund, Gas Tax, Measure A. Measure M and Parking Enterprise Funds Capital Improvement Program (CIP) Attachments: Staff Report Draft FY2015-16 General Fund CIP Spreadsheet Power Point Presentation 5. COUNCIL DIRECTION ON BUDGET POLICY ISSUES 6. ADJOURNMENT Notice: Any attendees 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 for 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 16, 2015 VIEW REGULAR COUNCIL MEETING ONLINE AT WWW.BURLINGAME.ORG - GO TO "CITY COUNCIL. VIDEOS" City of Burlingame Page f Printed on 2127/2015 BURLINGAME To: Date: From: Subject: STAFF REPORT Honorable Mayor and City Council March 4, 2015 AGENDA NO: 4a MEETING DATE; March 4, 2015 Carol Augustine, Finance Director — (650) 558-7222 FY 2014-15 Mid -year Financial Summary and Budget Adjustments; General Fund Five -Year Financial Forecast RECOMMENDATION Staff recommends that the City Council accept the FY 2014-15 Mid -year Financial Summary and adopt the attached resolution amending the FY 2014-15 Operating and Capital Budgets to reflect the recommended mid -year adjustments. 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 2014-15 fiscal year. Revised forecasts incorporate final 2013-14 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. In 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. A budget resolution (Exhibit C) is 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, 2015, but will also more accurately reflect the financial condition of the City as it enters the FY 2015-16 budget process. Having the latest projections reflected in the current budget enhances the forecasting process and allow decision makers to have greater confidence in the information provided within the budget development framework.. 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 FY 2014-15 Mid -Year Report March 4, 2015 DISCUSSION Economic Conditions National Economy At the time the City's 2014-15 budget was being prepared, the national economy was in its fourth year of a gradual recovery from the worst recession since the Great Depression of the 1930s, although there were signs of brightening compared to the sluggish pace of past years. Most forecasts indicated that the economy would continue to grow at a moderate pace. Although job growth was slow and unemployment remained stubbornly above 7 percent, businesses had begun to increase capital investments, the housing market was providing momentum for the construction industry, and consumer sentiment was improving. All of these signs pointed to a continuation of a modest trend toward recovery, with GDP growth anticipated to be in the range of 2.8 to 3.2 percent. In the end, the nation's economic growth in 2014 was very similar to the previous two years, with growth running in the low 2% range. Although this is well below growth estimates of the prior year, according to Beacon Economics, a leading independent economic research and consulting firm, the structure of the growth indicates that the nation's economy is well-positioned for 2015 and beyond. Consumer spending added 1.7 percent to overall GDP growth in 2014 — the best showing since 2006. (January 2015 numbers were weak, but not unlike last year, this appears to be primarily a weather-related effect). The single largest driver was significant improvement in the job sector, with the unemployment rate falling below 6 percent. Although still a function of "catch-up relative to the job losses seen in 2009-10, the job market is tightening, which leads to increased worker wages and forecast of spending growth in 2015. 2 U.S. Real Gross Domestic Product Quarter -to -Quarter growth, annualized 5 0% a 5'0/ 4.5% _,_--- _-- Forecast 4.590 — 4.0% 3.5% 3.4% 3.4% 3.2% 2,090 2.3% 2.2% 2.2% o- 2.5 /° 2.0% 1-g% 1.0% - -to96 _ -2.0% - -2.19'° -3.0% N N N N N N N N N N N N N N N N O_ O_ W W w w A A A A G� Crt Cn cn o'f cr � � �] €] L] f7 O fJ rJ 17 O D fJ � N W W A 1 N W A W � N W 4] N WW A Source: U.S. Bureau of Economic Analysis: CA Department of Finance Governor's Budget Forecast Consumer spending added 1.7 percent to overall GDP growth in 2014 — the best showing since 2006. (January 2015 numbers were weak, but not unlike last year, this appears to be primarily a weather-related effect). The single largest driver was significant improvement in the job sector, with the unemployment rate falling below 6 percent. Although still a function of "catch-up relative to the job losses seen in 2009-10, the job market is tightening, which leads to increased worker wages and forecast of spending growth in 2015. 2 FY 2014-15 Mid -Year Report March 4, 2015 Gasoline prices fell sharply over the past six months, but this apparently has not led to spending increases in other categories. Now that gasoline prices have leveled off, most economists agree that the lower prices will remain for a while, and will soon translate into additional household spending elsewhere. Although lower gas prices are not good for all industries and areas of the country, the gains to the U.S economy are, on net, very positive. Also helping the economy in 2015 will be low mortgage rates, which are yet again below 4 percent. Inflation is very tame because excess bank reserves remain steady. As a result, the Fed is expected to keep short-term rates low for the remainder of 2015. With domestic demand jumping, imports have started to grow, widening the trade gap with other countries. However, global growth (despite brief threats to financial stability that arise from time to time) appears to be stabilizing, which should help boost demand for U.S. exports in 2015. Gains are expected to be offset somewhat by the 10 percent appreciation in the value of the dollar that began last year, but the trade deficit is still forecast to stabilize by the second half of the year. Although not as strong a factor in the California economy, industrial production for manufacturing grew at a 4 percent pace over the last quarter. Data from Federal Reserve surveys suggest that many companies are increasing plans for new capital expenditures this year, also supporting future growth. "The forces that drive internal growth include increased business spending, rising consumer spending, a strengthening housing market, cheaper oil prices, and a public sector that is finally pulling out of austerity mode. Rising incomes, low interest rates, and solid profits will in turn drive more spending." (Beaconomics, Spring 2015) In short, ongoing gains are generally expected in the U.S. economy for the next two years. State Economy California's economy also continues to improve. Governor Jerry Brown released his proposed budget in early January, predicting continued growth in the economy and making additional strides toward fiscal reform. As the strengthening economy is continuing to push revenues higher, his State budget proposal provides increased investments in K-12 education and community colleges, health programs, further reductions in the State's long-term liabilities, and a $1.2 billion assignment to the rainy day reserve established last year. Though it will take time to fully implement long-term fiscal reform, the Governor appears to be making good on his efforts to avoid the use of budget balancing schemes employed in the past (such as the 8 percent property tax shift in 2009), much to the relief of cities and counties. The turn -around in California's fiscal situation continues to provide optimism throughout the state's economy. In fact, the state continues to be a significant source of the nation's current economic growth. Although still higher than the nation as a whole, the state unemployment rate has dropped to 7 percent from a peak of 12.4 percent in 2010, and the future continues to look bright for the California jobs picture. The rate is expected to drop to 6 percent by late 2016 3 FY 2014-15 Mid-Year Report 94.0% United States 12.0% 90.o% 8.0% 6.0% 4.0% 2.0% 0.0% N N N N N N N N O O d 4 4 0 _ 7I 00 Cp O N W A 12 2 2 !] 2 p LD 2 Source_ U.S. Bureau of Labor Statistics; CA Department of Finance Governor's Budget Forecast U.S. and California Unemployment Rates N N N d d Y Cn � 01 k7 k7 Fl a March 4, 2015 The state's economy appears to be doing well on other fronts as well: California remains a top tourist destination, businesses and consumers are still driving growth in spending, and the agricultural sector has so far weathered the drought. In 2014, California hit a record for venture capital investments. Firms in the state received at least half of all the investment funding, despite the fact that the state represents just 12 percent of the nation's population. Real estate remains a driver of economic growth over the short run. Home prices are rising, defaults and foreclosures continue to fall, and builders are getting back to business across the state. This has helped create a significant number of new jobs. Such growth in both the residential and commercial real estate markets translates (for state and local governments) into increased spending on building material, license/permit fees, and increases in property tax revenues. As home values rise, increased consumer confidence is reflected in a rise in spending, which boosts sales tax receipts. For example, sales taxes from new car sales are up significantly over the past 2 to 3 years. Despite this growth, California housing markets continue to suffer from chronic undersupply. Beacon Economics reports that the housing situation in California "represents one of the most significant impediments to growth over the longer term (a structural perspective)." Local Economy The San Francisco Bay Area continues to lead the state in job expansion. Non-farm employment in the region hit an all-time high in July 2014, with annual non-farm employment growth of 3.4 percent, compared to the state rate of 2.1 percent. This growth has not been limited to the high tech industries: job gains were seen across nearly every major industry in the region. Although the Professional, Scientific and Technical Services industry remains one of the largest job creators in the San Francisco Metropolitan Division (MD) (includes San Francisco, Marin and San Mateo Counties), occupations with the fastest job growth include not only biomedical engineers, but economists, statistician, personal care aids and logisticians. 4 FY 2014-15 Mid -Year Report March 4, 2015 The job gains have continued to boost the region's commercial real estate market. From the second quarter of 2013 to the second quarter of 2014, rents for office properties in the San Francisco MD had risen by 5.2 percent, compared to the state's overall 3.7 percent growth in the same period. The office vacancy rate in the area has fallen slightly faster as well: the overall vacancy rate is 12.6 percent compare to the state's average of 16.4 percent. The median price for an existing single-family home in the San Francisco MD has climbed into record high territory, making this area the first in the state to surpass its previous peak for the median price of an existing home (set in 2007). Because the Bay Area's recovery is so strong, with its increasing work force in professional and technical occupations comes a surge in rental costs. Apartment rates in San Francisco region increased 6.8 percent in the year ended June 30, 2014, compared to the state overall increase of 3.3 percent. Beacon Economics sees home prices continuing to increase in the coming year, albeit at a slower pace than experienced over the last several quarters. The cost of housing and the tight housing supply is evident by the number of workers who commute to the region. Data suggests that one in ten employees in the San Francisco MD are commuting into the region. Because the San Francisco Metropolitan area continues to be one of the United States' top tourist destinations, Burlingame has seen strong growth in hotel tax revenues and consumer spending. With an 85.3 percent occupancy rate in the first 6 months of this fiscal.year, hotels in the area are among the most occupied in the country. (The nationwide average for hotel occupancy rates is 64.4 percent.) As noted in the General Fund Revenue analysis (Attachment A), transient occupancy tax receipts in fiscal year 2013-14 were 17 percent ($3.1 million) higher than in the prior fiscal year. As in other cities in the region, spending on autos, general consumer goods, and restaurants was up through the first half of calendar year 2014. Burlingame sales tax receipts were 10.4 percent above the same quarter of the previous year. The largest growth was in the autos and transportation sector; as new motor vehicle dealer results combined with auto lease totals to generate this growth. 5 FY 2014-15 Mid -Year Report $8,000 $6,000 $4,000 $2,000 $0 Q3 Q3 Q3 Q3 11 12 13 14 Burlingame County California March 4, 2015 In short, the state and local economic outlook is expected to coincide with the national outlook of continued recovery. As the San Francisco Bay Area is currently a "hot spot" for the growing economy, it may experience a stabilization effect sooner than other parts of the state. Even with the positive economic trends of the last three years, budgets have been developed with a relatively conservative approach. The recession brought home the realization that some 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. In conjunction with the General Fund Reserve Policy recently approved by the Council, 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 identifying unfunded liabilities and systematically providing for them within the operating budget. Other liabilities await funding, however. The deferral of maintenance to infrastructure and facilities will eventually result 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 2014-15 budget anticipated that the recovery would continue at a moderate pace. Mindful of the difficult budget reductions that were made following the recession, departments were not required to provide further expenditure reductions for this mid -year analysis. However, 0 FY 2014-15 Mid -Year Report March 4, 2015 departments were asked to identify, to the extent possible, additional funding sources or revenues in order to offset any additional budgetary needs. 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 $4.6 million higher than projected in the FY 2014-15 adopted budget. Most of the growth came from increased tax revenues, and reflects real progress in terms of the local economy. Details of the City's General Fund Revenue analysis at mid -year are provided in Exhibit A of this report. Expenditure budget revisions are discussed in more detail in Exhibit 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 2014-15 budget was proposed. The resulting budget should provide a clearer, more transparent picture of operating needs going forward. This is particularly important in establishing the framework for the FY 2015-16 budget, where funds needed for continued service levels will be considered in the context of the City Council's established goals. General Fund - Revenues The following table shows the mid -year assessment of FY 2014-15 General Fund revenues. There are three columns for fiscal year 2014-15. The "FY 2014-15 Current Budget" column shows the revenue budget adopted by Council last June. The °FY 2014-15 Mid -year Projection" column shows the most current projection for the fiscal year. The final FY 2014-15 column reflects a summary of proposed revenue amendments to the FY 2014-15 budget for 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 2013-14, 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. Year-to-date receipts may be discussed in the various categories of revenue as they relate to a revised FY 2014-15 projection. FY 2094-95 Mid -Year Report March 4, 2095 CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND REVENUES The key factors that pertain to staff's recommended adjustments to each of the City's General Fund revenue categories are discussed in Exhibit 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. In fact, most revenue sources show continued improvement over the FY 2014-15 actual amounts, with receipts comparing favorably to the prior fiscal year. The midyear amendment also includes $1 million in one-time revenue from Millennium Partners, the original Burlingame Point developer, per the approved Development Agreement. These funds are shown as "other revenue". General Fund - Expenditures The following table shows the mid -year assessment of FY 2014-15 General Fund expenditures by department: CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY14-15 FY14-15 FY14-15 FY12-13 FY13-14 Current Midyear Midyear Year -End By General Fund Program Actual Actual Budget Projection Amendment Up (Down) % Property Tax $ 14,239,141 $15,496,548 $ 15,250,000 $ 16,610,000 $ 1,360,000 8.9% Sales and Use Tax 9,198,871 10,196,123 10,460,000 10,950,000 490,000 4.73/. Transient Occupancy Tax 18,244,310 21,357,066 21,100,000 22,500,000 1,400,000 6.6Y Other Taxes 854,231 1,041,240 1,560,963 1,500,963 (60,000) -3.8% Franchise Tax 1,572,005 1,575,S21 1,556,400 1,566,400 10,000 0.6% Business Licenses 952,804 981,821 995,000 980,000 (15,000) -1.5% State HOPTR 65,337 64,968 66,000 66,000 0 0.0% Real Property Transfer Tax 379,542 347,855 375,000 375,000 0 0.0% Licenses & Permits 101,753 111,712 86,000 81,000 (5,000) -5.8% Fines, Forfeitures and Penalties 860,476 788,772 780,000 794,000 14,000 1.8% Use of Money & Property 199,186 203,451 191,000 206,000 15,000 7.9% Charges for Services 3,G36,011 3,942,937 4,087,020 4,332,720 245,700 6.0% Other Revenue 1,376,223 165,628 30,000 1,040,000 1,010,000 3366.7% State Subventions 313,571 170,146 100,000 186,000 86,000 86.094. Interest Income 57,249 225,080 200,000 230,000 30,000 15.0% Total, General Fund Revenue $ 51,196,477 $55,627,628 $ 55,276,420 $ 59,917,120 $ 4,640,700 8.4% The key factors that pertain to staff's recommended adjustments to each of the City's General Fund revenue categories are discussed in Exhibit 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. In fact, most revenue sources show continued improvement over the FY 2014-15 actual amounts, with receipts comparing favorably to the prior fiscal year. The midyear amendment also includes $1 million in one-time revenue from Millennium Partners, the original Burlingame Point developer, per the approved Development Agreement. These funds are shown as "other revenue". General Fund - Expenditures The following table shows the mid -year assessment of FY 2014-15 General Fund expenditures by department: CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES Again, there are three columns for fiscal year 2014-15. The "FY 2014-15 Current Budget" column shows the budget adopted by Council in June 2014. Although the departmental 8 FY144-15 FY14-15 FY14.15 FY2012.13 FY2013-14 Current Midyear Midyear Year -End By General Fund Program Actuals Actuals Budget Projection Amendment Up (Down) % General government $5,636,245 $5,870,151 $4,778,056 $4,715,056 ($63,000) -1.3% Public Safety 18,829,704 19,775,505 23,535,550 23,647,750 112,200 0.5% Public Works 3,084,543 3,339,585 5,302,424 5,302,424 0 0.0% Community Development 854,231 1,041,240 1,560,963 1,500,963 (60,000) -3.8% Leisure & Cultural Services 9,208,620 10,112,681 12,284,705 12,408,205 123,500 1.09S TOTAL, Operating Expenditures $37,613,343 $40,139,162 $47,461,698 $47,574,398 $112,700 0.2% Again, there are three columns for fiscal year 2014-15. The "FY 2014-15 Current Budget" column shows the budget adopted by Council in June 2014. Although the departmental 8 FY 2014-15 Mid -Year Report March 4, 2015 budgets were internally adjusted for encumbrances of the prior fiscal year, the encumbrances are excluded for this mid -year analysis. The second FY 2014-15 column shows the new mid- year projection for each department's expenditures for FY 2014-15. The final FY 2014-15 column shows the resulting amendments to the FY 2014-15 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 year 2013-14, as well as figures for the previous fiscal year. Note that the City's operating expenditures for FY 2014-15 are much higher than in prior fiscal years due largely to the funding of retiree medical benefits: not only are the current year (normal) costs now included in the annual operating budget, but the cost of paying off the benefit liabilities of prior years is also included. Departmental budgets were analyzed for both underfunded operating needs and anticipated budgetary savings. As noted in the development of the FY 2014-15 budget, budget cuts or growth limitations that may have been applied across the board during the economic downturn resulted in recurring budget shortages that had to be "offset" with budgetary savings in other programs. Staff has endeavored to identify and address these discrepancies in recent budgets to better reflect the fiscal plans of the departments. However, despite these efforts and an improvement in the economy, many programs are still adversely constrained by prior year resource reductions. Increasing personnel costs tend to exacerbate these constraints. Such issues will be discussed in further detail as the fiscal year 2015-16 budget is developed. General Fund Oneratina Summary 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 GENERAL FUND OPERATING SUMMARY Total Revenue Expenditures Departmental Expenditures Transfers In (Out) Total Expenditures Net operating Revenue Establishment of CIP Renewal & Replacement Reserve Extraordinary Item - OPEB Trust Change in General Fund Balance FY2014-15 FY2014-15 FY2014-15 FY2013-14 Current Midyear Midyear Actual Budget Projection Amendment $ 55,627,628 $ 55,276,420 $ 59,917,120 $ 4,640,704 (40,139,162) (47,461,698) (47,574,398) (112,700) (5,950,145) (7,437,665) (7,927,874) (490,209) (46,089,307) (54,899,363) (55,502,272) (602,909) 9,538,321 377,057 4,414,848 4,037,791 0 0 (3,000,000) (3,000,000) (6,600,000) 0 0 0 $ 2,938,321 $ 377,057 $ 1,414,848 $ 1,037,791 M FY 2014-15 Mid -Year Report March 4, 2015 Adjusted by the recommended amendments in this report, the General Fund shows a projected surplus (positive net operating revenues) for fiscal year 2014-15 of approximately $4.4 million, which is $4 million higher than initially forecast, due largely to higher revenues than anticipated in the fiscal year's original budget, as summarized in this report. In January 2015, the 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. In 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 a General Fund transfer of $3 million to the newly - established Renewal and Replacement Reserve within the Capital Improvement Projects (CIP) Fund. Initially, the Renewal and Replacement Reserve will provide partial funding of the City's most immediate facilities' needs. If funded adequately, the reserve will eventually be able to provide funding for each asset at the end of its service life. In other words, the reserve will prevent further accumulation of unfunded liabilities that aging facilities represent. For this reason, the establishment of the Renewal and Replacement Reserve is shown as a separate budget line item for this mid -year analysis. The $3 million funding will be reported as a transfer out to the City's Capital Projects Fund. Unlike the current Capital Projects Fund Balance, the Renewal and Replacement 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. Note that less significant changes were made to departmental expenditures. Other than adjusting for the remaining $500,000 of funding for the General Plan Update from General Fund Reserves (included in transfers) prior to the end of the fiscal year, most expenditure amendments were fairly minimal in amount, or offset by operational savings elsewhere in the department. Additional budgetary savings are a certainty, because the expenditure budgets reflect the 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. As in recent years, higher -than -average expenditure variances are anticipated due to savings in the category of personnel costs, which are the result of an elevated level of personnel position vacancies. For this reason, it is anticipated that the City will experience a surplus in the range of $2 - $3 million in the current fiscal year due to such budgetary savings. General Fund Balance Once all the mid -year adjustments are posted, the General Fund shows a projected total fund balance of $24.1 million at the end of the 2014-15 fiscal year. T r✓Y 2014-15 Mid -Year Report CITY OF BURL] NGAME, CA CHANGES TO GENERAL FUND BALANCE FY2013-14 Beginning Fund Balance FY2014-15 Midyear Projection $ 22,664,206 Projected Revenues & Expenditures Projected better than budgeted revenue performance 59,917,120 Projected departmental expenditures (47,574,398) Subtotal, Revenues Net of Expenditures 12,342,722 General Fund Long -Term Debt (6,283,924) Transfers In (Out) of General Fund (4,643,950) Projected General Fund Balance, net of transfers $ 24,079,054 March 4, 2015 Due to a budgetary surplus in fiscal year 2013-14, the beginning General Fund balance was nearly $2.5 million higher than anticipated in the prior year budget. In the current fiscal year, the projected fund balance is now also projected to grow. The $4.6 million anticipated increase in revenues now projected for FY 2014-15 is largely offset with slight expenditure adjustments, additional funding of the General Plan Update, and the $3 million mid -year funding of the Renewal and Replacement Reserve. The one-time $1 million revenue from the Burlingame Point project represents a reimbursement of the City's investment in the Broadway Interchange project, and will serve to increase the General Fund balance. The schedule below shows how this change in fund balance will impact the reporting of General Fund reserve levels: i1 FY 2014-15 Mrd -Year Report CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS March 4, 2015 Add: Unassigned Fund Balance Total, Ending Fund Balance 13,664,206 5,779,054 (7,885,152) -57.7% $ 22,664,206 $ 24,079,054 $ 1,414,848 6.2% Although the FY 2014-15 Adopted Budget called for a $500,000 increase in the General Plan Update Reserve, this mid -year analysis suggests that the entire amount of funding for this important project be provided by a transfer of $1,000,000 in the current fiscal year. This will close out this temporary reserve established in last year's report, and allow for the adequate encumbrance of the project's contractual obligations. Once otherwise funded as approved In the General Fund Reserve Policy, the City's reserves ($18.3 million) will comprise the largest portion of the General Fund's ending balance. Approximately $5.8 million will remain as "unassigned fund balance", available for future appropriation. Similar to the use of unassigned fund balances from the prior fiscal year and in recognition of the City's large backlog of facility needs, the Council could decide to further fund the Renewal and Replacement Reserve, leaving only a minimal amount for operational enhancements. General Fund Reserve Policy — As of June 30, 2015, the projected fund balance of $24.1 million represents over 51 percent of General Fund operating expenditures of $47.6 million. Although this would normally be considered a very strong level of reserves, the City's General Fund Reserve Policy and resulting reserve target was based on 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 $18.3 million represents an amount equal to 31 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 to 9 percent, and a $500,000 Contingency Reserve. Other Funds 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 (Appendix A). The recommended adjustments are shown below: 12 FY2014-15 FY2013-14 Midyear Actual Projection Up (Down) $ Up (Down) % Economic Stability Reserve $ 6,000,000 $ 13,300,000 7,300,000 121.7% Catastrophic Reserve 2,000,000 4,500,000 2,500,000 125.0% General Plan Reserve 500,000 0 (500,000) -100.0% Contingency Reserve 500,000 500,000 0 0.0% Subtotal, Assigned Fund Balance 9,000,000 18,300,000 9,300,000 103.3% Add: Unassigned Fund Balance Total, Ending Fund Balance 13,664,206 5,779,054 (7,885,152) -57.7% $ 22,664,206 $ 24,079,054 $ 1,414,848 6.2% Although the FY 2014-15 Adopted Budget called for a $500,000 increase in the General Plan Update Reserve, this mid -year analysis suggests that the entire amount of funding for this important project be provided by a transfer of $1,000,000 in the current fiscal year. This will close out this temporary reserve established in last year's report, and allow for the adequate encumbrance of the project's contractual obligations. Once otherwise funded as approved In the General Fund Reserve Policy, the City's reserves ($18.3 million) will comprise the largest portion of the General Fund's ending balance. Approximately $5.8 million will remain as "unassigned fund balance", available for future appropriation. Similar to the use of unassigned fund balances from the prior fiscal year and in recognition of the City's large backlog of facility needs, the Council could decide to further fund the Renewal and Replacement Reserve, leaving only a minimal amount for operational enhancements. General Fund Reserve Policy — As of June 30, 2015, the projected fund balance of $24.1 million represents over 51 percent of General Fund operating expenditures of $47.6 million. Although this would normally be considered a very strong level of reserves, the City's General Fund Reserve Policy and resulting reserve target was based on 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 $18.3 million represents an amount equal to 31 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 to 9 percent, and a $500,000 Contingency Reserve. Other Funds 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 (Appendix A). The recommended adjustments are shown below: 12 FY 2014-15 Mia( -Year Report Interest income Amendments FY 2014-15 March 4, 2015 Capital Projects Fund — Several adjustments were identified for the City's Capital Projects Fund, reflecting projects closed with unused budgets, projects for which an additional appropriation is needed, as well as the previously -mentioned transfers out for the General Plan Update (an additional $500,000) and the funding of the newly -established Renewal and Replacement Reserve. The Electrical Vehicle (EV) Charging Stations project, which provided for the installation of two EV charging stations in City Parking Lot V in front of the Burlingame Avenue Caltrain Station, was recently completed. The final cost of the project is estimated to be approximately $65,000. As maintenance of the stations was included as part of the project construction, the remaining $35,000 that was budgeted for the project can be returned to the General Fund. The Council Chambers Video Upgrade project was originally budgeted at $150,000 in the 2013-14 fiscal year budget, to be funded from the Public TV Access Fund. Due to long-term issues such as asbestos and lack of seismic improvements, consideration is now being given to relocating/rebuilding the entire City Hall facility through a public-private partnership. With the future of the building uncertain, the existing video equipment was upgraded with minimum impact to the Chamber's interior. As such, there is an unused budget of $148,012 remaining in the fund. Closure of the project allows the return of the excess funds to the Public TV Access Fund. Residual funds in the amount of $700,000 in Residential Area Storm Drain Improvement Project will be re -allocated to Citywide Neighborhood Storm Drain Improvement Project to consolidate regional projects in the Storm Drain CIP program. The Village Park Restrooms project needs an additional appropriation due to costs that were unanticipated when the initial project budget ($200,000) was developed. The project was originally bid in February 2014, but due to a bid protest, all bids were declined. Additional plans, bid documents and architectural time were spent on developing the specifications prior to going out to bid a second time. The second bid came in at a cost higher than the original bids, by approximately $7,500. The project was immediately delayed due to rain, which resulted in the 13 Midyear Fund Amendment General Fund $ 30,000 Water Fund 84,000 Sewer Fund 87,000 Solid waste Fund 23,000 Parking Enterprise Fund 24,000 Building Enterprise Fund 25,000 Worker's Compensation Fund ISF 42,000 Equipment Services Fund ]SF 28,000 Information Services (Fund ISF 4,000 Storm Drainage Fund 56,000 Total $ 403,000 March 4, 2015 Capital Projects Fund — Several adjustments were identified for the City's Capital Projects Fund, reflecting projects closed with unused budgets, projects for which an additional appropriation is needed, as well as the previously -mentioned transfers out for the General Plan Update (an additional $500,000) and the funding of the newly -established Renewal and Replacement Reserve. The Electrical Vehicle (EV) Charging Stations project, which provided for the installation of two EV charging stations in City Parking Lot V in front of the Burlingame Avenue Caltrain Station, was recently completed. The final cost of the project is estimated to be approximately $65,000. As maintenance of the stations was included as part of the project construction, the remaining $35,000 that was budgeted for the project can be returned to the General Fund. The Council Chambers Video Upgrade project was originally budgeted at $150,000 in the 2013-14 fiscal year budget, to be funded from the Public TV Access Fund. Due to long-term issues such as asbestos and lack of seismic improvements, consideration is now being given to relocating/rebuilding the entire City Hall facility through a public-private partnership. With the future of the building uncertain, the existing video equipment was upgraded with minimum impact to the Chamber's interior. As such, there is an unused budget of $148,012 remaining in the fund. Closure of the project allows the return of the excess funds to the Public TV Access Fund. Residual funds in the amount of $700,000 in Residential Area Storm Drain Improvement Project will be re -allocated to Citywide Neighborhood Storm Drain Improvement Project to consolidate regional projects in the Storm Drain CIP program. The Village Park Restrooms project needs an additional appropriation due to costs that were unanticipated when the initial project budget ($200,000) was developed. The project was originally bid in February 2014, but due to a bid protest, all bids were declined. Additional plans, bid documents and architectural time were spent on developing the specifications prior to going out to bid a second time. The second bid came in at a cost higher than the original bids, by approximately $7,500. The project was immediately delayed due to rain, which resulted in the 13 FY 2014-15 Mid -Year Report March 4, 2015 need for adding new soil, hiring a soils engineer, and digging up old pipes. Repairs and improvement to the plumbing led to additional costs. A final work order was needed for additional concrete work that was needed to finish the back of the restroom for safety purposes. All told, the project came in $25,000 higher than the budget. Although a Sustainable Communities Grant from the Strategic Growth Council was anticipated to help fund the City's General Plan Update project, the amount was not known until after the budget was ready for adoption. The $491,000 grant was approved on June 3, 2014. These grant revenues, along with a $500,000 transfer from the General Fund (reserved in fiscal year 2013-14 - already budgeted), and an additional $500,000 from fiscal year 2014-15 General Fund reserves (part of this mid -year budget amendment) will provide full funding for this multi- year project. As such, an additional appropriation of $991,000 is included in this mid -year budget amendment for the General Plan Update, for a total budget of $1,491,000. The Library Millennium project includes an Americans With Disabilities Act -compliant pathway and access ramp improvements adjacent to the parking lot. Unfortunately, this work triggered the need to re -grade the adjacent parking lot. As the Library lot was previously in good condition, it was not anticipated to be a priority of the parking lot resurfacing project. Therefore, the additional cost of the work on the Library parking lot ($34,520) must be borne by the project. Fortunately, an offsetting revenue adjustment can be made to the project: the status report on the City's Public Facilities Impact Fees showed a balance of $34,311 in the fees set aside for library facilities. A preliminary assessment of Burlingame's impact fee program indicates that the impact fees for library facilities were calculated using a "buy -in" approach, meaning that the fees can serve both existing and future development. Therefore, staff proposes that the entire balance of these fees be appropriated to the Library Millennium project. Finally, as reported to Council on January 201h, funding was received through the Pacific Library Partnership (PLP) Innovation and Technology Grant in order to fund the Library's Tap, Swipe, Discover Touchscreen Project. The total amount of the grant ($7,216) will be recorded as revenues, providing funding of an appropriation for three touch -screen computers to be placed throughout the Burlingame Library, 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, an upward mid -year adjustment of $23,000 is proposed (for a total of $760,000 for this revenue source in fiscal year 2014-15). 14 FY2014-15 2014-15 2012-13 2013-14 Adopted Midyear Midyear Description Actuals Actuals Budget Projection Amendment Measure A $ 703,609 $ 717,714 $ 737,000 $ 760,000 $ 23,000 Gas Tax (HUTA) 702,336 901,322 735,402 842,402 107,000 Vehicle Code Fines (Traffic Safety) 24,240 85,424 87,000 96,000 9,000 Total $ 1,430,185 $ 1,704,460 $ 1,559,402 $ 1,698,402 $ 139,000 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, an upward mid -year adjustment of $23,000 is proposed (for a total of $760,000 for this revenue source in fiscal year 2014-15). 14 FY 2014-15 Mid -Year Report March 4, 2015 Gas Tax (HUTA) — This fund is 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. 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 are further complicated by the State's gasoline sales taxlexcise tax swap introduced in 2010, and formulas to ensure that cities and counties are "made whole" from impacts of the swap. However, new projections for these revenues were generated using a model reflecting the local allocation formulas, latest population estimates and state Department of Finance (DOF) estimates of statewide motor vehicle fuel tax revenues provided in the Governor's Proposed 2015-16 budget released on January 15. These projections indicate that Burlingame will receive $842,402 in HUTA revenues in the current fiscal year, a $107,000 increase from the adopted budget. The fiscal year 2014-15 city and county HUTA allocations include a $100 million HUTA loan repayment in addition to the normal allocations. This repayment, falling gas prices and consumption, and a "true up" of prior year over -allocations under the fuel tax swap system will result in a significant decline in revenue (approximately 23 percent) from this source in fiscal year 2015-16. Traffic Safety Fund — This fund is used to account for revenues received from traffic fines and used for traffic safety programs. Due to a slight increase in year-to-date receipts, which is highly dependent on administration and collection activities through the County court system, fiscal year 2014-15 revenues are now projected to come in approximately 12 percent ($9,000) higher than in the prior year. The Traffic Safety Fund was originally established as a special revenue fund in order to track revenues received from traffic fines. However, because there are no legal restrictions on the use of these fine revenues, this fund will be eliminated in the 2015-16 fiscal year budget. Receipts from traffic fines (approximately $90,000 annually) will be recorded and tracked as General Fund revenues in future budgets. Water & Sewer Funds The impact of the drought has been felt throughout the Bay Area due to declining levels at the Hetch Hetchy Reservoir from a continued lack of rainfall and snow. Aggressive campaigns promoting water conservation have occurred at both the local and state levels, and the City of Burlingame customers responded last year with a voluntary 15 percent reduction in use. A marked decline in water consumption patterns continues, as shown in the graph below. The decline has averaged 15% over the first six months of this fiscal year. After reviewing several years of consumption data, the City is projecting a 10% overall decline in consumption for the entire fiscal year. It is believed that while consumption patterns are reaching low levels due to the concerted and deliberate efforts to conserve water, it is difficult to predict whether these patterns will continue for the remainder of this fiscal year. 15 FY 2014-15 Mid -Year Report is,soo 15'm 0 $ 12 AW W %s00 Historical Water Billings By Fiscal Year Last Three Years G500 ♦°�� Jg°4 ^fit `,�� �,'+d IVB le loge Oc li N y c �D+c O�$, �` tp March 4, 2015 701213 Ac1u.d -701314 Aclval _ _7014-15 Ac tu.ir -1014.15 Projected As such, $15.8 million in water revenue is being forecasted for fiscal year 2014-15, which is $1 million below the fiscal year 2014-15 budgeted revenue of $16.8 million. This is in line with prior year revenue, as the previously implemented rate increase of 7.8 percent nearly offsets the expected 10.0 percent annual decline. Furthermore, the impact to the Sewer Fund revenue is expected to be approximately $750,000. Water conservation efforts have served to mitigate the impact of the SFPUC's wholesale water rate (the rate the City is charged on water purchases) increase of 19.6 percent. The cost of water purchases is projected to be $300,000 less than budgeted for the current fiscal year - a 5 percent increase in purchased water costs compared to FY 2013-14. The forecast includes the ongoing cost of debt associated with the refinancing of BAWSCA's obligations to the SFPUC in fiscal year 2013-14, and the effect of a water transfer to Millbrae, which is required due to ongoing construction by the SFPUC. The City will continue to closely monitor consumption patterns in the coming months, and Council will be informed if actual results deviate significantly from the mid -year forecast. In looking forward to the FY 2015-16 budget, recent reports from the SFPUC indicate the projected cost of wholesale water is expected to increase by 30.1 percent. Further information and updates will be provided to the Council as the City's future water rates are considered. Additionally, staff will be proposing a direct reimbursement to the Water and Sewer Funds for utility services provided to City facilities and parks based on consumption in the FY 2015-16 budget. These costs will be reflected as departmental costs, rather than included in the various transfers between funds. Solid Waste and Landfill Funds — The City's Solid Waste Fund was separated into two funds last year for improved tracking and transparency of two distinct activities: Solid Waste Operations and Landfill Post -Closure. 16 FY 2014-15 Mid -Year Report March 4, 2015 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 account. The higher rates ended the need for General Fund transfers to support activities of the Solid Waste Fund. After the rate increases, revenues became sufficient to pay the costs of all solid waste contracts and City -provided services, and provided surplus funding of a Solid Waste Rate Stabilization Reserve. An estimated $1.1 million surplus had been accumulated from the City's solid waste services going in to the 2015 calendar year rate setting process. Current reserve levels 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. At current rates, 2015 revenues for solid waste services are estimated to be slightly over $10.6 million, with a negligible surplus/shortfall after all costs (including agency franchise and other fees) are accounted for. Rates include a 5 percent surcharge for landfill post -closure costs. The surcharge provides revenues to the Landfill fund to cover maintenance and monitoring functions at the landfill site, and will serve to reduce the $3 million fund deficit that results from the liability recorded for future post -closure costs. No budget amendment is required for either of these enterprise funds for the current fiscal year, and very little change is anticipated in the budget for these activities in fiscal year 2105-16. Special Assessment District Fund — Since completion of the Burlingame Avenue Streetscape project, Public Works staff has investigated various strategies to keep the new sidewalks and crossing pavers looking attractive. The purchase of a power washer to deep clean the pavers was recommended to Council based upon initial quotes. However, the original estimate did not include the cost of a trailer (approximately $11,000), which is required for the mobility of the machine. Furthermore, the budget did not include the cost of a private contractor to perform power washing services prior to the purchase of a City -owned power washer, and the City has incurred approximately $8,000 in costs. Staff proposes amending the Special Assessment District Fund budget with an increase of $19,000 to cover these costs. Building Enterprise Fund — Revenues in the Building Enterprise Fund (largely construction permits and building plan check fees) for the 2013-14 fiscal year were approximately 33 percent higher than in the previous fiscal year, due to an increase in the volume and value of permits pulled. Because these factors are difficult to project, revenues are conservatively estimated in the proposed budget for each fiscal year. Receipts from these services remained strong in the first half of the fiscal year, as a significant number of permits have been pulled, and are anticipated to exceed FY 2013-14 receipts. The revenue budgets should therefore be increased ($340,000) to reflect the various levels of activities in the fund, for a total of nearly $2.2 million in fund revenues. 17 FY 2014-15 Mid -Year Report March 4, 2015 The submittal of plans for a number of large projects as well as the increased volume of plan check activity will result in a greater expenditure than was anticipated for plan check services. Bureau Veritas is the City's primary contractor for these plan checks. Staff has proposed a $150,000 increase in this line item. Parking Enterprise Fund — Revenues in the Parking Enterprise Fund (which include meter and other parking fees as well as monthly parking permits) were within 1 percent of the budget in fiscal year 2013-14. In October 2014, Council approved a reduction of the parking rate for Parking Lot H to encourage employees of Burlingame Avenue to use this lot as opposed to parking in nearby residential streets. As previously reported by staff, there has been little impact to parking lot revenue. As year-to-date receipts of this fund are keeping pace with the prior year, the budget for these revenues (slightly over $2.2 million for parking fees and $280,000 for permits) should be achieved. The Parking Enterprise Fund's expenditure budget, which includes the cost of maintenance and utility service for the new electric vehicle charging stations in Parking Lot V, also appears to be adequate for the current fiscal year. Although no changes in the fund's operating expenditure budgets are indicated for the current fiscal year, staff intends to provide a more appropriate placement of the cost of the City's parking enforcement activities in the FY 2015-16 budget. Currently, much of the personnel costs associated with parking enforcement are funded in the Parking Enterprise Fund, while the citation revenues generated from these activities are credited to the General Fund. In order to properly match the cost of parking enforcement with the associated revenues, these expenses will be moved to the General Fund. The Parking Enterprise should provide for the maintenance and upkeep of the City's parking lots and metering equipment; any excess revenues can be accumulated in the fund and used to provide funding for future parking facilities and associated revenue mechanisms. Internal Service Funds — Internal service funds are used to account for 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. 18 FY2014-15 2014-15 2012-13 2013-14 Adopted Midyear Midyear Description Actuals Actuals Budget Projection Amendment Construction Permit l=ee $ 578,756 $ 1,149,038 $ 1,100,000 $ 1,240,000 $ 140,000 Building Plan Check Fees 33,509 591,374 700,000 885,000 185,000 Microfilm ,Fees 723,844 42,939 35,000 50,000 15,000 Total $ 1,336,109 $ 1,783,351 $ 1,835,000 $ 2,175,000 $ 340,000 The submittal of plans for a number of large projects as well as the increased volume of plan check activity will result in a greater expenditure than was anticipated for plan check services. Bureau Veritas is the City's primary contractor for these plan checks. Staff has proposed a $150,000 increase in this line item. Parking Enterprise Fund — Revenues in the Parking Enterprise Fund (which include meter and other parking fees as well as monthly parking permits) were within 1 percent of the budget in fiscal year 2013-14. In October 2014, Council approved a reduction of the parking rate for Parking Lot H to encourage employees of Burlingame Avenue to use this lot as opposed to parking in nearby residential streets. As previously reported by staff, there has been little impact to parking lot revenue. As year-to-date receipts of this fund are keeping pace with the prior year, the budget for these revenues (slightly over $2.2 million for parking fees and $280,000 for permits) should be achieved. The Parking Enterprise Fund's expenditure budget, which includes the cost of maintenance and utility service for the new electric vehicle charging stations in Parking Lot V, also appears to be adequate for the current fiscal year. Although no changes in the fund's operating expenditure budgets are indicated for the current fiscal year, staff intends to provide a more appropriate placement of the cost of the City's parking enforcement activities in the FY 2015-16 budget. Currently, much of the personnel costs associated with parking enforcement are funded in the Parking Enterprise Fund, while the citation revenues generated from these activities are credited to the General Fund. In order to properly match the cost of parking enforcement with the associated revenues, these expenses will be moved to the General Fund. The Parking Enterprise should provide for the maintenance and upkeep of the City's parking lots and metering equipment; any excess revenues can be accumulated in the fund and used to provide funding for future parking facilities and associated revenue mechanisms. Internal Service Funds — Internal service funds are used to account for 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. 18 FY 2014-15 Mid -Year Report March 4, 2015 Workers' Compensation (WC) Fund -- The City's Risk Management Fund was split into two (Internal Service) funds prior to the development of the FY 2014-15 Budget in order to account separately for the City's Workers' Compensation and General Liability programs. Charges to the departments are calibrated so as to cover the costs of each type of insurance and the payment of claims, though demands of these funds have varied considerably in recent fiscal years. The 2013-14 fiscal year results for the WC program indicated a significant drop in net position, as these costs exceeded the charges allocated to the departments. However, the expenses to the fund, which included a provision for "incurred but not reported" claims, was based on an actuarial report that was prepared prior to significant changes in the WC program. Last year the Human Resources Department issued a request for proposal for a new third party administrator for the WC program and selected LWP Claims Solutions as the provider. This change resulted in significant improvements to the program, including employee access to the Company Nurse Program, additional treatment facilities (including Kaiser), and enhanced customer service. In addition, the City anticipates the cost of workers' compensation will decrease substantially due to lower administration fees and more proactive case management. As a result, the charges to departments that fuel this Internal Service fund will be closely monitored, but no changes are being made to these allocations for FY 2014-15. Administration/information Service Internal Service Fund — The budget for this fund includes the costs of maintenance for centralized printing and mailing equipment as well as software systems (such as the City's anti-viral software) support, as well as certain City-wide studies. In the development of the fiscal year 2013-14 budget, a provision was included in this fund for the Cost Allocation Plan (CAP) and Fee Study, but riot for a study of the City's development impact fees. After a thorough RFP process completed early in the 2014-15 fiscal year, two contracts for these services were negotiated. The cost for the scope of work for both contracts is nearly $78,000 ($14,000 for the Cost Allocation study, $31,000 for the user fee study, and $33,000 for the development impact fee study). As a result, a budget amendment in the amount of approximately $27,000 will be required. Note that in the FY 2015-18 budget, the cost of City-wide consultant contracts related to fiscal policy and procedures will be borne by the General Fund within the Finance Department budget, so that the Administration/information Service Fund will be used to track only the costs of Information Technology (largely the contract with Redwood City for IT services), and the maintenance of printing and mailing equipment. Equipment Services Fund — This fund is used to account for the costs of operation, maintenance, and replacement of automotive equipment used by the various departments. A $35,000 increase in contractual services is proposed for the fund in FY 2014-15, based on the recent addition of the Global Positioning System (GPS) for the City's fleet. An RFP (Request for Proposals) was sent out, but an estimate of funding for the project had not yet been established. Unfunded Needs In 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 19 FY 2014-15 Mid -Year Report March 4, 2015 City Council to prioritize the projects so that funding plans could be developed. The City Council ranked a new downtown parking garage as the highest priority, followed by the Community Center, and City Hall. In order to facilitate the funding of some of these projects, the City is exploring whether it can partner with private developers to build one or more parking garages and a City Hall at little or no cost to the City. One RFP has been issued relating to the provision of affordable housing and structured parking on Lots F and N south of Howard, and another RFP related to building City Hall in exchange for the rights to develop the existing City Hall site will be issued shortly. A third RFP that also involves the building of a parking structure in the downtown Burlingame Avenue area should be issued prior to the end of the fiscal year. Separately, the City has hired a financial consultant to help determine how to fund the projects (such as the Community Center) that may require some type of voter approval of a funding mechanism. At this time, no decisions have been made about any of the potential public-private partnerships or tax mechanisms. General Fund Five -Year Financial Forecast The five-year forecast attached to this report as Exhibit C was developed using the FY 2014-15 budget, adjusted for the recommended adjustments in this report, as a starting point for estimating revenues and expenses of future operating budgets. 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. However, the pre - funding of retiree medical obligations (OPER) as part of the annual operating budget, beginning in the current fiscal year, is a permanent change that will continue to impact the future budgets. 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 Exhibit 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 (CAGB) 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 growth 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. Likewise, different revenues are FY 2014-15 Mid -Year Report March 4, 2015 forecasted to adjust with the recovering economy at different speeds, even within the same category of revenues. The growth factor utilized for each revenue/expenditure analysis is determined using a combination of the CAGR — based on actual results of recent, relevant years -- and known economic, legislative, and departmental conditions. 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 Revenue Assumptions Revenue Description Growth Factor Explanatory Comments Actual assessment roll growth per the County Assessor based on January 1 lien date and continuing trend of low property turnover. 4.50% - 6.30% Expected changes in monetary policy by the Federal Reserve in the near-term will cause interest rates to increase and this will have Property Tax some impact on values, but some Bay Area insulation is expected due to high demand. Adjustments made for Education Revenue Varies — Augmentation Fund (ERAF) rebate based on a expected to decline recent change to the County's ERAF reserve policy. As a whole, the City will continue to treat as one-time revenue. Based upon recent Q3 2014 sales tax data, historical compound annual growth rates and high consumer demand due to continuing economic recovery. Sales Tax 3.50%— 5.80% Indications of a shift of consumer spending on services (rather than taxable goods) and statewide concerns regarding diminishing sales tax base could limit growth. Based upon assumption that average daily room rates will be constrained by price Transient Occupancy Tax -2.00% - 4A0% elasticity. Includes an assumption for Super Bowl 50 in fiscal year 2016 as well as some diversion of revenue as a result of new SFO hotel in fiscal year 2018. Other Taxes - Franchise Tax 1.00% - 3.00% Based upon expected gross revenue changes for PG&E, garbage, and cable TV. Based upon expected growth in parking garage traffic as a result of record highs in Other Taxes -Business Licenses 2.00% - 4.50% passenger traffic at SFO. Minimal growth is expected in general business license revenue because it is based upon volume of businesses rather than gross receipts. Other Taxes - State HOPTR 0.50% - 1.00% Limited to growth in the number of 21 FY 2014-15 Mid -Year Report March 4, 2015 Revenue Description Growth Factor Explanatory Comments Includes effect of current collective homeowner occupied parcels. Salary & Wages ratified MOUS for Teamsters Local 856 Based upon historical patterns and Other Taxes -Transfer Tax 1.30% — 1.40% consistently low inventories of properties for annual growth in salaries of 1% for out years. sale. Includes an annual growth rate of 8% for Based primarily on consumer price index Benefits expected PERS contribution rates and a adjustments under Proposition 218 as payroll surcharge assessed on full-time published by the Bureau of Labor Statistics. Licenses & Permits medical (implemented in fiscal year 2015) to Not included here is an assumption for added Fines, Forfeitures & Penalties 0.50% - 2.70% parking lots or garages over the next five Charges for Services years because a clear implementation date has not yet been established. Furthermore, growth in parking citation revenue is assumed to be marginal. The assumption is based upon current long- term lease information, which permits Use of Money & Property 1.70% - 2.70% adjustments based upon consumer price indices as well as a scheduled increase to the monthly rent for a T -Mobile tower in Washington Park. Other Revenue No growth No growth projected due to one-time revenue. The forecast assumes that mandated cost recoveries will continue as set forth in the State Subventions 0.50% - 4.00% Governor's most recent budget presentation and growth in Measure M revenues from vehicle registrations volume. Based upon expected cash balances and Varies -0.00% - changes in Federal Funds rate based upon Interest Income 85.00% Federal Reserve policy analysis (December 2014). Forecasted Expenditure Assumptions Expenditure Description Explanatory Comments Includes effect of current collective bargaining agreements, including recently Salary & Wages ratified MOUS for Teamsters Local 856 (Dispatchers), Department Heads and Unrepresented (December 2014). Assumes an annual growth in salaries of 1% for out years. Includes an annual growth rate of 8% for January 1 changes in health care rates, Benefits expected PERS contribution rates and a payroll surcharge assessed on full-time employees to fund the current cost of retiree medical (implemented in fiscal year 2015) to 22 FY 2014-15 Mid -Year Report March 4, 2015 Expenditure Description Explanatory Comments fully fund the ARC (annual required contribution). Also included are employee contributions to health care and PERS in accordance to current Mous. Based upon cost of living adjustments for most non -personnel costs and expected changes in utility rates. A reduction in fuel prices is expected, with a 5% compounded annual growth rate from the reduced base thereafter. A 5% escalation factor for service from Central County Fire is also assumed. Operating Costs Operating costs include a payroll surcharge assessed on full-time employees to fund previously incurred costs associated with retiree medical benefits for former employees (implemented in fiscal year 2015). Includes re -programming of parking citation - related operating costs to the General Fund (and out of the Parking Fund). Internal Services Based upon a 4% blended escalation factor. Capital Outlay Includes a base of $200K based upon historical use and 4% growth rate. Assumes reimbursements for debt service, continuing General Fund investments in Capital Projects equivalent to 2% TOT tax revenue, and support of City shuttle programs. Transfers In (Out) (In February 2015, the City embarked on a cost allocation study which may affect service cost reimbursements to the General Fund from other funds. Pending the results of the study, no change is assumed in the forecast.) Actual debt service for all current outstanding bond issues, including the payoff of the 2004 Debt Service Library Lease Refunding Bonds by lune 30, 2016 and Master Equipment Lease Purchase by lune 30, 2018. Assumes no refinancing of current debt and no new debt issuances. In the five-year forecast, property taxes 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 year 2013-14 was 7.42 percent, and current year property tax revenue was based on a roll nearly 6.83 percent higher, growth in the roll for fiscal year 2015-16 indicates that a 6.3 percent increase in property taxes can be anticipated. This rate includes an inflationary factor of 23 FY 2014-15 Mrd -Year Report March 4, 2015 slightly over 1 percent as reported by the State Board of Equalization for December 2014. 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. As 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 growth factor is 4.50% for secured property taxes in fiscal years 2016-17 through 2019-20. However, property tax revenues as a whole exhibit a much slower rate of growth in the five-year forecast due to the cessation of 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 come to an end. Note that the potential revenue impact of other future (specific) development, including any major development currently in initial stages - but without an approved fiscal impact report - is NOT included in the long-term forecast. 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 32 percent increase in the City's TOT revenues in the past three years. The rate was last increased five years ago from 10 to 12 percent (effective January 1, 2010), and that rate is expected to remain unchanged in future years. 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 decline, it is unreasonable to assume these revenues will continue to grow as they have in the past few years. A growth rate of 4.0 percent is applied to the City's base TOT revenue for most years of the forecast. An adjustment is included in fiscal year 2017-18 to reflect the completion of a 400 -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. Although the State's sales tax "Triple Flip" will expire in fiscal year 2016-17, this is not expected to significantly impact overall City sales tax revenue. Because the City's sales tax base fared well last year despite the disruptions on Burlingame Avenue, next year's forecast calls for a CAGR of 3.2 percent. But due to consumer trends that indicate a decrease in the purchase of goods and materials in favor of non-taxable transactions (i.e., services), a more conservative growth rate ranging between 3.5 and 4.0 percent is appropriate for the fiscal years beyond 2015-16. Income from the City's investments is assumed to increase very modestly with the growing economy. Because the yields on short-term, risk averse investments have been historically low for several years, changes will be moderate in the next couple of years. Any increase to a very low yield will result in significant growth 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. 24 FY 2014-15 Mid-Year Report March 4, 2015 Revenues in the categories of Licenses, Fines and Charges for Services are assumed to grow at CPl for purposes of the five-year forecast, which also assumes that intergovernmental and other (miscellaneous) revenues remain flat. Salaries and wages have been broadly projected at levels that assume all existing labor agreements are adhered to until expiration. Labor contracts currently in existence were negotiated in recent fiscal years, and reflect the concern over increasing employee benefit costs in an environment of revenues that had just begun to stabilize from an economic recession. The contracts provide savings in the four major cost areas of employee compensation: salary, health premium contributions, pension obligations and retiree medical, though the cost to the City continues to grow in most cases. The long-term forecast reflects growth in salaries and wages at a level of 1.0 percent once these contracts expire. Rates charged by the California Public Employees Retirement System (CaIPERS) are projected to go up in the next few years due to the impact on investment losses in fiscal year 2008-09. In addition, although steps toward pension reform were implemented as of January 1, 2013, CaIPERS has implemented changes to the actuarial economic assumptions that will further burden employer rates. The rates shown reflect rates provided by CaIPERS (through 2015-16) or calculated by City staff based on CaIPERS estimates for most current employees: Estimated CAPERS Rates Fiscal Year Misc Rate Safety Rate 2015-16 21.17 30.1 2016-17 22.9 32.1 2017-18 24.3 34.1 2018-19 25.6 36.1 2019-20 27.0 38.1 Note that part of the increase in rates is due to the inclusion of the UAL (unfunded accrued liability). A provision for employees to share the cost of the PERS employer rates was included in recent agreements with all labor groups. Since personnel costs are such a large portion of the General Fund budget, changes in these categories will have a significant impact on the fund's five-year projection. Like many other public and private employers, Burlingame will face the challenges of recruiting and maintaining a stable and competent work force in the face of continued Baby -Boomer retirements and reductions in benefit packages. The other major impact to personnel costs is the pre -funding of retiree medical benefits (OPEB). Funded on a pay-as-you-go basis until just this current fiscal year, the cost of these benefits, largely incurred in prior years, is now being pre -funded through an (external) irrevocable trust. These costs represent a major increase at the initial level of funding in fiscal year 20'14-15 — representing an approximately 30 percent surcharge on regular salaries and benefits. As FY 2014-15 is the base year for the five-year forecast, these charges are included in all personnel cost projections. 25 FY 2014-15 Mrd -Year Report March 4, 2015 With respect to non -personnel expenditures, it should be noted that the General Fund transfer out (expenditure) for CIP is based on a set portion of the TOT revenues (2 percent of the 12 percent rate — approximately $3.8 million for 2015-16), which is slightly higher than the same inflationary growth assumed in other General Fund operating expenditures in the five year forecast. The regular transfer amount reflects the annual cost of maintaining the City's current infrastructure in its current condition. As such, the transfer is considered an essential part of a sustainable budget. Although staff will be recommending the annual transfer be increased with the 2015-16 fiscal year budget, to include funding of the Renewal and Replacement Reserve in the Capital Projects Fund, this is not assumed in the five year forecast. Also, no "set-aside" funding for the General Plan is noted in the forecast; these amounts would be reflected in the General Fund Balance until the project is completed. No assumptions have been made regarding the use of the Renewal and Replacement 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 - needed for smoother budgetary times in the near future. No single strategy is assumed to succeed (and included in the five year forecast) until the result is imminent. 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 year 2015-16 budget, and will include 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 Council's attention through the budget, mid -year analysis, and financial reporting processes currently in place. FISCAL IMPACT Authorization of the attached budget amendment updates the previous allocation of City resources for the 2014-15 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 resolution, and/or additionalamendments to the FY 2014-15 budget. The goal is to provide the most accurate picture of 2014-15 fiscal year standings in preparation for the FY 2015-16 Budget and to assist decision makers in planning for the City's needs in the long-term. Exhibits: Attachment A -- General Fund Revenues Attachment B — General Fund Expenditures M FY 2014-15 Mid -Year Report • Attachment C -- Five -Year Forecast • Resolution: Mid -year Budget Amendments March 4, 2015 27 City of Burlingame 2014-15 Mid -year Report Attachment A — General Fund Revenues Property Taxes — The San Francisco Bay Area housing sector was a sustaining factor in the local economy through the difficult period following the "dot com" bust, and fared relatively well through the declines in home prices from 2008 through 2010. In the past four years the market has improved and stabilized. Although assessed property values are rising more slowly than earlier in the decade, the local housing market is very strong. And though credit conditions remain very tight, there is renewed interest in commercial real estate development. The broader economy must also recover in order to maintain this stability; an increased demand for housing is only achieved through increased employment and incomes. Property tax rolls are established prior to the beginning of the fiscal year. For FY 2014-15, Burlingame's roll value (land and improvements) increased by 6.83 percent, including an inflationary factor of 1.02 percent applied to all California property assessments. 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. Description 2012-13 Actuals 2013.14 Actuals 2014-15 Adopted Budget 2014-15 Midyear Projection Midyear Amendment Current Secured Property Tax $ 9,664,470 $ 10,379,063 $ 10,900,000 $ 11,204,000 $ 300,000 Secured Supplemental Property Taxes 226,029 349,352 270,000 320,000 50,000 Current Unsecured Property Tax 585,199 594,362 600,000 600,000 - Unsecured Personal Property (4,540) (5,233) - - - Property Tax in Lieu of VLF 2,231,659 2,503,852 2,500,000 2,670,000 170,000 ERAF Refund 1,284,602 1,425,203 730,000 1,560,000 830,000 Secured Supplemental Property Tax (Prior) 6,661 2,480 - - - Unitary Tax 245,062 247,468 250,000 260,000 10,000 Total $ 14,239,141 $ 15,496,548 $ 15,250,000 $ 16,610,000 $ 1,360,000 "The chart does not include the X1.1 million Pronosition 1A oroDerty tax shift repaid in fiscal vear 2013 In FY 2013-14, actual property tax revenue receipts were 1.5 percent higher than budgeted, (as adjusted at mid -year), representing an 8.8 percent increase in property taxes over the prior year. Revenues from secured property taxes were expected to rise approximately 4.7 percent in 2014-15, but since the final assessed roll for Burlingame reflects a 6.83 percent rise over the prior year, a $300,000 upward adjustment in the Secured Property Taxes budget is indicated. Other components of property tax revenues were conservatively budgeted. For example, 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 $170,000 higher than initially budgeted for 2014-15. In addition, adjustments in the County's ERAF (Educational Revenue Augmentation Fund) distributions were expected to negatively impact the City's excess ERAF reimbursement in comparison to prior years. However, the ERAF reimbursement, received early in February, was actually $135,000 higher than in the prior year. Most of this increase was due to a change in the County's policy regarding the distribution of prior year excess ERAF reserves. Whereas in prior years, 10 percent of each year's excess ERAF was held aside and distributed after a period of three years, this period has been reduced to two years. Therefore, Burlingame received a refund of $125,000 from 2012 ERAF funding, in addition to the 2011 ERAF fund reserves. Hereafter, release of excess ERAF reserve balances will be for one fiscal year only. The dissolution of redevelopment agencies, which resulted in asset disposition and subsequent distribution of these proceeds to the schools, limited the demand for ERAF funding for schools for the second year in a row. Therefore, despite higher demands for school funding, draws from the County's ERAF fund remained level, and the refunds to local government agencies contributing to the County's ERAF did not decline as anticipated. The State's Local Control Funding Formula (LCFF) for K-12 school districts, implemented in fiscal year 2013-14, will provide increased school funding in future years. Hence, the County continues to warn that excess ERAF distributions could decline significantly, and even be eliminated as funding for education grows, other State commitments are satisfied through the ERAF funds and redevelopment asset dispositions are completed. 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. As this revenue line item was conservatively budgeted, the FY 2014-15 budget should be adjusted upward by $830,000 to reflect the higher receipt. Supplemental property taxes, collected for the balance of the current tax year on increased assessed valuation when property changes ownership, is coming in slightly lower than in the same period last year. But because these revenues amounted to nearly $350,000 in fiscal year 2013-14, a $50,000 increase (to $320,000) is proposed for this line item revenue. Initial receipts of unsecured property taxes (assessed on business fixtures, business personal property, boats, aircraft, etc.) are slightly higher than in the prior fiscal year. As such, no adjustment is necessary. However, a higher assessment of utility -owned properties is reflected in the County Assessor's role, and should result in an additional $10,000 of Unitary Tax revenue for the City in the current fiscal year. Safes and Use Taxes - The recession was marked by a severe decline in consumer spending and associated taxable transactions. Burlingame experienced a flattening of sales tax revenues in the last quarter of fiscal year 2007-08, as both consumers and businesses retrenched in response to the economy. As can be seen in the chart below, sales tax revenues for the City declined 12.7 percent in 2008-09, with a further 23.68 percent decrease in 2009-10. As the economy continued to recover, sales tax revenues surged upward in 2010-11, and appear to be growing at an impressive pace. In fact, these revenues surpassed pre -recessionary levels in 2013-14, with nearly $10.2 million in receipts. Fiscal Year 2008-14 Sales & Use Tax Revenue (in millions) Revenue Description FY2008 PY2009 FY2010 FY2011 FY2012 FY2018 FY2014 Sales & use Tax 6.95 5.86 5.00 6.15 6.33 6.90 7.48 Sales Tax Compensation Fund 2.51 2.39 1.27 1.89 2.16 2.17 2.57 Public Safety Fund -Sales Tax 0.12 0.11 0.11 0.11 0.12 0.13 0.14 Grand Total 9.58 8.36 6.38 8.15 9.62 9.20 10.20 Year -over -year change 2.40% -12.70% -23.68% 27.7446 5.71% 6.73% 10.84% Historical Sales & Use Tax Revenue 7.48 $7 -- - -G95 — .94 .33 $5 .86 ----- - $5 44 -+-Sales & Use Tax o -*-Sales Tax Compensation Fund $4 -� Pubfic Safety Fund -Sales Tax $3 - 2.39 -_-L] 2.57 .27 $4 r3—; -t3 111 A�9.t2—�' c"m 0.14 FY08 FY09 FY10 FY11 FY12 FY13 FY14 A review of 3d quarter data for 2014 (remitted to the California Board of Equalization (BOE) in October — December 2014), shown below, shows increased sales tax revenues continue, with most major industry groups reporting a positive change compared to the same quarter of 2013. In total, taxable transactions were up 10.4 percent from the third quarter of the previous year. 30113 Comaamd To 30114 511,20GK $1,050K rr ri 3013 341.1 r� 5PI30'f,SOW • r /r!`r r�r r�i ii�� rrr�r �!f %!%r llrr f7f 2UpiCIf 1:4 r�r rrir rrr/ frr� ifii7 'r"r7 i ,. i�ri 'rfi ii`r 1 11 `r'/r'r'r� .1:4 Z . _ f ■ - 331f ZICe frrie rrrf - frrr /A.1tos RestaLmts General Business Budd'mg Fuel and Food and and Cortsurner and and serNce and Transportation HoteP. Goods Industry Construcdon sta5ons kgs The autos and transportation group shows the largest dollar increase, as low interest rates, more fuel-efficient drive trains and declining fuel prices continue to push the auto industry forward. The strength of Burlingame's Auto Row boosted autos and transportation results that were 9.8 percent higher than in the comparable quarter from the prior year. Even with sustained lower gas prices, the sector as a whole should remain fairly strong for the remainder of this fiscal year. Demand for automobiles is expected to level off somewhat in FY 2015-16. Autos And Tears pattation Ccunt 172 Res'muramis And Hods tort 104 General Consumer Goods Couftt &31 Business And lndushy Ccunt %8 Oaftng And Construction Gaunt 59 Fuel And Service SLAFORs Gnint 13 FoodAnd Drugs Gcunc 52 Sales Tax by Hlapmr IndUS" Cvou,o 51,2DOK $1,000K $BOOK 30 40 10 2Q 30 40 10 2Q 3Q 40 1Q 20 3Q 11 11 12 12 12 12 13 13 13 13 14 14 14 $606K $dt'18K $200K SOK It is interesting to note that the City's share of the countywide use tax pool jumped nearly 28 percent compare to same quarter in 2013. 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 an 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 adopted budget for sales taxes corresponds to a 2.6 percent growth over the prior year actual sales tax revenues. Because of the time lag in the reporting and submission of sales taxes to the BOE, only one quarter's data is available from which to project the City's 2014-15 revenues from this source. However, due to continued strength in this revenue source, an upward adjustment of $490,000 (an additional 4.7 percent) is proposed for the current fiscal year, for a total projection of $10.95 million in sales tax revenue_ Transient Occupancy Taxes (TOT) — TOT revenues constitute Burlingame's largest General Fund revenue, 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, 2015 reflect the first six months of the fiscal year. The budget for FY 2014-15 was established based on TOT collections through March 2014, when year-end results were projected to be over $20 million, an increase of 8.2 percent from the prior fiscal year. Noting the exceptional low vacancy rates and a continued rise in average daily room rates (ADR), the original fiscal year 2014-15 budget projected that TOT revenue would grow an additional 5 percent, to a projected $21.1 million. While occupancy rates as reported by the City's hotels have remained fairly robust, TOT revenues continue to be highly vulnerable to the cyclical nature of tourism and changes in the economy. In November 2014, Smith Travel Research (STR), a hospitality research firm, reported that the counties of San Francisco and San Mateo had the largest declines in average daily room (ADR) rates and revenue per available (RevPAR) room nationwide, with ADR falling 21 percent to $187 and RevPAR falling by 24 percent to $153. In January 2015, ADR and RevPAR rebounded throughout the Bay Area, climbing back up to $219 and $160 respectively. 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. Locally, Burlingame hotels reported an average occupancy rate of 85 percent between July and December 2014 and an ADR of approximately $124, which contributed to a 9 percent increase in TOT revenue. Current receipts outpaced prior year receipts during the first six months of the fiscal year, and the City believes that modest growth will be felt in the remainder of the year due to STR's January 2015 report. Even if hotel activity were to now level off, end - of -year projections are expected to exceed $22.3 million. Anticipating a modest rate of continued growth, a new projection of $22.5 million is proposed at mid -year for TOT revenues. 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 has been reviewed for the most accurate projection of 2014-15 year-end results. A significant decrease in the volume and value of real estate sales during the recession is reflected in the City's Property Transfer Tax revenue, as shown in the chart below. Although Historical Transient Occupancy Tax Revenue by Quarter 30 7.6 25 20 6.3 5.7 -$2013-14 N a 4.2 -$2012-13 15 - - -$2011-12 Vi 3.8 5•D 5.7 _$2010-11 3.7 -$2009-10 10 .x 3.8 .0 4.0 .7 s — 2.8 2.6 3.3 1.5 2.5 2.1 Q1 QZ Q3 Q4 While occupancy rates as reported by the City's hotels have remained fairly robust, TOT revenues continue to be highly vulnerable to the cyclical nature of tourism and changes in the economy. In November 2014, Smith Travel Research (STR), a hospitality research firm, reported that the counties of San Francisco and San Mateo had the largest declines in average daily room (ADR) rates and revenue per available (RevPAR) room nationwide, with ADR falling 21 percent to $187 and RevPAR falling by 24 percent to $153. In January 2015, ADR and RevPAR rebounded throughout the Bay Area, climbing back up to $219 and $160 respectively. 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. Locally, Burlingame hotels reported an average occupancy rate of 85 percent between July and December 2014 and an ADR of approximately $124, which contributed to a 9 percent increase in TOT revenue. Current receipts outpaced prior year receipts during the first six months of the fiscal year, and the City believes that modest growth will be felt in the remainder of the year due to STR's January 2015 report. Even if hotel activity were to now level off, end - of -year projections are expected to exceed $22.3 million. Anticipating a modest rate of continued growth, a new projection of $22.5 million is proposed at mid -year for TOT revenues. 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 has been reviewed for the most accurate projection of 2014-15 year-end results. A significant decrease in the volume and value of real estate sales during the recession is reflected in the City's Property Transfer Tax revenue, as shown in the chart below. Although improved home values have pushed these receipts higher with the recovering economy, rooertv turnover in the area continues to be relatively low Fiscal Year 2007-15 Real Property Transfer Tax Revenue 40D,000 379,266 379 542 350,000 Sq,006 347,855 318,578 300,900 280,069 250,000 231,612 2gR,A00 167,408 150,000 ------- ..-- 100,000 ....... 50,000 — -- -- 0 2007-08 2DOB-09 ZD09-10 2010-11 2011-i2 201Z 7,3 2013.14 201415 (Budget) The FY 2013-14 amount received for property transfer taxes was $347,855. Current year (July 2014 through January 2015) tax receipts are coming in about 2.1 percent shy of last year's receipts during the same time period. So, depending on real estate sales in the remainder of this fiscal year, this revenue could come in short of the $350,000 budget. Month to month variation in real estate sales (reflected in the chart below) makes this revenue difficult to project. However, cognizant of a least one large property sale to close before the fiscal year ends, staff proposes no change in the FY 2014-15 budget for the City's property transfer tax revenues. Year-to-date Business License Tax revenues are coming in at rate of 2.9 percent lower than last year. This includes the special business license tax assessed on airport parking enterprises. The budget of $995,000 for the current fiscal year represents a 1.34 percent increase over the 2013-14 fiscal year results for business license revenues. When the projection for this revenue source was developed, staff expected to be able to intensify compliance efforts to maintain the higher volume expected in an improving economy. Staffing changes and attention to other priorities within Finance may make this projection difficult to achieve, and a $15,000 decrease in the budget is proposed for this revenue source. The largest category of Burlingame's Franchise Fees is derived from the regional garbage hauler (8 percent of revenues), and is collected and remitted monthly. Because there have been no changes in solid waste rates since January 1, 2012, there should be little change in the franchise fees derived from this activity, and no mid -year adjustment is proposed for fiscal year 2014-15. The reason for the slight decline in garbage franchise fees in recent years is due to a change in the way the fee is charged: instead of a percentage of the total amount billed for solid waste services, the City has authorized the franchise fee be applied to billings net of agency fees — fees charged to recoup the City's cost of certain solid waste activities. Franchise fees for the provision of gas and electric utilities were slightly under -estimated in the prior fiscal year. Although these revenues are not received until April, there is no indication that the current year's revenues will deviate significantly, and the current year adopted budgets for these fees appear to be on target. However, a $10,000 upward adjustment is proposed for video service franchise fee, as these receipts appear to be coming in at a higher rate than last year. Licenses and Permits — General Fund revenues in this category, which consists largely of alarm permit fees and taxicab licenses, were up nearly 10 percent ($10,000) in FY 2013-14 compared to the previous year. A decrease of approximately $30,000 was anticipated in the current year adopted budget, as the charge for alarm permit fees was decreased effective July 1, 2014. With a budget of $86,000, these receipts account for a very small part of total General Fund revenues. Because prior year revenues for taxi cab licenses ($18,000) were slightly below budget, and year-to-date receipts are behind the pace of the last fiscal year, a $5,000 decrease is proposed. Fines, Forfeitures and Penalties — This category consists largely of revenue from parking citations and vehicle code violation fines. Parking citation revenue was anticipated to recover from the prior fiscal year amounts due to the completion of the Burlingame Streetscape project early in the fiscal year. (Steps were taken to make parking available and as easy as possible to access, with fess emphasis on compliance, during the construction of the streetscape improvements.) Although current receipts are easily surpassing that of the prior year, uncertainties in staffing are projected to slow the volume of parking citations issued for the FY2014-15 2012-13 2013-14 2014-15 Midyear Midyear Description Actuals Actuals Adopted Budget Projection Amendment Gas $ 104,303 $ 112,775 $ 115,400 $ 115,400 $ Electric 199,640 210,985 216,000 216,000 Garbage 750,484 724,634 700,000 700,000 Cable TV & wave Astound 433,946 440,529 445,000 445,000 AT&T Video Service 83,632 86,598 80,000 90,000 10,000 Total $ 1,572,005 $ 1,575,521 $ 1,556,400 $ 1,566,400 $ 10,000 Licenses and Permits — General Fund revenues in this category, which consists largely of alarm permit fees and taxicab licenses, were up nearly 10 percent ($10,000) in FY 2013-14 compared to the previous year. A decrease of approximately $30,000 was anticipated in the current year adopted budget, as the charge for alarm permit fees was decreased effective July 1, 2014. With a budget of $86,000, these receipts account for a very small part of total General Fund revenues. Because prior year revenues for taxi cab licenses ($18,000) were slightly below budget, and year-to-date receipts are behind the pace of the last fiscal year, a $5,000 decrease is proposed. Fines, Forfeitures and Penalties — This category consists largely of revenue from parking citations and vehicle code violation fines. Parking citation revenue was anticipated to recover from the prior fiscal year amounts due to the completion of the Burlingame Streetscape project early in the fiscal year. (Steps were taken to make parking available and as easy as possible to access, with fess emphasis on compliance, during the construction of the streetscape improvements.) Although current receipts are easily surpassing that of the prior year, uncertainties in staffing are projected to slow the volume of parking citations issued for the remainder of the fiscal year. None the less, revenues from this source are expected to exceed the current budget of $780,000 by approximately $14,000. Changes may be coming in the parking citation processing and adjudication process, as last year the current vendor for Burlingame (and other participating County agencies) agreed to extend its contract from the June 30, 2014 expiration date for one additional year. This was done in order to accommodate the completion of a new RFP process, for which the County of San Mateo is acting as the lead agency. Extension of the contract will ensure not only a thorough proposal and selection process, but sufficient time to implement new systems and procedures, should a new vendor be selected. No significant change in citation revenues is anticipated in future years, although the cost of citation processing and adjudication may decrease as a result of the competitive bid process and the employment of new technologies in the area of parking citation issuance and processing. Use of Money and Property — This revenue category includes lease payments received on various City properties. Budgeted revenue for the current fiscal year is proposed to be increased by $15,000 to reflect current year receipts and collectability, as well as amounts that are based on concessions and percentage rent. Investment Income — 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. Due to the relatively large size of Burlingame's portfolio, the Council last year approved the use of an outside investment advisory service. The City has since contracted with PFM Asset Management, LLC., and worked with them to review the City's ongoing cash flows, establish investment goals, revise the investment policy, realign the portfolio to the new benchmarks and develop an informative quarterly investment report. For the first half of the current fiscal year, the City achieved a 0.81 percent yield on its over $100 million portfolio, which includes a $67 million managed pool of top-rated securities, $31 million in the State Local Agency Investment Fund (LAIF) and $5 million in the County pool. Fund 2013-14 Actual Current Budget 2014-15 Midyear Projection Midyear Amendment General Fund $ 225,080 $ 200,000 $ 230,000 $ 30,000 Burlingame Avenue Assessment District 6,057 4,000 4,000 - Gas Tax Fund 41,439 24,000 24,000 - Water Fund 209,231 116,000 200,000 84,000 Sewer Fund 157,526 63,000 150,000 87,000 Solid Waste Fund 31,948 17,000 40,000 23,000 Parking Enterprise Fund 34,165 16,000 40,000 24,000 Building Enterprise Fund 48,725 25,000 50;000 25,000 Worker's Compensation Fund ISF 93,171 48,000 90,000 42,000 Facilities Services Fund ISF 4,230 4,000 4,000 - Equipment Services Fund ISF 69,076 42,000 70,000 28,000 Information Services Fund ISF 7,409 4,000 8,000 4,000 General Liability ISF 11,053 12,000 12,000 - Storm Drainage Fund 91,492 34,000 90,000 56,000 Total $ 1,057,682 $ 609;000 $ 1,012,000 $ 403,D00 Interest earnings for all of the City's funds in 2013-14 were approximately $1.06 million, above the $611,000 combined budgets for the year. These results, and the impact of the year-end "mark -to -market" adjustment, were unknown with the development of the current year projection. Noting that the 2013-14 earnings included the largest portion ($130,000) of the Lehman Brothers bankruptcy recovery from the County Pool, earnings for the 2014-15 fiscal year were conservatively estimated. A year later, yields have appeared to stabilize over the past year. Subsequently, year-end "mark -to -market" adjustments are less significant. The Federal Reserve intends to ease its current monetary policy very gradually, so there is reason to expect short-term investment rates to rise modestly in the near future. The Local Agency Investment Fund (LAI F), which holds the majority of the City's idle cash, is yielding 0.26 percent, up from 0.24 percent one year ago. Revenues from the City's investments are anticipated to be fairly level with the prior year in total. However, 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 funds, interest earnings by fund are difficult to project. Of the total interest earnings now projected for the 2014-15 fiscal year, $230,000 is projected to be General Fund interest revenue. Staff has proposed adjustments to the interest revenue budgets in all funds that will be credited with any material interest earnings in FY 2014-15. These mid -year adjustments will provide a more accurate projection of interest earnings to the various funds for future budgets. State Subventions (Intergovernmental revenues) - Through various pieces of legislation and propositions, the State of California has placed a requirement to reimburse local agencies for costs born when the State mandates a new program or higher level of service to be provided by those local agencies. 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 have been so erratic that they are no longer included in the City's budget. A $36,000 increase is proposed for this revenue item to reflect the current year receipt of mandated cost reimbursements in October. Note that the Governor's Budget for FY 2015-16 includes additional funding for mandatory cost claims, but the timing and allocation of these funds to the state-wide agencies for various mandates and accrued claims will not be determinable in advance. In addition, a proposed adjustment for Measure M revenue is included in this mid -year report. Measure M revenue is rased upon vehicle registration fees. Notice of the City's allocation is received from C/CAG (City/County Association of Governments), typically received in the Fall. Conservatively, a half year allocation was assumed based upon residual funds pending reimbursement; these amounts, which are required to be used before subsequent allocations. As these amounts (for traffic congestion management programs) have been expended and reimbursed, the City will adjust the budget by $55,000 to include a full year allocation in estimated revenue. Also in this same category of revenues, the POST (Peace Officer Standards and Training) reimbursement budget should be decreased $5,000, to reflect a slightly reduced participation of the City's police officers in POST programs than originally anticipated. Charges for Services - General Fund revenues in this category were up 8.4 percent in FY 2013-14 compared to the previous year due largely to a continued interest in the City's recreational programs and development services. As seen in the chart below, most departments generate some amount of receipts in this revenue category. With a budget of nearly 4.1 million, these receipts account for 7.4 percent of Burlingame's total General Fund revenues. CITY OF BURLINGAME, CA CHARGES FOR SERVICES BY DEPARTMENT Receipts from Recreation services were 4 percent over the adopted budget in fiscal year 2013- 14. Although this growth was largely anticipated in the current year budget, year-to-date receipts indicate further demand for recreational offerings. The latest projection for revenues from recreation fees is $81,500 higher than the adopted budget. Park fees are projected to be $18,100 higher than originally budgeted, largely due to an increased volume in arborist plan checks and site inspections. Revenues from Plan Checks and Permits also experienced a healthy increase in the prior fiscal year. Although these activities continue to grow in volume, much of the $91,600 increase in the current year projection is a reflection of this prior year growth. Public Works fees for services FY14-15 FY14-15 FY14-15 FY12-13 FY13-14 Current Midyear Midyear Year -End Actual Actual Budget Projection Amendment Up (Down) % Police 66,527 86,648 70,963 70,963 0 0.0% Parks 132,504 132,260 139,264 157,364 181100 13.0% Recreation 2,119,750 2,206,209 ! 2,403,819 2,485,319 81,500 3.4% Planning 383,825 546,978 484,896 576,495 91,6D0 18.995 Public works 325,173 383,054 391,694 406,594 14,900 3.8% Library b03,120 580,243 591,872 631,472 39,600 6.796 Finance 4,000 4,000 4,000 4,000 0 0,0% Elections 1,111 3,545 512 512 0 0.0% Total, Departmental Fees $3,636,011 $3,942,937 $4,(357,020 $4,332,720 $245,700 9.7% Receipts from Recreation services were 4 percent over the adopted budget in fiscal year 2013- 14. Although this growth was largely anticipated in the current year budget, year-to-date receipts indicate further demand for recreational offerings. The latest projection for revenues from recreation fees is $81,500 higher than the adopted budget. Park fees are projected to be $18,100 higher than originally budgeted, largely due to an increased volume in arborist plan checks and site inspections. Revenues from Plan Checks and Permits also experienced a healthy increase in the prior fiscal year. Although these activities continue to grow in volume, much of the $91,600 increase in the current year projection is a reflection of this prior year growth. Public Works fees for services are also experiencing a slightly faster pace than in the previous fiscal year; these fees are projected to be $14,900 higher than the proposed budget for FY 2014-15. Library fees fell slightly short of budget in the prior year, and current year receipts are somewhat lower in comparison to the first half of last year. However, remuneration for the provision of library services to the Town of Hillsborough, calculated after the year-end and based on average per -capita costs, was more than originally estimated. Because the current year budget did not reflect this increase, a $39,600 increase in these combined revenue sources is reflected in the attached FY 2014-15 mid -year budget amendment. Other Revenues — Early last week the City received the $1 million payment required per the Development Agreement for the Burlingame Point project. The project at 300 Airport Boulevard consists of 767,000 square feet of new uses, including office or life science uses, retail and restaurant uses in four buildings of five, seven and eight stories, a two-story amenities building with a child care facility, a recreational facility and food service, and a 5.5 level parking structure. The agreement identifies impacts of the development in regards to traffic in the surrounding region; the payment is to mitigate these impacts by funding of the Broadway Interchange project. The City's share of the Broadway Interchange project ($5 million) has been fully appropriated in the City's Capital Project Fund; construction on the project has begun. Therefore, the payment on the Burlingame Point project represents one- time revenue to the City's General Fund. Other miscellaneous revenues are received by the City from time to time. Current year receipts indicate that these miscellaneous revenues will exceed the adopted budget of $30,000 by approximately $10,000. City of Burlingame 2014-15 Mid -year Report Attachment B - Genera! Fund Expenditures The following table shows the FY 2014-15 mid -year assessment of departmental (operating) General Fund expenditures: CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES Description FY2012-13 Actual FY2013-14 Actual FY14-15 Current Budget FY14.15 Midyear Projection FY14-15 Midyear Amendment Year -End Up (Down) % General Gov't (Admin Svcs) $ 5,63b,245 $ 5,870,151 $ 4,778,056 $ 4,715,036 $ (63,000) -1.3% Public Safety Central County Fire (Burlingame) 8,999,505 9,553,912 10,766,149 10,848,349 82,200 0.8% Police & Dispatch 9,830,199 10,221,593 12,769,401 12,799,401 30,000 0.2% Public Works 3,084,543 3,339,585 5,302,424 5,302,424 0 0.0% Community Development - Planning 854,231 1,041,240 1,560,963 1,500,963 (60,D00) -3.8% Leisure & Cultural Services Aquatic Center 374,977 355,974 441,046 541,046 100,000 22.7% Library 3,771,547 3,920,511 4,658,794 4,662,294 3,500 0.1% Parks & Recreation 5,062,096 5,836,196 7,184,865 7,204,865 20,000 0.3% Total Expenditures $ 37,613,343 $ 40,139,162 $47,461,698 $ 47,574,398 $ 112,700 0,2% Although the proposed midyear budget amendments are often off -setting 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 2014-15 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 recent years on all labor groups have resulted in significant savings and have helped achieve structural benefit changes that will help control future employee benefit costs. For example, Burlingame employees are 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 eliminated. Although these savings are evident in recent year budgets, many of the savings will not be realized in full for many years. 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. New positions and several position reclassifications were identified in the FY 2014-15 budget. Below is a listing of position reclassifications that have been brought to the City Council for approval in the current fiscal year. Authorized Position Changes Fiscal Year 2014-15 *This change was cost neutral due to the deletion of a Police Captain position. Although many of these reclassifications were anticipated in the adopted budget, they were not clearly delineated as position changes in the budget document as a change in departmental staff. As indicated, no additional funding was requested in the current year personnel budgets for these classification changes. However, the changes are reflected in the City's position control system, which is used to model future year personnel cost forecasts. It should also be noted that most health plan rates were increased effective January 1, 2015; the increases ranged from 6-12 percent, depending on the plan. Although no adjustment is being made to the departmental budgets to cover the impact of these increases for the last half of the current fiscal year, the changes will put added pressure on personnel costs in the upcoming 2015-16 budget. Personnel costs (and total operating expenditures) for the General Fund increased significantly in FY 2014-15 due to the inclusion of contributions to the irrevocable trust fund established in October 2013 for the purpose of funding the City's retiree medical benefit obligations. 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 experience, and making changes to benefit and contribution rates as needed. Non -Personnel Costs 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, Recall that much of the reduction in the Administrative Services budget for fiscal year 2014-15 was due to the elimination of "Other Employee Benefits" (over $2.5 million in fiscal year 2013- 14) from this grouping. The category used to house the "pay-as-you-go" portion of retiree medical benefits. Beginning in fiscal year 2014-15, these costs are borne by all departments based on a payroll allocation. Annualized Change Add'I Budget From To Salaries & Benefits Requested? Accounting Assistant III Accounting Technician $9,000 No Associate Planner Senior Planner 15,000 No Financial Services Manager Deputy Finance Director 11,300 No Communications and Records Supervisor Poiice Services Manager 10,1m No Park Maintenance Leadworker Assistant Parks Supervisor 7,700 No Police Sergeant (2 positions) Police Lieutenant* 75,000 No Total annualized impact $128,100 *This change was cost neutral due to the deletion of a Police Captain position. Although many of these reclassifications were anticipated in the adopted budget, they were not clearly delineated as position changes in the budget document as a change in departmental staff. As indicated, no additional funding was requested in the current year personnel budgets for these classification changes. However, the changes are reflected in the City's position control system, which is used to model future year personnel cost forecasts. It should also be noted that most health plan rates were increased effective January 1, 2015; the increases ranged from 6-12 percent, depending on the plan. Although no adjustment is being made to the departmental budgets to cover the impact of these increases for the last half of the current fiscal year, the changes will put added pressure on personnel costs in the upcoming 2015-16 budget. Personnel costs (and total operating expenditures) for the General Fund increased significantly in FY 2014-15 due to the inclusion of contributions to the irrevocable trust fund established in October 2013 for the purpose of funding the City's retiree medical benefit obligations. 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 experience, and making changes to benefit and contribution rates as needed. Non -Personnel Costs 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, Recall that much of the reduction in the Administrative Services budget for fiscal year 2014-15 was due to the elimination of "Other Employee Benefits" (over $2.5 million in fiscal year 2013- 14) from this grouping. The category used to house the "pay-as-you-go" portion of retiree medical benefits. Beginning in fiscal year 2014-15, these costs are borne by all departments based on a payroll allocation. An amendment to the budget for part-time salaries in the City Manager's Office is proposed to better reflect current levels of personnel support. Funding for the proposed Sustainability Coordinator position was originally included in the 2014-15 fiscal year budget for the Community Development Department. This position, hired in December, reports to the City Manager. Since the cost to the department can be offset by the vacancy in the Assistant to the City Manager position (through November), only a $17,000 increase in the budget for salaries is needed for the remainder of the fiscal year. The General Fund budget for the City Attorney's Office has been frequently exceeded in recent years, but budget overages have been covered by savings in other areas of Administrative Services. The 2013-14 fiscal year budget was "tweaked" at mid -year, and the current fiscal year budget was developed after a thorough cost analysis of the ongoing operations of the office. The adopted budget included funding of $10,000 for a part-time temporary position (Deputy City Attorney). The position was vacated and will not be filled, so this funding can be eliminated. Otherwise, the office appears to be on target so far in fiscal year 2014-15. The budget for outside counsel to assist on specific issues may be constrained by the end of the fiscal year; however, a separate budget amendment will be requested for additional contract funding if needed. The Finance Department experienced two vacancies in recent months, resulting in a higher use of temporary help than initially anticipated. While the department should experience budgetary savings in regular salaries and benefits while the recruitment of these positions proceeds, these savings will be needed to support two part-time positions, so no adjustment is being proposed for Finance's personnel budget. However, the budget for contractual services for the department can be reduced. Staffing changes and other priorities have delayed implementation of the contracts for print and mail services, and eventually electronic bill payment and presentation (EBPP) for the City's water utilities. One-time implementation costs will be minimal; most of the $45,000 budget related to these contracts was to support estimated "per transaction" costs associated with credit card payments, and will not occur until the 2015-16 fiscal year. Note that a budget amendment for the Cost Allocation Plan, User Fee and Impact Fee studies has been proposed. These contracts reside in the City's Admin/IT Internal Service Fund. The Human Resources Department will also experience savings in its contractual services budget. $50,000 was initially budgeted for consultant/legal advice in regards to an IRS audit of the City's Social Security withholding. The audit has since been successfully closed, with most of this budget untouched. Staff proposes that the current year budget be reduced by $25,000, as the Department wishes to reprogram the remaining budget to other contract needs, such as labor representation and training. A vacancy in the Human Resources Specialist II position will result in salary savings for the department in the 2014-15 fiscal year. Some administrative tasks have been assigned to a part- time Office Assistant II position, pending the recruitment of the permanent position. Regular salary savings will be partially offset by the higher temporary costs, so no adjustment is being proposed for HR's personnel budget. Central County Fire Department JPA — Early in the fiscal year the partner cities of Central County Fire acknowledged that the costs of Human Resources and Finance Department activities to support the administration of the CCFD needed to be fairly allocated between Burlingame and Hillsborough. An analysis of the services provided to the department indicated that additional funding for these services was needed from Burlingame, amounting to an additional $82,200 for the 2014-15 fiscal year, to be billed quarterly. (The Town of Hillsborough provides human resources and finance services to CCFD. The additional funding is intended to reimburse the Town of Hillsborough for the City of Burlingame's fair share of these services.) Recently, the CCFD Board of Directors voted in favor of an agreement to expand shared fire and emergency medical services to the City of Millbrae. Under the agreement, which went into effect on December 291h, Millbrae's firefighters (other than chief officers) became employees of CCFD. Millbrae also retained ownership and capital maintenance responsibilities for their two fire stations and equipment. However, the partnership will allow CCFD to utilize all assets and personnel of the combined departments in providing services holistically to the expanded community. While the sharing of CCFD's cost of services will save taxpayer money in all the communities, these savings are difficult to estimate in the near-term. Millbrae will be sharing 30 percent of CCFD's operating costs, lowering Burlingame's share to 42 percent (from the current 60 percent). Of course the whole of CCFD's budget will grow, so staff will be working on providing an accurate budget scenario for the 2015-16 fiscal year. No budget amendment is proposed to reflect the impact of the agreement to Burlingame's current fiscal year budget. Library — The Library's renovation project is on target to be completed by the end of March. The cost of the project is funded by the City's Capital Improvement Program ($2.5 million) and $1 million in donations. The City Council charged the Burlingame Library Foundation and the Library Board of Trustees with raising the remaining $1 million. As of mid-February, the capital campaign, "Our Library, Our Future" had raised $970,000 in donations and pledges. Although impacts of the construction have been significant, the FY 2014-15 budget appears to be generally sufficient for the library's operating needs to the end of the fiscal year. However, one small amendment is needed to provide funds for damage done to a library truck and book drop container. These assets were damaged in a hit-and-run accident, and funds are requested for the $3,500 cost of repairs. Parks and Recreation — A $17,000 budget amendment is needed to increase funding for equipment maintenance for Murray Field. The Recreation Division is incurring ongoing maintenance problems due to bad wiring, poor fixtures, and wiring exposed to the weather. The funding will be used to replace bad ballasts and bulbs during FY 2014-15. Expected savings in part-time salaries will offset this additional cost in the current fiscal year. In next year's budget request, Recreation plans to replace fixtures and wiring to resolve ongoing issues that have increased maintenance costs each year. The Parks Division is experiencing staff shortages: there is one vacant position due to disability and a second position that is currently out on leave but will return to modified duty for at least the remainder of the fiscal year. A $20,000 budget amendment to fund two part-time (temporary) Parks Maintenance workers to backfill one full-time employee is requested. In January 2015 the San Mateo Union High School District closed the Aquatic Center for four weeks to complete maintenance and various repairs at the aquatics facility. These items were not known when the FY 2014-15 budget was prepared, and were brought to the City's attention by District staff in the months of November and December 2014. An additional appropriation of $100,000 ($50,000 in facility maintenance, $20,000 in equipment maintenance and $30,000 in the non -capital outlay budgets) is requested for these previously unanticipated expenditures. Planning Department — The Planning Department personnel budget can be reduced by the cost of the new Sustainability Coordinator position, which was originally included in the 2014-15 fiscal year budget for the Community Development Department. The position has been filled and is funded by the City Manager' Office budget. Minor budget revisions have been requested for the cost ($6,500) of purchases made to meet the needs of new employees (i.e., the Economic Development Specialist and Senior Planner), and associated memberships in professional organizations. Totally offsetting these costs are savings in the department's budget for the printing of notices for the General Plan Update and community meetings. So there is no net increase in the department's budget. Note that the General Plan Update project, "Burlingame 2040", is totally funded with a $1 million appropriation (reserved from the General Fund over the past two fiscal years), combined with state grant monies via the Sustainable Communities Planning Grant and Incentives Program ($491,000). As a multi-year project, it resides in the City's Capital Projects Fund. Police — The Police Department is proposing the enrollment of one police officer trainee in the San Mateo County Police Academy, and requesting a $30,000 increase in part-time salaries for the trainee. This investment in the workforce will ensure some continuity during times of potential staffing changes. Dispatch operations are fully staffed for the fiscal year. Unlike previous years, there are now more full-time dispatchers available to work overtime. The increased overtime hours worked by the permanent staff reduces the need for part-time employees. For this reason, a transfer of $34,000 from the budget of part-time salaries is requested to fund the overtime needs for the remainder of the fiscal year. In the area of non -personnel costs, anticipated savings ($9,000) in the Police communications budget will be used to offset overages in the AT&T costs for Dispatch activities. Not only did AT&T have to correct for billing anomalies of the prior year, but a T-1 line was added for the virtual dispatch system, increasing Dispatch communications costs going forward. The department also confirmed that, due to savings experienced in other contractual costs, the current budget can absorb the added cost of 50 percent of a new crossing guard at Our Lady of Angeles and at El Camino Real/Ray Drive/Rosedale. (The other 50 percent of this cost will be borne by the Burlingame School District.) Public Works — Although some budget adjustments were needed in other funds for Public Works activities, the General Fund budget was found to be adequate for regular, ongoing operations of the department. The only operational adjustments needed for the Public Works budget is attributable to the Water Fund. Transfers Out — The largest amount of "transfers out" of the General Fund are for debt service. There are no changes needed for the FY 2014-15 funding of debt service. However, as noted in the discussion of funds other than the General Fund, several adjustments are proposed that will affect transfers in/out, the net of which are shown as (non -departmental) expenditures: Amendments to General Fund Transfers In (Out) Fiscal Year 2014-15 Description Amount $ CIP -Village Park Restrooms ($25,000) CIP - Library Millennium (Parking Lot Resurfacing) (34,520) CIP- General Plan Update (FY2014-15 reserves) (500,000) Impact Fees (in lieu of General Fund support) - Library Millennium Project 34,311 Remainder - EV Charging Station Project 35,000 Net Change to Transfers In (Out) ($490,209) City of Burlingame 2014-15 Mid -year Report Exhibit C - Genera! Fund Five Year Forecast Expenditure Categories Salaries & Wages (Revised) Benefits Budget Revenue Categories 2013 Property Tax $ 16,610,000 Sales Tax 10,950,000 Transient Occupancy Tax 22,500,000 Other Taxes -Franchise Tax 1,566,400 Other Taxes - Business Licenses 980,000 Other Taxes - State HOPTR 66,000 Other Taxes - Transfer Tax 375,000 Licenses & Permits 81,000 Fines, Forfeitures & Penalties 794,000 Use of Money & Property 206,000 Charges for Services 4,332,720 Other Revenue 1,040,000 State Subventions 186,000 Interest Income 230,000 Total Revenues $ 59,917,120 Expenditure Categories Salaries & Wages (15,512,801) Benefits (8,494,474) Operating Costs (19,593,903) I nternal Services (3,858,220) Capital Outlay (115,000) Total Expenditures (47,574,398) Operating Revenue 12,342,722 Forecast Forecast Forecast Forecast Forecast 2016 2017 1018 2019 2020 $ 16,904,170 $ 17,524,358 $ 18,176,954 $ 18,963,417 $ 19,785,270 11,585,100 12,106,430 12,620,953 13,125,791 13,58S,194 23,066,218 23,868,000 24,822,720 24,294,114 25,265,878 1,582,064 1,597,885 1,645,821 1,695,196 1,746,052 1,001,010 1,022,670 1,045,004 1,068,036 1,091,792 66,330 66,993 67,663 68,340 69,023 382,835 390,834 399,000 407,337 415,848 81,405 81,812 82,221 82,632 83,045 797,970 801,960 805,970 809,999 814,049 209,500 215,157 220,966 226,932 233,059 4,449,703 4,569,845 4,693,231 4,819,949 4,950,087 40,000 40,000 40,000 40,000 40,000 193,250 201,226 202,232 203,243 204,259 425,500 607,614 729,137 845,799 845,799 $60,785,055 $ 63,094,782 $ 65,551,871 $ 66,650,783 $ 69,129,355 (16,212,141) (16,350,667) (16,560,819) (16,772,574) (16,935,945) (8,456,573) (8,863,033) (9,334,878) (9,863,916) (10,426,702) (20,996,840) (21,772,636) (22,586,937) (23,438,354) (24,328,747) (4,087,104) (4,250,588) (4,420,612) (4,597,437) (4,781,334) (208,000) (216,320) (224,973) (233,972) (243,331) (49,960,659) (51,453,245) (53,128,219) (54,906,252) (56,716,056) 10,824,3 97 11,641,537 12,423, 651 11,744,530 12,413,297 Transfers In (Out) (1,643,950) (743,017) (817,025) (922,397) (1,530,252) (1,658,052) Capital Renewal & Replacement Reserve (3,000,000) (3,000,000) (3,000,000) (3,000,000) (3,000,000) (3,000,000) Debt Service (6,283,924) (6,404,907) (5,767,547) (5,881,546) (2,753,249) (2,777,739) Change in Fund Balance $ 1,414,848 $ 676,472 $ 2,056,966 $ 2,619,709 $ 4,461,029 $ 4,977,506 Fiscal Year 2014-15 Mid -Year Status Report City of Burlingame, CA Budget Study Session March 4, 2015 000 •000 •000 •0® Overview ®® • Projected Revenues (p.8) Property Tax, Sales Tax & Transient Occupancy Tax All General Fund Revenues • Projected Operating Expenditures (p.8) • Projected Fund Balance (p.11) • Other Funds (p.12) • 5 -Year Forecast and Next Steps (p.20) 1 1 Projected Revenues: ==o@ Property Tax, Sales Tax & TOT 00 • Property tax for FY 14-15 expected to be $1.36 million or 8.9% better than adopted budget o Slightly higher net assessed values ® ERAF Refund - Actuals are $830K better than budgeted ® 7.2% higher revenues than in prior year • Sales & use tax actuals expected to be $ 490,000 or 4.7% better than budget • Transient occupancy tax (TOT) expected to be $1.4 million or 6.6% better than budget e Continued high local occupancy rates of 85% 7 ©®g Projected Revenues: All General Fund Sources FY13-14 FY14-15 FY14-15 Budget BucigIt Actuals Budget Projected Up {Down) $ up (Down) % Property Tax $15,496,548 $15,250,000 $16,610,000 $1,360,000 8.9% Sales and Use Tax 10,196,123 10,460,000 10,950,000 490,000 4.7% Transient Occupancy Tax 21,357,066 21,100,000 22,500,000 1,400,000 6,6% Other Taxes Franchise Tax 1,575,521 1,556,400 1,566,400 10,000 0.6% Business Licenses 981,821 995,000 980,000 {15,000) (1.5%) State HOPTR 64,968 66,000 66,000 0 0.0% Real Property Transfer Tax 347,855 375,000 375,000 0 0.0% Licenses & Permits 111,712 86,000 81,000 {15,000) (5.8%) Fines, Forfeitures and Penalties 788,772 780,000 794,000 14,600 1A% Use of Money & Property 203,451 191,000 206,000 15,000 7.9% Charges for Services 3,942,937 4,087,020 4,332,720 245,700 6.01A Miscellaneous Revenue 165,628 30,000 1,040,000 1,010,000 3366.7% State Subventions 170,146 100,000 186,OOD 86,000 86.0% Interest Income 225,080 200,000 230,000 30,000 15.0% Total, General Fund Revenue $55,627,628 $55,276,420 $59,917,120 $4,640,700 84% 4 Projected General Fund "'00 ° •®a Operating Expenditures • Proposed net increase of departmental budgets by $112K ® Departments continue to monitor operating expenditures well to stay within budget ® Budgetary savings tend to be 2-4%, but vacancies may result in higher savings • Proposed $490k net increase in transfers out, largely to complete FY 2015-16 funding of the General Plan Update • Proposed increase of newly -established Renewal and Replacement Fund Reserve for currently unfunded capital needs 5 Projected Fund Balance ®®° CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS 6 3 FY2014-15 FY2013-14 Midyear Actual Projection Up (Down) $ Up (Down) % Economic Stability Reserve $ 6,060,000 $ 13,300,0007 7,300,000 121.71A Catastrophic Reserve 2,000,000 4,500,000 2,500,000 125.0% General Pian Reserve 500,000 0 (500,000) -100.0% Contingency Reserve 500,000 500,000 0 0.0% Subtotal, Assigned Fund Ralance 9,000,00() 13,300,000 9,300,000 103.3°x, Add: Unassigned Fund Balance 13,664,206 5,779,054 (7,985,152( -57.7/ Total, Ending Fund Sa€ance $ 22,564,206 $ 24,079,054 $ 1,414,848 6.2% 6 3 .•eco Other Funds • Allocation of Interest Earnings • Capital Projects Funds © Unused funds returned to General Fund Additional appropriations requested for specific projects • Water and Sewer Funds o Examined for impacts of drought • Adjustments in Other Funds . Amend the Fiscal Year 2014-15 Adopted Budget for estimated revenue and supplemental appropriations per proposed resolution 8 4 Next Steps . Amend the Fiscal Year 2014-15 Adopted Budget for estimated revenue and supplemental appropriations per proposed resolution 8 4 •ss •000 0000 •®r3 a� Questions & Comments? Fiscal Year 2014-15 General Fund Five -Year Financial Forecast 000 City of Burlingame, CA • Budget Study Session • March 4, 2015 BURLINGAME to 5 ... ...® Overview "°® .©e ao e • General Fund Revenue Forecast . Property Tax Assumptions ® Sales Tax Assumptions ® Transient Occupancy Tax (TOT) Assumptions ® General Fund Revenue Summary • Expenditure Assumptions ® Increasing CaIPERS Employer Rates . Impact of Other Personnel Costs • Next Steps no Economic Indicators Economist Intelligence Unit (EIU) Forecast - Y Rea! GDP Growth (% Change) 3.4 3 2.5 2.3 2. 2.4 2.2 2 J 1 2010 2012 2014 2016 2018 Source: EIU Economic and Commodity Forecast February 2015 12 M so* O cJ Summary of Economic Indicators Economic Indicator Projected 2014-15 Forecast 2015-16 U.S. Real GDP Growth 3.9% 3.5% Consumer Price Index — San Francisco 2.58% 2.64% California Non -Farm Employment Growth 2.0% 2.4% California Unemployment Rate 7.0% 6,5% California Median Existing Home Prices Growth 5,1% 4.0% California Residential Building Permits 114,000 154,000 09 i'I sio Major General Fund Sources `® r Revenue, property Tax, -15.59 27.7% - ■ Property Tax Transient Sales and Use r5alesandUseTax Occupancy Tax, ` 376% Tax, 18.3% ■ Transient Occupancy Tax ■ Other Revenue 14 i'I Property Tax Assumptions • Growth in net assessed values (NAV) contingent upon.- Higher pon:Higher residential property values Local 2015-16 property roll reflects 5.09% growth since prior year 7.1 % growth in residential values expected statewide San Mateo median home price = +5.3% since PY • However, County inventories of properties for sale relatively low • Assume that any significant real estate developments in pipeline will not be completed in 5 years IN •:0 0 X00 Property Tax Assumptions °© • Decline of Excess ERAF distribution in next two years — ongoing loss of $0.8 million annually • Based on current year growth in secured roll, 6.34% increase assumed for FY 2015-16 • Five-year forecast assumes 4.5% growth in four subsequent years FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 Property Tax $16,904,170 $17,524,358 $18,176,954 $18,963,417 $19,785,270 16 E Property Tax Assumptions f. City of Burlingame Net Assessed Valuations Residential Category Parcels Net Assessed Value % Total Residential 7,704 5,657,587,039 71.2% Dec -14 Commercial 470 1,304,028,690 16.4% Industrial 195 487,612,064 6.1% -7.6% 6.6% -44.0% Historical growth Govt Owned 2 1,131,741 0.0% in annual net 49.0% -35.4% -1.8% assessed value has Institutional 43 5,686,994 D.19'n been about 3.84% 2,3% -34.1% -22.7% compounded Miscellaneous 128 52,216,889 0.7% annually Recreational 18 21,756,820 0.3% Vacant/Other 110 106,475,394 1.3% •4.6% SBE Nonunitary [4] 2,560,452 0.0% Unsecured [1,081] 302,712,785 3.8% r 3.3% Totals 9,755 7,941,768,868 100.0% 17 E Residential S.F. Bay Area Jan -15 Dec -14 Jan -14 1 MTIA% ' Chg 1(1-Y% - MTM% YTYW Chg Alameda S640,330 $693,180 $600,960 -7.6% 6.6% -44.0% Contra -Costa (Ctyj $723,960 $704,410 $608,610 2.8% 49.0% -35.4% -1.8% Marin $982,140 $490,130 5960,000 -010% 2,3% -34.1% -22.7% Nape $400,000 $536,670 $515,620 -22.6% •22.4% -19.5% •5.7% San Francisco $892,860 $935,480 $781,250 •4.6% 14.3% -48.2% •19.8% San Metro 1,012,500 5980,400 $955,000 r 3.3% 6.0% -43.8% -31.7% Santa Clam 5815,000 $846,590 $731,000 -3.7% 11.5% -32.4% -4.4% SoEano $325,510 $324,070 $296,120 0,8% 10.39; -23.6% -15.7% Snnnma 5468,180 $519,470 $469,830 .9,9% .O.q% -42.0% -2012% 18 E E THE CITY OF BURLINGAME PROPERTY TAX DOLLAR BREAKDOWN®� ®o $0.2940 San Malec Gmmly S 92145 San Malec Union 1096 Sd Dis0ic5 S 0.1722 Ming— Eleme,i General $ V706 l3mnageme General Fund $130341 San Maim Junior Cnlllege General Public S 0.6438 County Eduimtm Tar • IG6+fat xapaxsix • soowst conn x,�o�x f owra �.an s,vmam 19 $ U1000 Sales Tax Assumptions ®® • Little impact from declining gas prices • Some changes expected over the next 5 years: o Acceleration of on-line shopping 0 Burlingame Avenue Streetscape (Sept. 2014) ® California "Triple Flip" sales tax backfill will expire in fiscal year 2015-16 No expected impact to sales tax revenue; merely a reporting issue W. • Expected growth in US Real GDP is -3.6% • California GDP growth is (est.) 4.1% (2014) • Five year forecast provides for a 5.8% increase in 2015-16, declining to 3.5%, which coincides with other indicators FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 Sales & Use Tax $11,585,100 $12,1.06,430 $12,620,953 $13,125,791 $13,585,194 22 11 •••o ••0© Sales Tax Assumptions o00 Sales Tax Assumptions • Expected 2.9% average growth statewide in fiscal year 2015-16 across all categories Taxable Sales by Category 3rd Quarter Projected Projected 2014 % of FY2014-15 FY2015-16 Total Growth Growth Autos & Transportation 35.2% 7.3% 4.8% Building & Construction 4.4x/9 19.0% 2.9% Business & Industry 9.6% 6.4% 3.1% Food & Drugs 4.1% 2.0% 2.0% Fuel & Service Stations 4.3% 5.0% -9.1% General Consumer Goods 14.2% 5.4% 2.3% Restaurants & Hotels 15.5% 6.4% 6.0% Total 100.0% 5.0% 3.3% 21 • Expected growth in US Real GDP is -3.6% • California GDP growth is (est.) 4.1% (2014) • Five year forecast provides for a 5.8% increase in 2015-16, declining to 3.5%, which coincides with other indicators FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 Sales & Use Tax $11,585,100 $12,1.06,430 $12,620,953 $13,125,791 $13,585,194 22 11 Sales Tax Assumptions �o • Expected growth in US Real GDP is -3.6% • California GDP growth is (est.) 4.1% (2014) • Five year forecast provides for a 5.8% increase in 2015-16, declining to 3.5%, which coincides with other indicators FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 Sales & Use Tax $11,585,100 $12,1.06,430 $12,620,953 $13,125,791 $13,585,194 22 11 000 0000 0000 000 Sales Tax Assum tions $8,000 - - — $6,000 — $4,000 - - $2,000 - $0 - 03 Q3 Q3 Q3 1t 12 13 14 Burlingame County California 23 • The City's largest and most economically sensitive revenue source • 5 -year forecast assumes 2% growth in 2015-16; 4.0% CAGR thereafter • Assumes capped growth in ADRs due to price elasticity (currently averaging $219 in San Francisco -San Mateo) • Assumes continued high occupancy rates regionally • Adjustment made for new SFO hotel (est. 400 rooms, FY18-19) • Staff will continue to monitor receipts and will revise forecast if needed FYZ015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 TOT $23,066,218 $23,868,000 $24,822,720 $24,294,114 $25,265,878 24 12 :11: TOT Assumptions • The City's largest and most economically sensitive revenue source • 5 -year forecast assumes 2% growth in 2015-16; 4.0% CAGR thereafter • Assumes capped growth in ADRs due to price elasticity (currently averaging $219 in San Francisco -San Mateo) • Assumes continued high occupancy rates regionally • Adjustment made for new SFO hotel (est. 400 rooms, FY18-19) • Staff will continue to monitor receipts and will revise forecast if needed FYZ015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 TOT $23,066,218 $23,868,000 $24,822,720 $24,294,114 $25,265,878 24 12 11• General Fund Revenue Forecast v (Summary Revenue Categories Projected 2023 Forecast 20I6 Forecast 2017 Forecast 2019 off Forecast 21020 Property Tax $ 16,610,000 S 16,904,170 $ 17,524,358 $ 18,176,954 Projected Revenues: $ 19,785,270 So les Tax 10,950,000 11,585,100 12,106,430 12,620,953 13,125,791 13,585,194 Transient Occupancy Tax .o� All General Fund Sources 24,922,720 24,294,114 25,265,878 Other Taxes -Franchise Tax 1,566,400 1,582,054 1,597,885 1,645,821 FY13-14 FY14-15 FY14-I5 Budget Budglet 1,022,670 Actuals Budget Projected Up (Down) $ Up (Down) % 66,330 66,993 67,663 68,340 69,023 Property Tax $15,496,548 $15,250,000 $16,519,000 $1,360,000 8.9% Sales and Use Tax 10,196,123 I 10,460,000 10,950,000 490,000 4.7% Transient Occupancy Tax 21,357,0661 21,100,000 22,500,000 1,40D,000 6.6% Other Taxes 805,979 809,999 814,049 Use of Money & Property 206,000 Franchise Tax 1,575,521 I 1,556,400 1,566,400 10,000 0.6% Business Licenses 981,821 I 995,000 990,000 (15,000) (1.5%) State HOPTR 64,968 I 66,000 66,000 0 0.01/ Real Property Transfer Tax 347,855 I 375,000 375,000 0 0.0% Licenses & Permits 111,712 I 86,000 81,000 (15,000 {5.8%} Fines, Forfeitures and Penalties 788,772 I 780,000 794,000 14,000 1-8% Use of Money & Property 203,451 191,000 206,000 15,000 7.9% Charges for Services 3,942,937 4,087,020 4,332,720 245,700 6.0% Miscellaneous Revenue 165,628 I 30,000 1,040,000 1,010,000 3366.71/. State Subventions 170,146 I 100,000 186,000 85,000 86.0% Interest Income 225,084 l ' 200,000 230,600 30,000 15.0% Total, General Fund Revenue $55,627,ti28 $55,776,420 <15'9,937,12k> $4,644,700 8.41/ 25 11• General Fund Revenue Forecast v (Summary Revenue Categories Projected 2023 Forecast 20I6 Forecast 2017 Forecast 2019 Foremst 2019 Forecast 21020 Property Tax $ 16,610,000 S 16,904,170 $ 17,524,358 $ 18,176,954 $ 18,963,417 $ 19,785,270 So les Tax 10,950,000 11,585,100 12,106,430 12,620,953 13,125,791 13,585,194 Transient Occupancy Tax 22,500,000 23,066,218 23,868,000 24,922,720 24,294,114 25,265,878 Other Taxes -Franchise Tax 1,566,400 1,582,054 1,597,885 1,645,821 1,595,196 1,746,052 Other Taxes- Business Licenses 980,000 1,001,010 1,022,670 1,045,004 1,068,036 1,091,792 Other Taxes -State HOPTR 66,000 66,330 66,993 67,663 68,340 69,023 Other Taxes -Transfer Tax 375,000 382,835 390,834 399,000 407,337 415,848 Licenses & Permits 81,000 81,405 81,812 82,721 82,632 83,045 Fines, Foffeitures & Penattles 794,000 797,970 801,960 805,979 809,999 814,049 Use of Money & Property 206,000 209,500 215,151 220,966 226,932 233,059 Charges for Services 4,332,720 4,449,703 4,569,845 4,593,231 4,819949 4,950087 Other Revenue 1,040,000 40,000 40,000 40,000 4n,000 40,000 State Subventions 186,000 193,250 201,226 202,232 203,243 204,259 Interest Income 230,000 425,500 607,614 729,137 845,799 845,799 Total Revenues $ 59,917,120 $60,785,055 $ 63,094,782 $ 65,551,871 $ 66,650,793 $ 69,129,355 Bose Year - i= 4S9 - 3.8096 3.89% 1.68% 3.72% Excluding one-time reven+. 3.17% 26 13 General Fund Expenditures Forecast ••;° .® Assumptions Personnel Costs Includes effect of current collective bargaining agreements, lincluding recently ratified MOUS for Teamsters Local 856, Department Heads and Unrepresented. (most set to expire in fiscal year 2014-15) Approximately a 1.0% annual growth in salaries beginning fiscal year 2015-16, offset by increased employee share of benefits, except for Police (based on actual negotiated increases) Internal Services CaIPERS rates to rise, significantly in forecast years Capital Projects Other benefits to increase at varying rates (from 0-8%) %) Includes a payroll surcharge to fund current cost of retiree medical Transfers In (Out) benefits Includes employee contributions to health care and PERS in accordance with MOUS Non -Personnel Costs Based upon cost of living adjustments for most non -personnel costs, 5% escalation factor for Central County Fire; includes a payroll surcharge to fund previously incurred costs associated with retiree medical benefits for former employees • Reduction in base fuel prices for fiscal year 2015-16 is expected, with a 5% CAGR thereafter • Includes a new allocation for water and sewer service directly charged to departments ••• General Fund Expenditures Forecast •• Assumptions (continued) :® Debt Service Actual debt service for all outstanding bond issues; includes 1payoff of the 2004 Library Lease Refunding Bonds on June 1, 2016 ($750k annually), payoff of Master Equipment Lease Purchase ($25f)K annually), and $2.8 million drop in debt service on Pension Obligation Bonds in fiscal year 2019 Assumes no new debt service, refinancings, and issuances Internal Services Based upon a 4% blended escalation factor Capital Projects Continuing the annual General Fund investment in Capital Projects equivalent to 2% of TOT revenues Transfers In (Out) Assumes reimbursements for debt service from other funds Service cost reimbursements from other funds remain the same, pending results of City-wide cost allocation study (began in February 2015) 14 •s• •a0® is®® Forecast of CaIPERS Rates ®°® . FY 2014-15 Rates (base) ® Miscellaneous Employees 19.91% ® Safety Employees 29.55% • Rates do not include employee contributions • Estimated rates are for "classic" employees — PEPRA employees will serve to decrease costs over time Fiscal Year Mlac Rate Safety Rate 2015-16 21.17% 30.10% 2016-12 22.90% 32.10% 2017-18 24.39% 34.10% 2018-19 25.60% 36.10% 2019-20 27.00% 38.10% 29 •116 •10© Employee Contributions ®°© . Cost-sharing agreements with employees to reduce pension costs © Classic employees contributing employer share PEPRA -Annual contributions for new employees cannot be less than employer normal cost • Employee contributions to health care © Offsets increases to health care costs . Retiree medical program closed to new employees (November 2011) W. 15 •r• •�o Forecast of OPEB Contributions°° o OPEB contributions will increase as shown: $ 5,130 5,215 5,297 5,381 ' 5,468 City fully funds the ARC * However, OPEB costs will be partially allocated to other funds, including Enterprise Funds (approx. 17%) MOU Expiration Dates BARGAINING UNIT HEADCOUNT MOU EXPIRATION DATE AFSCMF 829 and 2190 126 6/30/2015 Burlingame Association of Middle Managers (BAMM ) 28 12/31/2014 Department Head and Unrepresented 15 12/31/2015 Police and Police Administration 35 12/31/2018 Teamsters 7 12/31/2015 Total Headcount 211 *tActudes City Council, City Manager, and city Attorney 0 16 General Fund Expenditure ::0® Forecast (Summary} ®° (Revfsed) Budget Forecsr# ForecoW Feremst Foremst Farecust 2015 2036 2017 2018 2019 2020 Expenditure cote99ries (Berr:edl Salaries &Wages (15,512,801) j16,212,141) (16,350,557) (16,560,919) (16,772,574) (16,935,945) Benefits (8,494,474) (8,456,573) [8,863,033) (9,334,878) (9,863,916) (10,425,702) Operating Cost^, (19,593,903) (20,996,840) (21,772,536) (22,586,937) (23,438,354( (24,328,747) Internal Services (3,858,220) (4,087,104) (4,250,586) (4,420,612) (4,597,437) (4,781,334) Capital Miley (115,000) (208,000) (216,320) 4224,973) (233,972) (243,331) Total E:pendit— (47,574,399) (49,960,659} (51,453,245) (53,128,219) (54,906,252) (56,716,058) (3,000,000) Bass Year 5.0% 3.0% 3.3% 3.3% 3.3% 0 r..a •rma •®ra€ General Fund Forecast „(Summary) ®® m EFA (Berr:edl Bvdgrt Fbrrmrt F..1—t Forest Faremsr Forearm 2015 7476 2017 2018 2019 2020 Total Revenues $ 59,917,170 $60,785,055 S 43,094,782 S 65,551,871 S 66,650,783 S 65,129,355 Total Expenditures (47,574,398) (49,960,659) (51,453,245) (53,178,219) (54,906,75x) (56,716,058) Operating Revenue 12,342,722 10,824,397 11,641,537 12,423,651 11,744,510 12,413,297 Transfers In {Out) (1,643,950) (743,017) (817,025) (922,397) (1,530,252) (1,658,052} Capital Re0ewai& Replacement Reserve (3,000,{100) (3,000,000) (3,000,000) (3,000,000) (3,900,000) (3,000,000) 0ebt S-1ce (6,783,924) (6,404,907) (5,767,547) (5,881,546) (2,753,249) (2,777,739) Change in Fund Balance $ 1,414,848 $ 676,472 S 2,056,966 S 2,619,709 $ 4,461,029 $ 4,977,506 m EFA Five -Year Financial Forecast — Risks City of Burlingame, CA 6660 Budget Study Session • March 4, 2015 0 Multi -Year Financial Planning is a Risk Assessment 0G • Baseline forecast Assumes the status quo • Alternative outcomes would includes changes to baseline forecast — "Better" or "Worse" "Better" — optimistic revenue scenarios and policies to control costs "Worse" - economic recovery falters and growth in long-term liabilities 18 •4• Conditions for "Better" or ::am •00 "Worse" Outcomes —r 11ETTER OUTCOME 9RSEUNE:ORECW WORSE OLMOME Grawdl in —1 ud pny .1 income It, continues to recover. fr,t rt de dy Ece ..y Lit— .nd sm k.0 5.t slugs h Amperty, sates, and TOTU. -11-ti.- gmw Scone gmvvdt to pmputy, sale, and TOT tas Lr mwket nA— vnpact CAM% and Gry and City services Treasray Increase In spading —It. in Ir><rs�sed resrnveS frnxn plan checks. Lidding permit, Continuation of cu I prce— and Gry fiscal Caissanrer spending dwm - wealwrTOT and sales and --flan programs policies tax cc,&e ons drop Fepar4nern[s-minae to--dn l costs Departments —tin- m c bnl costs C„nsrerer wainsss leads m less demand fn city services-plan checks. 6ullding permits, me aSon Investment in ppitsl repa'u, rept.—wL Capital;nv¢stmsM at 2% ofTOT. limited pnngrsns new vAractnctu , and unhanded needs fording cf Res n-I and Replacement R.— Deferred mpital needs, hWw replacement Lasts, and orf arded DIa611ides grow 37 "Better" Scenario: High Bay :::® 0000 •00 Area Property Demand • Property values are augmented by high demand ® Bay Area is a desirable place to live and work ® Bay Area leads the nation in foreign real estate investment (e.g. China) Ranks as highest $ per square foot at $421 38 19 "Worse" Outcome. Property turnover ; and investment may be affected by rising interest rates Crort 1- Mon gage Races and Home WE Qn 10.0% 8 0°h 80% 4.0% 20% 8.500 6,000 5.500 5.000 ;500 4,000 3.500 3,000 0.4362500 96 '00 '02 '04 '05 'OS '10 '12 —30-Yeaf FR)d Rale (%. LEFT AXJS) — S NV-Famy Existing Home Sales (S! -LR Thous, RIGHT AX15) So¢ as Ff&dd!AW, N&Ma7Aaso ofe WP.Gs`Ml9 IE "Better" Outcome: Sales tax ::0o •00 base remains strong m® • Consumer confidence is back to pre - recessionary levels Gallup Emttomic Confidence Index -- Weekly Averages Latest resuIts for week ending Ian- 12, 20LI 10 0 _ -3 -8 -to -1.i 1.1 �n 20 -20 -- -e1 _`ry -26 -39 Jan *11 Alar'13 A1ag'13 Ju1'13 Sep'Ig Nov't3 Jat1'1.1 40 20 "Worse" Outcome: Sales tax base is declining Changing demographics and growth in personal services are creating a downward trend on sales tax collections Revenues perer capita inilalion a adjusted R 56.0 5159 9 m 53.0 $125 c no = 54.0 3100 s 53.0 476 a a U 52.0 SM 4 h e $1.9 325 c } 50.9 "Worse" Outcome: Sales tax base is declining According to the Board of Equalization, local 1% sales tax revenue as a percentage of personal incorne is also declining. o.sa% So.scl% o.ao� II 0.20% a o.io% 1980 1950 X000 2010 2020 tinnludrshinlnRlnfn Hru cmnratrt..a IN 21 "Better" or Worse": TOT "'- ••1; 00 changes with the economy • "Better" outcome . High ADRs and occupancy rates continue as a result of economic recovery • "Worse" outcome • During recession, hotels experienced lower occupancy rates ® According to USA Today, in January 2010, occupancy levels were: Nationwide - 45.1 % Burlingame — 56.8% ® Price elasticity dramatically constrains further growth in ADR — year -over -year growth is more limited 43 CaIPERS Employer Rates are affected by the stock market "Better" outcome: Higher investment returns reduce employer rates by 4.2% over 3 years "Worse" Outcome: Lower investment returns increase employer rates by 11.1 % over 3 years Estimated Change in 2014-17 investment Estimated Employer Rate Employer Rate Return Scenario — between 2015-17 2017-18 20LB-19 2019-20 and 2019-24 11.1% Q.8% Stli ercentil 25.5% 29.20/0 34.0% 2.8% ercentile 34.80/a 27.2% 30.0% 7.2% 2_11° 24.3% 25.6% 27.0% 4,2% .6% 75th errenti 23.8°/° 24.1% 23.9% 1.1% -4.0% 18.9% ercentlle 23.01/o 21.7% 1819% Fiscal Year Misc Rate Safety Rate 2015-16 2117% 30.10% Baseline 201637 22.90% 32.10% assumptions per 2017-18 24.30°% 34.10% original 5 Year 2018-19 25.60% 36.10% Forecast 2019-20 27.00% 38-10% 44 22 CaIPERS History of Investment :::® 00 .. .e® Returns00 Questions & Comments? 23 guar` IN�AntE AGENDA NO. 4b STAFF REPORT MEETING DATE. March 4, 2015 To: Honorable Mayor and City Council Date; March 4, 2015 From: Syed Murtuza, Director of Public Works — (650) 558-7230 Subject: Review of Draft FY 2015-16 General Fund, Gas Tax, Measure A, Measure M, and Parking Enterprise Funds Capital Improvement Program (CIP) RECOMMENDATION Staff recommends that the City Council review the proposed draft General Fund, Gas Tax, Measure A, Measure M, and Parking Enterprise Funds CIP 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 projects, Gas Tax and Measure A -funded projects and parking improvements funded by Parking Enterprise Funds, DISCUSSION GENERAL FUND PROJECTS: In developing the FY 2015-16 CIP, staff conducted needs assessment of various infrastructure owned by the City and identified a total of $3,865,000 of improvements under the General Fund CIP as follows: Sidewalk Repair Program and ADA Ramps Improvements ($500,0001 The City maintains approximately 116 miles of sidewalk and has an estimated $9M backlog of sidewalk work. Staff is proposing $400,000 for addressing sidewalk tripping hazards in several areas throughout the city as part of the 50150 Sidewalk Repairs Program in which adjoining private property owners share in the cost of repairs. In addition, staff is proposing $100,000 for upgrading intersection curb ramps at several locations throughout the city to comply with Americans with Disability Act (ADA) standards. Parks and Recreation Improvements ($1,275,000) Staff is proposing a total of $1,275,000 for the following Parks and Recreation improvements projects: • Village Park Playground Renovation: The existing playground facility at Village Park was 7 Review of Draft FY 2015-16 General Fund, Gas Tax, Measure A and Parking Enterprise Funds CIP March 4, 2015 built approximately 18 years ago. The facility is outdated, does not comply with current safety standards, and needs to be upgraded. The estimated cost to upgrade the facility to current standards is approximately $350,000. • Murray Field Sports Lighting Improvements at Bayside Park: The Murray Field lights were originally constructed in 1998. The lighting system is outdated and frequently breaks down, costing significant staff time in repairs and maintenance. The system needs to be replaced with a more durable and energy efficient system. The estimated cost of this project is approximately $250,000. • Community Center EIR (Environmental Impact Report): The development of the Community Center Project is currently progressing with the preparation of a project concept plan and community outreach process. The next phase of work involves performing environmental studies and developing the EIR. The estimated cost of conducting the associated environmental studies and preparing the EIR is approximately $170,000. Upon completion of this phase of work, the project will then be advanced to detailed engineering design and preparation of construction documents based on funding availability. • Ray Park Playground Renovation Design: The playground facility at Ray Park was constructed in the late 1990s. The playground does not meet current safety standards and needs to be upgraded. Staff proposes to undertake engineering design of this project during the upcoming fiscal year, and fund the construction in the following fiscal year. The estimated cost for the engineering design and preparation of construction documents is estimated at approximately $105,000 + New Bay View Park (State Lands Parcel): Currently, staff is in the process of developing the project in consultation with the State Lands Commission and the Bay Conservation and Development Commission. The next phase of work in the project's development involves performing environmental studies to obtain the necessary permits from the state regulatory agencies. The cost of environmental studies and permits is estimated to range from $80,000 to $120,000 Staff is recommending a budget of $100,000 for this phase of work. • Citywide Parks Pathways Repairs: Similar to the sidewalk conditions, the pathway facilities throughout the city's parks system experience damage from tree roots, leading to potential tripping hazards. Staff is recommending $100,000 for performing repairs to various pathways citywide as part of the annual repair program to reduce tripping hazards. • Cuernavaca Park Renovation: The restrooms facility at Cuernavaca Park was built in the mid 1980s. The restroom roof leaks, causing damage to the interior walls. The project involves repairing the restrooms roof and replacement of the interior fixtures, as well as the repairs to the damaged backstop fencing. The estimated cost of the project is approximately $50,000. • Central Irrigation System Controller: The project involves additional installation of an irrigation system controller to reduce water consumption in the city's parks facilities and medians. The estimated cost of this project is approximately $50,000. The City is systematically upgrading the entire parks irrigation system to current standards in a phased approach. • Parks Landscaping Improvements: The project involves upgrading the landscaping at the Flag Pole Circle in front of the Burlingame Avenue Train Station to match the landscaping of 2 Review of Draft FY 2015-16 General Fund, Gas Tax, Measure A and Parking Enterprise Funds C1P March 4, 2015 Downtown Burlingame Avenue. Additionally, the project includes landscaping improvements, a rose garden, seating furnishings, and a retaining wall structure as well as a shade structure at Heritage Park. The estimated total cost of the project is approximately $50,000. • Parks Furnishings: Many of the city's parks have inadequate picnic tables, benches, drinking water fountains and garbage cans. Staff is in the process of annually upgrading the existing furnishings in the parks on a systematic basis. Staff recommends $50,000 in next year's budget to install furnishings in various parks citywide. Building Facilities improvements ($1,580,000) The City owns and maintains 20 building facilities with over 200,000 square feet. Many of the building facilities and associated components are aging and in need of upgrades. Timely maintenance will extend the life of the facilities. Staff is proposing a total of $1,580,000 for the following building facilities improvements projects: Police Station HVAC Improvements: The existing HVAC system of the Police Station building was installed in the early 1980s as part of the original construction. The system has served its intended design life, and needs to be replaced. The estimated cost of the project is approximately $650,000. • Fire Station 35 Rehabilitation and Plumbing Improvements: Fire Station 35 has inadequate living space and inadequate bathroom facilities for firefighters. Also, the plumbing system has aging and deteriorated pipes that need to be upgraded. Additionally, the building's roof is approximately 20 years old, has served beyond its intended design life, and requires a complete replacement. The estimated cost of the project is approximately $500,000. Building Facilities Conditions Assessment Study and Master Plan: With the exception of the Main Library and the Corporation Yard buildings, most of the city's building facilities are approximately 32 to 67 years old, and have not had any major upgrades since their original construction. Many components of the building systems have served their intended design life and need to be upgraded. Staff is recommending conducting a comprehensive condition assessment study of all buildings to develop a master plan for prioritizing improvements in order to maintain these buildings in a good condition to continue providing services to the community. Staff is recommending $200,000 for undertaking the condition assessment study and developing a CIP master plan for building facilities. Donnelly Parking Garage Roof Deck Resurfacing: The rubberized coating on the roof of the Donnelly parking garage structure was originally constructed in 1980. The coating is worn out and deteriorated and presents a potential tripping hazard. Further deterioration of the coating may result in the erosion of the concrete, exposure of steel reinforcement, and potential failure. The estimated cost of this project is approximately $70,000. Parks Yard Roof Replacement: The roof of the Parks Yard is deteriorated and needs to be replaced. In addition, the roof of the Equipment Shed is experiencing corrosion and needs to be coated to extend its life. The estimated cost of this project is approximately $60,000. Engineering Division Remodeling: The configuration of the Engineering Division area in the City Hall building is inadequate and inefficient. The map room and the rarely used vault area take significant space, rendering these spaces difficult to use. Additionally the configuration of the area is inefficient for the operations of the Engineering Division. Staff is 3 Review of Draft FY 2015-16 General Fund, Gas Tax, Measure A and Parking March 4, 2015 Enterprise Funds C!P proposing to remove the map room and vault area and convert the dead space into office area for staff use. The estimated cost of the project is approximately $50,000. The cost includes preparation of engineering plans and construction, including potential asbestos mitigation. ADA Improvements at the Corporation Yard and the Recreation Center: The existing counter and access area at the Recreation Center need to be upgraded for compliance with the ADA. Similarly, the handrails and the access area at the Corporation Yard building need to be reconfigured in order to comply with the ADA. The estimated cost of the project is approximately $50,000. Traffic Safety and Signage Improvements ($440,000) Staff is proposing the following traffic safety and signage improvements projects: California Drive Class I bicycle Improvements — Project Study Report (PSR): At the January 31, 2015 Goal Setting Session, the City Council expressed an interest in exploring the installation of a dedicated bicycle track along California Drive between the BART Station in Millbrae and the Burlingame Avenue Caltrain Station. The bicycle track would be separated from vehicular traffic, and is presumed to be located along the east side of California Drive within the San Francisco Public Utility Commission's right-of-way. The first step in this process is to perform a Project Study Report (PSR) to evaluate the feasibility and identify alternatives. The PSR will consist of preliminary engineering; feasibility determination; identification of project alternatives and determination of resources required to build such a project. The estimated cost of conducting the PSR ranges from approximately $180,000 to $220,000. Staff is recommending a preliminary budget of $200,000 to undertake the PSR. Traffic Calming Studies: Speeding continues to be a problem in the vicinity of City Hall despite stepped up enforcement efforts by the Police Department. Staff is proposing to perform a traffic calming study to identify necessary improvements to address the problems. The estimated cost of the engineering studies associated with this project is approximately $80,000. Upon completion of this phase of work and identification of improvements, staff W11 return to Council for the next steps in implementing the project as part of a future budget cycle. Annual Citywide Traffic Safety Striping Program: The city has approximately 84 miles of streets with numerous traffic signage, striping and pavement markings. The traffic striping and pavement markings get faded over the years due to wear and tear. Staff is recommending $80,000 for replacing worn out traffic striping and pavement markings at various locations throughout the city. Commuter Shuttle Demand Study: At the January 31St, 2015 Goal Setting Session, the City Council expressed an interest in adding a new shuttle to further reduce the greenhouse gases from the single occupancy vehicular trips generated in the city, and to connect the employment centers with the downtown and commercial areas within the city. This would be in addition to the existing three shuttles that already serve Burlingame, including the North Burlingame Shuttle, the Bayside Commuter Shuttle and the Burlingame Trolley The first step in implementing an additional shuttle is to perform a Shuttle Demand Study. The Study will provide essential data with regards to the demand and need for shuttle service, frequency of service and the service area to be covered. Additionally, the Study will identify associated costs for implementing and managing the shuttle program. Staff estimates that a Shuttle Demand Study cost would range from approximately $75,000 to $85;000. Staff is N Review of Draft FY 2095-16 General Fund, Gas Tax, Measure A and Parking March 4, 2015 Enterprise Funds CIP recommending a budget of $80,000 for this project. Information Technology Servers Upgrade ($70,000) Several components of the City's computer server systems are over 15 years old and need replacement. The estimated cost for the upgrade is approximately $70,000. GAS TAX, MEASURE A AND MEASURE M FUNDED PROJECTS: Staff is projecting an estimated $1,469,000 in revenues from a combination of Gas Tax, Measure A Funds and Measure M Funds. The following street improvements projects are proposed for FY 2015-16: FY 2014-15 Annual Street Resurfacina Proaram ($1.379.000 The City owns and maintains approximately 84 miles of streets valued at approximately $80M. The backlog of work for street maintenance is estimated at $20M. Based on the streets assessment conditions and pavement management program recommendations, staff is proposing the following streets be resurfaced as part of the Annual Street Resurfacing Program: Chapin Ave., Clarice Ave., Loma Vista Ave., Marin Dr., Marsten Rd., Martinez Dr., Sanchez Ave., Skyview Dr. and Vernon Wy, Annual Citywide Curb and Gutter Replacement Program (,$100,000) The City owns and maintains approximately 116 miles of curb and gutter. Similar to the sidewalk conditions, several segments of curb and gutter facilities are deteriorated and need to be replaced for public health and safety. Staff is recommending $100,000 to replace curb and gutter in the critical areas citywide as part of the annual program. PARKING ENTERPRISE FUNDS PROJECT: Smart Parking Meters Implementation 0475,000) The City Council implemented smart parking meters along downtown Burlingame Avenue as part of the Streetscape Project. The smart meters have greatly improved the parking experience for visitors along Burlingame Avenue. In order to continue improving the parking experience in the rest of the downtown area, staff is proposing to expand the smart meters in the downtown core area streets. There are approximately 700 old parking meters in the downtown core area streets that are next in line for smart meters conversion. These meters are located along the following streets: Chapin Ave., Primrose Rd., Donnelly Ave., Park Rd., Lorton Rd., Howard Ave., and California Dr. The estimated cost to replace the old meters with the new meters is approximately $475,000. The smart meters will have the capability to accept major credit cards and other methods of payments. After installation of smart meters, there will be additional ongoing charges for data fees and credit card transaction. FISCAL IMPACT The proposed General Funds CIP budget for FY2015-16 is $3,865,000. However, the projected funding from the 2% Transient Occupancy Tax is estimated at approximately $3,750,000. If the Council desires to fund all the projects listed, additional funding in the amount of $115,000 would Review of Draft FY 2015-16 Genera! Fund, Gas Tax, Measure A and Parking March 4, 2015 Enterprise Funds CIP need to be transferred from the City's General Fund into the CIP program. Alternatively, the City Council could choose to reduce the program size accordingly by eliminating one or more of the General Fund projects described above. The street resurfacing projects are proposed to be funded by Gas Tax, Measure A and Measure M funds as indicated in the report, while the smart parking meters project will be funded by Parking Enterprise Funds. Exhibits: • Draft FY2015-16 General Fund CIP Spreadsheet • Power Point Presentation FY2015-16 Draft General Fund Capital Improvement Program March 4, 2015 Projects Description Prosed Costs FY2025-16 Request Draft Recommendation On thousands (in thousandsl (in thousands) A Sidewalk & ADA Ramps Improvements A.1 Annual Sidewalk Repair Program (City portion and private properties) 400 400 400 A.2 Annual Citywide ADA Ramp Improvements Program 100 100 100 AlSidewalk Improvements & ADA Ramps Total $500 $500 $500 B Parks & Recreation Improvements B.1 Citywide Parks Pathway Improvements 100 100 100 B.2 VNage Park Playground Structure Improvements 350 350 35C B.3 Community Center- Environmental Studies and Environmental Impact Report 170 170 170 8.4 Murray Field Sports Lighting Improvements 250 250 250 9.5 Bayview Park Environmental permitting 100 100 100 8.6 Ray Park Playground Structure Improvements 105 105 105 B.7 Citywide Parks Landscape Improvements 50 50 50 B,S City Parks Furnishing Upgrades 50 50 50 B.9 Cuernavaca Park Renovation 50 50 50 13.10 Parks Central Irrigation System Controller upgrade 50 50 50 B - Parks & Recreation Improvements To 1,275 I 1,275 1,275 C Building Facilities Improvements CA Police Station HVAC System improvements 650 650 650 C.2 Fire Station 35 Rehabilitation and HVAC system upgrade 500 500 500 C.3 BuMing Facilities Condition Assessment Study & CIP Master Plan 200 200 200 CA Donnelly Parking Garage Roof Deck Resurfacing 70 70 70 C.5 Parks Yard Roof Replacement 60 60 60 C.6 Engineering Division Remodelling 50 50 50 C.7 ADA Improvements at Recreation Center and Corp yard 50 50 50 C Building FacIlitfes Improvements Total 1,580 1,580 1,580 D Traffic Safety Improvements D.1 California Drive Class I Bicycle Route - Project Study Report and Feasibility Study 200 200 200 0.2 Traffic Calming Studies for residential areas near the City Hall SO 80 80 D.3 Annual Citywide Traffic Safety Striping Program SO 3D 80 D.4 Commuter Shuttle Demand Study SO Bo 80 Traffic Safety Improvements Total 440 E Informational Technology IIT) New Backup server for City Information System - procurement and installation 70 70 70 E JIT Total 70 70 70 Total Recommended $3,865 $3,865 $3,865 City Council— Mid -Year Budget Study Session Draft Capita( Improvement Program FY2015-16 March 4, 2015 sE Overview • General Fund Projects • Gas Tax & Measure A Projects 4 • Parking Enterprise Fund Projects • Summary ? • Council Feedback & Direction 4 FY 2015-16 General Funds CIP ■ Total recommended for General Fund CIP funding is $3,865,000 ■ Approximately $3,750,000 in 2% TOT is projected for the next fiscal year. . A 50150 Sidewalk Program r L 2/27/2015 ge Park Playground Structure Improvements $350k 'ay Field Sports Lighting Improvements $250k imunity Center - Environmental Studies and Environmental Impact Report $170k Park Playground Structure Improvements $10514 pride Parks Pathway Improvements $100k View Park Environmental Permitting $100k wide Parks Landscape Improvements $50k •navaca Park Renovation $50k s Central Irrigation System Controller Upgrade S50k Parks Furnishings S Total Recommended: $1,275k-' 2/27/2015 12 Parks & Recreation Projects ,— _,. Cue rnalacaPark Renovation .. t s. 1 A l as parrs Landscape Imor�,e;r.ents Building Facilities Projects • City maintains 20 buildings with over 200.000 sq ft • Condition assessment identified $8M of maintenance program over 10 years • Timely maintenance extends life of building facilities • Recommend $1.580,000 annual program Aft°'_ I lice Station HVAC System Improvements $� e Station 35 Rehabilitation and HVAC system upgrade $� ilding Facilities Condition Assessment Study & CIP Master Plan $i nnelly Parking Garage Roof Deck Resurfacingries Yard Roof Replacement gineering Division Remodeling A Improvements at the Recreation Center and the Corp Yard 9 Total Recommended: $1,5 TT -.-71 Y 2/27/2015 1. California Drive Class I Bicycle Route - Project Study Report and Feasibility Study Traffic Calming Studies and Engineering Design for residential areas near the City Hall Annual Citywide Traffic Safety Striping Program Commuter Shuttle Demand Study Total Recommended: class I Bityule Route "ecl Study Repot & FeasiNl@y, Study '••`. - _ n�'y � 1 .. Traffic Calmltg _ Stufes and ty I}esign for e ' _ ' rasMen¢al areas near the city Hm r Computer System Server Upgrade _ _ r Estimated Cost is Not $70k 2/27/2015 7 Arguello Drive Marin Drive Bayshore Blvd Marsten Avenue -I Carolan Ave Madnez Drive Chapin Avenue Sanchez Avenue Clarice Lane Skyview Drive Loma Vista Ddve Vernon Way I w _ 2/27/2015 8 r p+ ire` Arguello Drive Marin Drive Bayshore Blvd Marsten Avenue -I Carolan Ave Madnez Drive Chapin Avenue Sanchez Avenue Clarice Lane Skyview Drive Loma Vista Ddve Vernon Way I w _ 2/27/2015 8 2/27/2015 2/27/2015 `[4;