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HomeMy WebLinkAboutMin - CC - 2018.03.14 Burlingame City Council March 14, 2018 Approved Minutes 1 BURLINGAME CITY COUNCIL Approved Minutes 2017 Mid-Year Budget Session on March 14, 2018 1. CALL TO ORDER A duly noticed regular meeting of the Burlingame City Council was held on the above date in the City Hall Council Chambers. 2. PLEDGE OF ALLEGIANCE TO THE FLAG The pledge of allegiance was led by Adrienne Leigh. 3. ROLL CALL MEMBERS PRESENT: Beach, Brownrigg, Colson, Keighran, Ortiz MEMBERS ABSENT: None 4. PUBLIC COMMENTS No one spoke. 5. STAFF REPORTS AND COMMUNICATIONS a. ADOPTION OF A RESOLUTION AMENDING THE FY 2017-18 OPERATING AND - CAPITAL BUDGETS TO REFLECT THE RECOMMENDED MID-YEAR ADJUSTMENTS Finance Director Augustine explained that the purpose of the mid-year budget study session is to: inform the Council and the public about the status of the City’s finances; update the budget based on expenditure and revenue projections; and provide a more precise fiscal forecast for FY 2018-19. Finance Director Augustine explained that the annual budget is adopted prior to the completion of the current fiscal year. Therefore, one of the biggest factors in the mid-year adjustments is the audit of the previous year’s budget. She noted that as a result of the completion of the audit, revenues are now projected to come in 2.2% higher than anticipated in the FY 2017-18 adopted budget. Burlingame City Council March 14, 2018 Approved Minutes 2 Finance Director Augustine discussed the big three sources of revenue for the City: property tax, sales tax and TOT. She stated that property tax is expected to be $961,000 (approximately 5%) better than the adopted budget. She stated that this is mostly the result of the ERAF refund. Next, she explained that the City continues to have a strong sales tax base. Automobile and transportation- related sales continue to be the major source of sales tax revenue. She stated that the sales and use tax actuals are expected to be on target, with the adopted budget about 1% higher than last year. Councilmember Keighran asked why Burlingame’s sales tax revenue is not increasing at the same pace as the County. Finance Director Augustine replied that sales tax revenue is 1% higher than last year. She noted that staff expected that it would decrease from last year because the City’s sales tax revenue is concentrated in auto sales. She explained that auto sales have been leveling off throughout the country since the third quarter of 2017. She stated that an additional factor was that a major consumer goods store closed for six months. Finance Director Augustine stated that TOT is expected to be $529,000 (approximately 2%) better than the adopted budget. She explained that TOT is a precursor of future economic trends, so it is carefully watched by staff. Finance Director Augustine stated that as part of the mid-year analysis of the General Fund, all of the departments were asked to review their budget and note any discrepancies. She explained that there were not a lot of requests for expenditure adjustments as funding for most unanticipated needs was found within each department’s budget. Expenditure adjustments for the General Fund equaled $575,000, or 1% of the budget. She stated that the adjustments include a few large items like improvements to the Broadway Business District and funding of Burlingame School District storm drain fees. She noted that transfers out include the $350,000 to assist in resurfacing the Burlingame School District turf fields. Finance Director Augustine stated that the Section 115 Pension Trust (“PARS” – Public Agency Retirement Services) funding also impacts the proposed transfers out. She explained that the PARS contributions are a transfer of the City’s available cash to another asset, and contributions to the trust can’t be recorded as current-year expenditures. As a result, the transfers out from the various funds for contributions to the pension trust account must be reversed. The PARS contributions won’t impact total fund balance but will be reflected as a restricted fund balance. She added that unless the City pays CalPERS directly, the funds aren’t expenditures. Vice Mayor Colson stated that PARS contributions work similar to pension obligation bonds. She explained that the pension obligation bond funds were transferred to CalPERS, which reduced the City’s liability with CalPERS, but the liability remains on the City’s balance sheet. Mayor Brownrigg asked why the City treats the pension restricted funds different than the City’s contributions to OPEB (Other Post-Employment Benefits). Finance Director Augustine replied that OPEB is set up as a separate trust, and it’s the City’s own obligation. Burlingame City Council March 14, 2018 Approved Minutes 3 Mayor Brownrigg asked if there was a single chart that shows the commitments the City is making in terms of reserving capital against employee costs. Finance Director Augustine replied that there isn’t a single chart because the obligations are to separate entities. Next, Finance Director Augustine reviewed the chart on page 13 of the staff report. The chart shows the City’s projected General Fund balance as a result of the proposed adjustments. She explained that the chart outlines FY 2016-17 actual fund balance and the FY 2017-18 projected balance based on proposed adjustments. She stated that in the original budget, staff predicted a budgetary deficit of $1.6 million, which was a conscious decision based on PARS funding. She stated that by reversing the PARS transfer, the City ends up with a projected surplus of $2 million. Finance Director Augustine explained that the allocation of $3.1 million into PARS came from the General Fund’s unassigned fund balance. She noted that it is predicted that the unassigned fund balance will be approximately $12.6 million at the end of this fiscal year. She stated that the unassigned fund balance is available for appropriation in future fiscal years or at the Council’s discretion. Finance Director Augustine next discussed the City’s unfunded needs including City facilities, storm drain repairs, and sidewalk repairs. Finance Director Augustine reviewed the next steps. She stated that staff is requesting Council adopt a resolution to amend the FY 2017-18 adopted budget for estimated revenues and supplemental appropriations. Additionally, staff is asking Council to approve a $75,000 appropriation for consulting assistance in the development of standards for placement of future cell antennas on City-owned poles. Mayor Brownrigg discussed the upcoming March 19 City Council meeting, where the Council would be discussing plans for a new community center. He explained that while Measure I would be the main source of funding, some assistance would be required from the General Fund. City Manager Goldman explained that the proposal was to combine $1 million from the General Fund with Measure I funds to obtain an approximately $30 million lease revenue bond. Finance Director Augustine explained that the $1 million from the General Fund was in the five-year forecast labeled as additional debt service. She stated that debt service is increased by $1 million for the next five years, and the transfer to the Capital Improvement Reserve is reduced by $1 million. Councilmember Keighran stated that the November ballot would include a measure to repeal SB 1. She asked if staff had a back-up plan in case the repeal passed. DPW Murtuza replied that the City’s only option would be Measure M funds that are already utilized. Accordingly, staff would have to decrease the City’s resurfacing program. Vice Mayor Colson asked if the potential 400 room SFO hotel was included in the City’s TOT projections. City Manager Goldman replied that staff reduced its TOT projection because of the SFO hotel. She added that the potential new hotel in Burlingame was not factored into TOT projections. This is because staff doesn’t add a project into the forecast until the City receives a start date. Burlingame City Council March 14, 2018 Approved Minutes 4 Vice Mayor Colson thanked staff for taking a conservative approach to its estimation of TOT revenue. Finance Director Augustine discussed the five-year forecast. She began by reviewing the summary of economic indicators. She stated that a majority of the information was from HdL and Beacon Economics. She explained that the economy is projected to stay robust for the next two years. The U.S. real GDP has a growth of 2.3% in 2018-19. Finance Director Augustine reviewed the General Fund’s major revenue sources over the next five years. She stated that it is predicted that property tax revenues and sales tax revenues will continue to increase. In reviewing the property tax assumptions, she explained that residential property values will remain high, and the County’s inventories of properties for sale will remain relatively low. She noted that one of the assumptions in the five-year forecast is a decline in the excess ERAF distribution. It is projected that the ERAF distribution will decrease by $100,000 a year. Councilmember Ortiz asked if the City should be more realistic in how it budgets for excess ERAF distributions. Finance Director Augustine stated that the City takes a conservative approach as it is a decreasing source. She added that for FY 2017-18, the City’s ERAF contribution was $2.6 million, and the City received an excess ERAF distribution of $1.7 million. Finance Director Augustine stated that the expected sales tax growth is 3.5% statewide, but the City is only expecting 1% growth. She explained that generally, sales tax is a declining revenue source for cities because of online retail. However, this decline hasn’t shown up in the City as sales tax revenues remain strong. Finance Director Augustine stated that the five-year forecast for TOT assumptions remain strong. She explained that it is predicted that Bay Area tourism will remain high, allowing for continued high occupancy rates at the hotels. Mayor Brownrigg explained that several of the hotel owners mentioned that with the Moscone Center coming back online, they are expecting a greater demand for their rooms Finance Director Augustine reviewed the City’s General Fund forecast. She explained that the expenditure increase for salaries and wages is based on the effects of the current collective bargaining agreements. She noted that the five-year forecast considers the $1 million increase in debt service for the lease revenue bonds. Finance Director Augustine next discussed the forecast for CalPERS rates. She stated that the cost for miscellaneous employees goes up an average of 14.6% a year for the next five years. For safety employees, the cost increases an average of 16% a year for the next five years. She noted that the CalPERS discount rate for FY 2017-18 is 7.5%, which will be lowered to 7% in 2020-21. Finance Director Augustine stated that the City will maintain a threshold rate of 37.7% for miscellaneous employees. This is because the City anticipates that rates will continue to increase for the next five years. She reviewed a graph that showed the effects of the discount rate reduction on miscellaneous employees through FY 2028-29. She explained that after FY 2028-29, the cost for miscellaneous employees levels off Burlingame City Council March 14, 2018 Approved Minutes 5 and then begins to decrease. She noted that 100% funded status for miscellaneous employees is supposed to be reached in 2042. Finance Director Augustine stated that the threshold rate for safety employees is 76.9%. She stated that after FY 2028-29, the rate continues to increase. She added that 100% funded status is projected to be reached in 2041. Finance Director Augustine noted that while maintaining the threshold rates, if rates do decrease, the City will put the additional funds into PARS. Vice Mayor Colson asked if staff had run a projection to ensure that the 37% is what is needed to sustain the City through the bubble. Finance Director Augustine replied in the affirmative. Vice Mayor Colson stated that by putting assets into the PARs fund, the City has control over asset allocation. She explained that under CalPERS, the City has to abide by CalPERS’ asset allocation and risk profile. Finance Director Augustine explained that City employees have agreed to cost-sharing agreements with the City to assist in reducing pension costs. Vice Mayor Colson asked how the City compares to other cities in relation to employees assisting with employer contributions. Finance Director Augustine stated that she would need to get back to Council with this information. City Manager Goldman added that there are a lot of variables involved; therefore it wouldn’t be a straightforward comparison. Finance Director Augustine stated that employees also contribute to their healthcare costs, and the retiree medical program was closed to new employees beginning in November 2011. Vice Mayor Colson asked where pension payments show up on the General Fund forecast. Finance Director Augustine stated that the City’s payments to CalPERS are seen in expenditures, and the City’s payments to the PARS trust are transfers. Finance Director Augustine explained that the General Fund forecast shows that the City’s expenditures are outpacing its revenues. She added that because the City has conservative assumptions, it shouldn’t be too concerning. Mayor Brownrigg discussed how the longer table in the handout breaks down the expenditure forecast. He explained the expenditure forecast shows total expenditures growing by 25% and revenues growing by 14%. He noted that what really jumped out to him was the 42% growth in benefits. He asked if this was from the exogenous assumptions and if it included OPEB contributions. Finance Director Augustine stated the OPEB contributions aren’t increasing and that the growth in benefits is the result of the pensions, healthcare rates, and other factors. City Manager Goldman added that Finance Director Augustine and HR Director Morrison have made presentations to staff and labor groups to discuss pension challenges so that everyone is on the same page. Burlingame City Council March 14, 2018 Approved Minutes 6 Vice Mayor Colson stated that she reviewed old staff reports and calculated what the numbers are for the pension contribution. She explained that in FY 2016-17, the pension contribution for miscellaneous employees was $5.2 million and that the required contribution increases to $10.6 million in 2023. She noted that the contribution for safety employees goes from $2 million to approximately $4 million. Therefore, in five years, the City will experience a 100% increase in pension contributions. Mayor Brownrigg opened the item up for public comment. Burlingame resident Adrienne Leigh, secretary of BPAC, voiced her support of the staff’s recommendation in the CIP to update the Bicycle Master Plan. Mayor Brownrigg closed the public comment. Mayor Brownrigg noted that staff is asking for direction on a few questions: • does the Council want to consider additional options for pension funding; • does the Council want to add additional funding to the Capital Investment Reserve; and • does the Council want to consider funding for unfunded needs. Councilmember Ortiz asked if the first question was about additional PARS funding. Finance Director Augustine stated that this is one option for pension funding. She added that the Council could also choose to make additional payments directly to CalPERS. Councilmember Ortiz asked if PARS acted as a reserve for future CalPERS contributions. Finance Director Augustine replied in the affirmative. City Manager Goldman explained that the base question is would the Council like to put additional funds towards pensions. She explained that often at the mid-year budget study session, Council approves an additional fund allocation to the Capital Investment Reserve. However, this year, staff is asking whether the Council wants to allocate funds towards pensions; allocate funds to the Capital Investment Reserve; or a combination. Councilmember Beach stated that the City is fortunate to be in a strong fiscal position. She thanked the voters for passing Measure I which will allow for continued efforts to repair streets and sidewalks. She explained that she would hate to see the City pull back significantly on funding the Capital Investment Reserve as construction costs are rising and the City has facility needs and the Broadway Grade Separation project looming. However, she explained that she also wanted to see the City allocate additional funds towards pensions during strong financial times. She stated that she would rely on her colleagues’ expertise on whether the additional funds are put in PARS or sent to CalPERS. Mayor Brownrigg asked what the total number the Council has to allocate to different funds. Finance Director Augustine stated that it is approximately $3.3 million. She explained that this is the amount that was put in the Capital Investment Reserve last year. Burlingame City Council March 14, 2018 Approved Minutes 7 Councilmember Beach suggested that Council consider putting the excess ERAF refund of $1.7 million towards pensions. She stated that the City shouldn’t expect an ERAF refund every year and that the refund will diminish in the future. Mayor Brownrigg asked if the Council should hear DPW Murtuza’s presentation on the Capital Improvement projects for next year prior to recommending how best to divide the surplus funds. City Manager Goldman stated that staff is recommending a huge CIP program of $7.8 million from the General Fund. She explained that it is a large amount of projects and that it is what the staff feels best equipped to accomplish this coming year. Therefore, the allocation of additional funds would be put into the Capital Investment Reserve for future projects. Mayor Brownrigg asked if the Capital Investment Reserve is the equivalent of a restricted fund but for capital improvements. City Manager Goldman replied in the affirmative. Mayor Brownrigg asked if the funds are coming out of the unrestricted fund balance, why only $3.3 million. Finance Director Augustine explained that the suggestion of $3.3 million was to be consistent with the prior year’s recommendation. City Manager Goldman stated that the City should maintain some level of unassigned fund balance to cover the unexpected. Councilmember Beach stated that she would still like to see a significant chunk of the $3.3 million go into the Capital Investment Reserve. She suggested adding a little more money to the $3.3 million because the economy is strong and putting $3 million in the Capital Investment Reserve and $1 million towards pensions. Vice Mayor Colson agreed that capital improvements are at least as important as the pensions. She explained that the pensions are a long-term obligation, and it’s going to be amortized over the next 18-20 years. She stated that what she is really concerned about is the rapidly increasing costs of capital improvements. She noted that she believes the community center is going to cost more than budgeted. Therefore, she stated that keeping funds flexible in the Capital Investment Reserve is important. Vice Mayor Colson asked when the pension obligation bonds will be paid off. Finance Director Augustine replied that she believed it was 2034. Vice Mayor Colson stated that the City has been steadily paying the pension obligation bonds off for the past decade. She explained that the debt service obligation on the bonds is dropping dramatically; therefore the City could take the delta and put that towards PARS. Councilmember Ortiz stated he liked Vice Mayor Colson’s suggestion. He recommended that the City allocate an additional $1 million to PARS for the mid-year and put the remaining $2.3 million in the Capital Investment Reserve. Councilmember Keighran stated that she wanted to ensure funding for the Capital Investment Reserve because of the increased costs of construction. Burlingame City Council March 14, 2018 Approved Minutes 8 Vice Mayor Colson discussed the funding of PARS. She explained that if the Council puts additional funding in it now and later the economy crashes or TOT goes down, then the City has gotten ahead of CalPERS payments. She noted that when the City gets to a point where equilibrium is reached, the Council can determine if they want to continue allocating funds to PARS. Councilmember Ortiz made a motion to adopt the resolution to approve the amended budget with the following additions: 1) $75,000 for the wireless antenna study; 2) $1 million to PARS; and 3) $2.3 million to the Capital Investment Reserve; seconded by Councilmember Keighran. The motion passed unanimously by voice vote, 5-0. b. REVIEW OF DRAFT FY 2018-19 GENERAL FUND, GAS TAX, MEASURE A, MEASURE I, MEASURE M, AND SENATE BILL (SB 1) FUNDED CAPITAL IMPROVEMENT PROGRAM (CIP) DPW Murtuza stated that staff is recommending $9.28 million in projects under the Capital Improvement Program for next fiscal year. He explained that $6.84 million is from the General Fund, $1.865 is from gas tax, SB 1, and Measure M funds, and $75,000 is estimated in Measure I projects. He noted that staff received a total of $7.14 million in CIP requests. DPW Murtuza discussed the proposed Parks and Recreation CIP projects including: Victoria playground, pool deck improvements, and BSD synthetic turf replacement fund. Councilmember Keighran asked for the total cost of the pool deck replacement and resurfacing project. DPW Murtuza stated that the total cost was $1.2 million, with the City’s contribution being $600,000. Vice Mayor Colson noted that the Washington Park parking lot resurfacing project would not interfere with the construction of a new community center. She explained that staff was recommending that the parking lot adjacent to BHS be resurfaced. Mayor Brownrigg stated that he was surprised by the cost of a batting cage. Parks and Recreation Director Glomstad stated she wasn’t convinced that the $100,000 was enough. She stated that she had talked to BYBA and BGS about backfilling any shortage. Mayor Brownrigg asked if it was staff’s intention to replace the existing batting cage. Parks and Recreation Director replied in the affirmative. Councilmember Beach asked for an elaboration on the vision for the Murray Playground removal and installation of grass. Parks and Recreation Director Glomstad stated that it wasn’t a complete vision yet. She explained that the playground is old, and staff has received interest in replacing the playground with grass. She stated that it is challenging because it is on top of the landfill cap and is raised. She added that staff would be hiring consultants to determine how best to utilize those areas. Councilmember Beach stated that if the City does lose that playground, she would like to see non- programmed space created for children at Murray. Burlingame City Council March 14, 2018 Approved Minutes 9 Mayor Brownrigg asked if the Bay Trail fitness equipment was located by the Marriott. Parks and Recreation Director Glomstad replied in the negative. It is on Airport Boulevard. She explained that staff will be working with the Parks and Recreation Foundation to help fund the project. Vice Mayor Colson stated that she appreciated that the City was setting aside funds to re-turf fields at BSD and Murray after their current installations. DPW Murtuza discussed the proposed building and facilities projects for next fiscal year. He explained that a major project is the Police Station underground fuel tank. He stated that staff is requesting $400,000 for this project. Additionally, he discussed the request for $100,000 to conduct ADA improvements at City facilities. Councilmember Keighran asked what City Hall acoustic improvements entail. DPW Murtuza explained that the walls in the executive offices and conference rooms are thin. Therefore, this project will help to mask confidential conversations that occur. DPW Murtuza next discussed the bicycle, pedestrian, and traffic safety projects. He stated that staff is requesting $500,000 for sidewalk and ADA improvements, of which $200,000 is from the General Fund and $300,000 is from Measure I. Additionally, staff is requesting funds to undertake a Bicycle and Pedestrian Master Plan study. The study would be citywide and would act as a foundation document to apply for grants. DPW Murtuza next discussed the Lyon Hoag neighborhood traffic calming study. He explained that staff will work with the community and identify improvements that are needed to help calm the traffic. Councilmember Keighran asked if the EIR for the Peninsula Interchange Project would also study the Lyon Hoag neighborhood. DPW Murtuza stated that the EIR will project future traffic conditions under the new project. Mayor Brownrigg explained that during the summer, the City would begin construction on its first roundabout. However, he noted that in the last couple of weeks, he had two narrow misses at the intersection in front of City Hall. He asked whether staff can include in an existing study or a new study whether this intersection should be turned into a roundabout. DPW Murtuza explained that about a year ago, there was a study done that included analysis of how to improve the intersection. He stated that this resulted in the installation of a number of stop signs. He added that there are a few small projects in the pipeline that will also improve the intersection. However, he explained that a roundabout in front of City Hall would create a number of unintended consequences. This is because of how the various legs of the intersection are situated. City Manager Goldman stated that the intersection in front of City Hall would require its own study and an allocation of funds. Mayor Brownrigg asked if staff could get a determination of how much the study would cost. DPW Murtuza responded in the affirmative. Burlingame City Council March 14, 2018 Approved Minutes 10 Councilmember Beach added that she believed this study would be incredibly valuable. However, staff needed to determine where it fits in the priority queue. Councilmember Beach stated that she was excited about the bicycle, pedestrian, and traffic safety projects. She noted her approval of the Master Plan and the projects that will arise from it. DPW Murtuza talked about the proposed finance department software for $500,000 and reviewed the requested Police Department improvements. DPW Murtuza discussed the proposed green infrastructure improvements. He stated that staff is recommending streetscape and storm water treatment improvements on Chapin Avenue. He explained that the project would promote carbon sequestration, encourage ground water recharge, and enhance pedestrian safety. Councilmember Beach asked if staff anticipated receiving grants from the state to help fund green infrastructure improvements. DPW Murtuza replied in the affirmative. Mayor Brownrigg asked why staff is choosing Chapin. DPW Murtuza stated that Chapin is an area with water runoff from El Camino Real. It has impervious areas with a lot of hard surfaces. The state regulators look for locations with impervious areas to do green infrastructure improvements. Additionally, Chapin was one of the projects identified at the County level for potential state funding. Mayor Brownrigg stated that he would like to see improvements at the north end of El Camino Real, where it widens in front of the hospital and Burlingame plaza. He noted that this is on Caltrans’ land. DPW Murtuza explained that with gas tax, SB-1, Measure A, I and M funds, the City will be resurfacing 17 streets next year. These streets are identified through a comprehensive effort that looks at the life of the streets and projects what is needed. Councilmember Beach asked staff to discuss the importance of SB 1 funds. DPW Murtuza explained that the amount of money the City receives from gas tax has been stagnant for decades. Therefore, SB 1 funding helps increase the City’s ability to complete necessary street repairs and address the backlog. He explained that if the City doesn’t have SB 1 funding, the number of street repairs will decrease by approximately 25%. Finance Director Augustine added that in the first full year of the SB 1 program, the City will have close to $1.3 million in funding to repair roads. Mayor Brownrigg asked that the slide outlining which streets will be resurfaced and where the funding comes from should be inserted in the City’s e-newsletter. Council noted that staff would be busy this coming year. Burlingame City Council March 14, 2018 Approved Minutes 11 6. ADJOURNMENT Mayor Brownrigg adjourned the meeting at 9:05 p.m. Respectfully submitted, /s/ Meaghan Hassel-Shearer City C lerk