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HomeMy WebLinkAboutAgenda Packet - CC - 2017.03.15City Council City of Burlingame Meeting Agenda - Final BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLINGAME, CA 94010 Council Chambers6:30 PMWednesday, March 15, 2017 2016-17 Mid-Year Budget Session Note: Public comment is permitted on all action items as noted on the agenda below and in the non-agenda public comment provided for in item 4. Speakers are asked to fill out a "request to speak" card located on the table by the door and hand it to staff, although the provision of a name, address or other identifying information is optional. Speakers are limited to three minutes each; the Mayor may adjust the time limit in light of the number of anticipated speakers. All votes are unanimous unless separately noted for the record. 1. CALL TO ORDER - 6:30 p.m. - Council Chambers 2. PLEDGE OF ALLEGIANCE TO THE FLAG 3. ROLL CALL 4. PUBLIC COMMENTS, NON-AGENDA Members of the public may speak about any item not on the agenda. Members of the public wishing to suggest an item for a future Council agenda may do so during this public comment period. The Ralph M . Brown Act (the State local agency open meeting law) prohibits the City Council from acting on any matter that is not on the agenda. 5. STAFF REPORTS AND COMMUNICATIONS (Public Comment) Adoption of a Resolution Amending the FY 2016-17 Operating and Capital Budgets to Reflect the Recommended Mid-year Adjustments and Adoption of a Resolution Further Funding the Renewal and Replacement Reserve in the City’s Capital Projects Fund a. Staff Report Resolution - Budget Amendments Resolution - Renewal & Replacement Reserve Attachments: Page 1 City of Burlingame Printed on 3/9/2017 March 15, 2017City Council Meeting Agenda - Final Review of Draft FY2017-18 General Fund, Gas Tax, Measure A, Measure M and Federally Funded Capital Improvement Program (CIP) b. Staff Report FY2017-18 General Funds CIP Spreadsheet Presentation Attachments: 6. COUNCIL DIRECTION ON BUDGET POLICY ISSUES 7. 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 20, 2017 VIEW REGULAR COUNCIL MEETING ONLINE AT WWW.BURLINGAME.ORG - GO TO "CITY COUNCIL VIDEOS" Any writings or documents provided to a majority of the City Council regarding any item on this agenda will be made available for public inspection at the Water Office counter at City Hall at 501 Primrose Road during normal business hours. Page 2 City of Burlingame Printed on 3/9/2017 1 STAFF REPORT AGENDA NO: MEETING DATE: March 15, 2017 To: Honorable Mayor and City Council Date: March 15, 2017 From: Carol Augustine, Finance Director – (650) 558-7222 Subject: Adoption of a Resolution Amending the FY 2016-17 Operating and Capital Budgets to Reflect the Recommended Mid-year Adjustments and Adoption of a Resolution Further Funding the Renewal and Replacement Reserve in the City’s Capital Projects Fund RECOMMENDATION Staff recommends that the City Council accept the FY 2016-17 Mid-year Financial Summary and Five-Year Financial Forecast, and adopt the attached resolutions amending the FY 2016-17 Operating and Capital Budgets to reflect the recommended mid-year adjustments and further fund the Renewal and Replacement Reserve in the City’s Capital Projects Fund. BACKGROUND This report summarizes the City’s mid-year fiscal status by providing an analysis of anticipated revenues and expenditures in comparison to the current adjusted budget for the 201 6-17 fiscal year. Revised forecasts incorporate final 2015-16 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 pr ovides an update for other funds where fiscal changes are noted. The attached budget resolutions are recommended so that the current budget will not only provide the proper funding needed to carry out the programs and activities anticipated through June 30, 2017, but will also more accurately reflect the financial condition of the City as it enters the FY 2017-18 budget process. Having the latest projections reflected in the current budget enhances the forecasting process and allows decision makers to have greater confidence in the information provided within the budget development framework. In addition, during this time of moderate economic growth, the City may choose to set aside further funding for an ever-growing list of unmet capital needs. 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 2016-17 Mid-Year Report March 15, 2017 2 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. DISCUSSION Economic Conditions National Economy At the time the City’s FY 2016-17 budget was being prepared, the national economy was in “pause” mode after its fifth year of a gradual recovery from the worst recession since the Great Depression. Most forecasts indicated that the economy would continue to grow at a moderate pace (2½ - 3 percent), perhaps less sporadically than in recent years. U.S. real GDP had increased 2.4 percent in 2015, the same rate as in 2014. The U.S. unemployment rate had dropped to 4.9 percent (in January 2016) - its lowest level in eight years. Gasoline prices were still falling, although consumer spending was only inching upward. Low mortgage rates remained below 4 percent, and inflation was very tame. The Federal Reserve had raised the benchmark interest rate (December 2015 - 25 basis points) for the first time in seven years. All the factors of internal growth appeared to be positive. However, the possibility of a significant weakening of some foreign economies had the potential to further restrain economic growth. In the end, U.S. real GDP increased only 1.6 percent in 2016. However, the most acceleration was seen in the third and fourth quarters. The deceleration in real GDP from the prior calendar year reflects downturns in private inventory investment and in nonresidential fixed investment. Although this measure of the nation’s economic growth would indicate a slower pace than experienced in previous years, the numbers actually reflect relative strength in the midst of global economic turmoil and low commodity prices. According to Beacon Economics, a leading independent economic research and consulting firm, moderately low inflation and interest rates continue to support spending. As the U.S. economy continues to chug along, real GDP growth is projected to grow in the range of 2 percent in upcoming years. 2016-17 Mid-Year Report March 15, 2017 3 The U.S. unemployment rate was 4.8 percent in January 2017, which is largely accepted as full employment, as a result of a tight labor market and more full-time hiring. Growth in payrolls is projected to push the unemployment rate a bit lower. Lower unemployment is expected to push wages higher, and inflation is expected to move higher. As a result, interest rates, both on the short end of the yield curve and longer-term rates, are expected to increase. In addition, higher wages should bolster consumer confidence, leading to potentially higher personal consumption expenditures, which will also put upward pressure on inflation. Still, inflation is expected to stay below the 2 percent Fed target rate for the near future. Strong retail sales growth in January indicates that U.S. consumers are still bullish on the economy. Although holiday sales were decent but unremarkable, January’s 0.7 percent monthly jump in core retail sales (which exclude autos and gasoline, two notor iously volatile categories) was positive. The election of Donald Trump has caused economists to rethink their outlook on the U.S. economy in 2017. While most agree that unified control under one party could remove the political gridlock that has prevented major policy changes from occurring in the past, some are not optimistic about the impact of such policies. Tax reform could create a modest positive impact on short-run growth, but the implications for the Federal budget deficit and a widening of the trade deficit are of concern. An increase in infrastructure spending would also be expected to provide a positive impulse to economic growth, but this may also be short-lived. President Trump campaigned aggressively on several policies that could, according to Beacon Economics’ Founding Partner Christopher Thornberg, “have seriously damaging effects on the functioning of the economy” and “create enough of a shock to the economy to tip the nation into a recessionary period”. In particular, Thornberg posits that the end of the U.S. commitment to free trade could result in sharply falling imports and exports, significant disruptions of supply chains, a decline in tourism, and a significant rise in consumer prices. 2016-17 Mid-Year Report March 15, 2017 4 So, although the economy headed into 2017 in a solid position, there is a lot of uncertainty about future economic policies and how they will influence the national economy going forward, especially into 2018. State Economy California turned in a solid performance in 2016, despite slower growth nationally. For four years running, the state has added jobs at a faster pace than the nation as a whole. California’s economy is also growing at a faster rate than that of the nation, and accounts for 13.6 percent of the U.S. GDP. The unemployment rate for California dipped to 5.1 percent on a seasonally adjusted basis in January. Nearly every industry in the state continues to add jobs year-over-year, with the categories of Healthcare and Social Assistance leading the way. It should be noted that the mild growth in January was largely driven by Southern California; several cities in the San Francisco Bay Area posted slight declines. In addition, manufacturing continued its slight decline in jobs in 2016. 2016-17 Mid-Year Report March 15, 2017 5 Along with employment growth, California’s residents have also experienced gains in personal income. Total real personal income in the state increased by 3.1 percent in 2016 to almost $1.8 trillion due to higher levels of employment and rising wages. State wide, real per capita income was $44,970 in 2016, up from $43,900 in 2015. Still, there are regions within the state where the labor markets continue to struggle with high unemployment and low growth. As of December 2016, six of California’s 58 counties still had unemployment rates of more than ten percent, and six more had rates higher than nine percent. The lowest unemployment rate was 2.7 percent in San Mateo County, followed by Marin County at 2.9 percent and San Francisco at 3.0 percent. Employment and wage growth continue to be strongest in Silicon Valley. Outside of the Bay area, the majority of the job gains over the past few years have been in low-paying retail, hospitality and social assistance. Looking ahead, the rate of job creation in California is expected to slow to 1.7 percent annually in 2017 and 2018. Economists also expect real personal income growth, estimated to be 3.1 percent in 2016, to additionally increase in the range of 3.0 percent to 3.6 percent in each of the next two years, as a tighter labor market results in higher wages for more workers. California’s minimum wage also will increase in future years under state law. 2016-17 Mid-Year Report March 15, 2017 6 Housing affordability continues to be a major concern in California. Home prices and rents remain very high in both the Bay Area and Los Angeles, as well as other parts of the state. Median home prices in the San Jose ($944,000) and San Francisco-Oakland ($813,000) areas ranked first and second highest among major urban areas in the country. While building permits in these areas are higher than in the past ten years, building levels remain low relative to other urban areas throughout the country. Over the long term, a constrained supply of new housing may limit prospects for job and economic growth. The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey signals that California commercial real estate continues its boom; but as U.S. economic growth slows, there are signs of this boom topping out. Commercial real estate fundamentals improve with increases in employment and income, and a slowing of the growth of these is potentially of concern. The biannual survey projects a three-year outlook for California’s commercial real estate industry and forecasts potential opportunities and challenges affecting office, multi-family, retail and industrial sectors. The latest survey (July 2016) indicates a new topping out of the market for office space in the near future. For each of the six markets surveyed (San Francisco, the East Bay, Silicon Valley, Los Angeles, Orange County and San Diego), office developer sentiment has declined. This downward trend occurs as developers become more pessimistic about the growth of real rental rates and vacancy rates. To be clear, the survey does not indicate construction of office space is imploding. Rather, it says that it is unlikely office space construction will be more robust in 2019 than it is today. In preparing the fiscal year 2017-18 budget, Governor Jerry Brown concluded that California’s fiscal condition had worsened. Absent new budget solutions, the State’s Special Fund for Economic Uncertainties would experience a deficit of $1.6 billion at the end of the 2017-18 fiscal year. The deterioration in the State budget’s condition was largely the result of lower revenue estimates relative to the assumptions in the June 2016 plan, and higher Medi-Cal costs than previously estimated. However, the Legislative Analyst’s Office (LAO) assumptions of wages 2016-17 Mid-Year Report March 15, 2017 7 and salaries and capital gains continue to be higher than the administration’s assumptions, and indicate healthy personal income tax revenue growth of nearly 7 percent in 2017-18, driving positive revenue growth for the state. However, the LAO projects weakness in sales tax revenue, largely due to the expiration of the temporary quarter-cent rate established by Proposition 30. Finally, the corporation tax – the third of the state’s “Big Three” revenues – is expected to decline by about 1 percent in the current fiscal year, followed by several years of growth that is roughly on pace with the broader economy. The Governor’s budget also notes a slowdown in the global economy as one of the main risks to the state’s economy. Stock market volatility adds additional risk to the forecast. Although the state is much better positioned for the next economic contraction, a recession would likely be accompanied by a large fall in the stock market, strongly affecting revenues. Local Economy Just as the national recovery is bifurcated, with people possessing 20th-century skills still struggling to find full employment, so, too in California there continues to be a marked difference between the coastal counties and the inland counties in employment-loss recovered. With its emphasis on the tech sector, the San Francisco Bay Area economy continued to outperform the nation in 2016. While growth in FY 2016-17 is expected to slow to a more moderate rate than experienced in the past two years, the Bay Area’s economy is still expected to grow faster than nearly all other large metropolitan areas in the country. Job growth in San Francisco and the East Bay is slowing from the heated pace of recent years due to the region’s high cost of living, according to Beacon Economics. Beacon anticipates job growth in San Francisco to expand in the 1 percent to 1.3 percent range over the next year. The firm sees housing costs slowing the pace of people moving into the region. Parts of the region are approaching full employment; San Francisco is already there. While the influx of highly educated professionals has been a primary driver of growth, the rising cost of living in the area often offsets wage advantages, and net migration is expected to decline over the next few years. Beacon said the San Francisco area rental market “appears to be approaching the end of frenzied growth.” The firm expects multifamily permitting activity will fall by 18 to 24 percent in 2017, as compared to 2016, as “demand for apartments in the region’s pricier submarkets continues to cool.” Beacon Economics does not expect housing costs to stop growing in the near term as 30-year mortgage rates pick up. Rising mortgage rates will keep median single-family home price appreciation to a more modest 3.0 percent to 4.5 percent over the next year. The Professional, Scientific, and Technology sector accounted for the largest number of job gains in the San Francisco Metropolitan District this past year. This is corroborated by strong taxable sales growth (+7.6 percent) in the Business and Industry spending category, which reflects increasing capital expenditures by employers on equipment and supplies. Between October 2015 and October 2016, this sector added 10,800 jobs, representing 6.1 percent year-over-year growth. While the Computer Systems Design and Related Services subsector has been a primary driver of job creation within the larger industry, it has comprised a shrinking share of 2016-17 Mid-Year Report March 15, 2017 8 overall employment growth. This subsector accounted for one-third of all job creation in the Professional, Scientific, and Technology sector this year, while between Oct ober 2014 and October 2015, the subsector made up 52.2 percent of the sector’s overall job creation. It is evident that California’s labor market has tightened considerably over the past year or so. However, according to seasonally adjusted figures from the Employment Development Department, the Bay Area overall broke a string of 66 consecutive months of job gains, losing 6,800 jobs in January. The San Francisco-San Mateo region suffered the largest losses (1,000 jobs) in technology, while hotels and restaurants lost an equal number. Gains in the area of educational services and health care nearly offset these job losses. But the overall downshift is a trend that was noted across the Bay Area and California as a whole. Because the San Francisco Metropolitan area continues to be one of the United States’ top tourist destinations, Burlingame continues to see strength in hotel tax revenues and consumer spending. With an 84.9 percent occupancy rate in the first six months of this fiscal year, hotels in the area are among the most occupied in the country. (The nationwide average for hotel occupancy rates is 65.9 percent.) Revenues were up slightly over one percent from the same period last year. As noted in the General Fund Revenue analysis (Attachment A), transient occupancy (hotel) tax receipts in fiscal year 2015-16 were 10.1 percent (nearly $2.4 million) higher than in the prior fiscal year. However, federally imposed travel restrictions could negatively impact tourism and the area’s occupancy rates in the years to come. As in other cities in the region, spending on autos, general consumer goods, and restaurants was up through the first half of calendar year 2016. Burlingame sales tax receipts in the 3rd quarter of 2016 were 4.7 percent below the same quarter of the previous year, due largely to a onetime use tax allocation that spiked last year’s returns. Adjusted for this anomaly, tax receipts increase 1.4 percent over the same prior year quarter. New auto returns were hampered by a dealership closure, while lower fuel prices negatively impacted service stations. Nevertheless, healthy gains were seen from restaurants, and the City’s share of the countywide use tax allocation pool also increased when compared to a year ago. 2016-17 Mid-Year Report March 15, 2017 9 Again, although increasing incomes and wages among local residents have helped fuel taxable sales, the high cost of housing in the region could impede growth in consumer spending in coming years. As more and more residents spend a larger portion of their income on housing, less money is left to purchase goods and services. 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 was previously a “hot spot” for the growing economy, it is expected to experience a stabilization effect sooner than other parts of the state. Even with the positive economic trends of recent years, budgets have been developed with a relatively conservative approach. The recession brought home the realization that some of the City’s largest sources of revenue are highly volatile, inexorably linked to the health of the general economy and events that cannot be anticipated in the short term. The recovery has been tentative at times, and accompanied by increases in certain operating costs – particularly in the area of personnel benefits – that need to be considered. The General Fund five-year financial forecast is provided in the final section of this report. In conjunction with the General Fund Reserve Policy, this long-term approach to the City’s budget helps ensure that future economic downturns can be managed effectively. Although renewed emphasis on budgeting for the longer-term will provide more certainty for future budgets, the City cannot have a true budgetary “surplus” if unfunded needs continue to grow. The establishment of the Other Post-Employment Benefits (OPEB) trust account was a significant step in identifying unfunded liabilities and systematically providing for them within the operating budget. Although pension reform has somewhat curbed the growth of these liabilities, accrued obligations are being addressed by CalPERS by increased employer contributions. Other liabilities await funding, however. The deferral of maintenance to infrastructure and facilities has resulted in an increase of projects on the City’s list of “unfunded needs.” Staff will strive to identify these deferrals and recommend their systematic funding within the operating budget (of the appropriate fund) whenever possible. General Fund The City’s FY 2016-17 budget anticipated that the economy would continue to grow at a moderate pace. Although not required to provide expenditure reductions for this mid-year analysis, departments were asked to identify, to the extent possible, additional funding sources or revenues that would be available 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 $1.7 million higher than projected in the FY 2016-17 adopted budget. Over 70 percent of the growth comes from increased tax revenues, and the remainder reflects a one-time increase in charges for services. Details of the City’s General Fund Revenue analysis at mid-year are provided in Attachment A of this report. Expenditure budget revisions are discussed in more detail in Attachment B of this report. The adjustments reflect an attempt to adjust certain departmental budgets to more accurately reflect current needs, in response to unanticipated events, a change in programming direction, or access to information that was not available at the time the FY 2016-17 budget was proposed. The resulting budget should provide a clearer, more transparent picture of operating needs going 2016-17 Mid-Year Report March 15, 2017 10 forward. This is particularly important in establishing the framework for the FY 2017-18 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 fiscal year 2016-17 General Fund revenues. There are three columns for the 2016-17 fiscal year: The “FY16-17 Current Budget” column shows the revenue budget adopted by the City Council last June; the “FY16-17 Midyear Projection” column shows the most current projection for the fiscal year; and the final “FY16-17 Midyear Amendment” column reflects a summary of proposed revenue amendments to the FY 16-17 budget for the City Council’s approval with this Mid-year Report. For comparison purposes, the table also includes the City’s actual General Fund revenues in fiscal year 2015-16, as well as figures for the previous fiscal year. Year-to-date revenues are not included here as the timing variability within each different category greatly complicates the analysis and would make for a confusing presentation as a whole. However, year-to-date receipts may be discussed in the various categories of revenue as they relate to a revised FY 2016-17 projection. The key factors that pertain to staff’s recommended adjustments to each of the City’s General Fund revenue categories are discussed in Attachment 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, revenue sources as a whole are keeping pace with the FY 2015-16 actual amounts, with many comparing favorably to the prior fiscal year. The recommended adjustments equate to a 2.4 percent increase in General Fund revenues when compared to the FY 2016-17 adopted budget, and a 1.7 percent increase over last year’s revenues for the fund. Note that FY 2014-15 actual amounts included $1 million in one-time revenue from Millennium Partners, the original Burlingame Point developer, per the CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND REVENUES FY14-15 Actuals FY15-16 Actuals FY16-17 Current Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % Property Tax 16,677,381$ 17,645,289$ 18,026,000$ 18,851,000$ 825,000$ 4.6% Sales and Use Tax 11,100,900 12,827,673 11,969,000 12,150,000 181,000 1.5% Transient Occupancy Tax 23,698,396 26,092,240 26,000,000 26,216,000 216,000 0.8% Other Taxes Franchise Tax 1,579,976 1,604,758 1,598,000 1,614,000 16,000 1.0% Business Licenses 966,675 985,568 990,000 990,000 0 0.0% State HOPTR 64,810 63,710 66,000 62,000 -4,000 -6.1% Real Property Transfer Tax 436,853 499,514 477,000 292,000 -185,000 -38.8% Licenses & Permits 83,840 86,154 88,000 88,000 0 0.0% Fines, Forfeitures and Penalties 837,704 864,393 942,000 942,000 0 0.0% Use of Money & Property 207,952 200,196 206,000 161,000 -45,000 -21.8% Charges for Services 4,481,618 4,470,274 4,825,200 5,247,200 422,000 8.7% Other Revenue 1,046,512 35,972 500 30,500 30,000 6000.0% State Subventions 578,158 146,530 254,000 234,000 -20,000 -7.9% Interest Income 260,740 757,153 389,000 630,000 241,000 62.0% Total, General Fund Revenue 62,021,516 66,279,425 65,830,700 67,507,700 1,677,000 2.5% 2016-17 Mid-Year Report March 15, 2017 11 approved Development Agreement; this is shown as “other revenue”. There are no similar projections in the adopted budget for future one-time revenues in FY 2016-17 or in the five-year forecast. Such items can be added when the amount and timing of these unanticipated receipts is certain. General Fund - Expenditures The f ollowing table shows the mid-year assessment of FY 2016-17 General Fund expenditures by critical service area: Again, there are three columns for fiscal year 2016-17. The “FY16-17 Adopted Budget” column shows the budget adopted by the City Council in June 2016. Although the departmental budgets were internally adjusted for encumbrances of the prior fiscal year, the encumbrances are excluded for this mid-year analysis. The second FY 2016-17 column shows the new mid-year projection for each department’s expenditures for FY 2016-17. The final FY 2016-17 column shows the resulting amendments to the FY 2016-17 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 2015-16, as well as figures for the previous fiscal year. Budgetary savings (positive expenditure variances) within the General Fund in fiscal year 2015- 16 were experienced in all departments, resulting in expenditures of $2.8 million (roughly 5.6 percent) less than budgeted for the fiscal year. Since local government expenditure budgets (appropriations) serve as the legal level of budgetary control, some level of savings will be realized in any fiscal year. Although departmental budgets were analyzed for both underfunded operating needs and anticipated budgetary savings, the focus was on ensuring budget adequacy for General Fund operations for the remainder of the fiscal year. There are fewer adjusting entries recommended for expenditure budgets in this analysis than recommended for the City’s General Fund revenues. Most expenditure adjustments were fairly minimal in amount, or offset by operational savings elsewhere in the department. Proposed revisions to General Fund Expenditure Budgets are explained in detail in Attachment B. Again, additional budgetary savings are a certainty, because the expenditure budgets reflect the upper limit of spending levels for each department. Departments are only able to expend or commit funds up to this legal level of budgetary control. Because these budgetary controls are CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES By General Fund Program FY2014-15 Actuals FY2015-16 Actuals FY16-17 Adopted Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % General government $ 4,121,895 $ 4,477,401 $ 5,182,271 $ 5,281,871 $99,600 1.9% Public Safety 22,773,494 24,625,071 26,300,304 26,325,304 25,000 0.1% Public Works 4,769,873 4,693,548 5,093,323 5,093,323 0 0.0% Community Development 1,244,199 1,405,794 1,658,233 1,718,233 60,000 3.6% Leisure & Cultural Services 11,495,604 12,257,646 13,897,197 13,897,397 200 0.0% Total, Operating Expenditures $44,405,064 $47,459,460 $52,131,328 $52,316,128 $184,800 0.4% 2016-17 Mid-Year Report March 15, 2017 12 established within each category of departmental expenditures, budgetary savings tend to average 2-4 percent of the annual expenditure budget. In recent years, the City experienced higher-than-average expenditure variances due to savings in the category of personnel costs from elevated levels of position vacancies. However, vacancy levels appear to have returned to a normal rate. For this reason, it is anticipated that the City will experience a budgetary savings in the range of $1 - $2 million in the current fiscal year. Finally, certain adjustments are included in the mid-year budget resolution that increase the Transfers Out of the General Fund in fiscal year 2016-17 as shown below: The recommended adjustments are made necessary due to changes in other funds, described later in this report. General Fund Operating 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: Adjusted by the recommended amendments in this report, the General Fund shows a projected surplus (positive net operating revenues) for fiscal year 2016-17 of approximately $4.1 million, Amendments to General Fund Transfers In (Out) Fiscal Year 2016-17 Description Amount $ CIP - Broadway Grade Separation ($500,000) CIP - Paloma Park Playground (40,000) Solid Waste Fund (28,600) Equipment Service Fund 102,512 Net Change to Transfers In (Out)($466,088) CITY OF BURLINGAME, CA GENERAL FUND OPERATING SUMMARY FY2015-16 Actual FY16-17 Adopted Budget FY16-17 Midyear Projection FY2016-17 Midyear Amendment Total Revenue $66,279,425 65,830,700$ 67,507,700$ 1,677,000$ Expenditures Departmental Expenditures (47,459,460)(52,131,328)(52,316,128)(184,800) Transfers In (Out)(18,179,186)(10,574,927)(11,041,015)(466,088) Total Expenditures (65,638,646)(62,706,255)(63,357,143)(650,888) Net Operating Revenue 640,779 3,124,445 4,150,557 1,026,112 Add'l Transfer to CIP Renewal & Replacement Reserve 0 0 0 0 Change in General Fund Balance 640,779$ 3,124,445$ 4,150,557$ 1,026,112$ 2016-17 Mid-Year Report March 15, 2017 13 which is $1 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 City Council approved a General Fund Reserve Policy that recognized the need for adequate reserves to guard against future economic downturns, as well as to provide a hedge for catastrophic events. 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 the establishment of a Renewal and Replacement Reserve within the Capital Improvement Projects (CIP) Fund. The purpose of the Renewal and Replacement Reserve was to prevent further accumulation of unfunded liabilities that aging facilities represent. It was initially funded with a General Fund transfer of $3 million, a reflection of the fund’s operating surplus in fiscal year 2013-14. In October 2015, the General Fund Reserve Policy was revised based on a refined analysis of the optimal reserve level for catastrophic events. The analysis supported a decrease in the Catastrophic Reserve to $2 million, citing more appropriate strategies to cover the potential of damages in excess of this new reserve target. The $2.5 million reduction allowed an increase in the Renewal and Replacement Reserve. Also in fiscal year 2015-16, an additional $5 million transfer from the General Fund to the Renewal and Replacement Reserve was approved at mid-year. Note that, unlike other amounts reflected in the fund balance of the Capital Projects Fund, Renewal and Replacement Reserve funding will not be appropriated to a specific project. Rather, it will accumulate for capital projects to be initiated when timing is optimal and sufficient other funding is identified. General Fund Balance Once all the mid-year adjustments are posted, the General Fund shows a projected total fund balance of $33.8 million at the end of the 2016-17 fiscal year. Although the mid-year budget projections for fiscal year 2015-16 reflected a reduction of fund balance of nearly $3 million, a slight budgetary surplus in fiscal year 2015-16 resulted in a beginning General Fund balance for FY 2016-17 that was more than $3.5 million higher than CITY OF BURLINGAME, CA CHANGES TO GENERAL FUND BALANCE FY 2016-17 Midyear Projection FY 2015-16 Beginning Fund Balance 29,641,334$ Projected Revenues & Expenditures Projected better than budgeted revenue performance 67,507,700 Projected departmental expenditures (52,316,128) Subtotal, Revenues Net of Expenditures 15,191,572 General Fund Long-Term Debt (5,756,745) Transfers In (Out) of General Fund (5,284,270) Projected General Fund Balance, net of transfers 33,791,891$ 2016-17 Mid-Year Report March 15, 2017 14 anticipated. This created a relatively large unassigned fund balance. In the current fiscal year, the projected fund balance is also projected to grow. The $4.1 million anticipated increase in the General Fund’s balance now projected for FY 2016-17 will essentially be reflected in a further increase in the City’s unassigned fund balance. Once funded as approved In the General Fund Reserve Policy, the City’s reserves ($18.7 million) comprise the largest portion of the General Fund’s ending balance. Approximately $15.1 million 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, staff recommends that the Renewal and Replacement Reserve be funded by an additional $4 million. The Renewal and Replacement Reserve was established with the intent of providing funding for the replacement of City assets. Governmental funds (as opposed to Enterprise Funds) do not incur annual charges for depreciation of assets; therefore, these costs are recognized only when the asset needs to be replaced. The City’s list of capital/facilities needs will continue to grow; the Renewal and Replacement Reserve is a mechanism to accumulate funds to offset these needs. As such, the funds in this reserve are not appropriated to a specific project, but would be available for capital projects to be initiated when timing is optimal and sufficient other funding is identified. Staff is developing a framework for a reserve policy specific to this Capital Project Fund reserve for City Council consideration and discussion; this policy will be included in the 2017-18 fiscal year budget deliberations. CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS FY2015-16 Actual FY2016-17 Midyear Projection Up (Down) $Up (Down) % Economic Stability Reserve 15,700,000$ 16,200,000$ 500,000 3.2% Catastrophic Reserve 2,000,000 2,000,000 0 0.0% General Plan Reserve 0 0 0 0.0% Contingency Reserve 500,000 500,000 0 0.0% Subtotal, Assigned Fund Balance 18,200,000 18,700,000 500,000 2.7% Add: Unassigned Fund Balance 11,003,467 15,091,891 4,088,424 37.2% Total, Ending Fund Balance 29,203,467$ 33,791,891$ 4,588,424$ 15.7% CITY OF BURLINGAME, CA CHANGES TO RENEWAL AND REPLACEMENT RESERVE Beginning Balance 7/1/16 $13,500,000 Budgeted Transfer from General Fund in FY2016-17 3,000,000 Projected Ending Balance 6/30/17 $16,500,000 Recommended add'l transfer from General Fund 4,000,000 Recommended Ending Balance 6/30/17 $20,500,000 2016-17 Mid-Year Report March 15, 2017 15 General Fund Reserve Policy – As of June 30, 2017, the projected fund balance of $33.8 million represents nearly 64.6 percent of General Fund operating expenditures of $52.3 million. 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 $18.7 million in reserves represents an amount equal to 27.7 percent of projected General Fund revenues (excluding one-time revenues) for the year; the reserve policy calls for an Economic Stability Reserve of 24 percent of budgeted revenues, a Catastrophic Reserve of $2 million, and a $500,000 Contingency Reserve. Other Funds Other Funds – All City funds were reviewed for this mid-year analysis. The recommended revenue adjustment for most funds is the result of anticipated earnings allocations from the City’s investment portfolio, explained in the General Fund Revenues section of this report (Appendix A). The recommended adjustments are shown below: Peninsula Clean Energy Options – At the City Council’s goal-setting session in January, staff was asked to determine the fiscal impact of enrolling the City’s municipal accounts in the Peninsula Clean Energy (PCE) ECO100 program. PCE is San Mateo County’s official electricity Interest Income Amendments FY 2016-17 Fund 2015-16 Actual Current Budget Midyear Projection Midyear Amendment General Fund 757,153$ 389,000$ 630,000$ 241,000$ Burlingame Avenue Assessment Dist.6,844 4,000 6,000 2,000 Gas Tax Fund 29,327 20,000 26,700 6,700 Measure A Fund 32,347 13,000 29,500 16,500 Water Fund 271,269 136,000 247,000 111,000 Sewer Fund 250,656 121,000 228,600 107,600 Solid Waste Fund 77,914 28,000 71,000 43,000 Parking Enterprise Fund 83,975 33,000 76,700 43,700 Building Enterprise Fund 78,525 38,000 71,600 33,600 Worker's Compensation Fund ISF 97,252 - 88,700 88,700 Facilities Services Fund ISF 5,867 4,000 5,000 1,000 Equipment Services Fund ISF 95,742 45,000 87,000 42,000 Information Services Fund ISF 11,234 6,000 10,000 4,000 OPEB Retiree Medical ISF 1,984 - 2,000 2,000 General Liability ISF 46,086 20,000 42,000 22,000 Other Local Grants/Donations - - 4,000 4,000 Public TV Access Fund 5,921 - 5,000 5,000 Development Fees 13,772 - 12,600 12,600 Storm Drainage Fund 172,361 79,000 157,000 78,000 Debt Service Fund 17,985 8,000 8,000 - Total 2,056,217$ 944,000$ 1,808,400$ 864,400$ 2016-17 2016-17 Mid-Year Report March 15, 2017 16 provider that provides electricity at competitive rates and with higher renewable energy content than that provided by PG&E. Burlingame joined PCE in February 2016 along with San Mateo County and all of its 20 cities; nine of these cities have “opted up” to PCE’s ECO100 program. The City is currently enrolled in PCE’s ECOplus program – which provides power with 50 percent renewable energy content. ECO100 is the opt-up option with 100 percent renewable energy content. Both programs support clean, renewable energy and significantly reduce greenhouse gas emissions and the City’s carbon footprint. ECOplus costs about 5 percent less than what PG&E charges for electricity, while ECO100 costs about 5 percent more. Burlingame has over a hundred electricity accounts consisting of buildings, parking lots, pumps, and traffic and street lights. In calendar year 2015, Burlingame used 3,013,474 kwh of energy, at a cost of about $625,138 under PG&E’s rates. Assuming the same level of electricity use, Burlingame will save about $31,256 annually in electricity costs with ECOplus compared to PG&E. If the City were to opt-up to ECO100™, it would cost approximately $31,256 per year above what the City would pay with PG&E. Staff estimates that if the City enrolled all of its accounts in ECO100, the City would reduce about 2,118 metric tons of carbon emissions, equivalent to removing 447 cars from the road (https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator). The ECO100 program is an especially attractive option for Burlingame as a way to purchase and use 100 percent renewable energy without installing on-site solar energy systems. A 2015 energy audit found that on-site solar would not be cost-effective for any City buildings. Another option available to the City is to partially opt-up to ECO100 to lessen the costs. For example, opting up to ECO100 for the City’s main building facilities, (City Hall, Rec Center, Corp Yard, Police Station, Main Library, Easton Library, and Golf Center) will cost about $13,000 more per year than PG&E’s rates. Since the City is currently saving 5 percent on its electricity bills, opting up to ECO100 would cost the City approximately $44,256 for the partial opt-up and $62,512 for the complete opt-up each year, assuming electricity use and rates remain stable. The cost of the City’s electric power is borne largely (75 percent) by the General Fund; approximately 23 percent is charged to the Water and Sewer utilities, and the remaining 2 percent is paid by the Parking Enterprise Fund. Staff intends to seek Council direction to start with ECO100 on July 1 as part of the fiscal year 2017-18 budget process. Capital Projects Fund – Several adjustments were identified for the City’s Capital Projects Fund, including additional appropriations for two new capital projects, and an increase in funding for a third. Where appropriate, unused funds will be returned to the source fund. Within the Storm Drain and Enterprise Funds, budgetary savings will be directed to similar projects, reducing the need for new funding in the subsequent fiscal year. The City’s Broadway Grade Separation Project will provide vital safety improvements by separating the tracks at Broadway, thereby eliminating conflicts between trains and motor vehicles, bicyclist and pedestrians; improve traffic circulation; and decrease emergency response times. As such, the project ranks as the second top priority for grade separation projects in the 2016-17 Mid-Year Report March 15, 2017 17 entire state and first among Northern California grade separation projects on the California Public Utilities Commission (CPUC) list. However, the $250+ million project cannot begin without the appropriate studies and funding. A $500,000 appropriation for the Broadway Grade Separation Project is needed so that the City can provide the local funding match required prior to initiating the project’s Environmental Studies and Preliminary Engineering phases. The City has requested $10.85 million in funding from the San Mateo County Transportation Authority (SMCTA ) to undertake these studies, as well as the Final Engineering Design phase. (On March 2, the SMCTA awarded the first $3.85 million for this project.) The City’s local match is estimated at $1.2 million for the three phases of the project. The completion of these phases will allow the project to begin the right-of-way acquisition and obtain appropriate agency approvals, thereby rendering the project “shovel ready” to compete for regional, federal and state funding. The remaining $700,000 local match will be requested through the annual CIP budgeting process in the future. An agreement was recently established between the City and the Peninsula Corridor Joint Powers Board (JPB) to ensure cooperation between the JPB and the City in connection with the design and construction of the Caltrain Electrification Project. The project consists of converting Caltrain from diesel-hauled to electrical-powered trains for service between San Francisco and San Jose. Although the JPB will be designing and constructing the project, an initial deposit of $34,000 was established to reimburse the City for costs incurred by the City for permit fees, design review, and inspection costs pertaining to construction within the jurisdiction. The budget should be amended to provide for this revenue and the offsetting expenditures for the project. The Paloma Park play structure was recently ruined by a fire set by unknown persons. The fire damage necessitated the removal of half of the play structure and caused damage to the resistant surfacing. Since the playground is nearly 20 years old and was scheduled for renovation in the next couple of years, the project should be moved up for completion as soon as possible. Insurance will cover some of the cost to renovate the park. Additional work on the park may be required in order to bring it up to current regulatory standards. As with all park renovations, community input will be sought. An appropriation of $40,000 is recommended to fund the design services needed to start the renovation process. Additional funds will be requested as part of the Capital Improvement Plan for the 2017-18 fiscal year budget development. In November, the Council approved an additional appropriation of over $30,200 for the Village Park Renovation project. Approved for the 2015-16 fiscal year, the project ran into delays as a result of having to be re-bid, as well as construction costs estimates that exceeded the initial $350,000 project budget. Unfortunately, heavy rains in the area began shortly after the project broke ground. The project was flooded during several storms by the creek adjacent to the playground, and several change orders were required. As with the additional funding request in November, there are funds available in the Ray Park Playground project, since that project has not yet started. Therefore, the proposed increase ($9,800) to the Village Park project can again be offset with a decrease in the appropriation for the Ray Park Playground project. 2016-17 Mid-Year Report March 15, 2017 18 Measure A Fund – This fund accounts for the City’s share of the special half-cent sales tax to fund transportation-related projects and programs. Based on improved sales tax revenues county-wide, the FY 2015-16 budget was set at a fairly aggressive level of $800,000. However, actual revenues for the year were well below target. Current year revenues are coming in only slightly higher than last year, so the $824,000 budget may not be achieved. However, no budget adjustment is recommended at this time. $1.1 million of Measure A Funds is appropriated for transportation-related capital programs in the current fiscal year. 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 extremely 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 tax/excise tax swap introduced in 2010, and formulas to ensure that cities and counties are “made whole” from impacts of the swap. However, the latest projections indicate that Burlingame will receive approximately $592,000 in HUTA revenues in the current fiscal year, a $27,000 decrease from the adopted budget. Note that the fiscal year 2014-15 city and county HUTA allocations included a one-time 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 has resulted in a significant decline in revenue from this tax source. A loss of transportation funding will stress other governmental funding sources if Gas Tax revenues decline, including the use of General Fund monies. Governor Brown called a special Legislative session in fall 2015 to deal with critical transportation funding needs. Despite proposals from the Governor, legislative leaders, and interest groups including the Fix-Our-Roads coalition (which includes the League of California Cities and CSAC), no agreement has been reached. The Governor provided a revised proposal in his January 2017 Budget proposal which would, when fully phased in, provide an estimated $4.2 billion annual increase for state and local transportation programs plus one-time loan repayments totaling $706 million. Water & Sewer Funds In recent years the Bay Area has been heavily impacted by a severe drought. Declining water levels at the Hetch Hetchy Reservoir and a lack of rain and snowfall prompted aggressive campaigns promoting water conservation at both the local and state levels. In January of 2014, Governor Brown issued an Executive Order mandating water use restrictions, and by this time last year, the City's residents and business owners had reduced consumption by 30 percent to Description 2013-14 Actuals 2014-15 Actuals 2015-16 Actuals Adopted Budget Midyear Projection Midyear Amendment Measure A 717,714$ 789,049$ 767,021$ 824,000$ 824,000$ -$ Gas Tax (HUTA)907,322 859,096 667,918 619,000 592,000 (27,000) Total 1,625,036$ 1,648,145$ 1,434,940$ 1,443,000$ 1,416,000$ (27,000)$ FY2016-17 2016-17 Mid-Year Report March 15, 2017 19 date as compared to calendar year 2013 (surpassing the State's mandate for Burlingame of a 16 percent reduction in consumption.) Consumption patterns reached progressively lower levels in the past two years due to the concerted and deliberate efforts to conserve water. (Note that the City’s water billings are issued on a bi-monthly cycle, creating the up-and-down pattern from month to month.) As a result of reduced water consumption due to drought conditions, and the increased capital and operating costs of the water system - including the cost of wholesale water purchased from the San Francisco Public Utilities Commission (SFPUC) - the City found it necessary to raise water rates to offset lost revenue. The proposed rate increases are equivalent to 9 percent in 2017, 7.5 percent in 2018, and 7.5 percent in 2019. However, recent winter rains have brought an end to drought conditions in Northern California. As indicated in the graph above, water consumption in the first four months of the fiscal year was above prior year actual amounts, but dropped to new lows when the rains began. For the remainder of the fiscal year, consumption is projected to match prior year experience. As such, revenues of the fund are anticipated to be on target with the 2016-17 fiscal year budget, and no adjustment to these revenues is anticipated at this time. The City will continue to closely monitor consumption patterns in the coming months. Further information and updates will be provided to the Council as the 2017-18 fiscal year budget for the Water Fund is developed. Note that a direct reimbursement to the Water and Sewer Funds for utility services provided to City facilities and parks based on consumption is assumed in the FY 2016-17 budget. These costs are now reflected as departmental costs, rather than included in the various transfers between funds. 6,000 9,000 12,000 15,000 18,000 July August September October November December January February March April May June100 gallonsHistorical Water Billings By Fiscal Year Last Three Years 2014-15 Actual 2015-16 Actual 2016-17 Actual 2016-17 Projected 2016-17 Mid-Year Report March 15, 2017 20 Solid Waste and Landfill Funds – Although significant increases in Solid Waste rates were necessary in 2011 and 2012 to pay off a deficit position from the 2001-2010 contract for solid waste services, revenues in subsequent years have been adequate to generate surpluses within the Solid Waste Fund account. The higher rates ended the need for General Fund transfers to support activities of the Solid Waste Fund; revenues became sufficient to pay the costs of all solid waste contracts and City-provided services, and they provided surplus funding of a Solid Waste Rate Stabilization Reserve. Despite increasing costs over the years, rate increases have not been required. For calendar year 2017, estimated revenues from collections for Burlingame ($10.6 million) are not quite adequate to cover the costs of the City’s collection contractor (Recology) of $5.5 million; disposal & processing fees of $3.3 million; franchise fees of $720,000; funding of the City’s landfill post-closure costs ($450,000); and $645,000 for costs borne by the City, including street sweeping, and steam cleaning and maintenance of public receptacles. A slight reduction in the utility’s rate stabilization reserve is anticipated. The recommended budget adjustments reflect a $70,000 increase in the City’s costs borne directly by the fund, as well as a $28,600 reduction in the transfer to the General Fund for the fund’s management. In addition, the amount received from the State (and allocated to Rethink Waste member agencies) to offset the cost of activities related to recycling containers is $31,200. This amount has been fairly consistent and will be included in the Solid Waste Fund budget for the 2017-18 fiscal year. Lastly, the amount collected for rate stabilization should be decreased ($61,000); the anticipated operating deficit dictates that the amount included in the 2017 calendar year rates for this reserve will be spent on services rather than put aside for future rate increases. Current reserve levels (nearly $4.2 million at June 30, 2016) 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. As noted, rates include a five 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 $2.2 million fund deficit that results from the liability recorded for future post -closure costs. No budget amendment is required for the Landfill fund for the current fiscal year, and very little change is anticipated in the budget for these activities in fiscal year 2017-18. Building Enterprise Fund – Revenues in the Building Enterprise Fund (largely construction permits and building plan check fees) for the last fiscal year were significantly higher than in the previous fiscal year, marking an increase in the volume and value of permits pulled, and providing revenues slightly higher than projected in the 2015-16 fiscal year budget. Because these revenues are difficult to project, and can swing significantly depending on the timing of large development projects, no mid-year adjustments are typically recommended. CITY OF BURLINGAME, CA BUILDING FUND REVENUES Description FY2014-15 Actuals FY2015-16 Actuals FY16-17 Adopted Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % Construction Permit Fee $ 1,001,899 $ 1,291,505 $ 1,180,000 $ 1,180,000 $0 0.0% Building Plan Check Fees 795,968 906,080 1,010,000 1,529,000 519,000 51.4% Microfilm/Other Fees 37,698 58,240 40,000 40,000 0 0.0% Total $1,835,565 $2,255,824 $2,230,000 $2,749,000 $519,000 23.3% 2016-17 Mid-Year Report March 15, 2017 21 However, in the current fiscal year the Building Division has received building permit applications for both the Burlingame Point and Summerhill Development projects that will necessitate engaging the services of the vendor Bureau Veritas to a greater degree than anticipated ($419,000) in the adopted budget. In addition, the volume of large projects, as well as in increase in plan check activity, will result in a greater expenditure (an estimated $100,000) than was anticipated in the City’s plan check services contract. These increased costs should be reflected in the amended budget, as well as the offsetting revenues anticipated from these activities. Parking Enterprise Fund – The Parking Enterprise Fund provides for the maintenance and upkeep of the City’s parking lots and metering equipment, including maintenance and utility service for the new electric vehicle charging stations in Parking Lot V. Excess revenues that accumulate in the fund are intended to provide funding for future parking facilities and associated revenue mechanisms. A budget for the revenues that result from the electric vehicle charging stations was not included in the adopted budget for the current fiscal year. Staff is recommending that these fee revenues (approximately $12,000) be budgeted going forward, as the program will likely increase in size. In addition, revenues from monthly parking permits exceeded budget last year due to an increase in the streets included in the City’s residential street parking permit program. Receipts through the first half of the year are keeping pace with fiscal year 2015-16 collections, so this budget can be increased by $34,000. The fund’s expenditure budget appears to be adequate for the current fiscal year. 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 intern al 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. Workers’ Compensation (WC) Fund – After incurring a significant drop in net position in the WC Fund in fiscal year 2013-14, charges to the various departments (revenues to the fund) were adjusted to more adequately provide for workers’ comp claims and activities. In addition, the City transitioned to a new third party administrator effective January 1, 2015 in an effort to more effectively settle claims, reduce litigation, and aggressively manage medical costs. These changes greatly stabilized the fund’s fiscal position, with a reduction in liabilities of $557,000 (9.2 percent) in the past two fiscal years. Note that expenses to the fund, including a provision for CITY OF BURLINGAME, CA PARKING FUND REVENUES Description FY2014-15 Actual FY2015-16 Actual FY16-17 Adopted Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % Parking Fees $ 2,234,493 $ 2,281,495 $ 2,335,000 $ 2,335,000 $0 0.0% Electric Vehicle Charging Station Fees 4,537 11,618 0 12,000 12,000 100.0% Monthly Parking Permits 333,840 356,142 322,000 356,000 34,000 10.6% Total $2,572,870 $2,649,255 $2,657,000 $2,703,000 $46,000 1.7% 2016-17 Mid-Year Report March 15, 2017 22 “incurred but not reported” claims, are based on an actuarial report of outstanding liabilities of the program, and are subject to some uncertainty. The City’s reserves for the fund are currently funded at the 70 percent confidence level. General Liability Fund – Similar to the Workers’ Compensation Fund, the charges to the various departments that fund this risk management internal service fund have been adjusted in recent years to more adequately reflect claims and activities in the area of general liability. T he fund is administered by the City Attorney’s Office, which recently reported a higher level of activity in the number of claims being litigated. The budget for the fund (both revenue and expenditures) was increased (approximately 4.5 percent) based on prior year results, but staff will not know the fiscal implications of current activities until after the fiscal year’s actuarial studies are complete. While no changes are recommended at this time, staff will monitor the fund carefully and increase charges to departments if indicated in the development of the 2017-18 fiscal year budget. Administration/Information Services Internal Service Fund – The budget for this fund includes not only information services, but also the costs of maintenance for centralized printing and mailing equipment. Several small budget enhancements are requested for the current fiscal year to provide funding for contractual services that were either unanticipated ($15,000 for Wi-Fi services survey, hardware, installation and licensing) or under budgeted ($15,000 for extension of ShoreTel and financial system licensing.) In addition, responses to a Request for Proposals (RFP) for consultant services in the procurement of a records management system had not yet been analyzed when the fiscal year budget was adopted, and the contract will require $5,000 more than the $30,000 initially estimated. Not unlike other cities and governmental agencies, Burlingame utilizes tools such as mobile devices and remote access to improve its organizational efficiency and the cost effectiveness of the services it delivers. However, this also increases its security risks, and the City cannot afford to ignore that additional efforts are needed to protect its information from cyberattacks. IT staff are currently reviewing the results of a recent audit of internal system controls performed by the City’s external auditors, and will be developing a strategy to prevent data breaches, detect when a data breach occurs, and determine the extent of such breaches. An incident response plan will then be put in place that identifies the actions the City will take in the event of a breach. Such a strategy involves leveraging cost-effective tools and technology, educating the staff on how to behave in a prudent manner regarding information security, and conducting regular reviews and security audits by an independent party to assess the effectiveness of the measures being taken. These activities will better position the City to recognize cyber-attacks/attempts and allow for better protection of the City’s data as these types of attacks become more frequent and sophisticated. An increased appropriation for the Administration/Information Services Internal Service Fund is anticipated for the additional cost of cyber-security technology in the upcoming 2017-18 fiscal year budget process. 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. The fund has been credited in the current fiscal year with revenues for the auction and sale of old vehicles in the amount of $6,000. 2016-17 Mid-Year Report March 15, 2017 23 In addition, the mid-year budget resolution calls for the elimination of a $102,512 transfer from the General Fund. The last payment of an interfund loan (for implementation of a computer aided dispatch records management system for Police dispatch in 2012) did not require a budget appropriation, so this budget adjustment corrects the error. 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 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. Since that time, City staff has explored various options/partnerships with private developers to build one or more parking garages at little or no cost to the City. Options to partner with developers on construction of a new City Hall were also considered. Separately, the City has worked with its 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. As funding options are explored, other capital needs have been identified that will compete for General Fund resources and challenge the organization’s capacity to successfully undertake future projects. For example, the Broadway grade separation project was discussed in the capital project section earlier in this report. The preliminary project cost is estimated to exceed $250 million. In the coming years, staff will explore opportunities to obtain external funding to advance the project beyond the design and environmental phases. As the project moves towards the construction phase, the City will be required to provide a local match, estimated to be in the range of $15–$20 million, towards the construction costs. Also, a large number of City buildings, in addition to the facilities previously identified, have served their original intended design life and are in need of major improvements. Though the City regularly invests in building maintenance, major building components are overdue for replacement. To the extent possible, necessary improvements are included in the five-year CIP program, but this approach has not proved to be sufficient in averting further unfunded needs. In early December, staff presented a Building Facilities Condition Assessment Study and Capital Improvement Master Plan which identify maintenance needs and capital improvements necessary to extend the lifespan of the City’s existing facilities. The study concluded that the City should consider replacing older buildings before maintenance costs increase significantly. It also concluded that, while staff is able to manage its current work load, additional resources are needed to properly maintain the buildings and manage new capital projects. Although funds are being set aside in the City’s Renewal and Replacement Reserve, the amount of funding seems to diminish when compared with the growing set of unfunded needs. In addition, the reserve is being funded by annual surpluses and one-time revenues, and as such will be the first General Fund resources that will be reduced or eliminated when the economy 2016-17 Mid-Year Report March 15, 2017 24 inevitably retracts. Staff is drafting a Renewal and Replacement Reserve Policy for City Council discussion and direction during the fiscal year 2017-18 Budget process. However, these unfunded needs should be kept in mind when reviewing the current General Fund Five-Year Forecast. General Fund Five-Year Financial Forecast The five-year forecast attached to this report as Attachment C was developed using the FY 2016-17 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. The five-year forecast was prepared with careful consideration to each revenue and expenditure category. These analyses roll up to the summary forecast shown in Attachment C. General Fund revenues are monitored closely, and projections are based upon a rolling forecast model that combines actual results with smoothed, multi-year historical data. When appropriate, compound annual growth rates (CAGR) are utilized to smooth cumulative year-over-year growth, as though growth has occurred steadily over the specified period of time. Adjustments are also made for known and/or assumed financial factors such as economic and legislative changes at the national, state, and local level. Forecast assumptions may also utilize information from third party experts, published industry indices, and/or data collected from City departments. This procedure for analysis allows a different CAGR or 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. 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 Property Tax 6% - 7.5% The actual assessment roll growth, per the County Assessor, is based on the January 1 lien date and continuing trend of low property turnover. The housing market may cool in the next few years due to rising interest rates, but some Bay Area insulation is expected due to high demand. In FY 2019-20, the Burlingame Point properties project will 2016-17 Mid-Year Report March 15, 2017 25 Revenue Description Growth Factor Explanatory Comments ERAF Rebate be included in the City’s assessed valuation data. Varies – expected to decline Adjustments made for Educational Revenue Augmentation Fund (ERAF) rebate, decreasing over the next five years due to growing demands on ERAF funds. The City will continue to treat largely as one-time revenue. Sales Tax 2.2% - 2.7% Based upon recent Q3 2016 sales tax data and the HdL Companies long-term forecast. Indications of a shift of consumer spending on services (rather than taxable goods) and statewide concerns regarding diminishing sales tax base could limit growth. Transient Occupancy Tax -2.6% - 2.5% Based upon assumption that average daily room rates will be constrained by price elasticity. Includes an assumption for some diversion of revenue as a result of new SFO hotel in fiscal year 2019-20. Other Taxes - Franchise Tax 1.0% - 3.0% Based upon expected gross revenue changes for PG&E, garbage, and cable TV. Other Taxes - Business Licenses 1.0% - 3% Based upon expected growth in long-term parking as a result of record highs in 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 Flat Limited to growth in the number of homeowner occupied parcels. Other Taxes - Transfer Tax 2.5% Based upon historical patterns and consistently low inventories of properties for sale. Licenses & Permits Fines, Forfeitures & Penalties Less than 1% Based primarily on no/slight annual adjustments to fees, and a very small increase in volume. Not included here is an assumption for added parking lots or garages over the next five years due to unknown implementation date. Charges for Services 2% - 2.5% Growth based primarily on consumer price index adjustments to fees. Not included here is an assumption for increased programming at new Community Center due to unknown implementation date. Use of Money & Property 2.5% The assumption is based upon current long- term lease information, which permits adjustments based upon consumer price indices, as well as a scheduled increase to the monthly rent for various leases. No 2016-17 Mid-Year Report March 15, 2017 26 Revenue Description Growth Factor Explanatory Comments assumptions have been made for the Golf Center lease. Other Revenue No growth No growth projected due to one-time revenue. State Subventions Flat The forecast assumes that mandated cost recoveries from past years will continue to decrease as the State makes progress in paying these liabilities. Interest Income 50% - 2017-18 10% thereafter Based upon expected cash balances and increases in Federal Funds rate per Federal Reserve policy analysis (December 2015). Forecasted Expenditure Assumptions Expenditure Description Explanatory Comments Salaries & Wages Includes effect of current collective bargaining agreements, including recently approved agreements with labor groups and increased wages for part-time employees effective January 1. Assumes an annual growth in salaries of 2-3% for out years, as well as normal merit step increases. Benefits Includes an annual growth rate of 5% - 6.5% for January 1 changes in health care rates, per the most recent OPEB study. Also includes expected PERS contribution rate increases (14.4% average annually for Safety and 11.4% for Misc. employees) coupled with forecast increases in salaries & wages. Also included are employee contributions to health care and PERS in accordance with current MOUs. Operating Costs Based upon cost of living adjustments for most non-personnel costs and expected changes in utility rates. A 3% compounded annual growth rate is assumed for most operating costs. A 6% escalation factor for service from Central County Fire is also assumed. Operating Costs (cont.) 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 2014-15). Internal Services Based upon a 3% blended escalation factor. 2016-17 Mid-Year Report March 15, 2017 27 Expenditure Description Explanatory Comments Capital Outlay Includes a base of $230K based upon historical use and 3% growth rate. Transfers In (Out) Assumes reimbursements for debt service, increasing General Fund investments in Capital Projects (with a floor of 2 of the 12% TOT tax revenue), and support of City shuttle programs. Debt Service Actual debt service for all current outstanding bond issues. Assumes no refinancing of current debt and no new general obligation debt issuances. In the five-year forecast, property tax revenues are assumed to grow at a rate higher than inflation, but not as quickly as in recent years. Although growth in Burlingame’s assessed value in fiscal year 2015-16 was 6.8 percent, and current year property tax revenue was based on a roll 7.85 percent higher, growth in the roll so far for fiscal year 2017-18 indicates that an increase of approximately 5 percent in property taxes can be anticipated. This rate includes an inflationary factor of slightly over 1 percent as reported by the State Board of Equalization for December 2016. 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. If 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 6.0 percent for secured property taxes in most fiscal years 2018-19 through 2021-22. Although a bump-up (to 7.5 percent) of these projected revenues is allowed in 2019-20 for the anticipated completion of the Burlingame Point development, the potential revenue impact of other future (specific) development, is NOT included in the long-term forecast. Property tax revenues as a whole exhibit a much slower rate of growth than secured property taxes in the five-year forecast due to the possible diminishment of excess ERAF refunds. Long a part of the City’s property tax revenue stream, the refunding of amounts remaining in the County’s Educational Revenue Augmentation Fund (ERAF) to the subsidizing local governments is projected to diminish considerably, perhaps even coming to an end if the State’s uses of ERAF are intensified. The City’s Transient Occupancy Tax (TOT) revenue has grown in recent years to be the City’s largest General Fund revenue source. A surge in both occupancy and hotel room rates has resulted in a 22.7 percent increase in the City’s TOT revenues in the past three years. The rate was last increased six years ago from 10 to 12 percent (effective January 1, 2010), and that rate is assumed to remain unchanged in future years. Yet the revenues generated from TOT are very volatile. As noted in the risk-based analysis of the City’s General Fund reserve needs, receipts are directly tied to changes in average daily room rates (ADR) of the City’s 3,742 hotel rooms. As occupancy rates are already very high, and room rates show some signs of leveling off, it is unreasonable to assume these revenues will continue to grow as they have in the past few years. A growth rate of 2.5 percent is applied to the City’s base TOT revenue for most years of the forecast. A downward adjustment is included in 2016-17 Mid-Year Report March 15, 2017 28 fiscal year 2019-20 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. The City’s sales tax base has continued to grow with the economic recovery of past years, and the forecast for the upcoming fiscal year and the four years beyond calls for a growth rate of approximately 2.5 percent. Due to consumer trends that indicate a decrease in the purchase of goods and materials in favor of non-taxable transactions (i.e., services), this more conservative growth rate is appropriate. Income from the City’s investments has increased very modestly with the growing economy. Though yields on the short-term, risk averse investments (typical for inclusion in municipal portfolios) have languished with historically low rates for so many years, increases in interest rates are anticipated in the next couple of years. Any increase to the very low yield rates 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. The limited revenues received in the categories of Licenses and Fines are assumed to grow only modestly for purposes of the five-year forecast. Charges for Services are forecast to grow at a rate of 2.5 percent annually. Although Increases in fees were anticipated due to the completion of the City’s Cost Allocation and User Fee studies in fiscal year 2015-16, the study did not result in measurable additional revenue. For the most popular services, the City either found their fees to be adequate to cover costs, or determined that the general public benefitted from the provision of these services. It is appropriate that fees for services that provide a public benefit are subsidized by general revenues (i.e., taxes). Fees will be additionally discussed in detail with the presentation of the Master Fee Schedule in April. With revenues forecasted to grow an average of 4.7 percent in the next five years, the examination of General Fund expenditures becomes critical in the evaluation of the City’s long - term fiscal health. In particular, assumptions regarding future personnel costs (which constitute over half of the General Fund budget) must be carefully considered. Whereas City revenues can vary widely with the economy, decisions made about employee costs have less of an immediate impact on operating budgets, but carry long-term implications that could stifle the ability to provide an appropriate level of services in the future. The trend of most concern in governmental expenditures has been anticipated for many years, and is reflected in large unfunded pension obligations. Last month, the California Public Employees' Retirement System (CalPERS) voted to reduce its investment return assumption to 7 percent from 7.5 percent over the course of three years. The action replaces a previous plan that would have triggered incremental declines in the return assumption in boom years when actual performance exceeded expectations. Many state retirement systems have made plans to gradually drop their long -held discount rates in response to lower-than-projected yields on their investments since the recession. Fitch called the new 2016-17 Mid-Year Report March 15, 2017 29 trend “an exceptionally slow recognition by pension decision-makers that high targeted returns are unlikely to materialize in the current investment environment.” The rating company also predicted that many other systems are likely to "follow suit as pension managers confront persistent challenges to achieving investment targets." These decisions are coming after pension plans have missed their return assumptions by wide margins for two years straight. The shortfalls largely wiped out the funding progress pensions made in 2013 and 2014. A higher expected rate of return increases the likelihood that assets set aside to fund retirement obligations will be insufficient to meet the demand of retiring workers. But pension plans have previously resisted large shifts downward in investment assumptions because it means higher payments from contributing governments to make up the difference. For example, California’s contribution to CalPERS in fiscal 2018 will increase by $172 million -- $105 million of which is from the general fund as a result of the lower assumed rate. The City has always reflected a conservative CalPERS rate in its five-year forecast. However the impact of the discount rate change is severe. The rates shown below reflect rates provided by CalPERS (through FY 2017-18); subsequent year rates are based on an actuarial study recently completed by Bartel Associates (the City’s external actuary), commissioned specifically to determine the impact of the change in CalPERS’ discount rate. Note that the most immediate impact of the discount rate assumed by CalPERS can be seen in the large increase in the UAL (unfunded accrued liability) of prior years. Since personnel costs are such a large portion of the General Fund budget, changes in employer contribution rates will have a significant impact on the fund’s five-year projection. Salaries and wages have been broadly projected at levels that assume all existing labor agreements are adhered to until expiration. The City’s most recent labor contracts, while reflecting concern over increasing employee benefit costs, also acknowledge the improved economy and the higher cost of living in the Bay Area. The contracts provide a balance in the four major cost areas of employee compensation: salary, health premium contributions, pension obligations, and retiree medical, though the cost to the City continues to grow in all these areas. The long-term forecast reflects growth in salaries and wages at a level of 3 percent once these contracts expire. Another part of the personnel cost budgets is the pre-funding of retiree medical benefits (OPEB). Funded on a pay-as-you-go basis until the 2014-15 fiscal year, the cost of these benefits, largely Fiscal Year Normal Cost UAL Payment Total % Normal Cost UAL Payment Total % 2016-17 10.60%+1,714,000 22.90%19.70%+958,000 40.60% 2017-18 10.70%+2,004,000 24.60%20.90%+1,179,000 45.20% 2018-19 11.10%+2,444,000 27.60%21.80%+1,496,000 51.80% 2019-20 11.50%+2,960,000 30.90%22.40%+1,866,000 58.70% 2020-21 12.40%+3,328,000 33.60%23.80%+2,148,000 64.40% 2021-22 12.20%+3,860,000 36.00%23.40%+2,529,000 69.80% Estimated CalPERS Rate Misc. Rate Safety Rate 2016-17 Mid-Year Report March 15, 2017 30 incurred in prior years, is now being pre-funded through an (external) irrevocable trust. These costs represent a surcharge of approximately 30 percent on regular salaries and benefits. The normal cost (cost of the benefit earned by active employees for the current fiscal year) is included in all personnel cost projections, and should decrease over time because retiree medical benefits offered to new employees (since 2012) are greatly reduced in this area. An actuarial valuation as of June 30, 2015 confirms the amount of the surcharge needed to continue funding these benefits for the next two fiscal years. With respect to non-personnel expenditures, it should be noted that the General Fund transfer out (expenditure) for the CIP has in past years been based on a set portion of the TOT revenues (2 of the 12 percentage point TOT rate) – over $4.3 million for 2016-17. As such, capital spending has been able to proceed at a rate higher than other General Fund expenditures. In the five-year forecast, the same rate of growth in this transfer is assumed as the growth rate in the City’s TOT revenues. The regular transfer amount was intended to reflect the annual cost of maintaining the City’s current infrastructure in its current condition, and has been considered an essential part of a sustainable budget. However, due to the identification of the City’s many unmet capital project needs, particularly in regards to City facilities, staff has recommended that the transfer amount based on TOT revenue be considered a minimum annual transfer amount. As in the 2016-17 fiscal year budget, staff will recommend the transfer for the upcoming fiscal year General Fund budget be increased based on the City’s capital needs for the upcoming fiscal year, to the extent there is staff capacity in the organization to accomplish the identified projects. While annual funding of $3 million for the Renewal and Replacement Reserve in the Capital Projects Fund is also assumed in the five-year forecast, 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. For example, the forecast includes a slightly higher-than-normal increase in property tax in the 2019-20 fiscal year in acknowledgement of the Burlingame Point development, but no other assumptions (in revenues or expenditures) were modified for the project. 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 2017-18 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 other financial reporting processes currently in place. 2016-17 Mid-Year Report March 15, 2017 31 FISCAL IMPACT Authorization of the attached budget amendment updates the previous allocation of City resources for the 2016-17 fiscal year, reflecting changes in economic conditions and the City’s current fiscal year-to-date performance. Also attached is a resolution approving the transfer of $4 million from the General Fund to the Capital Project Fund’s Renewal and Replacement Reserve. The City Council may consider revisions to the mid-year adjustment in the attached resolution, and/or additional amendments to the FY 2016-17 budget. The goal is to provide the most accurate picture of the 2016-17 fiscal year’s standings in preparation for the FY 2017-18 budget and to assist decision makers in planning for the City’s needs in the long-term. Exhibits:  Mid-year Budget Amendments Resolution  Funding of the Renewal and Replacement Reserve Resolution 2016-17 Mid-Year Report March 15, 2017 32 City of Burlingame FY 2016-17 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 diff icult period following the “dot com” bust, and fared relatively well through the declines in home prices f rom 2008 through 2010. In the past five years the market has improved and stabilized. Assessed property values continue to rise, increasing 7.85 percent in the past year, after rising 6.8 percent in each of the previous two years. The local housing market is very strong, despite a persistent lack of inventory. And though credit conditions remain relatively tight, recent years have seen a renewed interest in commercial real estate development. Property tax rolls are established prior to the beginning of the fiscal year. In FY 2016-17, Burlingame’s roll value (land and improvements) has increased 4.80 percent, including an inf lationary 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 (over 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. In FY 2015-16, actual property tax revenue receipts were within ½ percent of the budget (as adjusted at mid-year), representing a 5.8 percent increase in property taxes over the prior year. Revenues from secured property taxes were expected to rise approximately 6.6 percent in FY 2016-17, but since the final assessed roll for Burlingame reflects a 7.85 percent rise over the prior year, an upward adjustment of $126,000 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 $44,000 higher than initially budgeted for 2016-17. In addition, the City continues to expect adjustments in the County’s ERAF (Educational Revenue Augmentation Fund) distributions, as these may negatively impact the City’s excess ERAF reimbursement in comparison to prior years. Excess ERAF reserves are held by the County and distributed when all other obligations of the funds have been met. The ERAF reimbursement received early in January consisted of 45 percent of the excess ERAF amount for each of the current and prior fiscal years, plus the remaining ERAF reserve balances for fiscal year 2014. Due to growing demands on the ERAF funds, these reimbursements have leveled off and are expected to decline. The County continues to warn that, as funding for education grows and other State commitments are satisfied through the ERAF funds, excess ERAF distributions could decline significantly, and even be eliminated. For fiscal year 2016-17, the City’s excess ERAF distribution was slightly ($30,000) higher than in the prior year. But these funds were very Description 2014-15 Actuals 2015-16 Actuals Adopted Budget Midyear Projection Midyear Amendment Current Secured Property Tax 11,214,778$ 11,946,937$ 12,717,000$ 12,843,000$ 126,000$ Secured Supplemental Property Taxes 346,666 455,228 500,000 500,000 - Unsecured Property Tax 618,498 649,049 689,000 664,000 (25,000) Property Tax in Lieu of VLF 2,668,277 2,849,279 3,019,000 3,063,000 44,000 ERAF Refund 1,564,072 1,461,327 800,000 1,490,000 690,000 Unitary Tax 265,091 283,469 301,000 291,000 (10,000) Total 16,677,381$ 17,645,289$ 18,026,000$ 18,851,000$ 825,000$ 2016-17 2016-17 Mid-Year Report March 15, 2017 33 conservatively budgeted, and a $690,000 mid-year increase is proposed to bring this line item up to the actual amount received in 2016-17. 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. Supplemental property taxes, collected for the balance of the current tax year on increased assessed valuation when property changes ownership, is coming in only slightly ahead of amounts for the same period last year. Although it appears that these revenues will come in slightly short of budget, no adjustment is proposed for this line item revenue. Unsecured property taxes (assessed on business fixtures, business personal property, boats, aircraft, etc.) are only slightly higher than in the prior fiscal year. Because this line item revenue fell short of budget in FY 2015-16, a $25,000 decrease in this budget is recommended. In addition, Unitary Tax revenue was also a bit short of budget in the prior fiscal year. Although a higher assessment of utility-owned properties is reflected in the County Assessor’s role, a slight downward adjustment in the FY 2016-17 budget ($10,000) is proposed for this line item. Sales and Use Taxes – The table below shows the City’s sales tax revenues over the past eight years, as well as a projection for the current fiscal year. The recession was obviously marked by a severe decline in consumer spending and associated taxable transactions. 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 FY 2008-09, with a further 23.68 percent decrease in FY 2009-10. With the economy recovering, sales tax revenues surged upward in FY 2010-11, and continued to grow at an impressive pace. In fact, these revenues surpassed pre-recessionary levels in FY 2013-14, with nearly $10.2 million in receipts. Sales and use tax revenues for the City’s fiscal year ended June 30, 2016 reflected an over 15.5 percent increase from the prior year, but about half this increase was due to a one-time adjustment by the State. December 31, 2015 marked the end of a series of revenue swapping procedures by the State (referred to as the “triple flip”) which began in 2004 to secure debt service payments for the State’s Economic Recovery Bonds. The triple flip unwind process was wrapped up in May 2016, with receipt of “payback” amounts held by the state from previous quarters. This supplied a one-time bump in sales tax revenues of nearly $1 million for last fiscal year. The chart on the next page shows total sales tax receipts from the Bradley Burns (local 1 %) allocations from the State Board of Equalization (SBOE), the amounts received from the State’s Sales and Use Tax Compensation (SUTC) Fund, and the additional Public Safety Sales Tax. In future years, the local sales tax allocations will be received in whole, and the State’s SUTC Fund will be retired. Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 (Est.) Sales & Use Tax 5.86$ 5.00$ 6.15$ 6.33$ 6.90$ 7.48$ 8.36$ 10.20$ 12.00$ Sales Tax Compensation Fund 2.39$ 1.27$ 1.89$ 2.16$ 2.17$ 2.57$ 2.59$ 2.48$ -$ Public Safety Fund-Sales Tax 0.11$ 0.11$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.15$ 0.15$ Grand Total 8.36$ 6.38$ 8.15$ 8.62$ 9.20$ 10.20$ 11.10$ 12.83$ 12.15$ Year-over-year change -12.70%-23.68%27.74%5.71%6.73%10.84%8.87%15.56%-5.28% Fiscal Year 2009-17 Sales & Use Tax Revenue (in millions) 2016-17 Mid-Year Report March 15, 2017 34 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 FY 201 6-17 revenues from this source. Although a review of Burlingame’s 3rd quarter data for 2016 (remitted to the SBOE in October – December 2016), indicates a decline in taxable transactions of approximately 4.7 percent, the prior year quarter included a significant transaction in the area of energy/utilities (Business and Industry group). Without that one-time aberration, sales and use tax receipts grew 1.4 percent when compared with the same quarter last year. The chart below shows that sales tax revenues continue to increase moderately, with many major industry groups reporting a positive change compared to the same quarter of 2015. Revenues from transactions in the City’s largest sector – Autos and Transportation – decreased slightly in the comparable quarter. However, relatively low interest rates, more fuel-efficient drive trains, and declining fuel prices continue to push the auto industry forward. Although the demand 5.86 5.00 6.15 6.33 6.90 7.48 8.36 10.20 12.00 2.39 1.27 1.89 2.16 2.17 2.57 2.59 2.48 0.000.11 0.11 0.11 0.12 0.13 0.14 0.15 0.15 0.15$0 $2 $4 $6 $8 $10 $12 $14 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 ProjectionMillionsHistorical Sales & Use Tax Revenue Sales & Use Tax Sales Tax Compensation Fund Public Safety Fund- Sales Tax 2016-17 Mid-Year Report March 15, 2017 35 for automobiles is anticipated to level off somewhat in FY 2016-17, the sector as a whole should remain fairly strong for the remainder of this fiscal year. It is interesting to note that the City’s share of the countywide use tax pool jumped 9.5 percent compared to same quarter in 2015, after having risen 12 percent in the previous year. Use tax is the responsibility of the buyer rather than the seller and does not involve a California “point of sale”. Therefore, the tax is coded to the county of use and then distributed to each jurisdiction in the county on a pro rata share of taxable sales. While these receipts represent only 10-12 percent of the total sales tax revenues (and are categorized by major industry group along with point-of-sale receipts), the increase reflects a continued acceleration of online shopping for merchandise shipped from out of state. This trend, along with a shift in consumer spending habits to non-taxable goods and services, puts pressure on brick-and-mortar retailers and the underlying sales tax base for local governments. The City’s FY 2016-17 adopted budget assumed little growth in sales tax revenues due to the prior year adjustments and one-time transactions. However, due to continued strength in the economy, an upward adjustment of $181,000 (an additional 1.5 percent) is proposed for the current fiscal year, for a total projection of $12.1 million in sales tax revenue. This estimate is consistent with the projections supplied by HdL, the City’s sales tax consultant. HdL was also consulted in the preparation of the five year forecast for sales and use tax revenues. Transient Occupancy Taxes (TOT) – TOT revenues constitute Burlingame’s largest General Fund revenue source, and are usually a good indicator of current economic activity. TOT revenues are reported and paid to the City each month (for the prior month), so results as of January 31, 2016 reflect the first six months of the fiscal year. The budget for FY 2016-17 was 2016-17 Mid-Year Report March 15, 2017 36 established based on TOT collections through March 2016, when 2015-16 fiscal year-end results were projected to be approximately $25.2 million, an increase of 9.1 percent from the prior fiscal year. Noting that the new fiscal year would not include a regional event as large as Super Bowl L, continued low vacancy rates and a steady rise in average daily room rates (ADR) supported the original fiscal year 2016-17 budget projection of $26.0 million – a projected growth of 3 percent in TOT revenue. In fact, the City ended the 2015-16 fiscal year with nearly 26.1 million in TOT revenues (see graph above, where Q1 shows results for July through September of each fiscal year). And occupancy rates as reported by the City’s hotels remained fairly robust in the first half of the current fiscal year. Burlingame hotels reported an average occupancy rate of 84.9 percent between July and December 2016 and an ADR of approximately $192. Certain large remodeling projects were started and completed during the 2015-16 fiscal year, and staff believes that modest growth will be felt in the remainder of the current fiscal year. A new projection of $26.2 million is proposed at mid-year for TOT revenues, representing a 0.5 percent growth rate in the 2016-17 fiscal year. However, TOT revenues continue to be highly vulnerable to the cyclical nature of tourism and changes in the economy. The City continues to project TOT revenues conservatively, as hotel room pricing has far outpaced local pricing indices as well as inflation; as such, it is expected that in the near term, price elasticity will constrain growth. Other Taxes – A number of other sources provide tax revenues to the City’s General Fund. Although they are consolidated for reporting purposes, prior year actual amounts and the current year activity for each source ha ve been reviewed for the most accurate projection of 2016-17 year-end results. Real Property Transfer Tax revenues are showing a marked decrease, and that is largely due to the number of large property sales in the prior two fiscal years. A significant decrease in the volume and value of real estate sales during the recession is reflected in the City’s Property Transfer Tax revenue, as shown in the chart below. The City receives this revenue the month following a real property transaction, splitting the 0.11 percent tax evenly with the County. 3.0 2.6 2.6 3.0 4.2 3.9 3.8 4.3 4.9 4.5 4.0 4.8 5.8 5.1 4.8 5.6 6.3 5.6 5.4 6.4 7.4 6.0 6.0 6.7 - 1 2 3 4 5 6 7 8 Q1 Q2 Q3 Q4$ Millions2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Historical Transient Occupancy Tax Revenue by Quarter 2016-17 Mid-Year Report March 15, 2017 37 Although improved home values have pushed these receipts higher with the recovering economy, property turnover in the area continues to be relatively low. The FY 2015-16 amount received for property transfer taxes was an unprecedented $499,514. Current year (July 2016 through January 2017) tax receipts are coming in about 41 percent lower than last year’s receipts during the same time period, due to the lack of sale of any large commercial properties in recent months. So, depending on real estate sales in the remainder of this fiscal year, this revenue is expected to come in much lower than the $477,000 budget. Month to month variation in real estate sales (reflected in the chart below) makes this revenue difficult to project. However, staff conservatively proposes a $185,000 decrease in the FY 2016- 17 budget for the City’s property transfer tax revenues. Year-to-date Business License Tax revenues are coming in at a rate 1.0 percent higher than last year. This includes the special business license tax (5 percent of revenues) assessed on airport parking enterprises, which comprises approximately 40 percent of this revenue line item. To reach the budget of $990,000 for the current fiscal year would represent less than a ½ percent $231,612 $280,069 $379,266 $379,542 $347,855 $436,853 $499,514 $292,000 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 (Projected) Fiscal Year 2009-17 Real Property Transfer Tax Revenue $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 Jul-07Jul-08Jul-09Jul-10Jul-11Jul-12Jul-13Jul-14Jul-15Jul-16City of Burlingame Fiscal Year 2007-16 Real Property Transfer Tax Revenue 2016-17 Mid-Year Report March 15, 2017 38 increase over the 2015-16 fiscal year results for business license revenues. While a higher volume of licenses might be expected in an improving economy, the cost of an annual business license in Burlingame is small ($100 for most businesses). Unless airport parking enterprises experience a significant change in operations, this remains a relatively small and somewhat fixed revenue source. Staff believes that the budgeted amount is on target for this fiscal year. The largest category of Burlingame’s Franchise Fees is derived from the 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 th is activity, and no mid-year adjustment is proposed for fiscal year 2016-17. 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, ther e is no indication that the current year’s revenues will deviate significantly , and the current year adopted budgets for these fees also appear to be on target. However, a $16,000 upward adjustment is proposed for cable franchise fee revenues , as these came in ahead of budget last year, and current fiscal year receipts remain strong . Licenses and Permits – General Fund revenues in this category, consists largely of alarm and overnight parking permit fees, along with taxicab licenses. Last year, this revenue source, increased only mildly compared to the previous year . With a budget of $88,000, these receipts account for a very small part of total General Fund revenues. Fines, Forfeitures and Penalties – This category consists largely of revenue from parking citations and vehicle code violation fines. Parking citation revenue in FY 2015-16 declined from the prior fiscal year amount s due to a turnover in staffing. However, as the staffing challenges have been largely resolved, current receipts are on track with the adopted budget projections . No adjustment is recommended for these revenues. 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 decreased by $45,000 to reflect current year receipts and collectability, including a reduction in the VB Golf Lease agreement effective January 1, 2017. Investment Income – Yields on municipal portfolios dropped steadily following the 2008 market downturn. Over recent years, the Federal Reserve has implemented monetary policies to keep credit affordable and inflation in check to help the economy recover from the recent recession. Similar to other cities, Burlingame invests in only the safest of securities (the highest priority of the City’s investment policy is preservation of capital), and yields have continued to hover at historic lows for such investments . Description 2014-15 Actuals 2015-16 Actuals 2016-17 Adopted Budget Midyear Projection Midyear Amendment Gas 105,382$ 109,866$ 110,000$ 110,000$ -$ Electric 213,447 228,920 222,000 222,000 - Garbage 711,918 699,539 717,000 717,000 - Cable TV & Wave Astound 444,600 462,098 448,000 464,000 16,000 AT&T Video Service 104,630 104,336 101,000 101,000 - Total 1,579,976$ 1,604,758$ 1,598,000$ 1,614,000$ 16,000$ FY2016-17 2016-17 Mid-Year Report March 15, 2017 39 The City has contracts with PFM Asset Management, LLC. for outside investment advisory services. PFM assists in the annual review of the City’s ongoing cash flows and investment goals, and recommends any appropriate revisions in the investment policy. The managed portfolio’s benchmark is the Bank of America Merrill Lynch 1-5 Year U.S. Treasury Index, with a duration of 2.65 years. The market value of the portfolio as of December 31, 2016 was $140.5 million, consisting of an $81.5 million managed pool of top-rated securities, $58.3 million in the State Local Agency Investment Fund (LAIF), and $0.3 million in the County pool. The City’s aggregate investments (including the very liquid State and County investment pools) averaged a yield to maturity of 1.11 percent. Interest earnings for all of the City’s funds in FY 2015-16 were over $2 million, above the $922,000 combined budgets for the year. These results include the impact of the year-end “mark-to-market” adjustment (an increase of $254,000), which was unknown at the time of the projections, and generally not included in the development of the interest earnings budget . Given the Federal Reserve’s intention of tightening its monetary policy more gradually than anticipated in the prior year, there was reason to expect short-term investment rates to rise only modestly in FY 2016-17. The combined effect of an under-estimated budget in the prior year, and the anticipation of more frequent rate increases from the Federal Reserve , is current year interest revenue projections that are much higher than reflected in the 2016 -17 fiscal year budget. The aggregate yield to maturity on the City’s investments of 1.11 percent compares favorably with the 0.92 percent reported in last year’s mid -year analysis. The Local Agency Investment Fund (LAIF), which holds the majority of the City’s idle cash, is yielding 0.68 percent, up from 0.37 percent one year ago. Revenues from the City’s investments are therefore anticipated to be higher than in the prior fiscal year in total. However, it would not be prudent to include an assumption about the year -end “mark-to-market” adjustment in forecasting this revenue. Actual income earnings are allocated out to other City funds based on average cash balance throughout the fiscal year. As cash balances vary from year to year within the different funds, interest earnings by fund are difficult to project. Of the t otal interest earnings now projected for the 2016- 17 fiscal year, $630,000 is projected to be General Fund interest revenue. Staff has proposed adjustments to the interest revenue budgets in all funds (page 14 of this staff report) that will be credited with any material interest earnings in FY 2016-17. 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 were so erratic that they were no longer included in the City’s budget. Yet, based on the continued health of the State’s economy, staff conservatively estimated $10,000 of state reimbursements of prior year mandates in the FY 2016-17 Budget. Revenues were healthy enough in the 2015-16 State budget to pull the pre-2004 mandate repayment “trigger mechanism”, bringing additional funds ($765 million in total) to counties, cit ies and special districts, and fulfilling the state’s obligation for pre-2004 mandates in their entirety. Payments for both the City’s mandated cost claims and interest were accrued to the 2014-15 fiscal year. The total of this state revenue was over $313,000 for fiscal year 2014-15. Because these revenues were inconsequential in FY 2015-16, an elimination of the $10,000 budget in the current fiscal year is recommended. 2016-17 Mid-Year Report March 15, 2017 40 It is unknown whether the Governor’s Budget for FY 2017-18 will include additional funding for mandatory cost claims. At any rate, the timing and allocation of these funds to the state-wide agencies for various mandates and accrued claims will not be determinable in advance. Receipts of State Motor Vehicle License Fees (VLF) totaled $12,000 in 2015-16. Following the 2011 State Budget Act, which stripped most remaining VLF allocations from cities, revenues from this source are not significant and always uncertain. Thus, the City is no longer budgeting this revenue. Also in this same category of revenues, the POST (Peace Officer Standards and Training) reimbursement budget should be decreased $10,000, to reflect a reduced participation of the City’s police officers in POST programs than originally anticipated. Charges for Services – General Fund revenues in this category were down (approximately a quarter percent overall) in FY 2015-16 compared to the previous year due largely to a slight decline in the City’s development applications. As seen in the chart below, most departments generate some amount of receipts in this revenue category. With a budget of over $4.8 million, these receipts account for approximately 7.3 percent of Burlingame’s total General Fund revenues. Receipts from recreational services were 4.6 percent above the adopted budget in fiscal year 2015-16, but slightly below (1.9 percent) the mid-year projection. Additional growth was anticipated in the current year budget, and 2016-17 fiscal year-to-date receipts indicate a continued demand for recreational offerings. Park fees were also projected to be slightly higher and are targeted to come in on budget. The volume of development remains fairly high, approximating prior-year levels. Given that fiscal year 2015-16 fell slightly short of budget, the slim growth factor anticipated in the current year budget for Planning services revenue may not be totally achieved. However, Public Works fees for services have experienced a significant revenue increase in the current fiscal year due to the progression of several larger projects of higher structural complexity than experienced in the previous fiscal year. In fact, one of the projects called for special encroachment permits for subsurface shoring systems, a permit for which a fee was first established in the FY 2016-17 Master Fee Schedule. As a result, these fees are projected to be $432,000 higher than the proposed budget for the current fiscal year. CITY OF BURLINGAME, CA CHARGES FOR SERVICES BY DEPARTMENT Department FY14-15 Actual FY15-16 Actual FY16-17 Current Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % Police 62,280 59,456 92,700 62,700 (30,000) -32.4% Parks 158,475 148,572 172,500 172,500 - 0.0% Recreation 2,599,854 2,637,496 2,602,000 2,602,000 - 0.0% Aquatics - - 176,000 176,000 - 0.0% Planning 617,287 577,413 626,500 626,500 - 0.0% Public Works 425,538 421,996 463,000 895,000 432,000 93.3% Library 613,879 619,508 688,000 708,000 20,000 2.9% Other 4,306 5,834 4,500 4,500 - 0.0% Total, Departmental Fees 4,481,618$ 4,470,274$ 4,825,200$ 5,247,200$ 422,000$ 8.7% 2016-17 Mid-Year Report March 15, 2017 41 The revenue projection for Police Services should be adjusted downward due to the elimination of the Abandoned Vehicle Abatement program. This State program was administered by C/CAG (City/County Association of Governments) of San Mateo County and expired in May 2013. The program was closed in June 2016 after a final distribution of the residual fund balance was made. The Abandoned Vehicle Abatement program should be removed as a revenue source. The amount budgeted for the 20 16-17 fiscal year was $30,000. The FY 2016-17 Burlingame Library budget was increased slightly with the proposed opening of a Passport Intake Office. In an effort to offset a decrease in service fee revenues an d in recognition of a growing community need, the Library desired to provide this new service in partnership with the US State Department beginning in July 2016. Though staff turnover earlier in this fiscal year caused a significant delay, training of the appropriate staff has been completed, and the new program is expected to be operational within the month. The $60,000 revenue projection for the current year needs to be adjusted downward to $15,000. In addition, remuneration for the provision of library services to the Town of Hillsborough is calculated after each year-end and based on average per-capita costs (within Peninsula Library System budgets) applied to two-thirds of the population of Hillsborough. The new projection is more than originally estimated by $65,000. This upward adjustment is also reflected in the attached FY 2016-17 mid-year budget amendment. Other Revenues – The City receives other miscellaneous revenues from time to time. The budget for these miscellaneous revenues (unclaimed property from the State, rebates, miscellaneous refunds of prior -year expenses, etc.) was therefore set at a de minimis $500. However, the County recently reimbursed the City for the costs of a police investigation and expert witness services i n a civil law enforcement action. The reimbursements amounted to nearly $30,000, which is reflected in an increase in the proposed budget for this revenue category. 2016-17 Mid-Year Report March 15, 2017 42 City of Burlingame FY 2016-17 Mid-year Report Attachment B – General Fund Expenditures The following table shows the FY 2016-17 mid-year assessment of departmental (operating) General Fund expenditures: Although many of the proposed mid-year budget amendments are off-set within each department or division, they are described in detail below to illustrate changes in operations that were not anticipated at the time the FY 2016-17 budget was adopted. General Fund Personnel Costs The challenge of any public sector agency is to provide competitive salary and benefit packages in order to recruit and retain quality talent, while keeping the cost of providing these packages at a reasonable and sustainable level. Negotiated or imposed contracts in years since the recession have resulted in signif icant savings and have assisted in achieving structural benefit CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES Description FY2014-15 Actual FY2015-16 Actual FY16-17 Adopted Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % General Gov't (Admin Svcs)4,121,895$ 4,477,401$ 5,182,271$ $5,281,871 99,600$ 1.9% Public Safety Central County Fire (Burlingame)10,470,376 10,966,697 10,896,255 10,896,255 0 0.0% Police & Dispatch 12,303,118 13,658,374 15,404,049 15,429,049 25,000 0.2% Public Works 4,769,873 4,693,548 5,093,323 5,093,323 0 0.0% Community Development - Planning 1,244,199 1,405,794 1,658,233 1,718,233 60,000 3.6% Leisure & Cultural Services Aquatic Center 400,831 336,689 476,000 476,000 0 0.0% Library 4,392,440 4,385,376 5,016,939 5,004,939 -12,000 -0.2% Parks & Recreation 6,702,334 7,535,581 8,404,258 8,416,458 12,200 0.1% Total Expenditures 44,405,064$ 47,459,460$ 52,131,328$ 52,316,128$ 184,800$ 0.4% CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES By General Fund Categories FY2014-15 Actuals FY2015-16 Actuals FY16-17 Adopted Budget FY16-17 Midyear Projection FY16-17 Midyear Amendment Year-End Up (Down) % Salaries & Wages $ 13,960,108 $ 15,469,014 $ 17,378,905 $ 17,335,453 ($43,452)-0.3% Benefits 8,313,332 8,767,936 9,868,148 9,905,600 37,452 0.4% Operating Costs 18,176,224 19,920,557 21,068,541 21,259,341 190,800 0.9% Internal Services 3,861,235 3,247,960 3,586,234 3,586,234 0 0.0% Capital Outlay 94,165 53,993 229,500 229,500 0 0.0% Total Expenditures $44,405,064 $47,459,460 $52,131,328 $52,316,128 $184,800 0.4% 2016-17 Mid-Year Report March 15, 2017 43 changes that will help control f uture 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 curtailed. Although many of these savings are evident in recent-year budgets, the savings from some of these actions will not be realized in full for many years. In the current more favorable economic environment, compensation increases are anticipated to keep up with cost of living indexes. But the costs of prior-year pension obligations are anticipated to grow significantly in the next five years, and these changes will put added pressure on personnel costs beginning with the upcoming FY 2017-18 budget. Because personnel budgets are based on full occupancy (no vacancies) of permanent positions, budgetary savings will occur in most every department. However, personnel cost savings due to vacancies are difficult to estimate and vary by departments and programs, so no budget adjustments have been made on a City-wide basis. It should also be noted that most health plan rates were increased effective January 1, 2017; the increases ranged from -1.8 to +13.6 percent, depending on the plan, with an average of 4.0 percent across all plans. However, because the (weighted) average increase in the plans used most by the City’s current employees was only 0.8 percent, 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. Note that personnel costs (and total operating expenditures) for the General Fu nd have (since FY 2014-15) included contributions to the irrevocable trust fund established in October 2013 for the purpose of funding the City’s retiree medical benefit obligations (OPEB). The full costs of these past and current obligations are now reflected in the departmental budgets. As best practices would dictate, the City is committed to contributing the annual required contribution to the trust fund in both good and bad financial times, using conservative, realistic assumptions that are adjusted based on bi -annual actuarial report s specific to the City’s program and its participants . Unlike pension liabilities, the City’s OPEB is a closed program and less susceptible to volatile swings in annual contributions. General Fund Appropriation Adjustments Total General Fund expenditures increased nearly 4.7 percent in FY 2016-17 as compared with the prior year ’s adjusted budget due to strategic increases in City -wide FTE (full time equivalent) staff positions and personnel hours needed to carry out the City’s priorities, largely in the area of public safety. A 0.4 percent budget increase is re commended for the FY 2016-17 General Fund appropriations. The $185,000 budget increase is largely due to unanticipated operational needs. 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. The budget for the City Attorney’s Office has included funding for a full-time Code Compliance Officer for the last two years. However, the department has been well served in this area with contract services provided by CSG Consultants. This contract will remain in effect for the remainder of the current fiscal year. Therefore, a mid-year budget adjustment is proposed to move $77,000 from the City Attorney’s regular salaries budget to its contractual services budget. In addition, an appropriation for part-time salaries was included in the FY 2016-17 budget to fund 2016-17 Mid-Year Report March 15, 2017 44 part-time unbenefited professional assistance to the office, with an emphasis on special projects and anticipated development-related activity. The City Council has indicated that an increase in the hours provided by this additional resource is appropriate; an increase in this expenditure category of $13,000 is proposed. The City Clerk administers City elections and maintains files for all documents related to elections. Since fiscal year 2016 -17 was not an election year, no appropriation for these activities was included in the current year budget. However, enough signature s were gathered to place Measure R on the November 8, 2016 ballot. The estimated cost from the County for the election is estimated to be approximately $4 1,000. In addition, the City Clerk is responsible for mailing a notice to all registered voters in t he City of Burlingame to inform them of the changes made (pursuant to SB 415, the “California Voter Participation Rights Act”) in the general municipal election date and in the length of terms for Councilmembers elected in 2017 and 2019 . An estimated $9,000 is needed for printing and mailing these notices after approval of these changes in the City election ordinance by the County Board of Supervisors. The Human Resource Department experienced significant staff turn-over in the current fiscal year. While the department should experience some budgetary savings due to the temporary vacancies in two full-time employee positions, these savings are only sufficient to cover the necessary increase in part-time salaries and professional services costs needed to cover the workload. In addition to an adjustment to cover the pay-out of compensated absences to former employees ($10,000), a $20,000 increase in contractual services is requested to cover the cost of unanticipated recruitment services. Finally, an increase in General Government appropriations of $6,600 is proposed for the City Council’s budget, as the original budget for the annual tree lighting did not anticipate the need for re-stringing the tree with lights. Several small adjustments are recommended to the 2016-17 fiscal year budget for the Parks Division. Although the cost of maintenance and repairs has been generally less than expected for the grounds and park facilities, increased funding is needed for the purchase of plant material for the hanging baskets along Burlingame Avenue. In addition, the Broadway BID has asked for new landscape in the bulb outs as part of the tree replacement project. An additional $10,000 appropriation is recommended for these landscaping expenses, offset by a decrease in the maintenance budget of $5,000. The Recreation Division budget will require an additional $7,200 in the category of Non-Capital Equipment to fund the procurement and website installation of field scheduling software. Current fiscal year costs will include training and the annual maintenance fee. The software should help streamline the field rental and allocation processes. Early in the fiscal year, several officers were out on injury/disability status in the Police Department, requiring backfill overtime for patrol. A $20,000 increase in the overtime budget can be offset by an equal decrease in part-time salaries and will safeguard the budget against further unanticipated overtime needs in the current fiscal year. The Police Department contractual services budget needs a slight adjustment to cover needs that were unanticipated or simply overlooked in the development of the current fiscal year budget. Annual maintenance renewals for several software programs (such as the Citizen’s On-line reporting program and for Cradlepoint coverage in vehicles) will require an adjustment of $7,000. In addition, a major virus infiltration early in the fiscal year required contracting with a virus infiltration protection company ($4,000). The department also decided to rent six additional 2016-17 Mid-Year Report March 15, 2017 45 automated citation ticketing handheld machines. Although the devices will assist in maintaining parking compliance activities and related violation revenues, they come at a cost of approximately $13,000. Together these costs will exceed the contractual services budget by about $12,000. The department feels that its budget for office expenses can be decreased this amount to offset the additional appropriation for contractual services. Several adjustments are recommended in the Planning Division budget. Part-time assistance has been utilized to a greater extent than anticipated due to continually high volumes of planning and building applications, and the need to back-fill for staff on unexpected leave. The volume of planning applications has been consistently high since rising in 2013. During these years, there has been a need to engage part-time staff for some tasks, balanced with overtime. The number of applications in 2016 was slightly less than in 2015 and 2014, but not substantially less, so there continues to be a need for part-time assistance to keep pace with current planning and building applications. An adjustment to the current year budget to increase part-time salaries by $20,000 and overtime by $15,000 is recommended for the department. In addition, an increase in the Planning Division’s contractual services budget of $25,000 is proposed to fund ongoing contractual costs to date. Specifically, work on the Parking Lot E evaluation and negotiations performed through a contract with Economic Planning Systems (EPS) are expected to continue through the remainder of the fiscal year. Public Works – Although some budget adjustments were needed between categories for Public Works activities, the General Fund budget was found to be adequate for regular, ongoing operations of the department. For example, higher costs for electric and gas utilities are being experienced in the Streets and Storm Drainage Division, possibly due to the heavier-than-normal rainy season. But the additional funding needed ($10,000) can be offset from anticipated savings in the budget for contractual services in the same division. 2016-17 Mid-Year Report March 15, 2017 46 City of Burlingame FY 2016-17 Mid-year Report Attachment C – General Fund Five-Year Forecast (Revised) Budget Forecast Forecast Forecast Forecast Forecast Revenue Categories 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Property Tax 18,851,000$ 19,189,000$ 20,179,000$ 21,325,000$ 22,423,000$ 23,592,000$ Sales Tax 12,150,000 12,409,000 12,744,000 13,058,000 13,388,000 13,729,000 Transient Occupancy Tax 26,216,000 26,871,000 27,543,000 26,710,000 27,370,000 28,046,000 Other Taxes - Franchise Tax 1,614,000 1,630,000 1,646,000 1,696,000 1,747,000 1,799,000 Other Taxes - Business Licenses 990,000 994,000 998,000 1,020,000 1,042,000 1,046,000 Other Taxes - State HOPTR 62,000 62,000 62,000 62,000 62,000 62,000 Other Taxes - Transfer Tax 292,000 360,000 369,000 378,225 387,681 397,373 Licenses & Permits 88,000 88,000 89,000 89,000 90,000 90,000 Fines, Forfeitures & Penalties 942,000 942,000 951,000 961,000 971,000 980,000 Use of Money & Property 161,000 165,000 169,000 173,000 178,000 182,000 Charges for Services 5,247,200 5,352,000 5,486,000 5,623,000 5,764,000 5,908,000 Other Revenue 30,500 31,000 31,000 31,000 31,000 31,000 State Subventions 234,000 234,000 234,000 234,000 234,000 234,000 Interest Income 630,000 945,000 1,040,000 1,144,000 1,258,000 1,384,000 Total Revenues 67,507,700$ 69,272,000$ 71,541,000$ 72,504,225$ 74,945,681$ 77,480,373$ Expenditure Categories Salaries & Wages (17,335,453)(18,034,000)(18,663,000)(19,256,000)(19,814,000)(20,353,000) Benefits (9,905,600)(10,472,000) (11,519,000) (12,632,000) (13,627,000) (14,593,000) Operating Costs (21,259,341)(22,232,996)(23,260,100)(24,315,483)(25,411,457)(26,553,856) Internal Services (3,586,234)(3,693,821)(3,804,636)(3,918,775)(4,036,338)(4,157,428) Capital Outlay (229,500)(236,385)(243,477)(250,781)(258,304)(266,053) Total Expenditures (52,316,128)(54,669,202)(57,490,212)(60,373,039)(63,147,099)(65,923,337) Operating Revenue 15,191,572 14,602,798 14,050,788 12,131,186 11,798,581 11,557,035 Transfers In (Out)(2,284,270)(5,680,000)(5,772,000)(4,236,000)(3,956,000)(3,933,000) Capital Renewal & Replacement Reserve (3,000,000)(3,000,000)(3,000,000)(3,000,000)(3,000,000)(3,000,000) Debt Service (5,756,745)(3,230,000)(2,686,621)(2,710,573)(2,724,764)(1,585,048) Change in Fund Balance 4,150,557$ 2,692,798$ 2,592,167$ 2,184,613$ 2,117,817$ 3,038,987$ RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME APPROVING ADJUSTMENTS TO ESTIMATED REVENUES AND APPROPRIATIONS IN THE FISCAL YEAR 2016-17 BUDGET RESOLVED, by the CITY COUNCIL of the City of Burlingame, California and this Council does hereby APPROVE and AUTHORIZE the Finance Direc tor & Treasurer to amend the current Fiscal Year 2016-17 Budget as outlined below to reflect actual fiscal conditions and projections outlined in the Mid-Year Report: Amendments to Estimated Revenues: General Fund: Property Tax $ 825,000 Sales and Use Tax 181,000 Transient Occupancy Tax 216,000 Other Taxes – Franchise Tax 16,000 Other Taxes – Real Property Tax (185,000) Other Taxes – State HOPTR (4,000) Use of Money and Property (45,000) Charges for Services 422,000 Other Revenue 30,000 State Subventions (20,000) Interest Income 241,000 Other Funds: Special Assessment Revenue 16,116 Gas Tax (HUTA) (27,000) Caltrain Electrification Revenue 34,000 Steam Cleaning Downtown 41,500 Street Sweeping Fee 28,300 City Management Fee (28,600) Rate Stabilization Fee (61,000) Other Revenue 31,200 Electric Vehicle Charging Station 12,000 Monthly Parking Permits 34,000 Building Plan Check Fees 519,000 Sale of Property 6,000 Interest Income 623,400 Amendments to Appropriations: General Fund: City Council $ 6,600 Elections 50,000 City Attorney 13,000 Planning 60,000 Communications 25,000 Parks 5,000 Recreation 7,200 Library (12,000) Human Resources 30,000 Other Funds: Building $ 519,000 Admin/IT Services 35,000 Street CIP 34,000 Revisions to Transfers In / Out: Transfer Out from the General Fund (to Capital Projects Fund – Streets) $(500,000) Transfer In Capital Projects Fund - Streets (from General Fund) 500,000 Transfer Out from General Fund (to Equipment Services Fund) 102,512 Transfer In Equipment Services Fund (from General Fund) (102,512) Transfer Out from General Fund (to Capital Project Fund - Parks & Trees) (40,000) Transfer In Capital Project Fund - Parks & Trees (from General Fund) 40,000 Transfer Out from Solid Waste Fund (to General Fund) 28,600 Transfer In General Fund (from Solid Waste Fund) (28,600) _____________________________ Mayor I, MEAGHAN HASSELL-SHEARER, City Clerk of the City of Burlingame, do hereby certify that the foregoing Resolution was adopted at a special meeting of the City Council held on the 15th day of March, 2017 and was adopted thereafter by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: _____________________________ City Clerk RESOLUTION NO.________ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME APPROVING THE TRANSFER OF $4 MILLION FROM THE GENERAL FUND TO THE CAPITAL PROJECTS FUND – RENEWAL AND REPLACEMENT RESERVE IN THE FISCAL YEAR 2016-17 BUDGET WHEREAS, the City of Burlingame’s General Fund Reserves Policy was developed to ensure optimum reserve levels specific to the City and to provide options for responding to unexpected issues and a buffer against economic downturns and other forms of risk; and WHEREAS, the General Fund experienced a surplus $2.9 million higher than anticipated in the budget for the fiscal year ended June 30, 2016; and WHEREAS, based on the City’s mid-year fiscal analysis, the General Fund shows a projected total fund balance of $33.8 million at the end of the 2016-17 fiscal year; and WHEREAS, the Renewal and Replacement Reserve in the Capital Projects Fund was established with the intent of providing funding for the replacement of City assets; and WHEREAS, in recognition of the City’s large backlog of facility needs, staff has recommended that the Renewal and Replacement Reserve be funded by an additional $4 million. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BURLINGAME DOES HEREBY RESOLVE AND ORDER AS FOLLOWS: APPROVE and AUTHORIZE the Finance Director & Treasurer to amend the current Fiscal Year 2016-17 Budget as outlined below: General Fund Transfers In (Out): Transfer to Capital Projects Fund - Renewal and Replacement Reserve (from General Fund) (4,000,000) Transfer from General Fund (to Capital Projects Fund – Renewal and Replacement Reserve) 4,000,000 _____________________________ Mayor I, MEAGAN HASSEL-SHEARER, City Clerk of the City of Burlingame, do hereby certify that the foregoing Resolution was adopted at a special meeting of the City Council held on the 15th day of March, 2017 and was adopted thereafter by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: _____________________________ City Clerk 1 STAFF REPORT AGENDA NO: MEETING DATE: March 15, 2017 To: Honorable Mayor and City Council Date: March 15, 2017 From: Syed Murtuza, Director of Public Works – (650) 558-7230 Subject: Review of Draft FY2017-18 General Fund, Gas Tax, Measure A, Measure M and Federally Funded Capital Improvement Program (CIP) RECOMMENDATION Staff recommends that the City Council review the proposed draft General Fund, Gas Tax, Measure A, Measure M and Federal 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, Gas Tax, Measure A, Measure M, and federally funded projects. Staff will be presenting the CIP Program for the Storm Drainage System, Drinking Water System, and Sanitary Sewer System at a future meeting as part of the overall budget presentation. DISCUSSION GENERAL FUND CIP In developing the FY2017-18 CIP, staff conducted a needs assessment of various infrastructure owned by the City, and identified a total of approximately $38.4M of General Fund projects. After further review and analysis of these needs, and taking into consideration the existing available funding through fund balances and grant opportunities, staff refined the CIP requests list to a total of approximately $18.9M. Upon further analysis of the CIP requests from the perspective of prioritizing projects based on risk management principles, public health and safety needs, and staff’s capacity to undertake the projects in the context of existing work load and other priorities, staff is recommending a total of approximately $6.3M of General Fund CIP for FY2017-18. Please refer to the attached spreadsheet for project details and costs. The proposed FY2017-18 projects are basic and essential infrastructure needs to provide quality public services to the community. It should be noted these projects are in addition to the ones previously identified as big-ticket item projects in the City’s Unfunded Needs list. Below is a summary table of the proposed Draft FY2017-18 CIP. Staff will be providing the City Council with a detailed presentation of these projects at the March 15th Mid-Year Budget Study Session. FY2017-18 General Fund, Gas Tax, Measure A, Measure M and Federally Funded CIP March 15, 2017 2 GAS TAX, MEASURE A, MEASURE M AND FEDERALLY FUNDED CIP PROJECTS Based on condition assessment of 84 miles of existing street infrastructure, staff is proposing a total of $4.2M of CIP funding from a combination of Gas Tax, Measure A, Measure M, and Federal grant funds for next fiscal year’s street improvement program as follows:  Broadway Commercial Corridor from El Camino Real to California Drive  Cadillac Way from Rollins Road to Carolan Avenue  California Drive from Peninsula Avenue to Burlingame Avenue.  California Drive from Burlingame Avenue to Oak Grove Avenue (as part of Roundabout Project)  Humboldt Avenue from Rollins Road to Peninsula Avenue (shared with San Mateo)  Trousdale Drive from California Drive to Marco Polo Avenue. It is important to note that the City has applied for and is eligible to receive $546,000 in federal funds for resurfacing the arterial streets. The City will be utilizing a total of $3,654,000 from a combination of Gas Tax, Measure A, and Measure M funds to resurface the above-identified streets as part of the annual street resurfacing program and to provide additional funds for the California Drive Roundabout Project. FISCAL IMPACT General Fund CIP The total estimated cost of the recommended Draft General Fund CIP program is $14,540,000; $6,288,000 of this amount is recommended in new General Fund appropriations for FY2017-18, and $8,252,000 is available from a combination of outside grants and available project fund balances. FY2017-18 General Fund, Gas Tax, Measure A, Measure M and Federally Funded CIP March 15, 2017 3 Gas Tax, Measure A, Measure M and Federal Funds CIP The estimated cost of the Street Improvement Program is $4,200,000; $546,000 of this amount is available from federal funds through the OBAG2 Program, while the remaining $3,654,000 is available from a combination of Gas Tax, Measure A, and Measure M funds. Exhibits:  FY2017-18 General Fund CIP Program Spreadsheet  PowerPoint Presentation FY2017-18 Draft General Fund Capital Improvement Program 3/15/2017 Projects Description Project Costs Existing Funds/Grants FY-17-18 CIP Requests Draft Recommendations (in thousands)(in thousands)(in thousands)(in thousands) A Building Facilities Improvements 1 City Hall - HVAC and Plumbing Improvements and Asbestos Abatement 5,200 - 5,200 2 Parks Corporation Yard Renovation 1,750 - 1,750 3 Carriage House Improvements 1,300 - 1,300 4 FS #35 HVAC, Roof Replacement and Living Quarters Improvements 1,200 450 750 750 5 Energy Efficiency Improvements 1,000 - 300 300 6 Recreation Center Roof Replacement, Fire Sprinklers and Emergency Generator Improvements 900 - 900 7 Fire stations emergency generators upgrade project (FS 34, 35 and 36)700 - 150 150 8 Donnelly Parking Garage Deck Coating 575 70 505 9 FS #36 Foundation Rehabilitation 350 - 350 10 FS #34 Roof Replacement and HVAC upgrades 300 - 300 11 PW Corporation Yard Roof Repairs 210 - 210 12 Fuel Pump Station Improvements at Corp Yard 200 - 200 100 13 Library Basement Flood Protection Improvements 200 - 200 14 Easton Library HVAC Improvements 115 - 115 15 Building Facilities ADA Improvements 100 - 100 100 Building Facilities Improvements Total 14,100 520 12,330 1,400 B Bicycle, Pedestrian and Traffic Safety Improvements 1 California Drive Class I Bike/Ped Track Project (Long Term Solution)10,000 - - - 2 California Drive Class II Bike Lane Project (Near Term Solution)500 - 500 500 3 Broadway Grade Separation Project (PA/ED Phase)4,350 4,350 - - 4 Sidewalk Repairs Program and ADA improvements 1,000 1,000 - - 5 Hoover School Sidewalk Improvements (local match for federal grant)900 700 200 200 6 Broadway Pedestrian Lighting (local matching funds for federal grant)900 720 180 180 7 Residential Traffic Calming Program 100 - 100 100 8 Bike Boulevards Implementation Feasibility Study 70 - 70 70 Bicycle, Pedestrian and Traffic Safety Improvements Total 17,820 6,770 1,050 1,050 C Parks & Recreation Improvements 1 Murray Synthetic Turf Installation Project 2,200 450 1,750 1,750 2 Burlingame High School Aquatic Center Pool Deck Replacement Project 1,200 - 1,200 90 3 Ray Park Playground Upgrade 800 372 428 428 4 Burlingame Square Improvements 600 140 460 5 Paloma Park Playground - Fire Damage Replacement 325 - 325 325 6 City Parks Master Plan 275 - 275 275 7 Washington Park Restroom Replacement 250 250 250 8 Bay Trail Fitness Equipment Upgrade.150 - 150 9 Playground Repairs and Trees Planting 60 60 60 10 Playground Resilient Surfacing Repairs 50 - 50 50 Parks & Recreation Improvements Total 5,910 962 4,948 3,228 D Finance 1 New Financial System 200 - 200 200 Finance 200 - 200 200 E Police 1 Digital portable radio replacement 80 - 80 80 2 Police Dispatch Furniture Upgrades 80 - 80 80 Police 160 - 160 160 F City Clerk 1 Electronic Records Management System 250 - 250 250 City Clerk 250 250 250 Total 38,440 8,252 18,938 6,288 City Council Mid-Year Budget Study Session Draft Capital Improvement Program FY 2017 -18 March 15, 2017 Overview •General Fund Projects •Gas Tax & Measure A & M Projects •Summary •Council Feedback & Direction FY 2017-18 General Funds CIP •The City has over $100 million of unmet infrastructure needs such as the WWII-era Rec Center, a parking structure, and other public facilities identified in the City’s Unfunded Needs analysis. •These significant safety and quality of life projects do not include ongoing maintenance and capital upgrade needs such as sidewalks, parks, building safety maintenance, pedestrian/bike & traffic safety, etc. •As part of preparing the FY2017-18 CIP, staff conducted a needs assessment that identified a total of approximately $38.4M projects. •For FY2017-18, a total of $18.9M is requested for various projects. FY 2017-18 General Funds CIP •Approximately $8.2M is available through grants/ existing fund balances to fund some of the requests. •Based on risk management, safety needs, and staff’s capacity and resources to work on projects with current workload, approximately $6.3M is recommended for FY2017-18 from General Funds •Staff will prioritize the remaining unfunded projects in a five-year CIP program for future funding and also look for grant opportunities. •However, relying on these sources alone will not be adequate to address the entire range of infrastructure needs, which will only become more costly as time goes on. Summary of Department Requests Departments Project Costs Existing Funds/Grants FY-17-18 CIP Requests Draft Recommendations (in thousands) (in thousands) (in thousands) (in thousands) Building Facilities 14,100 520 12,330 1,400 Bicycle,Pedestrian & Traffic Safety 17,820 6,770 1,050 1,050 Parks & Recreation 5,910 962 4,948 3,228 City Clerk 250 250 250 Finance 200 200 200 Police 160 160 160 Department Totals $38,440 $8,252 $18,938 $6,288 Building Facilities Projects Project Descriptions Project Costs Existing Funds/ Grants FY-17-18 CIP Requests Draft Recommendations (in thousands) (in thousands) (in thousands) (in thousands) City Hall -HVAC and Plumbing Improvements and Asbestos Abatement 5,200 -5,200 Parks Corporation Yard Renovation 1,750 -1,750 Carriage House Improvements 1,300 -1,300 Fire Station #35 HVAC, Roof Replacement and Remodel 1,200 450 750 750 Energy Efficiency Improvements 1,000 -300 300 Recreation Center Roof Replacement, Fire Sprinklers and Emergency Generator Improvements 900 -900 Fire stations emergency generators upgrade project (FS 34, 35 and 36)700 -150 150 Donnelly Parking Garage Deck Coating 575 70 505 Fire Station #36 Foundation Rehabilitation 350 -350 Fire Station #34 Roof Replacement and HVAC upgrades 300 -300 PW Corporation Yard Roof Repairs 210 -210 Fuel Pump Station Improvements at Corp Yard 200 -200 100 Library Basement Flood Protection Improvements 200 -200 Easton Library HVAC Improvements 115 -115 Building Facilities ADA Improvements 100 -100 100 Building Facilities Improvements Total 14,100 $520 $12,330 $1,400 Building Facilities Projects Fire Stations 34, 35 and 36 Emergency Generator UpgradeFire Station 35 HVAC, Roof Replacement and Living Quarters Improvements Fuel Pump Station Improvements at Corporation Yard Building Facilities ADA Improvements Bicycle, Pedestrian and Traffic Safety Improvements Projects Description Project Costs Existing Funds/Grants FY-17-18 CIP Requests Draft Recommendations (in thousands) (in thousands) (in thousands) (in thousands) California Drive Class I Bike/Ped Track Project (Long Term Solution)10,000 -- California Drive Class II Bike Lane Project (Near Term Solution)500 -500 500 Broadway Grade Separation Project (Environmental Studies & Preliminary Engineering Phase)4,350 4,350 -- Sidewalk Repairs Program and ADA Improvements 1,000 1,000 -- Hoover School Sidewalk Improvements (local matching funds for federal grant)900 700 200 200 Broadway Corridor Pedestrian Lighting Improvements (local matching funds for federal grant)900 720 180 180 Residential Traffic Calming Program 100 -100 100 Bike Boulevards Implementation Feasibility Study 70 -70 70 Bicycle, Pedestrian &Traffic Safety Improvements Total $17,820 $6,770 $1,050 $1,050 Bike/Ped & Traffic Safety Improvements California Drive Class II Bike Lane Hoover School Sidewalk Improvements Broadway Pedestrian Lighting Sidewalk Repairs & ADA Improvements Program Parks & Recreation Projects Projects Descriptions Project Costs Existing Funds/Grants FY-17-18 CIP Requests Draft Recommendations (in thousands) (in thousands) (in thousands) (in thousands) Murray Synthetic Turf Installation Project 2,200 450 1,750 1,750 Burlingame Aquatic Club Pool Deck Replacement Project 1,200 -1,200 90 Ray Park Playground Upgrade 800 372 428 428 Burlingame Square Improvements 600 140 460 Paloma Park Playground -Fire Damage Replacement 325 -325 325 City Parks Master Plan 275 -275 275 Washington Park Restroom Replacement 250 -250 250 Bay Trail Fitness Equipment Upgrade 150 -150 Playground Repairs and Trees Planting 60 -60 60 Playground Resilient Surfacing Repairs 50 -50 50 Parks & Recreation Improvements Total $5,910 $962 $4,948 $3,228 Parks & Recreation Projects Murray Field Synthetic Turf Installation Aquatic Club Pool Deck Replacement Ray Park Playground Upgrade Paloma Park Playground –Fire Damage Replacement Washington Park Restroom Replacement Finance, Police and City Clerk Requests Project Description Project Costs Existing Funds/Grants FY-17-18 CIP Requests Draft Recommendations (in thousands) (in thousands) (in thousands) (in thousands) Finance New Financial Software System 200 -200 200 Police Digital portable radio replacement 80 -80 80 Dispatch furniture upgrades 80 -80 80 Police Improvements Total 160 -160 160 City Clerk Electronic Records Management System 250 -250 250 Gas Tax, Federal-Aid Funds Projects City maintains 84 miles of streets valued at $150M Estimated backlog is $20M Resurfacing Projects for FY 2017-18 Federally Funded Resurfacing Projects: Broadway -El Camino Real to California Dr. Cadillac Way –Rollins Rd. to Carolan Ave. California Dr. –Peninsula Ave. to Burlingame Ave. Trousdale Dr. –California Dr. to Marco Polo Way Other Funded Resurfacing Projects: California Dr. –Burlingame Ave to Oak Grove Ave. (as part of Roundabout Project) Humboldt Dr. –Peninsula Ave to Rollins Rd. (shared cost with City of San Mateo) Funding Sources Project Cost Federal-Aid Grant $546,000 Gas Tax,Measures A & M $3,654,000 Total Recommended:$4,200,000 Location Map of FY 2017-18 Street Resurfacing Program Federally Funded Resurfacing Projects Broadway –El Camino to California Dr. Cadillac Way-Rollins Rd. to Carolan Ave. California Drive-Peninsula Ave. to Burlingame Ave. Trousdale Drive –California Dr. to Marco Polo Way Other Funded Resurfacing Projects California Drive –Burlingame Ave. to Oak Grove Ave. Humboldt Avenue –Peninsula Ave. to Rollins Rd. Federally Funded Resurfacing Projects Other Funded Resurfacing Projects Summary of Draft FY 2017-18 General Fund CIP Recommendations Projects Recommendations (thousands) Parks and Recreation Improvements $3,228 Building Facilities Improvements $1,400 Bicycle, Pedestrian and Traffic Safety Improvements $1,050 Electronic Record Management System (City Clerk)$250 Finance Software System $200 Police Radio and Dispatch Furnishings $160 Total:$6,288 Residents’ Views on Infrastructure Needs •City residents clearly believe infrastructure needs are a priority. In a survey conducted last year: –97% said they want infrastructure addressed in a fiscally responsible manner, before Burlingame’s streets, roads, and sidewalks become more costly to fix in the future. –95% say maintaining this infrastructure is extremely or very important. –90% say well-maintained streets, sidewalks, and parks are important to maintaining Burlingame’s quality of life and property values. –And 75% say that maintaining recreation programs and the facilities that house them is extremely or very important. Conclusion •The recommendations contained in this presentation prioritize the most essential safety and quality of life needs as recommended by specific City departments, and are an important step forward •Even with authorization to proceed with these upgrade projects, additional revenue is still needed to address remaining unmet infrastructure needs before they become more costly. City Council Feedback & Direction