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HomeMy WebLinkAboutAgenda Packet - CC - 2020.03.11City of Burlingame BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLE BURLINGAME, CA 94010 Meeting Agenda - Final City Council Wednesday, March 11, 2020 6:30 PM Council Chambers 2019-2020 Mid Year Budget Study 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) a. Adoption of a Resolution Amending the FY 2019-20 Operating and Capital Budgets to Reflect the Recommended Mid-vear Adiustments Attachments: Staff Report Resolution b. Review of Draft FY 2020-21 General Fund, Parkina Enterprise Fund. Gas Tax. Measure A, Measure I, Measure M, and Senate Bill (SB 1) Funded Capital Improvement Program Attachments: Staff Report PowerPoint Presentation 6. ADJOURNMENT City of Burlingame Page 1 Printed on 31612020 City Council Meeting Agenda - Final March 11, 2020 Notice: Any attendees wishing accommodations for disabilities please contact the City Clerk at (650)558-7203 at least 24 hours before the meeting. A copy of the Agenda Packet is available for public review at the City Clerk's office, City Hall, 501 Primrose Road, from 8:00 a.m. to 5:00 p.m. before the meeting and at the meeting. Visit the City's website at www.burlingame.org. Agendas and minutes are available at this site. NEXT CITY COUNCIL MEETING - Next regular City Council Meeting Monday, March 16, 2020 VIEW REGULAR COUNCIL MEETING ONLINE AT www.burlingame.org/video 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. Cify of Burlingame Page 2 Printed on 31612020 STAFF REPORT AGENDA NO: 5a MEETING DATE: March 11, 2020 To: Honorable Mayor and City Council Date: March 11, 2020 From: Carol Augustine, Finance Director — (650) 558-7222 Subject: Adoption of a Resolution Amending the FY 2019-20 Operating and Capital Budgets to Reflect the Recommended Mid -year Adjustments RECOMMENDATION Staff recommends that the City Council accept the FY 2019-20 Mid -year Financial Summary and Five -Year Financial Forecast, and adopt the attached resolutions amending the FY 2019-20 Operating and Capital Budgets to reflect the recommended mid -year adjustments. BACKGROUND This report summarizes the City's mid -year fiscal status by providing an analysis of anticipated revenues and expenditures in comparison to the current adjusted budget for the 2019-20 fiscal year. Revised forecasts incorporate final 2018-19 fiscal year results, year-to-date cash flow, and other data points that were not available when the budget was originally developed. To the extent possible, trends or emerging items that were not included in the City's operating budget have been identified, and the budgetary impacts of these items have been assessed. In addition, this report notes changes in activities that have very little overall impact to the budget, but allow for better alignment with Council goals and departmental directives. Although the focus of the mid -year review is the City's General Fund, this report also provides an update for other funds where fiscal changes are noted. 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, 2020, but will also more accurately reflect the financial condition of the City as it enters the FY 2020-21 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 unmet capital needs and other liabilities. Considering current economic conditions and this most recent analysis of operations, staff has updated the assumptions and projections incorporated in the City's five-year financial forecast for the General Fund. This long-term forecast establishes an appraisal of fiscal sustainability beyond the current budget cycle, providing important context to the annual budget process. 1 2019-20 Mid -Year Report March 11, 2020 DISCUSSION Economic Conditions National Economy At the time the City's FY 2019-20 budget was being prepared, the national economy continued to hold promise after a year of moderate growth in 2018. U.S. real GDP had increased 2.9 percent in 2018, a modest uptick from 2017 and 2016, and the highest rate of growth since 2015. Exports had experienced a good year of growth, reflecting relative strength in the global economy. The U.S. unemployment rate had dropped to 3.8 percent (in March 2019), which is largely accepted as full employment, as a result of a tight labor market and more full-time hiring. The continued growth in payrolls resulted in a healthy increase in consumer spending as US retail trade grew. Supported by personal consumption expenditure, private inventory investment, state and local government spending, and nonresidential fixed investment, the U.S economy continued to grow in the first quarter of 2019. And as consumer confidence indices remained quite high, prospects for the national economy for the near -term exhibited good momentum. Most forecasts indicated that the economy would continue to grow at a moderate pace in the near term. Real GDP: Percent change from preceding quarter 4 3 2 1 0 - 7 02 Q3 G4 01 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 U.S. Bwe of Economic Analysis Srasonally adjusted at annual ,aces In the end, U.S. real GDP increased 2.3 percent in 2019, compared with an increase of 2.9 percent in 2018, with the most acceleration seen in the first quarter. The growth again reflected positive contributions from personal consumer spending, nonresidential fixed investment, federal government spending, state and local government spending, and private inventory investment, all partially offset by a decrease in residential fixed investment. While calendar year 2019 growth was lower than experienced in 2018, it reflects steady growth despite a myriad of frantic headlines surrounding trade tensions and political conflicts at home and abroad. January 2020 marks the 1271h month of economic expansion following the end of the Great Recession in June 2009. The current expansion is now the longest on National Bureau of Economic Research record, which goes back to the 1850s. While the expansion has been long, both the economy's average annual growth rate and the typical workers' earnings gains have been relatively modest by the standards of earlier long expansions. According to Beacon Economics, a leading independent economic research and consulting firm, there is no "timeline" for economic expansions. Defining recession as an "anomaly caused by a large, rapid, and sustained shock to 2019-20 Mid -Year Report March 11, 2020 the system", Beacon Economics' founding partner Christopher Thornberg stated early in 2020 that "Currently, there is little sign of the kind of collapsing imbalances or rapid shifts in aggregate demand that would be capable of pushing the economy into a downturn or even a protracted slow growth slump." But when the world's second-largest economy is brought to a virtual standstill of unknown duration, as has occurred with the outbreak of the COVID-19 virus in China, the global economy will suffer. China is the world's largest exporter by a large margin, and this disruption is a major bottleneck to global supply. The demand -side effects are also very important - China is now the largest source of external demand for most Asian economies, and America's third -largest and most rapidly growing export market. Although many economists predict a two -quarter growth shortfall for China, the trajectory of the virus will determine the full impact on the U.S. economy. So the COVID-19 shock should not be taken lightly. The Economy Has Been Growing Since Mid-2009 Percent change in real GDP Annualized change from previous quarter —Change from same quarter in previous year 5 First quarter 2009: �✓ American Recovery and -5 Reinvestment Act of 2009 -- - Fourth quarter 2008: Financial stabilization (TARP) -10 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Note Data are seasonally adjusted at annual rates. Source Bureau of Economic Analysis The U.S. unemployment rate was 3.6 percent in January 2020, up from 3.5 percent in the previous month, but well below the 4 percent rate experienced in January 2019. The U.S, added 225,000 nonfarm jobs in January, beating expectations by a wide margin for the second straight month. Notable gains occurred in construction (both residential and nonresidential), in health care, and in transportation and warehousing. The uptick marked the highest labor force participation in four years. With the economy entering its 11 th year of recovery, the nation's continued job growth defies the orthodoxy of traditional economics that says job growth slows when the employment rate falls below 4 percent. Per Beacon, the U.S economy continues to grow because of this consistent job growth, rather than in spite of it. "The health of the consumer, and therefore, the growth of the economy is being supported by record tight labor markets ... the U.S. unemployment rate has trended below the national jobs opening rate for two years. Competition for scarce labor resources has led many workers to receive a significant increase in earnings, and a growing share of national income." 3 2019-20 Mid -Year Report March 11, 2020 Falling Unemployment Supports Improved Consumer Confidence ---Conference Board ConSUmef Confidence dehl —Unemployment Rate (nghq 160 12% 140 10% 120 8% 100 80 6% 60 4 40 20 0 0°% 1980 1985 1990 1995 2000 2005 2010 2015 _e. 6(norwery. as-YD-1.7 3'. 20-y Chart 1. Unemployment rate, seasonally adjusted, January 2018 — January 2020 Percent 5.5 5.0 4.5 4.0 3.5 3.0 2.5 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Lower unemployment typically pushes wages higher, and higher wages serve to bolster consumer confidence, leading to potentially higher personal consumption expenditures. These trends would be expected to move inflation higher as well. As a result, interest rates, both on the short end of the yield curve and longer -term rates, should increase in the long run. However, mortgage rates are still hovering well below 4 percent, down one percentage point from where they were a year ago, and much lower than at any time between 1968 and 2008. M 2019-20 Mid -Year Report March 11, 2020 30-Year Fixed Rate Mortgage Average in the United States a M2 2004 2006 2008 2010 2012 201a 2016 rota 2.10 Shaded areas indicate u.S. reds Source: Freddie Mac myf.red19/G9t1 Consumer spending in the United States increased by 0.4 percent in the fourth quarter of 2019, compared to the third quarter, ending the year 2.8 percent higher than in 2018. Consumer sentiment remained high even through February. In summary, calendar year 2020 began with general optimism that the long -running economic expansion in the U.S. would continue, supported by a healthy job market, upbeat consumer confidence and household spending, a rebound in manufacturing activity, a surging stock market, and a pickup in global growth. Indeed, the U.S. economy is in the eleventh year of its current expansion (the longest economic expansion in the nation's history), and prior to the COVID-19 outbreak, most economists found little reason to expect that this expansion would reverse or even stall in the upcoming fiscal year. However, it is now clear that the spread of the virus, which now threatens global economic growth, could have a significant impact on consumer spending in general, and the U.S. economy, in the very short term. The following chart of economic indicators reflects the most recently measured data as of March 3, 2020, from Trading Economics: Overview Actual Q1/20 Q2/20 Q3/20 Q4/20 2021 GDP Growth Rate (%) Dec-19 2.1 1.8 2.4 2.5 2 1.7 Unemployment Rate (%) Jan-20 3.6 3.8 3.8 3.7 3.7 4.5 Inflation Rate (%) Jan-20 2.5 2 1.8 1.7 2.1 2 Interest Rate (%) Mar-20 1.25 2.5 2.5 2.5 2.5 2.5 Balance of Trade (USD Million) Dec-19 -48880 -55000 -51000 -49000 -62000 -53000 Government Debt to GDP (%) Dec-19 106.9 108 108 108 108 107 Government Budget (%of GDP) Dec-19 -4.6 -4.9 -4.9 -4.9 -4.9 -4.2 5 2019-20 Mid -Year Report March 11, 2020 State Economy California continues to enjoy a healthy fiscal situation. The state's economy reached a number of significant milestones in the 2019 calendar year. The unemployment rate dipped to 3.9 percent, representing a new record low, all while employment and wages reached all-time highs. Although still higher than the national rate of 3.5 percent at the end of the year, the state has gained over 3.4 million jobs since the current economic expansion began in February 2010, accounting for more than 15 percent of the nation's job gains over that same timeframe. In addition, the average weekly wage in California increased more rapidly compared to the nation as a whole. Unemployment Rate: California, National 10.0% With the state's industries expanding in a tightening labor market, workers experienced wage increases that generally outpaced inflation, giving workers more purchasing power to drive spending and economic activity. And metro area labor force dynamics are such that rapidly growing regions continue to attract workers, most notably in the San Francisco Bay Area and the Inland Empire. California Unemployment Jan-00 to Dec-19 ^, 19,500- - 2 Q 19,000- 6 g 18,500- 18.000- -8 c 2 t° 17,500- a > g 17,000- -g c J 16,500- -4 C: Jar-00 Jar-05 Jar.-10 Jan-15 Jan-20 _ Libor Force uremplayment Rate Source. CaWornia EDD and Beacon Economics, LLG Over the period from December 2018 to December 2019, Educational Services saw the fastest growth in the state (4.5%). This was followed by Construction (3.6%), Health Care (3.4%), 2019-20 Mid -Year Report March 11, 2020 Administrative Support (3.2%), Professional, Scientific, and Technical Services (2.4%), and Real Estate (2.2%). Despite total job growth in the state, payrolls decreased in a handful of sectors in December. Information posted the largest decline, where payrolls declined by 3,900. Still, employment in the sector has expanded by 2.1% since December 2018. Payrolls in Leisure and Hospitality (-2,400), Real Estate (-1,100), Wholesale Trade (-900), and Manufacturing (-600) also contracted during the month In 2018, while the U.S. economy expanded by 2.9%, California's grew by 4.3%. In 2019, economic growth slowed to 2.3% in the U.S., and 2.6% in California. Earlier in the recovery (2014 and 2015), California was the fastest growing state in the union by real gross state product. As of the third quarter of 2019, the state appeared more susceptible to the national slowdown relative to other states, ranking 23rd in terms of quarterly growth. Due largely to grim state and local statistics on housing affordability and stagnant population growth, California's GDP growth is predicted to slow to 2% in 2020, similar to the national growth prediction. Yearly rate of change in gross domestic product ■ calitomia a Redotus 7.50% 5.00% 2.50% 0.00% -2.50% -5.00% -7.50% a O a 0 0 OO O O O O O a 0 a 0 0 0 0 0 0 0 0 0 0 0 0 0 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 0 0 0 0 0 0 � m a a. 0 0 0 0 0 0 0 0 0 Home price growth in California finally started to show signs of exhaustion in 2019. The median price for a single-family home in California grew 2.2 percent, which when adjusted for inflation, means that price growth was effectively flat. This should not be surprising, given the persistent pace of appreciation that has occurred in recent years. Beacon concludes that the room for sustained price inflation is limited. "To be sure, lower interest rates should spur home price growth in the state, but it's unrealistic to expect the rate of growth we've seen in recent years to continue." In recent years, the high cost of housing in California has emerged as a threat to the state's future. Californians spend a disproportionate share of their income on housing, whether through mortgages or rent. Housing is especially unaffordable in coastal areas, where two-thirds of Californians reside. Throughout the state, home ownership remains low, vacancy rates are low, and household sizes are high — especially for renters. Although the Governor and the State Legislature have taken steps to spur housing production and address homelessness, there are no quick fixes to the housing crisis, which has been decades in the making. The FY 2019-20 state budget included $1 billion to address homelessness, a historic $1.75 billion investment in new housing, and incentives for cities to approve new home construction. Despite these measures, new housing permits are not meeting the demand. Estimates from Beacon Economics put the 2019-20 Mid -Year Report March 11, 2020 backlog of housing units at about 2.3 million in 2017, but only 104,000 residential permits were issued in 2018; the 2019 projection 2019 was about 95,000 permits. HOME VALUES VARY WIDELY ACROSS THE STATE ►l 1,600,000 1,400,000 1,200,000 1,000,000 800.000 600,000 400,000 200,000 PO 2002 2004 2006 2008 2010 2012 2014 2016 2018 2019 San Francisco Santa Clara Orange — Los Angeles San Diego �— California Sacramento Fresno United States SOURCE: Zillow. NOTE: Values for selected counties, the state, and the United States are reported in September 2019 dollars from January 2002 through September 2019. The Governor's FY 2020-21 budget proposal includes significant state funding for homelessness, but it is unclear how these resources will be used to further the housing supply. Current -year efforts at the state level must interact with local policies — the state's tight housing market reflects not only a scarcity of developable land but also an array of policy choices. Changes to zoning and other regulatory policies are needed to help reduce the cost of building housing, and coordinating these changes takes time. NEW HOME CONSTRUCTION PERMITS DIPPED IN 2019 250,000 -1 — Total 200,000 Multifamily Single-family Q 150,000 i...,..�� v a, Jy Z 100,000 c c Q 50,000 _ �,,,,,,� -r► 0 -}- 2001 2003 2005 2007 2009 2011 2013 2015 20T7 2019 SOURCE: US Department of Housing and Urban Development Office of Policy Development and Research, State of the Cities Data Systems (SOCDS). NOTE: September 2001 to September 2019. With more than a decade of economic expansion, coupled with deliberate legislative action to put the budget on better footing, the LAO concludes that the California state budget is in good condition. Governor Newsom's January Budget Summary for FY 2020-21 estimates that a $7 billion surplus will be available from continued, but slower, growth in General Fund revenues. The budget continues the state's focus on building up discretionary reserves, but acknowledges growing national and global economic risks from a near -term recession, global stock market volatility, and political instability. 050 2019-20 Mid -Year Report March 11, 2020 Overall, the final quarter of 2019 exhibited a healthy momentum, largely attributed to the easing of two major headwinds of the economy — labor shortages and the trade war with China. A slower rate of job growth can be expected in 2020 than has been seen the past four to five years. Most predictions are forjob growth in California at the rate of slightly below 2 percent — healthy, but below that of previous years. Local Economy In California, there continues to be a marked difference between the coastal counties and the inland counties in employment losses recovered since 2008. With its emphasis on the tech sector, the San Francisco Bay Area economy continued to shine, with the lowest unemployment rate in the state. The region is also atop national rankings in its commercial real estate market, with commercial vacancy rates among the lowest, and the cost of rent among the highest in the nation. The San Francisco Bay Area provided the most impressive performance of employment growth within the state in 2019. The unemployment rate in the San Francisco Metropolitan Division (MD) decreased 0.2 percent, from 2.2 percent in December 2018 to 2 percent in December 2019. During the year, the total number of jobs in the area increased by 2.5 percent, or 28,900 jobs. Professional and business services led the expansion in jobs, followed by private educational and health service, leisure and hospitality, and information services. San Mateo County alone had the lowest unemployment rate in the state, with an unemployment rate of 1.8 percent. As the housing shortage dilemma worsens across California, it would be logical for employment in the Construction sector (up 4.1 percent over the prior year) to have picked up more steam than it has. Yet, construction labor in the region is tight, employment is volatile, and the overall construction costs are among the highest in the state. Beacon Economics is forecasting strong employment growth for San Francisco's Metropolitan District (MD), which includes San Francisco and San Mateo Counties, but concedes, "Tight inventories in the residential housing market remain a problem as new units are quickly being absorbed into the market" San Francisco (MD) Unemployment Jan-00to Dec-19 1,050- -t0 N u g; 1,000- g m g1O 950- 2 m -6 -4 O $ 850- 8w- i 2 M Jan-00 Jmr05 J0R10 Jarr15 J-20 Labor Force - unwr bymera Rite Source: Cakfornia EDD and Beacon Economics, LLC 2019-20 Mid -Year Report March 11, 2020 Because the San Francisco Metropolitan area continues to be one of the United States' top tourist and business destinations, Burlingame continues to see strength in hotel tax revenues and consumer spending. However, the travel sector around the globe is taking a heavy hit as millions of Chinese have been ordered to stay put and avoid travel as a new virus spreads. Tourism from China was already weakening before the virus forced much of the country into a standstill. The duration of the impact of the COVID-19 coronavirus on the travel industry is unknown at this time. With an 89.4 percent occupancy rate in the first six months of this fiscal year, hotels in the area have been among the most occupied in the country. (The nationwide average for hotel occupancy rates in 2019 was 66.2 percent.) However, revenues in the same period were down 0.8 percent from the same period last year. As noted in the General Fund Revenue analysis (Attachment A), transient occupancy (hotel) tax revenues are very sensitive to the economy. Travel restrictions and other impacts of the coronavirus are expected to negatively impact tourism and the area's occupancy rates in the months to come. Trends in consumer spending are largely reflected in sales tax receipts. Burlingame sales tax receipts from July through September 2019 (the most recent data available) were 15.3 percent below the third quarter in 2018. However, this comparison is skewed due to the State's transition to a new reporting system in the prior year, when the City received additional payments. Excluding reporting aberrations, actual sales were down 2.8 percent. This decrease was largely expected, due to several one-time anomalies in the prior year. Generally, the City experienced a solid quarter in most major business categories. SALES PER A. 516.000 $12,000 $8,000 $4,000 , $o 03 Q3 Q3 03 16 11 18 19 Burlingame County California rr .•i..ns have been adlw Pert !c r08ect Sales activity Although continued increases in incomes and wages among local residents have helped fuel taxable sales in recent years, 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. - 10 2019-20 Mid -Year Report March 11, 2020 Economic Sustainability Even with the positive economic trends of recent years, budgets have been developed with a relatively conservative approach. 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 an 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 are allowed to grow. The establishment of the Other Post -Employment Benefits (OPEB) trust account was a significant step in assessing unfunded retiree medical liabilities and systematically providing for them within the operating budget. The establishment of a § 115 trust fund (and a plan to annually fund the trust) in 2017 reflected the City's commitment to meet its growing pension obligations without burdening future operating budgets with unsustainable pension costs. The transaction tax that resulted from the passage of Measure I, effective April 1, 2018, is funding additional safety services and enhanced streets and sidewalk maintenance activities, as well as providing partial support for the construction of a new Community Center, which is long overdue for replacement. Other liabilities await funding, however, and the major capital projects that have emerged as priorities for Burlingame are costly — far beyond the City's capacity to fund even over many years. Even if outside grant funding becomes available, these projects will no doubt require significant funding from the City. Staff will continue to identify capital and other unfunded needs, and recommend their systematic funding within the operating budget (of the appropriate fund) whenever possible. The City's FY 2019-20 budget anticipated another year of stable economic growth. Despite some one-time positive revenue events, revenues were generally expected to outpace those of fiscal year 2018-19 by a moderate margin. The budget supported continued funding of the City's underfunded pension and retiree medical programs, as well as a $6.5 million contribution to the Capital Investment Reserve. The budget also provided $2 million for the anticipated debt service necessary to fund the new Community Center construction project; these bonds were issued in December 2019. 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 $2.3 million higher than projected in the FY 2019-20 adopted budget. Much of the growth comes from increased sales tax revenues, as these were expected to level off following a year of prior -period corrections. An increase in departmental charges for services is also now indicated, though these revenues are largely offset with increases in the costs to provide the related services. Details of the City's General Fund Revenue analysis at mid -year are provided in Attachment A of this report. 11 2019-20 Mid -Year Report March 11, 2020 Departmental expenditure budget revisions are discussed in more detail in Attachment B of this report. The adjustments reflect an attempt to adjust certain departmental budgets to more accurately reflect current needs, in response to unanticipated events, a change in programming direction, or access to information that was not available at the time the FY 2019-20 budget was proposed. The resulting departmental budgets should provide a clearer picture of operating needs going forward. This is particularly important in establishing the framework for the FY 2020-21 budget, where funds needed for continued service levels will be considered in the context of the City Council's established goals. In addition to adjustments in departmental operating expenditures, only a small budget adjustment is needed to transfers in/out of the General Fund. Ltnir-TEMO-Firelm The following table shows the mid -year assessment of fiscal year 2019-20 General Fund revenues. There are three columns for the 2019-20 fiscal year: The "FY 19-20 Current Budget" column shows the revenue budget that the City Council adopted last June, and budget amendments approved by the City Council since that time; the "FY 19-20 Midyear Projection" column shows the most current projection for the fiscal year; and the "FY 19-20 Midyear Amendment" column reflects a summary of proposed revenue amendments to the FY 19-20 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 2018-19, 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 2019-20 projection. CITY OF BU RLI NGAM E, CA SUMMARY OF GENERAL FUND REVENUES Property Tax Sales and Use Tax Transient Occupancy Tax Other Taxes Franchise Tax Business Licenses Real Property Transfer Tax State HOPTR Licenses & Permits Fines, Forfeitures and Penalties Use of Money & Property Charges for Services Other Revenue State Subventions Interest Income Total, General Fund Revenue FY19-20 FY19-20 FY19-20 FY17.18 FY18-19 Current Midyear Midyear Adjustment Actuals Actuals Budget Projection Amendment Up (Down) % $ 20,334,818 $ 21,955,938 $ 23,270,000 $ 22,840,100 $ (429,900) -1.8% 12,819,794 17,819,970 14,760,000 16,860,000 2,100,000 14.2% 27,935,991 29,394,461 28,700,000 28,200,000 (500,000) -1.7% 1,675,891 1,657,802 1,724,000 1,672,000 (52,000) -3.0% 1,053,991 1,039,154 1,020,000 985,000 (35,000) -3.4% 425,143 476,852 420,000 420,000 0 0.0% 61,177 59,592 60,000 60,000 0 0.0% 82,630 84,610 79,500 79,500 0 0.0% 977,121 1,255,675 978,000 878,000 (100,000) -10.2% 177,887 179,055 130,000 130,000 0 0.0% 5,515,794 6,282,169 5,490,000 6,388,000 898,000 16.4% 29,321 59,071 30,000 30,000 0 0.0% 300,709 211,117 140,000 140,000 0 0.0% 332,714 4,071,886 1,970,000 2,400,000 430,000 21.8% $ 71,722,980 $ 84,537,352 $ 78,771,500 $ 81,082,600 $ 2,311,100 2.9% 12 2019-20 Mid -Year Report March 11, 2020 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 TOT - Transient Occupancy Tax) is not only based on the previous year's receipts, but also on the strength of the local economy as reflected in cash receipts for the current fiscal year. Although some slowing is indicated in the City's TOT, the City's major revenue sources are generally keeping pace with the FY 2018-19 actual amounts, with most comparing favorably to the prior fiscal year. The recommended adjustments equate to a 3.0 percent increase in General Fund revenues when compared to the FY 2019-20 adopted budget. Note that FY 2018-19 actual amounts are taken from the City's Comprehensive Annual Financial Report and therefore reflect interest income adjusted for a reduction in the City's investment portfolio at the fiscal year end. The adjustment is required by governmental accounting standards, but it creates large variations from year to year in the amount of interest income reported. As explained in Attachment A, the budget for this line item assumes no change in the market value of the City's portfolio, as this measure is difficult to anticipate and does not adequately reflect the City's true return on investments. Not taking into account the FY 2018-19 year-end mark -to -market adjustment in interest income (nearly $1.7 million), these revenues are anticipated to remain fairly flat for the current fiscal year. reTT, 1. .- r The following table shows the mid -year assessment of FY 2019-20 General Fund expenditures by critical service area: CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY19-20 FY19-20 FY19-20 FY17.18 FY18-19 Current Midyear Midyear Adjustment Actuals Actuals Budget Projection Amendment Up (Down) % By General Fund Program General Government $ 5,132,958 $ 5,513,693 $ 6,580,069 $ 6,729,099 $ 149,030 2.3% Public Safety 26,413,818 $ 27,758,430 $ 29,336,507 $ 29,699,707 363,200 1.2% Public Works 5,645,705 $ 5,934,117 $ 6,352,940 $ 6,533,410 180,470 2.8% Community Development 1,799,124 $ 1,709,736 $ 2,019,157 $ 2,189,507 170,350 8.4% Leisure & Culture 14,645,653 $ 14,847,131 $ 15,998,263 $ 16,610,808 612,545 3.8% Total Expenditures $ 53,637,258 $ 55,763,107 $ 60,286,936 $ 61,762,531 $ 1,475,595 2.4% Again, there are three columns for fiscal year 2019-20. The "FY 19-20 Current Budget" column shows the budget that the City Council adopted in June 2019 and budget amendments approved by the City Council since that time. Departmental budgets were also internally adjusted for encumbrances of the prior fiscal year, but these amounts are not included in this analysis. The second FY 2019-20 column shows the new mid -year projection for each program area's current year expenditures. The third FY 2019-20 column shows the resulting proposed amendments to the FY 2019-20 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 years 2017-18 and 2018- 19. All departments experienced budgetary savings (positive expenditure variances) within the General Fund in fiscal year 2018-19, resulting in expenditures of $4.3 million (roughly 7.1 percent) 13 2019-20 Mid -Year Report March 11, 2020 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. Staff is recommending more adjustments to the expenditure budgets in this analysis than usually recommended at the mid -year review. Expenditure adjustments were needed for higher personnel costs, due partly to increased FTE (full-time equivalent staff positions), and partly to a one-time retroactive benefit change. Operational adjustments were needed, especially in contract services (largely offset by related increased revenues from departmental services). And smaller expenditure adjustments were often offset by operational savings elsewhere within the department. Proposed revisions to General Fund Expenditure Budgets are explained in detail in Attachment B. Again, additional budgetary savings are a certainty, because the expenditure budgets reflect the upper limit of spending levels for each department. Departments are only able to expend or commit funds up to this legal level of budgetary control. Because these budgetary controls are established within each category of departmental expenditures, budgetary savings tend to average 3-5 percent of the annual expenditure budget. The City may experience larger variances, especially in the area of personnel costs, in years when there are a high number of position vacancies. For this reason, staff anticipates that the City will experience budgetary savings in the departmental budgets in the range of $2 - $3 million in the current fiscal year, largely from non -personnel budgets. Only a slight adjustment is needed in the mid -year budget resolution to increase the Transfers Out of the General Fund in fiscal year 2019-20, reflecting an increase ($20,000) in a capital project budget as explained in the discussion of the Capital Projects Fund. General Fund Operatina Summary A summary of the impacts to the General Fund of the adjustments made as a result of this mid- year analysis is shown in the schedule below: CITY OF BURLINGAME, CA GENERAL FUND OPERATING SUMMARY Total Revenue Expenditures Departmental Expenditures Transfers to Debt Services Other Transfer In (Out) Total Expenditures Net Operating Surplus Transfer to Capital Investment Reserve Change in General Fund Balance FY19-20 FY17-18 FY18-19 Current Actuals Actuals Budget $ 71,722,980 $ 84,537,352 $ 78,771,500 $ FY19-20 Midyear Projection 81,082,600 $ FY19-20 Midyear Amendment 2,311,100 (53,637,258) (55,763,107) (60,286,936) (61,762,531) (1,475,595) (5,579,688) (4,684,811) (4,708,763) (4,708,763) 0 (4,106,256) (8,293,863) (6,764,681) (6,784,681) (20,000) (63,323,202) (68,741,781) (71,760,380) (73,255,975) (1,495,595) 8,399,778 15,795,571 7,011,120 7,826,625 815,505 (5,300,000) (3,000,000) (6,500,000) (6,500,000) 0 $ 3,099,778 $ 12,795,571 $ 511,120 $ 1,326,625 $ 815,505 14 2019-20 Mid -Year Report March 11, 2020 Adjusted by the recommended amendments in this report, the General Fund shows a $1.3 million projected surplus (positive net operating revenues) for fiscal year 2019-20, a slight improvement over the $511,120 surplus provided in the current budget. General Fund Balance Once all the mid -year adjustments are posted, the General Fund shows a projected total fund balance of over $50.5 million at the end of the 2019-20 fiscal year. CITY OF BURLINGAME, CA CHANGES TO GENERAL FUND BALANCE FY 2019-20 Mid -Year Projection Beginning Fund Balance (audited) $ 49,167,751 Projected Revenues & Expenditures Projected revenue performance 81,082,600 Projected departmental expenditures (61,762,531) Subtotal, Revenues Net of Expenditures 19,320,069 General Fund Long -Term Debt (4,708,763) Other Transfers In (Out) of General Fund (6,784,681) Transfer to CIP Renewal & Replacement Reserve (6,500,000) Ending Fund Balance (Projected) $ 50,494,376 Although last year's mid -year budget projections for fiscal year 2018-19 reflected a $3.5 million increase in fund balance, the General Fund experienced a surplus of nearly $12.8 million for fiscal year 2018-19. The budget surplus is largely reflected in the increased unassigned fund balance — a $7.6 million increase, plus a $3.3 million increase in restricted fund balance reflecting General Fund contributions to the § 115 Pension Trust Fund. The remaining $1.9 million served to increase the reserves in accordance with the City's General Fund Reserve Policy. The large increase in General Fund unassigned fund balance from FY 2018-19 provides the City opportunities to make progress in funding long-term pension liabilities and/or setting aside additional funds in the Capital Investment Reserve for infrastructure in the current fiscal year. 15 2019-20 Mid -Year Report March 11, 2020 CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS FY18-19 FY19-20 Actual Mid -Year Results Projection Up (Down) $ Up (Down) % Economic Stability Reserve $ 18,837,000 $ 19,460,000 $ 623,000 3.3% Catastrophic Reserve 2,000,000 2,000,000 0 0.0% Contingency Reserve 500,000 500,000 0 0.0% Subtotal, Assigned Fund Balance 21,337,000 21,960,000 623,000 2.9% Add: Restricted for Pension Trust Fund (PARS) 7,459,442 10,416,442 2,957,000 39.6% Add: Unassigned Fund Balance 20,371,309 18,117,934 (2,253,375) -11.1% Total, Ending Fund Balance $ 49,167,751 $ 50,494,376 $ 1,326,625 2.7% As of June 30, 2020, the General Fund's projected fund balance of $50.5 million represents 68.9 percent of General Fund operating expenditures of $73.3 million. Because $10.4 million is restricted for pension benefits through the § 115 Trust Fund, a better measure of coverage may be that the unrestricted fund balance of nearly $40.1 million equates to 54.7 percent of the fund's operating expenditures. 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. Once funded according to the policy, the City's reserves (nearly $22 million) comprise the largest portion of the General Fund's ending balance, an amount equal to 27.1 percent of projected General Fund 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. This leaves an unassigned fund balance of $18.1 million. In past years, staff had recommended that surpluses of the prior year be used to provide additional funding to the Capital Investment Reserve at midyear. Staff now recommends that a portion of the General Fund surplus from FY 2018-19 be used to increase contributions to the § 115 trust fund for pensions that was established in 2017. In the past, the City Council has been comfortable with a $9-10 million unassigned fund balance for the General Fund. Because the pension trust fund is able to provide a better return on the City's investments than can be obtained in its general portfolio, staff recommends a $6 million transfer to the pension trust fund held by Public Agency Retirement Services (PARS). The trust fund is ultimately a very flexible placement of the City's funds. Although the funds can only be used to pay for retirement obligations through CalPERS, the City's required contributions to CalPERS will be over $7.5 million in the current fiscal year, and increasing in future fiscal years. Should funds be needed for other purposes, the CalPERS contributions could be paid directly from the trust fund, freeing up the General Fund monies for other desired uses. General Fund Reserve Policy and Capital Investment Reserve — Early in 2015, the City Council approved a General Fund Reserve Policy that recognized the need for adequate reserves to guard 16 2019-20 Mid -Year Report March 11, 2020 against future economic downturns, as well as to provide a hedge for catastrophic events. The policy dictates an annual review and adjustment in the Economic Stability Reserve. 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 Capital Investment Reserve within the Capital Improvement Projects (CIP) Fund. The purpose of the Capital Investment Reserve was to offset the further accumulation of unfunded liabilities that aging facilities represent. The reserve was initially funded with a General Fund transfer of $3 million, a reflection of the fund's operating surplus in fiscal year 2013-14. Since that time, the Capital Investment Reserve has been funded with each annual operating budget in the base amount of $3 million. The reserve has also grown as a result of surpluses generated during the continued economic expansion of recent years. The Council approved a $6.5 million appropriation in the current fiscal year. CITY OF BURLINGAME, CA CHANGES TO CAPITAL INVESTMENT RESERVE Beginning Balance Established 3/31/15 (FY14-15) $ 3,000,000 Budget Transfer from General Fund in FY 2015-16 3,000,000 Add'I Budget Transfer from General Fund in FY 2015-16 (mid -year) 5,000,000 Decrease in Catastrophic Reserve Fund (mid -year) 2,500,000 Ending Balance 6/30/16 $ 13,500,000 Budgeted Transfer from General Fund in FY 2016-17 3,000,000 Add'I Budget Transfer from General Fund in FY 2016-17 (mid -year) 4,000,000 Ending Balance 6/30/17 $ 20,500,000 Budget Transfer from General Fund in FY 2017-18 3,000,000 Add'I Budget Transfer from General Fund in FY 2017-18 (midyear) 2,300,000 Ending Balance 6/30/18 $ 25,800,000 Budget Transfer from General Fund in FY 2018-19 3,000,000 Ending Balance 6/30/19 $ 28,800,000 Budget Tra nsfer from General Fund in FY 2019-20 6,500,000 Budgeted Ending Balance 6/30/20 $ 35,300,000 Note that, unlike other amounts reflected in the fund balance of the Capital Projects Fund, Capital Investment Reserve funding will not be appropriated to a specific project. Rather, the reserve accumulates for capital projects to be initiated when timing is optimal and sufficient other funding is identified. For example, the City netted $38.9 million in proceeds from the issuance of the 2019 Lease Revenue Bonds, which will help fund the construction of the new Community Center that is estimated to cost approximately $52 million. Once the proceeds are fully drawn down, the remaining costs of the project will need to be funded from other sources, and an appropriation from the Capital Investment Reserve can be made with the adoption of the FY 2020-21 Budget. Generally, recommendations for funding this reserve will be executed with each budget adoption and again with the annual mid -year analysis. Finance staff reviewed all City funds for this mid -year analysis. There are two budget adjustments that impact all funds: an annual mid -year adjustment of investment revenue, and a one-time adjustment to reflect retroactive employee benefit payments. 17 2019-20 Mid -Year Report March 11, 2020 The recommended revenue adjustment for the City's individual funds is largely the result of the decreased earnings allocations anticipated from the City's investment portfolio, explained in the General Fund Revenues section of this report (Attachment A). The increase in the General Fund interest earnings is due to the larger cash balances in recent years; the increase in Debt Service earnings is from investment of the 2019 Lease Revenue bond proceeds, which will be drawn down as the new Community Center construction progresses. The recommended adjustments for interest income in each of the larger funds are shown below: CITY OF BURLINGAME, CA INTEREST INCOME AMENDMENTS FY19-20 FY19-20 FY19-20 FY18-19 Current Midyear Midyear Adjustment Actual* Budget Projection Amendment Up (Down) % General Fund $2,380,791 $1,970,000 $2,400,000 $430,000 21.8% Water Fund $252,020 438,000 250,000 (188,000) -42.9% Sewer Fund $179,165 465,000 180,000 (285,000) -61.3% Parking Enterprise Fund $139,051 229,000 140,000 (89,000) -38.9% Building Enterprise Fund $170,943 246,0D0 170,000 (76,000) -30.9% Storm Drain Fund $190,337 311,000 190,000 (121,000) -38.9% Debt Service Fund $188,172 104,000 520,000 416,000 400.0% *Excludes June 30, 2019 Mark -to -Market Adjustment The second citywide adjustment is the result of negotiations with City employee bargaining units, which began last fiscal year and resulted in additional employer contributions to employees' Health Reimbursement Arrangement (HRA) accounts. HRA contributions are not considered PERSable compensation, so this benefit does not increase the City's pension costs. However, as a defined contribution benefit, HRA accounts do provide a flexible form of coverage to employees for post - employment medical expenses. For retiree health "Tier 3" employees (those hired after November 2010 — January 2012 ,depending on bargaining unit) the City now contributes 2 percent of an employee's base pay at the time of hire, increasing to 3 percent starting at five years. This is in addition to an ongoing City contribution of one percent for all employees, and any employee matching contributions that may have been negotiated. The Council also authorized retroactive contributions to Tier 3 employees. Although increases in the City's regular HRA contributions were anticipated during the development of the 2019-20 fiscal year budget, the retroactive payments, which affected all operating funds, had not yet been determined. These retroactive contributions, paid in August 2019 through January 2020, totaled $359,400 for all funds combined. City of Burlingame FY 2019-20 Mid -Year Budget Adj. HRA Retro General Fund 298,600 Water Enterprise Fund 16,100 Sewer Enterprise Fund 24,300 Solid Waste Fund 6,500 Building Enterprise Fund 10,200 Internal Service Fund - Fleet 3,700 359,400 2019-20 Mid -Year Report March 11, 2020 Capital Projects Fund — Staff identified several adjustments for the City's Capital Projects Fund. Although not all of the projects will result in additional capital assets, they are best tracked in this fund due to the multi -year nature of the projects and significant long-term impacts for the City. As reported to the City Council in May 2019, a geotechnical evaluation was needed in order to complete the construction documents for the Skyline Park Project. The additional costs were not anticipated when the project budget was developed, so an additional $20,000 was requested from the General Fund. The City Council originally authorized $100,000 to start the planning phase of the Murray Playground Renovation as part of the fiscal year 2018-19 Parks & Trees Capital Improvement Program. Subsequently, the project to renovate Murray Field was completed, and the remaining budget of $242,847 was earmarked for use on the Murray Natural Playground project. In February, the Council approved execution of the main construction contract and reviewed the estimated project expenditures. In order to complete funding for the project, funds remaining from the Murray Lights Retrofit project ($25,003) and the Paloma Playground project ($49,479) will also be used. In November 2019, the Burlingame Recreation Foundation donated $20,000 to the City to provide additional funding for the Bay Trail Fitness Equipment project. In January 2020, the Foundation contributed $25,000 to augment the Washington Park Ballfield Lighting project. An adjustment to reflect both donations is needed to increase the budget for these two capital projects. The remaining mid -year budget adjustments impact the City's Parking & Garages Capital Improvement Program. The City's downtown area will be significantly impacted by the Village at Burlingame project, as the transformation of the City's existing Parking Lot F into an affordable housing development will take place simultaneously with the construction of the proposed parking garage on the adjacent Parking Lot N. A CIP project, funded by the Parking Enterprise Fund, was established to track the City's $1.85 million portion of the project, as well to support the parking mitigation strategy that will be necessary. The project was initially funded ($200,000) last fiscal year to cover the estimated cost of a project manager and public relations firm to ensure the smooth execution of the project. The additional contractual resources are being used to assist the City in planning alternate vehicle and pedestrian traffic routes, allowing for project deliveries, and initiating parking arrangements (including development of RFPs and analyzing and selecting firms). Project management also involves communication and coordination with stakeholders including the Downtown Business Improvement District, the Chamber of Commerce, merchants, the project developer, and various permitting agencies/departments. Two adjustments are needed to the project's budget to reflect City Council directives in the current fiscal year In August 2019, the City Council approved funding of $222,000 to implement certain parking mitigation measures, including valet -assist parking services three days per week, lease of a portion of the Caltrain parking lot at the Burlingame Station, and incentive programs for workers in the downtown area. Also specific to the Village at Burlingame project, $208,320 in funding was approved in November for project management and construction inspection services. The Council authorized an additional $60,000 for the Wayfinding Signage Improvements project in September 2019. The funds are to be used to conduct a 12-month pilot program for dynamic 19 2019-20 Mid -Year Report March 11, 2020 wayfinding signage for parking availability in three parking lots in the Burlingame Avenue Downtown District and the Broadway Commercial District. Particularly in light of the shortage of parking during construction on Lots F and N, this project will assist the City in maximizing the parking infrastructure that currently exists in the area. This project is also funded from the Parking Enterprise Fund. Phase I of the Community Center Project, which provided for installation of a new playground, a new sports court relocated to the large picnic area adjacent to the first baseline of the small ballfield, and a new small picnic area adjacent to the new playground, has recently been completed. The budget for Phase I was established as a standalone project. The work was necessary to allow for the beginning of Phase 11, which includes demolition of the existing Recreation Center and the construction of the new Community Center, associated site work, and underground parking. Modular buildings were delivered and installed in February to serve as temporary recreation facilities during Phase 11. As the total costs of Phase II are expected to exceed $50 million, the City Council approved the issuance of the 2019 Lease Revenue Bonds, to be financed with a $2 million annual debt service appropriation: $1 million per fiscal year will be funded from Measure I revenues, and an additional $1 million will be transferred annually from other General Fund revenues. The bonds were issued in December, yielding over $38.9 million in bond proceeds for the project. A budget for the construction of this major community facility will be established once the main contractor has been selected later this fiscal year. Debt Service Fund — Mid -year adjustments to the adopted budget for fiscal year 2019-20 are needed to reflect issuance and administrative costs of the 2019 Lease Revenue Bonds sold in December, along with the debt service payments in the current fiscal year. CITY OF BURLINGAME, CA GENERAL FUND DEBT SERVICE OBLIGATIONS FY19.20 FY19-20 FY19-20 FY18-19 Current Midyear Midyear Description Maturity Adopted Budget Projection Amendment 2006 Pension Obligation Bonds FY2036 $956,648 $976,500 $976,500 $0 2010 Lease Revenue Bonds (Corp Yard) 2012 Lease Revenue Bonds (Burl Ave Streetscape)• 2019 Lease Revenue Bonds (Community Center) Cost of Issuance for 2019 Lease Rev Bonds Debt Administration Costs Subtotal, Principal and Interest Contributions from Other Funds Net General Fund Debt Service FY2021 1,164,275 1,167,775 1,167,775 0 FY2042 550,888 551,488 551,488 0 0 0 1,997,334 1,997,334 0 0 303,054 303,054 13,000 13,000 20,950 7,950 2,684,811 2,708,763 5,017,101 2,308,338 (1,574,872) (1,583,218) (1,583,218) 0 $1,109,939 $1,125,545 $3,433,883 $2,308,338 *100%reimbursed by the Special Assessment District and Parking Enterprise Funds for the first debt service payment (due July 1S1) were set aside with General Fund and Measure I transfers in both fiscal years 2018-19 and 2019-20. Therefore, an additional $2 million will remain in the debt service fund for debt service payments beyond the current fiscal year. It is recommended that these funds be used to help fund the Community Center's construction budget, thus reducing the amount of funding to be required from General Fund reserves for the project. 20 2019-20 Mid -Year Report March 11, 2020 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 2018-19 revenues from Measure A totaled $793,000. The FY 2019-20 budget was set at $860,000, and it appears that this level of funding will be achieved. No budget adjustment is recommended at this time. $750,000 of Measure A Funds is appropriated for transportation -related capital programs in the current fiscal year. Measure W Fund — In November 2018, San Mateo County voters approved Measure W, a half - cent sales tax providing the county with additional resources to improve transit and relieve traffic congestion. Fifty percent of the funds are administered by SamTrans, while the remaining funds flow to the San Mateo County Transportation Authority (TA). The measure went into effect in July of 2019. The FY 2019-20 TA budget allows for a $9.1 million allocation of Measure W funds to cities based on a formula that considers population and street miles. The City of Burlingame will receive approximately $350,000 from Measure W funding in the current fiscal year. These funds will be used to support future projects in the Streets Capital Improvement Plan. Gas Tax (HUTA) and Road Repair and Accountability Act (RRAA) of 2017 — The Gas Tax is a special revenue fund used to account for the revenue received from the State of California derived from gasoline taxes. These funds may only be used for street purposes as specified in the State Streets and Highways Code, so they have always been an important revenue source for the City's Streets Capital Improvement Program. However, prior to the Road Repair and Accountability Act of 2017 (SB 1), Highway Users Tax (HUTA) revenues were in large part tied to gasoline sales. As a result of downward trends in taxable sales of gasoline, road and transit investments were not keeping pace with the growth in transportation needs across the state. The RRAA provides a significant new investment in California's transportation systems - about $5.2 billion per year over the next decade, split equally between state and local investments. The Act enhanced HUTA allocations through increases in per gallon fuel excise taxes, diesel fuel sales taxes, and vehicle registration taxes; stabilization of the problematic price -based fuel tax rates; and inflationary adjustments to rates in future years. The Act more than doubled local streets and road funds allocated from HUTA by also providing funds from new taxes through a new Road Maintenance and Rehabilitation Account (RMRA). The RMRA allocations include funds from the additional taxes enacted by SB 1: a 12 cent gasoline excise tax, a 20 cent diesel fuel excise tax, and transportation improvement fees (vehicle registration taxes). In addition, the Act provides for the payment of $225 million of transportation loans to be repaid over three years (FY 2019-20 is the last year for these repayments.) The State distributed revenues from the first full year of RMRA in fiscal year 2018-19. In total, the FY 2019-20 budget reflected an increase over the prior year due largely to a HUTA § 2103 rate reset on July 12, 2019. The California Department of Finance (DOF) provided new revenue estimates for transportation tax revenues in January. Estimates for the current fiscal year are adjusted modestly based upon these new estimates, resulting in an increase of $34,200 over the revenues initially projected. 21 2019-20 Mid -Year Report March 11, 2020 CITY OF BURLINGAME, CA GAS TAX ALLOCATIONS Description 2017-18 Actual 2018-19 Actual 2019-20 Adopted Budget 2019-20 New Estimates FY19-20 Mid -Year Amendment 2103 State Gasoline Tax $ 117,404 $ 101,204 $ 258,000 $ 251,700 $ (6,300) 2105 State Gasoline Tax 163,603 166,212 170,000 166,000 $ (4,000) 2106 State Gasoline Tax 121,424 124,174 124,000 124,000 $ - 2107 State Gasoline Tax 212,920 209,030 221,000 208,000 $ (13,000) 2107.5 State Gasoline Tax 6,000 6,000 6,000 6,000 $ - RMRA (S131) 138,972 546,154 501,000 558,500 $ 57,500 TCRF (SB1) Loan Repyment 34,273 34,163 34,000 34,000 $ - $ 794,595 $ 1,186,937 $ 1,314,000 $ 1,348,200 $ 34,200 Storm Drainage Fund - The Storm Drainage Fund accounts for the storm drainage fees collected due to an assessment approved by parcel owners in the city at a special election in May 2009. The storm drainage fees (approximately $3.0 million in the current fiscal year) have supported three issuances of bonds (Storm Drainage Revenue Bonds Series 2010, 2012, and 2016). The bond proceeds, which total nearly $26.7 million from the three issuances, are used to fund infrastructure improvements in the City's Storm Drain Capital Improvement program. Approximately $3.4 million of the bond proceeds remain in the Debt Service Fund; these proceeds should be totally drawn down in the current fiscal year as existing projects are completed. No adjustments are needed to the fund's 2019-20 fiscal year adopted budget. Water & Sewer Funds - Due to the reduced water consumption that resulted from state mandates during the drought conditions of 2012-2017, and increased capital and operating costs of the water system -including the cost of wholesale water -the City found it necessary to raise water rates. After the City completed a water rate study in 2016, the City Council approved rate increases equivalent to 9 percent in 2017, 7.5 percent in 2018, and 7.5 percent in 2019. The rate increase implemented on January 1, 2019 is the last approved rate increase for the water system; sewer rates have remained the same since 2012. Winter rains in 2017 brought an end to drought conditions in Northern California; water consumption increased, and the San Francisco Public Utilities Commission (SFPUC) has kept the rate of wholesale water flat. Because sewer charges are based on indoor water usage, these revenues are very stable. As such, only minor adjustments are required to the revenues of both funds for the current fiscal year - an increase of $400,000 (less than 2 percent) for the Water Fund for a new projection of $20.8 million for water sales is indicated. A combined increase of $28,000 in other Water Fund services (largely taps for new meters) is also projected. Within the Sewer Fund, revenues from Hillsborough sewer charges are projected to increase ($58,000 higher than projected in the current year budget) based on year-to-date discharge flow meter readings. In addition, sewer connection fees are projected to be $150,000 higher than budgeted due to development projects that will soon move into the construction phase. With commercial and residential development coming on-line, revenues in both funds are expected to rise moderately. A sewer master plan is currently underway, and an extensive sewer rate study 22 2019-20 Mid -Year Report March 11, 2020 will follow, probably in the next fiscal year. This will ensure that future rates are able to support the necessary improvements indicated for this aging infrastructure. 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 2019-20 budget; other than an increase in the General Fund budget for the Parks Division for water, these costs appear to be in line with amounts in the adopted budget. One slight budget adjustment is recommended for the Sewer Fund: the Public Works Sewer Division received a notice of violation (NOV) from the County's Environmental Health Services inspector at two pump stations (1740 Rollins &1301 Old Bayshore). To resolve the violations, the Division will need to have the ground fuel tanks at these locations pressure -tested and all corrosion removed, and then have the tanks painted, at a cost of approximately $7,500. Historical Water Consumption Billed Last Seven Fiscal Years 16,000,000 14,000,000 12,000,000 10,000,000 C) 8,000,000 O � 6,000,000 4,000,000 2,000,000 2M3-24 2014-15 2015-16 2026-17 2017-18 2018-19 2019-20 Actual Actual Actual Actual Actual Actual Projected Staff has recently implemented the requirements of Senate Bill 998, which places new restrictions on residential water service discontinuation when customers are delinquent in paying their water bills. This new legislation requires cities to have a written policy on discontinuation of residential service. It also prohibits cities from discontinuing service for non-payment unless the account is late for over 60 days, and it outlines several circumstances in which water service cannot be shut off for non-payment. Although Burlingame currently has a well -controlled delinquency rate, staff anticipates additional administrative costs in future fiscal years for translation and noticing, as well as increased costs associated with the appeals, extensions, and alternative repayment options required by the bill. However, no significant increase in bad debt expense is anticipated. Solid Waste and Landfill Funds — Although increases in Solid Waste rates were approved for three subsequent calendar years (2019, 2020 and 2021), the Solid Waste Fund is expected to experience a slight deficit, requiring a draw down on the fund's rate stabilization reserve in the current fiscal year. For calendar year 2019, estimated revenues from collections from Burlingame customers ($11.7 million) will fall short of the costs of the City's collection contractor (Recology) of $5.8 million; disposal & processing fees of $4.3 million; franchise fees of $812,000; funding of the City's landfill post -closure costs ($505,000); and $620,000 for costs borne by the City, including 23 2019-20 Mid -Year Report March 11, 2020 street sweeping and steam cleaning and maintenance of public receptacles. The shortfall is currently estimated to be $330,000 for the calendar year. The budget provides for an expense of $140,000 for the operational shortfalls attributable to the first half of the current fiscal year, so a $25,000 increase in the fund's contractual expense budget is proposed to cover the shortfall. The rate increase of 6 percent effective January 1, 2020, should nearly eliminate any shortfall for the last half of the fiscal year. The additional expense should create only a small reduction in the utility's fund balance, as the fund is credited with interest earnings and revenues from forfeited C&D deposits. Healthy reserve levels in the Solid Waste Fund allowed the City to avoid rate hikes prior to the increases beginning in 2019; the increases will insure that the fund is in good fiscal position when the current franchise agreement with Recology terminates at the end of 2020. The new agreement allows for an extension of the services provided by Recology through the year 2035. Solid waste rates also include a 5 percent surcharge for landfill post -closure costs. The surcharge provides revenues to the Landfill Fund to cover maintenance and monitoring functions at the landfill site and will serve to reduce the $1.8 million fund deficit that results from the liability recorded for future post -closure costs. Building Enterprise Fund — Revenues in the Building Enterprise Fund (largely construction permits and building plan check fees) are showing greater -than -anticipated activity in fiscal year 2019-20. Construction permit revenues are anticipated to exceed the adopted budget (and prior year results) by over $720,000, for a total adjusted budget of $1.9 million. Two very large development projects last year created a spike in building plan check service fees. Although plan checking fees this fiscal year will not approach the results of fiscal year 2018-19 (over $2 million), staff anticipates that these fees will exceed the current year budget of $800,000 by $300,000. As the current year volume of plan checks has increased, an upward adjustment for imaging fees is also proposed. CITY OF BURLINGAME, CA BUILDING FUND REVENUES FY19-20 FY19-20 FY17.18 FY18-19 Adjusted FY19-20 Midyear Adjustment Description Actual Actual Budget Projection Amendment Up (Down) % Construction Permit Fee $ 3,645,248 $ 1,126,935 $ 1,180,000 $ 1,904,000 $ 724,000 61.4% Building Plan Check Fees 614,822 2,048,931 800,000 1,100,000 300,000 37.5% Microfilm Fees 153,304 45,278 40,000 57,000 17,000 42.5% Other Revenues 58,459 62,974 0 0 0 n/a Total $ 4,471,833 $ 3,284,119 $ 2,020,000 $ 3,061,000 $ 1,041,000 51.5% Offsetting these increased revenues is a $700,000 increase in the Building Enterprise Fund expense budget for contractual services. In November, the City Council authorized the negotiation and execution of an amendment to the professional services agreement with Bureau Veritas North America. The agreement provides for additional plan check and building inspection services in the current fiscal year as a result of an increase in the submittal of building permit applications to the Building Division. Much of the demand increase was due to the plan check and inspection services 24 2019-20 Mid -Year Report March 11, 2020 created by an accelerated timeframe for required tenant improvements associated with the Burlingame Point project. However, as a result of regulatory changes in employment law, a review of the staffing configuration within the Building Division was conducted, including the Division's use of contractors. It was determined that the City was relying on contractors to perform building inspections and permit technician work when these services should be the responsibility of City employees. These changes do not result in any additional individuals providing services, but they shift the model from contractors to employees providing the services. The addition of two full-time equivalent (FTE) employees (a Permit Technician and a Senior Building Inspector/Plan Checker) will require an increase in the Division's personnel budget (approximately $74,000 for the remainder of the current fiscal year), but will also support a decrease in the contractual services budget of $72,000. Smaller adjustments are proposed to cover the needs resulting from the unanticipated increase in Building Division activities. $11,000 is needed for the Division's increased office expenses, and $20,000 should cover the increase in credit card fees charged on the higher volume of payments accepted from applicants. 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 electric vehicle (EV) charging stations in City lots. As the downtown area is in the midst of significant development activity, the impacts to the fund's various revenue streams have been significant. Parking Fees are below projections ($60,000), probably due to the shut -down of Lot N and a portion of Lot F beginning in October 2019. Employees are finding alternative transportation and/or are parking in alternative long-term lots that are less expensive. Similarly, revenues from the sale of parking permits for the downtown area should be adjusted downward ($40,000), as prior -year projections were too high, and anticipated growth in the use of the permits was optimistic. In addition, several larger employers are no longer buying the permits for their employees, thus reducing permit volume. Revenues from electric vehicle charging stations exceeded the budget last fiscal year, with $18,200 from this source. With an increased number of electric vehicle charging stations now being utilized, this line item revenue projection can be increased $5,000 (to $20,000). The use of smart meters has increased the credit card fees charged to the City, resulting in costs that exceeded the prior -year budget for this line item expense by $25,000. The original budget for credit card fees in the Parking Enterprise Fund for the current fiscal year is $100,000; it should be increased by $25,000 to cover the costs that are expected to be at the same level as experienced last year. And finally, funding for the costs of parking capital improvements also requires upward adjustments to the budget. In addition to funding $60,000 for a wayfinding signage pilot program, the temporary loss of parking during construction of the Village at Burlingame project also is being addressed: $222,000 will fund numerous mitigation measures (including valet -assisted parking and lease of a portion of the Caltrain parking adjacent to Lot O), and $208,320 is needed to fund the management and construction inspection services associated with this project. These measures are explained 25 2019-20 Mid -Year Report March 11, 2020 in the Capital Improvement Projects section this report, and were approved by the Council earlier this 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 internal service fund do not necessarily require an offsetting change in the fund's revenues (charges to the participating departments), as each fund has a separate fund balance that can vary due to need. However, these funds are carefully monitored to ensure that departments are appropriately and adequately charged. Administration/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. Only one adjustment is requested to this Internal Service Fund for the current fiscal year: a five-year lease of equipment designed for efficient mail sealing, postage metering, and reporting comes to an end in March. New equipment will be purchased at a cost of $7,800. Offsetting decreases in rental costs will be reflected in future years' budgets. Note that in early October, 2018, the City Manager executed an agreement with Tyler Technologies, Inc. for implementation of the Munis® Enterprise Resource Planning (ERP) System. The consultant costs for assistance in the RFP development and selection process, along with the one-time cost of the Tyler Munis System (license and implementation), were included in the FY 2018-19 CIP budget, for a total of $815,000. Phase I of the project, which consists of the financial modules (General Ledger, Accounts Payable/ Purchasing, Accounts Receivable, Budget, etc.) was implemented on October 1, 2019. Phase 2 of the project, Human Capital Management (Payroll and Human Resources modules), will be implemented in the coming months, with certain features to be rolled out in the 2020-21 fiscal year. Phase 3 of the project, the Utility Billing modules, will be implemented in FY2020-21 as well. The annual maintenance fees for all the Tyler Munis System modules are included in the City's Admin/IT Internal Service Fund. Workers' Compensation Fund — Premiums for the City's Workers' Compensation excess insurance renewal have gone down this year, even though payroll has gone up and premiums are based on a percentage of payroll. This is owed in part to a decrease in overall claims experience. Burlingame's claims experience compared to other agencies with the same excess reserve policy (covering claims over $500,000) is better than average, and shows continued improvement. In the chart below, experience modification factors (ex -mod) of less than 100% indicate that the City's loss rate compares favorably with other agencies. The most immediate impact of this recent data is a slight decrease ($20,000) in excess Workers' Compensation insurance. EWC EzMod History 93 % 92% 91% 90% 89% 88% 87% 18/19 19/20 20/21 max -mod 2 92% 92% 89% 26 2019-20 Mid -Year Report March 11, 2020 The City's ex -mod has been calculated for FY 2020-21 using updated payroll and loss data. The lower ex -mod should somewhat offset rising excess and reinsurance rates. Along with higher investment earnings on the fund's reserves, slightly lower charges to City departments and programs can be anticipated for the upcoming fiscal year. The identification and funding of capital projects and otherwise unfunded, long-term needs of the City has been a priority of the City Council for many years. Since developing and prioritizing an initial list of unfunded needs in fiscal year 2014-15, staff has explored various options to address the large liabilities represented by the City's aging facilities. In February 2018, the Council approved a Measure I spending plan that included partial debt financing of a new Community Center. The 2019 Lease Revenue Bonds were issued for this purpose, resulting in $38.9 million in bond proceeds. A large number of City facilities (other than the Recreation Center) have served their original intended design life and are in need of major improvements. Though the City regularly invests in building maintenance, major building components are overdue for replacement. A Building Facilities Condition Assessment Study and Capital Improvement Master Plan, performed in 2016, concluded that the City should consider replacing older buildings before maintenance costs increase significantly. 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. Although funds are being set aside in the City's Capital Investment Reserve, major projects, such as the Broadway Grade Separation project, will require a financing package of hundreds of millions of dollars, well beyond the City's budgetary or financing capacity. In addition, the reserve is being funded by annual surpluses and one-time revenues, and as such will be the first funding to be reduced or eliminated when the economy inevitably retracts. Non -capital needs, such as accrued pension liabilities, present additional challenges that should be kept in mind when reviewing the current General Fund Five -Year Forecast. General Fund Five -Year Financial Forecast The five-year forecast attached to this report as Attachment C was developed using the FY 2019- 20 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. 27 2019-20 Mid -Year Report March 11, 2020 Revenues associated with the Measure 1 '/4 % transaction/sales tax are now included in the City's five-year forecast, as are the offsetting expenditures identified in the Measure I spending plan. Measure I revenues and expenditures are accounted for in a subfund of the City's General Fund to provide maximum transparency as to the use of these resources, but are always included when reporting General Fund activities. 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 Annual Growth Explanatory Comments Assumption 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 continues to experience low turnover, but Secured 5% - 6.5% moderating home prices and continued Bay Property Tax Area growth is expected. In FY 2020-21, the Burlingame Point project will be included in the City's assessed valuation data. Assume VLF shortfalls are covered by State appropriations in the following year. The Educational Revenue Augmentation Fund (ERAF) rebate is held flat for projection ERAF Rebate Held flat purposes. Growing demands on ERAF monies are anticipated as the economy slows, which should decrease this revenue source. Sales Tax 0% - 1.5% This assumption is based upon recent Q3 2019 sales tax data and the HdL Companies' 2019-20 Mid -Year Report March 11, 2020 Revenue Description Annual Growth Explanatory Comments Assumption long-term forecast. Although these revenues remain very strong, growth is expected to level off somewhat. Despite the Wayfair decision that provides collection of use tax for out-of-state internet sales, a general shift of consumer spending (towards services rather than taxable goods) is projected to limit taxable transactions in the future. Measure I revenue projections (included) will follow the same growth. This assumption is based upon the past few years of more moderate growth, as well as a slowdown in the current year due to global travel restrictions prompted by COVID 19 Transient Occupancy Tax 0% - l% virus concerns. As demands for visitor lodging decrease, average daily room rates should soften. No change in the total of hotel rooms available is assumed in any forecast year. This assumption is based upon expected gross revenue changes for PG&E, an increase Other Taxes - Franchise Tax 1.0% - 3.0% in garbage rates in the next fiscal year, and moderate growth in cable/internet services. Despite record highs in passenger traffic at SFO, a decline in growth is expected from the long-term parking business licenses tax, Other Taxes -Business 1% which is based on gross receipts. Growth will Licenses be subdued in general business license revenue, as it is based upon volume of businesses rather than gross receipts. Limited to growth in the number of Other Taxes - State HOPTR 0% -1.0% homeowner occupied parcels. The transfer tax assumption is based upon historical patterns and consistently low Other Taxes - Transfer Tax 5.0% inventories of properties for sale. Average turnover rates and general increases in property values are assumed. This assumption is based primarily on no/slight annual adjustments to fees, and a Licenses & Permits very small increase in volume. Fines, Forfeitures & Penalties Flat Not included here is an assumption for added parking lots or garages over the next five years due to unknown implementation dates and impacts on citation volume. Growth in charges for services is based Charges for Services -2.0% - 3.0% primarily on consumer price index adjustments to fees. Programming at the new Community Center will increase these 29 2019-20 Mid -Year Report March 11, 2020 Revenue Description Annual Growth Explanatory Comments Assumption revenues after a 2-year lull from closure of the current facility. The assumption is based upon current long- term lease information, which has shown a Use of Money & Property Flat general decline in recent years as City facilities are temporarily repurposed. This does not include any assumptions about the Top Golf lease. Other Revenue Flat No growth is projected due to one-time revenue. The forecast assumes no further mandated State Subventions Flat cost recoveries, and limited additional state subvention programs. This growth assumption is based upon cash 1% in 2020-21; 2.5% balances remaining fairly level, and only Interest Income thereafter modest (if any) increases in interest rates in the next five years 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. Growth in Burlingame's assessed value in fiscal year 2018- 19 was 6.25 percent, and current -year property tax revenue was based on a roll 7.28 percent higher; growth in the roll so far for fiscal year 2020-21 indicates that an increase of at least 5.1 percent in property taxes can be anticipated. This rate includes an inflationary factor of 2 percent as reported by the State Board of Equalization for December 2019. (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 does not weaken, assessed values should continue to increase steadily, and the inflationary factor will most likely stay at the 2 percent level in future years. As a result, the assumed growth factor is 6.5 percent for secured property taxes in fiscal year 2020-21, followed by 5 percent growth each year through FY 2024-25. This allows for a slight bump -up in assessed values in fiscal year 2020-21 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 slightly lower rate of growth than secured property taxes in the five-year forecast due to the inclusion 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 continues to be uncertain. In recent years, the growing economy has yielded more adequate funding for local schools, reducing the need for draws on these funds within the County of San Mateo. However, offsetting this positive development is uncertainty in the future funding of the Property Tax in Lieu of VLF, which is currently funded from the same ERAF, but with no required funding from the State in the event of a shortfall. In addition, when the economy slows, school funding needs may intensify, decreasing the amounts available for refunding. These ERAF refunds may even come to an end if the State's uses of ERAF are expanded. Because of the many unknowns surrounding the allocation of ERAF funds, the five-year forecast assumes these refunds will remain flat. 30 2019-20 Mid -Year Report March 11, 2020 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 37.6 percent increase in the City's TOT revenues in the five years ended June 30, 2019. The rate was last increased — effective January 1, 2010 — from 10 to 12 percent, 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 3,700+ 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. Even as more hotel rooms are projected to be online in the next five years, the economy is a much greater factor in both occupancy levels and room rates. The current year projection for Burlingame's TOT revenues has been adjusted downward due to a slightly slowed pace year-to-date, coupled with recent uncertainties surrounding the spread of the coronavirus (COVID-19). After this reduction and leveling off in fiscal year 2020-21, a growth rate of 1.0 percent is applied to the City's base TOT revenue for the following four years of the forecast. The City's sales tax base has continued to grow moderately with the economic recovery of past years. After correcting for one-time events in fiscal year 2018-19, the forecast for the upcoming fiscal year projects a 1.5 percent growth, followed by an additional 1 percent growth for each of the next two years, and then leveling out for the last two years of the forecast. 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. While current economic conditions appear to be fairly solid, there are several factors converging that increase the level of uncertainty for this revenue source in the future, not least among them the impact of the coronavirus on travel and industry. In addition, the overall growing cost of general goods may begin putting pressure on the California spending economy. Larger mortgage payments, new restrictions on federal income tax deductions, and essential spending on non-taxable household needs (such as health care services) result in fewer resources being available for consumers to spend on taxable merchandise. Income from the City's investments has increased steadily with the growing economy, largely due to the growing portfolio associated with increased reserves. Though yields on the short-term, risk - averse investments (typical for inclusion in municipal portfolios) have been extremely low for many years, interest rates have risen only slowly over the past two years and are not expected to accelerate dramatically in the next five years. As the City continues to set aside funds for previously unfunded liabilities and future needs, staff anticipates these revenues to increase irrespective of changes in investment yields. However, with rates being so low, any increase in yield rates will result in significant growth factors. For example, if a 2 percent investment yield grows moderately to 3 percent in the fifth year of the forecast, this represents a 50 percent growth over the period. Staff does not anticipate such an increase. After an initial increase of 1 percent in fiscal year 2020- 21, a 2.5 percent increase is projected for the remaining four years of the forecast. Staff will continue to optimize the portfolio's performance while balancing the priorities of safety, liquidity, and yield. The limited revenues received in the categories of Licenses and Fines are assumed to stay flat for purposes of the five-year forecast. Charges for Services are forecast to decrease 2 percent next 31 2019-20 Mid -Year Report March 11, 2020 year as development activities subside from their current pace and recreation programs are housed in temporary buildings. After levelling off in FY 2021-22, an annual 3 percent rise is forecast for subsequent years. Fees for discretionary services are generally anticipated to keep pace with the cost of those services, as charges for the City's services are reviewed annually with the development of the Master Fee Schedule. However, 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. Forecasted Expenditure Assumptions Expenditure Description Explanatory Comments Includes effect of current collective bargaining agreements, including recently approved agreements with labor groups and increased Salaries &Wages wages for part-time employees effective January 1. Assumes an annual growth in salaries of 3% for out years, as well as normal merit step increases. Includes an annual growth rate of 5% for each January 1 change in health care rates. Also includes expected PIERS contribution rate increases (7.7 average annually for Safety and 7.1% for Misc. employees) coupled with forecast Benefits increases in salaries & wages. Also included are employee contributions to health care and PERS in accordance with current MOUs. Growth in other benefit costs — 3% annually. 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 5% Operating Costs escalation factor for service from Central County Fire is also assumed. Operating costs include a payroll surcharge assessed on full-time employees to fund previously incurred costs associated with retiree medical benefits (OPEB) for former employees Based upon various escalation factors; IT costs to increase 8% in FY 2021, then 4% thereafter; Vehicle and Facilities Central Services to grow 3% Internal Services and 4%, respectively. General liability will grow 4-5% based on the increased cost of coverage and litigation. Includes a base of $o250k (2021-22) based upon Capital Outlay historical use and 3/o growth rate. 32 2019-20 Mid -Year Report March 11, 2020 Expenditure Description Explanatory Comments Assumes reimbursements for debt service, increasing General Fund investments in Capital Transfers In (Out) Projects, and support of City shuttle programs; offset by transfers to the fund for administrative support of enterprise operations. Includes actual debt service for all current Debt Service outstanding bond issues. (2020-21 last year for 2010 Corp Yard Bonds.) Assumes no refinancing of current debt. With revenues forecasted to grow an average of only 2.2 percent annually in the next five years, the examination of General Fund expenditures becomes critical in the evaluation of the City's long- term fiscal health. In particular, assumptions regarding future personnel costs (which constitute slightly 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 attempts to restrict the growth of unfunded pension obligations. The City of Burlingame offers its permanent employees a defined benefit pension plan that is administered by the California Public Employees' Retirement System (CalPERS). Retirement costs continue to rise in part due to actions taken by the CalPERS Board. In December 2016, the Board adopted a policy to reduce its investment return assumption (discount rate) from 7.5 percent to 7 percent over the course of three years, beginning with fiscal year 2018-19. The action was a consequence of the weak performance in recent years of the CalPERS investment portfolio, a prolonged low -interest rate environment, and attempts to limit future volatility in investment returns. Decreasing the discount rate increases the likelihood that assets set aside to fund retirement obligations will be sufficient to meet the demand of retiring workers. Investment returns will be relied upon less, and contributions relied upon more, in order to fund pension obligations. The resulting higher contribution rates for employers and employees will exacerbate existing pension funding challenges. Whereas the impact of this discount rate reduction will not be fully realized until fiscal year 2024-25, outside investment advisors generally believe that investment returns over the next 10 years will be below 7 percent. In February 2018, CalPERS changed its amortization policy from 30 years to 20 years for all investment gains and losses. These changes, which will also serve to push pension costs higher, will be reflected in the June 30, 2019 valuation reports, affecting agencies' budgets in FY 2021-22. As a result of these actions and other actuarial assumption changes, the employer required contributions toward the City's unfunded CaIPERS liabilities are set to increase 40% ($2.1 million) over the course of the next five years. In order to smooth the impact of pension rate increases to future operating budgets, the City established a § 115 pension trust fund with Public Agency Retirement Services (PARS). A prefunding strategy was adopted utilizing a "target" rate of funding, representing the average rate of projected employer contributions that would be required from CalPERS over the next 15 years. (Target rates were established separately for the City's Safety 33 2019-20 Mid -Year Report March 11, 2020 and Miscellaneous pension plans with CalPERS.) Pursuant to this strategy, the required funding would be paid to CalPERS each pay period, and, to the extent that the target rate was higher than the required CalPERS employer contribution rate, amounts would be contributed to a dedicated trust or reserve fund, to be drawn upon when the required employer rate invariably exceeded the target rate. Contributions to the § 115 Trust for pensions will not impact total fund balance, but merely be reflected as "restricted" fund balance for financial statement purposes. A revised actuarial study for the City's pension plans with CaIPERS will be performed in fiscal year 2020-21. For purposes of the five-year forecast, the threshold rates used to determine the amount of contributions to the pension trust fund remain at 76.9 percent for the Safety plan and 37.7 percent for the Miscellaneous plan. Although CalPERS projections for Burlingame's employer contributions for the next five years are slightly lower than initially anticipated when the trust fund was established, maintaining these thresholds at the higher rates provides conservative funding guidelines for the City's long-term pension liabilities. CITY OF BURLINGAME, CA CONTRIBUTION TO PENSION (BY FUND) TRUST FY 17-18* FY 18-19 FY 19-20** TOTALS General Fund 4,139,920 2,838,000 2,957,000 9,934,920 Admin/IT 5,641 5,200 3,950 14,791 Building Enterprise 82,011 75,900 57,900 215,811 Facilities 56,212 51,900 39,300 147,412 Fleet/Equipment 36,669 30,100 23,460 90,229 Landfill Fund 4,752 4,600 3,490 12,842 Parking Enterprise 19,122 17,500 13,200 49,822 Sewer Enterprise 169,791 158,200 117,700 445,691 Solid Waste Enterprise 30,101 28,000 20,000 78,101 Water Enterprise 205,573 188,300 143,000 536,873 4,749,792 3,397,700 3,379,000 11,526,492 * Includes additional $1 million General Fund contribution at mid -year. ** Includes additional $800,000 General Fund contribution for CCFD. The City has always reflected a conservative CaIPERS rate in its five-year forecast. However, the impact of the changes to the CalPERS assumptions is severe. The rates shown below reflect rates provided by CalPERS (through FY 2020-21); subsequent year rates are based on an actuarial study completed by Bartel Associates in January 2019. Again, the most immediate impact of the discount rate assumed by CalPERS will be seen in a large increase in the UAL (unfunded accrued liability) of prior years. 34 2019.20 Mid -Year Report March 11, 2020 Estimated CaIPERS Rate Misc. Rate Safety Rate Fiscal UAL Total Total as% UAL Total Total as% Year Normal Cost Payment Contributions of Payroll Normal Cost Payment Contribution of Payroll 2019-20 1,848,000 + 2,875,000 4,723,000 29.10% 1,175,000 + 1,818,000 2,993,000 56.80% 2020-21 2,048,000 + 3,132,000 5,180,000 31.10% 1,293,000 + 2,029,000 3,322,000 61.50% 2021-22 2,075,000 + 3,533,000 5,608,000 32.80% 1,306,000 + 2,325,000 3,631,000 65.40% 2022-23 2,136,000 + 3,957,000 6,093,000 34.70% 1,342,000 + 2,620,000 3,962,000 69.50% 2023-24 2,232,000 + 4,267,000 6,499,000 36.00% 1,399,000 + 2,845,000 4,244,000 72.50% 2024-25 1 2,293,000 + 4,619,000 6,912,000 37.30% 1 1,435,000 + 3,091,000 4,526,000 75.20% Source of information: Bartel Associates' CalPERS acutarial analysis, January 2019 Since personnel costs are such a large portion of the General Fund budget, these changes in employer contribution rates have a significant impact on the fund's five-year projection. Salaries and wages have been broadly projected at levels that assume all existing labor agreements are adhered to until expiration. The City's most recent labor contracts, while reflecting concern over increasing employee benefit costs, also acknowledge the improved economy and the higher cost of living in the Bay Area. The contracts provide a balance in the four major cost areas of employee compensation: salary, health premium contributions, pension obligations, and retiree medical benefits. 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 2013-14 fiscal year, the cost of these benefits, largely incurred in prior years, is now being pre -funded through an (external) irrevocable trust. These costs represent a surcharge of approximately 22 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. An actuarial valuation as of June 30, 2019 is currently being performed to confirm the amount of the surcharge needed to continue funding these benefits for the next two fiscal years. As noted previously in this report, the City's contributions to employees' Health Reimbursement Arrangement (HRA) accounts were recently negotiated and caused a one-time bump up due to the retroactive contributions made in the current fiscal year. This benefit was needed to replace the much more expensive retiree medical care programs offered to new employees prior to FY 2011- 2012. HRA employer contributions are not included in PERSable compensation, and as a defined contribution benefit, will not increase the City's post -employment liabilities. With respect to non -personnel expenditures, it should be noted that the General Fund transfer out (expenditure) for the CIP was previously based on a set portion of the City's TOT revenues (2 of the 12 percentage point TOT rate) — about $4.7 million for FY 2019-20. The regular transfer amount was intended to reflect the annual cost of maintaining the City's current infrastructure in its current condition and has been considered an essential part of a sustainable budget. However, due to the identification of the City's many unmet capital project needs in recent years, and the recognition that the City's aging facilities are getting more costly to maintain, the transfer amount based on TOT revenue is now considered a minimum annual transfer amount. 35 2019-20 Mid -Year Report March 11, 2020 Although capital spending has been able to proceed at a rate higher than other General Fund expenditures, beginning with the 2016-17 fiscal year budget, staff has recommended that the budgeted transfer from the General Fund to the Capital Projects Fund be established based on the City's capital needs for the upcoming fiscal year (as opposed to a portion of TOT revenues), to the extent there is staff capacity in the organization to accomplish the identified projects. In addition to the $6.5 million set aside in the current fiscal year for the Capital Investment Reserve, transfers from the General Fund to support specific governmental capital projects were nearly $9.2 million in the FY 2019-20 adopted budget. The five-year forecast shows a transfer of $9.6 million, though the transfer that will be needed for FY 2019-20 has not yet been solidified. As the Council has prioritized several large infrastructure improvement projects, including the aforementioned Broadway Grade Separation Project and Sea Level Rise Shoreline Protection Improvements, which may require significant City funding, the transfer for capital projects is the single largest variable in the General Fund five-year forecast. A 5 percent growth factor is applied to this transfer for all years in the forecast. Annual funding of $3 million for the Capital Investment Reserve in the Capital Projects Fund has been assumed in prior forecasts. For purposes of the five-year forecast, it is assumed that this same level of funding will continue until year FY 2024-25, where it appears that this level of funding may not be feasible. In addition, the General Fund will continue to provide $2 million annually to service the debt for the new Community Center. Although the broad assumptions that underlie the five-year forecast are considered to be conservatively realistic, any number of risk factors could result in a less positive forecast, including ineffective monetary policy by the Federal government, a major retrenchment of consumer spending, increased unemployment, escalating inflation, or an emergency event. Conversely, improved revenues from the implementation of business development strategies in progress may provide the headwind —in the form of higher revenues —for continued surpluses in the 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 revenues in the 2020-21 fiscal year in acknowledgement of the Burlingame Point development, but no other assumptions (in revenues or expenditures) were modified for the project. Nor are the revenues and accompanying expenditure increases associated with the Top Golf development included in the forecast. Staff has endeavored to provide the most realistic budgetary projections possible using the most recent data available. Analysis of the General Fund and City operations as a whole will continue through the development of the fiscal year 2020-21 budget, and will undoubtedly provide revisions to this five-year forecast. Longer term financial planning is not limited to the General Fund. The City's other operating funds are also examined for unfunded liabilities and future vulnerabilities, and adjustments are made as needed. To the extent these funds are not self-sustaining, they can indicate a drag on the City's General Fund operations. To avoid such a condition, long-term plans are updated frequently, and any changes in the outlook of these funds are brought to the City Council's attention through the budget, mid -year analysis, and other financial reporting processes currently in place. 36 2019-20 Mid -Year Report March 11, 2020 FISCAL IMPACT Authorization of the budget amendments described in this report updates the previous allocation of City resources for the 2019-20 fiscal year, reflecting changes in economic conditions and the City's current fiscal year-to-date performance. The City Council may consider revisions to the mid -year adjustment in the attached budget resolution, and/or additional amendments to the FY 2019-20 budget. For example, the Council may want to consider the use of some portion of the General Fund's unassigned fund balance to further fund the § 115 Pension Trust, contribute additional sums to the Capital Investment Reserve, or use the monies for some other purpose. The overall goal is to provide the most accurate picture of the 2019-20 fiscal year's standings in preparation for the FY 2020-21 budget and to assist decision makers in planning for the City's needs in the long-term. Exhibit: • Mid -year Budget Amendments Resolution 37 2019-20 Mid -Year Report March 11, 2020 City of Burlingame FY 2019-20 Mid -year Report Attachment A — General Fund Revenues Property Taxes — The San Francisco Bay Area housing sector has been a sustaining factor in the local economy throughout the most difficult of past economic downturns. Property tax revenues leveled off in fiscal years 2010-11 and 2011-12, but have increased by 67.1 percent since that time, and 37.0 percent in the last five years. Assessed property values continue to rise, increasing 7.28 percent in the past year, after rising 6.25 percent in the prior year. The local housing market is very strong, despite a persistent lack of inventory. And though credit conditions remain relatively tight, mortgage/lending rates are low, and recent years have seen a renewed interest in both residential and commercial real estate development. Property tax rolls are established prior to the beginning of the fiscal year. In FY 2019-20, Burlingame's roll value (land and improvements) has increased 5.05 percent, including an inflationary factor of 1.02 percent applied to all California property assessments. This is slightly above the growth experienced in the rolls at this time last year. 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. CITY OF BURLINGAME, CA PROPERTY TAXES FY19-20 FY19-20 FY17-18 FY18-19 Current FY19-20 Midyear Adjustment Actual Actual Budget Projection Amendment Up (Down) % Current Secured Property Tax $ 13,830,419 $ 14,649,598 $ 15,665,000 $ 15,820,000 $ 155,000 1.0% Secured Supp. Property Tax 445,648 516,148 545,000 545,000 - 0.0% Current Unsecured Property Tax 761,571 779,370 855,000 821,000 (34,000) -4.0% Property Tax in Lieu of VLF 3,272,197 3,465,699 3,725,000 2,963,800 (761,200) -20.4% ERAF Refund 1,720,433 2,252,373 2,140,000 2,374,300 234,300 10.9% Unitary Tax 304,550 316,284 . 340,000 316,000 (24,000) -7.1% Total, Property Taxes $ 20,334,818 $ 21,979,473 :', $ 23,270,000 $ 22,840,100 $ (429,900) -1.8% In FY 2018-19, actual property tax revenue receipts were within '/2 percent of the budget (as adjusted at mid -year), representing an 8.1 percent increase in property taxes over the prior year. Revenues from secured property taxes were expected to rise approximately 6.7percent in FY 2019- 20, and the final assessed roll for Burlingame (received from the County Controller in August) indeed reflects a 7.24 percent rise over the prior year. Therefore, a slight increase in the Secured Property Taxes budget is indicated. However, revenues from unsecured property taxes (assessed on business fixtures, business personal property, boats, aircraft, etc.) fell short of the prior year budget projections, so this revenue line item should be reduced for the current fiscal year. Supplemental Property tax revenues are dependent on the volume and value of property transfers and new construction, so they vary significantly from year to year. Unitary taxes met last year's m 2019-20 Mid -Year Report March 11, 2020 projection, but are coming in at about the same pace. A $24,000 downward adjustment is appropriate due to the lack of growth in this line item. Excess ERAF (Educational Revenue Augmentation Fund) refunds have varied considerably over the years. Only in recent years has this revenue line item been fully budgeted, due to the possibility that the State's school funding formulas could change and require higher draws on the County's ERAF. However, the improved economy has had a positive effect on the County's ERAF, as it appears that the State can meet its obligations to educational agencies because of improved property tax revenues in the area. In fact, higher property tax revenues result in more funds from local agencies being held back for the ERAF, while fewer demands for education funding are being made on these funds. Therefore, the full amount of anticipated ERAF refunds ($2.1 million) was included in the property tax projection for fiscal year 2019-20. Excess ERAF reserves are held by the County and distributed back to the contributing agencies when obligations of the funds to education agencies have been met. The County allocated excess ERAF funds back to the jurisdictions early in January. Changes in the method of allocation last year (over a two-year, as opposed to a three-year, rolling period) accounted for a one-time bump - up in these funds of nearly $265,000 in fiscal year 2018-19. This was a one-time impact, as the City merely received its share of ERAF refund more rapidly than in the past. Despite the additional amount, the City's ERAF refund for fiscal year 2019-20 was $122,000 (5.4 percent) higher than the ERAF received last year, reflective of continued property tax growth and reduced demands on the County's ERAF fund for school funding. This amount is $234,300 more than projected in the adopted budget for the current year. However, a significant downward adjustment ($761,200) in total property taxes for the current fiscal year is recommended for Property Tax In Lieu of VLF. These revenues are allocated based on growth in the County's secured property tax roll but are funded from the countywide ERAF, and then from the property tax revenues of non -basic aid school districts. (Any monies taken from the non -basic aid school districts are back -filled by the State.) The large majority of school districts in the County are classified as basic aid, i.e, the property taxes within the district are sufficient to fund the schools, without funding from the County's ERAF fund. The number of non -basic aid school districts in the County has fallen over recent years, resulting in less available property tax revenues to fund VLF. For FY 2019-20, the total VLF amount due to the County and cities is $207,943,589. There is only $165,506,767 available in ERAF and from non -basic aid school district property taxes to fund VLF, resulting in a county -wide shortfall of over $42.4 million. As there is no statutory mechanism for the State to fully reimburse cities and counties for this shortage, the County is working with its legislative advocates to request that the FY 2019-20 VLF shortfall amounts be appropriated in the State's FY 2020-21 budget. Unfortunately, these funds will not be recovered in the current fiscal year, if at all. Sales and Use Taxes — The table below shows the City's sales tax revenues over the past ten years, as well as a projection for the current fiscal year. The first two line items, "Sales & Use Tax" and "Sales Tax Compensation Fund", comprise sales tax receipts from the Bradley Burns (local 1 %) allocations from the California Department of Tax and Fee Administration (CDTFA). The recession was obviously marked by a severe decline in consumer spending and associated taxable transactions. With the economy recovering, sales tax revenues surged upward in FY 2010-11, and they have continued to grow at an impressive pace. The "Triple Flip" (a State revenue swapping 39 2019-20 Mid -Year Report March 11, 2020 scheme that began in 2004) process was wrapped up in May 2016, creating a one-time bump in sales tax revenues of nearly $1 million for that fiscal year, and eliminating the need for the Sales Tax Compensation Fund. But with this aberration excluded, it appears that taxable sales transactions have remained healthy for the past few years. The addition of the City's Measure I tax, which was effective April 1, 2018, has further bolstered this revenue line item. Although Measure I revenues and expenditures are tracked internally in a separate sub -fund, they are included as General Fund transactions for financial reporting purposes. Description Sales & Use Tax Sales Tax Compensation Fund Public Safety Fund -Sales Tax Measure 1(0.25% Sales Tax) Total Year -over -year change City of Burlingame Fiscal Year 2010-20 Sales & Use Tax Revenue (in millions) FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 $ 5.00 $ 6.15 $ 6.33 $ 6.90 $ 7.48 $ 8.36 $ 10.20 $ 1.27 1.89 2.16 2.17 2.57 2.59 2.48 0.11 0.11 0.12 0.13 0.14 0.15 0.15 FY2017 FY2018 11.94 $ 12.19 0.15 0.16 0.47 FY2020 FY2019 Est. $ 15.14 $ 14.30 0.17 0.16 2.51 2.40 $ 6.38 $ 8.15 $ 8.62 $ 9.20 $ 10.20 $ 11.10 $ 12.83 $ 12.09 $ 12.82 $ 17.82 $ 16.86 -23.68% 27.74% 5.71% 6.73% 10.84% 8.87% 15.56% -5.76% 6.04% 39.00% -5.39% Because of the time lag in the reporting and submission of sales taxes to the CDTFA, only one quarter's data (third quarter of 2019) is available from which to project the City's FY 2019-20 revenues from this source. Unfortunately, issues surrounding the implementation of the State's new computerized reporting system created shortfalls from delayed payments in the 2018 second quarter, which skewed the third quarter results of 2018, which are used for prior -year comparison. The City's Sales Tax consultant, HdL, has adjusted the data for these aberrations to provide a clearer picture of actual economic activity behind the sales tax receipts, resulting in the charts and graphs which follow. A review of Burlingame's third quarter data for 2019 (taxes remitted to the CDTFA in October - December 2019) indicates a decline in taxable transactions of approximately $107,000 (2.8%). Nevertheless, the chart below shows that sales tax revenues continue to be strong, with many major industry groups reporting a positive change compared to the same quarter of 2018. However, the Autos and Transportation sector, which comprises nearly a third of the City's taxable transactions, reflected an anticipated decline in new auto sales in the third quarter of 2019. $1,400K $1,200K $1,OOOK $800K $600K $400K $200K $OK Autos and Transportation 3018 Compared To 3019 3018 3019 Ar State and Restaurants General Building Business Fuel and County and Consumer and and Service Pools Hotels Goods Construction Industry Stations Food and Drugs Eft 2019-20 Mid -Year Report March 11, 2020 Growing faster than most other components of local sales tax receipts in recent years, the allocation of taxes from the countywide use tax pool constitutes a larger portion of total sales tax revenues than ever before. Use tax is the responsibility of the buyer rather than the seller and does not involve a California "point of sale". Therefore, the tax is coded to the county of use and then distributed to each jurisdiction in the county on a pro rata share of taxable sales. As these receipts now represent over 17 percent of the total sales tax revenues, the increase reflects a continued acceleration of online shopping for merchandise shipped from out of state. In addition, early results from the Wayfair decision implementation, which provides for the remittance of more sales tax on out-of-state/on-line transactions, was launched in the second quarter of 2019, adding new revenues in this category. This trend, along with a shift in consumer spending habits to non-taxable goods and services, puts pressure on brick -and -mortar retailers, which previously served as the underlying sales tax base for local governments. Sales Tax by Maior industry Group $1,600K Autos And Transportation Count 149 State & County Pools - $1,400K Restaurants And Hotels $1,200K Count 1�47 11 General Consumer Goods Count 736 Building And Construetien Count- 62 Business And Industry Count: 545 Fuel And Service Stations Count- i i Food And Drugs Count ',7 . 30 40 10 20 3Q 40 10 20 30 40 10 20 30 16 16 17 17 17 17 18 18 18 18 19 19 19 $1,000K $800K $600K $400K $200K $OK Though not a large piece of the City's sales and use tax receipts, the graph shows a marked growth in the Building and Construction sector. This is largely attributable to the jobsite-specific sub - permits obtained for the Burlingame Point development project. Application of this sub -permit allows for the direct allocation of the use tax collected on out-of-state purchases on materials and fixtures associated with the development. Through the third quarter of 2019, the City has netted an additional $276,000 in additional use tax from purchases related to this jobsite in the past two years. 41 2019-20 Mid -Year Report March 11, 2020 The City's FY 2019-20 adopted budget assumed a 4.6 percent decline in sales tax revenues from prior year actuals, due largely to several one-time factors that skewed results in fiscal year 2018- 19 and created a 26.3 percent surge in local sales tax receipts. In addition, the slowdown in auto sales that has been anticipated for the past three quarters is being realized. Year-to-date receipts indicate that sales and use tax revenues will indeed fall short of those in the prior year. However, the prior -year projection did not accurately project the local sales tax revenue results of $15.1 million for the 2018-19 fiscal year, which exceeded the budget by over $1.9 million (14.7 percent). The new projection for these revenues in fiscal year 2019-20 is $14.3 million, a $1.7 million increase from the adopted budget. While the current projection for Public Safety Sales Tax ($160,000) is still valid, Measure I revenues are also expected to come in approximately $400,000 higher than the $2.0 million initially projected for the current fiscal year. These adjustments bring the FY 2019- 20 projections in line with those suggested by the City's sales tax consultant; a 5% decrease in these revenues is anticipated due to the one-time factors involved in the prior fiscal year's results. 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, 2019 reflect the first six months of the fiscal year. The budget for FY 2019-20 was established based on TOT collections through March 2019, when 2018-19 fiscal year-end results were projected to be approximately $28.5 million. Continued low vacancy rates, a levelling off in average daily room rates (ADR), and consideration of the new 350-room hotel at SFO in the summer of 2019 supported the original fiscal year 2019-20 budget projection of $28.7 million — a projected growth of less than one percent in TOT revenue. In fact, the City ended the 2018-19 fiscal year with nearly $29.4 million in TOT revenues (see graph below, where Q1 shows results for July through September of each fiscal year). And the SFO hotel did not open until October 2019. Occupancy rates as reported by the City's hotels remained robust in the first half of the current fiscal year. Burlingame hotels reported an average occupancy rate of 89.4 percent between July and December 2019 and an ADR of approximately $213, nearly on par with the prior year. Although revenue dipped slightly in October (compared with the prior year), November showed an improvement over the same month in 2018. If the current level of activity were expected to continue for the remainder of the current fiscal year, Burlingame's TOT revenues should be only slightly less than the FY 2018-19 year end results. However, it is difficult to project the extent to which the recent outbreak of the coronavirus in China will eventually impact domestic travel. Per an update from the San Mateo County/Silicon Valley Convention and Visitors Bureau, China has historically been the leader in overseas visitors to California — 45,000 airline seats per week. The health scare has forced many Chinese visitors to stay home, as authorities impose travel restrictions and flights to/from China have been suspended through at least the end of April. Several large/high profile tech conferences have been cancelled or are expecting severely cut attendance for the next couple of months. Statewide, a visitor decrease of 7 to 27 percent in projected. As more outbreaks are reported outside of China, airport closures, flight cancellations, and shuttered borders may prevail through the end of the current fiscal year. Burlingame will most likely begin to experience a negative impact in TOT revenues. Data for the month of February will not be available until early April. For this reason, a $500,000 downward adjustment (to $28.2 42 2019-20 Mid -Year Report March 11, 2020 million) is recommended for the City's projected TOT revenues for the current fiscal year. As such, the budget represents a 3.9 percent decline from the 2018-19 fiscal year. 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 in recent years has far outpaced local pricing indices as well as inflation, and price elasticity tends to constrain growth. However, the opening of the new on -site 351-room Grand Hyatt hotel at SFO appears to have had no immediate impact on Burlingame hotels. The City of Burlingame has approved an application to redevelop the property at 1499 Bayshore Highway with a 404-room, 11- story hotel. The impact of the additional supply of rooms in Burlingame is not considered in the City's five-year forecast, as ground has not yet broken on this project. The current health scare is anticipated to pass, and tourism should regain strength in the beginning of fiscal year 2020-21. However, with the virus now developing infection hotspots in Europe and the Middle East, there will be much focus in the weeks ahead on the observed "R-naught" (transmission rate) outside of the scope of rigid Chinese containment measures. Burlingame's TOT revenue projection for fiscal year 2020-21 will consider the most recent data available, and may change from the amount shown in the five-year forecast. Historical Transient Occupancy Tax Revenue by Quarter 9 8 �7.8 7 7.5 7.3 7. 7 7 ?--------7.3 _. 6.8__ _. 7.2 -- 6.7 6.6 6:5 .6 6. 6.1 .4 --- 2019-20 5.6� —2018-19 5.6 . 6 �...._._.. — _e 2017-18 4.5 �^-- —2015-16 4 4.2 4.0 4.3 2014-15 3.9 3.8 2013-14 3 _ __ ------2012-13 —2011-12 2 Q1 Q2 Q3 Q4 Other Taxes — A number of other sources provide tax revenues to the City's General Fund. Although they are consolidated for reporting purposes, prior year actual amounts and the current year activity for each source have been reviewed for the most accurate projection of FY 2019-20 year-end results. Real Property Transfer Tax — The City receives property transfer tax revenue the month following a real property transaction, splitting the 0.11 percent tax evenly with the County. Although improved home values have pushed these receipts higher in recent years, property turnover in the area continues to be relatively low. Month to month variation in real estate sales makes this revenue difficult to project, as the sales of significant properties can cause "spikes" in the amount of taxes collected. 43 2019-20 Mid -Year Report March 11, 2020 Burlingame ended the 2018-19 fiscal year with property transfer tax revenues of nearly $477,000. Receipts for the first half of the current fiscal year are falling behind the rate of the prior year by approximately 15 percent, with a slightly lower number of real property sales transactions. So the current year $420,000 budget for this line item appears to be appropriate. City of Burlingame Real Property Transfer Tax Revenue Fiscal Years 2011- 2020 $600.000 $500,000 W0,000 $300,000 $200,000 $100,000 5 2010-11 2011-12 2012-13 2013.14 2014-15 2015-16 201E-17 2017-18 2018-19 2019-20 (Esc.) Business License Tax — Year-to-date business license tax revenues are coming in at a slightly lower rate than last year. This includes the special business license tax (5 percent of revenues) assessed on airport parking enterprises, which comprises over 42 percent of this line item. While revenue from the volume of annual business licenses remains steady, revenues from airport parking enterprises have experienced moderate declines in recent years as ride -sharing services have become more prevalent. Year-to-date receipts show a 10.8 percent decline over the same period last fiscal year. Therefore, a reduction of $35,000 in the projection for this special business license revenue is proposed. After this adjustment, the City's business license revenue budget in total ($985,000) for the current fiscal year represents a 4.6 percent decrease from the 2018-19 fiscal year results. While a higher volume of licenses might be expected in a growing economy, the cost of an annual business license in Burlingame is small ($100 for most businesses). The rate was established by ordinance in 1978 and has not been adjusted since 1993. Therefore, the business license tax remains a relatively small and somewhat fixed revenue source for the City. Franchise Fees — 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 solid waste rates have been increased 6 percent for the 2020 calendar year, an increase was provided for in the FY 2019-20 adopted budget. And as service account volumes have not increased significantly from the prior year, no changes to the budgetary projection are needed for the solid waste utility. Franchise fees for the provision of gas and electric utilities were slightly under the estimated budgets in the prior fiscal year. Although the City does not receive these revenues until April, there is no indication that the current year's revenues will deviate significantly, so downward adjustments have been proposed. However, staff proposes a downward adjustment ($10,000) 2019-20 Mid -Year Report March 11, 2020 for cable franchise fee revenues, as these came in slightly below budget in fiscal year 2018-19, and current fiscal year receipts are coming in lower than experienced at this same time last year. An additional decrease in video service franchise fee revenues reflects a continued decline in demand for these services. CITY OF BURLINGAME, CA FRANCHISE TAXES FY19-20 FY19-20 FY17-18 FY18-19 Current FY19-20 Midyear Adjustment Actual Actual Budget Projection Amendment Up (Down) % Gas $ 129,951 $ 119,672 $ 156,000 $ 121,000 $ 135,000) -22.4% Electric 268,927 269,874 278,000 271,000 (7,000) -2.5% Garbage 743,450 772,154 812,000 812,000 0 0.0% AT&T Cable TV 433,554 406,107 390,000 380,000 (10,000) -2.6% Wave Astound 23,979 23,385 24,000 24,000 0 0.0% AT&T Video Service 76,031 66,611 64,000 64,000 0 0.0% Total, Franchise Taxes $ 1,675,891 $ 1,657,802 $ 1,724,000 $ 1,672,000 $ (52,000) -3.0% Licenses and Permits — General Fund revenue in this category consists largely of alarm and overnight parking permit fees, along with taxicab licenses. With a budget of less than $80,000, these receipts account for a very small part of total General Fund revenues. Last year, this revenue source was decreased at mid -year, due largely to a decrease in the volume of applications for taxi licenses. Legislation effective January 1, 2019 allows local regulatory fees on taxicabs only in the jurisdiction where they are "substantially located". At $60,000, alarm permit fees now account for the vast majority of this revenue category. Fines, Forfeitures and Penalties — This category consists largely of revenue from parking citations and vehicle code violation fines. The Police Department has refined their projections to reflect a lower volume of parking citations, resulting from short staffing in the first half of the fiscal year (a Parking Enforcement Officer was off duty for four months due to injury). In addition, Parking Lot N and part of Lot F were shut down beginning in October. A $100,000 decrease in the budget for parking citations revenues is indicated (to $800,000). Vehicle Code Fines are also slightly below prior -year results, but any adjustment would be minimal. Investment Income — Yields on municipal portfolios dropped steadily following the 2008 market downturn. To enable monetary recovery from the recession, the Federal Reserve has implemented monetary policies to keep credit affordable and inflation in check. 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 continued to hover at historic lows for the last ten years, rising only slightly in recent years. Maintaining its focus on safety and liquidity, the City maintains funds in the State's Local Agency Investment Fund (LAIF) and the California Asset Management Program (CAMP). CAMP and LAIF are permitted investments for all local agencies under California Government Code §53601(p). Although both pools have similar terms and offer daily liquidity, many public agencies use both LAIF and CAMP funds in order to diversify the liquid portion of their investment holdings. Currently, LAIF offers a slight yield advantage. 45 2019-20 Mid -Year Report March 11, 2020 In this midyear report, staff takes the opportunity to adjust the budget for interest income projections. Income from the City's investment holdings has always been difficult to forecast due to the requirement to "mark -to -market" the portfolio at each year end. As shown in the chart below, the change in market value has a significant impact on the reported earnings of the portfolio. A yield to maturity at cost on the main portfolio of securities was 2.22% as of December 31, 2019, compared to a "total return" of 4.61 percent if the change in the portfolio value is included. Interest Earned + Change in Value = Portfolio Earnings Total Return Quarter -over -Quarter Change in 2-Year U.S. Treasury Yield Main Portfolio Earnings Analysis As of December 31, 2019 $610,220 S947,863 S650,553 $1,457.180 $659,683 $430,620 $1.558,083 $2.107.733 $1.090,302 1.41 % •0.23% 1.81 % •0.51 % 0.92% •0.13% $661,717 -$179.325 $482.393 0.40% -0.05% $2.582,173 $2,656.338 $5,238,511 4.61 % -0.92% Wes • Performance on a trade4ate basis, gross (i e., before fees) in accordance mth the CFA Institutes Global Investment Performance Standards (GIPS) • Ouartedy returns are presented on an unannualized basis • May not sum to total due to roundinq- For this reason, the City's budget reflects investment income with the mark -to -market adjustment removed for all funds. Such treatment recognizes that the City typically holds its investments to maturity, and removes the uncertainty of the market place from the City's revenue forecasts. Therefore, "actual" interest income received in the prior year has been restated to reflect earnings unadjusted for market value as of June 30, 2019, and budgets have been established to reflect interest earning prior to the market adjustment at year end. 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 2.55 years. The market value of the portfolio as of December 31, 2019, was nearly $191 million, consisting of a $119.5 million managed pool of top -rated securities, $30.2 million in the State Local Agency Investment Fund (LAIF), and $41.3 million in the California Asset Management Program (CAMP). The City's aggregate investments (including the very liquid investments in LAIF and CAMP) averaged a yield to maturity of 2.22 percent. Elm 2019-20 Mid -Year Report March 11, 2020 This aggregate yield to maturity on the City's investments is slightly lower when compared to the 2.33 percent reported in last year's mid -year analysis. LAIF, which holds the majority of the City's idle cash, was yielding 2.04 percent, down from 2.29 percent one year ago (average monthly yield in December). CAMP earned an annualized rate of 1.8 percent in December. Note that as of December 31, 2018, the U.S. Treasury yield curve was significantly inverted between the 1- year and 5-year durations (short-term interest rates were higher than long-term rates.) One year later, the yield curve had un-inverted (short-term rates are now below long-term rates), and yields are lower across the range of maturities. Therefore, despite anticipated growth in cash balances for the remainder of the fiscal year, revenues from the City's investments in total are anticipated to be similar to interest earnings of the prior fiscal year. 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. Interest earnings were originally projected to be higher ($4.4 million in total) for the 2019-20 fiscal year, but in the current rate environment it appears that most of the projections (by fund) should be reduced. Excluding the $340,000 increase in the Debt Service Fund investment earnings on the unspent 2019 Lease Revenue Bonds proceeds, the budget for interest income for all funds should be decreased by $396,000. These mid -year adjustments will provide a more accurate projection of interest earnings to the various funds for future budgets. On March 3, 2020, the U.S Federal Reserve delivered an emergency half -percentage point interest rate cut in a bid to protect the longest -ever economic expansion from the spreading coronavirus. Such moves have immediate impacts on the market value of the City's investments, both in its main portfolio and in the trust accounts established to fund its long-term liabilities. However, short-term investments are selected for safety above yield, and long term investments are based on a consistent program of funding, with portfolios that balance risk and return. These solid investment plans should not be altered to respond to the volatilities in the markets. Given the uncertainty regarding the potential impact of the coronavirus outbreak on global growth and interest rates, the City and its investment advisors will maintain durations in line with benchmarks. And although the City's fund are invested in high credit quality investments and continue to meet the City's goals of safety, liquidity and yield, interest earnings cannot be relied upon as a critical part of the government's operating revenue stream. State Subventions (Intergovernmental Revenues) — This revenue line item in the General Fund now consists largely of the State's COPS (Citizens' Option for Public Safety) program revenues. These funds are allocated to the counties and then distributed to the various agencies within each county, with a minimum of $100,000 to each law enforcement jurisdiction. Burlingame has received an increased allocation of COPS funding in recent years, and year to date this allocation is 9% higher than last year. Therefore, a $20,000 increase (for $160,000 total) is projected in this revenue line item. Charges for Services — As seen in the chart below, most departments generate some amount of receipts in this revenue category. With a revised budget of nearly $6.4 million, these receipts account for approximately 7.9 percent of Burlingame's total General Fund revenues. 47 2019-20 Mid -Year Report March 11, 2020 CITY OF BURLINGAME, CA CHARGES FOR SERVICES BY DEPARTMENT FY19-20 FY19-20 FY19-20 FY17-18 FY18-19 Current Midyear Midyear Adjustment By Department Actual Actual Budget Projection Amendment Up (Down) % Police $79,416 $91,570 $87,000 $363,500 $276,500 317.8% Parks 116,197 127,470 120,000 150,000 30,000 25.0% Recreation 3,008,863 3,374,909 3,000,000 3,304,000 304,000 10.1% Aquatics 299,017 697 0 0 0 n/a Planning 555,671 1,057,703 837,000 987,000 150,000 17.9% Public Works 658,704 861,185 679,000 811,000 132,000 19.4% Library 784,985 759,320 758,000 763,500 5,500 0.7% Other 12,940 9,315 9,000 9,000 0 0.0% Total, Departmental Fees $5,515,794 $6,282,169 $5,490,000 $6,388,000 $898,000 16.4% General Fund revenues in this category increased considerably in FY 2018-19 compared to the previous years, due largely to an increase in development services rendered from the Planning Division and Public Works Department. Recreation programs also continued to gain in popularity. The projected budget for these fees assumed that development applications would slow, and that the mid -year demolition of the Recreation Center would also decrease fee revenues for fiscal year 2019-20. However, upon review of charges for services in the current year, staff projects that these revenues will match or exceed those of the prior year. Based on year-to-date volumes of ongoing application and permit activity, Planning fees are anticipated to be a bit less than in fiscal year 2018-19. A downward adjustment of $100,000 will bring this budget line item to $500,000, about 10 percent less than experienced last year. Plan checks (performed within the Planning Division), on the other hand, continue at last year's fast pace. These fees are projected to be approximately $450,000 in the current fiscal year, only slightly less than last year's results, but a $250,000 increase from the 2019-20 fiscal year adopted budget. The Public Works Department is experiencing a higher -than -anticipated volume of requests for engineering services related to development projects. Revenues to date indicate that these revenues will come close to those experienced last year, and support a new projection of $786,000. The recommended budget adjustment for revenues from engineering services is an increase of $132,000 for the current year. Following a successful automatic renewal pilot program, the Peninsula Library System launched the program system -wide early in December 2018. The decision was made to remove barriers for low income library patrons, as well as increase library usage by young adults. At that time, staff estimated a decrease in fines/fees revenues of approximately 21 % going forward Based on the continuing decline of fines in the current fiscal year, staff is projecting this line -item revenue to be approximately $46,000, a decrease of $8,000 more than the amount anticipated in the adopted budget. However, the amount due for library services charged to Hillsborough residents will increase. The amount is based on the average of yearly per capita spending of all PLS libraries, and will increase approximately $15,400 for the current fiscal year. 2019-20 Mid -Year Report March 11, 2020 Last year, the library increased the hours of operation for its convenient passport intake services. However, due to staffing issues during the holidays, the volume of such services declined slightly. A reduction of approximately $1,900 (3.5 percent) in passport intake fees is anticipated. Receipts from recreational services in fiscal year 2018-19 were nearly $3,375,000, over 12.1 percent above that experienced in the prior fiscal year, indicating a continued demand for recreational offerings. The current year budget projected a decrease in revenues due to the need to vacate the Recreation Center at mid -year and move certain classes and programs to other sites. However, year-to-date receipts are strong. Although some decrease from prior -year revenue is still expected for the remainder of the fiscal year, Recreation fee revenue is anticipated to end the year approximately $230,000 over budget, for a new projection of $3.3 million. The adjustment reflects an overall increase in contractual class enrollment, largely in after school enrichment classes and sports camps, requiring an increase in contractual expenses as well. In the Parks Division, a more effective method of collecting field use fees has resulted in more timely and higher collections of park services fees, and the budget projection for these fees can be increased in the current fiscal year by $40,000. This revenue increase will be somewhat offset by a slight reduction in protected tree application fees. The current year-to-date pace of these applications is much slower than in the previous year, and indicates a $10,000 reduction in these fees from the amount projected in the adopted budget. A significant adjustment is recommended to the General Fund revenue projections for the Police Department. The adjustment is an increase in reimbursement revenues, which serves to offset the overtime cost of providing the "special police services' ($262,500) for the Apple Store as well as the department's assistance with the Kincade Fire in Sonoma County ($14,000). Other Revenues — The City receives other miscellaneous revenues from time to time. The budget for these miscellaneous revenues includes unclaimed property from the State, rebates, miscellaneous reimbursements, and refunds of prior -year expenses. Such amounts average about $30,000 annually, and there is no indication that this revenue category will need adjustment in the current fiscal year. 49 2019-20 Mid -Year Report March 11, 2020 City of Burlingame FY 2019-20 Mid -year Report Attachment B — General Fund Expenditures The following table shows the FY 2019-20 mid -year assessment of departmental (operating) General Fund expenditures: CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES By General Fund Program General Government Public Safety Central County Fire (Burling Police & Dispatch Public Works Community Development Leisure & Culture Aquatic Center Library Parks & Recreation Total Expenditures FY19-20 FY19-20 FY19-20 FY17-18 FY18-19 Current Midyear Midyear Adjustment Actuals Actuals Budget Projection Amendment Up (Down) % $ 5,132,958 $ 5,513,693 $ 6,580,069 $ 6,729,099 $ 149,030 2.3% 10,694,035 11,042,679 11,782,359 11,792,359 10,000 0.1% 15,719,783 16,715,751 17,554,148 17,907,348 353,200 2.0% 5,645,705 5,934,117 6,352,940 6,533,410 180,470 2.8% 1,799,124 1,709,736 2,019,157 2,189,507 170,350 8.4% 439,627 267,212 309,000 309,000 - 0.0% 5,065,272 5,348,120 5,740,951 5,863,351 122,400 2.1% 9,140,754 9,231,799 9,948,312 10,438,457 490,145 4.9% $ 53,637,258 $ 55,763,107 $ 60,286,936 $ 61,762,531 $ 1,475,595 2.4% Although some 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 2019-20 budget was adopted. CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY19-20 FY19-20 FY19-20 FY17-18 FY18-19 Current Midyear Midyear Adjustment Actuals Actuals Budget Projection Amendment Up (Down) % By Expense Categories Salaries & Wages $ 17,325,633 $ 18,005,210 $ 19,667,799 $ 20,207,319 $ 539,520 2.7% Benefits 10,281,413 10,936,641 12,260,661 12,648,341 387,680 3.2% Operating Costs 21,733,221 22,512,011 23,969,724 24,478,119 508,395 2.1% Internal Services 4,124,377 4,177,333 4,170,252 4,170,252 - 0.0% Capital Outlay 172,614 131,913 218,500 258,500 40,000 18.3% Total Expenditures $ 53,637,258 $ 55,763,107 $ 60,286,936 $ 61,762,531 $ 1,475,595 2.4% General Fund Personnel Costs The challenge of any public sector agency is to provide competitive salary and benefit packages in order to recruit and retain quality talent, while keeping the cost of providing these packages at a reasonable and sustainable level. Negotiated or imposed contracts in years since the recession have resulted in significant savings and have assisted in achieving structural benefit changes that will help control future employee benefit costs. For example, Burlingame employees pay a portion of the employer's retirement rate in addition to the employees' rate, as well as a larger 50 2019-20 Mid -Year Report March 11, 2020 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. Still, 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 in future operating budgets. All these factors are considered in the five-year forecast. In the current more favorable economic environment, compensation increases are anticipated to keep up with cost -of -living indexes. However, the very tight labor market in the Bay Area has required public agencies to compete with the private sector for manpower. As the employment needs of the City grow, management strives to attract, retain, and develop a highly skilled workforce to meet the City Council's goals. In a February 18, 2020 staff report to the Council, changes in personnel/positions were requested due to the impact of several concurrent dynamics in the workplace. The effect of these changes on the current fiscal year, as well as previously authorized personnel additions, are included in the Mid -year Budget Amendment, and are summarized by department, below. Within the City Manager's Office, both the Assistant to the City Manager and the Sustainability Coordinator positions (previously casual non-benefitted positions) have been reclassified as regular part-time employees, eligible for the same pro -rated benefits as other regular part-time employees. As a result, personnel costs of the department will increase approximately $12,000 in the current fiscal year. The need to keep up with the service and regulatory demands of a growing City workforce, while concurrently maintaining successful recruitment, onboarding, safety, development, and retention programs and benefits, has resulted in a heavy workload for the lean Human Resources Department. Especially in this time of transition to the Human Capital Management software modules within the Tyler Munis® Enterprise Resource Planning (ERP) system, an additional position (Human Resources Analyst II) is needed. The position will add approximately $41,000 to the department's employee costs in the remainder of fiscal year 2019-20. Earlier in the fiscal year a staff vacancy occurred in the Office Assistant II position that supported both the Finance and City Clerk's departments equally. Upon a critical evaluation of the position and the needs of both departments, staff requested and the City Council approved the addition of an Administrative Assistant, allocating the position 80 percent for the City Clerk's Office and 20 percent for the Finance Department. The Administrative Assistant was recruited and started employment in October. Subsequently, the City Council approved the addition of a Management Analyst position for the Finance Department. The Management Analyst will begin employment in late March. As a result, personnel costs within the City Clerk's Office for the current fiscal year will increase approximately $20,000; the net increase in cost for Finance is approximately $16,000. (Because the cost of the original Office Assistant position was allocated in part to the IT/Administration Internal Service Fund, the General Fund cost in Finance will increase $33,000, and the IT/Administration Fund will experience savings of $17,000). In October 2019, the City Council authorized the deletion of one vacant Tree Worker position and the addition of one Tree Leadworker Position in the Parks Division so as to provide more effective 51 2019-20 Mid -Year Report March 11, 2020 supervision in the field. However, the added position has just recently been permanently filled, and budgetary savings from the vacancy should offset any fiscal impact in the current fiscal year. The only personnel cost budget adjustment needed in the Parks & Recreation Department is the cost increase associated with part-time staff. The Parks Division has been utilizing additional part-time employees to help with an increased workload while simultaneously experiencing staff absences due to workers' compensation incidents. The current part-time budget for the Division is $120,000, but about $170,000 of costs are projected for the current fiscal year. In the Planning Division of the Community Development Department, a full time Senior Planner position is being added to replace a 40-hour temporary staff position of the same title. The cost for the remainder of the current fiscal year is approximately $32,000. In addition, the .75 FTE Economic Development Specialist will assume Housing duties, resulting in a full FTE for this position, at an added current fiscal year cost of $14,000. And finally, one FTE Associate Planner is being added to the Planning Division. The additional $40,000 personnel cost for the remainder of the fiscal year will be largely offset by a reduction in contractual labor. An increase of two FTE positions in the Building Division is the result of the elimination of contractor hours in the areas of permits, plan checking, and inspection. As all the costs associated with the Building Division are supported through user fees (as opposed to the General Fund), these changes are discussed in the section of this report related to the Building Enterprise Fund. Personnel cost increases in the Police Department for fiscal year 2019-20 are limited to Police and Dispatch Service overtime needs, as opposed to staffing changes. The Police Department's budget for overtime wages will increase due to the additional detail provided on Burlingame Avenue. An agreement with the Apple Store provides for a reimbursement of this cost. The estimated cost to cover these additional services from the end of November through the end of the current fiscal year is $262,500. In addition, the department also spent $14,000 in unanticipated overtime sending officers to the Kincade Fire in Sonoma County. The costs of this mutual -aid assignment will also be reimbursed, by the Sonoma County Office of Emergency Services. Both reimbursements are reflected as an offsetting increase to the General Fund revenue budget in the category of charges for services. In addition, the department has experienced a staffing shortage when a dispatcher resigned during training early in the fiscal year. Although a replacement has been hired, training will not be complete until after the fiscal year ends. The estimated cost of additional overtime to maintain coverage during the staff shortage is $60,000. Several major transportation projects that will have substantial impacts to the City, coupled with a significant backlog of traffic calming projects, prompted the addition of a Program Manager position in the Public Works Department, to be dedicated to transportation and traffic programs. The additional position will increase current -year personnel costs in the department by approximately $50,000. 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 for vacancies have been made on a City-wide basis. 52 2019-20 Mid -Year Report March 11, 2020 It should also be noted that most health plan rate increases effective January 1, 2020 were not as severe as anticipated. The rate increases for the plans most utilized by the City's active employees averaged less than 1 percent, though the highest rate increase incurred was16.15 percent. On the whole, a 5% increase was anticipated for the last six months of the year. For this reason, there should be some minor savings in this benefit line item for most departments. Due to the small impact overall, no adjustment is being made to the departmental budgets for the current fiscal year. But the new rates have been considered in the five-year forecast. The retroactive payments to the HRA accounts for employees in the retiree health Tier 3 (those hired after November 2011), which affected all operating funds, requires a $298,600 increase to employee benefits in the General Fund. Note that personnel costs (and total operating expenditures) for the General Fund have (since FY 2014-15) included contributions to the irrevocable trust fund established in October 2013 for the purpose of funding the City's retiree medical benefit obligations (OPEB). The full costs of these past and current obligations are now reflected in the departmental budgets. As best practices would dictate, the City is committed to contributing the annual required contribution to the trust fund in both good and bad financial times, using conservative, realistic assumptions that are adjusted based on bi-annual actuarial reports specific to the City's program and its participants. Unlike pension liabilities, the largest portion of the City's OPEB obligations is attributable to benefits that are no longer offered to new employees. It can therefore be considered a "closed program", and is less susceptible to volatile swings in annual contributions. Pension costs (amounts sent directly to CaIPERS) for the General Fund were projected to increase by 14.8 percent in FY 2019-20 and account for the largest increase in year -over -year personnel costs. Only minor changes are proposed to the current —year budget for pension expense; these are to provide for the new positions added, largely in the last quarter of the fiscal year. Note that amounts deposited to the City's § 115 trust fund to fund future pension costs are not included as budgetary expenditures. Trust fund amounts are shown only as a restriction of fund balance. General Fund Non -personnel Appropriation Adjustments Total General Fund expenditures increased 2.7 percent ($1.6 million) in the FY 2019-20 budget (not including contributions to the pension trust fund) as compared with the prior year's adjusted budget. The increase in the operating budget was largely due to an increase in the cost of wages and benefits of full-time, part-time, and seasonal employees, as well as increased pension costs. Note that debt service levels were kept fairly level with prior years in anticipation of a new debt issuance for the Community Center construction project in fiscal year 2019-20. With this mid -year analysis, a fairly significant increase in the operating expenditures budget (nearly $1.5 million) is recommended for the FY 2019-20 General Fund appropriations, largely due to unanticipated operational needs as described by department, below. Administrative Services — The budget for this group of departments supplies the resources that support services often referred to as "general government" activities. Although each department is bound by a separate budget, recommended adjustments are fairly minor, and they are combined in this report to give an overall context to the administrative costs of the City. 53 2019-20 Mid -Year Report March 11, 2020 The City Council's budget falls within this group, and a $15,000 increase is needed to fund the $15,000 in matching funds for holiday decorations on Burlingame Avenue and Broadway. The Finance Department anticipates the procurement of an additional workstation for the newly added Management Analyst position, and the Human Resources Department is preparing that office for its new Human Resources Analyst II position. $3,000 is proposed in each of these departments for the additional computer equipment that will be needed. Emergency Preparedness — The San Mateo County Office of Emergency Services (OES) provides essential services that prepare and assist San Mateo County agencies in the event of disaster and other emergencies. The OES is partially funded through an agreement between the 20 incorporated cities and the County of San Mateo. The cities contribute money to fund a joint powers authority (JPA) based upon a formula that takes into account the population and assessed property value of each city. For the current fiscal year, the JPA's total cost share increased 6.6 percent from the prior year, but due to the allocation formula, Burlingame's share increased by nearly $10,000. The increase was not anticipated in the Emergency Preparedness Budget as adopted last June. Library - The Library will be moving its operating software from hardware servers to the Cloud via contract with the Peninsula Library System The move will allow broader (anytime/anywhere) access to internet services, and will eliminate the need for dedicated hardware at each location, decreasing hardware costs and the number of machines requiring support from the City's library staff. The service provides a 99.99% up -time guarantee, which is very important for some Library clients who have no access to computers or internet at home. The upfront cost of the service implementation is $6,500. An increase in the library's capital outlay expense is needed to replace seven self -check machines. The machines are heavily used and save the City in staff time, while providing efficient customer service. The current machines have been used almost constantly since their installation in fiscal year 2012-13. By coordinating the purchase with the Redwood City Library, the City has the opportunity to receive bulk discount pricing. The approximate cost of the machines for Burlingame is $54,000. Parks and Recreation — In addition to the need for increased part-time staff because of all the park construction work currently underway, the Park Division expects a higher amount of rental costs (an additional $2,000) for port -a -potties and associated equipment/supplies. Water consumption for the parks over the past 12 months has jumped significantly, requiring a $140,000 increase in the Division's projected water expense budget. Several small adjustments to the 2019-20 fiscal year budget are proposed for the Recreation Division due to the varying registration numbers within the department's many class/program offerings. For example, contractual services for the Division's most popular programs (especially After School Enrichment classes and Sports Camps) need to be boosted due to increased enrollment. An increase of $233,600 is proposed to fund the costs of contractual instructors/programs services needed. However, this additional expense is more than offset by the estimated higher fee revenues to be generated ($304,000) from the programs. (A total of $3.3 million in the Recreation Division's fee revenue is expected in the current fiscal year.) 54 2019-20 Mid -Year Report March 11, 2020 Community Development Department —A $44,000 increase is needed in the Planning Division's contract services budget to fund several different consultant contracts: an additional $12,000 was approved by the Council in October to cover additional consultant work to complete the analysis of sea level rise adaptation strategies; $12,000 is proposed to study the possibility of office uses in ground floor spaces behind retail stores within the Burlingame Avenue Commercial District; and an estimated $20,000 is needed for a consultant to assist in the preparation of a short-term rental ordinance and program. A decrease in contract expense ($38,250) will be experienced due to the number of contractor hours associated with the addition of an Associate Planner position (described in personnel cost adjustments). A $50,000 increase is needed to fund the Economic Development Division's Facade Improvement Grant Program in the current fiscal year. Last year, the Economic Development Subcommittee developed a fagade improvement grant program to provide assistance with improving the appearance of storefronts on Broadway. Over the course of several meetings, the subcommittee provided staff with direction to prepare the various elements of a facade improvement grant program, including project guidelines, and the application process. In May 2019, staff presented the draft program to the full City Council, which then approved the Broadway Facade Improvement Pilot Program to encourage more shoppers and residents to the Broadway commercial district. The timing of the roll -out of the program was unknown at the time the fiscal year 2019-20 Budget was being developed, but the application process is now underway, and runs until March 15, 2020. The pilot program calls for a maximum of $10,000 in grant funding for any individual project, with a total of up to $50,000 allocated for the program. A $50,000 budget has been added within the Community Development Budget so the grant program can proceed in the current fiscal year. Finally, an additional laptop computer ($2,500) is needed to allow for flexible hours for the Senior Planner, who will be working offsite two days per week. Public Works — The Public Works Department has contracted in two areas for work that was not anticipated during the 2019-20 fiscal year budget development: Early in the fiscal year, the paint and sign shop experienced a very low response to its summer crew recruitment, and as a result was able to utilize only one temporary employee for curb painting. In addition, the shop's leadworker has been on modified duty for a number of months due to a job - related injury. The addition to the department's contractual services budget ($25,000) is needed to catch up on the backlog in curb painting and street markings. City staff is being utilized to conduct inspections at private development projects that have installed stormwater treatment facilities. These inspections were previously conducted by Veolia staff, but personnel transitions at the plant have caused a backlog in these inspections. A current contract with CSG has been expanded ($12,000) to include cross -training staff to ensure that these inspections are done properly. 55 2019-20 Mid -Year Report March 11, 2020 City of Burlingame FY 2019-20 Mid -year Report Attachment C - General Fund Five -Year Forecast (Revised) Forecast Forecast Forecast Forecast Forecast Budget Revenue Categories 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Property Tax 22,840,100 24,175,000 25,269,000 26,417,000 27,623,000 28,889,000 Sales Tax 16,860,000 17,113,000 17,284,000 17,457,000 17,457,000 17,457,000 Transient Occupancy Tax 28,200,000 28,700,000 28,987,000 29,277,000 29,570,000 29,866,000 Other Taxes - Franchise Tax 1,672,000 1,728,000 1,762,000 1,778,000 1,795,000 1,812,000 Other Taxes - Business Licenses 985,000 995,000 1,005,000 1,015,000 1,025,000 1,035,000 Other Taxes -Transfer Tax 420,000 441,000 463,000 486,000 510,000 536,000 Other Taxes -State HOPTR 60,000 60,000 60,000 61,000 62,000 63,000 Licenses & Permits 79,500 80,000 80,000 80,000 80,000 80,000 Fines, Forfeitures & Penalties 878,000 878,000 878,000 878,000 878,000 878,000 Use of Money & Property 130,000 130,000 130,000 130,000 130,000 130,000 Charges for Services 6,388,000 6,260,000 6,260,000 6,448,000 6,641,000 6,840,000 Other Revenue 30,000 30,000 30,000 30,000 30,000 30,000 Federal & State Subventions 140,000 140,000 140,000 140,000 140,000 140,000 Interest Income 2,400,000 2,424,000 2,485,000 2,547,000 2,611,000 2,676,000 Total Revenues 81,082,600 83,154,000 84,833,000 86,744,000 88,552,000 90,432,000 Expenditure Categories Salaries & Wages (20,207,319) (20,910,000) (21,537,000) (22,183,000) (22,849,000) (23,535,000) Benefits (12,648,341) (12,752,000) (13,591,000) (14,369,000) (14,972,000) (15,604,000) Operating Costs (24,478,119) (25,488,000) (26,430,000) (27,412,000) (28,435,000) (29,502,000) I nterna I Services (4,170,252) (4,379,000) (4,561,000) (4,738,000) (4,921,000) (5,098,000) Capital Outlay (258,500) (250,000) (258,000) (266,000) (274,000) (282,000) Total Expenditures (61,762,531) (63,779,000) (66,377,000) (68,968,000) (71,451,000) (74,021,000) Operating Revenue 19,320,069 19,375,000 18,456,000 17,776,000 17,101,000 16,411,000 Transfer In (Out) Transfer to CIP Project Funds (9,185,000) (9,610,000) (10,091,000) (10,596,000) (11,126,000) (11,682,000) Transferto Capital Investment (6,500,000) (3,000,000) (3,000,000) (3,000,000) (3,000,000) (3,000,000) Transferto Debt Service Fund (4,708,763) (4,723,100) (3,575,700) (3,600,800) (3,623,500) (3,651,060) Transfers In (Out) - otherfunds 2,400,319 2,288,200 1,376,100 1,403,900 1,595,500 1,777,060 Change in Fund Balance before Adjustments 1,326,625 4,330,100 3,16S,400 1,983,100 947,000 (145,000) Adjustments Pension Trust 115 (2,957,000) (1,744,000) (1,337,000) (864,000) (517,000) (166,000) Net Surplus/ (Deficit) (1,630,375) 2,586,100 1,828,400 1,119,100 430,000 (311,000) 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Fund Balance, beginning of year $ 49,167,751 $ 50,494,376 $ 54,824,476 $ 57,989,876 $ 59,972,976 $ 60,919,976 Fund Balance, end of year $ 50,494,376 $ 54,824,476 $ 57,989,876 $ 59,972,976 $ 60,919,976 $ 60,774,976 Econ Stability Reserve 19,460,000 19,957,000 20,360,000 20,819,000 21,252,000 21,704,000 Catastrophic Reserve 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Contingency Reserve 500,000 500,000 500,000 500,000 500,000 500,000 PARS restricted cash 10,416,442 12,160,442 13,497,442 14,361,442 14,878,442 15,044,442 Unassigned Fund Balance 18,117,934 20,207,034 21,632,434 22,292,534 22,289,534 21,526,534 56 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME APPROVING ADJUSTMENTS TO ESTIMATED REVENUES AND APPROPRIATIONS FOR THE FISCAL YEAR 2019-20 BUDGET RESOLVED, by the CITY COUNCIL of the City of Burlingame, California which APPROVES and AUTHORIZES the Finance Director & Treasurer to amend the current Fiscal Year 2019-20 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 (429,900) Sales and Use Tax 2,100,000 Transient Occupancy Tax (500,000) Other Taxes - Franchise Tax (52,000) Other Taxes - Business Licenses (35,000) Charges for Services 898,000 Fines, Forfeitures & Penalties (100,000) Interest Income 430,000 Other Funds: Gas Tax - Highway User's Tax (23,300) Gas Tax - Road Repair & Accountability Act 57,500 San Mateo County Measure W 350,000 Water - Utility Sales 400,000 Water - Taps for New Meters, Inspection & Misc. Revenue 28,000 Sewer - Hillsborough Sewer Charges 58,000 Sewer - Connection Fees 150,000 Parking Enterprise - Parking Fees (60,000) Parking Enterprise - Monthly Parking Permits (40,000) Parking Enterprise - EV Charging Revenues 5,000 Building Enterprise - Permit Fees 724,000 Building Enterprise - Building Plan Check Fees 300,000 Building Enterprise - Imaging Fees 17,000 Interest Income (Various) (486,000) Amendments to Appropriations: General Fund: City Council 15,000 City Manager 11,780 City Clerk 19,800 Finance 58,200 Human Resources 44,250 Police & Dispatch 349,300 Parking Enforcement 3,900 Emergency Preparedness 10,000 Engineering 129,470 Streets and Storm Drainage 51,000 Planning 170,350 Recreation 275,545 Parks 214,600 Library 122,400 Other Funds: Debt Service Fund for the 2019 Community Center Bonds 2,308,338 Water Enterprise Fund 16,100 Sewer Enterprise Fund 39,300 Parking Enterprise Fund 25,000 Solid Waste Enterprise Fund 31,500 Building Enterprise Fund 741,600 Workers Comp Service Fund (20,000) Fleet/Equipment Service Fund 3,700 IT/Admin Service Fund (9,500) Revisions to Transfers In / Out: Transfer Out from General Fund to CIP Fund 20,000 Transfer Out from Parking Enterprise Fund to CIP Fund 490,320 Transfer In to Capital Projects Fund for: Skyline Park (85460) 20,000 Village at Burlingame (Lot F & N) (85550) 430,320 Pilot Project for Wayfinding - Parking (84000) 60,000 Amendments to Capital Improvement Project Budgets: Parks & Trees Capital Improvement Projects: Skyline Park (85460) 20,000 Bay Trail Fitness Equipment (85440) 20,000 Washington Park Ballfield Lighting (84050) 25,000 Citywide Playgrounds - Murray (85400) 317,329 Murray Field Renovation (84130) (242,847) Murray Lights Retrofits (83360) (25,003) Paloma Park Renovation (84940) (49,479) Parking Capital Improvement Projects: Village at Burlingame (Lot F & N) (85550) 430,320 Pilot Project for Wayfinding - Parking (84000) 60,000 Emily Beach, Mayor I, MEAGHAN HASSELL-SHEARER, City Clerk of the City of Burlingame, certify that the foregoing Resolution was adopted at a special meeting of the City Council held on the 11th day of March, 2020 and was adopted thereafter by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Meaghan Hassel -Shearer, City Clerk c�ry �r i t♦ RLI '� off' 9ooan'� To: Date: Honorable Mayor and City Council March 11, 2020 AGENDA NO: 5b MEETING DATE: March 11, 2020 From: Syed Murtuza, Director of Public Works — (650) 558-7230 Margaret Glomstad, Director of Parks and Recreation — (650) 558-7307 Art Morimoto, Assistant Director of Public Works — (650) 558-7246 Andrew Wong, Senior Civil Engineer — (650) 558-7236 Subject: Review of Draft FY 2020-21 General Fund, Parking Enterprise Fund, Gas Tax, Measure A, Measure I, Measure M, and Senate Bill (SB 1) Funded Capital Improvement Program RECOMMENDATION Staff recommends that the City Council review the proposed draft FY 2020-21 General Fund, Parking Enterprise Fund, Gas Tax, Measure A, Measure I, Measure M, and SB 1 funded Capital Improvement Program (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 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, Parking Enterprise Fund, Gas Tax, Measure A, Measure I, Measure M, and SB 1 funded projects. Staff will present the CIP for the Storm Drainage System, Water System, Sanitary Sewer System, and Waste Water Treatment Plant at a future meeting as part of the overall budget presentation. DISCUSSION GENERAL FUND CIP In developing the FY 2020-21 CIP, staff conducted a needs assessment of various infrastructure owned by the City and identified $7.61 M in General Fund projects; $0.85M in Parking Enterprise funded projects; $1.56M in Gas Tax, SB 1, and Measure M funded projects; and $2.OM in Measure I projects, for a total of $12.020M for next year's CIP. Below is a summary table of each of the CIP areas with project descriptions and costs. Staff will provide the City Council with a detailed presentation of these projects at the March 11, 2020 Mid - Year Budget Study Session. 1 FY 2020-21 General Fund, Gas Tax, Measure A, Measure 1, and Measure M funded C/P March 11, 2020 PARKS AND RECREATION IMPROVEMENTS ($3,255,000) The Field Renovations and Americans with Disabilities Act (ADA) Improvements at Cuernavaca Park project consists of improvements to the infield, outfield, dugouts, irrigation system, and drainage facilities. The project will address ADA deficiencies at the field. Additionally, funds are requested for improvements at Bayside Park, including parking lot resurfacing improvements, EV charging stations, and addressing ADA issues. The remaining projects on the list primarily consist of infrastructure maintenance projects based on the needs assessment and replacement schedule as identified in the department's work program. In addition, the list includes the continuation of annual funding in the amount of $200,000 and $150,000 for future replacement of synthetic turf at Burlingame School District facilities (BSD) and Murray Field, respectively. BUILDING FACILITIES IMPROVEMENTS ($1,225,000) 2 FY 2020-21 General Fund, Gas Tax, Measure A, Measure 1, and Measure M funded C1P March 11, 2020 3 Fire Station 35 Traffic Signal Upgrades T-0 22- v 4 Roof Repair and Replacement Plans - Depot, Police Station, Corp Yard, City $100 Hall, Fire Stations 34 and 36 5 Facilities ADA Improvements $100 6 Facilities CIP Program Management $50 Total: $1,225 The proposed HVAC upgrades and (EMS) Energy Management System projects at the Main Library and Corporation Yard consist of replacing out of date HVAC equipment that is beyond its expected service life of 15-20 years. The improvements will optimize energy efficiency in the buildings. Funding is also requested to upgrade the traffic signal warning beacon at Fire Station 35. Additionally, funding to develop plans and specifications for roof repair/replacement of various City facilities is proposed. Furthermore, funding is requested for ADA improvements as part of the City's proactive effort to comply with ADA regulations, as well as consultant assistance in implementing the CIP program. BIKE, PEDESTRIAN AND TRAFFIC IMPROVEMENTS ($4,130,000) Project Description Requests thousands) 1 Sidewalk Repair Program and ADA Improvements (General Fund - $400k, Measure I - $1,000k) _ . $1 400 2 Lyon Hoag Neighborhood Traffic Calming - Phase 1 Implementation I $950 3 Bicycle and Pedestrian Master Plan Improvements $500 4 Oak Grove/Carolan Avenue Traffic Signal Improvements $500 5 City Hall Traffic Improvements- Roundabout Concepts $200 6 City-wide Traffic Signal Upgrade $200 7 Neighborhood Traffic Calming Improvements $100 8 Pedestrian Improvements (signage and striping) $100 9 El Camino Real Consultant Assistance $100 10 Traffic and Transportation Studies (On -call Outside Consultant Services) $80 Total: T $4,130 The CIP includes $400,000 in new General Fund and $1 M from Measure I, for a total of $1.4M for next fiscal year, for the sidewalk program and associated ADA improvements. The attached map provides the general location of proposed sidewalk repairs and ADA improvements in the city. 3 FY 2020-21 General Fund, Gas Tax, Measure A, Measure 1, and Measure M funded CIP March 11, 2020 $950,000 is requested to implement the Phase 1 Improvements identified in the Lyon Hoag and Adjacent Neighborhoods Traffic Calming Studies. The draft recommendations are being finalized and will be presented to Council in April 2020. Additionally, $500,000 in preliminary funding is being requested for anticipated improvements identified in the Bicycle and Pedestrian Master Plan. The Bicycle and Pedestrian Master Plan is scheduled to be finalized at the end of summer 2020, at which time the City Council may elect to appropriate additional funds for recommended improvements. Funding in the amount of $500,000 is being requested to supplement the existing Oak Grove/Carolan Avenue intersection Traffic Signal Improvements to bring the total project budget to $1,000,000. Additionally, $200,000 is requested for preliminary conceptual design development and public outreach for City Hall traffic improvements, including the consideration of a roundabout. Traffic signal upgrades are proposed to implement camera detection upgrades for vehicles and bicycles at certain priority locations. Additionally, next year's work program includes funding for continued implementation of pedestrian and traffic calming improvements identified in response to studies or investigations that arise throughout the year. Funding is also proposed for consultant assistance related to the Caltrans El Camino Real Roadway Rehabilitation Project and ADA improvements, as well as citywide traffic studies initiated through public requests. It should be noted that the Broadway Grade Separation Project is not included in the list above for the upcoming fiscal year as $19.8M is currently available to complete the final engineering design. However, as the project moves forward, staff estimates that the City will need to contribute approximately $15M as part of the local match for construction. The total project cost is estimated at approximately $327M, of which approximately $26M has been previously funded through a combination of Measure A grant and City funds. The City has applied for a $125M Federal INFRA (Infrastructure for Rebuilding America) grant and has been working closely with regional and state agencies to secure the remaining funding. PARKING ENTERPRISE FUNDED PROJECTS Parking Structure/Lot N Improvements - Pay Stations, Dynamic Signage, EV $350 Charging, and Security System , 2 Downtown Parking Lot Resurfacing $500 Total: $850 Funding is requested for enhancements to the new public parking garage at Lot N that are not included in the project development agreement, such as pay stations, EV charging infrastructure, signage, and security. Additionally, funds are requested for resurfacing treatments and ancillary improvements in downtown parking lots as needed. 4 FY 2020-21 General Fund, Gas Tax, Measure A, Measure 1, and Measure M funded CIP March 11, 2020 GAS TAX, SB 1, MEASURE A, MEASURE 1, AND MEASURE M FUNDED PROJECTS Based on the condition assessment of 84 miles of existing street infrastructure and the recommendations from the Street Pavement Maintenance Software Program, staff is proposing a total of $2.56M of CIP funding from a combination of Gas Tax, Measure A, Measure I, Measure M, and SB 1 funds for next year's street repairs and resurfacing program as follows: • Summit Drive — Burlingview Drive to Belvedere Court • Bayview Place — Airport Boulevard to End • Edwards Court — Rollins Road to End • Guittard Road — Rollins Road to End • Ray Drive — Quesada Way to Davis Drive • Ray Court — Ray Drive to End • Cabrillo Avenue — Adeline Drive to End • Cortez Avenue — Adeline Drive to End • Concord Way — Dwight Road to Channing Road • Alpine Avenue — Carolan Avenue to Morrell Avenue • Plymouth Way — Dwight Road to Bloomfield Road • Balboa Avenue — Ray Drive to Adeline Drive • Easton Drive — Vancouver Avenue to Benito Drive • Loyola Drive — Frontera Way to Trousdale Drive • Vancouver Avenue — Adeline Drive to End • Bernal Avenue — Adeline Drive to Devereux Drive • Cananea Avenue — Alturas Drive to Los Montes Drive • Hunt Drive — Trousdale Drive to Rivera Drive The above list is tentative and subject to change depending on the availability of funds and construction costs. Of the total $2.56M proposed for next year, $1 M is from Measure I, and the rest is from a combination of Measure A, Gas Tax, Measure M, and SB 1 funds. FISCAL IMPACT The estimated cost of the proposed CIP program as identified in this staff report is $12.020M as follows: • General Fund $ 7,610,000 • Gas Tax, Measure A, Measure M, and SB 1 $ 1,560,000 • Measure 1 ($1 M for sidewalks & $1 M for streets) $ 2,000,000 • Parking Enterprise Fund $ 850,000 Total $12,020,000 Exhibit: • PowerPoint Presentation 5 MARCH 11, 2020 Mid -Year Budget Study Session FY 2020-2021 Draft Capital Improvement Program �AJ !`''lie At Proposed CIP Funding General Fund Projects Parking Enterprise Fund Projects Gas Tax & Measure A, I, & M Projects Summary Council Direction & Feedback $1,225,000 Building Facilities $3,255-000 Parks & $4,130,000 Bicycle/Pedestrian & Traffic Improvements (Includes $1M Measure I Funds) FY 2020m2021 General Fund CIP Requests Total of Requests: $8,610,000 (Includes $1M in Measure I Funds) ROLLINS ROAD Oy �OV GQ OP �J$e J0 P J Traffic signal upgrade locations ---------------------- ��'Y@� ", $��r� � y�G•g lit} -""-.-----"."_.._--- Rky 4 vim' iMrero*,' _,•Y� 3 .� � o+.�.'K�'�4 � ' tl ` 'tea, "f �`�*r`."'^�,ov�� , r�'Ji� °��p�' f� 'b }, T` `� • ,4j "'•` ar'OM 'z tea, • e' �`�� - u � '� .,f �` E,s & +�+ e "� • ~,'�'T.�"F .>t� .rt`M .,��•'n "'eH l �I.� "E'er ' :a�`'�o "� y � ,''�`'� �� � � : ,� `�,�� `.rwR,E , � - � � �.,.,,��s�Ov��; �+��,� �� a' �cy� � •19,� � S 011 S k z 5 •'" f ��,�Rw �� f,�" �,c�+^' `� �� 'fir'^ �`"-,,:•,�" ��' �'A �� • Project design is at 35% completion • Total project cost $327M ($26M funded) • City applied for $125M from federal INFRA Grant • City is working with outside agencies to secure funding • City local match estimated $15M -----_ __ • Construction to begin in 2023(provided &ROAMAY B�NE funding availability) Council Direction ' A & Feedback FY2O2O 2O2lDraft Capital |rnprovernent Program 14. =m�m�mmoNU�w' ' , '^,v