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HomeMy WebLinkAboutAgenda Packet - CC - 2020.05.13CITY v 0 ticow � � rPORATED Wednesday, May 13, 2020 City of Burlingame Meeting Agenda - Final City Council 6:30 PM Budget Study Session BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLINGAME, CA 94010 On March 17, 2020, the Governor issued Executive Order N-29-20 suspending certain provisions of the Ralph M. Brown Act in order to allow for local legislative bodies to conduct their meetings telephonically or by other electronic means. Pursuant to the Shelter -in -Place Order issued by the San Mateo County Health Officer on March 16, 2020 (which was then extended on March 31, 2020, and further extended on April 29, 2020), the statewide Shelter -in -Place Order issued by the Governor in Executive Order N-33-20 on March 19, 2020, and the CDC's social distancing guidelines which discourage large public gatherings, the Council Chambers will not be open to the public for the May 13, 2020 Burlingame City Council meeting. Members of the public may view the meeting by logging into the Zoom meeting listed below. Additionally, the meeting will be streamed live on Youtube and uploaded to the City's website after the meeting. Members of the public may provide written comments by email to publiccomment@burlingame.org. Emailed comments should include the specific agenda item on which you are commenting, or note that your comment concerns an item that is not on the agenda or is on the Consent Calendar. The length of the emailed comment should be commensurate with the three minutes customarily allowed for verbal comments, which is approximately 250-300 words. To ensure that your comment is received and read to the City Council for the appropriate agenda item, please submit your email no later than 5:00 p.m. on May 13, 2020. The City will make every effort to read emails received after that time, but cannot guarantee such emails will be read into the record. Any emails received after the 5:00 p.m. deadline which are not read into the record will be provided to the City Council after the meeting. All voters are unanimous unless separately noted for the record. Online City of Burlingame Page 1 Printed on 51812020 City Council Meeting Agenda - Final May 13, 2020 1. CALL TO ORDER - 6:30 p.m. - Online To Join the Zoom Meeting (Note that the link below doesn't look like a hyperlink, but it is) https://us02web.zoom.us/j/82218954356? pwd=Q05HeGdNRXJMaVlJandtOU9BYi9NUT09 Meeting ID: 822 1895 4356 Password: 982440 One tap mobile +16699006833„82218954356# US (San Jose) +12532158782„82218954356# US (Tacoma) Dial by your location +1 669 900 6833 US (San Jose) +1 253 215 8782 US (Tacoma) +1 346 248 7799 US (Houston) +1 312 626 6799 US (Chicago) +1 929 436 2866 US (New York) +1 301 715 8592 US (Germantown) Meeting ID: 822 1895 4356 Find your local number: https://us02web.zoom.us/u/kdXI61JN14 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 Revised Projections for the Remainder of the Fiscal Year Attachments: Staff Report Resolution City of Burlingame Page 2 Printed on 51812020 City Council Meeting Agenda - Final May 13, 2020 b. Study Session: Fiscal Year 2020-21 Budget Attachments: Staff Report Forecast Scenarios C. City Council Review of Draft FY 2020-21 Capital Improvement Proaram Attachments: Staff Report Presentation March 11, 2020 Staff Report 6. ADJOURNMENT Notice: Any attendees who require special assistance or a disability -related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the agenda, meeting notice, agenda packet, or other writings that may be distributed at the meeting, should contact Meaghan Hassel -Shearer, City Clerk by 10:00 a.m. on Wednesday, May 13, 2020 at 650-558-7203 or at mhasselshearer@burlingame.org. Notification in advance of the meeting w ill enable the City to make reasonable arrangements to ensure accessibility to this meeting, the materials related to it, and your ability to comment. NEXT CITY COUNCIL MEETING Regular City Council Meeting on May 18, 2020 VIEW REGULAR COUNCIL MEETING ONLINE AT www.burligname.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 via www.burlingame.org or by emailing the City Clerk at mhasselshearer@burlingame.org. If you are unable to obtain information via the City's website or through email, contact the City Clerk at 650-558-7203. City of Burlingame Page 3 Printed on 5/8/2020 BiFRL- 1NAGENDA NO: 5a STAFF REPORT MEETING DATE: May 13, 2020 To: Honorable Mayor and City Council Date: May 13, 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 Revised Projections for the Remainder of the Fiscal Year RECOMMENDATION Staff recommends that the City Council accept the Revised FY 2019-20 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 adjustments. BACKGROUND This report summarizes the City's most current fiscal status by providing an analysis of anticipated revenues and expenditures in comparison to the current adjusted budget for the 2019- 20 fiscal year. The FY 2019-20 Operating and Capital Budgets were last amended with the March 11, 2020 Mid -year Report. At that time, the effects of the COVID-19 pandemic were just recently being felt by the region's hotels. Although the Mid -year Report alluded to the possible impacts of the public health crisis on the travel industry and global economic growth as a whole, changes in the social and economic landscapes were happening too rapidly to include in staff's mid -year analysis. Now, revised forecasts incorporate data points that were not available when the Mid -year Report was developed. And because the impacts to the fourth quarter of the City's fiscal year are significant, revisions to the 2019-20 fiscal year operating and capital budgets are warranted. Not only is this revised financial picture of the current fiscal year vital to the development of solid operational and capital budgets for the upcoming 2020-21 fiscal year, but it also lays the groundwork for consideration of various long-term fiscal scenarios. As such, this update should help to inform future policy decisions regarding the deployment of City resources in the years to come. To the extent possible, staff has analyzed the budgetary impacts of federal, state, and county response to the global coronavirus outbreak on the City's revenues, particularly in the City's General Fund. Although City expenditures will also be impacted to some extent in the remaining months of the current fiscal year, amendments are only being proposed for severely impacted revenues. 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 part of the FY 2020-21 budget process. Again, having the latest projections reflected in the current budget allows decision makers to have greater confidence in the information provided 1 2019-20 Budget Revisions May 13, 2020 within the budget development framework. In addition, during this time of wide -spread economic uncertainty, 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 prior five-year financial forecast for the General Fund. Several forecast scenarios are provided to reflect varying rates of economic recovery and are presented with the FY2020-21 budget projections. These long-term scenarios will help decision makers establish an appraisal of fiscal sustainability beyond the current budget cycle. DISCUSSION Economic Conditions National Economy January 2020 marked the 127t" month of economic expansion following the end of the Great Recession in June 2009. The expansion was the longest on National Bureau of Economic Research record, which goes back to the 1850s. While the expansion had been long, both the economy's average annual growth rate and the typical workers' earnings gains had been relatively modest by the standards of earlier long expansions. Acknowledging that there is no "timeline" for economic expansions, Christopher Thornberg, founding partner of Beacon Economics, stated early in 2020 that there was "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." Since that time, however, a pandemic has proven to be the type of "large, rapid and sustained shock to the system" that defines a recession. The first quarter of 2020 was historic, both for markets and for the world at large, as a local outbreak in late 2019 of a previously unknown coronavirus in the Hubei Province of China morphed into a global pandemic. The disease caused by the virus, named COVID-19, has infected millions and led to tens of thousands of fatalities. In order to contain the virus and reduce the burden on healthcare systems, governments around the globe have closed down meaningful portions of their economies —imposing travel restrictions, cancelling social gatherings and events, shuttering non -essential businesses, and even locking down entire cities. These measures caused an abrupt turnaround in the nation's economy, and most economists agree that the U.S is now facing its biggest economic crisis since the Great Depression nearly a centurey ago. 2 2019-20 Budget Revisions May 13, 2020 COVID-19 Pandemic Spans the Globe and Is Still Growing Coronavirus Cases -CorRrmad Cases-Dlalh9-Rwoverkd 3AM 2,500k 2,0003c 1.Sook 1,000e Rank' Country 4 Cases # Deaths Death Rate 1 UwL—d States 8W.213 50,7015 �5_7yL 1 2 China 83,885 4,636 ■ 5.5% 3 .japan 12,368 328 � 2.7% d Germany 154.154 5.653 ' 3.7% 5 India 24.434 780 3.2% 6 Uni[ed Kingdom 144.681 19.564 7 France 167,70E 22.246 8 1101 142.99d 25,985 10 Canada ".509 2.W $A% 12 Sou[h Korea 10-708 240 2.2% BA 13 Spain 219.764 22.524 14 auetratia 6.667 76 1 1J% So09� $95k 15 Mexico 11,633 1,069 9.2% 20 Sxitzedand 28.677 t.576 ' S.6% 4� — 21-Jan 4-Fes 18-Feu 3-Mar 17-Mar 31-Mar 14-Apr 25 Man 88,194 S.574 L3% Swrm: Bb=bm data compiled horn Johns Hopkins Unrvetwky. Uw WwW Naane Organ¢aton, and opre. souses. 'By size of ecoramy. e0m4irs -- . --.::-- -.- 71 by IMF roe Staff's mid -year report charted U.S real gross domestic product increasing at an annual rate of 2.1 percent in the fourth quarter of 2019, marking the 23rd consecutive quarter of growth in GDP, and suggesting that the nation's economy was on steady footing. But while the first official estimate of real GDP growth in the first three months of 2020 won't be released prior to the drafting of this report, economists are now making dire predictions as to how much the economy will shrink in the second quarter. And these predictions change daily. The nonpartisan Congressional Budget Office (CBO) predicts that real GDP will show an 11.8 percent contraction in the second quarter of 2020, following a 0.9 percent (estimated) decrease in the first quarter. The CBO assessment was based on the sharp deterioration in the economic outlook resulting from the pandemic, but included the estimated effects of COVID-19 related federal legislation through April 24, 2020. WA 2019-20 Budget Revisions May 13, 2020 Real GDP: Percent change from preceding quarter 4 3 .. , . , , , 1 ■ , . , , -0.9 U 1F -1 41 Q2 03 Q4 01 Q2 Q3 Q4 Q1 Q2 Q3 Q4 M Q2 M Q4 -2 3 2D16 2017 2018 2019 2D2 Prole -4 -5 -6 -7 -8 -9 -10 -11 -12 Prior to the pandemic, many workers had received a significant increase in earnings, and a growing share of national income, due to competition for scarce labor resources. The mid -year report noted that the country was experiencing the highest labor force participation in four years, with the unemployment rate falling below 3.5 percent. 4.6 United States Unemployment Rate 3.7 3:7 36 3.6 Apr Z019 Jul Z019 Since then, federal expansion of existing unemployment insurance programs has made far more individuals eligible and provided greater benefits, encouraging Americans to shelter -at-home. As of the last full week of April, over 30 million Americans have filed for unemployment since President Trump declared a national emergency on March 13t", surpassing all of the 22.8 million jobs gained since the nation rebounded from the Great Recession. The United States has not seen this level of job loss since the Great Depression. Layoffs are mounting in nearly every sector as businesses have been forced to close in an effort to stem the spread of COVID-19. E 2019-20 Budget Revisions May 13, 2020 Initial Jobless Claims Surge to Record Highs Initial Jobless Claims 8,000 7,000 3/27/2020 6,867 ' 4/312020 6,000 6,615 w 5.000 26,453,000 4/10/2020 5,237 Total.Jnhless Claims since 4,000 the week ended March 20 14117/2020 4,427 r 3/2012020 ~ 3,000 3,307 2,000 Precious Peak during the all-time high Great Recession 1,000 0 1970 1975 1980 1985 Source: Bloomberg, as of 4124f2020. Data is seasonally adjusted. 1990 1995 2000 2005 2010 2015 2020 Every state has experienced job losses, with very few companies adding employees in substantial numbers. Because the coronavirus has drastically shifted the world's buying habits, only businesses that provide essential goods and food — particularly those that provide home delivery such as Walmart and Amazon — are able to hire some of the employees who have been furloughed or laid off in "non -essential" sectors of the economy. Consumer Confidence Index Jul 2019 Oct 2019 Jan 202D SOLIKE: TR461NGE Personal income fell 2 percent in March as workers received less compensation, and consumer spending plummeted 7.5 percent as households stayed home. The decline in consumer spending was driven by a large pullback in health care, due to the decision to put all but medically necessary procedures on hold. 5 2019-20 Budget Revisions May 13, 2020 Contributions to Real Consumer Spending SAAR Q4 19 to Q1 20 2019 2020 Avg ❑1 Percent change at annual rate: Personal consumption 2.68 -7,60 Health care 0_64 -3.28 Food and accommodations 0.14 -2.34 Recreation services 0.11 -1.47 Motor vehicles and parts 0.11 -1.39 Clothing and footwear 0.09 -1.13 Transportation services 0.11 -1.07 Other services 0.34 -0.34 Other durable goods 0.07 -0.22 Furnishings and durable household 0.11 -0.15 Gasoline and other energy goods -0.01 -0.13 Recreational goods and vehicles 0.33 0,00 Housing and utilities 0.18 0.12 Financial services and insurance 0.21) 0.24 Other nondurable goods 0.40 1.03 Food and beverages 0-14 1.64 With shelter -at-home restrictions in place, the University of Michigan's consumer sentiment index for the US was the lowest reading since December of 2011 due to the massive business closures and corresponding unemployment caused by the response to the coronavirus pandemic. Richard Curtin, chief economist for Surveys of Consumers, noted that "In the weeks ahead, as several states reopen their economies, more information will reach consumers about how reopening could cause a resurgence in coronavirus infections. The necessity to re -impose restrictions could cause a deeper and more lasting pessimism across all consumers, even those in states that did not relax their restrictions." The decline in the index from March to April was the biggest ever and reflects an economy already in recession. In response to the extraordinary economic disruptions created by the pandemic, the United States Federal Reserve (the Fed) announced two emergency rate cuts, first by 50 basis points on March 3 and then by 100 basis points on March 16—bringing the Fed funds rate range down to 0 - 25 basis points. In addition, the Fed announced open-ended Quantitative Easing alongside a host of other liquidity enhancing programs. Meanwhile, the federal government passed the bipartisan Coronavirus Aid, Relief, and Economic Securities (CARES) Act, which provided $2.3 trillion in fiscal stimulus. These concurrent acts of fiscal and monetary policy were unprecedented in terms of size and scope, as well as the speed with which they were enacted —a direct reaction to a problem unseen in modern times. It remains to be seen to what extent these measures will assist in the recovery from this most recent and still evolving national economic downturn. Like the rest of the financial world, the mortgage market has also been affected by the coronavirus. Bond yields and mortgage rates have both seen a drop in recent weeks, with mortgage rates hitting their lowest point in more than three years. However, whether mortgage rates remain low depends on what happens in the short term. If the outbreak is contained and the number of reported cases remains steady, investors may regain confidence in the market, and rates may head in an upward position. Currently, while refinancing activity is up, actual home ON 2019-20 Budget Revisions May 13, 2020 sales are subdued as household incomes are less stable. Web traffic to real estate portals like Zillow and Redfin dropped by almost 40 percent in the immediate aftermath of the pandemic, and new listings of homes for sale initially dropped by as much as 70 percent in some markets like New York and the East Bay, California. Weekly mortgage applications dropped 17.9 percent in early April. 30-Year Fixed Rate Mortgage Average in the United States 40 39 3.8 n 3.7 3.6 3.5 3.4 3.3 32 2019-05 2019-06 2619-07 2019-08 2019-09 2919-10 2019-11 2019-12 2020-01 2a2014)2 202"3 2020-04 Shaded areas lndcate U.S recess;ors Source: Rr d&] M4 ired.sdouiffed.org 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. 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 will have a significant impact on consumer spending in general, and the U.S. economy, in the very short term, with long term implications. While the exact timing of the medical and economic recovery is highly uncertain, and relapses are plausible, one assumption is that stronger Iockdown and social distancing measures and perhaps some weather effects will reduce new infections over the next month. Combined with potential medical breakthroughs or adaptation by firms and consumers, a slowdown in new infections may lead to a gradual economic recovery. The slow pace of recovery in most forecasts through 2021 translates to longer -lasting scarring effects on businesses and workers. State Economy For the first seven months of the fiscal year, California continued to enjoy a healthy fiscal situation. The state's unemployment rate dipped to 3.9 percent in 2019, representing a new record low. At the same time, employment and wages reached all-time highs. The state had gained over 3.4 million jobs since the economic expansion, which began in February 2010. Rapidly growing regions of the state continued to attract workers, most notably in the San Francisco Bay Area and the Inland Empire. Now, as residents are forced to cancel travel plans, and retreat from social life and the workplace to shelter at home, the coronavirus is causing the first pandemic -induced recession of the postwar era. For millions of Californians and their families, this means less work, lower incomes, and more financial stress. 7 2019-20 Budget Revisions May 13, 2020 As of April 30th, more than six weeks since Governor Newsom issued a mandatory stay-at-home order that told Californians they could only leave home for essential reasons, California had 50,316 confirmed coronavirus cases and 2,034 deaths from the virus. HOW MANY CALIFORNIANS HAVE DIED EACH DAY The number of deaths reported in the state due to COVID-19, according to official health department figures, reached 1,887 on April 29. 50 O n r� ✓, .p n 00 S O eJ n ry C= ry h ry P O �: ry n i a�n b fr W P O N n �A N Iti W iti Qa`CC CC va V vv C y v`e`vp`ae C Chart: Jayson Chesler • Source: Cahfornla Department of Public Health • Get the data COVID-19 is currently hitting the California economy with full force. The largest downturns have occurred in sectors that rely on the movement of people and nonessential goods: accommodations and food service; administrative and support services, especially employment services; mining and oil/gas extraction; entertainment and recreation; and transportation and warehousing. Employment in these sectors makes up more than a fifth of overall non -farm employment in California and the nation as a whole. The Public Policy Institute of California estimates that the poverty rate among workers in the accommodation and food service sector is 24 percent and states that "this sector, which is being hit hard by reduced tourism and dining out, is the largest of those expected to experience the most immediate economic consequences." LARGE: NUMBERS OF CALIFORNIANS WORK IN INDUSTRIES THAT ARE AT FiISK DURING THE PANDEMIC 4,500 4,000 3,500 3,00111) 2,500 7.000 1,500 1,000 50C V 0 Accommodatlon & food services ■ Administra0ve & suppoI services ■ Tr am5portation & wareiIng ■ Arts, entertainment & re€reatian ,;—rcw. 8uroa,4 Or LaNw 5136vas, Qprient ErrioW int 510G9ACB Prog' cill i Na'-: From ❑r'(;1mtW1 21M_ No!. iQbSp If adiuSNLd. Proem: PPIC 6iog. witci 20W PPIC C.i 2019-20 Budget Revisions May 13, 2020 As at the federal level, the state's leaders face the challenge of helping businesses weather the crisis and rebound quickly, while also addressing the tangible needs of working-class families who may be losing income. The California unemployment rate rose to 5.3 percent in March, ending the record job expansion in the state of 120 months, with the largest month -over -month rate increase on record. Not surprisingly, the Leisure & Hospitality sector posted the biggest jobs loss due in large part to drops in hotels and full service restaurants. However, these results reflect data as of mid -March — just as parts of the economy were shutting down, but about a week before Governor Newsom and various counties issued stay-at-home orders. Many economic experts believe the state unemployment rate will approach 20 percent sometime in the next month or two. As incomplete as the official numbers are, they show the abruptness of the economic shock from the COVID-19 shutdowns in a state where job growth had been unremitting until now. Administrators have said that the early cost of the state's initial efforts to combat the coronavirus will hit the state's finances to the tune of $7 billion. Much of the money was earmarked for personal protective equipment for healthcare and emergency workers as well as medical supplies and sweeping public health initiatives, including prevention programs focused on the homeless population. On April 2"d, the Governor announced a series of actions intended to help California's small businesses and struggling workforce during the pandemic. In addition to granting a one- year sales tax reprieve to small businesses, loans of up to $50,000 per business could be taken out against the taxes due. The federal Paycheck Protection Program, which will reimburse businesses up to $10 million as long as they commit to paying employees, was also announced that day. By May 1st, California had provided $7.5 billion in unemployment benefits to the state's 3.9 million unemployed workers. With more than a decade of economic expansion, coupled with deliberate legislative action to put the budget on better footing through the creation of discretionary reserves, the Legislative Analyst's Office concluded in January that the California state budget was in good condition. In his Budget Summary for FY 2020-21, Governor Newsom had estimated that a $7 billion surplus would be available from continued, but slower, growth in General Fund revenues for the year. Even though the first seven months of the current fiscal year exhibited a healthy momentum, the coronavirus has created a crisis that could easily exceed the state's reserves before the new fiscal year even begins, with more pain in the years to come. Governor Newsom must release a revised spending plan by next month, and by law the Legislature has to pass a balanced budget for the 2020-21 fiscal year by June 15 or go without pay. Prior to the COVID019 public health crisis, the high cost of housing in California had emerged as the uppermost threat to the state's future. 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 were not meeting the demand during the first half of the fiscal year. Estimates from Beacon Economics put the backlog of housing units at about 2.3 million in 2017, but only 104,000 residential permits were issued in 2018; the projection for 2019 was about 95,000 permits. The impacts of the coronavirus on the state's efforts to increase supply are largely unknown at this time. What is known is that many of the inputs to California's building industry are sourced from Asian E 2019-20 Budget Revisions May 13, 2020 countries, and as the coronavirus continues to disrupt these supply chains, the cost of building materials may increase over the short run or the materials may become limited. An increase to the cost of construction could potentially reduce the pace of new residential development further. Fewer new homes combined with low mortgage rates could lead to more upward pressure on home prices in California. Local Economy At the time of the mid -year analysis, the San Francisco Bay Area economy was robust, with the lowest unemployment rate in the state. With its emphasis on the tech sector, the region was 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. However, the Bay Area is now in a different economic reality than before the COVID-19 pandemic hit. The good news is that the region entered the crisis from a position of strength. The latest employment information for the San Francisco -Redwood City —South San Francisco Metropolitan Division was issue by the State EDD on April 171h for the month of March 2020. The unemployment rate was reported at 2.9 percent for the month, up from 2.2 percent in February. This compares with an unadjusted rate of 5.6 percent in California and 4.5 percent for the nation. The unemployment rate was 2.8 percent in San Mateo County. On May 1st, the nine -county Bay Area region recorded its 300th death from the coronavirus (51 in San Mateo County). More than 8,000 had been infected in the Bay Area by that date. In "normal" times, the San Francisco Metropolitan area is one of the United States' top tourist and business destinations. As such, Burlingame has heretofore benefited from an underlying strength in hotel tax revenues and consumer spending. With an 89.4 percent occupancy rate in the first six months of this fiscal year, hotels in the area had been among the most occupied in the country. However, the travel sector around the globe is taking a heavy hit as the virus has forced the economies of many nations to a standstill. Both business and leisure travel plans have been canceled indefinitely since the end of February. There have been wholesale cancellations of conferences, sporting events, and live entertainment that bring people to the area and provide the tourism that have kept hotels and the surrounding downtown districts vibrant with activity. Bay Area hotel occupancy has in the past relied heavily on business travel from the East Coast, so even if the local outbreak is well -controlled, there is little possibility that the area's hospitality industry will rebound quickly. In reality, the duration and complete impact of the COVID-19 coronavirus on the travel industry is unknown at this time. The impact to local sales transactions will soon be measurable. Core retail sales are expected to see significant drops as society practices social distancing measures; the restaurant industry is reporting 65 percent drops in revenue as facilities that prepare and serve food are restricted to delivery or take-out; industry observers have predicted 80 percent or more declines in auto sales while shelter -in -place regulations are in force; regional decision makers had put most construction on hold until May 4; labor shortages and ongoing uncertainty over trade and tariff policies appear to be slowing capital investment decisions and new orders; and the combination of strong supply and weak demand for fuel has pushed oil barrel prices down to historically low levels. Although there has been an unprecedented degree of public support for businesses and workers who are 10 2019-20 Budget Revisions May 13, 2020 being negatively impacted, it is unclear if many of the area's merchants will survive this economic crisis. Because sales tax data is generally collected by the state a quarter after the actual transactions take place, the estimates are anecdotal until the data can be collected. And since the state is allowing a one-year delay for sales tax filings, it will be difficult to affix the economic damage done to taxable sales until long after recovery has started. Due to the flattening of the curve of coronavirus cases in the Bay Area, restrictions on business activity may be loosening up in the coming months. However, as with many parts of the country and the world, the region is in the very early stages of dealing with the virus. The virus and its impact on businesses is likely to be an ongoing problem until a vaccine is available, herd immunity prevails, or exceptionally good treatments become widely accessible. Economic Sustainability As noted in the 2019-20 Adopted Budget, General Fund revenues, which are 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 General Fund five-year financial forecast is provided with each mid -year report to provide clarity to the City's fiscal direction in the longer term. In conjunction with the General Fund Reserve Policy, a long-term approach to the City's budget has helped to ensure that future economic downturns can be managed effectively. The coronavirus pandemic has created just such a downturn. It is not apparent that the City's reserves will allow the City to operate as effectively and provide the same level of services that it has in the past while still maintaining a budget that is sustainable for the future. Although there are many unknowns about the duration and depth of the current crisis, reserves will sustain the City through the current fiscal year and well into the 2020-21 fiscal year. Staff will continue to examine strategies that will ensure the most prudent use of resources as the situation unfolds, through to its eventual resolution. 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 and liabilities 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) three years ago 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 has been carefully planned over the years. However, 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 11 2019-20 Budget Revisions May 13, 2020 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. General Fund 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. With more than half of the fiscal year of actual transactions under analysis, staff's mid -year analysis presented in March projected that the City's year-end General Fund revenues would be over $2.3 million higher than projected in the FY 2019-20 adopted budget. Now, due to the severe and sudden impact of the coronavirus pandemic on the City's major revenues, staff's projections must be updated. Not surprisingly, much of the decline in revenues comes from significantly decreased hotel tax and sales tax revenues. Decreases in departmental charges for services are also now indicated, though these revenues are largely offset with increases in the costs to provide the related services. Departmental expenditure budget revisions have only been proposed to reflect recent Council actions to fund support for business recovery efforts and programs to assist residents most severely impacted by the COVID-19 crisis. Although expenditures in all funds will be affected by the extraordinary conditions under which the City continues to provide services, staff believes that the FY 2019-20 operating budget is sufficient to provide for these expenditures as a whole for the remainder of the fiscal year. Staff has recently developed departmental budgets for the upcoming fiscal year that should provide a clearer picture of operating needs going forward. General Fund - Revenues The following table shows the revised assessment of fiscal year 2019-20 General Fund revenues. There are three columns for the 2019-20 fiscal year: The "FY 19-20 Current Adjusted Budget" column shows the revenue budget that the City Council adopted last June, adjusted by budget amendments approved by the City Council including the FY 19-20 Mid -year Amendments approved in March. The "FY 19-20 New Projection" column shows the most current projection for the fiscal year; and the "FY 19-20 Budget Amendment" column reflects a summary of proposed revenue amendments to the FY 19-20 budget for the City Council's approval with this 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. 12 2019-20 Budget Revisions May 13, 2020 CITY OF BURLINGAME, 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 FY17-18 FY18-19 Current FY19-20 Budget Adjustment Actuals Actuals Adjusted Budget New Projection Amendment Up (Down) % $ 20,334,818 $ 21,955,938 $ 22,840,100 $ 23,435,600 $ 595,500 2.6% 12,819,794 17,819,970 16,860,000 14,230,000 (2,630,000) -15.6% 27,935,991 29,384,461 26,200,000 20,050,000 (6,150,000) -23.5% 1,675,891 1,657,802 1,672,000 1,642,000 (30,000) -1.8% 1,053,991 1,039,154 985,000 865,000 (120,000) -12.2% 425,143 476,852 420,000 360,000 (60,000) -14.3% 61,177 59,592 60,000 60,000 0 0.0% 82,630 84,610 79,500 79,500 0 0.0% 977,121 1,255,675 878,000 608,000 (270,000) -30.8% 177,887 179,055 130,000 130,000 0 0.0% 5,515,794 6,282,169 6,388,000 5,135,000 (1,253,000) -19.6% 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 2,400,000 2,400,000 0 0.0% $ 71,722,980 $ 84,537,352 $ 79,082,600 $ 69,165,100 $ (9,917,500) -12.5% As can be seen from the Budget Amendment column, recent impacts in the economy due to the coronavirus outbreak have had severe implications for the City's General Fund revenues in the final quarter of this fiscal year. Up through the month of February, the City's major revenue sources were generally keeping pace with the FY 2018-19 actual amounts, with most comparing favorably to the prior fiscal year. Although slowing was indicated in the City's Transient Occupancy Tax (TOT), the mid -year adjustments reflected a slight (0.4 percent) increase in overall General Fund revenues when compared to the FY 2019-20 adopted budget. Although current year TOT revenues were most immediately and acutely impacted by the sudden changes in the global economy, consequences of the resulting downturn in the local economy are being felt in many of the City's General Fund revenue categories, as discussed below. Property Taxes - As noted in the mid -year analysis, 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. Although the impacts of the current economic downturn on the local housing market are unknown, as of mid -year it remained strong, despite a persistent lack of inventory. Since property tax rolls are established prior to the beginning of the fiscal year, the pandemic is not anticipated to have much impact on FY 20-21 property tax revenues. As of April 181" Burlingame's FY 2019-20 roll value (land and improvements) has increased 5.57 percent, including an inflationary factor of 1.02 percent applied to all California property assessments. This is only slightly below the growth experienced in the rolls at this time last year, so revenues from property taxes are anticipated to grow at a healthy rate for at least the upcoming fiscal year. And as shown in the chart below, the preponderance of the City's property tax revenues (over 13 2019-20 Budget Revisions May 13, 2020 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 New Budget Adjustment Actual Actual Adjusted Budget Projection Amendment Up (Down) % Current Secured Property Tax $ 13,830,419 $ 14,649,598 $ 15,820,000 $ 15,820,000 $ - 0.0% Secured Supp. Property Tax 445,648 516,148 545,000 545,000 0 0.0% Current Unsecured Property Tax 761,571 779,370 821,000 821,000 0 0.0% Property Tax in Lieu of VLF 3,272,197 3,465,699 2,963,800 3,559,300 595,500 20.1% ERAF Refund 1,720,433 2,252,373 2,374,300 2,374,300 0 0.0% Unitary Tax 304,550 316,284 316,000 316,000 0 0.0% Total, Property Taxes $ 20,334,818 $ 21,979,473 $ 22,840,100 $ 23,435,600 $ 595,500 2.6% The only positive change to Burlingame's General Fund revenue projections for the current fiscal year is the only adjustment not related to the rapid economic decline caused by the coronavirus. Rather, it is the result of an update from the County Controller regarding the previously reported Vehicle License Fees (VLF) shortfall. In the mid -year analysis, staff recommended a significant downward adjustment ($761,200) in total property taxes 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.) While 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. In a December memo to all cities, the County Controller reported that there was 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. In an April 13th update, the shortfall was decreased to $9.2 million. As a result, cities received an additional allocation of Property Tax in Lieu of VLF. For Burlingame, this meant an additional allocation of $595,500. The County continues to work with its legislative advocates to request that the FY 2019-20 VLF shortfall amounts be appropriated in the State's FY 2020-21 budget, as there is no statutory mechanism for the State to fully reimburse cities and counties for this shortage. Sales and Use Taxes — Swift reaction by consumers and businesses to the outbreak of coronavirus in the U.S. has caused a massive decrease in spending on certain goods and services. The national and state response combined with the uncertainty of how long the presence of the virus will disrupt the U.S. economy has made forecasting local government revenues particularly challenging. Early in April, the City's sales tax consultant, HCIL, issued a revised forecast for California sales tax receipts. The forecast showed statewide percentage changes by category (major industry group) for the first and second quarters of calendar year 2020, as well as for the upcoming fiscal year 2020-21. 14 2019-20 Budget Revisions May 13, 2020 Sales Tax Revenue By Category Using HdL Revised April 2020 Projected Projected New Projected Projected 1Q20 2Q20 projection FY 1Q20 2Q20 Growth Growth 2019-20 Autos & Transportation -12.0% -55.0% 857,105 521,883 3,328,621 Building & Construction -7.0% -40.0% 305,931 190,880 1,019,769 Business & Industry -15.0% -30.0% 502,226 201,767 1,152,424 Food & Drugs 5.0% 5.0% 101,505 104,264 363,930 Fuel & Service Stations -10.0% -50.0% 304,739 99,132 720,359 General Consumer Goods -15.0% -45.0% 349,704 219,424 1,230,328 Restaurants & Hotels -10.0% -60.0% 473,310 228,033 1,657,358 State & County Pools 15.0% 10.0% 785,135 758,110 2,669,464 -6.8% -40.2% 3,679,654 2,323,493 12,142,254 Estimated Measure 1 1,957,128 Total 14,099,382 The HdL forecast assumes that the statewide shelter -in -place directive will continue until the end of May 2020, although more site -specific containment actions could take place. Their forecast assumes that the virus will have run its course by the end of September, but it does not consider a return of the virus and potential economic impacts after the current period. While HdL's quarterly forecasts are statewide, each local jurisdiction has its own distinctive sales tax demographics and business characteristics. Therefore, the depth of the impact will vary amongst California jurisdictions. However, staff utilized the percentage changes projected by HdL and applied these percentages to Burlingame's sales tax by category to provide an estimate of sales tax receipts in the first and second quarters of calendar year 2020. Note that, because of the time lag in the reporting and submission of sales taxes to the California Department of Tax and Fee Administration (CDTFA), actual data for the 4th quarter of 2019 is still not available at the time of this analysis. Unfortunately, projections of the current year's sale tax receipts became even more unreliable after Governor Newsom's issuance of Executive Order N-40-20, which allows the CDTFA to offer a 90-day extension for sales, use and transactions tax returns and tax payments for all businesses filing a return for less than $1 million in tax liability. The order automatically enrolled qualified businesses, allowing them until the end of July to file their first-quarter returns. HdL determined that this 90-day sales tax reporting deferral program potentially impacts 91.75 percent of Burlingame businesses, constituting a total of 54.03 percent of the City's sales tax revenues for the quarter. In addition, as part of the CDTFA COVID-19 State of Emergency Relief program, small business taxpayers will be able to enter into a 12-month, interest -free, installment plan agreement for up to $50,000 of sales and use tax liability. The two programs create delays in the timely determination of the amount of sales activity taking place and uncertainty in the amount of sales tax (including both the local 1 % local sales tax and Measure 1) receipts that will ultimately be recovered and allocated to the jurisdictions. 15 2019-20 Budget Revisions May 13, 2020 Therefore, an additional 10% decrease was factored into the current year estimate for sales tax revenues. Although this provides a more conservative projection on which future years' forecasts will be based, staff believes that the additional decrease is prudent due to the large number of small businesses in Burlingame's sales tax revenue generators. 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. 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 budget was adjusted upward by $2.1 million ($1.7 for local sales tax and $0.4 million for Measure 1) based on the mid -year (pre-COVID-19) analysis presented in March, for a total projection of nearly $16.9 million. The latest projections therefore require a decrease of over $2.6 million in total sales tax revenues for the current fiscal year. The new projection for Public Safety Sales Tax, a relatively small portion of sales tax revenues, is $130,000 — an additional decrease of $30,000. 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, 2020, reflecting the first six months of the fiscal year, were utilized in the City's mid- year analysis. But by the time that analysis was presented to the City Council on March 11, it was clear that the ever-expanding fallout surrounding the coronavirus pandemic — including a cataclysmic decline in travel and mass cancellations of major events and conventions — would greatly impact area hotels and result in a marked decline in the City's TOT revenues. The Council approved a $2.5 million reduction in projected TOT revenues (to $26.2 million), rather than the $500,000 decrease recommended in the analysis. Since that time, the travel industry has been badly damaged, with airlines cutting flights and tourists cancelling business trips and holidays. Governments around the world have introduced travel restrictions to try to contain the virus. Data from the flight tracking service Flight Radar 24 shows that the number of flights globally has taken a huge hit. 16 2019-20 Budget Revisions May 13, 2020 Far fewer flights Number of total daily flights — 2017 — 2018 2019 — 2020 200,000 150,000 100,000 50,000 0 March Source: Flightradar24, 03 April 2020 WHO announces Covil outbreak a pandemic April BBC Per an update from the San Mateo County/Silicon Valley Convention and Visitors Bureau in early April, occupancy rates in area hotels were down by 90 percent, and contingency plans had been deployed that included measures such as closing food and beverage outlets, reducing staff, and closing floors or even entire hotels. In addition to the loss of international tourism (China has historically been the leader in overseas visitors to California), domestic flights supporting East Coast corporate travel has also been greatly curtailed. Many of the hoteliers were prepared for a total write-off of second quarter operations and bracing for a slow recovery for the nation as a whole and for the travel/hospitality industry in particular. As shuttered borders prevail through the end of the current fiscal year, staff anticipates that Burlingame's TOT revenues will barely achieve the $20 million mark, requiring an additional downward adjustment of $6.2 million. The resulting projection indicates a 31.8 percent drop in TOT revenues from the prior (2019-20) fiscal year. Although the City has allowed TOT payments from the hotels to be deferred (for the months of March through June) until the end of July, Burlingame hotels will continue to report activities throughout this time so that the revenues can be reported in the proper fiscal year. Other Taxes — A number of other sources provide tax revenues to the City's General Fund. Although they are consolidated for reporting purposes, staff reviewed each source for vulnerabilities associated with the COVID-19 pandemic that were not previously captured in the mid -year analysis for a more 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. COVID-19 restrictions have created some delays in the overall real estate transfer process. In addition, economic uncertainties normally create some reluctance from buyers and sellers alike to participate in large transactions. Although data for property transactions in the City of Burlingame through March 2020 show a decrease of only 5.8 percent for the fiscal year, staff anticipates property transfer volumes to 17 2019-20 Budget Revisions May 13, 2020 remain subdued through much of the remainder of the current fiscal year. A $60,000 decrease is indicated for this revenue source for FY 2019-20 (from $420,000 to $360,000). Note that 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. City of Burlingame Real Property Transfer Tax Revenue Fiscal Years 2011- 2020 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 (Est.) Business License Tax — Staff noted in the initial mid -year analysis that year-to-date business license tax revenues were coming in at a slightly lower rate than last year. This included declines in the special business license tax (5 percent of revenues) assessed on airport parking enterprises, which typically comprises over 42 percent of this revenue line item. While revenue from the volume of annual business licenses was holding steady, revenues from airport parking enterprises continued to experience declines with the prevalence of ride -sharing services. Because year-to-date receipts showed a 10.8 percent decline over the same period last fiscal year, a reduction of $35,000 for this special business license revenue was proposed. Now with the significant drop in activity at SFO, staff recommends a further ($120,000) decline in the business license revenue budget for the current fiscal year. The new projection of $865,000 represents a 16.8 percent decrease from the 2018-19 fiscal year results. 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 had not changed significantly from the prior year, no changes to the budgetary projection were proposed for the solid waste utility in staff's initial mid -year analysis. However, with businesses shuttering during the "shelter -in -place" response to the coronavirus, some commercial accounts have now subscribed to a lower service level. Billings for debris box collection services (approximately 20 percent of Burlingame customer billings) have declined from $212,400 in January to $135,700 in March. As this reduction is expected to continue for the remainder of the fiscal year, the franchise fees on these revenues are now expected to decline by $30,000. Fines, Forfeitures and Penalties — This category consists largely of revenue from parking citations and vehicle code violation fines. Certain mid -year adjustments were previously made to reflect short staffing in the first half of the fiscal year (a Parking Enforcement Officer was off EE:3 2019-20 Budget Revisions May 13, 2020 duty for four months due to injury) and the closures in Parking Lots N and F in October 2019. An additional $270,000 decrease in this revenue category is now recommended, largely due to a near -complete cessation of parking citations in the City's Broadway and Burlingame Avenue downtown districts. As so many businesses are "sheltering -in -place", parking is now free in these areas, although metering fees may be reinstated at least in part toward the end of the fiscal year. Investment Income — 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). Following the 2008 market downturn, the Federal Reserve implemented monetary policies to keep credit affordable and inflation in check, to enable monetary recovery from the recession. As a result, yields on these safe investments have continued to hover at historic lows for the last ten years, rising only slightly in recent years. Markets did not begin heavily discounting the economic risks associated with the COVID-19 outbreak until the last week of February. As recently as February 19, the S&P 500 closed at an all-time high of 3,386, and the VIX, a market implied measure of S&P 500 volatility, finished the day at 14.4. Over the course of the following three weeks, the S&P 500 closed in bear market territory —representing the fastest 20% drawdown from an all-time high in the history of the index. Ultimately, the index fell 33.9% from peak -to -trough before partially rebounding near month -end. The VIX touched levels last seen in October 2008, hitting an intraday high of 85.5 on March 18. Risk assets saw significant declines during the first quarter of 2020. Although equities grabbed most of the headlines, lesser -followed markets were stressed as well. Spreads in short-term commercial paper and interbank lending markets relative to the target federal funds rate reached their highest levels since the Global Financial Crisis, as the market began to price in severely elevated credit risks. On March 3, the U.S Federal Reserve (FOMC) delivered an emergency half -percentage point interest rate cut in a bid to protect the longest -ever economic expansion from the spreading coronavirus. On March 151h, the FOMC reacted to further and increasing negative economic impacts and risk related to the COVID-19 outbreak, cutting the federal funds rate by 1% to a target rate range of 0.00 — 0.25%. Target Fed Funds Rate &W 5.00 4.00 3.O0 2.00 LOU —Target Fed Funds Rabe (Mid) 0_00 , tit � �`7��ip l am° y_y4_fP #-yk le �°� v°y� w°w°� ,P4w°�� ° IN" 19 2019-20 Budget Revisions May 13, 2020 Such moves have immediate impacts on the market value of the City's investments. 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 March 31, 2020, compared to a "total return" of 5.98 percent if the change in the portfolio value is included. Main Portfo1ia Earnings Analysis As of March 31, 2020 Interest Earned $650.553 $659.683 $661,717 $655,300 $2.627.253 + Change in Value $1,457,180 5430,620 -5179,325 $2,623,194 $4,336,669 = Portfolio Earnings $2,107,733 $1,090,302 $482,393 $3,203,494 $6,963,922 Total Return % 1.81% 0.92% 0.40% 2.73% 5.98°h Quarter -over -Quarter Change in 2-Year U.S. Treasury Yield -0.51% -0.13% -0.05•A -1.32°le 2.01 • Notes: Performance on a trade -date basis, gross (i.e, before fees) in accordance with the GFA Institute's Globai Investment Performance Standards (GIPS). Quarterly returns are presented on an unannualized basis. May not sum to total due to roundinq. Overall, as the markets deal with the economic implications of the COVID-19 pandemic both nationally and around the globe, yields have fallen dramatically lower. As part of the mid -year analysis presented in early March, staff took the opportunity to adjust the budget for interest income projections for all of the City's major funds. Due to the marked increase in the value of the safe investments, which comprise the City's main portfolio, staff anticipates an increase in the market -to -market valuation at fiscal year-end, which will result in an increase in investment earnings for the year. To remove market fluctuations from the analysis of portfolio earnings, 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 volatility and uncertainty of the market place from the City's revenue forecasts. Therefore, the budgets that were established at mid -year reflect interest earnings prior to any market adjustment, and will not change significantly in the remaining months of the current fiscal year. (In comparison, note that the City's investment income for last fiscal year reflected an upward mark -to -market adjustment of nearly $1.7 million.) Moreover, 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. Charges for Services — As seen in the chart below, most departments generate some amount of receipts in this revenue category. These receipts accounted for nearly 7 percent of Burlingame's total General Fund revenues per the FY 2019-20 adopted budget. In the initial 20 2019-20 Budget Revisions May 13, 2020 mid -year analysis, many of the revenues from departmental services were revised upward, for a total of $898,000 in these General Fund revenues. However, with the abrupt closure of governmental facilities due to shelter -in -place measures taken at the state and county levels, many of these service revenues must now be adjusted downward. CITY OF BURLINGAME, CA CHARGES FOR SERVICES BY DEPARTMENT FY19-20 FY17-18 FY18-19 Current FY19-20 Budget Adjustment By Department Actual Actual Adjusted Budget New Projection Amendment Up (Down) Police $79,416 $91,570 $363,500 $363,500 $0 0.0% Parks 116,197 127,470 150,000 140,000 (10,000) -6.7% Recreation 3,008,863 3,374,909 3,304,000 2,304,000 (1,000,000) -30.3% Aquatics 299,017 697 0 0 0 n/a Planning 555,671 1,057,703 987,000 797,000 (190,000) -19.3% Public Works 658,704 861,185 811,000 781,000 (30,000) -3.7% Library 784,985 759,320 763,500 740,500 (23,000) -3.0% Other 12,940 9,315 9,000 9,000 0 0.0% Total, Departmental Fees $5,515,794 $6,282,169 $6,388,000 $5,135,000 ($1,253,000) -19.6% 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. For these departments, the current slowdown in development services will reflect the more "normal" level of activity experienced in fiscal year 2017-18. But the impact is severe for the Recreation Department, whose popular spring and summer programs constitute the largest portion of the department's revenues, recorded in the last quarter of each fiscal year. Though arrangements had been made to provide high -quality programming despite the demolition of the Recreation Center and through the period of construction of the new Community Center, the cancellation of all group activities will create a much larger revenue decline. Revenues from recreation programs have totaled well over half of the General Fund's Charges for Services in recent years. General Fund - Exnenditures No changes are being proposed for the current fiscal year's General Fund expenditures based on current conditions. As such, the expenditures remain largely as they were once adjusted based upon the mid -year analysis presented to the Council on March 11. Staff anticipates that the cost of additional paid leave and unemployment payments for casual workers furloughed in response to the shelter -in place restrictions will be absorbed within the departments' operating budgets. The only significant addition to the General Fund budget is the funding needed to provide for certain small business and individual support programs adopted by the Council in April At its April 6 meeting, the City Council tasked the Economic Development Housing Specialist with assisting Burlingame businesses through publicizing resources at the federal, state and local levels made available specifically in response to the COVID-19 public health emergency. The City Council also agreed to provide $5,000 in funding to SAMCEDA to support advisory assistance to Burlingame businesses. Two weeks later, the Council approved a small business grant program in the amount of $500,000, to be administered by SMC Strong and the San Mateo 21 2019-20 Budget Revisions May 13, 2020 Credit Union, as well as a Kickstart Burlingame Debit Card program for low income Burlingame households (now referred to as Burlingame CARES cards). The proposed budget amendment reflects an increase of $505,000 to the Planning Department's operating budget for the SAMCEDA services and SMC Strong grant program; and provides $250,000 to the City Council's budget for the debit card program. CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY17-18 FY18-19 FY19-20 FY19-20 Budget Adjustment Actuals Actuals Current Budget New Projection Amendment Up (Down) By Expense Categories Salaries & Wages $ 17,325,633 $ 18,005,210 $ 20,207,319 $ 20,207,319 $ - 0.0% Benefits 10,281,413 10,936,641 12,648,341 12,648,341 0 0.0% Operating Costs 21,733,221 22,512,011 24,478,119 25,233,119 755,000 3.1% Internal Services 4,124,377 4,177,333 4,170,252 4,170,252 0 0.0% Capital Outlay 172,614 131,913 258,500 258,500 0 0.0% Total Expenditures $ 53,637,258 $ 55,763,107 $ 61,762,531 $ 62,517,531 $ 755,000 1.2% Staff is cognizant of other increases in operational spending for which no budget amendments are being proposed for the 2019-20 fiscal year. Of particular note are an increase in unemployment costs. All non -essential casual employees that the City furloughed effective April 8, 2020 due to the extension of the County's shelter -in -place order became eligible for unemployment benefits as of that date. Although the State' Employment Development Department (EDD) administers the unemployment benefit program and makes payments to eligible individuals, the City reimburses the State on a dollar -for -dollar basis for benefits paid to their former employees. The cost of these benefits for the last quarter of the fiscal year is approximately $135,000. Because these costs will be somewhat offset with reduced salaries and wages for affected employees, staff estimates that the departmental budgets will be adequate to absorb this incremental cost for the current fiscal year. The City has also experienced increased information technology spending as a result of the COVID-19 crisis. Compliance with state-wide shelter -at-home restrictions and social distancing when at the workplace required a reinforcement of the City's Information Technology tools — both in terms of hardware and software. In order for employees to be able to work from home, access to internal network resources such as email, network files, and/or remote access to workplace computer desktops was needed. The primary way to achieve such remote access to internal network resources is over a VPN (Virtual Private Network) connection. As the existing VPN located in the Redwood City Data Center was never intended to run at a high capacity of 30 plus users on the system at the same time, there were concerns that the VPN system could become overwhelmed and possibly slow down or prevent remote access for all Burlingame VPN users. A new VPN system providing connection directly to the Burlingame network (through the City's own network firewall) was needed to spread the growing remote -access work load between the Redwood City and Burlingame systems. This solution also provides a redundant backup structure should problems occur in either VPN system. A license was purchased that allowed up to 50 users to connect on the new VPN system. Additional laptop computers were purchased and deployed; and access was provided for over 20 personal computers so that employees could 22 2019-20 Budget Revisions May 13, 2020 work remotely. The costs of these and other "virtual workplace" tools will be borne by the City's Admin/IT Internal Service Fund, and will result in slightly higher allocations to departmental operating budgets in future fiscal years. Note that 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 smaller variances in the current fiscal year, especially in the area of personnel costs, as close -to -full staffing was reached prior to the pandemic workplace restrictions, and most of the workforce has been compensated thus far through the crisis. 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. General Fund Operating Summary A summary of the impacts to the General Fund of the adjustments made as a result of this revised analysis for the remainder of the 2019-20 fiscal year is shown in the schedule below: CITY OF BURLINGAME, CA GENERAL FUND OPERATING SUMMARY FY19-20 FY19-20 FY17-18 FY18-19 Current New Budget Actuals Actuals Adjusted Budget Projection Amendment Total Revenue $ 71,722,980 $ 84,537,352 $ 79,082,600 $ 69,165,100 $ (9,917,500) Expenditures Departmental Expenditures (53,637,258) (55,763,107) (61,762,531) (62,517,531) (755,000) Transfers to Debt Services (5,579,688) (4,684,811) (4,708,763) (4,708,763) 0 Other Transfer In (Out) (4,106,256) (8,293,863) (6,784,681) (6,784,681) 0 Total Expenditures (63,323,202) (68,741,781) (73,255,975) (74,010,975) (755,000) Net Operating Surplus 8,399,778 15,795,571 5,826,625 (4,845,875) (10,672,500) Transfer to Capital Investment Reserve (5,300,000) (3,000,000) (6,500,000) (6,500,000) 0 Change in General Fund Balance $ 3,099,778 $ 12,795,571 $ (673,375) $(11,345,875) $ (10,672,500) Adjusted by the recommended amendments in this report, the General Fund shows a $4.8 million projected deficit (negative net operating revenues) for fiscal year 2019-20 - a complete reversal from the surplus provided in the initial mid -year analysis. General Fund Balance Once the adjustments in this report are posted, the General Fund shows a projected total fund balance of over $37.8 million at the end of the 2019-20 fiscal year. 23 2019-20 Budget Revisions May 13, 2020 CITY OF BURLINGAME, CA CHANGES TO GENERAL FUND BALANCE Beginning Fund Balance (audited) Projected Revenues & Expenditures Projected revenue performance Projected departmental expenditures Subtotal, Revenues Net of Expenditures General Fund Long -Term Debt Other Transfers In (Out) of General Fund Transfer to CIP Renewal & Replacement Reserve Ending Fund Balance (Projected) FY 2019-20 Current Adjusted FY 2019-20 Budget New Projection Changes $ 49,167,751 $ 49,167,751 $ - 79,082,600 69,165,100 (9,917,500) (61,762,531) (62,517,531) (755,000) 17,320,069 6,647,569 (10,672,500) (4,708,763) (4,708,763) 0 (6,784,681) (6,784,681) 0 (6,500,000) (6,500,000) 0 $ 48,494,376 $ 37,821,876 $ (10,672,500) As noted in the mid -year report, the General Fund experienced a surplus of nearly $12.8 million for fiscal year 2018-19. Initially, the large increase in General Fund unassigned fund balance from the prior year surplus provided the City with opportunities to make progress in funding long- term pension liabilities and/or setting aside additional funds in the Capital Investment Reserve. However, based on this new analysis for the current fiscal year, and the anticipated impact of the public health crisis to the City's major revenue sources going forward, the $8.3 million unassigned fund balance now projected for June 30, 2020 should be retained for future operational needs. CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS Economic Stability Reserve Catastrophic Reserve Contingency Reserve Subtotal, Assigned Fund Balance Add: Restricted for Pension Trust Fund (PARS) Add: Unassigned Fund Balance Total, Ending Fund Balance FY18-19 Actual FY19-20 Results New Projection Up (Down) $ Up (Down) % $ 18,837,000 $ 16,600,000 $ (2,237,000) -11.9% 2,000,000 2,000,000 0 0.0% 500,000 500,000 0 0.0% 21,337,000 19,100,000 (2,237,000) -10.5% 7,459,442 10,416,442 2,957,000 39.6% 20,371,309 8,305,434 (12,065,875) -59.2% $ 49,167,751 $ 37,821,876 $ (11,345,875) -23.1% As of June 30, 2020, the General Fund's projected fund balance of $37.8 million represents 51.1 percent of the General Fund's operating expenditures of $74.0 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 $27.4 million equates to 37.0 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 24 2019-20 Budget Revisions May 13, 2020 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 $19.1 million in reserves comprise the largest portion of the General Fund's ending balance, an amount equal to 27.6 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 $8.3 million. Note that the portion of the General Fund balance restricted for the City's pension trust fund is reflected as the balance as of June 30, 2019 plus the amount contributed in the current fiscal year. However, with the recent, severe downturn in the markets, the trust fund may be significantly less.at year end. Because the fund reflects a more diversified portfolio that includes longer term assets with a modest level of risk, the pension trust fund is expected to be able to provide a better return in the long run term than in the City's general portfolio. Note, too, that 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 increase 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. Funding of the City's pension trust fund and the impacts of the economic downturn on its long-term pension liabilities will be considered further with the budget deliberations for the fiscal year 2020-21 Capital Investment Reserve — In addition to General Fund reserves, and 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 has also repeatedly funded the Capital Investment Reserve since its establishment five years ago. The purpose of the Capital Investment Reserve, which is within the Capital Improvement Projects (CIP) Fund, was to offset the further accumulation of unfunded liabilities that aging facilities represent. Though the Capital Investment Reserve has been funded with each annual operating budget in the base amount of $3 million, it 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; the transfer has been made and is reflected in this General Fund operating budget review. 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. On April 20, the City Council approved a $39,967,000 contract for the construction of the new Burlingame Community Center, culminating an eight -year planning effort for the new facility to replace the former Recreation Center. The total project expenditures are estimated to be $52,258,600. The budget resolution attached to this report includes the addition of this budget to the Capital Improvement Plan, with funding of $38,928,500 from bond proceeds; application of $803,100 remaining from the associated Washington Park Playground, Sports Court and Picnic Area and Community Center Master Plan projects; and a draw of $12,527,000 from the Capital Investment Reserve. 25 2019-20 Budget Revisions May 13, 2020 CITY OF BURLINGAME, CA CHANGES TO CAPITAL INVESTMENT RESERVE Beginning Balance Established 3/31/15 (FY14-15) Budget Transfer from General Fund in FY 2015-16 Add'I Budget Transfer from General Fund in FY 2015-16 (mid -year) Decrease in Catastrophic Reserve Fund (mid -year) Ending Balance 6/30/16 Budgeted Transfer from General Fund in FY 2016-17 Add'I Budget Transfer from General Fund in FY 2016-17 (mid -year) Ending Balance 6/30/17 Budget Transfer from General Fund in FY 2017-18 Add'I Budget Transfer From General Fund in FY 2017-18 (mid year) Ending Balance 6/30/18 Budget Transfer from General Fund in FY 2018-19 Budgeted Balance at 6/30/19 Budget Transfer from General Fund in FY 2019-20 Transfer to fund New Community Center Project Budgeted Balance at 6/30/20 $ 3,000,000 3,000,000 5,000,000 2,500,000 $ 13, 500, 000 3,000,000 4,000,000 $ 20,500,000 3,000,000 2,300,000 $ 25, 800, 000 3,000,000 $ 28, 800, 000 6,500,000 (12,527,000) $ 22,773,000 This will take the reserve balance down to roughly $22.8 million. In actuality, the bond proceeds will be drawn down first; to the extent interest earnings accumulate on the bond proceeds, the amount drawn from the Capital Investment Reserve will be decreased. Other Funds Although the General Fund is emphasized in this update to the 2019-20 fiscal year budget, staff reviewed all City funds that may be impacted by the abrupt social and economic changes created by the COVID-19 crisis. Staff is recommending budget adjustments for impacts to revenues in several funds. 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. The Road Repair and Accountability Act of 2017 (SB 1) enhanced Highway Users Tax (HUTA) revenue 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 strengthened the stability of gas tax revenues to local jurisdictions, as the amount available for distribution is no longer tied strictly to taxable sales of gasoline (i.e., the per gallon price of gasoline). Revenues from the first full year of RMRA were distributed in fiscal year 2018-19, and the California Department of Finance (DOF) provided new revenue estimates for transportation tax revenues for the current fiscal year in January. Based on these estimates, gas tax revenues 26 2019-20 Budget Revisions May 13, 2020 were adjusted modestly ($34,200) upward with the mid -year analysis. However, the current public health crisis has resulted in a dramatic drop in fuel consumption. Because fuel taxes are collected each month for sales occurring in the prior month and then allocated according to statute, jurisdictions will begin to see the effect of COVID-19 on gas tax allocations in the May 2020 allocations. Reflected in the table below are staff's early estimates of the reduction in both RMRA and HUTA allocations for the current fiscal year, assuming that road transportation in California will be suppressed well into June. CITY OF BURLINGAME, CA GAS TAX ALLOCATIONS 2019-20 2019-20 2017-18 2018-19 Current New Budget Adjustment Description Actual Actual Adjusted Budget Projection Amendment Up (Down) % 2103 State Gasoline Tax $ 117,404 $ 101,204 $ 251,700 $ 210,000 $ (41,700) -16.6% 2105 State Gasoline Tax 163,603 166,212 166,000 144,000 (22,000) -13.3% 2106 State Gasoline Tax 121,424 124,174 124,000 104,000 (20,000) -16.1% 2107 State Gasoline Tax 212,920 209,030 208,000 178,000 (30,000) -14.4% 2107.5 State Gasoline Tax 6,000 6,000 6,000 6,000 0.0% RMRA (SB1) 138,972 546,154 558,500 500,000 (58,500) -10.5% TCRF (SB1) Loan Repyment 34,273 34,163 34,000 34,000 0.0% $ 794,595 $ 1,186,937 $ 1,348,200 $ 1,176,000 $ (172,200) -12.8% Going forward, the magnitude of the effect of the COVID-19 event on fuel consumption and therefore tax collections and allocations depends on many as -yet unknown factors including: the impact of the disease itself, restrictions by state and federal government on activity, and changes in transportation choices through and during the recovery from the event. 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, but, due to the recent drop in gasoline prices and consumption, it appears that this level of funding will be not be achieved. A downward budget revision of $100,000 is recommended at this time. Note that a total of $750,000 of Measure A Funds is appropriated for transportation -related capital programs in the current fiscal year. Water & Sewer Funds - Although a slowdown in business activity may be expected to reduce the demand for wholesale water, such has not been the case thus far according to the City's water consumption reports. For the month of March, commercial accounts actually posted a mild increase over the same month last year, while residential accounts predictably jumped 22.5 percent as households adhered to the County's shelter -in -place orders. Some of the increase is due to dryer conditions as a result of less precipitation than experienced last year. April consumption reports will provide a better picture of what to expect for the remainder of the current fiscal year, but no adjustment is proposed to the Water Fund at this time. However, due to the greatly reduced activity in the "heavy commercial" (including hotels) and "food related" sectors in the City, staff anticipates a significant drop in sewer billings for the last four months of this fiscal year. Although residential accounts are adjusted on an annual basis according to historical water usage, non-residential sewer charges are based on actual bimonthly 27 2019-20 Budget Revisions May 13, 2020 water usage, and incur higher rates "per 1000 gallons". Since water usage in these sectors has been down since the beginning of the health public crisis, sewer service charges are anticipated to decrease by nearly $1.8 million. Note that City 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 legislation requires cities to have a written policy on discontinuation of residential service. Effective February 1, 2020, the regulation also prohibits cities from discontinuing service for non-payment unless the account is late for over 60 days, outlines several specific circumstances in which water service cannot be shut off, and requires alternative repayment options be offered to customers behind in payment. During this time of hardship for many households and small businesses, late fees are being waived for customers agreeing to an alternative payment schedule. Solid Waste and Landfill Funds — Although solid waste collection services continue largely as regularly scheduled, the shuttering of many businesses in response to the coronavirus pandemic has created a reduction in the frequency and volume of commercial waste collected. The decrease in debris box collections previously cited will impact Solid Waste billings and the associated revenues to the fund. And because garbage rates include a 5 percent surcharge for landfill post -closure cost, revenues credited to the Landfill Fund will also be negatively impacted. However, revenue adjustments are not proposed for these funds, as there will also be expenditure reductions associated with the reduced activity in this area. 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. The impacts of significant development activity in the City's downtown area on this fund's revenues were largely foreseen in the adopted budget; revenue projections were refined further with the mid -year analysis. However, the abrupt downturn in all business activity since early March, coupled with the elimination of parking meter and permit fees since that time, provides the basis for additional, substantial reductions in parking -related revenues. The reduction is based on a complete cessation of the collection of parking fees ($597,500) and issuance of monthly parking permits ($110,000) through the end of the fiscal year, and a reduction in EV charging station revenues ($10,000). FISCAL IMPACT The recent world-wide coronavirus outbreak has had a profound impact on every aspect of the global economy. Due to the economic downturn that was not evident in the FY 2019-20 mid -year analysis presented to the Council in early March, staff requests authorization of the budget amendments described in this report. These adjustments will allow the budget to reflect the most drastic changes (largely in revenues) anticipated for the City's current fiscal year. 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. W:3 2019-20 Budget Revisions May 13, 2020 Exhibit: Fiscal Year 2019-20 Budget Amendments Resolution 29 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 and this Council does hereby APPROVE and AUTHORIZE 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 budget review report: Amendments to Estimated Revenues: General Fund: Property Tax 595,500 Sales and Use Tax (2,630,000) Transient Occupancy Tax (6,150,000) Other Taxes - Franchise Tax (30,000) Other Taxes - Business Licenses (120,000) Other Taxes - Real Property Transfer Tax (60,000) Charges for Services (1,253,000) Fines, Forfeitures & Penalties (270,000) Other Funds: Gas Tax - Highway User's Tax (113,700) Gas Tax - Road Repair & Accountability Act (58,500) Measure A (100,000) Sewer Service Charges (1,755,000) Parking Enterprise - Parking Fees (597,500) Parking Enterprise - Monthly Parking Permits (110,000) Parking Enterprise - EV Charging Revenues (10,000) Amendments to Appropriations: (`-cncrrol P:i inel- City Council 250,000 Economic Development 505,000 Amendments to Capital Improvement Project Budgets: Parks & Trees Capital Improvement Projects: Transfer remaining balance from the Washington Park Playground & Sports Court Project (85670) to Facility Capital Project Fund for the Community Center Project Facility Capital Improvement Protects: Community Center Project (83240 — current budget $420,000) Capital Investment Reserve Reduction to Fund the Community Center Project Debt Service Fund Restricted for the Community Center Project Mayor (383,10 0) 51,838,600 (12,527,000) (38,928,500) I, MEAGHAN HASSELL-SHEARER, City Clerk of the City of Burlingame, do hereby certify that the foregoing Resolution was adopted at a special meeting of the City Council held on the 13th day of May, 2020 and was adopted thereafter by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: City Clerk AGENDA 5b BUR LINGAME STAFF REPORT MEETING DOATE: May 13, 2020 To: Honorable Mayor and City Council Date: May 13, 2020 From: Carol Augustine, Finance Director — (650) 558-7222 Subject: Study Session: Fiscal Year 2020-21 Budget RECOMMENDATION The purpose of this report is to give an overview on the development of the 2020-21 fiscal year budget, and receive Council comment and direction. No Council action is required. BACKGROUND Development of the fiscal year 2020-21 budget has been underway since January, and the final budget document is beginning to take shape. Before finalizing the proposed budget for City Council approval at a public hearing in June, staff wishes to provide this budget overview for Council comment and direction. The budget process this year was significantly upended by the world-wide outbreak of a coronavirus in late February, when staff was completing the mid -year report for FY 2019-20. The global response to the COVID-19 pandemic impacted every facet of life and greatly altered the economic landscape at the national, state, and local levels. In fact, in a few short weeks, the economic outlook took an abrupt about face from the scenario presented with the mid -year report. Because an accurate financial picture of the current fiscal year is critical to the development of solid operational and capital budgets for the upcoming 2020-21 fiscal year, staff prepared a revised economic outlook for the City and amended current -year projections for the City's key revenue sources. With the proposed revenue adjustments, the General Fund balance at June 30, 2020 is estimated to be $37.8 million, as opposed to the $50.5 million presented in the mi-year report. Although the City has prudently established reserve balances in recognition of its economically -dependent revenues, an annual revenue loss of over $15 million (as from FY2018-19 actuals) is not sustainable in the longer term. Not only is this revised financial picture of the current fiscal year vital to the development of solid operational and capital budgets for the upcoming fiscal year, but it also lays the groundwork for consideration of various long-term fiscal scenarios. In the near term, judicious use of budget reserves is warranted. However, as the fiscal effects of the pandemic -induced recession will likely span well beyond the upcoming budget year, the City should forego optimistic scenarios of a robust bounce -back of City revenues, proceed with a more realistic outlook for a more subdued recovery, but also be prepared for the possibility of an extended economic down -turn in the coming years. FY 2020-21 Budget May 13, 2020 Lacking a solid basis for revenue estimates, adoption of a cautious budget for the 2020-21 fiscal year in June is justified. As always, this important effort should reflect the priorities and needs of the Burlingame community, while remaining cognizant of the City's long-term financial health. This initial budget for FY 2020-21 utilizes the tools available to adjust to the changing economic environment. Compared to the General Fund budget adopted for the 2019-20 fiscal year, revenues are greatly depressed. On the expenditure level, current staffing levels and employee benefits have been maintained. Departmental budgets include anticipated operating cost increases, although travel and meeting budgets have been reduced from the prior year. The most significant changes in response to the recent reversal in the economy are reflected in decreased capital spending and the removal of contributions to the Capital Investment Reserve. These short-term measures serve to lessen further impact to the City's General Fund reserves while the trajectory of the virus, and its effect on the City's revenues, unfolds. The presence of reserves allows the City to respond more deliberately to the longer -term repercussions of the global COVID-19 pandemic. As in each annual budget process, guided by Council discussion, City staff has endeavored to identify public priorities and make sure those priorities are reflected in each of the department's budget proposals. DISCUSSION Economic Conditions — Current information and analyses on the economic forces that are likely to impact the City's operations in the upcoming fiscal year have influenced the development of the annual budget for the City more than ever before. The COVID-19 crisis has impacted nearly every element of the local, national, and global economies, and projections of what the future holds, even in the near term, vary widely. The economic evaluation that informed this initial budget for the 2020-21 fiscal year was presented with the proposed amendments to the FY 2019-20 Budget. That economic picture was compiled largely from recent reports provided by HdL Companies, the City's sales tax consultant, in partnership with Beacon Economics, LLC. However, assessments of the economic outfall from the pandemic change daily, and could require revisions to this initial budget before it is presented to the City Council for adoption in June. General Fund Burlingame's fiscal year 2019-20 budget anticipated that the local economy would continue to grow at a moderate pace, and the long-term forecast reflected relative stability for at least the next several years. However, since the coronavirus came on the scene in late February 2020, even the short-term outlook is difficult to decipher. The pandemic has ravaged local government revenues in the current fiscal year, and the decimating impact is expected to carry through to at least the first quarter of fiscal year 2020-21. Beyond that first quarter, revenues are expected to recover moderately, as the public at large adapts to new social and economic realities that are yet to be specifically determined. The City's 2019-20 fiscal year General Fund budget now reflects all of these proposed budget changes, with revenues anticipated to be nearly $9.7 million lower than projected in the FY 2 FY 2020-21 Budget May 13, 2020 2019-20 adopted budget. For fiscal year 2020-21, General Fund revenues are expected to decline further before showing signs of recovery toward the end of calendar year 2020. Although some revenues will recover at a faster rate, staff projects $66.1 million in total General Fund revenues for the fiscal year — a 4.4 percent decrease from projections for the current year. As a result of the rapid deterioration in the global, national, state, and local economies, revenue projections for the 2020-21 fiscal year are significantly lower in total than the projections in the five-year forecast presented with the mid -year report. All General Fund revenues are discussed in more detail in this report. Each revenue line item was refined to reflect existing and anticipated changes in terms of the economic recovery from the coronavirus pandemic. Departmental expenditure budgets, however, remain tight and very much on target with the five- year forecast. The plunging of revenues and continued growth in expenditures make for a very different economic future than was presented with the mid -year report. As always, in establishing departmental budgets for the upcoming fiscal year, emphasis was placed on the desire to maintain current service levels, particularly in public safety, preclude any increase in unfunded liabilities, and move forward to address the City's current and future unfunded needs. However, staff is also keenly aware of the volatile nature of the current economic climate, and remains prepared to adjust to changing revenues as well as the changing needs of the community. The initial expenditure budgets for the 2020-21 fiscal year continue to reflect significant fiscal restraint on the part of all departmental operations, with a focus on long-term fiscal sustainability. General Fund - Revenues The following table shows the current forecast of fiscal year 2020-21 General Fund revenue projections in the context of recent -year actual amounts and current -year estimated amounts. 3 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, 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 FY20-21 $ Change % Change FY18-19 Adjusted Proposed from Prior from Prior Actuals Budget Budget Year Year $ 21,955,938 $ 23,435,600 $ 24,411,000 $ 975,400 4.2% 17,819,970 14,230,000 14,005,000 (225,000) -1.6% 29,384,461 20,050,000 16,500,000 (3,550,000) -17.7% 1,657,802 1,642,000 1,641,200 (800) 0.0% 1,039,154 865,000 730,000 (135,000) -15.6% 476,852 360,000 400,000 40,000 11.1% 59,592 60,000 60,000 0 0.0% 84,610 79,500 78,200 (1,300) -1.6% 1,255,675 608,000 680,000 72,000 11.8% 179,055 130,000 80,000 (50,000) -38.5% 6,282,169 5,135,000 5,798,000 663,000 12.9% 59,071 30,000 30,000 0 0.0% 211,117 140,000 145,000 5,000 3.6% 4,071,886 2,400,000 1,563,000 (837,000) -34.9% $ 84,537,352 $ 69,165,100 $ 66,121,400 $ (3,043,700) -4.4% Sales and Use Tax - included Measure I revenue $1.96 million and $1.925 million, respectively, for the FY19-20 and FY20-21 Budget. The FY 2019-20 Adjusted Budget column includes the revenue amendments proposed by staff for the current fiscal year, assuming their approval by the Council at this budget study session, and reflects the extensive impact of the current public health crisis. Although the fiscal year 2020-21 projections present a fairly dismal revenue picture for the fund as a whole, several of the City's revenue sources reflect improvement over projections for the current year. A careful review of each revenue source shows that those revenues most highly impacted by pandemic - induced recession are expected to decline further in the new fiscal year, and recover more slowly than perhaps the general economy. Revenues from property taxes are expected to remain strong in the 2020-21 fiscal year. In fact, this is the only revenue source that is projected to remain relatively unscathed from the abrupt economic disruption caused by the current public health emergency. That is because the taxes due for fiscal year July 1, 2020 through June 30, 2021 are based on the assessed value as of January 1, 2020. As of the writing of this report, the secured tax roll established by the County Assessor's Office shows a growth of 5.63 percent in assessed value for the City of Burlingame over the prior year. (This includes an inflation factor of two percent for all properties; the remaining growth is attributable to higher assessed values of properties that have changed ownership over the course of the year.) The roll will continue to be refined until set at the end of June. Although there is not a one-to-one correlation of the change in assessed values to the change in property tax eventually allocated to the City, it is a good indication of how property tax receipts will trend in the upcoming year. Last year, the City's secured tax roll increased 7.28 percent. 0 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA PROPERTY TAXES FY19-20 FY20-21 $Change %Change FY17-18 FY18-19 Adjusted Proposed from Prior from Prior Actual Actual Budget Budget Year Year Current Secured Property Tax $ 13,830,419 $ 14,649,598 $ 15,820,000 $ 16,848,000 $ 1,028,000 6.5% Secured Supp. Property Tax 445,648 516,148 545,000 491,000 (54,000) -9.9% Current Unsecured Property Tax 761,571 755,835 821,000 821,000 0 0.0% Property Tax in Lieu of VLF 3,272,197 3,465,699 3,559,300 3,560,000 700 0.0% ERAF Refund 1,720,433 2,252,373 2,374,300 2,375,000 700 0.0% Unitary Tax 304,550 316,284 316,000 316,000 0 0.0% Total, Property Taxes $ 20,334,818 $ 21,955,938 $23,435,600 $24,411,000 975,400 4.2% However, the forecast for property tax revenues shows an increase of only 4.2 percent from the current year's property tax estimate, due to lower (or flat) estimates of growth for other types of property tax revenue. As noted in the mid -year report for the current fiscal year, ERAF (Educational Revenue Augmentation Fund) revenues are held by the County of San Mateo, with any excesses distributed back to the contributing agencies when all other obligations of the funds have been met. The calculations involved in determining these Excess ERAF refunds are complex, and the interpretation of what constitutes an ERAF obligation has, on occasion, varied between the State and the County. For FY 2019-20, a shortfall in ERAF from non -basic aid school districts in the County meant that there were insufficient funds to pay the Property Tax in Lieu of VLF due to the County and cities. This "VLF shortfall" was partially mitigated for the current fiscal year, but the underlying dispute regarding these calculations has not been resolved. As there is no statutory mechanism for the State to fully reimburse cities and counties for this shortage, the County continues to work 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 may not ultimately be recovered, and VLF shortfalls are expected to increase if the matter with the State is not resolved in the County's favor. Therefore, the Property Tax in Lieu of VLF and ERAF Refund amounts are held flat in the initial budget for FY 2020-21. 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. As there has been a noticeable decline in the number of real estate transfers during the pandemic crisis, a decline in supplemental billings is anticipated for next year. Other property tax line item revenues are expected to remain at current levels. TOT (Transient Occupancy Tax) revenues have historically constituted Burlingame's largest General Fund revenue and are usually a good indicator of current economic activity. The graph below shows the rapid and sharp decline in these revenues as international air traffic began to slow early in the calendar year, and the progression downward as the pandemic brought all travel -related activities to a halt. Burlingame hotels, which had experienced very high occupancy rates in past years, were forced to cut staff, shutting off floors and even suspending operations for whole hotels. In an attempt to slow transmission of the virus, the County has leased some hotel rooms in order to offer health care workers and patients an alternative to returning home. Other hotels are being used to alleviate the density in homeless shelters, 5 FY 2020-21 Budget May 13, 2020 where the virus can also spread rapidly. But this temporary re -purposing of rooms does nothing to help the hospitality industry or the economy as a whole. Area hotels will be starting their recovery at single -digit occupancy rates. Historical Transient Occupancy Tax Revenue by Quarter 9 7.8 S 7 7.3 7. 6.8 -7.2 7 �X_ 6.5 6.6 —�� .6 6. 6.1 + 6.4 6 5 `` 5.6 �. _ .6 — — 2020-21 Est. c 5 s }�- �� — — — 2019-20 Est. 4.5 4.0 \ 2018-19 � 4 \♦ 2017-18 yy 3.9 � 3.8 3 \ 2016-17 ♦� — 2015-16 2 ♦ 2014-15 _ ♦ 2013-14 1 \\ > 2012-13 b — 2011-12 Q1 Q2 Q3 Q4 Estimates from the San Mateo County/Silicon Valley Convention & Visitors Bureau helped to inform staff's calculations of TOT revenues for the 2020-21 fiscal year. With the recovery predicted to be slow but steady throughout the last half of 2020, hotels are predicted to be 70% recovered by December. Burlingame hotel businesses are heavily reliant on travel into the SFO Airport — particularly corporate travel from the East Coast. Not until New York City is "opened up" will hoteliers begin to regain some of the former occupancy levels achieved in prior years. Currently, restrictions are being maintained for business travel. The length of the recovery will depend on how willing employees will be to travel once the restrictions are lifted. Sales tax receipts also reflected a fairly healthy economy at the time of the FY 2019-20 mid- year, analysis, despite the anticipated slowdown in auto sales. However, once the City's sales tax consultant HdL estimated the impact of the COVID 19 pandemic, staff proposed a downward adjustment for the current fiscal year of over $2.6 million. Although this revenue source should reflect true economic activity, the reporting and collection of sales taxes is not available to the City until four months after the end of the quarter in which the transactions occurred. Note, too, that several one-time events served to push anticipated sales tax revenues for the 2018-19 fiscal year up to $17.8 million (including Measure 1). These factors, coupled with the Governor's decision to allow a 90-day extension for sales, use and transactions tax returns and payments, will make it difficult to ascertain the true damage to these revenues resulting from the COVID 19 pandemic and its aftermath, even after the data is collected. Transaction data from the fourth quarter of calendar year 2019 has recently been made available and supports the fiscal year 2020-21 forecast. The HdL forecast for the State of California assumes that the statewide shelter -in -place order will continue until the end of May 2020. The forecast assumes that the virus will have run its course by the end of September, and does not consider a return of the virus (and potential economic impacts) after that time. Under this scenario, declines in sales tax revenues are expected to continue through the fourth quarter 0 FY 2020-21 Budget May 13, 2020 of 2020, with only moderate gains for several quarters thereafter. The most dramatic decreases are expected during the first and second quarter of 2020. Even considering significant federal and state subsidies, HdL notes that already marginal or overly leveraged businesses still may not survive a lengthy shutdown. From their observation from pervious downturns, HdL cautions that the return to previous spending patterns after significant income interruptions is not immediate and often evolves. They note: Consumers may now take even more time to fully get back to previous leisure travel, dining and discretionary spending habits. Businesses similarly may become more cautious about capital investment and the number of employees to hire after emerging from an economic crisis. Business travelers who had to resort to teleconferencing may continue to teleconference. Formerly avid brick -and -mortar shoppers may find that online shopping and delivery service suits them just as well. Sales tax revenues from the Auto and Transportation sector are expected to be much lower, as industry leaders predict an 80 percent decline while the State's shelter -in -place is enforced. The Building & Construction sector will also reflect a weakness from prolonged work stoppages, with a hesitancy to advance housing development and commercial projects that may be put off in the current fiscal year. The Business and Industry sector will show declines due to shutdowns and disruption in supply chains and labor, though food processing, medical, and telecommunication equipment or businesses deemed essential will be less impacted. Sales tax receipts from the Fuel and Service Stations sector are anticipated to increase only in the third quarter of 2020, in comparison to the slump of the first half of the calendar year. A temporary pent-up demand for travel will be offset with the lower price of gasoline, resulting in taxable sales in this category for FY 2020-21 on par with the current fiscal year. Sales of general consumer goods are also expected to remain subdued as increased unemployment and the lingering fear of a resurgence of the virus will hold discretionary spending down. Restaurants and hotels, many of which have temporarily shut down, are experiencing 65-85 percent drops in 7 FY 2020-21 Budget May 13, 2020 the final quarter of the current fiscal year. Small restauranteurs are vulnerable given the already tight operating margins, and dining places will probably operate at greatly reduced capacities when shelter -in -place orders are lifted. The increased shift from take-out grocery stores may offset some pent-up demand, but as a whole, taxable sales in this sector are predicted to only partially rebound by the end of fiscal year 2020-21. Sales Tax Projections By Category Projected FY Projection Projection 2020-21 Growth FY 2019-20 for2020-21 Autos & Transportation -6.3% 3,328,621 3,120,000 Building & Construction -0.1% 1,019,769 1,020,000 Business & Industry -5.4% 1,152,424 1,090,000 Food & Drugs 2.0% 363,930 375,000 Fuel & Service Stations 0.0% 720,359 720,000 General Consumer Goods -2.5% 1,230,328 1,200,000 Restaurants & Hotels -6.5% 1,657,358 1,550,000 State & County Pools 7.3% 2,669,464 2,875,000 -1.6% 12,142,254 11,950,000 Measure 1 1,957,128 1,925,000 Public Safety Sales Tax 130,000 130,000 Total Sales & Use Tax Revenues 14,099,382 14,005,000 Social distancing has pushed consumer spending to online platforms, intensifying a trend that has been challenging traditional brick & mortar establishments for nearly a decade. Sales taxes collected on -site within the jurisdiction are remitted to the jurisdiction; sales taxes collected on- line are forwarded to the countywide pools for distribution. State and local agencies were expecting to see a slight sales and use tax revenue boost following the passage of AB 147, which expanded the collection of these taxes from out-of-state sales via the implementation of the landmark U.S Supreme Court decision in South Dakota v. Wayfair in 2018. (In Wayfair, the Court upheld a South Dakota statute that imposed a collection requirement on out-of-state retailers who have specified levels of economic activity in the state, even if they do not have a physical presence in the state.) The provisions of AB 147 requiring collection and remittance of sales and use tax by out-of-state retailers became effective April 1, 2019. However, the marketplace facilitator (firms that contract with sellers to sell goods and services on their on-line platforms) requirements were not effective until October 1, 2019. Preliminary data on collections for the fourth quarter of 2019 indicate that these marketplace facilitators increased the local sales taxes by an additional $240,000, or 5.7 percent. FY 2020-21 Budget May 13, 2020 JHdLe STATE OF CALIFORNIA Brick& Mortar vs_ Online Sales of General Consumer Goods Brisk & Murlar onlin■ Local 1 % Sales Tax by Calendar Year $1,400,000K St,200,r10OK 51 swixiDK sSOO,DOOK MODDK S4DO,DDDK 52W.DoOK LSOK '01 W M U '05 SOB '07 'D9 �09 '10 `11 '12 '13 '14 '15 '16 '17 '18 '19 The sales tax revenue originally budgeted for fiscal year 2019-20 was comprised of a projected $12.6 million in the Bradley Burns (local 1 %), $160,000 in Public Safety Fund Sales Tax (Prop 172 sales tax), and an estimated $2.0 million from the City's 1/4 cent Measure I transactions tax, for a total of $14,760,000. For fiscal year 2020-21, staff anticipates a total of just over $14 million from all three sources. Although all are reported as General Fund sales and use tax revenues, the Measure I transaction tax is not applied to the same transactions as the other sales tax revenues. Measure I monies are separately budgeted, and are recorded in a separate sub -fund to allow for maximum transparency and accountability. $1D 8.49 .07 9 8.04 $8 6.27 $6 $4 $2 $0 FY 2010 FY 2011 FY 2012 F" 2013 Historical Sales & Use Tax Revenues (in millions) 15.14 12.68 11.94 12.19 12.14 11.95 10.95 10.05 --m—Sa les & Use Tax (including the State SUTC Fund) � P u61ic Safety Fund -Sales Tax Meas u re 1 10.25% Sales Tax) 2.51 1.96 1.925 0.47 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Est. FY 2021 Est. As can be seen from the pie chart below, 83.1 percent of General Fund revenues (per the initial fiscal year 2020-21 budget) are derived from TOT, property tax, and sales tax receipts. Because TOT and sales tax revenues are closely linked to the local economy, these revenues tend to be much more volatile than property taxes and most other revenue sources. For long- range fiscal planning purposes, these revenues should bolster the General Fund reserve when Z FY 2020-21 Budget May 13, 2020 the economy is strong, and be used to support General Fund services in times of economic downturn. The volatility of these revenues is a major consideration in the City's risk -based reserve policy. City of Burlingame General Fund Revenue Composition Other Revenue, 16.9% Property Tax, Property Tax Transient 36.9% Occupancy Tax, ■ Sales and Use Tax 25.0% Sales and Use Tax, 21.2% Transient Occupancy Tax ■ Other Revenue Franchise fees comprise slightly less than 2.5 percent, of the City's General Fund revenue sources. The solid waste franchise fee makes up nearly half of all franchise fee revenues for the City. Solid waste rates were increased six percent as of January 1, 2019 due to increased costs for the collection, disposal, and recycling processes since 2012 (the last time rates were raised); an additional 6 percent increase went into effect for calendar year 2020, and a third 6 percent increase is approved and scheduled for calendar year 2021. In the past, service volumes were conservatively projected to remain level despite significant development activity, as service levels can change. However, the shelter -in -place mandate of the past few months has compelled many businesses to suspend or reduce their level of service obtained from Recology, the City's solid waste collection franchisee. This translates to a reduction in Recology's commercial billings, and a reduction of the franchise fees collected for the City. As the SIP orders are lifted, it is anticipated that business activities will resume to some extent, and over some period of time. Staff expects a decline in these franchise revenues, particularly in the first quarter of the new fiscal year. Although Gas and Electric utilization/consumption and rates have also increased in recent years, changes to these line items are kept to a minimum for the fiscal year 2020-21 budget. These revenues are paid on a calendar year basis, and they were slightly underestimated in the current fiscal year (for 2019). Staff projects that these fees will remain relatively flat. 10 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA FRANCHISE TAXES Gas Electric Garbage AT&T Cable TV Wave Astound AT&T Video Service Total, Franchise Taxes FY17-18 Actual FY18-19 Actual $ 129,951 $ 119,672 268,927 269,874 743,450 772,154 433,554 406,107 23,979 23,385 76,031 66,611 $ 1,675,891 $ 1,657,802 FY19-20 FY20-21 $ Change % Change Adjusted Proposed from Prior from Prior Budget Budget Year Year $ 121,000 $ 136,200 $ 15,200 12.6% 271,000 288,000 17,000 6.3% 782,000 740,000 (42,000) -5.4% 380,000 390,000 10,000 2.6% 24,000 25,000 1,000 4.2% 64,000 62,000 (2,000) -3.1% $ 1,642,000 $ 1,641,200 $ (800) 0.0% Business license taxes, which account for approximately 1.1 percent of General Fund annual revenues, consist not only of the $100 license per business establishment, but also the special license tax paid by the City's long-term parking businesses, which is paid quarterly and is set at 5 percent of gross proceeds. As airport traffic has decreased significantly, long-term revenues from long-term parking activities is down. Trends toward ride -sharing services were already impacting these revenues, so it is doubtful that these revenues will recover fully. In addition, business licenses are paid/renewed at the beginning of the calendar year or upon starting up a new business in Burlingame. The number of businesses could possibly wane early in the fiscal year as some businesses decide not to open or perhaps choose not to return to a post-Covid-19 environment that may prove to be less profitable. Alternatively, property transfer taxes, which are assessed when properties change ownership, should recover from the current fiscal year's lapse in real-estate activity created by shelter in place mandates. The spring and early summer season is usually an active one for real estate — both residential and commercial. To the extent that property transactions were delayed, a return to a "normal activity" should provide a bump -up in the summer and fall months. These tax receipts are anticipated to provide a pre-COVID average of approximately $400,000 in fiscal year 2020-21, though even a small number of large property sales in the city could bolster this line item revenue. Similarly, revenues from activities in the category of fines, forfeitures and penalties are expected to rise from the current -year estimates, as the City begins to enforce regular parking restrictions in the City's downtown areas. The Council directed that most parking be free of charge while the County's shelter in place orders are lifted, plus two weeks for a smooth transition back to metered, limited duration, and permit parking. No citations were anticipated to be issued for at least three months, causing a decrease of this revenue (to $608,000) for fiscal year 2019-20. The number of "smart meters" installed in the City's downtown has in past years facilitated the issuance of citations, but the number of citations has actually dropped. Since compliance with parking restrictions throughout the city is necessary to support the safe and fair turnover of the limited parking facilities available to residents, businesses, and customers, this is an excellent 11 FY 2020-21 Budget May 13, 2020 result attributable to the convenience of the new meters. As businesses are once again drawing customers to the downtown areas, this revenue should recover somewhat (to $680,000). Licenses and permits consist largely of alarm permit fees and taxicab licenses. These revenues, which account for approximately one-half of one percent of total General Fund revenues, are not expected to deviate significantly from current collections. CITY OF BURLINGAME, CA CHARGES FOR SERVICES BY DEPARTMENT FY19-20 FY20-21 $ Change % Change FY17-18 FY18-19 I Adjusted Proposed from Prior from Prior By Department Actual Actual Budget Budget Year Year Police $79,416 $91,570 $363,500 $84,000 ($279,500) -76.9% Parks 116,197 127,470 140,000 160,000 20,000 14.3% Recreation 3,008,863 3,374,909 2,304,000 3,000,000 696,000 30.2% Aquatics 299,017 697 0 220,000 220,000 n/a Planning 555,671 1,057,703 797,000 887,000 90,000 11.3% Public Works 658,704 861,185 781,000 681,000 (100,000) -12.8% Library 784,985 759,320 740,500 757,000 16,500 2.2% Other 12,940 9,315 9,000 9,000 0 0.0% Total, Departmental Fees $5,515,794 $6,282,169 $5,135,000 $5,798,000 $663,000 12.9% Revenues from charges for services increased significantly in fiscal year 2018-19, due largely to fees generated from development projects. Volumes were anticipated to increase in the current fiscal year, prior to the County's shelter in place (SIP) orders designed to contain the spread of the coronavirus. The impact to the City's recreation services was most severe, preventing the continuation of the popular spring and summer programs that constitute the largest portion of the department's revenue. Although the closure of the Recreation Center to make way for the New Community Center Construction project had been anticipated, classes and events had been effectively relocated. The effect of continuing SIP conditions on late summer and fall registrations is largely unknown at this time, as daycare programs are still restricted and schools may open earlier than regularly scheduled. The Master Fee Schedule has been updated to keep up with the current cost of providing services, and the revised schedule will be effective at the beginning of the 2020-21 fiscal year. Even with an anticipated recovery for most service offerings, the revenue projection for this category as a whole has decreased nearly 7.4 percent from March's (pre-COVID) five-year forecast, based on the departmental projections for each revenue source as shown above. Finally, interest income on the City's investment portfolio is predicted to decline. Yields on the safe investments that constitute the City's portfolio are at historic lows, and while increasing yields are anticipated in the next fiscal year, the size of the City's cash and investments is expected to decrease. In the past year, the average yield to maturity on the City's portfolio has decreased from 2.45 percent to 2.22 percent (as of March 31s), a 9.4 percent decrease. The size of the portfolio itself increased $6.7 million, or 5.8 percent. When General Fund balance 12 FY 2020-21 Budget May 13, 2020 declines, the City's cash and investment holdings also decrease. The General Fund is projected to incur a net operating deficit of $4.8 million (prior to a transfer to the Capital Investment Reserve of $6.5 million) in the current fiscal year, representing a 4 percent decline in holdings. Interest attributed to the City's Capital Investment Reserve (projected to be $35.3 million as of June 30, 2020) and other governmental capital project funds is credited to the General Fund; these interest earnings should continue to grow until the funds are appropriated to the City's infrastructure needs. Staff anticipates draws from the Capital Investment Reserve in fiscal year 2021-22 for the Community Center, and for the Broadway Grade Separation project as early as fiscal year 2022-23. The El Camino Real Undergrounding Project will require additional funding in FY 2023-24. In response to the economic uncertainties created by the pandemic -induced recession, the Federal Reserve cut interest rates to the new target range of 0% to 0.25%. Not surprisingly, U.S. Treasury yields ended the quarter down markedly across all durations, with longer maturity obligations reaching record lows. This resulted in strong market value appreciation for fixed income investments. On the other hand, U.S. equity markets plummeted in March, resulting in losses for investments in the City's trust funds for OPEB and pension obligations. How soon the various markets can recover is dependent on the broader economic recovery in the nation as a whole. In general, interest rates are projected to move upward with that recovery. The U.S. Treasury yield curve is no longer inverted, but treasuries are trading at significantly lower yields than just three months ago. This makes the forecast of future earnings for these investments difficult, as Treasury notes make up 22 percent of the City's portfolio. However, the City will continue its strategy (for its main portfolio) of broad diversification across the high - quality sectors permitted in the portfolio, including federal agencies, corporate notes, negotiable CDs, and supranationals. As shown in the chart on the next page, although interest earnings are projected to be slightly higher in fiscal year 2020-21, many governmental funds will experience decreased fund balances, and therefore, decreased interest earnings for the year. Note that an assumption about the year-end "mark -to -market" adjustment is not included in the City's budget, and the FY 2018-19 actual interest earnings are shown without that year-end adjustment. 13 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA INTEREST INCOME FY19-20 FY20-21 FY18-19 Adjusted Proposed Actual* Budget Budget General Fund $2,380,791 $2,400,000 $1,563,000 Debt Service Fund 188,172 520,000 330,000 Storm Drain Fund 190,337 190,000 77,000 Water Enterprise Fund 252,020 250,000 313,000 Sewer Enterprise Fund 179,165 180,000 320,000 Parking Enterprise Fund 139,051 140,000 174,000 Solid Waste Fund 63,918 64,000 77,000 Landfill Fund 23,523 24,000 31,000 Building Enterprise Fund 170,943 170,000 200,000 Burlingame Avenue Assessmer 5,257 5,000 4,000 Gas Tax Fund 6,919 7,000 5,000 Measure A Fund 1,339 2,000 1,000 Public TV Access Fund 8,212 9,000 11,000 Measure W Fund 0 0 2,000 Other Local Grants/Donations 0 0 10,000 Development Fees 81,191 82,000 122,000 General Liability ISF 74,836 75,000 94,000 Worker's Compensation ISF 89,184 90,000 115,000 Facilities Services Fund ISF 11,306 10,000 6,000 Equipment Services Fund ISF 76,440 76,000 95,000 Information Services Fund ISF 15,277 15,000 20,000 Total, Interest Income $3,957,880 $4,309,000 $3,570,000 *Excludes June 30, 2019 Mark -to -Market Adjustment General Fund - Expenditures The following table shows the proposed fiscal year 2020-21 General Fund expenditures by department/area as compared to the current -year adjusted budget. Again, expenditure budgets are compared with the prior fiscal year as well as with the current year (2019-20) adjusted budget. The FY 2019-20 Adjusted Budget column includes all budget revisions approved by the City Council since the beginning of the fiscal year, including mid -year budget revisions, and the most recently proposed adjustments needed to reflect the impact of the COVID-19 pandemic in the current fiscal year. CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES By General Fund Program General Government Public Safety Public Works Community Development Leisure & Culture Total Expenditures FY19-20 FY20-21 %Change FY17-18 FY18-19 Adjusted Proposed $ Change from from Prior Actuals Actuals Budget Budget Prior Year Year $ 5,132,958 $ 5,513,693 $ 6,979,099 $ 7,135,597 $ 156,498 2.2% 26,413,818 27,758,430 29,699,707 30,157,969 458,262 1.5% 5,645,705 5,934,117 6,533,410 7,073,458 540,048 8.3% 1,799,124 1,709,736 2,694,507 2,549,168 (145,339) -5.4% 14,645,653 14,847,131 16,610,808 17 17 414,009 2.5% $ 53,637,258 $ 55,763,107 $ 62,517,531 Q3,941,009 1,423,478 2.3% 14 FY 2020-21 Budget May 13, 2020 To allow a comparable operating picture to prior year budgets, the fiscal year 2020-21 proposed budget provides a consistent application in accounting principles and budgetary assumptions, as well as a systematic allocation of the costs of funding the City's long-term liabilities. For example, retiree medical benefits are shown in the departmental budgets, rather than on a "pay-as-you-go" basis. Both the normal (current year benefits earned by active employees) and amortized (benefits earned in all prior years) costs of the retiree medical program are part of the regular operating budgets. Note, however, that pension costs are shown within the departmental budgets only to the extent that the CalPERS-required employer contributions are made. Additional contributions approved by the Council for the § 115 Pension Trust are not shown as expenses in the City's operating budget; such contributions are shown as reserved cash for the payment of pension obligations in future years. Shown below are total appropriations, personnel and non -personnel, by department or functional area: CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY19-20 FY20-21 $ Change % Change FY18-19 Adjusted Proposed from Prior from Prior Actuals Budget Budget Year Year By General Fund Program General Government $ 5,513,693 $ 6,979,099 $ 7,135,597 $ 156,498 2.2% Public Safety Central County Fire (Burling 11,042,679 11,792,359 12,569,737 777,378 6.6% Police & Dispatch 16,715,751 17,907,348 17,588,232 (319,116) -1.8% Public Works 5,934,117 6,533,410 7,073,458 540,048 8.3% Community Development 1,709,736 2,694,507 2,549,168 (145,339) -5.4% Leisure & Culture Aquatic Center 267,212 309,000 480,000 171,000 55.3% Library 5,348,120 5,863,351 5,984,001 120,650 2.1% Parks & Recreation 9,231,799 10,438,457 10,560,816 122,359 1.2% Total Expenditures $55,763,107 $ 62,517,531 -3,941,009 1,423,478 2.3% Below is a further breakdown of appropriations by program/division: 15 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY19-20 FY20-21 % Change FY17-18 FY18-19 Adjusted Proposed $ Change from from Prior Actuals Actuals Budget Budget Prior Year Year By General Fund Program City Council $ 333,794 $ 348,006 $ 698,961 $ 460,660 $ (238,301) -34.1% City Manager 676,570 771,425 908,552 965,073 56,521 6.2% City Attorney 704,342 830,095 1,124,164 1,126,967 2,803 0.2% City Clerk 395,650 359,358 620,729 644,591 23,862 3.8% Finance 2,260,381 2,319,355 2,643,427 2,758,687 115,260 4.4% Human Resources 762,222 885,453 983,266 1,179,619 196,353 20.0% Fire & Disaster Preparedness 10,694,035 11,042,679 11,792,359 12,569,737 777,378 6.6% Police & Dispatch 15,094,396 16,033,869 17,188,646 16,915,984 (272,662) -1.6% Parking Enforcement 625,387 681,882 718,702 672,248 (46,454) -6.5% Public Works 5,645,705 5,934,117 6,533,410 7,073,458 540,048 8.3% Community Development 1,799,124 1,709,736 2,694,507 2,549,168 (145,339) -5.4% Recreation 4,357,822 4,621,749 4,980,775 4,896,129 (84,646) -1.7% Parks 4,782,932 4,610,050 5,457,682 5,664,687 207,005 3.8% Aquatics Center 439,627 267,212 309,000 480,000 171,000 55.3% Library 5,065,272 5,348,120 5,863,351 111284001 120,650 2.1% Total Expenditures $ 53,637,258 $ 55,763,107 $ 62,517,531Q 63,941,009 1,423,478 2.3% Overall, departmental expenditures are shown as increasing 2.3 percent in the proposed budget over the current fiscal year 2019-20 adjusted budget. Because the current year budget includes $755,000 to fund response programs to assist small businesses and vulnerable residents through the public health emergency created by COVID-19 (reflected in the City Council and Community Development Department), the increase is actually closer to a 3.5 percent increase in General Fund expenditures. (Note that the most recent $200,000 appropriation to assist individuals through supporting the services of Samaritan House, CALL Primrose, and HIP Housing is not yet reflected in the current -year budget.) Increases vary by department, but are largely associated with an increase in personnel added at mid -year, and the associated benefit costs, discussed below. As can be seen in the summary tables, the largest share of the General Fund budget (27.5 percent) is allocated to Police services such as 911 emergency response, neighborhood patrols, crime prevention, and investigation programs. Maintaining public safety as the City's number one priority while enhancing additional quality of life services remains the City's vision and goal. The only accounting change to note in this proposed budget for the 2020-21 fiscal year is in Fire and Disaster Preparedness. These services comprise an additional 19.7 percent of the General Fund expenditure budget. The adopted budget for Central County Fire District operations for fiscal year 2020-21 were capped at a 3 percent ($409,000) increase (based on the District's FY 2019-20 projection) in Burlingame's share of funding (nearly $11.9 million). The City's budget also includes funding of approximately $100,000 for disaster preparedness costs. However, the largest increase reflected in this line item is the addition of over $360,000 in OPEB (retiree medical benefits) costs. This cost has in the past been recorded and reported as a public safety expense in the Police Department. In actuality, the benefit 16 FY 2020-21 Budget May 13, 2020 provided for the existing 46 Fire Department retirees covered under the City's Tier 1 retiree medical program should be shown as part of the Fire and Disaster Preparedness program. The costs associated with this change are classified as non -personnel costs; only the department in which it is recorded has changed. The 2020-21 fiscal year budget proposed for the General Fund can also be compared to the current year budget by category of expenditure. CITY OF BURLINGAME, CA SUMMARY OF GENERAL FUND EXPENDITURES FY19-20 FY20-21 $ Change % Change FY18-19 r Adjusted Proposed from Prior from Prior Actuals Budget Budget Year Year BV Expense Categories Salaries & Wages $ 18,005,210 $ 20,207,319 $ 20,514,956 $ 307,637 1.5% Benefits 10,970,167 12,648,341 13,386,148 737,807 5.8% Operating Costs 22,478,484 25,233,119 25,306,860 73,741 0.3% Internal Services 4,177,333 4,170,252 4,570,045 399,793 9.6% Capital Outlay 131,913 258,500 163,000 (95,500) -36.9% Total Expenditures $55,763,107 $ 62,517,531 63,941 0 $1,423,478 2.3% Personnel Costs — A review of the proposed 2020-21 fiscal year General Fund expenditure budget by type shows that personnel costs are projected to increase 3.2 percent (approximately $1.0 million) when compared to the current year's adjusted budget. 17 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA GENERAL FUND WAGES & BENEFIT DETAIL FY18-19 Personnel Cost Actuals Salaries & Wages Benefits: Retirement Health Premiums OPEB Current Medicare Workers' Compensation Dental, Vision, Life & LTD Other Benefits Total Benefits Total Personnel Cost $ 18,005,210 1 5,008,884 2,481,006 995,557 262,071 728,828 265,162 1,228,660 10,970,167 $28,975,377 FY19-20 FY20-21 $ Change % Change Adjusted Proposed from Prior from Prior Budget Budget Year Year $ 20,207,319 $ 20,514,956 307,637 1.5% 6,136,972 6,625,560 488,588 8.0% 2,737,222 2,978,790 241,568 8.8% 1,039,320 840,753 (198,567) -19.1% 296,370 310,714 14,344 4.8% 728,828 787,893 59,065 8.1% 302,137 322,967 20,830 6.9% 1,407,492 1,519,471 111,979 8.0% 12,648,341 13,386,148 737,807 5.8% $32,855,660 $33,901,104 $ 1,045,444 3.2% Increases in CalPERS pension costs — based on the required employer contribution rates for both Safety and Miscellaneous Employee Plans — resulted in an increase of 8.0 percent from the prior year. (Note that contributions to the § 115 Trust for pension obligations are not included in the budget as an expenditure at the time of contribution.) The increase in required contribution rates to CalPERS was largely anticipated. Increasing pension costs have been a concern for years — shown below is an estimate of future increases for the City as a whole. Pension costs have been built into the City's most recent five-year forecasts for the General Fund, but a more in-depth discussion of the assumptions behind these rates, the funded status of the City's plans, and how best to fund future pension increases will be held early in the new fiscal year. Estimated CalPERS Rate Misc. Rate Safety Rate Fiscal UAL Total Total as % of Normal UAL Total Total as Year Normal Cost Payment Contributions Payroll Cost Payment Contributions of Payroll 2020-21 2,094,000 + 3,060,000 5,154,000 27.00% 1,005,000 + 1,995,000 3,000,000 55.00% 2021-22 2,149,000 + 3,412,000 5,561,000 28.30% 1,034,000 + 2,263,000 3,297,000 58.70% 2022-23 2,214,000 + 3,981,000 6,195,000 30.60% 1,065,000 + 2,661,000 3,726,000 64.40% 2023-24 2,280,000 + 4,389,000 6,669,000 32.00% 1,096,000 + 2,984,000 4,080,000 68.50% 2024-25 2,348,000 + 4,854,000 7,202,000 33.60% 1,129,000 + 3,322,000 4,451,000 72.60% 2025-26 2,419,000 + 5,220,000 7,639,000 34.60% 1,163,000 + 3,599,000 4,762,000 75.40% Health premiums are anticipated to rise in 2021; the health plan rates for 2021 will be approved by the CalPERS board in June. For this initial budget, a 10 percent increase is assumed at January 1, 2021. The remainder of the increased budget for health premiums is the additional number of benefitted employees, discussed below. The cost of OPEB (retiree IN FY 2020-21 Budget May 13, 2020 medical benefits) will continue to decrease as the number of employees eligible for this defined benefit program diminishes. (The program is no longer offered to new employees.) Another contributor to the increase in the benefit budget is reflected in the cost of "other benefits". $82,000 was included in this General Fund's budget line item for unemployment reimbursement. Many casual/part time employees were furloughed in recent months due shelter -in -place orders, and, although the cost of unemployment can be absorbed in the current fiscal year budget, these benefits will carry forward well into the new fiscal year. The budget for salaries and wages includes regular salary increases, calculated according to contractually -agreed upon increases for most employees, including hourly employees. Offsetting these increases is the cost of new employees, who are generally placed in a lower salary step than existing employees. Overtime, another component of salaries and ages, is also expected to be approximately $328,000 less than in the current fiscal year. This reduction in overtime costs is projected mainly in the Police Department, as a FY 2019-2020 mid -year budget amendment provided funding for the extra detail needed on Burlingame Avenue through an agreement with the Apple Store. The overtime needed for dispatch activities should also decline as the division is now fully staffed. Since personnel costs represent a large investment in the City's current and future resources, requests for increases in Full Time Equivalent (FTE) positions are carefully monitored to ensure they provide the best on -going value for the City. As a result of Assembly Bill 5 (AB 5), effective January 1, 2020, the City adopted new standards for the use of contract labor. It was determined that many of the contractors used by the City, particularly in development services, did not meet the new standards established by the bill. In order to continue to meet service demands, staff positions were added, and the use of contract services in the affected departments, along with some hourly wages, was decreased. The changes in personnel/ positions were deemed necessary to effectively carry out the City's priorities and support both General Fund and Capital Improvement Program activities, and are reflected as a 6.75 increase in city-wide FTEs. In addition, a Management Analyst position was approved for the Finance Department earlier in the year. The FY 2020-21 budget is the first to provide a full year of funding for these positions; there are no additional staffing proposals for the new fiscal year. 19 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA PROPOSED BUDGET FISCAL YEAR 2020-21 AUTHORIZED FULL-TIME EQUIVALENT POSITIONS Department 2019-20 Adopted Budget GENERAL FUND City Attorney 3.40 City Clerk 1.50 City Manager 2.13 Community Development - Planning 6.75 Finance 10.25 Human Resources Library Parks Police Police - Communications Police - Parking Enforcement Public Works - Engineering Public Works - Streets & Storm Drain Recreation Total General Fund ENTERPRISE & INTERNAL SERVICE FUNDS Sewer Enterprise Solid Waste Enterprise Landfill Enterprise Parking Enterprise Community Development - Building Facilities Services ISF Admin & Information Technology ISF Fleet & Equipment Maintenance ISF Water Enterprise Total Enterprise & Int Svc Funds Grand Totals, City -Wide 2019-20 Adjusted Change in 2020-21 Budget Positions Proposed 3.40 0.00 3.40 1.80 0.30 1.80 2.63 0.50 2.63 9.00 2.25 9.00 11.20 0.95 11.20 3.00 4.00 1.00 4.00 23.00 23.00 0.00 23.00 21.50 21.50 0.00 21.50 47.00 47.00 0.00 47.00 7.00 7.00 0.00 7.00 4.00 4.00 0.00 4.00 12.75 13.75 1.00 13.75 8.03 8.03 0.00 8.03 11.25 11.00 (0.25) 11.00 161.56 167.31 5.75 167.31 15.48 15.48 0.00 15.48 3.00 3.00 0.00 3.00 0.25 0.25 0.00 0.25 2.00 2.00 0.00 2.00 6.00 8.00 2.00 8.00 5.00 5.00 0.00 5.00 0.50 0.50 0.00 0.50 3.00 3.00 0.00 3.00 17.48 17.48 0.00 17.48 52.71 54.71 2.00 54.71 214.27 222.02 7.75 222.02 In addition to the adjustments made in the current fiscal year, staff proposes several classification changes in personnel/positions in this 2020-21 fiscal year budget. The reclassifications result largely from adjustments in the departments' organizational structures implemented to best support the specific operational and capital activities. New class specifications are proposed to more closely align actual duties performed by staff with the job classification, and will be presented for Council approval along with the FY 2020-21 budget. The proposed classification plan changes have all been presented to the City's bargaining units. The personnel changes presented as part of the proposed budget include three reclassifications and one classification title change: 20 FY 2020-21 Budget May 13, 2020 Parks & Recreation The Recreation Supervisors in the Parks & Recreation Department are responsible for all program areas in the Recreation division. The duties of the senior incumbent, who has been with the City for more than five years, have broadened to include an increasingly greater number of program areas and a higher level of responsibility within the department, including responsibility for large portions of the move out of the old Recreation Center and into portable buildings and various temporary office locations. The existing duties of the senior incumbent are more closely aligned with those of a Recreation Manager. Public Works With the departure of the Fleet Manager, the Public Works Department reorganized two small divisions, Facilities and Fleet, into one division, under the direction of the existing Facilities Division Manager. Replacing the vacant Fleet Manager with a Facilities and Fleet Supervisor will provide more supervisory support to the Facilities division, and allow the Facilities Manager (renamed the Facilities and Fleet Division Manager) sufficient time to assume management of the Fleet Division. Reclassifying the Automotive Mechanic to a Lead Equipment Mechanic with responsibility for fleet maintenance ensures maximum efficiency and adequate skills coverage in both divisions. Non -Personnel Costs — This group of costs is increasing less than 1.3 percent in the 2020- 21 fiscal year proposed budget when compared to the current year's adjusted budget. Though not a large percentage increase for the fiscal year, the change represents not only regular cost increases, but an attempt to curb expenses as much as possible. Departments were careful to review contract services to ensure that only projects that were necessary and could realistically be addressed in the upcoming fiscal year were included in the budget proposal. It should be noted that not all expenses are incurred every fiscal year. For example, the current- year budget reflects $150,000 for the November 2019 elections, while local elections will not be held in the upcoming fiscal year. Some programs and initiatives are not repeated with each budget cycle, such as the City's funding of COVID-19 relief to businesses and vulnerable households in the current year's adjusted budget ($755,000). In addition, certain expenditures may be anticipated in the delivery of services that provide a high level of cost recovery, increasing revenues at the same rate as the increased expense. This is especially true in the delivery of Parks and Recreation programs, and development services as well. So it is difficult to compare the various year -over -year budgetary changes in this large class of expenditures. But a careful eye was kept on the bottom line in all departments. General Fund budgets for Travel, Conferences and Meetings, for example, were reduced by 30 percent. General Fund Operations Summary A summary of the General Fund operations per the FY 2020-21 proposed budget is shown below: 21 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA GENERAL FUND OPERATING SUMMARY Total Revenue Expenditures Departmental Expenditures Transfers to Debt Services Transfers to Capital Project Fund Other Transfer In (Out) Total Expenditures Net Operating Surplus (Deficit) Transfer to Capital Investment Reserve FY18-19 Actuals $ 84,537,352 (55,763,107) (4,684,811) (10,934,000) 2,640,137 (68,741,781) 15,795,571 (3,000,000) FY19-20 FY20-21 Adjusted Proposed Budget Budget $ 69,165,100 $ 66,121,400 (62,517,531) (4,708,763) (9,185,000) 2,400,319 (74,010,975) (4,845,875) (6,500,000) (63,941,009) (2,728,338) (3,155,000) 2,573,550 (67,250,797) (1,129,397) 0 Change in General Fund Balance $ 12,795,571 $ (11,345,875) $ (1,129,397) As anticipated with the massive changes to General Fund revenue projections proposed for the current year budget, the City will experience a budgetary deficit (operating expenses exceeding revenues) of approximately $11.3 million for fiscal year 2019-20 after funding the CIP Capital Investment Reserve in the amount of $6.5 million. The deficit will largely be reflected in reduced unassigned fund balance as of June 30, 2020 if all revenues and expenditures mirror the adjusted budget for fiscal year 2019-20. Note, however, that budgetary savings are a certainty, because the expenditure budgets reflect the limit of spending levels for each department. Departments are only able to expend or commit funds up to this legal level of budgetary control. Because these budgetary controls are established within each category of departmental expenditures, budgetary savings tend to average two to four percent of the annual expenditure budget ($1.2 — $2.3 million for fiscal year 2019-20). This will help decrease the deficit actually incurred. However, though staff attempted to keep abreast of the changing economic environment of the past few months, the possibility of General Fund revenue shortfalls should also be recognized. Although expenditure increases were minimized to the extent practical, staff anticipates that General Fund revenues will continue to be sluggish into the new fiscal year; neither an immediate nor full rebound is anticipated. In fact, most revenues are not expected to achieve current -year results. In order to avoid another $11.3 million decrease in General Fund balance, staff proposes that any transfer to the Capital Investment Reserve be eliminated. Such a move is to be anticipated in any economic downturn. In addition, funding for capital improvement projects was greatly reduced (by over $6.0 million when compared to the prior year) Finally, existing monies in the debt service fund will be used to offset the annual $2 million General Fund transfer for the 2019 Lease Revenue Bonds debt service, as indicated below. 22 FY 2020-21 Budget May 13, 2020 General Fund Debt Service Obligations As can be seen in the following schedule of General Fund Debt Service Obligations, the amount of General Fund Debt service (not reimbursed by other funds) for fiscal year 2020-21 will remain fairly level with that of the current fiscal year. The roughly $300,000 decline is due to the inclusion of the cost of issuance paid in the current fiscal year for the 2019 Lease Revenue Bonds, issued in December. The bonds were issued to partially cover the cost of the Community Center project, and the debt service is covered by annual transfers of $1 million from the Measure I Fund, and $1 million from other General Fund monies. CITY OF BURLINGAME, CA GENERAL FUND DEBT SERVICE OBLIGATIONS Description Maturity 2006 Pension Obligation Bonds FY2036 2010 Lease Revenue Bonds (Corp Yard) FY2021 2012 Lease Revenue Bonds (Burl Ave Streetscape)* FY2042 2019 Lease Revenue Bonds (Community Center) FY2049 Cost of Issuance for 2019 Lease Rev Bonds Debt Administration Costs Subtotal, Principal and Interest Transactions for the 2019 Bonds: Transfers from General Fund & Measure I Drawdown from General Fund & Measure I Transfers Drawdown from the 2019 Bond Proceeds Gross Funding Needs from General Fund Contributions from Other Funds Net General Fund Debt Service *100%reimbursed by the special Assessment District and Parking Enterprise FY19-20 FY20-21 $ Change % Change Adjusted Proposed from Prior from Prior Budget Budget Year Year $976,500 $998,891 $22,391 2.3% 1,167,775 1,164,375 (3,400) -0.3% 551,488 546,688 (4,800) -0.9% 1,997,334 1,997,000 (334) 0.0% 303,054 0 (303,054) -100.0% 20,950 16,100 (4,850) -23.2% 5,017,101 4,723,054 (294,046) -5.9% 2,000,000 0 (2,000,000) -100.0% (2,005,284) (1,994,716) 10,567 -0.5% (303,054) 0 303,054 -100.0% 4,708,763 2,728,338 (1,980,425) -42.1% (1,583,218) (1,579,750) 3,468 -0.2% $3,125,545 $1,148,588 ($1,976,957) -63.3% Note that the $2 million debt service for the Community Center bonds will not require a transfer of funds from the General Fund in FY 2020-21. Transfers were made in both fiscal years 2018-19 and 2019-20, but the bonds were not issued until fiscal year 2019-20. Rather than retain the initial $2 million indefinitely in the debt service fund, staff recommends that the funds be utilized for the debt service in fiscal year 2020-21, negating the need for an additional transfer. This saves the General Fund $2 million ($1 million of which remains in the Measure I fund) and helps reduce the operating deficit anticipated during this time of economic downturn. General Fund Balance The General Fund shows a projected total fund balance of nearly $37.8 million at the end of the 2019-20 fiscal year. As previously stated, budgetary expenditure savings in the current fiscal year might provide a higher beginning fund balance (assuming budgeted revenues are realized) than shown in the chart below: 23 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA CHANGES TO GENERAL FUND BALANCE Beginning Fund Balance (audited) Projected Revenues & Expenditures Projected revenue performance Projected departmental expenditures Subtotal, Revenues Net of Expenditures Transfer to Debt Service Transfer to Capital Project Fund Other Transfers In (Out) of General Fund Transfer to CIP Renewal & Replacement Reserve Ending Fund Balance (Projected) FY 2019-20 FY 2020-21 FY 2018-19 Adjusted Proposed Actual Budget Budget $ 36,372,181 $ 49,167,751 $ 37,821,876 84,537,352 69,165,100 66,121,400 (55,763,107) (62,517,531) (63,941,009) 28,774,245 6,647,569 2,180,391 (4,684,811) (4,708,763) (2,728,338) (10,934,000) (9,185,000) (3,155,000) 2,640,137 2,400,319 2,573,550 (3,000,000) (6,500,000) 0 $49,167,751 $37,821,876 $ 36,692,479 Unlike prior fiscal years, the FY 2020-21 budget provides no funding for the Capital Investment Reserve in the City's Capital Projects Fund. Although the City has an extensive list of currently unfunded capital needs, both in facilities and infrastructure, current funding of this reserve is simply not possible in this time of economic downturn. Also note the very large reduction in funding for specific projects in the Capital Projects Fund — many projects have been deferred in order to keep the General Fund deficit to a minimum. The absence of the $2 million transfer for debt service on the 2019 Lease Revenue bonds is also evident — monies transferred in fiscal year 2018-19, prior to the debt being incurred, will provide for the necessary payment in FY 2020-21. The remaining deficit will be covered by further use of General Fund reserves. These are all one-time temporary measures, often employed by municipalities to deal with a short-term decline in revenues, while still maintaining core operations and a high level of public services. For longer -term declines, structural changes would be needed. Fortunately, the City has reserves needed to fund normal operations until the economy begins to recover, and the fiscal future becomes clearer. CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS Economic Stability Reserve Catastrophic Reserve Contingency Reserve Subtotal, Assigned Fund Balance Add: Restricted for Pension Trust Fund (PARS) Add: Unassigned Fund Balance Total, Ending Fund Balance FY18-19 FY19-20 FY20-21 Actual Adjusted Proposed Results Budget Budget $ 18,837,000 $ 16,600,000 $ 15,869,000 2,000,000 2,000,000 2,000,000 500,000 500,000 500,000 21,337,000 19,100,000 18,369,000 7,459,442 10,416,442 12, 666,442 20,371,309 8,305,434 5,657,037 $ 49,167,751 $ 37,821,876 $ 36,692,479 24 FY 2020-21 Budget May 13, 2020 The schedule above shows how the $1.1 million decrease in fund balance for the 2020-21 fiscal year will impact the reporting of General Fund reserve levels: The decrease in General Fund revenues projected for the 2020-21 fiscal year allows for a $731,000 decrease in the fund's Economic Stability Reserve. (In accordance with the General Fund policy, this reserve is maintained at 24 percent of the year's projected revenues.) During the year, the General Fund's contribution to the Pension Trust Fund is estimated to be $2.25 million, reflected in an increase of the restricted fund balance. Again, only when the trust fund is drawn upon (in future years) to pay required CalPERS employer contributions will the expenditures be recorded, and the amount restricted for this purpose in the fund balance be reduced. Finally, the unassigned fund balance is reduced by over $2.6 million. As of June 30, 2020, a fund balance of approximately $37.8 million represents 56.2 percent of the General Fund's department expenditures and debt service total of $67.2 million for the year. Although this would normally be considered a very strong level of reserves, the City Council adopted a risk -based General Fund Reserve Policy that targets reserve levels as a percentage of General Fund budgeted revenues (before transfers). Because the policy is based on an assessment of the City's revenue volatility and infrastructure risks, as well as the possibility of extreme events, the City Council's reserve management strategies reflect best practices in public finance. In addition, the City's fund balances include amounts that are restricted — set aside for use only to pay unfunded pension obligations due to CalPERS. These obligations are large. Valued at approximately $65.5 million (city-wide) as of the beginning of the current fiscal year, the amount due from these liabilities will increase in the near future due to the application of more realistic discount rates (as well as other assumption changes) in the coming years. Due to the magnitude of the unfunded pension liabilities, the City established a § 115 Trust Fund with Public Agency Retirement Services (PARS) in October 2017. The intent of the trust fund is to grow these contributions at a higher yield than can be generated in the City's own portfolio so that monies are available when the required employer contribution rates to CalPERS, which will increase rapidly in the next 5-10 years, exceed certain threshold rates. The balance in the trust at the beginning of the current fiscal year was $8.7 million; as of March 31, 2020, the balance was nearly $11.3 million. The following schedule shows the same General Fund Balance changes, but includes not only revenues and expenditures, but funding of the reserves according to Council policy, and the contributions accumulating in the § 115 Trust Fund. Again, a total change in fund balance of $1.1 million is indicated; unassigned and unrestricted fund balance decreases by $2.6 million. 25 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA GENERAL FUND BALANCE ASSIGNMENTS Beginning Balance at 7/1/2020 Changes in FY 2020-21: Projected Revenues Projected Expenditures Transfer Out to Debt Services Transfer Out to Capital Project Fund Other Transfers In/Out, net Transfer to Restricted & Assigned Fund Bal. Subtotal, Changes in 2020/21 Ending Balance at 6/30/2021 Restricted Assigned Fund Balances Unassigned for Pension Economic Fund Balance Trust Fund Stability Catastrophic Contingency Total Fund (PARS) Reserve Reserve Reserve Balance $ 8,305,434 $ 10,416,442 $ 16,600,000 $ 2,000,000 $ 500,000 $ 37,821,876 66,121,400 66,121,400 (63,941,009) (63,941,009) (2,728,338) (2,728,338) (3,155,000) (3,155,000) 2,573,550 2,573,550 (1,519,000) 2,250,000 (731,000) - (2,648,397) 2,250,000 (731,000) (1,129,397) $ 5,657,037 $ 12,666,442 $ 15,869,000 $ 2,000,000 $ 500,000 $ 36,692,479 Measure I Fund — Though Measure I revenues and expenditures are part of General Fund operations, these monies are accounted for in a separate sub -fund to provide greater transparency in reporting the uses of this new funding source. This accounting treatment will also facilitate external audit activities and allow a straight -forward review by the Measure I Oversight Committee. Approved by voters in November 2017, this general purpose t/4% transaction tax went into effect on April 1, 2018; the City Council adopted the Measure I Expenditure Plan in February 2018. The budget priorities from the public engagement surrounding Measure I included public safety; street and sidewalk maintenance; and safe, adequate park and recreation programs and facilities. CITY of BURLINGAME, CA MEASURE I Beginning Fund Balance Revenues Expenditures Transfers. Transfer to Street Capital Project Fund Transfer to Debt Service Fund Net Change Ending Fund Balance 2019-20 2020-21 Projection Projection $ 1,274,083 $ 865,283 1,960,000 1,925,000 (168,800) (170,300) (1,200,000) {1,600,000} {1,000,000} - (408,800) 154,700 $ 865,283 $ 1,019,983 The Measure I tax was expected to provide approximately $1.75 million in additional revenue in the first complete fiscal year of receipts (FY 2018-19). Bolstered by the same one-time events that impacted other sales tax revenues, Measure I tax revenues of over $2.5 million were realized. The initial -year expenditures included funding for one police officer, $1 million in debt service for an anticipated Lease Revenue bond issuance for the new Community Center construction project, and approximately $575,000 for specific street and sidewalk improvements 26 FY 2020-21 Budget May 13, 2020 identified in the FY 2018-19 Capital Improvement Plan. Due to the higher revenues achieved, the 2019-20 fiscal year budget allowed for a Measure I appropriation of $1.2 million for street and sidewalk improvement projects. Because $1 million was set aside for debt service for the Community Center bond issuance in FY 2018-19, prior to the bonds actually being issued, staff proposes that the annual transfer to the debt service fund be waived for fiscal year 2020-21. Despite an anticipated decline in revenues, this will allow $1.6 million to be appropriated for streets and sidewalk improvements. In addition, Measure I continues to fund one police officer position. Unfunded Needs The City has long recognized the need to balance ongoing operations and services with a significant list of unfunded needs. These unfunded needs are largely reflected in the City's aging facilities, many of which are utilized by the public. Nearly five years ago, the City Council ranked a new downtown parking garage as the highest priority for small businesses and shoppers alike, followed by a new Community Center and essential City Hall upgrades to enhance public access to policy decision -making. Since that time, the passage of Measure I has helped advance the replacement of the City's World War II -era Recreation Center in Washington Park with a new, more functional Community Center. Supported by the Measure revenues, the 2019 Lease Revenue Bond issue will help make the new Community Center a reality. In addition, more infrastructure (specifically, street and sidewalk) repairs and replacement will be made possible with Measure I funds. As funding options have been pursued, other capital needs have been identified that will require funding as well as stretch the organization's capacity in the future. The City Council has prioritized five major infrastructure projects: Broadway grade separation, City Hall safety improvements, development of a specific plan for Rollins Road, sea level rise shoreline protection improvements, and the undergrounding of power lines on El Camino Real. The selection of these five large infrastructure priorities indicates a desire to initiate, prioritize, and provide a focus with regard to identifying funding sources. The funding for these identified priorities may include a combination of the City General Fund, state and federal grants, assessment district, a ballot measure, partnering with private developers, and other sources. Meanwhile, the City has continued regular investments in building maintenance and infrastructure maintenance through the five-year CIP. To the extent possible, funds have been set aside in the City's Capital Investment Reserve within the Capital Projects Fund. The reserve balance as of the end of the current fiscal year is anticipated to be $24.7 million. Because the reserve is being funded by annual surpluses and one-time revenues, it has long been recognized that contributions to the reserve will inevitably be reduced or eliminated when the economy retracts. Due to the current economic environment, no additional funding of the Capital Investment Reserve is provided in the initial General Fund budget for fiscal year 2020-21. 27 FY 2020-21 Budget May 13, 2020 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 (mid year) 2,300,000 Ending Balance 6/30/18 $ 25,800,000 Budget Transfer from General Fund in FY 2018-19 3,000,000 Budgeted Balance at 6/30/19 $ 28,800,000 Budget Transfer from General Fund in FY 2019-20 6,500,000 Transfer to fund New Community Center Project (10,644,000) Budgeted Balance at 6/30/20 $ 24,656,000 Budget Transfer from General Fund in FY 2020-21 0 Budgeted Balance at 6/30/21 $ 24,656,000 In addition, unfunded pension liabilities are requiring immediate attention, as the interest on these obligations begins to outpace efforts to pay down these expenses for prior -year service. The City Council has taken steps to address these growing unfunded pension liabilities with CaIPERS. The City's CaIPERS contribution rates are expected to increase from the current Misc./Safety rates of 27.0%/55.0% to 39.2%/86.3% (as a percent of payroll) in the next 10 years. The 2020-21 fiscal year will be the fourth year for funding the § 115 Trust Fund. The trust fund was established to augment the City's budget when required CaIPERS employer rates exceed a pre -determined threshold. Although staff continues to analyze additional options for funding pension obligations, these unfunded needs will be kept in mind when assessing the City's long-term fiscal health. A fuller discussion of the City's pension funding, including stress testing of the plans under various scenarios, will be agendized for a City Council study session in the fall. Other Funds Although the General Fund is the main operating fund of the City, the City utilizes various enterprise, capital, internal service, and special revenue funds to account for both governmental and business -like activities. The activities accounted for in these other funds are significant and wide-ranging. Staff analyzes all funds at least monthly to ensure that they are self-sustaining and carry adequate fund balances for periods of uncertainty. The chart below shows initial expenditure budgets for the City's larger funds for the 2020-21 fiscal year: FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA BUDGET SUMMARY BY FUND General Fund Capital Projects Financing Authority Water Enterprise Sewer Enterprise Parking Enterprise Solid Waste Enterprise Landfill Fund Building Enterprise Special Revenue Funds Internal Service Funds Total Capital Protects Fund FY19-20 FY20-21 Adjusted Proposed Budget Budget $ 62,517,531 $ 63,941,009 $ 26,400,320 14,105,000 $ 7,085,640 6,634,393 $ 14,915,977 15,329,401 $ 11,023,275 11,296,611 $ 785,753 825,472 $ 824,595 893,975 $ 251,813 258,414 $ 3,016,329 2,461,875 $ 215,500 227,500 $ 69,576 156,448 $ 127,106,309 $ 116,130,098 The Capital Improvement Program budget as adopted for the 2019-20 fiscal year was not significantly adjusted until the new Community Center project funding requirement was finalized. The $52.2 million project, partially funded by proceeds from the 2019 Lease Revenue Bond issued in December, is not shown in the above summary table to allow for a more meaningful comparison to the upcoming fiscal year. Funding from the General Fund was purposefully reduced to limit the extent of the deficit anticipated for the 2020-21 fiscal year. A complete presentation of 2020-21 fiscal year Capital Projects Program activities has been prepared by Public Works for this (May 13, 2020) budget study session. CITY OF BURLINGAME CAPITAL IMPROVEMENT PROGRAM General Fund Streets CIP $ 2,600,000 Parks & Trees CIP 555,000 Parking & Garages CIP 0 Facilities CIP 0 Storm Drain CIP 0 Water CIP 0 Sewer CIP 0 All CIP Funding Sources, FY2020-21 $ 3,155,000 Other FY20-21 Funds/Sources Proposed CIP $ 800,000 $ 3,400,000 0 555,000 350,000 350,000 0 0 4,500,000 4,500,000 3,500,000 3,500,000 1,800,000 1,800,000 S 10.950.000 S 14.105.000 29 FY 2020-21 Budget May 13, 2020 Although deferred infrastructure maintenance must be avoided for a truly sustainable budget, it is difficult to determine the appropriate annual investment into comprehensive maintenance programs and the Capital Investment Reserve that will provide for assets that retain a targeted condition level. But due to the sudden downturn in the economy and resulting damage to the City's revenues, the Capital Improvement Program was significantly reduced for fiscal year 2020-21 when compared to the budgets of recent years. Note that there are no General Fund transfers to the Capital Investment Reserve included in the FY 2020-21 Operating Budget. As previously noted, this was also done in an attempt to minimize the General Fund's operating deficit for the fiscal year. A $3 million transfer to the Capital Investment Reserve has served as a placeholder in past budgets, representing an affordable investment in unfunded infrastructure projects. Contributions to the Capital Investment Reserve since its inception in fiscal year 2014-15 are projected to total $22.8 million (after funding the Community Center project) as of June 30, 2020. Staff anticipates draws from the Capital Investment Reserve in fiscal year 2021-22 for the Community Center, and for the Broadway Grade Separation project as early as fiscal year 2022-23. The ECR Undergrounding Project will require additional funding that will far exceed the remaining reserve balance anticipated; that project timeline is contingent on planning for the concurrent Caltrans project, but funding is currently anticipated to be needed in fiscal year 2023-24. Solid Waste Fund and Landfill Funds As noted in the mid -year report, Solid Waste rates were approved for three calendar years (effective January 1, 2019, 2020 and 2021). However, the Solid Waste Fund will continue to experience deficits, requiring draw downs on the fund's rate stabilization reserve. Revenues from the utility are anticipated to fully cover the expenses of the fund only in the third calendar year of rate increases. For calendar year 2019, revenues from collections from Burlingame customers ($11.7 million) fell short of the costs of the City's collection contractor (Recology) of $5.7 million; disposal & processing fees of nearly $4.4 million; franchise fees of $788,000; funding of the City's landfill post -closure costs ($493,000); and $619,000 for costs borne by the City, including street sweeping and steam cleaning and maintenance of public receptacles. The shortfall for calendar year 2019, even with the rate increases in effect, was $283,000. The estimated shortfall for calendar year 2020 is estimated to be $120,000. Although the fund is credited with interest earnings and a share of the revenues from forfeited C&D deposits, the additional expense will draw down further the fund's rate stabilization reserve. However, the shortfall is diminishing with the enhanced revenues so that the fund will be in stable 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. Water & Sewer Funds The severe five-year drought that ended in northern California in 2017 created higher costs and lower revenues (due to conservation efforts) for both of these City utilities. Water rate increases were implemented over a three-year period; the final rate increase (7.5 percent) was effective January 1, 2019. The rate increases helped the Water Fund cover for the higher cost of 30 FY 2020-21 Budget May 13, 2020 wholesale water purchased from the San Francisco Public Utilities Commission (SFPUC), and provided continued funding of prudent capital improvements in the Water utility. With improving reservoir levels and water consumption easing back into higher, pre -drought patterns, revenues in the Water and Sewer Utilities have been much easier to accurately anticipate in the past few years. CITY OF BURLINGAME, CA CHANGES TO WATER FUND NET POSITION FY19-20 $ Change % Change Adjusted FY20-21 from Prior from Prior Budget Projected Year Year Beginning of Year Balance (Budget/Audit) $ 9,464,595 $ 9,776,653 $ 312,058 3.3% Projected Revenues & Expenses Projected revenues 21,038,850 21,009,000 (29,850) -0.1% Projected operating expenses (16,309,377) (16,782,000) (472,623) 2.9% Subtotal, Revenues Net of Expenses 4,729,473 4,227,000 (502,473) -10.6% Interest Revenues (Expenses) (446,600) (334,401) 112,199 -25.1% Transfers - General Fund - Contributions for Debt Other Transfers In (Out) of Water Fund Transfers to Water CIP Projected Water Unrestricted Net Position (513,015) (514,681) (1,666) 0.3% (457,800) (474,500) (16,700) 3.6% (3,000,000) (3,500,000) (500,000) 16.7% $ 9,776,653 $ 9,180,071 $ (596,582) -6.1% However, the shelter -in -place orders meant to curb the spread of the COVID-19 virus have drastically shifted the characteristics, if not the volume, of water consumption in Burlingame. Whereas residential customers consumed 33.9 percent more in April 2020 than in the same month last year, industrial customers consumed 38.7 percent less. Within this category, consumption declined 47.2 percent in the subcategory of "hotels with restaurants". However, consumption as a whole was down less than 1 percent. In fiscal year 2020-21, water consumption is projected to match current -year experience. As there will be no rate increases, projected revenues are anticipated to be slightly over $21.0 million. Funding of capital projects/infrastructure within the Water utility will be increased to $3.5 million. Note that capital spending is not included as expenses of the fund. At year end, infrastructure improvements are capitalized and reported as long-term assets, rather than remaining in "unrestricted net position." 31 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA CHANGES TO SEWER FUND NET POSITION Beginning of Year Balance (Budget/Audit) Projected Revenues & Expenses Projected revenues Projected operating expenses Subtotal, Revenues Net of Expenses Interest Revenues (Expenses) Transfers - General Fund - Contributions for Debt Other Transfers In (Out) of Sewer Fund Transfers to Sewer CIP Projected Sewer Unrestricted Net Position FY19-20 $ Change % Change Adjusted FY20-21 from Prior from Prior Budget Projected Year Year $ 7,536,432 $ 2,092,342 $ (5,444,090) -72.2% 14,108,000 14,165,000 57,000 0.4% (13,173,161) (13,502,367) (329,206) 2.5% 934,839 662,633 (272,206) -29.1% (560,114) (364,244) 195,870 -35.0% (513,015) (514,681) (1,666) 0.3% (225,800) (237,300) (11,500) 5.1% (5,080,000) (1,800,000) 3,280,000 -64.6% $ 2,092,342 $ (161,250) $ (2,253,592)-107.7% Revenues for the Sewer Fund are projected to increase somewhat in fiscal year 2020-21. No rate increases were indicated for the fund as part of the FY 2016-17 rate study, and the current year actual revenues are falling slightly below budget. (The last rate increase for sewer services was in 2012.) Funding of capital projects/infrastructure within the Sewer utility — both collection system improvements and wastewater treatment plant upkeep — will fall to $1.8 million. As with the Water Fund, infrastructure improvements will be capitalized at year end and reported on the fund's balance sheet. Note that the negative unrestricted net position, while not optimal for a long period of time, merely indicates that the cash assets of the fund are earmarked for capital projects. Once completed, the Sewer/Sanitary Master Plan will inform a rate study for both of these major utilities. Proper rate setting will ensure the long-term sustainability of the Water and Sewer funds. Gas Tax (HUTA) and Road Repair and Accountability Act MAN of 2017 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, and may only be used for street purposes as specified in the State Streets and Highways Code. As such they have always been an important revenue source for the City's Streets Capital Improvement Program. The Road Repair and Accountability Act of 2017 (SIB 1) enhanced Highway Users Tax (HUTA) revenue allocations so that the amount available for distribution is no longer tied strictly to taxable sales of gasoline (i.e., the per gallon 32 FY 2020-21 Budget May 13, 2020 price of gasoline). The state distributed the first full year of SB 1 allocations in fiscal year 2018- 19, providing a 49.3 percent increase in this funding source. Staff recommended a decrease of $172,200 in the estimated revenues to be derived from gas taxes in the current fiscal year, as the COVID-19 health crisis has resulted in a dramatic drop in fuel consumption. Because fuel taxes are collected each month for sales occurring in the prior month and then allocated according to statute, jurisdictions will begin to see the effect of COVID-19 on gas tax allocations in the May 2020 allocations. For budgetary purposes, revenues in the Gas Tax Fund for FY 2020-21 are presumed to be level with that of the current year. CITY OF BURLINGAME, CA GAS TAX ALLOCATIONS 2019-20 2020-21 $ Change % Change 2017-18 2018-19 Adjusted Proposed from Prior from Prior Description Actual Actual Budget Budget Year Year 2103 State Gasoline Tax $ 117,404 $ 101,204 $ 210,000 $ 228,000 $ 18,000 8.6% 2105 State Gasoline Tax 163,603 166,212 144,000 156,000 12,000 8.3% 2106 State Gasoline Tax 121,424 124,174 104,000 113,000 9,000 8.7% 2107 State Gasoline Tax 212,920 209,030 178,000 193,000 15,000 8.4% 2107.5 State Gasoline Tax 6,000 6,000 6,000 6,000 - 0.0% RMRA (S61) 138,972 546,154 500,000 512,000 12,000 2.4% TCRF (SB1) Loan Repyment 34,273 34,163 34,000 - (34,000) -100.0% $ 794,595 $1,186,937 $1,176,000 $1,208,000 $ 32,000 2.7% The California Department of Finance normally updates its fuel consumption and transportation fund forecast as part of the Governor's budget revision, typically released in mid -May, in preparation for a budget bill to be approved by the Legislature by June 15th. These revised statewide revenue estimates are the basis of specific city and county allocation estimates. Staff hopes to have a revised forecast for these revenues prior to adoption of the City's 2020-21 fiscal year budget in June. Internal Service Funds Internal service funds (ISFs) 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. The proposed budgets for each of the ISFs for the 2020-21 fiscal year vary greatly over the current year spending levels; overall charges to the City's departments and programs were up 5.4 percent from the prior year. The allocation of internal service funds impacts each department and program differently based on the benefits provided. For example, even though funding projected to be necessary for the General Liability ISF (through internal charges to departments) has not increased significantly, the allocations to some departments are diminished, while others bear a higher percentage of the charges based on past frequency and severity of General Liability claims. 33 FY 2020-21 Budget May 13, 2020 CITY OF BURLINGAME, CA INTERNAL SERVICE FUNDS FY19-20 FY20-21 $ Change % Change FY17-18 FY18-19 Adjusted Proposed from Prior from Prior Actuals Actuals Budget Budget Year Year Admin & Info Technology ISF $1,022,890 $948,216 $1,185,555 $1,441,669 $256,114 21.6% Facilities Services ISF 1,547,304 1,641,530 1,824,011 1,841,762 17,751 1.0% Fleet & Equipment ISF 1,235,560 1,243,373 1,148,700 1,687,568 538,868 46.9% OPEB Retiree Medical ISF 4,349,551 5,076,693 4,907,912 4,624,681 (283,231) -5.8% General Liability ISF 653,559 585,402 1,510,000 1,514,000 4,000 0.3% Worker's Comp ISF 808,222 883,558 877,000 1,149,500 272,500 31.1% Total $9,617,085 $10,378,772 $11,453,178 $12,259,180 $806,002 7.0% In addition, increases or decreases in an internal service fund's budget do not necessarily result in an overall increase or reduction in charges to departments or fund "recoveries". This is evident in the FY 2020-21 preliminary budget: the largest budgetary change is proposed in the Fleet and Equipment ISF. The Capital Outlay budget for the division varies from year to year, and happens to include several pieces of heavy equipment and special purpose vehicles. But because replacement costs are built into the annual charges to departments, the city-wide allocation changes very little. Over time, the higher cost of replacement vehicles and equipment will result in higher depreciation costs, increasing the allocation of this ISF's expenditure budget to the various departments. The Workers' Comp ISF budget for the upcoming fiscal year reflects a fairly significant bump up, reflecting an updated actuarial analysis of the liability for outstanding workers' comp claims. Although there is no change in actual experience (frequency or severity of claims), the adjustment requires the fund to carry additional reserves to cover the actuarially determined claims liability for the City. Increases in the annual costs associated with maintenance of network and computer hardware, as well as the many software systems deployed for use in the City, has resulted in the need to significantly increase charges to departments in the Admin/IT Fund. Again, the methodology for allocating to these departments is not changed, but headcount and the use of department - specific systems form the basis for the amount charged to each department. Although the 2020-21 fiscal year budget for the General Liability ISF reflects very little change from the current budget, staff is aware that the cost of this program is rising. The City is a member of the Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA), a joint powers insurance authority that consists of 28 member cities in the Bay Area. Although the JPA and the City in particular have been able to keep claims and expenses to a minimum, the California public entity insurance marketplace is changing dramatically. Public agencies throughout the state are seeing a significant increase in plaintiff demands and high dollar liability claims. Areas of particular concern include dangerous conditions, road design, intersections, sidewalks, and public safety services. Excess and reinsurance liability renewal premiums are at least 10-15 percent, even before taking into account any significant pool losses. The current 34 FY 2020-21 Budget May 13, 2020 budget in the General Liability ISF includes some margin for increasing the fund's balance and providing a greater level of confidence for claims reserves. However, to the extent that excess insurance premiums increase, the fund's budget (and allocations to the departments) will also have to be raised in the future to maintain an acceptable fund balance for this self -insured program. Fluctuations that have a substantial impact within the departments will be explained in detail in the budget book. General Fund Five -Year Financial Forecast The five-year forecast was last updated with the fiscal year 2019-20 mid -year report in March. At the time the mid -year analysis was performed by staff, the only consideration given to the possible effects of the coronavirus was limited to the potential economic impact of slowing international travel. After that time, the scope of the virus's reach became rapidly apparent and rendered the mid -year report out-of-date upon presentation. Because a comprehensive analysis of the current fiscal year is so critical in informing the development of the 2020-21 fiscal year budget, staff re-evaluated the City's financial resources in light of the COVID-19 pandemic and provided a proposal to update General Fund revenues for the 2019-20 fiscal year budget. This serves as the best baseline for the initial 2020-21 fiscal year, and for projections for a revised five-year forecast. Lacking a more solid basis for revenue estimates going forward, staff developed three scenarios to depict possible fiscal outcomes for the City over the next five years. Each of the scenarios reflects a recovery of the City's revenues to some form of "normal", but in Scenario C, recovery will not be achieved within the five-year timeframe: Scenario A presents the most probable resolution of the pandemic -induced recession the country is currently dealing with. While the uncertainty is substantial, the lockdowns and social distancing practices now in place are likely to result in sharply lower new infections over the remainder of the fiscal year. That slower virus spread, coupled with swift adaptation by businesses and individuals of safe work and market places, should set the stage for a gradual recovery for most of the City's revenues. Unless the gradual easing of the current shelter -in place orders spark a resurgence of the virus (see Scenario C), the recovery will be modest, but steadily growing into the next fiscal year, with some pent-up demand for travel and discretionary spending reflected prior to the holidays. Unemployment will ease fairly steadily as businesses regain momentum. While some industries and markets will recover more quickly, others will take a couple of years to level off before recovering from this global economic downturn. Tax revenues will gradually return to more normal levels, allowing for replenishment of reserves and full funding of current capital needs within two years. Scenario A is shown in full, with graphic presentation following in Attachment A to this report. Scenario B presents a more optimistic view of the ability of business and industry to recover quickly and provide consumers with opportunities for discretionary spending. While an immediate bounce back to pre -recessionary revenue levels is not realistic, pent-up demand 35 FY 2020-21 Budget May 13, 2020 for personal services and experiences, travel, discretionary medical services, and durable goods will re -ignite the local economy even prior to the rest of the nation. Demands for workers to resume their places in modestly modified settings/conditions, will quickly bring unemployment numbers back to near -full employment within the fiscal year, and full recovery will be obtained within the calendar year. The relatively low cost of borrowing will prompt the purchase of homes, vehicles, and luxury goods. This can be referred to as the "snap back" scenario. Scenario B is shown in graphic format only as Attachment B to this report. Scenario C presents a more pessimistic view of the ability of businesses, industries, workers, and consumers to recover in the next three years. People and companies are unwilling or unable to resume their normal spending patterns. The cost to businesses to adapt to new labor regulations and ways of doing business is prohibitive, and individuals "hunker down", for a long, slow recovery. The West Coast is no longer affordable, prompting even younger workers to re -locate in the hopes of a better lifestyle. Entrepreneurial businesses seek less expensive channels to start their enterprises. Budgets provide no room for discretionary spending. Tax revenues are lower and more difficult to collect. Overall recovery is sluggish and may be difficult to detect at times. Scenario C includes a scenario where a resurgence of the virus is experienced after sheltering in place orders are rescinded. Scenario C is shown in graphic format only as Attachment C to this report. Note that all of the scenarios assume that the CalPERS rate of return for the current fiscal year is 0 percent, and that CalPERS returns match their assumed rate of 7 percent for subsequent plan years. Due to how CalPERS investment losses are amortized, the loss will be ramped up to full payments over the next five years, for a total of 20 years. This is reflected in the growth of pension costs over the five-year period covered by the forecast. Public Agency Contributions July 2020 Re[ur.vs Today 5-yeaf ramp 15 years of full payments 60 June 30,2020 Public Agencies 2022-23 2026-27 2041-42 Fnwi yeor Returns Locked -in Staff is fairly confident that a rate close to 0 percent is a realistic one for the current fiscal year, and a recovery in rates of over 7 percent is likely under scenarios both A & B. However, staff also believes that a 7 percent assumed rate of return is too high, even in the longer term. Although larger increases in pension rates would necessitate budgetary reductions of some kind, the options are too many to pursue in this exercise. Various scenarios for pension funding, allowing for a variety of assumptions using the City's own employee and retiree data, will be presented to the Council at a study session in the fall. 36 FY 2020-21 Budget May 13, 2020 Similarly, operating costs (including payroll costs other than pensions) remain fairly stable across all scenarios. Different rates of growth are applied in the various scenarios, (from 2- 5 percent, with Scenario C exhibiting the lowest rate of growth), but more aggressive actions would be taken to cut costs or increase revenues if needed to protect the City's financial viability. For example, contracts for labor, services, supplies, debt, and/or capital spending would need to be renegotiated to conform to resource availability. Again, these options are too varied to examine here. Also, the City's property tax revenues are expected to stay relatively solid across all scenarios. Because the recession was not prompted by a real estate market bubble, property values are expected to remain fairly level. Even with the current deferrals on the collection of these taxes, the assessments remain and will be collected at some time. Finally, all scenarios neglect to identify funding for the El Camino Real Undergrounding Project. Although there are limited funds available to support the project through the Rule 20A program, the City's share of this project is estimated to be $24 million, with initial funding required in fiscal year 2023-24. The Capital Investment Fund (not shown in the forecast) would be expected to fund such a project, if not tapped for operating expenses (Scenario C). But even in the rosiest of scenarios, transfers out of the General Fund to the Capital Investment Reserve do not resume until fiscal year 2022-23. Staff will continue to monitor economic conditions and analyze events that could impact the City's future revenue or expenditure composition. Changes that significantly alter the City's long-term projections will be brought to the Council's attention. 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 financial reporting processes currently in place. FISCAL IMPACT The preliminary General Fund budget for the 2020-21 fiscal year calls for projected revenues of approximately $66.1 million, with expenditures and net transfers out of $67.2 million. The resulting $1.1 million operating deficit will be used to further reduce the City's General Fund unassigned fund balance. However, this initial budget calls for continued funding of the City's § 115 Trust Fund for pension obligations ($2.2 million from the General Fund). These funds are being set aside to fund the City's pension obligations as they come due The Economic Stability Reserve will be reduced slightly, as prescribed in the City's General Fund Reserve Policy. Given the significantly reduced revenues, this annual budget cannot provide additional funding to the City's Capital Investment Reserve or further address the unfunded needs identified in 37 FY 2020-21 Budget May 13, 2020 previous budget discussions. While it is clear that such a budget cannot be considered sustainable over the long-term, now is a fiscally prudent time to utilize the City's reserves. The reserves were put in place with the intention of protecting the City's ability to provide a high level of municipal services in all economic environments. The General Fund balance is estimated to be $36.7 million at the end of fiscal year 2020-21. The budgets for all other funds have been equally reviewed and analyzed in the context of long- term fiscal planning. Though not unscathed from the revenue impacts of a severely weakened economic climate, these funds appear to be self-sustaining. Careful attention will need to be given the delicate process of future rate setting, so that operating results do not pose a threat to the City's long-term fiscal health. More detail on each of these funds will be provided in the final fiscal year 2020-21 Budget document. Exhibits: • General Fund Five -Year Forecast Scenario A — Most Probable • General Fund Five -Year Forecast Scenario B — More Optimistic • General Fund Five -Year Forecast Scenario C — More Pessimistic 2020-21 Budget Attachment A General Fund Five -Year Forecast Scenario A - Most Probable 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Estimates Proposed Forecast Forecast Forecast Forecast Revenue Categories Budget Property Taxes 23,435,600 24,411,000 25,513,000 26,670,000 27,885,000 28,905,000 Sales Tax (including Measure 1) 14,230,000 14,005,000 16,806,000 17,646,000 18,175,000 18,720,000 Transient Occupancy Tax 20,050,000 16,500,000 21,450,000 24,668,000 27,135,000 28,492,000 Other Taxes - Franchise Tax 1,642,000 1,641,200 1,672,000 1,687,000 1,703,000 1,720,000 Other Taxes- Business Licenses 865,000 730,000 803,000 811,000 831,000 856,000 Other Taxes -Transfer Tax 360,000 400,000 460,000 483,000 497,000 502,000 Other Taxes - State HOPTR 60,000 60,000 63,000 66,000 67,000 68,000 Licenses & Permits 79,500 78,200 82,000 86,000 88,000 90,000 Fines, Forfeitures & Penalties 608,000 680,000 884,000 911,000 938,000 966,000 Use of Money & Property 130,000 80,000 84,000 88,000 90,000 92,000 Charges for Services 5,135,000 5,798,000 6,668,000 7,335,000 7,555,000 7,782,000 Other Revenue 30,000 30,000 32,000 34,000 35,000 36,000 Federal & State Subventions 140,000 145,000 152,000 160,000 163,000 166,000 Interest Income 2,400,000 1,563,000 2,345,000 2,580,000 2,709,000 2,844,000 Total Revenues 69,165,100 66,121,400 77,014,000 83,225,000 87,871,000 91,239,000 Expenditure Categories Salaries & Wages (20,207,319) (20,514,956) (21,131,000) (21,765,000) (22,418,000) (23,090,000) Benefits (12,648,341) (13,386,148) (14,133,000) (15,138,000) (15,966,000) (16,864,000) Operating Costs (25,233,119) (25,306,860) (26,447,000) (27,536,000) (28,563,000) (29,634,000) Internal Services (4,170,252) (4,570,045) (4,799,000) (4,991,000) (5,141,000) (5,295,000) Capital Outlay (258,500) (163,000) (250,000) (258,000) (266,000) (274,000) Total Expenditures (62,517,531) (63,941,009) (66,760,000) (69,688,000) (72,354,000) (75,157,000) Operating Revenue 6,647,569 2,180,391 10,254,000 13,537,000 15,517,000 16,082,000 Transfer In (Out) Transfer to CIP Project Funds (9,185,000) (3,155,000) (9,405,000) (7,435,000) (6,155,000) (5,835,000) Transfer to Debt Service Fund (4,708,763) (2,728,338) (3,580,400) (3,600,700) (3,623,500) (3,651,060) Transfers In (Out) - other funds 2,400,319 2,573,550 1,693,525 1,723,779 1,755,120 1,790,059 Transfer to Capital Investment (6,500,000) - - - (3,000,000) (3,000,000) Change in Fund Balance before Adjustments (11,345,875) (1,129,397) (1,037,875) 4,225,079 4,493,620 5,385,999 Adjustments Transfer to Pension 115Trust (2,957,000) (2,250,000) (1,867,000) (1,285,000) (876,000) (503,000) Net Surplus / (Deficit) (14,302,875) (3,379,397) (2,904,875) 2,940,079 3,617,620 4,882,999 FUND BALANCE 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 General Fund Beginning Bal. 49,167,751 37,821,876 36,692,479 35,654,604 39,879,683 44,373,303 General Fund Ending Bal. 37,821,876 36,692,479 35,654,604 39,879,683 44,373,303 49,759,302 Assigned Balance: 19,100,000 18,369,000 20,983,000 22,474,000 23,589,000 24,397,000 Econ. Stability Reserve @ 24% 16,600,000 15,869,000 18,483,000 19,974,000 21,089,000 21,897,000 Catastrophic Reserve ($2 mil.) 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Contingency Reserve ($500,00 500,000 500,000 500,000 500,000 500,000 500,000 PARS restricted cash 10,416,442 12,666,442 14,533,442 15,818,442 16,694,442 17,197,442 Unassigned Fund Balance 8,305,434 5,657,037 138,162 1,587,241 4p089,861 8,164,860 2020-21 Budget Attachment A Scenario A - Most Probable (continued) General Fund - Top 3 Revenues -Property Taxes -Sales Tax (inc IudingMeasure 1) -Transient Occupancy Tax 40 _ O 35 30 28 29 � 77t 27 28 25 � 22� 23----- 24 26� 25� 20 18 17 17� 181 18— 19 15 13 14— 14---" 10 5 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Actual Actual Estimates Proposed Forecast Forecast Forecast Forecast Budget General Fund Assigned + Unassigned Balance 0 Fund Balance (Assigned +Unassigned) 0 Draw from Capital Investment �Econ. Stability Reserve @ 24% at GF Rev. —Catastrophic Reserve ($2 mil.) Contingency Reserve ($500,000) 55 0 50 45 40 42 35 30 32 33 25 27 28 20 24 15 10 5 General Fund Revenues vs. Expenses E:::= Baseline Expenses Transter to Cl P Transter to Capital Investment —Revenues 110 c 100 90 80 70 60 50 — 40 30 — 20 — 10 — 2017-18 2019-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2020-21 Budget Attachment B General Fund Five -Year Forecast Scenario B — More Optimistic General Fund - Top 3 Revenues Property Taxes -Sales Tax (including Measure 1) -Transient Occupancy Tax 40 c a 35 33 � 32� 30 28� 29 28� 28 29 25 23� 24� 26 23� 20 7p� 22 20 18� 14- 17_ 18 15 14 13 10 5 2017-18 2018-19 2019-20 7020-21 2021-22 2022-73 2023-24 2024-25 Actual Actual Estimates Proposed Forecast Forecast Forecast Forecast Budget General Fund Assigned + Unassigned Balance 0 Fund Balance [Assigned +Unassigned] 0 Draw from Capital Investment -Econ. Stability Reserve @ 24% of GF Rev. -Catastrophic Reserve ($2 mil.) -Contingency Reserve ($500,00p) 55 0 50 54 45 40 42 41 35 30 32 25 30 27 20 24 15 10 5 0 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 General Fund Revenues vs. Expenses Baseline Expenses Transfer to CI P Transfer to Capital Investment -Revenues 110 c 100 g 90 ea 70 60 50 40 30 20 i 10 2017-18 2018-19 2019-20 2020.21 2021-22 2022-23 2023.24 2024-25 2020-21 Budget Attachment C General Fund Five -Year Forecast Scenario C — More Pessimistic General Fund - Sop 3 Revenues Property Taxes -Sales Tax (including Measure Q Transient Occupancy Tax 40 c 0 35 30 28....... � 29 25 23 24�` 25 -26---- 7 20 20 22 19 —1821 �17�17�18�18� - 15 13 14` 14..... 1S 10 5 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 202425 Actual Actual Estimates Proposed Forecast Forecast Forecast Forecast Budget General Fund Assigned + Unassigned Balance 0 Fund Balance (Assigned +Unassigned) 0 Draw from Capital Investment �Econ. Stability Reserve @ 24% of GF Rev. —Catastrophic Reserve ($2 mil.) ,Contingency Reserve ($500,000) 55 — 0 50 45 40 42 35 30 32 25 77 20 24 15 10 14 5 10 9 0 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 General Fund Revenues vs. Expenses Baseline Expenses Tra n sfe r to C I P Transfer to Capital Investment —Revenues 110 c 0 100 90 SO 70 60 50 40 30 20 10 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 BUR LINGAME AGENDA NO: 5c STAFF REPORT MEETING DATE: May 13, 2020 To: Honorable Mayor and City Council Date: May 13, 2020 From: Syed Murtuza, Director of Public Works — (650) 558-7230 Art Morimoto, Assistant Public Works Director — (650) 558-7230 Margaret Glomstad, Parks and Recreation Director — (650) 558-7307 Subject: City Council Review of Draft FY 2020-21 Capital Improvement Program RECOMMENDATION Staff recommends that the City Council review the proposed draft FY 2020-21 Capital Improvement Program (CIP) and provide feedback. BACKGROUND On March 11, 2020, staff 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. The presentation included summaries of the infrastructure priorities for General Fund projects, Parking Enterprise Fund projects, and Gas Tax, SB 1, and Measure A, I, and M funded projects. At the meeting, the City Council requested to review the five-year CIP in order to assess large capital expenditures anticipated in the near future. DISCUSSION Typically, this follow-up review of the overall draft CIP includes Water Enterprise, Sewer Enterprise, and Storm Drainage projects, as well as any changes made to the draft General Fund CIP previously reviewed by the City Council. Due to the extreme changes in economic conditions that have occurred since the March meeting due to COVID-19, staff has developed alternate General Fund and Parking Enterprise Fund CIP options with significant reductions in funding for Council review. Additionally, the proposed Sewer Enterprise projects reflect reduced revenue projections due to the impacts in hotel and restaurant activity. GENERAL FUND CIP For the March 11, 2020 meeting, staff conducted a needs assessment of various City infrastructure 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 the FY 2020-21 CIP. Following a re-evaluation of the City's budget due to COVID-19 shelter -in -place orders, two additional CIP lists were developed to reflect a reduced 1 City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 CIP and a minimal CIP addressing public health and safety. Annual funding that is allocated for future improvements, but not immediately spent, is included in both options. Below is a summary table of each of the CIP areas with project descriptions and costs that were previously presented. Additionally, the two alternate CIP project lists are included. PARKS AND RECREATION IMPROVEMENTS ($405,000 - $3,255,000) 020Wic Health OW Project Description inthousands) (in thousands) rCiun thousands) 1 ==MAI Cuenavaca Field Renovations and ADA Improvements $ 1,600 $ - $ - 2 Bayside Park Parking Lot and Pathway ADA and EV Charging $ 900 $ - $ - 3 BSD Synthetic Turf Replacement Fund $ 200 $ 200 $ 200 4 Murray Field Synthetic Turf Replacement Fund $ 150 $ 150 $ 150 5 Pathway & Landscape Improvements $ 100 $ 50 $ - 6 Athletic Field Renovations Fund $ 100 $ 50 $ - 7 Playground Replacement Fund $ 100 $ 50 $ - 8 Parks Safety & Maintenance Improvements $ 50 $ 50 $ 50 9 Playground Resilient Resurfacing/Treatment $ 50 $ - $ - 10 Annual Tree Replacement $ 5 $ 5 $ 5 i The field renovations and Americans with Disabilities Act (ADA) improvements at Cuernavaca Park and the improvements at Bayside Park will be removed from the project list in the reduced CIP. These projects will be added to a future CIP. 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. These projects have been reduced or eliminated in the revised options. 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, is proposed to remain. These funds are not immediately spent and are accumulated in the CIP for a future date. 2 City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 BUILDING FACILITIES IMPROVEMENTS ($0 - $1,225,000) 1 Main Library - HVAC and EMS Upgrades $ 400 $ - $ - 2 Public Works Corp Yard - HVAC and EMS Upgrades $ 350 $ - $ - 3 Fire Station 35 Traffic Signal Upgrades $ 225 $ - $ - 4 Roof Repair and Replacement Plans - Depot, Police Station, $ 100 $ - $ - Corp Yard, City Hall, FS 34 and 36 5 Facilities ADA Improvements $ 100 $ - $ - 6 Facilities CIP Program Management $ 50 $ - $ - All building facilities improvements are proposed to be eliminated in both options. These projects will be added back into a future CIP when economic conditions are stabilized and adequate funding becomes available. BICYCLE, PEDESTRIAN AND TRAFFIC IMPROVEMENTS ($1,250,000 - $4,130,000) 1 2 Project Description r MdK Sidewalk & ADA Improvements (GF $400, Measure 1-$1000k) (Revised GF $OK, Measure 1-$800K) 3/11/2020 (in thousands) $ $ 1,400 950 Reduced (in thousanCd,) $ $ IP 800 500 & Safety [Clun th usands) $ $ 800 300 Lyon Hoag Neighborhood Traffic Calming - Implementation 3 Bicycle and Pedestrian Master Plan Improvements $ 500 $ 300 $ - 4 Oak Grove/Carolan Traffic Signal Improvements $ 500 $ - $ - 5 City Hall Traffic Improvements - Roundabout Concepts $ 200 $ - $ - 6 City-wide Traffic Signal Upgrade $ 200 $ 50 $ 50 7 Neighborhood Traffic Calming Improvements $ 100 $ 50 $ 50 8 El Camino Real Consultant Assistance $ 100 $ 50 $ - 9 Pedestrian Improvements $ 100 $ 50 $ 50 10 Traffic and Transportation Studies (Consultant Services) $ 80 $ - $ - Bicycle, Pedestrian & Traffic Safety Improvements Total $ 4,130 $ 1,800 The proposed reduced CIP options eliminate the $400,000 General Fund contribution for the sidewalk program and associated ADA improvements. The Measure I contribution for this project has been reduced to $800,000 due to revised projected sales tax revenue. The attached map provides the general location of proposed sidewalk repairs and ADA improvements in the city. 3 City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 The implementation of Phase 1 improvements identified in the Lyon Hoag and Adjacent Neighborhoods Traffic Calming Study has been reduced in both options to extend the implementation schedule of the improvements. The draft recommendations are scheduled to be presented to the City Council on May 18, 2020. The Council can decide to modify this budget at that time. Additionally, the preliminary funding requested for anticipated improvements identified in the Bicycle and Pedestrian Master Plan was reduced in both options. The Bicycle and Pedestrian Master Plan is scheduled to be finalized at the end of summer 2020; the City Council may elect to appropriate additional funds for recommended improvements at that time. Funding that was requested to supplement the existing Oak Grove/Carolan Avenue intersection traffic signal improvements has been eliminated from the CIP at this time. Upon completion of the design and public review of the project, staff can request additional funds for construction. The preliminary conceptual design development and public outreach for City Hall traffic improvements, including the consideration of a roundabout, will be deferred to a future date. 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. These budget requests have all been reduced, and work will be implemented based on priority. The funding requested 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, have been eliminated from the budget. These services can be re-evaluated as needed. FIVE-YEAR GENERAL FUND CIP 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; approximately $26M has been previously funded through a combination of a 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. The El Camino Real Undergrounding Project is one of the high priority projects that must be done in conjunction with the proposed Caltrans project underway on El Camino. The preliminary estimate for undergrounding the overhead utilities on El Camino Real is estimated to range from $25M to $30M. The City has approximately $6M available in Rule 20A work credits with PG&E to fund the project. The remaining funds may be needed as soon as FY 2023-24 to implement the project. E City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 Per Council's request at the March 11, 2020 Study Session, the below table provides an overview of projected General Fund CIP needs over the next five year's. CIP Programs 2020-21 (in thousands) 2021-22 (in thousands) 2022-23 (in thousands) 2023-24 (in thousands) 2024-25 (in thousands) Beyond (in thousands) Parks • Recreation1 1 Facilities $ 1 $ 1,350 $ 1,350 $ 1,350 Streets • • -• 111 111 $ 2,230 $ 2,250 •:1 Subtotal $ 1,555 $ 8,605 $ 6,635 $ 5,355 $ 5,035 Broadway Grade Separation111 City Hall $ 40,000 ,60 21,635 $ 29,355 Funding for the City's share of the Burlingame High School Pool Improvements is included in the FY 2021-22 Parks and Recreation projected budget. CIP projects that were eliminated or reduced in FY 2020-21 has been moved to future years. FY 2020-21 PARKING ENTERPRISE FUNDED PROJECTS Funding is requested for enhancements to the new public parking garage at Lot N that are not included in the project development agreement. These include pay stations, EV charging infrastructure, signage, and security. Funds that were previously requested for downtown parking lot improvements have been deferred to future years. FY 2020-21 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 revised total of $1.6M of CIP funding from a combination of Gas Tax, Measure A, Measure I, Measure M, and SB 1 funds for next year's street repair and resurfacing program as listed below. • Summit Drive — Burlingview Drive to Belvedere Court • Bayview Place — Airport Boulevard to End • Edwards Court — Rollins Road to End 5 City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 • Guittard Road — Rollins Road to End • Cortez Avenue — Adeline Drive to End • 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 Streets to be micro surfaced include Clovelly Lane, Meadow Lane, and Killarney Lane. The above list is tentative and subject to change depending on the availability of funds and construction costs. Of the total $1.6M proposed for next year, $800K is from Measure I, and the rest is from a combination of Measure A, Gas Tax, Measure M, and SB 1 funds. SUMMARY OF FUNDING BY SOURCE A funding summary of the CIP program as presented on March 11, 2020 with reduced funding options for Council review is presented below. InIr Funding SourcM'M e 3/11/2020 (in thousands) Reduced (in thousands) CIP mmmmj Vublic & Safety I (in thousands) Health 1 General Fund $ 7,610 $ 1,555 $ 855 2 Parking Enterprise Funds $ 850 $ 350 $ 350 3 Gas Tax, Measure A & Other Funds $ 1,560 $ 800 $ 800 4 Measure 1 (50% for sidewalks & 50% for streets) $ 2,000 $ 1,600 $ 1,600 FY 2020-21 WATER ENTERPRISE FUND PROJECTS The City owns and maintains over 100 miles of the drinking water distribution system, with five storage reservoirs and six pump stations. Based on a condition assessment of the City's water distribution system and prioritization of the Capital Improvements Plan, staff recommends a total of $3,500,000 of improvements to the City's drinking water system as follows. on City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 1 1 South El Camino Real Water Main Replacement Project $ 1,800 2 1 Glenwood & Burlingame Heights Water Main Replacement Project $ 525 3 1 Burlingame Park Water Main Replacement Project $ 400 4 1 Hillside and Skyview Reservoir Site Improvements $ 300 5 1 Water Planning — Studies/Modeling $ 275 6 I Trousdale Pump Station Improvements $ 100 7 1 Water Meter Replacements 1 $ 100 The South El Camino Real Water Main Replacement (WMR) Project is in the first phase of a large subdivision project to replace approximately 5,300 linear feet of old and aging cast iron water mains with new PVC/ductile iron water mains along El Camino Real from Sanchez Avenue to Barroilhet Avenue. This budget will supplement the existing budget to meet the engineer's estimate of construction costs. The Glenwood Park and Burlingame Heights Subdivision WMR Project is in the second phase of a large subdivision project to replace approximately 7,520 linear feet of old and aging cast iron water mains with new PVC/ductile iron water mains in the Glenwood, Burlingame Heights, and Burlingame Park subdivisions. The project locations include Chapin Avenue, Ralston Avenue, Occidental Avenue, Howard Avenue, Central Avenue, Cypress Avenue, Carol Avenue, East Carol Avenue, and Crescent Avenue. This budget will be allocated for engineering design, and additional funds will be requested to fully fund the construction phase in future budgets. The Burlingame Park Subdivision WMR Project is in the third phase of a large subdivision project to replace approximately 8,100 linear feet of old and aging cast iron water mains with new PVC/ductile iron water mains in the Burlingame Park Subdivision. The project streets include Occidental Avenue, Costa Rica Avenue, Howard Avenue, Ralston Avenue, Chapin Avenue, and Pepper Avenue. This budget will be used for the preparation of plans, specifications, and estimate. Additional funds will be requested for the construction phase of the project. The Hillside and Skyview Reservoir Site Improvements include site concrete, asphalt, fence, and miscellaneous site improvements at the Hillside and Skyview Reservoirs. The Hillside Reservoir improvements include a new driveway and parking area off of Hillside Drive, which will allow additional vehicle access to the reservoir. The water planning efforts consist of the Regional Water Studies/Modeling, 2020 Urban Water Management Plan, and American Water Infrastructure Act. 7 City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 The Trousdale Pump Station was built over 12 years ago and is causing operational issues. The funding requested for this project is to conduct an evaluation of the pumps infrastructure and identify solutions. FY 2020-21 SEWER ENTERPRISE FUND PROJECTS The City owns and maintains over 100 miles of sanitary sewer collection system with seven pump stations and the Waste Water Treatment Plant (WWTP). Based on a condition assessment of both components of the waste water collection system and the treatment plant, as well as prioritization of the capital improvements and availability of reduced funding, staff is recommending a total of $1,800,000 in improvements to the City's sanitary sewer system as follows. 1 1 Waste Water Treatment Plant Upgrades 1 $ 800 2 1 EI Camino Real Sewer Rehabilitation $ 500 3 11740 Rollins Road Pump Station Force Main Project 1 $ 500 The Waste Water Treatment Plant Upgrades include replacement of the Rollins Road Lift Station pumps, main switchgear breaker replacement, and headworks channel assessment. The goal of these projects is to continue with the repair and upgrade of the aging critical infrastructure. The El Camino Real Sewer Rehabilitation will replace/rehabilitate old vitrified clay pipe (VCP) sewer pipelines along El Camino Real. The goal of this project to complete all the sewer rehabilitation projects prior to the El Camino Real Street Renewal Project. Additional funding is needed for the 1740 Rollins Road Pump Station Force Main Project to cover the additional length of sewer force main that needs to be upgraded. This additional force main will remove the siphons in the existing gravity portion. The goal of this project is to rehabilitate the existing aging force main and to install a new parallel force main. FY 2020-21 STORM DRAINAGE FEE FUND PROJECTS In 2009, Burlingame property owners approved a ballot measure to upgrade the aging and deteriorated storm drainage system to provide 30-year design storm capacity to major creeks and address localized flooding problems citywide. Thanks to the community's support, approximately $27.5M of improvements have been completed to date. The completed projects include the Easton Creek Improvements, Marsten Pump Station, Marsten Outfall Channel, Laguna Storm Drainage Culvert, Burlingame Creek Bypass Stub at Safeway, Burlingame Avenue E:3 City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 Improvements, Terrace Creek Capacity, Vancouver Bridge Repair, Summit Drive Culvert, Lorton Storm Drain Cleaning, El Portal and Trousdale Channel Rehabilitation, Sanchez Lagoon Flap Gates Project, Easton Drive Drainage Improvements, and miscellaneous neighborhood projects to address localized flooding problems at 163 locations citywide under the Neighborhood Storm Drain Improvements Program. For FY 2020-21, staff is recommending $4,500,000 for Storm Drainage Projects as follows. The Neighborhood Storm Drain Project #13 is a continuation of storm drain improvements that have been identified in the 2010 Kennedy/Jenks report that ranked and identified deficiencies in the system. In addition, staff has added one location at Dufferin Avenue and California Drive that experienced street flooding during the winter of 2019. The Large Diameter Storm Drain Cleaning Project will focus on cleaning large diameter storm drain pipes between 24-inches to 72-inches in diameter that have collected sediment and build- up over time, which has reduced the design capacity of the pipe lines. The Burlingame Avenue Storm Drainage Improvements Project will address local flooding issues that are between the 100 and 600 block of Burlingame Avenue. Storm runoff collects by means of surface gutters on the relatively flat street of Burlingame Avenue. A new underground storm drain system will be constructed to alleviate the localized flooding, as well as increase the storm drain capacity for the area. The Culvert Crossing Repairs Project, Phase 2, is a continuation of Phase 1 of the project that focuses on repairing storm culvert crossings that have been ranked by a citywide study conducted in 2018. FISCAL IMPACT The estimated total funding identified to undertake the projects presented in the staff report is approximately $13,405-14,105M in FY 2020-21 depending on the General Fund CIP option selected. The funding sources include General Fund, Gas Tax, SB 1, Measures A, I, & M, Water Enterprise Fund, Sewer Enterprise Fund, and Storm Drain Fees. E City Council Review of Draft FY 2020-21 Capital Improvement Program May 13, 2020 Exhibits: • Presentation • March 11, 2020 Staff Report 10 Fiscal Year2020-2021 Draft Capital Improvement Program ATI, i 41k, r1f. t 1 ARi City Council Budget Study Session I May 13, 2020 \DPORA7ED • BURLINGAME Overview of FY 2020-2021 CIP s General Fund Projects Parking Enterprise Fund Projects Street Resurfacing � Water System Projects Program Sewer System Projects + Council Feedback General Fund Categories 1 Parks and Recreation Improvements 2 Building Facilities Improvements 3 Bicycle, Pedestrian & Traffic Improvements Total 1 Public 3/11 /2020 Reduced CIP Health & (in thousands) (in thousands) Safety (in thousands) $ 3,255 $ 555 $ 405 $ 1,225 $ 4,130 $ 8,610 $0 $ 1,800 $ 2,355 $0 $1,250 $ 1,655 BURLINGAME . Reduced Public Project Description 3/11 /2020 CIP (in Health & (in thousands) thousands) Safety (in thousands) 1 Cuenavaca Field Renovations and ADA Improvements $ 1,600 $ - $ - 2 Bayside Park Parking Lot, Pathway ADA & EV Charging $ 900 $ - $ - 3 BSD Synthetic Turf Replacement Fund $ 200 $ 200 $ 200 4 Murray Field Synthetic Turf Replacement Fund $ 150 $ 150 $ 150 5 Pathway & Landscape Improvements $ 100 $ 50 $ - 6 Athletic Field Renovations Fund $ 100 $ 50 $ - 7 Playground Replacement Fund $ 100 $ 50 $ - ■ 8 Parks Safety & Maintenance Improvements $ 50 $ 50 $ 50 9 Playground Resilient Resurfacing/Treatment $ 50 $ - $ - 10 Annual Tree Replacement $ 5 $ 5 $ 5 Parks & Recreation Improvements Total $ 3,255 $ 555 $ 405 Project Description 1 Main Library - HVAC and EMS Upgrades 2 Public Works Corp Yard - HVAC and EMS Upgrades 3 Fire Station 35 Traffic Signal Upgrades 4 Roof Repair and Replacement Plans - Depot, Police Station, Corp Yard, City Hall, FS 34 and 36 5 Facilities ADA Improvements 6 Facilities CIP Program Management Building Facilities Improvements Total Reduced Public 3/11 /2020 CIP Health & (in thousands) (in thousands) Safety (in thousands) $ 400 $ - $ - $ 350 $ - $ - $ 225 $ - $ - $ 100 $ - $ - $ 100 $ - $ - $ 50 $ - $ - $ 1,225 $ - $ - Reduced Public Project Description 3/11 /2020 CIP Health & (in thousands) (in thousands) Safety (in thousands) Sidewalk & ADA Improvements 1 $ 1,400 $ 800 $ 800 (GF $400, Measure 1-$1000k) (Revised GF $OK, Measure 1-$800K) 2 Lyon Hoag Neighborhood Traffic Calming- Implementation $ 950 $ 500 $ 300 3 Bicycle and Pedestrian Master Plan Improvements $ 500 $ 300 $ - 4 Oak Grove/Carolan Traffic Signal Improvements $ 500 $ - $ - 5 City Hall Traffic Improvements - Roundabout Concepts $ 200 $ - $ - 6 City-wide Traffic Signal Upgrades $ 200 $ 50 $ 50 7 Neighborhood Traffic Calming Improvements $ 100 $ 50 $ 50 8 El Camino Real Consultant Assistance $ 100 $ 50 $ - 9 Pedestrian Improvements $ 100 $ 50 $ 50 10 Traffic and Transportation Studies (Consultant Services) $ 80 $ - $ - Bicycle, Pedestrian & Traffic Safety Improvements Total $ 4,130 $ 1,800 $ 1,250 CIP Programs 2020-21 2021-22 2022-23 2023-24 2024-25 Beyond (in thousands) (in thousands) (in thousands) (in thousands) (in thousands) (in thousands) Parks and Recreation $ 555 $ 4,255 $ 3,055 $ 1,755 $ 1,705 Facilities $ - $ 1,350 $ 1,350 $ 1,350 $ 1,350 Streets (including Bike/Ped) $ 1,000 $ 3,000 $ 2,230 $ 2,250 $ 1,980 Subtotal $ 1,555 $ 8,605 $ 6,635 $ 5,355 $ 5,035 Broadway Grade $ $ $ 15,000 $ - $ Separation El Camino Real $ _ $ _ $ - $ 24,000 $ - Undergrounding City Hall $ - $ - $ - $ - $ - $ 40,000 Total $ 1,555 $ 8,605 $ 21,635 $ 29,355 $ 5,035 $ 40,000 Project Description Parking Structure - Lot N Improvements - Pay Stations, Dynamic Signage, EV charging, Security 2 Downtown Parking Lot Resurfacing Parking and Garages Total Reduced Public 3/11 /2020 Health & (in thousands) CIP Safety (in thousands) (in thousands) $ 350 $ 350 $ 350 $ 500 $ - $ - $ 850 $ 350 $ 350 a �' 4 J Streets Summit Drive - Burlingview to Belvedere Bayview Place - Airport Boulevard to End Edwards Court - Rollins to End Guittard Road - Rollins to End Cortez Avenue - Adeline to End Alpine Avenue - Carolan to Morrell Plymouth Way - Dwight to Bloomfield Balboa Avenue - Ray to Adeline Easton Drive - Vancouver to Benito 7AF`n Loyola Drive - Frontera to Trousdale Vancouver Avenue - Adeline to End Clovelly Lane (microsurface) Meadow Lane (microsurface) Killarney Lane (microsurface) TOTAL: $1,600,000 2021 STREET RESURFACING PROGRAM P ROJ ECT MAP r - a 4 LEGEND — fi PROJECT SIREETS SAN FRAN'CISCO RAY el 4, • j .. j:-� r m . ��. �� 'Y a. R•,� '_ i r - •'.-`�\ wee .� A� +Ati %'"�:.: ,� �. co- "`• • �`.. �. �� e..� � : i � - .- ". - - - � - - �' ' I ' � �' F��i .� t •� - : �.: `�' ti ��' .lam' - � •����. `�' T?(�",... �s'.. _� �{ �,:-.. � _ �.� __ r,' -- _ np ?��. } •t, \��s`'�� •. gig .� ` �,n6 ..._- — � r � • • T�v- �M1��` .. ,1 • a� ':'mom � r ,� R� ' ' -000 e .` � • '' _ ram. L an .. �a� x � � • ��-,.« r � r' :�,,.�:.. ego TOWN OF HILLHOHOUGH DE v { Funding Source 1 General Fund 2 Parking Enterprise Funds 3 Gas Tax, Measure A & Other Funds 4 Measure I Funds Total of Funding Sources MO 3/11 /2020 Reduced CIP Public Health (in thousands) (in thousands) & Safety (in thousands) $ 7,610 $ 1,555 $ 855 $ 850 $ 350 $ 350 $ 1,560 $ 800 $ 800 $ 2,000 $ 1,600 $ 1,600 $ 12,020 $ 4,305 $ 3,605 Capital Improvement Program WATER SYSTEM Estimated Projects Costs (in thousands) South El Camino Real Water Main Replacement Project $1,800 Glenwood & Burlingame Heights Water Main Replacement Project $525 Burlingame Park Water Main Replacement Project $400 Hillside & Skyview Reservoir Site Improvements $300 Water Planning - Studies/Modeling $275 Trousdale Pump Station Improvements $100 Water Meter Replacements $100 TOTAL $3,500 e mow UMNA Capital Improvement Program SEWER SYSTEM F Sewer System CIP � Proposed Projects for FY 2020-202 RIC NO AII Capital Improvement Program STORM DRAIN SYSTEM Projects Neighborhood Storm Drain # 13 Large Diameter Storm Drain Cleaning Burlingame Avenue Storm Drainage Improvements Culvert Crossing Repairs, Phase 2 TOTAL A.J. 7.� -- • .'..i •��� ' Estimated Costs (in thousands) $1,500 $1,000 $1,000 $1,000 $4,500 A Fiscal Year 2020-2021 Summary of Capital Improvement Program CIP Program Categories 1 General Fund Projects (Measure 1) 2 Parking Enterprise Fund Projects 3/11 /2020 Reduced CIP Public Health (in thousands) (in thousands) & Safety (in thousands) 1 $ 8,610 $ 2,355 $ 1,655 IN 3 Street Resurfacing Program (Gas Tax, Measures A, I, & M) $ 4 Water Enterprise Fund Projects 5 Sewer System Enterpise Fund Projets 6 Storm Drainage System Projects TOTAL 850 $ 2,560 $ $ 21,820 $ 350 $ 1,600 $ $ 3,500 $ 1,800 $ 4,500 14,105 $ 350 1,600 13,405 Fiscal Year2019-2020 Draft Capital Improvement Program . �S BURLINGAME STAFF REPORT AGENDA NO: 5b MEETING DATE: March 11, 2020 To: Honorable Mayor and City Council 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 CIP March 11, 2020 PARKS AND RECREATION IMPROVEMENTS ($3,255,000) 1 2 3 4 5 6 7 8 9 Cuernavaca Field Renovations and ADA Improvements Bayside Park Parking Lot and Pathway ADA and EV Charging Improvements BSD Synthetic Turf Replacement Fund Murray Field Synthetic Turf Replacement Fund Pathway & Landscape Improvements Athletic Field Renovations Fund Playground Replacement Fund Parks Safety & Maintenance Improvements Playground Resilient Resurfacing/Treatment $1,600 $900 $200 $150 $100 $100 $100 $50 $50 10 Annual Tree Replacement Total: $5 $3,255 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) Public Works Corp Yard - HVAC and EMS Upgrades 2 FY 2020-21 General Fund, Gas Tax, Measure A, Measure 1, and Measure M funded CIP March 11, 2020 3 Fire Station 35 Traffic Signal Upgrades $225 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) 1 Sidewalk Repair Program and ADA Improvements $1,400 (General Fund - $400k, Measure I - $1,000k) 2 Lyon Hoag Neighborhood Traffic Calming - Phase 1 Implementation $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: $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 1 Parking Structure/Lot N Improvements - Pay Stations, Dynamic Signage, EV $350 Charging, and Security System 2 Downtown Parking Lot Resurfacing $500 Total: I $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. n 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