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HomeMy WebLinkAboutMin - CC - 2021.03.10CITY BURLINGAME q $AaiEo JLkE � BURLINGAME CITY COUNCIL Approved Minutes 2020-2021 Mid -Year Budget Study Session on March 10, 2021 1. CALL TO ORDER A duly noticed meeting of the Burlingame City Council was held on the above date on Zoom at 6:30 p.m. 2. PLEDGE OF ALLEGIANCE TO THE FLAG The pledge of allegiance was led by Finance Director Augustine. 3. ROLL CALL MEMBERS PRESENT: Beach, Brownrigg, Colson, O'Brien Keighran, Ortiz MEMBERS ABSENT: None 4. PUBLIC COMMENTS A citizen asked if hazard pay for workers would be discussed at an upcoming meeting. (Submitted via publiccommentgburlin am�e.org). 5. STAFF REPORTS AND COMMUNICATIONS a. ADOPTION OF A RESOLUTION AMENDING THE FY 2020-21 OPERATING AND CAPITAL BUDGETS TO REFLECT THE RECOMMENDED MID -YEAR ADJUSTMENTS Finance Director Augustine stated that the purpose of the mid -year report is to: • Inform the Council and public of the fiscal year to -date; • Update the City's budget based on projected results; and • Provide a more precise fiscal picture of the state of the City's finances and provide greater confidence going into the next fiscal year and beyond Finance Director Augustine stated that the report is focused on the bigger picture in order to get a better look at the long-term fiscal health of the City. She continued that this includes looking at the target ranges of the City's reserves as well as the funded and unfunded liabilities. Burlingame City Council March 10, 2021 Approved Minutes Finance Director Augustine stated that in spring 2020, due to the Covid-19 Pandemic, millions of workers lost their jobs, businesses closed, and consumer spending decreased. She continued that by summer 2020, the economy began to slightly improve. By October 2020, consumer spending nationally had recovered to about 10% of the pre -pandemic numbers. Finance Director Augustine continued that despite the recovery in some sectors, other sectors of the economy have not experienced the same recovery. She stated that employment in the leisure and hospitality sector remains at about one third of pre -pandemic levels. She added that many low wage workers remain unemployed. Finance Director Augustine stated that the first 12 or 13 pages of the report contain the most recent economic data from December, augmented by later data if available. She continued that revenue projections will most likely change in the coming months. Finance Director Augustine gave an overview of the presentation: • Budget strategies for FY 2020-21 • Projected revenues: property tax, sales tax, TOT, and other General Fund revenues • Projected operating expenditures • Projected fund balance • Other funds • 5-year forecast Finance Director Augustine explained the adopted budget strategies for FY 2020-21. She stated that the City wants to maintain services while minimizing the draw from the General Fund reserves. She continued that to do this, the City: • Reduced the CIP transfer out by $6.3 million • Utilized $2 million of previously set -aside funds for Debt Service of 2019 Lease Revenue Bonds • Eliminated the transfer to the Capital Investment Reserve Finance Director Augustine explained that there were no drastic cuts from any individual departmental operating budgets. She continued that the FY 2020-21 operating budget includes continued funding for the Section 115 Pension Trust Fund. Finance Director Augustine reviewed a chart of the projected revenues for all General Fund sources. She explained that sales tax has started to bounce back but that the TOT has not. She noted that it would be difficult to forecast when TOT returns to its former level. Finance Director Augustine stated that the FY 2020-21 TOT projection was $14 million. However, the new projection is much lower at $7.5 million. Councilmember Brownrigg asked if the FY 2020-21 projection of $14 million in TOT was a result of the City lowering its expectations. Finance Director Augustine replied in the affirmative. She commented that 2 Burlingame City Council March 10, 2021 Approved Minutes the rebound for the leisure/hotel sector has not been as quick as was projected. Therefore, it was necessary to further decrease the projection. Councilmember Brownrigg commented that at an Economic Development Subcommittee meeting, they heard similar things from the hoteliers. Councilmember Colson commented that the TOT projection of $7.5 million is down almost 75% from FY 2018-2019 actuals of $29,384,461. Finance Director Augustine replied in the affirmative. She added that in FY 2018-19, TOT accounted for approximately 40% of General Fund revenues. Finance Director Augustine stated that the projected revenues for this year are expected to be 7.9% lower than where the budget currently stands. She explained that the decline is due to the pandemic's impact on the hotels and restaurants. Finance Director Augustine stated that the Mid -Year Budget Report does not take into consideration the recently approved COVID-19 Relief Bill. She explained that it is currently estimated that the City will receive $5.81 million from this bill. Mayor O'Brien Keighran asked how the relief funds would be utilized. Finance Director Augustine responded that the funds would be included in the 2021 revenues, which flow into the projections for the General Fund balance. Finance Director Augustine discussed the City's big three revenue sources: property tax, sales tax, and TOT. • Property Tax Finance Director Augustine explained that property tax for FY 2020-21 is expected to be $477,000, or 1.9%, less than the adopted budget. She noted that Burlingame saw a 0.5% increase in assessed value, which can most likely be attributed to the Burlingame Point Project. Finance Director Augustine reviewed the City's ERAF refund. She explained that usually the ERAF refund is the largest mid -year budget adjustment. She reviewed the countywide shortfall due to the decrease in non - basic aid school districts. Finance Director Augustine explained that the ERAF refund continues to be uncertain. She stated that in recent years, the growing assessed roll has yielded more adequate property tax funding for local schools, thereby reducing the need for draws on these funds within the county. However, offsetting this development is uncertainty in the future funding of the property tax in lieu of VLF, which is currently funded from the same ERAF, but with no required funding from the State in the event of a shortfall. She noted that future ERAF refunds may come to an end. Councilmember Brownrigg stated that he has heard from local real estate representatives that Burlingame's market remains strong. • Sales Tax Burlingame City Council March 10, 2021 Approved Minutes Finance Director Augustine stated that sales tax revenue has recovered quicker than anticipated. She added that this resulted in an upward adjustment of $2.6 million. She noted that consumers are spending more online and that this is reflected in the County pool of sales tax distribution However, Finance Director Augustine noted that tourism shopping and hotel restaurants have seen dramatic decreases in business. • TOT Finance Director Augustine stated that for the first seven months of the fiscal year, TOT came in 82.1 % lower than last fiscal year. She explained that currently, the City gets around $500,000 a month from TOT. Pre -pandemic, the City was receiving approximately $2.6 million a month. She stated that in order to make the decreased projection of $7.5 million, the hotel industry would need to see a resurgence in the next four to five months. Councilmember Brownrigg commented that the hoteliers project a return to pre -pandemic hotel occupancy rates (around 80%) in 2024. He continued that the hoteliers' projected revenue per available room won't return to pre -pandemic levels until 2025. He stated that the hoteliers are making a very conservative projection for when the hotel sector will return to pre -pandemic operations. Finance Director Augustine replied in the affirmative. Finance Director Augustine discussed revenue amendments to the budget: • TOT — reduction of an additional $6.5 million for the current year • Sales Tax — less impact than anticipated • Charges for Services — impact harshest for Recreation activities • Interest Income — will decline further based on declining cash balances Finance Director Augustine reviewed the projected General Fund operating expenditures. • Decrease in expenditures: $1,010,900 (-1.6%) o Decrease in part-time wages by $617,000 o Decrease in health insurance premiums by $302,000 o Increase in Police Department overtime by $431,000 o Decrease in Contractual Services — Recreation decrease of $791,000 o $150,000 increase to cover the costs of parklets • Some expenditure increases offset with revenue increases Finance Director Augustine stated that there were two additional transfers from the General Fund to the Capital Projects Fund that are reflected in the new General Fund summary. Finance Director Augustine stated that the projected General Fund expenditures for FY 2020-21 are $66.8 million, which is $4 million less that the FY 2019-20 actual expenditures of $70.8 million. She explained that in order to alleviate the need to drawdown from the reserves, the transfer to the CIP Fund was decreased 4 Burlingame City Council March 10, 2021 Approved Minutes by $6.3 million. She stated that the $2 million that was already in the debt service fund was used to pay the debt service for the Community Center bonds for this year. Councilmember Colson asked what the average difference is between the projected budget and the actual budget. Finance Director Augustine responded that it is usually 4% to 5%. She noted that it can be higher when there are a lot of open positions as personnel costs are a large portion of General Fund expenditures. Councilmember Colson praised the discipline that staff has when putting together the budget. Finance Director Augustine stated that in the FY 2020-21 adopted budget, there was an anticipated budgetary deficit of $5.2 million. She continued that the City received $372,000 from the first federal COVID-19 Relief Bill. She stated that the current budget shows a deficit of just under $5 million. She explained that after the mid -year budget adjustments are made, the projected General Fund deficit for FY 2020-21 is around $8.9 million. Councilmember Brownrigg commented that even with the approximately $5.81 million in relief funds from the second federal COVID-19 Relief Bill, the City will not recover its projected budget deficit. Finance Director Augustine replied in the affirmative. Finance Director Augustine explained that the unassigned fund balance is less despite the decrease in funding for the Economic Stability Reserve. She stated that there is still an unassigned fund balance of nearly $4.7 million that can be reduced further if the economy slows further or does not recover. Finance Director Augustine stated that in the past, Council has been comfortable with an unassigned fund balance of around $8 to $10 million. She commented that use of these funds is a reasonable approach to keeping the City's finances as stable as possible. She noted that the balance of the Pension Trust Fund held by PARS was $17.2 million as of January 31, 2021. Finance Director Augustine reviewed the City's other funds. She noted that the portfolio's aggregate earnings last year were 2.22%; this year the aggregate earnings are 1.25%. She added that minor adjustments were made to both the Capital Projects Fund and Gas Tax Fund. She stated that the Water and Sewer Funds revenues were adjusted down but appeared manageable. She continued that revenue projections for the Parking Fund are adequate, but that there has been diminished demand for downtown parking permits, which will result in a reduction of $150,000 (this is a 50% reduction of demand for downtown parking passes). She stated that there was no mention of the Storm Drain Funds as no changes were recommended. She noted that staff is preparing to make a fourth and final Storm Drain bond issuance later this year due to the availability of lower interest rates. Councilmember Colson asked about the decrease in demand for downtown parking passes. Finance Director Augustine replied that she believed the demand would increase as the larger employers start bringing their staff back into the office. 5 Burlingame City Council March 10, 2021 Approved Minutes Councilmember Beach asked why Water and Sewer Funds are down. Finance Director Augustine replied that there has been less commercial use. She noted that while residential use has increased, it was not enough to offset the difference. Finance Director Augustine discussed long-term priority projects. She explained that the City wants to keep in mind these projects when talking about fiscal sustainability. She stated that the City tries to establish separate funding for large projects. She reviewed some of the large projects that the City has including: Broadway Grade Separation, sea level rise mitigation, and the undergrounding of powerlines on El Camino Real. She explained that while these are high -cost projects, the City will only be paying a small portion of the cost. However, the City will have to have some matching funds to successfully complete the projects. Councilmember Brownrigg praised Finance Director Augustine, City Manager Goldman, and staff for all they have done in keeping the budget in check during such difficult financial times. Vice Mayor Ortiz commented that the decrease in the TOT has been devastating to the City budget. He thanked City staff for navigating through these difficult times. Mayor O'Brien Keighran thanked Finance Director Augustine for all she has done to help the City through the pandemic. She praised her fellow Councilmembers for taking a more conservative path as it has helped keep the City in a good financial position. Mayor O'Brien Keighran opened the item up for public comments. No one spoke. Councilmember Brownrigg made a motion to adopt Resolution number 024-2021; seconded by Mayor O'Brien Keighran. The motion passed unanimously by roll call vote, 5-0. Finance Director Augustine reviewed the five-year financial forecast. She stated that the City entered the current recession much better off than some surrounding cities, and the City is well prepared to get through it. Finance Director Augustine noted that the City has the fiscal infrastructure in place in order to be flexible with the five-year forecast. Finance Director Augustine reviewed the economic indicators: Economic Indicator Projected 2020-21 Forecast 2021-22 U.S Real GDP Growth 12.0% 3.4% U.S Unemployment Rate 6.8% 4.9% California Unemployment Rate 8.8% 5.7% California Median Existing Home Prices $583,320 $618,930 California Residential Building Permits 111,780 117,780 6 Burlingame City Council March 10, 2021 Approved Minutes Finance Director Augustine stated that the main indicators of economic growth are the unemployment rate, home values, personal and corporate income, and construction permits. She stated that recovery will be tied to how quickly the population can be vaccinated. Councilmember Brownrigg discussed the health of the stock market. He noted that the stock market is still healthy and wondered if because Ca1PERS is heavily invested in the stock market, if Ca1PERS will give cities a break on their payments. Finance Director Augustine responded in the negative. Councilmember Colson commented that when the stock market was doing well pre-2008 and pre-2001, pension funds were given a "contribution holiday", but this proved to be bad financial policy. Finance Director Augustine reviewed property tax assumptions. She stated that the property tax roll is growing at a pace slightly behind last year. She continued that the assumed growth will not be near the 11.52% from last year, and instead closer to 6% going forward. She noted that statewide, assessed residential property values increased by 8.1% for revenues collected in FY 2019-20. She continued that major developments may have a significant impact on revenues over time, but the amount and timing of such developments are not typically forecasted. Finance Director Augustine explained that excess ERAF is projected to remain flat. She stated that the City contributed nearly $3.3 million to the County's education fund this year. She commented that there is an assumed 6.0% revenue growth in secured taxes through FY 2025-26. Finance Director Augustine reviewed sales tax assumptions. She mentioned that the data staff has is from the third quarter, and that fourth quarter data will not be ready until mid -April. She noted that the auto and transportation sector, excluding gas stations, makes up roughly a third of Burlingame's taxable transactions. She stated that staff is projecting Burlingame to have an average growth of 7.1% for the fiscal year across all categories. She noted that staffs projection is conservative due to the decline in tourism. She noted that staff is projecting a 7% increase in FY 2021-22, a 4% increase in FY 2022-23, and then averaging 4% through FY 2025-26. Finance Director Augustine reviewed TOT assumptions. She commented that TOT had been the City's largest revenue source and is the most economically sensitive. She explained that staff assumes an 80% "rebound" in FY 2021-22 and 35% in FY 2022-23. She stated that staff will continue to monitor the TOT trends and will update the forecast as needed. Finance Director Augustine explained that investment yields are down. She stated that staff expects low yields on investments well into the future. She noted that the treasury curve does show an upward trend in the coming years. Councilmember Brownrigg commented that the City went to market for the Community Center at the best possible time for rates. 7 Burlingame City Council March 10, 2021 Approved Minutes Finance Director Augustine reviewed the General Fund revenue forecast. She commented that once adjustments are made to the revenue totals, staff will have a new base on which to build the five-year forecast. Finance Director Augustine reviewed the General Fund expenditures forecast: • Salaries and Wages — includes effect of current collective bargaining agreements. Assumes an annual growth in salaries of 2% for FY 21-22, then 3% for out years, as well as normal merit step increases. Assumes part-time wages, after being reduced by 50% in FY 20-21, return to the City's normal operating level starting in FY 21-22. • Benefits — includes an annual health care cost growth rate of 8% for 2022, then 5% for each January 1 change thereafter. Also includes expected PERS contribution rate increases (7.5% average annually for Safety and 6% for Misc. employees) coupled with forecast increases in salaries & wages. • Operating Costs — based upon cost of living adjustments for most non -personnel costs and expected changes in utility rates. A 3% compounded annual growth rate is assumed for most operating costs. A 5% escalation factor for service from Central County Fire is also assumed. • Internal Services — assumes an annual growth of 4% for FY 21-22, then 3% thereafter. • Capital Outlay — includes a base of $250,000 (FY 21-22) based upon historical use and 3% growth rate. • Transfers In (Out) — assumes reimbursements for debt service, increasing General Fund investments in Capital Projects after FY 21-22, and renewed support of City shuttle programs; offset by transfers to the fund for administrative support of enterprise operations. • Debt Service — includes actual debt service for all current outstanding bond issues. (FY 20-21 was the last year for the 2010 Corp Yard bonds.) Assumes no refinancing or new debt. Finance Director Augustine reviewed Ca1PERS' rates and forecast. She explained that Ca1PERS' rates were increased at the beginning of the year and will be increased going forward. She stated that the Miscellaneous Plan cost goes up an average of 6% annually for the next five years, while the Safety Plan goes up 7.5%. She noted that pension costs are rising throughout the entire Ca1PERS system in order to make it more sustainable. Finance Director Augustine stated that the retiree healthcare program is a closed program to new employees, and it should be paid off in the next 12 years. Finance Director Augustine reviewed General Fund expenditures. She stated that for this year, the expenditure forecast is much more stable than the revenue forecast. She noted that the revenues are growing faster than expenditures. She explained that this is due to the revenues decreasing more drastically than expenditures. Vice Mayor Ortiz asked when the City will go from contributing to the Section 115 Pension Trust to utilizing those funds. Finance Director Augustine responded that the City will probably be drawing down on those funds in FY 2026-27. 8 Burlingame City Council March 10, 2021 Approved Minutes Councilmember Colson thanked previous Councils for setting up the reserves. She stated that because of their foresight, the City would weather the storm. Mayor O'Brien Keighran opened the item for public comment. No one spoke. Councilmember Colson made a motion to approve the five-year forecast; seconded my Vice -Mayor Ortiz. Councilmember Brownrigg praised the City staff that were in attendance. The motion passed by unanimous roll call vote, 5-0. b. REVIEW OF DRAFT FY 2021-22 GENERAL FUND, MEASURE I, GAS TAX, MEASURE A, MEASURE M, AND SENATE BILL (SB 1) FUNDED CAPITAL IMPROVEMEMNTS PROGRAM Assistant Public Works Direct Art Morimoto stated that staff is proposing a total of $4.81 million in CIP projects. He noted that funding is comprised of- * General Fund - $1.36 million • Measure I - $1.80 million ($800,000 for sidewalks and $1 million for streets) • Gas Tax, Measure A, Measure M, and SB 1 - $1.65 million • Parking Enterprise Fund - $0.00 Mr. Morimoto stated that some of the funds would be utilized for the following improvements: Programs FY 2021-22 Requests Bicycle/Pedestrian & Traffic Improvements* $1.9 million Parks & Recreation Improvements $810,000 Building Facilities Improvements $100,000 TOTAL $2,810,000 *Includes $800,000 in Measure I Funds and $650,000 in Measure A Funds Mr. Morimoto reviewed the proposed $1.9 million for Bicycle/Pedestrian & Traffic Improvements projects: Project Description FY 2021-22 Requests Sidewalks & ADA Improvements* $800,000 Oak Grove/Carolan Ave Traffic Signal Improvements" $650,000 California Drive Bike Facility $200,000 Master Plan Pedestrian Improvements Implementation $150,000 Burlingame Station Pedestrian Improvements $100,000 TOTAL $1,900,000 *Measure I $800,000 **Measure A $650,000 9 Burlingame City Council March 10, 2021 Approved Minutes Mr. Morimoto stated that the Californian Drive Bike Facility received an $800,000 grant. He added that the Burlingame Station Pedestrian Improvement project received a $600,000 grant. Therefore, the request for an additional $100,000 for the Burlingame Station Pedestrian Improvements project would be enough to complete the project. Mr. Morimoto gave an update on the Broadway Grade Separation Project. He stated that the project is in final design and that environmental clearance has been approved by the Federal Transportation Administration. He noted that the total project cost remains unchanged at $327 million, with $26 million currently funded. He commented that the City is applying for the FY 2021 Federal INFRA Grant. He added that staff is also working with regional agencies to secure funding. He noted that the City's required match would be $15 million. He stated that, provided funding is available, construction could start as early as late 2023. Mr. Morimoto reviewed the $810,000 for Parks and Recreation CIP projects: Project Description FY 2021-22 Requests BSD Synthetic Turf Replacement Fund $200,000 Murray Field Synthetic Turf Replacement Fund $150,000 Playground Replacement Fund $100,000 Bayside Park Parking Lot/Pathway ADA & EV Charging Improvements $85,000 Cuernavaca Field Renovations & ADA Improvements $70,000 Central Irrigation Controller $50,000 Athletic Field Renovations Fund $50,000 Picnic Tables, Benches, Fountains $50,000 Playground Resilient Resurfacing/Treatment $50,000 Annual Tree Replacement $5,000 TOTAL $810,000 Mr. Morimoto next reviewed the proposed $100,000 in CIP projects for Building Facilities: Project Description Draft Recommendations FY 2021-22 Requests Police Station Fuel Tank Removal & Replacement $100,000 $100,000 Main Library HVAC and EMS Upgrade $500,000 $0* Public Works Corp Yard HVAC and EMS Upgrades $350,000 $0 Fire Station 35 Traffic Signals Upgrades $250,000 $0 Roof Repair and Replacement Plans $100,000 $0 Facilities CIP Program Management $50,000 $0 10 Burlingame City Council March 10, 2021 Approved Minutes TOTAL $1,350,000 1 $100,000 *This project will be completed with existing available Facilities CIP Funds Mayor O'Brien Keighran asked if the City had been setting aside funds for the Murray Field Synthetic Turf Replacement project. Mr. Morimoto responded in the affirmative. He explained that the City has been putting aside funds for this project for the past three to four years. Parks and Recreation Director Glomstad added that staff dropped the request from $200,000 to $150,000 for this year and that it should be enough. Parks and Recreation Director Glomstad noted that the BSD Synthetic Turf Replacement Fund has been at $200,000 for the last few years as per the agreement with the School District. Councilmember Beach asked about HVAC improvements in the older facilities, particularly City Hall. Mr. Morimoto responded that City Hall HVAC has never been considered for upgrades. He noted that it is very difficult to replace and would ultimately be cost prohibitive. Councilmember Beach if there were any short-term upgrades that could be done to the HVAC system in response to COVID. DPW Murtuza responded that over the last year, the Facilities Division has taken a number of steps to insure high air quality standards such as installing new filters. He noted that HVAC upgrades, especially to City Hall, would cost a few million dollars. Councilmember Colson asked if she was correct that the City would need to make payments to the San Mateo Union High School District for the Aquatic Center when the Community Center is completed. Additionally, she asked where the allocation for those funds would come from. Parks and Recreation Director Glomstad explained that the City's payment to San Mateo Union High School District is not part of the CIP Funds and instead is a separate agreement. Finance Director Augustine added that it is part of the five-year forecast. Councilmember Colson discussed the needed ADA improvements to the Aquatic Center. Councilmember Brownrigg endorsed Councilmember Colson's sentiment that the City should look into upgrades to the Aquatic Center's internal facilities and changing rooms. Mr. Morimoto reviewed the proposed $2 million in Street Resurfacing projects: Street From To Anza Boulevard Airport Boulevard Freeway Easton Drive Vancouver Avenue Alvarado Avenue Escalante Way Rivera Drive End Hillview Court Burlin view Drive End Hoover Avenue Adeline Drive Columbus Avenue Hunt Drive Trousdale Drive Rivera Drive 11 Burlingame City Council March 10, 2021 Approved Minutes Laguna Drive Lincoln Avenue Broadway Linden Avenue Morrell Avenue Larkspur Drive Ray Drive Quesada Way Davis Drive Summit Drive Burlin view Drive Belvedere Court Summit Drive El Prado Road Burlin view Drive Valdivia Way Hayward Drive Valdivia Court Westmoor Road Dufferin Avenue Hamilton Lane Councilmember Brownrigg discussed a project that Mercy is undertaking and asked if staff was coordinating the Hoover Street resurfacing with this project. DPW Murtuza responded that when staff is ready to bring the resurfacing project forward, they will coordinate with any ongoing or potential projects to mitigate any further disruptions to the public. Councilmember Beach commented if any further investments are need in the IT department infrastructure. Mayor O'Brien Keighran opened the item up for public comment. No one spoke. Councilmember Beach made a motion to approve the draft of FY 2021-22 general fund, Measure I, Gas Tax, Measure A, Measure M, and Senate Bill (SB 1) funded Capital Improvements Program; seconded by Councilmember Colson. The motion passed by roll call, 5-0. 6. ADJOURNMENT Mayor O'Brien Keighran adjourned the meeting at 8:54pm. Respectfully submitted, /s/ Meaghan Hassel -Shearer City Clerk 12 Burlingame City Council March 10, 2021 Approved Minutes