HomeMy WebLinkAboutMin - CC - 2018.05.09
Burlingame City Council May 9, 2018
Approved Minutes
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BURLINGAME CITY COUNCIL
Approved Minutes
Budget Study Session on May 9, 2018
1. CALL TO ORDER
A duly noticed meeting of the Burlingame City Council was held on the above date in the City Hall Council
Chambers.
2. PLEDGE OF ALLEGIANCE TO THE FLAG
The pledge of allegiance was led by CDD Meeker.
3. ROLL CALL
MEMBERS PRESENT: Beach, Brownrigg, Colson, Keighran, Ortiz
MEMBERS ABSENT: None
4. PUBLIC COMMENT
There was no public comment.
5. STAFF REPORTS AND COMMUNICATIONS
a. STUDY SESSION: FISCAL YEAR 2018-19 BUDGET
Finance Director Augustine reviewed the proposed budget for FY 2018-19. She began by discussing the key
points of the proposed budget:
1. Aligns with Council and community priorities, including Measure I plan;
2. Confirms long-term focus: identify and fund accrued liabilities;
3. Changes from 5-year forecast assumptions identified; and
4. Continues consideration of unfunded infrastructure needs
Next she reviewed the General Fund challenges:
1. Provide day-to-day operations and capital needs required to sustain high quality services;
2. Fund long-term, legally-obligated liabilities; and
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3. Resolve unfunded infrastructure needs.
Finance Director Augustine discussed the highlights of the proposed budget. This included the addition of
one police officer utilizing Measure I funds. Additionally, the proposed budget assumes continued economic
growth and sets aside $3.4 million for the Section 115 Pension Trust Fund. She noted that consistent with
careful planning, the budget assumes $2 million funding for the Capital Investment Reserve. She explained
that in previous years the City set aside $3 million for the Capital Investment Reserve. However, as
discussed at the Mid-Year Budget Study Session, $1 million of the annual $3 million transfer would be set
aside for the anticipated debt service of a new community center.
Finance Director Augustine stated that General Fund revenues in the proposed budget are up 6.3%, with a
total General Fund balance increase of $4.5 million. She stated that out of the $4.5 million, $2.8 million
would be set aside for the Section 115 Pension Trust Fund, and $1.1 million would be for the Economic
Stability Reserve.
Finance Director Augustine reviewed the City’s three main revenue sources: transient occupancy tax
(“TOT”), property tax, and sales tax. She noted that these three sources constitute nearly 85% of General
Fund revenues.
1. TOT is the largest revenue source for the City. She explained that average daily room rates are
holding steady, and occupancy rates remain at 87%. She stated that there is an assumed growth of
2% for TOT in the coming fiscal year.
2. Property tax is anticipated to increase 7% from last year as a result of rising property assessments.
Additionally, she stated that the proposed budget includes a larger provision for ERAF refunds than
in previous years.
3. Sales tax is anticipated to increase by $1.8 million in FY 2018-19 as a result of steady automobile
sales and the inclusion of Measure I sales tax revenue.
Additionally, she noted that the fourth largest revenue source was charges for services, which are 7.6% of the
budget.
Finance Director Augustine reviewed the expenditure highlights for the proposed budget. She explained that
expenditures would increase by 3.7%. She noted that the largest change would be the addition of one police
officer that would be funded by Measure I. She stated that the personnel budget would increase by 4.9% due
to salary and benefit cost increases. However, she noted that there were minimal non-personnel increases in
the budget. The aquatics budget would be increasing because of an adjustment for actual water and utility
consumption.
Finance Director Augustine stated that the proposed budget with revenues is $74.9 million, departmental
expenditures are $58.2 million, transfers out for debt service are $3.1 million (including $1 million from
Measure I and $1 million from General Fund for revenue bonds), and transfers in and out are $7 million.
She explained that this leaves the City with net operating revenue of $6.5 million, from which $2 million will
be transferred to the Capital Investment Reserve. She explained that the remaining $4.5 million would
increase the General Fund balance to $36.8 million.
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Finance Director Augustine reviewed the fund balances of the reserves. She stated that the Economic
Stability Reserve would be increased by $1.1 million due to the increase in projected revenues. She noted
that $2.8 million would be restricted for the Section 115 Pension Trust Fund.
Finance Director Augustine recommended that Council consider increasing the $2 million transfer to the
Capital Investment Reserve to $3 million. This is because there should be expenditure savings at the end of
the year, and the City’s debt service has been reduced as a result of paying down pension obligation bonds.
Mayor Brownrigg asked if the decrease in the City’s legally obligated debt service was due to earlier
tranches of the pension obligated bonds being paid off. Finance Director Augustine replied in the affirmative
and explained that the pension obligation bonds were heavily weighted for the first ten years. She explained
that the debt service on the bonds was reduced by over $2 million dollars.
Councilmember Ortiz asked if the debt service on the pension obligation bonds would continue to decline or
remain stable. Finance Director Augustine stated that the debt service would remain stable.
Finance Director Augustine stated that the proposed budget includes $50,000 for community group funding.
She explained that each year, the City provides small grants to groups that provide services to specific
populations within the City. She stated that a lot of cities do this as a way of leveraging the good work of
local non-profits for the betterment of the entire community.
Finance Director Augustine reviewed the unfunded needs of the City. She stated that unfunded
infrastructure projects were formally identified and prioritized in FY 2013-14. She noted that various
funding mechanisms were examined and will continue to be examined. She added that the Renewal &
Replacement Reserve was established in January 2015, and it is now known as the Capital Investment
Reserve. She explained that the Capital Investment Reserve has grown since its inception, and it is projected
to have $26.5 million in the next fiscal year.
Next, Finance Director Augustine explained that in FY 2016-17, public outreach confirmed the City’s
priorities including:
• Repairing potholes, streets and sidewalks
• Replacing aging infrastructure such as the Recreation Center
• Maintaining excellent public safety services, parks and programs for all ages
She noted that with the passage of Measure I, the City will have additional funds for these priorities. She
explained that the Measure I spending plan was approved at the Council’s February 20, 2018 meeting.
Finance Director Augustine stated that GASB Statement 68 (accounting and financial reporting for pensions)
was implemented in FY 2014-15. As a result, the City’s net pension that was reported in the CAFR in FY
2014-15 took a pretty big hit. Net pension liability is now on the City’s balance sheet. She explained that
the recently issued GASB Statement 75 will have a similar impact. This is because under GASB Statement
75, OPEB liability will now be reported on the City’s balance sheet.
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Finance Director Augustine reviewed the CalPERS decision to reduce the discount rate for all its pension
programs from 7.5% to 7% over a three-year period. She stated that employer contributions are currently
24.6% for miscellaneous employees, but will rise to 37.5% in 10 years. For public safety, employer
contributions are currently 45.2%, but will rise to 76.4% in 10 years. These anticipated rates are based only
on a discount rate reduction of 7.5% to 7%. Therefore, it doesn’t take into account any other assumptions
that may change in the future. In response, the City established a Section 115 Pension Trust Fund. She
stated that the City will continue to make contributions to the Section 115 Pension Trust Fund until the
CalPERS required rates go above the threshold. At that point, the City will draw from the trust fund. She
noted that the contributions to the Section 115 Pension Trust Fund cannot be shown as expenditures.
Instead, the contributions are shown as restrictions of fund balances.
Councilmember Ortiz asked about the increase for police and dispatch of over a million dollars. He stated
that he understood that part of that was to pay for a new police officer using Measure I funds but asked what
else led to the increase. Finance Director Augustine stated that the increase was mostly due to salary and
step increases.
Councilmember Ortiz asked about the increase to the Burlingame Aquatic Center budget. He stated that he
was under the impression that the City’s subsidy to the program would be decreasing. Parks and Recreation
Director Glomstad stated that the budget item was for operating expenses. She explained that previously,
utility costs were not accurately budgeted for, and therefore the number was increased. City Manager
Goldman added that the City wouldn’t be paying this full amount. She explained how the billing process
worked between BAC, the high school district, and the City.
Councilmember Ortiz asked what the City would be paying. City Manager Goldman stated that last year it
was $150,000, and this year it would be $155,000.
Councilmember Keighran discussed the increase in sales tax revenue. She asked for a breakdown of sales
tax revenue in regards to Broadway and Burlingame Avenue. Finance Director Augustine stated that she
would get this information for Council.
Councilmember Beach asked if she was correct that the debt service on the pension obligation bonds is being
reduced by more than $2 million a year. Finance Director Augustine replied in the affirmative.
Councilmember Beach asked if she was correct that this is a responsible time for the City to take on new
bonds for the proposed community center. Finance Director Augustine replied in the affirmative.
Vice Mayor Colson stated that she appreciated the extensive detail around CIP and pensions as they are
important items. She stated that in reviewing the CAFR, it shows that the City has 257 inactive employees
or beneficiaries currently receiving benefits, 132 who are entitled to but not receiving benefits, and 166
active employees. She explained that this demographic shows a reverse triangle where there is a small base
of employees that are trying to fund the pensions. She stated that there are 550 people in the plan, and only
166 of these are actively paying into it. She discussed the question of whether full funding is necessary. She
explained that she didn’t think it was necessary, and that the goal should be to get the City to a point where
pension funding is not pushed on any one particular generation but rather the responsibility is equally shared.
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Mayor Brownrigg discussed the unfunded OPEB liability. He asked about the status of this liability and
whether the City was putting meaningful capital towards this matter. Finance Director Augustine stated that
currently the City is investing approximately $5 million a year in retiree medical obligations. She explained
that she estimates that in five to six years, the City will be drawing down from the reserve fund to pay the
ongoing pay-as-you go costs, but in the meantime, the City will continue to put money in the reserve.
Mayor Brownrigg explained that in 2012, the Council was made aware of $76 million in unfunded OPEB
liability that would rise to $82 million. He stated that he was looking to understand why this issue no longer
felt like a priority. Finance Director Augustine explained that the City initially invested $6.6 million in
OPEB reserves. She stated that the City continues to make systematic contributions to the fund. She
explained that once pay-as-you go costs reach $5 million a year, the City will start drawing down on their
reserves.
Vice Mayor Colson stated that the City has an actuarially accrued liability of approximately $58.4 million in
OPEB, with assets of $9.6 million. This means there is a funded ratio of only 16.4%.
Finance Director Augustine stated that the OPEB contributions are about 7% of the General Fund budget.
She explained that currently, the City is able to fund both the pay-as-you go costs and add to the reserve each
year. She added that unlike CalPERS, OPEB is a closed system and will eventually be retired.
Mayor Brownrigg asked for information on the City’s debts that were accruing and what was being paid. He
asked that it be displayed like the pension obligation bonds where he can see when the City will be done
paying. Finance Director Augustine replied in the affirmative.
Vice Mayor Colson added that because OPEB is a closed system, an actuary could estimate its ending date.
She stated that CalPERS pensions are an open system as the City is continually hiring new employees who
are owed these benefits.
Mayor Brownrigg asked if there were separate study sessions for enterprise funds like water and sewer.
Finance Director Augustine stated that staff brings water and sewer rate issues to the Council as they occur.
Mayor Brownrigg discussed the decrease in parking fines as a result of the newly installed smart meters. He
asked if this decrease would lead to the City reevaluating the number of personnel assigned to parking
enforcement. Finance Director Augustine replied that this could be a future decision.
Mayor Brownrigg stated that he felt the City would have higher consulting costs in the coming years for
large projects including City Hall.
Councilmember Beach asked about the Finance Director’s recommendation to increase Capital Investment
Reserve funding from $2 million to $3 million.
Councilmember Ortiz and Councilmember Keighran stated that they would be in favor of increasing the
funding for the Capital Investment Reserve.
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Vice Mayor Colson stated that she was okay with looking at that. She noted that the pension conversation is
very fluid, so it is probably better to wait to see where the City ends up at the end of the year to determine if
additional funding should go towards pension liability.
Mayor Brownrigg stated that the Council was in agreement to put $3 million into the Capital Investment
Reserve.
b. CITY COUNCIL REVIEW OF DRAFT FY 2018-19 CAPITAL IMPROVEMENT PROGRAM
Assistant DPW Morimoto presented the proposed FY 2018-19 Capital Improvement Program. He explained
that for FY 2018-19, staff was proposing $7.54 million in General Fund CIP. He reviewed the Parks and
Recreation projects, which included $400,000 for the new Skyline Park. Next, he reviewed the proposed
$2.125 million in public building facilities projects.
Mayor Brownrigg asked about the underground fuel storage tanks for the Police Department. He asked if the
City should consider using Boosters fuel service instead of putting the tanks underground for $400,000.
DPW Murtuza stated that this option was reviewed. He stated that there were environmental issues with the
tank, and the City was under stipulations to evaluate and address the issues.
Assistant DPW Morimoto reviewed the list of street resurfacing projects for FY 2018-19 totaling $2.14
million. He noted that $200,000 is from the City of Millbrae to assist in resurfacing of Murchison and
Sequoia. He showed a map that reviewed the location of the streets that would be resurfaced in FY 2018-19.
Assistant DPW Morimoto reviewed the water system CIP. He stated that since the mid-2000s, the City has
completed $42 million of projects to upgrade the system. However, $86 million of backlog remains. He
highlighted a few of the projects staff completed last year including:
• South Rollins Road Water rehabilitation project which replaced over 4,000 feet of water main
• Unidirectional flushing was developed to more efficiently flush the system for water quality
improvements.
He explained that staff is proposing $3 million in water system projects for FY 2018-19 of which most are
pipeline replacements.
Next, Mr. Morimoto reviewed the sanitary sewer CIP. He stated that since the mid-2000s, the City has
completed $74 million of projects including; replacing 37 miles of pipeline; and undertaking upgrades at the
Waste Water Treatment Plan. However, $85 million of backlog remains. He highlighted a few of the
projects staff completed last year including:
• Easton Addition sewer replacement
• Sewer line replacement on Rollins Road
He explained that staff proposes $5.2 million in sewer projects for FY 2018-19, of which the majority of the
work will focus on pipeline replacement.
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Next, Mr. Morimoto reviewed the storm drainage system CIP. He stated that these projects are funded by
the 2009 storm drain fee passed by voters. He noted that the City has completed $24 million of projects and
$28 million of projects remain. He explained that last year, the City repaired the Vancouver Ave Bridge,
Summit Drive Culvert, and cleaned the Lorton Avenue storm drain. He stated that for FY 2018-19, staff is
proposing $4.02 million in projects.
Vice Mayor Colson asked how many trucks it took to remove 220 cubic feet of debris found in the Lorton
Avenue storm drain. Mr. Morimoto stated that it took 40 dump trucks. He added that staff would monitor
that line to see how silt accumulates.
Mr. Morimoto summarized that the total amount of CIP projects proposed for FY 2018-19 is $21.9 million.
Vice Mayor Colson asked if staffing levels were appropriate for the large amount of CIP projects proposed
for FY 2018-19. DPW Murtuza stated that staff is trying to manage projects a lot more and utilize outside
resources in order to fast track projects.
Councilmember Beach discussed the State’s storm water compliance regulations. She asked what the
infrastructure and CIP needs will be. DPW Murtuza stated that there is an unfunded mandate from the State
to invest heavily in improving the water quality (runoff water, not drinking water) in the Bay Area. He
explained that there are a number of pollutants that the State is concerned about, but the primary focus is on
trash, PCBs, and mercury. He discussed the studies that have been done to review how pollutants are
generated and get into the Bay. He explained that as a result, the Regional Water Quality Control Board is
working on requirements that will have a large effect on both cities and private developers.
DPW Murtuza continued by explaining that the City will need to increase funding to address PCBs. He
stated that PCBs could be addressed through green infrastructure. Additionally, he stated that the City
installed several hundred trash capture devices throughout the storm drain system. He stated that the
downside is that the devices block the storm drains, and staff has to ensure that they are cleaned before and
after each storm.
He noted that the City is facing a 100% trash reduction requirement by 2021, and that the City is currently
measuring over 70% reduction of trash.
Councilmember Keighran asked if Public Works will need to increase staffing numbers to address the new
requirements. DPW Murtuza replied in the affirmative but noted the constraints of City Hall.
Councilmember Keighran asked how far behind schedule the City is on storm water projects. DPW Murtuza
stated that based on regulatory requirements, the City is up-to-date.
Vice Mayor Colson asked if the future requirements would be funded out of the regular budget, or will the
City have to resort to other financing. DPW Murtuza stated that many cities are struggling with this problem
statewide. He noted that San Mateo County recently determined the overall cost for each city in the County
and is discussing a potential ballot measure.
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Vice Mayor Colson asked about possible infrastructure needs for sea level rise and whether it was
incorporated in the new requirements. DPW Murtuza stated that it will be a separate project. He explained
that staff will be bringing a report on this matter to the Council at a later date.
Vice Mayor Colson asked when the City would go out for bonds with Measure I funds. Finance Director
Augustine stated that she believed it would be next fiscal year.
Vice Mayor Colson asked where the $2 million budgeted for Measure I debt service would go while waiting
for the City to purchase bonds. Finance Director Augustine stated that this money would remain in the
General Fund.
Councilmember Ortiz asked if the funds should be budgeted towards other areas since it most likely won’t be
spent towards the bonds this fiscal year. Finance Director Augustine stated that these numbers could be
reviewed during the mid-year budget study session.
6. ADJOURNMENT
Mayor Brownrigg adjourned the meeting at 8:22 p.m.
Respectfully submitted,
/s/
Meaghan Hassel-Shearer
City Clerk