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HomeMy WebLinkAboutMin - CC - 2018.05.09 Burlingame City Council May 9, 2018 Approved Minutes 1 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 Burlingame City Council May 9, 2018 Approved Minutes 2 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. Burlingame City Council May 9, 2018 Approved Minutes 3 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. Burlingame City Council May 9, 2018 Approved Minutes 4 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. Burlingame City Council May 9, 2018 Approved Minutes 5 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. Burlingame City Council May 9, 2018 Approved Minutes 6 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. Burlingame City Council May 9, 2018 Approved Minutes 7 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. Burlingame City Council May 9, 2018 Approved Minutes 8 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