HomeMy WebLinkAbout4/18/2023 Item 6b, Jackson and Harnett - Staff Agenda CorrespondenceCity of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: April 18, 2023
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 6B – 2023-25 FINANCIAL PLAN – STRATEGIC BUDGET
DIRECTION
In the Council Agenda Report, staff noted that the City contracted with Foster and Foster,
an actuarial consulting firm to complete an updated CalPERs analysis to understand the
progress that has been made with the Fiscal Health Response Plan (FHRP) to make
additional payments to reduce the CalPERs unfunded liabilities. Originally, the report was
going to be published ahead of Strategic Budget Direction and the consultant was going
to provide a short presentation at that Council meeting. Given the volume of the material
and several outstanding clarifications with the consultant, staff added this as a standalone
item at the May 16, 2023 Council meeting.
Based on the actuarial report, the City’s commitment to paying down its pension debt by
making additional discretionary payments (ADPs) has helped to make progress on
improving the plan’s overall funded status. Unfortunately, the 2022 investment losses
experienced by CalPERs have significantly impacted the City’s funded status (as well as
that of other PERs agencies throughout California). Several summary slides of the report
are included in Exhibit A to this Agenda Correspondence. The slides provide a year over
year comparison of the City’s funded status as of the 2017 actuarial valuation to the
current valuation. Also, included for context is information about what the funded status
would look like without the ADPs as well as a comparison to other PERs agencies.
Additionally, staff received the following questions regarding the 2023-25 Strategic
Budget Direction. The questions are below with staff’s response shown in italics:
1) On pg 5, 1.1 regarding CWAs, please provide clarification on what
“monitoring” means and what would lead us to shift our policies as they
currently stand? Are CWAs the default for new major City projects and what
threshold do we use to determine when one will be utilized?
The City Council evaluated the entire planned $1 billion of projects and ultimately
provided direction to seek CWAs for the Prado Road Overpass and the Public
Safety Center. The reason for that was that the goal was local labor activation and
employment. A thorough analysis showed that for the planned categories and
types of projects, the majority were being contracted to local labor. The purpose
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
of monitoring is to continue to track whether projects were being awarded to local
labor and to potentially reevaluate the Council’s approach to CWAs if project
awards were going to non-local labor. To date, 123,000 hours of capital project
labor has been tracked, with 82% of that labor provided by local labor.
2) 1.2 Upper Monterey area plan. What led to this not being given a line item
like the Margarita special plan? Are they inherently different or just funded
differently?
The Margarita Area Plan and Upper Monterey Area Plan are fundamentally
different. The Margarita Area Plan is a fairly focused update of an existing specific
plan in response to changes to the County’s Airport Land Use Plan that the City
successfully advocated for. There is the potential now for substantially higher
residential density, which also creates the potential for more funding to accomplish
the Prado Road extension to Broad Street.
The Upper Monterey plan is envisioned as a collaborative effort with area property
owners, business owners and residents to first determine alignment between
General Plan Policy 8.2.2, which includes a list of eight actions that the City will
undertake, and the needs and desires of the area’s stakeholders. The initial efforts
for Upper Monterey can be facilitated by staff, which would then lead to a complete
scope of work for the plan. Funding for the creation of the plan – including potential
consultant support – would be identified as part of the 2025-27 Financial Plan
process. Outreach efforts are scheduled to begin in the 2024-25 Fiscal Year.
3) Pg 16 3.1: Is this part of the below market rate study session that will be
provided in Spring of ’24? Is it connected to the consultant mentioned on pg.
30, #30?
These are two separate items and staff will do the work on the Below Market study
work.
4) Can you provide some background on the Public Safety Equipment Fund
and why the contribution has gone up? If this is the cost of core services,
why is it being presented as an SOBC and not included in the base budget?
The Public Safety Equipment Fund (PSEF) was created with the 2019-21 Financial
Plan to help budget and forecast the replacement of Public Safety equipment that
has expired or become damaged. Prior to this approach, critical public safety
equipment had to essentially “compete” with other CIP projects and the fact is that
the equipment generally needs to be replaced to preserve community and
employee safety and/or readiness.
The Fund had received an original seed amount with the 2019-20 budget and,
since then, an annual allocation is made from the General Fund. It is a stand-alone
fund and expenditures are budgeted and paid for directly out of the fund. Internally,
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
staff have a twenty-year equipment replacement schedule. The annual allocation
helps smooth the cost of expensive equipment replacement over the years.
Regrettably, the cost of this equipment has increased over the last several years
and the annual contributions have not kept pace with historical levels of increases.
Additionally, the City is no longer able to take advantage of some programs that
provided low-cost or no-cost equipment.
The increase in allocation is presented as an SOBC to enhance transparency and
because there is not enough available budget to add this into the ongoing base
budget. The General Fund assumes a 3% increase year-over-year for non-staffing
expenditures. When line items exceed the 3% increase, they often cannot be
absorbed in the ongoing budget without tradeoffs. The one-time allocation
recommended in 2023-25 will help ensure that critical equipment will be fully
funded for the next several years; however, the fund will need to be evaluated and
ultimately staff may recommend an ongoing increase to the annual allocation with
the 2025-27 Financial Plan.
Some of the equipment to be replaced in FY 2023-25 includes new fire turnout
sets, rescue jackets, SWAT helmets, extrication equipment, and radio headsets.
5) What is the utilization of the current funding for childcare grants and have
the businesses been successful?
This program provides startup funding for businesses participating in a CAPSLO
program supporting the development and expansion of childcare businesses in the
City. To date, CAPSLO has committed $80,000 of the $95,000 available to 12
businesses representing approximately 100 new childcare slots available to the
community. The remaining funding is expected to be used by the end of the fiscal
year. CAPSLO completes program follow up and currently all businesses that have
received a grant are in operation or in the licensing process.
Staff and CAPSLO believe the program is effective and the funding level of
$25,000 per year over the next two years is the appropriate level.
6) Page 5, 1.1E- What is the additional funding for, and what FY will the
economic activity scorecard by completed by?
The funding for this work effort is $11K in each of the two years in the 2023-25
Financial Plan (item 22 in Appendix A) and funds ongoing collection of raw data
from EDD and analysis by Beacon to determine effectiveness of Economic
Development efforts. The scorecard is expected to be complete by the end of the
current fiscal year and funding requested will allow for the scorecard to be updated
as new data becomes available.
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
7) Page 21, 4.3D- What is the timing on the California/Taft Roundabout project?
Design is far along and is expected to be complete by end of 2023. However, right-
of-way negotiations are still underway and may continue beyond 2023, depending
on cooperation from adjacent private property owners. Staff is endeavoring to
complete final design and right-of-way acquisition by end of 2024, with plans to
request construction funding as part of 2025-27 Financial Plan. Staff is also
monitoring opportunities to pursue additional grant funding for this project in the
interim.
8) Page 22, 4.3I- Why is there no requested resources to reassess viability of
launching a citywide bikeshare program?
This work effort will be done in house, by existing staff.
9) Page 29, Table 3, Line 8- Why is the cost of the reclassification from
Communications Manager to Lieutenant $105K?
This amount only reflects the incremental fully burdened (salary and benefit) cost
of a Lieutenant at top step, compared to the former Communications Manager
position at step 3. The intent was to demonstrate the incremental cost of hiring a
new civilian Communications Manager at step 3, versus a sworn Lieutenant at top
step. The actual difference at max step between the two positions is approximately
$82K, which we can look at revising in developing the budget.
10) Page 30, Table 4- The total cost of the one-time General Fund SOBCs is
$1.47M over two years, higher than the amount of the initially planned $1.3M
CalPERs ADP. What makes up the difference?
As discussed, the $1.3M CalPERs amount covers the majority of the two year cost,
but there is additional funding from projected revenue over expenditures, assuming
that we are successful in realizing FEMA and State reimbursement for storm-
related expense. Additional information on this one will be included in Agenda
Correspondence to be routed on Tuesday morning.
11) Page 39, Lines 7 and 9- One-time funding is recommended, but isn't this work
an ongoing need?
Per our discussion, both positions are intended to be limited term, based upon the
described duties. If it is determined that there is an ongoing need for either, staff
would return for an ongoing budget request in a future financial plan.
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
12) Page 41- Will Cal Poly contribute toward the cost of the Reservoir 2
Replacement?
It is expected that Cal Poly will contribute towards the cost of Reservoir 2
replacement. They will contribute in two ways:
(1) Rates: Like all customers, Cal Poly's rates will be based on the cost of
capital projects, operations and maintenance, and debt service.
(2) Capacity interest payments: These are payments that reserve a portion
of the water system's capacity for Cal Poly use (measured in million gallons
daily). As we expand the system, Cal Poly can increase their capacity share.
Cal Poly has expressed interest in increasing their capacity share, but the
specifications of such an agreement will need to be negotiated between the
City and Cal Poly.
13) Page 61, Lines 58 and 29- Why are the wastewater positions LRM-funded and
not funded through enterprise revenues?
Stormwater activities are a General Fund program. Wastewater Collection staff
help to support this program, and the LRM amounts pay for that staff's support of
Stormwater work.
14) Page 61, Line 72- Why are there different amounts budgeted for Open Space
Acquisition in 2023-24 and 2024-25?
The CIP in the 2021-23 Financial Plan showed a planned annual allocation of
$250K for Open Space Acquisition. This amount was reduced in 2023-25 in order
to balance the LRM funded portion of the CIP overall. The decreased allocation in
2023-25 shouldn't have a significant impact, given what is on the list and planned
for 2023-25.
15) Page 62, Line 130- What is $100K for 2024-25 intended to fund?
Lines 130 and 131 both include funding for minor Pedestrian Facility
Improvements and Bicycle Facility Improvements that are intended to fund lower-
cost active transportation improvements that do not warrant a larger Capital
Improvement Project. The City Active Transportation Committee (ATC) provides
recommendations to staff on project priorities for these funds, which have
historically funded things like addition of green bike lane markings at conflict areas,
minor sign/striping modifications on bikeways, installation of hi-visibility crosswalk
markings or lower-cost flashing beacon systems and individual crossing
locations. In some cases, the ATC has recommended that staff use these funds
to advance planning/design for future capital projects—for example, in 2022 the
ATC recommended that staff use available Bicycle Facility Improvement funds to
start preliminary design for a future Foothill Boulevard Complete Street project.
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
16) Page 62, Line 150- What is planned use of funding for Vision Zero?
This funding is intended for safety projects identified in the last Traffic Safety
Report that could not be implemented with current funding resources, as well as
new projects to be identified in the forthcoming Vision Zero Action Plan. Staff is in
progress with transitioning our traditional Traffic Safety Report to a Vision Zero
Action Plan, which focuses priority on systematic and reactive strategies to
address the types of collisions that result in injury/death. The traditional Traffic
Safety Report has focused on reactive measures to address all collisions,
regardless of severity, which is out of sync with current best practices and City
goals. Staff plans to have the updated Vision Zero Action Plan available for City
Council review in late 2023, which will identify a new set of safety project priorities.
17) Page 79, Table 34- What is the significant decline in Economic Recovery,
Resiliency and Fiscal Sustainability?
The primary driver in the decrease is due to the timing of funding being allocated
to the Cultural Arts District Parking Structure. This project alone makes up $47
million of the $51 million programmed in 2023-24 and is very much an outlier.
Considering all other “Economic Recovery, Resiliency and Fiscal Sustainability”
capital projects, the totals in 2023-24 and 2024-25 are right around $4 million and
$3.6 million respectively.
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
Exhibit A – CalPERS
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%Table 1: Historical Funded Status -City of San Luis Obispo
CalPERS Pension Plans
Projected Funded Status From 2017 Study based on 6/30/15 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation - WITHOUT ADPs (Extra Payments to
CalPERS)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
2015 2016 2017 2018 2019 2020 2021 2022
(ESTIMATED)
Table 2: Miscellaneous Funded Percentage
Projected Funded Status From 2017 Study based on 6/30/15 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation - WITHOUT ADPs (Extra Payments to
CalPERS)
Average for CalPERS Public Agency Miscellaneous Plans
Staff Agenda Correspondence Item 6b – 2023-25 Strategic Budget Direction
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2015 2016 2017 2018 2019 2020 2021 2022
(ESTIMATED)
Table 3: Safety Funded Percentage
Projected Funded Status From 2017 Study based on 6/30/15 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation - WITHOUT ADPs (Extra Payments to CalPERS)
Average for CalPERS Public Agency Safety Plans