HomeMy WebLinkAboutItem 8a. FY 2023-24 Third Quarter Budget Review and FY 2024-25 Supplemental Budget Preview Item 8a
Department: Finance
Cost Center: 2002
For Agenda of: 5/7/2024
Placement: Business
Estimated Time: 90 minutes
FROM: Emily Jackson, Finance Director
Prepared By: Riley Kuhn, Principal Budget Analyst
SUBJECT: FISCAL YEAR 2023-24 THIRD QUARTER BUDGET REVIEW AND
FISCAL YEAR 2024-25 SUPPLEMENTAL BUDGET PREVIEW
RECOMMENDATION
Receive and file the Fiscal Year 2023-24 Third Quarter Budget Report and preview of the
FY 2024-25 Supplemental Budget.
POLICY CONTEXT
Development and presentation of the quarterly reports conforms with the following
adopted Budget Policies:
Financial Plan Purpose and Organization- Goal Status Reports which
requires that the status of major program objectives be formally reported to the
Council on an ongoing, periodic basis.
Financial Reporting and Budget Administration- Interim Reporting which
requires the City to prepare and issue timely interim reports on the City’s fiscal
status to the Council and staff.
DISCUSSION
The accompanying Financial Report for the third quarter of FY 2023 -24 (Attachment A)
provides a high-level overview of the City’s financial condition as of March 31, 2024. The
attached report highlights revenue and expenditure actuals for the first nine months of the
fiscal year and an update on the Major City Goal (MCG) tasks and the Capital
Improvement Plan (CIP). The report’s focus is on the General Fund and each of the City’s
four enterprise funds. The report also provides an update on the City’s storm -related
expenditures and an attachment summarizing and providing an update on the programs
identified in the housing needs and opportunities study session held on March 5, 2024
(MCG 3.1(d)).
In addition to the Third Quarter Budget Report, this item provides a preview of the
information that will be shared as part of the upcoming FY 2024-25 Supplemental Budget
which will be presented to Council on June 4, 2024 (Attachment B).
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Item 8a
Background
Third Quarter Budget Report
Section 1: General Fund Update: As of March 31, 2024, operating expenditures trend
on target with past years’ third quarters.
Section 2: Enterprise Funds: The enterprise funds are generally tracking in line with the
projected budget, with noted exceptions in the sewer fund driven by required emergency
repairs at the Water Resource Recovery Facility.
Section 3: Major City Goal (MCG) Update: The City has made significant progress on
many of its MCG efforts. Three specific tasks were completed in the third quarter and
most ongoing efforts are in progress. One task completed in the third quarter was to
“Conduct a study session with the City Council to identify needs and opportunities across
the housing spectrum, including various types of transitional and supportive housing
options,” (MCG 3.1(d)) which was held on March 5, 2024. At the conclusion of the study
session, staff committed to including a table in the upcoming supplemental budget
process summarizing the identified opportunity programs and providing an update on the
status of the programs within the Community Development Department’s current and
future work plans. That table is included with the Third Quarter Budget Update as an
attachment.
Section 4: Capital Improvement Plan Update: The City has completed 23 Capital
Improvement Plan (CIP) projects between July 2023 and March 2024. Some of the major
completed projects include the Railroad Bike Path Fencing Project, 2022 Street Sealing
Project, Phase 1 of the Cultural Arts District Parking Structure, and eight emergency
storm projects including the San Luis Drive Emergency Repair. In addition, staff is
currently working on 17 active CIP projects.
Section 5: Outlook and Conclusion: Based on the third quarter results, the City is well
on its way to ending FY 2023-24 in a good financial condition. As identified in the Mid-
Year Budget Report, there are a number of factors that impact the City’s budget, including
inflationary pressures and ongoing development which will increase the population of the
community over the next several years. Staff is currently working to identify budgetary
implications of this long-term growth and expects the need to carefully monitor
expenditure growth.
Fiscal Year 2024-25 Supplemental Budget Preview
Section 1: Forecast: The Mid-Year Budget Report included a long term forecast which
indicated expenditures would exceed revenues beginning in FY 2027-28. As a preview to
supplement, staff revised the long-term forecast with the most recent revenue and
expenditure growth assumptions. Driven largely by increased required CalPERS
contributions and the addition of operating costs to run a fifth fire station , the expected
deficit has widened.
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Item 8a
Section 2: Capital Improvement Plan True-up: In light of rising construction costs and
the overall number of projects in process, staff evaluated the current CIP and prepared a
proposed “true-up” that would allocate re resources more efficiently for the upcoming
fiscal year. As part of the Supplemental Budget preview, staff is providing a preview of
this proposed FY 2024-2025 CIP true-up. This process involves identifying projects that
would not begin construction before July 2025 and prioritizing those with immediate
funding needs and significant pre-July 2025 work efforts. Projects identified as being
constructed after the current financial plan would be considered for funding in the 2025-
27 Financial Plan, when resources would be required. In some cases, staff has
recommended transferring or allocating partial funding from one project fund to another
project fund or from projects that were completed under-budget, sometimes to
supplement projects anticipated to be constructed in the next fiscal year and sometimes
so that design can continue and construction can be funded in the appropriate future year.
All recommendations have been taken to the CIP Review Committee prior to City Council.
The Revenue Enhancement Oversight Committee has not yet reviewed the CIP
recommendations but will do so at its May 23rd meeting, prior to formal recommendations
be made to Council on June 4th.
Public Engagement
Public comment on this item can be provided to the City Council through written
correspondence prior to the meeting and through public testimony at the meeting. The
Third Quarter Financial Report for FY 2023-24 (Attachment A) and FY 2024-25
Supplemental Budget Preview (Attachment B) will be posted on the City’s website for
public review.
CONCURRENCE
Operating departments review and monitor financial results on a regular basis.
Departmental fiscal officers reviewed the numbers and will be closely monitoring the
budget for the remainder of the year.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended
action in this report, because the action does not constitute a “Project” under CEQA
Guidelines Sec. 15378.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2023-24
Funding Identified: Yes
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Item 8a
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ $ $ $
State
Federal
Fees
Other:
Total N/A N/A N/A N/A
There is no fiscal impact associated with staff’s recommendation to receive and file the
FY 2023-24 Third Quarter Budget Report.
ATTACHMENTS
A - FY 2023-24 Q3 Budget Report
B - FY 2024-25 Supplemental Budget Preview
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Q3 Budget Report Page 1
Third Quarter Financial Report
Fiscal Year 2023-24
Introduction
This financial report provides an overview of the City’s financial position through the third quarter of Fiscal
Year 2023-24 (July 1, 2023 - March 31, 2024) for the General Fund and the four enterprise operating funds.
It also provides an update on the status of the City’s Capital Improvement Plan (CIP) projects and progress
on Major City Goals. Notable milestones or trends within the third quarter are addressed and detailed
throughout the document. The report is broken down into the following sections:
General Fund Update
As of March 31, 2024, operating expenditures and revenues are on target with past years’ third quarters.
1
1 General Fund Update/
Storm Expenditure Update
2
Enterprise Funds
Update
3 Major City Goal
Update
4 Capital Improvement
Plan Update
5 Outlook and
Conclusion
Fund Balances
$82 Million in
Revenues
(YTD)
$70 Million in
OpEx (YTD)
3 MCG Tasks
Completed in
Q3
23 CIP
Projects
Completed
through Q3
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Q3 Budget Report Page 2
Table 1. General Fund Revenue
Sales and Use Tax (including Measure G): At the end of March 2024, about 70% of the City’s forecasted
sales tax revenue for this fiscal year had been collected; this is generally consistent with prior years due
to the timing of disbursements from the California Department of Tax and Fee Administration (CDTFA).
The actuals noted above include sales taxes earned July 2023 through February 2024.
Property Tax: The City receives most of its property tax revenue in the 3rd and 4th quarters of the fiscal
year and the variable timing explains why current year receipts appear lower than last fiscal year. The
County recently sent the City updated property tax estimates that are roughly in line with the mid-year
budget. As a reminder, the City participates in the “teeter” system for property tax meaning that
disbursements are generally provided two times a year and the City foregoes any potential delinquency
fees in exchange for the County advancing all due applicable property taxes (meaning that property tax
receipts should always meet budget).
Safety Prop 172: Year to date, revenue as a percent of budget is in line with general sales tax and with
expectations. The year over year variance is driven by timing of receipts.
Transient Occupancy Tax (TOT): TOT revenue follows strong seasonal trends and can be highly volatile
based on factors like weather, local events, and consumer spending. Year to date revenue is lower than
the prior year as March receipts have not been recorded and several payments from February are still
outstanding. Staff expect to collect all payments and TOT revenue is broadly on track to meet current year
projections.
Utility User Tax (UUT): UUT revenue is trending about 11% lower than last fiscal year due to the timing
of receipts. Staff expect this revenue stream to finish on budget and will continue to monitor over the
next several months.
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Q3 Budget Report Page 3
Business Tax: The City collects business taxes at the beginning of the fiscal year in amounts based on the
gross receipts of the previous calendar year. Business Tax should have been entirely collected at this point
in the fiscal year, but there are several delinquent filings. Staff have issued citations and are working to
collect this revenue.
Cannabis Tax: Cannabis tax revenue has stayed very consistent at $1.1m annually since the second retail
location opened in April 2021. Revenue is expected to finish on budget at $1.1m again this year.
Franchise Fees: These are fees on privately owned utility companies and other businesses that use the
City's infrastructure to run their businesses. Year to date revenue is down year over year driven by timing
of receipts. Staff expect this revenue stream to finish on budget and will continue to monitor over the
next several months.
Gas Taxes: Both the Highway User Tax (line 10) and the SB1 Road Maintenance and Rehabilitation
Apportionment (line 11) are tracking as expected. The budget for FY 2023-24 is based on information
provided by the State. This revenue is based upon a fee per gallon of gas and is not based on gas prices.
Development Review: Revenues are broadly in line with budget for the current year. However, large
projects with high fees have a significant impact on total revenue collection, so an abnormal fourth
quarter could shift the overall outlook.
Parks & Recreation: Parks and Recreation saw a 15% increase in year-to-date revenue compared to FY
2022-23. This was primarily driven by storm related closures in the prior year.
Other Departmental Revenue (Police & Fire): Police and Fire department revenue are broadly on track
with projections.
Grants and Subventions: Grant revenues fluctuate from year-to-year based on availability and award
success. In many cases, this revenue helps offset expenditures and is not budgeted for. Year to date
revenues are up primarily due to mutual aid for the fire department.
Business and Cannabis Licenses: Business license fees are on track with projections. Business licenses are
renewed at the beginning of the fiscal year; therefore, 100% of budgeted revenue for the year has already
been collected.
Other Revenue: This budget is intentionally conservative as it includes adjustments to the fair market
value of the City’s financial assets which are driven by market projections of future interest rates and have
proven highly volatile. Interest from the city’s investments is the single largest revenue stream in this line
item and is well above budget year to date. This line also includes positive fair market value adjustments
which are expected to be reversed at year-end based on recent market developments.
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Q3 Budget Report Page 4
General Fund Expenditures
The tables below include year-to-date consumption for FY 2023-24 compared to budget. The “Total
Expenditures & Obligations” column includes both costs that have already been incurred and costs that
are obligated on purchase orders.
Table 2. Expenditures by Type
There are no significant variances in the General Fund. The PERS Unfunded Liability expenditure is paid
upfront to take advantage of a prepayment discount. It is expected that contract services and other
operating expenses are more than 75% consumed because annual purchase orders are set up at the
beginning of the year and the funds are considered “Obligated” from that point forward. Salaries and
benefits should track at a consistent level and at this point in the year, it would be normal to expect about
70-75% of the budget to be expended. The year-to-date actuals indicate there is about 4% salary savings,
more than the forecast assumption of 3%.
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Q3 Budget Report Page 5
Table 3. Expenditures by Department
As of the third quarter, there are no significant variances in the General Fund departments. Public Safety
departments are trending high because the approved equity adjustment parameters for SLOPSOA and
Fire employees were not distributed throughout the individual departments but instead budgeted for
within “non-departmental” – this will balance out at year end.
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Q3 Budget Report Page 6
An Update on Storm Expenditures
As noted in prior budget reports, the winter storms in January and March 2023 caused significant damage
to City infrastructure and resulted in emergency declarations at the Federal and State level, in addition to
the Emergency Services Director’s local emergency proclamation. The City Council authorized use of up
to $9 million from the City’s operating reserve in FY 2022-23 and FY 2023-24 to address unbudgeted storm
costs, and with adoption of the 2023-25 Financial Plan, the City Council also approved allocation of $2.75
million in the CIP to fund projects to repair storm damages and mitigate against future damage. The
Federal and State declarations enable the City to seek reimbursement for certain storm related costs. The
maximum reimbursement for eligible costs is 93.75% (75% from the Federal Emergency Management
Agency (FEMA) and 18.75% from the California Office of Emergency Services (CalOES)), meaning that the
City will pay a minimum of 6.25% for certain storm related costs. The FEMA reimbursement process has
moved slowly due to turnover in the FEMA Program Delivery Managers assigned to assist local agencies
in submitting projects for reimbursement and a lack of clarity about the information required in order to
submit projects. Based upon information provided by Ernst and Young (EY) (the City’s consultant hired to
provide disaster recovery technical assistance), staff expects that reimbursement will be received
approximately 12 months following formal submittal of projects to FEMA. The timing of reimbursement
is being closely tracked, as the City’s ability to pay back the operating reserve and fund future storm-
related projects is dependent on receiving reimbursement for incurred storm costs.
The City has expended approximately $12.5 million on storm response to date, including debris removal,
emergency protective measures, and projects to make permanent repairs to damaged facilities. As noted
in prior updates, storm related cost estimates continue to shift as projects are scoped, designed and
completed. Currently, the total storm costs are estimated at $35.2 million, slightly down from what was
reported in the First Quarter Financial Report. Total costs reflect efforts to not only repair storm damage,
but to mitigate against future damage brought on by a potential El Niño year or subsequent storm events.
In order to move quickly to address storm damages, staff continues to use streamlined procurement
processes, including the authorization of construction contracts and change orders by the City Manager
where necessary and allowable to expedite work in order to protect community health and safety. As of
the writing of this report, $9.3 million worth of storm-related expenditures have been submitted to FEMA
for reimbursement, including the City’s largest project to repair and stabilize the creek bank at San Luis
Drive. Staff continue to work to prioritize the repairs and identify which projects will be eligible for the
highest reimbursement.
Table 4. Storm Response Project Status
Row # Projects by Phase Percentage Complete
1 Design 17%
2 Nipomo Bridge over Stenner Creek 10%
3
Remove damaged revetment and install new revetment
upstream and downstream of bridge. Revetment was
undermined during storm event. 10%
4 Prefumo Creek Grade Structure 18%
5
Phase I - Remove damaged grade control structure and install
RSP roughened ramp. 25%
6 Phase II - Install new sewer siphon. Sewer siphon relocation. 10%
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Q3 Budget Report Page 7
7 Prefumo through Golf Course 20%
8 Phase 1 - Install City Owned Ped bridge 50%
9 Phase 2 - Install creek bank revetment in golf course 5%
10 Phase 3 - Stabilize creek banks upstream of golf course 5%
11 SLO Creek at Elks Lodge 15%
12
Phase 1 - Install RSP on East Side (Elks Side) - armor
embankment due to Caltrans revetment 25%
13
Phase 2 - Install creek bank revetment on Elks Lodge side
downstream of Elks Lodge 25%
14
Phase 3 - Install soil nail wall on Hwy 101 side of SL Creek
near Elks Lodge 5%
15 Phase 4 - Armor bridge abutments at Elks Lane and SL Creek 5%
16 SLO Creek at Mission Plaza 25%
17 Remove and install structural sidewalk 25%
18 Complete 100%
19 Lower Marsh Street Bridge Debris Removal 100%
20
Remove vegetative debris and rock materials downstream
and below the Marsh Street Bridge at US 101. 100%
21 Old Garden Creek - 141 Cuesta 100%
22 Remove and replace creek retaining wall 100%
23 Old Garden Creek - 533 Broad 100%
24 Remove RSP and install new RSP + Soil Nail wall 100%
25 Pismo / Johnson Creek Bank Repair 100%
26
Remove revetment and install soil nail wall. Reimbursement
for mitigation work has a high likelihood. 100%
27 Prefumo Clearing (LOVR to Laguna) 100%
28 Phase 1 - Remove debris near LOVR to Mariner's Cove 100%
29
Phase 2 - Remove debris removal from Mariner's Cove to
Laguna Lake 100%
30 Phase 3 - Culvert Repair 100%
31 San Luis Drive at SLO Creek 100%
32 Install soldier pile wall 100%
33 Old Garden Creek - 152 Cuesta 100%
34 Repair lined portion of Old Garden Creek 100%
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Q3 Budget Report Page 8
Enterprise Fund Update
Utilities: Water and Sewer Funds
The tables below include third quarter actuals for FY 2023-24 compared to the budget. The “Total
Expenditures & Obligations” column on the expenditure table includes both costs that have already been
incurred and costs that are obligated on purchase orders.
Table 5. Utilities Revenue
Revenue: Due to the timing of utility billing, the amounts above reflect eight months of charges for
services revenue (i.e. base charges, water sales, sewer services, recycled water sales, etc.) or about 66%
of the fiscal year. Relative to projected revenues for fiscal year 2023-24, charges for services are at
$31,534,000.00 or 68% of what was budgeted and are on track to meet expected revenues. Year-over-
year charges for services reflect about a $1,800,000 or 6% increase and are consistent with the rate
increases approved by R-11427 and R-11428. The remaining actual and budgeted revenues are generally
lumpy or comprise a very small percentage of expected revenues. An example of lumpy revenue is the Cal
OES Grants for flood mitigation infrastructure at the WRRF ($1,500,000 budgeted). Examples of other
expected, but smaller revenues include interest on investments, various permits, and sales of surplus
assets.
2
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Q3 Budget Report Page 9
Table 6. Utilities Expenditures
Expenditures: Currently, there is one significant variance in utilities expenditures to highlight. The
Contract Services budget for the Sewer Fund is currently $862,000 or 67% overbudget. This overspend is
a result of Water Resource Recycling Facility (WRRF) emergency expenses due to construction sequencing
constraints and mercury remediation. In short, residual mercury was encountered during the demolition
of a legacy wastewater treatment system that required unexpected expenditures to address, and
sequencing constraints at the facility resulted in solids accumulation beyond the WRRF’s processing
capacities, which created odors that required additional remediation. Staff obtained Council authorization
to add budget for these expenses from Sewer Fund Undesignated Capital (Completed Projects) via R-
11487. Once these approved changes are implemented, the variance will be addressed. Staff continue to
monitor Other Operating Expenses and Utilities accounts due to highly volatile inflation in electric service
and chemical costs. Staff foresee being able to cover any overages in these accounts with underspend in
other accounts. It is normal and expected that contract services and other operating expenses track above
75% because annual purchase orders are set up at the beginning of the year and the funds are considered
“Obligated” from that point forward. Staffing should track at a consistent level and the actuals seen above
are due to staffing vacancies and subsequent savings during staffing transitions.
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Q3 Budget Report Page 10
Parking Fund
The tables below include third quarter actuals for FY 2023-24 compared to budget.
Table 7. Parking Revenue
Revenue: Revenue from on-street and surface parking lot areas is tracking higher than budgeted which is
likely due to conservative forecasts for the rate increases that took effect July 1, 2023. Revenue from
citation payments is also tracking higher than budgeted. Enforcement related revenue is difficult to
accurately forecast because it is reliant on individuals to violate state and local laws and for an officer to
be present to issue a citation for said violation. Revenue from investments is also tracking higher than
budgeted because it is unknown at the time the budget is adopted what rate of return the City will realize.
Parking structure revenue is tracking low even after being adjusted at Mid-Year to account for the
reestablishment of first hour free program and establishing free Sunday parking in the structures, as
approved by Council in November 2023. Recent occupancy studies conducted as part of the Parking Rate
Study revealed lower than typical utilization of the parking structures which may be contributing to the
lower than anticipated revenue. A rate study is underway and expected to be presented to the City Council
in May 2024 to consider potential adjustments to parking rates and other operational modifications,
which may alter future fiscal year revenue projections.
Table 8. Parking Expenditures
Expenditures: Contract Services and Other Operating Expenditures are tracking higher than budget mostly
due to increased adoption of mobile payment among users. There have been over 200,000 mobile
application (app) transactions (all credit card based) in the first eight months of FY 2023-24, in which the
City incurs credit card merchant fees. In addition, credit card payments represent over 90% of revenue
collected at the pay stations and at the parking meters. At Mid-Year budget review, the credit card
merchant fees budget was increased from $205,590 to $390,590 to account for continued and significant
digital payment adoption. However, through the first eight months of FY 2023-24, credit card merchant
fees were averaging $45,170 per month with a projected year-end of $542,000. Additionally, execution of
the Parking Communications Plan has required more resources than originally budgeted , as well have
expenditures for out-of-warranty repairs to pay stations and charging stations, regulatory signs and
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signposts for new enforcement areas, and maintenance equipment for the parking structures. These
actual costs have been reflected in adjustments to the FY 2024-25 budget that will be presented as part
of Budget Supplement.
Transit Fund
The tables below include third quarter actuals for FY 2023-24 compared to Budget. The “Actuals” column
includes both costs that have already been incurred and costs that are obligated on purchase orders.
Table 9. Transit Revenue
Revenue: The Transit program saw a modest year over year decline in transit fare revenue. Fare revenue
is vital to secure State Transit Development Act (TDA) funds which require 20 percent of the programs’
operating budget be generated from local revenue (fares, bus passes, and payment from Cal Poly). Most
State and Federal revenue is directly tied to capital projects and will not be realized until projects are
either initiated or completed and reimbursement requests are submitted. Other Revenue includes
interest on investments which is difficult to predict, so revenue from interest is typically conservatively
forecasted. At this time, the Transit Fund is tracking as expected for its annual revenues.
Table 10. Transit Expenditures
Expenditures: Salaries and Benefits are trending lower than budget due to reallocation of Mobility
Services positions between funds to better align with the workloads of those roles. Other Operating
Expenditures is trending low mainly due to the contract for Purchased Transportation services. The City
anticipated returning to pre-pandemic levels of service but difficulty hiring and retaining drivers has
delayed this effort.
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Major City Goal (MCG) Update
Three 2023-25 Major City Goals have been completed in FY 2023-24 Q3. The table below highlights the
MCGs that were expected to be completed in the current quarter.
Table 11: Major City Goal Tasks with Completion Dates in FY 2023-24 Q3
3
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CIP Update – Completed and Ongoing
Over the past year, the City's Capital Improvement Program (CIP) has achieved significant milestones,
demonstrating the City’s commitment to enhancing infrastructure and addressing community needs.
Notable accomplishments in the third quarter of FY 2023-24 include the following:
Prado Road Interchange: The Prado Road Interchange Project in San Luis Obispo is a legacy Capital
Improvement Project (CIP) that plays a crucial role in the City's infrastructure development. This project
constructs a bridge over US 101, connecting Prado Road to Dalidio Drive and establishing a continuous
transportation link between S. Higuera Street and Madonna Road. The project aligns with major City goals
such as Housing and Homelessness, Climate Action, Open Space, and Sustainable Transportation, and is
identified in the General Plan. Currently, the project is transitioning from the Project Approval and
Environmental Document (PA/ED) phase to the Plans, Specifications, and Estimates (PS&E) phase. During
a recent Council Meeting on September 5, 2023, staff presented updated project cost estimates based on
its progress, projecting a construction cost of $106 million. This estimate included a 5% escalation rate,
amounting to $10 million, factored into the total construction cost. Additionally, staff anticipates a total
of $20 million in soft costs such as construction management and design, for a total project cost of $126
million. As the project progresses through the PS&E phase, the estimated cost will be refined and adjusted
based on value analysis recommendations, ensuring alignment with the project's objectives and financial
considerations.
Cultural Arts District Parking Structure: After two decades of planning, work has commenced on the
Cultural Arts District Parking Structure. The Cultural Arts District Parking Structure is necessary to address
longstanding and growing urban challenges. As the City envisions the realization of future surrounding
projects like the SLOREP Theater and housing projects, coupled with the proposed liner building, this new
structure serves as a pivotal enabler, ensuring adequate parking provisions to accommodate both existing
and forthcoming developments. By adding 397 parking spaces to the downtown inventory, this project
aligns strategically with the City's aspirations for increased density in its urban landscape. This structure,
poised to more than double the availability of public electric vehicle charging stations, also positions the
City as a champion of sustainability, actively supporting greener transportation alternatives and amplifying
its commitment to a forward-looking and accessible urban environment. The project is currently in the
initial phase of construction, and the shoring wall is close to completion. The parking structure is expected
to be completed and operational by January 2026.
North Chorro Greenway: In mid-2023, the City started construction on the North Chorro Neighborhood
Greenway project. This project prioritizes bicycle and pedestrian travel between the Foothill Boulevard
and North Chorro neighborhoods to downtown SLO.
The Greenway project includes construction of over 40 accessible curb ramps, separated bicycle lanes,
safety lighting along the route, public art, and lighting at the Chorro/US 101 underpass, as well as
landscaping along the corridor with 60 new street trees and improved stormwater management features.
This greenway makes traveling by bike or on foot a more convenient and low-stress option, in addition to
providing safe connections to schools and enhancing the overall quality of life for residents.
4
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The project is nearly finished, with paving now completed along the entire greenway. Remaining items to
be completed include striping, signage, painting of the underpass and columns, and fence installation. The
project is anticipated to be completed in the summer of 2024.
Storm Response Projects: Staff’s swift response to the 2023 storm events led to the successful completion
of crucial storm projects throughout the city. The largest storm response project was the San Luis Drive
Retaining Wall, constructed adjacent to the high school. Several portions of San Luis Obispo creek were
also damaged, resulting in the construction of a soil nail wall near the intersection of Pismo and Johnson
Streets, as well as debris removal projects under the Marsh Street Bridge and between Prado and Los Osos
Valley Roads. A portion of Prefumo Creek that experienced a major flooding event was also cleared to
minimize future flooding risk. Several areas along Old Garden Creek were also damaged, including several
portions of a retaining wall that fell. These areas were swiftly repaired, often during rain events. The
proactive approach to emergency situations, demonstrates the City’s commitment to ensuring the safety
and resilience of our infrastructure. Status on all storm response projects can be found on Table 3 above.
Completed Projects: Throughout the year, staff completed 23 diverse capital improvement projects,
ranging from the Railroad Bike Path Fencing project to the Prefumo Creek Clearing project. These projects
not only improve infrastructure but also contribute to environmental sustainability and community well-
being.
Active Projects: Currently, 17 projects are in active construction, with numerous others in various stages
of design. This active project pipeline reflects an ongoing commitment to progress and development,
addressing the evolving needs of the growing community.
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Table 12. Completed and Ongoing Construction Projects (July 2023-March 2024):
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Table 13. Status of Major Projects in Design:
Outlook and Conclusion
Based on the third quarter results, the City is well on its way to ending FY 2023-24 in a good financial
condition. As identified in the Mid-Year Budget Report there are a number of factors that impact the City’s
budget including inflationary pressures and ongoing development which will increase the population of
our community over the next several years. Staff is currently working to identify budgetary implications
of this long-term growth and expects the need to carefully monitor expenditure growth in order to assure
the long-term sustainability of the programs and services provided by the City.
ID#Project
TOTAL ESTIMATED
PROJECT COST
(Design and
Construction)
Estimated
Construction Start
Date Additional Comments
41 Mid-Higuera Bypass $11,550,000 Q3 FY 24-25
Finalizing design documents and easement
acquisition process.
42 Prado Road Bridge and Road Widening $25,000,000 Q2 FY 25-26
Working on regulatory permits and 90%
constuction documents.
43 California and Taft Roundabout $4,000,000 Q2 FY 25-26
Right of way acquisition in progress and finalizing
design documents.
44 Prado Road Interchange $126,000,000 Q2 FY 27-28
Alternative analysis and environmental
document phase. Pursuing advertisement of
CEQA document and final project report.
45 Public Safety Center $1,750,000
Q3 FY 24-25 (for
1106 Walnut
work)
Consultant to analyze two site option for public
safety center project and present conceptual
design for review. Currently working on 1106
Tenant Improvement and Site Security Fencing
project. Construction of 1106 TI and Fencing
project estimated to start March 2025 (Q3 FY 24-
25).
Status of Major and Legacy Projects in Design
5
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Supplemental Budget Preview
Fiscal Year 2024-25
Introduction
This report accompanies the FY 2023-24 Q3 Budget Report and is intended to provide Council a preview
of the FY 2024-25 Supplemental Budget. Included is a highlight of both an updated long-term forecast for
the General Fund and a true-up to the Capital Improvement Plan (CIP).
Supplemental Budget Preview
The City is nearly through the first year of the two-year 2023-25 Financial Plan and must adopt a balanced
budget for FY 2024-25. Staff will bring the FY 2024-25 Supplemental Budget before Council for approval
on June 4, 2024. In advance of that meeting, this preview is intended to give context to the budget
recommendations to be made. This preview includes a summary of the General Fund long-term forecast
intended to indicate the availability of resources and the sum of Significant Operating Budget Change
(SOBC) requests planned to be recommended by staff for consideration with the Supplemental Budget.
General Fund Long Term Forecast
The long-term forecast is an essential planning tool for the City and its ongoing service delivery. While the
City adopts a two-year Financial Plan that must be balanced, the outer years of the forecast are presented
to show the City’s financial condition and availability of resources into the future. The forecast is updated
every six months which gives staff the opportunity to alert Council of looming imbalances and strategize
proper actions to be taken.
Assumptions and Changes to Forecast
Where new information is not available or current assumptions have been validated, staff leave forecast
inputs unchanged. Many significant revenue streams including property tax, utility user tax, and franchise
fees were adjusted upwards at mid-year and do not require updating. User fee revenue is expected to
increase in FY 2024-25 based on the results of the fee study that is nearing completion; however, this
revenue has not been modeled into the forecast as Council has not reviewed or approved any
recommended changes. Consistent with prior years, the forecast does include an assumed 1-2% increase
in various fee categories.
Sales Tax revenue, including the Local Revenue Measure G20, has been revised upwards in line with
current year pacing and new business openings.
Expenditures reflect the cost to fund the City’s existing employee base and programming. The primary
driver of the projected increase was the required CalPERS unfunded liability payment which continues to
exceed estimates due to broader market and economic factors. One significant addition to the forecast is
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staff’s estimate of the cost to operate a fifth fire station as required by the development agreement (DA)
for the Avila Ranch Development. The DA requires that a temporary fire station be in place by the time
that development reaches 50% build out, which is currently estimated to occur around July 2026. While
much remains uncertain about the new fire station and staffing configuration, staff has included an
estimate of this required expenditure in the forecast to provide an approximation of potential future
budgetary impacts. Staff has also included the total cost of SOBCs expected to be recommended to
Council.
There are a number of other considerations that staff are aware of but are not currently modeled into the
forecast, chief of which are labor pressure and the costs to serve a growing population. The costs to serve
a growing population are expected to put significant pressure on the City’s finances. These costs are
expected to include new capital investments like neighborhood parks and increased ongoing operating
expenditures to operate and maintain those investments. Staff has begun an effort to identify and
estimate those costs and whether population growth will deliver sufficient additional revenues to fund
them. The table below is from the General Plan and shows estimated population over the next
approximately ten years as we move toward buildout of the General Plan.
Table 1. Population growth forecast
On labor pressure, the City’s staffing costs have increased through recent labor negotiations and are
expected to continue as additional bargaining agreements come up for renewal in the forecast period. As
the cost of living has skyrocketed and comparator agencies continue to increase wages to remain
competitive with the market, staff expect that the cost to attract and retain a talented workforce in line
with the City’s compensation philosophy will continue to increase above and beyond what is currently
modeled in the forecast.
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Table 2. General Fund Long Term Forecast
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Forecast Takeaways
The forecast presented here indicates that expenditures are expected to grow faster than revenues and
will lead to a deficit. Although a deficit was projected in the mid-year budget report, it has widened slightly
by FY 2027-28, driven by expectations of increased expenditures. Staff use the forecast to indicate the
availability of funding, or lack thereof, when making recommendations to Council on changes to the
budget.
Significant Operating Budget Change Requests
Departments submitted $2.2m in General Fund SOBC requests. In light of the projected deficits in the
General Fund, the Financial Plan Steering Committed requested that departments critically review their
requests and place them in one of the following categories:
1. Consideration of request can be deferred to the 2025-27 Financial Plan
2. Request is for one-time funding and can potentially be funded with carryover available at the end
of FY 2023-24 (availability of carryover funding is dependent on departments finishing the year
with operating budget savings and funding is not guaranteed)
3. Request is critical for consideration with the FY 2024-25 Supplemental Budget and the
department has identified tradeoffs within their planned budget for FY 2024-25 to fund the new
request
The Financial Plan Steering Committee is still working with the Leadership Team to finalize
recommendations, but it is estimated that after deferrals and offsets, recommendations for SOBCs will
total $379k including $160k in one-time items and $219k in ongoing funding in the General Fund.
CIP True-up
In evaluating escalating construction costs and the current workload of the CIP Engineering Team, staff
has adopted a strategic approach to allocate resources effectively. With a total of 123 Projects on the
current CIP list, it has become imperative to prioritize initiatives that are advancing towards construction
or have a heightened demand for funding within the current Financial Plan. This approach is not about
deferring projects, but rather about focusing staff and financial resources on those projects that can
realistically be completed or significant progress made in FY 2024-25. By concentrating on projects that
are nearing the finish line, the City can optimize resources and ensure that critical milestones are met in a
timely manner and that projects are fully funded when they are ready to construct. This streamlined
strategy is essential for maintaining the team's productivity and delivering impactful outcomes across the
CIP portfolio. This information is being brought forward during the third-quarter report, allowing the
Council to preview the CIP true-up which will be included in staff’s FY 2024-25 Supplemental Budget
recommendation.
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True-Up Process:
Over the past few months, our Capital Improvement Program (CIP) team has been engaged in the true-up
process. CIP Engineering, Transportation, and Utilities staff worked on identifying initial solutions to
address escalating construction costs within the current budget framework. These solutions were then
communicated by the CIP Administrative Manager to the CIP Review Committee, initiating a round of
review and feedback. Following this, staff conducted a comprehensive internal review and comment
period, including dedicated time for staff to meet with the CIP Administrative Manager to fine-tune
recommendations. The final recommendations were then presented back to the CIP Review Committee,
incorporating valuable input and suggestions. The CIP Administrative Manager made final tweaks in close
coordination with the Public Works Director based on the committee's input.
It is possible that the initial recommendations described below may shift slightly based on dynamic project
situations, such as bid results and updated cost estimates expected shortly for some projects. However,
this presentation to Council provides an opportunity for feedback on any major concerns or areas in which
modifications are desired prior to finalization of staff recommendations to be included in the FY 2024-25
Supplemental Budget which will be formally presented to Council on June 4, 2024.
Recommendation:
The parameters established for the CIP true-up focus on projects slated to commence construction before
July 2025 that could require additional funding. This includes taking a deeper look at projects outside this
deliverable timeframe due to the existing construction schedule. To meet these funding needs, funds from
existing accounts or the incoming FY 2024-25 budget were recommended for allocation. The recent
assessment by the CIP Review Committee identified 7 new assets and 29 projects set for construction
before July 2025 that require a total additional $16,229,162. for design, construction, and/or procurement
support. Conversely, staff was able to identify 38 project accounts from the current CIP that did not to
require funding prior to July 2025, amounting to $18,919,203 of available funding. Of these 37 project
accounts, some include projects that have begun construction but have surplus maintenance account
funding or are complete and have remaining unspent funds. For example, staff is recommending
transferring $67,321.68 from the Curb Ramps project account, which is a project that has been completed.
The table below delineates funds recommended for transfer versus funds recommended for reallocation,
providing a clear overview of the funding adjustments. It is essential to emphasize that all projects, even
those adjusted, will undergo thorough review as part of the 2025-27 Financial Plan process to assure
appropriate funding recommendations.
Addressing the funding shortfall involves leveraging capital reserves, completed projects, or identified
operating accounts, as detailed below. This proactive strategy ensures the CIP budget remains aligned with
strategic goals, maximizing the impact of our investments.
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Table 3. Supplemental Budget Funding Requests:
Project/Account Budget Request
General Capital Outlay Request $834,730.04
Mission Plaza Enhancements $234,730.04
Remodel City Hall's lower-level Finance/IT Office area $575,000.00
New Fleet: Utilities Safety Manager - Maverick (Capital Funded Portion)$25,000.00
Info Tech Repl Fund Request $175,000.00
Remodel City Hall's lower-level Finance/IT Office area $175,000.00
Local Revenue Measure Request $6,474,432.68
Emergency Storm Response Projects $2,100,000.00
Mission Plaza Enhancements $1,163,432.68
Safety Center/1106 Walnut $750,000.00
Building Electrification PG&E SST Program $50,000.00
New Fleet: Parks and Rec Ranger Truck, F150 Lightning (long range)$81,000.00
Street Reconstruction & Resurfacing (2023 Arterials) $220,000.00
New Fleet: Fire Station 5 Apparatus (Debt Finance Yr 1)$150,000.00
Righetti - Neighborhood Park (phase 1)$750,000.00
Street Reconstruction & Resurfacing - Sealing Project $1,060,000.00
North Chorro Neighborhood Greenway $150,000.00
Operating - CDD Request $98,000.00
New Fleet: CDD - Building & Safety (2 new inspection positions, replacement of 1 grey fleet)$98,000.00
Parking Request $155,000.00
1166 Higuera Parking Lot - Improvements $100,000.00
Big Belly Trash Cans in Parking Structures $35,000.00
Parking Structure Safety Element Research and Design $20,000.00
Sewer Fund Request $5,731,000.00
Foothill and Santa Rosa CalTrans Pipeline Replacement $350,000.00
Major Facility Maintenance - 879 Morro Roof $65,000.00
Sewer-main Replacement: Morro, Mill, Santa Rosa, and Chorro Pipeline Replacement $1,100,000.00
Sewer-main Replacement: Oceanaire - Cayucos to Froom Road $700,000.00
Wastewater Collections System - Point Repairs $140,000.00
Wastewater Collections System Improvements - Islay, Henry, Sierra Way $2,200,000.00
Water Meters and Boxes - AMI Box Lids $75,000.00
Water Meters and Boxes - AMI Radios $360,000.00
Water Meters and Boxes - Water Meters and Boxes $288,500.00
New Fleet: Utilities Safety Manager - Maverick (Sewer Funded Portion)$12,500.00
New Fleet: Utilities Chief Operator - WWC Ford Lightning (std range)$70,000.00
Buckley Lift Station $150,000.00
Sewer Inflow/Infiltration Reduction $220,000.00
Water Fund Request $2,761,000.00
Fire Hydrants $55,000.00
Major Facility Maintenance - 879 Morro Roof $65,000.00
Mid-Higuera Bypass $45,000.00
Salinas Reservoir Transfer of Ownership Plan - Salinas Reservoir Transfer of Ownership Plan $550,000.00
Water Meters and Boxes - AMI Box Lids $75,000.00
Water Meters and Boxes - AMI Radios $360,000.00
Water Meters and Boxes - Water Meters and Boxes $288,500.00
Waterline Replacement: Chorro - Highland to Meinecke 24-inch Pipeline Replacement $720,000.00
Waterline Replacement: Johnson - Iris to Bishop $440,000.00
Waterline Replacement: Santa Rosa - Stenner Creek Road to Highland 30-inch Pipeline $150,000.00
New Fleet: Utilities Safety Manager - Maverick (Water Funded Portion)$12,500.00
Grand Total $16,229,162.72
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Table 4. Supplemental Budget Transfer Recommendations:
Project Existing Balance
(Transfer)
New Funding -
July 24
(Reallocation)
Total
General Capital Outlay $259,730.04 $575,000.00 $834,730.04
KVEC Tower $10,537.48 $10,537.48
Major Facility Maintenance - Corp Yard $249,192.56 $249,192.56
Parking Lot Maintenance - Santa Rosa Park $300,000.00 $300,000.00
Pedestrian and Bicycle Pathway Maintenance - Railroad Safety Trail $275,000.00 $275,000.00
Info Tech Repl Fund $175,000.00 $175,000.00
ERP Acquisition $69,739.70 $69,739.70
IT Completed Projects Account $4,958.84 $4,958.84
KVEC Tower $25,301.46 $25,301.46
IT Fund Balance $75,000.00 $75,000.00
Local Revenue Measure $4,209,404.68 $2,265,028.00 $6,474,432.68
ATP - Orcutt Road Railroad Crossing Upgrades - ATP - Orcutt Road Railroad Crossing Upgrades $200,000.00 $200,000.00
Bob Jones Trail and RRST Solar Lighting $1,350,000.00 $1,350,000.00
Bridge Preventative Maintenance $200,000.00 $200,000.00
CIP Reserve $1,500,000.00 $1,500,000.00
Downtown Renewal - Broad Street - West Side - Higuera to Marsh $200,000.00 $200,000.00
Fire Hydrants $55,000.00 $55,000.00
KVEC Tower $171,750.00 $171,750.00
Laguna Lake Dredging and Sediment Management Project Implementation $800,000.00 $800,000.00
Major Facility Maintenance - ADA Transistion Plan Implementation $15,000.00 $15,000.00
Major Facility Maintenance - Hydration Stations $34,333.00 $25,000.00 $59,333.00
Mission Plaza Broad Street Dog-Leg Enhancements $100,000.00 $100,000.00
Mission Plaza Primary Area Enhancements $370,028.00 $370,028.00
Open Space Maintenance - General Open Space Maintenance $81,000.00 $81,000.00
Parking Lot Maintenance - Laguna Lake $35,000.00 $35,000.00
Parking Lot Maintenance - Ludwick Community Center $10,000.00 $10,000.00
Parking Lot Maintenance - Meadow Park $100,000.00 $100,000.00
Parking Lot Maintenance - Throop Park $80,000.00 $80,000.00
Pedestrian and Bicycle Pathway Maintenance - Andrews and Johnson Bike Path $10,000.00 $10,000.00
Pedestrian and Bicycle Pathway Maintenance - Pathway Maintenance Various Locations $150,000.00 $150,000.00
Playground Equipment Replacement - Mitchell Park Playground $100,000.00 $100,000.00
Righetti Hillside Repair $200,000.00 $200,000.00
Sacramento Drive Paving $220,000.00 $220,000.00
SLO Creek Walk Maintenance - Lighting, Signage, Irrigation, Plants $250,000.00 $250,000.00
Curb Ramps $67,321.68 $67,321.68
CIP Completed Projects Account $150,000.00 $150,000.00
Operating - CDD $98,000.00 $98,000.00
CDD Operating Account (For Inspector Vehicle Use)$98,000.00 $98,000.00
Parking $155,000.00 $600,000.00 $755,000.00
871 Marsh Parking Structure Maintenance - General Parking Structure Maintenance $100,000.00 $100,000.00
General Parking Structure Account $55,000.00 $55,000.00
Parking Pay Station Installation $600,000.00 $600,000.00
Sewer Fund $6,000,000.00 $5,400,000.00 $11,400,000.00
Foothill Sewer Lift Station Replacement $2,000,000.00 $2,000,000.00
Sewer Lift Station Replacement - Airport Lift Station $800,000.00 $800,000.00
Sewer Lift Station Replacement - Silver City - Silver City Lift Station $100,000.00 $100,000.00
Sewer-main Replacement: San Jose, Ramona, Monte Vista, and California $1,225,000.00 $1,225,000.00
Sewer-main Replacement: Serra, Bressi, Dana and Higuera Pipeline Replacement $1,275,000.00 $1,275,000.00
WRRF and Wastewater Collection Maintenance Facility $6,000,000.00 $6,000,000.00
Water Fund $1,751,000.00 $1,010,000.00 $2,761,000.00
Reycled Water Annual UV Bulb Replacement $10,000.00 $10,000.00
Water Storage Tank Major Maintenance - Edna Tank Recoating $1,000,000.00 $1,000,000.00
Water Unreserved Capital $1,751,000.00 $1,751,000.00
Grand Total $12,648,134.72 $9,850,028.00 $22,498,162.72
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Table 5. Supplemental Funding Summary:
The table above provides a comprehensive overview of all fund accounts in aggregate, demonstrating a
balanced approach between funding requests and reallocation from existing projects in the CIP that are
not scheduled for construction before July 2025. Additionally, there is supplementary support from various
accounts including the CIP Reserve, CIP Completed Projects Account, IT Completed Projects Account, IT
Fund Balance, Community Development Operating Account, and the Water Fund’s unreserved working
capital, which are detailed in Table 3, Supplemental Budget Transfer Recommendation.
Two funding sources listed in table 5 above are not balanced. The sewer fund recommends transferring
additional funds than budget requests, while the parking fund recommends not allocating new money.
Staff are recommending the transfer of $5,669,000 in encumbered projects to the Sewer Fund’s
unreserved working capital to offset anticipated cost escalation related to capital projects for sewer main
and lift station replacements. Additionally, staff are exploring tax credits through the Inflation Reduction
Act to further offset anticipated cost escalations. This strategy is consistent with the City’s CIP true-up
methodology and ensures that critical projects are sufficiently funded beyond the 2023-25 Financial Plan.
Staff are also recommending not to allocate $600,000 into the Parking Pay Station project account and to
leave funding in the parking enterprise fund. This modification to the current financial plan was proposed
but not officially adopted at the November 7, 2023 City Council meeting updating council on the parking
program and parking rate study.
Full descriptions of all supplemental requests with more detail will be provided during the upcoming
Supplemental Budget report. Council’s ongoing support and feedback are greatly appreciated to navigate
these critical stages of the Capital Improvement Program.
Infrastructure Investment Fund Status
The Infrastructure Investment Fund (IIF) was established with the primary goal of enabling the City to
harness the advantages of well-planned growth, a process that often requires timely financial support for
essential infrastructure. The fund's purpose extends to leveraging additional grant funding, providing
loans, or directly participating in critical infrastructure projects that enhance quality of life and spur
economic development.
Funding Source Total Budget Requests Total Funds Transferred/Reallocated
General Capital Outlay $834,730.04 $834,730.04
Info Tech Repl Fund $175,000.00 $175,000.00
Local Revenue Measure $6,474,432.68 $6,474,432.68
Operating - CDD $98,000.00 $98,000.00
Parking $155,000.00 $755,000.00
Sewer Fund $5,731,000.00 $11,400,000.00
Water Fund $2,761,000.00 $2,761,000.00
Grand Total $16,229,162.72 $22,498,162.72
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Originally earmarked for the Prado Interchange and Prado Road Widening Projects, legacy projects within
the City, the fund has evolved to support initiatives with broader community benefits and positive
economic impacts. These new projects, initially centered on land acquisition, are now progressing through
design and construction phases under the oversight of the CIP Engineering team.
As the City increasingly leverages the IIF to enhance San Luis Obispo's quality of life, transparent reporting
on current and future expenditures becomes crucial for accountability to the City Council. The tables
below detail revenues and expenditures for the 2023-2024 Fiscal Year, with forecasts extending into FY
2024-25 and 25-26. It is important to note that the Mid-Year Planned Additional Contribution funding
amount in FY 2024-25 is contingent upon reimbursement of costs related to the 2023 storms.
Table 6: IIF Fund Summary and Forecast
Payment Amount Ending Account Balance
Starting Fund Balance FY 23-24 9,630,088.00$ 9,630,088.00$
Repayment of 1106 Walnut 5,400,000.00$ 15,030,088.00$
1166 Higuera Property Aquisition (4,845,000.00)$ 10,185,088.00$
Mid-Year Repayment of 1166 Higuera 4,000,000.00$ 14,185,088.00$
Mid-Year Transfer in Lieu of David Statue 120,000.00$ 14,305,088.00$
Mid-Year Transfer to Broad Street (800,000.00)$ 13,505,088.00$
600 Tank Farm, Buckley Extension (2,641,092.00)$ 10,863,996.00$
10,863,996.00$
FY 2023-2024 IIF Fund Summary
Payment Amount Anticipated DateEnding Account Balance
Prado Bridge Widening (10,000,000.00)$ Jul-24 863,996.00$
Prado Interchange (2,750,000.00)$ Jul-24 (1,886,004.00)$
Mid-Year Planned Repayment of 1166 Higuera 845,000.00$ Sep-24 (1,041,004.00)$
Mid-Year Planned Additional Contribution 2,959,358.00$ Sep-24 1,918,354.00$
1,918,354.00$
Payment Amount Anticipated DateEnding Account Balance
Prado Interchange (1,150,000.00)$ Jul-25 768,354.00$
768,354.00$
FY 2024-2025 IIF Fund Forecast
FY 2025-2026 IIF Fund Forecast
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Outlook and Conclusion
While Fiscal Year 2023-24 is expected to finish on budget and with the General Fund in good financial
condition, the long-term forecast indicates that expenditures are projected to grow more quickly than
revenues, and without action a deficit is projected beginning in FY 2026-27.
Moving forward with the CIP true-up process, there is an opportunity to increase staff’s ability to deliver
projects with additional funding. This not only ensures the successful execution of projects but increases
efficiency, aligns resources with need, and maximizes the impact of City initiatives to achieve even greater
success in realizing the Council's goals and objectives.
Staff welcomes feedback from the Council in order to finalize recommendations leading up to formal
presentation of the FY 2024-25 Supplemental Budget in June.
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FY 2023-24 Q3 Budget Report
and Supplement Preview
May 7, 2024
Recommendation
1.Receive and file the Fiscal Year 2023-24 Third Quarter Budget
Report and preview of the Fiscal Year 2024-25 Supplemental Budget
Development and presentation of the quarterly reports conforms with the
following adopted Budget Policies:
•Financial Plan Purpose and Organization- Goal Status Reports
which requires that the status of major program objectives be formally
reported to the Council on an ongoing, periodic basis.
•Financial Reporting and Budget Administration- Interim
Reporting which requires the City to prepare and issue timely interim
reports on the City’s fiscal status to the Council and staff.
POLICY CONTEXT
FY 2023-24 Q3 Budget Review
Q3 Update: General Fund
•Revenue expected to finish in line with projections
•Salary savings are projected to exceed the 3% assumption used in the budget
•Some non-staffing savings are expected and will be evaluated at year-end
Revenue:
Major funds are all on track with budgets
Fund Budget YTD Actuals % Received
General Fund $116,844,202 $82,453,171 71%
Water Fund $27,920,902 $19,673,809 70%
Sewer Fund $21,571,555 $16,087,636 75%
Parking $9,700,994 $8,265,839 85%
Transit $12,240,968 $4,261,580 35%
Expenditures: Major funds are expected to finish on budget
Staffing
71%
Contract Services
81%
Other OpEx
70%
Utilities
66%
General Fund percent expended by type
Fund Budget YTD Actuals % Consumed
General Fund $92,192,536 $69,895,255 76%
Water Fund $20,355,227 $16,118,677 79%
Sewer Fund $9,440,369 $8,360,128 89%
Parking Fund $3,733,939 $3,246,712 87%
Transit Fund $5,413,551 $4,018,657 74%
Storm Update
•The City has expended approximately $12.5m on
storm response to date
•$9.3m has been submitted to state and federal
agencies for reimbursement
•The total cost to repair storm damage and mitigate
against future damage is estimated at $35.2m
Supplemental Budget Preview
Background
•Two -year Financial Plan approved for 2023-25
•Supplemental Budget for FY 2024-25 will come
before Council in June
•Staff preview the Supplemental Budget prior to
formal adoption in June, with a focus on Capital
Improvement Plan true-ups
General Fund Long-term Forecast
•Changes from mid-year forecast:
•Sales tax revenue increased
•Increased pension costs
•Addition of estimated Fire Station 5 operating costs
•Forecast balanced in budget years 2024-25 & 2025-26;
expenditures to exceed revenues by 2027-28
Actual Mid-year revised Supplement Forecast
(in thousands)FY
2022-23
FY
2023-24
FY
2024-25
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Revenue $116,410 $114,884 $125,355 $126,826 $121,288 $124,375 $127,426 $130,548
Expenditures 114,618 127,062 119,281 119,800 120,526 123,351 128,146 132,262
CalPERS ADP 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Undesignated
Fund Balance $8,275 $0 $907 $1,862 $658 ($608)($3,944)($8,046)
Significant Operating Budget Change (SOBC) Tentative Recommendations
General
Fund
Water
Fund
Sewer
Fund
Parking
Fund
Transit
Fund
One-time $160k $1,061k $129k $285k -
Ongoing $219k $37k $285k $309k -
Total $379k $1,098k $414k $594k -
CIP True-up
CIP True-Up Need
Number of Projects Remaining on the CIP List
Construction Cost Escalation
Staff Resources
Basis of CIP True-Up PROJECTS
EXPECTED TO GO
TO BID
BEFORE JULY 2025
PROJECTS NOT
EXPECTED TO GO
TO BID
BEFORE JULY 2025
Recently bid project with favorable outcome
Project or Account with Savings Identified
Urgent CIP Need
Projects Requiring Additional Funding
•Staff did not reprioritize the existing
Capital Improvement Plan
•Projects not expected to go to
bid/construction before July 2025 will
be re-evaluated for adequate funding
during the 25-27 Financial Plan
•Staff preview the Supplemental
Budget prior to formal adoption in
June, with a focus on Capital
Improvement Plan true-ups
29 Projects Going into Construction Prior to July 2025
7 New Assets $16,229,162 7 Different Funds
CIP True-Up Funding Needs
Funding Source Total Budget Requests
General Capital Outlay $834,730.04
Info Tech Repl Fund $175,000.00
Local Revenue Measure $6,474,432.68
Operating - CDD $98,000.00
Parking $155,000.00
Sewer Fund $5,731,000.00
Water Fund $2,761,000.00
Grand Total $16,229,162.72
CIP True-Up Funding Needs Highlights
Big Belly Trash Cans ($35,000)
•New Receptacles in Parking Structures
Mission Plaza Enhancements ($1,398,162)
•Recently Received Bid
Righetti Neighborhood Park ($750,000)
•Additional Funding for Phase 1 of the Project
Safety Center/1106 Walnut ($750,000)
•Additional funding for 1106 Walnut TI
North Chorro Greenway ($150,000)
•Underpass painting and unforeseen utility conflicts
2024 Sealing Project ($1,060,000)
•Base Bid and Potential for Grand Ave Bid Alternate
Funding Source Total Budget Requests
General Capital Outlay $834,730.04
Info Tech Repl Fund $175,000.00
Local Revenue Measure $6,474,432.68
Operating - CDD $98,000.00
Parking $155,000.00
Sewer Fund $5,731,000.00
Water Fund $2,761,000.00
Grand Total $16,229,162.72
CIP True-Up Recommended Transfers/Reallocation
•Projects Not Going to Construction Prior to July 2025
•Had Account or Project Savings
•Was Added to a Larger Project (Interim Solution Found)
•Had a Favorable Construction Bid
Funding Source Recommended Transfer/Reallocation
General Capital Outlay $834,730.04
Info Tech Repl Fund $175,000.00
Local Revenue Measure $6,474,432.68
Operating - CDD $98,000.00
Parking $755,000.00
Sewer Fund $11,400,000.00
Water Fund $2,761,000.00
Grand Total $22,498,162.72
32 Projects Not Going into Construction Prior to July 2025
6 Accounts or Projects with Savings Identified
$22,498,162 7 Different Funds
CIP True-Up Transfer/Reallocation Highlights
Mission Plaza Phases 2 and 3 ($470,028)
•Phase 1 going into Construction shortly. Projects will not require funding during current Financial Plan
Bob Jones Trail Solar Lighting ($1,350,000)
•Project in Design and is not scheduled for construction prior to 2025
Parking Pay Station Installation ($600,000)
•Staff waiting for implementation until parking rate and technology can be fully vetted
WRRF/Wastewater Collections Maintenance Facility ($6,000,000)
•Project is in the design phase and will not be ready for construction
•Additional Funding will be utilized to fund the Sewer Unreserved Capital Account for Future Planning
Righetti Hillside Repair ($200,000)
•Favorable Bid Results
Sacramento Drive Paving ($220,000)
•Project Added to 2025 Paving Project (Interim solution found)Funding Source Recommended Transfer/Reallocation
General Capital Outlay $834,730.04
Info Tech Repl Fund $175,000.00
Local Revenue Measure $6,474,432.68
Operating - CDD $98,000.00
Parking $755,000.00
Sewer Fund $11,400,000.00
Water Fund $2,761,000.00
Grand Total $22,498,162.72
Funding Source Total Budget Request Recommended Transfers/Reallocations
General Capital Outlay $834,730.04 $834,730.04
Info Tech Repl Fund $175,000.00 $175,000.00
Local Revenue Measure $6,474,432.68 $6,474,432.68
Operating - CDD $98,000.00 $98,000.00
Parking $155,000.00 $755,000.00
Sewer Fund $5,731,000.00 $11,400,000.00
Water Fund $2,761,000.00 $2,761,000.00
Grand Total $16,229,162.72 $22,498,162.72
CIP True-up
Fund Requests VS
Transfers
Additional Funding to
support reduction in
parking rates
Additional Funding
Used for Unreserved
Capital for FY 25-27
Planning Purposes.
Infrastructure Investment Fund (IIF) Status
FY 2024-2025 IIF Fund Forecast
Payment Amount
Anticipated
Date Ending Account Balance
Prado Bridge Widening Reallocated 25-26 Jul-24 $10,863,996.00
Prado Interchange $(2,750,000.00)Jul-24 $8,113,996.00
Mid-Year Planned Repayment of 1166 Higuera $845,000.00 Sep-24 $8,958,996.00
$8,958,996.00
FY 2025-2026 IIF Fund Forecast
Payment Amount
Anticipated
Date Ending Account Balance
Prado Interchange $(1,150,000.00)Jul-25 $7,808,996.00
Prado Bridge Widening (reallocated from 24-25)$(10,000,000.00)Jul-25 $(2,191,004.00)
FEMA Reimbursement $3,000,000.00 $808,996.00
$808,996.00
Next Steps
•June 4th, 2024: Staff to return with Supplemental Budget
•August – September, 2024: Staff to present FY 2023-24
year end report
•~November 2024: Setting the Stage for the 2025-27
Financial Plan
•~January 2025: 2025-27 Financial Plan Budget Foundation
•~February 2025: Council Goal Setting Workshop
•June 2025: 2023-25 Financial Plan adoption
Recommendation
Receive and file the Fiscal Year 2023-24 Third Quarter Budget Report and
preview of the Fiscal Year 2024-25 Supplemental Budget
Thank You
Appendix
Long-term forecast
Housing Policy/Program Matrix
•Result of study session on housing needs and
opportunities
•Outlines various opportunities
•Short term work plan items
•Medium term work plan items
•Long term items not in work plan
Housing Policy/Program Matrix
STAFF RESOURCE
LEVEL AND TIMING
STAFF RESOURCE
LEVEL AND TIMING
STAFF RESOURCE
LEVEL AND TIMING
STAFF RESOURCE
LEVEL AND TIMING
STAFF RESOURCE
LEVEL AND TIMING
CIP True-Up Project List
Projects Going to Bid Prior to July
2025
Project Additional Budget Request
1166 Higuera Parking Lot - Improvements $100,000.00
Big Belly Trash Cans in Parking Structures $35,000.00
Buckley Lift Station $150,000.00
Building Electrification PG&E SST Program $50,000.00
Emergency Storm Response Projects $2,100,000.00
Fire Hydrant Project Account $55,000.00
Foothill and Santa Rosa CalTrans Pipeline Replacement $350,000.00
879 Morro Roof Replacement $130,000.00
Mid-Higuera Bypass (Sewer Portion)$45,000.00
Mission Plaza Enhancements $1,398,162.72
New Fleet: Fire Station 5 Apparatus (Debt Finance Yr 1)$150,000.00
New Fleet: Parks and Rec Ranger Truck, F150 Lightning (long range)$81,000.00
New Fleet: Utilities Chief Operator - WWC Ford Lightning (std range- new position)$70,000.00
New Fleet: Utilities Safety Manager - Maverick (currently using grey vehicle) $50,000.00
North Chorro Neighborhood Greenway $150,000.00
Parking Structure Safety Element Research and Design $20,000.00
Remodel City Hall's lower-level Finance/IT Office area $750,000.00
Righetti - Neighborhood Park (phase 1)$750,000.00
Safety Center/1106 Walnut $750,000.00
Salinas Reservoir Transfer of Ownership Plan $550,000.00
Sewer Inflow/Infiltration Reduction $220,000.00
Sewer-main Replacement: Morro, Mill, Santa Rosa, and Chorro $1,100,000.00
Sewer-main Replacement: Oceanaire - Cayucos to Froom Road $700,000.00
Street Reconstruction & Resurfacing - Sealing Project $1,060,000.00
Street Reconstruction & Resurfacing (2023 Arterials) $220,000.00
Wastewater Collections System - Point Repairs $140,000.00
Wastewater Collections System Improvements - Islay, Henry, Sierra Way $2,200,000.00
Water Meters and Boxes - AMI Box Lids $150,000.00
Water Meters and Boxes - AMI Radios $720,000.00
Water Meters and Boxes - Water Meters and Boxes $577,000.00
Waterline Replacement: Chorro - Highland to Meinecke 24-inch $720,000.00
Waterline Replacement: Johnson - Iris to Bishop $440,000.00
Waterline Replacement: Santa Rosa - Stenner Creek Road to Highland 30-inch Pipeline $150,000.00
New Fleet: CDD - Building & Safety (2 new inspection positions, replacement of 1 grey fleet)$98,000.00
Grand Total $16,229,162.72
Funding Source Total Budget Requests
General Capital Outlay $834,730.04
Info Tech Repl Fund $175,000.00
Local Revenue Measure $6,474,432.68
Operating - CDD $98,000.00
Parking $155,000.00
Sewer Fund $5,731,000.00
Water Fund $2,761,000.00
Grand Total $16,229,162.72
CIP True-Up Project List
•Projects Not Going to Construction Prior to July
2025
•Had Account or Project Savings
•Was Added to a Larger Project (Interim Solution
Found)
•Had a Favorable Construction Bid
Recommended
Transferred/Reallocated
Projects NOT Expected to Bid Prior to July 2025 $18,073,553.56
871 Marsh Parking Structure Maintenance - General Parking Structure Maintenance $100,000.00
ATP - Orcutt Road Railroad Crossing Upgrades - ATP - Orcutt Road Railroad Crossing Upgrades $200,000.00
Bob Jones Trail and RRST Solar Lighting $1,350,000.00
Bridge Preventative Maintenance $200,000.00
Downtown Renewal - Broad Street - West Side - Higuera to Marsh $200,000.00
Fire Hydrants $55,000.00
Foothill Sewer Lift Station Replacement $2,000,000.00
General Parking Structure Account $55,000.00
Laguna Lake Dredging and Sediment Management Project Implementation $800,000.00
Major Facility Maintenance - ADA Transistion Plan Implementation $15,000.00
Major Facility Maintenance - Corp Yard $249,192.56
Major Facility Maintenance - Hydration Stations $59,333.00
Mission Plaza Broad Street Dog-Leg Enhancements $100,000.00
Mission Plaza Primary Area Enhancements $370,028.00
Parking Lot Maintenance - Laguna Lake $35,000.00
Parking Lot Maintenance - Ludwick Community Center $10,000.00
Parking Lot Maintenance - Meadow Park $100,000.00
Parking Lot Maintenance - Santa Rosa Park $300,000.00
Parking Lot Maintenance - Throop Park $80,000.00
Pedestrian and Bicycle Pathway Maintenance - Andrews and Johnson Bike Path $10,000.00
Pedestrian and Bicycle Pathway Maintenance - Pathway Maintenance Various Locations $150,000.00
Pedestrian and Bicycle Pathway Maintenance - Railroad Safety Trail $275,000.00
Playground Equipment Replacement - Mitchell Park Playground $100,000.00
Reycled Water Annual UV Bulb Replacement $10,000.00
Sewer Lift Station Replacement - Airport Lift Station $800,000.00
Sewer Lift Station Replacement - Silver City - Silver City Lift Station $100,000.00
Sewer-main Replacement: San Jose, Ramona, Monte Vista, and California $1,225,000.00
Sewer-main Replacement: Serra, Bressi, Dana and Higuera Pipeline Replacement $1,275,000.00
SLO Creek Walk Maintenance - Lighting, Signage, Irrigation, Plants $250,000.00
Water Storage Tank Major Maintenance - Edna Tank Recoating $1,000,000.00
WRRF and Wastewater Collection Maintenance Facility $6,000,000.00
Parking Pay Station Installation $600,000.00
Favorable Construction Bid $200,000.00
Righetti Hillside Repair $200,000.00
Project Added to 2025 Paving Project $220,000.00
Sacramento Drive Paving $220,000.00
Account or Project Savings $4,004,609.16
CDD Operating Account (For CDD Inspector Vehicle Use)$98,000.00
CIP Completed Projects Account $150,000.00
CIP Unreserved Capital $1,500,000.00
Curb Ramps $67,321.68
ERP Acquisition $69,739.70
IT Completed Projects Account $4,958.84
IT Fund Balance $75,000.00
KVEC Tower $207,588.94
Open Space Maintenance (For Ranger Vehicle Use)$81,000.00
Water Unreserved Capital $1,751,000.00
22,498,162.72$
Project
Grand Total
Funding Source Recommended Transfer/Reallocation
General Capital Outlay $834,730.04
Info Tech Repl Fund $175,000.00
Local Revenue Measure $6,474,432.68
Operating - CDD $98,000.00
Parking $755,000.00
Sewer Fund $11,400,000.00
Water Fund $2,761,000.00
Grand Total $22,498,162.72
Prado Interchange