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Item 8a. FY2023-24 Q3 Budget Report and Supplement Preview - Staff Agenda Correspondence
G�TY OfiI 'it 0 Council Agenda Correspondence ��rs o4 DATE: May 2, 2024 TO: Mayor and Council FROM: Emily Jackson, Finance Director Prepared By: Riley Kuhn, Principal Budget Analyst VIA: Whitney McDonald, Interim City Manager SUBJECT: Item 8a. FY 2023-24 Q3 Budget Report and Supplement Preview The purpose of this agenda correspondence is to update Attachment A - FY 2023-24 Q3 Budget Report. After publishing of the agenda, it was discovered that Attachment A did not include information on housing work program items as requested by Council on March 5, 2024. A matrix of short-, medium- and long-term housing opportunity work plan items has been prepared by the Community Development Department and has been added to Attachment A- FY 2023-24 Q3 Budget Report. This replaces the attachment that was initially published with Item 8a. City of San Luis Obispo Page 271 of 324 Page 272 of 324 agQ 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/ Major City Goal Outlook and Storm Expenditure Update © Update Conclusion Enterprise Funds Capital Improvement Update Plan Update 0 General Fund Update As of March 31, 2024, operating expenditures and revenues are on target with past years' third quarters. Q3 Budget Report Page 1 Page 273 of 324 Table 1. General Fund Revenue 2022-23 1 2023-24 Tax & Franchise Revenue _ Sales Tax: LRM G20 (July -Feb only) $ 20,221,278 67% $ 30,262,098 $21,238,335 70% 5% 2 Sales Tax: Bradley Burns (July -Feb only) $ 14,780,256 69% $ 22,578,995 $14,996,278 66% 1% 3 Property Tax $ 14,752,110 69% $ 22,863,770 $14,603,385 64% -1% Safety Prop 172 $ 421,301 85% $ 550,000 $ 360,718 66% -14% Transient Occupancy Tax $ 7,870,402 74% $ 10,704,000 $ 7,078,275 66% -10% c Utility User Tax $ 4,452,678 80% $ 6,332,000 $ 3,963,767 63% -11% Business Tax $ 3,263,104 103% $ 3,252,293 $ 2,984,082 92% -9% 6 Cannabis Tax $ 776,073 71% $ 1,100,000 $ 74-4,058 68% -4% 9 Franchise Fees $ 1,795,637 100% $ 2,000,000 $ 1,130,134 57% -37% 10 Gas Tax (Special Revenue Fund) $ 943,964 72% $ 1,389,292 $ 1,220,450 88% 29% _ SB1 - Gas Tax (Special Revenue Fund) --102.210.442 $ 612,525 60% 1 $ 1,177,994 $ 486,229 :O 41% -21% Development Review $ 4,326,404 66% $ 6,275,536 $ 4,558,106 73% 5% _4 Fire $ 1,294,050 81% $ 1,701,565 $ 1,274,105 75% -2% _�5 Parks & Recreation $ 1,153,315 58% $ 2,026,043 $ 1,514,629 75% 31% 1E Police $ 461,901 72% $ 751,009 $ 532,063 71% 15% _? Grants & Subventions $ 1,134,510 162% $ 1,262,929 $ 1,557,170 123% 37% _s Business Licenses (Incl Cannabis) $ 670,302 108% $ 694,774 $ 694,551 100% 4% 19 Other Revenue $ 491,501 - $ 1,921,905 $ 3,516,835 183% 616% 20 Total 79.421.210 72% $116,844,202 $82,453,171 71% 4% 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. Q3 Budget Report Page 2 Page 274 of 324 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 S131 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. Q3 Budget Report Page 3 Page 275 of 324 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 1 Salaries $ 46,606,091 $ - $ 33,218,158 $ 33,218,158 71% 2 Retirement/Benefits $ 11,513,067 $ - $ 8,236,970 $ 8,236,970 72% 3 PERS Unfunded Liability $ 11,132,870 $ - $ 10,%8,102 $ 10,998,102 99% 4 Contract Services $ 13,738,995 $3,129,020 $ 7,960,773 $ 11,089,794 81% 5 Other OpEx $ 5,937,567 $ 593,006 $ 3,589,822 $ 4,181,829 70% 6 Utilities $ 3,263,947 $ 20,949 $ 2,149,455 $ 2,170,403 66% 7 Grand ` 92.192.536 i 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%. Q3 Budget Report Page 4 Page 276 of 324 Table 3. Expenditures by Department FY 2423-24(July-March 1 Public Safety 2 Police $ 22,38%713 $ 121,469 $ 17,940,213 $ 1B4O61,682 81% 3 Fire $ 15,638,786 $ 120,049 $ 12,293,729 $ 32,413,778 79% 4 Comnwafty Services Group (CSG) 5 C5f Admin $ 830,784 $ (1,683) $ 6W,447 $ 688,764 83% 6 CDD $ 8,840,587 $ 779,725 $ 5,303,944 $ 6,083,669 69% 7 Public Works $ 17,918,390 $1,044,436 $ 12,897,409 $ 13,941,844 78% 8 Parks & Recreation $ 5,706,573 $ 59,365 $ 3,955,952 $ 3,915,217 69% 9 Solid Waste - AB 939 $ 464,836 $ 27,516 $ 329,232 $ 356,748 77% 10 Internal Services 11 Ad m i n f IT $ 12,184,186 $1,115,550 $ 8,090,189 $ 9,205,739 76% 12 City Attorney $ 1,66%051 $ 140,257 $ 1,110,460 $ 1,250,717 75% 13 Finance $ 2,544,004 $ 94,402 $ 1,727,095 $ 1,821,497 72% 14 Human Resources $ 2,266,158 $ 216,127 $ 1,599,809 $ 1,804,936 80% 15 Non -Departmental 16 $ 1,740,469 a! $ 25,761 $ 324,903 55.152.281 $ 350,664 5}':.895.255 24% ! y 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. Q3 Budget Report Page 5 Page 277 of 324 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 Nino 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 1 Design 2 Nipomo Bridge over Stenner Creek Remove damaged revetment and install new revetment upstream and downstream of bridge. Revetment was 3 undermined during storm event. 4 Prefumo Creek Grade Structure Phase I - Remove damaged grade control structure and install 5 RSP roughened ramp. 6 Phase II - Install new sewer siphon. Sewer siphon relocation. Q3 Budget Report Page 6 17% 10% 10% 18% 25% 10% Page 278 of 324 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% Phase 1- Install RSP on East Side (Elks Side) - armor 12 embankment due to Caltrans revetment 25% Phase 2 - Install creek bank revetment on Elks Lodge side 13 downstream of Elks Lodge 25% Phase 3 - Install soil nail wall on Hwy 101 side of SL Creek 14 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% Remove vegetative debris and rock materials downstream 20 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% Remove revetment and install soil nail wall. Reimbursement 26 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% Phase 2 - Remove debris removal from Mariner's Cove to 29 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% Q3 Budget Report Page 7 Page 279 of 324 © 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. Q3 Budget Report Page 8 Page 280 of 324 Table 6. Utilities Expenditures 603-Water Fund Salaries $ 3,882,239 $ $ 2,666,269 $ 2,666,269 69% 3 Retirement/Benefits $ 936,831 $ $ 683,660 $ 683,660 73% 4 PERS Unfunded Liability $ 678,507 $ $ 668,626 $ 668,626 99`Yo 5 Contract Services $ 1,199,759 $ 238,257 $ 507,142 $ 745,399 62`/0 6 Other OpEx $ 12,624,171 $ 602,080 $ 10,195,147 $ 10,797,229 86% 7 8 Utilities Water Fund TotalM $ 1,033,720 $ 6,850 $ 550,645 9i $ 557,495 54% 9 602-Sewer Fund 10 Salaries $ 3,884,630 $ - $ 2,710,528 $ 2,710,529 70% 11 Retirement/Benefits $ 909,393 $ $ 664,876 $ 664,976 73% 12 PERS Unfunded Liability $ 692,112 $ $ 682,034 $ 682,034 99% 13 Contract Services $ 1,291,283 $ 449,379 $ 1,703,628 $ 2,153,007 167% 14 Other OpEx $ 1,600,059 $ 277,161 $ 1,000,538 $ 1,277,699 80% 15 Utilities $ 1,062,892 $ 14,635 $ 857,350 $ 871,985 82% 16 Sewer Fund Tota 1 5 9,440,369 .1 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. Q3 Budget Report Page 9 Page 281 of 324 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 1 Salaries $ 1,405,279 $ - $ 1,017,526 $ 1,017,526 72% 2 Retirement/Benefits $ 321,392 $ - $ 243,614 $ 243,614 76% 3 PERS Unfunded Liability $ 196,276 $ - $ 177,823 $ 177,823 91% 4 Contract Services $ 969,370 $ 433,544 $ 581,955 $ 1,015,499 105% 5 Other Operating Expenditures $ 577,450 $ 34,722 $ 585,216 $ 619,939 107% 6 Utilities $ 264,172 $ - .: $ 172,312 $ 172,312 65% 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 Q3 Budget Report Page 10 Page 282 of 324 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 FY 2022-23 1 FY 2023-24 Federal $ - 0% $ 7,579,701 $ 1,012,148 13% 0% State $ 1,527,196 44% $ 3,657,688 $ 2,315,905 63% 52% Local (Bus Fare) $ 733,544 96% $ 990,000 $ 722,957 73% -1% Other Revenue $ 298,778 -60% $ 13,579 $ 210,570 1551% -30% 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 1 Salaries $ 396,069 $ - $ 187,450 $ 187,450 47% 2 Retirement/Benefits $ 74,554 $ - $ 44,193 $ 44,193 59% 3 PERS Unfunded Liability $ 45,399 $ - $ 44,728 $ 44,728 99% 4 Contract Services $ 4,487,341 $1,006,988 $ 2,369,971 $ 3,376,959 75% 5 Other Operating Expenditures $ 410,200 $ 42,467 $ 322,860 $ 365,327 89% h Transit Fund Total0.9 ... 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. Q3 Budget Report Page 11 Page 283 of 324 HMajor 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 Economic Resiliency, Cultural Vitality & Fiscal Sustainabil'ry Strategy 1.5: Practicing Fiscal Resoonsibiliri Staffwill present the user and regulatory fee study to Task c. Implement a city fee program update FY2023-24Q3 FY2023-24Q4 Counci I i n J une or Ju IV with i mpl ementation a ntici pated by the end of FY 2024-25 Q1 Draft report for all Impact Fees except TIF has been Taskd. Implement a Development impact FY 2023-24 Q3 FY 2024-25 Q2 provided and reviewing with staff. Staff anticipate fee (AB1600) study and update. presenting the complete Impact Fee study to Council in early Q3 of FY 2024-25. Housing and Homelessness StratePv 3.1: Implement Housile Element Task d. Conduct a study session with the City Council to identify needs and opportunities across the housing spectrum, including FY 2023-24 Q3 various types of transitional and supportive housing options Task e. Develop a scope of work for possible funding as part of the 2023-25 Financial Plan Supplement to update the City's parking requirements in consideration of best practices that support housing FY 2023-24 Q3 production. Strategies may include lowering parking minimums, establishing parking maximums, reducing parking requirements in areas close to services and transit facilities, and other proven strategies. Strateev 3.2: Implement Inckismmwv Housile Ordinance Task f. Continue to develop the City's Safe Housing Outreach and Education Program, Task completed this quarter. A table summarizing and Complete updating the opportunities discussed during the study session is provided as an attachment to this report. Task completed this quarter to develop the scope of Complete work and obtain cost estimates for a potential study of the City's parking requirements. The estimated cost of the study is $200,000. including preparation of a Council Memo on FY 2023-24 Q3 FY 2023-24 Q4 options for protecting renters, including homelessness prevention strategies. Cremate Action, Open Space s Sttsf dolls Transportation Strateev 45 Plamiie & Implementation for Resience Taskf. Conduct G H G Emissions Inventory and Biennial CAP and Lead by Example Progress Reports as called for in CAP FY 2023-24 Q3 Administrative Action 2 and Lead by Example Plan Administrative Action 2. Work on this task is ongoing; staff expect to submit a Council Memo in May Complete Programs completed, to be presented to Council in May Q3 Budget Report Page 12 Page 284 of 324 At the March 5, 2024 City Council meeting, the Council requested a summary matrix from staff that outlines what the next steps are in terms of short-, medium- and long-term work plan items related to housing needs and opportunities (City Council Agenda Item 8A). This matrix modifies study session "Attachment F — Summary of Future Potential Housing Opportunities" to include both current work efforts underway as well as potential future programs for each portion of the housing continuum for the benefit of further stakeholder engagement. The matrix is organized into three sections: Short-term existing work program items, medium - term existing work program items, and long-term potential future work program items. The short- and medium- term existing work program items are efforts that are already in the City's work program or have been added by staff because they are required by state law or are efforts related to the regular course of work of the housing staff. The last section, long-term potential work program items, are efforts that are not on any work plan at this time but are included for Council's consideration for inclusion in future budgets and work programs if desired. Most of these ideas were presented in the staff report on the March 5, 2024, however, some additional ideas that were raised by the public or City Council are also included. Table 12: Housing work program update 1. Comply or Leverage New or Recent State Laws New Create program for MARKET RATE and BELOW MARKET 2023-25 pre -approved ADU RATE (BMR) Required per plans State law AB 1332 Carillo required state law New Zoning Regulations 2023-25 update Required per state law 2. Specific Plan or Area Amendments 2023-25 Margarita Area Specific Plan Update 2023-25 Airport Area Specific Plan Update L by January 1, 2025. MARKET RATE State law implementation of minor amendments for small lot ministerial approvals in MF zoned areas per S13684, ADUs and Density Bonus (AB1287) MARKET and BMR RFP has been approved and issued. MARKET RATE and BMR where now allowable under SLO CO Airport Land Use Plan Q3 Budget Report Page 13 Low: can include in existing work program without additional funding Medium: can include in existing work program without additional funding Medium - Funded, RFP underway Medium — Funded (Developer) Page 285 of 324 3. Other Incentives for Housing Continuum 2023-25 2023-25 Update Impact Fee Deferrals Council memo on renter protection options BMR Tentatively scheduled for Spring 2024 to give clarity for applicability and process and develop guidelines for what fees are eligible to defer and for how long MARKET RATE Memo scheduled for Spring 2024 Low: underway Low to Medium underway 2023-25 Fund and collaborate BMR/PERMANENT SUPPORTIVE High: with supportive HOUSING (PSH)/TRANSITIONAL Ongoing effort housing partners Ex. Calle Joaquin Homekey including HASLO, Ex. SLO County Welcome Home TMHA and PSHH to Village develop additional Ex. Developer Applications: units Monterey Senior Housing/THMA Palm Street Studios/Waterman Village 2023-25 Support 12-parking EMERGENCY SHELTER Medium: space expansion of Expansion of existing 40 Prado HSC In progress, overnight safe parking overnight safe parking to include implementation through 40 Prado HSC additional 12 spaces at rotating summer/fall 2024 rotating safe parking sites at City property and faith - program. based partner sites; program funding needed 2023-25 RFP BMR BMR Low to medium: Administration New RFP for BMR Administration to Expected to release allow efficient processes and BMR RFP summer 2024 2023-25 Homelessness Response Strategic Plan Update agreements TRANSITIONAL and EMERGENCY High: SHELTER Update and continued implementation Q3 Budget Report Page 14 Ongoing effort; update at City Council May 21, 2024 Page 286 of 324 Comply or Leverage New or Recent State Laws New/ unfunded 2023-25 Required per state law Update Objective Design standards 2. Specific Plan or Area Amendments 2023-25 Upper Monterey Special Focus Area — Outreach and Engagement 3. Other Incentives for Housing Continuum 2023-25 unfunded New 2023-25 Develop MARKET RATE Update needed to better address design needs for smaller scale developments subject to ministerial review through new state law [-)B HOME Act (Atkins); SB 424; (Wiener); SB 4 (Wiener); SB 684 (Caballero)] MARKET RATE (primarily) Add integration of additional housing options with mixed -use and commercial place -making economic initiative High: Anticipated to take <1yearto complete 1XM47111 or, Anticipated to take 1— 2 years to comp) itweilllii� Downpayment may use future Prohousing Anticipated to take Assistance Program Incentive Funds; may seek other less than one year state funding sources; May include to develop other expanded funding for BMR housing Support CAPSLO 46 EMERGENCY SHELTER Medium: Prado non -congregate CAPSLO purchased property for 40 Anticipated to take Family Shelter project Prado Homeless Services campus between one expansion for families and potential 1— 2 years additional Permanent Supportive Housing 2023-25 Pre -approve ADU MARKET RATE and BMR Low: plans for City use that Allows additional pre -approved Anticipated to take are currently available ADU plans for applicant selection less than 1 year through SLO County 2023-25 Parking Standards MARKET RATE Medium: unfunded Update A project plan and Scope of work Anticipated to take have been prepared for study to approximately 1 support housing production. If year funded an RFP will be issued.(Note: additional parking reductions Q3 Budget Report Page 15 Page 287 of 324 already exist per state law for BMR units.) 2023-25 Pursue grant funds TRANSITIONAL AND EMERGENCY Medium: and collaborate with SHELTER Anticipated to take service providers to (opportunity for new round about 1 year Support Resiliency Encampment Resolution Funds or Strategic Plan for 40 other State funds) Prado HSC development more beds 2023-25 Apply for additional BMR Low: Anticipated to Prohousing Incentive Round 2 application submitted take 1 year Program (PIP) funds (additional NOFA's expected in the and other state funds future) may include downpayment assistance 2023-25 Support BMR housing BMR Low: Anticipated to on City property — Ex. Waterman Village project under take less than Waterman Village review; need inventory of future 1 yr possible sites 1. Comply or Leverage New or Recent State Laws Future Zoning amendments MARKET and BMR High: Anticipated for additional projects potential implementation SB 10 to take 1-2 years to receive ministerial Wiener for arterial corridors in review areas with services specific to missing middle typologies; may also include small modular -units homes or mobile homes in areas that cannot support height/density or permanent foundations; anticipate further state legislation 2. Specific Plan Amendments Future Update Upper MARKET RATE (primarily) High: Anticipated Monterey planning Build upon outreach planned in to take between 1 area 2023-2025 to integrate additional and 3 years housing options with mixed -use and commercial place -making economic initiative Q3 Budget Report Page 16 Page 288 of 324 Future Mid-Higuera Planning MARKET RATE (primarily) High: Anticipated area Develop and integrate zoning and to take between 1 other incentives to allow new and 3 years housing options 3. Other Incentives for Housing Continuum Future Pre -approved plans — MARKET RATE High: Anticipated "missing middle" Develop pre -reviewed designs to to take 1-2 years typologies incentivize missing middle housing for specific neighborhoods Future Customized Pre- MARKET RATE and BMR Low to medium: approved ADU plans Resource need based on number of Anticipated to take designs specific to SLO plans to provide as pre -approved. approximately 1 neighborhoods year Future Allow additional MARKET RATE High: Anticipated incentives through Additional incentives for downtown to take between 1 zoning amendments in may be additional height or and 3 years limited areas to allow modification of setbacks; expand more density or applicable area for flexible density; missing middle expand areas for multi -family housing development Future Develop sustainable BMR Medium to high: funding for BMR Participate in state tax exempt Anticipated to take housing bond programs to help increase the between supply of BMR rental units; or local 1 and 3 years revenue measure Future Develop incentives for BMR —Transitional Medium: property owners for Additional guidelines or incentives Anticipated to SB 4 (Wiener) housing for BMR/Transitional housing with takel to 2 years development (housing faith -based partners and local allowed ministerially service providers on property owned by religious organizations) Future Financial incentives for MARKET RATE and BMR Medium to high: housing developers — Develop incentives for developers Anticipated to take low interest loans of specific types of housing, ex. between missing middle. Explore a low 1 and 3 years L interest loan program Q3 Budget Report Page 17 Page 289 of 324 Future Incentives for housin€ attainable to households earning 120%-200% Average Medium Income Future Remove zoning requirement for mixed -use for 100% BMR housing project where applicable ueveiop incennves Tor resiaenriai construction, rehabilitation or ownership programs to increase opportunities for households earning 120-200%AMI BMR Remove requirement for projects in Mixed -use districts to require commercial components that and that create barriers for development of 100% BMR residential projects Q3 Budget Report Page 18 Hnucipaiea io TaKe between 1 and 3 years Low to medium: Anticipated to take approximately one year Page 290 of 324 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. Q3 Budget Report Page 19 Page 291 of 324 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. Q3 Budget Report Page 20 Page 292 of 324 Table 13. Completed and Ongoing Construction Projects (July 2023-March 2024): .• 1 Completed Oracle Account Number 2000525 & Ongoing Construction Capital Projects (July Project 842 Palm Parking Structure Gateless Entry 2023 - March 2024) Total Budget $175,000.00 Estimated Construction Completion Date Completed 2 2000069 2022 Pedestrian Crossing Improvements $841,643.64 Completed 3 2001010-28 Railroad Safety Trail Fencing $350,000.00 Completed 4 2000559 Santa Rosa at Montery Intersection Improvements $1,067,084.24 Completed 5 2000198 Silt Removal2023 $38,055.00 Completed 6 2091118 Calle Joaquin Lift Station Replacement $9,225,565.47 Completed 7 200560 2022 Roadway Sealing $5,550,000.00 Completed 8 2001009 Whale Rock Dam Maintenance -Spillway Underdrain Repairs $472,430.00 Completed 9 2000035 San Luis Obispo Creek Emergency Bank Stabilization Project near Johnson Avenue $1,700,455.00 Completed 10 2001027-15 Marsh Street Bridge Emergency Debris Clearing $343,222.00 Completed 11 2000576 CDBG Curb Ramps 2022 $800,128.00 Completed 12 2000613 Ruth and Iris Storm Drain Repair $321,656.00 Completed 13 Council Hearing Room TI $107,478.03 Completed 14 2001027-01 San Luis Drive Emergency Repair $7,000,000.00 Completed 15 2001027 Old Garden Creek - 141 Cuesta Emergency Repair $450,000.00 Completed 16 2001027 Old garden Creek -533 Broad Emergency Repair $230,000.00 Completed 17 2001027 152 Custa Wall Failure Old Garden Creek Emergency Repair $130,000.00 Completed 18 2001027 Prefumo Grade Structure Phase 1 - Patch $42,000.00 Completed 19 2000117 Cultural Arts District Parking Structure Phase 1 $1,067,264.00 Completed 20 2000075-1.01 City Hall Landing $162,942.00 Completed 21 2090742-08 Downtown Trash Capture Device Installation $23,575.00 Completed 22 Luneta, Verde, Ramona Sewer $2,106,425.45 Completed 23 2001015 Buchan Street Traffic Calming $337,370.00 Completed 24 2000535 Transit Facility Electric Vehicle Charging Infrastructure $2,692,434.00 Q4 FY 23-24 25 2000036 North Chorro Neighborhood Greenway $8,218,904.00 Q4 FY 23-24 26 2001065 2023 Arterials $8,521,058.00 Q4 FY 23-24 27 2001010-01 Cheng Park Revitalization $907,786.00 Q4 FY 23-24 28 2000075-5.01 Fire Station 1 Fleet Maintenance Roof $409,597.00 Q4 FY 23-24 29 2001027-08 Prefumo Creek LOVR to Laguna Lake $1,850,000.00 Q4 FY 23-24 30 2000049 842 & 919 Palm Parking Structure Repairs $3,462,180.00 Q1 FY 24-25 31 2001050 Tank Farm Lift Station Discharge Pipe Replacement Phase 2 $276,000.00 Q1 FY 24-25 32 2000578 Johnson Waterline $5,204,444.00 Q1 FY 24-25 33 2000188 Mitchell Park Revitalization $471,253.00 Q1 FY 24-25 34 2091219 Wastewater Resource Recovery Facility Upgrade $143,376,754.12 Q1 FY 24-25 35 2000034-02 Reservoir No. 2 Cover Replacement Project $3,449,835.00 Q1 FY 24-25 36 2000126 Water Treatment Plant Generator Improvement Project at Facility 98 $3,527,523.00 Q2 FY 24-25 37 Cultural Arts District Parking Structure Phase 2 $41,070,044.00 Q3 FY 25-26 38 2000075-9.01 Corporation Yard Fuel Island and Wash Station Rehabilitation $978,867.00 Q1 FY 24-25 39 2000034-03 Wash Water Tank#1 $753,807.00 Q2 FY 24-25 40 2091439 Mission Plaza Enhancements $3,729,574.00 Q1 FY 25-26 Q3 Budget Report Page 21 Page 293 of 324 Table 14. Status of Major Projects in Design: Status of Major and Legacy Projects TOTAL COST in Design Estimated .. (DesignPROJECT Date Additional Comments Finalizing design documents and easement 41 Mid-Higuera Bypass $11,550,000 Q3 FY 24-25 acquisition process. Working on regulatory permits and 90% 42 Prado Road Bridge and Road Widening $25,000,000 Q2 FY 25-26 constuction documents. Right of way acquisition in progress and finalizing 43 California and Taft Roundabout $4,000,000 Q2 FY 25-26 design documents. Alternative analysis and environmental document phase. Pursuing advertisement of 44 Prado Road Interchange $126,000,000 Q2 FY 27-28 CEQA document and final project report. 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 Q3 FY 24-25 (for project. Construction of 1106 TI and Fencing 1106 Walnut project estimated to start March 2025 (Q3 FY 24- 45 Public Safety Center $1,750,000 work) 25). © 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. Q3 Budget Report Page 22 Page 294 of 324