HomeMy WebLinkAbout08/20/2002, C13 - CREEK AND FLOOD PROTECTION BUDGET REVISIONS ADcouncil Mcb,D.x 8.20-02
aacEnba RepoRt
CITY OF SAN LU I S OB I SPO
FROM: Bill Statler, Director of Finance
SUBJECT: CREEK AND FLOOD PROTECTION BUDGET REVISIONS
CAO RECOMMENDATION
Approve budget revisions related to the projected loss of$285,800 in creek and flood protection
fee revenues in 2002-03.
DISCUSSION
Background. Following an extensive series of public meetings, community outreach and
Council workshops over the last several years, on March 21, 2002 the Council conceptually
approved forming a new Creek and Flood Protection Fund and adopted a multi-year rate
implementation strategy that phased-in fees over the next six years, with continuing General
Fund subsidies until the sixth year (2007-08). After follow-up community outreach and another
public hearing, the Council formally adopted this multi-year program on May 21, 2002.
For the first year (2002-03), the fee was set at an "equivalent dwelling unit" rate of$1.00 per
month for a single-family residence. At this rate, the new fees would only cover about 40%
($285,800) of program costs in 2002-03, with the remaining funding sources coming from Zone
9 reimbursements ($100,000) and a General Fund subsidy($290,700).
However, shortly after Council approval of this new fee program, there was a court decision
regarding a similar fee in the City of Salinas that led City staff to recommend deferring
implementation of the fee until February 2003, pending a more detailed analysis of the basis for
the court's decision, how this might affect our fee program, and changes we might want to
consider to address the concerns underlying the court decision. Further, it was likely that the
City of Salinas would appeal this decision (which they have), and that the decision might be de-
certified or repealed in its entirety. On June 17, 2002, the Council took the more conservative
approach of rescinding these fees rather than deferring them.
Under either approach—deferring or rescinding the fees—we did not recommend formally
modifying the budget at that time, but instead, deferring the enhanced program coordination
($39,900) and all CII' projects ($286,000). We would then follow-up with a more detailed
assessment of which projects (if any) needed to go forward, and how to fund them in light of
reduced fee revenues.
Proposed Strategy. We have completed this analysis, and are now recommending specific
budget actions for the Council's approval-in addressing the loss of these fees in 2002-03. As
detailed below, our strategy consists of a combination of expenditure reductions and an increase
in the General Fund subsidy, which will allow us to move forward with three key CIP projects
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previously approved by the Council: Johnson underpass lift station replacement; Morro at
Monterey storm sewer replacement; and silt removal from the Laguna Lake Prefumo arm.
In addition to moving forward with these three projects, this revised funding strategy also
maintains current service levels for operations and maintenance.
Specific Recommendations
1. Offset the projected loss of$285,800 in fee revenues in the Creek and Flood Protection Fund
in 2002-03 by:
a. Reducing appropriations by $117,400 for program coordination ($39.900), utility billing
($46,500) and silt removal at the Tank Farm Road bridge ($31,000).
b. Increasing the subsidy transfer from the General Fund by $168,400 and funding this
through the Capital Improvement Plan (CIP) reserve account ($147,400), reduced
appropriations for the payment of creek and flood protection fees ($18,200) and reduced
transfer to the Golf Fund ($2,500).
2. Reduce appropriations in other City funds for the payment of creek and flood protection fees:
$300 in the Water Fund; $1,800 in the Sewer Fund; $900 in the Parking Fund and $2,500 in
the Golf Fund.
3. Increase the Sewer Fund reimbursement transfer for utility billing services by $46,500 since
this cost will no longer be shared with the Creek and Flood Protection Fund.
4. Approve going forward with three high-priority creek and flood protection CIP projects
previously approved by the Council: Johnson underpass lift station replacement ($75,000);
Morro at Monterey storm sewer replacement ($110,000); and silt removal from the Laguna
Lake Prefumo arm ($70,000).
Key Assumption: No Fee Revenue in 2002-03. This strategy is based on the key assumption of
no fee revenues during 2002-03. We believe this is consistent with the Council's action to
rescind these fees rather than to defer them. In the event that they are re-adopted by the Council
later in 2002-03, we can revisit these changes at that time. However, given our recommendation
to proceed with three high-priority CIP projects totaling $255,000, we believe assuming no fee
revenue during 2002-03, and making budget changes accordingly, is the most prudent course of
action at this time.
FISCAL IMPACT
Creek and Flood Protection Fund
The following summarizes the fiscal and service impacts of our recommended strategy on the
Creek and Flood Protection Fund in offsetting the projected revenue loss in 2002-03 of
$285,800.
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Flood,Creek and 00 •
Expenditure Reductions
Program Coordination (primarily funding for a new position starting in January 2003) 39,900
Tank Farm Bridge Silt Removal 31,000
Utility Billing Reimbursement Transfer 46,500
Total Expenditure Reductions 117,400
Increased General Fund Subsidy 168,400
Total Revenue Loss Offsets $ 285,800
1. Program Coordination. This deferral will adversely impact our ability to begin
implementing National Pollution Discharge Elimination System (NPDES) requirements and
other desirable creek and flood protection improvements. However, given our uncertain
General Fund revenue outlook, we cannot recommend moving forward with this new
initiative without the additional resources that would have been provided from the new fee
program.
2. Tank Farm Bridge Silt Removal. Of the four CIP projects scheduled for funding in 2002-
03, this has the lowest priority. While it would be preferable to do this project sooner rather
than later, we believe deferring this project is acceptable given our uncertain fiscal outlook.
3. Utility Billing Reimbursement Currently, the Water and Sewer Funds bear the cost for
utility billing, for which they reimburse the General Fund through the Cost Allocation Plan.
Under the Plan for 2002-03, the Water Fund's share of these costs is $189,000 and the Sewer
Fund's is $93,000. While there will be no increased costs in adding creek and flood
protection fees to the City's utility billing system, the new fund should pay its fair share of
these costs. After analyzing the underlying nature of these costs, we concluded that the effort
was similar to that of the Sewer Fund. Accordingly, the Council approved sharing the
$93,000 cost previously assigned to the Sewer Fund equally between the Sewer Fund and
Creek and Flood Protection Fund ($46,500 each). Since this fee is no longer in place, this
reimbursement should also be eliminated. There are no adverse impacts on either the Creek
and Flood Protection Fund or the General Fund in making this change. However, as noted
below, the reimbursement transfer from the Sewer Fund should be reinstated to its former
level and increased by$46,500.
For 2002-03, these changes will result in total Creek and Flood Protection Fund expenditures of
$559,100 (a reduction of $117,400 from the 2002-03 Supplement), which will be funded by
estimated Zone 9 revenues of $100,000 and a General Fund subsidy transfer of $459,100 (an
increase from the 2002-03 Supplement of$168,400).
General Fund
The following summarizes related General Fund changes based on implementing the proposed
strategy outlined above:
1. Eliminate the 518,200 appropriation for creek and flood protection fees. In crafting the
proposed fee program on an enterprise fund basis, it was important to treat the City like all
other customers. This resulted fees to be paid by the General Fund in 2002-03 of$18,200.
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2. Reduce the operating transfer to the Golf Fund by $2,500. We estimated that the Golf
Fund's fees would be $2,500 annually. These should be eliminated in the Golf Fund, which
will in turn reduce the General Fund's subsidy to this fund by the same amount (from
$216,300 to $213,800).
3. Increase the General Fund subsidy to the Creek and Flood Protection Fund by $168,100.
After reducing expenditures in the Creek and Flood Protection Fund by $117,400, this is the
balance remaining to fully offset the $285,800 revenue loss. After adjusting for the reduced
appropriations of$20,700 related to paying these related service fees, the net General Fund
impact of this subsidy is $147,400. Since this is driven by going forward with the remaining
CIP projects, we recommend funding this net amount from the CIP Reserve, resulting in no
net impact on the General Fund.
Other Funds
1. Capital Outlay Fund Under the recommended budget revisions, the CIP reserve will be
reduced by $147,400. The current balance in this account is $253,900, leaving $106,500 to
address other CIP contingencies for the balance of the fiscal year.
2. Sewer Fund As discussed above, the Sewer Fund's reimbursement transfer to the General
Fund for utility billing services should be restored to its previous level (an increase of
$46,500). On the other hand, the appropriation of$1,800 for creek and flood protection fees
should be eliminated.
3. Parking Fund. The appropriation of $900 for creek and flood protection fees should be
eliminated.
4. Golf Fund The appropriation of $2,500 for creek and flood protection fees should be
eliminated. Related to this, the subsidy transfer from the General Fund should also be
reduced by this same amount.
CONCURRENCES
The Departments of Public Works and Utilities concur with these recommendations.
ALTERNATIVES
Do Not Go Forward with the Other CIP Projects. While this would reduce the General Fund
impact, we believe it is important to move forward with these three projects. Each of them
address basic, high-priority infrastructure maintenance needs that should not be deferred:
1. Johnson Underpass Lift Station. This lift station helps prevent flooding in the low spot
where Johnson Avenue passes under the railroad bride by pumping storm water to a storm
drain at a higher elevation. The current pumps and electrical switchgear are original
components installed when the lift station was built almost 50 years ago. Over the last five
years there have been several pump and switchgear failures attributable to age and wear.
Although there are two pumps that are designed to back each other up, they are so old that it
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Creek and Flood Protection Budget Revisions Page 5
is possible both could fail, particularly during extended pumping periods after heavy rainfall.
Because Johnson Avenue is a major arterial and provides an important northern access to
French and General Hospitals, it is important to keep it open and passable at all times. If
both pumps failed during heavy storms, Johnson Avenue would remain impassable for an
extended period. As such, we believe it is important to move forward in replacing the 50-
year-old pumps and switchgear with up-to-date reliable equipment.
2. Morro at Monterey Storm Sewer. This project is needed to correct drainage problems at the
intersection of Monterey and Morro Streets. While this could be deferred on its own merits,
replacing the wastewater main in Monterey Street between Osos and Chorro is a high-
priority project, and these two projects should be built at the same time to minimize
disruption to the downtown. Since the wastewater project has previously been deferred in
order to coordinate it with this storm drain project,we do not recommend further deferral.
3. Prefumo Arm Silt Removal Previously scheduled for 2003-04, this project was accelerated
in the 2002-03 Supplement due to the desirability of maintaining a three-year siltation
removal period, which is the optimum cycle calculated by the CIP Project Engineering staff
and approved by the Corps of Engineers. Given our past permitting history with the Corps
and the need to complete this work before October 15, we recommend moving expeditiously
on this project. For this reason, approval of plans for this project is a separate agenda item on
the August 20, 2002 Council meeting.
Do Not Defer Any of the Current Programs and Projects. We do not recommend this option
given its impact on the General Fund. Going forward with all of the programs and projects as
planned would require an additional General Fund subsidy of$70,900 in 2002-03, and create an
even greater ongoing funding commitment in future years.
SUMMARY
Assuming that creek and flood protection fees will not be restored in 2002-03 results in a
revenue loss for the year of $285,800. To offset this shortfall, we recommend expenditure
reductions of$117,400 in the Creek and Flood Protection Fund and an increase in the General
Fund subsidy of$168,400. This will allow us to maintain current service levels and go forward
with three high-priority CIP projects: Johnson underpass lift station replacement; Morro at
Monterey storm sewer replacement; and silt removal in the Laguna Lake Prefiuno arm.
However, this is a short-term measure intended to get us through 2002-03 without adverse
impacts on the General Fund or current service levels. While this is reasonable in the near term,
we should not let it lull us into a false sense of security about the prospects of adequately funding
creek and flood protection services in the future. In short, the Council adopted these new fees
for a compelling reason: to create a stable and dedicated source of funding to adequately meet
the current and future needs of this important service. If we are not able to restore these fees and
get back on track with our long-term plans, we will be facing a much more difficult situation as
part of the 2003-05 Financial Plan process and beyond.
G:Creek and Flood Protection Fund/Budget Revision CAR-8-20-02