REPORT TO COUNCIL
SUBJECT
Title
Review of Various Infrastructure Improvement Needs and Funding Levels for Consideration as Part of a Potential November 2018 Infrastructure Ballot Measure and Approval of a Related Budget Amendment
Report
BACKGROUND
The City has a number of unfunded capital infrastructure needs and in 2017 and 2018 the City Council held Study Sessions to discuss infrastructure. These unfunded needs include major projects that affect City services such as the Civic Center Campus, City maintenance yard, and fire stations and also quality of life improvements including parks and recreation, and community services facilities. One of the major projects from a need and cost perspective is the International Swim Center (ISC) and Community Recreation Center (CRC). Since 2007 the City has analyzed various options related to building a new ISC and CRC to replace the existing aging facilities. A full schematic design was developed, and an Environmental Impact Report (EIR) was certified by City Council on September 20, 2016.
On April 4, 2017, Council approved an Agreement with Project Finance Advisory, Limited (PFAL) to conduct a financial feasibility analysis of the project as envisioned. The current cost of the project as schematically designed is $250-$300 million, which raised financial feasibility concerns. PFAL’s work included evaluating public and private funding sources, analyzing operations and lifecycle costs, conducting community opinion research, and assessing project delivery options. Study Sessions were held with Council on July 18, 2017, February 22, 2018 and April 24, 2018.
February 22 Study Session
On February 22, 2018, staff and PFAL representatives presented the ISC/CRC project findings to the City Council. The presentation provided the project background, financial feasibility, funding options, and preliminary community opinion research results for a sales tax or property tax measure. In addition, the presentation provided an overview on the overall City infrastructure needs.
In summary the key findings of the Study Session were as follows:
• There are limited funding options to construct, operate, and maintain a new ISC/CRC.
• The current 171,000 SF schematic design is not affordable.
• New funding was needed to fund a “right-size” project.
• A new tax measure was identified as the only feasible funding alternative.
PFAL completed preliminary community opinion research to determine support for a new tax measure. The key findings were presented at the Study Session and are summarized below:
• There was not enough support for a sales tax measure, but there was preliminary support for a property tax bond measure.
• There was not enough support for an ISC/CRC only measure. However, there was support for 2/3 voter approval for a more comprehensive measure that also included citywide park improvements, trails, and library expansion.
• PFAL also completed a revenue and financing capacity analysis based on a property tax of $20-$25 for every $100,000 of assessed value. The revenue summary is provided in the table below:
Tax Measure Revenue and Financing Capacity
|
Growth Rate of Assessed Value |
Total Property Tax Revenue (Life) |
Total Property Tax Revenue (2018 $) |
Principal Financing Capacity |
|
4% |
$495M |
$303M |
$202M |
The Council discussed a number of elements in the presentation. In summary, the Council expressed interest in further exploring a more comprehensive measure and “right-sizing” the ISC/CRC project. Staff committed to return to Council at a future date with additional information.
April 24 Study Session
In an effort to further define what projects might be included in a comprehensive measure, the City Council held a second Study Session on April 24, 2018. At the Study Session, staff presented an infrastructure needs and funding overview (excluding Silicon Valley Power) for the City. The Departments of Public Works, Water and Sewer, and Parks and Recreation all provided overall infrastructure summaries, key funded projects, unfunded needs, and funding opportunities. Staff requested specific feedback regarding Council infrastructure priorities to help inform a project priority list.
In summary, the Council expressed support and interest in continuing the discussion of including a Measure on the November 2018 ballot. Council discussed proceeding with possible project options and next steps for consideration.
DISCUSSION
Based on Council input as part of the Study Sessions, staff recommends conducting additional community opinion research to determine the viability of a November 2018 Measure when tested against other revenue generating opportunities that stabilize the City’s fiscal outlook. Given that this revenue option is the most studied of all presented, absent approval of other revenue opportunities, the Council will need to weigh heavily the viability of staff’s ability to implement a significant capital program of this magnitude while concurrently reducing expenditures, and staffing, to balance the budget. Meaning that, the voters may approve a Property Tax for investment in projects important to the City; however, given the 10 Year Fiscal Outlook, the ability to deliver in the context of reduced staffing throughout the City will impact the ability to successfully deliver the projects.
Staff has developed two project options for consideration based on existing needs and priorities. The project lists are based on $200 million of available funding, given the previously presented financing capacity, and on existing 2018 engineering and construction costs with no escalation (further refinement of costs and financing will be necessary). Although there are many City infrastructure priorities, staff’s goal was to develop project options that provide significant community benefit, could have community support, and don’t have other near-term funding options.
The intent of the project list is not to finalize the projects and funding levels, but to provide perspective on what type and number of projects could be included as part of a Measure and inform the community opinion research process. As an example, if the Council would like to dedicate more funding to a particular project category, staff would want to understand what project category would be decreased to balance the available funding. This will assure that the community opinion research can be as accurate as possible and reflects what projects could be included as part of a Measure with the available funding.
Staff developed two project categories for consideration, Parks and Recreation Projects and Safety Projects. Two different funding level options were developed (Attachments 1 and 2), and Council can modify or add projects based on City priorities.
Parks and Recreation Projects
• International Swim Center and Community Recreation Center - The ISC, per the schematic plan and EIR, is assumed to be relocated to Kiely Boulevard to address access and parking concerns, and provide operational benefits. Relocating to Kiely Blvd. allows the CRC and ISC to share building facilities and be more operationally efficient. It is important to note that the schematic plan assumed demolition of the CRC, however, the Kitchell Report has shown the building to be in good condition and demolition is not required.
• Park Improvements - The Kitchell Report (http://santaclaraca.gov/home/showdocument?id=56812) analyzed that improving City Parks would require a minimum of $150 million. With the proposed funding levels under both options, staff would prioritize park facilities in critical or poor condition. Actual project priorities and packages would need to be determined.
• Trails - The City has a number of trail needs which are significantly expensive and will require additional funding beyond current funding sources.
• CityPlace Park - Ultimate buildout of the park would require approximately $35 million, and currently only $5 million are identified (developer contribution). This funding would be used to activate part of the 30 acres. There are no other funding options for a park of this size.
• Library Expansion - Although a full need analysis has not been completed, the Council has expressed interest in a library expansion. At a conceptual stage, the cost for additional building space is approximately $1000 per S.F. As an example, a $10 million expansion project would add approximately 10,000 S.F. of library.
Safety Projects:
• Fire Station Upgrades - Reconstruction of Fire Station 5, which would allow for additional fire equipment, better operations, and improvements to Fire Stations 1, 7, and 9. With the reconstruction of fire station 5, the City will be able to relocate a ladder truck from its current location at Fire Station 2, to provide optimal fire response coverage to the southwest portion of the city. This is consistent with recommendations from the 2016 Staffing and Deployment Study performed by Citygate and Associates. LLC.
• Storm System Improvements/Flood Protection - The City’s Storm System Study has shown approximately $300 million worth of needs for upgrades to the storm system, but as discussed at the Study Session, $20-$30 million are needed for priority projects.
The two options provide funding for all project categories, but at different funding levels. The key decision point is related to how much funding would be dedicated to ISC/CRC project. Option 1 provides $80 million for the CRC/ISC project and with that level of funding there are two key assumptions:
• The ISC will likely provide similar service levels as it does today. Additional improvements would have to be included as part of the project only if additional donations (or other funding sources) are identified.
• The CRC would be maintained. Aesthetic improvements would be included and some additional work would be required to incorporate into the ISC.
Under Option 2 the CRC/ISC project is increased to $100 million, and this is achieved by reducing funding levels from every other category. In general, the additional $20 million allows for:
• The ISC design would include additional program elements above current service levels.
• The additional funds would provide some flexibility for expansion of the existing CRC, however a full demolition/replacement is still unlikely. Demolishing the current 30,000 S.F. building and replacing it in-kind would cost approximately $30 million.
At this time Council does not need to finalize the exact amount for each project, however staff would like to understand if there are specific projects that should be deleted or added to help inform the community opinion research.
If Council would like to proceed with pursuing an Infrastructure Ballot Measure, a contract amendment with PFAL will be required to complete additional work to inform the decision process. The additional work with PFAL will help determine the financing capacity of the new tax measure to support Council priority projects, review the capital cost estimates and analyze project financing, review construction costs for the ISC/CRC, and possible additional outreach
FISCAL IMPACT
Allocate $300,000 from Unallocated Developer Contributions to International Swim Center capital improvement project to for additional work as outlined in the attached Amendment No. 1 with PFAL.
BUDGET AMENDMENT
|
|
2017-18 Current |
Increase/ (Decrease) |
2017-18 Revised |
|
Revenues |
|
|
|
|
Fund 532 - Parks and Recreation |
|
|
|
|
Unallocated Developer Contributions (532-3000-80019) |
$528,495 |
($300,000) |
$228,495 |
|
Expenditures |
|
|
|
|
Fund 532 - Parks and Recreation |
|
|
|
|
International Swim Center, IRC, ISHOF (5323172-80100) |
$738,235 |
$300,000 |
$1,038,235 |
.
COORDINATION
This report has been coordinated with the Parks & Recreation Department, Finance Department, and City Attorney’s Office.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment. .
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
ALTERNATIVES
1. Select a conceptual project option (Option 1, Option 2, or a different Council option) and continue the process of developing a November 2018 Ballot Measure.
2. Approve the appropriation of $300,000 in the Budget Amendment to the International Swim Center, CRC, ISHOF (CIP 3172), and authorize the City Manager to execute Amendment No. 1 in substantially the same form with PFAL in the amount of up to $300,000.
3. Do not select a conceptual project option and do not continue the process for a November 2018 Measure.
4. Do not authorize the City Manager to execute Amendment No. 1 with PFAL in the amount of up $300,000.
RECOMMENDATION
Recommendation
Alternatives 1, 2, & 3:
1. Select a conceptual project option (Option 1, Option 2, or a different Council option) and continue the process of developing a November 2018 Ballot Measure.
2. Approve the appropriation of $300,000 in the Budget Amendment to the International Swim Center, CRC, ISHOF (CIP 3172), and authorize the City Manager to execute Amendment No. 1 in substantially the same form with PFAL in the amount of up to $300,000.
Staff
Reviewed by: Manuel Pineda, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Project Option 1
2. Project Option 2
3. Amendment No. 1 with Project Finance Advisory Limited