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HomeMy WebLinkAbout1998-12-01 City CouncilTO: ATTENTION: THE-SUBJECT OF THIS REPORT ISA .........COUNCI~PRIORt~,,,, City of Palo Alto 2ity Manager’s Report HONORABLE CITY COUNCIL This staff report is being packeted early. Please retain for the December 1, 1998 Finance Committee meeting. FINANCE COMMITTEE FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE:DECEMBER 1, 1998 CMR: 422:98 SUBJECT:INTEGRATION OF NEW AND EXISTING INFRASTRUCTURE NEEDS REPORT IN BRIEF On July 20, 1998 the Council approved a General Fund infrastructure fmancing and prioritization plan (CMR:191:98). The General Fund infrastructure plan approved by Council includes two policies: 1) existing facilities should be prioritized over new facilities for purposes of infrastructure funding; and 2) new or enhanced infrastructure facilities, should be funded from specific new revenue sources. At the July 20 meeting, Council directed staff to report back on integrating new infrastructure needs along with the plan for existing infrastructure. Staff has compiled a list of new infrastructure needs.with rough approximations of costs at this point. In order to help show the magnitude of the potential impacts for funding all of the projects, the projects are listed as if they were funded by General Obligation (G.O.) bonds, although other fmancing sources are possible. The list of projects totals between $133 and $217 million. It is probably realistic to expect that Palo Alto citizens would not vote for new bonds or taxes to support all of the projects, so prioritization of these projects becomes an important policy decision for the Council. Staffhas prioritized several projects as high priority projects and recommends that they be considered first for consideration by voters for approval of funding. They include the library master plan, residential arterial and neighborhood traffic calming efforts, and the public safety building. CMR:422:98 Page 1 of 7 RECOMMENDATION Staff recommends that the Finance Committee: Consider the list of recommended General Fund capital projects listed in Attachment B and give staff feedback on the top priority projects for initial funding. Staff believes the top priority projects for initital funding are: library master plan improvements, residential arterial and neighborhood traffic calming projects, and a new public safety building. Consistent with the infrastructure policy (CMR: 191:98) approved by Council July 20, 1998, these new infrastructure projects should be funded with new revenue sources. Direct staff to return to the Finance Committee with a suggested timeline that addresses the decision points needed to obtain Council approval of the funding needed to secure the recommended priority projects. BACKGROUND On July 20, 1998 the Council approved a General Fund infrastructure financing and prioritization plan (CMR:191:98). The General Fund infrastructure plan approved by Council includes two policies: 1) existing facilities should be prioritized over new facilities for purposes of infrastructure funding; and 2) new or enhanced infrastructure facilities, such as a public safety building or anexpanded main library, a performing arts center, and major new traffic and transportation projects, should be funded from specific new revenue sources such as general obligation bonds, grants, new or increased taxes, and assessment or special tax districts. The financing plan for existing infrastructure approved by Council on July 20 includes about $75 million in projects over the next ten years. Council did not approve increasing the transient occupancy tax (TOT) from 10 percent to 13 percent to raise another $22 million over ten years, as recommended by staff, pending additional outreach efforts to the business community. That effort has begun, as the City Manager’s Office convened an initial meeting in August with the Government Action Committee of the Chamber of Commerce. Staffwill report back to the Finance Committee in 1999 after more progress has been made on the feasibility of a TOT or other tax increase to fund the balance of the existing infrastructure needs. In addition, at the July 20 meeting staff also committed to return to the Finance Committee with a more detailed time line and implementation plan, including a staffing augmentation plan for the $75 million approved infrastructure plan. Staff has obtained consultant services support to analyze staffing needs, and will return to the Finance Committee early in 1999 with the results. CMR:422:98 Page 2 of 7 Finally, at the July 20 meeting, Council directed staff to report back on integrating new infrastructure needs along with the plan for existing infrastructure. That is the focus of this staff report. DISCUSSION Staff has compiled a list of new infrastructure needs (Attachment A). The list is in alphabetical order, and totals between $133 and $217 million. Each project listed has a high and low cost estimate as a starting point for further discussion. The estimates are only rough approximations of costs at this point, and are meant only to provide the Finance Committee with information regarding possible resource commitments. Accurate estimates cannot be made until scopes of work have been defmed. In order to help show the magnitude of the potential impacts for funding all of the projects listed in Attachment A, the projects are listed as if they were funded by General Obligation (G.O.) bonds. While other financing sources are possible, assuming G.O. bonds for illustration purposes here allows staff to calculate the potential levy on households and businesses. Such a calculation also allows for a consistent point of comparison of resource impacts to different households and businesses. For comparison purposes, staff made calculations for the potential assessments for houses and businesses with assessed valuations of $100,000, $250,000, and $750,000. (While Palo Alto houses sold in recent years are on the higher end of this scale, it is reasonable to assume that many of Palo Alto’s homes have assessed values closer to $100,000, as they were purchased some years ago). Note that with G.O. bonds, a home or business with an assessed valuation of $1.0 million would get a levy of ten times that of a home with a $100,000 valuation, so this table can be used to estimate other values. For calculation purposes, staff assumed thirty year G.O. bonds at a 6 percent interest rate, which is conservative given the last two years’ markets. In order to arrive at the attached list of projects, information from recent staff reports was compiled and reviewed by staff from the Public Works, Administrative Services, and Community Services Departments, the City Manager’s Office, and the Transportation Division. Certain projects have been excluded from the list for the following reasons: Only General Fund and Street Improvement Fund capital projects are listed. Council’s direction is that new infrastructure project will require new financing sources and, thus, will require voter approval of debt financing or tax increases. the downtown parking structure is not included on the list. That assessment will be voted on, and will affect a very specific set of property owners downtown, not Citywide property owners and!or voters; CMR:422:98 Page 3 of 7 storm drainage improvements are not included, as they are a separate utility fund, and additional storm drainage work will require a vote of storm drainage rate payers. Storm drainage infrastructure will be the topic of a separate staff report in the coming months; major intersection improvements (such as Page Mill/Hanover and Page Mill Road/El Camino Real), are not included on the list because there is Federal Transportation Equity Act (TEA) grant funding that is being applied for now, and the extent of city funding is not known at this time. Finally, traffic impact fees can be used to help finance major intersection improvements; and Downtown Intermodal (Dream Team) work is not included. The estimated construction costs for this project are so high that it does not seem feasible to proceed with work on construction unless and until significant external grant financing sources are available. Items which would cost less than $250,000 were excluded, as they could more easily compete for funding in the annual CIP process than can the larger projects. Staff excluded these projects in order to make the list more manageable for the Council to consider and prioritize. o No operating budget items are included. Proposed Prioritization To carry out the policy adopted by Council to fund new infrastructure from specific new revenue sources, significant sources of new revenues for new infrastructure can come from three basic sources, all of which require voter approval: G.O. bonds, increased taxes, and assessments. A fourth source, grant funding, will continue to be pursued by staff as grant sources become available for specific projects. Due to their limited availability for all but street and intersection projects, however, grant funding can only supplement, but cannot replace taxes, bonds, and!or assessments as the major fmancing source for large capital needs. The list of projects on Attachment A totals between $133 and $217 million. This amount is more than the Palo Alto Unified School District’s (PAUSD) "Building for Excellence" bond issuance. As was pointed out in a recent survey of other cities capital spending and debt levels (CMR: 158:98), Palo Alto property owners already pay for a relatively high level of total debt, primarily due to the outstanding PAUSD debt. Similarly, Palo Alto levies slightly above the average amount of local taxes measured on a per capita basis. There may be room for additional debt and tax revenue, considering the City’s relative wealth and its citizens’ support for high levels of service. It. is probably realistic to expect that Palo Alto citizens CMR:422:98 Page 4 of 7 would not vote for new bonds or taxes to support all of the projects listed on Attachment A. The prioritization of these projects therefore becomes an important policy decision for the Council. Staff has prioritized several projects as high priority projects on Attachment B and recommends that they be considered first for consideration by voters for approval of funding. They include the library master plan, residential arterial and neighborhood traffic calming efforts, and the public safety building. 0 Library. Master Plan Improvements Much attention has been given recently to the issue that the current configuration, size, and technological capacity of the current Palo Alto library system facilities are no longer adequate to meet the demand for library services. Palo Alto has long had an affinity and affection for its library system, and Palo Altans’ high usage of the libraries is a strong indication of the priority placed on their libraries. The Council has approved the formation of a Library Commission in part to wrestle with the issues related to longer term facility needs. Ci .tywide Traffic Safety. The Council has ranked citywide traffic safety as a top Council priority for several years. In order to continue to improve citywide traffic safety, staff recommends the top priorities for funding should be residential arterial and neighborhood traffic calming projects. Citywide school commute traffic improvements are also a top priority, but the bulk of the identified funding needs for these projects have already been provided ($150,000 has already been funded in the 1997-98 CIP for upgrading bike lanes on collector streets and signing and striping projects, while the remaining elements will be reviewed and prioritized in the capital budget process, which is underway now). Residential Arterial Traffic Calming Traffic calming efforts on Middlefield, Embarcadero, Charleston and Arastradero Roads, and on,University Avenue involves maintaining the residential nature of roads not originally designed as major thoroughfares. These projects are a key part of the new Comprehensive Plan’s vision for Palo Alto. Initial funding for developing a schematic design plan for traffic calming on Embarcadero Road was included in the 1997-98 capital budget. Neighborhood Traffic Calming Transportation staff have indicated that it would be advantageous to formalize City policies and programs relating to the protection of neighborhood streets from impacts of vehicular traffic. Currently, the capital budget funds such programs on an ad hoc basis. Transportation staff recommended (CMR:336:96) that an annual program be CMR:422:98 Page 5 of 7 established that can accomplish design and installation of traffic calming devices on local and collector streets. Staff has estimated that an annual commitment of $100,000 could accommodate a manageable amount of work per year. For this report, a ten-year total of $1,000,000 is assumed. O New Public Safety. Building The feasibility study for a new public safety building is underway. Public safety staff have comprehensively documented their space concerns (CMR:342:97). A public safety building would provide an opportunity .for the consolidation of the various divisions and the two departments into an efficiently .laid out, technologically advanced facility that will enhance existing operations, reduce potential liabilities, and increase efficiency and productivity of personnel. The current site has been described by public safety staff as inadequate for in house training; processing and storage of evidence; separating adult and juvenile prisoners being held prior to being transported to the County jail; storage of equipment and records; keeping up with current technology; having a dedicated emergency operations center to use during emergencies; and parking the patrol, investigation, undercover, and parking enforcement vehicles that are used at City Hall. The space needs for. the City as a whole are linked to public safety; a new facility would free up City Hall space and resolve other critical City space needs, including a long term solution to one stop permitting. The top priority new projects for funding are listed in Attachment B, and for illustration purposes, with the dollar impact of G.O. debt financing for houses/businesses with assessed valuations of $100,000, $250,000, and $750,000. If Council directed staff to pursue tax increases rather than issuing general obligation debt, the impacts would fall differently. (For example, a utility user’s tax extension on interstate phone calls would fall more heavily on businesses, and a TOT increase would fall most heavily on out of town business travelers visiting Palo Alto, and indirectly therefore on hoteliers). RESOURCE IMPACT Staff.has recommended a prioritization of new infrastructure that is dependent on new revenues to be approved by the voters. Preliminary estimates of dollar are shown in Attachments A and B. Approving new infrastructure could also impact staffing costs, and ongoing maintenance in the General Fund operating budget. POLICY IMPLICATIONS The approach contained in this report is consistent with the policy direction approved by Council on July 20, 1998, that existing facilities should be pfioritized over new facilities for CMR:422:98 Page 6 of 7 purposes of infrastructure funding. New or enhanced infrastructure facilities should be funded from specific new revenue sources such as G.O. bonds, grants, new or increased taxes, and assessment or special tax districts. TIMELINE After staff receives feedback from the Finance Committee and the Council on staff’s recommended priofitized General Fund projects, staff believes the next steps would include staffbringi.n, g back to the Finance Committee in approximately March 1999: o A specific recommendation on a fmancing plan; and A rough timetable for key decision points for bringing a f’mancing pl.an to the voters, including a review of where existing projects are in the public review and Council decision process and what decisions still need to occur. ENVIRONMENTAL REVIEW This report on infrastructure planning and prioritization represents preliminary policy assessment and direction to staff. It does not require California Environmental Quality Act (CEQA) review. Individual projects will be subject to environmental review as they are developed. ATTACHMENTS Attachment A - New Infrastructure Over $250,000 " Attachment B - Staff’s Recommended New Infrastructure Funding Priorities PREPARED BY:Jim Steele, Manager, Investments and Debt APPROVED BY: CITY MANAGER APPROVAL: CC: n/a CARL Director,Services E~~SO!~ Assistant City Manager CMR:422:98 Page 7 of 7 r~ UJ Z