HomeMy WebLinkAboutStaff Report 270-06City of Palo Alto
City Manager’s Report
TO:
ATTN:
FROM:
HONORABLE CITY COUNCIL
FINANCE COMMITTEE
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
JUNE 20, 2006
OPTIONS FOR
INFRASTRUCTURE
CMR: 270:06
INCREASING FUNDING FOR
RECOMMENDATION
Staff recommends that the Finance Committee direct staff to pursue the short-term options
included in this report for increasing infrastructure funding and move forward with planning for
the medium- and long-term options for incorporation into the 2007-08 budget.
BACKGROUND
In April 2006 the City Council approved the milestones for the "Top 3" priority, Increase
Infrastructure Funding (CMR:191:06). The milestones include reviewing options to increase
long-term "CityWorks" funding by $3 million through a combination of expenditure reductions
and revenue enhancements. These options are to be presented to the City Council and
incorporated into the City’s Long Range Financial Plan and the 2007-08 budget.
The Finance Committee held an initial discussion of the options on May 23 and directed staff to
return to the Finance Committee for further discussion. This report presents the options for
further discussion.
DISCUSSION
The Infrastructure Reserve (IR) was created in 2001 to provide funding for projects in the
Infrastructure Management Plan (IMP). In 2004, $36 million was transferred from the General
Fund to the Capital Fund to fund the IR. The interest income generated from the reserve
(approximately $1 million) combined with an additional $1 million from General Fund year-end
surplus, when available, is intended to contribute approximately $2 million to the IR annually.
Along with a base transfer from the General Fund of $3.6 million for project expense, the total
contribution to the IR is approximately $5.6 million annually.
CMR:270:06 Page 1 of 3
While maintaining the base transfer to the IR, the expense base in the General Fund operating
budget has been reduced by approximately $20 million over the past four years as part of the
budget reduction strategies. Over this same period, capital spending has increased to $14 million
from $7 million. The increase in spending has not been sufficient to cover the growth in
infrastructure project costs, which have been impacted by inflation, changes in scope, and an
increase in the cost of construction materials. To maintain an adequate IR balance to fund the
City’s long-term infrastructure needs while covering increased construction costs, the
contribution to the IR should be betweenS7 million and $10 million per fiscal year, representing
approximately $3 million in additional funding over current levels.
The attached list of options (Attachment 1) for increasing revenue and reducing expense to
achieve an additional $3 million for "CityWorks" is organized into short-, medium-, and long-
term alternatives. The short-term options are to be implemented with the 2007-08 budget, the
medium-term options are to be implemented with the 2007-09 budget and the long-term options
are to be implemented in 2009-10 and later. The attached list of options shows the anticipated
steps needed to implement each option as well as possible policy issues that may need to be
addressed. Finally, the list shows a summary of the "best bets" (most doable) for moving
forward. Together these options are intended to provide the necessary annual contribution to the
IR required to maintain the reserve balance at adequate levels to complete the IMP and maintain
the City’s infrastructure.
With Finance Committee direction on the list of options, staff expects to return to the Finance
Committee and then the City Council with an implementation plan in the fall 2006 time frame.
With that plan, staff will identify the steps needed to accomplish the options and suggest actions
for addressing potential obstacles to implementation.
RESOURCEIMPACT
The development of the plan for increased funding for infrastructure will be accomplished with
existing resources in the Administrative Services Department budget and no additional funding is
needed.
POLICY IMPLICATIONS
These recommendations are consistent with existing City policies.
ENVIRONMENTAL REVIEW
Adoption of the budget does not represent a project under California Environmental Quality Act
(CEQA).
CMR:270:06 Page 2 of 3
PREPARED BY:
DAVID RAMBERG
Budget Manager
DEPARTMENT HEAD APPROVAL:
CARL
of Administrative Services
CITY MANAGER APPROVAL:
FRANK BENEST
City Manager
ATTACHMENTS
Attachment 1"Options for Increasing Funding for Infrastructure
CMR:270:06 Page 3 of 3
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