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HomeMy WebLinkAbout2003-05-20 City CouncilCity of Palo Alto CRy l a ager s Report TO:HONORABLE CITY COUNCIL ATTENTION:FINANCE COMMITTEE FROM: DATE: CITY MANAGER MAY 20, 2003 DEPARTMENT: City. Manager CMR: 190:03 SUBJECT:TRANSMITTAL OF 2003-08 CAPITAL IMPROVEMENT PROGRAM GENERAL FUND INFRASTRUCTURE RECOMMENDATION Staff recommends that the CiD" Council: Adopt a Capital Improvement Plan for the General Fund totaling $10.0 million in 2003-04. Approve a goal for maintaining a relatively constant level of infrastructure spending in future years, adjusted for inflation, ta~ng into account the overall fiscal health of the General Fund and its ability, to make the annual transfer to the Infrastructure Reserve. , Reaffirm the Council’s prior direction to staff to give first priority to renovation and rehabilitation of current infrastructure. Evaluate each proposed capital project in light of current conditions and make recommendations to the Council for adjustments as appropriate for both inflation and operating efficiencies and concerns. BACKGROUND Beginning in 1996, staff began the process of putting together a comprehensive inventory of the City’s general fund infrastructure needs. In 1998, staff presented a proposed General Fund Infrastructure Management Plan (IMP) to Council. This ten-year, $100 million plan prioritized $95 million in work on City buildings, facilities, streets, sidewalks, medians, parks and open space areas. An estimate of CtVIR: 190:03 Page 1 of 5 $5 million for staffing needs was also included in the plan. Council earmarked specific funding sources for $78 million in infrastructure work and directed staff to return with options for raising the balance of needed funding. The Infra.structure Reserve was established to accumulate funding for the IMP. In approving the IMP, the Council also adopted a policy that new infrastructure projects must be funded by new revenues. As part of the 2001-03 Budget, the City Manager proposed "the $22 million solution." This involved an additional $2 million per year to be provided through General Fund spending reductions. An interdepartmental team was formed to oversee implementation of the IMP. The staffing required for implementation of the $78 million program (3.5 positions in Public Works and 3 in Community Services) was in place with the 200t-02 fiscal year. -fhere has been an enormous amount of work accomplished with the IMP implementation. Approximately $8 million is budgeted for infrastructure work in this current (2002-03) fiscal year and approximately $!0.0 million is planned for 2003-04. This compares to the "baseline" spending in FY 1999-2000 of $6.3 million. Among the major accomplishments of the program in the past two years have been: $7.4 million in street maintenance and $3.9 million in sidewalk repairs from 2001-2003 *Park improvements at Seale, Werry, Bol, Robles and Hale Well Parks *Hoover Park restroom *PAUSD athletic fields improvements (including JLS, Escondido and Walter Hays school fields) *Duck Pond parking lot *Byxbee Park trail repairs and phased construction of Arastradero trail improvements *Up~ade of various traffic median landscaping *Mitchell Park improvements - Phase 1 *Downtown Library roof repairs *Fire station seismic evaluations *Library., Art Center and Mitchell Park Community Center project designs (accelerated) Art Center plumbing replacement DISCUSSION Attached is the recommended 2003-08 Infrastructure Capital Program. In the process of developing the program, the staff Infrastructure Committee struggled with a number of issues. Staff believes it is important to begin to think and talk about the Infrastructure Management Plan in a new way. The IMP is a CMR: 190:03 Page 2 of 5 commitment on the part of the City of Palo Alto to enhanced maintenance of its key infrastructure assets. The program will not be "completed" in a 10-year timeframe. The projects identified in the original Adamson study will cost much more than $100 million to complete, and some of those projects will not be completed in the 10 year span of the progam (2000-2010). Projects identified in Adamson have been and will continue to be re-evaluated in light of current information and the scope and cost of these projects will likely change. Projects may be added to the IMP that were either overlooked in the original Adamson study or which have become a priority since the study was completed in 1996. For all these reasons, staff believes that the message of a "10 year/S100 million progam" should be discontinued, and that the "emphasis should be on the City’s long-term commitment to ongoing infrastructure excellence. Key issues resulting in this recommendation include: A significant number of projects have been paid for from the Infrastructure Reserve although they were not a part of the Infrastructure Management ("$100 million") Plan. When the proposed two-year budget is taken into account, over $7.5 million will be expended from the Infrastructure Reserve for projects that were not included in the "$100 million" plan. These include $1.5 million for the E1 Camino Real Tree project, $1 million to demolish the Roth Building wings, $0.8 million to air condition the Community Theatre. $0.6 million for safety lighting at community facilities and $0.3 million for two traffic signals. All of these projects have been determined to be necessary for safety or other reasons. However, such significant reductions in the Infrastructure Reserve will have to be offset with ta’king projects out of the original IMP. There are additional new infrastructure projects for which funding from the Infrastructure Reserv-e will appear attractive at a time when general fund are severetv restricted. Examples include: athletic fields: the SOFA Park; Downtown Urban Design Plan implementation. The "$100 million" plan has become significantly more expensive because of inflation and significant changes in the original scope of building projects. The $100 million for the IMP was in 1998 dollars. Staff estimates that construction costs have inflated roughly 4% per year over the intervening years, and thus a 24% add-on for inflation should be factored in to the projects proposed in the next two-year budget. In addition, a number of building projects were only roughly scoped in the Adamson study, and need to be reevaluated prior to being actually budgeted. For example, staff has reviewed the infrastructure renovations required for the Children’s Library, Mitchell Park Community Center and Mitchell Park Library. All three projects were determined to require additional funding for seismic upgrades and air CMR: 190:03 Page 3 of 5 conditioning, which were not included in the original scope. These elements, plus the impact of inflation, have added almost $900,000 to the original funding included in the IMP. General Fund operating budget reductions will likely impact the IMP, since reduced maintenance will erode the benefits of restoration of infrastructure assets. The Capital Improvement Program was put together well in advance of the process of constructing the General Fund operating budget. Given staff’s understanding now that significant reductions may be required in maintenance and operating budgets in the Public Works and Community, Services Department, staff feels strongly that it would be appropriate to review the CIP at midyear and make recommendations on any projects it feels should be delayed until such time as General Fund operating budget resources are sufficient to ensure that the capita! project work will be adequately maintained after construction. Given these facts, staff believes it is necessary to move beyond the concept of a 10 year program and recognize that the City Council has made an ongoing commitment to enhanced infrastructure maintenance. Staff is recommending that the Council adopt a goal of maintaining a relatively constant level of infrastructure spending in future years, making adjustments as appropriate for inflation. Staffing was added for the Infrastructure Program to accomplish $7.8 million in projects per year, using 1996 dollars. If an average annual inflation rate of 4% per year is used, that equates to $t0 million for 2003-04. This amount is in line with the actual CIP requests. However, it is important to recognize that the Infrastructure Plan is dependent on the overall health of the General Fund and its ability to make an annual transfer of funding into the Infrastructure Reserve. Consequently, in any fiscal year it may be necessary to adjust this level of funding, and the dollar amount of the proposed CIP, accordingly. It is also important to recognize that now project will be automatically increased to adjust for inflation: all projects will be evaluated at the time they are budgeted, and will be subject to competitive procurement. Staff also believes it would be appropriate to reaffirm Council’s original decision to require new funding for new programs, given the significant reductions in available resources for infrastructure due to inflation and scope evaluation. Finally, given the fact that the Adamson study is now over 7 years old, it is important to look at the scope of each of the projects included in the original IMP as they come up for budget scheduling to take into account new information and new priorities, l~xamples of this include General Fund budget reductions in the areas of maintenance and operations; new regulatory requirements; more detailed engineering information: customer service priorities (e.g. air conditioning) and other critical factors. CMR: 190:03 Page 4 of 5 Prepared by: Emily Harrison, Assistant City Manager City Manager Approval:Frank ~ager CMR: 190:03 Page 5 of 5