TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: RN Mendoza, Financial Analyst
SUBJECT:
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Consideration of the Fiscal Year 2025/26 Capital Improvement Plan Budget and Approve the Capital Improvement Plan for Fiscal Years 2025/26 to 2029/30
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RECOMMENDATION
recommendation
Conduct a public hearing; and
Adopt Joint Resolution No. 25-4836, MLB 25-200, CSD 25-284, RSA 25-34, entitled: A Joint Resolution of the City Council of the City of Murrieta and the Boards of Directors of the Murrieta Library District, Murrieta Community Services District, and the Successor Agency to the Murrieta Redevelopment Agency, Approving the Capital Improvement Plan Budget for Fiscal Year 2025/26, Approving the Fiscal Years 2025/26 to 2029/30 Capital Improvement Plan, Authorizing the Operating Transfers for Various Funds; Authorizing the Use of Unassigned Fund Balances, Sustainability Reserves and Committed Fund Balances.
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PRIOR ACTION/VOTE
On May 6, 2025, the City Council held a workshop to receive a presentation and report from City staff on the Proposed Capital Improvement Plan and Budget for Fiscal Year 2025/26 through Fiscal Year 2029/30 (Non-Action Item).
On May 14, 2025, the Planning Commission adopted a Resolution finding the project additions to the Capital Improvement Plan in conformance with the General Plan (Vote: 4-0).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
One of local government's primary responsibilities is creating and preserving a community’s physical infrastructure. The City of Murrieta’s (City) infrastructure and capital improvement plan includes roads, bridges, stormwater systems, public buildings, parks, open space, communication, and information management systems. Given that these types of infrastructure projects require a significant commitment of public resources, long-range planning for capital improvements is a matter of prudent financial management.
The Government Finance Officer Association (GFOA) recommends staff prepare a rolling five-year Capital Improvement Plan (CIP)which outlines expenditures for future capital projects and identifies the corresponding revenue sources. California Government Code Section 65401 states that if a General Plan or a part thereof has been adopted, a list of the proposed projects is to be sent to the City Planning agency for review and to report their conformity with the adopted General Plan. On May 14, 2025, the City’s Planning Commission found that the new projects referenced in this report conform to the City’s General Plan 2035.
On an annual basis, per California Government Code Section 65403, the City Council adopts the CIP Budget to appropriate funding for new projects and amends existing project budgets as needed. The CIP prioritizes projects over the next five (5) fiscal years (FY) based on community needs but only appropriates funding for the first year of the CIP. The funding for capital projects comes from a variety of sources. These funds are restricted to specific types of capital project construction and cannot be spent on ongoing operating costs. The proposed CIP budget provides a net appropriation of $11,542,300, for new projects, additions to existing projects, and defunding appropriations for closed projects. Unspent project budgets for previously appropriated projects totaling approximately $101,983,877, will be carried over for a total estimated Capital Improvement Plan of $113,526,177 for FY 2025/26. The detailed description of the projects within the CIP budget book in “Exhibit A” between pages 75 and 262 to Resolution No. 25-4836.
Fiscal Year 2025/26 Proposed Appropriations
FY 2024/25 Carryover Amount Items
Staff proposes to carry over unspent prior year appropriations in the amount of $101,983,877. These are existing and ongoing projects previously approved in prior fiscal years.
New Projects for Appropriation in FY 2025/26
Staff proposes adding new projects to the first year of the CIP budget (FY 2025/26). The appropriation required for new and future projects is $1.4 Million. New projects include an Enterprise Resource Planning (ERP) System (also known as Financial Software), Library Fire Alarm System Replacement, and a Library Public Address System.
Changes to Existing Projects
As part of regular budget monitoring and project management, the CIP budget requires certain major and minor construction projects, along with changes to existing annual maintenance projects, to be amended. Staff proposes a total of $10,206,556, in additional funding for FY 2025/26 for completion of right-of-way acquisition, design, and adjustments to the various construction phases of existing CIP projects. This section also includes 13 construction projects and 12 various citywide annual maintenance-related projects.
Closed Projects for FY 2024/25
The total closed projects of $131,056 at the end of FY 2024/25 are proposed to be defunded. The projects were deemed closed as the funding or project was either closed out, unfunded, deferred, transferred, put on hold, or finalized.
Substantially Completed Projects for FY 2024/25
In FY 2024/25, 16 CIP projects, with approximately $7,936,767 in total project costs, were deemed substantially complete. These CIP projects are ready in-service or are ready to be placed into use, while awaiting full project closeout. Once these projects are completed, they will be closed, and full project costs will be reported to the City Council. The detailed description of the substantially completed projects is within the CIP budget book in “Exhibit A” between pages 23 and 25.
Major CIP Budget Funding Source Updates
Gas Tax / Highway User Tax Account (HUTA)
Well-maintained streets are essential for residents and visitors to conduct business and for general transportation purposes. An adequately funded street program reduces potholes, supports the improvement of existing roads, and contributes to the construction of new roads. One of the special revenue sources the City uses to maintain its roads is gas tax. Gas tax is received through an allocation from the State of California from taxes collected on gasoline, diesel fuel sales, and registration of motor vehicles. These revenues have remained flat in recent years due in part to fuel-efficient vehicles and the increase in use of alternative fuels. The cost to maintain the roads, however, continues to increase.
As of June 2024, revenue received was $3,027,444, which is 0.1% higher than what was budgeted at $3,003,380. As of January 2025, the City expects to receive $3,128,645 for FY 2024/25, approximately 3.34% higher than FY 2023/24 actuals. Initial estimates for FY 2025/26 are expected to stay the same, for a total of $3,128,290. Finance staff will monitor actual receipts and recommend amending the project budgets as necessary.
Measure A
In 2002, Riverside County voters extended Measure A, which will continue to fund transportation improvements through 2039. The funds are generated from the half-cent sales tax levied throughout Riverside County to carry out transportation projects. The funds are restricted to funding a comprehensive program of roadway and transit improvements.
As of June 2024, the City received $3,588,810, which is approximately 0.9% higher than the budgeted amount of $3,553,700. The latest revenue projection for FY 2024/25 is $3,611,000, approximately 0.6% higher than the prior fiscal year's actuals. Initial estimates for FY 2025/26 are projected to increase by approximately 2.62% above FY 2023/24 actuals, for a total of $3,683,000. Staff will monitor actual receipts and recommend amending the project budgets as necessary.
SB1 Road Maintenance and Rehabilitation (RMRA)
The Road Repair and Accountability Act of 2017 (SB1 Beall) provides a significant increase in revenue to the City. The revenue is restricted to road maintenance and rehabilitation, safety projects, and complete street components. In FY 2023/24, actual revenues received were $2,856,782. FY 2024/25 actuals are expected to come in approximately 2.15% lower at $2,795,244. Estimates for FY 2025/26 are projected to increase by approximately 1.35% higher than FY 2024/25, for a total of $2,833,125. Staff will monitor actual receipts and recommend amending the project budgets as necessary.
Development Impact Fee Revenue
As the City’s population grows, an increased demand is placed upon its infrastructure and public facilities. In response to the additional demands, the City requires every new development that develops land to mitigate the impacts of that development by paying a Development Impact Fee (DIF). The collected fees are used for new public facilities, vehicles, equipment, and infrastructure projects. DIF fees are a major revenue source for the construction of City projects. The DIF fees are contingent on development within the City. DIF revenues make up 36.7% of the overall CIP funding sources, as shown in Section II, page 18, of the CIP Funding Sources and Uses chart and table.
In September 2024, the Governor of California signed SB 937 (Wiener) into law which coincided with the regulation of fees for development projects. The act prohibits a local agency that imposes fees or charges on residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received. The act authorizes a local agency to require the payment sooner than the date of the final inspection or certificate of occupancy, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made. Prior to the passage of SB 937, the City collected DIF fees prior to building permit issuance for all development. SB 937 defers payment of DIF fees on most residential projects until the end of the project. The result of deferred DIF fees will be fewer fees collected for the next 12 to 18 months. Staff will continue to monitor actual receipts and recommend amending the budgets and revenue projections as necessary.
Summary of Operating Transfers and Authorized Use of Reserve and Fund Balance
The table below summarizes the proposed FY 2025/26 net appropriation of $11,542,300, which will be funded using the unassigned fund balance and the sustainability reserve. Previously, the City allocated $3.5 million from the Measure T Fund to establish a sustainability reserve (CSD Facilities Reserve) as part of the operating budget. This $3.5 million will be transferred to the Library Development Impact Fee Fund as a loan to fully finance the Children’s Library Expansion Project (CIP No. 21027).
The committed fund balance totals $101,983,877, representing the unspent budget for projects that were previously appropriated.
FISCAL IMPACT
The proposed Capital Improvement Plan Budget for FY 2025/26 includes a carryover budget of $101,983,877, and $11,542,300, in new appropriations and changes to previous appropriations from various funding sources for new and existing projects, with a total budget of $113,526,177.
ENVIRONMENTAL IMPACT
The Capital Improvement Budget is not a "project" as defined in CEQA Guidelines Section 15378 because it involves a funding mechanism and will not cause a significant environmental impact. As such, this activity is not subject to CEQA pursuant to Section 15060(c)(3). This determination is predicated on Section 15004 of the guidelines, which provides direction to lead agencies on the appropriate timing for environmental review. The projects for which this budget is intended may require the preparation of an environmental document in accordance with State CEQA Guidelines.
ATTACHMENTS
1. Joint Resolution No. 25-4836, MLB 25-200, CSD 25-284, RSA 25-34
2. Exhibit A to Joint Resolution No. 25-4836 - Proposed Capital Improvement Plan and Budget FY 2025/26-FY 2029/30