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 2024/25 Capital Improvement Plan Budget and Approve the Capital Improvement Plan for Fiscal Years 2024/25 to 2028/29
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RECOMMENDATION
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Adopt Joint Resolution No. 24-4745 et al. 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, Murrieta Fire District, and the Successor Agency for the Murrieta Redevelopment Agency, Approving the Capital Improvement Plan Budget for Fiscal Years 2024/25, Approving the Fiscal Years 2024/25 to 2028/29 Capital Improvement Plan, Authorizing the Operating Transfers for Various Funds; Authorizing the Use of Unassigned Fund Balances and Committed Fund Balances.
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PRIOR ACTION/VOTE
On May 7, 2024, 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 2024/25 through Fiscal Year 2028/29 (Non-Action Item).
On May 8, 2024, the Planning Commission adopted a Resolution finding the project additions to the Capital Improvement Plan in conformance with the General Plan (Vote: 5-0).
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.
As the Government Finance Officer Association (GFOA) recommends, City staff prepares a rolling five-year Capital Improvement Plan (CIP). The five-year Plan 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 8, 2024, the City’s Planning Commission found that the new projects referenced in this report conform with the City’s General Plan 2035.
On an annual basis, per California Government Code section 65403, the City Council adopts the CIP to appropriate funding for new projects and amend existing project budgets as needed. The CIP prioritizes projects over the next five 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. Mostly, 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 $23,404,302 for new projects, additions to existing projects, and defunding appropriations for closed projects. The detailed appropriation by funds and projects can be found on pages 21 and 38, respectively. Previously appropriated projects totaling $86,930,820 will be carried over for a total estimated Capital Improvement Plan budget of $110,335,122 through FY 2024/25. The detailed description of the projects is within the CIP budget book in “Exhibit A” and attached to Resolution No. 24-4745.
Fiscal Year 2024/25 Proposed Appropriations
A. FY 2023/24 Carryover Amount Items
Staff proposes to carry over unspent prior year appropriations and budgets for purchase orders of $86,930,820. These are existing and ongoing projects previously approved in previous fiscal years.
B. New Projects for Appropriation in FY 2024/25
Staff is proposing adding new projects to the first year of the CIP budget (FY 2024/25). The appropriation required for new and future projects is $6,690,068. New projects include various City facility improvements, park improvements, storm drains, and street improvements. The new projects include a $6,225,000 appropriation from Development Impact Fee (DIF) funds to be aligned with the DIF study and five-year report for projects such as the Police Department Building Expansion, Line D Box Culvert Extension at Murrieta Hot Springs Road, Line G between Nutmeg/Adams and Murrieta Creek, Alderwood Park Splash Pad, and a traffic signal system at the intersection of Jefferson and Magnolia Streets. The remaining appropriation of $465,068 is associated with the following projects to be completed in the near future:
• Police Department locker room remodel; and
• Citywide Pickleball Court projects.
C. 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 $16,837,851 in FY 2024/25 in additional funding as completion of right-of-way acquisition, design, and adjustments to the various construction phases of existing CIP projects rely on these appropriations. This section also includes the various citywide maintenance-related projects. The projects with changes identified include the Murrieta Innovation Center Improvements Project, Murrieta Library Expansion Project, Madison Avenue Project, Keller Road at I-215 Interchange, City Hall and Fire Station 1 Generator Project, Fire Station 1 and 6 Projects, and the Palomar, NorthStar and Monte Vista Tot Lot projects.
D. Closed Projects for FY 2023/24
The combined total of the closed projects' remaining budget of $123,617 at the end of FY 2023/24 is proposed to be defunded. The projects were deemed closed because they were completed or no longer feasible. The list of closed projects includes the Pierce Type 1 Fire Truck #2, Library Bin Sorter Replacement, Max Gillis Blvd Roadway Improvement, Police Building - Records Section/Gang Task Force Improvements, the Library Roof and HVAC projects, and the Town Square Park Amphitheater Project.
Substantially Completed Projects for FY 2023/24
In FY 2023/24, the Vietnam War portion of the Veteran’s Memorial at Town Square Park, Automated Book Bin Sorter, Pedestrian Safety Enhancements 20/21 and 21/22, Max Gillis Boulevard Improvement, Library Roof and HVAC Controls Projects, Police Department Administrative Office Improvements, and the City Hall Annex Projects were deemed substantially complete, with approximately $2,242,786 in total project costs. Except for the CIP 21040 City Hall Annex project, all other projects include the total project costs since inception. The final cost for the CIP 21040 City Hall Annex project will be reported in the following capital improvement budget update. These CIP projects are ready to be in service or ready to be used while awaiting full project closeout. Once they are completed, they will be closed, and total project costs will be reported. A detailed description of the projects is included in the CIP budget book in “Exhibit A.”
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. An adequately funded street program reduces potholes, supports the improvement of existing roads, and contributes to constructing new roads. Gas Tax is one of the primary revenue sources the City uses to maintain its roads. Gas tax is received through an allocation from the State of California from taxes imposed on gasoline, diesel fuel, and registration of motor vehicles. These revenues have remained flat in recent years due in part to fuel-efficient vehicles and the increase in the use of alternative fuels. The cost to maintain the roads, however, continues to increase.
As of June 2023, revenue was projected at $2,746,528; actuals were approximately 2.52% higher, at $2,815,689. As of January 2024, the City expects to receive $3,003,379 for FY 2023/24, approximately 6.67% higher than FY 2022/23 actuals. Initial estimates for FY 2024/25 are expected to increase by approximately 8.41%, for a total of $3,052,476. Finance staff will monitor actual receipts and amend the budget 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 2023, the City received $3,419,266, which is approximately 29.76% higher than the budgeted amount of $2,635,000. The latest revenue projection for FY 2023/24 is $3,588,000, approximately 4.93% more than the prior fiscal year actuals. Initial estimates for FY 2024/25 are projected to increase by approximately 5.61% higher than FY 2022/23 actuals, for a total of $3,611,000. Finance staff will monitor actual receipts and amend the budget 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 2022/23, actual revenues received were $2,481,328. FY 2023/24 SB1 RMRA revenue is expected to be approximately 6.81% higher at $2,650,389. Estimates for FY 2024/25 are projected to increase by approximately 14.18% to FY 2022/23 for a total of $2,833,125. Finance staff will monitor actual receipts and amend the budget 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 person who develops land to mitigate the impacts of that development by paying a Development Impact Fee (DIF). The fees collected are used for new public facilities, vehicles, equipment, and infrastructure development projects. DIF fees are a significant revenue source for the development of City projects because they are contingent on development within the City. DIF revenues comprise 41% of the overall CIP funding sources, as shown in Section II of the CIP Funding Sources and Uses chart and table.
Current economic indicators show an increase in federal interest rates, yet current operational indicators suggest a favorable commercial and residential development trend within City limits in the upcoming years. Staff anticipates that development-related revenues will continue to fluctuate each year.
A new nexus impact fee study was conducted in FY 2023/24. The current fiscal year activity suggests that due to the increase in development within the City, year-to-date receipts through December 2023 are collectively at $2.4 million, outperforming budgeted revenues by approximately 18%. The initial projected revenues for the various Development Impact Fees are approximately $6,007,769 for FY 2024/25. Finance and Public Works staff will continue to monitor actual receipts and amend the budget and revenue projections as necessary.
Operating Transfers
As part of regular budget monitoring and project management, City staff identified projects requiring transfers from other eligible funding sources as part of the project closeout phase. The combined total transfer between various funds is $2,644, as detailed in the table below.
Summary
In summary, the action before the City Council is to Adopt Joint Resolution No. 24-4745 et al. to:
1) Approve the FY 2024/25 Capital Improvement Plan Budget;
2) Approve the five-year (5) FY 2024/25 through FY 2028/29 Capital Improvement Plan;
3) Authorize operating transfers for various funds; and
4) Authorize the use of unassigned fund balances and committed fund balances.
FISCAL IMPACT
The proposed Capital Improvement Plan Budget for FY 2024/25 includes a carryover budget of $86,930,820 and $23,404,302 in new appropriations and changes to previous appropriations from various funding sources for new and existing projects, with a total budget of $110,335,122.
ENVIRONMENTAL IMPACT
This report is not a “project” as defined in CEQA Guidelines (Title 14, Division 6, Chapter 3 of the
California Code of Regulations), Section 15378(b)(4), because it involves Citywide budget allocations, which, on its own accord, will not cause a significant environmental impact. The individual projects will be evaluated per the CEQA Guidelines before implementation.
ATTACHMENTS
1. Joint Resolution No. 24-4745 et al.