TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Director of Finance
PREPARED BY: RN Mendoza, Financial Analyst
SUBJECT Consideration of the Fiscal Year 2023/24 Capital Improvement Plan
budget and approving the Capital Improvement Plan for Fiscal Years
2023/24 to 2027/28
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RECOMMENDATION
recommendation
Conduct a public hearing; and
Adopt Joint Resolution No. 23-4699 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
Year 2023/24; Approving the Fiscal Years 2023/24 to 2027/28 Capital Improvement Plan;
Authorizing the Operating Transfers for Various Funds; and Authorizing the Use of
Unassigned Fund Balances, Committed Fund Balances and the Use of Various Operating
and Sustainability Reserves.
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PRIOR ACTION/VOTE
On May 2, 2023, the City Council received a presentation and report from City staff on the Proposed Capital Improvement Plan and Budget for FY 2023/24 through FY 2027/28 (Non-Action Item).
On May 10, 2023, the Planning Commission discussed proposed additions to the Capital Improvement Plan in conformance with the General Plan (Non-Action Item).
On June 14, 2023, the Planning Commission adopted Resolution No. 23-XXX, finding the project additions to the Capital Improvement Plan in conformance with the General Plan (Vote: 5-0)1.
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
One of the primary responsibilities of local government is the creation and preservation of 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 recommended by the Government Finance Officer Association (GFOA), 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 June 14, 2023, the City’s Planning Commission found 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 amends 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. For the most part, 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 $10,459,809 for new projects, additions to existing projects, and defunding appropriations for closed projects. Previously appropriated projects totaling approximately $81,368,483 will be carried over for a total estimated Capital Improvement Plan of $91,828,292 in FY 2023/24. The detailed description of the projects is within the CIP budget book in “Exhibit A” and the schedule in “Exhibit B” attached to Resolution No. 23-4699.
Fiscal Year 2023/24 Proposed Appropriations
A. FY 2022/23 Carryover Amount Items
City staff is proposing to carry over unspent prior year appropriations and budgets for purchase orders of $68,780,456. These are existing and ongoing projects previously approved in prior fiscal years.
B. Post FY 2022/23 Adoption Items
During Fiscal Year 2022/23, City staff brought forward several significant projects for the City Council’s consideration and approval. Included among those new projects are various city facility improvements, park improvements, design and engineering services, and pedestrian safety enhancements that were brought forward early to avoid delays due to contractual obligations, grant covenants, to mitigate supply chain issues, and to avoid potential disruptions to acceptable service levels citywide. The project appropriations for these items total $12,588,027.
C. New Projects for Appropriation in FY 2023/24
City staff is proposing for the first year of the CIP budget, a new project appropriation of $3,587,731. New projects include various city facility improvements, equipment, park improvements, and pedestrian safety enhancements.
D. Changes to Existing Projects
As part of regular budget monitoring and project management, the CIP budget requires specific major and minor construction projects, along with the changes to existing annual maintenance projects be amended. Staff proposes the appropriation in FY 2023/24 of $7,898,859 in additional funding for the completion of right-of-way acquisition, design, and adjustments to the various construction phases of existing CIP projects.
E. Closed Projects for FY 2022/23
For FY 2022/23, City staff proposes to defund $1,026,781 in appropriations. These CIP projects are deemed closed as the funding or project was either closed, unfunded, deferred, transferred, put on hold, or finalized.
Substantially Completed Projects for FY 2022/23
In FY 2022/23, six CIP projects were deemed substantially complete, with approximately $6,011,677 in total preliminary project costs. These CIP projects are ready to be in service or ready to be in use while awaiting full project closeout. Once these projects are completed, they will be closed, and total project costs will be reported.
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 towards the cost of constructing new roads. One of the major revenue sources the City uses to maintain its roads is Gas Tax. The Gas Tax is received through an allocation from the State of California from taxes imposed on gasoline, diesel fuel, and the 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.
The initial projections for FY 2021/22 revenue were $2,955,663; actuals were approximately 8% lower, at $2,716,320. As of May 2023, the City expects to receive $2,866,150 for FY 2022/23, approximately 5% higher than FY 2021/22 actuals. Estimates for FY 2023/24 are projected to increase by 5% for a total of $3,010,606. The Finance staff will monitor actual receipts and propose amendments to the budget as necessary.
§ Measure A
In 2002, Riverside County voters extended Measure A. Measure A will now continue to fund transportation improvements through 2039. Funds are generated from a 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 2022, the City has received $3,502,321, which is approximately 34% higher than the budgeted amount of $2,609,000. The latest revenue projection for FY 2022/23 is $3,588,000, approximately 3% higher than the prior fiscal year actuals. Initial estimates for FY 2023/24 are projected to increase by 1% for a total of $3,615,000. The Finance staff will monitor actual receipts and propose amendments to 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, revenues were estimated at $2,107,697. Actuals are expected to come in 17% higher at $2,458,518. Estimates for FY 2023/24 are projected to increase by 9% for a total of $2,694,139. The 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 all new development to mitigate the impacts of that development by paying Development Impact Fees (DIF). The fees collected are used for new public facilities, vehicles, equipment, and infrastructure development projects. DIF fees are a major revenue source for the construction of City projects because they are contingent on development within the City. FY 2022/23 DIF revenues made up approximately 25% of the overall CIP funding sources.
Although economic indicators show an increase in the federal interest rates, current and projected plan check activity continues to trend upward for both commercial and residential development in the City. Due to the long-term uncertainty of development, DIF fees are budgeted conservatively, and staff monitors carefully.
In FY 2022/23, due to the increase in development within the City, year-to-date receipts outperformed budgeted revenues by approximately 60%. Amended budgeted revenues are at $8.29 million, and preliminary year-to-date actual receipts are approximately $13.26 million. This results in approximately 36% higher than FY 2021/22 actuals. The initial projected revenues for the various DIF funds are approximately $3.8 million for FY 2023/24. Finance and Public Works staff will continue to monitor actual receipts and amend the budget and revenue projections as necessary.
§ Grant Funds
The City of Murrieta has been successful at applying for and receiving grants in the past fiscal year 2022/23, and the City anticipates receiving more in the upcoming year. In FY 2023/24, the City is anticipating a total grant carryforward balance of $19,282,894. The grant sources vary from the Federal government, the State of California, the County of Riverside, and other districts and governmental agencies. City staff continues to apply for subvention funds to offset the cost of capital improvements citywide.
Operating Transfers
During the last operating biennial budget process for FY 2023/24 and 2024/25, Council approved using various sustainability reserves. The CIP budget and plan identified projects requiring Council approval to use the sustainability reserves. If the City Council adopts the recommended actions, the various sustainability reserves will fund the projects as shown in the schedule of reserve and operating transfers “Exhibit C.” $2,307,379 will then be reallocated from the Measure T Fund sustainability reserves to the capital projects budget.
Additionally, as part of regular CIP budget monitoring and project management, City staff identified a project requiring transfers from different funding sources. The total transfer between the various funds is $188,567. The detailed description of the project is also in the CIP budget book in “Exhibit A” and the operating transfers schedule is detailed in “Exhibit C” of Resolution No. 23-4699.
Summary
In summary, the total action before City Council is to:
§ Adopt Resolution No. 23-4699 to:
i. Approve the FY 2023/24 Capital Improvement Plan Budget;
ii. Approve the five-year (5) FY 2023/24 through FY 2027/28 Capital Improvement Plan;
iii. Authorize operating transfers for various funds; and
iv. Approve the use of Measure T facility repair reserve, Measure T Fire facility reserve, Measure T CSD facility repair reserve, and Measure T fleet replacement reserve.
FISCAL IMPACT
The proposed Capital Improvement Plan budget for FY 2023/24 includes a new appropriation of $10,459,809 from various funding sources for new and existing projects.
ATTACHMENTS
1) Resolution No. 23-4699 et al.