08.01 Proposed Budget FY 2019-20 - 1 Staff Report _
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March 26, 2019
TO: Honorable Mayor and Members of the City Council
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William M. Kolbow, Administrative Ser.vices,Director ti;
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REVIEW.. :: : City Manag Finanee _
1. SUBJECT
First Study Session for the:Proposed Fiscal Year 2019-20 Budget
2. SU ARY:.
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This is the first study session in support of the preparation.o the.FY 2019-20 Bu get:
This study session is int:endecl.fo provide:,a:status of the c.urrent.year budget,: an: initial
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analysis of the projected General Fund revenues and expenditures:for FY_2019=20, the
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ro osed Annual _D.e artmental Work::Plans for FY 20�:9-20, and the: dr:aft: of the Five=
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Year Capital.lrnprovement Plan for the period.of FY 2019-20 thro.ugh FY 2023-24.
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3. : RECOMMENDED ACTION -
Receive and file ttie report and provide direation to staff: -
4. : FISCAL IMPACT .
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Fiscal:impact.will be determined.with:final budget,adoption. . ._
5. STRATEGIC. PLAN GOALS .
.. Goal 2: Be a fiscally healthy commun.ity;
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a: Expend fiscal resources:responsibly.
b: Analyze future fiscal needs and potential revenue opportunities.
c: Provide appropr:iate reserves.
Goal 4:: Provide outstanding pub.lic service: : .. ::: :
b:.Provide faeilities:and services fo meet customer expectations.
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6. DISCUSSION:AND BACKGROUND
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his is the first stud :.session in su ort of the re aration o t e ity s 2019-20 ..
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Q) Budget. This study:session is intended to focus on:the: o owing items:: :
• Providing a status:of the current year budget; -
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ITEM .
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• Providing an initial analysis of the projected revenues and expenditures for FY 20;
• Presenting the proposed Annual Departmental Work Plans for FY 20, and;
Presenting the draft Five-Year Capital Improvement Plan for the period of FY 19-20
through FY 23-24.
� Introduction
The outlook of the Orange economy continues to be very strong. In the past several
months, we have seen growth at the Old Towne Plaza, including the grand opening of the
Old Towne West Metrolink Parking Structure, various restaurant openings such as Taco
Stand, Snooze, and the historic rehabilitation of the original Armor Building — now home
to Urth Cafe. We also witnessed the opening of the 150,000 square foot KECK Center for
Science and Engineering,building at Chapman University, and the completion of the
Eleven-10 West apartment complex. Looking forward, development in the City continues
to thrive with the construction of both the Village Park Orchards and the Marriott Hotel at
West Orange, and the development of two mixed-used apartment complexes on West
Town and Country Road — the 727-unit Fairfield project and the 262-unit Toll Brothers
project.
Although the economic outlook of the City is positive, the CaIPERS issue continues to be
the biggest financial obstacle facing every full-service city in the State. The City continues
to encounter significant fiscal challenges due to the rising costs of the City's share of
CaIPERS. In FY 20, PERS costs will increase by $2.7 million to $23.3 million, which
equates to a 2.0% increase in the General Fund budget. PERS costs continue to escalate
dramatically in FY 21 with an additional estimated increase of $2.2 million, with
� anticipated escalation of expenditures in the years thereafter. As in recent years; our
General Fund revenue estimates struggle to keep pace to sustain these increases. To
mitigate this, we must continue to implement several cost-saving strategies, including a
budget reduction policy, and updates to the master fee schedule. Both will be discussed
below.
Similar to all cities in this State, the fiscal health of Orange improves as the economy
improves. Conversely, if the economy does not improve, then an undesirable outlook
takes hold. This and past City Councils continue to be extremely proactive in responding
to the economic challenges that the City has faced in the past and will likely continue to
face in the future. Throughout the years, the City Council has taken decisive actions to
manage our operating costs, while preserving service levels to Orange citizens. With the
adoption of the FY 19 Budget, the City achieved a balanced budget for the seventh year
in a row. However, this was only accomplished through our prudent spending practices.
Due to the continued slow economic growth, the City must continue to find ways to tighten
its belt to avoid stark budget cuts in the future.
At this point in the budget process, staff is projecting a slight surplus to the preliminary
General Fund budget for FY 20. However, the budget will continue to be refined in the
next several months to address a conservative spending plan that is responsive to the
priorities set by the City Council.
ITEM 2 03/26/2019
Status of Current Year Budget (FY 19)
Review of General Fund Revenues for FY 19
As the economy continues its slow and steady growth, many of our sources of revenue
reflect positive gains. Total General Fund revenues for FY 19 are projected to be $116.5
million, a 5% increase from FY 18. Our largest General Fund revenue resource, Sales
Tax, is expected to be $44.1 million, $195,000 above the budget of $43.9 million. We
continue to receive catch-up payments from the previous quarters, which have,been
delayed by the State Board of Equalization's transition to a new software and reporting
system. Higher fuel prices and consumption are anticipated to bring in more receipts,
despite fuel prices having leveled off recently. Strong performance in building and
construction, general consumer goods, and allocations from the county pool of tax
receipts for online shopping will continue to contribute to more revenue. However, we
, anticipate much of these gains will be offset by the slight decline in new car sales, now
being realized after years of significant growth: Property Taxes are projected to end the
fiscal year at $42.1 million, a $321,000 increase over budget, due to more property tax
increment distributed from the County of Orange for the Successor Agency. Based on
current trends, other resources such as Fines and Forfeitures and Revenue from Other
Agencies are expected to be above budget as well. Miscellaneous Revenues are
estimated to be $2.6 million, $2.1 million higher than the budget. The majority of this
increase is contributed by reimbursements from the Office of Emergency Services for
costs incurred by the City through its participation in fighting statewide wildfires.
As part of the adoption of the FY 19 budget, Council approved the updated Master Fee
Schedule; however, the revenue impact of the revised fees was not included in the
budget's revenue projections. The fee changes took effect on July 1, 2018. Staff is
projecting the total increase from fee adjustments is $958,000, which approximates the
estimated $1.0 million revenue increase projecfed last June.
Licenses and permits are anticipated to be $5.1 million, $371•,000 higher than
budget. This increase is mostly due to the revised fees for annual fire permits,
underground tank permits, and building related permits. Charges for services are
estimated to be $587,000 above budget based on the updated fee schedule for new
business license applications, fire construction plan review and inspection fees,
hazardous material disclosures, vehicle tow releases, encroachment fees, and building
plan check fees.
Review of General Fund Expenditures and Ending Fund Balance for FY 19
General Fund expenditures are tracking less than budgeted amounts. As such, the fiscal
year is projected to end with expenditure savings of $2.2 million. While we have
maintained approximately 40 frozen full-time positions during FY 19, we have generally
been filling funded positions when they become vacant. However, with recent and
upcoming retirements, departments continue to evaluate the operations of various
divisions to determine the most effective structure moving forward. This includes the
continuation of scrutinizing every vacancy, filling positions that are necessary, and
identifying reclassifications and movement of resources that will increase service levels
and promote succession planning efforts. Further, last year we implemented a "hiring
ITEM 3 03/26/2019
chill" in which we have slowed down the hiring process for certain positions while we
conduct a thorough evaluation of options. Overall, departments have done an excellent
job of maintaining targets on expenditures, and being creative in meeting the City's
service delivery goals.
With our adjusted budgeted expenditures of $112.4 million and revenues of $116.5
million, we are currently projecting a surplus of about $4.1 million. This is due to diligent
cost management by departments, implementation of the budget reduction policy,
reimbursement from Fire strike team efforts, and salary savings from unfilled positions.
To date, the estimated ending fund balance for the General Fund is approximately $7.7
million.
Initial Review of the Proposed Budget for FY 20
Estimated General Fund Revenues for FY 20
The economy continues to show slow signs of strength: the unemployment rate has
remained low, and wages are expected to grow gradually. Many economists maintain a
positive view of the economy but project a slowdown in the economic growth. According
to Chapman University, Orange County will experience economic improvement at a
slower pace in 2019 and 2020. Job growth is expected to continue mainly in the
construction sector. �Increases in nonresidential construction will offset the decline in
residential building investments. Our initial analysis suggests F.Y 20 General Fund
revenues will be $116.9 million, an increase of $435,000 or 0.4% over the FY 19
estimate.
The following are the most significant highlights of the General Fund revenue for FY 20:
• Sales tax revenue is projected to be $45.0 million, $925,000 (2.1%) above the FY
19 estimate. We anticipate receiving more receipts from additional business
coming into the City, and fuel consumption sales. We expect the improved
performance in building and construction activity, restaurants, and the business-
to-business sector will continue, though at a reduced growth level. We also expect
the recent openings of the Metrolink Parking Structure and new restaurants in the
Old Towne Plaza Area will enhance the dining and shopping experience in that
area. We will continue to closely monitor retail sales in Orange, as well as the local
economy, and anticipate to have more refined sales tax revenue estimates for the
April 23rd Study Session.
• Property tax revenue is estimated to be $43.8 million, an increase of $1.7 million
(4.1%). Property tax receipts are expected to grow as homes will be assessed with
annual increases in their property taxes. The Proposition 13 increase in assessed
values remains at 2%, the maximum allowed by law.
• Transient Occupancy Tax is anticipated at $5.8 million, an increase of $720,000
(14.1%). The new dual Marriott hotel featuring a Courtyard Hotel and Residence
Inn as a redevelopment of the Motel 6 site east of The Outlets/Uptown area is
expected to open by early 2020 and contribute to higher hotel occupancy
revenue.
ITEM 4 03/26/2019
As part of the annual budget process, staff is working on revising the Master Fee
Schedule based on the model prepared by the consultant who conducted last year's fee
study. Time estimates and costs for delivering each service will be updated and analyzed
through the model. Proposed adjustments to the fee schedule and a more detailed
analysis of projected revenue will be provided at the next Study Session.
Estimated General Fund Expenditures for FY 20
Our initial estimate for FY20 General Fund expenditures is $116.5 million. This reflects a
4.2% increase in expenditures over the original adopted FY 19 budget. As is.the course
in previous years, we will continue to refine our estimates throughout the budget process.
In FY 19, an analysis determined that departments had not been using their entire
budgeted allocation by the end of each fiscal year. This was primarily the result of vacant
positions and more efficient use of operation monies. As such, the City Council adopted
a budget reduction policy to "close the gap" on, what was then, an anticipated budget
deficit. The outcome of this policy direction yielded a General Fund expenditure reduction
of about $2.5 million, through decreases on all department budget salaries and benefits
(S&B) by 2.5%, and on maintenance and operations (M&O) by 5%.
As we began the FY 20 budget process last fall, it became clear that we must continue
this budget reduction policy in order to close an expected gap between anticipated
revenues and projected expenditures. As such, City departments were given their
respective target reduction amounts, while maintaining the liberty to decrease their S&B
and M&O budgets according to their best interests. The following table depicts the
departments' target reductions and total reductions:
General Fund Operating Budget Reductions by Department
Department Target S&B M&O Total
� Reduction ' .�' Reduction Reduction Reduction
Non De artmental � 30,000 �'�� ��� - 30,000 � 30,000
Cit Council 1,500 .�:.°,' - 1,500 1,500
Cit Mana er � 28,924 "��,:',� 60,424 � - 60,424
Cit Attorne o 24,726 � °':>� - - -
Cit Clerk 4,500 - 5,000 5,000
Finance/Treasurer 70,700 ,` } 70,700 - 70,700
Human Resources 35,065 F 35,065 - 35,065
Libra ' 109,340 "� 75,854 33,486 109,340
Fireo 598,027 �: - 112,050 112,050
� Police 894,111 °:. 793,829 100,282 894,111
Public Works 271,781 ; 261,781 10,000 271,781
Communit Develo ment 90,779 �ti_�..� 90,779 - 90,779
Communit Services 296,314 ;_� 109,892 186,422 296,314
TOTALS $2,455,767 $1,498,324 $478,740 $1,977,064
�O Salaries and Benefits Reduction will be accomplished by transferring the fixed cost distribution of the
Assistant City Attorney II to the Workers Compensation fund (730) and Liability Fund (740), generating
General Fund savings of about$86,000.
OO The continued fixed cost distribution of three (3) Fire Fighters to the Paramedics Fund (125)
accomplishes the Fire Department's salary and benefits reduction of about$486,000.
ITEM s 03/26/2019
The outcome of this policy direction will produce an expenditure reduction of about $2.0
million. However, by transferring General Fund S&B fixed cost distribution of key positions
in the City Attorney and Fire departments to other funds, General Fund expenditures are
reduced by an additional $572,000, resulting in a total expenditure reduction of $2.6
million.
Expenditures have also been modified by projecting an additional salary savings of
$300,000 resulting from staff charging administrative and design costs to capital
improvement projects. As a result, approximately $1.1 million in salary costs will now be
charged to capital projects in FY 20.
Although departments reduced their budget appropriations, these reductions were
savings that they have already realized at the end of the past several fiscal years from
position vacancies, and pilot programs to realize greater business efficiencies. Applying
this to the FY 20 budget, these savings will be counted in advance, which will result in a
reduced revenues over expenditures amount at the close of FY 20.
The following are the most significant issues impacting the General Fund expenditures
for FY 20:
1. Status of PERS Retirement Costs: Managing our retirement costs continues to
be a high priority. Classic miscellaneous employees (those who were CaIPERS
members on or before December 31, 2012) pay their full 8% contribution, while
classic safety employees pay their required 9%. In FY 20, employees hired under
the new California Public Employees' Pension Reform Act (PEPRA) formulas will
continue to pay 6% and 11% contributions for miscellaneous and safety,
respectively, while receiving a reduced level of retirement benefits. The City's
proportional share for normal costs related to PEPRA are also lower. The City has
128 miscellaneous PEPRA members (36.7% of active miscellaneous PERS
members) and 81 safety PEPRA members (31.0% of active safety PERS
members). The employee rates for PEPRA members represent half of the normal
cost of the benefit. As such, the City's PERS rates will be positively affected over
time as the number of PEPRA employees increase.
PERS Costs Paid by Employee and City— Past and Future
Fiscal Employee City PERS Rates*
Year Status Paid Cit Paid Misc. Safet
2015-16 Actual 4,723,785 16,975,110 24.9% 36.3%
2016-17 Actual 4,828,920 18,795,627 26.7% 39.4%
2017-18 Actual 4,917,008 20,827,100 29.9% 42.7%
2018-19 Pro'ected 5,120,000 23,570,000 34.2% 46.6%
2019-20 Prelim Bud et 5,120,000 26,510,000 38.6% 52.3%
2020-21 Forecast 5,120,000 29,080,000 42.0% 57.6%
2021-22 Forecast 5,120,000 31,450,000 45.4% 62.3%
" - For FY 18 and beyond, the PERS rate is an estimated effective rate, as CaIPERS now separates
out the normal cost (calculated as a percentage of payroll), and the unfunded liability contribution
(expressed as a fixed dollar amount).
ITEM 6 03/26/2019
While the City had been experiencing a steady increase in PERS rates over the
last decade, FY 15 was the first year of dramatic increases, as PERS began to
reassess how cities would pay their unfunded liability. With each new amortized
gain or loss, PERS has planned to ramp up the cost over a five-year period, hold
the rate steady for twenty years, then ramp down the rates over the last five years.
The intent was to soften the impact of large gains and losses since PERS shifted
from valuing their assets by an actuarial value to a market value. The actuarial
value had a softening mechanism built in to its values, whereas market values are
tied to the actual value of their assets, which can fluctuate quite a bit from year to
year. The FY 15 increase in PERS costs was also due to the end of furloughs and
new salary increases for most employee groups.
In FY 17, recognizing the lower than anticipated rates of return on investments, the
PERS Boar.d agreed to lower the discount rate from 7.5% to 7% over three years.
This further resulted in increased costs to member agencies. The discount rate
used for FY 20 calculations is 7.25%. In FY 21, the rate will be lowered to 7%.
In February 2018, the CaIPERS Finance and Administration Committee adopted a
new amortization policy. Beginning with the June 30, 2019 actuarial valuation
(which will set contributions for FY 22), investment gains and losses will be
amortized over a 20-year period rather than the current 30-year period. The policy
will only apply to future gains and losses (existing gains and losses will continue
to be amortized as they are currently). Through January 2019, the fiscal year-to-
date return on the CaIPERS portfolio is 0.2%. The difference between the actual
and projected return (7%) will be subject to the shorter amortization period.
When factoring in the above changes, and not including any impacts from ongoing
labor negotiations, PERS costs are expected to increase $2.9 million ($2.7 million
� in the General Fund) in FY 20, and $11.1 million cumulatively, over the next five
years.
2. Impact on Potential Salary and Benefit Increases: The City continues to
negotiate with key bargaining groups. Depending on the results of the negotiations,
the FY 20 budget will reflect the applicable agreed upon negotiated pay and
benefits increases. A more detailed analysis of potential salary and benefits
increases will be provided at the next Study Session.
3. Contractual Obligations: The departments continue to manage contract
agreements as efficiently and cost effectively as possible. As in previous years,
contractual obligations are experiencing cost increases. In FY 20, an additional
General Fund cost of $383,182 is expected to impact City maintained contract
agreements with Orange County Animal Control, North Net Fire Training, Metro
Cities Fire Authority, landscape maintenance and custodial services for park
facilities, software licensing agreements for Library computers at library facilities,
and additional security to City parks.
4. Departmental Operating Budgets: Every year during the budget preparation
process, the City departments are charged with reviewing their existing operations
ITEM � 03/26/2019
to determine if there are areas of budgetary savings and operational efficiencies.
Departments assess if there are budget increases to address rising costs, respond
to required mandates, enhance existing service levels, or the need to implement a
new program. This is an effort the departments continue to take extremely
seriously and with much internal scrutiny. Nevertheless, other than the contractual
obligations noted above, departments are again holding the line with their budgets
without making any significant changes to their allocated amounts from FY 20,
other than the discussed budget reductions. As mentioned before, this continues
to get more difficult each successive year in that there are programs and services
that need budgetary increases, and the City is not in a position to budget
appropriately. Further, the proposed FY 20 budget does not include the addition of
any new full-time positions (excluding the proposed transition of the Information
Technology program in-house) in spite of the increase service levels provided by
nearly every department. Orange continues its commitment to doing more with
less as calls for service continue to be at their highest levels for the Police and Fire
Departments, planning and building applications continue to come in at high levels,
parks and libraries are being utilized more and more, and Public Works is
managing an increased number of capital and infrastructure projects. The number
of funded Full Time Equivalent (FTE) positions has dropped significantly from 796
FTE's in FY 09 to 715 FTEs in FY 20. We continue to implement a "hiring chill" in
holding certain positions vacant for an extended period as a cost saving measure
as well as to allow for a thorough analysis of the position through the FY 20
budget.
5. Street Sweeping: Staff is in continued negotiations with CR&R for a new
agreement for FY 20, as the contract expires in 2021. The General Fund includes
the $510,000 cost of street sweeping services. CR&R is also requesting an
additional 2% rate escalator adjustment, or$20,604, in FY 20 as permitted by the
existing contract. Staff will continue to brief the Council with periodic updates
during the negotiation process.
6. Information Technology: At your February 12th meeting, the City Council directed
staff to present a transition plan for bringing the Information Technology (IT)
program in-house. The City has contracted for its IT services since 1984. However,
as our IT environment has become more complex and 'the outsourcing
marketplace has become limited, we have concluded that our IT services are best
provided by employees of the City. Staff is still preparing a transition plan, but it is
anticipated that a hybrid model will be proposed that contemplates establishing
approximately seven to eight IT positions that will be augmented by outside
contracts. With this model, we expect a higher level of service at a comparable
cost to the current outsourcing model. The proposed FY 20 budget does not reflect
a change in the IT enterprise cost structure.
7. Special Election: On January 22, the City Council called for a special election in
November 2019 to fill the vacant City Council seat. The estimated cost for the
special election is $470,000.
ITEM s 03/26/2019
8. Internal Service Funds: For FY 20, we project allocating a total of $12.6 million
between the Business Investment, Worker's Compensation, Accrued Liability (for
retirement costs), Equipment Maintenance, Information Technology, and Liability
funds. As in FY 19, most Internal Service Funds (ISF) are budgeted as part of FY
20 operational costs as opposed to being funded by unreserved General Fund
balance generated through prior year savings. Allocations not completely covered
by General Fund operational costs are funded by prior year savings. Of the
remaining ISFs not included as part of operational costs, staff is requesting a
transfer of $200,000 to the Equipment Replacement Fund (720), $900,000 to the
Computer Replacement Fund (790), $500,000 to the IT Maintenance Fund (780),
and $1,700,000 to the Business Investment Fund (115) from General Fund
Unreserved Fund Balance.
This preliminary budget does not reflect any significant increases in the level of service
or new programs other than the proposed IT transition. At this point in the budget process,
anticipated revenues for FY 20 are above projected expenditures by $430,566, creating
a surplus. As we continue to refine the revenue and expenditure amounts, in the next
several months, it is anticipated that the City Council will be able to adopt a balanced FY
20 budget.
Preliminary Estimate of the General Fund Balance for FY 20
The beginning fund balance is projected to be $7.7 million. With revenues slightly above
expenditures, the ending fund balance is projected to be $8.2 million. However, after four
proposed transfers from the unreserved fund balance, including $200,000 to the
Equipment Replacement Fund, $900,000 to the Computer Replacement Fund, $500,000
to the IT Maintenance Fund, and $1,700,000 to the Business Investment Fund, the
projected unreserved fund balance for the General Fund is $4.9 million. The following
table highlights the Estimated Available General Fund Balance for FY 20:
Estimated Available General Fund Balance
Unreserved Fund Balance Available @ 6/30/19 $7,736,927
FY 20 Estimated Revenues $116,908,798
FY 20 Estimated Expenditures (116,478,232)
Revenue over Expenditures 430,566
Unreserved Fund Balance Available @ 6/30/20 8,167,493
Transfers Out
Transfer to Equipment Replacement Fund (200,000)
Transfer to Computer Replacement Fund (900,000)
Transfer to IT Maintenance Fund (500,000)
Transfer to Business Investment Fund (1,700,000)
Total Transfers Out (3,300,000)
Estimate Available Fund Balance @ 6/30/20 4,867,493
General Fund Catastrophic Reserve 20,067,960
Est. Reserved & Unreserved General Fund Balance @ 6/30/20 �24,935,4,�
ITEM 9 03/26/2019
Five-Year Capital Improvement Plan
The City continues to provide its residents and businesses with much needed capital
improvements and infrastructure. This past February, the Old Towne West Metrolink
Parking Structure was completed to better serve both our downtown visitors as well as
patrons of the Orange Transportation Center. Additionally, the completion of the
renovation of Shaffer Park is planned for April. Lastly, we continue to replace our aging
infrastructure through the pavement management program and sewer line replacement
project.
As in recent years, we will continue to maintain an increased level of capital improvement
activity in Orange. The FY 20 Five-Year Capital Improvement Plan (CIP) identifies 139
proposed projects. For FY 20 itself,there are 19 newly budgeted projects and 120 projects
that are either a continuation of previously approved plans, or anticipated to start during
the out-years. With these proposed projects, the City Council will be investing over$28.3
million in the upcoming fiscal year, and $93.7 million over the five-year planning horizon.
This is a major investment in the City's infrastructure, and represents a significant
commitment to our community's future.
The following are highlights of the FY 20 Five-Year Capital Improvement Plan projects:
• Installation of shade sails over existing tot lot equipment at Grijalva Park.
• Replacement of the exiting pedestrian bridge with a new steel structured bridge at
the Del Rio Community Facility District.
• Replacement of outdated flash cameras with video surveillance systems to be
installed at EI Camino Park.
• Renovation of the Children's Homework Center at the Orange Public Library &
History Center, including .
• Rehabilitation of the Orange libraries, including interior carpeting, lighting, and
interior and exterior painting.
• Commitment of $5.5 million to the Pavement Management Program and an
additional $6.2 million for street maintenance and rehabilitation efforts at various
locations throughout the City.
• Commitment of $3.6 million towards 14 projects intended to maintain or improve
the City's water production and distribution, including $1.5 million for pipeline
replacement.
The City Council has continued to set-aside monies from the unreserved fund balance of
the General Fund in the Capital Projects Fund (500), resulting in an estimated beginning
fund balance of $10.1 million for FY 20. While staff endeavors to make every effort to
prolong much needed repairs and improvements, reinvesting in our infrastructure is
necessary. The following projects are proposed for this fund for FY 20, totaling $507,022:
1. Minor Traffic Control Devices ($75,000);
2. Santiago Creek Multipurpose Trail Extension ($97,532);
3. Street Light Pole Replacement Program ($120,000), and;
4. Cambridge Storm Drain Improvement Phase 3 ($214,490).
ITEM io 03/26/2019
Looking forward to the future of Orange, we have also specified several long-term capital
improvement projects.
Update to Grijalva Park Master Plan
At your February 12th meeting, the City Council reviewed an update to the Grijalva Park
Master Plan based upon the desire of several community groups to develop the remaining
27 acres of the park, including an arts theater, community center/branch library, skate
park, aquatics center, and additional parking. Through FY 20, staff will be engaging with
these various community groups to further the planning efforts for future uses at the park.
Oranqe Police Headquarters Roof
The Orange Police Headquarters is nearly 30 years old. Unfortunately, the glass atrium
roof has been past its useful life for several years as more and more water leaks become
evident inside its lobby. This year's rain took a significant toll on the roof. As a result, we
have allocated $60,000 towards the initial assessment of long-term solutions for the roof.
With our preliminary estimate for the roof replacement at about $2.1 million, this project
will be a significant capital improvement project moving forward.
Fire Headquarters
Initial planning efforts have begun and the design of a permanent facility for Fire Station
1 and Headquarters will commence in FY 20. The facility will serve the portion of the city
within a two-mile radius of the Old Towne Plaza, and will provide increased emergency �
service response to the Old Towne area, the immediate surrounding area, and to the
general population of the City of Orange. The total estimated project cost, including
construction, is $28 million.
Old Towne East Parking Structure
The Old Towne East Parking Structure will serve our downtown visitors and provide much
needed parking for the commercial areas east of the Old Towne Plaza. While this project
is still at its beginning stages, conceptually, the three-story mixed-used structure could
span the entire west side of 100 block of South Grand Avenue, from Almond Street to
Chapman Avenue. The estimated project cost is $14.5 million.
As these projects require significant financial resources, staff is beginning to explore
alternative funding options including grants, bond issuance, developer fee increases, and,
with respect to the Old Towne East Parking Structure, paid parking around the Old Towne
Plaza. We hope to have more information later this year.
Proposed Annual Work Plans for FY 20
A draft set of departmental mission statements, goals, service objectives, and work plans
for the upcoming budget year is provided for your review. The work plans are prepared
for each division within each department and specifically identify actions to be completed
by a certain date using budgeted funds. The City Manager and each department monitor
the progress of the adopted work plans. As such, these work plans provide a mechanism
for each department to be held accountable for the delivery of specific programs and
services funded in their budget.
In keeping with prior years' objectives and feedback, staff has proposed work plans on
behalf of the City Council, which include the following highlights:
ITEM �1 03/26/2019
• Provide policy direction that safeguards financial stability while preserving
community character and maintaining a positive organizational direction.
• Provide the necessary resources to public safety to ensure the community remains
among the safest cities in California.
• Work closely with the City's State of California legislative representative to ensure
that the needs of Orange residents and businesses are addressed.
• Continue to work with the County of Orange, adjacent cities, care providers, and
other stakeholders to effectively address the problem of homelessness in our
community and throughout the region.
• Monitor statewide efforts to address the rising costs of maintaining the CaIPERS
retirement system and provide leadership in managing its impacts to the City's
financial stability.
• Enhance the City's economic base by continuing to attract quality businesses to
the City's commercial corridors and industrial areas.
• Continue to evaluate options to assist businesses with processing city land use
entitlements and other business development activities.
• Oversee the design of the new Fire Headquarters project, ensuring the project
meets the current and future needs of the Fire Department.
• Evaluate and expand the use of technology to automate city processes to enhance
the customer experience for businesses and residents.
• Enhance the management of the Old Towne Plaza, including the new Old Towne
West Metrolink parking structure, utilizing a maintenance crew dedicated solely to
supporting and keeping the area clear of debris.
• Continue to assess the City's infrastructure needs and providing policy direction to
' ensure facility sustainability and prioritizing funding options.
As a reflection of the economy in Orange, the proposed work plans continue to remain
very modest and, for the most part, address core services and programs. Although
provided to the City Council as part of this agenda package, staff will not be formally
presenting the proposed FY 20 work plans at this study session. Rather, if the City
Council has specific questions regarding particular department work plans, please inquire
prior to the conclusion of this study session.
Conclusion
The City Council's prudent policies continue to set the stage for staff to meet the
budgetary challenges and demands for FY 20. The City continues to take advantage of
the growing economy to maintain services and enhance our infrastructure. While it is
important to continue on the path of caution to ensure long-term fiscal health, the City
Council works hard to be able to allocate the necessary resources to allow the City to
provide the citizens and businesses of the City with the excellent services they have come
to expect.
Staff still has a few months to refine FY 20 revenue and expenditure amounts. In addition,
feedback from the City Council received at this study session will help further refine our
projections. The next study session is tentatively planned for April 23, 2019.
ITEM 12 03/26/2019
7. ATTACHMENTS
• FY 20 Proposed Annual Work Plans
• FY 20 Draft Five-Year Capital Improvement Plan
ITEM 13 03/26/2019
APPROVED BY THE CITY COUNCIL ON MAY 14, 2019
CITY COUNCIL ORANGE, CALIFORNIA
MEETING MINUTES MARCH 26, 2019
4. REPORTS FROM MAYOR MURPHI'—None
5. REPORTS FROM COUNCILMEMBERS—None
6. REPORTS FROM BOARDS, COMMITTEES,AND COMMISSIONS—None
7. ADMINISTRATIVE REPORTS—None
8. REPORTS FROM CITY MANAGER
8.1 First Study Session for the Proposed Fiscal Year 2019-20 Budget.
City Manager Rick Otto and Administrative Services Director Will Kolbow reviewed a series of
slides, outlining the status of the current year budget and the projections for the FY 2019-20
budget. Also reviewed were the CIP Budget. Departmental work plans have been made available
to the City Council and any questions can be answered by the Department Heads who were all in
attendance. The local economy remains strong and expenditures have held steady. Increased
PERS contribution rates are still hurting the City. Staff will be able to present a balanced budget
to the City Council again this year.
In response to questions from Councilmember Monaco, staff confirmed that the IT maintenance
fund is the same as prior years. The dollars moved into it do not include any projected savings
from the new IT model being implemented. PERS investments are doing less well than the
general market due to the PERS board working with private company investments that don't
perform as well.
In response to a question from Mayor pro tem Alvarez, staff indicated the idea of paying down
the unfunded liability in PERS payments is a gamble due to the uncertain economy. If the
economy continues to grow, making the payments will not cause too much stress. If the economy
fails, then the payments will be difficult and any money that was prepaid would be missed.
Staff confirmed that the City also has utilities in the streets. Public Works will not start a new
project in the streets for five years after the completion of a street project. The Department of
Public Works coordinates with the utilities prior to any work in City streets.
Staff confirmed that the signage for the new parking structure was paid for by the contractor and
will be installed soon.
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APPROVED BY THE CITY COUNCIL ON MAY 14, 2019
CITY COUNCIL ORANGE, CALIFORNIA
MEETING MINUTES MARCH 26, 2019
In response to a question from Councilmember Nichols, staff confirmed that Edison is also
replacing streetlights in the City. They are working with residents who are complaining about
brightness issues.
Staff confirmed that Fire Station 1 project will come before the City Council with many options
to choose from.
Staff confirmed that the infrared intersections will be switched out over time and that the City fee
schedule is available on the City website.
In response to a question from Mayor Murphy, staff confirmed that the Police Station roof leak
problems were most likely caused by birds. The Christ Cathedral has a similar roof and has had
similar problems.
Staff confirmed that the costs for a new apparatus bay for the fire station will cost 1.2 million
dollars.
In response to a question from Mayor pro tem Alvarez, staff confirmed that there would be little
change to the flow of customers with the redesign of the Public Works Counter.
Councilmember Monaco requested that staff delay a $270,000 project to install bell shaped
lamps on City Streets. This project is a beautification project at the City Council's discretion.
Monaco recommends the project be moved to future years.
Staff informed that the reason the fire Station two driveway does not align with the street grid
well is due to the costs. It would require a 3.8 million dollar project to make everything line up.
Mayor Murphy and the City Council thanked staff for the hard work in preparing the annual
budget and for the informative presentation.
9. LEGAL AFFAIRS—None
RECESS TO CLOSED SESSION—The City Council recessed back to Closed Session at 6:45
p.m. with all Members present.
PAGE 4