Agenda Item Wording:
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Capital Improvement Program - Review select FY 2024/25 and 2025/26 Capital Improvement Program (CIP) Budgets and future capital plans
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Deadline for Action: 2/20/2024
Submitting Department: Finance and Technology Services
Contact Name and Phone Number:
Melody Murch, (559)713-4379, melody.murch@visalia.city <mailto:melody.murch@visalia.city>
Renee Nagel, (559) 713-4375, renee.nagel@visalia.city <mailto:renee.nagel@visalia.city>
Department Recommendation:
That the City Council receive this first presentation of the City’s draft Capital Improvement Program (CIP) budget and provide direction as appropriate. The Council is scheduled to act upon the CIP budget during the month of June in conjunction with the operating budget. No formal action is required or requested at this time.
Background Discussion:
The Review Process- This is Council’s first opportunity to review a portion of the City’s proposed Capital Plan. Portions of the proposed 2024/25 and 2025/26 capital budget will be brought to Council for review at each scheduled meeting during the months of February-April 2024. This allows Council to conduct their review of the proposed CIP budget in manageable groupings.
The Capital Improvement Program presents the two fiscal years 2024/25 and 2025/26 for adoption and appropriation. Four additional years are shown for planning purposes only. This allows Council to plan future projects and consider the near-term impacts of those decisions. However, only the first two years are proposed for appropriation and deserve greater scrutiny. Amounts included in the final four years will not be appropriated in the 2-year budget.
Staff has prepared a Power Point presentation to review the proposed Capital Programs of the various funds discussed below. CIP Project Managers will be available to address Council’s questions on proposed projects. To assist Council in reviewing the proposed CIP projects, staff recommends the following: •
• Staff will present a summary of proposed project appropriations and provide Council with the opportunity to request further information on individual projects.
• It is recommended that Council review and either tentatively approve or direct changes to the attached proposed CIP budgets for the selected funds.
• No formal action is required at this time. At Council’s direction, staff will return with additional information or changes to the CIP at a following meeting, until all projects have been reviewed, and Council is satisfied with the proposed capital budget for all funds.
• A final Capital Improvement Program document will be prepared, after the review process is completed, and included for adoption with the City’s Operating Budget in June 2024.
The CIP includes all projects and equipment purchases costing $10,000 or more. When possible, Capital Projects are separated from the operating budget, using separate capital funds. This allows a clear view of capital activities and prevents operating budgets from being artificially inflated by those same capital activities.
Funds for Review- The eight funds to be reviewed today include two impact fees and six enterprise funds.
• Impact Fee funds hold revenue from fees imposed upon new development to pay for the proportionate costs of providing public infrastructure to serve that new development. These funds can only be used for the purchase or construction of new or expanded infrastructure related to the growth from development.
• Enterprise funds are meant to be self-sufficient, and revenues are restricted to uses designated within the fund in which they are received. Enterprise funds are independent of the General Fund. In general, dollars not used for operating in these funds are available for capital projects.
The Funds to be discussed in today’s meeting include those listed in Table 1: Capital Budget Funds for Review February 20, 2024, below.
Table 1: Capital Budget Funds for Review February 20, 2024
Corporation Yard Impact Fee 103 (CIP detail attached): This fund is derived from Corporation Yard (CY) Impact fees collected at the time of building permit issuance. Impact Fee funds hold revenue from fees imposed upon new development to pay for the proportionate costs of providing public infrastructure to serve that new development. These funds can only be used for the purchase or construction of new or expanded infrastructure (facilities and equipment) related to the growth from development and not for operation or maintenance.
This fund has been included in today’s discussion based upon the funding proposed for CY Site Development during the 6-year plan. This fund has no projects proposed for appropriation in the 2-year Capital Budget. The CY New Site Development proposed in this fund is projected for the third year of the capital plan (2026/27) and contingent upon the completion of Corporation Yard improvements planned in earlier years. A detailed description of this project is included in the Corporation Yard Impact Fee’s proposed capital plan, included in Attachment A.
Wastewater Trunk line Construction, Fund 231 (CIP detail attached): This fund's revenues are derived from Sanitary Sewer and Trunk Line Connection Fees and a portion of the monthly storm sewer fee revenue. Funds are to be used only for new sanitary sewer trunk line construction, and not for operation and maintenance.
There are five projects proposed in the 2-year portion of the capital budget which include two projects with annual funding for preliminary engineering and developer reimbursements to accommodate development when necessary. The remaining three projects for proposed trunk line improvements are driven by development and current development trends indicate these projects to be the highest priority for this funding, however staff is constantly adjusting plans and projections based upon what occurs and will bring any necessary changes to council for approval. The largest of the three projects proposed in this fund is discussed below,
• Shirk St. Sanitary Sewer Trunkline - Walnut to Noble ($6,185,000): Install a 48" sanitary sewer trunk line in Shirk Street between Walnut Avenue and Noble Avenue to connect the existing sewer trunkline within Shirk Street south of Hwy-198 to the existing sewer trunkline in Walnut Avenue to accommodate future growth. This project includes removal of existing 6" sewer force main and the associated lift station located at Shirk Street and Noble Avenue. Project total of $6.1m is fully funded from Wastewater Trunkline (231) including $385k in prior year funding.
The remaining three projects shown in the planning portion of the 6-year plan include this funds portion of the Storm Drian and Sewer Master Plan Update, and two infrastructure projects which are dependent upon the need for the improvements described, based upon development and will be re-evaluated during the next 2-year capital budget process. For more detail on proposed projects please see the fund summary included in Attachment A.
Building Safety, Fund 401 (CIP detail attached): This fund was established for the operation of the Building Safety Division. Revenues are provided by fees charged for Building Permits. This revenue is used to fund both the operational expenses of the division and all capital expenditures. This fund does not have an established reserve solely for capital purchases.
This fund has requested an appropriation of $692,400 for three projects proposed in the 2024/25 fiscal year. The three capital requests are for the purchase of one replacement vehicle, participation in the multi-funded Corporation Yard Facility Assessment and Master Plan, and migration of the Accela Permit Software system to the cloud. One additional project for vehicle replacement is in the 2028/29 planning year. The requested vehicles will replace current vehicles which have reached the end of their useful lives. For additional project details, please see the fund summary included in Attachment A.
Animal Services, Fund 406 (CIP detail attached): This fund was established to account for the operation of the City’s Animal Control facility and the state mandated services provided there. The revenue in this fund is generated by user fees for pet licensing, adoptions, vaccinations and shelter related fees, as well as contracted services provided to surrounding cities. This fund receives an annual cash transfer from the General Fund which is used in combination with the fees for services to operate the Animal Services division. Because this fund does not fully cover its own expenses with the revenues it generates, any capital request will increase the transfer amount required from the General Fund.
The Visalia Animal Care Center was completed and opened by the City in 2016 and the provision of Animal Services was brought in-house by the City in that same year. As this facility and the associated equipment begins to age, requests for maintenance and replacements will increase. Construction of the Animal Care Center was completed with debt financing, which will have a remaining balance of $2,102,822 as of 6/30/24 and will be fully repaid during the 2027/28 Fiscal year. This fund has four project requests in the 2-year budget for extension of the City fiber optic network to the Animal Care Center, additional funds to replace one Animal Control Officer vehicle, updated lighting for the parking lot, and updates to the software controlling the facility’s crematorium. Communication through the City network is patchy at the Animal Care Center due to the current wireless connection. The Animal Services Fund will participate in the Walnut Avenue Communications Connectivity project, to facilitate a hard connection at the facility, making communications more reliable. The Animal Services vehicle replacement project is discussed further below.
• Replace one (1) of the existing Animal Control Vehicles ($102,000): An additional appropriation of $31,100 is requested for this existing project. The 13-year-old unit has reached the end of its useful life and is currently in the budget for replacement with an appropriation of $70,900. Increases in vehicle pricing, and the need to manufacture a specialized cage bed require additional funding to complete this replacement. The cage bed will be equipped with air conditioning for the animal boxes mounted on the truck bed, which is important for the safety of the animals in the hot summer months.
For additional Animal Services project details, please see the fund summary included in Attachment A.
Airport, Fund 411 (CIP detail attached): The Airport Fund’s primary revenue source is airport user fees, such as hangar rentals and fuel sales. These revenues are used to fund the Airport’s operating expenses. Funds not used to pay operating expenses are set-aside for capital. The Airport Fund has shown the ability to cover operating expenses with the revenue it generates, and to also fund smaller capital projects. The airport’s primary source for larger capital projects is Federal Aviation Administration Airport Improvement Program (FAA-AIP) grants. Based upon the Airport Layout Plan, the City submits projects to the FAA for possible funding. According to FAA criteria, the projects are prioritized and ranked resulting in a tentative funding plan. If the City chooses to accept the proposed funding, when it is made available, the projects can move forward. The standard match requirement for Federal Aviation Administration (FAA) funding increased from 5% to 10% when the Visalia Airport was accepted into the Community Flexible Pilot Program in 2016. The Airport is eligible to receive a 5% match from the Caltrans Department of Aeronautics (DOA) which pays a portion of the required 10% local match. The remaining balance of required match amounts must be paid from the Airport fund balance.
Requested appropriations in the 2-year capital plan include two (2) projects planned to receive funding from the FAA-AIP, for the design and construction of a Taxilane reconstruction. Only projects which receive a final award of grant funding will move forward. The remaining three projects in the Airport’s 2-year capital plan are for extension of the City fiber optic network to the Airport, and general maintenance of the Airport facility and are proposed for funding from the Airport Fund. The two FAA-AIP funded projects proposed for appropriations in the 2-year budget are discussed further below.
• Taxilane/way A & B and Hangar H3 Row 10 (Design): Design phase of reconstruction project. These movement areas have minimal remaining expected lifespan. Pavement condition is a critical measure of airport performance and reconstruction before failure occurs is essential from both a cost effectiveness and safety standpoint. Project design funding total of $455k expected breakdown is: $410k FAA Grant, $20k State Grant, $25k Airport Fund (411)
• Taxilane/way A & B and Hangar H3 Row 10 (Construct). Use the FAA approved and funded design to reconstruct Taxilane/way A& B and Hangar H3 Row 10. This will ensure the safe movement of aircraft and vehicles around the airport. Project Funding total of $4.12m expected breakdown is: $3.7 million FAA Grant, $185k State Grant, and $227k Airport Fund (411).
This fund is projected to have a sufficient balance to cover the airport portion of all projects requested with no advances from the General Fund during the 6-year plan period. The Airport Fund has a total of seven projects in its 6-year capital plan which are included in the Summary of Proposed Capital Projects attached.
Wastewater Fund 431 (CIP detail attached): The Wastewater fund is derived from Sanitary Sewer user fees and rates. Funds are to be used only for operations, maintenance, and improvements, including vehicle and equipment acquisitions related to collection and disposal of wastewater and operation of the Wastewater Reclamation Facility (WRF). Funds remaining from operations at the end of each fiscal year are available for capital improvements.
The Wastewater Fund completed an upgrade of the WRF in 2018 which brought the WRF into compliance with discharge permit requirements from the Regional Water Quality Control Board. As the new plant equipment and infrastructure begins to age, new maintenance tasks are required to ensure optimal function and preserve this investment. The 6-year capital plan for the Wastewater Fund includes maintenance tasks and spare part purchases which are required for the maintenance of the upgraded WRF.
The upgrade of the WRF was accomplished with debt funding from the Clean Water State Revolving (CWSR) Fund. The balance of the CWSR fund debt will be $81,635,890 at the end of Fiscal Year 2023/24. A significant fund balance is projected to remain at the end of the 2-year budget which is planned for projects to be completed in remaining years of the capital plan. In addition, this fund must plan for future Regional Water Quality Control Board requirements. If, over time, any excess funds are not needed for this purpose, they may be used for the early retirement of the Clean Water State Revolving (CWSR) Fund debt, at the discretion of the City Council. Currently, the debt in this fund exceeds the financial resources.
The Wastewater Fund has a total of 45 projects in the capital plan and 29 require funding in the 2-year budget. Most projects proposed in the Wastewater Fund are for equipment and on-going maintenance of the plant. The two largest projects included in this budget, which are summarized below, are for additional funding for the Mission Linen Soil Remediation, and the replacement and relocation of sanitary sewer mains throughout the city, as needed.
• Mission Linen Soil Remediation ($2,504,300): Additional funding of the City's obligated portion of remediation in the general area along Mineral King between Tipton and Santa Fe Streets, and Santa Fe Street and Tipton Street north of Mineral King. This project provides reimbursement of activities associated with soil remediation implementation. Apex Companies, LLC and Environmental Risk Solutions, Inc. are contracted by Mission Linen in compliance with the Imminent and Substantial Endangerment Order as the first step in the contamination cleanup. Additional funds are required for installation and operation of the Soil Vapor Extraction (SVE) Interim Remedial Measure (IRM). The project total of $5m includes prior year funds of $1.47m from the Wastewater Fund (431).
• Replace and Relocate Sanitary Sewer Mains ($1.0 million annually): This funding will replace sanitary sewer mains which are shown to be deteriorating throughout the City and relocate sanitary sewer mains as necessary to accommodate development of property formerly used as streets or alleys. This work prevents sewer failures which can cause overflows and service disruptions.
For additional projects and details included in Wastewater’s proposed capital plan, please see the CIP detail included in Attachment A.
Solid Waste, Fund 441 (CIP detail attached): The Solid Waste fund is supported by refuse collection fees. The Solid Waste revenues collected are to pay for operating expenses and capital projects. This fund is responsible for the replacement cost for the Solid Waste Fleet which has over 60 garbage trucks. With no significant grant funding currently available for the large-scale replacement of Solid Waste vehicles, it is necessary to plan long-term for the replacement of this large fleet which is so vital to the health and safety of our citizens. To prepare, any available fund balance remaining at the end of each year is set aside to fund the depreciation of Solid Waste capital assets and to pay for future capital projects, including truck replacements. The goal of this process is to pre-fund capital maintenance and replacement to ensure adequate funding and prevent the need to borrow from the General Fund. The Solid Waste fund is projected to have a significant cash balance at the end of the 6-year capital plan. This balance is planned for use in the replacement of 29 trucks manufactured in 2020 (19 Side Loaders, 2 Roll Offs, and 8 Front Loaders), which will become due for replacement in 2030/31, or soon thereafter.
The SW capital plan also includes projects for improvements at the City Corporation Yard with funding proposed for the multi-funded Corporation Yard Facility Assessment and Master Plan and improvements to be funded in the planning years of the 6-year Capital Plan. Also proposed is ongoing funding for the successful and widely utilized Dump-On-Us events which are operated by Solid Waste 6 times per-year. With the purchase of Solid Waste vehicles being the majority of the appropriations proposed in the 2-year budget, additional discussion of vehicle replacements follows.
Solid Waste Fleet Replacement: The proposed capital plan includes the replacement of 10 garbage trucks in the 2-year capital budget. In addition, 5 new growth garbage trucks are proposed for purchase in the 2-year capital budget, one of which is contingent upon the receipt of grant funding. The SW trucks have a life of approximately 10 years and are evaluated and scheduled by the Fleet Maintenance Division for replacement. Trucks which have reached the end of their useful life are sold at auction after they have been replaced. Typically, a new residential truck is needed for every additional 960 daily pickups (3,840 per week), and a commercial truck is needed for every additional 105 daily pickups (525 per week). All new vehicles requested are dependent upon actual need in response to growth in utility accounts.
As discussed above, a large number (29) solid waste trucks will be reaching their end of life soon after the completion of the current 6-year plan, in 2030/31. This funds ability to provide for the replacement of these vehicles will be reassessed every two years during the budget process to ensure proper management of the Solid Waste fleet.
Alternative Fuel Options: In compliance with Title 13 of the California Code of Regulations, Section 2021.2 the Solid Waste Fleet was fully converted to Compressed Natural Gas (CNG) with the assistance of Congestion Mitigation Air Quality (CMAQ) grant funding. This conversion to CNG was completed in 2022. At that time, the fleet consisted of 61 trucks (36 Side-Loaders, 20 Front-Loaders, and 5 Roll-offs) which were all powered by CNG. However, there is no further CMAQ funding available to reduce the higher replacement cost for CNG trucks. Moving forward, it is appropriate to fully evaluate the long-term cost, and carbon footprint of different fuel options each time a purchase is made.
Since 2022, the Solid Waste division has replaced 10 CNG trucks with trucks powered by clean diesel. This alternative was recommended by staff, and approved by Council, based upon comparison of the carbon footprint and life-time costs of the two vehicle types. While there are arguments to be made in favor of both clean diesel and CNG, the cost of CNG powered vehicles remains high compared to clean diesel. With no significant CMAQ funding available to cover the higher cost of CNG trucks, staff currently plans to continue the recommendation to purchase clean diesel-powered vehicles. All trucks purchased will comply with applicable regulations, including those of the California Air Resource Board.
The City will pursue any available grant funding to pay for the replacement of Solid Waste trucks scheduled in the 2-year capital budget. While every effort will be made to secure a grant, if no grant funding is available or awarded, and unless noted in the project description, the purchase will move forward with Solid Waste funds, depending upon the condition of the trucks needing to be replaced. For additional projects and details included in Solid Waste’s proposed capital plan, please see the CIP detail included in Attachment A.
Transit, Fund 452 (CIP detail attached): This fund was established in 2018 to manage the Capital Projects of the City’s Transit Division separately from operating expenditures. The fund receives Local Transportation Funds (LTF), Federal Transportation Agency (FTA) capital funding, Measure R Transit Funds, capital set asides from the National Park Service contract for Sequoia service, and various other State and Federal capital grants. This revenue is to be used for Transit Capital expenditures only.
Transit’s plan for the next 6 years includes 15 Capital Improvement projects, 14 of which are requesting appropriations in the 2-Year Budget. The focus of projects planned for the 2-year budget is the purchase of vehicles for a Micro Transit Pilot Program, bus replacement for Fixed Route, Dial-A-Ride, and Sequoia Shuttle services, and maintenance of Transit facilities. A summary of the Micro Transit project follows below.
• Micro Transit Pilot Program SB125: Transit will implement micro transit system wide. To operate this service, Transit will purchase 10 electric ADA accessible vans, 5 electric sedans, and the charging infrastructure for all 15 vehicles. Additional labor and materials for the route and bus stop changes and on-demand software will be budgeted separately. Continued operation of Micro Transit will be contingent upon grant funding.
Transit Fleet Replacement: Also included in the capital plan is the replacement of a significant number of vehicles. Twelve (12) Fixed Route CNG buses will be replaced with Battery Electric Buses (BEB’s) in the 2-year budget, and additional charging stations will be purchased and installed to accommodate the conversion of these units to battery power. Twelve CNG Dial-A-Ride buses will be replaced with similar vehicles, and (3) Sequoia Kings Shuttle (SEKI) diesel buses will be replaced with diesel hybrids. Also, thirteen (13) SEKI trailers used to house bus drivers in the Sequoia National Park, are planned for replacement in the 2-year budget. All SEKI vehicles planned for replacement will be paid for with revenues set aside from the National Park Service (NPS) contract for SEKI services, or NPS grant funding, and no local Transit funds will be used. For additional projects and details included in Transit’s proposed capital plan, please see the CIP detail included in Attachment A.
Fiscal Impact:
The City’s Capital Improvement Plan details a six-year plan for the expenditure of funds and the completion of projects (see Attachment A). Information for the years 2026/27 through 2029/30 is provided for informational and planning purposes and will be revised, updated, and adopted in 2-year increments. The attached spreadsheets summarize each fund and provide a detailed list of the proposed projects. The fund title and number are followed by a brief explanation of the revenue source and general purpose of the fund. Each fund summary shows projections of the beginning cash, operating revenue (or capital contribution from operating revenue), operating expenditures, proposed CIP expenditures, and the projected ending cash balance for each of the six years.
No appropriation will result from the review requested in this item. A final Capital Improvement Program document will be prepared, after the review process is completed, and included for adoption and appropriation with the City’s Operating Budget which will be brought to Council in June 2024.
Prior Council Action: Click or tap here to enter text.
Other:
Table 2: Capital Funds to be reviewed by Council in future Council Sessions, below is a summary of the capital fund to be reviewed by Council during the Council meetings indicated.
Alternatives: None recommended.
Recommended Motion (and Alternative Motions if expected):
recommendation
No motion requested or required at this time.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments:
Attachment A: Summary of proposed Capital Projects by Fund
Attachment B: Directory of Map Points and Maps.