The Pleasanton City Council reviewed several aspects of what Mayor Karla Brown called the "tightest budget I've had" during a special workshop meeting held last week.
The workshop, according to city staff, was part of an early stage budget process review where Pleasanton finance director Susan Hsieh provided a high-level overview of the general fund operating budget.
She, along with other city staff, also presented recommendations on amending the city's reserve policy, updates on the city's capital improvement program projects and a short list of work plan priorities that the city will aim to plan for in the coming years such as water and infrastructure projects.
"This is a budget adjustment to the way we've done business in the past," Brown said during the April 18 session. "I've been doing this job for over 10 years and this is a significant adjustment to the way the city of Pleasanton is budgeting money. We're now looking more at full asset management. If we own something, how are we going to maintain it? And if it needs to be repaired and replaced, let's really talk about what that cost is. So it means budget tightening."
In Pleasanton, the four-year capital improvement program budgeting for each two-year budget cycle typically involves prioritizing the funding for proposed projects based on revenue projections for the upcoming two-year budget period.
City staff presented the preliminary budget report in order to expand its engagement efforts for more community and council input before staff present the full budget next month on May 16 and before the council votes on adopting it in June.
Among that community input and council input that staff have been gathering through community events and council meetings, staff pointed out that this year's budget process had several key changes that they had to bring to the council's attention.
Those changes include the elimination of American Rescue Plan Act funds, which helped stabilize the previous two-year budget and an increase in accrued liability for pensions due to the investment markets declining last year.
"Staff outlined it in the report, the reduction in market investments has caused our CalPERS and Other Post-Employment Benefit costs to increase and we're realizing that we are having a challenge with a state of good repair throughout the city," Vice Mayor Jack Balch said. "So when I look at this budget as presented, in a surplus position of $1,829, which is basically less than one month's rent for a studio apartment in our community, I'm concerned."
City attorney Daniel Sodergren explained that this reduction in market investments is an industry-wide problem because excess insurance, which provides additional financial limits above those covered by an underlying insurance policy, is difficult to get in California right now due to the recent wildfires and flooding.
As for the funds that will be available for projects, while staff reassured the council that there currently are no changes to previously backed capital improvement projects that the council has prioritized such as the proposed skate park at Ken Mercer Sports Park, there will be some projects in the CIP that were recommended for deferral.
These projects included the Santa Rita Road at Valley Avenue intersection improvement project, the Santa Rita fiber interconnect project and Nevada Street improvements project.
Hsieh said that while the last project has had some public outreach work completed, the funds are not going to be available due to lower than anticipated traffic impact fee revenues.
But Balch said he wanted to look further into what other discretionary spending can be temporarily deferred across all areas in the city's budget in light of the recent issues with the city finding PFAS, otherwise known as forever chemicals, in the city's operated groundwater wells.
"I think we should, as a council, try to have the budget reflect the values," Balch said. "I know we all value water and so I think we need to be looking at -- in light of the other agenda items -- supply, treatment and delivery of water as our primary purpose with the budget reflecting that."
He said that as the city put a pause on potentially having to build a well rehab and treatment facility, which the council voted to halt the project in October due to a $46 million cost projection, he said the city needs to do more to have the fiscal strength to be able to address the city's water problem.
"During the pause we did in October, I mentioned that when we ultimately come up with a water plan of how to address PFAS in our water, we need to have the financing plan ready to go as well so that we have sufficient financing to do it," Balch said.
His comments stemmed from Hsieh mentioning that the water enterprise fund reserve is projected to fall below the minimum reserve level, meaning water rate adjustments will be necessary to maintain high levels of services and continue to invest to maintain infrastructure.
"There's a long period of time where we really didn't spend a lot of time looking at our water enterprise fund," City Manager Gerry Beaudin said.
"We're recommending up to three years to replenish the reserves and what we said for the enterprise fund is that once we recognize there's an issue where we fall below the reserve level, we have to do a rate study within 12 months," Beaudin added. "So that's how we keep in check going forward, but we have a lot of work to do just to get to the starting line in this conversation."
Brown said that she agreed with Balch in that as the city looks at the budget in the next coming months, the council will need to really weigh out what projects will be necessary to maintain the city's values and which ones can wait.
"Our enterprise funds need to pay for their project. Enterprise for water doesn't pay for roads and roads don't pay for water," Brown said. "We need to look at that enterprise fund for water and see how it can fund any of the demands and needs that we're going to need going forward."
"These are tough times for water," Brown added. "We know we have PFAS in our water and that affects our water volume, that affects our ability to deliver the amount of water that we want to to our residents."
As for the city's 2023-24 work plan, water will be one of the 11 projects that staff will be looking at as part of the water and sewer master plan updates, updates to the utility rates and ongoing water supply assessments such as the water study that the city is currently working on completing.
Other work plan projects for the next year will include: the diversity equity and inclusion action plan; developing a plan to reduce homelessness in Pleasanton; updating affordable housing fees; creating an American with Disabilities Act transition plan; and an update and implementation of the Eastern Alameda County 2011 Human Services Needs Assessment.
One of the last major changes that Hsieh went over was a proposed change to the city's reserve policy.
Pleasanton's reserve policy currently combines unrestricted reserves and restricted pension reserves together for the reserve calculation, but now Hsieh said staff will be looking to follow the Government Finance Officers Association's recommendation to maintain at least two months or 16.7% of unrestricted reserves in the general fund.
She said the goal is to separate the other restricted reserves from the unrestricted reserves but that the intent is not to reduce overall reserve level.
The change that staff will be proposing during future budget discussion will be to change the general fund reserve target from 25% to 20% and change the 20% to 30% reserve range to 16.7% to 25.0%.
Some other notable pieces of information during the presentation included capital investments over the next four years being projected at about $83 million with the most significant one being transportation and streets at about $44 million.
Other investments include: $8 million for facilities, $7 million for sewer, $5 million for parks and over $4 million for water projects.
Staff also anticipates eight new projects in the CIP in this upcoming budget cycle including the repair and replacement of pavement of trails along the arroyos at various locations. The other seven projects include an asset management plan to plan and fund maintenance needs of existing infrastructure such as facilities, installation of electric vehicle charging stations, replacement of irrigation equipment, electrical improvement at sewer facility and three projects related to storms.