For many years capital maintenance and improvements were underfunded in an attempt to maintain general fund public services. That shortfall has caught up with us, and the need for upgrading and maintaining our extensive capital investment is a major council concern this year.
An overview of the budget and discussion of infrastructure needs and potential funding sources was conducted at the special Council meeting April 30, but the formal detailed discussion of spending, revenues, services, and staffing begins May 8 and is very much worth community involvement.
One example of budget issues, funding limits, and capital needs is the very controversial proposal to eliminate animal services by closing the facility on East Bayshore and outsourcing animal services to agencies miles away. This has generated lots of attention, complaints, and objections.
When it is discussed May 10 there are certain to be lots of people at the committee meeting expressing their concerns and opposing closing animal services. Unfortunately this is an unusual reaction to the budget process. In the past Finance Committee meetings had very poor public attendance when the budget was discussed. Often I was the only non-staff person at the meetings.
Since capital needs are a major council issue this year, and the backlog of capital projects is drawing funds from the operating budget, a brief look at the proposed Capital Budget is a good way to start budget reviews. In FY 2013 the proposed general fund capital spending is $16.1 million plus $3.7 million for staff to oversee capital projects.
This is down from $33.9 million in FY 2012 because that budget included $16.2 million in library bond money which has been spent, committed, or sequestered for future library construction. Another $2.2 million is proposed to be transferred from the General Fund into catch-up capital spending in FY 2013, but the nature of that spending is pending formal council action in June. There is $41 million worth of overdue capital spending that staff proposes to cover over the next 10 years.
The highest expenses are $14.5 million for parks, $8.8 million for streets and sidewalks, and $6.9 million for Cubberley. No actual spending for Cubberley is proposed until the future of the site is agreed to by the School District. In addition $32 million/year is needed to keep up with ongoing system maintenance needs.
Currently there is a $2.2 million gap between existing capital funding sources and keep up needs. That is the gap to be funded by additional transfers from the General Fund.
New projects are projected to cost $211 million with an upgraded municipal services center at $93 million and public safety building at $69 million the major costs. Potential revenue sources for catch-up new projects also are being discussed.
They include a business license tax that could generate $3 to $5 million/year; a parcel tax that could generate $2 million/year if the tax was $100/parcel/year; increasing the property transfer tax from $4.40/$1000 assessed value to $6.40//$1000 assessed value could generate $2.9 million/year; general obligation bonds, the cost and income raised depending on specific projects to be covered.
Needless to say transfers from the general fund to capital improvements reduce spending capability for services such as police, libraries, fire, etc. The general fund budget proposes several service cuts, partly because revenues haven’t fully recovered from the recession, but also because capital spending catch up takes money from the general fund. I’ll discuss general fund budgets and impacts in another posting.