CC 2017-04-11_10a Five Year Sales Tax Review
MEMORANDUM
TO: CITY COUNCIL
FROM: BOB MCFALL, INTERIM CITY MANAGER
DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES
SUBJECT: CONSIDERATION OF 5-YEAR REVIEW OF LOCAL SALES TAX
DATE: APRIL 11, 2017
RECOMMENDATION:
It is recommended the City Council approve continuation of the local sales tax.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Revenue from the local sales tax in FY 2016-17 is projected to be approximately $2.2 million
and is anticipated to grow modestly during the five year period. The beginning fund balance
is $1.7 million. Expenditures, including carryover of unfinished projects from prior years, are
budgeted at $3.7 million in FY 2016-17, which will result in an ending fund balance of
approximately $210,000. This amount represents an unappropriated fund balance of
approximately 9% of annual revenue.
BACKGROUND:
In November 2006, the voters of Arroyo Grande approved Measure O-06, which
established a half-percent local sales tax to meet City needs identified in the City’s long-
range financial plan. The following four categories of needs were projected:
Transportation projects, including upgrade of the Brisco/Halcyon interchange;
Infrastructure improvements, including the street, drainage and creek systems;
Public safety needs, including Police and Fire Department facilities, equipment and
staffing; and
Facility upgrades to meet Americans with Disabilities Act (ADA) requirements.
Since then, the City Council has provided direction that the use of Local Sales Tax funding to
support information technology infrastructure is an appropriate use. As proposed in the May
12, 2015 staff report, this does not indicate utilizing the Sales Tax Fund for items such as
desktop computers, printers, scanners or other peripherals, but for technology that enhances
the City’s “network backbone” or provides enterprise-wide benefit.
To ensure accountability, the measure required: 1) the City to publish and distribute an
annual report to each household on the revenues and expenditures from the sales tax
Item 10.a. - Page 1
CITY COUNCIL
CONSIDERATION OF CONSIDERATION OF 5-YEAR REVIEW OF LOCAL SALES TAX
APRIL 11, 2017
PAGE 2
proceeds; and 2) a review and public hearing by the City Council every five years to
determine whether the sales tax is necessary to remain in effect.
The local sales tax took effect in April 2007. The first 5-year review occurred on April 10,
2012 and it is now time for the second review.
ANALYSIS OF ISSUES:
Local Sales Tax History
Attachment 1 presents a revenue and expenditure history of all local sales tax funds
received during fiscal years 2011-12 through 2015-16. Approximately $10.5 million was
spent over the five year period. The most significant percentage of funding has been for
street and park improvements, with 62% of funds dedicated to this purpose. Nearly 26%
of expenditures were used in enhancing public safety services, 5% for City facilities, 5% for
drainage improvements and 1% for transportation projects. Therefore, the funds have
been utilized for the purposes intended and expenditures reflect the priorities identified by
the community.
Local Sales Tax Projections
Attachment 2 is the proposed updated 5-Year Plan for expenditures of local sales tax funds.
The proposed 5-Year Plan continues to maintain adequate funding for the City’s highest
priorities as outlined when the Measure was proposed. In particular, the FY 2016-17 budget
carries forward approximately $1.4 million of unspent appropriations that are for multi-year
projects. Some of the most significant issues are outlined in the following sections.
Transportation Projects
As reflected, over $700,000 in transportation related projects are budgeted in FY 2016-17.
This includes setting aside $200,000 toward the eventual Brisco/Halcyon interchange project.
Transportation
2%
Streets/Parks
62%
Drainage
5%
Public Safety
26%
Facilities
5%
Administration
0%
Local Sales Tax 5 Year Expenditures
Item 10.a. - Page 2
CITY COUNCIL
CONSIDERATION OF CONSIDERATION OF 5-YEAR REVIEW OF LOCAL SALES TAX
APRIL 11, 2017
PAGE 3
One of the priority needs in establishing the local sales tax was to fund improvements to the
Brisco Interchange. Minimal funds have been utilized for this project thus far due to delays in
obtaining approval from Caltrans, and engineering and environmental review costs have
been paid for from development impact fee revenues. However, since State funding is now
programmed and Caltrans approval is anticipated in the near future, local sales tax revenues
will be a critical component of the project’s proposed funding plan. Funding of $1.6 million is
included in the 5-Year Plan, which will likely be used to finance a portion of the project costs
over a thirty year period. Without this funding source, the project cannot proceed.
Street Improvements
The 5-Year Plan maintains $725,000 - $800,000 annually for the Pavement Management
Program and nearly $500,000 for sidewalk and other street improvements. In addition, there
is $100,000 annually for staff to perform ongoing street repairs. The Oak Park Rehabilitation
and Alpine Street Improvements will provide an additional $267,000 in street improvements
as well. In total, over $6.1 million is allocated over the five year period to street
improvements. This amount falls well short of the funding required to maintain the City’s
streets.
Five Cities Fire Authority
Local sales tax funds have been instrumental in paying for enhancements to Fire operations
prior to and following formation of the Five Cities Fire Authority. Over $140,000 is
programmed for this purpose on an ongoing basis. Given the already minimal staffing of the
Fire Department, any reduction or elimination of local sales tax funds would significantly
impact the City’s ability to provide critical public safety services. In addition, funds continue to
be committed for the next five years for the City’s share of debt services costs for the
replacement of a fire engine.
Police Services
The 5-Year Plan includes ongoing funding of one Police Senior Officer position and the City’s
required contribution for the countywide Narcotics Task Force (NTF). Both of these are
critical to the ongoing operations of the Police Department. Participating in the NTF allows
the City to utilize staffing from other police agencies and the Sheriff’s Office when dealing
with narcotics related crimes. The funding of one Senior Officer position is an important
component in the Police Department’s investigations division. Given the already minimal
staffing in the Police Department, any reduction or elimination of local sales tax funds would
significantly impact the City’s ability to provide critical public safety services.
City Facilities
Over the past five years, almost $2 million has been expended improving City facilities, in
particular the Police Station Upgrade and the new Corporation Yard administrative office
building. Included in the 5-Year Plan are funds to improve several City facilities, including the
recent accessibility improvements at the Council Chambers, phase 2 of the Corporation Yard
remodel and $460,000 in funding toward a solution for the Elm Street Community Center
upgrade or replacement.
Item 10.a. - Page 3
CITY COUNCIL
CONSIDERATION OF CONSIDERATION OF 5-YEAR REVIEW OF LOCAL SALES TAX
APRIL 11, 2017
PAGE 4
Budget Development
As the City Council is aware, efforts are currently underway to develop the FY 2017-18
budget, which may propose changes to the 5-Year Plan as currently presented. Any
changes will be reviewed and discussed with the City Council as part of the budget adoption
process.
ALTERNATIVES:
The following alternatives are provided for City Council consideration:
1. Approve staff’s recommendation and maintain the Local Sales Tax Measure;
2. If the City Council would like to pursue a reduction or elimination of the local sales tax,
it would be necessary to direct staff to prepare a measure for voter consideration.
This would require either a special election or inclusion on the November 2018 ballot;
or
3. Provide other direction to staff.
ADVANTAGES:
Maintaining the local sales tax funds is critical to meet the City’s future infrastructure
maintenance, public safety and operating funding needs.
DISADVANTAGES:
The only disadvantage identified is the inability to reduce the tax burden on the residents and
visitors. However, the City has worked hard to address extremely difficult financial
challenges over the last several years without any additional tax increases.
ENVIROMENTAL REVIEW:
No environmental review is required for this item. Environmental review, if required, is
performed individually for the projects identified in the 5-Year Plan.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachment:
1. Local Sales Tax History
2. Local Sales Tax 5-Year Revenue and Expenditure Projections
Item 10.a. - Page 4
Item 2011-12 2012-13 2013-14 2014-15 2015-16 5-Year Total
Traffic Model Update 11,465 13,480 - - - 24,945
Digital Speed Limit Signs - 9,058 - - - 9,058
Castillo Del Mar Road Improvements - 15,053 - 6,924 - 21,977
East Branch St Streetscape - - - - 36,848 36,848
Halcyon Rd Complete Street Plan Study - - - - 11,601 11,601
Swinging Bridge Reinforcement - - - 3,000 39,563 42,563
Traffic Way Bridge Improvements - - 455 3,042 - 3,497
Subtotal Transportation 11,465 37,591 455 12,966 88,012 150,489
Short Street Narrowing and Realignment 24,554 - - - - 24,554
Tree Inventory and Trimming 12,520 - - - - 12,520
Montego St Sidewalk Project 3,956 3,852 (126) - - 7,682
Traffic Way Extension Resurfacing 2,758 - - - - 2,758
El Camino Real Resurfacing Project 428,224 125,000 - - - 553,224
Greenwood Tract Resurfacing 5,920 399,617 - - - 405,537
Crown Hill ADA Ramps and Crosswalk - 8,087 - - - 8,087
Fair Oaks Ave Improvements - 6,023 142,870 - - 148,893
Utility Undergrounding - 3,065 179,902 - - 182,967
Americans with Disabilities Act (ADA) Retrofits - - - 33,443 - 33,443
Pavement Management Program 1,069,312 644,472 835,269 476,532 730,859 3,756,444
Striping and Sidewalk Improvements 46,557 109,173 50,367 98,925 94,327 399,349
Oak Park Rehabilitation Project - - - - 11,391 11,391
Street Maintenance 53,027 59,379 - 45,253 154,886 312,545
Construction Management/Inspection - - - 30,000 42,700 72,700
Paulding Wall Project - - - 2,802 86,387 89,189
Alpine St Waterline & Street Imp - - - 356 1,082 1,438
Larchmont Street Improvements - - 445 187,693 - 188,138
Various Park Improvements - - - - 25,000 25,000
Soto Complex ADA Improvements Phase II - - - - 10,459 10,459
ADA Ramps @ Mid-Block Crosswalks - - - - 6,150 6,150
Car Corral Upgrade - - - - 20,559 20,559
Le Point St Parking Lot 100,267 29,380 48,734 19,244 38,588 236,213
Subtotal Street/Park Improvements 1,747,095 1,388,048 1,257,461 894,248 1,222,388 6,509,240
CITY OF ARROYO GRANDE
LOCAL SALES TAX FUND HISTORY
ATTACHMENT 1
Item 10.a. - Page 5
Item 2011-12 2012-13 2013-14 2014-15 2015-16 5-Year Total
CITY OF ARROYO GRANDE
LOCAL SALES TAX FUND HISTORY
Newsome Springs Drainage Project 165,567 - - - - 165,567
Drainage and Creek Preservation Projects 44,233 26,471 10,720 24,810 - 106,234
E. Branch Street Drainage Improvements - - 58,173 - - 58,173
Retention Basin Maintenance 25,700 25,700 26,124 26,646 27,200 131,370
Platino Ln/Oro Dr Inlet 409 77,192 77,601
Stormwater Annual Permit & Program - - - 2,250 15,000 17,250
Subtotal Drainage Improvements 235,500 52,171 95,017 54,115 119,392 556,195
Five Cities Fire JPA 115,000 117,300 120,000 125,000 137,700 615,000
Emergency Operations Center 1,000 500 2,500 - - 4,000
Fire Apparatus 21,163 21,163 21,163 21,163 21,164 105,816
Police Station Upgrade 57,846 70,256 556,247 595,500 116,850 1,396,699
Police Senior Officer Position - - 150,000 165,500 167,700 483,200
Narcotics Task Force 24,000 24,000 24,000 24,000 24,000 120,000
Subtotal Public Safety 219,009 233,219 873,910 931,163 467,414 2,724,715
Capital Project Planning Studies 3,750 13,153 6,600 - - 23,503
City Hall Complex Upgrade 70,448 - - - - 70,448
City Hall Debt Service - 27,743 20,000 20,000 20,000 87,743
Council Chambers Accessibility Improvements - - - - 18,309 18,309
Corporation Yard Upgrade - - 18,845 218,359 11,953 249,157
Information Technology Improvements - - - 42,853 - 42,853
Wireless Internet Access - - - - 24,743 24,743
Electric Vehicle Charging Station - - - - 4,663 4,663
City Hall Safety Improvement Project - - - - 17,344 17,344
Subtotal City Facilities 74,198 40,896 45,445 281,212 97,012 538,763
Annual Audit and Sales Tax Report 4,296 3,706 1,477 6,925 3,412 19,816
Subtotal Other 4,296 3,706 1,477 6,925 3,412 19,816
Item 10.a. - Page 6
Item 2011-12 2012-13 2013-14 2014-15 2015-16 5-Year Total
CITY OF ARROYO GRANDE
LOCAL SALES TAX FUND HISTORY
Total Expenses 2,291,563 1,755,631 2,273,765 2,180,629 1,997,630 10,499,218
Revenue 1,852,148 1,916,290 2,061,925 2,036,689 2,165,424 10,032,476 -
Revenue Over/(Under) Expenses (439,415) 160,659 (211,840) (143,940) 167,794 (466,742)
Beginning Fund Balance 2,176,103 1,736,688 1,897,347 1,685,507 1,541,567
Ending Fund Balance 1,736,688 1,897,347 1,685,507 1,541,567 1,709,361
Fund Balance as % of Revenues 94%99%82%76%79%
Item 10.a. - Page 7
Item
2016-17
(Budget)2017-18 2018-19 2019-20 2020-21 5-Year Total
Castillo Del Mar Road Improvements 143,075 - - - - 143,075
East Branch St Streetscape 130,752 - - - - 130,752
Fair Oaks/Orchard Rd Intersection Imp 50,000 - - - - 50,000
Halcyon Rd Complete Street Plan Study 7,899 - - - - 7,899
Swinging Bridge Reinforcement 202,437 - - - - 202,437
Traffic Way Bridge Improvements 13,605 48,200 - - - 61,805
Brisco Rd Interchange Project 200,000 350,000 350,000 350,000 350,000 3,000,000
Subtotal Transportation 747,768 398,200 350,000 350,000 350,000 3,595,968
Pavement Management Program 754,305 725,000 750,000 775,000 800,000 7,229,305
Striping and Sidewalk Improvements 51,975 60,000 115,000 120,000 125,000 991,975
Oak Park Rehabilitation Project 193,609 - - - - 193,609
East Grand Ave Sidewalk Imp 33,100 100,000 - - - 133,100
Street Maintenance 196,700 100,000 100,000 100,000 100,000 996,700
Construction Management/Inspection 43,600 44,400 45,300 46,200 47,100 423,700
Alpine St Waterline & Street Imp 73,558 - - - - 73,558
Soto Complex ADA Improvements Phase II 3,001 - - - - 3,001
ADA Ramps @ Mid-Block Crosswalks 3,025 3,025
Le Point St Parking Lot 633,800 - - - - 633,800
Subtotal Street/Park Improvements 1,986,673 1,029,400 1,010,300 1,041,200 1,072,100 10,681,773
Clark Properties Drainage Improvements 53,500 - - - - 53,500
Vard Loomis Drainage Improvements 50,000 - - - - 50,000
Retention Basin Maintenance 27,700 28,300 28,800 29,400 30,000 269,600
Stormwater Stream Monitoring 17,500 18,000 18,500 19,000 19,500 175,500
Open Channel Maintenance (Env & Permit)15,000 - - - - 15,000
Sierra/Hillcrest Drainage Design 20,000 - - - - 20,000
CMP Replacement - Huasna Rd - 88,000 - - - 88,000
El Camino Real Drainage Pipe 88,900 88,900
Stormwater Annual Permit & Program 15,000 15,000 16,000 16,000 16,000 142,000
Subtotal Drainage Improvements 287,600 149,300 63,300 64,400 65,500 902,500
CITY OF ARROYO GRANDE
LOCAL SALES TAX FUND
5-Year Revenue and Expense Plan
ATTACHMENT 2
Item 10.a. - Page 8
Item
2016-17
(Budget)2017-18 2018-19 2019-20 2020-21 5-Year Total
CITY OF ARROYO GRANDE
LOCAL SALES TAX FUND
5-Year Revenue and Expense Plan
Five Cities Fire JPA 140,500 143,300 146,100 149,100 152,000 1,366,900
Fire Apparatus 28,800 28,800 28,800 28,800 28,800 259,200
Police Senior Officer Position - 186,600 192,200 198,000 203,900 1,659,300
Narcotics Task Force - 24,000 24,000 24,000 24,000 192,000
Police Firing Range - - - 120,000 - 120,000
Subtotal Public Safety 169,300 382,700 391,100 519,900 408,700 3,597,400
City Hall Debt Service 20,000 20,000 20,000 20,000 20,000 180,000
Document Imaging 7,500 - - - - 7,500
Council Chambers Accessibility Improvements 231,691 - - - - 231,691
Corporation Yard Upgrade 65,841 - - - - 65,841
Elm Street Community Center Upgrade 160,000 150,700 150,700 - - 461,400
Citywide Solar Panel Project 3,500 - - - - 3,500
Wireless Internet Access 7,707 - - - - 7,707
Electric Vehicle Charging Station 337 - - - - 337
IT Firewall Replacement 30,000 - - - - 30,000
City Hall Safety Improvement Project 15,156 - - - - 15,156
Financial Management System - - 200,000 - - 200,000
Subtotal City Facilities 541,732 170,700 370,700 20,000 20,000 1,203,132
Annual Audit and Sales Tax Report 7,500 7,500 7,500 7,500 7,500 67,500
Subtotal Other 7,500 7,500 7,500 7,500 7,500 67,500
Total Expenses 3,740,573 2,137,800 2,192,900 2,003,000 1,923,800 20,048,273
Projected Revenue 2,241,900 2,345,438 2,415,801 2,439,959 2,464,359 2,464,359
Revenue Over/(Under) Expenses (1,498,673) 207,638 222,901 436,959 540,559 1,716,620
Beginning Fund Balance 1,709,361 210,688 418,326 641,227 1,078,186
Estimated Ending Fund Balance 210,688 418,326 641,227 1,078,186 1,618,745
Fund Balance as % of Revenues 9%18%27%44%66%
Item 10.a. - Page 9
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