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City Council Report

 

City Council Meeting: June 9, 2009

Agenda Item: 8-A

 

To:                   Mayor and City Council 

                       

From:              Andy Agle, Director of Housing and Economic Development

                        Carol Swindell, Director of Finance           

           

Subject:          Redevelopment Agency Capital Funding Priorities:

                        Supplemental Information on Remaining Recommended Projects

 

 

Recommended Action

Staff recommends that the City Council provide additional direction on long-term funding priorities for the Redevelopment Agency and prioritize the remaining recommended capital improvement projects.  The recommendations contained in this report and previous reports are based on staff’s review of proposed projects relative to community priorities.  Staff seeks direction from Council on the final prioritization of projects.

 

Executive Summary

This staff report follows two previous reports presented on April 14 and May 12 concerning redevelopment funding priorities for capital improvement programs and projects.  At the May 12 meeting, Council identified several projects as senior priorities for funding.  This report provides supplemental information including project objectives and refined operating and maintenance costs for Council’s consideration in prioritizing the remaining projected Agency funding capacity.

 

Background

At its April 14 and May 12 meetings, Council considered a summary of recommended capital improvement projects and preliminary funding allocation recommendations based on an estimated Earthquake Recovery Redevelopment Project Area funding capacity of $283 million (excluding redevelopment funds set aside for affordable housing).  The proposed capital projects were recommended based on specific criteria related to long-standing community priorities including affordable housing, open space, circulation and parking, and arts and culture.  The proposed preliminary funding allocations were based on several factors including the desire to capitalize on one-time opportunities and to help move or accelerate projects forward.

 

Each recommended capital project was evaluated based on the following criteria:

·        Advances Redevelopment Agency goals and priorities

·        Advances City Council-adopted community priorities

·        Satisfies long-standing, unmet  community needs

·        Creates facilities that can be maintained and operated in the long-term

·        Leverages funding from other sources

·        Advances a prior City investment 

 

Following extensive consideration of the recommended capital projects, Council reached consensus to support senior priorities for the following projects and in the amounts reflected below.

Project

5/12/09 Council Priorities

(in millions)

Civic Center Planning and Design

      $   2.5

Palisades Garden Walk and Town Square

25.0

Civic Auditorium Renovation

25.0

Civic Auditorium District Projects

21.0

Early Childhood Education Center

4.4

Expo Green Streets and Pathways

20.9

Santa Monica High School Joint Use (Phase 1)

57.0

Civic Center District Shared Parking

25.0

Memorial Park Expansion

2.3

Pico Neighborhood Branch Library

12.8

Exposition Light Rail Station Enhancements

10.0

Total

$206.0

 

If staff’s understanding of Council’s direction, as shown in the table above, is correct, approximately $77 million of the total estimated funding capacity of $283 million remains available to allocate. After reviewing notes from the May 12, 2009 Council meeting, as well as subsequent review of the meeting recording, staff seeks clarification regarding two points of the Council’s action.  First, it is unclear whether the motion was to allocate the full amount ($30 million estimated cost)  to construct the Pico Neighborhood Library on Pico Boulevard, or the lower amount ($12.8 million) to develop within Virginia Avenue Park.  Second, Council’s prioritization included the parks, cultural facilities and circulation systems in the Civic Center.  Staff seeks clarification as to whether the $2 million allocation to study and design freeway capping was included in that allocation.

 

Discussion

Following prioritization of the first tier of “senior priority” capital projects, staff seeks direction from Council on prioritization of the remaining uncommitted redevelopment funds ($77 million.)  A synopsis of each remaining recommended project is provided in Attachment A.  It should be noted that project costs are estimated based on the best information currently available and do not yet reflect fully analyzed hard costs. As stated above, each recommended project was evaluated based on specific criteria and these projects were included for consideration because they achieved several of the criteria. Attachment B shows the City Council’s May 12, 2009 allocation and lists the original and revised, recommended RDA allocations for the remaining projects that are RDA eligible and continue to be recommended for funding. These include:

 

Affordable Housing

·        The demand for affordable housing exceeds supply. Provision of additional funds for this activity will be used to support efforts to preserve and produce affordable housing for very low and low-income households in Santa Monica.  The $10 million could increase the supply of affordable housing by approximately 30 to 35 residences. Existing apartment buildings could be rehabilitated and dedicated for affordable housing are readily available for purchase. Recommended allocation: $10 million

 

Civic Center Parks and Public Facilities

·        Freeway Capping The $2 million of recommended funds would be used to cap or bridge the freeway east of the McClure Tunnel, in order to correct the irregularly shaped bridge deck and allow for an entrance into Palisades Garden Walk at the key pedestrian intersection of Ocean Avenue and Colorado Boulevard, across from the Santa Monica Pier.  Currently, the north edge of the bridge funnels pedestrians onto a 10-foot wide sidewalk at a substandard Rapid Bus stop.  Providing a pedestrian entrance to the park and an improved bus stop area would provide opportunities to improve pedestrian paths of travel, as well as supporting the approved Civic Center Specific Plan for connecting the Civic Center to the Pier and Palisades Garden Walk.   Recommended allocation: $2 million

Downtown Parking Strategic Plan

·        Parking Design and Construction: Continued design and construction of Downtown Parking Structures 1 and 6 to include ground-floor pedestrian-oriented spaces, per the Downtown Parking Strategic Plan.  Combined with $17 million of Parking Authority Funds, the recommended $1 million would fulfill the City’s funding obligation for the project.  Recommended allocation:  $1 million

 

·        Acquisition: Continuation of the Downtown Parking Strategic Plan through acquisition of strategic properties.  If acquired properties are not needed for parking, they could be used for other public purposes such as open space or affordable housing. Recommended allocation: $27 million

 

Commercial Corridor Enhancements

·        Lincoln Blvd:  In coordination with the LUCE Strategy Framework, this project seeks to improve pedestrian facilities and landscaping, enhance transit stop facilities, create gateway treatments, and create shared parking at the Ocean Park/Lincoln Activity Center identified in the Strategy Framework.  Funding of the planning efforts is recommended to cover the development of a master plan for the corridor and to define specific projects.  Recommended allocation: $1.1 million

 

·        Pico Blvd: Funding of the planning for this project is requested for master planning and defining specific projects to improve the walkability of Pico Boulevard including construction of additional crosswalks, to improve the Dorchester Tunnel and other connections, and to explore shared parking facilities for the activity centers and a potential parking district, in coordination with LUCE Strategy Framework.  Recommended allocation: $600,000

 

Traffic Signal Master Plan

The multi-phased upgrade of the City’s signal technology will enable the City to manage the entire system of traffic signals from a centralized location in real-time to closely manage incidents, special events, and specialized timing needs.  The upgrade includes new traffic signals, video detection, controllers and communication through fiber-optic or wireless. Funding this project is critical in order to reduce traffic congestion and improve circulation, two major concerns of Santa Monica’s residents, workers, and visitors. Funding the final phases of the City’ traffic signal system (the ATMS project) is critical in order to achieve the goals of the ATMS project. Without these two final phases, the City’s traffic signal system will not be completely interconnected along major corridors, and future plans for the centralized monitoring and control of these intersections will not be achievable.

 

·        Phase IV - Mid-City/Ocean Park Blvd/Main St./Arizona Blvd: Phase IV covers intersections in the Mid-City area and Arizona in the downtown, as well as portions of Ocean Park Boulevard, and the Main Street/Neilson Way corridor. Mid-City segments include sections of Broadway, Olympic, 17th Street, 14th Street, and 11th Street. The traffic signal equipment at the intersections along Arizona in the downtown is very old. Recommended allocation:  $4.4 million

 

·        Phase V - Northern Section of the City: Phase V, the final phase of the City-wide upgrade project, covers the northern portion of the City and  includes Montana Avenue, sections of 26th Street and 7th Street.   Recommended funding: $3 million

 

Infrastructure Improvements

·        Newcomb Deck Improvements – The recently completed Santa Monica Pier Infrastructure Assessment Study evaluated the condition of all structural elements of the Pier and determined that substantial improvements were needed on the Newcomb Deck. Various areas of the Newcomb Deck are constructed differently and require different levels of upgrades in order to support structural loads of 15 tons.  The Study determined that Areas 2, 4 and 7, at the eastern portion of the Newcomb Deck, were in immediate need of repair to stringers and deck boards.  Over the next five years, the Study estimated that the total cost of the Newcomb Deck Repairs, including Areas 2, 4 and 7, would be $8.1.  The report scheduled other repairs in years six through ten. Although this project is not located within a redevelopment project area, it is contiguous and of benefit to the Earthquake Recovery Project Area, as retrofitting the Pier produces safety benefits for all residents, businesses and visitors in the Project Area.

 

The previous RDA recommendation included $2.964 million towards Phase IV infrastructure improvements to the Municipal Pier. As the proposed FY 2009/2010 CIP Budget includes funding for this project from other sources, this portion of the Pier infrastructure improvement project is no longer recommended for redevelopment funding.  Recommended allocation: $8.1 million

 

·        Beach Bike Path Extension: North of the Santa Monica Pier, pedestrians are forced to share the beach bike path with cyclists. The County of Los Angeles recently submitted a Metro Call for Projects grant to create a dedicated pathway for pedestrians terminating at the northern city limit.  The City’s local match commitment to the project would be $365,000.  Additional funding is requested to implement improvements along the heavily used Pier section of the Beach Bike path. Recommended allocation: $1 million

 

·        Citywide Tree Planting: The Greenhouse Gas (GHG) Reduction Tree Planting Project is being conducted in conjunction with the US Forest Service’s Center for Urban Forest Research (CUFR) who has developed protocols for reporting actual carbon storage by trees. In order to qualify for carbon credits on the Climate Registry, the protocol requires that cities undertake GHG tree planting projects, adding an additional 1,000 trees to a municipality’s baseline tree inventory.  The trees must be sustained for at least 100 years. This project demonstrates the second guiding principal of the Sustainable City plan by helping to restore the natural environment.  This project is the first of its kind in the US and will be used as a template for other public agencies across the US to follow. This project will bring the City of Santa Monica closer towards generating reliable information on reducing greenhouse gas emissions. Without funding this project will not go forward. Recommended allocation: $300,000

 

·        Bike Transit Center:  Funding this project confirms the City’s commitment to promoting multi-modal transportation and sustainability. The Bike Transit Center will provide attendant and self-park secure bike parking, lockers, showers, repair, retail and rentals as a store-front facility in Parking Structure 2.  Providing such facilities can reduce vehicle trips to the downtown, thus reducing the need to build future vehicle parking spaces.  The facility on 2nd between Arizona and Wilshire will be part of a system of facilities to serve employees, visitors and residents.  This request is for local funding to prepare construction drawings for a project that will be constructed with federal grant funds. Recommended allocation: $200,000

 

·        Streetlight Retrofit/Replacement:  The Maintenance Management Division is requesting $1 million in RDA funds to upgrade/convert 33,431 linear feet of the City’s existing high voltage circuits (5,000 volt) to low voltage (120/240 volt).  Approximately 1/3 of the City’s remaining high voltage circuits fall within the Earthquake Recovery Redevelopment Project Area.  Funding this project will address issues of maintenance costs savings, safety and sustainability.  Residents are very concerned when the streetlights are out on their streets. Because high voltage circuits are older, more antiquated systems and because there are very few companies that produce replacement parts, it typically takes several weeks or months until the custom order parts arrive. The City has experienced outages to high voltage equipment that required an electrician to turn on the lights each night and turn them off each morning for several weeks until repairs were completed.  It is expensive to have SCE repair and replace high voltage equipment and it is not efficient as high voltage systems consume more energy and result in costly repair fees.  Funding the completion of this project will help the City realize costs savings in terms of operations and maintenance; ensure that residents have reliable well lit streets; and, advance the City’s goals related to sustainability. Without these improvements neighborhoods in the RDA area will continue to lose all the street lights at one time, experience darkened and perhaps dangerous conditions, but with these improvements they will experience added safety with reliable streetlight features and improved aesthetic in their neighborhoods. The recommended redevelopment funds are to cover the shortfall from the proposed FY 2009/2010 CIP Budget. Recommended allocation: $1 million

 

Given the need to prepare and complete the City’s FY 2009/2010 budget and the Agency’s Five-Year Implementation Plan, as well as meet the Agency’s deadline of 2014 to establish debt and the desired timing of 2012 to issue bonds, staff seeks Council’s prioritization of the remaining funds.

 

Project Considerations

In the absence of redevelopment funding or an increase in the General Fund’s ability to fund capital improvements, the projects described above will be deferred.  As General Fund revenues have tapered off and operating expenses have continued to grow, the General Fund CIP Budget has continued to shrink, to the point that very few capital projects can be funded by the General Fund.  The availability of Redevelopment Agency funds creates on opportunity to continue to fund locally important capital improvement projects.  For the recommended infrastructure projects, delaying replacement will result in increased maintenance and utility costs, for streetlights for instance, and continued inadequate conditions, for instance on the Pier and beach bike path. If grant funds are secured for projects but no local match is available, the City will need to forfeit the grant funds.  

 

Another project consideration relates to the Civic Center Specific Plan’s call for a dedicated sports field as part of the Civic Auditorium Park.  Creative Capital, as well as the Civic Center joint-use campus planning with the school district, envisions the area developed with more flexible open space that supports the adjacent cultural and community facilities.   The demand for a dedicated sports field in the Civic Auditorium Park could be alleviated by creating a new sports field as part of the Memorial Park expansion or as part of the Civic Center Joint Use Project at Santa Monica High School.

 

Based on the Council’s final direction regarding funding priorities, staff will continue to work with School District representatives on the structure for providing redevelopment funding for the Civic Center Joint-Use Project at Santa Monica High School.  The structure will likely take the form of an agreement between the Agency and School District which includes provisions for the disbursement of funds which will take into account redevelopment requirements as it relates to advancement of future pass-through payments to the School District along with the cash flow requirements of the Civic Center Joint-Use Project.  The terms of the agreement would also be expected to include requirements regarding the projects to be constructed and operated pursuant to redevelopment funding. The current Civic Center Joint Use Project schedule reflects a three-year pre-construction phase.  During that period, it is anticipated that final designs and a financing plan for the Project will be developed.  In the event appropriate funding cannot be secured for the project, the project could be designed to match the available funds or the redevelopment funds could be redirected to other eligible projects.  Such timing requirements will apply to all projects proposed for funding by the Agency.

 

Operating and Maintenance Costs

 

While Redevelopment funds can be used to construct facilities and public improvements, California Redevelopment Law prohibits the use of funds to assist with the operations and maintenance of such facilities. Recognizing that there are implications for the City’s general fund relative to on-going costs for new facilities, Council requested information regarding the estimated operating and maintenance costs associated with each proposed project. 

 

At this point, the operating and maintenance costs (O & M) for the projects are very conceptual and will likely change as the projects are further designed (Attachment C).   Facility Maintenance, Public Landscaping and Community Forest, Custodial Services, and Community Programs updated their O & M costs based on current estimates for similar facilities, rather than based on general industry standards or other measures. The revised estimates are mostly affected by the recalculation of utility costs using current expenses for comparable facilities.  Shared Parking and Palisades Garden Walk estimates are the most revised with respect to O & M cost reductions at approximately $2.5 million and $2 million less, respectively, than originally estimated.  The Civic Auditorium District Project’s revised estimates are lower by roughly $1.5 million and Memorial Park revisions are nearly $1 million less than originally calculated.  With the revised estimates, Council can more appropriately consider the full cost of proposed projects.

 

Estimated O & M costs for the Santa Monica High School Civic Center Joint-Use facilities project have also been revised.  Several factors were taken into account in developing these estimates including staffing (for running the programs and maintenance staff during the proposed public use times) and other factors such as utilities, equipment and supply costs.  While using the current cost formula for School District Joint-Use facilities, Custodial Services found that their cost estimates are higher than originally projected for the gym, yet lower for the pool.  Custodial Services based their estimates on in-house custodial costs for similar staffing and hours of operation at the Memorial Park Gym and the Swim Center.  However, these costs should be partially offset by revenues from fees that would be collected for Community Programs. Attachment D shows the various cost factors that were used to develop the annual estimate of $2.86 million (the $2.86 million reflects the net O & M after the reduction of $590,000 of estimated revenues) for the School District Joint-Use facilities project’s O & M. It is important to note the estimated revenues are based upon similar facilities operated by the city. 

 

Funding Considerations

As noted in earlier reports, the estimated funding capacity is predicated on a number of factors that may change over time, including growth in tax increment, timing of the bond issue(s), whether any bonds would need to be issued on a taxable instead of tax-exempt basis and the general conditions of the municipal credit markets at the time bonds are issued.   The current estimated funding capacity of $283 million assumed that the first bond issuance would occur in FY 2009-10.  The actual timing of bond issuances will have an impact on capacity.  If the first bond issue were delayed until 2011-12, for instance, and the same underlying assumptions are maintained, there would be additional project capacity of approximately $31 million.   However, other factors could reduce capacity.  If, for example, assessed valuation dropped by 4% in 2010-11 and remained relatively flat through 2013-14, funding capacity would decrease by $40 million.  In addition, interest rates for municipal debt have already increased since the time the model was prepared and may be higher than those in the model by the time the Agency issues bonds, which would further reduce funding capacity. Staff will regularly report back to the Council regarding factors which affect the Agency’s funding capacity; using the annual budget adoption process and mid-year budget review as two opportunities each year to update Council.  For example, cost estimates for the proposed projects have been developed based on the amount of information currently available.  As projects are further defined, updated cost estimates will be developed to provide a more refined assessment of funding needs. If the updated cost estimate for a project is lower than originally anticipated or if grants or other opportunities to leverage funds are available, staff will seek Council direction on how to reallocate the excess funds.  Likewise, if cost estimates prove to be greater than estimated or total funding capacity is less than estimated, staff will ask Council for direction on reallocating funds between projects.  The need for reallocation of funds could be affected by a variety of factors, ranging from growth in assessed property valuation to borrowing costs to budgetary and legislative actions by the State of California.

 

Staff will also continue to explore various debt instruments to maximize funding, while moving forward with community design of projects to capitalize on the ideal bonding window and the final debt obligation deadline.  There is typically a long lead time required for the issuance of bonds, in particular lease revenue bonds.  Therefore, the final projects should be identified twelve to eighteen months before bonds are issued, in order to support adequate project planning.  It is important that the projects be fully defined, including completing design, CEQA review and obtaining construction bids, before going to the bond market.  This ensures a high level of certainty that the bond amount will fully fund the proposed projects and that the projects can be completed within the three-year spending requirement.  In addition, much of the debt will need to be issued as Lease Revenue Bonds, which have certain requirements related to the beneficial use of the property being leased and may require capitalizing interest during the construction period.   The flexibility to shift funds between projects will depend to a large extent on the type of financing structure used.   Some structures provide more flexibility than others.   When examining the financing plan, City staff and consultants will analyze the projects to be financed in order to determine the financing structure that best meets the City's needs in maintaining flexibility with respect to less certain projects and reducing the overall costs of borrowing.   Flexibility to shift funding between projects will be highest prior to the issuance of bonds.  The ability to reimburse funds for prior expenditures can help to maximize this flexibility. 

Once the City or the RDA issues lease revenue bonds, the bond offering documents must describe the actual projects to be financed, the expected cost to complete the project and the time expected for completion.  The City must also enter into lease agreements with the Santa Monica Public Facilities Financing Authority (or another appropriate entity) for the long-term use of the facility and agree to make lease payments to repay the bonds.  After the bonds have been issued, and if circumstances warrant, it would be possible for the City to reallocate the bond proceeds to one or more additional projects; however, these other projects must meet similar characteristics to the original projects.  For example, the substituted projects must have a useful life at least as long as the original project, must have a fair rental value at least equal to the original project and would have to also qualify for tax-exempt financing at the time the substitution occurs.  The City may also be required to certify that the substituted project has a similar or greater importance to the City than did the original project. 

 

Next Steps

The Agency funding priorities will be reflected in the City’s final Capital Improvement Program for FY 2009-10 through 2013-14, the City’s final FY 2009-10 Budget, and the Agency’s Implementation Plan to be considered later this year. 

 

Financial Impacts & Budget Actions

 

All budget actions resulting from these funding commitments will be included in the FY  2009-2010 Budget and any approved funding commitments beyond this fiscal year will be appropriated each fiscal year thereafter.  Funds for operating cost impacts will need to be identified and appropriated as well. 

Prepared by:   Tina Rodriguez, Redevelopment Administrator

 

Approved:

 

Forwarded to Council:

 

 

 

 

 

 

 

 

Andy Agle, Director

Housing and Economic Development

 

P. Lamont Ewell

City Manager

 

 

 

 

 

Carol Swindell

Finance Director      

 

 

 

Attachments:

 

Attachment A:            Summary of Remaining Recommended Projects

Attachment B:            Updated Summary of Recommended Funding Allocations

Attachment C:            Updated Operational and Maintenance Costs

Attachment D:            Santa Monica High School Civic Center Joint-use Facilities Project (O & M Detail)