Bonnie Teaford, Public Works Director

PURPOSE:

This report provides Council with an overview of the work completed to date by the 2006-2007 Council Infrastructure Subcommittee. The report

�        summarizes the work efforts

�        discusses the potential funding sources for infrastructure

�        provides a draft short-term (five year) infrastructure investment plan

BACKGROUND:

As part of the Fiscal Year (FY) 2006-07 budget process, Council requested that staff update the infrastructure deficit report, which had been presented to Council in February 2005.  In response to that request, Public Works prepared a Discussion Paper that identified about $200 million in public works and park related infrastructure needs.  The Discussion Paper recommended a timeframe ranging from 1 year to 20 years for addressing specific items.

In response to the Discussion Paper, Council formed a subcommittee to analyze and prioritize the City�s infrastructure deficit.  Council Members Vander Borght and Golonski were appointed to the subcommittee along with the following executive team members:

�        Mary Alvord, City Manager

�        Mike Flad, Assistant City Manager

�        Sharon Cohen, Library Services Director

�        Ron Davis, Burbank Water and Power General Manager

�        Sue Georgino, Community Development Director

�        Eric Hansen, Park, Recreation and Community Services Director

�        Bonnie Teaford, Public Works Director

�        Bob Torrez, Financial Services Director

The Infrastructure Subcommittee began meeting in August 2006, with subsequent meetings held about every month thereafter.  The committee�s primary goals were

identified as follows:

• Determine the type of facilities to be considered �infrastructure� by the Subcommittee

• Complete a comprehensive needs assessment of all existing (non-Enterprise Fund) City infrastructure

• Identify future Capital Projects (buildings or facilities) needed in the City of Burbank

• Identify available and potential funding sources for specific infrastructure

• Develop realistic short-term and long-term timeframes for completion of infrastructure projects

• Deliver a report to Council on the status of the City�s infrastructure during the 2007-2008 budget cycle (in Spring 2007)

ANALYSIS:

Types of Infrastructure Considered and Needs Assessment

One of the Subcommittee�s first tasks was to determine what was to be included in the group�s consideration of �infrastructure.�  Staff recommended that in addition to traditional public infrastructure such as existing streets, alleys, sidewalk, bridges, buildings, and parks, the Subcommittee should consider future infrastructure such as the hoped-for future Central Library replacement, investments in technology and communications, and improvements in transit and transportation systems.  The subcommittee agreed that the Enterprise Funds (Electric, Water, Sewer, Refuse and Golf) and the Parking Authority would not be the focus of the group�s work; however, the subcommittee would ask staff to query the appropriate departments to assess whether the infrastructure of those special funds was thought to be adequately funded.

A summary of the types of infrastructure that were included in the subcommittee�s work is provided in Table 1.  Three main categories were identified: 1) existing infrastructure, 2) future infrastructure, and 3) enterprise and other infrastructure.   Table 1 identifies the various subcategories and the City department that is responsible for each.  In addition, the assessment or management tool used by the responsible department to monitor the physical condition of each type of infrastructure was described, along with a comment the age and quality of that assessment tool. 

Existing Infrastructure:  When the Subcommittee�s work first began, three types of existing infrastructure needed updated condition assessments: 1) sidewalk deficit (places in the City that have no sidewalk); 2) municipal buildings; and 3) parks grounds needs.  To address the sidewalk issue, Public Works systematically revisited each street in the City and updated its map illustrating areas where sidewalk does not exist.  For park infrastructure, the Park, Recreation and Community Services (PR&CS) Department assessed each of its parks and facilities to determine when play equipment, shade structures, irrigation, lights, and other physical infrastructure would likely need replacement or major renovation. The results of the park assessment are provided in Appendix A. This park assessment did not include park buildings or the City�s two public swimming pools because those were addressed under the municipal buildings category. 

The assessment of 55 non-Enterprise Fund City building facilities required a team effort.   Working together, Public Works� Building Maintenance Division staff and the Community Development Department�s Building Division staff inspected each of the City�s buildings and evaluated their core systems (e.g. roofs, plumbing, HVAC systems, paint, flooring, etc.).  Cost estimates and generalized schedules were developed for the planned replacement or major renovation of each of these systems. A summary of the building assessment, including staff�s estimate of improvements that will be needed over the next 20 years, is provided in Appendix B.

Once the assessments had been completed for each type of existing infrastructure, the facilities were plotted on a citywide map that included the boundaries of the Redevelopment Agency�s Project Areas as well as Community Development Block Grant (CDBG) eligible areas[1].   This map, including an index to the buildings, is provided as Appendix C.  

Future Infrastructure:  In addition to the City�s existing infrastructure, the Subcommittee considered other facilities that the City has had on its �wish list� for the community.  These future facilities, which are listed on the second page of Table 1, include traditional infrastructure such as the proposed New Central Library that is planned for the Civic Center and the joint-use athletic fields at Burbank and John Burroughs high schools and Jordan Middle School.  In addition, the Subcommittee included technology and communications systems on the list, as well as transit and transportation investments.  The Subcommittee felt that both of these non-traditional infrastructure categories can require tremendous capital investments and re-investments and thus should be included on the �list of lists� (Table1).

Enterprise and Other Infrastructure: Subcommittee staff queried the various departments responsible for the City�s enterprise funds to determine if adequate resources are being programmed for the proper maintenance and future replacement of infrastructure. With the exception of the Parking Authority, which operates and maintains publicly owned parking structures and lots in the City, the enterprise funds are actively planning for future known capital investments.  Unknown future regulatory requirements that affect water, wastewater, electric, or refuse systems could, of course, change the predictions for these funds.

The Parking Authority, which generates revenue primarily through the sale of monthly parking permits, has been operating at a loss, and will need assistance to fund needed investments in the structures.

Potential Funding Sources for Infrastructure:  The Financial Services Department took the lead on identifying the potential funding sources for infrastructure, and presented a summary of the various methods at the Subcommittee meeting on December 7, 2006.  A copy of the presentation slides is provided as Appendix D.

In summary, the presentation focused on the three basic ways that cities pay for infrastructure:  1) cash; 2) borrowing; or 3) a combination of cash and borrowing. In terms of cash, cities can either use cash-on-hand or can rely on future cash from known revenue streams.  As part of the City of Burbank�s annual budget process, the Financial Services Department prepares a five-year forecast of projected revenues and expenditures.  The current projections will be presented during the Budget Study Sessions scheduled to be held in May 2007. 

Additional cash can be generated by increasing assessments, taxes, or fees, although the feasibility of getting such increases approved by the voters is doubtful.  The rules and restrictions for these funding mechanisms are summarized in the December 7 presentation handout (Appendix D).

The second common method cities use to fund infrastructure needs is borrowing money.  A variety of debt mechanisms exist, which include:

�        General obligation bonds

�        Revenue bonds

�        Certificates of participation or lease/revenue bonds

�        Assessment bonds

�        Mello-Roos special tax bonds

�        Tax allocation/Tax increment bonds

�        Pension bonds

�        State Infrastructure Bank

Each of these mechanisms is presented in the December 7 presentation handout (Appendix D).

In addition to a city�s ability to incur debt to pay for infrastructure, voters in the State of California passed infrastructure-related bond issues totaling nearly $40 billion in the November 2006 election.  While much of the money generated by these bond issues will address statewide concerns such as levee safety and freeway repair and construction, the City of Burbank expects to receive about $3.395 million directly from Proposition 1B that can be used for roadway repair.  Propositions 84 and 1C will provide funds for local and regional parks, but the implementing legislative language for the distribution of these funds has not yet been approved.

Burbank�s Infrastructure-Related Cash Position

The Financial Services Department prepared a summary of the City�s projected undesignated fund balances (as of June 30, 2007) for select infrastructure-related funds.  This summary is provided as Table 2.  While every dollar is important, the summary indicates two line items with significant resources: the Capital Projects Holding Fund (under the �Available One-Time Resources� heading), and the Projected Agency Fund (under the �Redevelopment Agency� heading).

The Capital Projects Holding Fund currently has approximately $20 million in the fund balance.  The majority of this money was derived when the construction of the Community Services Building (CSB) was approved in December 2006. At that time, Council and the Redevelopment Agency approved the reprogramming of Agency Bond Remarketing Proceeds from the CSB project to fund City capital facility needs.  The resulting shortfall for the CSB project was funded by the Redevelopment Agency.  Staff has recommended that at least $9 million of this $20 million be used to fund improvements at Burbank and John Burroughs high schools for joint use athletic facilities.  The remainder of the funds may only be used for capital investments and are not to be used for maintenance activities.

The other significant source of funds for infrastructure is Redevelopment Agency funds.  Historically, the Agency has played an important role in funding infrastructure projects in project areas throughout the City.  To date, the Agency has contributed more than $173 million in combined tax increment revenue and bond issuance proceeds to City infrastructure since 1988.  Recently completed Agency-funded projects include the Mary Alice O�Conner Family Center, the South San Fernando Streetscape Project, the Empire Avenue Improvements, and numerous transportation projects including the realignment of the Five Points intersection and the State Route 134 ramps project.

At the October 12, 2006, Subcommittee meeting, the Community Development Director provided a comprehensive overview of the cash and debt position of the Agency, along with a discussion of the laws and regulations regarding the use of Agency funds.  Among these rules is the need for the Agency to make the following findings for each project it intends to fund:

�        The project or improvements are of benefit to a project area,

�        The project will help alleviate blight within the project area

�        There is no other reasonable means of financing the project

To summarize, the Agency has approximately $23 million in cash, and owes the City approximately $49 million.  The decision regarding whether the Agency should immediately repay debt is ultimately a policy issue that staff feels should be based on the implications of various financing options. An important consideration is that after a project area reaches its plan effectiveness date, the area�s tax increment may only be used to repay debt (such as that owed to the City), and to meet the Agency�s 20 percent obligation for affordable housing. Under current law, after the expiration date of a project area, tax increment revenue cannot be used to pay for infrastructure or purchase properties.  However, the City could use the debt repayment proceeds for infrastructure after the project area�s expiration date.  Table 3 provides the expiration date for the various project areas in the City.

Another important consideration of the use of Agency funds (both tax increment and debt repayment) is that these are one-time resources.  Staff recommends that meaningful, significant projects that will serve our community well into the future should be considered a priority for these funds, rather than smaller, perhaps less enduring investments.   

RECOMMENDATION:

After consideration of the information discussed at the Subcommittee meetings, the Council representatives suggested that staff prepare a draft five-year infrastructure investment plan to present to the full Council in anticipation of the 2007-2008 budget hearings.  This draft is provided as Table 4.  It addresses existing infrastructure as well as future investments in new facilities and identifies potential funding sources for each.

Like most governmental entities in California, Burbank has several infrastructure needs that remain partially or fully unfunded.  Staff recommends that Council consider various revenue enhancement strategies to help address these ongoing needs.

Attachments:

TABLES

Table 1 � November 2006 �List of Lists�

Table 2 � Projected Fund Balance Summary

Table 3 � Critical Dates: Redevelopment Plan Effectiveness

Table 4 � Draft Five-Year Plan

Table A: RDA-Eligible Infrastructure Projects

Table B: Municipal Buildings: Non-Seismic Five Year Plan

Table C: PR&CS Supplemental Funding Recommendation

Table D: Athletic Fields Project

Table 5 � Summary of Five Year Funding Plan

APPENDICES

Appendix A � Park Facilities Assessment

Appendix B � Municipal Facilities Assessment

Appendix C � RDA/CDBG Eligible Areas (with facilities index)

Appendix D � December 7, 2006 Overview of Possible Financing Options for Infrastructure Projects

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