Jan. 14 SLT city manager's report

CORRECTION TO ITEM BELOW:
Correction to the Joint Facilities Report Contained in the January 14, 2008 Management Observations Report Regarding Joint Facilities

The contingency used in the estimate was 15%, or $4.3 million, but they also said that they had not looked at the site work needed yet and this % might be reduced once they do.

Soft costs were 23.8%, or $6.8 million (for permits, fees, testing, inspection, furniture, equipment, etc).

Christine M. Vuletich
Director of Finance
-------------------------------------------------------------------
CITY OF SOUTH LAKE TAHOE
Electronic Version

January 14, 2008

MANAGEMENT OBSERVATIONS

In this Edition:

State Budget Update
Workforce and Affordable Housing
Highway 50 Project
Joint Government Facilities
Bijou Erosion Control Project

HAPPY NEW YEAR!

In 2007 the community faced major challenges and opportunities. The Angora Fire, its impact and aftermath demonstrated clearly the terrible consequences of neglecting fuel reduction in the forest and the need for accelerating fuels reduction in the forest and City. The best fire suppression is fire prevention.

The response to the fire also demonstrated the outstanding support our community receives from other governmental agencies that helped us fight the fire and respond to the need of victims. The fire and its aftermath demonstrated the love and charity of our community to help victims of the fire. We are blessed!

In 2008 we look forward to an active and productive year. There are many initiatives in place to improve the community and they all need to be carefully evaluated and explained to the community. The City’s General Plan, the Tahoe Valley Community Plan and its implementation, the 56 Acre Project, workforce and affordable housing, fuel reduction on public lands, the feasibility of joint government facilities, fire and growing the local economy are but a few of the important issues.

We must work as a community to build understanding and consensus on important policy issues, and City staff stands ready in support of the City Council and the community to do so.

“
LET IT SNOW, LET IT SNOW, LET IT SNOW?

After experiencing a series of low-snow years, South Lake Tahoe finally received large amounts of snow that should dramatically help our tourist-based economy. South Lake Tahoe fared far better than many communities from the major storm fronts. City emergency response personnel were ready for the worst and cooperated with County, State and neighboring agencies. We were ready, and they did a great job!

Once the snow came, Caltrans and City snow removal crews did a fantastic job keeping our streets and highways clear and our neighborhoods accessible. These snow crew members worked long hours and did so with a positive attitude. They know that unless streets and highways are clear, people do not get to work, visitors cannot come here, children can’t get to school, and emergency vehicles cannot provide service when it is needed. My personal thanks and appreciation is extended to all emergency personnel and to the fine Caltrans and City snow crews that kept our community open and safe.


STATE BUDGET UPDATE – The Governor Makes his Proposal

Even though the State Constitution and law guarantees to local governments funds from the local sales tax, property tax etc, these funds are controlled in their distribution principally by State government that has the power and ability to “borrow” funds earmarked for local governments. For this reason, I am printing for you below the entire analysis done by the League of California Cities as a way of giving you all current budget-impact information.

“Governor Outlines Solutions to Fill Current Year Budget Gap and Address Projected Deficits for FY 2008-09 (LOCC Report of 1/11/08)
Gov. Arnold Schwarzenegger released his proposed budget Jan. 10. He began by declaring a fiscal emergency and calling for "true reform" of the budget process to provide the state with a permanent solution to the systemic structural deficit.
Echoing his remarks in his State of the State address Tuesday, Jan. 8, Gov. Schwarzenegger unveiled his Budget Stabilization Act, a constitutional amendment that would establish a mechanism to cap spending when revenues are high, helping prevent future deficits.
The Governor outlined a two-pronged approach to deal with both the projected budget deficit for the current fiscal year (2007-08) and the structural deficit in FY 2008-09.
Governor's Proposed Solution to FY 2007-08 Imbalance
In the FY 2007-08 budget the Legislature passed last August, the Governor projected a $4 billion surplus at the end of the year. However, because of the housing slump and sub prime mortgage crisis, state revenues have dropped to such a level that there is no surplus, and the state lacks funding to fulfill its current financial obligations.
To close this gap, the Governor announced that he will sell the remaining $3.3 billion in Economic Recovery Bonds (ERB) by February 2008. For local governments, the effect is that the anticipated sunset of the triple flip mechanism will be delayed several years, to 2012 or beyond.
The triple flip mechanism was established by Proposition 57 (2004), the Economic Recovery Bond Act. It involves taking a quarter-cent of the local sales tax to repay these bonds and reimburses local governments' losses on a dollar-for-dollar basis with property tax.
As another means to address the projected shortfall, the Governor proposed cutting $217 million from state agencies. The 10 percent across the board to state agencies and programs cuts Gov. Schwarzenegger proposed will take effect March 1, 2008. He is also seeking to delay payments on $6.24 billion in funding intended for a variety of existing programs including; K-12 schools, state teachers' supplemental benefits and various Medi-Cal and other health programs.
Proposal Includes Delay in Highway User Tax Payments
The Governor is proposing to delay payment of approximately $500 million of payments of Highway Users Tax (per gallon Gasoline Excise Tax) payments to local governments. Cities and counties receive about $100 million per month of these revenues. The Governor has proposed to suspend these payments for a five-month period (April-August 2008) to be paid in full without interest in September 2008. The League is analyzing this proposal for impacts on cities.
The Administration is citing the authority to delay payment pursuant to Section 6 Article 19 of the California Constitution, which permits borrowing of these funds under certain conditions but requires repayment either within 30 days of the adoption of the budget bill for the subsequent fiscal year or within three years. (At this point, the proposal is suggesting the shorter pay-back period.) This section of the Constitution also authorizes the Legislature to establish a loan program to offset the temporary losses experienced by local government.
Note that these are revenues from the Motor Vehicle Fuel Tax (also called the Gasoline Excise Tax or the Highway Users Tax) allocated among local governments and state transportation funds pursuant to California Streets & Highways Code §§2104-2108. These are not revenues derived from the Proposition 42 sales tax on gas.
Governor's Proposed Solution to Fix FY 2008-09 Imbalance
For the fiscal year that begins July 1, the Governor proposes to cut funding across all state agencies by 10 percent. These cuts have many significant impacts on state programs, including education, with the suspension of Proposition 98. Gov. Schwarzenegger has not proposed to take property taxes from local governments under Proposition 1A (2004), nor has he proposed to taking any transportation funds under Prop. 42, protected by Proposition 1A (2006).
Across the Board Cuts Impact Public Safety Programs
Payments to counties for Local Detention Facilities (Gov Code Sec 29552) have also been reduced by 10 percent to $31.5 million. Current law stipulates that in any year the budget appropriates less than $35 million, counties may impose booking fees on cities in proportion to the under appropriation.
For additional information please see http://www.californiacityfinance.com/BkgFees070831.pdf.
Funding for Gang Abatement Programs: Included in the budget proposal is funding for gang and youth violence prevention including:
• $1.3 million to establish the Office of Gang and Youth Violence Policy
• $5.3 million to fund the Department of Justice's four existing Gang Suppression Enforcement Teams permanently
Transportation Funding
Proposition 42 Fully Funded: Following two Prop. 42 gap years, cities and counties will statutorily receive these funds again beginning in FY 2008-09. The Governor has proposed fully funding the program including $594.2 million specifically for cities and counties. This amount is a significant increase in prior allocations due to the statutory elimination of funding for the Traffic Congestion Relief Program.
The budget proposes to fully fund Prop. 42 at $1.5 billion which includes:
• $594 million for the State Transportation Improvement Program (STIP)
• $297 million for cities (local streets and roads)
• $297 million for counties (local streets and roads)
• $297 million for the Public Transportation Account (PTA)
Proposition 1B: Prop. 1B, which passed in November 2006, included $2 billion in funding for transportation projects. The 2007 Budget Act appropriated $950 million of these bond funds. However, no additional Prop. 1B bond funds for local streets and roads are proposed to be allocated in FY 2008-09.
The proposed budget does include $4.7 billion in bond allocations for the following:
• $1.547 billion for Corridor Mobility Program
• $350 million for Local Transit Program
• $1.186 billion for State Transportation Improvement Program
• $500 million for Trade Corridor Program
• $200 million for State/Local Partnership Program
• $216 million for State Highway Operations and Protection Program
• $65 million for Grade Separation Program
• $108 million for Highway 99
• $21 million for local seismic retrofit projects
• $73 million for intercity rail
• $250 million for air quality
• $101 million for transit security
• $58 million for port security
Public Transportation Account: The proposed budget allocates $1.343 billion to the Public Transportation Account (PTA) for a variety of transit purposes. This amount includes $455 million of "spillover" revenue. The total spillover amount projected for FY 2008-09 is $910 million, half of which will be transferred to address non-transit programs as established under SB 79 in last year's budget.
Housing
The Governor's budget proposes $771 million in Proposition 1C funding for FY 2008-09. This funding includes:
• $200 million for Regional Planning Housing and Infill Incentive Account
• $95.5 million for the Affordable Housing Innovation Fund
• $30 million for the Housing Urban-Suburban-Rural Parks Account
• $96 million for Transit-Oriented Development Implementation Fund
Environment/Resources
Over the last decade, environmental programs at the state level have largely been funded through special fees and ballot measure. Because of this, budget reductions in the General Fund do not typically impact these programs. Impacts may be felt in time delays for the processing of state permit applications such as National Pollution Discharge Elimination System and Local Coastal Plan Amendments.
In addition, there are a few areas specifically that may have city impacts including:
• The budget proposes to reduce funding for the Subventions for Open Space (Williamson Act) by $3.9 million.
• The potential closure of 48 state parks may increase pressure on local emergency responders and law enforcement.
Flood Protection: The proposed budget includes $598 million from Proposition 1E to fund a variety of flood response and levee improvements.
Proposition 84: The budget proposes the expenditure of $1 billion in Prop. 84 funds for a variety of natural resource programs.
Governor's Wildland Firefighting Initiative
The Governor is proposing legislation that would enact a 1.25 percent surcharge on residential and commercial property insurance policies to fund the recommendations of the Blue Ribbon Commission created after the 2003 Southern California fire storms. The projected $125 million generated annually over six years would fund various programs including expansion of the Office Emergency Services engine flee, GPS systems, a reverse 911 system for counties that do not have one and a state-wide warning system.
Mandates Reimbursement Funding
The FY 2008-09 proposed budget includes $139 million for reimbursement claims for costs incurred prior to July 1, 2007. Of this amount, $75 million is proposed for the third payment of reimbursement claims owed to local governments for cost incurred prior to July 1, 2004.
Additional Infrastructure Bonds Proposed: During his statement Thursday, the Governor discussed additional bond measures as part of his Strategic Growth Plan to expand the state's water supply and fund K-12 and higher education facility improvements and courthouse repairs. The League will provide additional information on these proposals at a later date.
Budget Negotiations Will Continue
There is a great deal of action expected this year on the budget. The Legislature, in accordance with Proposition 58, has 45 days to respond to some of the Governor's proposals to address the declared fiscal emergency.
The proposed across the board cuts are sure to trigger many other discussions about how best to address the state's deficit. The League will continue to analyze the many details in the Governor's proposed budget and provide updated materials to city officials.
A copy of the Governor's budget can be accessed at http://www.ebudget.ca.gov/. “

WORKFORCE AND AFFORDABLE HOUSING UPDATE – Good News!

Officials of the Lake Tahoe Community College and Barton Hospital are collaborating to examine the feasibility of building workforce housing on the LTCC campus for staffs of these organizations in order to help retain qualified people. They are in the preliminary stages of review to determine project feasibility and project parameters, and City staff is assisting and will assist them in this feasibility effort. This collaborative effort and discussion has been part of initial discussions of the Workforce Housing Committee that includes key members of City staff and chaired by Council Member Ted Long. LTCC and Barton officials are to be commended for looking for ways to collaborate on this important matter.

In a related matter the City Council approved at its last regular meeting allocating up to $850,000 in restricted RDA housing set-aside funds to fill, to the extent necessary, the financial gap for the Senior Plaza II Project. The Project consists of the construction of 33 units of affordable senior housing. It is estimated to cost $8.5 million. The project is expected to begin construction in May 2008.

The breakdown of financial partners is as follows:

• CalHFA Construction Lender
• Federal Home Loan Bank
• State/Federal HOME Funds
• City Redevelopment Agency 20% Set-Aside Funds

In addition to the inherent benefits of the project, the project developer to the extent legally possible has committed to the City Council to do the following:

1. Give a preference in the selection of tenants to persons already living in South Lake Tahoe or who have relatives who live here. The list already has over 100 individuals on it.
2. Give a preference to using qualified contractors with businesses inside the City limits where price is equal or better.
3. Give preference to the hiring of qualified local labor; and
4. Give preference to suppliers of building materials and products where cost and quality are equal or better.

STATE HIGHWAY 50 PROJECT

It is clear that project costs exceed revenues to undertake and complete the entire project from Stateline to the Y. Over thirteen years, project costs have accelerated and funds for the project have not kept pace with rising costs. As mentioned in previous Management Observation reports there are many reasons for this situation.

The project as originally conceived has water quality, road improvement, pedestrian, bicycling, lighting and landscaping components. The project was supposed to be the region’s highest priority for SNPLA, other Federal funds and State funds. Unfortunately, full funding for the project was not requested in the past by Tahoe regional agencies and Caltrans nor allocated for the project from any of these sources. In addition, the project involves acquisitions of many properties from private parties and the cost of these acquisitions is making even a smaller project hard to deliver.

As currently scoped, the project has been downsized to now only include sidewalk, landscaping, lighting behind the curb from Trout Creek to Ski Run only on the mountain side of the roadway. The current scope also includes a Class II bike trail on both sides of the roadway for that same section. There is however a $3.2M funding shortfall for these improvements according to Caltrans officials. Caltrans will not move forward with the project until additional funding sources can be provided.


I am told that at a recent meeting of the Tahoe Transportation District (TTD) one member of the TTD Board from Placer County expressed the opinion that there should be no further support for any additional funding until at least 2011. In addition he said that any Highway 50 shortfall should to be made up by local property owners as they did in the North Shore (Kings Beach) project. I understand that no other TTD Board members voiced agreement with this opinion. The other option for the project is to further reduce the scope of work to meet current budget. If additional funding is to be realized from State and Federal sources, the first step is to convince the TTD of the need and wisdom of the expenditure and get their help and that of Caltrans in requesting full funding from the State and Federal governments for the entire project. What does being the No. 1 Project in the Basin mean if full funding is not associated with it?

When built, the project will definitely improve water quality and create pedestrian, cycling, and aesthetic amenities to this Federal owned and State maintained roadway for the section between Trout Creek and Ski Run only.

City staff will continue seeking full funding for the project and a favorable decision from Caltrans to get a segment of the project out to bid (Trout Creek to Ski Run) and make as many of the improvements as possible with available funding in this segment. By demonstrating the benefits of building this segment to the community, regional, State, and Federal agencies, we expect a better reception and environment for building the complete project.

I will have a full report and update presented to the City Council at your February 12, 2008 City Council meeting.


JOINT GOVERNMENT FACILITIES ISSUES AND CHALLENGES

On January 9, 2008 a meeting was held at which School District, City, and County representatives participated (the latter by telephone). Mr. Downs, the architect attended the meeting as well. The purpose of the meeting was to discuss the status of the proposed joint government facilities project.

The preliminary construction number by the ANOVA Architects of almost $40 million for City, District and County facilities is too high. The estimate includes a 27% contingency that adds almost $10 million to project costs. The size of the building and its costs must be re-evaluated and reduced for the project to approach being feasible. In the alternative, additional grant funds must be found to assist in paying for the project,.Those present at the meeting indicated that the following steps are needed:

• County representatives agreed to review the architects report and provide their comments to the District and City before the end of January 2008.
• Grant funds for the joint-use project (e.g. School District, OES) need to be tracked down, identified, and verified. What might grant funds bring to the funding table and what is timeline for getting these funds? If obtained, would the project be financially feasible?
• What value can be assigned for the sale of City-owned property on Tata Lane with proceeds going toward the City portion of the project?
• What are financing costs for the project and what is the General Fund impact on an annual basis for the (to be determined) City portion of the project?
• An examination of partnering with the private-sector to build the project needs to be examined. Could a facility be part of a larger private-sector facility as done in other communities?
• A determination must be made about the value of District land for the project and this cost factored into mix for the potential partners. New architects must be identified to assist in this next phase of planning.
• Until more details are known about costs, who will be the partners, financing etc, those present agreed that a new MOA should not be entered into by any of the parties.

ANNEXATION OF NON-CONTIGUOUS CITY-OWNED PROPERTIES

Annually the City of South Lake Tahoe must pay the County property taxes for property it owns outside of the City limits. All properties are currently vacant. The cost to the City annually in tax payment is approximately $11,000.

Staff is exploring the process and cost to annex these non-contiguous publicly owned lands to the City under State law consistent with rules set forth by LAFCO. The LAFCO Executive Officer recently told me that LAFCO would likely look favorably on annexation but this is a decision of his Board. City staff is examining the cost to process this annexation, and then I will alert the City Council to the cost and the opportunity for annexation.

BIJOU EROSION CONTROL PROJECT

Sarah Hussong Johnson, P.E. City Associate Civil Engineer, informs us of the following: “The Bijou Area ECP continues to progress through the watershed planning process. Currently, the Consultant and City engineering staff are responding to questions on the project alternatives put forth by members of the Technical Advisory Committee (i.e., CTC, Lahontan, TRPA, etc.) In parallel, we are working through the alternatives evaluation process, which includes preparing summaries to assist the TAC/public in understanding the improvements/modifications to the existing conditions based on the implementation of each alternative. Each alternative will be ranked against a set of 15 criteria established for the project (i.e., water quality cost, cost, operations and maintenance, etc.). We expect to have a draft of the alternatives evaluation memorandum ready by the beginning of February.

We are still waiting to hear back from the (State) Department of Water Resources regarding our flood control grant application for the proposed channel from the outlet of Bijou Meadow to Lake Tahoe. We hope to know whether our proposal was selected for funding in the next month or so.



DAVID JINKENS
City Manager