TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Joe DeFrancesco, Interim Public Works Director
Libby Bretthauer, Finance Director
Gilbert Gamboa, City Engineer
Marzena Laskowska, Principal Civil Engineer
SUBJECT:Title
Resumption of the Presentation of the Proposed Five-Year Capital Improvement Program (CIP) for Fiscal Year 2026-2027 through Fiscal Year 2030-2031 (Not Budgeted) (Interim Public Works Director DeFrancesco).
(Estimated Time: 30 Mins.)
A) DISCUSS AND PROVIDE DIRECTION
B) APPROVE
Body
_________________________________________________________
RECOMMENDATION:
Staff recommends that the City Council receive a further presentation on the proposed modifications to the Five-Year Capital Improvement Program (CIP) for Fiscal Year 2026-2027 (FY 2027) through Fiscal Year 2030-2031 (FY 2031) and:
1. Provide direction on the Senior and Scout House Project, including funding options and CIP Fund reductions; and
2. Provide direction for the Upper Pier Parking Lots Railings Replacement Project; and
3. Direct staff to revise the Five-Year CIP Plan based on any changes or modifications requested by City Council.
FISCAL IMPLICATIONS:
With City Council concurrence of the proposed modifications to the FY 2027 through FY 2031 CIP Plan, the modification to the prior year appropriations and the modified funding appropriations for FY 2027 will occur as part of the adoption of the City's Budget in June.
BACKGROUND:
A comprehensive overview of the proposed CIP for Fiscal Years 2027 through 2031 was presented at the City Council meeting on May 5, 2026. After a staff presentation, public comment, and Council discussion, the Council continued this item to tonight’s Council meeting for further discussion and Council direction. A complete list of the proposed Five-Year CIP projects, including recommended funding sources and amounts, titled “Schedule of Capital Improvement Projects by Fund,” that was attached to the May 5, 2026 agenda, is attached to this report. Likewise, a CIP Project Summary Sheet Report, detailing capital costs and funding sources for all projects, is also included as an Attachment.
DISCUSSION:
On May 5, 2026, City Council directed staff to return with details regarding the Senior and Scout House Project cost estimate breakdown, finance options for the Senior and Scout House Project, the metrics for project prioritization, an evaluation of potential project impacts (CIP Fund reductions), and the maintenance and repairs for the Upper Pier Parking Lot railings. This report provides the information requested by the City Council and the proposed modifications to the CIP Fund and to the State Pier and Parking Lot Fund for City Council consideration.
Senior and Scout House Project Cost Estimate Breakdown:
Construction $ 9,745,275 (AACE Class 2 Estimate dated 3/12/26)
15% Contingency $ 1,461,792 (15% of Construction Estimate)
Subtotal Construction: $ 11,207,067
Permits $ 59,477 (Actuals)
Edison Utility $ 25,000 (Estimated)
Environmental (CEQA Class 32) $ 83,814 (Paid/Actuals)
Subtotal Permits/SCE/CEQA: $ 168,291
Estimate/Constructability $ 88,570 (Actuals)
Public Outreach $ 15,000 (Estimated)
Project Manager $ 992,000 (Estimated)
Construction Management $ 1,170,000 (12% of Construction Estimate)
Construction Inspection $ 780,000 (8% of Construction Estimate)
Construction Design Support $ 293,000 (3% of Construction Estimate)
Subtotal Soft Costs: $ 3,338,570
TOTAL PROJECT COSTS: $ 14,713,928 ($14.7M rounded)
Senior and Scout House Project Funding Options:
Staff obtained debt service estimates for two levels of cash contribution options:
Option 1 - Cash Contribution of existing community donations ($2.1 million)
Bond Proceeds: $14.6 million
30-Year Maturity in 2056
True Interest Cost (TIC): 4.47%
Annual Debt Service: $890,000
Option 2 - Cash Contribution of existing community donations ($2.1 million) plus City contribution ($4.0 million)
Bond Proceeds: $10.6 million
30-Year Maturity in 2056
True Interest Cost (TIC): 4.47%
Annual Debt Service: $645,000
It should be noted that interest rates have risen about 1% since the City’s last debt issuance in August 2025.
Should the City Council pursue the issuance of debt to fund the Senior and Scout House project, staff reviewed additional funding sources that could be dedicated to future debt service.
Potential Revenue Generating Opportunities:
Facility Rentals
• Joslyn Center - $17,000 in annual revenue
• Impact on neighbors
• MOU limitations
o Friends and Older Adults use
o No more than 30 days prior
Programming
• Community-based
• Free and low cost
Due to limitations on the potential for facility rentals and programming, alternative funding sources such as one or more of the revenue enhancement options presented with the Proposed Budget presentation may be considered (e.g. 0.5% Sales Tax Measure). Staff also researched the feasibility of placing a bond measure before voters to support capital infrastructure financing, but it is not recommended. It should be noted that overall project and financing costs would remain, but repayments shift to a dedicated tax source instead of existing General Fund or other City revenues. Unlike schools, voter approval of a 2/3rd majority is required for cities. Due to a risk of failed election, cities tend to rely on General Fund secured Certificates of Participation (COP) for speed and execution certainty, assuming limits of budget affordability and asset availability for the lease are met. General Obligation COPs also provide the strongest credit and lowest cost of funds for cities.
CIP Fund
PRIORITIZATION METRICS:
During the development of the Five-Year CIP Plan, capital projects that affect public health and safety and/or legal mandates are given the highest priority. Emphasis is placed on capital projects that maintain existing service levels or prevent damage to critical property or disruption of service to the community. Projects that would enhance existing services or improve efficiency beyond industry standards receive secondary priority. The following additional metrics were used to identify potential funding reductions in the CIP Fund for prior-year appropriations and Fiscal Year 2027 requests.
• City Council Work Plan
• Contract encumbrance (i.e., active contract)
• Projects in construction (in FY2027)
• Regulatory element (i.e., ADA compliance)
• Project schedule constrained by outside agency (i.e., grant)
• Project is multi-funded
RECOMMENDED PROJECT FUNDING REDUCTIONS:
The following projects were identified as meeting the funding-reduction prioritization metrics outlined above and are recommended for City Council consideration. Additionally, these recommended projects achieve the maximum reduction in project funding with the fewest number of projects adversely affected.
1. Begg Pool Upgrades reduced by $700,000:
a. Reduce prior appropriations from $700,000 to zero based on Bay Club funding commitment.
2. City Facility Renovation reduced by $2,000,000:
a. Reduce prior appropriations from $2,825,000 to $825,000.
3. Sand Dune Park Improvements reduced by $1,000,000:
a. Reduce FY2027 from $1,500,000 to $500,000.
4. Project at 400 MBB reduced by $1,000,000:
a. Reduce FY2027 from $1,000,000 to zero.
ALTERNATIVE PROJECT FUNDING REDUCTIONS:
The subsequent projects were recognized alongside the recommended ones; however, they present greater negative impacts on the projects themselves and provide smaller reductions.
1. Annual Citywide Security Cameras Phase 3 reduced by $700,000:
a. Reduce prior appropriations from $873,000 to $173,000
2. Renovation of City Hall Employee Lounge reduced by $200,000:
a. Reduce prior appropriations from $100,000 to zero.
b. Reduce FY2027 from $100,000 to zero.
3. City Hall HVAC Replacement Phase 2 reduced by $350,000:
a. Rebalance by moving $350,000 from FY2027 to FY2028.
4. Deferred Parks Maintenance reduced by $625,000:
a. Reduce prior appropriations from $625,000 to zero.
5. School District reduced by $250,000:
a. Reduce FY2027 from $250,000 to zero.
6. Annual Street Resurfacing reduced by $600,000:
a. Reduce prior appropriations from $600,000 to zero.
Upper Pier Parking Lots Railings
The Upper Pier Parking Lots Railing Replacement Project is included in the FY 2027-2031 CIP Plan and funded by the State Pier and Lot Fund. The City Council has instructed staff to explore the possibility of advancing the project funding in order to expedite the completion of the project. City Council also requested to review the option of continuing maintenance repairs (i.e., painting).
The modifications also include a change to the State Pier and Lot Fund core operating expenditures to support the maintenance of the Roundhouse Aquarium. This item was approved at the February 17, 2026, City Council meeting as part of the Mid-Year Budget process.
Staff reviewed the State Pier and Lot Fund and proposed the following modifications.
1. Roundhouse Aquarium Maintenance:
a. Add $80,000 in FY 2027 and FY 2028 in the State Pier and Lot Fund core expenditures to support the maintenance of the Roundhouse Aquarium.
2. Pier Improvements Project:
a. Reduce FY 2029 from $350,000 to zero.
b. Reduce FY 2030 from $325,000 to $25,000
c. Increase FY 2031 from $350,000 to $400,000
3. Upper Pier Parking Lots Railings Replacement Project:
a. Increase FY 2027 from zero to $200,000
b. Increase FY 2028 from $200,000 to $275,000
c. Decrease FY 2029 from $400,000 to $375,000
d. Decrease FY 2030 from $400,000 to $350,000
Given the constraints of the State Pier and Lot Fund, the allocation of funds in FY 2027 will enable the execution of maintenance repairs (either conducted by City maintenance staff or outsourced) or the commencement of the design process for the replacement of the railings.
CONCLUSION:
Staff is requesting that the City Council provide direction on the Senior and Scout House Project, including funding options and CIP Fund reductions; provide direction for the Upper Pier Parking Lots Railings Replacement Project; review these modifications; and provide direction for any further changes or modifications to be incorporated before final adoption in June 2026.
The proposed Five-Year CIP is ultimately presented to and reviewed by the City Council and, pending any changes, becomes part of the adopted plan and operating budget for FY 2027.
PUBLIC OUTREACH:
The public has been informed of this agenda item as part of the City’s standard meeting notice practices via public bulletin boards, website calendar, and social media. The list reflects the priorities of residents and the City Council. Additionally, it reflects the October 2025 Community Opinion Survey, where the community's top 3 high or medium spending priority items were fixing potholes and street repairs at 92%, improving park maintenance at 87%, and upgrading sewer systems at 79%.
As part of this year’s review process, the Planning Commission evaluated the proposed Five-Year CIP Project List on April 22, 2026, and determined its consistency with the City’s General Plan. Similarly, the Parking and Public Improvements Commission (PPIC) reviewed the draft CIP on April 23, 2026, and provided comments. Additionally, a presentation to the Parks and Recreation Commission was provided on parks-related Five-Year CIP projects, and comments were received. The commissions reviewed a preliminary version of the Five-Year CIP, which has since been updated and is now being presented to the City Council for consideration.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that adoption of the Five-Year CIP is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. May 5, 2026, City Council Staff Report (Web-Link Provided)
2. Schedule of Capital Improvement Projects by Fund
3. Capital Improvement Projects Summary Sheets
4. PowerPoint Presentation