CITY COUNCIL AGENDA PACKET - Laserfiche WebLink

Page 5 of 9 Capital Improvement Program The Capital Improvement Program serves as a strategic resource allocation plan for capital projects and promotes long-term planning. Capital investments are critical in building and maintaining infrastructure for a livable, vibrant community. The City updates its five-year Capital Improvement Plan (CIP) every two years, incorporating both Capital Improvement (CIP) Projects and Repair and Replacement (R&R) initiatives. The next CIP, covering fiscal years 2025/26 through 2029/30, will be presented for adoption in June 2025. This cycle is guided by the newly adopted Capital Improvement Program Prioritization Process (CIPPP) framework, approved by the City Council in December 2024. The CIPPP introduced a more structured and transparent methodology for evaluating and prioritizing projects based on objective criteria. CIP projects typically involve new construction or major infrastructure replacements, while R&R projects focus on sustaining the performance of existing assets. Deferred maintenance, or the delayed upkeep of infrastructure, can significantly increase long-term costs and heighten the risk of asset failure if left unaddressed. Total capital expenditures and reserves recommended in the first two years of this CIP are approximately $54.0 million for FY 2025/26 and $32.0 million for FY 2026/27 for a total of $86.0 million over the two funded years of the CIP and a total of $221.7 million over all five years. As noted in the budget message in the CIP book (Attachment 2), funding for enterprise- funded water and sewer projects assumes rate increases and anticipated debt proceeds. General Fund-Supported Projects General Fund contributions are essential for maintaining the City’s core infrastructure, particularly facilities, parks, and other assets not supported by enterprise or restricted funds. Since the City has and continues to rely on a “pay-go” model (meaning the City relies on the General Fund, not infrastructure bonds or other borrowing) for non-enterprise fund projects, it is critical to set aside funds as capital needs continue to grow. The City has developed a proposed five-year CIP amid significant infrastructure funding challenges. A Citywide call for projects resulted in 27 General Fund supported CIP project requests totaling $53.4 million, as outlined in the April 10, 2025, City Council meeting agenda packet. However, existing reserves and projected contributions are insufficient to fund all requests without drawing on Deferred Maintenance resources. Considering this funding gap, and with the Asset Management Plan (AMP) scheduled for completion by December 2025, staff recommends deferring most project funding decisions until the AMP provides a comprehensive, data-driven prioritization of needs. In the interim, only the nine most critical urgent projects totaling $16.6 million are recommended for funding in this cycle. These critical projects address regulatory requirements, minimize the likelihood of facility closures, or are significantly grant-funded. At the April 10, 2025, City Council meeting, staff recommended reallocating $2.0 million of the FY 2025/26 General Fund CIP contribution to support repairs and replacements in the Facilities Renovation Fund. This reallocation will extend the service life of critical community assets such as the Dolores Bengtson Aquatic Center, Fire Station 2, and Bernal Synthetic Fields, and other deferred maintenance which would otherwise require major capital reinvestment if allowed to further deteriorate. This resulted in a total of $15.5 million from the CIP General Fund in addition to the City's commitment of $30.3 million over the next five years for Deferred Maintenance. The CIP fund will be applied to address the needs in the upcoming Page 268 of 682