Council planning session covers upcoming priorities, projects, funding

By SARA HALL

The Newport Beach City Council’s recent planning session covered a variety of priorities, including long-range plans, capital improvement projects, and various funding requests, including for additional code enforcement and the sculpture garden.

Councilmembers spent nearly three hours on February 3 at OASIS Senior Center in Corona del Mar in the workshop that was aimed at identifying what issues and projects the council wanted to take on in the upcoming fiscal year. The city also recorded the public meeting and posted it online.

This is the time to discuss and think through projects and issues, which will help inform the staff as they move forward with the upcoming budget, said City Manager Grace Leung.

“It’s a good time for us, as staff, to get good input from the council,” she said.

Director of Public Works Dave Webb discussed long-range planning and capital improvement projects. This includes the facilities financing plan (FFP), master plans for harbors and beaches, and the newly developed parks maintenance master plan, and major projects in these plans; funding sources, and how they inform the development of the upcoming FY 2024-25 capital improvement program.

The capital improvement plan sets priorities and serves as a guide for the provision of public improvements, special projects, on-going maintenance programs and the implementation of the city’s master plans, Webb said. Projects in the CIP include improvements and major maintenance on arterial highways, local streets and alleys; storm drain and water quality improvements; harbor, pier and beach improvements; park and facility improvements; water and wastewater system improvements; transportation safety, reliability and traffic signal improvements, and planning programs and studies.

Staff is planning to build the fiscal year 2024-25 CIP budget around approximately $26.4 million in general funds and $21.1 million in restricted funds.

Looking toward the upcoming CIP, staff is suggesting to focus resources on essentials, the “nuts and bolts” of infrastructure. The aim is to keep the existing backbone infrastructure in good shape (streets, pipes, lights, existing facilities and parks), and deliver (most) key projects that are already in the works.

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Photo by Sara Hall

City Council discussed priorities for the upcoming fiscal year 2024-25 budget at a recent planning session

Webb mentioned the pavement management plan, which sets targets for road conditions and funding levels necessary to maintain the city’s pavement condition index (PCI) goal. Newport Beach’s citywide 2023 PCI is 82, listed as “good” on the index.

“This allows us to basically keep our streets in good condition and maintain our PCI,” he said.

It is more cost effective to maintain a pavement section in good condition over its useful life than to let it deteriorate to the point that it requires a major overlay or reconstruction, Webb noted.

Regarding the FFP, the document plans for the new construction, or major reconstruction/replacement of large city facilities which will require significant funding, typically more than $1 million and often require saving up for many years to fund, Webb said. The city currently has $25 million in FFP reserves ($10 million already earmarked for the Balboa library/fire station project). Plan funding comes from new development fees and the annual general fund contribution, which is set at 3% of total general fund revenues (which equaled $9.1 million in FY 2023-24).

There are a number of upcoming projects: Central Library main air handler unit replacement; fire station #8 and OASIS Senior Center HVAC rehabilitation; Central Library alarm system rehabilitation; utilities department and police department painting; utilities locker room and shower rehabilitation; Balboa Yacht Basin buildings’ exterior paint; Eastbluff restroom rehabilitation; and Central Library and OASIS Senior Center carpet replacement.

Staff recommended increasing general fund contribution to build reserves for future upcoming projects.

Nearly every time the city has gone out to bid for recent projects the submissions received are “significantly higher” than the number they have placed on the FFP, Mayor Will O’Neill pointed out. That’s been happening for several years, he added. He asked if staff can look into whether they should increase the amounts listed on the FFP.

The harbor and beaches master plan (HBMP) looks forward for new construction, or major reconstruction/replacement, of city harbor and ocean structures, dredging, significant beach care and maintenance efforts. It’s funded by the city’s general fund and tidelands revenues, augmented by federal and state funding.

Webb noted that a majority of the HBMP’s future funding needs, or about 50%, are in a few specific projects including: Balboa Island seawall replacement at approximately $136.6 million (design begins 2026, first section replacement begins 2028); Newport Pier replacement which will cost about $20 million (public outreach and concept development underway, construction scheduled to start in 2027) and the Balboa Pier replacement for around $15 million (design scheduled for 2034).

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Staff recommended increasing general fund contributions to build up reserves for these major projects.

An increase was also suggested for the new parks maintenance master plan (PMMP), which covers all 67 city parks (not including beaches) for approximately 250 acres of space.

Last year, knowing the PMMP was in the works, they approved allocating $1 million annually from the general fund, Webb noted.

“Now that the plan is complete, we’re starting to look at the plan and we’re finding we have more need than we probably have money in there right now,” Webb said.

Staff recommended increasing the annual contribution to $2.3 million for fiscal year 2024-25 through FY 2027-28. The request is in anticipation of some major upcoming work on local parks, including: ADA playground improvements at San Miguel Park; dugout bench replacements at Arroyo Park, and replacement or rehabilitation of chain link fences, shade structures, drinking fountains, benches and trash cans at various parks.

Overall, the city has amazing parks with only some deferred maintenance “here and there,” O’Neill noted. He and some of his fellow councilmembers worked on developing the parks maintenance master plan several years ago to get ahead of upcoming necessary work “instead of doing ‘whack-a-mole’ and pointing things out as they were coming up.”

This was one area they had never completed a comprehensive survey to evaluate the overall status and maintenance need, he pointed out. It was set aside and then, during the most recent fiscal year, they allocated the $1 million general fund contribution knowing it would almost certainly require at least that much. Although he was not surprised to hear the staff request that the PMMP needed more, he was a little taken aback to see how much more.

The increase should take care of a “significant chunk” of the maintenance over the next four years and then that amount will drop down pretty quick and likely not be above $2 million, O’Neill noted.

“It’s really that over that four-year spread we’ve really got to increase the amount to take care of the parks the way that people would expect,” he said. “It’s not like we’re going to be doing a significant amount of ribbon cutting on this stuff – we’re talking about pedestrian concrete and chain link fence replacement and shade structures – but this is the kind of stuff that really matters for our residents.”

Councilmember Lauren Kleiman also commended the previous council and staff that conducted the park audit, which likely won’t need to be done again for some time. Hopefully it can be worked into a long-term plan, she added.

“I’m glad that we did it and that we are now looking forward to making some of those improvements,” she said.

Webb also highlighted some other projects in the ocean and harbor. They should plan to: Complete the lower harbor main channel dredging; continue work on Balboa Island (drainage improvements, west end seawalls, Collins Island bridge replacement); advocate for sand nourishment and groin field modifications and the Newport Pier/McFadden Square reconstruction.

In terms of traffic, transportation and mobility, staff suggested the city identify and implement the next phase of community mobility, like the Balboa Peninsula trolley and app-based transit.

The CIP recommendations also includes some action on city facilities: Complete and open new Sunset View Park and bridge; develop and approve concept for new Balboa Library and fire station, start final design and permitting and construction of the new lecture hall.

Mayor Pro Tem Joe Stapleton also mentioned looking into making better use of Lower Castaways Park. It’s a shame that it’s one of the least utilized lots in the city, he added.

“I’d love to take charge and spearhead whatever that looks like going forward,” Stapleton said.

A fresh perspective would be helpful on Lower Castaways, O’Neill added. They’ve been trying to figure out what to do with that space for many years, he said. He suggested creating an ad hoc committee, which Stapleton and Councilmembers Robyn Grant and Noah Blom all volunteered to sit on, which would be officially agendized at an upcoming council meeting. The group can work on what the vision is for the space, O’Neill said.

Stapleton also noted the discussion about a potential West Newport Beach community center. He suggested looking into possibly better utilizing the theater space, Avon parking lot and John Wayne Park.

That is something worth looking at, O’Neill agreed, although it’s a longer discussion.

City staff also asked for guidance for programs and service levels as the FY 2024-25 proposed budget is being developed, specifically in the areas of code enforcement, and arts programming and funding.

The current budget for code enforcement is $956,000, while revenue is approximately $217,000. There are currently four full-time and one three-quarters staffers in the department. The team is small, but efficient, noted Assistant City Manager Seimone Jurjis. The city saw a total of 4,400 cases in 2023, with the most common cases involving property maintenance, water quality, illegal encroachments and unpermitted construction.

Addressing enforcement related to beach vending is staff and labor intensive. Illegal vending on the beach has increased since the COVID-19 pandemic and the city has received complaints from both the public and lifeguards.

They’ve also heard from a number of businesses concerned about the illegal vendors, O’Neill added.

“They just want people to play by the rules and when people aren’t and it’s costing the livelihood of small business owners in our community, that’s a real problem,” he said.

Code enforcement officers have to navigate miles of beachfront on foot, which can be challenging, and it’s hard to properly identify vendors. They also need dedicated resources in the summer, Jurjis noted.

To address these beach vending enforcement issues, staff recommended converting the part-time code enforcement officer to full-time and purchasing an ATV to navigate on the sand. They also want to evaluate options for more proactive enforcement.

“We definitely feel that there is more opportunity to take a much more proactive stance on the beach vending,” Jurjis said.

Staff anticipates returning to the council in March with proposals for a plan.

Stapleton expressed strong support for the request. They are often dropped off in his neighborhood on the Balboa Peninsula. They have trucks and radios and know where code enforcement officers are at all times, he commented, and it’s not in the purview of the lifeguards to tackle the issue.

“It is a massive problem,” he said.

Weigand asked if vendors start to catch on to the focused enforcement effort and stop illegally setting up shop on the beaches, if the resources could eventually be shifted to other projects.

That could happen, Jurjis answered. Once the strong enforcement plan is implemented, they will likely see a reduction in the number of vendors on the beach, he said, and they feel confident in this approach.

“There’s some more tools in the toolbag that we can utilize to have a much more proactive enforcement program,” Jurjis said.

There was also discussion about enforcement suggestions related to refuse and commercial businesses in residential neighborhoods (related to short-term lodging).

Library Services Director Melissa Hartson also spoke about cultural arts funding and programming.

For FY 2024-25, staff is requesting $47,000 for program enhancements ($10,000 for cultural arts grants and $37,000 to fully fund the sculpture exhibition with the general fund).

Some proposed uses for the additional $37,000 include sculpture exhibition class field trips, photo contest, live performances, plein air art event and other art in public spaces.

Grant noted that the biggest chunk of arts program expenditures is the Sculpture Exhibition. For fiscal year 2023-24, Phase IX is expected to cost $172,000.

It’s essentially a passthrough item, it’s not necessarily part of the Arts Commission’s budget, but the money that is essential for the city to continue the sculpture exhibition at the Civic Center Park. It’s a regular city program at this point, Grant said.

As a body, Grant said the council either needs to acknowledge that they are going to continue to do it at the current level or somehow restrict it. She mentioned the last budget review when the council “hit a brick wall” but ultimately agreed to fill a funding gap for the next phase of the rotating art pieces.

If it’s a passthrough and is actually a City Council responsibility, O’Neill said he would “100% welcome the opportunity” for them to have sole discretion on what it looks like, in terms of the number of phases it goes through.

“I don’t think there’s any reason for us to do this every year,” O’Neill said. “There’s no reason for us to be spending $172,000 every year on changing out sculptures in the sculpture garden.

Every two years would be a better plan, he added, which would cut the cost in half, but still provide 30 sculptures in the park.

As they talk about other needs during the planning session this is a chance to look at the city budget more holistically. He hasn’t received feedback from residents demanding more cultural arts in the city, O’Neill commented. The money used for the Sculpture Exhibition could instead be used to maintain a budget that puts the emphasis where residents would clearly prefer it, he said, like citywide efforts with police and code enforcement and capital improvement projects. Those are the priorities, he emphasized.

Grant contended that the Sculpture Exhibition is a priority. They’ve made a commitment to it, she said. Although she’s open to adjusting it or refining it so it doesn’t cost as much, possibly not changing it every year or reducing the number of sculptures. Although there would be savings, there are still associated costs, for example, if it’s every two years they have to pay the artist for a longer term.

There might be a hybrid approach, Weigand suggested, and possibly a public-private partnership to help fund the sculptures.

Staff can look into lengthening the time that the sculptures are placed and not installing different pieces every year, Hartson said. There would be cost savings, although the artist honorariums would fluctuate. Also, the materials used in the sculptures might need to be considered since they would need to withstand the coastal elements for a longer period of time, she added.

Overall, there would definitely be reduced cost, Hartson concluded, since a large portion of the $172,000 goes to the installation and de-installation project management of each phase.

Leung asked if it would be helpful for staff to return with options for the program.

They need to ask the Arts Commission to take a “harder look” into the Sculpture Exhibition with consideration to the council comments and come up with some options, O’Neill answered.

Also during the workshop, Finance Director Jason Al-Imam provided an update on the city’s fiscal picture and the preliminary outlook for city revenues in developing the next budget.

“We’re projecting more economic expansion and growth in fiscal year 24-25,” he said.

General fund revenues are projected at $316 million, which reflects an increase of $8 million (or 2.6%), which is primarily due to increases of: Property tax of more than $5 million; sales tax of more than $2.6 million and transient occupancy tax of more than $0.6 million.

Staff attributes the increase in revenue from property tax, the city’s largest source of revenue, primarily to the Proposition 13 inflationary adjustment and due to changes in ownership and new construction.

The increase in sales tax is largely due to projected growth from autos and transportation. Al-Imam explained that a large luxury auto dealership closed last year for a construction project, but is expected to re-open in the second half of the upcoming fiscal year. That is part of the reason why last year’s sales tax revenue in autos and transportation was down and why it’s expected to bounce back in FY 2024-25, he said.

Other areas seeing a bump in sales tax revenue compared to the previous fiscal year are restaurants and hotels, general consumer goods and the county pool. Although overall, as O’Neill pointed out, the levels of sales tax from all four major industry groups is relatively flat compared to fiscal year 2022-23.

The TOT increase is due to projected growth in TOT receipts from hotels and short-term rentals. The Pendry, which opened in late September, has already started to add to the bottom line, Al-Imam noted, although the steep growth the city saw in TOT revenue in FY 2021-22 and FY 2022-23 is tapering off. Growth from short-term lodging has flattened out as well, he added.

Other revenues are projected to increase $1.7 million (2.6%), largely due to projected growth from service fees and charges and property income, which includes leases and parking revenue. These include service fees and charges, fines and penalties, property income and other miscellaneous revenues.

This is a high-level review of the major funds that add up into the city’s general fund, but the more specific breakdown of the budget will be provided at a Finance Committee meeting in March, O’Neill pointed out.

While the budget for next year is still under development, staff expects that general fund operating expenditures are preliminarily projected to increase $6 million (2%) in FY 2024-25, Al-Iman said. Salaries and benefits are projected to be up approximately $2.5 million (2%) and non-personnel costs are projected to be up approximately $3 million (3%), which includes contract services, utilities, supplies and materials, and maintenance and repair costs.

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Sara Hall covers City Hall and is a regular contributor to Stu News Newport.

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