First Year Successes and Goals Analyzed in Measure P

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In November 2018, Burbank voters approved Measure P, which increased the City’s sales tax from 9.50% to 10.25%.  That increase took effect on April 1, 2019, and is on track to generate about $20 million per year in additional sales tax revenue.

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Before Burbank voters went to the ballot, the City Council promised that it would use the additional $20 million per year to solve two major General Fund problems: deferred capital maintenance and a looming operating deficit related to pension liabilities. 

The City’s making good on its promises.

Several Council policies were put in place shortly after Measure P’s passage.  These include:

  • At least half of all annual Measure P revenues, some $10+ million, goes toward needed infrastructure improvements. The City is now in a position to overcome its backlog of street paving projects and keep Burbank’s streets in good condition going forward, as well as to make additional deferred maintenance improvements to the City’s capital infrastructure. 
  • The City and its employees will evenly share in the on-going annual pension cost.
  • At year-end, any General Fund balance in excess of 6% of the General Fund’s budgeted recurring appropriations will be used to fund employee pension liabilities. This annual funding commitment will be required if employee pension benefits are less than 90% funded and the pension funding commitment does not cause the General Fund balance to decline below $10 million.

The watchdogs are also in place.  In keeping with its promises to Measure P supporters, the City Council established oversight for the use of Measure P revenues; specifically by:

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  • Creating a new Infrastructure Oversight Board (IOB) appointed by the City Council that includes City residents. Their responsibilities include, at a minimum, the annual review of proposed infrastructure spending as well as the status of funded projects. 
  • Expanding the responsibilities for the existing Retirement Plans Committee to include at least an annual review of the City’s pension funding and benefits.
  • Expanding the responsibilities for the Audit Committee to make sure, among other things, that all Measure P proceeds are used in the City of Burbank.
  • Two City Council members selected each year will act as liaisons to the Infrastructure Oversight Board. Currently, these are Mayor Gabel-Luddy and Vice Mayor Springer.

So with the policy and administrative machinery now in place, what has the City accomplished?

Streets are being repaved; with the backlog begin decreasing in FY 28/29 with the current $8.0M recurring budget.

A long-term street pavement plan, aimed at improving and then sustaining the quality of Burbank streets currently requires $8.0 million per year.  Before Measure P, there had been varying amounts allocated to street paving that ranged between $3.0 to $5.0 million annually with a portion of this coming from SB1 revenues.  Now, with Measure P in place, the City is able to achieve the annual $8 million funding requirement.

Using these funds, the Public Works Department recently finished their largest local/residential paving project the City has ever embarked upon. They have more than doubled the annual paving schedule, which now includes 180 local and residential streets along with arterial City blocks, as well as upgrading about 100 curb ramps. The City is diverting approximately 150,000 discarded tires from landfills using rubberized asphalt, which is also quieter and more durable.

Public Works has developed a paving schedule so that Burbank streets are repaved and maintained much more frequently, and therefore at significantly lower overall cost..  A street’s life expectancy is based on a variety of factors including age, traffic loads and volumes, construction materials, climate, and previous maintenance.  For example, a main arterial street receives much more wear and tear than a residential street due to heavier loads and greater volumes of vehicles, and therefore will usually need more frequent maintenance

About $7.5 million in annual Measure P funds are available for other capital purposes, including major deferred maintenance. With more a than $400 million deficit in infrastructure maintenance, it will take a while to catch up. 

The City is currently prioritizing Measure P dollars on deferred maintenance of high demand and critical City infrastructure.  Besides street pavement, this includes traffic systems, building roofs, fencing, playground equipment, and irrigation systems.  The City will also leverage the use of external revenue sources like grants and restricted revenues whenever possible.

Over time, the City plans to accumulate funds with the aim of meeting community demands for some larger scale renovations and capital improvement projects. The IOB will play a critical advisory role in determining City’s infrastructure funding priorities. 

Additionally, the City has one outstanding General Fund bond issuance that ends four years from now, in FY 2022/23. About $2.3 million per year is needed to service these bonds; but after FY2022/23, these dollars could be available for pay-as-you-go funding or for helping to service the debt of a new bond issue.

Perhaps the best ongoing service the IOB can render to the public is helping to make sure that capital projects are completed within budget and on schedule.  Cost overruns can undo the best funding plans, as nightmares like California’s “bullet train” and Boston’s “big dig” attest.  The IOB can help forestall local project disasters by requiring that staff’s capital project proposals demonstrate project management competence, and by reviewing procurement and bidding procedures.  By 2022/23, when the opportunity to finance major building projects will be better, both the IOB and staff will have hopefully developed the “muscle” to undertake these projects with confidence.

The City has a better chance to avoid future retirement funding crises but will need to be diligent in their spending.

For Measure P to be effective over the long term, the General Fund operating deficit must be addressed.  To accomplish this, the City must make good on sustaining $9.0 million in ongoing annual savings.  So far, the City has achieved $7.4 million in annual savings by:

  • Adopting targeted fees. Annual revenues so far: $2.0 million, even with the PASS program subsidy.
  • Paying salaries that are relevant to Burbank’s market and no higher than what is necessary to be competitive. Annual savings: $2.0 million.
  • Reducing the amount due to the CalPERS Liability each year by paying at the beginning of each fiscal year. Annual savings: $0.9 million.
  • Reducing workers compensation claim expenses. Annual savings: $2.5 million annually. Reducing claim expenses by $2.5 million–$1.3 million more than originally projected–is an instance of very successful cooperation between labor and management.

Most importantly, none of these cost-saving measures reduce the scope or quality of services to Burbank citizens and businesses. 

A more challenging arena of cooperation is getting all employees to contribute 50% of their pension costs, which would save $3.7 million per year.  As one of their cost-saving priorities, City Council approved a policy that all labor pays 50% of their pension costs.  (New hires contribute 50% of their pension costs pursuant to state law.)   The City has been making strides in this area.  The Burbank Management Association, and Burbank Police Officers’ Association recently approved contracts that will move them toward paying their half in the coming years and the City is currently negotiating with Burbank Fire Fighters and the International Brotherhood of Electrical Workers. 

If the $3.7 million per year in savings were achieved, this would result in a total operating savings of $11.1 million, $2.1 million more than the $9.0 million target.  In view of the progress made so far, the City seems on track to making good on its commitment to generate long-term significant savings that don’t come at the expense of resident services.

The City is also making efforts to keep inflation from eroding its operating savings. 

As a result, the City has had no need to dip into its $33 million emergency fund, and has instead generated about $32 million in spendable surpluses; some of this money was generated from the hiring freeze put in place prior to Measure P and then released after voters passed Measure P.  Based on the City’s pension funding policy, this General Fund balance will ultimately help the City reduce its outstanding unfunded pension liability.

Retirement systems throughout the U.S. have been taken to task for overoptimistic projections, achievable—if at all–only by resorting to riskier investments that are subject to volatile market swings. As such, CalPERS has lowered its projected returns on investment from 7.5% to 7.0%, phased in over the next three years, beginning in FY 2019-20. For every 1% that CalPERS reduces the discount rate, the city’s annual cost increases by approximately 7%, highlighting the benefit of the 50/50 employee cost share policy.  Sharing in the costs reduces the City’s impact to 3.5% or half of the approximate increase.  As a result, the City and employees must contribute more to ensure that the retirement funds stays viable.

Besides City and employee contributions to CalPERS, increasing the actual rates of return on invested funds is another possible way to meet future retirement costs.

This coming year, City Council will consider placing funds into a 115 Trust Fund dedicated toward meeting pension obligations. By establishing this Trust the City hopes to put itself in a better position to absorb future pension cost volatility caused either by economic downturns or new CalPERS changes.

With all of these changes, the City’s financial future is healthier than the dire forecast prior to these adjustments.  The additional revenue along with cost savings has placed the city in the black for its 5-year future budget forecast, but barely. Pre-paying pension liability will certainly help; however, if CalPERS makes additional changes in their projected returns or City Council overspends, this can quickly change.

 It’s up to all of us—citizens and  watchdog committees alike–to help keep the City in check.                                           

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