With more than $20 million in excess reserves, a passionate debate over how those funds could be spent is expected to shake up Foster City Hall.
Decades of fiscal conservatism appear to have served the Bayfront community well, but what to do with a superfluous rainy-day fund is drawing sharp critique.
The council Jan. 16 will host a discussion about its general fund reserve policy that’s expected to revolve around a constellation of possible projects and expenditures.
While no formal decisions on how to spend the money will be made Tuesday, the meeting could set the stage for future considerations and study on financing for a range of projects that include recreation, flood protection, housing and more.
A citizens group wants the funds used to reduce the cost of a proposed bond measure to rebuild the city’s levee, but officials have noted there’s a range of needs.
Foster City is well above — almost double — its minimum reserve goal of having a rainy-day fund ranging from 33.5 percent to 50 percent of its annual budget. City officials will be asked to reconfirm that goal, and consider whether keeping expanded reserves should be policy, as well as how to possibly spend the unallocated public funds.
The heaviest debate may center on plans to raise Foster City’s levee as it strives to meet federal mandates or face being pulled into a flood zone. The city is slated to ask voters to pay more in property taxes to fund that $90 million project through a general obligation bond. While a city report suggests using all of its excess reserves to pay down the bond would only save the average homeowner about $62 a year, some residents contend it’s only fair taxpayers see a benefit.
Alternative prospects, such as contributing toward a workforce housing project, is also sparking opposition by residents frustrated with the impacts of growth. The citizens group Foster City Residents for Responsible Development has been vocal in urging the council to pay down the levee and return funds to taxpayers, noting allocating $20 million could save property owners 22 percent.
City Manager Kevin Miller said the council has “tough decisions, tough discussions” ahead but urged everyone to remain respectful and recognize a shared love for the city.
Mayor Sam Hindi said while he understands some people are focused on a single project, he has to consider all of the options and what kind of impact the funds can have.
“We have to explain that there’s a bigger picture here that we have to look at,” Hindi said. “I don’t think it’s wise to invest all the money in one single project, especially if there are other needs that need to be met.”
Other projects that may come forward in the coming months or years include building a new community center, estimated to cost upwards of $27 million, in place of Foster City’s aging recreation center, a 1970s facility that otherwise might need millions of dollars in repairs. Another early prospect could be for the city to construct a workforce housing project. That stems from developer Sares Regis Group’s ongoing effort to rezone its portion of the master-planned Pilgrim Triton to allow for housing in lieu of commercial space. In an effort to sweeten the deal, Sares Regis has offered to give the public land and work with the city on a city-owned development. Still very preliminary, it could cost the city upwards of $13 million to fund construction. In a similar vein, the city is considering allocating $2 million toward an employee home loan program.
Another looming need is pension liabilities that have grown to over $69 million, according to a staff report.
Hindi and Vice Mayor Gary Pollard said they’d like to look at ways to support the community while being mindful of current and future needs.
“I believe government should be as lean as possible,” Pollard said. “If there’s money, I want to find ways to quote-unquote give it back to the residents. That doesn’t mean I want to lower the bond or not lower the bond, but I want to make sure we’re doing the right thing by being prudent.”
The levee
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At the crux of the debate is how much of an effect allocating reserves could have on reducing taxpayers’ costs toward the levee. The city is striving to avoid being declared a flood zone by the Federal Emergency Management Agency, which could result in many property owners being forced to buy costly flood insurance.
City officials contend raising the levee protecting the 4-square-mile community is the most significant infrastructure project since Foster City was built. Last year, after hiring an expert to review financing options, the council decided to ask property owners to fund the $90 million project with a general obligation bond.
Estimates suggest the average homeowner would pay $278.80, through an estimated tax levy of $41 per $100,000 of assessed property values. A staff report shows an analysis of using excess reserves to pay down the bond. A $10 million allocation would reduce taxpayers annual assessment by just under $31, and a $20 million contribution would offer almost $62 back to homeowners, according to the report.
Commercial property owners, including the major corporations headquartered in Foster City, will also contribute to paying off the bond and would save money should reserves be returned.
Citizens group
But considering the length of the 30-year bond and the fact assessed property values increase over time, Bob Cushman, a leader of the citizens group Foster City Residents for Responsible Development, estimates taxpayers could save between $2,500 and almost $3,400 for homes assessed between $680,500 and $900,000 over the life of the city’s loan. Cushman contends the city shouldn’t hoard reserves to avoid needing voter approval for other projects, such as a new community center.
Excess reserves “should not be used to avoid the two-thirds vote needed to raise money for large capital projects. Ideally, excess reserves should be returned to the people in some equitable way,” Cushman said in an email.
He said Foster City already holds itself to a higher reserve standard as compared to several other neighboring jurisdictions and wants the council to be required to consider the pros and cons of returning excess funds to taxpayers. Plus, the $20 million allocation could save homeowners 22 percent, Cushman said.
Hindi and Pollard said officials have reviewed the impact of using the funds to pay down the bond and both floated the term “compromise” ahead of next week’s meeting. Pollard also clarified any city-owned workforce housing project would be retained by the public and the cost paid back through rent over time. They also noted using the excess reserves would benefit corporate property owners as well.
Still, what’s considered the greater good may be up for debate.
“We’re not looking for ways to spend money because it’s burning a hole in our pocket, it’s public money,” Hindi said. “But I encourage us to have a global look. … If we invest in our community, the quality of life will benefit for the future.”
City Council meets 6:30 p.m. Tuesday, Jan. 16, at City Hall, 620 Foster City Blvd.
(650) 344-5200 ext. 106
Twitter: @samantha_weigel
(3) comments
What council members neglected to say in this article is that they have already changed the reserve fund policy to do an end run on the idea of paying down the levee bond total. The new policy specificallyy calls out capital expenditures, workforce housing and pension liabilities as the ONLY approved uses for xcess reserve funds. This means council is not truly interested in a real discussion at the January 16 meeting.
In the last council meeting, two council members went so far as to ask city staff to strike the words “excess reserves” from the audit report. They are acting in bad faith.
As if that wasn’t enough, one council member referred to members of the citizens group referenced in the article( he did not use the group’s name) as “ miscontents, malfeasants, and miscreants”.
This is another well written, informative and balanced article by reporter, Samantha Weigel. One clarification needed: The City told her the savings to the average homeowner would be $62 dollars per year. That is inaccurate and deliberately misleading. It is the savings for the first year, only. There after, the savings grow each year because the levee bond payments are based on assessed valuation, which is expected to increase each year for 30 years!
Similarly, the table in the staff report makes no mention that these are first year payments, only. A 22% per year savings is not chump change.
Also, do not assume that the average is a median; that is, that 50% would have a larger savings and 50% would have a smaller savings. The average the City is using is a mean average.
If this were a private company they would be accused of false and misleading advertising.
Kalifornians and those who come here from other places, gee, pay down debt! Get assets for that money, don't just .... it away. There will be another earthquake. One that will damage a lot of your city. Save it for a disaster day!!
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