DATE: December 5, 2017
SUBJECT: MAJOR MAINTENANCE PROGRAM
Title
ORDINANCE AMENDING THE FY 2017/18 BUDGET, INCREASING THE CAPITAL MAJOR MAINTENANCE APPROPRIATION CONTINGENCY IN THE AMOUNT OF $390,000 TO BE FUNDED FROM UNRESTRICTED RESERVES
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EXECUTIVE SUMMARY:
The FY 2017/18 Capital Major Maintenance Appropriation Contingency is nearly depleted. To date, contingency funds have been utilized to supplement approved projects which experienced higher than expected bids due to increasing regional construction costs, and to address the installation of stormwater treatment facilities at the National City Marine Terminal. Staff estimates $390,000 in additional funding for the Capital Major Maintenance Appropriation Contingency is required in order to restore projects’ allowable contingencies.
Staff recommends approving an ordinance to transfer funds from prior fiscal year’s Unrestricted Resources to the FY 2017/18 Capital Major Maintenance appropriation in the amount of $390,000.
Recommendation
RECOMMENDATION:
Ordinance amending the FY 2017/18 budget, increasing the Capital Major Maintenance Appropriation Contingency in the amount of $390,000 to be funded from Unrestricted Reserves.
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FISCAL IMPACT:
The increase to Capital Major Maintenance Appropriation Contingency will be funded from the remaining cumulative Unrestricted Reserves As of June 30, 2017; the balance in the cumulative unrestricted reserves is approximately $12.0M, before any other requests are approved at the December 2017 board meeting.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A thriving and modern maritime seaport.
• A vibrant waterfront destination where residents and visitors converge.
• A Port that is a safe place to visit, work and play.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
The initial Capital Major Maintenance Appropriation Contingency for FY 2017/18 was budgeted at $367,000 and currently stands at $72,653. Contingency funds have been applied to projects for change orders addressing stormwater facilities at the National City Marine Terminal, and to allow award of construction contracts with bids in excess of the project budget. Staff anticipates additional funding demands on the Capital Major Maintenance Appropriation Contingency this fiscal year to support planned construction projects.
Since November 2016, construction labor costs have increased due to an uptick in private and public sector projects, and a shortage in skilled trade labor. The increased demand has also contributed to the rising cost of construction materials. According to Caltrans Construction Cost Index data, project costs have risen 11% and 18% over the past two years, respectively. Other cost indicators are showing similar increases.
In the first five months of the fiscal year, four construction projects were awarded with a combined construction budget of $3.9M. Each of these projects was awarded at or above the initial project budgets nearly depleting the project’s budgeted contingency. It is standard practice to assume 10% contingency when the project budget is developed. Staff recommends an increase of $390,000 pursuant to the authority granted to the District by San Diego Unified Port District Act Section 38 and 83, to the Major Maintenance Appropriation Contingency to make funds available for potential construction changes on projects planned for construction this fiscal year.
General Counsel’s Comments:
The Office of the General Counsel has reviewed the issues presented in this agenda sheet and approves as to form and legality.
Environmental Review:
The proposed Board action does not constitute a “project” under the definition set forth in California Environmental Quality Act (CEQA) Guidelines Section 15378 because it will not have a potential to result in a direct or indirect physical change in the environment and is, therefore, not subject to CEQA. No further action under CEQA is required.
In addition, the proposed Board action complies with Sections 81, 83, and 87 of the Port Act, which allow for the use of funds for expenses of conducting the District, the use of funds for acquisition and maintenance of improvements, works and facilities, and for visitor-serving commercial and industrial uses and purposes, and the construction, reconstruction, repair, and maintenance of commercial and industrial buildings, plants, and facilities. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board action is consistent with the Public Trust Doctrine.
Finally, the proposed Board action does not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit Regulations. Therefore, issuance of a Coastal Development Permit or exclusion is not required.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Christopher McGrath
Program Manager, Engineering-Construction