Item 12 - Engineering Division Funding

Home Browse Search

Engineering Division Funding December 19, 2023 Page 2 3 9 1 7 with higher amounts of overhead. While looking for other solutions, Staff reported the situation to City Council and the public in the following reports and presentations: •May 24, 2021 Budget Workshop presentation indicated that a majority of Internal Services Funds, including the Engineering Fund, are underfunded. •March 1, 2022 Mid-Year Budget Report indicated that Public Works was currently updating its Cost Recovery Plan, which may improve the current fund deficit; and that future General Fund support may be needed. •May 17, 2022 Budget Workshop presentation identified the Engineering Fund as an issue. Staff oral comments indicated the Engineering Fund continues to experience delays in project billing and reconciliation; and that staff would like to fold the operation into the General Fund after staff has current information and develops a plan. •November 15, 2022 First Quarter Budget Report recommended moving construction inspection costs from the Engineering Fund to the General Fund, with a net fiscal impact of approximately $237,000. The staff report indicated that the next phase is to transition engineering costs to the General Fund after process improvements are completed. City Council approved the staff recommendation. •May 11, 2023 Budget Workshop presentation indicated the fund had a $1.5 million deficit balance and that the work of improving the business model is ongoing. Staff oral comments included that engineers cannot charge their time for administration, management, and non-productive time such as vacation; staff has been working on improving the business model; and as funding allows, staff may return with a request for a General Fund infusion. To date, Public Works Agency staff has taken the following measures to increase revenue and decrease expenditures in the Engineering Fund: •Worked with Caltrans and OCTA to substantiate and increase billable rates via approved Indirect Cost Rate Plans •Filled vacancies in billable engineering positions •Maintained vacancies in administrative positions •Implemented new timekeeping solutions to demonstrate billable hours •Prepared Indirect Cost Allocation Plans for administration cross charges assessed to the Engineering Fund (a requirement to increase billable rates). Staff will continue to work to increase the ability to recoup overhead costs by preparing additional Indirect Cost Allocation Plans and further reduce the net cost of the Engineering Services Division. At this point, staff recommends adding the Engineering Services Division budget to the General Fund with an approximate $900,000 per year net cost for overhead and time that cannot be charged to projects or developer deposits. The internal service fund would be closed.