Costa Mesa studies $28.7 million CIP, staff seeks temporary CAN waiver to cover $3.6 million shortfall

City staff on April 22 presented the Costa Mesa City Council with a proposed fiscal-year 2025–26 capital improvement program (CIP) totaling $28.7 million and asked the council to consider temporary deferrals and a one-year exception to the city’s Capital Asset Needs (CAN) rule to address a $3.6 million shortfall for FY 2024–25.

Finance Director Karol Molina told the council that the city’s all-funds budget for the current fiscal year is about $240 million and that the general fund is roughly $189.9 million. “The waiver of the CAN does require a super majority vote, which means we would need at least five city council members to vote in favor of the waiver,” Molina said, explaining the vote threshold for any exception to the ordinance.

Public Works Director Raja Setharaman and division managers then reviewed projects by category and funding source, noting that the CIP is financed from a mix of federal, state and local grants and restricted funds and that many projects are multiyear. City Engineer Sung Yang highlighted the citywide street improvement program (including grind-and-overlay, slurry seal and parkway repair), saying the current program covers about 10.1 lane miles — an amount he likened to the length of I-405 between two regional interchanges — and is intended to keep the pavement condition index near 85.

Why it matters: the CAN municipal code ordinarily requires a fixed transfer of general-fund revenue into capital (roughly 5% of general fund receipts). Staff said the city faces a near-term shortfall of about $3.6 million for FY 2024–25, and proposed covering $2.9 million of that by temporarily deferring approved capital projects and reallocating $700,000 by shifting street-sweeping costs from the general fund to gas-tax revenue. Without an approved exception, staff said the city would otherwise need to find alternate budget cuts.

Key numbers and next steps - FY 2024–25 general fund: approximately $189,900,000 (staff…