Costa Mesa staff propose $33.4 million CIP as council wrestles with CAN accounting and park priorities

City staff presented a preliminary FY 2026–27 Capital Improvement Program (CIP) totaling about $33.4 million at a March 31 special study session of the Costa Mesa City Council, and councilmembers pressed staff on how to meet the city’s Capital Asset Needs (CAN) ordinance and how to prioritize limited general-fund dollars across parks, streets and facilities.

Raja, a longtime public-works staff member who led the presentation, said the recommendation includes 39 projects with a proposed split of funding that relies on future bond financing, grants and several local sources. "We're recommending a total of 39 projects with a total CIP amount of 33.4," Raja said, noting a planned $12 million in future bond financing tied to Fire Station 2 and grant awards of roughly $5.7 million.

Why it matters: The council must adopt the full budget, including the CIP, by June 30. Councilmembers signaled they will weigh small, safety-driven items against larger, higher-profile projects as they refine allocations this spring.

Staff and the PACS commission framed the discussion around prioritization and deferred projects. City Engineer Sun Yang and other presenters highlighted near-term accomplishments — citywide street and sidewalk repairs, Brentwood Park updates and an ongoing alley-improvement program — and explained that CIP projects are multi-year in nature, often involving design, outreach, bidding and construction over several fiscal years.

A central point of debate was how the CAN ordinance’s 5% general-fund commitment is calculated and what counts as eligible capital spending. Raja said the proposed general-fund portion of the CIP had been estimated at about $5.55 million but could be revised to approximately $5.2 million, pending updated revenue figures from finance staff. Councilmembers asked whether internal staff time devoted to CIP projects — engineering, project management, inspections — can be counted against the CAN requirement. Staff told council that project-management work and related staff costs are commonly considered eligible for capital accounting; finance staff and legal advisers outlined practical limits and cautioned that altering prior audited budgets would be complex.

Councilmember discussion focused on transparency and trade-offs. Several members urged staff to present a clear, single-sheet view of total deferred projects, CAN repayment obligations and the net general-fund contribution before finalizing the budget. Councilmember Marr (by role reference) expressed concern that counting many internal costs could make the CAN calculation appear to meet the letter but not the spirit of the ordinance; staff countered that the municipal code lists design, construction, inspection and project administration as qualifying activities.

Projects and timing: Among projects highlighted were the Fairview Road active-transportation improvements (bike signals, a HAWK pedestrian signal and a bus boarding island), Fire Station 2 nearing final plan check, the citywide alley-improvement project nearing completion, and deferred projects carried forward in the five-year CIP (attachment 4). Staff also flagged the skate-park expansion: bids exceeded current contingency and staff said additional funding for contingency and construction management will be requested at an upcoming council meeting. Regarding that project, staff warned of a December 2026 ARPA expenditure deadline linked to previously allocated federal funds.

Budget uncertainties and next steps: Raja stressed the CIP amounts are preliminary and could change if revenue projections shift between the presentation and final budget adoption. Staff asked council for direction on the FY 26–27 and five-year CIP and outlined a tentative schedule that aims for budget adoption by June 30. Finance staff described ongoing work with bond counsel and municipal advisors on Fire Station 2 bond timing and collateral, with a possible bond issuance window in July pending credit ratings and council resolutions in June.

What council asked staff to do: councilmembers requested clearer breakout tables showing CAN repayment schedules, the portion of general-fund dollars dedicated to the CIP, and granular project-level justifications (cost, prioritized need, and whether an item could be handled in operating funds). Multiple members urged staff to return with refined cost estimates and funding options, including possible public–private partnerships and pursuit of additional grant matches.

The study session adjourned after a robust public comment period and follow-up council discussion; no formal budget vote occurred that night. Staff will return with updated finance figures and refined project lists during the spring budget process.