HomeMy WebLinkAbout _ 3.2--City of Redding Budget Workshop No. 3C IT Y OF
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AN CITY OF REDDING
REPORT TO THE CITY COUNCIL
MEETING DATE: May 20, 2025
FROM: Barry Tippin, City Manager
ITEM NO. 3.2
F- ***APPROVED
BY***
btippin(kcityofredding.org
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4 12P P ci�i I 5/19/2025
bfippin*cityofredding.org
SUBJECT*3.2--Consider presentations regarding the current budget development of the City
of Redding's Biennial Budget for Fiscal Years 2025-26 and 2026-27 for the EnteTrise Funds.
Recommendation
Accept presentation regarding the current budget development of the City of Redding's Biennial
Budget for Fiscal Years 2025-26 (FY26) and 2026-27 (FY27) for the Enterprise Fund
Departments (Redding Electric, Public Works & Airports); and provide direction to staff as
needed.
Attachments
A REU Off Agenda Memo Biennial Budget Final 05.15.2025
2025-27 Budget Workshop - Electric Department v5
RELJCity of Redding OFF -AGENDA MEM
lElectric Utility I
To
From
Through
Date
Subject
SUMMARY
Honorable Mayor and City Council
Nick Zettel, Electric Utility Director
Barry Tippin, City Manager
05/15/2025
FY2026-2027 Biennial Budget
The Redding Electric Utility's (REU) biennial budget for fiscal years 2025-26 (FY26) and 2026-27
(FY27) has been developed to align resources with the City Council's strategic priorities and long-
term financial goals. The proposed budget reflects extensive divisional input, financial forecasting,
interdepartmental engagement, and guidance from the Council provided during the budget
development process. This budget is based on current information and assumptions and may be
adjusted as financial and operational data are further refined.
Total revenue is projected to increase by $13.6 million (9.0%) for FY26, followed by an increase of
$10.2 million (6.2%) for FY27. This growth is largely driven by the continued electrification of key
industries, increases in customer volume, and approved rate adjustments.
The table below categorizes the expenditure budget based on primary functions: Electric Generation
and Distribution, Customer Service, and Field Services.
a luded carryover amounts
ItUN (e Wiff►T7
Every effort is made to manage and contain costs despite external challenges, including rising power
supply costs due to regulatory mandates and market conditions, inflation, and increased demand. In
addition to addressing the repair and replacement of aging, critical utility infrastructure, and to
ensure the continued financial stability of the utility, as well as to protect public health and safety,
the following rate adjustments are incorporated into the Utility's five-year plan:
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The following table presents the Department's budget allocations, categorized by principal
expenditure classifications:
ANALYSIS
The following paragraphs provide an overview of key budget components, including personnel,
operations and maintenance, debt service, capital outlays funded by revenue and bonds, major plant
maintenance, and rolling stock replacement.
Significant Issues
Leadership remains focused on proactively addressing the following complex and potentially costly
challenges outlined in the 2021-2026 Strategic Plan: wildfire risk and safety compliance; grid
reliability and resource adequacy; cybersecurity and grid modernization; state clean energy
mandates; rising energy costs and market volatility; electrification demands, equity and affordability;
and supply chain disruptions, including tariffs on materials and equipment. Tariffs on imported
equipment, such as transformers, steel, and components, pose a financial risk to utilities by
2
FY2025-26
FY2026-27
FY2022-2
FY2023-24
FY2024-25
Financial
Financial
Rate Adjustments Actual
Actual
Actual
Plan
flan
2025 Financial Plan 2.00%
4.00%
4.00%
5.00%
5.00%
2023 Financial Plan 2.00%
4.00%
4.00%
4.00%
4.00%
The following table presents the Department's budget allocations, categorized by principal
expenditure classifications:
ANALYSIS
The following paragraphs provide an overview of key budget components, including personnel,
operations and maintenance, debt service, capital outlays funded by revenue and bonds, major plant
maintenance, and rolling stock replacement.
Significant Issues
Leadership remains focused on proactively addressing the following complex and potentially costly
challenges outlined in the 2021-2026 Strategic Plan: wildfire risk and safety compliance; grid
reliability and resource adequacy; cybersecurity and grid modernization; state clean energy
mandates; rising energy costs and market volatility; electrification demands, equity and affordability;
and supply chain disruptions, including tariffs on materials and equipment. Tariffs on imported
equipment, such as transformers, steel, and components, pose a financial risk to utilities by
2
The proposed budget maintains the current staffing level of 202 full-time equivalent (FTE) positions
and does not include any new position requests. Leadership remains committed to identifying
opportunities to optimize staffing and achieve cost savings within the existing budget. Electric
personnel costs for FY26 have increased by only 3.8% when adjusted in line with the assumptions
outlined in the 2023 financial plan. While the FY26 budget reflects an 18.1% increase over the FY25
adopted budget, followed by a modest 1.9% increase in FY27, these variances are primarily driven
by key personnel -related changes that were not anticipated during the development of the FY25
budget in 2023. It did not capture Council -approved changes in negotiated Memoranda of
Understanding (MOUs) and the implementation of a more competitive salary structure to support
employee retention and market alignment. The largest portion of the unfunded liability with Public
Agency Retirement Services (PARS) has been fully paid off in FY24. This means that the previously
required payments to cover that liability are no longer needed, resulting in a significant reduction in
our annual costs going forward.
Aerations and Maintenance (O&M)
Operation and Maintenance (0&M) expenses are categorized into two groups: (1) Specific 0&M
expenses, which include operating materials and the cost of power, and (2) Interdepartmental
Charges, Interdepartmental Charges consist of fixed charges from other City departments, such as
Electric's portion of the General Fund Cost Allocation, in -lieu fees, and rent for the Corporation Yard.
0&M expenses are requested to increase by $7.6 million (9.1%) for FY26, followed by a small increase
of $1.6 million (1.7%) for FY27, primarily due to increased power supply costs and
wildfire/vegetation management.
Power supply costs are a primary driver of operating materials expenses. In the upcoming biennial
budget forecast, rising fuel expenditures are the key factor contributing to the projected increase in
overall power supply costs of $3.2 million (5.6%) for FY26, followed by a minimal increase of 1.0%
in FY27. Approximately 38% of the increase in power supply costs is attributed to a rise in load
demand. Additionally, the cost increase is influenced by a reduced reliance on spot market purchases,
as the narrowing gap between gas and energy market prices has made power plant operations more
cost-effective. Importantly, the rise in load is accompanied by a corresponding increase in revenue,
which is expected to offset the additional costs associated with meeting the higher demand.
In the past, the Electric Department experienced a period of relatively stable resource portfolio,
largely due to sustained and strategic investment in long-term resource planning. However, recent
developments, such as changes in customer demand, evolving regulatory requirements and
compliance, and emerging energy and capacity deficits, now pose significant challenges to REU's
lon -term resource OlanninCr strate4aies, relaulator com fiance, and customer rates. These pressures
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may drive costs upward, but every effort will be made to mitigate the impact on customers. In
response to these challenges, the Long -Term Resource Planning team (Resources) has evaluated
available resource options and development recommendations to ensure the utility continues to
meet customer demand reliably and cost-effectively.
0&M also includes REU's continued wildfire mitigation efforts through a collaborative partnership
with the City of Redding Fire and Parks Departments. To ensure a timely and capable emergency
response, REU funds 15 full-time firefighter positions to maintain appropriate coverage levels and
improve fire suppression readiness, particularly in high-risk areas served by REU's electric system.
In addition, REU funds six full-time Parks field positions and one Parks Superintendent to support
proactive vegetation management in REU's electric utility corridors and around substations. Key
activities include mastication, weed abatement, ladder fuel removal, and utility pole wrapping to
reduce the risk of wildfire ignition and improve system resilience. For the upcoming biennial budget
cycle, REU will fund an additional 1/3 of a crew proposing to expand this partnership by leveraging
a Cal Fire grant, which will allow REU to receive additional crew time dedicated to utility -focused
vegetation work. The proposed funding for positions in the Fire and Parks Departments is
approximately $4.0 million per year.
On a more positive front, an increase in hydro deliveries has been budgeted on current policy and
operational changes. Additionally, participation in the Energy Imbalance Market (Spring 2021) and
the Extended Day -Ahead Market (EDAM) in Spring 2027 is expected to boost wholesale market
activity. While this increased wholesale activity may increase supply costs, it is projected to result in
a net positive outcome that will ultimately benefit our customers.
Overall, the $749,100 (6.0%) decrease in Interdepartmental Charges during the first year of the
proposed budget is primarily driven by a reduction in Electric's general and payment -in -lieu -of -tax
to the General Fund. In the second year of the budget request, however, Interdepartmental Charges
are projected to increase by $1,456,900 (12.4%), mainly due to higher Electric's payment -in -lieu -of -
tax and increased risk management costs to the General Fund.
The Electric Utility Debt Service budget requests $18.8 million in FY26 and $19.6 million in FY27. For
FY23 to FY25, Debt Service has stayed flat at approximately $14.4 million. The increase in debt
service cost of approximately $4.4 million in FY26 and an additional increase of $0.8 million in FY27
is due to the issuance of $67.175 million Electric System Revenue Bonds, 2025 Series A in March
2025. This bond issuance was for financing the additions, betterments, extensions, and
improvements to the electric utility system, including significant replacement and upgrades to
overhead and underground infrastructure systems, and construction of a maintenance building at
the Redding Power Plant.
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RELJCity of Redding OFF -AGENDA MEM
lElectric Utility I
The table below presents the components of the Capital Outlay requests for FY26 and FY27 compared
with the actual FY24 expenditures and the adopted and amended FY25 Budget (excluding carryover
amounts).
Most capital outlay requests fall under the categories of Projects, Programs, Equipment, and
Furnishings. General System Improvements include annual, recurring expenditures necessary to
install infrastructure that ensures reliable electric service for both new developments and existing
customers. These improvements are carried out by Electric utility crews and contractors and
typically involve the installation of key facilities such as transformers, poles, overhead and
underground conductors, trenching, conduit, and vaults. This budget cycle emphasizes the
continuation of overhead/underground infrastructure, substation security, power plant renovation
projects, back-up power control center relocation and enhancements, and technology
upgrades/replacements. As General System Improvements, Projects, and Programs are on "existing
facilities of an investor and publicly owned utilities used to provide electric power, natural gas,
sewerage, or other public utility services," these types of projects are exempt from review under the
California Environmental Quality Act (CEQA) guidelines Section 15301.
General System Improvements include the continuation of REU's meter modernization effort of
approximately $500,000 per year due to the age of the utility's mechanical meters. As the City
continues to expand and modernize its overhead and underground electric infrastructure, the need
for additional materials and resources has grown. This includes increased demand for conductors,
transformers, conduit, poles, switchgear, and other essential components.
The capital items for projects and programs are as follows:
FY26
Overhead/Underground Infrastructure
Power Plant Renovation
Substation Security
GIS Utility Network Upgrade/Software Replacement
5
$ 5,372,000
$ 2,140,000
$ 1,190,000
$ 1,500,000
FY 023-24
FY2024-25
FY2024-25
FY2025- ;6
Increase
FY2026-27
Increase
Description
Actual
I Adopted
I Amended
I Proposed
(Decrease)
Proposed
(Decrease)
General System
$ 6,961,574
$ 6,585,000
$ 6,585,000
$ 8,750,000
$ 2,165,000
$ 8,750,000
$ -
Improvements
Projects, Programs, &
Equipment and
5,957,420
17,160,800
15,315,000
10,202,000
(5,113,000)
11,390,000
1,188,000
Fumishin s
Total Capital Outlay ,
$12,918,994
$23,745,800
$21,900,000
$18,952,000
$(2,948,000)
$20,140,000
$1,188,000
Most capital outlay requests fall under the categories of Projects, Programs, Equipment, and
Furnishings. General System Improvements include annual, recurring expenditures necessary to
install infrastructure that ensures reliable electric service for both new developments and existing
customers. These improvements are carried out by Electric utility crews and contractors and
typically involve the installation of key facilities such as transformers, poles, overhead and
underground conductors, trenching, conduit, and vaults. This budget cycle emphasizes the
continuation of overhead/underground infrastructure, substation security, power plant renovation
projects, back-up power control center relocation and enhancements, and technology
upgrades/replacements. As General System Improvements, Projects, and Programs are on "existing
facilities of an investor and publicly owned utilities used to provide electric power, natural gas,
sewerage, or other public utility services," these types of projects are exempt from review under the
California Environmental Quality Act (CEQA) guidelines Section 15301.
General System Improvements include the continuation of REU's meter modernization effort of
approximately $500,000 per year due to the age of the utility's mechanical meters. As the City
continues to expand and modernize its overhead and underground electric infrastructure, the need
for additional materials and resources has grown. This includes increased demand for conductors,
transformers, conduit, poles, switchgear, and other essential components.
The capital items for projects and programs are as follows:
FY26
Overhead/Underground Infrastructure
Power Plant Renovation
Substation Security
GIS Utility Network Upgrade/Software Replacement
5
$ 5,372,000
$ 2,140,000
$ 1,190,000
$ 1,500,000
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Overhead / Underground Infrastructure $5,200,000
Power Plant Renovation $2,140,000
Substation Security $1,190,000
Back -Up Power Control Center Relocation/Enhancements $1,540,000
GIS Utility Network Upgrade/Software Replacement $500,000
PI Implementation $820,000
AN W."T" IN I 171115V I NO 1#1
The Utility anticipates that the majority of these projects, including General System Improvements,
will be funded through bond proceeds.
Major Maintenance and Rolling Stock Funds
In addition to the regular Capital Outlay Budget, a "Special Purpose Fund" has been established for
the periodic major maintenance of the Electric Utility's power -generating equipment (Major
Maintenance Fund). The annual contributions to this fund are designed to support a balanced 10 -
year maintenance plan. Maintenance expenses are budgeted in the fund and recognized in the year
the work is completed. For FY25, the adopted funding amount for Major Maintenance was $1.6
million. To maintain adequate funding levels, the budget for FY26 is $3.6 million and $1.8 million in
FY27. The higher funding request in FY26 is primarily due to two large planned projects on Units 5
and 6.
The Major Maintenance Fund is allocated for significant, periodic expenditures arising from the wear
and tear that generating units experience due to regular use. These expenses are not included in the
typical Operations & Maintenance budget because of their occasional and unpredictable nature. From
a risk management perspective, it is considered sound utility practice to follow manufacturers'
maintenance guidelines to ensure the continued, reliable operation of the generating units. Failure
to adhere to preventive and periodic maintenance schedules could lead to catastrophic generator
failures, resulting in substantial repair costs and the need for replacement power purchases,
potentially amounting to millions of dollars.
The Rolling Stock Replacement Fund operates similarly to the Power Plant Major Maintenance Fund.
The adopted FY25 funding amount for the Rolling Stock Replacement Fund was $1,100,000.
However, the budget proposal calls for $1,200,000 annually for FY26 and FY27 to maintain adequate
funding levels. This increase is primarily due to higher-than-expected inflation in the auto and
electric equipment sectors.
The Rolling Stock Replacement Fund for Field Services requests increased from $55,000 in FY25 to
$58,000 in FY26 and $58,000 in FY27. The increase is primarily due to higher -than -projected
replacement costs of trucks.
The request for the Rolling Stock Replacement Fund is based on the Electric Utility's established need
for the scheduled, jeriodic re6:)1,acement and uearade of heavy rolling stock, such as line trucks, as
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well as vehicles like sedans, light trucks, and trailers. Fleet maintenance has confirmed the need for
these replacements as appropriate. The Rolling Stock Replacement Fund should be maintained at the
proposed levels to address the demonstrated and projected needs of the Utility.
Electric is not requesting any new vehicles during this budget cycle.
Five -Year Plan.
The Electric Utility's financial plan, outlined below for the current year and the subsequent five years,
is a preliminary projection. It is subject to change based on evolving circumstances and further
analysis.
A key assumption in the previous plan was a return to the Federal Reserve's long -run inflation target
of 2%. While the Fed remains committed to this target, recent economic conditions have introduced
uncertainties. As of early 2025, inflation has moderated but remains slightly above the 2% target,
with core Personal Consumption Expenditures (PCE) inflation at 2.8%. Consequently, the current
five-year plan uses a target inflation rate of 3%. Assuming 3% for future projections is a prudent
approach, considering ongoing inflationary pressures and uncertainties related to global supply
chains, recent tariff implementations, and geopolitical factors. Other assumptions include bond -
funding capital outlay, and excluding Power Supply, only expending approximately 90% of 0&M and
Personnel appropriations. The days of cash on hand are projected to be 148 days in FY26 and 161
days in FY27. While both projections exceed the required minimum level of 75 days, in FY26, it falls
below the goal of 150 days. The debt service coverage ratio is expected to be 1.73 times in FY26 and
1.95 times in FY27. Although the FY26 projection is below the required minimum of 1.80 times, the
Financial Policy recognizes a practical range of acceptable results, balancing cash flow needs with
reserve levels. The Utility's Affordability KPI remains well within the target range throughout the five
years.
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RELJCity of Redding OFF -AGENDA MEM
lElectric Utility I
CONCLUSION
REU's biennial budget reflects the City's continued commitment to fiscal responsibility, service
reliability, and strategic investment in critical infrastructure. It balances current operational needs
with long-term planning priorities while addressing external challenges such as rising costs,
regulatory requirements, and system modernization. Leadership will remain focused on managing
resources efficiently, optimizing service delivery, and ensuring the financial health of the Utility for
the benefit of all customers.
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FY24-25
Amended
FTE Employees
FY26-27
Proposed
Year over Year (YoY)
increase(decrease)- %
FTE
Employees
118,630,530 12,712,840 13,799,670 1,736,300 146,879,340
188.75 47 60 1 296.75
115,127,630
14,151,820
13,209,560
1,566,120
144,055,130
$(6,585,040) - (5.4%) decrease
$587,390 - 4.3% increase
$193,480 - 1.5% increase
$12,360 - 1% increase
$(5,791,810) - (3.9%) decrease
192.75 48 63 1 304.75
FY24-25
Amended
I FTE Employees
FY26-27
Proposed
Revenue
FTE
Employees
$33,832,890 $43,652,710 $2,732,310 $38,412,620 $118,630,530
33.5 49 8.25 98 188.75
$34,611,060 $43,783,290 $2,607,340 $34,125,940
$36,397,000 $42,815,000 $2,397,000 $33,461,000
34.5 52
8.25 90
$115,127,630
$115,070,000
192.75
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FY24-25 $6,216,990 $3,816,920 $2,678,930 $121712,840
Amended
FTE Employees 21 15 11 47
FY26-27 $7,000,520 $4,541,390 $2,609,910 $14,151,820
Proposed
FTE 21 16 11 48
Employees
FY24-25 $12,050,510 $1,749,160 $13,799,670
Amended
FTE Employees 18.5 41.5 60
FY26-27 $11,228,390 $1,981,170 $13,209,560
Proposed
FTE 19.5 43.5 63
Employees
FY24-25 $473,910 $1,262,390 $1,736,300
Amended
FTE Employees
FY26-27 $487,850 $1,078,270 $1,566,120
Proposed
FTE
Employees
�_ .'0. 1
Overview
Within the City Manager's Office under Economic Development, the Airports Division oversees operation and
maintenance of the City of Redding's (City) two Airports - Redding Regional Airport (RDD) and Benton Field
(085). RDD is a non -hub primary commercial service airport with scheduled passenger service, and Benton Field
is a general aviation airport. The City is responsible for safety and security at the airports and compliance with the
Federal Aviation Regulations Part 139, 49 CFR Part 1542, State Aeronautics Act, California Code of Regulations
(CCR), Title 21, Sections 3525-3560, and federal grant assurances. The Redding Regional Airport and Benton.
Field are primarily funded by revenues generated from aviation, mostly in the form of leases, rents, and fees
collected from users of City -owned aviation facilities. These revenue sources generally cover the basic operating
requirements of both airports, however, because the City provides round-the-clock Airport Rescue and Fire Fighting
services at RDD as a public safety measure, the General Fund assists the airport in subsidizing the ARFF costs
incurred.
In general, Airport Division revenues consist of a backbone of fixed income sourced from ground and facilities
leases and more variable income sources such as user fees. Revenues from airport user fees tend to have a close
relationship to either passenger enplanements or the count of airport operations at a given airport. Following several
years of steady rates despite year -over -year increases is an indicator of user activity, the Airports Division
determined that gradual rate increases will be necessary to support the maintenance and operations of local aviation
facilities. Additionally, new automation opportunities for airports in the area of aircraft tracking, identification, and
billing could help increase transient aircraft user fees by approximately 35% from current estimates if implemented
for the upcoming biennial budget cycle. Airport Revenues since FY2018 have grown, on average, 7.65% each year
despite major fluctuations due to COVID-19 in FY21 and FY22.
On the other hand, the Airports Division anticipates that operating expenses will continue to increase. Increasing
operating expenses in the upcoming budget cycle is driven more by the rising prices of existing goods and services
used by the airport rather than representing an expansion of the scope of work to be done. The Airports Division is
heavily reliant on outside consultants for FAA program needs that are often statutory and regulatory requirements
in order to maintain the airport operating certificate and eligibility for capital grant funding. In addition, the cost of
maintenance materials and supplies continues to fluctuate — mostly rising — based on the supply and demand and
other economic factors. Furthermore, as industrial facilities, airports are typically subject to requirements of other
regulatory bodies which impose further operating requirements regardless of availability of funds. One notable
example is the Central Valley Regional Water Quality Control Board with which the airport has a voluntary cost
recovery program for site monitoring due to potential PFAS contamination resulting from the use of aviation
firefighting foams at RDD. Between the fluctuating costs of regulatory compliance and increasing backlog of
deferred maintenance at both airports, due to budgetary constraints, the operating budget continues to rise in order
to maintain near -current levels of service.
The Airports Division's requested budget for 2025-26 includes a significant increase in expenses due to regulatory
cost increases and increasing operational costs. Strong revenue forecasts mitigate the medium- and long-term
impacts of the increased expenses:
Fiscal Year 2025-26 Fiscal Year 2026-27
Amount Percent Chane Amount Percent Change
Revenue $3,689,592.41 10.9% $3,844,430.51 4.2%
Expenditure $3,686,857.95 15.6% $3,788,733.95 2.8%
Capital improvement projects at the City's airports are funded by a combination of grant funding sources, including
Federal Aviation Administration (FAA) Airport Improvement Program (AIP) grants, FAA Airport Infrastructure
Grants (AIG), State of California Division of Aeronautics grants and loans, Redding Airport's Passenger Facility
Charge (PFC) program and local match from the Airports Enterprise fund. The information the Airports Division
provided in the City's Capital Improvement Plan includes approximately $34,227,765.64 of investment in the FY26
and FY27. Of that amount $2,077,527.24 would be City -funded either as whole projects or matching funds for
federal and state capital grants. The remaining $31,598,591.99 would be funded either by federal and state capital
grants, or by Passenger Facility Charges (PFCs) at RDD which are user fees which require prior authorization from
the FAA to collect and must be used on the projects for which they were authorized to collect.
In addition to commercial air service, RDD hosts an interagency aerial attack firefighting facility operated by the
United States Forest Service supporting Department of Defense C -130s equipped with Modular Airborne
Firefighting Systems as well as supporting CalFIRE firefighting resources. When activated, these wildfire -attack
operations are critical to the public safety of the region. Additionally, RDD hosts City's Fire Station #7 (a facility
constructed with AIP funding) which provides airport rescue and firefighting (ARFF) services for the airside users
and which is dually used for community structural firefighting. There are numerous commercial licensees, lessees,
and tenants for various business and personal activities on the field which are managed directly by airport staff.
The Airports Division initiated an Airport Master Plan (AMP) for RDD in early 2023 which guides the development
of future airport facilities over a 20 -year period and is anticipated for completion in coming months. The AMP
identifies current and future aeronautical demands including air service, aircraft operations, general aviation and
other commercial services and developments. In addition to facilitating airport -user driven demand at RDD, the
AMP will influence the priorities and direction of the Airport Capital Improvement Plan (ACIP). The current ACIP
includes a number of key projects for the short-term (five years), mid-term (5-10 years), and long-term (10-20
years).
Benton Field is a general aviation airport which hosts a City -owned Fixed Base Operator (FBO) facility which is
leased to a private operator who provides services to based and transient members of our aviation community. In
addition, rental tie -down, sunshade, and hangar spaces are available to aircraft owners on a month-to-month basis.
The current FBO offers full-service operations including fueling, maintenance, and flight training with a restaurant
for users and the local public to enjoy.
Budget Requests as of 5/19/2025
RDD
085
TOTAL
FY26
FY27
FY26
FY27
FY26
FY27
Revenue
$3,303,042.41
$3,447,880.51
$386,550.00
$396,550.00
$3,689,592.41
$3,844,430.51
Expense
$3,491,797.95
$3,586,233.95
$195,060.00
$202,500.00
$3,686,857.95
$3,788,733.95
Balance
$(188,755.54)
$(138,353.44)
$191,490.00
$194,050.00
$2,734.46
$55,696.56
Personnel
The Airports Division has a total of 13 staff consisting of 11 full-time (six administrative with four operations and
maintenance and one janitorial) and two (2) part-time employees (one account clerk and one janitorial). Due to
budget constraints the Airports Division is exploring holding a position vacant in FY26 pending a planned
retirement in one position anticipated by November 2025. It is anticipated that the held vacant position would be
filled again in FY27 based on current projections.
The Airports Division is requesting $1,682,458 in FY26 and $1,718,444 in FY27 for the 2025-26 budget continuing
an overall trend of steady increases due to rising costs of employee salaries and benefits as negotiated by the City
at -large and some time -specific cross charges such as City Manager support during the Airports Manager position
vacancy. The FY26 personnel and cross charges budget represents a 10.64% increase from the budgeted amount in
FY25. Airports will have an offset of approximately $132,000 by billing at least the base amount of administrative
costs allowable on Airport Improvement Program grants for the projects forecast in FY26. Direct, allowable costs
by the City may generate further cost -savings for personnel and cross -charges to the Airport if applicable to a
particular grant funded project such as grants available for the runway rehabilitation project and the east -side taxi -
lanes design at Benton.
Siv-nificant Issues
In 2021, the City entered into a voluntary cleanup program (C-8825) with the State Water Resources Control Board
for site -monitoring related to potential PFAS contamination due to the use of aviation firefighting foams. Under the
voluntary cleanup program, the SWRCB provides an annual scope of work and cost estimate which must be paid
by the City at actual cost to reimburse the SWRCB for its site monitoring activities. Under this agreement, the City
may also be required to undertake certain site -monitoring activities at its own expenses. As a measure to help control
overall costs of the site -monitoring program the City engages a qualified consultant to assist with the City
responsibilities limiting exposure to further findings and review by SWRCB. Nonetheless, the cost recovery
program is developing into a significant issue for the Airports Division because of the unpredictable nature of the
scope changes and cost estimates provided by SWRCB from year-to-year. The most recent cost estimate clearly
demonstrated the concern as it jumped from $18,400 to an FY 26 estimate of between $90,000 and $180,000 for
reimbursement of the state costs and not the City's own site monitoring responsibilities. Due to budget constraints,
for FY 26, staff is projecting the water monitoring costs will increase to $50,000 — if costs increase above $50,000,
staff will return to City Council for a budget amendment. Additionally, Airports staff is proposing to limit Air
Service Development costs to $60,000 in FY26 and will return to City Council for a budget amendment if additional
funds are required in FY26 whereas in FY27 lower projected expenses, particularly related to the water board, allow
the Airports Division to budget a more robust figure for Air Service Development in that financial period.
In 2023, the City Council eliminated a payment -in -lieu -of -taxes (PILOT) paid by the Airports Division to the
General Fund to cover the expenses of ARFF and in turn authorized the City Manager to establish a set amount of
net transfer for the City Council to set between $0 and $760,000 (the full cost of ARFF at the level of service that
the City elects to provide). For the past three fiscal years the amount transferred to the General Fund, either under
the previous PILOT, or more recently as a Net Transfer, has been $250,000. As an Airports Division and community
safety measure, the Redding Fire Department provides service at a higher level than required for the current ARFF
index of RDD and there could be potential for significant cost savings to the Airports Division by re-examining
both the level of service and the basis for the costs associated with ARFF to the Airport. Additionally, the Net
Transfer covers costs for RFD to staff ARFF services at RDD while the Airport continues to pay for vehicle
maintenance, replacement (grant -funded), dry -chemical, certain training(s), and previously funded construction of
the Fire Station through federal grants provided to the airport.
The Airports Division maintenance budget has been severely constrained by pressures to reduce costs for other
essential airport functions and as a result has fallen short of completely satisfying the airfields overall maintenance
needs. While the budgets were eventually increased through further justified spending, the initial budgets for airfield
maintenance often hover around $50,000 and in the most recent budget cycle, no funds at all were budgeted for
airfield maintenance at Benton Field. In order to provide safe aviation facilities and meet regulatory and compliance
needs, the Airports Division effectively triages airfield maintenance resulting in a backlog of deferred maintenance
— this is particularly evident in the paved surfaces at both Airports. The Airport Pavement Management System
update in 2019 for Benton. Field identified several paved surfaces which have not been improved since are in either
a "serious" (PCI >10 and <25) or a "failed" (PCI <10) state. The condition of facilities, and in particular paved
surfaces, exposes the Airports Division to the possibility that revenues from such facilities may decline or cease in
the future further limiting the ability of the Airports Division to respond to maintenance needs. In an ideal setting,
the Airports Division would proactively fund maintenance in order to preserve facilities in good conditions rather
than attempting to mitigate issues arising from failed or end -of -life infrastructure. Many structures, particularly at
Benton but present at both airports, are original structures which are at the end of their useful lives and require either
major structural improvements (roof replacement, notably) or redevelopment (not eligible for grants), further
burdening the airport budget. One solution to this issue is rate increases which are proposed beginning in FY26 and
may have to increase further depending on the impact the rate increases have on the availability of funds for
maintenance and how other cost increases mitigate the impact of increased revenues.
The 2017 RDD Airport Pavement Management System update did not rate the passenger terminal public parking
lot, however, it identified the surrounding street (Woodrum Circle) at the time as "failed" (PCI <10). Although the
street was eventually able to be rehabilitated through AIP grant funding over several years as a phased landside
access road project, the Airports Division does not have any grant funding sources for which the parking lot is
eligible to receive funds since it is a revenue generating source. Over time, certain spaces of the paid public parking
have become unusable due to pavement condition and the uneven surfaces have increased the City's potential
exposure to liability for trips, falls, and other incidents. The Airports Division has proposed to borrow, as a loan,
from the City's Risk Management Reserves sufficient capital to reconstruct the parking lot in order to address these
deficiencies; the financing costs of the loan will be addressed through a $2/day rate increase for passenger terminal
public parking and renegotiation of the termed out concession agreement with the parking vendor to maximize
revenues from paid public parking which is one of the largest single sources of revenue for the Airports Division.
In addition to reconstruction, the parking lot will be reconfigured to facilitate the installation of license plate reading
technology in order to improve the efficiency of parking lot revenue collection and, indirectly, improve the customer
experience of parking at RDD.
At both Airports, the Airports Division currently partners with FBOs to collect transient tie -down nightly parking
fees due to the City and as part of these agreements the FBO is entitled to keep approximately 50% of the fee
collected. In the past, this has been a common airport industry practice which is now fading due to the availability
of new tracking and billing software solutions that utilize ADS -13 (understandable as publicly available GPS
tracking of the real-time position of aircraft). In conversation with service providers for these technologies, the
Airports Division has determined that it may be possible to increase the share of transient aircraft collections due
for each airport by up to 35%. This software would also enable the Airports Division to more efficiently implement
its proposed landing fees, particularly in regards to unscheduled aircraft which may not typically have provided
reports of landings and aircraft operations to the airport in a similar manner to scheduled counterparts. The Airports
Division is still in an exploratory phase as far as determining the cost and other related impacts of implementing a
software -based tracking and billing solution for transient tie -down fees, overnight (aircraft) parking, and landing
fees. These new revenues could help the airport in its goal to achieve economic self-sufficiency if properly
developed.
Performance Measures and Workload Indicators
Description
FY24 Actual
FY25 Estimated
FY26 Projected
FY27 Projected
Enplanements
91,1.94
87,000
98,090
98,474
Aircraft Operations
46,359
62,000
62,000
62000
Hangar Occupancy
100%
100%
100%
100%
Facility and Ground
Leases
39
38
41
41.
Unmet Needs
1. In 2024, the Airports Division prepared an estimate of unmet infrastructure needs on a 2, 5, and 10 -year
time -scale. The infrastructure needs mostly related to the replacement, reconstruction, or rehabilitation of
past useful life structures and paved surfaces, but included other items such as access control and security
infrastructure, fixture replacements due to landlord tenant obligations, and equipment purchases.
2. Car rental concessions have strained the existing car wash facility at the Redding Regional Airport. The
car wash system is served by a septic and leach field and cannot accommodate the demands by the car rental
companies. A new replacement facility with a connection to sanitary sewer is estimated at $300K.
3. The Airports Division is responsible for maintaining a large inventory of leased facilities which are nearing
or already beyond the end of their useful lives, or otherwise have fixtures which are at or beyond the end
of their useful lives. Ideally the Airports Division would commission a "facilities assessment" to identify,
prioritize, and plan for capital improvement needs on leased, or leasable, facilities in order to continue to
support revenue generation at the Airport. The Airports Division anticipates a facilities assessment may
cost up to $75,000 and will likely identify further needs in the hundreds of thousands to millions between
structural improvements (such as roofs) and fixtures (such as HVAC) at airport facilities.
4. Land use at a "federally obligated" airport (meaning an airport which has accepted federal grant funding,
such as both RDD and Benton) is subject to certain federal requirements regarding rates and charges
implemented towards both aeronautical and non -aeronautical users of airport property. For non -
aeronautical land uses on airport property, the Airports Division is obligated to charge fair market value
rent including for other uses by the sponsor agency - the City of Redding, itself - with limited exception. In
order to facilitate a number of existing and proposed non -aeronautical land uses and meet regulatory
compliance needs, the Airports Division must implement a practice of valuing all land used for non -
aeronautical purposes with a fair market value appraisal. While this may eventually result in increased
revenues from non -aeronautical land -uses, the short-term budget limits the ability of the Airport to conduct
appraisals needed, starting from a backlog, which in turn limits potential added revenues in the upcoming
budget cycle. On average, an appraisal that is compliant with FAA standards has cost about $7,000 per land
area (often portions of several parcels) appraised.
5. Security systems at RDD are past their useful life. Upgrading the systems are a high priority as sensors and
cameras are starting to fail. A full replacement of these systems is being evaluated. Camera replacement
alone are anticipated to cost $100,000 - $120,000.
Conclusion
Airports staff is making every effort to manage and contain costs in light of these noted internal and external
challenges. Staff is presenting a balanced budget based on United's RDD -DEN air service performing well which
will also improve car rental and concession revenues; additional and new revenues from fair market lease/rent
increases; and reducing, postponing and in some cases, eliminating expenditures. Overall, as staff monitors the
expenses and revenues, adjustments will be made to ensure the Airports Division is fiscally sound and operating
efficiently.
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