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HomeMy WebLinkAbout04.09.2024@300 SP Budget Standing Committee of the City CouncilTuesday, April 9, 2024 3:00 PM City of South San Francisco P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA City Manager's Conference Room, 400 Grand Avenue South San Francisco, CA 94080 Budget Standing Committee of the City Council JAMES COLEMAN, Mayor MARK ADDIEGO, Councilmember Special Meeting Agenda 1 April 9, 2024Budget Standing Committee of the City Council Special Meeting Agenda American Disability Act: The City Clerk will provide materials in appropriate alternative formats to comply with the Americans with Disabilities Act. Please send a written request to City Clerk Rosa Govea Acosta at 400 Grand Avenue, South San Francisco, CA 94080, or email at [email protected]. Include your name, address, phone number, a brief description of the requested materials, and preferred alternative format service at least 24-hours before the meeting. Accommodations: Individuals who require special assistance of a disability -related modification or accommodation to participate in the meeting, including Interpretation Services, should contact the Office of the City Clerk by email at [email protected], 24-hours before the meeting. Notification in advance of the meeting will enable the City of South San Francisco to make reasonable arrangements to ensure accessibility to the meeting. How to submit written Public Comment before the City Council Meeting: Members of the public are encouraged to submit public comments in writing in advance of the meeting via the eComment tab by 1:00 p.m. on the meeting date. Use the eComment portal by clicking on the following link : https://ci-ssf-ca.granicusideas.com/meetings or by visiting the City Council meeting's agenda page. eComments are also directly sent to the iLegislate application used by City Council and staff. Page 2 City of South San Francisco Printed on 4/10/2024 2 April 9, 2024Budget Standing Committee of the City Council Special Meeting Agenda CALL TO ORDER ROLL CALL AGENDA REVIEW PUBLIC COMMENTS- Comments are limited to items on the Special Meeting Agenda. MATTERS FOR CONSIDERATION Motion to approve the Minutes for the meeting of February 05, 2024.1. Report regarding the discussion of City of South San Francisco Operating Budget for Fiscal Year 2024-25. (Karen Chang, Director of Finance) 2. ADJOURNMENT Page 3 City of South San Francisco Printed on 4/10/2024 3 City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:24-329 Agenda Date:4/9/2024 Version:1 Item #:1. Motion to approve the Minutes for the meeting of February 05, 2024. City of South San Francisco Printed on 4/5/2024Page 1 of 1 powered by Legistar™4 CALL TO ORDER TIME: 4:01 p.m. ROLL CALL PRESENT: Mayor Coleman Councilmember Addiego AGENDA REVIEW None. PUBLIC COMMENTS None. MATTERS FOR CONSIDERATION 1. Motion to approve the Minutes for the meeting of May 31, 2023. Motion – Councilmember Addiego / Second – Mayor Coleman: to approve the minutes. The motion carried unanimously. 2. Report presenting Fiscal Year (FY) 2023-24 Mid-Year Financial Report as of December 31, 2023, and proposed budget amendments for FY 2023-24 City Operating and Capital Improvement Program (CIP) Budgets (Karen Chang, Director of Finance) Finance Director Chang provided an overview of the FY 2023-24 Mid-Year Financial Results and proposed amendments to the City Operating Budget and CIP Budget. Councilmember Addiego inquired about interest rates and our ability to anticipate increases. Finance Director Chang and Economic and Community Development Director Selander noted that developers rushed to submit building permits in December of 2022 as the new building code went into effect January of 2023 which led to a cycle of incomplete revisions and delays. Councilmember Addiego requested clarification regarding the discretionary funds per district for Council. Finance Director Chang and City Manager Ranal noted these funds were under the City Manager Budget as it was a new allocation and will be under the City Council Budget in the new fiscal year. Councilmember Addiego requested explanations from departments who exceeded 50% of their budgets to understand the expenditures. Fire Chief Magallanes, Economic and Community Development Director Selandar, Police Chief Campbell, and Public Works Director Kim all provided brief explanations. MINUTES SPECIAL MEETING BUDGET STANDING COMMITTEE OF THE CITY OF SOUTH SAN FRANCISCO MONDAY, FEBRUARY 5, 2024 4:00 p.m. City Hall, City Manager’s Conference Room 400 Grand Avenue, South San Francisco, CA 5 SPECIAL BUDGET STANDING COMMITTEE MEETING FEBRUARY 5, 2024 MINUTES PAGE 2 Finance Director Chang noted that a factor in all payroll percentages include the one-time prepayment to CalPERS which occurs in July. Mayor Coleman requested that these numbers be represented without the inclusion of this payment to review the differences. City Manager Ranals shared that all departments were directed to save 3% this year and highlighted that departments were doing a good job. Councilmember Addiego and Mayor Coleman provided requests and feedback to staff to include a breakdown by district of maintenance funds, additional information, and reports to understand trends, clarity in payroll expenditures, and exploration of revenue and tax categories. ADJOURNMENT Being no further business, Mayor Coleman adjourned the meeting at 4:59 p.m. Submitted by: Approved by: Jazmine Miranda James Coleman Assistant City Clerk Mayor Approved by the Budget Standing Committee: / / 6 City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:24-366 Agenda Date:4/9/2024 Version:1 Item #:2. Report regarding the discussion of City of South San Francisco Operating Budget for Fiscal Year 2024-25.(Karen Chang, Director of Finance) RECOMMENDATION It is recommended that the Budget Standing Committee provide feedback in preparation for the Budget Subcommittee study session on May 8,2024,related to the establishment of the City’s Fiscal Year (FY)2024-25 operating budget. BACKGROUND/DISCUSSION Due to the formatting limitations of the City’s Agenda Management platform,the full staff report accompanying this agenda item is being attached as Attachment 1 of this report. Attachments: 1.Staff Report 2.Department Discretionary List 3.Budget Study Session Presentation City of South San Francisco Printed on 4/5/2024Page 1 of 1 powered by Legistar™7 City of South San Francisco Page 1 of 8 City of South San Francisco Legislation Text File#: 24-366 Agenda Date: 4/9/2024 Version: 1 Item #: 2 Report regarding the discussion of City of South San Francisco Operating Budget for Fiscal Year 2024- 25. (Karen Chang, Director of Finance) RECOMMENDATION It is recommended that the Budget Standing Committee provide feedback in preparation for the Budget Subcommittee study session on May 8, 2024 related to the establishment of the City’s Fiscal Year (FY) 2024-25 operating budget. BACKGROUND/DISCUSSION During the revenue enhancement study session in November 2023, staff discussed with the Council about the City’s General Fund structural deficit as reflected in the updated General Fund 10-Year Long Range Forecast. The council adopted the FY 2023-24 mid-year budget on February 28, 2024. During the mid-year review, staff updated the year end projection to reflect a potential $2.1 million shortfall for FY 2023-24. Based on a preliminary budget projection for FY 2024-25, staff currently estimates General Fund total revenue to be $131.1 million and $150.3 million in total expenditures. This will result in a deficit of approx. $19.2 million. The current projected deficit is significant enough to warrant a deep dive discussion with the Budget Standing Committee. The discussion of this report will be focused mainly on the General Fund and Information Technology Department operating budget. CITYWIDE OVERVIEW – EXECUTIVE SUMMARY FY 2024-25 Revenue Projection The FY 2024-25 Operating Budget has been developed assuming many of the revenue categories would experience moderate to flat growth. 1. Property Tax revenue to remain flat due to the volatility of the VLF shortfall 2. Sales Tax is expected to remain flat due to economic uncertainty 3. TOT revenue with modest increase 4. Franchise Fee with a moderate increase from FY 2023-24 5. Permit Fees slightly increase from mid-year forecast P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA 8 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 2 of 8 Property Tax remains the City’s largest revenue component and is projected to be $49.2 million in FY 2024-25. Property tax revenues have increased at an annual rate of 6% over the last five years from the economic boom along with robust developments. However, interest rate hikes throughout 2023 and a looming recession are expected to dampen the growth of the property valuation in this upcoming fiscal year. Staff has factored in such a slowdown in revenue growth during the mid-year budget for the FY 2023-24 budget and expects to see this continued trend in FY 2024-25. This revenue stream is also overshadowed by the risk of increasing Property Tax In-Lieu of Vehicle License Fees (VLF) shortfalls from declining numbers of non-basic aid schools. Following the previous practice, the County of San Mateo, on behalf of itself and all the municipalities within the county, filed a claim with the State of California in August 2023 for the $70.0 million FY 2022-23 VLF shortfall, which the State will consider as a part of its 2024-25 budget for appropriation. At present, the State’s proposed 2024-25 budget does not include any appropriations for the 2022-23 VLF county-wide shortfall of $77.0million (of which the City’s share is $3.0 million). The State of California has consistently approved budget appropriations since 2019-20 for San Mateo County’s VLF shortfall. The City has submitted a letter to its state representatives to address this matter. To be conservative, staff has realigned the projection for VLF for FY 2024-25 based on the latest information available. Transient Occupancy Tax (TOT) was hit the hardest during FY 2020-21 with collection dropping to an all-time low of $6.7 million (40% of the pre-pandemic amount.) Since then, this revenue stream has demonstrated a strong recovery, however, during FY 2023-24, TOT has not rebounded as quickly as staff has hoped for. Based on the current industry trend, staff anticipates TOT might slightly decrease in the upcoming fiscal year. However, since TOT was adjusted during mid-year, staff is cautiously optimistic that the current base budget level is appropriate. Revenue Type FY 2023 Actual FY 2024 Adjusted Budget FY 2024 Actual as of 2-29-24 FY 2025 Based Budget % of Total Projected Revenue Property Taxes 54.00$ 49.30$ 31.90$ 49.20$ 38% Sales Taxes 21.70 22.00 12.80 22.00 17% Transient Occupancy Tax 16.70 14.00 9.50 14.50 11% Other Taxes 8.10 6.70 5.40 6.70 5% Franchise Fees 5.20 4.60 2.30 4.80 4% License & Permits 20.50 12.50 10.00 13.20 10% Fines & Forfeitures 0.80 0.70 0.30 0.70 1% Intergovernmental (Grants)3.60 6.00 3.80 3.30 3% Charges for Services 11.70 11.60 7.20 10.10 8% Use of Money & Property (0.30) 4.50 2.00 4.50 3% Other Revenues 0.40 0.30 0.30 0.30 0% Transfers In 5.30 3.70 1.00 1.90 1% PO/CIP Rollover - 12.40 12.40 - 0% ARPA - 5.00 - - 0% Total 147.70$ 153.30$ 99.10$ 131.10$ 100% 9 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 3 of 8 Licenses and Permit revenues had been relatively stable prior to FY 2022-23 as construction and economic development throughout the City was strong. Rising interest rates triggered by untamed inflation started in mid-2022, along with recent bank collapses, casts a shadow on the economy and presents a challenging environment for developers in FY 2023-24. Staff is cautiously optimistic about the development growth within the city boundary and project a modest increase in revenues related to construction and economic development based on discussions between with developers and Economic and Community Development staff. Charges for Services revenue is projected to remain relatively flat in FY 2024-25. This projection is based on the current master fee schedule. Use Money & Property is budgeted as the same level as FY 2024-25 as staff expects the Federal Reserve to start reducing the federal funds rate in FY 2024-25. Expenditure Projection FY 2023-24 Year-End Estimate As presented during the FY 2023-24 mid-year budget on February 28, 2024, General Fund Total Revenues were projected to be $140.3 million. Since that time, the City received welcome news that it will be receiving $5.7 million more in property tax residual (as a taxing entity) from the former Redevelopment Agency (RDA) than anticipated, reflecting the impact of long-term growth and development of the RDA on assessed value. As such, staff anticipates General Fund total revenues of $146.0 by the end of FY 2023- 24. As a simple means of estimating year-end budget performance for FY 2023-24, the table below notes that General Fund total expenditures through February 2024, which is 66.7% of the fiscal year, were $92.3 million. Assuming a similar burn rate for the remainder of the fiscal year, the General Fund would account for approximately $138.4 million in total expenditures juxtaposed against the current amended budget of $155.3 million. It is important to note that the net surplus that is calculated at the end of the fiscal year that is reported on the City’s income statement in the Annual Comprehensive Financial Report (ACFR) is the net of total revenues and total expenditures. Using the revised projection for total revenues of $146.0 million and a straight-line method of projecting total expenditures to derive $138.4 million, one plausible outcome is a net surplus of $7.6 million, which would be consistent with generally accepted accounting principles (GAAP). While the potential outcome for FY 2023-24 is favorable, the straight-line methodology for year-end estimates is the most straightforward and simple method. Absent the one-time use of the remaining $5.0 million in American Rescue Plan Act (ARPA) funds and the one-time bump in property tax residual from the former RDA of $5.7 million, the year-end result would be a net loss of $3.7 million. However, when measuring true budget performance for expenditures, the amended budget, which includes budget related to purchase orders that have a remaining balance at the end of the fiscal year, is measured against the total expenditures plus the remaining balance of purchase orders that are carried over to the subsequent fiscal year. This is referred to as the budgetary basis (Non-GAAP). Using the example above, the straight-line method for projecting total expenditures only reflects projected expenditures that were either expended or accrued. Comparing the amended budget of $155.3 million to total projected expenditures of $138.4 million is not a meaningful nor accurate measurement, as carryover purchase 10 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 4 of 8 orders and capital improvement plan (CIP) projects represent contractual obligations from the current year. As an example, at year-end for FY 2022-23, there were $8.7 million in carryover purchase orders and $3.7 million in CIP carryover for the General Fund that were carried over into FY 2023-24. On the expenditure side, personnel costs and benefits remain the largest component of the General Fund budget. Finance is projecting no increase in interdepartmental charges. The 2024-25 projection of $150.20 million in General Fund expenditure does not include $4.4 million new requests from departments. FY 2024-25 Expenditure Projection Higher payroll costs for FY 2024-25 are largely due to: 1. 3% COLA, roughly $3.0 million 2. Increase in healthcare costs roughly resulted in $1.5M increase for the General Fund a. 17% Kaiser b. 10% for Blue Shield 3. Increase of overall Pension costs of $2.7M due to CalPERS’ investment losses from FY 2021-22; General Fund impact is $2.1 million. DEPARTMENT FY 2023 Actual FY 2024 Adjusted Budget FY 2024 Actual 2-29-24 % spent FY 2024 FY 2025 Based Budget City Council 0.20$ 0.30$ 0.20$ 63.6%0.30$ City Clerk 1.00 1.30 0.60 48.8%1.10 City Treasurer - 0.10 0.10 62.1%0.10 City Attorney 1.20 1.10 0.70 64.8%1.10 City Manager’s Office 3.80 5.20 2.20 41.2%4.30 Finance Department 3.10 4.50 2.00 45.0%3.80 Non-Departmental*9.40 1.90 1.20 61.9%1.90 Human Resources Dept.2.20 3.00 1.60 52.8%2.70 Economic & Community Develop.11.80 12.50 7.20 57.4%9.50 Fire Department 35.50 34.30 24.90 72.5%37.00 Police Department 36.30 37.00 25.00 67.8%38.90 Public Works Department 7.90 13.80 6.60 48.0%13.10 Library Department 6.50 8.50 5.00 59.3%8.30 Parks and Recreation Dept.20.50 27.40 14.60 53.2%27.20 CIP 0.70 4.40 0.40 8.9%0.90 TOTAL 140.10 155.30 92.30 59.4%150.20 Information Technology 3.80$ 5.00$ 2.80$ 56.5%4.40$ 11 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 5 of 8 After discussing the potential deficit in FY 2024-25 at the Department Head meeting on March 21, 2024, the City Manager directed each department to take a deep dive in their existing budget to identify any discretionary items in their budget. Attachment 1 of this report shows a draft summary of the discretionary items that departments have identified to date. Staff is currently working with each department to confirm the final numbers. The narratives below provide additional information for each of the major expenditure categories. Payroll: • Total payroll costs, which includes salaries, wages, overtime, healthcare, pension, and other benefits, are projected to be $116.80 million. The projected cost reflects negotiated increases in employee compensation, increases in cost of healthcare, and an increase in pension contributions. • The payroll costs take into consideration the City’s required annual Unfunded Accrued Liability (UAL) payment to CalPERS. The UAL payment is the City’s obligation and is based on an amortization schedule provided by CalPERS. It is calculated based upon the assets that are in the City’s pension plans versus how much is required to pay pension benefits for all current and future retirees. The total UAL obligation for FY 2024-25 is $19.9 million. This is a 14.4% increase from the FY2023-24 $17.4 million UAL payment. The cost is much higher in FY 2024- 25 because CalPERS’ investment return of negative 6.1% in FY 2021-22, which begins its 20- year amortization in FY 2024-25. Supplies and Services: • The budget currently shown in the summary reflects the adopted budget from fiscal year 2023- 24, plus mid-year adjustment minus one-time expenses. Interdepartmental Charges: • Interdepartmental Charges are expenses that are accounted for in the General Fund (and other funds as necessary) and summarily transferred out to fund “internal services”. The largest internal service fund is for the Information Technology (IT) Department. In effect, the cost to fund IT services, as an example, is calculated and then “charged” to various funds of which the General fund is the largest component. The interdepartmental charges haven’t been finalized yet. 12 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 6 of 8 1. RESERVES General Fund reserves are expected to be approximately $61.8 million. A breakdown is shown below: The General Reserve, which represents 20 percent of the General Fund’s annual revenue budget excluding transfers in (General Fund), follows the best practices guidelines from the Government Finance Officers’ Association (GFOA). The Infrastructure Reserve is largely comprised of General Fund surpluses that were set aside over previous years in anticipation of the City’s future infrastructure projects. The value shown is the unencumbered monies available that have not yet been designated toward a project. The CalPERS Stabilization Reserve was established through two separate Council actions in FY 2015- 16 and FY 2017-18 totaling $5.546 million. Finance took advantage of the higher interest environment and set up a separate investment account with the City’s investment manager, Chandler, in December 2022 that yields a higher rate of return. As of March of 2024, the balance of the account has grown to $5.6 million. The Unappropriated General Fund Balance is the available fund balance remaining in the General Fund (as shown in the table in the summary section of this report) that has not been assigned for any particular purpose. This balance will change depending on the extent to which expenditures may exceed revenues (deficit) in FY 2023-24. It is important to note that the unassigned fund balance also acts as a buffer allowing for the natural ebb and flow within the General Fund that occurs during the year as a resul t of the mismatch between when revenues are received, and expenditures are incurred. Although placed in different categories, the City Council, by majority vote, can use the above reserve funds as necessary. Strategy for balancing this year’s budget (Short-Term) While staff continues to refine budget assumptions for FY 2024-25, the current baseline budget is projected to result in a net deficit of approximately $19.0 million. Below are the strategies to bring the General Fund closer to a balanced budget with an initial target amount: Attrition/Hiring Freeze: $3.0 million Each month, the City’s list of vacant positions will be reviewed. The report will include the operating fund(s) that the position is/are allocated to. The attrition/hiring freeze will apply to positions funded in General Fund Reserves as of February 2024 (in millions) General Reserve $29.3 Infrastructure Reserve 3.6 CalPERS Stabilization Reserve 5.6 Unappropriated GF Balance 23.3 Total $ 61.8 13 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 7 of 8 part or wholly by the General Fund. The City will have a target amount of General Fund payroll budget savings to achieve during FY 2024-25. As employees leave the City, whether through retirement, resignation, or other means of termination, the amount of General Fund payroll budget savings will fluctuate from month to month. As such, the City Manager will have the discretion to strategically authorize recruitment for frozen positions based on need if the General Fund’s target payroll budget savings has been met. Business License Tax ballot measure: $3.0 million The biennial statistically significant community survey that was presented to the City Council at the January 2024 retreat indicated support from likely voters for a business license tax (BLT) ballot measure. Below are subsequent near-term actions based on Council direction: • Before considering the BLT ballot measure, staff to provide a deep dive on the budget (via this special meeting with the Budget Subcommittee and the budget study session in May 2024); • Update the BLT analysis to quantify the potential fiscal impact of modernizing the City’s BLT and present the results to the City Council. Review employee payroll cost allocation: $3.0 million • Evaluate the appropriateness of shifting employee payroll costs for employees that are wholly or partially funded by the General Fund to other operating funds based on job duties; • Evaluate the capacity of other operating funds to take on employee payroll costs. Discretionary expenditure items: $3.0 million • Each department has done an initial evaluation of its budget for supplies and services to identify discretionary items that are not mission critical to providing core services. As a part of the presentation, departments will share the impact of reducing the larger initial discretionary items. Beyond the base budget, the City has prioritized new funding requests to only those that are cost neutral or those that are mandatory. Use of General Fund reserves Beyond the strategies noted above, the remaining budget deficit would result in the use of General Fund reserves. If the initial target amounts for the above strategies remain intact and the projected revenues and expenditures came to fruition, General Fund reserves would decrease by $7.0 million. If the Budget Subcommittee directs staff to limit use of General Fund reserves, staff will need to increase its strategic target amounts for Attrition/Hiring Freeze and Discretionary expenditures. One-time Resources • Additional Income from Billboard agreements ($1.4 million) • Loan from Community Benefits payments to build firehouse ($9 million) • Review if any discretionary programs funded by Infrastructure Reserve can be repurposed • CalPERS Stabilization Reserve The above one-time resources will not resolve the General Fund’s structural deficit. However, the one- time resources will provide the City’s major revenues with additional time to recover in the post-COVID era, including TOT, permit revenues, and user fees. 14 File#: 24-xxx Agenda Date: 4/9/2024 City of South San Francisco Page 8 of 8 FISCAL IMPACT While staff are currently compiling all the information to finalize the Fiscal Year 2024-25, staff anticipates that the General Fund will have a potential deficit of approximately $19.0 million. RELATIONSHIP TO STRATEGIC PLAN This effort supports the City’s strategic initiative (Priority Area 3) of ensuring fiscal stability. CONCLUSION As discussed in the revenue enhancement study session in November 2023, the City is facing a significant structural deficit. It would not be sustainable to continue to provide the current level of services without incorporating the recommended strategies for balancing the General Fund budget. 15 Citywide Proposed Budget Balancing Measures - Per Department Submission - Draft as of April 4, 2024 DEPARTMENT/DESCRIPTION Gl account Amount Finance Comments CMO Comments Yes / No CITY MANAGER Reduction of discretionary budget 100-05110-5005 (85,279) Legal services for Monsanto case- required legal cost 100-05110-5003 3,708 Largely reflects the elimination of federal lobbyist 100-05110-5005 (103,096) Reduction of discretionary budget 100-05110-5020 (522) Reduction of discretionary budget 100-05110-5021 (3,315) Reduction of discretionary budget 100-05110-5025 (1,146) Storage fees 100-05110-5029 (1,453) Reduce budget for misc. items, including stickers and cups 100-05110-5030 (10,350) Membership for City and CMO- Cal Cities ($22k); Council report ($10k); National League of Cities ($6k); 100-05110-5031 7,844 Bio conference, CSMFO, Cal Cities City Manager conference 100-05110-5032 3,856 15Five, Taste of SSF, CMO Holiday Luncheon 100-05110-5033 (5,198) SSF Community Chest 100-05110-5035 (1,750) IT Purchases In other departments 100-05110-5045 (5,025) Remaining budget accounts for Employee holiday luncheon ($12k), Mayor large event ($25k), National Night Out ($5k); 100-05110-5061 (12,950) Aligning budget with YTD trend. 100-05110-5071 5,490 Every Kid Deserves a Bike-Need grant funding in order to continue the program 100-05120-5001 (34,000) Lead for America fellowship 100-05120-5001 (35,000) Leaves $28k in this line item for AmeriCorps fellow ($20k) + Management Fellow ($8k) 100-05120-5001 (13,380) Leaves $10k available for recurring costs, including $5k for potential Farmers Market move.100-05120-5020 (5,191) Leaves $5k available for recurring costs. While we've historically never exceeded $2700 in this line item, setting a new baseline at $5k with potentially additional resources needed for the Communications Manager. 100-05120-5025 (11,050) Year-end estimate is $20k. Historically, we've never spent more than $14k 100-05120-5030 (59,600) Adjust to account for CMO getting closer to fully staffed. 100-05120-5031 3,950 Provide adequate budget for DEI Officer to attend a couple of conferences 100-05120-5032 3,950 There is currently no budget in this line item 100-05120-5033 1,000 Youth in Government ($7k) and Sister Cities ($15k) 100-05120-5061 20,416 Canva & Constant Contact 100-05130-5001 14,702 Translation & other communications services; newsletter design; texting/messaging platform.100-05130-5005 89,712 Assumes city-wide newsletter will be issued at a similar frequency as 2022-23. 100-05130-5025 (52,805) Assumes city-wide newsletter will be issued at a similar frequency as 2022-23. 100-05130-5027 (19,982) Total (306,464) FINANCE Reduce -Temporary staff assistance- ERP 100-06110-5005 (20,000) Limit to essential travel for trainings and conferences, staff development 100-06110-5031 (2,000) Limit to essential travel for trainings and conferences, staff development 100-06110-5032 (10,000) Total (32,000) S:\24-25 Budget\Dept Discretionary Review\FY2025 Budget Balancing Proposal - By Department 04.04.24 1 of 416 Citywide Proposed Budget Balancing Measures - Per Department Submission - Draft as of April 4, 2024 DEPARTMENT/DESCRIPTION Gl account Amount Finance Comments CMO Comments Yes / No HUMAN RESOURCES Safety Training Consultant 100-09110-5001 (20,000) Youth Summer Internship Consultants 100-09110-5001 (26,000) Classification & Compensation Consultant 100-09110-5005 (20,000) HR Sponsored Department Training 100-09110-5013 (30,000) Eliminate Travel/Conferences overnight 100-09110-5032 (4,000) Recruitment Supplies and Services- 50% reduction 100-09110-5036 (10,000) Total (110,000) ECONOMIC & COMMUNITY DEVELOPMENT BIO Conference 100-10115-5030 (150,000) Reduce Professional services 100-10410-5005 (250,000) Reduce Professional services 100-10520-5005 (250,000) Buidling Official- Assistant (1.0 FTE) Freeze in FY2025 100-10520-4001 (264,314) Research and Rehab Specialist PT (0.40 FTE) - Eliminate position 100-10120-4002 (25,154) Misc Hourly (1.0 FTE) - Eliminate position 100-10120-4002 (62,885) Total (1,002,353) FIRE Find other funding sources or delay purchase 100-11110-5022 (150) Reduce amount of literature for public 100-11110-5025 (288) Find other funding sources or delay purchase 100-11110-5027 (500) Reduce use or find other funding 100-11110-5034 (500) Reduce use or find other funding 100-11210-5020 (1,300) Reduce amount of literature for public 100-11210-5025 (575) Reduce use or find other funding 100-11210-5027 (1,000) Limit travel to core requirements 100-11210-5032 (1,050) Limit travel to core requirements 100-11310-5032 (300) Reduce use or find other funding 100-11310-5033 (600) Reduce use or find other funding 100-11610-5022 (575) Reduce use or find other funding 100-11610-5025 (275) Limit travel to core requirements 100-11610-5032 (600) Find other funding sources or delay purchase 100-11610-5045 (7,134) Find other funding sources or delay purchase 100-11610-5051 (575) Reduce use or find other funding 100-11710-5025 (575) Reduce use or find other funding 100-11710-5027 (275) Reduce use or find other funding 100-11720-5021 (3,650) Reduce use or find other funding 100-11720-5025 (262) Total (20,183) POLICE Investigative Database. Future cost savings. Service eliminated. 100-12720-5001 (6,000) Investigative Database. Future cost savings. Service eliminated. 100-12720-5021 (500) Eliminate 3 FTE- Parking Enforcement Officers-Contract out with LAZ Parking 100-12720-4001 (347,803) Outsource PEO with LAZ Parking agreement- $649K/yr cost. New budget request submitted. Total (354,303) S:\24-25 Budget\Dept Discretionary Review\FY2025 Budget Balancing Proposal - By Department 04.04.24 2 of 417 Citywide Proposed Budget Balancing Measures - Per Department Submission - Draft as of April 4, 2024 DEPARTMENT/DESCRIPTION Gl account Amount Finance Comments CMO Comments Yes / No PUBLIC WORKS Sewer Service Low Income Program 100-13110-5078 (250,000) Purchase of one (1) Chevy Bolt 100-13410-6008 (45,000) Purchase of one (1) Roland RTW-640 64" Sign Printer. 100-13430-5051 (41,500) Eliminate back up street sweeping services. 100-13440-5001 (62,100) Free Shuttle Services- Measure A match not GF 100-13999-5999 (553,000) This was a trs from Meas A to GF. Not funded by GF. (2- yr contract) Public Works Maintenance Worker - Senior (1.0 FTE) 100-13430-4001 (164,794)Request to be funded by Sewer Enterprse fund Public Works Maintenance Worker - Hourly (1.50 FTE) 100-13440-4002 (131,496)Request to be funded by Parking District fund Total (1,247,890) LIBRARY Hold off on purchasing backup supplies until very low inventory 100-15110-5020 (3,000) Reduce technical processing, general library, special programming supply budgets 100-15110-5021 (5,000) Severely limit travel, conferences 100-15110-5032 (10,000) Reduce staff development funds; important to maintain some funding to support new staff 100-15110-5033 (2,000) Reduce Technology Equipment and Software Upgrades 100-15110-5045 (3,000) GRANTS 100-15110-5063 (10,500)Need to futher discuss why reducing grants Reduce Phone service budget 100-15110-5071 (1,000)Used in allocation of utilities 5% cut to library books and periodicals 100-15210-5022 (5,801) Cancellation of Wall Street Journal and digital science magazines recently added to collection 100-15230-5019 (18,567) Reduction in a/v budget for adult collections 100-15230-5043 (10,500) 5% cut to all library supplies and services categories not already listed above, including children's books, DVDs, and program supplies)100-15110-???? (35,262) This is the mandatory library network and equipment maintenance increases as a result of increased technology and uses in the new library; this was submitted as an essential budget increase that may end up actually being a decrease, which will have to be covered with additional reductions to Supplies and Services. 100-15110-???? (34,250) Discuss why eliminating if mandatory Freeze Management Analyst II for six months (1 FTE) 100-15110-4001 (112,998) Library Assistant I - Hourly- 5% cut reduce in assistance with equipt, collection, programs (.20 FTE)100-15210-4002 (15,132)Freeze or eliminate position? Library Clerk - Hourly (0.25 FTE) 100-15210-4002 (13,396)Freeze or eliminate position? Library Page - Hourly (2 FTE) 100-15210-4002 (93,757)Freeze or eliminate position? Librarian II - Hourly (0.09 FTE) 100-15220-4002 (9,919)Freeze or eliminate position? Librarian I - Hourly (0.06 FTE) 100-15230-4002 (6,311)Freeze or eliminate position? Literacy Services Assistant Coordinator - Hourly (0.02 FTE) 100-15430-4002 (1,583)Freeze or eliminate position? Literacy Services Assistant I - Hourly (0.02 FTE) 100-15430-4002 (1,434)Freeze or eliminate position? Office Specialist - Hourly (0.05 FTE) 100-15430-4002 (4,060)Freeze or eliminate position? Total (397,470) PARKS AND REC Child Care Master Plan Implementation held under PO 0103440 100-17110-5001 (150,000)Will help in FY2024 and there's no impact in FY2025 S:\24-25 Budget\Dept Discretionary Review\FY2025 Budget Balancing Proposal - By Department 04.04.24 3 of 418 Citywide Proposed Budget Balancing Measures - Per Department Submission - Draft as of April 4, 2024 DEPARTMENT/DESCRIPTION Gl account Amount Finance Comments CMO Comments Yes / No Eliminate Concert in the Park - budget line reduction - 1 year only 100-17110-5061 (150,000) Supplies and services for LPR and PD 100-17420-5050 (179,455)Request to be funded by Measure W Bird Mitigation at PD held by PO 0103435 100-17971-5061 (40,000)Will help in FY2024 and there's no impact in FY2025 Corp Yard HVAC held by PO 0103425 100-17971-5061 (25,000)Will help in FY2024 and there's no impact in FY2025 MSB Fire Sprinkler Repairs - held by PO 0103442 100-17971-5061 (41,000)Will help in FY2024 and there's no impact in FY2025 Recreation Leader III - Hourly (2.05 FTE)100-17240-4002 (116,772)Request to be funded by Measure W Park Maintenance Worker (1.0 FTE)100-17320-4001 (139,470)Request to be funded by Measure W Park Maintenance Worker (1.0 FTE) 100-17320-4001 (139,470)Request to be funded by OP CFD (if fund is available) Park Maintenance Worker (1.0 FTE)100-17320-4001 (139,470) Should be paid by Southline Developer Fee (expected Oct2024) Park Maintenance Worker - Lead (1.0 FTE)100-17320-4001 (165,978)Request to be funded by OP CFD (if fund is available) Park Maintenance Worker - Senior (1.0 FTE)100-17320-4001 (149,466)Request to be funded by OP CFD (if fund is available) Building Maintenance Craftsworker (0.75 FTE)100-17420-4001 (136,424)Request to be funded by Measure W Building Maintenance Custodian (2.0 FTE)100-17420-4001 (242,211)Request to be funded by Measure W Building Maintenance Custodian - Lead (1.0 FTE)100-17420-4001 (169,089)Request to be funded by Measure W Building Maintenance Custodian - Senior (2.0 FTE)100-17420-4001 (266,721)Request to be funded by Measure W Recreation Leader III - Hourly (2.05 FTE)100-17999-4002 (116,772)Freeze or eliminate position? Recreation Leader IV - Hourly (2.05 FTE)100-17999-4002 (129,569)Freeze or eliminate position? Total (2,496,867) Total General Fund (100) (5,967,531) IT Special Projects 785-16110-5005 (75,000) Reduce books/publications/library material 785-16110-5040 67,000 Reduce consulting services-no impact. Budget left is enough. 785-16110-5042 (6,825) Software maintenance annual increases 785-16110-5044 (42,000) Funding to replace computers and other equipment 785-16110-5051 (2,500) Funding to replace network and other City equipment 785-166610-5061 (25,000) Copier Managed Services 785-16110-5074 (38,000) Total (122,325) Total Information Technology fund (785) (122,325) Estimated Budget Savings from Balancing Measures (6,089,856) S:\24-25 Budget\Dept Discretionary Review\FY2025 Budget Balancing Proposal - By Department 04.04.24 4 of 419 FY 2024-25Budget Study Session Presentation to Budget Sub-committee Karen Chang, Director of Finance April 9, 2024 20 AGENDA 1 FY 2024-25 Budget Summary 2 Budget Discussions 3 Reserve & Other Considerations 4 Q&A 2221 Revenue Assumptions 1. Property Tax revenue –same level as 2024 ‒Due to uncertainty of VLF shortfall 2.Sales Tax revenue –same level as 2024 -Due to uncertainty of economy 3. TOT, Franchise Tax & Permit Fee –Modest increase (2-3%) 4. Department input updated 5. No ARPA funds 3 1FY 2024-25 Budget Overview 22 Expenditure Assumptions 1. Personnel Costs ‒Include 3% COLA (~$3M) ‒Increase in health care costs (Kaiser 17%, Blue Shield 10%) (GF~$1.3M) ‒Pension cost increase (GF ~$2.1M) 2.Supplies & Services -Use Base Line budget (FY 2023 + mid-year –one-time expenditures) 3. Interdepartmental Charges –Stay flat 4. New Request –Not approve unless it has no negative impact to GF 4 1FY 2024-25 Budget Overview 23 FY 2024-25 General Fund – Revenues ($ Millions)FY 2024-25 Budgeted Revenue –($131.M) Revenue Type FY 2023 Actual FY 2024 Adjusted Budget FY 2024 Actual as of 2-29-24 FY 2025 Based Budget % of Total Projected Revenue Property Taxes 54.00$ 49.30$ 31.90$ 49.20$ 38% Sales Taxes 21.70 22.00 12.80 22.00 17% Transient Occupancy Tax 16.70 14.00 9.50 14.50 11% Other Taxes 8.10 6.70 5.40 6.70 5% Franchise Fees 5.20 4.60 2.30 4.80 4% License & Permits 20.50 12.50 10.00 13.20 10% Fines & Forfeitures 0.80 0.70 0.30 0.70 1% Intergovernmental (Grants)3.60 6.00 3.80 3.30 3% Charges for Services 11.70 11.60 7.20 10.10 8% Use of Money & Property (0.30) 4.50 2.00 4.50 3% Other Revenues 0.40 0.30 0.30 0.30 0% Transfers In 5.30 3.70 1.00 1.90 1% PO/CIP Rollover - 12.40 12.40 - 0% ARPA - 5.00 - - 0% Total 147.70$ 153.30$ 99.10$ 131.10$ 100% 24 FY 2024-25 General Fund – Expenditures by Category ($Millions)FY 2024-25 Budgeted Expenditure $150.2M) Expenditures FY 2023 Actual FY 2024 Adjusted Budget FY 2024 Actual as of 2-29-24 FY 2024 % spent FY 2025 Based Budget PAYROLL 103.50$ 106.80$ 70.50$ 66.0%116.80$ SUPPLIES & SERVICES 27.00 33.20 13.80 41.5%22.50 CAPITAL OUTAY 0.20 0.90 0.20 20.1%- INTERDEPARTMENTAL CHARGES 8.10 9.50 6.20 65.0%9.50 TRANSFERS 1.40 4.90 0.30 6.8%1.40 TOTAL 140.20 155.30 91.00 58.6%150.20 25 Salary and Benefits Trends ($ millions) 7 2FY 2024-25 Budget Overview FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total Adjusted Budget $106.7 $116.9 $120.4 $139.2 $123.8 $138.6 $143.9 $155.3 Salary and Benefits $71.5 $74.7 $79.7 $85.2 $87.4 $95.4 $103.5 $106.8 % of Total Adj Budget 67.0%63.9% 66.2%61.2% 70.6% 68.9% 71.9% 68.8% 26 FY 2024-25 General Fund – Expenditures by Dept ($ millions) FY 2024-25 Budgeted Expenditure – excluding transfers ($150.2M) DEPARTMENT FY 2023 Actual FY 2024 Adjusted Budget FY 2024 Actual 2-29-24 % spent FY 2024 FY 2025 Based Budget City Council 0.20$ 0.30$ 0.20$ 63.6%0.30$ City Clerk 1.00 1.30 0.60 48.8%1.10 City Treasurer - 0.10 0.10 62.1%0.10 City Attorney 1.20 1.10 0.70 64.8%1.10 City Manager’s Office 3.80 5.20 2.20 41.2%4.30 Finance Department 3.10 4.50 2.00 45.0%3.80 Non-Departmental*9.40 1.90 1.20 61.9%1.90 Human Resources Dept.2.20 3.00 1.60 52.8%2.70 Economic & Community Develop.11.80 12.50 7.20 57.4%9.50 Fire Department 35.50 34.30 24.90 72.5%37.00 Police Department 36.30 37.00 25.00 67.8%38.90 Public Works Department 7.90 13.80 6.60 48.0%13.10 Library Department 6.50 8.50 5.00 59.3%8.30 Parks and Recreation Dept.20.50 27.40 14.60 53.2%27.20 CIP 0.70 4.40 0.40 8.9%0.90 TOTAL 140.10 155.30 92.30 59.4%150.20 Information Technology 3.80$ 5.00$ 2.80$ 56.5%4.40$ Note : Most of expenditures and revenues might not be spent or earned evenly throughout the year. Staff continues to monitor the revenue and expenditures. 27 City Reserves (As of February 29, 2024) ($ Millions) 3Reserve & Other Considerations 9 General Reserves (20%)$29.30 Pension Stabilization Reserves 5.60 Infrastructure Reserves 3.60 Total Reserve Levels $38.50 Available Unassigned GF Fund Balance 23.34 Reserves &Surplus Fund Balance $61.84 28 General Fund Summary-FY 2024-25 ($ millions) 10 Description Amount PROJECTED REVENUES $131.10 PROJECTED EXPENDITURES <150.20> Deficit <$ 19.10> 29 Budget Balancing Strategies ($ Millions) 11 Description Target Amount FY 24-25 Deficit $< 19.0> + Employee payroll cost allocation 3.0 + Business License Tax Ballot Measure 3.0 + Dept. Discretionary Savings 3.0 + Salary Attrition 3.0 + Use of Reserve/Other Resources 7.0 RESULT BALANCED 30 One-Time Resources •Additional Income -Billboard agreement ($1.4M) •Loan from Community Benefits Payments to build firehouse ($9M) •Review if any discretionary programs from Infrastructure Reserve to re-purpose •CalPERS Stabilization Reserve •Will not help with the structurally deficit •But could provide additional time for City’s major revenues to recover 31 QUESTIONS? 4Q&A 1332