RESOLUTION NO.
PAGE 2
WHEREAS, pursuant to Revenue and Taxation Code section 7285.9, a two-thirds (2/3) vote of all members of the City Council is required to place the Measure on the November 5, 2024 ballot; and
WHEREAS, the ordinance to be considered by the qualified voters and the terms of approval, collection and use of the general sales tax are described and provided for in the ordinance/measure attached hereto as Exhibit “A” (the “Measure”) and by this reference made an operative part hereof, in accordance with all applicable laws.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
THE CITY OF ARROYO GRANDE:
SECTION 1. Incorporation of Recitals. The foregoing recitals are true and correct and are hereby incorporated and made an operative part of this Resolution.
SECTION 2. Submission of Ballot Measure. Pursuant to California Elections Code section 9222, Government Code section 53724, Revenue and Taxation Code section 7285.9 and any other applicable requirements of the laws of the State of California relating to the City, the City Council, by a two-thirds (2/3) vote of all members, hereby orders the Measure to be submitted to the voters of the City at the General Municipal Election to be held on Tuesday, November 5, 2024.
SECTION 3. The City Council, pursuant to California Elections Code section 9222, hereby orders that the ballot question for the Measure shall be presented and printed upon the ballot submitted to the qualified voters in the manner and form set forth in this Section 3. On the ballot to be submitted to the qualified voters at the General Municipal Election to be held on Tuesday, November 5, 2024, in addition to any other matters required by law, there shall be printed substantially the following ballot question:
“ To provide funding for Arroyo Grande city services, such as: fixing potholes, maintaining city streets, sidewalks, parks, aging infrastructure, and community facilities; providing local fire protection, police, and 9-1-1 emergency services;
cleaning up litter/graffiti, and addressing homelessness; shall City of Arroyo Grande’s ordinance establishing a one-cent sales tax for 10 years be adopted, providing $6,000,000 annually for general government use that can’t be taken by the State, with citizen oversight, independent audits, and all money locally controlled?”
YES
NO
SECTION 4. Conduct of Election. The City Clerk is authorized,
RESOLUTION NO.
PAGE 3
instructed, and directed to procure and furnish any and all official ballots, printed matter and all supplies, equipment and paraphernalia that may be necessary in order to properly and lawfully conduct the election. In all particulars not recited in this Resolution, the election shall be held and conducted as provided by law for holding municipal elections.
SECTION 5. Pursuant to Elections Code section 9280, the City Council hereby directs the City Clerk to transmit a copy of the Measure to the City Attorney. The City Attorney shall prepare an impartial analysis of the Measure, not to exceed 500 words in length, showing the effect of the Measure on the existing law and the operation of the Measure, and transmit such impartial analysis to the City Clerk not later than the deadline for submittal of primary arguments for or against the Measure.
The impartial analysis shall include a statement indicating whether the Measure was placed on the ballot by a petition signed by the requisite number of voters or by the City Council. In the event the entire text of the Measure is not printed on the ballot, nor in the voter information guide, there shall be printed immediately below the impartial analysis, in no less than 10-font bold type, the following: “The above statement is an impartial analysis of Ordinance or Measure _____. If you desire a copy of the ordinance or measure, please call the Office of the City Clerk at (805) 473-5418 and a copy will be mailed at no cost to you.”
SECTION 6. Notice of the election is hereby given and the City Clerk is authorized, instructed and directed to give further or additional notice of the election, in time, form and manner as required by law.
SECTION 7. Placement on the Ballot. The full text of the Measure shall not be printed in the voter information guide, and a statement shall be printed on the ballot pursuant to Elections Code section 9223 advising voters that they may obtain a copy of this Resolution and the Measure, at no cost, upon request made to the City Clerk.
SECTION 8. Filing with County. The City Clerk shall, not later than the 88th day prior to the General Municipal Election to be held on Tuesday, November 5, 2024, file with the Board of Supervisors and the Registrar of Voters of the County of San Luis Obispo, State of California, a certified copy of this Resolution.
SECTION 9. Public Examination. Pursuant to Elections Code section 9295, this Measure will be available for public examination for no fewer than ten (10) calendar days prior to being submitted for printing in the voter information guide. The City Clerk shall post notice in the Clerk’s office of the specific dates that the examination period will run.
RESOLUTION NO.
PAGE 4
SECTION 10. The City Council hereby finds and determines that the Measure relates to organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment, and therefore is not a project within the meaning of the California Environmental Quality Act (“CEQA”) and the State CEQA Guidelines, section 15378(b)(5).
SECTION 11. Severability. The provisions of this Resolution are severable and if any provision of this Resolution is held invalid, that provision shall be severed from the Resolution and the remainder of this Resolution shall continue in full force and effect, and not be affected by such invalidity.
SECTION 12. This Resolution shall become effective upon its adoption.
SECTION 13. The City Clerk shall certify to the adoption of this Resolution.
On motion of Council Member _____________, seconded by Council Member __________, and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 28th day of May, 2024.
RESOLUTION NO.
PAGE 5
CAREN RAY RUSSOM, MAYOR
ATTEST:
_________________________________________
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
Exhibit “A”
Transactions and Use Tax Ordinance
[attached behind this page]
ORDINANCE NO.
AN ORDINANCE OF THE PEOPLE OF THE CITY OF ARROYO GRANDE, CALIFORNIA, ADDING CHAPTER 3.26 TO TITLE 3 OF THE ARROYO GRANDE MUNICIPAL CODE TO ENACT A ONE PERCENT (1%) GENERAL TRANSACTIONS
AND USE TAX (SALES TAX) TO BE ADMINISTERED BY THE CALIFORNIA
DEPARTMENT OF TAX AND FEE ADMINISTRATION
WHEREAS, pursuant to California Revenue and Taxation Code section 7285.9 the City of Arroyo Grande (“City”) is authorized to levy a Transactions and Use Tax for general purposes, subject to majority voter approval; and WHEREAS, the People of the City desire add Chapter 3.26 to Title 3 of the Arroyo Grande Municipal Code establishing a general Transactions and Use Tax (“sales tax”) until ended by voters, on the sale and/or use of all tangible personal property sold at retail in the City, at a rate of one percent (1%).
NOW, THEREFORE, THE PEOPLE OF THE CITY OF ARROYO GRANDE DO HEREBY ORDAIN AS FOLLOWS:
Section 1. Title and Text. This Ordinance shall be known as the “Arroyo Grande General Transactions and Use Tax”, the full text of which is set forth in Attachment “1”, attached hereto and incorporated herein by reference.
Section 2. Approval by the City Council. Pursuant to California Government Code section 53724 and Revenue and Taxation Code section 7285.9, this Ordinance was duly approved for placement on the ballot by a minimum two-thirds (2/3) supermajority of all members of the City Council on May 28, 2024.
Section 3. Approval by the Voters. Pursuant to California Elections Code section 9217, this Ordinance shall be deemed adopted and take effect only if approved by a majority of the eligible voters of the City of Arroyo Grande voting at the General Municipal Election of November 5, 2024. It shall be deemed adopted when the City Council has certified the results of that election by resolution and shall take effect ten (10) days thereafter.
Section 4. Operative Date. “Operative Date” for the Transactions and Use Tax means the first day of the first calendar quarter commencing more than 110 days after the date this Ordinance is adopted, as set forth in Section 3 above.
Section 5. Severability. If any provision of this Ordinance or the application thereof to any person or circumstance is held invalid, the remainder of the Ordinance and the application of such provision to other persons or circumstances shall not be affected thereby.
I HEREBY CERTIFY that the foregoing ordinance was adopted by a two-thirds vote of all members of the City Council of the City of Arroyo Grande as required by Revenue and Taxation Code Section 7285.9 and Government Code Section 53724 and submitted to the voters at the meeting of the City Council held on the day of June, 2024, by the following roll call vote:
AYES:
NOES:
ABSENT:
_________________________________
CAREN RAY RUSSOM. MAYOR
ATTEST:
_________________________________
JESSICA MATSON, CITY CLERK
Ordinance No. ____ was submitted to the People of the City of Arroyo Grande at the November 5, 2024 General Election. It is hereby certified that this ordinance was passed and approved by following vote of the People of the City of Arroyo Grande:
YES:
NO:
This ordinance was thereby adopted by the voters at the November 5, 2024 General Election and shall take effect as provided by law.
ATTACHMENT 1
Chapter 3.23 – GENERAL TRANSACTIONS AND USE TAX
Sections:
3.23.010 - Title.
3.23.020 - Purpose.
3.23.030 - Contract With State.
3.23.040 - Transactions Tax Rate.
3.23.050 - Place of Sale.
3.23.060 - Use Tax Rate.
3.23.070 - Adoption of Provisions of State Law.
3.23.080 - Limitations on Adoption of State Law and Collection of Use Taxes.
3.23.090 - Permit Not Required.
3.23.100 - Exemptions and Exclusions.
3.23.110 - Amendments.
3.23.120 - Enjoining Collection Forbidden.
3.23.130 - Duration of Tax
Sections:
3.23.010 – Title.
This ordinance shall be known as the “City of Arroyo Grande General Transactions and Use Tax Ordinance”. The City of Arroyo Grande hereinafter shall be called “City.” This ordinance shall be applicable in the incorporated territory of the City.
3.23.020 – Purpose.
This ordinance is adopted to achieve the following, among other purposes, and directs that the provisions hereof be interpreted in order to accomplish those purposes:
A. To impose a retail transactions and use tax in accordance with the provisions of Part
1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code and Section 7285.9 of Part 1.7 of Division 2 which authorizes the City to adopt this tax ordinance which shall be operative if a majority of the electors voting on the measure vote to approve the imposition of the tax at an election called for that purpose.
B. To adopt a retail transactions and use tax ordinance that incorporates provisions identical to those of the Sales and Use Tax Law of the State of California insofar as those provisions are not inconsistent with the requirements and limitations contained in Part 1.6 of Division 2 of the Revenue and Taxation Code.
C. To adopt a retail transactions and use tax ordinance that imposes a tax and provides a measure therefore that can be administered and collected by the
California Department of Tax and Fee Administration in a manner that adapts itself as fully as practicable to, and requires the least possible deviation from, the existing statutory and administrative procedures followed by the California Department of Tax and Fee Administration in administering and collecting the California State Sales and Use Taxes.
D. To adopt a retail transactions and use tax ordinance that can be administered in a manner that will be, to the greatest degree possible, consistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, minimize the cost of collecting the transactions and use taxes, and at the same time, minimize the burden of record-keeping upon persons subject to taxation under the provisions of this ordinance.
3.23.030 - Contract With State.
Prior to the operative date, the City shall contract with the California Department of Tax and Fee Administration to perform all functions incident to the administration and operation of this transactions and use tax ordinance; provided, that if the City shall not have contracted with the California Department of Tax and Fee Administration prior to the operative date, it shall nevertheless so contract and in such a case the operative date shall be the first day of the first calendar quarter following the execution of such a contract.
3.23.040 - Transactions Tax Rate.
For the privilege of selling tangible personal property at retail, a tax is hereby imposed upon all retailers in the incorporated territory of the City at the rate of one percent (1%) of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in said territory on and after the operative date of this ordinance.
3.23.050 - Place of Sale.
For the purposes of this ordinance, all retail sales are consummated at the place of business of the retailer unless the tangible personal property sold is delivered by the retailer or his agent to an out-of-state destination or to a common carrier for delivery to an out-of-state destination. The gross receipts from such sales shall include delivery charges, when such charges are subject to the state sales and use tax, regardless of the place to which delivery is made. In the event a retailer has no permanent place of business in the State or has more than one place of business, the place or places at which the retail sales are consummated shall be determined under rules and regulations to be prescribed and adopted by the California Department of Tax and Fee Administration.
3.263060 - Use Tax Rate.
An excise tax is hereby imposed on the storage, use or other consumption in the City of tangible personal property purchased from any retailer on and after the operative date of this ordinance for storage, use or other consumption in said territory at the rate of one percent (1%) of the sales price of the property. The sales price shall include delivery charges when such charges are subject to state sales or use tax regardless of the place to which delivery is made.
3.23.070 - Adoption of Provisions of State Law.
Except as otherwise provided in this ordinance and except insofar as they are inconsistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, all of the provisions of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code are hereby adopted and made a part of this ordinance as though fully set forth herein.
3.23.080 - Limitations on Adoption of State Law and Collection of Use Taxes.
In adopting the provisions of Part 1 of Division 2 of the Revenue and Taxation Code:
A. Wherever the State of California is named or referred to as the taxing agency, the name of this City shall be substituted therefore. However, the substitution shall not be made when:
1. The word “State” is used as a part of the title of the State Controller, State Treasurer, California Victim Compensation Board, California Department of Tax and Fee Administration, State Treasury, or the Constitution of the State of California;
2. The result of that substitution would require action to be taken by or against this City or any agency, officer, or employee thereof rather than by or against the California Department of Tax and Fee Administration, in performing the functions incident to the administration or operation of this Ordinance.
3. In those sections, including, but not necessarily limited to sections referring to the exterior boundaries of the State of California, where the result of the substitution would be to:
a. Provide an exemption from this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not otherwise be exempt from this tax while such sales, storage, use or other consumption remain subject to tax by the State under the provisions of Part 1 of Division 2 of the Revenue and Taxation Code, or;
b. Impose this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not be subject to tax by the state under the said provision of that code.
4. In reference to Sections 6701, 6702 (except in the last sentence thereof), 6711, 6715, 6737, 6797 or 6828 of the Revenue and Taxation Code.
B. The word “city” shall be substituted for the word “state” in the phrase “retailer engaged in business in this state” in Section 6203 of the Revenue and Taxation Code and in the definition of that phrase in Section 6203.
1. “A retailer engaged in business in the District” shall also include any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property in this state or for delivery in the State by the retailer and all persons related to the retailer that exceeds five hundred thousand dollars ($500,000). For purposes of this section, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of Title 26 of the United States Code and the regulations thereunder.
3.23.090 - Permit not Required.
If a seller’s permit has been issued to a retailer under Section 6067 of the Revenue and Taxation Code, an additional transactor’s permit shall not be required by this Ordinance.
3.23.100 - Exemptions and Exclusions.
A. There shall be excluded from the measure of the transactions tax and the use tax the amount of any sales tax or use tax imposed by the State of California or by any city, city and county, or county pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law or the amount of any state-administered transactions or use tax.
B. There are exempted from the computation of the amount of transactions tax the gross receipts from:
1. Sales of tangible personal property, other than fuel or petroleum products, to operators of aircraft to be used or consumed principally outside the county in which the sale is made and directly and exclusively in the use of such aircraft as common carriers of persons or property under the authority of the laws of this State, the United States, or any foreign government.
2. Sales of property to be used outside the City which is shipped to a point outside the City, pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. For the purposes of this paragraph, delivery to a point outside the City shall be satisfied:
a. With respect to vehicles (other than commercial vehicles) subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code by registration to an out-of-City address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his or her principal place of residence; and b. With respect to commercial vehicles, by registration to a place of business out-of-City and declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address.
3. The sale of tangible personal property if the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of this ordinance.
4. A lease of tangible personal property which is a continuing sale of such property, for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of this ordinance.
5. For the purposes of subparagraphs (3) and (4) of this subsection, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.
C. There are exempted from the use tax imposed by this ordinance, the storage, use or other consumption in this City of tangible personal property:
1. The gross receipts from the sale of which have been subject to a transactions tax under any state-administered transactions and use tax ordinance.
2. Other than fuel or petroleum products purchased by operators of aircraft and used or consumed by such operators directly and exclusively in the use of such aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this State, the United States, or any foreign government. This exemption is in addition to the exemptions provided in Sections 6366 and 6366.1 of the Revenue and Taxation Code of the State of California.
3. If the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of this Ordinance.
4. If the possession of, or the exercise of any right or power over, the tangible personal property arises under a lease which is a continuing purchase of such property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease prior to the operative date of this Ordinance.
5. For the purposes of subparagraphs (3) and (4) of this subsection, storage, use, or other consumption, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.
6. Except as provided in subparagraph (7), a retailer engaged in business in the City shall not be required to collect use tax from the purchaser of tangible personal property, unless the retailer ships or delivers the property into the City or participates within the City in making the sale of the property, including, but not limited to, soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the City or through any representative, agent, canvasser, solicitor, subsidiary, or person in the City under the authority of the retailer.
7. “A retailer engaged in business in the City” shall also include any retailer of any of the following: vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code. That retailer shall be required to collect use tax from any purchaser who registers or licenses the vehicle, vessel, or aircraft at an address in the City.
D. Any person subject to use tax under this ordinance may credit against that tax any transactions tax or reimbursement for transactions tax paid to a district imposing, or retailer liable for, a transactions tax pursuant to Part 1.6 of Division 2 of the Revenue and Taxation Code with respect to the sale to the person of the property the storage, use or other consumption of which is subject to the use tax.
3.23.110 - Amendments.
All amendments subsequent to the effective date of this ordinance to Part 1 of Division 2 of the Revenue and Taxation Code relating to sales and use taxes and which are not inconsistent with Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, and all amendments to Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, shall automatically become a part of this Ordinance, provided however, that no such amendment shall operate so as to affect the rate of tax imposed by this Ordinance.
3.23.120 - Enjoining Collection Forbidden.
No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the State or the City, or against any officer of the State or the City, to prevent or enjoin the collection under this ordinance, or Part 1.6 of Division 2 of the Revenue and Taxation Code, of any tax or any amount of tax required to be collected.
3.23.130 – Duration of Tax.
The tax imposed by this chapter shall continue for ten (10) years from the Operative Date and shall, thereafter be automatically repealed, unless extended by Arroyo Grande voters in a subsequent election.
ATTACHMENT 2
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO
GRANDE, CALIFORNIA, PROVIDING FOR THE FILING OF PRIMARY
AND REBUTTAL ARGUMENTS AND SETTING RULES FOR THE
FILING OF WRITTEN ARGUMENTS REGARDING A CITY MEASURE
TO BE SUBMITTED AT THE NOVEMBER 5, 2024 GENERAL
MUNICIPAL ELECTION
WHEREAS, a General Municipal Election is to be held in the City of Arroyo Grande, California on November 5, 2024, at which there will be submitted to the voters the following measure:
“To provide funding for Arroyo Grande city services, such as:
fixing potholes, maintaining city streets, sidewalks, parks, aging infrastructure, and community facilities; providing local fire protection, police, and 9-1-1 emergency services; cleaning up litter/graffiti, and addressing homelessness; shall City of Arroyo Grande’s ordinance establishing a one-cent sales tax for 10 years be adopted, providing $6,000,000 annually for general government use that can’t be taken by the State, with citizen oversight, independent audits, and all money locally controlled?”
Yes
No
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE,
CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. Primary Arguments. That the City Council authorizes (i) the City Council or any member(s) of the City Council, (ii) any individual voter eligible to vote on the above measure, (iii) a bona fide association of such citizens or (iv) any combination of voters and associations, to file a written argument in favor of or against the City measure, accompanied by the printed name(s) and signature(s) of the author(s) submitting it, in accordance with Article 4, Chapter 3, Division 9 of the Elections Code of the State of California, and to change the argument until and including the date fixed below by the City Clerk, after which no arguments for or against the City measure may be submitted to the City Clerk.
The deadline to submit arguments for or against the City Measure pursuant to this Resolution is declared by the City Clerk to be July 19, 2024, at 5 p.m. Each argument shall not exceed 300 words and shall be filed with the City Clerk, signed, and include the printed name(s) and signature(s) of the author(s) submitting it, or if submitted on behalf of an organization, the name of the organization, and the printed name and signature of at least one of its principal officers who is the author of the argument.
RESOLUTION NO.
PAGE 2
2 Section 2. Rebuttal Arguments. Pursuant to Section 9285 of the Elections Code of the State of California, when the City Clerk has selected the primary arguments for and against the City Measure which will be printed and distributed to the voters, the Clerk shall send copies of the primary argument in favor of the Measure to the authors of the primary argument against, and copies of the primary argument against to the authors of the primary argument in favor. The authors or persons designated by them may prepare and submit rebuttal arguments not exceeding 250 words. The rebuttal arguments shall be filed with the City Clerk not later than July 30, 2024, at 5 p.m.
Rebuttal arguments shall be printed in the same manner as the primary arguments.
Each rebuttal argument shall immediately follow the primary argument which it seeks to rebut.
Section 3. Prior Resolutions. That all previous resolutions providing for the filing of primary and rebuttal arguments related to City measures are repealed.
Section 4. November 5, 2024 Election. That the provisions of Sections 1 and 2 shall apply only to the election to be held on November 5, 2024, and shall then be repealed.
Section 5. Certification. The City Clerk shall certify to the passage and adoption of this resolution and enter it into the book of original Resolutions.
On motion of Council Member _____________, seconded by Council Member __________, and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 28th day of May, 2024.
RESOLUTION NO.
PAGE 3
3 CAREN RAY RUSSOM, MAYOR
ATTEST:
_________________________________________
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
ATTACHMENT 3
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO
GRANDE, CALIFORNIA, REQUESTING THE BOARD OF
SUPERVISORS OF THE COUNTY OF SAN LUIS OBISPO TO
CONSOLIDATE A GENERAL MUNICIPAL ELECTION TO BE HELD ON
NOVEMBER 5, 2024 WITH THE STATEWIDE GENERAL ELECTION TO BE HELD ON THAT DATE PURSUANT TO §10403 OF THE
ELECTIONS CODE
WHEREAS, on May 28, 2024, the City Council of the City of Arroyo Grande adopted Resolution No. ____, calling a General Municipal Election to be held on November 5, 2024; for the purpose of submitting to the voters the question relating to the General Transactions and Use Tax; and
WHEREAS, it is therefore desirable that the General Municipal Election be consolidated with the Statewide General Election to be held on the same date and that within the City the precincts, polling places and election officers of the two elections be the same, and that the election division of the County of San Luis Obispo canvass the returns of the General Municipal Election and that the election be held in all respects as if there were only one election.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARROYO
GRANDE DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. Request for Consolidation. Pursuant to the requirements of §10403 of the Elections Code, the Board of Supervisors of the County of San Luis Obispo is hereby requested to consent and agree to the consolidation of a General Municipal Election with the Statewide General Election on Tuesday, November 5, 2024, for the purpose of submitting to the voters the following question relating to the Transactions and Use Tax.
Section 2. Measure Language. A measure is to appear on the ballot as follows:
“To provide funding for Arroyo Grande city services, such as:
fixing potholes, maintaining city streets, sidewalks, parks, aging infrastructure, and community facilities; providing local fire protection, police, and 9-1-1 emergency services; cleaning up litter/graffiti, and addressing homelessness; shall City of Arroyo Grande’s ordinance establishing a one-cent sales tax for 10 years be adopted, providing $6,000,000 annually for general government use that can’t be taken by the State, with citizen oversight, independent audits, and all money locally controlled?”
Yes
No
RESOLUTION NO.
PAGE 2
2 Section 3. Canvass of Returns. The County election division is authorized to canvass the returns and perform all other proceedings incidental to and connected with the General Municipal Election. The Election shall be held in all respects as if there were only one election, and only one form of ballot shall be used. Pursuant to California Elections Code Sections 10403 and 10418, the election will be held and conducted in accordance with the provisions of law regulating the Statewide General Election.
Section 4. Necessary Steps. The Board of Supervisors is requested to issue instructions to the County election division to take any and all steps necessary for the holding of the consolidated election.
Section 5. Costs. The City Council determines and declares that the City will pay to the County the reasonable and actual expenses incurred by the County by the consolidation of the General Municipal Election with the Statewide General Election.
The City shall reimburse the County for services performed when the work is completed and upon presentation to the City of a properly approved bill. The City Manager of the City of Arroyo Grande is authorized and directed to pay for the expenses incurred after receiving a statement from the County of San Luis Obispo.
Section 6. Filing of Resolution. The City Clerk is hereby directed to file a certified copy of this resolution with the Board of Supervisors and the election division of the County of San Luis Obispo.
Section 7. Certification. The City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original Resolutions.
On motion of Council Member _____________, seconded by Council Member __________, and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 28th day of May, 2024.
RESOLUTION NO.
PAGE 3
3 CAREN RAY RUSSOM, MAYOR
ATTEST:
_________________________________________
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
Item 12.b.
MEMORANDUM
TO: City Council
FROM: Matthew Downing, City Manager
Bill Robeson, Assistant City Manager/Public Works Director BY: Nicole Valentine, Administrative Services Director
SUBJECT: Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid-Cycle Budget Update Report
DATE: May 28, 2024
RECOMMENDATION:
Review the preliminary budget, receive a presentation from staff, and provide feedback to staff in preparation for the public hearing scheduled for June 11, 2024, to consider the Fiscal Years (FY) 2024-25 Mid-Cycle Budget Update Report.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The proposed FY 2024-25 Mid-Cycle Budget Update Report recommends approximately $48 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital related items.
The proposed FY 2024-25 Budget General Fund budget utilizes excess fund balance reserves to pay for a combination of one-time and ongoing expenditures that will exceed expected revenues in order to address several goals. However, as presented, fund balance reserves are expected to remain at 23.1%, above the adopted 20% goal.
BACKGROUND:
Each year the City Council adopts a budget, which commits resources for the next Fiscal Year. The City Council adopted the FY 2023-24 and 2024-25 Biennial Budget on June 27, 2023. The biennial budget process includes updates each quarter of the first year, a Mid-Cycle Update at the beginning of the second year that also includes appropriation of the second year budget, and updates each quarter of the second year. Quarterly updates for the FY 2023-24 have been provided on December 12, 2023, February 27, 2024, and May 14 ,2024.
On February 27, 2024, the City Council approved an update on City Council Goals and Priorities for FY 2023-25. Additionally, on April 23, 2024, the City Council provided
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
direction on the 5-year Capital Improvement Program (CIP) budget and the 5-Year Local Sales Tax Fund Expenditures Program. The prioritization and direction provided by the City Council at these previous meetings have been incorporated into the FY 2024-25 MidCycle Budget Update.
ANALYSIS OF ISSUES:
General Fund Overview
On January 23, 2024, the City Council reviewed the FY 2022-23 Annual Comprehensive Financial Report (ACFR) summarizing the Fund Balance at the end of FY 2022-23. The Consolidated General Fund Balance can be reviewed in the following table:
Table 1: Beginning and Ending Balances as of June 30, 2023 The ACFR reports a General Fund total fund balance of $20.6 million. However, a small amount of the fund balance is considered non-spendable because it is held as inventory ($37,592). The City’s Fiscal Policy establishes the maintenance of a fund balance reserve goal of 20% of expenditures with a minimum of 15% in the General Fund. At the conclusion of Fiscal Year 2022-23, the reserve, based on available General Funds, was 55% and exceeded the City’s reserve goal.
Though General Fund expenditures are expected to outpace revenues in FY 2023-24 by $1.6 million, as shown in Table 2, the year will end with a healthy projected fund balance of $10.3 million (see “2023-24 Estimated Budget” column). This projected fund balance is higher than what was originally projected in the adopted FY 2023-25 Biennial Budget due to the higher than anticipated Beginning Fund.
General Fund
Measure O 2006
Sales Tax Fund OPEB Total
Beginning Fund Balance 7/1/22 $ 10,823,192 $ 5,967,140 $ 1,011,630 $ 17,801,962 Revenues 22,758,054 3,004,610 122,374 25,885,038
Expenditures (21,718,987) (1,346,413) - (23,065,400)
Net Change in Fund Balance $ 1,039,067 $ 1,658,197 $ 122,374 $ 2,819,638 Fund Balance:
Nonspendable $ 37,592 $ - $ - $ 37,592
Assigned for capital projects - 3,522,243 - 3,522,243
Assigned for post employment benefits - - 1,134,004 1,134,004 Unassigned 11,824,667 4,103,094 - 15,927,761
Ending Fund Balance, 6/30/23 $ 11,862,259 $ 7,625,337 $ 1,134,004 $ 20,621,600
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Table 2: General Fund Budget & Available Fund Balance in Thousands Measure O 2006 Sales Tax Fund
The General Fund is the primary operating fund of the City, which accounts for resources and services traditionally associated with government. The General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund.
The City has historically reported on the General Fund separately from the Measure O 2006 Sales Tax Fund, although the City’s auditors traditionally combine this information in the ACFR as shown above in Table 1. The Measure O 2006 Sales Tax Fund accounts for the revenues derived from Measure O 2006, a local 1/2% sales tax approved by the City's voters in November 2006. To ensure accountability, the measure included a provision requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds. To aid in the collection and reporting of this information, the City has accounted for this fund in a separate account.
For the purpose of providing the City Council and the community the full picture of the City revenues, expenditures, and ending fund balance, staff has combined these two funds for information purposes into a Consolidated General Fund picture in this report as shown in Table 3.
2021-22 2022-23 ADOPTED AMENDED ESTIMATED CURRENT PROPOSED
ACTUAL ACTUAL BUDGET BUDGET BUDGET BUDGET BUDGET
Beginning Fund Balance $8,089 $10,824 $8,993 $11,863 $11,863 $10,275 $10,275 Revenues 18,589 19,689 18,544 18,819 19,247 19,000 19,389 Transfers In 2,993 3,069 3,114 3,114 2,755 3,185 2,796
Total Revenues 21,582 22,758 21,658 21,933 22,002 22,185 22,185 Salaries and Benefits 10,851 13,198 12,089 12,834 12,853 12,437 13,539 Services and Supplies 6,455 7,315 9,435 9,292 9,296 9,775 9,932 Debt Service 129 308 310 310 307 294 294
Capital Outlay 13 242 240 318 318 150 130
Transfers Out 1,399 656 115 816 816 2,475 2,475
Total Expenditures 18,847 21,719 22,189 23,570 23,590 25,131 26,370 Total Operating Incr/(Decr) 2,735 1,039 (531) (1,637) (1,588) (2,946) (4,185) Available Fund Balance $10,824 $11,863 $8,462 $10,226 $10,275 $7,329 $6,090 Reserve % 57.4% 54.6% 38.1% 43.4% 43.6% 29.2% 23.1%
$ Above Reserve Policy $7,054 $7,519 $4,025 $5,512 $5,557 $2,302 $816 2023-24 2024-25
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Table 3: FY 2024-25 Consolidated General Fund Budget & Available Fund Balance in Thousands
The projected fund balance for the Consolidated General Fund at the end of FY 2024-25 is $6,762,402 or 22.2%. This leaves approximately $560,000 in funds available that could be allocated from fund balance and still achieve the 20% reserve goal. A discussion about appropriation of Excess Available General Fund Balance has been included later in this report.
Proposed Budget
The FY 2024-25 proposed budget presents a balanced budget, with excess revenues and fund balance sufficient to cover recommended work plan and capital project budget expenditures. The FY 2024-25 proposed budget includes a total of $25.1 million in revenues and $30.4 million in operating and capital budget for a net of $5.3 million more expenditures than revenues. The operating budget is balanced, with a $6.7 million net operating surplus. The expenditures that exceed revenues are for one-time projects that the City has been anticipating. Fund balances accumulated over time offset the additional expenditures.
Consolidated General Fund Revenues
As shown in Chart 1 below, Sales and Property Taxes comprise the largest source of revenue in the General Fund, together accounting for approximately 68% of revenue in that fund. Given this dependence on just two revenue sources, fluctuations in the amount General General
Fund Fund
Beginning Fund Balance $11,862 $7,625 $19,487 $10,275 $1,759 $12,034 Revenues:
Revenues 19,247 2,906 22,153 19,388 2,966 22,354
Transfers In 2,755 - 2,755 2,796 - 2,796
Total Revenues 22,002 2,906 24,908 22,184 2,966 25,150
Expenditures:
Salaries and Benefits 12,852 - 12,852 13,539 - 13,539
Services and Supplies 9,296 1,042 10,338 9,932 1,087 11,019 Debt Service 307 - 307 294 - 294
Capital Outlay 318 - 318 130 - 130
Transfers Out 816 7,730 8,546 2,475 2,966 5,441
Total Expenditures 23,589 8,772 32,361 26,370 4,053 30,423 Total Operating Incr/(Decr) (1,587) (5,866) (7,453) (4,186) (1,087) (5,273) Available Fund Balance $10,275 $1,759 $12,034 $6,089 $673 $6,761 Reserve % 43.6% 20.1% 37.2% 23.1% 16.6% 22.2%
$ Above Reserve Policy 5,557 5 5,562 816 (138) 678
Funds Available to Allocate 4,500 - 4,500 560 - 560
FY 2023-24 Estimated Budget FY 2024-25 Proposed Budget
Local
Sales
Consolidated
Total
Local
Sales
Consolidated
Total
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
of taxes received can have profound impacts on the City’s ability to provide services. As long as the real estate market stays reasonably strong, property taxes are a relatively stable revenue source.
Chart 1: FY 2024-25 Consolidated General Fund Revenues – $25.1 Million Total Overall, General Fund tax revenues have been trending upward over the past several years and are expected to increase in FY 2024-25. Based on the latest information provided by the County Auditor-Controller’s Office, Property taxes are expected to increase 4% in FY 2024-25. This is the result of an increase in the assessed valuation of properties in Arroyo Grande and a housing market that has remained robust throughout the past year.
Sales tax receipts have remained consistent throughout the past year. The City’s sales tax consultant projected a reduction in sales tax revenues of 1.9% in FY 2023-24 due to an anticipated minor economic slowdown. These projections reflect expected declines in categories like automobiles and transportation, fuel and service stations, and general consumer goods. The lower projections in these categories are the result of lower expected consumer demand in the short-term. This budget is projecting a decrease in sales tax revenues of 2% in FY 2024-25, as the economy is only anticipating a minor slowdown.
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Chart 2: Consolidated General Fund Tax Revenues $19.5 Million Consolidated General Fund Expenditures
The following two charts show the proposed $30.4 million Consolidated General Fund expenditure budget for FY 2024-25, both in terms of the relative size of each department as well as the total dollars budgeted for each department. As the charts show, the Police Department is the City’s largest function, with 25% of the budget. Fire services for the FCFA will receive 13% of the Consolidated General Fund and Local Sales Tax Fund budget. Public Works and Community Development will receive 11% and 7% of FY 2024- 25 budget resources, respectively. The “Non-Departmental” category represents 17% of the General Fund budget and includes items that affect all departments, such as the annual payment on the City’s Unfunded Actuarial Liability (UAL), property and general liability insurance, and transfers to the Street and Capital Improvement Project funds.
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Chart 3: FY 2023-24 Consolidated General Fund Expenditures by Department $30.4 Million
Chart 4: FY 2023-24 Consolidated General Fund Expenditures by Department $30.4 Million
The tables in the following pages identify specific budget request items in the FY 2024- 25 Mid-Cycle Budget in the areas of staffing, vehicles and equipment, and other budget expenditure items. The total Consolidated General Fund Expenditure requests included in the Mid-Cycle Budget Update increase the FY 2024-25 Budget by $1,235,233.
Proposed Staffing Requests
During the First Quarter Financial Status report on December 12, 2023, the City Council approved an Intern position within the Community Development Department to assist with research, project renderings, scanning, and organizing project files. This position was not
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
originally included in the FY 2024-25 budget and accounts for a portion of the proposed staffing requests listed below.
Staff are also requesting to add two additional positions:
Part time Recreation Specialist in the Recreation Department to provide additional support on special projects such as marketing, assistance with special events, and customer service at the office.
Part time Executive Secretary within the Human Resources Division of the City Manager’s Office to support increased demands and complexities of the citywide organization. This additional staff resource is needed as the Human Resources Officer continues to get pulled into high‐level analysis of changing legislation and regulations, in addition to a steady City staff turnover rate, fueling additional workload related to hiring and onboarding new employees. Delegating more of the administrative work to a part-time Executive Secretary will more equally balance the workload of the division, and allow for more support to City employees. The City’s Human Resources team supports not just the City of Arroyo Grande but all Human Resources needs for the Five Cities Fire Authority.
Table 4: Proposed Staffing Requests
Salaries and benefit costs included in the proposed Mid-Cycle Budget Update for FY 2024-25 reflect contractually obligated increases.
Services and Supplies Requests
Staff is requesting to increase Contractual Services totaling $542,328 within the following departments:
City Attorney contract totaling $225,608 for increased support related to legal review and requirements. The FY 2024-25 original budget included $303,142, this request will bring the total budget to $528,750. The City has seen an increase in public records request from July 2023 to April 2023 that has increased expenditures by $75,200 alone. On average the City is receiving an additional 70 hours per month compared to the previous Attorney firm. Community Development Department totaling $185,000 for the increased costs related to Building Contractual Services. Recent development and building permit activity has increased demand for plan check services.
Public Works Department totaling $81,720 for the increased cost related to the Street Sweeper contract that provides all Street Sweeping within the City previously approved by the City Council.
Position Budget Increase
PT CDD Intern 20,800
PT Recreation Assistant 26,000
PT HR Executive Secretary 37,333
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Legislative and Information Services Department totaling $50,000 for records scanning services. In an effort to reduce the need for physical storage and for more efficient access to requested records, staff propose contracting with a vendor to scan thousands of permanent records into the City’s electronic records storage system. The Department currently does not have the staff capacity to complete this in-house.
Information Technology Division of the Administrative Services Department totaling $268,850 including:
o $100,000 to hire a Consultant to create a Technology Strategic Plan to build out the City’s IT infrastructure for the next ten years, o $73,800 for the Public Safety Camera system support beginning in May 2025,
o $50,000 for Multifactor Authentication solution to reduce the City’s exposure to cyber risks,
o $25,000 for budget software to streamline processes, reduce redundancies, and create a user-friendly platform for the public to easily navigate the budget document,
o $24,100 for an additional platform for the City’s existing human resources software,
o $10,000 for eScribe module to provide City Council meeting indexing, o $10,000 for IT Training Lab for staff to complete training classes for new software platforms in one setting,
o $14,200 for email archiver and anti-spam/phishing software to continue to support the City email system, and
o Reduction of $38,250 for IT Support Services as the refinement of costs for software platform estimates have been updated.
The proposed Mid-Cycle Budget Update also includes an increase in the Police Department’s budget for minor adjustments to three line items, reflecting a total increase of $29,000. This increase would include:
Transparency Engagement and Public Records Request platform to streamline the body-worn cameras, in-car cameras, and public safety videos; Outside background screening for new hires; and
Narcotics Testing related to evidence processed by the Sheriff’s Office, which was previously provided at no cost.
Other requested expenditure variances include:
Increase in multiple departments to include $47,000 for travel and training; Add $15,000 annually to rent a Modular for the Recreation Department’s offices after the demolition of the Mark M. Millis Community Center; and Increase in Governmental Buildings Division to include $10,000 for a City Hall Bulletin Board Replacement and the City’s cost after donations to paint the Women’s Center.
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Vehicle Replacement Requests
As detailed in Table 5 below, the proposed budget includes a decrease to the budget of $20,000, for a total general fund vehicle and equipment request of $100,000, decreased from the current budget of $120,000. It is important to note that all vehicles due for replacement are evaluated to determine the status of their operating condition and whether or not their replacement can be delayed.
Table 5 – Proposed Vehicle Requests
Appropriation of Excess Available General Fund Balance
This preliminary budget discussion also includes information for the City Council to provide direction towards spending the balance above the 20% Fund Balance Goal Limit and to appropriate funds, if applicable, to certain expenditures.
At the end of FY 2024-25, the projected fund balance is approximately $677,913 greater than the 20% goal. Because the act of allocating excess reserves adds to budgeted expenditures, the amount available to spend while keeping the reserve at 20% is $560,000. This is the amount staff recommends the City Council appropriate as part of this item.
There are many options available for spending excess general fund reserves. However, because the excess reserves are one-time funds and do not represent an ongoing funding source, it is recommended that they be allocated to one-time items rather than to fund ongoing costs, such as new positions or programs. Spending options include an additional UAL payment to CalPERS and infrastructure projects, such as pavement maintenance, sidewalk improvements, or other capital improvement projects. Decisions regarding projects funded using excess reserves should also consider staff resource constraints.
Additionally, staff brought forward a Fund Balance and Reserve Policy during the April 9, 2024, City Council meeting to update the existing policy and consider updating the policy to incorporate a Budget Stabilization Reserve, as well as, three replacement/repairs reserves:
Information Technology Reserve
Fleet Replacement Reserve
Facility Repairs Reserve
Vehicles Current Budget Proposed Budget
Small Truck - 50,000
Small Truck - 50,000
Riding Mower 120,000 -
Total FY 2024-25 Vehicles 120,000 100,000
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
This item was continued to a later date. Staff has incorporated this discussion in the preliminary budget item so that the City Council has an opportunity to review the policy as an example and discuss before staff returns with an update on June 11, 2024. An option for the excess available General Fund Balance would be to appropriate a portion or all the excess available General Fund Balance to one or all of these Reserves.
Infrastructure Projects
Infrastructure projects include pavement maintenance, sidewalk improvements or other capital improvement projects that are not currently funded in the proposed 5-Year CIP.
Infrastructure needs were discussed on April 23, 2024, and reviewed in the proposed 5- Year CIP.
The 5-Year CIP Budget includes $10,346,624 for the Pavement Management Program (PMP) over the course of the 5-year period. To maintain the City’s current Pavement Condition Index (PCI) of 56, which borders on the Poor Condition, approximately $7.2 million needs to be spent annually. Additional allocations of funding from General Fund Reserves to the PMP may result in greater efficiencies for the FY 2024-25 project that is currently budgeted to include $5 million.
The 5-Year CIP Budget includes $1,063,000 over the course of the 5-year period for Sidewalk Improvements. Additional funding for the sidewalk repair program would increase the number of sidewalk panels that could be repaired in the City and may enable the City to install new sidewalks to close existing gaps in one or two locations.
The City has a number of CIP projects that are not currently funded. If the City Council wishes to retain excess General Fund Balance for these CIP projects that are not currently funded, it is recommended that the funding remain in fund balance and discussed as part of the next 5-Year Capital Improvement Program Budget, in Spring 2025, in order to ensure staff capacity to complete additional projects.
Reducing the City’s CalPERS UAL
Because past earnings have not matched assumptions used by CalPERS to determine the amount of funding needed to cover pension obligations for member agencies, most CalPERS pension plans have liabilities that exceed the market value of assets in the plan, creating an UAL.
During the time period of 2004 to 2023, the expected rate of return has ranged from a high of 8.25% to the current expectation of 6.8%. In any year that the rate of return falls below these earnings expectations, the UAL will likely increase. This factor has been the primary driver of the increasing UAL over the years. Additionally, other factors, such as changes to mortality assumptions and shorter amortization of gains and losses, have also increased the UAL.
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
The City has a UAL of $12.3 million as of June 30, 2022. This total includes amounts from all six City pension plans, though primarily from the Tier 1 Plans, as shown in Table 6:
Table 6: City’s UAL on 06/30/2022 Based on Letter issued July 2023 In an effort to reduce the City’s CalPERS UAL, the City Council decided during the FY 2018-20 Biennial Budget hearings to make two prepayments on the UAL. The first prepayment of $3 million was made in July 2018 and a second prepayment of $2 million was made in July 2019. The future realized savings from these investments will be approximately $423,000 annually on average for the next 29 years. This represents a rate of return on investment from the $5 million paid to CalPERS of 7.1%. During the FY 2022- 23 Mid-Cycle Update and during the FY 2023-25 Biennial Budget, the City Council chose not to make another prepayment but to focus on other City needs. The City Council may choose to allocate some or all of the $560,000 of excess General Fund Balance to pay down the UAL further in FY 2024-25.
Fund Balance and Reserve Policy
Healthy reserves are a mark of fiscal responsibility and a cornerstone of financial flexibility. The Government Finance Officers Association best practice recommends, at a minimum, that general-purpose governments, regardless of size, maintain unrestricted budgetary fund balance in their General Fund of no less than two months (16.67%) of regular general fund operating revenues or operating expenditures.
The updated Fund Balance and Reserve Policy does not change the current Operating Reserve policy that is equal to 15%, with a goal of 20% of the City’s annual operating expenditures. The previous recommendations brought to Council included contributions to the Budget Stabilization Reserve, staff does not recommend this due to the amount of fund balance required to properly fund the Budget Stabilization Reserve. However, staff does recommend appropriating funds above the City’s fund balance goal of 20% to the three replacement/repairs reserves:
Information Technology Reserve
Fleet Replacement Reserve
Facility Repairs Reserve
Tier
PERS Unfunded
Liability
Funded
Percentage
Misc. 1st Level 15,313,957 66.1%
Misc. 2nd Level 78,534 91.4%
Misc. PEPRA 1,919,437 90.2%
Safety Police 1st Level 7,273,466 81.5%
Safety Police 2nd Level 141,857 89.4%
Safety Police PEPRA 108,125 88.9%
24,835,376 84.6%
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Should the City Council be interested in funding the three replacement/repairs reserves, staff recommends this amount not exceed 1%. The City Council may choose to allocate some or all of the $560,000 of excess General Fund Balance toward these Reserves, although the $560,000 is not enough to fund the full 1% maximum recommended amount.
Table 7 demonstrates how this appropriation could be divided:
Table 7: Fund Balance and Reserve Policy Potential Allocation Enterprise Funds
Though the focus of this report has been on the City’s General Fund, it is important to point out that the City’s two enterprise fund programs, Water and Sewer, reflect rate adjustments approved by the City Council on March 8, 2022, based on the Water and Wastewater Rate Study. Table 8 below details a consolidated look at these enterprise funds.
Table 8: Consolidated Enterprise Budget & Available Fund Balance in Thousands Reserve
Reserve
Percentage
Fund Balance
Allocation
General Fund Balance 20% 6,084,489
Information Technology Reserve 0.61% 186,666
Fleet Replacement Reserve 0.61% 186,667
Facility Repairs Reserve 0.61% 186,667
Total 21.84% 6,644,489
2021-22 2022-23
FINAL FINAL ADOPTED AMENDED ESTIMATED CURRENT PROPOSED
ACTUAL ACTUAL BUDGET BUDGET BUDGET BUDGET BUDGET
Beginning Working Capital $ 8,041 $ 6,639 $ 8,148 $ 4,891 $ 4,891 $ 4,536 $ 4,536 Revenues:
Revenues 7,616 7,730 10,013 10,013 9,338 9,882 9,872
Transfers In 4,057 3,360 4,299 5,998 5,948 3,962 3,890
Total Revenues 11,673 11,090 14,312 16,011 15,286 13,844 13,762 Expenditures:
Salaries and Benefits 1,017 1,105 1,187 1,235 1,195 1,183 1,279 Services and Supplies 4,475 4,530 4,948 4,972 4,908 5,744 5,733 Debt Service 0 - 14 - - - -
Capital Outlay 875 848 117 51 54 48 48
Capital Improvement Program 323 511 3,607 2,495 2,729 712 530 Transfers Out 6,385 5,844 6,550 7,021 6,755 6,486 6,342 Total Expenditures 13,075 12,838 16,423 15,774 15,641 14,173 13,932 Total Operating Incr/(Decr) (1,402) (1,748) (2,111) 237 (355) (329) (170) Available Fund Balance $ 6,639 $ 4,891 $ 6,037 $ 5,128 $ 4,536 4,207 4,366 2023-24 2024-25
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Special Revenue Funds
Special Revenue Funds are a governmental fund type used to account for specific revenues that are legally restricted to expenditures for particular purposes. The Mid-Cycle Budget Update for FY 2024-25 proposes changes to 3 of the 24 Special Revenue Funds.
Only the Special Revenue Funds with changes will be highlighted in this section.
Fund 220 Streets
Fund 220 Streets accounts for receipts and expenditures of money apportioned by the State under Streets and Highway Code. The use of gas tax revenues can only be used to construct and maintain streets, roads and highways. The anticipated revenues increased by $100,700 compared to the current budget due to more consumers driving and the increase in gas costs. The expenditure budget also increased by $35,300 related to increased employee costs. The anticipated fund balance at the end of FY 2024-25 is $1,897 as shown in Table 9 below:
Table 9: Fund 220 Streets Budget & Available Fund Balance Fund 225 Transportation
Fund 225 Transportation revenue is provided by the San Luis Obispo County of Government’s (SLOCOG) Local Transportation Fund (LTF). The annual appropriation is restricted to transportation systems, including transit, pedestrian, street, and road maintenance. The expenditure budget increases by $155,000 to transfer to the Streets Fund 220. The anticipated fund balance at the end of FY 2023-25 is $1.4 million as shown in Table 10 below:
2021-22 2022-23
FINAL FINAL ADOPTED AMENDED ESTIMATED CURRENT PROPOSED
ITEM ACTUAL ACTUAL BUDGET BUDGET BUDGET BUDGET BUDGET
Beginning Fund Balance $ 90,338 $ 81,326 $ 244,024 $ 81,325 $ 81,325 $ 66,564 66,564 Revenues:
Revenues 970,471 894,727 891,066 891,066 953,508 1,027,100 972,800 Transfers In 471,048 507,467 576,000 576,000 576,000 500,000 655,000 Total Revenues 1,441,519 1,402,194 1,467,066 1,467,066 1,529,508 1,527,100 1,627,800 Expenditures:
Salaries and Benefits 504,575 507,329 547,200 558,500 558,500 565,000 600,300 Services and Supplies 263,827 326,357 310,800 415,100 415,100 382,700 382,700 Debt Service 28,545 8,369 8,369 8,369 8,369 8,369 8,369 Capital Outlay - 41,352 22,000 22,000 22,000 140,000 140,000 Transfers Out 653,584 518,788 540,300 540,300 540,300 561,100 561,100 Total Expenditures 1,450,531 1,402,195 1,428,669 1,544,269 1,544,269 1,657,169 1,692,469 Change in Fund Balance (9,012) (1) 38,397 (77,203) (14,761) (130,069) (64,669) Ending Fund Balance $ 81,326 $ 81,325 $ 282,421 $ 4,122 $ 66,564 $ (63,505) 1,895 2023-24 2024-25
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Table 10: Fund 225 Transportation & Available Fund Balance Fund 240 Tourism Business Improvement District (TBID)
Fund 240 TBID provides projects, programs and activities that benefit lodging businesses located and operating within the City of Arroyo Grande. A two percent (2%) assessment is levied on all lodging businesses of the cost charged by the operator per occupied room per night, for all transient occupancies. Revenue collected is used to promote the lodging industry within the City. The expenditure budget is proposed to increase by $136,350 compared to the current budget. The TBID budget was approved at the April 23, 2024, City Council meeting. Additionally, staff has incorporated an additional request totaling $11,350 for the online payment platform that short term vacation rental owners can make payments on. The anticipated fund balance at the end of FY 2024-25 is $277,909 as shown in Table 11 below:
Table 11: TBID Budget & Available Fund Balance
2021-22 2022-23
FINAL FINAL ADOPTED AMENDED ESTIMATED CURRENT PROPOSED
ITEM ACTUAL ACTUAL BUDGET BUDGET BUDGET BUDGET BUDGET
Beginning Fund Balance $ 540,130 $ 967,679 $ 1,248,679 $ 1,337,178 $ 1,337,178 $ 1,452,178 $ 1,452,178 Revenues:
Revenues 660,553 602,502 515,000 515,000 515,000 516,000 516,000 Transfers In - - - - - - -
Total Revenues 660,553 602,502 515,000 515,000 515,000 516,000 516,000 Expenditures:
Salaries and Benefits - - - - - - -
Services and Supplies - - - - - - -
Debt Service - - - - -
Capital Outlay - - - - - - -
Transfers Out 233,004 233,004 400,000 400,000 400,000 425,000 580,000 Total Expenditures 233,004 233,004 400,000 400,000 400,000 425,000 580,000 Change in Fund Balance 427,549 369,498 115,000 115,000 115,000 91,000 (64,000) Ending Fund Balance $ 967,679 $ 1,337,178 $ 1,363,679 $ 1,452,178 $ 1,452,178 $ 1,543,178 $ 1,388,178 2023-24 2024-25 2021-22 2022-23
FINAL FINAL ADOPTED AMENDED ESTIMATED CURRENT PROPOSED
ITEM ACTUAL ACTUAL BUDGET BUDGET BUDGET BUDGET BUDGET
Beginning Fund Balance $ 328,350 $ 405,833 $ 383,583 $ 436,489 $ 436,489 $ 420,739 $ 420,739 Revenues:
Revenues 290,014 307,704 309,500 309,500 309,750 319,050 319,020 Transfers In - - - - - - -
Total Revenues 290,014 307,704 309,500 309,500 309,750 319,050 319,020 Salaries and Benefits - - - - - -
Services and Supplies 204,527 269,044 275,500 275,500 275,500 275,500 411,850 Debt Service - - - - - - -
Capital Outlay - - - - - - -
Transfers Out 8,004 8,004 50,000 50,000 50,000 50,000 50,000 Total Expenditures 212,531 277,048 325,500 325,500 325,500 325,500 461,850 Change in Fund Balance 77,483 30,656 (16,000) (16,000) (15,750) (6,450) (142,830) Ending Fund Balance $ 405,833 $ 436,489 $ 367,583 $ 420,489 $ 420,739 $ 414,289 $ 277,909 2023-24 2024-25
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
Summary
The proposed FY 2024-25 Budget recommends approximately $48 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital related items as shown in the consolidated fund summary Table 12 shown below:
Table 12 – Consolidated Fund Summary Budget & Available Fund Balance Next Steps
The FY 2024-25 Mid-Cycle Budget Update and the 5-Year CIP will be presented to the City Council on June 11, 2024, for formal adoption. Once approved by the City Council, FY 2024- 25 funds will be appropriated on July 1, 2024.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Review and provide direction on the Preliminary FY 2024-25 Mid-Cycle Budget Update Report; or
2. Provide other direction to staff.
ADVANTAGES:
Providing direction will assist staff in developing the Preliminary FY 2024-25 Mid-Cycle Budget Update Report that is responsive to the City’s needs and community priorities, while maintaining economic feasibility.
DISADVANTAGES:
The recommendations do not fully address the long-term replacement needs of all City equipment and infrastructure, including the City’s streets, sidewalks, and stormwater facilities. Limited staffing levels continue to be a challenge for accomplishing all desired Beginning Fund Balance $ 10,274,662 $ 1,759,416 $ 4,535,607 $ 10,958,995 $ (610,413) $ 26,918,267 Revenues:
Revenues 19,388,470 2,966,000 9,871,840 2,443,011 423,944 35,093,265 Transfers In 2,796,300 - 3,889,750 655,000 - 7,341,050
Total Revenues 22,184,770 2,966,000 13,761,590 3,098,011 423,944 42,434,315 Expenditures:
Salaries and Benefits 13,538,725 - 1,278,500 600,300 - 15,417,525 Services and Supplies 9,932,023 1,087,000 5,732,850 1,025,406 7,900 17,785,179 Debt Service 294,386 - 47,500 8,369 382,944 733,199
Capital Outlay 129,500 - 530,000 140,000 - 799,500
Transfers Out 2,475,000 2,965,812 6,341,850 1,446,400 35,900 13,264,962 Total Expenditures 26,369,634 4,052,812 13,930,700 3,220,475 426,744 48,000,365 Total Operating Incr/(Decr) (4,184,864) (1,086,812) (169,110) (122,464) (2,800) (5,566,050) Available Fund Balance $ 6,089,798 $ 672,604 $ 4,366,497 $ 10,836,532 $ (613,213) $ 21,352,217 Enterprise
Funds
Agency
Funds Total
Special
General Fund Revenue
Local Sales Tax
Fund
Item 12.b.
City Council
Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 MidCycle Budget Update Report May 28, 2024
City priorities in a timely manner. Significant cost increases related to pensions and insurance are still threats that will require close monitoring. The performance of the economy in general, and the impacts of specific economic development activities, will also affect the financial condition and sustainability of City operations.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2.