1 STAFF REPORT
DATE: April 26, 2022
TO: Justin Hess, City Manager
FROM: Jennifer Becker, Financial Services Director
BY: Leana Mkrtchyan, Deputy Financial Services Director Susan Langford, Revenue Manager
SUBJECT: Review The Proposed Fiscal Year 2022-23 Budget
RECOMMENDATION
Review the proposed recommendations for the Fiscal Year (FY) 202 2-23 Budget and Citywide Fee Schedule.
BACKGROUND
After facing the fiscal challenges of the COVID-19 Pandemic (Pandemic) and the related economic fallout, the City of Burbank is heading into FY 2022-23 with a Proposed Budget that reflects a solid financial recovery, surpassing expectations formed at the b eginning of the Pandemic. The phase out of state and local public health restrictions combined with the pent-up demand for consumer spending and further bolstered by federal government relief programs facilitated a strong economic recovery in 2021. Economists are forecasting a steady economic growth to continue in 2022 and 2023. However, the economic uncertainties seem far from over , with continued inflation and supply chain disruptions, elevated energy and fuel pri ces, Federal Reserve tightening, unforeseen consequences related to future COVID -19 variants, and geopolitical concerns resulting from the war in Ukraine. Thus, Burbank must remain vigilant with our finances as we look forward to a post Pandemic future.
The FY 2022-23 Proposed Budget was developed using a conservative and responsible approach to revenue allocation while meeting the community’s needs and addressing the
FINANCIAL
SERVICES
2 goals established by the City Council for the upcoming year. Most significantly, after several years of General Fund deficits due to the impacts of the Pandemic, the FY 2022- 23 Budget as proposed is balanced, not just in the coming fiscal year, but for all five years of the City’s financial forecast. Staff is committed to maintaining this balance by continuing to move forward with the implementation of prior initiatives that will provide long- term recurring savings to the City , such as the multi -year pension funding plan and the on - going investment in maintaining and improving the City’s infrastructure, in support of a citywide culture of continuous improvement and financial sustainability.
DISCUSSION
FY 2022-23 General Fund Budget Overview:
Based on the projected FY 2022-23 revenue and proposed recurring appropriations, staff is projecting a recurring balance of approximately $280,605 in FY 2022-23 (see detail contained within the FY 20 22-23 Budget Matrix in Attachment 1). Facto ring in the anticipated ending balance from FY 202 2-23, contributions to reserves , and proposed one-time appropriations, staff is expecting an available balance of $29,637,157 in the General Fund at the end of FY 2022-23.
FY 2022-23 Recurring General Fund Revenue Projections and Trends:
Burbank’s economy has rebounded quickly from the initial Pandemic recession that began in March 2020. The Pandemic recession ended in April of 2020, but the federal policy response extended well into 2021 to ensure a robust economic recovery. Economic growth in FY 2021- 22 surpassed consensus expectations while households and businesses maintained a surprising amount of activity and spending while social distancing. Although not as robust as FY 2021-22, it is expected that there will be moderate growth in revenues in FY 2022-23, as the economy is expected to continue its steady recovery. It will likely take several years for some revenue categories to return to the level projected before the Pandemic. The Russian invasion of Ukraine is not likely to derail the US recovery, but it will push up inflation in the short run.
Burbank’s General Fund recurring revenue estimates for FY 2022 -23 represent a 5. 1% increase over the revised FY 2021-22 projections. Sales tax and property tax continue to be the General Fund's largest revenue sources, representing 57.6% of recurring revenue.
Table 1 shows actual FY 2020- 21 revenue, the adopted and revised estimates for FY 2021-22, and the projection for FY 2022- 23. For further detail on the City’s revenues, please refer to the “Revenues” section of the FY 2022-23 Proposed Budget.
3 Table 1 - General Fund Recurring Revenues FY 2022-23
• Sales Tax: Preliminary sales tax results for the second quarter of FY 2022-23 (fourth quarter calendar year 2021) were recently released. The economy continues to rebound as the fear of the Pandemic is decreasing. Increases were experienced in almost all sales tax r evenue categories. Overall, Burbank’s receipts from October through December were 19.7% above the fourth quarter of 2020. General consumer goods experienced an 18.5% increase as consumers returned to the brick-and-mortar stores seeking the in- store experience during the holiday shopping period.
Restaurants and hotels experienced a 60.9% increase from the prior year as the Pandemic created stored up demand for food services and leisurely experiences. Fuel and service stations experienced an increase of 109.3% for the fourth quarter of 2021 compared to the same quarter of the previous year. This is attributable to the increase in crude oil prices, the return of commuters to businesses, and the increase in petroleum/gas stations around the airport with the increase in flight activity.
Measure P, which is the City’s Transaction and Use Tax, is performing better than anticipated since this revenue is collected based on the location where goods are delivered. Measure P revenues experienced an 18.8% increase for the fourth quarter of 2021 versus the same period of 2020.
A strong demand for consumer goods, buoyed by inflation has increased the price of Sales Tax 46,363,192$ 49,788,463$ 52,576,463$ 54,417,033$ 3.5% Property Tax 62,106,513 59,021,784 59,821,784 61,786,895 3.3% Utility Users Tax 15,595,788 16,707,000 15,707,000 16,312,400 3.9% Services Charges - Intra City 14,730,469 13,396,765 13,396,765 13,499,790 0.8% Services Charges 16,398,662 16,051,612 16,801,612 18,405,990 9.5% In Lieu Tax 8,287,655 8,792,381 8,392,381 8,728,076 4.0% Interest/Use of Money 2,153,171 2,013,006 2,013,006 2,271,472 12.8% Parking/Traffic/Other Fines 2,074,373 2,202,000 2,202,000 2,002,000 -9.1% Transient Occupancy Tax 5,531,388 7,000,000 8,373,000 10,048,000 20.0% Building Permits/License Fees 4,851,794 4,819,895 4,819,895 5,593,503 16.1% Transient Parking Tax 1,282,537 1,680,000 3,180,000 3,339,000 5.0% Business Taxes 2,063,546 2,300,000 2,300,000 2,400,000 4.3% Franchises 1,698,249 1,524,179 1,524,179 1,471,179 -3.5% Intergovernmental Revenues 16,646,110 859,475 859,475 1,558,715 81.4% TOTAL REVENUE 200,886,539$ 186,156,560$ 191,967,560$ 201,834,053$ 5.1% %
CHANGE
REVENUE
CATEGORY
ACTUAL
TOTAL
FY 2020-21
ADOPTED
RECURRING
FY 2021-22
REVISED
RECURRING
FY 2021-22
PROPOSED
RECURRING
FY 2022-23
Note: FY 2020-21 includes $20.1M of non-recurring revenue which are not part of the adopted budget. 4 goods, resulting in higher sales tax revenue in this category. It is expected that for FY 2022-23, inflation will continue to remain high and influence the cost of goods , as interest rates are increased by the Federal Reserve. Impacted by the Ukraine-Russia crisis, fuel prices remain volatile. As the global co nflicts continue, supply chain and material interruptions could disrupt some sales. Taking these factors into consideration, a 3.5% increase is anticipated for FY 2022-23.
• Property Tax: A total tax of 1% is levied on the Assessed Value (AV) of property as determined by the Los Angeles (LA) County Assessor. The City of Burbank receives approximately 18.5% of the 1% levy on the AV. Under Prop 13, AV on parcels with continuing ownership may change by inflation as defined by the California Consumer Price Index (CPI), up to a maximum increase of 2%. The State has released CPI growth, and for FY 2022- 23 the AV of properties will increase by 2%. Other sources of AV growth are change of ownership, new construction, recapture of prior Prop 8 impairments of value, change to values for unsecured items such as aircraft, and post Redevelopment residual distribution.
Fueled by low inventory and low mortgage rates, the housing market continued to see considerable strength in 2021. Compared to FY 2020- 21, the AV for the entire city increased by 2% for FY 2021- 22. General Fund related AV increased by 3.4%. The Citywide AV increase between FY 2020- 21 and FY 2021- 22 was $517 million. The median sales price of a detached single- family residential home in Burbank for the fourth quarter of 2021 was $1,130,000; this is a 15.4% increase when compared to the fourth quarter of 2020 at $979,000. This trend is expected to continue in 2022 , though it may be tempered by rising interest rates. Based on the continued positive growth in property tax, it is anticipated that this category will increase by 3.3 % for FY 2022-23.
• Utility User’s Tax (UUT) : The UUT rate of 7% is applied to telephone, gas, and electric usage. Unlike other cities, Burbank does not apply this tax to water, cable television, sewer, and refuse collection usage/sales. The UUT revenue is anticipated to increase by 3.9% for FY 2022- 23. The proposed electric rate increase and the strong performance of natural gas revenues are offset by reduced electric usage due to efficiencies as well as the decline in telecom revenue as a result of the Federal Communications Commission (FCC) reclassification of data to non- taxable information services.
• Service Charges: Service charges are fees charged to users of city-provided services and are designed to at least partially cover the costs incurred providing these services.
The easing of the public health restrictions allowed for the reopening of indoor park 5 facilities, the surge in passport applications and renewals, and the resumption of the film industry. This resulted in increased service charge revenues during FY 2021-22.
With the reopening of Starlight Bowl activities for the summer season, the continued participation in golf activities, and the return of full participation in day camp and after school activities, it is anticipated that service charges for Parks and Recreation will increase by 13.9% for FY 2022- 23 from the revised FY 2021- 22 projection. With film and television production continuing to ramp up at Burbank studios, it is expected that safety filming service revenues will increase by 9 % from the revised FY 2021- 22 projection. Considering the above factors, staff is forecasting an increase in service charges of 9% for FY 2022-23.
• Transient Occupancy Tax (TOT): The City receives 10% TOT on short-term lodging rentals within the city limits. Despite the threats of the COVID variants, the pent -up demand for domestic leisure travel generated a strong recovery for the hospitality industry for FY 2021- 22. Hotel occupancy rates for March 2022 were at 76. 8% compared to the prior year’s occupancy rate of 59.1%. Although not fully recovered to the pre-pandemic levels, hotel occupancy is rebounding faster than anticipated. For FY 2022-23, TOT is anticipated to increase by 1 8.8% from the revised FY 2021- 22 projection. Attributable to this increase is the return of group event bookings, such as weddings, reunions, and business travel.
• Transient Parking Tax (TPT): The current rate for TPT is 12% and is charged by parking lot operators for short -term parking (e.g., airport, businesses, hotels, and restaurants). With approximately 80% of the parking tax revenue derived from lots at or directly serving the Hollywood Burbank Airport, the City’s TPT is dependent on travel demand. Similar to the increase in hotel occ upancy, airport activity has experienced a rebound from the Pandemic due to the pent -up demand for leisure travel. Passenger counts at the airport have increased by 87% for 2021 when compared to 2020. For FY 2022-23, staff anticipates TPT revenues to increase by 5% from the revised budget of FY 2021-22.
• Building Permits/License Fees: The City requires permits for various construction activities. FY 2021- 22 revenue is expected to end the year above forecast due to recent legislative actions that removed several restrictions around building accessory dwelling units (ADUs). The 16.1% incr ease projected for FY 2022 -23 reflects the continuation of ADU related increases in addition to anticipated permit applications for major development projects.
6 FY 2022-23 Recurring General Fund Expenditures:
At the Mid-Year Financial Report on March 1 , 2022, staff projected a recurring deficit of $880,000 heading into FY 2022 -23. After adjusting FY 2022- 23 revenue projections to account for a stronger than anticipated revenue recovery from the Pandemic, the budget as proposed has a balance of approximately $280,605 for FY 202 2-23. Proposed recurring General Fund appropriations for FY 2022 -23 are just under $ 202 million, an increase of approximately 4.6% over last year’s adopted recurring budget of $193 million.
Staff has made significant efforts to maintain spending at existing budget levels citywide; however, several departments did identify immediate needs for items that required funding. Roughly $1.3 million in new General Fund recurring budget items (net of revenue) and $1.7 million in one-time items (net of revenue) were incorporated into the FY 2022-23 Proposed Budget. The City Manager reviewed in detail the proposed budget requests during the months of February and March. New appropriations were prioritized in accordance with their adherence to the City Council’s stated goals for the year . The following chart summarizes the total new proposed General Fund budget requests (net of revenue) by department. A comprehensive listing of all budget requests by department is included in the Proposed FY 2022-23 Budget under the “New Budget Requests” tab.
DEPARTMENT
NEW BUDGET
ITEMS
(Recurring)
NEW
BUDGET
ITEMS
(One-Time)
NET PERCENTAGE
CHANGE TO
TOTAL BUDGET
City Attorney $93,000 2.1%
City Clerk $3,100 $236,000 14.6%
City Council 0.0%
City Manager $19,849 0.8%
City Treasurer 0.0%
Community Development $141,496 $60,000 1.5%
Financial Services $86,516 $90,000 3.1%
Fire $441,731 $850,000 3.4%
Information Technology 0.0%
Library Services $15,000 1.9%
Management Services $115,000 $150,000 4.1%
Parks & Recreation $66,330 $46,500 0.4%
Police $155,290 $15,000 0.3%
Public Works $302,341 $200,000 3.0%
TOTALS: $1,346,653 $1,740,500 1.73%
7 Citywide Fee Schedule
The FY 2022-23 Proposed Fee Schedule remains in compliance with the City Council’s adopted policy, which provides a set of principles to determine when, and if, cost recovery is appropriate for different types of fees for services based on the benefits a user receives above a general taxpayer. Some of the more notable changes to the Fee Schedule for FY 2022-23 include container fees for commercial businesses as mandated by the State, the restructuring of medical emergency service fees, cost recovery for issuance of student film permits, the establishment of a brush inspection fee , and an inclusionary fee for monitoring affordable housing.
The City Council’s adopted cost recovery policy dictates that all fees be adjusted annually by the CPI, to maintain the current level of cost recovery for City Services. However, the FY 2022-23 Fee Schedule does not propose to increase fees by the full CPI, which ended the 2021 calendar year at 7% due to impacts from inflation. Instead , the proposed fees are based on a 3-year average of CPI, calculated at 3.4%. Staff is proposing to complete a new Citywide Fee Study in the coming fiscal year to give the City Council an opportunity to review the recovery levels for the City’s various service fees and maintain compliance with Proposition 218. A detailed listing of all proposed new fees and changes can be found in the “Fee Schedule Changes” section of the FY 2022-23 Proposed Budget.
The Burbank Program Activity and Service Subsidy (PASS) remains in effect citywide.
This popular program provides financial assistance to low -income residents for City services and has served as a valuable resource for residents who have been financially impacted by the Pandemic. To date, 840 Burbank residents have been enrolled in the PASS program.
City Utility Rates
For FY 2022- 23 Burbank Wat er and Power (BWP) staff is recommending increases to both the Electric and Water Funds. The Electric Fund is proposing a 6% increase to balance the need to have a 100% Greenhouse Gas (GHG) neutral electric supply by 2045 while keeping rates affordable and the system reliable. The Water Fund is proposing a 9% increase to cover elevated costs of purchased water, operations and maintenance, conservation, and capital improvement programs. The Sewer Fund is proposing a 2% increase due to higher cost from the City of LA for sewage treatment services and capital improvement projects. The Refuse Fund is proposing a 4% increase to meet rising operational costs, particularly those associated with new State mandates, and to continue providing comprehensive refuse serv ices. For the typical single- family residential customer, the total proposed fees and charges for FY 2022-23 reflect monthly increases of approximately $7.91 for electric services, $6.46 for water services, $0.51 for sewer services, and $1.34 for refuse services. The public hearing for all utility rates is scheduled 8 for May 17, 2022. Staff has complied with the noticing requirements established by the California Supreme Court in 2006 in the Bighorn- Desert View Water Agency v. Verjil decision. The noticing requirements include mailed notice to all fee payers at least 45 days prior to the public hearing at which the fees may be imposed or increased. These noticing requirements apply to the City’s water rates, sewer service charges, and refuse collection fees.
American Rescue Plan Act of 2021 (ARPA)
In response to the Pandemic, the U.S. government enacted a series of measures to mitigate the effects of the health and economic crises. In March 2020, Congress passed the Coronavirus Aid, R elief, and Economic Security Act (CARES Act). The American Rescue Plan Act (ARPA) was signed into law in March 2021. ARPA included an extension of many CARES Act programs. ARPA established the Coronavirus State and Local Fiscal Recovery Funds (SLFRF), prov iding $350 billion to state, local, territorial, and Tribal governments.
The City of Burbank was allocated $25.6 million from the ARPA funding. The City received the first installment of $12.8 million in May of 2021 and is expected to receive the second installment of $12.8 million in May of 2022. The allocation from the ARPA funding will be utilized for the following eligible categories:
Public Sector Revenue-Loss to fund General Fund services. ($17.4 million) Support the Pandemic public health and economic response to the public sector by funding projects for the City’s technological infrastructure shown below by department* ($5.8 million):
• Fire and Police Departments ($4,795,000)
• Financial Services Department ($125,000)
• Information Technology ($283,000)
• Projects involving multiple departments ($642,000)
*A detailed listing of the specific projects can be found in the FY 2022-23 Proposed Budget. Support the Pandemic public health and economic response through Public Sector Capacity and Workforce by opening up positions that were frozen during the Pandemic ($2.4 million)
FY 2022-23 State Budget Proposal
In early January, Governor Newsom released his proposed budget for FY 2022- 23. This proposal serves as the beginning of deliberations in the State Legislature leading to final budget adoption in June 2022. The proposal calls for a $286.4 billion budget, wi th a General Fund total of $213.1 billion. The budget proposes a series of emergency investments to respond to the public health effects of the Pandemic and a combination of 9 one-time and ongoing investments to provide greater support for the health and economic well-being of Californians. The state entered the Pandemic recession on a strong fiscal foundation after years of building reserves and a focus on maintaining balanced budgets over the long term. The budget reflects the utilization of $34 billion fro m budgetary reserves and discretionary surplus. Although the Pandemic has been devastating to many Californians, the state has recently experienced unprecedented revenue growth due to factors including surging incomes among the wealthy, the booming stock m arket, steep growth in corporate profits, and strong retail sales. According to current estimates, the state exceeded its Appropriations Limit or “Gann Limit” by $19 billion in FY 2020- 21 and is expected to be under the limit by $16.4 billion in FY 2021- 22. The difference between the two fiscal years of $2.6 billion is the projected amount to surpass the Gann Limit. Any funds above this limit are constitutionally required to be allocated evenly between schools and a refund to taxpayers.
To prepare for uncertainties with future variants, the administration proposes additional funding to bolster vaccination and booster efforts, expand testing capacity, and support health care workers. The administration proposes a total of $2.7 billion to mitigate the spread of the virus and protect the health of Californians. Of this amount, the administration requests that $1.4 billion be included in an early action package before the June budget. The proposed budget would provide a comprehensive Medi -Cal plan for Californians who are undocumented, provide cash assistance for low-income households through state tax credits, invest in homelessness prevention and housing, invest in behavioral health, and commit additional funding across education systems, from early learning to K-12 to higher education. The budget would also provide temporary tax credits for companies investing in climate change mitigation and green energy technologies that are headquartered in California.
The administration is continuing to implement the Road Repair and Accountability Act of 2017, Senate Bill 1 (SB-1), which provides funding for both state and local transportation infrastructure. SB-1 increased the gas fuel tax by 12 cents, providing a stable and ongoing increase in state tra nsportation funding. To provide relief to consumers and lower gasoline and fuel prices, the budget proposes to suspend the annual inflation adjustment to the per-gallon fuel excise tax rate scheduled for July 1, 2022. Based on an estimated
5.6% inflation rate, fuel tax revenues would be reduced by $523 million in FY 2022- 23.
The Governor and the Legislature have committed to backfill any revenue impact on local streets and roads allocations to make them whole. The City of Burbank is estimated to receive SB -1 funding of $2.4 million in FY 2022- 23, which assumes the inflationary adjustment. Staff will continue to monitor developments in the state budget process and provide updates to the City Council as necessary.
10 General Fund Financial Forecast
The intended purpose of the financial forecast is to foster an understanding of long- term financial trends, and their impact to the City’s overall financial picture. This long- term perspective allows the City Council and City m anagement to make informed fi nancial decisions today while fully understanding the future financial impacts of decisions.
Projected Revenues and Expenditures:
Forecasted revenues are driven by the parameters included within Attachment 2. These assumptions are inherently conservative; however, there is a risk that certain revenues may not perform as projected due to economic cycles and legislation. Staff will update projected revenues periodically throughout the year as new information becomes available.
It is staff’s expectation that recurring revenue growth over the next five years (FY 202 2- 23 through FY 2026 -27) will average 3.6% while recurring expenditures will average
3.4%. Revenue expectations assume a continued economic recovery from the Pandemic for TOT and TPT, which still have yet to fully recover from pre-pandemic levels. Sales Tax and Property Tax rebounded quicker than anticipated and are expected to have moderate growth in future years. The average revenue growth in the current forecast includes the following projections for the City’s largest general fund revenues: Sales Tax
2.7% and Property Tax 3.8%.
The two main drivers of expenditures for the General Fund are salaries and benefits, most notably the CalPERS rates that are applied to the base salaries. The expenditure growth assumes the following costs:
Memorandum of Understanding (MOU) Projected Costs:
Salaries and benefits account for approximately 75% of the General Fund’s operating budget. As such, the MOU negotiation process for the City’s bargaining groups plays a significant role in determining the City’s financial position. The City’s Financial Policies dictate that Burbank strives to pay market rates to all of the City’s labor groups. Market rates are determined through salary and benefit s surveys which compare the City’s job classifications to those of similar organizations throughout the region. The City of Burbank calculates the average salary paid for the comparable positions to determine whether employee salaries are at market value. The General Fund forecast includes recently adopted MOUs as well as assumptions for salary and benefit growth over the next five years based on projected market rates for the City’s bargaining groups. At present time, all the City’s bargaining groups have MOUs established for FY 2022-23 with the exception of the Burbank Fire Fighters (BFF), the Burbank City Employees Association (BCEA), and the Burbank Management Association (BMA).
11 Public Employees Retirement System (PERS) Costs:
Managing costs associated with CalPERS pensions continues to be a challenge for the City, leading to a significant fiscal constraint. In recent years, Burbank has taken measures towards mitigating pension cost incr eases, including sending lump sum contributions to CalPERS to decrease the City’s unfunded liability, establishing a Section 115 trust to offset future pension volatility, increasing employee contributions towards their pension rates, and implementing the changes directed by the Public Employees’ Pension Reform Act (PEPRA) adopted by the State of California in 2012.
In July of 2021, the City received the CalPERS actuarial reports for the FY 2022- 23 budget year. Based on the most recent reports, Burbank cur rently has an Unfunded Actuarial Liability (UAL) of just under $385 million across the City’s three pension plans.
Table 2 shows the actual CalPERS employer rates and UAL contributions for the three employee classifications for the current year (FY 2021-22), next fiscal year (FY 2022-23), and the projected employer rates and contributions for the following two fiscal years (F Y 2023-24 and FY 2024-25).
Table 2 – City of Burbank Pension Costs FY 2021-22 – FY 2024-25
Classification
Actual
FY 2021-22
Actual
FY 2022-23*
Projected
FY 2023-24
Projected
FY 2024-25
Police 3% @ 50 Rate 23.1% 22.05% 21.5% 21.1%
Police Liability Payment $7,300,248 $8,152,664 $8,733,000 $9,341,000 Fire 3% @ 55 Rate 17.55% 17.71% 17.3% 17.0%
Fire Liability Payment $4,561,502 $5,028,014 $5,413,000 $5,856,000 Misc 2.5% @ 55 Rate 10.38% 10.00% 9.8% 9.6%
Misc Liability Payment $19,578,570 $21,224,820 $22,627,000 $24,294,000 * Amounts shown are the total amounts due for FY 2022-23 if the City were to pay CalPERS on a monthly basis. For FY 2022-23, staff will propose prepaying the liability payments, which will result in a net savings of $1,094,974 citywide.
It should be noted that several of CalPERS actions subsequent to the issuance of the 2021 actuarial reports are not yet factored into the rates provided above but will definitely impact Burbank’s projected pension costs beginning in FY 2023- 24. The 21.3% fiscal year-end investment returns earned by CalPERS in 2021 will decrease the City’s UAL payment amount and increase the overall funded status of Burbank’s three plans by as much as 10%. Offsetting the investment gains is CalPERS’ recent decision to lower the discount rate from 7% to 6.8%, as well as the adoption of new assumptions regarding retirement age, life expectancy, and salary inflation. These revised assumptions are projected to increase the normal cost rates for each plan by a range of 1.7% to 3%.
Overall, CalPERS estimates that the UAL savings from investment gains will offset the 12 normal cost increases and still provide a nominal net benefit to the City, but this is contingent upon CalPERS meeting their projected rate of return in future fiscal years.
Staff continues to implement the City Council’s multi-year pension funding plan approved as part of the FY 2019-20 Budget process to help reduce future pension payments, with a proposed payment to CalPERS of $12 million included in the FY 2022- 23 proposed budget. To date, $41 million in one- time resources across all City funds were sent to CalPERS, with a total of $53 million in planned contributions over a four -year period ending in FY 2022- 23. The General Fund portion of this commitment is approximately 68% ($36 million). To date, the City has achieved $4.6 million in recurring savings as a result of the City Council’s pension funding plan. Following the final contribution of the multi-year pension funding plan of $12 million during the upcoming fiscal year, staff will reevaluate various options to continue the City’s pension funding plan and provide a recommendation for the City Council’s consideration.
Financial Reserves
The City of Burbank has continued to fulfill the City Council’s Financial Policies by fully funding our financial reserves. The City’s policy is to designate 15% of the General Fund’s operating budget to its working capital reserve and a designated emergenc y reserve equivalent to 5% of the General Fund’s operating budget. Based on the current figures for the proposed budget as presented, the City will contribute $ 1,089,445 and $363,148 to each of these reserves respectively for FY 2022-23.
The City also maintains a Compensated Absences reserve, which was established to offset the City’s unfunded accrued leave payout liability and fund estimated annual payoffs that are not included within the operating budget. As of June 30, 2021, the City’s total General Fund accrued leave payout liability is estimated at $14.3 million. The City is projected to have $2.5 million set aside in the Compensated Absences reserve at the end of FY 202 1-22. To fulfill the policy approved by the City Council that this reserve is maintained at or above 20% of the General Fund’s total outstanding liability, staff is recommending a contribution of $383,918 in FY 2022-23.
Infrastructure Funding
Adhering to the City Council’s adopted Infrastructure Maintenance, Repair , and Improvement Policy, the FY 2022-23 Proposed Budget continues to contribute half of the Measure P sales tax revenue to the Municipal Infrastructure Fund 534, in addition to the annual $4.7 million General Fund maintenance of effort.
The FY 20 22-23 Proposed Capital Improvement Program (CIP) continues the City’s efforts towards addressing the City’s infrastructure needs, with nearly $22.5 million in capital spending proposed, alongside $4.6 million in annual Fund 534 maintenance 13 dollars. Included in the $22.5 million is an $8 million annual investment in the City’s streets and sidewalks, along with a variety of capital projects which include building improvements, park playground and facility upgrades, and street and pedestrian improvements. Proposed projects were given a prioritization score based on five categories, including health and safety, system condition, joint agreement/legal requirements, coordination opportunity, and community interest. The prioritized projects were then presented to the Infrastructure Oversight Board (IOB) for review at two public meetings on February 24 and March 24 , 2022, the second of which the IOB formally approved the capital plan for inclusion in the Proposed Budget. Information on individual CIP project appropriations proposed for FY 202 2-23 can be found in the “Infrastructure Investment Plan” tab of the FY 2022-23 Proposed Budget.
CONCLUSION:
With the solid economic recovery from the Pandemic along with several large- scale development projects on the horizon, t he City’s revenues are recovering at a pace significantly above expectation, placing Burbank’s fiscal health in a more sustainable position over the next five years of our forecast. In addition, the City’s pension obligation bonds are largely paid off, leaving the General Fund free of bonded debt by the end of FY 2022-23.
As illustrated in Chart 1, staff is projecting a recurring General Fund balance of $280,605 in FY 2022-23, increasing to $1.7 million in FY 2026-27, as revenues continue to recover.
It should be noted that there are several risks associated with our projections, including outstanding labor agreements, potential changes to future CalPERS assumptions, and the overall health of the economy . Should the budget be adopted as proposed, the City is projected to have a year-end non-recurring balance of $29.6 million for the FY 2021-22 General Fund.
14 Chart 1 - General Fund Financial Forecast FY 2022-23 through FY 2026-27 (in millions)
A dedicated City Council Budget Study Session to review the proposed FY 2022- 23 Budget is scheduled for April 26, 2022, with a continued discussion scheduled for May 3.
The public hearing and adoption of utility rates is scheduled for May 1 7, 2022, and the public hearing and adoption of the citywide budget and fee schedule is scheduled for May 24, 2022. Per the City’s Charter, the FY 2022-23 Budget must be adopted by Ju ne 30, 2022.
ATTACHMENTS:
Attachment 1: General Fund Projected Spendable Fund Balance FY 2022-23 Attachment 2: General Fund Financial Forecast FY 2022-23 through FY 2026-27 $201.8
$208.6
$216.1
$222.7
$229.5
$201.6
$208.6
$215.2
$221.5
$227.8
$160
$170
$180
$190
$200
$210
$220
$230
$240
2022-23 2023-24 2024-25 2025-26 2026-27
Revenue Expenses
Balance: $0.3 $0.1 $0.8 $1.2 $1.7