1 STAFF REPORT
DATE: May 7, 2024
TO: Justin Hess, City Manager
FROM: Jennifer Becker, Financial Services Director
BY: Leana Mkrtchyan, Deputy Financial Services Director Susan Langford, Revenue Manager
Joy Escalante, Budget Manager
Nathan Lightell, Senior Administrative Analyst
SUBJECT: Review the Proposed Fiscal Year 2024-25 Budget
RECOMMENDATION
Review the proposed recommendations for the Fiscal Year (FY) 20 24-25 Budget and Citywide Fee Schedule.
BACKGROUND
The City of Burbank continues to experience consistent growth and resilience after economic fluctuations in the years following the COVID-19 pandemic (pandemic), providing a positive financial outlook for the upcoming fiscal year. With the City’s current unemployment rate below average , several large -scale development projects on the horizon, and the opening of new businesses around town, the City’s revenues are increasing steadily. Nationally, given the recent easing of inflation and the likely end to related interest rate hikes, economists are hopeful for steady growth in 2024 as the overall economic data related to labor markets, industrial production, and construction related activities shows improvement.
Despite the positive outlook, the City must proceed with caution moving forward with this proposed financial plan for FY 2024 -25. The e ntertainment related labor strikes in late 2023 had a profound (albeit short-term) impact on Burbank’s business economy, and
2 more potential labor disputes are on the horizon. Additionally, the November 2024 election has the potential to create instability within financial markets and the federal government itself, and those impacts would certainly trickle down to local governmen ts.
Fortunately, prior City Council decisions to increase reserves and set aside funds for future liabilities have placed Burbank in a favorable position to weather any future economic events.
The FY 2024-25 Proposed Budget was developed using a conservative and responsible approach for both revenues and appropriations while meeting the community’s needs and addressing the goals established by the City Council for the upcoming year. The FY 2024- 25 Proposed Budget is balanced ; however, the five -year financial forecast reflects a recurring budget deficit starting in FY 2027-28 and increasing to $1.7 million in year five as growing expenses outpace anticipated revenue growth. Staff is committed to mitigating the future recurring deficit by implementing prior cost-saving initiatives and identifying future efficiencies, revenue -generating opportunities, and financial policies that will provide long-term recurring savings to the City . The Proposed FY 202 4-25 Budget also includes additional one -time funding towards paying down pension liabilities and the ongoing investment in maintaining and improving the City’s infrastructure , in support of continuous improvement and financial sustainability.
DISCUSSION
FY 2024-25 General Fund Budget Overview
Based on the projected FY 20 24-25 revenues and proposed recurring appropriations, staff is projecting a recurring balance of approximately $2.2 million in FY 20 24-25 (see detail included within the FY 20 24-25 Budget Matrix in Attachment 1). This does not include a number of proposed discussion papers that are addressed later in this report.
Factoring in the anticipated ending balance from FY 20 23-24, contributions to reserves, proposed one -time appropriations, staff is expecting an available one-time balance of $7.2 million in the General Fund at the end of FY 2024-25.
FY 2024-25 Recurring General Fund Revenue:
Economic growth in FY 2023-24 surpassed consensus expectations, with businesses and households maintaining spending levels despite the elevated interest rates and continued inflation. Although not as robust as FY 202 3-24, Burbank is expected to see moderate growth in revenues for FY 2024-25, in line with state and federal economic forecasts. It is anticipated that as inflation begins to stabilize, the Federal Reserve will slowly decrease interest rates in 2024 . This could result in lower mortgage rates, a rise in consumer
3 confidence to bolster spending, and more investments by businesses due to the lowered borrowing costs.
Burbank’s General Fund recurring revenue estimates of $246.7 million for FY 202 4-25 represent a 5 .7% increase over the revised FY 202 3-24 projections. Sales tax and property tax continue to be the General Fund's largest revenue sources, representing 56% of recurring revenue.
Table 1 shows the actual FY 2022-23 revenue, the adopted and revised estimates for FY 2023-24, and the projection for FY 202 4-25. For further detail on the City’s revenues, please refer to the “Revenues” section of the FY 2024-25 Proposed Budget.
Table 1 - General Fund Recurring Revenues FY 2024-25
REVENUE
CATEGORY
ACTUAL
TOTAL
FY 2022-23
ADOPTED
RECURRING
FY 2023-24
REVISED
RECURRING
FY 2023-24
PROPOSED
RECURRING
FY 2024-25
%
CHANGE
Sales Tax $ 61,697,887 $ 60,002,899 $ 63,103,399 $ 64,412,066 2.1% Property Tax 69,425,311 65,817,908 69,817,908 74,955,921 7.4% Utility Users Tax 18,645,937 17,997,000 18,884,000 19,639,000 4.0% Services Charges - Intra City 13,380,003 14,621,839 14,621,839 15,657,042 7.1% Services Charges 22,729,064 22,740,816 22,740,816 25,458,890 12.0% In Lieu of Tax 9,077,939 9,512,850 9,512,850 9,893,000 4.0% Interest/Use of Money 4,004,406 3,248,614 4,248,614 4,318,156 1.6% Parking/Traffic/Other Fines 1,198,285 2,401,000 2,401,000 2,601,000 8.3% Transient Occupancy Tax 12,208,382 10,759,000 12,259,000 13,853,000 13.0% Building Permits/License Fees 5,129,260 5,995,478 6,656,678 6,152,195 -7.6% Transient Parking Tax 4,302,522 3,772,980 4,272,980 4,401,000 3.0% Business Taxes 2,316,840 2,464,190 2,464,190 2,464,190 0.0% Franchises 1,538,954 1,442,000 1,442,000 1,519,650 5.4% Intergovernmental Revenues 1,823,976 1,067,051 1,067,051 1,385,781 29.9%
TOTAL REVENUE
$229,630,915
$221,843,625
$233,492,325
$246,710,891
5.7%
NOTE: FY 2022-23 includes $2.1M of non-recurring revenue.
• Sales Tax: Sales tax results for the second quarter of FY 202 3-24 (fourth quarter calendar year 2023) were recently released. Burbank’s receipts from October through December were 1.7% above the fourth quarter of the prior year, on an adjusted basis.
Burbank experienced a positive growth rate for the quarter compared to the County
4 and State with declines of 4.6% and 2.5%, respectively. The Autos and Transportation category experienced a 61.1% increase in this quarter , due to revised reporting of revenue from an auto dealer. Restaurants and Hotels increased by 2.1%, attributable to casual dining and catering. Business and Industry experienced a 28.9% decline as motion picture sales fell by 47.1%, impacted by the Writers Guild of America Strike and SAG-AFTRA labor disputes that ended in November.
Measure P, which is the City’s Transaction and Use Tax (TUT), experienced a decline of 7.2% for the fourth quarter of 2023 versus the same period in 2022. Measure P is a district tax that the City receives only if goods are delivered or first used in Burbank, so it did not benefit from the aforementioned increase in auto sales.
Overall, s ales tax revenues are anticipated to grow by 2. 1% for FY 202 4-25.
Consumer spending, which shifted sharply toward goods and away from services during the pandemic, has returned to pre -pandemic patterns of consumption.
Consumers are shifting away from buying retail goods and spending more on travel and entertainment, and this trend is expected to continue into FY 2024-25.
• 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 osition 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 202 4-25, 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.
Compared to FY 202 2-23, the AV for the entire city increased by 9.7% for FY 2023-
24. General Fund related AV increased by 8.9%. The citywide AV increase between FY 2022-23 and FY 2023-24 was $2.8 billion. The largest AV increase was reported on several large industrial parcels that merged under one company which triggered a reassessment due to the change of ownership. The parcels added over $ 700 million to the tax roll.
The median price of homes continue s to increase when compared to the prior year , however sales volume remains low due to the elevated interest rate environment. The median price for a single -family home in Burbank was up nearly 16% for the first quarter of 2024 when compared to the prior quarter and up 5.2% from a year ago. The median sale price was $1,275,000 and the average price was $1,439,024, exceeding
5 $1.4 million for the first time. Staff is projecting property tax revenue to increase by
7.4% for FY 2024-25, reflecting the recent growth in development throughout the City.
If inflation normalizes, the Federal Reserve has indicated that it will begin to lower rates in 2024. This trend , combined with the high demand for housing and state policies promoting new home building, should mean a good recovery for the housing sector.
• Utility Use r’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 FY 2024 -25 rates for electricity were adopted a t the public hearing in May of 2023. UUT revenue is anticipated to increase by 4% for FY 2024-25. The growth is attributable to the electric rate increase and higher natural gas prices but offset by reduced electric usage due to efficiencies , as well as the decline in telecom revenue because 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 for providing these services. The high demand for passport applications and renewals, the construction of large developments throughout the City, and the increased participation in recreation activities contributed to the increased service charge revenues for FY 2023-
24. For FY 2024-25, Parks and Recreation will see an increase in revenues due to a projected rise in special events and tournaments for golf. Revenues are also expected to increase for plan check fees for large developments within the City. Acc essory Dwelling Units (ADU s) will continue to bolster revenue due to legislation that accelerates the review process. The Burbank Fire Department is revising its Emergency Medical Service (EMS) and medical transport service fees as recommended by the EMS Fee Study performed in November of 2023 . Considering the above factors, staff is forecasting an increase in service charge revenues of 12% for FY 2024-25.
• Parking/Traffic/Other Fines : Parking fines are issued by the Burbank Police Department and represent a small portion of the General Fund revenue. Fines are dependent on the amount of the fine, the number of citations issued, and the amount retained by the County and State agencies. For FY 2024-25, revenue in this category is anticipated to increase by 8.3% from the revised FY 2023 -24 budget with the implementation of a third-party agreement to manage citywide parking enforcement.
The Burbank Police Department is proposing an expansion of this program that will generate additional revenues for the City.
6 • Transient Occupancy Tax (TOT): The City receives 10% TOT on short-term lodging rentals within the city limits. TOT has finally recovered to pre-pandemic levels .
Although hotel occupancy rates for February 2024 were at 66.5% compared to the prior year’s occupancy rate of 70.8%, this can be attributed to the opening of the new Cambria Hotel which added 150 more rooms to the total inventory. According to the Visit California website for the February 2024 update, California domestic visitation is expected to reach 98% of pre -pandemic levels in 2024. For FY 202 4-25, TOT is anticipated to increase by 13% from the revised FY 2023-24 projection, primarily due to the addition of the Cambria Hotel.
• Transient Parking Tax (TPT): The current rate for TPT is 12% and is charged by parking lot operators (e.g., airport s, businesses, hotels, and restaurants) for short- term parking. With approximately 85% 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. Passenger counts at the airport increased by 3% in 2023 compared to 2022. Staff anticipates that trend to con tinue in FY 2024 -25, with TPT revenues expected to increase by 3%, compared to the revised budget of FY 2023-24.
FY 2024-25 Recurring General Fund Expenditures:
The Mid-Year Financial Report was presented to the City Council on February 27, 2024, and projected a recurring General Fund balance of $6 million heading into FY 202 4-25.
While current inflation has steadily slowed down and supply chain inventory is improving, the price of consumer goods and services along with labor costs continue to escalate. In addition, the hardened insurance market in California has significantly impacted indemnification, driving general liability and property insurance rates higher. Proposed recurring General Fund appropriations for FY 2024-25 are $244.5 million, an increase of approximately 12.3% over last year’s adopted recurring budget of $217.7 million.
As part of the budget process, the City Manager reviewed proposed budget requests from all City departments . New budget requests were prioritized in accordance with their adherence to the City Council’s stated goals for the year. Staff has made significant efforts to maintain spending at existing budget levels citywide. However, several departments identified immediate needs that required funding as well as a number of opportunities for service enhancements that align with the City Council’s identified goals. Additionally, Internal Service Fund rates increased by an average of 9 % in order to meet actuarial liabilities and provide for the replacement of equipment such as vehicles and technology items, all of which have been impacted by inflation.
Roughly $5.7 million in new General Fund recurring budget requests ($2.5 million net of revenue) and $5.3 million in one -time requests ($5.2 million net of revenue) were
7 incorporated into the FY 2024-25 Proposed Budget. The following are some of the notable new budget requests:
➢ The Burbank Fire Department (BFD) is requesting funding to expand the EMS division by implementing a peak-hour ambulance pilot program. This includes the upgrade of three Emergency Incident Technicians to Fire Captains and the procurement of a new ambulance. One -time appropriation requests for turnouts, supplies, and staffing will support a Fire Recruitment Academy. Additionally, BFD is requesting the replacement of defibrillators and new Lund University Cardiopulmonary Assist System (LUCAS) Devices to maximize the availability on responding apparatus and increase positive patien t outcomes for cardiac arrest calls.
➢ The Community Development Department is proposing to add a Parking Technician to assist parking management functions related to residential and commercial permits , a Building Inspector II to support the increase in building inspections due to construction and new developments, and an Intermediate Clerk to assist with processing business licenses and tax applications. With the passage of Assembly Bill (AB) 434, the Building Division will need to establish a City-specific pre-approved ADU program that will cost $ 260,000. Other Professional Services requests include long-range planning consultants for the Housing Element and the review of three specific plans including the Golden State, Media District, and th e Downtown Burbank Transit Oriented Development (TOD).
➢ The Burbank Police Department is requesting funding to formalize and expand the pilot parking control program that was launched last fiscal year including additional parking enforcement officers and patrol vehicles. The expansion and formalization of this program will assist in enforcing parking laws , such as illegal parking in restricted areas, overtime parking in commercial areas and residential neighborhoods, 72-hour parking restrictions, and street sweeping violations.
➢ The Parks and Recreation Department is adding funding to enhance sports camps, classes, and other activities for the community. Additional one -time funding is being requested to continue the reforestation plan that would remove and replace mature parkway trees. Adaptive sports funding was added to further the department's Diversity, Equity, and Inclusion (DEI) goals by continuing to host an annual adaptive sports day and other special events aimed at increasing inclusiveness and awareness of people living with disabilities in the community.
The following chart summarizes the total new propos ed General Fund budget requests (net of revenue) by department. A comprehensive listing of all budget requests by
8 department is included in the Proposed FY 202 4-25 Budget Document under the “New Budget Requests” tab.
DEPARTMENT NEW BUDGET
ITEMS (Recurring)
NEW BUDGET
ITEMS
(One-Time)
TOTAL
REVENUE
OFFSET
NET TOTAL
City Attorney $13,554 $13,554
City Clerk $39,590 $14,590 $25,000
City Treasurer $62,941 $30,000 $92,941
Community Development $618,287 $575,000 $500,461 $692,826 Financial Services $426,092 $55,000 $118,794 $362,299 Fire $841,782 $2,985,000 $591,782 $3,235,000
Library Services $150,000 $45,974 $20,974 $175,000
Management Services $591,702 $205,099 $85,000 $711,801
Non-Departmental $45,000 $45,000
Park & Recreation $2,143,251 $1,350,000 $1,796,829 $1,696,422 Police $731,127 $200,000 $531,127
Public Works $75,000 $11,404 $86,404
TOTALS: $5,738,326 $5,257,477 $3,328,430 $7,667,374
Discussion Papers:
At this time, four items have been identified as discussion papers for FY 2024-25. In total, these items have a General Fund recurring impact of $912,601 plus a one -time cost of $100,000. Should the City Council approve all discussion papers as proposed, t he General Fund recurring balance would be reduced to $1.3 million in FY 2024-25, and the year end projected cash balance would drop to $6.2 million.
A summary of these items along with the individual discussion papers can be found in the “Discussion Papers” tab of the Proposed Budget Document. Throughout the Budget presentation process, City Council members will have the opportunity to identify additional items that they would like to consider for discussion papers. These will be compiled and reviewed at the final Budget presentation on May 21st.
Citywide Fee Schedule
The FY 2024-25 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 2024-25 include a hearing fee for potentially dangerous or vicious animals, a new program offering batting cage rentals to the community, and permit fees for electric vehicle chargers and energy storage systems.
9 For FY 2024 -25, staff is proposing to increase all fees Citywide in accordance with the cost recovery policy established by the City Council in FY 2017 -18. The goal was to establish a consistent and objectively based fee structure to align with industry-accepted best practices and reaffirm the City’s compliance with Proposition 26 that limits certain fees collected to the reasonable cost of providing the service. A citywide User Fee Study was done in FY 2022 -23 to review the City’s fee structure and determine an accurate accounting for the true cost of providing various programs an d services. Staff is recommending a CPI adjustment to maintain the level of recovery for fees.
It is important to note that the Burbank Program, Activity, and Service Subsidy (PASS) Program provides financial assistance for Burbank residents to afford th em the opportunity to participate in Citywide services. Subsidy amounts vary from 40% -80% depending on the activity or service. The Parks and Recreation Department oversees the administration of the PASS program, and detailed information can be found on the department’s website.
City Utility Rates
At the April 26, 2022 City Council meeting, City Council directed staff to complete a two - year budget for Burbank Water and Power electric and water rates and for Public Works sewer and refuse rates. The two-year budget enabled the utilities to communicate longer term plans to customers, including two years of utility rates instead of one. The June 6, 2023 public hearing followed all Proposition 218 noticing requirements and included the adoption of utility rates for both FY 2023-24 and FY 2024-25. Electric rates for FY 2024- 25 will see an 8% increase while water rates will increase by 9% to reflect the increasing costs of providing water and power to Burbank residents and businesses.
The Sewer Fund budget incorporates a 4% rate increase for FY 2024-25 due to higher charges from the City of L os Angeles for sewage treatment services and capital improvement projects. The Refuse Fund will increase by 6% to meet rising operational costs, particularly those associated with new State mandates, and to continue providing comprehensive refuse services.
FY 2024-25 State Budget Proposal
In early January, Governor Newsom released his proposed budget for FY 2024-25, which serves as the beginning of deliberations in the State Legislature leading to final budget adoption in June 2024. The proposal calls for a $291.5 billion budget, with a General Fund total of $208.7 billion.
The proposed budget estimates a $37.9 billion shortfall in FY 2024-25, partly attributable to the revenue deficit from the FY 2023 -24 budget. The State will manage this shortfall by drawing on reserves, reducing programs, shifting certain expenditures from the
10 General Fund to other funds, and d elaying the funding for multiple items by spreading them across a three-year period beginning in FY 2025-26.
The budget shortfall for FY 2024 -25 is rooted in two separate but related developments during the past two years - the delay in income tax collections for 2023 and the substantial decline in the stock market that drove down revenues in FY 2022 -23. Following natural disasters that impacted the State in January 2023, the IRS extended various income tax filings and payment deadlines from April 2023 to N ovember 2023. These unforeseen extensions caused the State Administration to go without critical cash data from the prior year and current year taxes that are utilized to determine projected revenues for the FY 2023-24 budget and make any necessary adjustm ents. Due to the extensions through November 2023, the State was unable to make necessary revenue adjustments for FY 2023-24 and was required to adjust along with the newly proposed FY 2024 -25 budget due in early January 2024. The stock market decline drove down revenues in 2022 after having growth over the past two fiscal years. The 2022 decline resulted in a revision of FY 2022-23 revenues and continued to 2023.
The FY 2024-25 Budget proposes to pull back $131.3 million of the $439 million in one - time General Fund support for the Local Library Infrastructure Grant Program in the 2021 Budget Act and forego planned one -time General Fund investments of $33 million, $33 million, and $34 million, respectively through FY 2026 -27. The City of Burbank was allocated a $10 million grant and received $5 million, or 50% of the allocation in February of 2024. Burbank remains on schedule to be paid out 40% after a year and proof of project progress, and 10% at completion in FY 2026-27.
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 transportation funding. SB-1 funding is protected under Article 19 of the California state constitution for transportation purposes only and is not impacted by the reduction to revenues. The City of Burbank is estimated to receive SB-1 funding of $2.7 million in FY 2024 -25, which assumes the inflationary adjustment. Staff will continue to monitor developments in the state budget process and provide updates to Council as necessary.
General Fund Financial Forecast
The intended purpose of the financial forecast is to foster an understanding of long -term financial trends and their impact on the City’s overall financial picture. This long -term perspective allows the City Council and City management to make informed financial decisions today while fully understanding the future financial impacts of decisions.
11 Projected Revenues and Expenditures
Forecasted revenues are driven by the parameters included in Attachment 2 . These assumptions are inherently conservative; however, there is a risk that certain revenues may not perform as projected due to economic cycles, new legislation, and other external factors. Staff will update p rojected 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 20 24- 25 through FY 202 8-29) will average 4.1% while recurring expenditures will average
5.7%. Revenue expectations have been revised based on the most recent economic data available, as well as recent and planned business openings and developments . The average revenue growth in the current forecast includes projections of 2.5% for Sales Tax and 5.5% for Property Tax, the City’s largest general fund revenue sources.
The two main drivers of expenditures for the General Fund are salaries and benefits, including the CalPERS rates that are applied to the base salaries. The forecasted expenditure growth assumes the following costs:
Memorandum of Understanding (MOU) Projected Costs
Salaries and benefits currently comprise approximately 74% of the General Fund recurring budget. As such, the City’s MOU negotiation process for the various bargaining groups plays a significant role in determining the City’s financial position. While all of the City’s bargaining groups have MOUs in place for the current fiscal year, the Burbank City Employees Association (BCEA), the Burbank Police Officer Association (BPOA), and the Burbank Fire Fighters – Chief Officers Unit (BFFCOU) have contracts up for negotiation for FY 2024 -25. Aligning with the City Council’s Financial Policies related to employee compensation, the General Fund forecast includes assumptions for salary and benefit growth over the next five years based on projected market rates for all employee groups.
Market rates are determined through salary and benefits survey s 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 compatible positions to determine whether employee salaries are at market value.
Public Employees Retirement System (PERS) Costs
Managing costs associated with CalPERS pensions continues to be a challenge for CalPERS cities throughout California, and Burbank is no exception. In recent years, the City has taken measures towards mitigating pen sion cost increases including sending Additional Discretionary Payments (ADPs) to CalPERS over the City’s required contributions, establishing a Section 115 trust to offset future pension volatility , and increasing employee contributions towards their pension rates.
12 In July of 2023, the City received the CalPERS actuarial reports for the FY 2024 -25 budget. Based on the most recent reports, Burbank currently has an Unfunded Actuarial Liability (UAL) of just under $433 million across the City’s three pension plans, with the funded status for the City’s three plans at 76.5% for Miscellaneous, 69.8% for Police, and
75.4% for Fire. Table 3 shows the actual CalPERS employer rates and UAL contributions for the three employee classifications for the previous fiscal year (FY 2022 -23), the adopted fiscal year (FY 2023-24), and the projected employer rates and contributions for the following two fiscal years (FY 2024-25 and FY 2025-26).
Table 2 – City of Burbank Pension Costs FY 2022-23 – FY 2025-26
Classification
Actual
FY 2022-23
Actual
FY 2023-24
Actual
FY 2024-25*
Projected
FY 2025-26
Police 3% @ 50 Rate 22.05% 24.01% 23.20% 22.60%
Police Liability Payment $8,152,664 $7,175,729 $7,997,927 $8,697,000 Fire 3% @ 55 Rate 17.71% 18.80% 18.42% 18.00%
Fire Liability Payment $5,028,014 $4,465,006 $5,066,096 $5,597,000 Misc 2.5% @ 55 Rate 10.00% 11.11% 10.96% 10.70%
Misc Liability Payment $21,224,820 $18,843,953 $20,417,782 $22,415,000 * Amounts shown are the total amounts due for FY 2024-25 if the City were to pay CalPERS on a monthly basis. For FY 2024-25, staff is proposing to prepay the CalPERS liability payments, which will result in a cumulative net savings of $1,059,630 citywide.
As part of the FY 2023 -24 budget process , the City Council adopted a new pension funding plan, committing $9 million in Additional Discretionary Payments (ADP) towards the City’s unfunded pension liabilities over a two-year period. In July 2023, the City made the first ADP of $4.5 million to CalPERS. In September 2023, CalPERS provided the City with an update of the UAL payment amounts for FY 2024-25, which accounts for the July payment. The total savings generated were $735,492 citywide ($499,920 General Fund).
At the February 27 Council Meeting (Mid-Year Financial Report), the City Council directed staff to consider the feasibility of contributing additional dollars to CalPERS in the upcoming budget process in order to generate more recurring savings for the City. Staff analyzed the availability of one -time funding within each of the City’s fun ds and is recommending that the City Council consider an expanded pension funding plan which doubles the citywide ADP contribution from $4.5 million to $9 million in FY 2024-25, and adds another $4.5 million ADP in FY 2025 -26 to extend the plan out to a third year .
Roughly 65%, or $8.7 million of the remaining total will come from the General Fund. The combined contributions from all three years of the plan are estimated to generate a cumulative citywide recurring pension savi ngs of $3 million ($1.9 million General Fund)
13 at the end of FY 2025-26, offsetting a portion of the projected deficit in the later years of the General Fund forecast and providing operating savings to the City’s utilities and other special purpose funds.
The City continues to maintain the Section 115 trust for pension obligations, which was established in June of 2020 in accordance with the City Council’s Pension Funding Commitment Policy. The Section 115 Trust allows the City to set aside funds that coul d be used to help support future pension -related economic volatility. In adherence to the policy, which requires the City to contribute half of any year-end General Fund balance in excess of 6% of the General Fund’s budgeted recurring appropriations, staff is proposing to contribute another $6.3 million to the trust in FY 2024-25. As of April 2024, the current balance in the trust is $23.9 million.
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 , 5% to a designated emergency reserve, and up to 5% to a Budget Stabilization reserve, as adopted by the City Council in previous years. Based on the current figures for the proposed budget as presented, the City will contribute the following amounts to the reserves for FY 2024-25:
➢ $4,021,417 to the Working Capital Reserve
➢ $1,340,472 to the Emergency Reserve
➢ $1,340,472 to the Budget Stabilization Reserve
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 in the operating budget. As of June 30, 2023, the City’s total General Fund accrued leave payout liability is estimated at $ 15.8 million. Currently, the City has $3.5 million set aside in the Compensated Absences reserve. To fulfill the policy approved by the City Council that this reserve is maintained at or above 25% of the General Fund’s total outstanding liability, staff is recommending a contribution of $379,379 in FY 2024-25.
Infrastructure Funding
Adhering to the City Council’s adopted Infrastructure Maintenance, Repair, and Improvement Policy, the FY 2024-25 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.
14 The FY 2024 -25 Proposed Capital Improvement Program (CIP) continues the City’s efforts towards addressing the infrastructure needs, with just over $33 million in proposed general city capital spending from 15 different funds and funding sources, alongside $4.7 million in annual Fund 534 maintenance dollars . Included in the proposed infrastructure program is an increase to the annual investment in the City’s streets and sidewalks from $8 million to $11.3 million, along with a variety of capital projects which include building improvements, park playground and facility upgrades, street and pedestrian improvements, and funding towards the future development of a new Central Library and Civic Center. Proposed Municipal Infrastructure funded projects include the restoration and modernization of the City Hall fountain , Orange Grove parking structure renovation and repairs, and playground improvements at McCambridge, Brace Canyon, and Ma ple Street parks, in addition to the annual residential and arterial pavement rehabilitation program.
The proposed CIP projects were presented to the Infrastructure Oversight Board (IOB) for review at two public meetings on February 22 and March 28, 2024, 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 2024 -25 can be found in the “Capital Improvement Program” tab of the FY 2024 -25 Proposed Budget Document.
ENVIRONMENTAL REVIEW
This activity includes the FY 2024-25 Proposed Budget and has no potential for resulting in either a direct or a reasonably foreseeable indirect physical change in the environment.
As such, is not a “project” subject to the requirements of the California Environmental Quality Act (CEQA) 14 Cal. Code Regs § 15378.
CONCLUSION:
As illustrated in Chart 1, staff is projecting a recurring General Fund balance of $2.2 million in FY 2024-25, with that balance giving way to a budget deficit of approximately $1.7 million by FY 2028-29, prior to the consideration of discussion papers . The City’s cash position remains s teady, with a projected year -end non -recurring General Fund balance of $7.2 million at the end of FY 2024-25, if the budget is adopted as proposed. It should be noted that there are seve ral risks associated with our projections, including further potential changes to CalPERS assumptions, impacts of local development projects, and potential fluctuations in the overall economy.
15 Chart 1 - General Fund Financial Forecast FY 2024-25 through FY 2028-29 (in millions)
Burbank is heading into FY 202 4-25 with a proposed budget that reflects the City Council’s goals and priorities but still adheres to the City’s values of fiscal responsibility.
The City Council has consistently pursued sound fiscal policies and strategies like strengthening revenues, payin g down pension liabilities, building up reserves, and utilizing one -time funds to make strategic investments to reduce future recurring expenses. In addition to the projected FY 202 4-25 year-end General Fund Balance of $7.2 million, Burbank’s formal reserves total approximately $54.4 million. These funds will allow Burbank to make strategic investments to offset future costs and weather any potential economic fluctuations over the next several years. Staff will continue to monitor any economic conditions or legislative actions that may impact the City’s financial position and provide updates to the Council.
A dedicated City Council meeting to review the proposed FY 202 4-25 Budget is scheduled for May 7, 2024, with continued discussion planned for May 21, 2024. The public hearing and adoption of the citywide budget and fee schedule is scheduled for June 4, 2024. Per the City’s Charter, the FY 2024-25 Budget must be adopted by June 30, 2024.
$246.7
$255.8
$265.4
$275.1
$284.8
$244.5
$254.2
$265.4
$275.3
$286.6
$200
$210
$220
$230
$240
$250
$260
$270
$280
$290
$300
2024-25 2025-26 2026-27 2027-28 2028-29
Revenue Expenses
Balance/
(Deficit): $2.2 $1.6 $0.02 ($0.2) ($1.7)
16 ATTACHMENTS:
Attachment 1: General Fund Projected Spendable Fund Balance FY 2024-25 Attachment 2: General Fund Financial Forecast FY 2024-25 through FY 2028-29