CA Review JRT
Meeting Date: Sept. 26, 2023
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Zach Korach, Finance Director
[email protected] or 442-339-2127
Subject: General Fund Surplus Policy: Approval of Fiscal Year 2022-23 Budget Carryforward Requests and Appropriation of Funds to Fiscal Year 2023-24 Districts: All
Reco
mmended Action
Adopt the following:
1. A resolution approving the fiscal year 2022-23 budget carryforward requests and appropriation of funds to fiscal year 2023-24 and authorizing capital outlay purchases.
2. A resolution approving the restriction of General Fund reserves in fiscal year 2023-24 to fund the initial contribution to a Section 115 Trust.
3. A resolution approving the use of the fiscal year 2022-23 General Fund surplus for appropriation and transfer to the city’s Workers’ Compensation Fund in fiscal year 2023-
24. 4. A resolution approving the use of the fiscal year 2022-23 General Fund surplus for appropriation and transfer to the city’s Risk Management Fund in fiscal year 2023-24.
Executive Summary
The City of Carlsbad, like other governments, usually has surplus funds at the end of each fiscal year as a result of the city’s actual revenue exceeding what it actually spent, plus any unspent and unencumbered funds that had been budgeted to have been spent in that fiscal year.
These unspent funds can be moved into the budget for the following fiscal year in what is referred to as a budget carryforward of funds. The city’s General Fund Surplus Policy was established by City Council Policy No. 87. In accordance with Policy No. 87, staff are presenting the list of budget carryforward requests and appropriation of funds to FY 2023-24 for the City Council’s consideration and approval. The requests are detailed below.
Staff are also reporting that the city is in conformance with City Council Policy No. 74 on the General Fund Reserve and with City Council Policy No. 86 on pension funding.
This item is before the City Council because council policies require reporting the status of the reserve levels relative to the policy to the City Council, and because the City Council’s approval is required for individual carryforwards greater than $100,000.
Sept. 26, 2023
Item #11 Page 1 of 21
Discussion
Items approved by prior City Council action
The City Council has already approved carrying forward the budget for various items from FY 2022-23 to FY 2023-24. A list of unspent grant funding and developer deposits previously approved by the City Council through the FY 2023-24 operating budget resolution (Resolution No. 2023-161, adopted on June 13, 2023) is included as Exhibit 3. These items include:
• Grant funding approved but not yet completely expended by the end of the fiscal year for various programs and services, including:
o $171,330 in unspent grant funding in the General Fund o $3,505,645 in total unspent grant funding in all other funds • Unspent developer deposits received for developer-funded studies and plan check services that were not expended by fiscal year-end. These total $32,777 in the General Fund.
Council Policy No. 87 – General Fund Surplus Policy
This policy established the process of using surplus funds after a fiscal year has ended. The policy dictates that the city will take the four actions listed below, in order. Each action is followed by staff’s updates and recommendations.
Action 1 - The city will use surplus funds to replenish any General Fund reserve deficiencies, up to 40%, as set forth in the City Council General Fund Reserve Policy No. 74.
The city’s General Fund reserve is projected to end the fiscal year at approximately $141.3 million, or 65% of the FY 2023-24 budget, excluding the funds set aside for economic uncertainty, which total $9.6 million.
Action 2 - The city will use surplus funds to replenish any pension liability deficiencies to achieve a pension-funded ratio of no less than a minimum of 80%, with a target funded ratio range of 80% to 85%.
The unfunded liability is the difference between pension assets and liabilities, while the funded ratio or status is the ratio of pension assets to liabilities. Over the last six years, the city has taken proactive steps to address pension contribution volatility and manage the unfunded liability. Since fiscal year 2016-17, the city has contributed $56.4 million in additional discretionary payments to CalPERS, which has significantly helped increase the plan’s funded status.
As of CalPERS’ June 30, 2021, actuarial valuation, the city’s plan had a total actuarial liability of $828.8 million, an unfunded liability of $115.9 million and a funded status of 86%. No additional contribution was required at that time. However, in fiscal year 2021- 22, CalPERS experienced an investment loss of -6.1%, which significantly reduced the city’s funded status. As of June 30, 2022, actuarial valuation (released in August 2023), the city’s plans, in total, have an actuarial liability of $874.4 million, an unfunded liability of $222.4 million and a funded status of 74.6%. While CalPERS’ -6.1% investment performance in fiscal year 2021-22 will not impact the city’s required contributions until fiscal year 2024-25, the city’s current funded status is 74.6%, putting it below the policy target of 80%. To achieve an 80% funded status, the city would need to contribute an additional discretionary payment of $47,553,869 to CalPERS.
Sept. 26, 2023
Item #11 Page 2 of 21
Policy No. 86 also states that “in the event the city is unable to meet the minimum combined pension funded ratio of 80% with current resources (i.e., without borrowing or using reserves), the Finance Director or Deputy City Manager of Administrative Services will identify a reasonable period to return to a minimum 80% funded ratio status.” Rather than making a one-time payment of $47.5 million to CalPERS, staff recommend the difference between the current funded status of 74.6% and the 80% target be contributed to the Section 115 Trust over a five-year period. The city would make an initial trust contribution of $10.0 million followed by four annual contributions of $7.5 million with General Fund dollars. Over the five-year period and beyond, assets in the trust will be invested, in accordance with the city’s Pension Trust Investment Policy, with a “balanced” investment strategy. Staff project that at the end of fiscal year 2027-28, assets in the trust will meet the 80% funded status target.
While this will ensure an 80% combined funded ratio is maintained, the ultimate funding goal would be for the city to have sufficient assets in the trust to be prepared for further discount rate reductions by CalPERS. Following the funding schedule of an initial contribution of $10 million, followed by four annual contributions of $7.5 million, and assuming an annual rate of return of 6.25%, not only would the city’s funded status reach 80% over a five-year period, but over a 20-year period there would be sufficient assets in the trust to fund a potential reduction in CalPERS’ discount rate from the current 6.8% to 6.25%. This potential reduction in CalPERS’ discount rate represents an additional $118 million in currently unfunded costs.
The accounting for this $10 million contribution does not require the City Council to approve a budget appropriation or transfer of General Funds. Instead, if the City Council approves the contribution, this money will be marked as restricted and presented as such in the city’s financial statements.
Action 3 - The City Manager is authorized to approve the carrying forward of any unspent and unencumbered budget for a particular item equal to or less than $100,000 into the following fiscal year. These items will be one-time expenditures and not for ongoing services, programs or personnel.
In July 2023, the Finance Department asked city departments to submit budget carryforward requests for one-time expenses and not for ongoing services, programs or personnel. The requests were reviewed by the City Manager. The City Manager approved $770,636 in General Fund carryforward requests and $130,067 in carryforward requests for other non-General Fund funds. All individual items are less than $100,000. A listing of all City Manager-approved requests is included as Exhibit 2 of this staff report.
Action 4 - Items equal to or greater than $100,000 will be brought forward for City Council consideration to approve the use of any remaining surplus funds.
The City Manager completed a preliminary review of department-submitted budget carryforward requests greater than $100,000 for submission to the City Council. The requested items over $100,000 requiring City Council approval are listed and described in the following section. The General Fund carryforward requests total $2,802,416 and the Sept. 26, 2023
Item #11 Page 3 of 21
non-General Fund requests total $3,550,506. A listing of these requests is included as Attachment A to Exhibit 1.
General Fund requests for City Council approval
• Planning Division on-call contract support $150,000
o The Planning Division Community Development workload is subject to market conditions, and variables such as land value, home values, construction costs and lending rates have combined to have significant variability in the discretionary work proposed. Its workload is also changing from handling master planned communities to infill developments and smaller projects by homeowner applicants (such as for accessory dwelling units). Permit numbers were at a record in FY 2022-23 and have been just below that in FY 2023-24. o The budget request will be used to have contracts available with up to three consultants that could help process discretionary projects for the planning division only when and if workload increases. This is a temporary solution in case the department experiences an increase in permit activities in the current year. • Ambulance gurney replacement $620,000
o Fire Department uses ambulance gurneys during every patient transport to package, treat and relocate a patient from the incident location to the ambulance and then from the ambulance to a hospital bed. The gurney is also the means of safely securing a patient while in transit on the road. The department’s gurneys are outside of their warranty life and are showing signs of failure earlier than anticipated. The Fire Department requests carryforward budget to purchase and install new ambulance gurneys ahead of schedule. The proposed replacements provide greater load capacity and an electrically powered lifting and loading capability. Neighboring agencies have implemented the same technology and have seen a decrease in workers’ compensation related back injuries and experienced greater reliability and patient safety.
• Take-home vehicle program costs - $513,176
o On Aug. 30, 2022, the City Council approved the purchase and outfitting of 34 fully outfitted marked police vehicles. On Dec. 6, 2022, City Council approved additional funding for the take-home vehicle program. The funds for the vehicles and radios have been encumbered. The remaining funding will be used to outfit the take-home vehicles with necessary police equipment such as restraints, protective gear, first aid kits, fire extinguishers, flares, blankets and safety tools.
Supply chains are still recovering from the effects of the COVID-19 pandemic, which has delayed this process, thus requiring a request for a budget carryforward.
• M500 in-car video systems - $338,356
o On August 30, 2022, the City Council approved the purchase and installation of the M500 in-car video systems for police patrol vehicles. The Police Department has not yet received all of the equipment. Due to the delays in receiving the Sept. 26, 2023
Item #11 Page 4 of 21
cameras ordered, this process is taking longer than expected, thus requiring a request for this budget carryforward.
• Taser replacements - $622,164
o The Police Department’s inventory of 140 Tasers will be entirely beyond their useful lives beginning in January 2024 and no longer covered under the vendor’s liability insurance policy, so the department is requesting a budget carryforward to fully replace the current inventory.
• Local traffic safety emergency distribution - $558,720 o The City Council declared a local traffic safety emergency on Aug. 30, 2022, and appropriated $2 million for various projects to address the emergency. As of 2022-23 fiscal year-end, $558,720 of budget is still available. On July 11, 2023, the City Council extended the emergency through Sept. 8. This request carries forward the full remaining balance of budget related to the emergency declaration. Staff stated at the July 11 City Council meeting that they plan to return to the City Council in Oct. 2023 when they have a full year of data with a comprehensive report on the emergency.
Non-G
eneral Fund requests for City Council approval
• Complete FY 2022-23 approved vehicle purchases - $1,270,000 o Due to supply chain issues vehicle and equipment availability some vehicles slated for replacement in FY 2022-23 were unable to be procured before the end of the fiscal year. This request carries forward budget to replace the remaining vehicles as originally planned in the fiscal year 2022-23 budget. • Pending agricultural mitigation fee grants - $112,206 o The city approved several appropriations of grant funds in fiscal year 2022-23, including for a regional beach sand project, to the Agua Hedionda Lagoon Foundation, Buena Vista Audubon Society, Flower Fields at Carlsbad Ranch, and Carlsbad Aquafarms, Inc. This request is for the total amount of budget not yet encumbered or spent before fiscal year-end related to these grants. • Complete FY 2022-23 approved Information Technology replacements - $484,454 o This request carries forward budget to complete the remaining replacements planned in the fiscal year 2022-23 budget. The budget is needed to ensure all city hardware is replaced on a timely basis. Items remaining to be purchased include computers, switches, servers, routers, firewalls and miscellaneous infrastructure. No item costs over $100,000.
• Potable water master plan update - $650,000
o The Potable Water Master Plan update provides a system evaluation and capacity assessment of the potable water system and recommends a capital improvement program project to provide for continued reliable water service through buildout conditions, which are projected to occur by 2045 or later. By updating this master plan, the project will help guide Carlsbad in spending precious funds in the most cost-effective manner. The plan was last updated in 2019, and it is an industry best practice to update every five years to reflect Sept. 26, 2023
Item #11 Page 5 of 21
changing conditions such as development, zoning and water availability. The process can take a year or more, so Utilities staff recommend initiating it now. • Wastewater master plan update - $650,000
o The Wastewater Master Plan update provides a system evaluation and capacity assessment of the wastewater system and recommends a capital improvement program to provide for continued reliable wastewater service through buildout conditions, which are projected to occur by 2045 or later. By updating this master plan, the resulting capital improvement program (CIP) will help guide Carlsbad in spending precious funds in the most cost-effective manner. The Plan was last updated in 2019, and it is an industry best practice to update every five years to reflect changing conditions such as development, zoning, and system replacement needs. The process can take a year or more, so Utilities recommends initiating now.
• Convert several trucks in the Utilities fleet - $145,000 o This request is a combined effort to convert two trucks slated for replacement to utility trucks, combine the planned replacements of two vehicles for one utility truck, and the outfitting costs for a separate utility truck. The conversion of two trucks to utility trucks will offer a utility bed for greater operational capability.
The combined replacement of two vehicles for one utility truck was identified as an effort to reduce the department’s number of vehicles in its Fleet. The outfitting costs are to install a crane in the back of a truck to lift fire hydrants that weigh 500 pounds, which is necessary, especially with the recent hiring of a senior SCADA technician and a utility locator position. All costs noted above are affiliated with vehicle replacements already approved during one of the city’s budgeting processes.
• Opioid settlement - $238,846
o Under the Janssen and Distributor Settlement agreements dated as of July 21, 2021, the City of Carlsbad is entitled to receive annual settlement payments totaling $1.8 million over the next 16 years.
1 The settlement funds are to be
committed and/or expended within a period of five years after receiving and must be used primarily on high-impact abatement activities. The amount requested to be carried forward represents the settlement funds received as of June 30, 2023. In collaboration with the city’s Fire, Police and Housing & Homeless Services departments, these funds will be used in accordance with the allowability requirements set forth in the respective settlement agreements.
Transfer items
The city is self-insured for both Risk Management and Workers’ Compensation claims. During fiscal year 2022-23, both funds encountered higher expenses than anticipated, prompting the City Manager to appropriate additional budget in the amount of $1.3 million to the Workers’
1 The Janssen and Distributor settlement agreements are two separate agreements finalized in 2022 to resolve liabilities in over 3,000 opioid crisis-related lawsuits. The settlements are estimated to pay out more than $50 billion to state and local governments over the next 18 years. California is estimated to receive approximately $2.05 billion through 2028.
Sept. 26, 2023
Item #11 Page 6 of 21
Compensation Fund and $5 million to the Risk Management Fund. The City Manager has the authority to do so in accordance with the resolution adopting the city’s fiscal year 2022-23 operating budget.
The Workers’ Compensation expenses exceeded budget for several reasons, including:
• A high volume of new claims and both old and new claims being closed and settled • Increasing surgical and other high-cost claims
• 33 additional full-time equivalent positions in the Fire and Police departments from FY 2019-20 to FY 2021-22
• An increase in reserves of $2.8 million during FY 2022-23 The Risk Management expenses also exceeded budget based on the following factors:
• An increase in reserves of $1.9 million for several large claims, including three landslide claims
• An increased cost for legal defense and for experts, such as engineers The additional spending above budget resulted in the Workers’ Compensation nearly depleting its available fund balance and the Risk Management Fund experiencing a temporary deficit at the end of the 2022-23 fiscal year. To put the funds in a positive position and provide a conservative fund balance to support their operations, staff recommend the City Council approve General Fund transfers of $1.3 million to the Workers’ Compensation Fund and $5 million to the Risk Management Fund.
Options
Options for surplus budget and the General Fund reserve Several options to deploy budget surplus from FY 2022-23 are presented for the City Council’s consideration:
A: Adopt a resolution approving General Fund transfers of $10 million to the Section 115 Trust Pro
• The city would not need to make an immediate payment to CalPERS for $47.5 million.
Rather, over a five-year period, the city will contribute assets to the Section 115 Trust to reach a combined 80% funded status.
Con
• Funds that would have otherwise been contributed to the trust could be used for other purposes.
B: Adopt a resolution approving a General Fund of $1.3 million to the Workers’ Compensation Fund
Pro
• The city will have sufficient fund balance to support operations funded out of the Workers’ Compensation Fund.
Con
• Funds that would have otherwise been contributed to the Workers’ Compensation Fund could be used for other purposes.
C: Adopt a resolution approving General Fund transfers of $5 million to the Risk Management Fund
Sept. 26, 2023
Item #11 Page 7 of 21
Pro
• The city will have sufficient fund balance to support operations funded out of the Risk Management Fund.
Con
• Funds that would have otherwise been transferred to the Risk Management Fund could be used for other purposes.
D: Take no action on the transfer requests brought forward for City Council approval.
Pro
• Funds that would have otherwise been contributed to the trust and transferred to the Risk Management and Workers’ Compensation funds could be used for other purposes.
Con
• If a five-year funding strategy to reach an 80% funded ratio is not approved, then an immediate $47.5 million contribution to CalPERS may be needed in accordance with City Council Policy No. 86.
• The city’s Risk Management Fund would be nearly depleted, and the Workers’ Compensation Fund would be temporarily in a deficit position and not have sufficient fund balances to support their operations.
Options for carryforward requests
Staff provide the following options in response to the carryforward requests brought forward for the City Council’s consideration:
1. Approve all or a combination of individual carryforward requests equal to or greater than $100,000 presented above and listed in Attachment A to Exhibit 1 of this staff report. Staff will appropriate the City Council-approved carryforward requests to FY 2023-24 Pro
• Provides the needed resources to execute city programs as detailed in Attachment A to Exhibit 1.
Con
• The funds used would not be available for other programs the City Council might wish to fund.
2. Take no action on the carryforward requests brought forward for City Council approval.
Pro
• Funds would be returned to the reserve account and be available to support future needs.
Con
• Departments will be unable to fully implement planned programs and expenditures.
Staff recommend Option 1.
Sept. 26, 2023
Item #11 Page 8 of 21
Fiscal Analysis
Council Policy No. 87 defines “surplus” as actual revenues less actual expenditures, plus any unspent and unencumbered expenditure budget. The table below calculates the surplus available for the City Council’s consideration in accordance with the policy. All figures presented below are unaudited.
Summary of General Fund surplus at 2022-2 3 fiscal year-end Unassigned at end of FY 2021-22 $120,554,527
Revenues 225,859,521
Expenditures* 205,160,746
Surplus $20,698,775
Unassigned at end of FY 2022-23 $141,253,302
Unspent and unencumbered budget 10,822,333
Carryforward authority (surplus + unspent budget) $31,521,108 *Excludes encumbrances
The table below presents the effect on the budget surplus if the City Council were to approve all presented carryforward requests and additional staff-recommended options.
Summary of staff recommended General Fund budget actions
Carryforward authority (surplus + unspent budget) $31,521,108 Previously approved grants/developer deposits 204,107
Initial Section 115 Trust contribution* 10,000,000
City Manager approved carryforward requests below $100,000 770,636 City Council approved carryforward requests above $100,000 2,802,416 Transfer to Workers’ Compensation Fund 1,300,000
Transfer to Risk Management Fund 5,000,000
Total spending $20,077,159
Remaining authority $11,443,949
*Does not require appropriation
The following table presents a summary of the General Fund at 2022-23 fiscal year-end after considering approval of the items presented above and the new General Fund reserve in comparison to policy.
Effect of carryforward budget decision on the General Fund reserve
Reserve
balance
Reserve
percent*
Initial unassigned fund balance as of 2022-23 FYE $141,253,302 65% Proposed use of surplus -20,077,159 -9%
Updated estimated unassigned fund balance $121,176,143 56% 40% minimum reserve policy $86,771,842 40%
Funds in excess of reserve requirement $34,404,301 16%
*Calculated as a percentage of the FY 2023-24 adopted budget of $216,929,604
Sept. 26, 2023
Item #11 Page 9 of 21
The city’s current pension-funded ratio is 74.6%, which is $47.5 million below the 80% policy target. Rather than immediately contributing the $47.5 million to CalPERS, $40 million will be contributed to the Section 115 Trust over a five-year period with an annual target rate of return of 6.25%. Contributions to the trust will move the funds from “unassigned” fund balance to “restricted” fund balance in the General Fund. These funds will be available to count towards the city’s funded ratio as set forth in City Council Policy 86, as amended, and mitigate budgetary pressures resulting from potential volatility in CalPERS’ required contributions made by the city.
If approved, the city will contribute $10 million from the General Fund to the Section 115 Trust, and the remaining funds over a five-year period. The City Council will have the opportunity to review and approve each transfer in the coming years.
Next Steps
All City Council and City Manager-approved carryforward requests will be appropriated to the fiscal year 2023-24 budget. If approved, General Fund reserve will be restricted to make the initial $10 million contribution to the Section 115 trust. If approved, the budget for General Fund transfers to the Workers’ Compensation and Risk Management funds will be appropriated and the transfers will be completed. The annual fiscal year audit is currently underway for FY 2022-23. City staff will return to the City Council to present the results of the financial audit and the status of the city’s General Fund reserve after the final audit opinion has been issued.
Environmental Eval
uation
This action does not require environmental review because it does not constitute a project within the meaning of the California Environmental Quality Act under California Public Resources Code Section 21065 in that it has no potential to cause either a direct physical change or a reasonably foreseeable indirect physical change in the environment.
Exhibits
1. City Council resolution - carryforward approval
2. List of City Manager-approved FY 2022-23 General Fund and non-General Fund carryforward budget requests
3. Items approved by previous City Council action, including unspent grant and developer balances
4. City Council resolution - contribution to Section 115 Trust
5. City Council resolution - transfer to Workers’ Compensation Fund
6. City Council resolution - transfer to Risk Management Fund Sept. 26, 2023
Item #11 Page 10 of 21
RESOLUTION NO. 2023-251
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE FISCAL YEAR 2022-23 BUDGET
CARRYFORWARD REQUESTS AND. APPROPRIATION OF FUNDS TO FISCAL YEAR 2023-24 AND AUTHORIZING CAPITAL OUTLAY PURCHASES
WHEREAS, the City Council of the City of Carlsbad, California established its General Fund Surplus Policy (City Council Policy No. 87} for the appropriation of surplus funds resulting from General Fund actual revenues exceeding total actual expenditures, plus any unspent and unencumbered expenditures budgeted for a given fiscal year; and
WHEREAS, at the close of fiscal year 2022-23, the city's unaudited General Fund reserve balance is 65% and has exceeded its General Fund Reserve Policy (City Council Policy No. 74} target of 40%; and WHEREAS, at the close of fiscal year 2022-23, the remaining unaudited unspent and unencumbered expenditure budget for the General Fund is $10.8 million of which approximately $200,000 has been carried forward because of a previous City Council resolution, resulting in an available surplus of $10.6 million; and
WHEREAS, at the close of fiscal year 2022-23, the General Fund surplus, or actual revenues less actual expenditures, is $20.7 million; and
WHEREAS, in accordance with City Council Policy No. 87, the City Manager has approved individual items of less than $100,000 that total $770,636 in General Fund carryforward requests and $130,067 in carryforward requests for other non-General Fund funds; and WHEREAS, City Council Policy No. 87 requires City Council approval for the carryforward of any unspent and unencumbered budget for a particular item equal to or greater than $100,000; and WHEREAS, department carryforward requests submitted for City Council approval that total $2,802,416 in General Fund carryforward requests and $3,550,506 in carryforward requests for other non-General Fund funds are listed in Attachment A to this resolution.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That the budget carryforward requests shown in Attachment A to this resolution are approved for carryforward from fiscal year 2022-23 to fiscal year 2023-24.
Exhibit 1
Sept. 26, 2023 Item #11 Page 11 of 21
3. That the City Manager, or designee, is authorized to purchase the capital outlay items as shown in Attachment A.
4. That the Deputy City Manager, Administrative Services, is authorized to appropriate carryforward budgets to the funds in the amounts shown in Attachment A.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 26th day of Sept., 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
KEITH BLACKBURN, Mayor
�
,rsHERRY FREISINGER, City Clerk
(SEAL)
Sept. 26, 2023 Item #11 Page 12 of 21
DEPARTMENT FUND DESCRIPTION
REQUEST
TYPE AMOUNT
Community Development General Fund Pl anning Division on-call contract support Professional Services 150,000$ Fire General Fund Ambulance Gurney Replacement Capital Outlay 620,000 Non-Departmental General Fund Remain ing $2 million local traffic safety emergency funds Capital Outlay 558,720 Police General Fund Take Home Vehicle Program Costs Capital Outlay 513,176 Police General Fund M500 In-Car Vi deo Systems Capital Outlay 338,356 Police General Fund Taser inventory replacement Equipment & Supplies 622,164 Fire Non General Fund Unspent opioid settlement funds Other 238,846 Fleet & Facilities Non General Fund Complete FY 2022- 23 Approved Vehicle Purchases Capital Outlay 1,270,000 Housing & Homeless Services Non General Fund Complete Approved Agricultur e Mitigation Fee Grants Other 112,206 Information Technology Non General Fund Complete FY 2022-23 IT Replacements Capital Outlay 484,454 Utilities Non General Fund Potable Water Master Plan Update Professional Services 650,000 Utilities Non General Fund Wastewater Master Plan Update Professional Services 650,000 Utilities Non General Fund Fleet truck conversions and outfitting for approved vehicle replacements Capital Outlay 145,000 General Fund Total 2,802,416$
Non General Fund Total 3,550,506$
GRAND TOTAL 6,352,922$
(ITEMS EQUAL TO OR GREATER THAN $100,000)
CITY OF CARLSBAD FY 2022-23 TO FY 2023-24
CARRYFORWARD BUDGET REQUESTS FOR CITY COUNCIL CONSIDERATION Attachment A
Sept. 26, 2023
Item #11 Page 13 of 21
DEPARTMENT FUND DESCRIPTION
REQUEST
TYPE AMOUNT
Administrative Services Administration General Fund TOT Review Engagement Budget Carryforward Other 22,700$ City Council's Office General Fund Challenge Coins Equipment & Supplies 2,800 City Manager's Office General Fund December employee appreciation event Equipment & Supplies 8,500 Community Development General Fund Update Carlsbad Tribal, Cultural, and Paleontological Resources Guidelines Professional Services 95,000 Community Services Administration General Fund Weed Abatement Professional Services 25,000 Finance General Fund Cost allocation plan contract Study/Reports 18,000 Fire General Fund Hi-Lo Alert & Warning System Equipment & Supplies 26,000 Fleet & Facilities General Fund Rappel Tower Safety Inspection Professional Services 12,000 Fleet & Facilities General Fund HEPA Filter Replacements - Safety Training Center Equipment & Supplies 47,626 Library & Cultural Arts General Fund Pending Agreements for Temporary Public Ar t Professional Services 48,000 Library & Cultural Arts General Fund Anticipated Maintenance on Permanent Public Art Professional Services 33,364 Library & Cultural Arts General Fund Pending Agreement for Guest Artist Residenc y Professional Services 6,000 Parks & Recreation General Fund Weed Abatement Professional Services 50,000 Parks & Recreation General Fund Trail Improvements - Lake Calavera Preserve Professional Services 50,000 Police General Fund NicheRMS Conversion Fees Professional Services 30,000 Police General Fund Smaller Farmers Building Outfitting Capital Outlay 34,003 Police General Fund Crossing Guard Contract Professional Services 59,590 Police General Fund Homeless Outreach Team vehicle outfitting Equipment & Supplies 4,053 Police General Fund SWAT Equipment Equipment & Supplies 3,000 Police General Fund Police services community survey Study/Reports 45,000 Transportation General Fund Sustaina ble Mobility Plan update with Vision Zero Professional Services 60,000 Transportation General Fund Active Transportation Monitoring Report Professional Services 90,000 Environmental Sustainabililty Non General Fund Watershed Protection Conferences Other 4,067 Golf Course Non General Fund Various property needs (landscaping and structures) Equipment & Supplies 43,000 Library & Cultural Arts Non General Fund Cannon Gallery art exhibit Professional Services 25,000 Police Non General Fund Asset Forfeiture Other 18,000
Utilities Non General Fund FCS/Temetra - meter reading system costs Professional Services 40,000 General Fund Total 770,636$
Non General Fund Total 130,067$
GRAND TOTAL 900,703$
(ITEMS LESS THAN $100,000)
CITY OF CARLSBAD FY 2022-23 TO FY 2023-24
CARRYFORWARD BUDGET REQUESTS APPROVED BY CITY MANAGER
Exhibit 2
Sept. 26, 2023
Item #11 Page 14 of 21
DEPARTMENT FUND DESCRIPTION
REQUEST
TYPE AMOUNT
Community Development General Fund Engineering Third Party Review Grant balance or developer deposit 32,777 Library & Cultural Arts General Fund Unspent Grant Balances FY 2022-23 Grant balance or developer deposit 86,378 Police General Fund Officer Wellness a nd Mental Health Grant Balance Grant balance or developer deposit 84,952 Environmental Sustainability Non General Fund CalRecycle Beverage Container and SB 1383 grants Grant balance or developer deposit 54,908 Housing & Homeless Services Non General Fund Unspent Grant Funds (HUD, CDBG, County) Grant balance or developer deposit 3,168,252 Police & Fire Non General Fund Grant balances for the Pub lic Safety Fund Grant balance or developer deposit 282,485 General Fund Total 204,107$
Non General Fund Total 3,505,645$
GRAND TOTAL 3,709,751$
AND UNSPENT GRANT AND DEVELOPER BALANCES
CITY OF CARLSBAD FY 2022-23 TO FY 2023-24
CARRYFORWARD BUDGET LIST OF ITEMS APPROVED BY PREVIOUS CITY COUNCIL ACTION Exhibit 3
Sept. 26, 2023
Item #11 Page 15 of 21
RESOLUTION NO. 2023-252
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING THE RESTRICTION OF GENERAL FUND RESERVES IN FISCAL YEAR 2023-24 TO FUND THE INITIAL CONTRIBUTION TO A SECTION 115 TRUST
WHEREAS, City Council's General Fund Surplus Policy (City Council Policy No. 87) allows for General Fund reserve levels in excess of the 40% target requirement to be used for one-time opportunity cost purposes at the discretion of the City Council; and WHEREAS, at the close of fiscal year 2022-23, the city's unaudited General Fund reserve balance is 65% and has exceeded its General Fund Reserve Policy (City Council Policy No. 74) target of 40%; and WHEREAS, at the close of fiscal year 2022-23, the remaining unaudited unspent and unencumbered expenditure budget for the General Fund is $10.8 million of which approximately $200,000 has been carried forward because of a previous City Council resolution, resulting in an available surplus of $10.6 million; and
WHEREAS, at the close of fiscal year 2022-23, the General Fund surplus, or actual revenues less actual expenditures, is $20.7 million; and
WHEREAS, City Council Policy No. 87 requires City Council approval for the carryforward of any unspent and unencumbered budget for a particular item equal to or greater than $100,000; and WHEREAS, a Section 115 Trust for pension was established by the City Council on September 12, 2023;and
WHEREAS, City Council Policy No. 86 strives to maintain a combined pension-funded status of 80% and allows assets in the city's Section 115 Trust for pension to count towards the city's combined pension-funded status; and
WHEREAS, as of CalPERS' June 30, 2022, actuarial valuation report, the city's combined funded status was 74.6%; and
WHEREAS, the city's Section 115 Trust shall be funded over a period of five fiscal years in order to achieve and maintain an 80% combined pension-funded status.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
Exhibit 4
Sept. 26, 2023 Item #11 Page 16 of 21
2. That a contribution to the city's Section 115 Trust for pension in the amount of $10,000,000 is approved.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 26th day of Sept., 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
v KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
Sept. 26, 2023 Item #11 Page 17 of 21
~ ----
RESOLUTION NO. 2023-253
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE USE OF THE FISCAL YEAR 2022-23 GENERAL
FUND SURPLUS FOR APPROPRIATION AND TRANSFER TO THE CITY'S WORKERS' COMPENSATION FUND IN FISCAL YEAR 2023-24
WHEREAS, City Council's General Fund Surplus Policy (City Council Policy No. 87) allows for General Fund reserve levels in excess of the 40% target requirement to be used for one-time opportunity cost purposes at the discretion of the City Council; and WHEREAS, at the close of fiscal year 2022-23, the city's unaudited General Fund reserve balance is 65% and has exceeded its General Fund Reserve Policy (City Council Policy No. 74) target of 40%; and WHEREAS, at the close of fiscal year 2022-23, the remaining unaudited unspent and unencumbered expenditure budget for the General Fund is $10.8 million of which approximately $200,000 has been carried forward because of a previous City Council resolution, resulting in an available surplus of $10.6 million; and
WHEREAS, at the close of fiscal year 2022-23, the General Fund surplus, or actual revenues less actual expenditures, is $20.7 million; and
WHEREAS, City Council Policy No. 87 requires City Council approval for the carryforward of any unspent and unencumbered budget for a particular item equal to or greater than $100,000; and WHEREAS, the balance of the city's Workers' Compensation Fund on June 30, 2023, is nearly depleted due to unanticipated costs and costs trending above budget for Fiscal Year 2022-2023.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That a transfer to the city's Workers' Compensation Fund in the amount of $1.3 million, is approved.
Exhibit 5
Sept. 26, 2023 Item #11 Page 18 of 21
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 26th day of Sept., 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
Sept. 26, 2023 Item #11 Page 19 of 21
-L
RESOLUTION NO. 2023-254
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE USE OF THE FISCAL YEAR 2022-23 GENERAL
FUND SURPLUS FOR APPROPRIATION AND TRANSFER TO THE CITY'S RISK MANAGEMENT FUND IN FISCAL YEAR 2023-24
WHEREAS, City Council's General Fund Surplus Policy (City Council Policy No. 87) allows for General Fund reserve levels in excess of the 40% target requirement to be used for one-time opportunity cost purposes at the discretion of the City Council; and WHEREAS, at the close of fiscal year 2022-23, the city's unaudited General Fund reserve balance is 65% and has exceeded its General Fund Reserve Policy (City Council Policy No. 74) target of 40%; and WHEREAS, at the close of fiscal year 2022-23, the remaining unaudited unspent and unencumbered expenditure budget for the General Fund is $10.8 million of which approximately $200,000 has been carried forward because of a previous City Council resolution, resulting in an available surplus of $10.6 million; and
WHEREAS, at the close of fiscal year 2022-23, the General Fund surplus, or actual revenues less actual expenditures, is $20.7 million; and
WHEREAS, City Council Policy No. 87 requires City Council approval for the carryforward of any unspent and unencumbered budget for a particular item equal to or greater than $100,000; and WHEREAS, the balance of the city's Risk Management Fund at June 30, 2023, is in a temporary deficit position due to unanticipated costs and costs trending above budget for Fiscal Year 2022-2023.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That a transfer to the city's Risk Management Fund in the amount of $5 million, is approved.
Exhibit 6
Sept. 26, 2023 Item #11 Page 20 of 21
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 26th day of Sept., 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
KEITH BLACKBURN, Mayor
r SHERRY FREISINGER, City Clerk
(SEAL)
Sept. 26, 2023 Item #11 Page 21 of 21
WL
Tammy Cloud-McMinn
From:
Sent:
To:
Council Internet Email
Monday, September 25, 2023 7:44 AM
City Clerk
Subject: FW: Public comment on 9/26/2023 City Council Item #11 : Budget Carryforward Requests
From: Steve Linke <[email protected]>
Sent: Friday, September 22, 2023 10:28 PM
To: Council Internet Email <[email protected]> All Receive - Agenda Item# /.L
For the Information of the:
~f.11)',SOUNCIL
Datio/~ CA ~ c .--
CM ...!CACM _ v1X M (3) .:::::::-
Subject: Public comment on 9/26/2023 City Council Item #11: Budget Carryforward Requests Mayor, Mayor Pro-Tern, and Councilmembers:
I noted on Page 492 of the agenda packet that the City Manager approved a $60,000 budget request for a consultant to update the Sustainable Mobility Plan (SMP) with Vision Zero language. When this item came before the traffic commission, staff was proposing $150,000 for a consultant to create a standalone Vision Zero Plan, and I made a successful motion to recommend instead just updating our existing SMP with a few sentences with similar goals (with the intent to save the $150,000). I am not sure now why the city would have to spend up to $60,000 to have a consultant add some Vision Zero language to the SMP.
I have expressed how "the commitment" to Vision Zero to eliminate all serious and fatal traf fic-relate d injurie s is an unachievable goal, and that it is well-documented that it has not worked in othe r cities. In that regard, it is interesting to note that last month's Carlsbad police report to the traffic commission sadly included one traffic fatality and one severe injury. The fatality was due to loss of control of a car that hit a tree on the roadside, and the severe injury was a motorcyclist who lost control going over one of the new speed cushions on Tamarack Avenue.
It is unclear how staff is going to re-engineer all city streets to prevent any cars from losing control and hitting trees, and it is quite ironic that it was the very installation of a traffic calming device consistent with Vision Zero (speed cushion) that led to the severe injury. We also know that installation of roundabouts leads to increased crashes into the roundabout itself. I supported and still support the speed cushions on Tamarack and some (but not all) roundabouts .
However, these incidents exemplify why you should not spend up to $60,000 of taxpayer money on the absurd Vision Zero commitment.
Just have staff spend five minutes copying and pasting the Vision Zero goals into a paragraph in the SMP, and then use the $60,000 you save in consulting fees to pay for actual safety projects . No hypothetical futu re grant relies on a consultant adding the Vision Zero language.
Best regards,
Steve Linke
CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content i safe.
1 General Fund Surplus Policy:
Fiscal Year 2022-23 Review
Zach Korach, Finance Director
Jeremy Bates, Senior Management Analyst
Finance
September 26, 2023
2 BUDGET CARRYFORWARDS
City Council Policy No. 87 – General Fund Surplus Policy • The city will use surplus funds to replenish:
– any General Fund reserve deficiencies, and
– any pension liability deficiencies.
• The City Manager is authorized to approve the carry
forward of unspent budget for an item up to
$100,000.
• Items equal to or greater than $100,000 will be
brought forward for City Council approval.
ITEM 11: GENERAL FUND SURPLUS
3 FISCAL YEAR 2022-23 GENERAL
FUND RESERVE SUMMARY
Year-end summary: Total Reserve %*
Unassigned at 2021-22 FYE $120,554,527
Revenues 225,859,521
Expenditures 205,160,746
Surplus $20,698,775
Unassigned at 2022-23 FYE $141,253,302 65%
*Calculated as a percentage of the FY
2023-24 adopted budget of $216,929,604.
ITEM 11: GENERAL FUND SURPLUS
4 PENSION LIABILITY STATUS
• City Council established
Section 115 Trust at Sept. 12,
2023 meeting intending to
fund it over a 5-year period
• This approach would require
an initial $10 million
contribution to the Trust
$651,974,831,
74.6%
$47,553,869,
5.4%
$174,882,175,
20.0%
Funded status
Funded Unfunded Above 80% requirement
ITEM 11: GENERAL FUND SURPLUS
5 SUMMARY OF CARRYFORWARD REQUESTS
AUTHORIZED BY CITY MANAGER
ITEM 11: GENERAL FUND SURPLUS
Fund Amount
General Fund $770,636
Non General Fund 130,067
Total $900,703
Examples:
• Updating the Carlsbad Tribal,
Cultural, and Paleontological
Resources Guidelines
• Weed abatement costs
• Safety Training Center inspection
costs and HEPA filter replacements
• Increases to the school crossing
guards contract
• Cannon Gallery art exhibit
• Lake Calavera Preserve trail
improvements
6 CARRYFORWARD REQUESTS FOR
CITY COUNCIL APPROVAL
General Fund $2,802,416
Community Development Planning Division on-call contract support $150,000 Fire ambulance gurney replacement $620,000
Police take-home vehicle program costs $513,176
Police M500 in-car video systems $338,356
Police taser replacements $622,164
Local traffic safety emergency distribution $558,720
ITEM 11: GENERAL FUND SURPLUS
7 CARRYFORWARD REQUESTS FOR
CITY COUNCIL APPROVAL
Non-General Fund $3,550,506
Complete Fleet vehicle replacements from prior fiscal year $1,270,000 Complete Information Technology replacements from prior fiscal year $484,454 Approved agricultural mitigation fee grants $112,206
Potable Water master plan update $650,000
Wastewater master plan update $650,000
Fleet conversions in Utilities $145,000
Opioid settlement funds $238,846
ITEM 11: GENERAL FUND SURPLUS
8 OPTIONS FOR REMAINING GENERAL FUND
SURPLUS:
Transfer to two of the city’s internal service
funds:
• Workers’ Compensation $1,300,000
• Risk Management $5,000,000
ITEM 11: GENERAL FUND SURPLUS
9 SUMMARY OF RECOMMENDED
GENERAL FUND BUDGET ACTIONS
ITEM 11: GENERAL FUND SURPLUS
Carryforward authority (surplus + unspent budget) $31,521,108 Previously approved grants/developer deposits 204,107
Initial Section 115 Trust contribution* 10,000,000
City Manager approved requests below $100,000 770,636
City Council approved requests above $100,000 2,802,416 Transfer to Workers’ Compensation Fund 1,300,000
Transfer to Risk Management Fund 5,000,000
Total spending $20,077,159
Remaining authority $11,443,949
*Does not require appropriation
10 FISCAL YEAR 2022-23 GENERAL
FUND RESERVE SUMMARY
ITEM 11: GENERAL FUND SURPLUS
Year-end summary: Total Reserve %*
Unassigned at 2022-23 FYE $141,253,302 65%
Proposed use of surplus 20,077,159 -9%
Updated estimated unassigned fund balance $121,176,143 56% 40% minimum reserve policy $86,771,842 40%
Funds in excess of reserve requirement $34,404,301 16%
*Calculated as a percentage of the FY
2023-24 adopted budget of $216,929,604.
11 PROPOSED ACTION
Adopt resolutions:
• approving the fiscal year 2022-23 budget
carryforward requests, the appropriation of funds
and authorizing capital outlay purchases,
• restricting General Fund reserves to fund the
initial $10 million Section 115 Trust contribution,
• approving a $1.3 million General Fund transfer to
the city’s Workers’ Compensation Fund, and
• approving a $5 million General Fund transfer to
the city’s Risk Management Fund.
ITEM 11: GENERAL FUND SURPLUS
12 General Fund Surplus Policy:
Fiscal Year 2022-23 Review
Zach Korach, Finance Director
Jeremy Bates, Senior Management Analyst
Finance
September 26, 2023
14 BUDGET CARRYFORWARDS
City Council Policy No. 87 – General Fund Surplus Policy • The city will use surplus funds to replenish:
– any General Fund reserve deficiencies, and
– any pension liability deficiencies.
• The City Manager is authorized to approve the carry
forward of unspent budget for an item up to
$100,000.
• Items equal to or greater than $100,000 will be
brought forward for City Council approval.
ITEM 11: GENERAL FUND SURPLUS
15 PROPOSED ACTION
Adopt resolutions:
• approving the fiscal year 2022-23 budget
carryforward requests, the appropriation of funds
and authorizing capital outlay purchases,
• restricting General Fund reserves to fund the initial $10 million Section 115 Trust contribution,
• approving a $1.3 million General Fund transfer to
the city’s Workers’ Compensation Fund, and
• approving a $5 million General Fund transfer to the
city’s Risk Management Fund.
ITEM 11: GENERAL FUND SURPLUS
16 GENERAL FUND RESERVE REQUIREMENTS
City Council Policy No. 74 – General Fund Reserve
Guidelines
• Maintain General Fund reserves at a target of
40% of General Fund annual operating
expenditures.
• At the discretion of the City Council, reserve
levels in excess of the 40% target requirement,
may be used for one-time opportunity cost
purposes.
ITEM 11: GENERAL FUND SURPLUS
17 FISCAL YEAR 2022-23 GENERAL
FUND RESERVE SUMMARY
Year-end summary: Total Reserve %*
Unassigned at 2021-22 FYE $120,554,527
Revenues 225,859,521
Expenditures 205,160,746
Surplus $20,698,775
Unassigned at 2022-23 FYE $141,253,302 65%
*Calculated as a percentage of the FY
2023-24 adopted budget of $216,929,604.
ITEM 11: GENERAL FUND SURPLUS
18 PENSION LIABILITY REQUIREMENTS
City Council Policy No. 86 – Pension Funding Policy
• The city will ensure the costs of the city's
defined benefit pension plans will be funded in
an equitable and sustainable manner.
• The city commits to fund these benefits based
on regular actuarial valuations and commits to
maintaining no less than an 80% funded ratio,
with a target funded ratio of 80% to 85%.
ITEM 11: GENERAL FUND SURPLUS
19 PENSION LIABILITY STATUS
• City Council established
Section 115 Trust at Sept. 12,
2023 meeting intending to
fund it over a 5-year period
• This approach would require
an initial $10 million
contribution to the Trust
$651,974,831,
74.6%
$47,553,869,
5.4%
$174,882,175,
20.0%
Funded status
Funded Unfunded Above 80% requirement
ITEM 11: GENERAL FUND SURPLUS
32 QUESTIONS?