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May 10, 2022
ITEM TITLE
Financial Report and Appropriations: Accept the Quarterly Financial Report for the Quarter Ending March 31, 2022, Amend the American Rescue Plan Act Spending Plan, and Appropriate Funds to Adjust for Variances
Report Number: 22-0112
Location: No specific geographic location
Department: Finance
Environmental Notice : The activity is not a "Project" as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Accept the Quarterly Financial Report for the quarter ending March 31, 2022, adopt a resolution (1) amending the American Rescue Plan Act (“ARPA”) Spending Plan and (2) making various amendments to the Fiscal Year 2021/22 budget to adjust for variances and appropriating funds for that purpose. (4/5 vote required)
SUMMARY
The Finance Department, in collaboration with other City departments, prepares quarterly financial reports for the General Fund that reflect budget to actual comparisons, projected revenues and expenditures, and highlight major variances that may require additional action or changes as of March 31, 2022. The quarterly financial reports are in compliance with Section 504 (f) of the City Charter, which requires that quarterly financial reports be filed by the Director of Finance through the City Manager.
In preparing the quarterly financial projections, staff has identified various budget changes that are needed to reflect actual revenues and expenditures or address changes in budgetary needs. For government entities, a budget creates a legal framework for spending during the fiscal year. After the budget is approved by the City Council, there are circumstances which arise that could require adjustments to the approved budget.
Council Policy 220-02 “Financial Reporting and Transfer Authority” was established in January of 1996 and allows for budget transfers and adjustments to be completed. This report discusses budget adjustments that staff recommends in the General Fund as well as various other funds to address identified fiscal issues.
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In addition to the Fiscal Year 2021/2022 budget recommendations for City funds, this report includes an update on Measure P and Measure A actual revenues and expenditures as of March 31, 2022.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
DISCUSSION
The Third Quarter Report is developed using nine months of recorded revenue and expenditure activity for Fiscal Year 2021/2022 as of March 31, 2022. City revenues and expenditures are forecasted through the end of the Fiscal Year in collaboration with City departments, consultants, statistical data, trend analysis and other resources. The data in this report is the most current data available; however, the data and projections are subject to change.
This report will provide summary information for the following areas:
• Major General Fund Revenues and Expenditures
• Adjustments to General Fund Expenditures
• Adjustments to non-General Fund funds
• Update to the Measure P and Measure A Funds
Attachment A – Quarterly Financial Report provides additional information for the financial outlook for the General Fund for the current fiscal year including City revenues and expenditures.
The Finance Depart ment will continue to monitor the City’s actual revenues and expenditures and will provide any significant changes in subsequent quarterly budget monitoring reports.
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General Fund Overview
Table 1: Fiscal Year 2021/2022 Summary summarizes the overall General Fund projections.
The City’s Fiscal Year 2021/2022 financial outlook shows overall General Fund Resources (revenue plus prior year appropriations) projected to exceed expenditures by approximately $9.1 million.
This is primarily due to (1) use of prior year appropriations, (2) recommendation to amend the ARPA Spending Plan, and (3) Major General Fund R evenue increases. The increased re venues are partially offset by a $2.1 million reallocation between funds of the Pension Obligation Bond payments and Section 115 trust contribution as well as increased utility costs.
Prior year appropriations in the amount of $4.7 million carried forward into the current year budget. This funded both CIP and non-CIP projects, various encumbrances anticipated to be spent during fiscal year 2022, and the pension reserve fund and related contribution to the Section 115 Trust fund based on the City’s Pension Reserve policy and eligible funding, approved March 1, 2022, via the Quarterly Financial Report of the Quarter Ended December 31, 2021.
Revenue projections include staff’s recommended amendment to the ARPA Spending Plan. The proposed amendment reallocates the Revenue Replacement category of the plan, by reprogramming $2.0 million from the Loma Verde Reconstruc tion project 1 to reimburse the General Fund for eligible General Government Services expenditures. Additionally, Major General Fund Revenues are trending above budget by $11.0. This includes Measures A and P which, are projected to be above budget by $5.3 million; however, this increase is offset by the required transfer to the Measure P and Measure A Funds.
1 Loma Verde Reconstruction project is currently included in the Proposed Fiscal Year 2022/2023 Budget and is fully funded by the General Fund.
Table 1 - Fiscal Year 2021/2022 Summary of Projections
Description
FY 2022
Revised
Budget 1
FY 2022
Projected Actuals
Revenues:
Major Discretionary Revenues 172,859,100$ 183,815,700$ Other General Fund Revenues 52,240,724 52,860,380 Total Revenues 225,099,824$ 236,676,080$
FY 2021 Prior Year Appropriation/Fund Balance 4,734,540 4,734,540 Total Sources 229,834,364$ 241,410,620$
Expenditures:
Personnel Expenditures 126,751,449$ 120,163,558$
Other Expenditures 104,664,745 112,146,517
Total Expenditures 231,416,194$ 232,310,075$
Total General Fund Surplus (Deficit) (1,581,830)$ 9,100,545$ 2 1 Revised Budget as of March 31, 2022
2 $9.0 million of this balance is anticipated to be allocated to the Bayfront Project P a g e | 4
Additional information on General Fund revenue and expenditures are provided in Attachment A.
Major General Fund Revenues
The City’s major General Fund revenues, which make up approximately 77% of the City’s General Fund revenues, are projected to be $11.0 million more than the Revised Budget amounts, largely due to increased projections for Sales Tax, Measure A and Measure P revenues. Additionally, Property Tax, Franchise Fee, and Transient Occupancy Tax revenues are projected to be $2.2, $0.3, and $0.6 million above budget, respectively.
However, Utility Users Taxes is projected to be slightly below budget.
Table 2: Fiscal Year 2021/2022 Major General Fund Revenue Projections summarizes the revenue projections.
The remaining General Fund revenues (not represented in Table 2) are anticipated to be approximately $0.6 million above the Revised Budget amounts. All the General Fund revenues are summarized in Attachment A.
The overall General Fund revenues are project ed to be above the Revised Budget by approximately $ 11.6 million.
Major General Fund Expenditures
The City’s major General Fund expenditures, which make up approximately 65% of the City’s General Fund expenditures, are shown in Table 2. As of the end o f the third quarter of Fiscal Year 2021/2022, Personnel Services expenditures are projected to be under budget by approximately $6.6 million, Supplies and Services expenditures are projected to be under budget by approximately $0.8 million, and Utility expenditures are projected to exceed budget by approximately $0.6 million, resulting in a net decrease of approximately $6.8 million in expenses. Based on the percentage of the Revised Projected Budget expended to date, the major General Fund expenditures are in line with projections. Staff will continue to monitor expenditures to identify any costs that might continue to trend higher than anticipated and propose future actions to address these expenses. Additionally, information related to departmental ex penditures is provided in Attachment A.
Table 2 - Fiscal Year 2021/2022 Major General Fund Revenue Projections Revenue Category FY 2022
Revised Budget
FY 2022
Projected Actuals Variance
Property Tax 39,433,546 41,618,238 2,184,692 Sales Tax 39,717,123 42,395,826 2,678,703 Measure P Sales Tax 23,042,000 25,702,243 2,660,243 Measure A Sales Tax 23,042,000 25,719,709 2,677,709 PT in lieu of Motor Vehicle License Fee (VLF) 25,981,110 25,981,110 - Franchise Fees 12,901,132 13,194,206 293,074 Utility Users Taxes 3,800,000 3,657,095 (142,905) Transient Occupancy Tax 4,942,189 5,547,273 605,084 Total 172,859,100$ 183,815,700$ 10,956,600$ P a g e | 5
As mentioned previously, due to an increase in Measure P and Measure A revenues, a corresponding transfer out from the General Fund to the Measure P and Measure A funds will increase expenditures (transfers out) by approximately $5.3 million. An accounting adjustment for the debt service payments to the Pension Obligation Bonds and Section 115 Trust Fund contribution will result in an increase to transfers out by $2.1 million. The remaining General Fund expenditure s (not represented in Table 3) are largely in line with projections.
American Rescue Plan 2021 Plan Amendment
On August 21, 2021, City Council approved the formal Spending Plan in the amount of $28.7 million which represented the first round of ARPA funds received in May 2021. Subsequent to the initial allocation, four Spending Plan Amendments have been approved as critical needs increase and are identified in response to the pandemic.
The Amendments include:
Amendment No. 1: Jacobs and Cushman San Diego Food Bank allocation of $100,000 to provide food distribution services.
Amendment No. 2: Alpha Project, Take Back the Streets, allocation of $100,000 to provide job training and placement to previously homeless individuals.
Amendment No. 3: Homeless Supportive Services allocation in the amount of $100,000 to support the City’s Homeless Outreach Team to provide a continuum of services for homeless, at risk and low- income households.
Amendment No. 4: provide $200,000 of ARPA funds and approve an associated Agreement with SBCS Domestic Violence Program (the “Program”) to continue providing therapeutic counseling and crisis intervention services to adult and children victims of family violence.
Staff is recommending reallocating the Loma Verde Reconstruction1 (GGV0247) appropriation of $2,000,000 in FY2023, since the funding source for this project will be included in the FY2023 City Manager’s Proposed Budget from other funding sources. Within the Revenue Recovery category, this reallocation will be used to reimburse the General Fund for General Governmental Services in compliance with the legislative intent of the ARPA program.
Table 3 - Fiscal Year 2021/2022 General Fund Major Expenditure Projections Expenditure Category FY 2022
Revised Budget
FY 2022
Projected Actuals
FY 2022
Expended to date % Expended
Personnel Services 126,751,449 120,163,558 90,349,654 75.2% Supplies and Services 18,043,347 17,225,363 11,637,345 67.6% Utilities 4,903,424 5,505,651 4,200,437 76.3% Total 149,698,220$ 142,894,572$ 106,187,436$ 74.3% P a g e | 6
1 Loma Verde Reconstruction project is currently included in the Proposed Fiscal Year 2022/2023 Budget and is fully funded by the General Fund.
Proposed Fund Adjustments
General Fund
At the conclusion of the third quarter of Fiscal Year 2021/2022, the proposed adjustments are: 1) inter- and intra- Department transfers; 2) expense appropriations associated with offsetting revenue (e.g., grants); appropriations associated with changes in projected revenue ; 3) increase revenue associated with the amendment to the ARPA Spending Plan . The proposed adjustments are anticipated to result in a General Fund negative net impact of approximately $0.1 million (increase of expenses by $2.7 million and revenue by $ 2.6 million). The following table provides a summary of the proposed budgetary ad justments, by department and budgetary category.
Table 4 - ARPA Plan Revenue Recovery
Category FY 2022 FY 2022 FY 2022 FY 2023 FY 2024 Total
Operational Support 9,290,000$
Development Services Fund -$ -$ -$ 1,000,000$ 1,000,000 COVID Premium pay 2,900,000 - 2,900,000 345,000 845,000 4,090,000 Funding new positions 350,000 - 350,000 350,000 700,000 PW Proj Management-Non CIP Proj
(PWP0001) 1,000,000 - 1,000,000 500,000 1,500,000 General Governmental Services - 2,000,000 2,000,000 - 2,000,000 Infrastructure 19,500,000$
Main Street Fiber (GGV0258) 300,000 - 300,000 - - 300,000 Telegraph Canyon Culvert Repair
(DRN0208) 3,200,000 - 3,200,000 9,000,000 12,200,000 Loma Verde Reconstruction (GGV0247) 1 4,000,000 (2,000,000) 2,000,000 4,000,000 6,000,000 Rehabiliation of the YMCA Building
(GGV0262) 1,000,000 - 1,000,000 - 1,000,000 -
Economic Development 3,210,000$
Public Art Grants(Library) 400,000 - 400,000 - 400,000 Starlight Parade 200,000 - 200,000 - 200,000 Equity and Inclusion 100,000 - 100,000 100,000 200,000 University Innovation Center/Recruitment 350,000 350,000 2,060,000 2,410,000 TOTAL 13,800,000$ -$ 13,800,000$ 17,355,000$ 845,000$ 32,000,000 Governmental Fund Revenue Recovery Recommendation
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The significant adjustments to the General Fund are described below. Non-Departmental: Increase expenditure appropriations by $862,538 for the reallocation of Section 115 Trust contributions which fund future pension liabilities, and by $1,169,816 for the reallocation of Pension Obligation Bond payments based on the City’s Pension Reserve policy and eligible funding; Increase expenditure appropriations by $33,200 for the reduction in tax subsidies for the 2017 Clean Renewable Energy Bonds (CREBs) Lease Revenue Bonds.
Increase operating department revenues by $2,000,000 from ARPA funds, which will fund eligible General Government Services expenditures within the various departments. Parks and Recreation: I ncrease revenue and ex penditure appropriations by $ 315,880 based on additional programming for Parks & Recreation in FY 2022, including: additional park and recreation program revenues, instructor, and other staff costs, supplies and materials, utilities, and other expenses.
Other Funds
The following recommended adjustments are for funds outside of the General Fund. The proposed adjustments, displayed in Table 4, result in a net cost decrease by approximately $1.9 million. A brief discussion follows the table on the significant proposed adjustments.
PERSONNEL SUPPLIES & OTHER TRANSFERS TOTAL TOTAL
Footnote SERVICES SERVICES EXPENSES OUT EXPENSE REVENUE NET COST
GENERAL FUND
Non-Departmental 1 - - - 2,065,554 2,065,554 - 2,065,554 Animal Care Facility 6 - - - - - (42,200) (42,200) Economic Development 2,6 - 20,000 - 209,000 229,000 (259,000) (30,000) Development Services 6 - - - - - (53,200) (53,200) Engineering/Capital Projects 6 - - - - - (167,100) (167,100) Police 6 - - - - - (924,700) (924,700) Fire 4,6 - 42,470 - - 42,470 (477,170) (434,700) Public Works 6 - - - - - (177,700) (177,700) Parks and Recreation 5,6 - 231,880 84,000 - 315,880 (434,380) (118,500) Library 6 - - - - - (51,900) (51,900) TOTAL GENERAL FUND -$ 294,350$ 84,000$ 2,274,554$ 2,652,904$ (2,587,350)$ 65,554$ General Fund Amendment Footnotes
4 - Increase revenue and expenditure appropriations by $42,470 for Strike Team activity in FY 2022 in the Fire Department. 3 - Transfer expenditure appropriations of $36,106 from Personnel Services to Supplies & Services based on salary savings from vacancies for the costs of emergency communication equipment related to SB 296 and code compliance policy.
Table 5 - General Fund Budget Adjustments Summary - 3rd Quarter Fiscal Year 2021/2022
DEPARTMENT
2 - Increase revenue and expenditure appropriations by $229,000 for the Chula Vista Golf Course activity in FY 2022. 1 - Increase expenditure appropriations by $2,032,354 for Transfers Out to increase the previous Section 115 Trust and Pension Obligation Bond (POB) allocations and establish new allocations for each; and by $33,200 for the 2017A Lease Revenue Bonds (CREBs) subsidy reduction costs.
5 - Increase revenue and expenditure appropriations by $315,990 for additional programming for Parks & Recreation in FY 2022. 6 - Increase revenue from ARPA to reimburse the General Fund for General Governmental Services.
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The significant adjustments to the Other Funds are described below. 2016 Measure P Sales Tax: Transfer expenditure appropriations of $8,134,250 from Supplies & Services and Other Expenses to Transfers Out to establish a separate bond debt service fund for the 2017 Measure P Lease Revenue Bond for accounting purposes. 2017 Measure P Lease Revenue Bonds: Increase revenue and expenditure appropriations by $8,141,250 to establish this separate bond fund for the 2017 Measure P Lease Revenue Bond for accounting purposes.
Reduction of Transfers Out appropriations to the Pension Obligation Bond fund for $1,169,816, and the Section 115 Trust Fund for $862,358 between various Other Funds for a total of $2,032,354.
Measure P Fund Overview
In November 2016, Chula Vista voters approved Measure P, authorizing a ½ cent sales tax increase on retail sales within the City for ten years. The funding from the sales tax measure is to allow the City to make progress toward replacing and repairing failing City assets. In December 2016, the City Council adopted the expenditure plan for the Measure P funding. The expenditure plan identified critical deferred maintenance and infrastructure projects for which the Measure P funding was to be allocated toward.
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The following table provides an update on the allocation and expenditures (unaudited) for the Measure P funds.
Measure A Fund Overview
In June 2018, the citizens of Chula Vista approved Measure A which enacted the ½ cent sales tax to support public safety staffing. The measure imposed a ½ cent transaction and use tax (sales tax) on retail sales within the City of Chula Vista and became effective on October 1, 2018. Concurrent with the approval of placing the measure on the ballot, the City Council adopted an Intended Public Safety Expenditure Plan for the anticipated revenues generated from the measure. By doing so, the City Council expressed its intent to spend the sa les tax revenues exclusively on the critical staffing needs of the City's police and fire departments, including necessary equipment and support provided by other City departments.
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The following table provides an update on the allocation and expenditures (to date totals) for the Measure A funds.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
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Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
The Third Quarter Monitoring Report presents updates to revenue and expenditure projections as of March 31, 202 2. As a result of the revised projected revenues and expenditures within this report, the overall General Fund revenues and prior year appropriations are projected to exceed projected expenditures by approximately $ 9.1 million. It is anticipated that these one-time funds will be appropriated to fund the Bayfront Development Project as part of the financing proposal. Staff will continue to monitor actual revenue receipts and expenditures to determine if any budget adjustments will be needed in the future.
Across the non-General Fund funds, multiple actions are recommended for the third quarter, leading to a net decrease in costs of approximately $1.9 million to non-General Fund accounts.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact related to this action for the General Fund.
ATTACHMENTS
A. FY 2022 Third Quarter Financial Report
Staff Contact: Sarah Schoen, Finance Department