Agenda packet — Clayton City Council, June 7, 2022 (part 2 of 3)

have been reduced. For example, Animal Services is no longer routinely picking up deceased wild animals from private property. Although this was not a legally required service, it had historically been provided by Animal Services to property owners at no cost. It is now available on a fee-per-service basis.

Animal Services has also reduced service hours and eliminated on-call personnel at night.

The proposed Agreement is for an initial two-year term with a provision to automatically renew for successive three-year terms, with a 90-day cancellation notice period. The agreement provides for an annual meeting between the City and Animal Services staff to discuss the agreement, issues and any potential updates. It continues the practice of the County providing quarterly statistical reports on services rendered within the City. While the costs of the agreement have been rising, there are no viable alternatives to contracting with the County for these required services.

The new agreement does provide more detail regarding the services to be provided by the County specifically by:
• Detailing specific services provided under the agreement for all areas of operation; • Creating accountability by listing target response times for each activity type; • Defining what is covered under deceased animal services; • Describing what services are not included under the agreement; and • Codifying performance reporting within the agreement.

FINANCIAL IMPACT
The updated agreement includes a defined fee structure for FY2022/23 and FY2023/24 which converts to a formula-based fee structure that will commence beginning in FY2024/25. The proposed fees are as follows:
• FY2022/23 - $7.97 per capita (population as of January 2022). This will result in an increase of approximately $15,000 (20%) over the current year and is included as a cost in the Proposed FY2022/23 budget.
• FY2023/24 - $9.11 per capita (14%) (population as of January 2023). • FY2024/25 and beyond – per capita formula taking into account the County’s budgeted cost to provide Animal Services throughout the County, net of fees and the County’s General Fund contribution, divided by population.

After each year, the County will reconcile actual costs against budget and any cost savings will be applied to the following fiscal year.

Subject: Adopt a Resolution of the City Council of the City of Clayton Approving an Interagency Agreement with Contra Costa County Animal Services Department for Animal Control Services and Authorizing the City Manager to Execute the Agreement
Date: June 7, 2022

Page 3 of 3 ends

It should be noted that the costs for these services have been rising more rapidly than costof-living over the last several years, reflecting the County’s experience with increased costs to provide the service.

Attachment:1: Resolution
Attachment 2: Interagency Agreement with Contra Costa County Animal Services Department Attachment 3: Clayton Summary Sheet
Attachment 4: Animal Services Brochure
Resolution ##-2022 County Animal Care Agreement June 7, 2022 RESOLUTION NO. ##-2022

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CLAYTON APPROVING

AN INTERAGENCY AGREEMENT WITH THE CONTRA COSTA COUNTY ANIMAL

SERVICES DEPARTMENT FOR ANIMAL CONTROL SERVICES FOR AN INITIAL TWO-YEAR TERM IN AN AMOUNT NOT TO EXCEED $200,000 OVER THE TWOYEAR PERIOD, AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE

AGREEMENT

THE CITY COUNCIL
City of Clayton, California
WHEREAS, the City of Clayton currently contracts with the Contra Costa County Animal Services Department for animal control services for the City of Clayton through an interagency agreement; and
WHEREAS, the Animal Services Department has a demonstrated history of providing professional animal control services to the City since the City’s incorporation and through an agreement that was last approved in 2005; and
WHEREAS, the Animal Services Department is especially suited to provide animal control services and is also doing so for most of the cities in Contra Costa County; and WHEREAS, there is funding budgeted in the Fiscal Year 2022/23 budget for animal control services; and
WHEREAS, the Interagency Agreement would commence on July 1, 2022, providing a seamless transition and allowing for animal control services with the Contra Costa County Animal Services Department for a two (2) year term for a maximum total cost of $200,000 with an automatic renewal for successive three (3) year periods and the Annual Fee in the initial term varies per fiscal year based on population with a formula specified for calculation of the Annual Fee in the renewal periods.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Clayton does hereby approve the Interagency Agreement between the City of Clayton and Contra Costa County Animal Services Department for animal control services for a Two (2) Year Initial Term, with an Automatic Renewal for Successive Three (3) Year Periods, pursuant to the City of Clayton Purchasing Policy.

BE IT FURTHER RESOLVED that the City Manager is hereby authorized to execute the Agreement in the form attached to the staff report, with minor revisions that may be approved by the City Manager and the City Attorney, and to execute any other necessary documents to effectuate the terms of the Agreement.

Resolution ##-2022 County Animal Care Agreement June 7, 2022 PASSED, APPROVED AND ADOPTED by the City Council of the City of Clayton, California, at a regular public meeting thereof held on the 7th day of June, 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

THE CITY COUNCIL OF CLAYTON, CA
Peter Cloven, Mayor
ATTEST:

Janet Calderon, City Clerk
1 CITY-COUNTY ANIMAL SERVICES AGREEMENT
The County of Contra Costa, a political subdivision of the State of California ("County"), and the City of Clayton, a municipal corporation in the County ("City"), enter into this City-County Animal Services Agreement (“Agreement”) effective as of July 1, 2022 (“Effective Date”).

1. Authority. The City has adopted by reference Division 416 of the Contra Costa County Ordinance Code (hereafter "Division 416") governing animals.

Division 416 establishes requirements and procedures for animal control by the County’s Animal Services Department. This Agreement is entered into to memorialize the County’s provision of Animal Services and enforcement of Division 416 within the City as provided in Section 416-4.208, and as authorized by California Government Code section 51301.

2. Enforcement Duties and Personnel. The County will enforce Division 416 within the City’s boundaries. The City hereby designates and appoints the County's Animal Services Director and his or her staff as public officers of the City for the purposes of this Agreement and enforcing and carrying out its provisions.

3. Scope of Services.
a. In addition to enforcing Division 416, the County will provide to the City the Field Services, Shelter Services, and Deceased Animal Services described in this Agreement (collectively, “Animal Services”) in the manner provided for in this Agreement. During periods of emergency (such as fire, earthquake, flooding, pandemic), it might not be possible to provide the Animal Services to the same extent and within the same time frames as during non-emergency times.
b. Calls made to the County for services that are not provided by the County pursuant to this Agreement will be referred back to the City in which the call was requested. In such a case, the City is responsible for determining the next appropriate action.
c. The County will provide Animal Services within the City’s boundaries in accordance with all applicable federal, state, and local laws, including the Ordinance Code.

4. Definitions.
a. “Critically Sick or Injured Animals” means those animals that have lifethreatening conditions. b. “Emergency Calls” means complaints of animal bites, potential rabies exposure, or attacks on humans or domestic animals that are in progress, or, when a bite or attack has occurred, where the animal remains an immediate threat to humans.
c. “Livestock” means a large domesticated agricultural animal, such as a 2 cow, bull, steer, horse, sheep, or other large agricultural animal. d. “Regular Field Services hours” means between 8:00 am and 9:00 pm each day of the week, including Saturdays and Sundays.

5. Field Services. The County will provide the following services (collectively, “Field Services”) within the City upon a request from a City resident or person within the boundaries of the City.
a. Pick up and attempt to return to their owners domesticated animals that are found “at large,” to the extent possible without impoundment by relying on the animal’s identification, including dogs, trapped, injured, or sick cats, and other small, domesticated animals, including rabbits, chickens, turkey, geese, and ducks, but excluding wildlife, such as deer, mountain lions, opossums, wild turkeys, raccoons, skunks or squirrels unless a rabies exposure has occurred.
b. Investigate complaints of animal bites, rabies exposure and attacks to humans or domestic animals, including documenting the incident, interviewing witnesses, quarantining animals, preparing and transporting animals for rabies testing, and investigating any alleged violations of a quarantine order.
c. Enforce provisions governing potentially dangerous and dangerous animals, including but not limited to investigating complaints, designating animals, impounding animals, conducting hearings, and issuing permits for animals designated dangerous or potentially dangerous. d. Enforce provisions governing barking dogs and other noisy animals, including but not limited to conducting hearings.
e. Respond during regular business hours to police or fire department calls for assistance regarding animal-related issues. The County may provide after-hours warrant support to the City with advance notice, if County Animal Services personnel are available and willing to volunteer for the assignment, and provided the City pays additional fees sufficient to cover the County’s actual costs.
f. Investigate, cite, impound, and seek resolution of complaints regarding potential mistreatment of domestic animals by their owners.

6. Response Times for Field Services.
a. The County will attempt to respond to requests for Field Services during the hours and within the times specified in this section. The County shall maintain records of its response times to calls for Field Services. i. Priority 1 calls are Emergency Calls, which are calls for assistance from police or fire personnel and calls regarding rabies exposure, dangerous animals, and Critically Sick or Injured Animals.

1. The County will respond to Priority 1, 2, and 3 calls between 8:00 AM and 9:00 PM, seven (7) days per week, including 3 holidays.

2. For ninety-five percent (95%) of responses to Priority 1 calls, County personnel will attempt to arrive on the scene within two (2) hours from the time when the call for service is received by County staff.
ii. Priority 2 calls are calls to pick up animals that were at large but have since been confined at a location within the County, and calls regarding urgent, animal-related requests for assistance not involving Critically Sick or Injured Animals.

1. The County will respond to Priority 2 calls during regular Field Services hours.

2. For eighty percent (80%) of responses to Priority 2 calls received during regular Field Services hours, County personnel will attempt to arrive on the scene within 12 hours from the time the call for service is received by County staff.

3. The County will respond to Priority 2 calls received outside of regular Field Services hours no later than 7:00 pm on the next day.

4. The County may respond to Priority 2 calls by taking a report by phone or by contacting parties and witnesses at the scene. iii. Priority 3 calls are all other calls, such as calls regarding animals at large, animals causing a nuisance, and dead animals.

1. The County will respond to Priority 3 calls during regular Field Services hours.

2. For sixty-five percent (65%) of responses to Priority 3 calls received during regular Field Services hours, County personnel will attempt to arrive on the scene within 24 hours from the time the call for service is received by County staff.

3. The County will respond to calls received outside of regular Field Services hours on the next day.

4. The County will respond to Priority 3 calls only after the County has responded to all then-outstanding Priority 1 and Priority 2 calls.

5. The County may respond to Priority 3 calls by taking a report by phone or by contacting parties and witnesses at the scene.

7. Shelter Services.
a. The County will provide the following services to City residents (“Shelter Services”):
i. Impound and shelter lost or stray dogs, injured/sick, lost or endangered community cats, and other small, domesticated 4 animals that are brought to the shelter by County staff, residents of the County or cities that have contracts with the County for the provision of Animal Services. A community cat is considered endangered if it is in imminent risk of being killed, poisoned, or injured but not if, due to being at large, it is at risk of starvation, being attacked by another animal, or hit by an automobile. Orphaned kittens that cannot survive without human intervention are also considered endangered.
ii. Impound and quarantine biting animals.
iii. Provide rabies testing of animals suspected of infection. iv. Provide for reclamation of abandoned, lost or stray domestic animals.
v. Provide onsite services to the public at the County’s Martinez shelter for the following: search for lost animals, reclaim animals, adopt animals, answer inquiries regarding animals, accept complaints regarding animals, provide vaccines and spay/neuter services for a small fee, conduct humane education programs, and license animals onsite or online.
vi. Provide care for sheltered animals based on the California Veterinary Board Guidelines for Standards of Care in Animal Shelters published by the Association of Shelter Veterinarians. vii. Provide services as required by the California Penal Code Section 597.1 and other laws governing shelters for animal care, treatment, holding periods, placements, and dispositions.
b. Medical Services. As part of the Shelter Services, the County will provide the following medical services (“Medical Services”):
i. The County will provide veterinarian services twenty-four (24) hours per day through partnerships with emergency vets to treat injured or sick impounded animals.
ii. If an animal’s condition requires immediate treatment outside of the County shelter’s regular business hours or when no veterinarian is on staff at the County’s shelter, then County Animal Services Department officers or Good Samaritans may take the animal to any emergency veterinarian clinic/hospital that is under contract with the County to provide emergency veterinary services (as posted on the County shelter’s doors and on the County’s Animal Services Department’s website).
iii. The County will monitor animals on a rabies virus quarantine. iv. The County will conduct a minimum of one vaccine clinic per month and maintain a spay and neuter clinic in Martinez, which for a fee paid by the animal’s owner will provide vaccine and spay/neuter services for County residents’ dogs and cats. The fee will be 5 approved by the County Board of Supervisors and published on the County Animal Services Department fee schedule.
v. Provide rabies control information free of charge to the public. vi. The County will provide emergency veterinary services in accordance with Section 597(f) of the California Penal Code. c. Shelter Services Hours
i. The Martinez shelter will be open to the public for a minimum of 30 hours per week, 5 days per week, 6 hours per day, including one weekend day each week except during weeks that are shortened by a County holiday.
ii. The Martinez Shelter will be closed on designated County holidays and one day per year dedicated to in-house staff training.

8. Deceased Animal Services. The County will provide the following services within the City in response to calls regarding deceased animals during regular Field Services hours:
a. Pick up deceased domestic animals, wildlife, and livestock from public property.
b. With property owners’ consent, pick up deceased domestic or wild animals from private property for a fee based on the Department’s fee schedule paid directly to the County Animal Services Department by the property owner or reporting party.
c. Identify and notify the owner of deceased animals, whenever possible. d. Dispose of the body of any deceased animal picked up by the County.

9. Excluded Services. The County will not provide the following services to the City under this Agreement:
a. Respond to requests for removal of live or deceased marine animals and disposal of deceased marine animals.
b. Pick up and transport wildlife, including baby birds. c. Pick up live animals for surrender. The County may, at its discretion, accept live animals belonging to County residents for surrender at the Martinez shelter and charge a fee to the animal owner or property owner as part of its regular operations.
d. Respond to pest control issues (i.e., infestations, perceived or real, of squirrels, rats, mice, insects, gophers, wasps, bees, spiders, or other pests).
e. Respond to calls regarding live, sick and injured racoons, opossum, deer, mountain lions, coyotes, wild turkeys, wild pigs, peacocks, or other wildlife unless a rabies exposure has occurred. The County will refer calls regarding live wildlife to the California Department of Fish and Wildlife.
6 10. Policies and Procedures. All policies and procedures shall be developed with the goal of ensuring animal welfare, enhancing cost efficiency and quality of services provided to the contracted cities and unincorporated areas of Contra Costa County. They will be developed to reflect best practices in the industry for animal control and shelter animal care using the Guidelines for Standards of Care in Animal Shelters published by the Association of Shelter Veterinarians, ASPCA, the Humane Society of the United States, National Animal Control Association (NACA) and/or other currently accepted best practices for animal control and animal sheltering.

11. Performance and Activity Reports. The County will deliver to the City within 14 days of the end of each quarter, an Animal Control and Results Report summarizing Animal Services provided by the County to the City during the previous quarter and including year-to-date data. This report will include the following information:
a. The total number of calls for service received by the County under this Agreement, identified by type of service and Priority level. b. A response time report identifying response times by Priority level. c. The outcomes for animals impounded, identified by City/County jurisdiction.
d. The number of calls for service received from City residents or persons within the City’s boundaries.
e. A listing of dogs registered to City residents identified as potentially dangerous or dangerous (PDA/DA) that have a valid County-issued PDA/DA permit.

12. Fees and Fines. Pursuant to Food and Agricultural Code Section 30652, all fees and fines collected by the County for providing Animal Services to the City shall be deposited into the County Treasury and shall be used to meet the County’s cost of providing Animal Services to the City.

13. Annual Fee.
a. In consideration for Services provided by the County to the City, and in addition to any fees and fines imposed on City residents, the City agrees to pay to the County the following amounts (“Annual Fee”):
i. For fiscal year 2022-2023, $7.97 for each person residing within the City limits as of January 2022. For example, if the City’s population is 50,000, the Annual Fee is $398,500.
ii. For fiscal year 2023-2024, $9.11 for each person residing within the City limits as of January 2023. For example, if the City’s population is 50,000, the Annual Fee is $455,500.
iii. For each fiscal year thereafter, the per capita rate for the Annual Fee shall be calculated using the following formula: (A) The County’s budgeted cost to provide Animal Services throughout the 7 County in that fiscal year, minus the sum of animal licensing fees and user fees projected to be received from all County residents in that fiscal year, minus the budgeted County general fund contribution for that fiscal year, divided by (B) the sum of the population of the unincorporated area plus the population of all cities for which the County provides Animal Services. For example, if the budgeted cost to provide Animal Services throughout the County is $12,640,000, the animal licensing and user fees projected to be received are $1,620,00, the budgeted general fund contribution is $4,112,000, and the population is 866,583, then the per capita Annual Fee would be $7.97
[($12,640,000 - $1,620,000 - $4,112,000) / 866,583]. For a City with a population of 100,000, the total Annual Fee would be $797,000.
b. The City shall pay the Annual Fee to the County in four equal quarterly installments. Each installment shall be due on the first day of each fiscal quarter (i.e., July 1, October 1, January 1, and April 1). The City shall make the payment to the County Treasurer-Tax Collector, 625 Court Street, Martinez, CA 94553.
c. The City shall pay the Annual Fee to the County regardless of the amount of any fees and fines collected by the County pursuant to Division 416.
d. Each year, the County will prepare a reconciliation report of actual costs incurred by the County to provide Animal Services during the immediately preceding year to ensure the Annual Fee paid by the City covers only actual costs incurred to provide Animal Services. The reconciliation report will be completed and sent to the City in the month of August for each fiscal year. Any cost savings for that fiscal year will be applied to the following fiscal year.
e. For purposes of calculating the Annual Fee, the County shall rely on the population figures reported by the California State Department of Finance E1 Population Estimates report as of January of each year. f. The County shall notify the City of the amount of the Annual Fee for the next fiscal year by March 1st of each year.

14. Term; Termination.
a. The term of this Agreement begins on the Effective Date and continues for two (2) years. This Agreement shall automatically renew for successive three-year periods until either party terminates this Agreement by giving the other party 90 days advance written notice of termination.
b. This Agreement shall automatically terminate if the County repeals Division 416 or if the City repeals its resolution incorporating and applying Division 416 within the City.
8 c. The County may terminate this Agreement if the City fails to pay the Annual Fee by its due date by giving the City 30-days advance written notice.
d. The County agrees to meet jointly with all contracting city agencies annually during Quarter 2 of each fiscal year (i.e., October) to discuss potential revisions or updates through the Public Managers Association.

15. Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties, and supersedes any prior agreement between the parties, with respect to the subject matter hereof. Any amendment to this Agreement must be in writing and approved by the Contra Costa County Board of Supervisors.

16. Governing law; Venue. This Agreement shall be governed by the laws of the State of California. Any dispute arising out of or related to this Agreement shall be brought in Contra Costa County Superior Court.

17. Notices. Any notice to be given to either of the parties in connection with this Agreement shall be sent by U.S. mail to the following address:

If to County:

Director, Animal Services
4800 Imhoff Place
Martinez, California 94553-4300
If to City:
__________________________
__________________________
__________________________
__________________________
The parties are signing this Agreement as of the Effective Date set forth above.

COUNTY CITY
By: Beth Ward By:

Title: Animal Services Director Title:

Date: Date:

Contra Costa Animal Services Agreement Fact Sheet
Summary
Contra Costa Animal Services (CCAS) is proud to present for your consideration an updated services agreement to provide animal services for the City of Clayton. The updated agreement and fee structure are the result of numerous meetings and touch points with city officials (predominantly City Managers and Police Chiefs) from each of our contract cities over the last few years. The agreement reflects the feedback that was provided to us through that process by the City Managers and Police Chiefs during individual meetings, regional meetings that included the County Supervisor that represents Clayton, as well as multiple presentations and listening sessions at the Public Managers Association and Police Chiefs Association. The updated agreement and fee structure clearly describes the services CCAS will provide to Clayton and defines a funding structure to ensure the Department is able to cover the costs of providing those services.

Services Defined
The current agreement, which has been in place since 2006, is approximately one page in length and provides little detail with regards to what specific services will be provided. The updated agreement provides much greater detail regarding service levels, including:
• Detailing specific services provided under the agreement for all areas of operation, • Creating accountability by listing target response times for each activity type, • Defining what is covered under deceased animal services, • Describing which services are not included under the agreement, and • Codifying performance reporting within the agreement.

Cost
The updated agreement includes a defined fee structure for FY 22/23 and FY 23/24, which converts to a formula-based fee structure that will commence in FY 24/25. The fee structure is as follows:
• For fiscal year 2022-2023, $7.97 for each person residing within the City limits as of January 2022.

For example, Clayton’s population is 11,268. Therefore, Clayton’s Annual Fee for FY 22/23 is $89,806.

For fiscal year 2023-2024, $9.11 for each person residing within the City limits as of January 2023.

For example, if Clayton’s population remained the same (11,268), the Annual Fee will be $102,651. • For each fiscal year thereafter, the per capita rate for the Annual Fee shall be calculated using the following formula: (A) The County’s budgeted cost to provide Animal Services throughout the County in that fiscal year, minus the sum of animal licensing fees and user fees projected to be received from all County residents in that fiscal year, minus the budgeted County general fund contribution for that fiscal year, divided by (B) the sum of the population of the unincorporated area plus the population of all cities for which the County provides Animal Services. • Each year, the County will prepare a reconciliation report of actual costs incurred by the County to provide Animal Services during the preceding year.

Contra Costa Animal Services (CCAS) - Serving Our Community!

AGENCY SNAPSHOT
Martinez Shelter
A 38,000 sq. ft. facility to provide public
services and house animals while they
are in our care
Law Enforcement Unit
Field Service Officers that enforce state laws and
local ordinances, investigate animal bites, attacks
and crimes, and serve as our “boots on the
ground” in your city
Animal Care Unit
A medical and husbandry team to
provide basic daily care to the animals
as well as any necessary medical care
Veterinary Team
A veterinary team to support our
low-cost spay/neuter and vaccination
clinics
Administrative Unit
An administrative team that manages our call
center, dispatch services, administrative hearing
processes, and assists the public in person, online,
and by phone
Volunteer Unit
A core of more than 150 committed
volunteers that perform vital tasks in and
out of the shelter, including animal enrichment, adoptions and lost/found support Public Safety Services
• Stray & Aggressive Animal Patrols (inc. Livestock)
• Animal Bite Investigations
• Quarantine of Dangerous Animals & Potential
Rabies Suspects
• Animal Cruelty Investigations
• Impoundment & Sheltering of Stray/Sick/Injured Pets
• Pet Licensing & Enforcement
• Animal Noise Enforcement
• Deceased Animal Retrieval
• Enforcement of County Dangerous Animal Laws
• Enforcement of State & Local Animal Welfare Laws
• Assisting Local Agencies (Police, Fire, etc.)
with Activity Calls
• 24/7 Dispatch Services
For more information about our services, visit ccasd.org Community Services
• Shelter & Medical Support for Lost/Sick/Injured Pets
• Pet Adoptions (Martinez Shelter)
• Lost Pet Support & Return To Owner (RTO) Services
• Shelter & Care for Animals Displaced by Disaster
• Humane Education Programs
• Public Low-Cost Spay/Neuter Clinic
• Public Low-Cost Vaccination Clinic
• Community Clinics & Adoption Events
• Community Cat Trap-Neuter-Release (TNR) Program
• Customer Service Support
• Volunteer Program

COST FOR COMPASSION IN ACTION
ANIMAL

SERVICES
ANIMAL

SERVICES

CONTRA COSTA COUNTY
4800 Imhoff Place
Martinez CA
Ph: 925-608-8400
www.ccasd.org
Just One Click Away!
Many of our services can be accessed via our website:
• View pets available for adoption
• Report lost or found pets
• Purchase a license for your pet
• Schedule a spay/neuter appointment
• Schedule a vaccination appointment
• Sign up to become a volunteer or foster
• Donate to the Animal Benefit Fund
• File an animal noise complaint
• Report deceased animals
All this and more at ccasd.org
See Our Animals
CCAS Serving Clayton
Contra Costa Animal
Services partners
with the City of
Clayton to provide
animal services.

The annual cost is
established by a per
capita rate the City
pays based on
current population.

The cost for Animal
Services in Clayton
for Fiscal Year
2021/2022 is
$6.79 per capita.

Agenda Item: 5(b)
declaring
June 14, 2022
as
“Otter Day”
Whereas, the Dana Hills Swim Team (DHST) has embodied the character of Clayton for the past 45 years, with every parent volunteering and working side by side in an effort to develop and maintain a high-quality swim program with an emphasis on building self-esteem, camaraderie, good sportsmanship, and team spirit; and
Whereas, DHST is a recreation swim team that has enabled thousands of Clayton youth of all abilities to through four decades to have fond memories of summers with friends on the pool deck and at meets. DHST is non-profit organization led by countless volunteers and tireless and talented coaches; and
Whereas, the Dana Hills Swim Team was formed in 1977 as the Aquaducks consisting of 50 swimmers. During the 1986 season, the team was renamed as the Otters. By 1989, the team’s roster had swelled to over 100 swimmers; and
Whereas, in 1990 under the leadership of Matt Mazzei and in partnership with the Dana Hills Homeowners Association, the team opened a new 25-yard, 8-lane pool in a gorgeous setting tucked beneath the majestic Mt. Diablo. It immediately transformed Dana Hills into one of the finest private swimming facilities in the County, that became home to over 250 swimmers from Clayton and surrounding cities who participate each year. Every year since 1995 Dana Hills hosts the Devil Mountain Pentathlon; an event which draws 1,000 swimmers to Clayton; and
Whereas, DHST participates annually in the Concord City Swim Meet, held in late July each year. DHST won the A Division for the first time in 1992. DHST has won Division A at the Concord City meet for the last 18 years, capturing the team's 25th City Meet Championship in 2021; and
Whereas, the Contra Costa County Swim Championships is the biggest meet of the year and features swimmers who achieve qualifying times. At the County meet, DHST competes against the best swimmers in the County and has been a perennial top 5 team throughout the last decade. DHST has 2 Division II championships from 1998 and 1999, placing second in Division I in 1995; and
Whereas, in 2021, the Dana Hills Swim Team under the leadership of Head Coach Nikki Palmer won Division 1 of the Contra Costa County Swim Championships for the first time! NOW THEREFORE, I, Peter Cloven, Mayor, on behalf of the Clayton City Council, do hereby proclaim Tuesday, June 14, 2022, as “Otter Day” in in the City of Clayton, and call upon our residents to do the same.
[Type here] [Type here] Agenda Item: 9(a)

STAFF REPORT
TO: HONORABLE MAYOR AND COUNCILMEMBERS
FROM: REINA SCHWARTZ, CITY MANAGER

KATHERINE KORSAK, FINANCE DIRECTOR
DATE: June 7, 2022
SUBJECT: Discuss and Approve Conceptual Framework for Allocation of Pandemic Recovery Reserve Funds

RECOMMENDATION
Discuss and approve a conceptual framework for allocation of Pandemic Recovery Reserve Funds.

BACKGROUND
On March 11, 2021, President Biden signed into law HR 1319, the American Rescue Plan Act of 2021 (“ARPA”), which provides a total of $1.9 trillion in financial assistance to individuals, businesses, and state and local government agencies to assist in the economic recovery from the COVID-19 pandemic. ARPA included a provision entitled “Coronavirus State and Local Fiscal Recovery Funds” (“SLFRF”) that includes $350 billion in funding for state and local governments of which $65 billion was dedicated to local government agencies. ARPA provided flexibility for each government to meet local needs in four areas: 1) supporting public health response to and economic impacts from the pandemic; 2) provide premium pay for essential workers; 3) replace lost public sector revenues; and 4) invest in water, wastewater and broadband infrastructure; and The City is classified as a non-entitlement unit within the provisions of SLFRF and will receive a total of $2,934,049, in federal relief funds divided in two equal payments (or “tranches”) of approximately $1,467,025. The City received its first payment in July 2021 and the second payment will be received on or before the same time this year.

In the fall of 2021, the City Council embarked on a process to identify investment opportunities of the one-time ARPA funds and approved an agreement with Management Partners to engage the community and provide an analysis of such investment opportunities for Council consideration. As a result of that outreach and analysis, the City Council has approved a series of programs related to COVID recovery.

Subject: Discuss and Approve a Conceptual Framework for Allocation of Pandemic Recovery Reserve Funds Date: June 7, 2022
Page: 2 of 4
The programs approved by the City Council have included appropriating the initial tranche of $1,467,025 for the Clayton Cares program to provide relief to businesses and community members and related administrative expenses. Subsequently, in January 2022 the City Council reappropriated $242,000 of these funds to provide one-time essential worker premium pay to City employees.

Additionally, in March, the City Council approved the use of $49,500 in ARPA funding for the purchase and implementation of a 3-year license of the ClearGov budget software platform.

In response to the US Treasury Department’s Final Rule governing the use of SLFRF funds, the City Council elected to assign all of its SLFRF funding to the category of Revenue Replacement resulting in a transfer in of the ARPA funding amount to the General Fund. This also had the result of simplifying and streamlining the reporting and auditing requirements for these federal funds. The replenishment/inflow of these one-time revenues in the General Fund then allowed the City Council to designate the resulting unanticipated surplus from these funds into a “Pandemic Recovery Reserve Fund” (Fund 111) which captures the ultimate uses of the ARPA funds.

DISCUSSION
To date programs funded through the Pandemic Recovery Reserve include:
• Clayton Cares program grants ($1,025,500);
• Administrative costs ($150,025);
• One-time premium pay for essential workers ($242,000); and • Purchase of a 3-year license of the ClearGov budget software ($49,500).

Of these $1,467,025 appropriations approved, it is anticipated that $1,087,632 will be spent by year end FY2021/22. This will leave a balance of $381,960. Combined with the second tranche of funding in the amount of $1,467,024 that will be received in July 2022, the City Council has a total of $1,848,984 to allocate going forward. Within the context of the Proposed FY2022/23 Budget, staff is recommending that up to $400,000 be spent from the Pandemic Recovery Reserve for critical needs and to help stabilize the General Fund for FY2022/23. If approved, that would leave the City Council $1,452,416 for further appropriation. It is also recommended to reserve 20% ($586,810) of the total grant funds to be able to revisit and assess future needs of the City. This 20% $586,810 would be designated as “restricted” in fund 111. This would leave $865,606 in unassigned funds for the City Council to be able to allocate at a future date.

At the Council Budget/Audit Committee meeting on May 23, 2022, the Committee asked that a report be brought back to discuss allocation categories and/or priorities overall for ARPA/Pandemic Recovery Reserve spending to allow the budget requests to be put in context with other spending options and needs.

Since the City Council now has significant flexibility in allocating Pandemic Recovery Reserve Funds, it is helpful to think about categories of potential spending and assigning priority to those categories.

Staff recommends that the Council consider the following broad categories for spending as a first level of decision-making regarding future use of Pandemic Recovery Reserve funds.

Subject: Discuss and Approve a Conceptual Framework for Allocation of Pandemic Recovery Reserve Funds Date: June 7, 2022
Page: 3 of 4
Category Examples Priority
Budget Stabilization • Potential use of Pandemic Recovery Reserve funds for annual budget stabilization FY2022/23 (possibly $130,000), FY2023/24 and FY2024/25 – pending a potential ballot measure in November 2024; could be approximately $150,000 - $200,000 per year
Organizational
Efficiency
Investments to
improve operational
efficiency and
effectiveness
• 1-year limited term Senior Accountant position to finish follow-up to audit and develop more robust financial systems ($150,000 recommended for FY2022/23)
• Software and services to digitize and implement electronic document management for records management ($35,000
recommended for FY2022/23)
• Increased IT support for better leveraging of technology and cybersecurity. ($50,000 recommended for FY2022/23)
• Development & implementation of a comprehensive Asset Management system
Infrastructure &
Equipment
Investments in
construction, purchase
and/or installation of
physical
improvements
• Energy efficiency projects
• Water efficiency projects
• Accelerate replacement of non-police vehicles that are costly to maintain
• Renovate turf areas at Clayton Community Park
• Replace carpet and re-paint City Hall
• Replace the carpet at the Library
• Obtain a key card system for City Hall to increase building safety, have personalized access levels, create safety audits, and have capacity for employee activity logs.

Direct Community
Support
Direct financial support
to households and/or
businesses
• Extension of the Clayton Cares grant program
• Funding for fee subsidies for resident use of facilities (beyond that already provided)
Communication and
Community
Engagement
• Revamp or replace City website
• Better online payment mechanisms
• New telephone system that allows call forwarding and has improved technology for improvement in responding to residents.

Recruitment/
Retention
• Fund a comprehensive compensation review and job
classification study.
• Fund an organizational audit, assessment, or scan
Subject: Discuss and Approve a Conceptual Framework for Allocation of Pandemic Recovery Reserve Funds Date: June 7, 2022
Page: 4 of 4

FISCAL IMPACT
The ultimate fiscal impact will depend on the City Council’s decisions regarding priorities for use of Pandemic Recovery Reserve funds, as well as the timing of those uses. Those items in bold and italic in the table above are staff priorities for operational and financial needs of the City to stabilize the FY2022/23 fiscal year budget and ensure best practices are being met.

A summary of the recommended uses of Pandemic Recovery Reserve Funds for FY2022/23 is shown below.

Budget Stabilization (3 Major Items that contribute to this) Replenish Fund 502 CERF for Police Vehicle Replacement $70,000 Increased Insurance Costs $55,000
Replenish Shortfall in Fund 214 Neighborhood Streetlights $20,000 Savings in other areas like recruitment and PERS Normal Costs $(15,000) Total Transfer from Fund 111 for FY23 Budget Stabilization $130,000 Unmet needs that City Staff Recommends to Use in FY23
Full Time Senior Accountant Limited One Year Term $150,000 Software and Services to Digitize Records $35,000
Increased IT Support for cybersecurity $50,000
Other needs as City Council approves $35,000
$270,000
Total Recommended to Use from Pandemic Recovery Reserve Fund in FY23 $400,000 Fund 111 Pandemic Recovery Reserve Summary:

Projected Fund Balance at beginning of FY23 $382,392
Revenue in FY23 $1,470,024
Proposed Expenditures in FY23 $(400,000)
Proposed TOTAL Ending Fund Balance FY23* $1,452,416
*Reserve 20% of the total Pandemic Reserve as "restricted for future uses" $586,810
*Proposed unrestricted fund balance at end of FY23 $865,606 [Type here] [Type here] Agenda Item: 9(b)

STAFF REPORT
TO: HONORABLE CITY COUNCIL MEMBERS
FROM: Katherine Korsak, Finance Director
Reina Schwartz, City Manager
MEETING DATE: June 7, 2022
SUBJECT: Workshop for Fiscal Year 2022/23 Draft Budget and Direction to Staff The City budget process has typically included a Council subcommittee review then introduction at a public meeting in June then adoption at a second public meeting in June. This report is to provide the City Council an overview of the proposed budget for FY2022/23 and request direction to staff on any potential adjustments.

Total General Fund operating revenues for the FY 2022/23 proposed budget are $6,850,320 including the transfer in of ARPA funding. Without ARPA funding, the total General Fund proposed revenues are $5,384,771, a $199,321 or 3.8% increase over FY2021/22. General Fund operating expenditures are proposed at $6,957,459 including ARPA and $5,490,435 absent the ARPA funding. This represents an increase of $312,950 or 6% over FY2021/22. This initial draft base budget for FY2022/23 would result in a deficit of $107,139 absent strategies to balance the budget. In addition to the financial challenge in the General Fund, the city’s Street Light Assessment District is anticipated to need a subsidy of $20,403 for FY2022/23 just to maintain the basic services in the district. If this amount is added to the General Fund deficit amount, the likely amount needed for funding is:
$127,542. The Proposed Budget includes strategies to address the potential deficit and result in a balanced budget.

Revenues. For FY 2022/23, the proposed budget has been prepared with revenue estimates based on input from HdL Companies, who assist the City (and many other cities) in tax revenue estimates, and in consultation with the Contra Costa County Tax Collector and Controller/Auditor offices. The largest revenue sources of Property Taxes and Property Tax In-Lieu of VLF are both estimated to grow significantly, largely due to the increases in home values and turnover/sales of homes resulting in higher assessed values. Sales tax revenues, however, are not faring as well, and are estimated to come in slightly below the prior year’s budget. Overall tax revenue is projected to grow by about 6% and all General Fund revenue sources by 3.8%.

Expenditures. The single most significant factor in overall expenditure growth is salaries; labor costs represent nearly 70 percent of the General Fund budget. This is true even though Clayton salaries lag significantly behind comparable small cities in Contra Costa and Alameda counties. Having salaries so far below the comparable market limits the City’s ability to recruit and retain adequate talent which leads to nearly continual organizational disruption. The disruption is costly in its own right and damaging to employee morale. Labor cost increases in the budget are the result of the negotiated 4% COLA for Police Officers Association employees, a proposed 3% COLA for unrepresented miscellaneous employees, and increases in health care costs and required contributions to PERS Subject: Workshop for Fiscal Year 2022/23 Proposed Budget Date: June 7, 2022
Page: 2
_______________________________________________________________________________________________________________________ toward the City’s Unfunded Accrued Liability (UAL). A table showing the major General Fund expenditure changes is attached (as well as being included in the overall attached Proposed Budget).

Special Funds. Of the various special restricted funds, there are three – the Geological Hazard Abatement District [GHAD] (Fund 212), Neighborhood Street Lights (Fund 214), and Stormwater (Fund 216) which have potential fund balance issues within the next few years. Each of these have declining fund balances and are forecast that they may not have sufficient revenues to cover future costs.

Increases in revenues would then be needed to maintain the services these funds provide. Any revenue increases may be subject to Proposition 218 majority protest, a 50% plus on if a general revenue measure; or if a special revenue measure a voter approved 2/3 approval.

Without sufficient special fund revenue, the City’s General Fund would need to subsidize these special purpose funds, and which would place increased pressure to reduce other General Fund operations.

In FY2022/23, the Street Light Fund in fact cannot cover all of the costs typically assigned to that budget function. This will result in the need to fund approximately $20,403 from the General Fund (which is already predicted to end the year in a deficit absent additional actions) or from ARPA or other reserves.

The Landscape Maintenance District Budget and Grove Park budgets are projected to have the annual CPI increase of 3% as stipulated in the ballot measures. Both funds have sufficient revenue and fund balances to address various operational and capital needs.

Budget/Audit Committee Review
On May 23, 2022, the City Council’s Budget/Audit Committee consisting of Vice Mayor Tillman and Councilmember Jeff Wan met to review the Proposed Budget. Committee comments and suggestions included:
• Consider potential leasing options for police and other vehicles to determine if there would be cost savings. Also consider delaying the annual contribution to vehicle replacement or funding from Pandemic Recovery Reserve.
• Conduct a more detailed analysis of fee structures and amounts to improve efficiencies and cost recovery.
• Consider evaluating the value of the City’s membership in various regional and state-wide organizations.
• Support for a 3% COLA for the City’s miscellaneous employees. • Consider eliminating or reducing City Council and Planning Commission stipends. • Pursue increased community engagement.
• Related to the Pandemic Recovery Reserve – bring forward a framework for evaluating these funds in a more comprehensive way. Additionally, strategically use Pandemic Recovery Reserve funds but also consider minimizing the use of Pandemic Recovery Reserve for budget stabilization where possible.
• Acknowledged that the budget deficit to be resolved for FY2022/23 is reflective of the underlying structural deficit in the City’s budget.

Ultimately the Committee recommended forwarding the Proposed Budget to the full Council for a more comprehensive discussion and decisions.

Subject: Workshop for Fiscal Year 2022/23 Proposed Budget Date: June 7, 2022
Page: 3
_______________________________________________________________________________________________________________________ Attached is a draft of the City’s Proposed FY2022/23 Budget. It is also available as a digital interactive book at: https://cleargov.com/california/contra-costa/city/clayton It should be noted that, as discussed in several previous meetings, the long-term projections for the City show that there is a structural gap between ongoing revenues and ongoing expenses.

Furthermore, since historically we have seen that revenues are growing more slowly than expenditures, it will be imperative for the City to spend time over the coming months on developing a long-term budget balancing strategy.

Attachments:

1. Summary of Proposed Increases and Unmet Needs

2. Draft FY2022/23 Proposed Budget
City of Clayton
City of Clayton Fiscal Year 2022/23 Budget
Proposed Version
Last updated 06/04/22
City of Clayton | FY2022/23 Budget Page 1

TABLE OF CONTENTS
Budget Overview 3
Proposed Increases and Unmet Needs 4
City of Clayton | FY2022/23 Budget Page 2

BUDGET OVERVIEW
City of Clayton | FY2022/23 Budget Page 3
Proposed Budget Changes
The Proposed Budget for FY2022/23 reflects cost increases in a number of areas. The most significant changes are summarized in the table below.

Major Budget Changes
Budget Item Increased Cost Reduced Cost Net Comments
POA COLA $43,218 Already negotiated agreement for 4%
Health Care Premiums $12,390 Anticipate increased costs of at least 5% Insurance (MPA) $53,823 Insurance premium amounts for FY2022/23 from MPA PERS Unfunded Liability $46,265 Per PERS Actuarial Report Dispatch $15,388 Contract with Concord for 5% increase
Animal Care $14,180 Contract with CC County; reflects increased costs.

Electric/Gas $11,480 Anticipated increases in electric costs Election $20,000 Every other year.

Required Actuarial Reports $11,500 GASB 68 and GASB 75 reports.

Legal Services $5,820 Agreement with BBK has CPI escalator (5% for FY23) COLA Miscellaneous Empl $55,820 Proposed 3% COLA for Miscellaneous Employees Engineering Services
$28,949
Reflects minor increase in hourly costs and an increase in work hours.

Capital Equip Replacement $10,000 Reflects increased costs for Police vehicles IT support for Council Meetings $7,400 Additional support needed for hybrid meetings.

PD Radio Lease Payment
$35,000
Transfer from Rainy Day Fund shown in Revenues; no
net General Fund Cost
Add 0.2 FTE Assistant Planner $21,000 Needed to address workload increases Other changes ($20,902)
PERS Normal cost ($20,607)
This reflects the impact of turnover, both in terms of
lower salaries as well as an increasing percentage of
the workforce covered under PEPRA rather than
Classic PERS formulas.

Recruitment ($24,850)
Less need for recruitment expense with department
head positions filled.

Water ($23,585)
Appears to have been over-budgeted in the past.

Adjusted to better reflect actual experience, plus an
anticipated increase in rates due to the drought.

Totals $392,683 ($79,733)
Net Total $321,950
When total proposed costs are compared to total proposed revenues (which are projected to have an increase (other than ARPA funding) of $199,321, the General Fund shows a net deficit of $107,139.

Additionally, the Neighborhood Streetlight Maintenance District will exhaust its reserves this upcoming fiscal year and will require a subsidy of $20,403 in FY2022/23 in order to maintain services. To the extent that this cost would revert to the General Fund absent any other action, the initial deficit is $127,542.

To address this shortfall the following recommendations are made:

Delay for one year the General Fund contribution for police vehicle replacement saving $70,000. A replacement vehicle can still be purchased in FY2022/23 from the existing fund balance in the Capital Equipment Replacement Fund (CERF - Fund 502). That will significantly reduce the existing fund balance in that fund which will need to be made up in future years. This expense could also be funded through Pandemic Recovery Reserve Funds if desired. In either case, this is a one-time fix to an ongoing expense.

Use Pandemic Recovery Reserve in the amount of $57,542 to stabilize the budget while allowing needed expenditure increases to be incorporated.

Other options that could be considered to eliminate the use of $57,542 in Pandemic Recovery Reserve Funds to balance the budget:

Cap City Engineer costs at $12,000 per month retainer - $12,000 Reduce or eliminate Council and Planning Commission Stipends - up to $40,000 (Identified at Budget/Audit Committee meeting of May 23, 2022)
Eliminate COLA for Miscellaneous employees - $55,820
Roll back City Manager 3% salary increase (was effective 12/14/2021) - $7,650 (Recommended if COLA for Miscellaneous is not adopted) City of Clayton | FY2022/23 Budget Page 4
Ultimately, it is recommended that Pandemic Recovery Reserve be used to cover the deficit anticipated for FY2022/23. Reductions in any of the identified areas would have significant negative consequences for City operations, community service and staff morale.

In addition to needing to address this anticipated shortfall, there are a number of other financial pressures that need to be addressed for the upcoming fiscal year, as summarized in the table below.

Budget Item Increased Cost Comments
Add 1.0 FTE Senior Accountant $150,000
Needed for continued accounting clean-up. Proposed as a one-year limited term position. Propose using ARPA funds for this one-year effort. Re-evaluate at year-end FY2022/23 as to future needs.

Additional IT Support $50,000
Estimated. Pending completion of IT Security Assessment in June.

Recommend use of ARPA for this effort once the scope is defined.

Records Management/Digitizing $35,000
Rough estimate. No appropriation is requested until proposals are received.

Recommend use of ARPA for this effort once defined.

Total $235,000
Based on the needs described above, the following is recommended for use of Pandemic Recovery Reserve for FY2022/23:

Budget Stabilization (3 Major Items that contribute to this) Replenish Fund 502 CERF for Police Vehicle Replacement $ 70,000 Increased Insurance Costs $ 55,000
Replenish Shortfall in Fund 214 Neighborhood Streetlights $ 20,000 Savings in other areas like recruitment and PERS Normal Costs $ (15,000) Total Transfer from Fund 111 for FY23 Budget Stabilization $ 130,000 Unmet needs that City Staff Recommends to Use in FY23
Full Time Senior Accountant Limited One Year Term $ 150,000 Software and Services to Digitize Records $ 35,000
Increased IT Support for cybersecurity $ 50,000
Other needs as City Council approves $ 35,000
$ 270,000
Total Recommended to Use from Pandemic Recovery Reserve Fund in FY23 $ 400,000 Fund 111 Pandemic Recovery Reserve Summary:

TABLE OF CONTENTS
Proposed Budget FY2022/23 4
Proposed Budget Fiscal Year 2022/23 5
Background Information 6
Directory of Officials and Advisory Bodies 7
Organizational Chart 8
Mission/Vision 9
Demographics 10
History of Clayton 14
Fund Structure 17
Basis of Budgeting 18
Budget Overview 20
Budget Message 21
Economic Recovery 22
Public Employees Retirement Pension System (CalPERS) 23 Improvement Opportunities 28
American Rescue Plan Act 30
Proposed Increases and Unmet Needs 31
Staffing 33
How to Read the Budget Document 34
Fund Summaries 35
General Fund 101 36
Rainy Day Fund 110 51
Pandemic Recovery Reserve (111) 53
Gas Tax (HUTA) 56
RMRA Gas Tax 61
Landscape Maintenance District 64
The Grove Park CFD 72
Oakhurst Geological Hazard Abatement District 78
Presley GHAD Settlement 83
Street Light Assessment District 85
Stormwater Assessment 89
Measure J 96
Development Impact Fees 101
Successor Housing Agency 104
American Rescue Plan Act - State & Local Fiscal Recovery 108 Restricted Grants 109
Self Insurance Fund 116
Capital Equipment Replacement Fund 120
Pension Rate Stabilization 124
Endeavor Hall 126
High Street Bridge Assessment District 131
Oak Street Bridge Assessment District 135
Lydia Lane Sewer Assessment 139
City of Clayton | FY2022/23 Budget Page 2
Oak Street Sewer Assessment 143
Diablo Estates Benefit Assessment District 147
Clayton Financing Authority 151
Middle School CFD 154
CFA 2007 Middle School Refunding Bonds 158
Redevelopment Successor Agency 161
Capital Improvements Fund 166
Departments 170
Legislative 171
Admin/Finance/Legal 175
Public Works 180
Community Development 184
General Services 188
Police 191
Library 196
Engineering 199
Clayton Community Park 202
Capital Improvements 205
One year plan 206
Multi-year plan 207
Appendix 209
Engineering Requests 210
Glossary 231
City of Clayton | FY2022/23 Budget Page 3
PROPOSED BUDGET FY2022/23
City of Clayton | FY2022/23 Budget Page 4
Proposed Budget FY 2022/23
The City Council
Peter Cloven, Mayor
Letecia "Holly" Tillman, Vice-Mayor
Jeff Wan, Councilmember
Jim Diaz, Councilmember
Carl "CW" Wolfe, Councilmember
Recommended by:

Reina J. Schwartz, City Manager
Prepared and Presented by:

Reina J. Schwartz, City Manager
Katherine Korsak, Finance Director
City of Clayton
6000 Heritage Trail Drive
Clayton, CA 94517
www.claytonca.gov 
City of Clayton | FY2022/23 Budget Page 5

BACKGROUND INFORMATION
City of Clayton | FY2022/23 Budget Page 6
Directory of Officials and Advisory Bodies
The City of Clayton operates under the Council-Manager form of government. Under this system, the City Council hires a professional City Manager who is responsible for translating council policy into action, as well as the daily administration and management of all City departments. The strength of the Council-Manager form of government lies in the political leadership of the City Council combined with the managerial expertise of the City Manager.

The City Council
Peter Cloven, Mayor
Letecia "Holly" Tillman, Vice-Mayor
Jeff Wan, Councilmember
Jim Diaz, Councilmember
Carl "CW" Wolfe, Councilmember
Commissions
Planning Commission
Committees
Trails and Landscape Committee
Appointed Officials and Department Heads
City Manager, Reina J. Schwartz
City Attorney (contract), Malathy Subramanian
Interim Chief of Police, Joseph Kreins
City Clerk/HR Manager, Janet Calderon
Finance Director, Katherine Korsak
City Treasurer, Hank Stratford
Community Development Director, Dana Ayers
City Engineer (contract), Larry Theis
Maintenance Supervisor, Jim Warburton
City of Clayton | FY2022/23 Budget Page 7
City of Clayton Organization Chart

CITIZENS
City Council
5 Member Elected Offici...

Planning Commission
5 member
Appointed by City Coun...

Trails & Landscaping C...

City CouncilAppointed
11 members
City Manager
Reina Schwartz
Assistant totheCity ...

Laura Hoffmeister
City Clerk/HR Manager
Janet Calderon
Community Develope...

Dana Ayers
CodeEnforcementOff...
30%
AssistantPlanner
Chief of Police
Interim Chief Jospeh Kr...

PoliceSergeants (3)
PoliceAdministrative...

PoliceOfficers (7)
PoliceOfficeCoordina...

FinanceDirector
Katherine Korsak
Accounting Technician
AdministrativeAssista...
70%
City Engineer
Larry Theis &Jason Chen
Anchor CM (contracted ...

MaintenanceSupervis...

Jim Warburton
SeniorMaintenanceW...

MaintenanceWorkers ...

City Treasurer
Hank Stratford
City Attorney
Malathy Subramanian
Best, Best &Krieger, LL...

City of Clayton | FY2022/23 Budget Page 8
Mission, Vision and Values
Mission
Enhance the City of Clayton by providing quality of service through:

Responsible Stewardship
Effective Collaboration
Continuous Progress
Our Vision
The City of Clayton organization will be recognized as a premier small city. Customer service will be our hallmark; organizational processes will be a model of efficiency and effectiveness; innovation will be commonplace; and excellence of work product will be the norm. The employees will enjoy their work environment, and each will be a valued and respected member in his or her field of work. All residents and the City Council will be proud of their City government.

Our Values
Excellence
Integrity
Respect
Teamwork
(Updated 2020)
City of Clayton | FY2022/23 Budget Page 9
Population Overview

TOTAL POPULATION
12,083
1%
vs. 2018

GROWTH RANK
111 out of 483
Municipalities in California

DAYTIME POPULATION
8,197
Daytime population represents the effect of persons coming into or leaving a community for work, entertainment, shopping, etc. during the typical workday. An increased daytime population puts greater demand on host community services which directly impacts operational costs. * Data Source: American Community Survey, 2010 Census, 2000 US Census and 1990 US Census

POPULATION BY AGE GROUP
Aging affects the needs and lifestyle choices of residents. Municipalities must adjust and plan services accordingly. * Data Source: American Community Survey, 2010 Census, 2000 US Census and 1990 US Census * Data Source: American Community Survey, 2010 Census, 2000 US Census and 1990 US Census 1990
1991
1992
1993
1994
1995
1996
1997
19981999
2000
2001
20022003
2004
2005
2006
2007
20082009
2010
2011
20122013
2014
2015
2016
2017
2018
2019
7k
8k
9k
10k
11k
12k
<5 5-9 10-14 15-19 20-24 25-34 35-44 45-54 55-59 60-64 65-74 75-84 >85 City of Clayton | FY2022/23 Budget Page 10
Household Analysis

TOTAL HOUSEHOLDS
4,232
Municipalities must consider the dynamics of household types to plan for and provide services effectively. Household type also has a general correlation to income levels which affect the municipal tax base.
* Data Source: American Community Survey, 2010 Census, 2000 US Census and 1990 US Census 41%
higher than state average
Family Households
70%
40%
higher than state average
Married Couples
70%
75%
lower than state average
Singles
1%
6%
lower than state average
Senior Living Alone
12%
City of Clayton | FY2022/23 Budget Page 11
Economic Analysis
Household income is a key data point in evaluating a community’s wealth and spending power. Pay levels and earnings typically vary by geographic regions and should be looked at in context of the overall cost of living.

HOUSEHOLD INCOME
Above $200,000
36%
193%
higher than state average
Median Income
$157,768
110%
higher than state average
Below $25,000
3%
79%
lower than state average
* Data Source: American Community Survey, 2010 Census, 2000 US Census and 1990 US Census Over $200,000
$150,000 to $200,000
$125,000 to $150,000
$100,000 to $125,000
$75,000 to $100,000
$50,000 to $75,000
$25,000 to $50,000
Below $25,000
City of Clayton | FY2022/23 Budget Page 12
Housing Overview
2019 MEDIAN HOME VALUE
$771,400
* Data Source: 2019 US Census Bureau (http://www.census.gov/data/developers/datasets.html), American Community Survey. Home value data includes all types of owneroccupied housing.

HOME VALUE DISTRIBUTION
* Data Source: 2019 US Census Bureau (http://www.census.gov/data/developers/datasets.html), American Community Survey. Home value data includes all types of owneroccupied housing.

HOME OWNERS VS RENTERS
Clayton
7%
Rent
93%
Own
State Avg.
45%
Rent
55%
Own
* Data Source: 2019 US Census Bureau
(http://www.census.gov/data/developers/data-sets.html), American Community Survey. Home value data includes all types of owner-occupied housing.
2009
2010
2011
20122013
2014
201520162017
2018
2019
550k
600k
650k
700k
750k
800k
> $1,000,000
$750,000 to $999,999
$500,000 to $749,999
$400,000 to $499,999
$300,000 to $399,999
$250,000 to $299,999
$200,000 to $249,999
$150,000 to $199,999
$100,000 to $149,999
$50,000 to $99,999
< $49,999
City of Clayton | FY2022/23 Budget Page 13
History of Clayton
~
The Incorporation of Clayton
by Eldora Hoyer and Julie Pierce
A California voting record was established when ninety-one percent of Clayton’s 364 registered voters approved incorporation of Contra Costa County’s 13th city on March 3, 1964, in Endeavor Hall. Clayton residents wanted local control of planning and development. They worried about development quality and density and the commercial strip zoning racing their way. They did not oppose development, but after many futile hearings in Martinez and elsewhere, they wanted to retain the semi-rural ambience of the Upper Clayton Valley.

In 1959, some leading Clayton citizens discussed incorporating Clayton to retain its historic identity and rural atmosphere through local control of land use planning and zoning. They were Randall “Chubby” Humble, owner of the Pioneer Inn; George Murchio, land owner; M. F Ohman, general manager of Pittsburg’s Dow Chemical plant; Judge Wroy Renaghan; and Lawrence Wallace, real estate appraiser. Appointed to their committee were Henry White, Martinez Hospital administrator; Thomas Grundy, Eldora Hoyer and Robert Kuntz.

Although an initial incorporation attempt failed in 1960, when two quarry properties requested exclusion, the Clayton Revolution was rekindled in 1963 by an impending annexation that would divide the town and forever prevent incorporation of historic Clayton.

News of a cherry stem annexation using streets and the Clayton home of Concord’s city attorney to access Cardinet Glen [the subdivision of homes near City Hall on Wallace and Cardinet] was seen in an obscure paragraph of the Oakland Tribune by Clayton’s Nan Wallace on March 3, 1963, who alerted Clayton residents and formed an incorporation study committee.

To delay the Concord annexation long enough to explore alternatives, shocked Claytonians immediately filed notice of intention to begin incorporation proceedings. Many residents circulated petitions and Eldora had the honor of delivering the papers to the county offices in Martinez to place it on the ballot. James Conley walked house to house collecting contributions for election expenses and ended up with enough extra money to buy a flag for city meetings. This time, the proposed incorporation area excluded large properties whose owners, wanting Concord sewers, could be expected to withdraw their lands and defeat the attempt to bring incorporation to a vote. It was hoped that future residents would annex to Clayton later.

City of Clayton | FY2022/23 Budget Page 14
While exploring alternatives to incorporation, the Clayton Incorporation Committee managed to have the Concord annexation attempt withdrawn because of irregularities, but it seemed evident that annexation attempts would continue. Clayton residents decided to bring incorporation to a vote feeling that it must be done now or probably never.

At 8:00 pm on March 3, 1964, Sigrid Frank, a 69-year-old Clayton old-timer who was the poll inspector, stepped onto the front porch of Endeavor Hall, rang a brass bell, and in traditional style proclaimed, “Hear Ye! Hear Ye! Hear Ye! The polls are closed.” The incorporation workers were tired but hopeful and euphoria built as the votes were tallied, with community “watchdogs” looking on. On top of the hill above town, Ken Byrd and Richard Hamb began ringing victory news across the valley with Clayton’s old school bell. The community had successfully declared its independence on March 3, 1964 in that historic vote.

Clayton’s first official meeting was March 18, 1964, when the council was sworn into office by Judge Wroy Renaghan with a large crowd in attendance. George Abbott and Al Liming drove to Sacramento to file the incorporation papers directly with the Secretary of State, to ensure prompt processing.

Maurice Huguet, Jr. was hired as city attorney and Marguerite Ellingson became the city’s part-time clerk. Huguet was then the youngest city attorney in Contra Costa County.

Our inaugural Planning Commission consisted of Joe Wallace, chairman, Joe Swicegood, Beth Laurence, Charles Levine and Howard Sumerlin. William Walker, a professional accountant, was appointed the first City Treasurer. Clayton’s city letterhead, still in use today, was designed in 1964 by Bob Hoyer with art by Ray Hare, a Clayton Valley High School art student.

Clayton’s standing among other jurisdictions grew with its activity on county, district, and regional boards and commissions and in the League of California Cities. In 1966-67 Clayton’s mayor chaired the Contra Costa Mayors’ Conference, and Clayton’s part-time clerk was Conference secretary. Clayton was represented at the 1967 National Mayors’ Conference in Honolulu (at no expense to Clayton). Clayton councilmen and appointees filled many key roles and influenced regional decisions affecting Clayton.

On Clayton’s first anniversary, the City received a resolution from the County Board of Supervisors commending the City on its first year and its efforts to comply with the wishes of its citizens in terms of community life, and for its forward-looking actions related to balanced development. The resolution noted that Clayton was incorporated to maintain a careful balance between progressive development and preservation of one of the most scenic landscapes in the central part of Contra Costa County.

Incorporation Facts:

Election Day: March 3, 1964
Number of Registered: Voters in Clayton 364
Number of Voters who cast ballots in election: 312
Turnout 91% of Registered Voters cast ballots, the largest percentage in the history of California for a municipal election.

Votes in Favor of Incorporation: 251
Votes Against Incorporation: 61
Clayton became the 13th City in Contra Costa County
Results of Council Election: Robert Hoyer-183; Henry Wagner-179; George Abbott-151; David Cook-147; Alvin Liming-140; Clyde Baker-113; Richard Hamb-104; Kenneth Byrd-90; Jack Leue-68; Gloria Patten-56.

City’s First Treasurer: William Walker
City’s First Clerk: Marguerite Ellingson
Police Services Contracted with the City of Concord
Public Works/Engineering Services Contracted with County City Attorney Maurice Huguet, Jr.

Population Approximately: 600
Clayton City Limits consisted of ½ square mile
City Boundaries: Clayton Road and Mt. Diablo Creek on the north, Marsh Creek Road on the east, Mitchell Canyon Road on the west and certain properties on the east.

Assessed Land Valuation: $1,200,000
City’s Budget: $23,517.00
Year-end Surplus: $2,589.00
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Partial List of Expenses: City Attorney, $2,000; City Clerk, $1,500; Police Services, $8,875.00; Accounting Services, $250; Insurance and Bonding, $425; Utilities, $48; Telephone, $160; Supplies, $250; Rent, $175.

One year after incorporating, the City of Clayton was recognized by the Contra Costa County Board of Supervisors for their superb effort. In 1966, just two years following cityhood, Clayton hosted the Mayor’s Conference. Robert Hoyer served the City of Clayton for 16 years, and chaired the Bay Area Air District in 1971 after being appointed in 1968 to the District.

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Fund Structure
According to the Government Finance Officers Association (GFOA), fund accounting is used to meet the reporting objective of providing information as to whether resources were obtained and used in accordance with the budget and other finance related requirements by accounting for financial transactions and balances through several separate funds, each accounting for designated assets, liabilities and equity. The City of Clayton reviews our fund structures annually to ensure appropriate and relevant data is reflected in our financial reporting. Additionally, all new funds must be reviewed and approved by the City Council. Healthy fund balances are essential to making good long-term decisions for any government organization. Our funds are broken into four different types: General Government (General fund with 9 different departments and 2 reserve accounts), Proprietary (business-like activities), Fiduciary (held in trust) and Special Revenue Funds (used for specific projects or uses).

Fund Categories
General Government
Fiduciary
Proprietary
Special Revenue
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Basis of Budgeting
Basis of budgeting - the basis of accounting utilized throughout the budget process. The City of Clayton is required by law to pass an annual balanced budget.

Basis of accounting - a term used to refer to when revenues and obligations are recognized in the accounts and reported in the financial statements. The City of Clayton's budgets for the General, Special Revenue, and Fiduciary funds are prepared on essentially the same as a modified accrual basis of accounting. This method is also used for the City’s financial reporting and financial statements. Although the City of Clayton utilizes Modified Accrual that does not require budgeting for depreciation, the City still budgets for depreciation for Endeavor Hall, the main enterprise fund.

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Overall Financial Structure
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BUDGET OVERVIEW
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Budget Message
Transmittal
Honorable Mayor and City Council Members:

Through the annual budget process, the City of Clayton ensures the efficient and effective use of economic resources as well as establishes that the highest priorities are accomplished. Through the budget, the City Council sets the direction of the City. The budget is expected to keep in mind both the positive and negative events happening within the City of Clayton and how they affect our bottom line. This document gives the City Council an ability to allocate resources and establish priorities.

The Fiscal Year 2022/23 Budget is respectfully submitted to the City Council and to the residents of Clayton, California. This budget represents the City Council’s commitment to strong financial management practices and a strategic plan for a sustainable future.

This budget document has been a collaboration between the City Manager, Department Managers, City staff, and members of the Clayton City Council to be used as a tool to identify funding priorities, reflect the needs and desires of the community, and to guide management throughout the year by clearly setting forth the goals and objectives of the Council for the coming year. The broad goals that the City Council adopted for FY2022/23 were as follows:

Pursue a structurally sustainable budget;
Identify what it takes to support staff in terms of technology and tools to bring the City into the 21st century; Present a compliant Housing Element to HCD.

In general, there is little added to the Proposed Budget other than acknowledging the impacts of inflation, price increases and the need to retain our city staff. The Proposed Budget reflects the previously negotiated cost-of-living adjustment (COLA) for the Clayton Police Officers Association (POA) members of 4%. It also reflects a proposed 3% COLA for the City's unrepresented miscellaneous employees.

As a whole, the City of Clayton is in a good position to be able to plan for the future, now. The authorization of the American Rescue Plan Act of 2021 has provided funding to help stabilize the City in the short term. With this money we were able to provide short-term relief to residents and local businesses who were negatively impacted by the COVID-19 pandemic. As we plan for future cost increases, we will have the option to use the Pandemic Recovery Reserve Fund to allocate funds as directed by the City Council as a possible stop-gap instrument to shore up the deficits that we will continue to have.

More than two years after the COVID-19 pandemic began, the local and national economies continue to be challenged. While overall, City of Clayton revenues have escaped deep impacts due to the public health shut-downs and economic contraction, the pandemic has nonetheless affected the City both financially and in terms of staffing.

At the time of the Proposed Budget, the most significant economic impact is that of inflation. Over the first part of calendar year 2022, inflation has increased more quickly than at any time in the last 40 years. In February, the national inflation rate was near 8% and the Bay Area inflation rate was over 5%. By the time the April-to-April CPI measure, which is the specific CPI calculation that is used for many local fiscal calculations, was released, it seems that while inflation is still at a high level, the rate of increase may be slowing. This may be in part due to the Federal Reserve already taking steps to increase interest rates, with indications that they will continue to increase borrowing rates over the next year to temper the effects of inflation.

We have our work cut out for us, but with thoughtful partnership with the City Council and local community members, we will be able to plan for the best uses of our financial resources and work together to ensure a sustainable future for the City of Clayton.

Reina J. Schwartz
City Manager
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Economic Recovery & Fiscal Stability
Recent Economic Trends
Sales Tax
Although the City of Clayton has a relatively small sales tax base, it is affected by global, national and local economic factors.

Overall, in California, local sales tax receipts grew more than 11% in FY202/21 (nearly 9% above pre-pandemic levels). Year-todate, local tax receipts statewide are nearly 17% above one year ago.

For the coming year, it is likely that inflation will continue to be a significant factor, although the April to April Bay Area CPI increase was only 5% compared to the February to February increase of nearly 8%.

An additional factor is the international outlook which has increased economic disruption, particularly to the supply chain that was already stressed due to more than two years of COVID-related impacts.

Overall, statewide and likely locally, consumers are healthy in terms of savings, equity and stock market gains that preceded the increases in inflation.

HdL's short-term forecast for sales tax revenues calls for a continued expansion but a deceleration of growth in FY 2022/23 and FY 2023/24.

Property Tax
The property tax estimates included in the Proposed Budget are based on data and projections from HdL with whom the City contracts for both property and sales tax analysis and advice. The assumptions included in the estimate for the Proposed Budget are as follows:

All real property (except those that had Proposition 8 reduced assessments) will receive the maximum 2% CPI adjustment.

For those properties that have sold between January and December 2021, the difference between the value on the prior property tax roll released for FY 2021/22 and the price paid for the property in the sale transaction has been calculated and used as a basis for increased overall market value of properties within the City.

The personal property on the secured tax rolls and the unsecured property values are being budgeted flat at FY2021/22 levels. This is based on the analysis that depreciation of these business assets will be offset by new purchases.

Because overall there has been relatively little new construction in Clayton, no additional increases are added to the projection associated with new construction.

The projection reflects the reality that Clayton is a relatively "low" property tax City in that the City receives only about 6.5 percent of the base property tax bill paid by a Clayton property owner.

The full net taxable value of property in Clayton is estimated to grow approximately 5.3% compared to the prior year.

It appears that the City's adopted General Fund budget for property tax revenues was conservative and actual revenues for FY2021/22 have come in above the budgeted amounts.

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Public Employees Retirement Pension System (CalPERS)

PUBLIC EMPLOYEES RETIREMENT PENSION SYSTEM
A Brief History
Eleven years after its incorporation as a municipality in 1964, the City of Clayton joined the California Public Employees Retirement System (CalPERS) to establish a pension system for its public employees (June 1975). At that time, it contracted for a retirement system plan of 2% at age 55 for its sworn law enforcement officers and 2% at age 60 for its general (miscellaneous) employees. Each enrolled plan was the least costly “defined benefit” plan offered by CalPERS. For the next 40 years and continuing today, permanent employees of the City are members of CalPERS for retirement pension purposes. The City organization does not belong to Social Security; therefore, its employees rely on this public pension system as the primary retirement program.

A plan change occurred in 1997 when the City moved its law enforcement employees from the CalPERS 2% at age 55 Plan to a 2% at age 50 Plan; miscellaneous employees were kept on the 2% at age 60 Plan. Presumably at that time the City elevated the retirement benefits of its Police Department in order to attract and retain quality sworn personnel in the competitive public sector market. In early 2001 the retirement plans were again modified (through the collective bargaining process) to the existing “Classic” contracts of 3% at age 55 for Public Safety (sworn law enforcement) and 2% at age 55 for the Miscellaneous Unit (civilian). CalPERS also initiated unilateral action to eliminate small-employer public agency members from consideration as independent agencies and “pooled” them together to share some of the pension risk. These new pooled plans (in effect today) are referred to as Multiple-Employer “Cost-Sharing” Defined Benefit Plans. Although cost sharing plans are designed to bundle employer pension expenses of several employer plans that provide identical benefits, plans that had super- or underfunded statuses carried forward their positive or negative balances into the new plan in what is referred to as a “Side-Fund”.

Thus, this CalPERS action caused several of the small employers (including Clayton) to report separate side-fund “unfunded liabilities” which the City of Clayton has been reducing over time within its annual employer contribution pension rates as analyzed in greater detail later.

In 2008, coinciding with the abrupt downturn in the national and local economies and the wave of retiring Baby Boomers (born 1946 - 1964), the press and the public waged a vigorous debate concerning the amount and scope of unfunded liabilities of governments [taxpayers] for the CalPERS defined benefit retirement plan. Public pension policies have been modified, reformed and threatened over the course of this examination and it continues today in the form of state legislation reform bills, statewide initiatives and court cases. Resulting from this, the State of California legislature enacted the Public Employee Pension Reform Act (PEPRA) effective January 2013 creating a new defined benefit pension tier for any newly-enrolled CalPERS-covered employees.

However, even in advance of PEPRA and most other public agencies, the City of Clayton established a 2 Tier Plan effective January 2011 for all new “Classic” hires. To further mitigate its unfunded liability exposure, the Clayton City Council took action in March 2012 to prohibit all future local elected officials (e.g., city council members) from becoming members of the CalPERS pension plan.

In regards to action taken to address the reasonableness of actuarial assumptions, the 2016 Annual Review of Funding Levels and Risks published by CalPERS on September 20, 2016 concluded economic conditions at that time increased the risk associated with achieving a 7.5% rate of return over the medium term (10 years or so). With this in mind, action was taken by the CalPERS Board to re-address the viability of the actuarially assumed discount rate for future years with the goal of increasing funded status of pension plans. Accordingly, on December 21, 2016 the CalPERS Board voted to lower its discount rate from 7.5% to 7.0% over a three-year timeframe with the hope the incremental lowering of the rate would give employers more time to prepare for the changes in contribution costs. The first year of pension contribution increases resulting from lowering the discount rate was FY 2018/19.

Various Pension Plan Groups and Composition
As a consequence of the actions taken as described previously the City of Clayton now has three (3) separate CalPERS pension plan tiers for its employees for both the Public Safety and Miscellaneous employee groups:

1. Tier I “Classic” – This plan covers existing City employees hired prior to January 2011. No future employee of the City can ever enroll into the Tier I Plan and accordingly this pool of existing employees will shrink in number as these employees move to other employment or retire from the City. The benefit formula for Public Safety Tier I members is 3% @ 55 and the benefit nd
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formula for Miscellaneous Tier I members is 2% @ 55.

Previously, the City made the required employee contributions on behalf of all Tier I employees, which is defined as “Employer Paid Member Contributions” (EPMC) by CalPERS. As part of three-year Police Officers Association (POA) labor agreement approved on July 7, 2015, the previous 9% EPMC for Public Safety Tier I members has now been entirely phased out, with members of this group paying the full required employee contribution rate. While beneficial for future pension obligations, this phase-out did come at a cost and was offset by a negotiated 4% annual cost of living adjustment for all sworn officers for the three- year period ending June 30, 2018. In accordance with labor agreements currently in place and assuming status quo terms, the proposed budget for FY 2021/22 assumes the City will continue to make the full 7% EPMC for all Miscellaneous Tier I Plan Members, which comprises two full-time employees and one part-time employee. To add some perspective, this small group of Tier I Miscellaneous employees represents less than one quarter (25%) of the entire unrepresented Miscellaneous employee group of sixteen (16) permanent employees.

Commencing FY 2018/19, as part of the current three (3) year labor agreement with the POA, Tier I Public Safety members of the POA were required to help contribute towards the escalating normal cost employer rate. Referred to as “cost-sharing”, these member-paid employer contribution sharing rates were 0.5%, 1.25%, and 2.25% for FY 2018/19, FY 2019/20, and FY 2020/21, respectively. In FY 2021/22, net of any member-paid employer contributions, employer contribution rates for Tier I employees will be 20.64% and 10.34% for Public Safety and Miscellaneous Plan Members, respectively.

2. Tier II “Classic” – This plan covers City employees hired during the timeframe January 2011 through December 2012, plus any new hire of the City that comes from an employer previously enrolled in a CalPERS pension system (without a break in service longer than six months). The benefit formula for Public Safety Tier II members is 2% @ 50 and the benefit formula for Miscellaneous Tier II members is 2% @ 60. There is no EPMC provision, making employees responsible for the entire employee pension contribution rate, which is 9% for Public Safety plan members and 7% for Miscellaneous Plan members. In FY 2021/22 employer contribution rates for Tier II employees will be 18.19% and 8.65% for Public Safety and Miscellaneous Plan members, respectively.

3. Tier III “PEPRA” – This plan automatically covers any new employee of the City not previously a member of CalPERS or with a break in service longer than six months. The benefit formula for Public Safety Tier III members is 2.7% @ 57 and the benefit formula for Miscellaneous Tier III members is 2% @ 62. Under PEPRA law, members are required to pay at least 50% of the normal cost of benefits, essentially splitting the pension contribution rate requirement with some exceptions. In FY 2021/22 employer contribution rates for Tier III employees will be 13.13% and 7.59% for Public Safety and Miscellaneous Plan Members, respectively.

The following chart summarizes the organization-wide spread of the City’s pension contributions projected for FY 2021/22:

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As depicted in the pie chart above, the Police Department makes up over fifty percent of the budgeted employer pension contributions. This statistic is generally reflective of the Police Department’s share of the City’s permanent workforce.

Status of the City’s Unfunded Actuarial Liability
An unfunded actuarial liability (UAL) is the difference between the estimated current liability to pay future benefits and the current market value of assets accumulated to pay those benefits. If assets are greater, a plan is overfunded and if the liability is greater, a plan is underfunded, creating an unfunded liability. The unfunded liability is an estimated figure changing with each actuarial valuation pursuant to changes in market value of assets, investment earnings and actual results of the plan as compared to actuarial assumptions. Unfunded liabilities are not amounts that are actually due today but are estimates of what pension actuaries believe will be needed to pay future benefits. The funding policies established by CalPERS are intended to provide for full funding of the pension plan by the time employees retire. The following is a line chart summarizing the City’s UALs for both the Public Safety Tier I and Miscellaneous Tier I employee plans over the past seven (7) years (since CalPERS began publishing this information in the actuarial reports) and CalPERS’ estimates for the next ten (10) fiscal years:

As depicted in the chart above, when considering the current funded status of the City’s pension plan’s, the most recently issued actuarial reports (annual valuation report as of June 30, 2020/contributions for FY2022/23) reflect increases to both the Safety and Miscellaneous Tier I Plan UALs. As of the June 30, 2020 valuation, the Safety Tier I Plan UAL increased by approximately 9.5 % to $3,255,816 reflecting a funded status of 72%. Similarly, the Miscellaneous Tier I Plan UAL also increased, by 6.1% to $2,392,453, reflecting a funded status of 73.1%.

CalPERS reported a 21.3% investment return in FY 2020/21, which is substantially higher than the assumed 7.0% discount rate benchmark that was in place at the time. In response to these high earnings and consistent with previously adopted CalPERS policy, the Board considered and ultimately approved a reduction in the discount rate to 6.8%. While the positive results in FY 20202/21 will help reduce the increases in City pension costs, in future years the lower discount rate may put more pressure on employer funding of pension costs.

Prospectively, arising from policies adopted by the City, the state legislature, and CalPERS, gradual reductions are predicted for the City’s UALs. These gradual reductions incorporate CalPERS policies to amortize annual plan investment gains and losses over thirty (30) year periods well as its five (5) year ramp up and down phases to smooth the volatility these annual conditions can have on employer pension contribution requirements. Consequently, the latest actuarial valuation reports project employer UAL pension contributions for the two “Classic” Tier I plans to gradually increase until reaching their ceiling in FY 2020/21, after which they steadily reduce until both plan UALs are fully paid off in FY 2043/44 (under present value calculations and CalPERS methodologies).

Impacts of Statutory Pension Reform – Short and Long-term Since the adoption of PEPRA and due to measures taken by the City Council in 2011 to create second retirement tiers, noteworthy savings were realized by the City in the three-year timeframe from FY 2012/13 to FY 2014/15. Ultimately, these savings were realized by the City through the gradual attrition of several Tier I “Classic” employees with those positions subsequently filled by less expensive Tier II and PEPRA enrolled employees. However, commencing in FY 2015/16, in an City of Clayton | FY2022/23 Budget Page 25
aggressive and deliberate measure to recapture these savings realized by participating agencies, CalPERS began billing for the unfunded portion of the City’s Tier I pension liabilities as a fixed dollar amount as opposed to the “percentage of payroll” method used in all prior years leading up to FY 2015/16. Therefore, to understand and better prepare for fluctuations in employer pension costs, a city must monitor both the percentage of payroll (or “Normal Cost”) rate as well as the relatively new fixed dollar UAL contribution components.

The latest CalPERS actuarial reports for the year ended June 30, 2020 establish the City’s normal cost contribution rates as well as the fixed dollar UAL contribution requirements for the upcoming fiscal year. The City’s FY 20221/23 contribution requirements relative to the prior year (FY 2020/21) are as follows:

FY 2021/22 FY 2022/23
Pension Tier
Normal Cost
Rate
Normal Cost
Safety Classic 20.64%* 20.64%*
Safety Tier II 18.19% none
Safety PEPRA 13.13% 12.78%
Miscellaneous Classic 17.34%** 17.32%**
Miscellaneous Tier II 8.65% 8.63%
Miscellaneous PEPRA 7.59% 7.59%
*Excludes negotiated member-paid employer contribution portions. **Includes employer-paid member contribution (EPMC) of 7.0%.

Changes in legislation, employee workforce attrition, and volatility of CalPERS estimates (i.e., investment returns), make it challenging to predict future pension costs as well as the status of the UAL with absolute certainty. However, the following chart provides a summary of historical City-wide employer pension contributions over the past ten (10) years as well as a projection for the current fiscal year still underway (FY 2021/22) and the following five future years thereafter using employment and actuarial information known at this time. As noted previously, the unpredictability of workforce and market factors makes these future year projections subject to change prospectively.

The steady decline in required employer pension contributions from FY 2011/12 to FY 2014/15 was caused by the gradual attrition of the City’s Tier I employees (i.e., retirement, employment separation to pursue employment at another agency, etc.) and filling those vacancies with less expensive Tier II and Tier III “PEPRA” employees. Thereafter, the spike in FY 2015/16 and subsequent two (2) years is caused by CalPERS’ implementation of fixed dollar UAL billings to supplement normal cost percentage-of-payroll contribution rates.

The chart also incorporates the impact of the CalPERS Board voting to decrease the discount rate in December 2016 impacting employer pension contribution assumptions from FY 2018/19 and onward. Pension costs are projected to rise with actuarially assumed wage growth as well as CalPERS’ policy to (eventually) achieve “fully funded” status through calculated annual UAL payment increases.

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The drop shown in FY2018/19 reflected the City paying off the “side fund” that was described earlier, thus reducing the annual pension cost to just the normal cost plus the standard UAL requirement.

In all, the total amount of monies in the proposed budget projected to be required to pay CalPERS retirement contributions in FY 2022/23 is approximately $765,938 across all City funds, representing an increase of $67,444 or 9.7%. The significant increase in FY2022/23, comes after a year in which the City already had a significant increase of nearly $90,000 in PERS costs in FY2021/22. It should be noted as well that it appears the statewide pension reform that was enacted a decade ago, PEPRA, does seem to be having an impact on reducing at least the annual "normal" cost of the City's PERS requirements. It does not, however, yet have an impact on the unfunded accrued liability which continues to increase each year. This year it represents more than 60% of the City's total PERS costs for FY2022/23. This means for every one dollar spent on employer pension contributions, 60¢ is used to address the buildup of the unfunded liability reported by CalPERS actuaries and not to address future retirement benefits of the current workforce.

Summary of Pension Analysis
The purpose of this information published annually is not to marginalize the seriousness of the unfunded pension plan debate, but to provide transparency and context to a story often sensationalized by the media. Acknowledging the importance of addressing the City’s exposure to the growth of unfunded pension liabilities, several actions outlined in detail previously have been taken by the City Council, CalPERS, and the state legislature. These actions were designed to address the issue in the long-run, without causing immediate and detrimental set-backs to the City’s current ability to provide public services.

Considering the already scarce local resources available, it is encouraging to see the City appears to be headed in the right fiscal direction on this matter. Nevertheless, prudent and regular monitoring of the City’s progress will be essential to achieving sustainable and sensible budgets well into the future.

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Policy and Process Improvement Opportunities
Comprehensive Review and development of a Fiscal Management Policy which will include:

Pension and OPEB Policy
Reserve Policy
Investment Policy and Investment Management
Pension and OPEB Policy
The Pension policy will provide goals for funding the pension debt, a clear structure for sustainability, risk tolerance, funding status and funding plans and clearly defined oversight.

The Other Post-Employment Benefits (OPEB) Policy will be a separate policy from the Pension Policy and will provide ways to invest funds to pay for these benefits as well as to reduce overall liabilities and increase overall net position of the City as well as manage this debt with a plan that maximizes the use of the City'sresources.

Reserve Policy
One of the key components of a financially stable municipality is the adherence to a policy of maintaining an appropriate level of reserves. Establishing a target minimum General Fund reserve is a mechanism that governments can implement to help ensure adequate levels of fund balance are available to help mitigate current and future risks. A minimum General Fund reserve is generally considered a prudent and conservative fiscal policy to deal with unforeseen situations. Some examples of unforeseen situations include, but are not limited to: extreme events, economic downturns, reduced revenues, Federal/State/County Budget Cuts, unfunded legislative or judicial mandates, capital obligations, one-time City Council approved expenditures, and innovative opportunities for the betterment of the community. To provide guidelines for establishing, maintaining, and reviewing minimum target General Fund reserves for the City of Clayton. This policy is developed to consider the minimum level necessary to:

Maintain creditworthiness;
Ensure cash availability during times of economic uncertainties and other financial hardships or downturns in the local or national economy or extreme events;
Provide for long-range planning, especially around future debt or capital obligations; Deciding when to use reserves, define what the minimum level is and how to replenish this if it should fall below the defined minimum threshold.

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Investment Policy and Investment Management/Oversight
The objective of the investment portfolio is to meet the short and long-term cash flow demands of the City. To achieve this objective, the portfolio will be structured to provide Safety of Principal, Liquidity and Return on Investments.

It is the policy of the City of Clayton to meet the short and long-term cash flow demands of the City in a manner which will provide for the safety of principal monies with sufficient liquidity, while providing a reasonable investment return. The purpose of this Investment Policy is to identify and outline various methods and procedures for the prudent and systematic investment of public funds. This Investment Policy applies to all investment activities and financial assets of the City. The following Funds are covered by this Investment Policy and are accounted for in the City’s Comprehensive Annual Financial Report:

A. General Fund
B. Special Revenue Fund
C. Debt Service Fund
D. Capital Project Funds
E. Enterprise Funds
F. Internal Services Funds
G. Trust and Agency Funds
H. Any new funds created by the City Council.

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American Rescue Plan Act
On March 11, 2021, President Biden signed into law HR 1319, the American Rescue Plan Act of 2021 (“ARPA”), which provides a total of $1.9 trillion in financial assistance to individuals, businesses, and state and local government agencies to assist in the economic recovery from the COVID-19 pandemic. ARPA included a provision entitled “Coronavirus State and Local Fiscal Recovery Funds” (“SLFRF”) that includes $350 billion in funding for state and local governments, of which $65 billion was dedicated to local government agencies.

ARPA provided flexibility for each government to meet local needs in four areas: 1) supporting public health response to and economic impacts from the pandemic; 2) provide premium pay for essential workers; 3) replace lost public sector revenues; and 4) invest in water, wastewater and broadband infrastructure; and The City is classified as a non-entitlement unit within the provisions of SLFRF and will receive a total of $2,934,049, in federal relief funds divided into two equal payments (or “tranches”) of approximately $1,467,025. The City received its first payment in July 2021 and the second payment will be received on or before the same time this year.

The programs approved by the City Council included appropriating the initial tranche of $1,467,025 for the Clayton Cares program to provide relief to businesses and community members and related administrative expenses. Subsequently, in January 2022, the City Council reappropriated $242,000 of these funds to provide one-time essential worker premium pay to City employees. Additionally, in March, the City Council approved the use of $49,500 in ARPA funding for the purchase and implementation of a 3-year license of the ClearGov budget software platform. The City Council also recently approved the creation of the American Rescue Plan Act special revenue fund (#232) for purposes of tracking revenues and expenditures associated with ARPA funds.

The US Treasury Department (“Treasury”) is responsible for administering the provisions of the SLFRF. They issued an Interim Final Rule (IFR) on the use and reporting of SLFRF funds in May 2021, and issued their Final Ruling (FR) on January 6, 2022, the latter of which becomes effective April 1, 2022. Treasury also issued compliance and reporting guidelines on February 28, 2022 that assist local agencies in understanding the reporting requirements under the legislation.

One of the key changes that occurred in the FR is that Treasury determined that they would allow a standard revenue loss allowance for each agency of up to $10 million, rather than having to rely on the formula originally contained in the Interim Rule. Under this category, known as the “Revenue Replacement” category, any agency can stipulate to this $10 million revenue loss amount and claim up to that amount based on the funds they received. In practice, agencies that received less than $10 million (like Clayton) are allowed to report their use of ARPA funds entirely as revenue replacement to streamline reporting of the use of the funds to the Treasury Department.

By assigning the use of ARPA funds for the purpose of reporting to Treasury under this category, the City has chosen to use the funds for the provision of general government services”, which the FR defines as any service normally provided by the local government. The City has been able to report use of all of its ARPA funds under this revenue replacement category based on the expenditures incurred in the City’s General Fund (which well exceed the ARPA funds received in any fiscal year).

The replenishment/inflow of these one-time revenues in the General Fund has allowed the City Council to designate the resulting unanticipated surplus from these funds as a “Pandemic Recovery Reserve Fund” (Fund 111) which then captures the ultimate use of the ARPA funds. The City Council has the ultimate discretion to invest these funds for purposes already identified such as the Clayton Cares program, premium pay for City essential workers and purchase of a 3-year license for the ClearGov software platform. The Council also has the discretion to program any funds remaining from the first tranche of ARPA funding and an amount equal to the full second tranche of the funding.

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Proposed Budget Changes
The Proposed Budget for FY2022/23 reflects cost increases in a number of areas. The most significant changes are summarized in the table below.