CITY OF COMMERCEAGENDA REPORTCITY OF COMMERCEAGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
Item No. Item No.
Item No.
Item No.
TO: Honorable City Council
FROM: City Manager
SUBJECT: A Resolution Authorizing the Continuing of Operations into Fiscal Year 2022-2023 at the Amended Fiscal Year 2021-2022 Appropriation Levels with Contractually Required Adjustments Meeting Date: June 14, 2022
RECOMMENDATION:
Approve and adopt the proposed Resolution authorizing the continuing of operations into Fiscal Year 2022-2023 at Fiscal Year 2021-2022 amended appropriation levels with adjustments for needed items and contractually required increases and/or decreases, and assign the number next in order.
BACKGROUND/ANALYSIS:
Normally the City’s budget process would begin in April or May with meetings between the various City Departments, Finance and City Administration. Staff then would hold a study session with the City Council in May to review progress on the budget and get further direction. The final plan would be presented to the City Council for consideration typically in June. However, various circumstances have contributed to a recommended modification of this year’s budget process.
Because the City held elections in June this year and it appears that there will be 2 new council members seated in July, adopting a status quo budget in June is recommended. Doing such, will provide time for new council members to familiarize themselves with the City’s budget and programs so they can make an informed decision when voting on adopting the City’s budget that will govern spending during the next fiscal year and the first year of their term. This year’s plan will be for Finance staff to work with the City Council and City staff over the summer months to develop a budget update report. City Council will be presented with the budget update report by late summer or early fall of 2022.
Another reason to adopt a status quo budget is the various economic challenges and uncertainties that are manifesting on the horizon. While the economic impact of the COVID-19 pandemic has mostly subsided, new issues have arisen that pose potential future challenges. Inflation has been running at record highs not seen in over 40 years. COVID-19 outbreaks in China and other parts of the world continue to wreak havoc on the world’s supply chains further exacerbating inflationary issues. Additionally, the conflict in Ukraine has the potential to cause even more inflation due to sanctions being placed on Russian oil and gas. The ripple effect on commodity prices such as food and fuel are yet to be fully felt and the ongoing damage of this conflict on economic output is still unknown. Many in the world of finance and business are anticipating a recession in the coming months.
At a more local level the following issues are a concern:
The “California Legalize Sports Betting and Revenue for Homelessness, housing, and Education Initiative” would legalize online sports gambling in California – hurting tribes, exposing kids to the perils of online gambling and driving jobs and business out of California is on the November 2022 ballot and if passed by voters could potentially devastate the City’s revenue base as it includes a provision which allows for unlimited private lawsuits against Card Clubs. While the COVID-19 pandemic had a major impact of the City’s revenue, particularly the Card Club, revenues have mostly returned to close to pre-pandemic levels. If the ballot measure supported by the Indian Gaming industry passes in November 2022, the impact would be almost as severe as the COVID-19 pandemic for the City’s Card Club revenues, the major difference being that this revenue reduction would become permanent.
The City is in the process of completing a Class and Compensation study. Staff recommends that any changes that may be made based on this report be taken into consideration with the overall budget process. By adopting a baseline budget now, the conclusions and fiscal impact of the Class and Compensation study can be incorporated into the overall budget review process that would happen over the summer months and allow for a holistic approach to the budget.
Given these circumstances, staff is recommending the FY 2022/23 budget be adopted based on the amended FY 2021/22 budget with adjustments for needed items and contractually required increases and/or decreases. This would mean that the programs and costs reinstated during FY 2021/22 and at the mid-year review would continue in the proposed FY 2022/23 operating budget. The total dollar amount of programs and costs reinstated during FY 2021/22 which would continue under this proposed budget equals $1,294,310. Exhibit A shows a summary of reinstated programs and costs that are included in the proposed FY 2022/23 operating budget.
As noted at the beginning of this report. Finance staff will work with the City Council and City staff over the summer months to develop a budget update report. City Council will be presented with the budget update report by late summer or early fall of 2022.
ALTERNATIVES:
Approve staff recommendation
Provide staff with further direction
FISCAL IMPACT:
The FY 2022/23 proposed budget includes expenditures of $60,478,237. Staff will return to the City Council with a budget update report including projected FY 2022/23 revenues in the late summer or early fall of 2022. Moving some of the budget process to the summer will provide time for any new council member(s) to become familiar with the budget and budget process.
Other funds that the City Council needs to take action on are as follows:
Fund 22 – COPS Grant $ 100,000
Fund 25 – Proposition A $1,425,000
Fund 26 – State Gas Tax $ 624,264
Fund 29 – CDBG Fund $ 187,834
Fund 33 – Community Assistance $ 437,695
Fund 42 – Community Ctr. Debt Svc $ 792,363
Fund 45 – Pension Obligation Bonds $ 625,247
Fund 50 – Water Utility Fund $2,117,500
Fund 57 – Transportation $6,582,314
Fund 58 – CNG $2,080,000
Additionally, events over the coming months could potentially shed some light as it relates to economic risks that could greatly impact the City’s budget. The potential for a recession and continued inflationary environment as well as the potential revenue hit to the City’s budget if the aforementioned sports betting initiative passes in November 2022 are all reasons to approach this year’s budget process with caution and pragmatism. Additionally, the recommended process will allow the City Council to incorporate the yet to be completed Class and Compensation study into the budget process.
RELATIONSHIP TO STRATEGIC GOALS:
This report is applicable to the following 2016 Strategic Plan Fiscal Sustainability Guiding Principle 1: Demonstrate fiscal responsibility through establishing financial policies, budgeting practices that meet the Financial Standards of Excellence requirements.
Respectfully submitted: Edgar P. Cisneros, City Manger Recommended by: Josh Brooks, Director of Finance
Reviewed by: Assistant City Manager, Vilko Domic
Approved as to form: Noel Tapia, City Attorney
ATTACHMENT:
Resolution
Exhibit A
Exhibit B Power Point Presentation