Agenda #: 1
Meeting Date: May 21, 2024
CITY COUNCIL STUDY SESSION REPORT
TO: Honorable Mayor and Members of the City Council
VIA: Daniel Fox, City Manager
FROM: Jason Jacobsen, Finance Director
TITLE: DRAFT FISCAL YEAR 2024/25 OPERATING BUDGET
BACKGROUND:
Each year, the City prepares an annual Operating Budget and Capital Improvement Program for City Council consideration that implements the Council’s priorities and Strategic Plan Goals, and provides the financial resources to deliver services to the community. The preparation of the annual budget is a significant and important undertaking that takes place over the course of more than five months.
Below is the schedule for the public meetings related to the FY 2024/25 City Budget:
• Council Study Session on Draft FY 2024/25 CIP and Draft Five-Year CIP Review – Held on 5/7/2024
• Council Study Session on Draft FY 2024/25 Operating Budget – Scheduled for 5/21/2024
• Adoption of the Proposed FY 2024/25 City Budget & CIP – Scheduled for 6/4/2024
On May 7, 2024, the City Council held a Study Session to review the recommended Draft Capital Improvement Program (CIP). Following Council discussion, there were no recommended changes to the presented Draft FY 2024/25 CIP (see below for details on the CIP).
The purpose of this Study Session is to provide the City Council with an opportunity to review the combined Draft FY 2024/25 Operating Budget and Capital Improvement Program. The Draft General Fund Revenue and Expenditure Totals are included in Attachment 1. The Draft Consolidated Fund Balance Schedule is included in Attachment 2. The Draft Department and Fund line-item budgets are included Attachment 3.
Based on direction received, appropriate revisions and refinements will be made and presented to the City Council for adoption at the June 4, 2024 City Council meeting. At the City Council meeting on June 4, 2024 staff will provide a summary of any changes to the draft budget reviewed at tonight’s study session that were incorporated into the final Proposed FY 2024/25 Operating Budget.
ANALYSIS:
The proposed FY 2024/25 Budget offers a positive outlook and continues to provide for many City programs and services, advance deferred maintenance and Capital Improvement Projects, and focuses on key initiatives consistent with the City’s LongTerm Financial Stability Report. Notwithstanding modest increases to key revenue sources, management remains cautious and conservative in budgeting due to ongoing pressure from rising costs driven by a competitive labor market, increased prices for materials and service delivery, higher fuel prices, and other economic pressures that may precipitate a mild recession. Importantly, the proposed budget implements the various objectives and priorities of the City Council guided by the three overarching goals found in the adopted FY 2024-2027 Strategic Plan which include:
• Responsible Stewardship of Public Resources
• Open, Engaged and Responsive Government
• Save, Sustainable and Healthy Community
FY 2024/25 Proposed General Fund Budget Overview
The Proposed Operating Budget for the General Fund comprises estimated resources ($32.7 million) and expenditures ($33.2 million) inclusive of various one-time costs which would necessitate the budgeted use of General Fund unassigned reserves in the amount of $444,568. This proposed use of unassigned reserves is appropriate for onetime costs and is made possible due to savings realized in the General Fund over past fiscal years. Consistent with the City’s financial policy to maintain a balanced budget, the General Fund operational budget reflects a surplus of $357,432 prior to the addition of one-time items:
Revenue Highlights – General Fund: $32,725,050
Proposed General Fund revenues for FY 2024/25 have increased $2.1 million, or 6.9%, when compared to the prior FY 2023/24 Adopted Budget. The following are noteworthy General Fund revenue items incorporated into the proposed FY 2024/25 Operating Budget. The table below displays the Adopted FY 2023/24 Adopted Budget, the proposed budget for next FY 2024/25, and the percent of change for next fiscal year.
Property Taxes
Adopted Proposed
FY 23/24 FY 24/25
The estimated change in the City's net taxable value
of real property (secured & unsecured property) in the
City is expected to increase by 3.67% for FY 2024/25
which will result in year-over-year increase in all
Property Tax revenues of 4.09%. The City uses HdL
as a consultant to help monitor, audit and project this major revenue source.
$6,438,183 $6,701,322
4.09%
Property Tax in Lieu of VLF (Vehicle License Fees)
Adopted Proposed
FY 23/24 FY 24/25
This revenue source grows at the same general pace
as the City's net assessed valuation. The City’s
consultant, HdL, also assists with the projection of this significant revenue item.
$7,510,497 $7,812,508
4.02%
Sales Taxes
Adopted Proposed
FY 23/24 FY 24/25
Sales Tax revenue remains stable with a projected
increase of $436,000 compared to the FY 23/24
Adopted Budget. Year-over-year revenue increases
are mainly due to fuel and services stations, business
& industry, and online sales.
$6,161,000 $6,597,000
7.08%
Transient Occupancy Taxes Adopted Proposed
FY 23/24 FY 24/25
Transient Occupancy Tax is projected to increase by
5% based on current trends.
$1,380,000 $1,449,000
5.00%
Use of Money & Property - Investments
Adopted Proposed
FY 23/24 FY 24/25
Investment Income is anticipated to increase as the
City's portfolio continues to benefit from the current
interest rate environment.
$800,000 $1,320,000
65.00%
Current Service Charges
Adopted Proposed
FY 23/24 FY 24/25
Building Permit Activity – Revenue from Building,
Planning and Engineering activity is estimated to be
higher than projected in the current year.
$1,873,920 $1,929,057
2.94%
Rental Revenue – Revenue from rentals at the
Diamond Bar Center is anticipated to increase by
$50,000.
Field and Park Facility Rentals are anticipated to
increase $37,500.
Cell tower lease revenue is projected to increase
$29,800 due to one additional site under lease and
adjustments for CPI to current leases.
$939,000 $1,056,300
12.49%
Recreation Programs – Program revenue is
projected to have a net decrease of $10,602 mainly
due to a decrease in revenues for Youth Programs
$714,095 $703,493
-1.48%
(loss of swimming venue for recreation classes) offset
by increases in Senior Programs.
Gas Tax – Transfer In
Adopted Proposed
FY 23/24 FY 24/25
The Transfer-In from the Gas Tax fund supports the
City’s street maintenance budget. This amount varies
from year to year based on the level of budgeting set
by the Public Works Dept. for the anticipated
maintenance activities for a particular year. The
Transfer-In will reimburse 98% of eligible costs
included in the General Fund budget for this service.
$1,204,000 $1,475,000
22.51%
Expenditure Highlights - General Fund: $33,169,618
Proposed General Fund expenditures for FY 2024/25 have increased $1.2 million, or
3.9%, when compared to the prior FY 2023/24 Adopted Budget. The following highlighted items have been incorporated into the expenditure estimates:
• Public Safety
Law Enforcement – FY 2024/25 Los Angeles County Sheriff’s Department expenditures are expected to be approximately $8.4 million, representing the single largest line item and approximately 25% of proposed General Fund expenditures. LASD expenditures reflect a net increase of $309,648 year over year, inclusive of a contract rate increase of 3.44% plus a Liability Trust Fund (LTF) surcharge of 12.5% on each contracted position. The General Fund includes a transfer-in from the Law Enforcement Reserve Fund in the amount of $50,000 for as-needed special assignments and suppression patrols which have proven to be a cost-effective approach to reducing crime and responding to specific public safety issues throughout the year. Lastly, the professional services budget for Public Safety also includes the second year of the Flock Agreement ($165,000) for the Automated License Plate Reader system.
Crossing Guard Services – The City provides Crossing Guard Services at seven (7) elementary schools and two (2) middle schools with a total of 16 guards. The total budget for crossing guard services in FY 2024/25 is $280,000.
This amount is the same as the current fiscal year, since the agreement will be in its third year and provides no rate adjustment for the first three years.
Animal Control – The City has contracted with the Inland Valley Humane Society (IVHS) for animal control and licensing services since incorporation. The City’s IVHS agreement was last amended in 2021 and is based on a gross contract model where the City pays for all contract services minus any licensing revenue collected by IVHS. The base contract amount is adjusted every two years by the IVHS pooled adjustment factor which is indicative of the percentage of IVHS services used by the City (currently 6.25%) compared to the other twelve contract agencies. The FY 2024/25 gross cost for services is $563,305, which reflects a $19,049 increase compared to the prior year due to a 3.5% CPI adjustment. Taking into account estimated revenues from licensing and fees for services, the proposed net cost as reflected in the FY 2024/25 proposed budget is $440,000 which is an increase of $7,500 compared to the prior year.
Canvassing is anticipated to take place citywide during FY 2024/25 which may generate additional licensing revenue thereby reducing net costs for this service. • Human Resources
“Human Capital Investment Program” – Each year, the City Council adopts the Compensation and Benefits Plan for the upcoming fiscal year which includes cost of living adjustments, and employee positions with associated salary ranges and benefits. To remain an “Employer of Choice” in the region the City must continue to reinvest in its personnel (i.e. human capital) in a manner similar to its capital projects and infrastructure. To identify and prioritize investment in organizational staffing and organizational structure, and to maintain, enhance and expand City programs, the City has developed a focused effort, led by members of the City Manager’s executive team, referred to as the Human Capital Investment Program (HCIP).
Cost-of-Living Adjustment – The City’s Personnel Rules and Regulations specify that the City Manager may request that the City Council authorize a Costof-Living Adjustment (COLA) for employees based on the March-to-March rates of the federal Consumer Price Index (CPI) for Wage Earners and Clerical Workers in Los Angeles/Orange Counties. This year’s CPI calculation in March 2024 was 3.90%. In order to avoid real wage losses and remain an “Employer of Choice” in the surrounding Los Angeles, Orange, Riverside and San Bernardino counties, it is recommended that the salary schedules for all benefitted classifications of employment including all executive positions, such as Department Directors, Assistant City Manager and City Manager, be increased by 3.9% effective with the pay period beginning June 29, 2024. A $100 per month increase to the Benefit Allotment is also recommended for all benefitted classifications of employment including the executive positions and members of the City Council to help keep up with corresponding health premium rate increases. The annual cost of the COLA and Benefit Allotment increase is approximately $421,000.
Salary Range Adjustments – The City Council Strategic Plan prioritizes the development of a high-performing organization with a positive, value-based culture that attracts and retains talent. The Employer of Choice and Human Capital Investment Programs were developed to meet these City Council goals, leading to extensive organizational analysis of long-term departmental structural needs, employee development opportunities, and necessary succession planning efforts, all in an effort to provide the most positive and effective local government customer service experience possible.
Pursuant to recent organizational analysis, salary range adjustments for the Parks and Recreation Director and Administrative Intern classifications are recommended for FY 2024/25. The salary grade adjustment for the Parks and Recreation Director reflects equity amongst most of the other Department Heads and is indicative of the actual work assigned, such as major Capital Improvement Projects, a heavily used event center (Diamond Bar Center) and city-wide special events including the City Birthday Party, Concerts and Movies in the Park, and Snowfest. The City currently budgets for three part-time non-benefitted Administrative Interns which are currently assigned to the Finance, Public Works and Community Development Departments. The City has a long history of employing paid technical interns and has found them to be of great value to the organization. Over time the intern adds organizational efficiencies, frees full-time staff to perform more complex duties, and becomes integral to departmental operations and service delivery. In turn, the City provides valuable professional experience for the interns. Due to a competitive job market and the valuable role interns have come to play in city operations, it is recommended that the Administrative Intern salary range be adjusted. The fully burdened cost (salary plus benefits) to implement these two salary range adjustments is $21,083 and is funded by the General Fund.
Job Classification Current Salary Range Proposed Salary Range Parks and Recreation
Director
$138,988.02 - $186,257.24 $153,512.72 – $205,721.72
Administrative Intern $16.50 - $18.00 $19.75 - $21.25
Department Reorganizations – In addition to these two salary adjustments, two new full-time benefitted positions are recommended:
• (New) Recreation Coordinator – This position will be dedicated to customer service and event rentals at the Diamond Bar Center. • (New) Public Works Inspector – This position will address current and anticipated inspection activity associated with various construction and roadway improvement projects throughout the City.
Department/Division Classification Salary
Range
FLSA Status
Parks and Recreation Recreation Coordinator 17NE Non-exempt Public Works Public Works Inspector 17NE Non-exempt
The City budgets for new positions conservatively at the top step of the salary range; therefore, the approximate cost, including benefits, to fill both positions for nine months of the year in FY 2024/25 is budgeted at $154,174. These positions will add to overall organizational productivity and add capacity to address high standards of service expectations, assistance with administering key capital projects, and maintain compliance with state mandates.
• Parks & Recreation
The proposed Parks & Recreation department budget was developed based on continued community interest in valuable programs, services, and events.
Several programs and events offered this year to support an active and healthy community include summer youth day camp, senior dances, field allocations with sports organizations, contract classes, picnic reservations, and Concerts/Moviesin-the-Park. This fiscal year will include the ever-popular Bridal Show at the DBC to promote the facility, which is mostly a cost neutral event. All special events including: Windmill Lighting, Winter Snow Fest, Veterans Recognition, and the Halloween Party will continue to improve and bring the community together.
Expenses for recreation programs ($2.80 million) and operations at the Diamond Bar Center ($1.73 million) have been increased commensurate with the anticipated activities, and with a combined budget of $4.53 million, the Parks & Recreation Department’s Proposed FY 2024/25 budget represents an increase of $260,000 from the prior year. As would be expected, operations at the Diamond Bar Center have continued to flourish as rental revenue increases and is budgeted at $675,000, which is an increase of $50,000 from the prior year. The DBC revenue may fluctuate slightly in FY 2024/25 due to several capital improvement projects scheduled for the 20-year-old facility.
Special Revenue Fund Highlights
• Integrated Waste Management Fund (250) – The proposed budget of $928,890 includes $174,000 which will be used to achieve the City’s 100% procurement target of Recovered Organic Waste Products (ROWP) set forth by Senate Bill (SB) 1383: Short-Lived Climate Pollutants strategy. SB 1383 is a state mandate that aims to reduce organic waste disposal by 75% and increase edible food recovery by 20% by the year 2025. To alleviate the cost of this required action, 84% ($146,317) will be funded by the SB 1383 Local Assistance Grant, which the City will receive in Q4 of FY 2024/25.
• Lighting & Landscape Assessment Districts (LLADs) – Much work has been done over the recent years to help address the operating deficits and reduce the General Fund subsidies to the LLADs, particularly Districts 39-2022 and 41-2021.
Total General Fund contributions to all three districts for FY 2024/25 is budgeted at $364,469, an increase of $92,469 from the prior year due mainly to an increase in the contribution to LLAD No. 38 related to the scheduled 5-year tree trimming cycle for citywide road medians. Budgeted resources and expenditures for all three districts for FY 2024/25 are as follows:
• AB 2766 Air Quality Management District Fund (251) – The proposed budget of $154,000 is recommended to accommodate citizen requests for neighborhood traffic management improvements ($84,000), and to partially fund the purchase of a zero-emissions replacement vehicle (expensed in Vehicle Maint./Repl. Fund 502).
Internal Service Funds Highlights
• Debt Service Fund (401) – In May 2021, the City refunded the outstanding Lease Revenue Bonds associated with the original acquisition and construction of the Diamond Bar Center. This achieved a gross savings of $1.736 million and present value savings of $1.63 million (or 20.85%) for the General Fund, which translates to approximately $144,700 in average annual debt service savings for the remainder of the term through June 1, 2033 at an effective interest rate of
1.15%. The 2021 Bonds were rated by S&P as AA+ (top rating for this type of bond) which is a testament to the Council’s conservative and prudent fiscal policies. The total debt service (principal and interest) will be $718,400 for the upcoming year and is funded by a transfer to the Debt Service Fund from the General Fund.
• Self-Insurance Fund (501) – CJPIA covers the City’s property, pollution liability, crime, workers’ compensation and general liability needs. The combined premiums are anticipated to be approximately $534,550 which reflects a yearover-year decrease of $74,830, or 12 percent. This reduction is mainly due to a decrease in the Liability Insurance premium ($90,000) offset by a minor increase in the Property Insurance premium ($14,000). Workers’ Compensation costs are reflected in the line-item budgets for all city funds for which there are personnel costs. The total Workers Compensation premium for the upcoming year is anticipated to be $136,637, a decrease of $24,133 year-over-year, or 15 percent. • Vehicle Maintenance & Replacement Fund (502) – The proposed budget of $289,500 is recommended for necessary operations and maintenance of the citywide fleet, as well as the purchase of three vehicles, one of which is a new addition to the fleet (for the Public Works Inspector), and two of which are replacements for vehicles purchased 10 and 13 years ago. It is anticipated that one of the three vehicles purchased will be a zero-emissions truck for which funding in the amount of $70,000 is supplied by the AQMD Fund (251), as noted above. In addition, a fourth vehicle will be purchased out of the Law Enforcement Reserve Fund (102) and ownership will be transferred to the Los Angeles County Sheriff’s Department. This vehicle will replace the vehicle used by the City’s Volunteer on Patrol (VOP).
• Computer Equipment Maint. & Replacement Fund (503) – The proposed budget of $1,170,000 is recommended for necessary information systems, hardware upgrades, and replacements, such as:
• Creston/Audio-Visual project at Diamond Bar Center (Construction). • Server Replacements (5 quantity).
• Printer Replacements (25 quantity).
• PC, Monitor, Related Accessories Replacements (118 quantity). • Replacement of Network Switch (1 quantity).
• Replacement of the City’s Agenda Management and Live Meeting Streaming Software.
• Building Facility & Replacement Fund (504) – The proposed budget of $165,000 is recommended for necessary facility maintenance projects not categorized as capital improvement projects, such as:
• Diamond Bar Center Office Space Reconfiguration.
• Engineered Wood Fiber Replacement at Diamond Cyn. Park and Sycamore Cyn. Park Playgrounds, and Pantera Dog Park.
• Replacement of Sewer Line Lining at Ronal Regan Park.
Fiduciary Fund
• OPEB Trust Fund (601) – The proposed budget for this fund consists only of revenue via a transfer-in from the General Fund in the amount of $88,000 and investment earnings in the amount of $26,600 designated to fund the City’s Other Post-Employment Benefits (OPEB) Trust, an investment vehicle managed by CalPERS for the purpose of reducing the City’s long-term OPEB liabilities (e.g. retiree medical costs). This amount is unchanged from the prior fiscal year.
There are no expenses budgeted in this fund.
Capital Improvement Program
• As discussed at the May 7, 2024 Study Session, the Draft FY 2024/25 Capital Improvement Program (CIP) budget includes eight (8) new projects totaling $14.3 million. Some proposed projects have already received funding for the design phase in the current FY 2023/24 and are now proposed to move to the construction phase. The Draft FY 2024/25 CIP encompasses four (of five) project categories and represents an expenditure increase of 18.4% when compared to the Adopted CIP for FY 2023/24. The Diamond Bar Blvd. Complete Street Project is the most significant new project proposed at an estimated $9.3 million (primarily grant funded) and will serve as an early implementation public project that will act as a catalyst for the transformation of the Town Center area into a pedestrian-oriented mixed-use “downtown”. The CIP budget includes General Fund funding in the amount of $450,000 for the design of prioritized improvements proposed for Ronald Regan and Sycamore Canyon Parks. The remaining balance needed to fund the program is supplied by other sources such as the City’s Measure M, Measure R, Measure W, SB-1, Prop. A, Prop. C, CDBG and Waste Hauler funds.
Proposed CIPs for FY 2024/25 - Total Budget Request: $14,250,189 Project No. Street Improvements: $13,356,189
SI25105 Arterials -Lemon Ave (SR60 to Northerly City Limit); Brea Cyn Cutoff (SR57 to Westerly City Limit) (Const.)
SI25101 Residential and Collector Street Rehab - Area 4 (Const.) SI25104 CDBG Area 5 ADA Curb Ramp Project (Const.)
SI25106 Diamond Bar Blvd Complete Street Project (Const.) Project No. Traffic Management/Safety Projects: $64,000 TM25201 Battery Back-Up and CCTV Replacement Program (Construction) Project No. Transportation Infrastructure Improvements: $0 N/A None.
Project No. Miscellaneous Public Works Improvements: $380,000 PW25403 Installation of Full Capture Devices on Stormwater Catch Basin for Trash Amendment Compliance - Phase 1
Project No. Facilities, Parks and Rec Improvements: $450,000 FP25507 Ronald Reagan Park Pickleball Court, Playground and ADA (Design) FP25508 Sycamore Canyon Park Lower Bridge Replacement Options (Design) Recommendation
The proposed FY 2024/25 Operating Budget and Capital Improvement Program provides a positive outlook to continues to provide for a wide range of City programs, services and projects. It prioritizes the one-time use of General Fund resources for projects that help build resiliency, financial stability, and projects that create valuable City assets. The recommended strategic investment in human capital will improve the customer and resident experience and respond to changing demands brought on by a rapidly evolving human resources environment. Should the City Council desire to modify any part of the proposed FY 2024/25 Operating Budget and Capital Improvement Program, staff will ensure to incorporate all revisions for final adoption at the June 4, 2024 City Council Meeting.
Attachments:
1. 1.a General Fund Rev & Exp Schedule - FY 2024-25
2. 1.b Consolidated Fund Balance Schedule - FY 2024-25
3. 1.c Draft Budget Schedules - FY 2024-25