Special City Council
March 9, 2022

City of Fort Bragg
Mid-Year Budget
Report
Fiscal Year 2021/22

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

TABLE OF CONTENTS
Introduction………. ...................................................................................................... 2 General Fund Financial Summary ............................................................................... 3-8 Water Enterprise Fund................................................................................................. 9-11 Wastewater Enterprise Fund ....................................................................................... 12-13 Internal Service Funds................................................................................................. 14-17 Budget Adjustment Requests at Mid-Year ................................................................... 18 Long-Term Financial Planning- General Fund ............................................................ 19-21 Fiscal Year 2022/23 Budget Preparation Schedule …………………………..…… ...... 22 Prioritized List of Financial Goals ……………………………………………………… ..... 22

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

INTRODUCTION
The City operates on an annual budget cycle. Through the budget, the City Council approves revenue estimates and authorizes City staff to expend the City’s limited financial resources. The City Council adopts an original budget prior to the start of each fiscal year, then makes adjustments to the budget throughout the year to reflect changes in expected revenues and to increase or decrease expenditures to address changes in policy or operational priorities.

As one of the many activities that the City undertakes to help ensure its financial soundness, staff provides quarterly financial reports on the City’s budget condition. Following the conclusion of the second quarter of the fiscal year (October through December), staff conducts a second quarter/mid-year budget review.

The mid-year review provides an in-depth assessment of the City’s revenues and expenditures during the first half of the fiscal year (July through December). It helps determine whether the City is on track to meet the budget for the fiscal year or if adjustments are warranted. It also includes a projection of the fiscal year end results, which serve as the starting point for the development of next year’s budget and the long-term financial forecast.

The City of Fort Bragg’s mid-year performance Report addresses the financial activity during the first two quarters of FY 2021/22. The report focuses on the General Fund, Internal Service Funds and the Water and Wastewater Enterprise Funds. Special Revenue and Capital Project Funds are not included in the City's base operating budget and, therefore, are not detailed in the Mid-Year Performance Report. The C.V. Starr Center Enterprise Fund is addressed in a separate report.

In reviewing this report, the following information should be taken into consideration:
 Revenues and expenditures are recorded during the period received or paid. As of January 31, accrual entries were made to associate January receipts and expenditures to the second quarter as appropriate.

Year-end accruals use a 60-day window and therefore are more exhaustive.  The schedule of revenues received varies according to the source of funding. As an example, property tax payments are received as follows: 55% in December, 38% in April and 7% in August of the following fiscal year. The August payment is presented in the fiscal year to which it relates.  Although most expenditures occur monthly, there are some quarterly, semi-annual, and even annual expenditures. Examples include debt service payments, liability insurance, and audit fees.  This report is not meant to be inclusive of all finance and accounting transactions. It is intended only to provide the Council and the public with an overview of the state of the City's general fiscal condition. The report has been prepared by the City's finance department without audit and does not include many of the year-end adjustments required to bring the City's financial records into compliance with generally accepted accounting principles (i.e. accruals of sales and use tax revenues, payroll and other expenditures).

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

GENERAL FUND
The General Fund supports many of the City's day-to-day operations, including police and fire protection, street and park maintenance, community development, and general administrative functions. The General Fund receives the broadest variety of revenues, and many of its revenue sources are cyclical in nature. By contrast, the revenue sources for the Enterprise Funds are received on a monthly basis and, as a result, are more evenly distributed throughout the fiscal year.

The General Fund includes all services that are funded through general taxes. It is the funding source for all City programs except those that are paid for through dedicated taxes, user fees, impact fees, or grants.

FISCAL YEAR 2020/21 RECAP
For the fiscal year ended June 30, 2021, the General Fund ended the year with a Budget surplus of $1.51 million, resulting in an increase in Fund balance by 16 percent from $2.7 million to $3.1 million. Like the rest of our nation, our local economy was hit hard by the COVID-19 pandemic. Fort Bragg is a tourist-based economy and depends heavily on tourism for its revenue. Transient Occupancy Tax, which accounts for 31 percent of the General Funds revenues, had the most considerable reduction due to COVID.

Expenditures also ended the year below budget by $839k due to the COVID-19 Expenditure Budget reduction plan, which the City Council approved in April 2020 in response to the projected revenue shortfalls. The General Fund continued to maintain an operating reserve of $1.4 million, a litigation reserve of $200k, and a newly established recession reserve of $489k.

STATUS OF GENERAL FUND REVENUES
Overview
General Fund revenue through the second quarter was $5.3 million, or 51% of the amended budget, compared to $4.5 million at FY 2020/21 mid-year. Staff projects that General Fund revenue will total $10.4 million this fiscal year, approximately $2k less than currently budgeted.

The following table details actual 2021-2022 General Fund revenue collections through December as compared with budgeted revenue estimates and the last two fiscal year audited actuals for historical trends before he pandemic. Also included are changes to each category that are recommended as part of this report.

REVENUE SOURCE
FY 2019/20
Actuals
FY 2020/21
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Transient Occupancy Tax $ 2,204,152 $ 3,321,928 $ 3,064,742 $ 1,532,371 $ 1,938,123 63% $ 405,752 $ 3,264,742 $ 200,000 Sales and Use Tax 1,797,520 2,028,010 1,966,846 983,423 888,439 45% (94,984) 2,043,900 77,054 Property Tax 1,107,039 1,085,532 1,159,533 579,767 659,674 57% 79,907 1,152,076 (7,457) Other Taxes 774,924 810,652 779,500 389,750 367,576 47% (22,174) 812,830 33,330 Sub Total Tax Revenue 5,883,633 7,246,120 6,970,621 3,485,311 3,853,811 55% 368,501 7,273,549 302,928 Licenses & Permits 124,929 91,567 93,702 46,851 38,176 41% (8,675) 88,157 (5,545) Fines and Forfeitures 70,097 12,181 36,200 18,100 11,356 31% (6,744) 22,539 (13,661) Intergovernmental 14,231 3,000 - - - 0% - - -
Use of Money and Property 261,029 (64,616) 27,020 13,510 (32,456) -120% (45,966) 38,782 11,762 Charges for Services 70,402 45,370 57,000 28,500 39,040 68% 10,540 65,492 8,492 Operating Grant Revenue 144,627 130,163 489,212 244,606 34,738 7% (209,868) 178,304 (310,908) Reimbursements 2,277,219 2,299,275 2,686,400 1,343,200 1,325,277 49% (17,923) 2,656,403 (29,997) Other Revenue 31,675 109,358 18,500 9,250 25,920 140% 16,670 28,298 9,798 TOTAL GENERAL FUND REVENUES $ 8,877,842 $ 9,872,419 $ 10,378,655 $ 5,189,328 $ 5,295,863 51% $ 106,535 $ 10,351,523 $ (27,132)

GENERAL FUND REVENUES

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
The 2021-2022 Adopted Budget was developed assuming that many of the General Fund and other economically sensitive City fund revenues would continue to recover with the rollout of vaccines and corresponding loosening of public health restrictions. A comprehensive review of all General Fund revenue accounts has been performed based on activity through the first six months of the year. Based on the available data through December, General Fund Tax revenues have outperformed expectations and are anticipated to end the year approximately $7.4 million (positive variance of about $328k or 5% when compared to the amended budget) above budgeted levels due to solid growth in Transient Occupancy Tax (TOT), Franchise tax and Sales Tax categories.

Partially offsetting these tax revenue growth is lower than anticipated Operating Grant Revenues to reimburse staff time administering these grants and carrying out Grant activities. Much of the reimbursable time is for Community Development Block Grant (CDBG), which includes: the Code Enforcement Program, Business Loans, Fire Station Rehabilitation design work, Parents and Friends, and general administration. The position of Grants Coordinator is currently vacant with the hope to fill the position in the fourth quarter. These unspent funds will be transferred to the next fiscal year.

Revenue adjustments are included in the Mid-Year Budget Review to align the budgeted estimate with anticipated receipts, which are further described on the following pages. Notable variance in Revenues are listed below.
 Transient Occupancy Tax (TOT)
Fort Bragg is a tourist-based economy and depends heavily on tourism for its revenue. Transient Occupancy Tax, which accounts for 32 percent of the General Funds revenues, had the most considerable reduction due to COVID in the last quarter of FY 2019/20. In FY 2020/21, TOT rebounded, recorded its best year to date 43 percent or $425k above budget estimates, and set a record for the year to date at $3.3 million.

Relative to this strong actual performance for FY 2020-21, the current budget estimate was relatively conservative, representing a decrease of 17% cognizant of the reopening of other tourist destinations, international travel, and the emergence of other variants could impact the TOT performance. Indicative of a sustained, though more gradual than initially forecasted, increased in local travel following the unprecedented impacts of COVID-19. However, year-to-date TOT receipts through December 2021 continued the strong performance, recording a 16% increase to $1.9 million, beating the prior year collection level of $1.6 million at the mid-year and recording a $406k positive variance.

Based on the high collections that have been received for the first quarter, Staff has adjusted the adopted budget from $2.7 million to $3 million. As of December 31, 2020, TOT recorded another favorable variance of $405k and is forecasted to end the fiscal year at $3.3 million, $200k above budget estimates. A recommendation is included in this report to increase the TOT revenue estimate by $200k to align the budget with estimated receipts more closely.

REVENUE SOURCE
FY 2019/20
Actuals
FY 2020/21
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Transient Occupancy Tax $ 2,204,152 $ 3,321,928 $ 2,764,742 $ 300,000 $ 3,064,742 $ 1,532,371 $ 1,938,123 63% $ 405,752 $ 3,264,742 $ 200,000

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
 Sales Tax:

The Sales Tax category includes General Sales Taxes, Local Sales Taxes, and Proposition 172 Sales Taxes. The FY 2021-22 General Sales Tax estimate was built on the assumption that FY 2020-21 receipts would total $1.7 million and grow to $1.8 million in FY 2021-22. This estimate assumed underlying growth of 4%. However, since the fourth quarter receipts were significantly stronger than anticipated, FY 2020-21 collections totaled $2 million. These strong results continued into the first quarter of FY 2021-22, Staff has adjusted the adopted budget from $1.8 million to $1.9 million. Therefore, FY 2021-22 receipts may fall by almost 1% and still meet the budgeted estimate Sales tax for the General Fund received through the second quarter equaled $888k, or 45% of the amended budget. That did not include the City's payment for December due to timing. Revenue continues to rebound quicker than industry experts predicted. In a few major categories, sales tax revenues have returned to or exceeded pre-pandemic levels, notably building and construction and the food product categories.

Additionally, inflation will likely drive up Sales tax in the 2nd half of the fiscal year which will be offset by changes in consumer spending for larger purchases. Staff has taken a "most likely" approach, as there are still many unknowns, such as the Ukraine conflict, the emergence of another variant, and changes to consumer spending habits. The projections of a little over $2 million to end the fiscal year are consistent with the recent projections by the City's sales tax consultant, Muni Services, in addition to the certain amount of conservatism that Muniservices builds in their forecasts.  Reimbursements
Reimbursements includes the annual COPS reimbursements for the City's CSO cost ($141k), developer deposit reimbursements ($29k), and cost allocations transfers ($993k), which are considered a cost to the Enterprise funds but revenue to the General Fund. At mid-year, actuals totaled $1.3 million or 49 percent and are expected to come in under budget by $29k at the end of the fiscal year due to the timing of some of the reimbursements, which will be roll-forward to the next fiscal year.  Operating Grant Revenues
Operating Grant revenues are only at 7 percent at mid-year and are expected to end the year at $302k below budget. This revenue category accounts for staff time reimbursement administering the City’s various grants programs and carrying out Grant activities. Much of the reimbursable time is for Community Development Block Grant (CDBG), which includes: the Code Enforcement Program, Business Loans, Fire Station Rehabilitation design work, Parents and Friends, and general

REVENUE SOURCE
FY 2019/20
Actuals
FY 2020/21
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Sales and Use Tax 1,797,520 2,028,010 1,966,846 983,423 888,439 45% (94,984) 2,014,972 48,126

REVENUE SOURCE
FY 2019/20
Actuals
FY 2020/21
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Reimbursements 2,277,219 2,299,275 2,685,200 11,200 2,686,400 1,343,200 1,325,277 49% (17,923) 2,656,403 (29,997)

REVENUE SOURCE
FY 2019/20
Actuals
FY 2020/21
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Grant Revenue 144,627 130,163 489,212 - 489,212 244,606 34,738 7% (209,868) 187,304 (301,908)

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
administration. The negative variance is attributed to the unsuccessful recruitment of a Grants Coordinator/Manager to carry out the City’s Grant activities which left the position unfilled for much of the fiscal year. The Finance Department has been administering these Grants with the hope of filling the vacant position in the fourth quarter of this fiscal year.

These unspent grant funds will be transferred to the next fiscal year. The code enforcement activity has made significant progress by hiring a Code Enforcement Officer and has begun to implement the program guidelines of the grant.
 Other taxes
Franchise Fees are collected in the Cable Television, Solid Waste, and PG&E Electric. Through December, Franchise Fee receipts of $368k, $22k short of mid-term budget estimates are consistent with the prior year collection level. As further discussed below, Electric and Gas Franchise Fees collected through December are formula driven advance amounts, with the true-up occurring in April 2022. Based on historical collection trends, it is currently anticipated that overall Franchise Fees will meet or exceed budgeted levels by year-end. Revenues from Cable television franchise fees have slowly declined as more customers move to satellite and internet-based services.

Additionally, Business License Tax collected was also down by $18k, which is consistent with the prior year as most Tax is collected during business license renewal season in February and March of each year.

STATUS OF GENERAL FUND EXPENDITURES
General Fund expenditures totaled $5.4 million for the first half of FY 2021/22, representing 52 percent of the amended annual budget. Appropriations of $9.9 million were adopted for FY 2021/22. Throughout the year, budgeted appropriations have increased by $505k resulting in an amended budget of $10.4 million. The following chart displays the year to date expenditures compared to the prior years.

REVENUE SOURCE
FY 2019/20
Actuals
FY 2020/21
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Other Taxes 774,924 810,652 779,500 - 779,500 389,750 367,576 47% (22,174) 812,830 33,330

DEPARTMENT
FY 2019/20
Actuals
FY 2020/21
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)

GENERAL GOVERNMENT
City Council $ 120,522 $ 131,496 $ 176,632 $ 111,175 $ 287,807 $ 143,903 $ 114,190 40% $ (29,714) $ 276,409 11,398 Administrative Services 663,500 751,418 956,386 256,025 1,212,411 606,205 575,555 47% (30,651) 1,218,324 (5,913) Marketing & Promotions 185,617 93,060 230,000 - 230,000 115,000 84,549 37% (30,451) 220,650 9,350 Finance 530,505 468,573 606,666 - 606,666 303,333 280,392 46% (22,941) 554,458 52,207 Non-Departmental 682,127 801,470 1,176,338 7,300 1,183,638 591,819 590,386 50% (1,433) 1,058,989 124,648 Community Organizations 38,162 69,869 132,500 - 132,500 66,250 29,900 23% (36,350) 132,500 - DEBT SERVICE 259,956 38,797 80,850 86,092 204,906 102,453 174,243 85% 71,790 197,207 7,699 COMMUNITY DEVELOPMENT 448,795 301,983 384,519 565 385,084 192,542 194,707 51% 2,165 396,168 (11,084)

PUBLIC SAFETY
Police Department 3,854,833 3,467,709 3,797,188 3,000 3,800,188 1,900,094 2,050,841 54% 150,747 3,858,750 (58,563) Fire Department 378,756 439,962 447,758 - 447,758 223,879 335,141 75% 111,262 434,423 13,335

PUBLIC WORKS
Administration & Engineering 588,349 515,726 558,107 25,000 583,107 291,553 322,605 55% 31,052 620,786 (37,679) Parks and Facilities 35,484 31,926 39,800 - 39,800 19,900 15,578 39% (4,322) 40,600 (800) Street Maintenance 111,424 107,607 117,000 16,200 133,200 66,600 41,086 31% (25,514) 130,200 3,000 Storm Drains 22,546 10,847 16,000 - 16,000 8,000 11,145 70% 3,145 16,000 - Corporation Yard 730,605 634,446 444,284 - 444,284 222,142 222,558 50% 416 436,762 7,522 Traffic and Safety 30,894 24,022 73,500 - 73,500 36,750 16,212 22% (20,538) 32,738 40,762 COST ALLOCATION 633,474 478,497 686,131 - 686,131 343,066 343,066 50% - 686,631 (500) TOTAL GENERAL FUND EXPENDITURES $ 9,315,549 $ 8,367,408 $ 9,923,658 $ 505,357 $ 10,466,979 $ 5,233,489 $ 5,402,153 52% $ 168,664 $ 10,311,597 $ 155,382

GENERAL FUND EXPENDITURES

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
Some of the notable variances in expenditures include:
 The Administrative Services budget is expected to end the fiscal year with a small negative variance $6k. The variance is attributed to a requested adjustment of $7k for the Chief of Police recruitment (total cost is $27,500) and $3k for legal ads for ordinances.  The Finance department is projected to be $52k under budget primarily due to salary savings from the vacant Grants coordinator position, which is hoped to be filled in the fourth quarter. As of mid-year, the department budget is $280k, or 46 percent of the amended budget.  The Police Department diligently works to fill vacancies in both sworn and community service officer positions, including a new Chief of Police, which recruitment has not yet begun.

Expenditures are slightly above estimated levels through December and are expected to end the year with a negative variance driven by the increase in recruitment, utility, and academy costs. The Department sent three police recruits to the academy in Jan 2022. While the goal is to fill vacancies and eliminate the need to backfill positions, the normal duration for the academy and field training is approximately 6 months, requiring overtime to backfill until the recruits are ready to serve as sworn officers. The Department's cost control measures will be instrumental in meeting this target while maintaining required service levels.

The budget adjustments recommended in this report are to allocate funds for the academy costs, which will be reimbursed from POST once the officers graduates. Additionally, the Department is resuming the School Resource Officer program with the Fort Bragg Unified School District in March 2022, which will also reimburse the Department for a sworn officers salary and benefits through the end of the fiscal year.  The Non- Departmental category records expenditures not associated with a specific department of the City. These include Retiree Medical costs, Insurance costs, Utilities, and OPEB funding, to name a few.

Year-to-date actuals are at 50 percent of the annual budget and are expected to end the fiscal year with a positive variance of $124k. The costs of REMIF liability and property premium payments paid in the first quarter were much lower than anticipated.

Additionally, a budget of $150k has been set aside to pay down the City’s increasing pension obligation costs in addition to the $750k realized surplus from the previous fiscal year. Staff will be recommending establishing a Section 115 Pension trust in the fourth quarter to accumulate and invest funds to smooth the impacts of future pension cost increases.
 The Community Development Department expenditures are projected to be $11k over budget come year-end due to increases in professional services. The budget adjustment requested in this report includes funding for additional CEQA training for staff and hiring a consultant to assist the department with planning services.
 The Public Works Administration and Engineering department is projected to be $38k over budget primarily due to increases in personnel costs from the hiring of an Assistant City Engineer and increases in vacation/accrual payouts. A budget adjustment of $35k is being requested to align the budget with the year-end expenditure projections.

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

GENERAL FUND NET RESULT AND FUND BALANCE
With projected revenues of $10.3 million, less total expenditures of $10.31 million, Staff projects that the general fund to end FY 2021/22 with a small surplus of $21k, increasing the General Fund's Fund balance to $4.2 million, an increase of 1 percent compared to the prior year. It is important to note that while the projected surplus is not a large one, expenditures, particularly personnel costs, have returned to pre-covid levels, which has been offset by a strong performance from the City's top tax revenue category in Transient Occupancy Tax and Sales Tax.

The City's unassigned balance is projected to end the fiscal year at $1.5 million with Committed Reserves of $2.7 million, including Operating Reserves of $1.9M, a Recession Reserve of $489k, and a Litigation Reserve of $200k.
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
FY 18/19 FY 19/20 FY 20/21 FY 21/22 Projections

GENERAL FUND

REVENUES & EXPENDITURES
Revenues Expenditures
Surplus
$196k
Deficit
$437k
Surplus
$1.5M
Surplus
$21k
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22 Projections
General Fund Fund Balance- 10 Years;
(In thousands)
Committed Unassigned Non-spendable Total Fund Balance

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

WATER ENTERPRISE
The Water Enterprise rate structure is functioning as designed and continues to fund all operations, maintain the operating reserve, provide for debt and accumulate funds for infrastructure upgrades, replacements, and maintenance. The fiscal Year 2020/21 ended with an annual net position increase of $13.5 million. Per policy, the operating reserve is set at 25 percent of the prior year's operating expense, and for the Fiscal Year, 2020/21 was set at $342k. The Enterprise fund also established a recession reserve of $100k, which is sufficient to 5 percent of the fund's operating budget.

The capital reserve increased year over year by $1.3 million to $4.7 million. The CIP for the Water Enterprise stood at $39.8 million in total identified capital projects. The fund is well-positioned to continue work on many of the projects listed on page 23 of the FY 20/21 budget. Staff is currently working on a full rate study in the current fiscal year.

FISCAL YEAR 2021/22 AS OF 12/31/2021

REVENUES
 User fees fully support the revenues for the Water Enterprise Fund. COVID had impacted the enterprise funds revenues during the fourth quarter of the fiscal year 2019-20, resulting in a budget shortfall of 3 percent. Water revenues rebounded to pre-COVID levels fiscal year 2020-21. In quarter one of the current fiscal year, revenues were $789k, down 10 percent compared to the prior year and 16 percent compared to FY 2018-19 due to the water restrictions implemented in response to the reduced flows in the Noyo River, increased high tide events, and the lower than normal precipitation which affected the City’s water supply. The City Council approved the Stage 2 water conservation in July and has since upgraded to a Stage 4 water crisis on September 13, 2021, which targeted a reduction in water consumption by 30-40%.

The projected year-end total revenue is $3.2 million or approximately $5k more than budget, but down 12 percent from the prior fiscal year.

FY 2019/20
Actuals
FY 2020/21
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 3,325,694 $ 3,726,967 $ 3,203,119 $ 1,601,560 $ 1,799,535 56% $ 197,975 $ 3,207,817 $ 4,697 Total Revenue 3,325,692 3,726,965 3,203,119 1,601,560 1,799,535 56% 197,975 3,207,817 4,697 Personnel services 444,488 452,486 941,515 470,757 342,088 36% (128,669) 890,770 50,745 Administration 439,217 473,261 465,083 232,542 229,524 49% (3,018) 461,383 3,700 Repairs & maintenance 49,885 36,419 40,000 20,000 14,741 37% (5,259) 30,811 9,189 Materials & supplies 140,121 149,867 180,548 90,274 103,639 57% 13,365 142,848 37,700 Utilities 134,585 117,070 120,000 60,000 74,194 62% 14,194 120,000 - Contractual services 45,788 56,769 120,400 60,200 28,165 23% (32,035) 103,400 17,000 Insurance 21,031 17,230 24,122 12,061 - 0% (12,061) 22,349 1,773 Interest/Debt Service * 74,076 64,949 446,103 223,052 379,801 85% 156,749 446,103 - Depreciation ** 326,312 319,552 - - - 0% - - -
Total Expenditures 1,675,503 1,687,603 2,337,771 1,168,885 1,172,151 50% 3,266 2,217,664 120,107 Net Revenue/(Expense) $ 1,650,189 $ 2,039,362 $ 865,349 $ 432,674 $ 627,384 $ 194,709 $ 990,153 124,804

WATER ENTERPRISE
* Audited results do not include payment of principal which is not an expense in full accrual accounting ** Depreciation Expense is not budgeted and therefore not included in calculation of budget variance

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

EXPENDITURES

Water Enterprise expenses for the first half of FY 2021/22 totaled $1.2 million, representing 50% of the amended annual budget. The projected year-end total is $2.2 million or approximately $120k greater than budget.  At mid-year, Debt Service is 85 percent of the total annual budget. Each year the Enterprise makes a principal payment in October and a second smaller interest payment in April.  No other significant variances are expected in any of the enterprise expense categories at year-end.

The summer months presents water shortage challenges for the City if there isn't sufficient rainfall. City Staff is actively preparing alternative plans to address the looming emergency, including the Desalination Unit implemented in 2021 and looking at alternative water sources and storage. Additionally, the new water meter installation funded by the Community Development Block Grant (CDBG) will assist the City in better detecting leaks and water usage in real-time.
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 Projections
Revenues Expenditures Net Rev/Exp
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22
Projections

WATER ENTERPRISE RESERVES

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
With projected revenues of $3.6 million, expenses of $2.2 million, staff projects, the Water enterprise will end the FY 2021/22 with a net position of $13.2 million and reserves of $6.3 million. The Enterprise Capital Reserve has budgeted $2.1 million to be transferred for Capital improvement projects which includes the Pudding Creek water main $812k, Distribution system $850k, Raw Water Reservoir $350k and Raw water line engineering $159k. Staff is actively seeking Grant funds to pay for some of the identified CIP projects and use capital reserves for matching funds. For a more detailed list of Capital improvement project scheduled for the Water Enterprise, refer to page 183-184 of the Adopted Budget.

Capital Reserve,
$3,292,138 , 8%
Unfunded CIP,
36,600,000 , 92%
Water Enterprise Capital Improvement Funding
Capital Reserve Unfunded CIP

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

WASTEWATER ENTERPRISE
The Wastewater Enterprise rate structure is functioning as designed and continues to fund all operations, maintain the operating reserve, provide for debt and accumulate funds for infrastructure upgrades, replacements, and maintenance. The fiscal Year 2020/21 ended with an annual net position increase of $2.04 million to $24.4 million. Per policy, the operating reserve is set at 25% of the prior year's operating expense, and for the Fiscal Year, 2020/21 was set at $625k.

FISCAL YEAR 2020/21 AS OF 12/31/2021

REVENUES
Like the water enterprise fund, wastewater revenues rebounded to pre-COVID levels in FY 2020/21, totaling $3.4 million. The projected year-end revenue for the current fiscal year is estimated to be $3.3 million or approximately $84k more than the original adopted budget but down from the prior year by 17 percent or $679k.

The new septic dumping station recorded a $30k increase in operating revenues for the fund.

EXPENDITURES
Wastewater Enterprise expenses for the first half of FY 2021/22 totaled $1.1 million, representing 43 percent of the amended annual budget. The projected year-end total is $2.6 million, which is approximately $13k less than budget:
 At year-end personnel, services are expected to be approximately $50k under budget, mainly due to savings in personnel costs.
 Contractual services are forecasted to be $55k above budget estimates, a budget amendment request is requested for the increase in costs of Bio solids removal.  At year-end, materials and supplies in the Non-Routine Maintenance division are expected to be under budget by approximately $4k. Less maintenance is required for the sewer lift stations since a complete overhaul was undertaken.

FY 2019/20
Actuals
FY 2020/21
Actuals
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as
of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 3,589,864 $ 4,054,058 $ 3,261,722 $ (130) $3,253,131 $ 1,626,566 $ 1,852,628 57% $ 226,062 $ 3,337,323 $ 84,192 Capital Grants 4,512,326 - - - - - 0% - - -
Total Revenue 8,102,190 4,054,058 3,261,722 (130) 3,253,131 1,626,566 1,852,628 57% 226,062 3,337,323 84,192 Personnel services 651,540 686,110 631,549 49,500 681,049 340,524 304,498 45% (36,026) 630,408 50,641 Administration 726,514 693,735 696,714 - 696,714 348,357 361,118 52% 12,761 695,714 1,000 Repairs & maintenance 81,148 60,669 145,250 50,000 195,250 97,625 53,209 27% (44,416) 199,250 (4,000) Materials & supplies 168,008 272,530 230,237 18,953 249,190 124,595 134,266 54% 9,671 228,996 20,194 Utilities 172,435 198,320 210,000 - 210,000 105,000 114,349 54% 9,349 210,000 - Contractual services 111,735 164,551 312,300 52,506 364,806 182,403 161,679 44% (20,724) 419,806 (55,000) Insurance 26,181 53,032 60,305 - 60,305 30,153 - 0% (30,153) 59,225 1,080 Interest/Debt Service * 84,606 97,760 187,650 2,500 190,150 95,075 - 0% (95,075) 190,150 - Depreciation ** 304,310 816,300 - - - - 0% - - -
Total Expenditures 2,326,476 3,043,007 2,474,005 173,459 2,647,464 1,323,732 1,129,120 43% (194,612) 2,633,548 13,915 Net Revenue/(Expense) $5,775,714 $ 1,011,051 $ 787,717 $ (173,589) $ 605,667 $ 302,834 $ 723,508 $ 420,674 $ 703,775 98,108

WASTEWATER ENTERPRISE
* Audited results do not include payment of principal which is not an expense in full accrual accounting ** Depreciation Expense is not budgeted and therefore not included in calculation of budget variance

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
With projected revenues of $3.3 million, expenses of $2.6 million, and transfers of $880k, Staff projects the Wastewater enterprise to end FY 2021/22 with a net position of $26.1 million and reserves of $3.1 million. The decline in reserves in fiscal year FY 17/18 is a result of the Wastewater treatment plant construction in addition to grant funds.

During the budget development, Staff identified a list of Capital Improvements Program (CIP) of $14.1 million needed to improve the fund's infrastructure. A collection system rehab of $12 million is planned for FY 2024/25 with $880k of Capital improvements budgeted for this fiscal year. -
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 Projections
Wastewater Fund Operations
Revenues Expenditures Net Revenues
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22
Projections

WATER ENTERPRISE RESERVES
Capital Reserve,
$1,570,000 , 12%
Unfunded CIP,
12,000,000 , 88%
Wastewater Enterprise Capital Improvement
Funding
Capital Reserve Unfunded CIP

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
INTERNAL SERVICE: FACILITIES REPAIR & MAINTENANCE
Internal Service Funds-Facilities fund accounts for the maintenance of all City-owned buildings.  No significant revenue variances are expected year-end.  The repairs and maintenance schedule are listed below, with $102k of maintenance budgeted. Due to staffing, only the town hall rehab design and Guest House Stain Glass window will be completed this fiscal year, with the rest of the projects to be evaluated during the FY 2022/23 Budget process and moved to the next fiscal year.

FACILITY ISF 10 YEAR MAINTENANCE PROGRAM
FY 2019/20
Actuals
FY 2020/21
Actuals
FY 21/22
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 11,225 $ 5,826 $ 7,495 $ - $ 7,495 $ 3,748 $ 2,000 27% $ (1,748) $ 5,000 $ (2,495) Interdepartmental Charges 205,744 97,147 195,068 - 195,068 97,534 97,534 50% - 195,068 - TOTAL REVENUES 216,969 102,973 202,563 - 202,563 101,282 99,534 49% (1,748) 200,068 (2,495) Personnel Services 127,949 78,810 93,568 - 93,568 46,784 46,784 50% - 93,568 - Repairs & Maintenance 6,666 19,738 101,500 - 101,500 50,750 13,764 14% (36,986) 50,000 51,500 TOTAL EXPENDITURES 134,616 98,548 195,068 - 195,068 97,534 60,548 31% (36,986) 143,568 51,500 Net Revenue/(Expense) $ 82,354 $ 4,425 $ 7,495 $ - $ 7,495 $ 3,748 $ 38,986 520% $ 35,239 $ 56,500 49,005

ISF-FACILITIES
MAJOR PROJECTS/REPLACEMENTS FY: 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/30 City Hall - 20,000 - 75,000 - - 25,000 - - -
City Hall East - 3,500 - - 3,500 - - - - -
Fort Building - - - - - - - - 10,000 -
Town Hall - 50,000 - 60,000 - - 3,000 - - -
Fire Station, Main St - - - - - - - - - -
Fire Station, Hwy 20 - - - - - - - - - -
Guest House - 8,000 - 80,000 - - - - - 110,000
Police Department - - - 15,000 70,000 - - - - -
Noyo Headlands Park - 18,000 - 4,500 - 30,000 5,000 - - - Pomo Bluffs Park - 2,000 - 5,000 - - - - 40,000 -
Noyo Beach - - - - - - - - - -
Corp Yard - - - - - - - - - -
Harbor Lite Trail - - - - - - - - - -
TOTAL major projects - 101,500 - 239,500 73,500 30,000 33,000 - 50,000 110,000 General Repairs Facilities $0 $0 $0 $0 $0 $0 $0
TOTAL preventative maintenance $0 $0 $0 $0 $0 $0 $0 $0
TOTAL PROJECT FUNDING NEED: $0 $101,500 $0 $239,500 $73,500 $30,000 $33,000 $0 $50,000 $110,000 560,000
580,000
600,000
620,000
640,000
660,000
680,000
FY 19/20 FY 20/21 Projected FY 21/22

FACILITIES (ISF) RESERVES

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
INTERNAL SERVICE: INFORMATION TECHNOLOGY (IT)
Information technology accounts for all activities of the City's computer networks, the costs of which are distributed among user departments using equitable formulas.  No significant variances are expected in the revenue categories come year-end.  Materials and Supplies account for all IT Software/Hardware related costs in maintaining the City’s computer networks. Expenditures are estimated to end the fiscal year under budget by $17k. With the transition to Springbrook cloud, savings in purchasing a Finance Server and not implementing the HR Software-NeoGovt contributed to the positive variance. Conversely, due to the increasing number of worldwide cyber threats against organizations of all sizes and types, the City amended the previously adopted budget by $196k to upgrade and add to the City’s network and firewall system, which caused an increase of 178% or $345k from the prior year’s total budget. Staff expects the requested Budget for FY 2022/23 to be more consistent with prior year numbers as most of these work will be completed by December 2022.
 Also included in the budget is a penetration test to audit the City’s IT network to look at potential vulnerabilities within the system.

FY 2019/20
Actuals
FY 2020/21
Actuals
FY 21/22
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Interdepartmental Charges 303,965 272,450 440,990 - 440,990 220,495 220,495 50% - 440,990 - TOTAL REVENUES 303,965 272,450 440,990 - 440,990 220,495 220,495 50% - 440,990 - Personnel Services - 88,483 94,535 10,000 104,535 52,267 51,351 49% (916) 95,680 8,854 Repairs & Maintenance 67 - 4,700 - 4,700 2,350 415 0% (1,935) 4,700 - Materials & Supplies 169,832 194,562 343,498 196,561 540,060 270,030 252,380 47% (17,650) 523,212 16,848 Contractual Services 828 24 - - - - 106 0% 106 106 (106) Depreciation 49,005 (11,734) - - - - -
TOTAL EXPENDITURES 219,732 271,336 442,733 206,561 649,294 324,647 304,253 47% (20,394) 623,699 25,595 Net Revenue/(Expense) $ 84,233 $ 1,114 $ (1,743) $ (206,561) $ (208,304) $ (104,152) $ (83,758) 40% $ 20,394 $ (182,709) 25,595 ISF-IT
114,522
100,881
(81,828) (100,000)
(50,000)
-
50,000
100,000
150,000
FY 19/20 FY 20/21 Projected FY 21/22

IT (ISF) RESERVES

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
INTERNAL SERVICE: FLEET
Fleet and Equipment services account for all activities of the City's central garage operations, the costs of which are distributed among designated user departments using equitable formulas.  USDA Grant Reimburses the City for 55 percent of the vehicle cost. Staff will be applying for the reimbursement of all vehicle purchased amounting to $204k  Materials and Supplies is projected to be over-budget by $15k, due to increase in fuel costs. A budget adjustment of $15k is being requested to align the budget with the year-end expenditure projections.

FY 2019/20
Actuals
FY 2020/21
Actuals
FY 21/22
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2021
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Interdepartmental Charges 275,810 255,422 384,676 - 384,676 192,338 192,338 50% - 384,676 - Grant Reimbursements 16,744 636,938 130,000 130,000 65,000 - 0% (65,000) 204,600 74,600 TOTAL REVENUES 292,554 892,360 384,676 - 384,676 192,338 192,338 50% - 589,276 (204,600) -
Personnel Services 126,631 144,542 137,689 - 137,689 68,845 81,401 59% 12,556 107,559 30,130 Repairs & Maintenance 35,743 43,647 41,000 - 41,000 20,500 17,746 43% (2,754) 41,000 - Materials & Supplies 62,273 96,891 70,300 - 70,300 35,150 41,645 59% 6,495 85,200 (14,900) Vehicles 490 - 372,000 16,000 388,000 194,000 84,347 22% (109,653) 388,000 - Contractual Services 4,579 2,619 2,000 - 2,000 1,000 - 0% (1,000) 2,000 - Depreciation 117,694 94,221 - - - 0% -
TOTAL EXPENDITURES 347,410 381,920 622,989 16,000 638,989 319,495 225,139 35% (94,356) 623,759 15,230 Net Revenue/(Expense) $ (54,856) $ 510,440 $ (238,313) $ (16,000) $ (254,313) $ (127,157) $ (32,801) 13% $ 94,356 $ (34,483) 219,830

ISF-FLEET
Funded by Grant. Savings for ISF Carried forward from Prior year. Move to next Fiscal year.

Unit No. Make Yr. Model Hours/Miles
FY 20/21
Adopted
FY 21/22
Adopted
FY 22/23
Projected
FY 23/24
Projected
FY 24/25
Projected
FY 25/26
Projected
FY 26/27
Projected
FY 27/28
Projected
FY 28/29
Projected
FY 29/30
Projected
FY 30/31
Projected
New New 2021 Generator $85,000
New New 2021 Car Trailer $6,000
WWT15 TMC 1986 LIFT TRUCK Gone $55,000
WT1 Dodge 2005 1500 Q. CAB 60,618 $30,000
PW8 JOHNDE 1985 BACKHOE 5,949 $140,000
PW16 FORD 2006 F-150 X-TRA 73,402 $30,000
PW46 STERLING 2020 Vactor 2,576 $602,000
PW1 CHEV. 2000 3500 Flatbed 44,143 $70,000
CHE121 FORD 2006 ESCAPE 59,407 $38,000
PW5 FORD 2006 F-250 SERV. 77,493 $37,000
$657,000 $225,000 $0 $70,000 $67,000 $30,000 $38,000
PD745 FORD 2020 Ford Van 1,135 $62,500 $70,000
PD735 FORD 2005 CROWN VIC 89,424 $56,000 $62,000
PD747 FORD 2009 ESCAPE 127,041 $36,000 $42,000
PD744 FORD 2008 RANGER 55,563 $37,000 $42,000
PD1302 FORD 2011 CROWN VIC 93,103 $56,000
PD1301-K9 FORD 2011 CROWN VIC 74,021 $56,000
PD1403 FORD 2014 INTERCEPTOR 81,966 $58,000
PD501 FORD 2015 INTERCEPTOR 60,435 $58,000
PD500 FORD 2015 INTERCEPTOR 65,201 $58,000
PD509 FORD 2015 TAURUS 109,956 $55,000 $35,000
PD503 FORD 2015 INTERCEPTOR 49,377 $58,000
PD510 FORD 2015 TAURUS 26,398 $37,000
PD502 FORD 2015 INTERCEPTOR 35,072 $60,000
PD507 FORD 2016 INTERCEPTOR 36,271 $60,000
PD508 FORD 2016 INTERCEPTOR 27,193 $60,000
PD513 FORD 2018 INTERCEPTOR 13,826 $62,000
Police Sub-Total $62,500 $147,000 $149,000 $116,000 $93,000 $95,000 $120,000 $60,000 $62,000 $70,000 $146,000 Total Replacement Costs $719,500 $372,000 $149,000 $186,000 $160,000 $125,000 $158,000 $60,000 $62,000 $70,000 $146,000 Vehicle Replacement Plan
Public Works Sub-Total

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

RESERVES
With projected revenues of $589k, expenses of $623k, Staff projects the Fleet Internal Service Fund will end the FY 2021/22 with a reserve balance of $130k. A decrease of 21 percent or $34k. $205,134
$164,796
$130,313
$-
$50,000
$100,000
$150,000
$200,000
$250,000
FY 19/20 FY 20/21 Projected FY 21/22

FLEET (ISF) RESERVES

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

BUDGET ADJUSTMENT REQUESTS AT MID-YEAR
 Staff requests the following budget adjustments at mid-year. Council will not be asked to take official action on these requests today, but if Council is amenable, Staff will bring the adjustments back at a future Council meeting on the consent calendar:

Account
Number Account Description Department
Current
Budget
Budget
Amendment
Request
Adjusted
Budget Justification Funding Source

REVENUES
110-0000-3137 Transient Occupancy Tax General $ 3,064,742 $ 200,000 $ 3,264,742 Adjusted to reflect year to date revenue n/a Total General Fund Revenues $ 3,064,742 $ 200,000 $ 3,264,742

EXPENDITURES
110-4200-0319 Professional Services Police Department $ 200,000 $ 15,000 $ 215,000 Background, Medical, Pshcyological
and hiring fees for influx of new
employees.

Operating Appropriation
110-4200-0367 PD Recruit Training Police Department - 22,000 22,000 Redwoods Police Academy for the three recruits
Operating Appropriation,
Reimb by POST after
Graduation
110-4200-0383 Utilities Police Department 3,000 3,500 6,500 Increase in Propane costs Operating Appropriation 110-4320-0319 Professional Services Community Development 565 4,400 4,965 Additional CEQA assistance Operating Appropriation 110-4320-0319 Professional Services Community Development 565 20,000 20,565 Consultant for Planning services Operating Appropriation 110-4330-0101 Salaries & Benefits Public Works 341,922 36,000 377,922 New hire- Assistant City Engineer Operating Appropriation 110-4130-0364 Legal Notices Admin 3,000 3,000 6,000 Legal ads for Ordinances Operating Appropriation 110-4130-0317 Recruitment Costs Admin 28,750 7,000 35,750 Recruitment costs for Chief of Police Operating Appropriation 110-4110-0315 Election Costs City Council 2,964 5,000 7,964 Election costs November election. Operating Appropriation Total General Fund Expenditures $ 580,766 $ 115,900 $ 696,666 710-4712-0319 Professional Services Wastewater Enterprise $ 287,006 $ 70,000 $ 357,006 Additional funds for Biosolids removal Operating Appropriation 522-4550-0382 Fuel and Lubricants Fleet -ISF $ 68,000 $ 15,000 $ 83,000 Cover increases in Fuel costs Operating Appropriation Wastewater Enterprise
Fleet- Internal Services
FY 2021/22 Requested Mid-Year Revenue Budget Adjustments

GENERAL FUND

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

LONG-TERM FINANCIAL PLANNING
Long term financial planning is an important tool used to help maintain ongoing financial sustainability and helps governments provide a consistent level of services to their citizens. It is important to keep in mind that no one has a crystal ball and can predict the future with complete accuracy. However, the exercise of projecting revenues and costs into the future, while highly unlikely to be 100% correct, still gives the government an opportunity to develop a general sense of its financial health in the years to come.

The long term forecast provided in this report was developed at a high level (low level of detail). The City's major sources of revenue were projected individually with all other revenue sources aggregated together. Likewise, the City's major expenditure categories were projected individually with many costs aggregated together. The majority of the assumptions used in the report were based on a five-year historical trend. Year's that were clear outliers were removed prior to averaging so as not to affect the overall trend. Some projections however are based on known payment or increase percentages. Pension costs have been projected to increase 15% each year for the next five years.

This is an estimated 1% higher than prior CalPERS estimates to factor in the yet unknown impact of CalPERS not reaching the target earnings rate for the last two years. The target earnings rate is 7.0% but the investment return for FY 2018-19 was 6.7% FY 2019-20, just 4.7% and a very strong performance of 21.3% for FY 2020-

21. Over a 20-year period, the overall CalPERS fund performance has averaged just 5.5%. The unfunded pension liability for the fiscal year ended June 30, 2021, is $10.7 million.

Like most cities in California, Fort Bragg continues to experience double digit increases in its unfunded liability payments with little or no reduction in the overall unfunded liability. In November 2021, the City adopted a Pension Policy and issued $11.4 million in taxable Lease Revenue Bonds. Proceeds in the amount of $7.5 million were used to reduce the City’s unfunded pension liability with an additional $3.5 million set aside for City projects.

The record CalPERS investment return mentioned above and the $7.5 million liability payment places the City in a better position to manage pension obligations going forward.

Furthermore, the City will be setting up a Section: 115 trust in the next quarter to provide more Capacity to absorb any potential future UAL that may be added once CALPERS has a bad year.

The table on the following page includes three years of audited results for context as well as projected results for six additional years into the future. Four "what-if" scenarios are provided as well showing possible long-term results if certain revenue enhancements were to be enacted.

FIVE-YEAR PROJECTION
In Fiscal Year 2018-19 the citizens of Fort Bragg voted on a ballot initiative entitled Measure H. Measure H was a proposed general sales tax aimed at closing the budget gap caused by skyrocketing pension costs. With additional revenue the City planned to enter into a shorter amortization schedule with CalPERS for payment of unfunded liabilities. Although this would have resulted in a higher annual payment it would have saved the City nearly $4M of interest cost over 15 years. Measure H was not successful.

With the defeat of Measure H, the City did take some steps aimed at closing the budget gap on the expenditure side. The Administrative Services department eliminated the position of Administrative Services Director with and the Police Lieutenant. Additionally, in FY 2019-20 the Community Development Director terminated employment with the City, this position was replaced with a lower cost Planner position.

The City’s General Fund operated at a record surplus for FY 2020/21 and fund balance improved by nearly $1.5 million. The surplus was the result of deep budget cuts early in the pandemic which reduced staff and services and the previously discussed increases in TOT and sales tax revenue as tourism rebounded. In May, 2020, the City laid off four full-time employees, froze two positions in the Police Department and furloughed another twelve employees 50% to 75% of their regular hours. The furloughed staff was returned to full-time status in August,

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
2020 but several of the laid off positions remain vacant. In addition, the City did not replace two positions (Finance Director and Assistant City Engineer) that became open in late June. As the reliance and demand for City services continues to grow, one of the challenges the City faces is the same as many other employers – recruiting and retaining qualified staff.

The City adopted a balanced General Fund budget for FY 2021/22 and projected a small surplus of $47k. While the surplus was small, the budget included $150k to pay down pension obligations and relatively modest revenue projections.

The long-term forecast indicates that in the next year or two the City will likely be able to fill budgeted or realized deficits with appropriated fund balance. Within two years, it is likely that revenue enhancements and/or additional cost-cutting measures will be necessary. The long-term forecast includes four "what-if" scenarios showing the effect of a variety of different hypothetical revenue generators and cost reductions. Staff recommends that the City Council once again pursue a general sales tax measure at the next opportunity.

In addition to pursuing a general sales tax measure, the City could leverage accumulated funds from the internal service funds, enterprise funds, debt borrowings and other expense reductions or revenue generating opportunities.

The following charts depict the General Fund expenditure categories. $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 FY 17-18
FY 18-19
FY 19-20
FY 20-21
FY 21-22
FY 22-23
FY 23-24
FY 24-25
FY 25-26
FY 26-27
Salaries & Wages Pensions Other Benefits Benefits Materials & Services Allocations to Internal Service Funds Other Expenditures Debt Service

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 Audited Audited Audited Audited Projected Forecast Forecast Forecast Forecast Forecast Revenue: Sales Tax 1,785,264 $ 1,728,222 $ 1,797,520 $ 2,028,010 $ 2,014,972 $ 2,193,915 $ 2,277,033 $ 2,351,465 $ 2,417,417 $ 2,474,606 $ Property Tax 1,034,552 1,074,931 1,107,039 1,085,532 1,152,076 1,180,878 1,210,400 1,240,660 1,271,677 1,303,468 Transient Occupancy Tax 2,619,227 2,640,275 2,204,152 3,321,928 3,264,742 3,362,685 3,446,752 3,532,920 3,621,243 3,621,243 Cost Allocations 2,078,877 1,863,711 2,238,252 2,299,275 2,656,403 2,775,941 2,900,858 3,031,397 3,167,810 3,310,361 All Other Revenue Sources 1,677,902 2,073,789 1,536,429 1,137,673 1,244,902 1,257,351 1,269,925 1,282,624 1,295,450 1,308,405 Total Revenue 9,195,822 9,380,928 8,883,392 9,872,419 10,333,095 10,770,770 11,104,968 11,439,066 11,773,597 12,018,084 Expenditures: Salaries & Wages 3,940,434 3,615,604 3,762,405 3,271,863 3,707,175 4,016,313 4,104,039 4,247,680 4,396,349 4,496,349 Pensions 745,604 792,101 1,016,499 915,481 984,436 790,000 708,657 680,631 690,631 690,631 Other Benefits 1,792,361 1,536,145 1,605,731 1,573,690 1,848,497 1,804,399 1,876,574 1,951,637 2,029,703 2,029,703 Benefits 2,537,965 2,328,246 2,622,230 2,489,172 2,832,933 2,594,399 1,785,231 1,832,268 1,920,334 1,920,334 Materials & Services 2,080,027 2,301,401 2,111,910 1,971,858 2,869,167 2,394,174 2,442,058 2,490,899 2,540,717 2,540,717 Allocations to Internal Service Funds 601,371 717,808 633,474 478,497 686,631 888,827 959,933 1,036,727 1,119,666 1,119,666 Other Expenditures 107,966 35,895 - 130,091 177,727 - - - - Debt Service 185,535 185,533 185,533 37,964 37,964 599,703 543,322 611,197 677,197 756,774 Total Expenses 9,453,298 9,184,487 9,315,552 8,379,445 10,311,597 10,493,415 9,834,582 10,218,771 10,654,262 10,833,839 Net Transfers: 110,014 (14,289) (18,229) - - - -
Net Increase (Decrease) to Fund Balance (147,462) 182,152 (450,389) 1,492,974 21,499 277,355 1,270,385 1,220,295 1,119,335 1,184,245 Beginning Fund Balance 3,106,940 2,959,478 3,141,630 2,691,242 4,184,215 3,455,714 3,733,069 5,003,454 6,223,749 7,343,084 Ending Fund Balance 2,959,478 $ 3,141,630 $ 2,691,242 $ 4,184,215 $ 3,455,714 $ 3,733,069 $ 5,003,454 $ 6,223,749 $ 7,343,084 $ 8,527,329 $ Revised change in f/balance assuming $190k revenue annually - 211,499 467,355 1,460,385 1,410,295 1,309,335 1,374,245 Projected Fund Balance 4,184,215 $ 4,395,714 $ 4,863,069 $ 6,323,454 $ 7,733,749 $ 9,043,084 $ 9,107,994 $ Revised change in fund balance assuming $430k revenue annually - 451,499 707,355 1,700,385 1,650,295 1,549,335 1,614,245 Projected Fund Balance 4,184,215 $ 4,635,714 $ 5,343,069 $ 7,043,454 $ 8,693,749 $ 10,243,084 $ 10,307,994 $ Revised change in fund balance - 25% Sales Tax first year ($500k/yr.) - 147,435 825,833 1,839,644 1,808,161 1,723,689 1,788,599 Projected Fund Balance 4,184,215 $ 4,331,650 $ 5,157,483 $ 6,997,127 $ 8,805,288 $ 10,528,977 $ 10,593,887 $ Revised change in fund balance - 25% Sales Tax first year ($750k/yr.) - 210,402 1,100,073 2,124,273 2,102,094 2,025,866 2,112,222 Projected Fund Balance 4,184,215 $ 4,394,618 $ 5,494,690 $ 7,618,963 $ 9,721,057 $ 11,746,924 $ 13,859,146 $ City of Fort Bragg General Fund Five Year Forecast
Storm Drain
Enterprise $190k
annually
Parcel Tax
$430k/yr.
1/4 cent General
Sales Tax
$500k/yr.
3/8 cent General
Sales Tax $750k/yr.
$2,959,478 $3,141,630
$2,691,242
$4,184,215
$3,455,714
$3,733,069
$5,003,454
$6,223,749
$7,343,084
$8,527,329
$9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- - 8,000,000 6,000,000 4,000,000 2,000,000
14,000,000 12,000,000 10,000,000
Audited Audited Audited Audited Projected Forecast Forecast Forecast Forecast Forecast FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27

GENERAL FUND FIVE YEAR FORECAST
Total Revenue Total Expenses Ending Fund Balance Linear (Total Revenue)

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021
The FISCAL YEAR 2022/23 BUDGET PREPARATION
A. BUDGET PREPARATION SCHEDULE
Initial activities related to the preparation of the Fiscal Year 2022/23 budget are already under way. Direction provided today by Council will be incorporated into the budget draft. Staff will present a draft budget to the Council and public at a budget workshop on May 18. Further direction provided at the workshop will be incorporated into a "Final" budget that will be presented to the Council for consideration of adoption on June 14.

The complete budget calendar is provided below:

B. PRIORITIZED LIST OF FINANCIAL GOALS
Staff used the prioritized list as guidance in preparing the FY2021/22 budget and will again use the list in preparing the FY 2022/23 budget unless Council directs otherwise:
1) Adopt a balanced budget
2) Provide for additional contributions to CALPERS in order to pay the unfunded liability off earlier than 30 years.
3) Maintain operating reserve and litigation reserve
4) Provide funding for emergency reserves
5) Maintain current level of service (no staff layoffs, no program cuts) 6) Provide cost of living adjustments for Staff in years to come C. CITY COUNCIL DISCUSSION

ACTIVITY DAY DEADLINE
FINANCE PROVIDES BUDGET SPREADSHEETS TO DEPARTMENTS AS WELL AS INSTRUCTIONS RE: NARRATIVES & CAPITAL PROJECTS (INCLUDING INTERNAL SERVICE FUNDS, GRANTS, DDAs) Friday 2/25/2022 MID-YEAR PERFORMANCE BUDGET REVIEW WITH COUNCIL ( 9 am - 2:30pm)(COMMUNITY INPUT) Thursday 3/9/2022 FINANCE PROVIDES INITIAL REVENUE FORECASTS TO CM (ALL REVENUE SOURCES, AND FUNDS) Friday 3/11/2022 DEPTS SUBMIT PROPOSED DEPARTMENTAL EXPENSE BUDGETS AND NARRATIVES TO FINANCE Friday 3/23/2022 PW & CDD SUBMIT COMPLETED BUDGET SECTIONS FOR GRANTS AND CAPITAL PROJECTS Wednesday 3/23/2022 HR PROVIDES PAYROLL PROJECTIONS INCLUDING BENEFITS Tuesday 3/28/2022 CM & FINANCE MEET WITH All DEPTS; REVIEW APPROPRIATIONS REQUESTS Tues-Tues 3/22/2022 thru 3/31/2022 CM & FINANCE FOLLOW UP MEETING CIP Friday 4/1/2022
FINANCE POSTS REVISED BUDGET WORKSHEETS IN BUDGET FOLDER; Tueday 4/5/2022 DEPARTMENTS REVIEW REVISED EXP WORKSHEETS; REPORT ANY DISCREPANCIES TO FINANCE THIS INCLUDES PROJECTED YEAR END FOR FY20, GRANTS; CAPITAL PROJECTS, ETC Friday 4/8/2022 FINANCE REVIEWS TOTAL REVENUES vs EXPENDITURES WITH CM - ADJUST AS NECESSARY; draft CV Starr Budget due Tuesday 4/12/2022 INTERNAL REVIEW/QUALITY CONTROL (FINANCE, CM, DEPTS) - DRAFT BUDGET DOCUMENT Wed - Wed (3 wks) 4/15/2020 thru 5/6/2022 FINALIZE DRAFT BUDGET DOCUMENT Wed 5/6/2022
CM COMPLETES BUDGET TRANSMITTAL LETTER Thurs 5/4/2022
FINANCE DISTRIBUTES PROPOSED FY 2022/23 Draft BUDGET Friday 5/8/2022 CITY COUNCIL CONDUCTS FY 2022/23 BUDGET WORKSHOP ( 9 am - 2:30pm)(COMMUNITY INPUT) Thursday 5/12/2022 FINANCE DISTRIBUTES FY 2022/23 BUDGET INCLUDING COUCIL AND PUBLIC UPDATES (FOR COUNCIL ADOPTION) Mon 6/1/2022 CITY COUNCIL ADOPTS FY 2022/23 BUDGET Mon 6/6/2022
SCHEDULE FOR DEVELOPMENT OF FY 2022/23 BUDGET