Special City Council
March 22, 2023

MID-TERM

BUDGET REPORT
FY 2022/23
Isaac Whippy
PREPARED BY :
[email protected]
City of Fort Bragg
Mid-Term Budget FY 2022/23

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 Asset Forfeiture Funds ……………………………………………………………………… 18
Budget Adjustment Requests at Mid-Year ................................................................... 19 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
Mid-Term Budget FY 2022/23

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 City of Fort Bragg's mid-year performance report addresses the financial activity during the first two quarters of Fiscal Year 2022/23 (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 report focuses on the General Fund, Internal Service Funds, and 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 City 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
Mid-Term Budget FY 2022/23

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 2021/22 RECAP
For the fiscal year ending June 30, 2022, the General Fund ended with a budget surplus of $528,783, increasing the Fund balance by 21 percent from $4.2 million to $8.5 million, with $3.5 million subsequently returned as part of the 2021 Lease Revenue Debt proceeds for land acquisition. Expenditures ended the year at $10.6 million, an increase of 27 percent as expenditures, particularly personnel costs, returned to pre-pandemic levels.

The General Fund maintained an operating reserve of $1.4 million, a litigation reserve of $200k, and a recession reserve of $489k.

STATUS OF GENERAL FUND REVENUES
Overview
General Fund revenue through the second quarter was $5.4 million, or 48% of the amended budget, compared to $5.2 million at FY 2021/22 mid-year. The General Fund revenue is forecasted to be $11.1 million at the end of the fiscal year, approximately $59k less than budget.

The following table details actual FY 2022/23 General Fund revenue collections through December as compared with budgeted revenue estimates and the last two fiscal year audited actuals for historical. Also included are changes to each category that are recommended as part of this report.

The Fiscal Year 2022/23 Adopted Budget was developed assuming that many of the General Fund and other economically sensitive City fund revenues would continue the strong performance but start to adjust to economic conditions in 2023. Transient Occupancy Tax and Sales Tax were forecasted to decline by 2% from the "best year to date" achieved in the prior year. A comprehensive review of all General Fund revenue accounts has been performed based on activity through the year's first six months. Based on the available data REVENUE SOURCE FY 2020/21
Actuals
FY 2021/22
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Transient Occupancy Tax $ 3,321,928 $ 3,444,990 $ 3,371,081 $ - $ 3,371,081 $ 1,685,540 $ 1,892,950 56% $ 207,409 $ 3,371,081 $ - Sales and Use Tax 2,028,010 2,215,161 2,178,000 - 2,178,000 1,089,000 1,150,054 53% 61,054 2,178,000 - Property Tax 1,085,532 1,150,352 1,176,309 - 1,176,309 588,154 192,765 16% (395,389) 1,176,309 - Other Taxes 810,652 851,622 832,442 - 832,442 416,221 416,103 50% (118) 829,259 (3,182) Sub Total Tax Revenue 7,246,120 7,662,122 7,557,831 - 7,557,831 3,778,916 3,651,873 48% (127,043) 7,554,649 (3,182) Licenses & Permits 91,567 86,176 95,413 - 95,413 47,707 44,405 47% (3,301) 93,600 (1,813) Fines and Forfeitures 12,181 51,396 31,500 - 31,500 15,750 8,211 26% (7,539) 17,350 (14,150) Intergovernmental 16,383 30,089 - - - - - 0% - - -
Use of Money/Property (64,617) (166,316) 61,300 - 61,300 30,650 (124,585) -203% (155,235) 100,036 38,736 Charges for Services 45,369 62,388 70,546 - 70,546 35,273 50,875 72% 15,602 88,327 17,781 Operating Grant Revenue 130,162 133,986 517,555 66,287 583,842 291,921 290,797 50% (1,124) 445,864 (137,978) Reimbursements 2,285,895 3,333,187 2,781,850 - 2,781,850 1,390,925 1,446,264 52% 55,339 2,754,136 (27,714) Other Revenue 109,358 22,574 14,500 - 14,500 7,250 62,169 429% 54,919 83,693 69,193 TOTAL REVENUES $ 9,872,419 $11,215,601 $11,130,495 $ 66,287 $ 11,196,782 $ 5,598,391 $ 5,430,009 48% $(168,382) $11,137,655 $ (59,127)

GENERAL FUND REVENUES
City of Fort Bragg
Mid-Term Budget FY 2022/23

through December, General Fund tax revenues have continued the strong performance and are anticipated to end the year approximately $7.4 million (positive variance of about $3k 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 the 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. 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 variances in revenues are listed below.

 Transient Occupancy Tax (TOT)
Fort Bragg is a tourist-based economy that depends heavily on tourism for its revenue, accounting for 30% of the total General Fund's revenue. During the last quarter of FY 19/20, this revenue category was hit hard by COVID-19 restrictions and ended the fiscal year falling short of budget projections by $660k, resulting in an overall budget deficit for the general Fund. In FY 20/21 and FY 21/22, TOT rebounded and recorded its best year to date ending the fiscal year at $3.3 million. In part, international and domestic travel restrictions due to the pandemic contributed to the increase in local visitor numbers. Furthermore, Visit Fort Bragg has continued marketing campaign efforts to attract more visitors to Fort Bragg.

In the first half of the fiscal year, TOT again recorded strong results. Although down 2% compared to last year's period, revenues are up 46% or $575k growth compared to pre-pandemic. TOT is on track to meet budget forecasts come fiscal year-end at $3,371,081, down 2% from prior year.  Sales Tax:

The Sales Tax category includes General Sales Taxes, Local Sales Taxes, and Proposition 172 Sales Taxes. The City's Sales Tax projections were that revenues would end the fiscal year at $2.1 million, down 2% from the prior year's result of $2.2 million, as the Fed has aggressively raised interest rates to curb inflation the past year. Inflation eased in February 2023 but remained stubbornly high, presenting a challenge for the Federal Reserve as it confronts how to slow the economy with higher interest rates while moving to stem banking problems. The Consumer Price Index, a closely watched inflation gauge, rose 6% in February from a year earlier, down from a 6.4% gain the prior month, according to the Labor Department. It was the smallest increase since September 2021. Inflation has certainly eased from the 9.1% highs in June last year and is expected to fall to 3.1% by the end of 2023 and end in 2024 at 2.4%, which will impact consumer spending habits, particularly when making large purchases.

REVENUE SOURCE
FY 2020/21
Actuals
FY 2021/22
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Sales and Use Tax 2,028,010 2,215,161 2,178,000 1,089,000 1,150,054 53% 61,054 2,178,000 -

REVENUE SOURCE
FY 2020/21
Actuals
FY 2021/22
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Transient Occupancy Tax $ 3,321,928 $ 3,444,990 $ 3,371,081 $ 1,685,540 $ 1,892,950 56% $ 207,409 $ 3,371,081 $ - City of Fort Bragg
Mid-Term Budget FY 2022/23

Locally, quarter two results were $1,150,054 (53% of the total budget) in line with budget projections. Compared to the prior year, Sales Tax was only down 2% but still up 9% compared to pre-pandemic, which is optimistic news for the City as this revenue category continues to record gains. All sales tax categories have experienced year-overyear growth, the largest of which includes food products, construction, and transportation. In addition, the County Pool, where most online transactions are captured, has continued to grow. This growth is attributable to the pandemic's sustained impact of redirecting significant activity to online sales. The recent growth in County Pool receipts has been fueled by online purchases during the pandemic and is facilitated by the South Dakota vs. Wayfair, Inc. Supreme Court decision in 2018, which provided states with the authority to require online retailers to collect sales tax even without a local presence in that State. The County Pool revenue is distributed to all cities within Mendocino County based on a distribution formula administered by the CDTFA.  Reimbursements
Reimbursements include the annual COPS grant reimbursements for the City's Community Service Officers (CSO) costs ($159k), developer deposit reimbursements ($35k), 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 $1.4 million or 52 percent of the budget and are expected to come in under budget by $28k at the end of the fiscal year due to the timing of some of the reimbursements, and the true-up of hours worked by Staff during the fiscal year per the City's Cost Allocation Plan.
 Operating Grant Revenues
Operating grant revenues are right at 50% at mid-year and are expected to end the year at $138k 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 from the BHJIS Grant for Social Liason Officers and 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 negative variance is attributed to the temporary suspension of the School Resource Officer (SRO) program due to staffing. The SRO program generates $125k/annually and is expected to be back up and running in the next few months. Additionally, due to the timing of some of the CDBG grant reimbursements these unspent grant funds will be utilized in the next fiscal year. Also, the Code Enforcement division was transferred to the Police Department in the second quarter, adding a second Code Enforcement officer, and has begun to make progress in implementing the program guidelines of the grant.

REVENUE SOURCE
FY 2020/21
Actuals
FY 2021/22
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Reimbursements 2,285,895 3,333,187 2,781,850 1,390,925 1,446,264 52% 55,339 2,754,136 (27,714) TOTAL REVENUES $ 9,872,419 $11,215,601 $ 11,196,782 $ 5,598,391 $ 5,279,873 47% $(318,518) $11,137,655 $ (59,127)

REVENUE SOURCE
FY 2020/21
Actuals
FY 2021/22
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Grant Revenue 130,162 133,986 583,842 291,921 290,797 50% (1,124) 445,864 (137,978) TOTAL REVENUES $ 9,872,419 $11,215,601 $ 8,623,509 $ 4,311,755 $ 4,283,237 50% $ (28,517) $ 8,955,194 $ 331,685

GENERAL FUND REVENUES
City of Fort Bragg
Mid-Term Budget FY 2022/23

 Other taxes
Franchise Fees are collected from Cable Television, Solid Waste, and PG&E. Through December, Franchise Fee receipts were $416k, in line with the mid-term budget and consistent with the prior year's 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 2023. 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, the 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 $6.3 million for the first half of FY 2022/23, representing 56 percent of the amended annual budget. Appropriations of $10.9 million were adopted. Throughout the year, budgeted appropriations have increased by $405k resulting in an amended budget of $11.4 million. The following chart displays the year-to-date expenditures compared to the prior years.

Some of the notable variances in expenditures include:
 The Finance Department is projected to be $21k under budget primarily due to salary savings from the vacant part-time Accountant position, which will be filled in the third quarter. As of mid-year, the department budget is $274k, or 44 percent of the amended budget.  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.

REVENUE SOURCE Sub 2
FY 2020/21
Actuals
FY 2021/22
Actuals
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Other Taxes 403 810,652 851,622 832,442 416,221 416,103 50% (118) 829,259 (3,182)

DEPARTMENT
FY 2020/21
Actuals
FY 2021/22
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)

GENERAL
City Council $ 131,496 $ 214,276 $ 193,718 $ 28,600 $ 222,318 $ 111,159 $ 96,347 43% $ (14,812) $ 206,646 15,672 Administrative Services 751,316 1,225,232 1,270,375 (28,768) 1,241,606 620,803 608,408 49% (12,395) 1,231,962 9,644 Marketing & Promotions 93,060 226,875 220,500 - 220,500 110,250 89,680 41% (20,570) 220,400 100 Finance 468,573 536,978 606,653 10,986 617,639 308,819 274,614 44% (34,205) 596,165 21,474 Non-Departmental 794,428 985,774 1,159,261 2,647 1,161,908 580,954 553,596 48% (27,358) 1,122,185 39,723 Community Organizations 69,869 97,297 152,962 - 152,962 76,481 35,116 23% (41,365) 152,962 - DEBT SERVICE 38,797 547,580 684,302 - 687,563 343,781 242,191 35% (101,590) 452,241 235,322 COMMUNITY DEVELOPMENT 301,984 365,417 436,471 46,646 479,854 239,927 204,033 43% (35,894) 426,932 52,922

PUBLIC SAFETY
Police Department 3,468,404 3,891,041 3,805,179 242,247 4,047,426 2,023,713 2,089,638 52% 65,925 3,920,058 127,368 Fire Department 439,962 434,423 439,962 - 439,962 219,981 326,519 74% 106,538 440,106 (144)

PUBLIC WORKS
Administration & Engineering 515,726 679,782 684,010 26,135 710,145 355,073 387,071 55% 31,998 693,007 17,138 Parks and Facilities 31,926 36,479 41,100 - 41,100 20,550 21,509 52% 959 41,903 (803) Street Maintenance 110,831 124,497 120,784 - 120,784 60,392 51,148 42% (9,244) 122,000 (1,216) Storm Drains 14,071 12,681 23,170 - 23,170 11,585 8,296 36% (3,289) 18,600 4,570 Corporation Yard 634,446 494,217 402,111 18,413 420,524 210,262 231,730 55% 21,468 422,875 (2,351) Traffic and Safety 24,022 24,873 28,500 58,452 86,952 43,476 76,443 88% 32,966 85,952 1,000 COST ALLOCATION 478,497 789,396 686,129 - 686,129 343,065 1,029,194 150% 686,129 686,129 - TOTAL GENERAL FUND EXPENDITURES $ 8,367,408 $10,686,818 $10,955,185 $ 405,359 $ 11,360,542 $ 5,680,271 $ 6,325,532 56% $ 645,262 $10,840,124 $ 520,418

GENERAL FUND EXPENDITURES
City of Fort Bragg
Mid-Term Budget FY 2022/23

Year-to-date actuals are at 48% of the annual budget and are projected to end the fiscal year with a positive variance of $39k. The costs of REMIF liability and property premium payments paid in the first quarter were much lower than anticipated. Conversely, utility costs increased by 20%, and retiree medical were up by 3% from the adopted budget.

Additionally, a budget of $150k has been set aside to be contributed to the Section 115 to accumulate and invest funds to smooth the impacts of future pension cost increases. A total of $1.6 million have been deposited into the trust.
 Debt service represented the most significant budget savings for the General Fund—the return of the $3.5 million Debt-2021 Lease Revenue Bonds resulted in a budget savings of $235,322. The funds were earmarked for land acquisition. These funds were returned in August 2022, reducing the City's Debt from $11.4 million to 7.9 million, consequently reducing future annual debt payments.  The Police Department diligently worked to fill vacancies in both sworn and Community Service Officer positions. At the end of quarter two, there were three unfilled positions, including a sergeant and two sworn officer positions, for which recruitment is underway. The Department plans to fill the sergeant position in May, with the two officer positions most likely be filled next fiscal year by sending recruits to the academy. As a result of these unfilled positions and savings in overtime costs, the Department is expected to end the fiscal year under budget by $127,368. Conversely, utility and dispatch costs have increased by 5%.

The Police Department was awarded a $222,000 Social Service Liason Grant in 2022 by the California Department of Health Care Services (DHCS) through March 31, 2023. The team began expanding past homeless-related tasks to serve more of the community. They provide immediate assistance and ongoing support to families with family members experiencing mental health illnesses by offering wrap-around support, connection to available services, and general assistance in day-to-day life struggles. The amended budget includes funding for the two full-time positions through the end of the fiscal year. The City is actively pursuing other grant opportunities to fund this critical service.

The budget adjustments recommended in this report are to allocate funds for wellness expenditures. The Department was awarded $24,000 from the Mental Health Grant and State for the officer's wellness.  The Community Development Department at mid-term is at 43% of the amended budget and is projected to end the fiscal year below budget by $52k as a result of personnel costs savings from unfilled positions. The Department is recruiting for a Community Development Director or a Senior Planner and hopes to fill the position in the fourth quarter of the fiscal year. The Code Enforcement program was transferred to the Police Department in November 2022.

The budget adjustment requested in this report includes $67,690 to perform a central business district parking feasibility study. MCOG funds the parking study at $57,062, and special revenues from parking fees are $10,628- there is no cost to the General Fund.

City of Fort Bragg
Mid-Term Budget FY 2022/23

GENERAL FUND NET RESULT AND FUND BALANCE
With projected revenues of $11.1 million, less total expenditures of $10.8 million, the General Fund is projected to end FY 2022/23 with a surplus of $297,531, increasing the General Fund's balance to $3.7 million, an increase of 1 percent compared to the prior year. It is important to note that while the projected surplus is not large, expenditures, particularly personnel costs, have returned to pre-COVID levels, offset by savings from the redemption of the $3.5 million debt and continued strong performance from the City's top tax revenue category in Transient Occupancy Tax and Sales Tax. A deposit of $1.6 million was deposited into the Section 115 trust with PARS in this fiscal year- decreasing the General Fund reserves.

The City's unassigned balance is projected to end the fiscal year at $1.6 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.
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
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 FY 22/23 Committed Unassigned Restricted Non-spendable Total Fund Balance $-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23

GENERAL FUND

REVENUES & EXPENDITURES
Revenues Expenditures
Deficit
$39k
Deficit
$257k
Surplus
$196k
Surplus
$1.5M
Projected
Surplus
$296k
Surplus
$530k
Deficit
$437k
City of Fort Bragg
Mid-Term Budget FY 2022/23

WATER ENTERPRISE FUND
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 2021/22 ended with an annual net position increase of $16.6 million.

Per fiscal policy, the operating reserve is set at 25 percent of the prior year's operating expense, and for the Fiscal Year 2021/22 was set at $342k. The Enterprise fund also established a recession reserve of $100k, sufficient for 5 percent of the Fund's operating budget.

The capital reserve increased by $1.3 million to $4.7 million. The CIP for the Water Enterprise stood at $71.4 million in total identified capital projects for the next five years, relying on grants and enterprise capital reserves for funding. The Fund is well-positioned to continue working on many projects on page 190 of the FY 22/23 budget.

REVENUES
 User fees fully support the revenues for the Water Enterprise Fund. At the end of the second quarter, revenues were $262k more at 59% of the budget. In FY 20-22, the City implemented water restriction measures in the summer in response to the reduced flows in the Noyo River, increased high tide events, and the lower-than-usual precipitation that affected the City's water supply. The City Council approved a targeted 30-40% reduction in water consumption in the previous years. Fortunately, in the second quarter, Fort Bragg received a significant amount of needed rainfall.

The projected year-end total revenue is $3.2 million or approximately $108k more than budget, a 2 percent increase from the prior fiscal year due to an increase in consumption and more in line with the prior year (pre-COVID) totals.

FY 2020/21
Actuals
FY 2021/22
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2021
YTD Actual
12/31/2022
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 3,288,053 $ 3,005,288 $ 2,970,342 $ - $ 2,970,342 $ 1,485,171 $ 1,747,268 59% $ 262,097 $ 3,036,779 $ 66,437 Capacity Fees 346,561 44,837 20,000 - 20,000 10,000 46,200 231% 36,200 52,000 32,000 Miscellaneous 92,353 - 82,300 - 82,300 41,150 32,346 39% (8,804) 91,800 9,500 Total Revenue 3,726,967 3,050,125 3,072,642 - 3,072,642 1,536,321 1,825,814 59% 289,493 3,180,579 107,937 Personnel services 452,486 1,039,332 919,986 11,151 931,137 465,569 426,121 46% (39,447) 856,897 74,240 Administration 470,943 683,735 457,183 - 457,183 228,592 244,226 53% 15,634 459,314 (2,131) Repairs & maintenance 36,419 52,440 42,200 - 42,200 21,100 9,588 23% (11,512) 15,700 26,500 Materials & supplies 149,770 169,998 226,348 - 207,348 103,674 96,191 46% (7,483) 212,548 (5,200) Utilities 117,070 147,423 144,000 - 144,000 72,000 89,160 62% 17,160 174,930 (30,930) Contractual services 56,769 93,135 127,500 46,033 173,533 86,767 47,710 27% (39,056) 123,000 50,533 Insurance 17,230 31,351 40,442 - 40,442 20,221 14,314 35% (5,907) 38,628 1,813 Interest/Debt Service * 64,949 55,434 782,993 - 782,993 391,496 383,077 49% (8,419) 782,993 - Depreciation ** 319,552 364,752 - - - - 0% - - -
Total Expenditures 1,687,506 2,672,538 2,751,652 57,184 2,789,836 1,394,918 1,316,797 47% (78,121) 2,670,419 119,417 Net Revenue/(Expense) $ 2,039,461 $ 377,587 $ 320,990 $ 282,806 $ 141,403 $ 509,017 180% $ 367,614 $ 510,160 227,353 * 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

WATER ENTERPRISE
City of Fort Bragg
Mid-Term Budget FY 2022/23

EXPENDITURES

Water Enterprise's expenses for the first half of FY 2022/23 totaled $1.3 million, 47% of the amended annual budget.

The projected year-end total is $2.6 million, $119k under budget.  At mid-year, Debt Service is 49% of the total annual budget. Principal payments are paid in October and a second smaller interest payment in April. The adopted budget includes the $785k to pay off the 2007 Department of Water Resource Loan. Once this loan is paid off, Water Enterprise will have only one remaining debt which will be paid off in 2025.
 Utility costs are 62% of the adopted and are forecasted to end the fiscal year at $30,930 above budget. Energy costs for electric have risen by 35% per month compared to last year due to rate increases with a slight increase in consumption. This report includes a budget amendment request for additional funds to cover these overages.
 No other significant variances are expected in other enterprise expense category at year-end.

The summer months of 2019-2022 represented water shortage challenges for the City. City Staff actively pursued alternative plans to address these challenges, 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 FY 22/23 projections Water Fund Operations
Revenues Expenditures Net Operating Income
City of Fort Bragg
Mid-Term Budget FY 2022/23

With projected revenues of $3.1 million and expenses of $2.6 million, staff projects the Water Enterprise will end the FY 2022/23 with a net position of $13.2 million and reserves of $1.8 million. The Enterprise Capital Reserve budgeted $3.3 million to be transferred for Capital improvement projects, including the Pudding Creek water main $812k, the distribution system $850k, the raw water reservoir $500k, the extended water system north $300k, and the reclamation design $750k. Additionally, the Enterprise fund is closing on a 582+ acres property purchase from the Mendocino Coast Recreation Park District, $2,420,579, which the Water reserves will fund. The reserves are projected to be reduced by $5.8 million altogether. Staff continues actively seeking Grant funds to fund the identified CIP projects and use capital reserves for matching funds.

For a more detailed list of the Capital Improvement Project scheduled for the Water Enterprise, refer to pages 190- 196 of the Adopted Budget.

-
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 FY 22/23 Projections

WATER ENTERPRISE RESERVES
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
Mid-Term Budget FY 2022/23

WASTEWATER ENTERPRISE FUND
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 2021/22 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 2022/23 was set at $625k.

REVENUES
Like the Water Enterprise fund, the projected year-end revenue for the current fiscal year is estimated to be $3.4 million or approximately $166k more than the original adopted budget but down from the prior year by 4% or $679k. The new septic dumping station recorded a $40k increase in operating revenues for the Fund.

EXPENDITURES
Wastewater Enterprise expenses totaled $1.2 million, 49% percent of the amended annual budget. The projected year-end total is $2.5 million, which is approximately $27k less than the budget:
 At year-end, personnel services are expected to be approximately $25k under budget, mainly due to savings in personnel costs from benefits in a couple of positions.  Utilities are forecasted to be $55k above budget estimates. Energy costs for electricity have risen by 35% per month compared to last year due to rate increases with a slight increase in consumption. A budget amendment is requested for the overages.
 At year-end, materials and supplies in the Non-Routine Maintenance division are expected to be under budget by approximately $46k. Less maintenance is required for the sewer lift stations since a complete overhaul was undertaken.

FY 2020/21
Actuals
FY 2021/22
Actuals
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as
of
12/31/2021
YTD Actual
12/31/2022
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 3,707,788 $ 3,570,257 $3,212,050 $ - $ 3,212,050 $ 1,606,025 $ 2,062,592 64% $ 456,567 $3,378,170 $ 166,120 Capacity Fees 309,446 7,353 15,000 15,000 7,500 39,727 265% 32,227 50,000 35,000 Miscellaneous Revenues 36,823 32,544 34,000 34,000 17,000 9,333 27% (7,667) 23,500 (10,500) Total Revenue 4,054,057 3,610,153 3,261,050 - 3,261,050 1,630,525 2,111,653 65% 456,567 3,451,670 166,120 Personnel services 686,110 687,773 576,890 12,651 589,541 294,771 314,532 53% 19,761 563,740 25,801 Administration 693,735 1,225,605 702,284 - 702,284 351,142 346,072 49% (5,070) 698,890 3,394 Repairs & maintenance 85,697 175,875 128,700 - 128,700 64,350 57,157 44% (7,193) 82,700 46,000 Materials & supplies 266,418 298,357 273,244 77,209 350,453 175,226 131,540 38% (43,686) 330,494 19,959 Utilities 198,320 222,967 220,000 - 220,000 110,000 194,328 88% 84,328 306,333 (86,333) Contractual services 164,551 360,280 260,000 205,495 465,495 232,747 222,518 48% (10,229) 460,495 5,000 Insurance 53,032 49,798 64,240 - 64,240 32,120 22,660 35% (9,459) 50,321 13,919 Interest/Debt Service * 97,760 95,650 93,850 - 93,850 46,925 - 0% (46,925) 93,850 - Depreciation ** 816,300 829,815 - - - - 0% - - -
Total Expenditures 3,061,923 3,946,121 2,319,208 295,354 2,614,562 1,307,281 1,288,807 49% (18,474) 2,586,822 27,740 Net Revenue/(Expense) $ 992,134 $ (335,967) $ 941,842 $ (295,354) $ 323,244 $ 822,846 $ 475,041 $ 864,847 864,847 * 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

WASTEWATER ENTERPRISE
City of Fort Bragg
Mid-Term Budget FY 2022/23

With projected revenues of $3.4 million and expenses of $2.6 million, Staff projects the Wastewater Enterprise to end FY 2022/23 with a net position of $26.1 million and reserves of $2.1 million. The decline in reserves in FY 17/18 is a result of the Wastewater Treatment Plant construction in addition to grant funds- seen below.

During the budget development, Staff identified a list of Capital Improvements Program (CIP) of $16.6 million needed to improve the Fund's infrastructure. A collection system rehab of $12 million is planned for FY 2024/25, with $1.5 million of capital improvements budgeted for this fiscal year. (500,000)
-
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 FY 22/23 projections Wastewater Fund Operations
Revenues Expenditures Net Operating Income
-
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 FY 22/23 Projections

WASTEWATER RESERVES
City of Fort Bragg
Mid-Term Budget FY 2022/23

INTERNAL SERVICE: FACILITIES REPAIR & MAINTENANCE REPAIR Internal Service Funds-Facilities fund accounts for the maintenance of all City-owned buildings.  No significant revenue variances are expected.
 The repairs and maintenance schedule are listed below, with a $63k maintenance budget. Due to staffing, only the park bathrooms, fencing for Noyo headlands park, and miscellaneous repairs and maintenance will be undertaken this year- most of the scheduled work will be moved to the next fiscal year, with the rest of the projects to be evaluated during the FY 2023/14 budget process and moved to the next fiscal year.

FACILITY ISF 10-YEAR MAINTENANCE PROGRAM
 Transfer of $147,000 was made to the Fleet fund for the cost of charge stations for Fleet.

FY 2020/21
Actuals
FY 2021/22
Actuals
FY 21/22
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 5,826 $ 4,143 $ 6,030 $ - $ 6,030 $ 3,015 $ 3,518 58% $ 503 $ 6,030 $ - Interdepartmental Charges 97,147 200,959 195,068 - 195,068 97,534 97,534 50% - 195,068 - TOTAL REVENUES 102,973 205,101 201,098 - 201,098 100,549 101,052 50% 503 201,098 - Personnel Services 78,810 105,998 93,568 - 93,568 46,784 46,784 50% - 93,568 - Repairs & Maintenance 19,738 15,601 63,749 - 63,749 31,874 8,512 13% (23,363) 26,657 37,092 TOTAL EXPENDITURES 98,548 121,600 157,317 - 157,317 78,658 55,296 35% (23,363) 120,225 37,092 Net Revenue/(Expense) $ 4,425 $ 83,501 $ 43,781 $ - $ 43,781 $ 21,891 $ 45,756 105% $ 23,865 $ 80,873 37,092

ISF-FACILITIES
MAJOR PROJECTS/REPLACEMENTS FY: 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/30 30/31 Annual
Average
General
Fund
Water
Enterpris
e
Wastewat
er
Enterprise
City Hall - 10,000 - - - - - 60,000 35,000 8,000 1,250 625 313 313 City Hall East - 4,000 - 3,500 - - - - - - 938 938 - -
Fort Building - 10,000 - - - - - - - - 1,250 1,250 - -
Town Hall - - - - - 3,000 - - - - 375 188 94 94
Fire Station, Main St - - - - - - - - - - - - - -
Fire Station, Hwy 20 - - - - - - - - - - - - - -
Guest House 19,722 - - - - - - - 110,000 - 2,465 2,465 - - Police Department - 22,000 - - - - - - - - 2,750 2,750 - - Noyo Headlands Park - 17,749 4,500 - 30,000 5,000 - - - - 7,156 7,156 - - Pomo Bluffs Park - - 9,000 - - - - 40,000 - - 1,125 1,125 - - Noyo Beach - - - - - - - - - - - - - -
Corp Yard - - - - - - - - - - - - - -
Harbor Lite Trail - - - - - - - - - - - - - -
TOTAL major projects 19,722 63,749 13,500 3,500 30,000 8,000 - 100,000 145,000 8,000 17,309 16,496 406 406 General Repairs Facilities $6,187 $6,249 $6,311 $6,374 $6,438 $6,503 $6,568 $6,376 $3,188 $1,594 $1,594 TOTAL preventative maintenance $6,187 $6,249 $6,311 $6,374 $6,438 $6,503 $6,568 $6,376 $3,188 $1,594 $1,594 TOTAL PROJECT FUNDING NEED: $25,909 $69,998 $19,811 $9,874 $36,438 $14,503 $6,568 $100,000 $145,000 $8,000 $23,685 $19,684 $2,000 $2,000 600,620
680,030
325,903
-
200,000
400,000
600,000
800,000
FY 20/21 FY 21/22 Projected FY 22/23

FACILITIES (ISF) RESERVES

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

INTERNAL SERVICE: INFORMATION TECHNOLOGY
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 category.  Personnel services are forecasted to end the fiscal year under budget by $39k due to the delay in hiring the System Analyst lead position. The position was filled in November 2022.  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. The City's IT budget has doubled in the last two fiscal years due to the increasing number of worldwide cyber threats against organizations of all sizes and types.

Also included is a budget request to purchase two file servers. The current file servers are very old and are at the age where the risk of failure becomes more likely. Although the City has an excellent and secure backup system, if either server fails, there is no "spare" server to restore the data from a backup. This is an ever-present risk to operations and is strongly recommended to be undertaken this fiscal year.

FY 2020/21
Actuals
FY 2021/22
Actuals
FY 21/22
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Interdepartmental Charges 272,450 497,457 471,859 - 471,859 235,930 275,251 58% 39,322 471,859 - TOTAL REVENUES 272,450 497,457 471,859 - 471,859 235,930 275,251 58% 39,322 471,859 - Personnel Services 90,755 101,970 163,297 26,131 189,428 94,714 69,990 37% (24,724) 150,209 39,219 Repairs & Maintenance - 1,964 4,100 - 4,100 2,050 482 0% (1,568) 4,100 - Materials & Supplies 194,562 415,508 396,810 49,869 446,679 223,339 242,836 54% 19,497 447,057 (379) Contractual Services 24 390 - - - - - 0% - - -
Depreciation 11,734 15,450 - - - - 0% - -
TOTAL EXPENDITURES 297,075 535,282 564,207 76,000 640,207 320,103 313,308 49% (6,795) 601,366 38,841 Net Revenue/(Expense) $ (24,625) $ (37,825) $ (92,348) $ (76,000) $ (168,347) $ (84,174) $ (38,057) 23% $ 46,117 $ (129,507) 38,841 ISF-IT
100,881
78,506
(51,001) (60,000)
(40,000)
(20,000)
-
20,000
40,000
60,000
80,000
100,000
120,000
FY 20/21 FY 21/22 Projected FY 22/23

IT (ISF) RESERVES
City of Fort Bragg
Mid-Term Budget FY 2022/23

INTERNAL SERVICE: FLEET
RNAL 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 grants reimburse the City for 55 percent of the vehicle cost. Staff will be applying for the reimbursement of all vehicles purchased, amounting to $155k.
 Personnel costs include a budget amendment request of $10,380 for overlapping personnel costs in hiring a replacement for the City's mechanic, who is retiring at the end of the fiscal year. A budget adjustment is being requested to cover this overlap.
 A sharp rise in new-car prices since the pandemic has caused this line item to be over budget by $159k caused by the supply chain disruption (in global semiconductors shortage, supply of chips, and other disruptions caused by the pandemic) that has created new-vehicle scarcity in recent years, resulting in a seller's market. According to research firm J.D. Power, the average price paid for a new vehicle hit a record of $47,362 in December.

The City has been on the waitlist to purchase seven City vehicles; two were from the prior fiscal year. A budget adjustment of $159k is being requested to align the budget with the year-end expenditure projections.

FY 2020/21
Actuals
FY 2021/22
Actuals
FY 21/22
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2022
YTD Actual
12/31/2022
Mid-Year
Variance
%
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Interdepartmental Charges 272,166 342,307 409,513 - 409,513 204,757 238,883 58% 34,126 409,513 - Grant Reimbursements - - - - - 197 0% 197 155,300 155,300 TOTAL REVENUES 272,166 342,307 409,513 - 409,513 204,757 239,079 58% 34,126 564,813 (155,300) -
Personnel Services 144,542 150,409 125,721 2,669 128,390 64,195 72,185 56% 7,990 138,770 (10,380) Repairs & Maintenance 43,647 51,986 38,000 - 38,000 19,000 26,560 70% 7,560 38,000 - Materials & Supplies 96,891 99,586 92,300 - 92,300 46,150 44,050 48% (2,100) 91,650 650 Vehicles - 221,526 291,000 147,000 438,000 219,000 - 0% (219,000) 597,000 (159,000) Contractual Services 2,619 439 2,000 - 2,000 1,000 44 2% (956) 500 1,500 Depreciation 94,221 69,881 - - - 0% -
TOTAL EXPENDITURES 381,920 593,826 549,021 149,669 698,690 349,345 142,839 20% (206,506) 865,920 (167,230) Net Revenue/(Expense) $ (109,754) $ (251,519) $ (139,508) $ (149,669) $ (289,177) $ (144,588) $ 96,240 -33% $ 240,632 $ (301,107) (11,930)

ISF-FLEET
Unit No. Make Yr. Model Hours/Miles
Adopted
Budget Actual quotes Diff
48 FORD 2008 Ranger 80,830 $37,000 $ 35,000 -$2,000
PW1 CHEV. 2000 3500 Flatbed 44,143 $90,000 $ 104,000 -$14,000 PD745 FORD 2020 Ford Van 1,135
PD735 FORD 2005 CROWN VIC 89,424 $56,000 $83,000 -$27,000 PD747 FORD 2009 ESCAPE 127,041 $36,000 $83,000 -$47,000 PD744 FORD 2008 RANGER (hybrid) 55,563 $44,000 $71,000 -$27,000 PD1302 FORD 2011 CROWN VIC 93,103 $60,000 $83,000 -$23,000 PD1301-K9 FORD 2011 CROWN VIC 74,021 $60,000 $83,000 -$23,000 DIFF $383,000 $542,000 -$159,000
Carried
forward from
Prior year.

City of Fort Bragg
Mid-Term Budget FY 2022/23

RESERVES
With projected revenues of $564k and expenses of $812k, the Fleet Internal Service Fund will end the fiscal year with a reserve balance of ($195k). During budget development for the next fiscal year, Staff will review the replacement plan schedule to ensure sufficient operating revenues to absorb the negative fund balance and cover essential fleet purchases. In addition to USDA reimbursements, Staff will work with the Police Department to potentially use some Asset Forfeiture funds to cover the upfits costs to these police vehicles, which is an eligible use of Asset Forfeiture funding.

Unit No. Make Yr. Model Hours/Miles FY 21/22
FY 22/23
Adopted
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 $ 225,000
WWT31 NISSAN 2007 FRONTIER 64,414 $37,000
48 FORD 2008 Ranger 80,830 $ 35,000
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
PW1 CHEV. 2000 3500 Flatbed 44,143 $104,000
CHE121 FORD 2006 ESCAPE 59,407 $38,000
PW5 FORD 2006 F-250 SERV. 81,415 $60,000
$225,000 $139,000 $97,000 $255,000 $30,000 $38,000
PD745 FORD 2020 Ford Van 1,135
PD735 FORD 2005 CROWN VIC 89,424 $83,000
PD747 FORD 2009 ESCAPE 127,041 $83,000
PD744 FORD 2008 RANGER (hybrid) 55,563 $71,000
PD1302 FORD 2011 CROWN VIC 93,103 $83,000
PD1301-K9 FORD 2011 CROWN VIC 74,021 $83,000
PD1403 FORD 2014 INTERCEPTOR 81,966 $61,000
PD501 FORD 2015 INTERCEPTOR 60,435 $61,000
PD500 FORD 2015 INTERCEPTOR 65,201 $63,000
PD509 FORD 2015 TAURUS 109,956 $55,000
PD503 FORD 2015 INTERCEPTOR 49,377 $63,000
PD510 FORD 2015 TAURUS 26,398 $44,000
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 $55,000 $403,000 $122,000 $63,000 $107,000 $120,000 $60,000 $62,000 $0 $0 $280,000 $542,000 $219,000 $318,000 $137,000 $158,000 $60,000 $62,000 $0 $0 Vehicle Replacement Plan
Dump Truck (10Yard)
Public Works Sub-Total
Total Replacement Costs
$259,017
$53,039
$(248,068) $(300,000)
$(200,000)
$(100,000)
$-
$100,000
$200,000
$300,000
FY 20/21 FY 21/22 Projected FY 22/23

FLEET (ISF) RESERVES
City of Fort Bragg
Mid-Term Budget FY 2022/23

ASSET FORFEITURE PRIOR YEARS CORRECTIONS
Asset forfeiture funds account for funds obtained from seized assets of criminal activities and are kept in a separate fund. The funds are used solely to support law enforcement purposes. It was brought to the City's attention in March of this fiscal year that in fiscal years 2016-2018, funds were misappropriated to fund the task force officer's salary and benefits, including overhead costs. Staff immediately investigated the matter and found that irregular transfers were made between Asset Forfeiture and the General Fund from 2010 – 2018. The City Attorney concurred that using Asset Forfeiture Funds to reimburse the General Fund for personnel expenditures was incorrect.

Here is a summary of CA Health & Safety §11489 & §11469 govern the disposition of these funds:
 Funding must be used to support law enforcement efforts (HS § 11489(d))  Funding shall not be used to replace or supplant local resources (HS § 11489(d))  No sworn law enforcement officer's employment or salary shall be made dependent upon the level of forfeitures (HS § 11469(b))
 Forfeiture proceeds shall be maintained in a separate fund or account subject to the appropriate accounting controls and annual financial audits (HS § 11469(h))  Seizing agencies shall implement training for officers assigned to forfeiture programs, which training should be ongoing (HS § 11469(e)).
 Funds shall be used "for the sole purpose of [supporting] programs designed to combat drug abuse and divert gang activity" (HS § 11489(b)).
 Funding "shall, wherever possible, involve educators, parents, community-based organizations and local businesses, and uniformed law enforcement officers" (HS § 11489(b)).  Programs must cause the development and continuation of positive intervention programs for high-risk elementary and secondary-age students (HS § 11489(b)).

Below is the list of transfers made in FY 2010-2018 from the Asset Forfeiture Funds to the General Fund for the Task Force & K9 Officer Costs, amounting to $551,224.21:

Staff recommends transferring $551,224.21 from the General Fund Unassigned Reserves to the Asset Forfeiture Fund – General to correct the prior year's misappropriations and make it right. If approved, the projected Unassigned General Fund Reserve balance would be reduced from $1.6 million to $1.05 million. The Asset Forfeiture balance would increase from $344,496 to $895,720.

FISCAL YEAR

TASK FORCE &
K9 OFFICER
COSTS
FY 10/11 $ 25,000
FY 11/12 $ 19,729
FY 12/13 -
FY 13/14 $ 60,000
FY 14/15 $ 99,298
FY 15/16 $ 125,000
FY 16/17 $ 130,460
FY 17/18 $ 91,737
FY 18/19 -
Total $ 551,224.21
City of Fort Bragg
Mid-Term Budget FY 2022/23

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 for approval.

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

REVENUES
110-4200-3998 Miscellaneous Revenue $ 1,500 $ 24,000 $ 25,500 Wellness Grant Funds Grants 110-4320-3205 MCOG/Parking Fund Reimb - 67,690 $ 67,690 CBD Traffic Study funding Grants 110-4520-3497 Interfund Reimb 261,200 50,000 $ 311,200 Funding for Radar Trailer MCOG Total General Fund Revenues $ 261,200 $ 141,690 $ 404,390

EXPENDITURES
110-4200-0380 Wellness Police Department $ - $ 24,000 $ 24,000 $9k grant and $15k from state for wellness exp Grants 110-4520-0319 Professional Services Streets 15,000 15,000 30,000 On Call Grant Writing Services GF 110-4916-0911 Principal Expenses Non-Departmental 85,000 (85,000) - Redeemed $3.5million, savings in principal GF 110-4916-0912 Interest Expenses Non-Departmental 514,703 (150,322) 364,381 Redeemed $3.5million, savings in interest GF 110-4320-0319 Professional Services CDD 20,000 67,690 87,690 CBD Traffic Study MCOG & Parking Fund Total General Fund Expenditures $ 634,703 $ (128,632) $ 506,071 610-4612-0319 Professional Services Water Enterprise $ 88,533 $ 15,000 $ 103,533 On Call Grant Writing Services Operating Appropriation 610-4612-0383 Utilities Water Enterprise 144,000 31,000 175,000 Increase in Utility Costs Operating Appropriation $ 232,533 $ 46,000 $ 278,533
710-4712-0319 Professional Services Wastewater Enterprise$ 355,495 $ 15,000 $ 370,495 On Call Grant Writing Services Operating Appropriation 710-4712-0383 Utilities Wastewater Enterprise 220,000 86,000 306,000 Increase in Utility Costs $ 575,495 $ 101,000 $ 676,495
810-4812-0319 Professional Services CV Starr Enterprise $ - $ 15,000 $ 15,000 On Call Grant Writing Services Operating Appropriation $ - $ 15,000 $ 15,000
520-4393-0319 Professional Services Facilities $ - $ 15,000 $ 15,000 On Call Grant Writing Services Operating Appropriation 520-7999-7999 Transfer to other Funds 55,000 55,000 Corp Yard Roof Replacement Operating Appropriation $ 70,000 $ 70,000
521-4394-0382 Hardware Expenses IT $ 108,068 $ 60,000 $ 168,068 Purchase two File Servers Operating Appropriation $ 108,068 $ 60,000 $ 168,068
522-4550-0382 Vehicles Fleet -ISF $ 438,000 $ 159,000 $ 597,000 Overages in 7 Vehicle purchased Operating Appropriation 522-4550-0101 Salaries & Wages Fleet -ISF 69,555 10,390 79,945 Costs for overlap in Mechanic position $ 507,555 $ 169,390 $ 676,945
426-4875-0731 Corp Yard Replacement $ 50,000 $ 55,000 $ 105,000 Corp Yard Roof Replacement increase in costs Facilities-ISF 120-0000-0309 Parking Fund- Interfund Cost Reimb - 10,628 10,628 CBD Parking Feasibility Study Parking Fund $ 50,000 $ 65,628 $ 115,628

CAPITAL IMPROVEMENT PROGRAM (CIP)/SPECIAL REVENUES
FACILITIES- ISF (520)

WASTEWATER ENTERPRISE
FLEET- ISF (522)
FY 2022/23 Requested Mid-Term Budget Adjustments

GENERAL FUND

WATER ENTERPRISE
CV STARR ENTERPRISE (810)
INFORMATION TECHNOLOGY - ISF (521)
City of Fort Bragg
Mid-Term Budget FY 2022/23

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. Years 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 in FY 2024/25 and thereafter as a result of new Unfunded Liability (UAL) added by the -7.5% return recorded by CALPERS and almost 0% return projected for 2023.

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 6.8% but the investment return for FY 2018-19 was 6.7% for 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 that ended June 30, 2022, is $6.4 million.

Like most cities in California, Fort Bragg will see increases in its unfunded liability in FY 2024/25 payments with little or no reduction in the overall unfunded liability helped by the City adopting a Pension Policy and issued $11.4 million in taxable Lease Revenue Bonds in 2021 to restructure the UAL debt with CALPERS. Proceeds 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 which were later returned to reduce the City's debt. The record positive CalPERS investment return mentioned above, the $7.5 million liability payment, and the setting up of a Section 115 Trust with PARS placed the City in a better position to manage pension obligations. However, recent negative returns by CALPERS in June 2022 have caused UAL to increase.

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, showing possible long-term results if certain revenue enhancements were 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 $4 million of interest cost over 15 years. Measure H was not successful.

With the defeat of Measure H, the City took steps to close the budget gap on the expenditure side. The Administrative Services department eliminated the position of Administrative Services Director and the Police Department eliminated a 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 the 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 City of Fort Bragg
Mid-Term Budget FY 2022/23

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, at 50% to 75% of their regular hours. The furloughed Staff was returned to full-time status in August 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 continue 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 and $175k in FY 22/23. While the Surplus was small, the budget included $150k to pay down pension obligations, a budget for the Police Chief position, and a new City Manager position with 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 positions or realized deficits with appropriated fund balance. Revenue enhancements and/or additional cost-cutting measures will likely be necessary within two years. 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 pursue a general sales tax measure again at the next opportunity or identify new sources of revenues.

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 FY 20-21
FY 21-22
FY 22-23
FY 23-24
FY 24-25
FY 25-26
FY 26-27
Salaries & Wages Benefits Materials & Services Allocations to Internal Service Funds Other Expenditures Debt Service City of Fort Bragg
Mid-Term Budget FY 2022/23

FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Audited Audited Forecast Forecast Forecast Forecast Forecast Forecast Revenue: Sales Tax 2,028,010 $ 2,215,161 $ 2,178,000 $ 1,916,640 1,974,139 2,043,234 2,114,747 2,188,763 Property Tax 1,085,532 1,150,352 1,176,309 1,205,716 1,235,859 1,248,218 1,260,700 1,273,307 Transient Occupancy Tax 3,321,928 3,444,990 3,371,081 3,033,973 3,124,992 3,156,242 3,187,804 3,219,682 Cost Allocations 2,299,275 3,333,187 2,754,136 2,478,722 2,590,265 2,706,827 2,828,634 2,955,923 All Other Revenue Sources 1,137,672 1,071,911 1,658,130 1,624,967 1,657,466 1,674,041 1,690,781 1,707,689 Total Revenue 9,872,418 11,215,601 11,137,655 10,156,540 10,582,722 10,828,562 11,082,667 11,345,365 Expenditures: Salaries & Wages 3,271,863 3,831,953 4,205,464 4,331,628 4,461,577 4,550,808 4,641,824 4,734,661 Benefits 2,489,172 2,728,147 2,616,939 2,695,447 2,776,311 2,859,600 2,916,792 2,975,128 Materials & Services 1,979,993 2,762,347 2,781,147 2,836,769 2,893,505 2,951,375 3,010,402 3,070,611 Allocations to Internal Service Funds 478,497 789,396 686,129 699,852 720,847 742,473 764,747 787,689 Other Expenditures 109,919 216,637 232,032 243,633 255,815 263,489 271,394 279,536 Debt Service 37,964 358,337 364,381 440,513 433,348 465,555 521,910 561,410 Total Expenses 8,367,408 10,686,817 10,886,091 11,247,842 11,541,402 11,833,300 12,127,070 12,409,034 Net Transfers: - - - -
Net Increase (Decrease) to Fund Balance 1,505,010 528,784 251,564 (1,091,302) (958,680) (1,004,738) (1,044,402) (1,063,669) Other restricted funds 3,879,236 (5,100,000) - - - - -
Beginning Fund Balance 2,679,205 4,184,215 8,592,235 3,743,799 2,652,498 1,693,817 689,079 (355,324) Ending Fund Balance 4,184,215 $ 8,592,235 $ 3,743,799 $ 2,652,498 $ 1,693,817 $ 689,079 $ (355,324) $ (1,418,993) $ - 718,784 441,564 (901,302) (768,680) (814,738) (854,402) (873,669) 4,184,215 $ 4,902,999 $ 5,344,563 $ 4,443,262 $ 3,674,581 $ 2,859,843 $ 2,820,179 $ 1,986,174 $ - 958,784 681,564 (661,302) (528,680) (574,738) (614,402) (633,669) 4,184,215 $ 5,142,999 $ 5,824,563 $ 5,163,262 $ 4,634,581 $ 4,059,843 $ 4,020,179 $ 3,426,174 $ - 667,232 796,064 (612,142) (465,146) (493,930) (533,594) (534,982) 4,184,215 $ 4,851,447 $ 5,647,511 $ 5,035,369 $ 4,570,223 $ 4,076,294 $ 4,036,630 $ 3,541,312 $ - 736,455 1,068,314 (372,562) (218,378) (238,526) (251,372) (242,883) 4,184,215 $ 4,920,671 $ 5,988,985 $ 5,616,423 $ 5,398,045 $ 5,159,519 $ 4,908,147 $ 4,665,264 $ 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.
$8,592,235
$3,743,799
$2,652,498
$1,693,817
$689,079
$(355,324)
$10,000,000 $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 $- $(1,000,000) 9,500,000 9,000,000
12,500,000 12,000,000 11,500,000 11,000,000 10,500,000 10,000,000 Audited Forecast Forecast Forecast Forecast Forecast
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
City of Fort Bragg
Mid-Term Budget FY 2022/23

The FISCAL YEAR 2023/24 BUDGET PREPARATION
A. BUDGET PREPARATION SCHEDULE
Initial activities related to preparing the Fiscal Year 2023/24 budget are underway. The direction provided today by Council will be incorporated into the budget draft. Staff will present a draft budget to the Council and the public at a budget workshop on May 18. The 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 FY 2022/23 budget and will again use the list in preparing the FY 2023/24 budget unless Council directs otherwise:
1) Adopt a balanced budget
2) Provide additional contributions to the Section 115 Trust to help pay the unfunded liability 3) Maintain operating reserve (15-20% of operating Exp) and litigation reserve ($200k) 4) Provide additional funding for emergency reserves (Increase Recession Reserves from 5% to 10% of Operating Expenditures)
5) Maintain current level of service (no staff layoffs, no program cuts) 6) Provide cost of living adjustments for Staff in years to come 7) Change Policy – 50% of Surplus to be deposited to Section 115 Trust instead of additional payments to CALPERS.

C. CITY COUNCIL DISCUSSION

ACTIVITY DEADLINE
FINANCE PROVIDES BUDGET SPREADSHEETS TO DEPARTMENTS AS WELL AS INSTRUCTIONS RE: NARRATIVES & CAPITAL PROJECTS (INCLUDING INTERNAL SERVICE FUNDS, GRANTS, DDAs) 2/25/2023 MID-YEAR PERFORMANCE BUDGET REVIEW WITH COUNCIL ( 1.30PM-5.30pm)(COMMUNITY INPUT) 3/22/2023 FINANCE PROVIDES INITIAL REVENUE FORECASTS TO CM (ALL REVENUE SOURCES, AND FUNDS) 3/31/2023 DEPTS SUBMIT PROPOSED DEPARTMENTAL EXPENSE BUDGETS AND NARRATIVES TO FINANCE 4/7/2023 PW & CDD SUBMIT COMPLETED BUDGET SECTIONS FOR GRANTS AND CAPITAL PROJECTS 3/23/2023 HR PROVIDES PAYROLL PROJECTIONS INCLUDING BENEFITS 4/15/2023 CM & FINANCE MEET WITH All DEPTS; REVIEW APPROPRIATIONS REQUESTS 4/17/2023 thru 4/21/2023 CM & FINANCE FOLLOW UP MEETING CIP 4/21/2023
FINANCE POSTS REVISED BUDGET WORKSHEETS IN BUDGET FOLDER; 4/22/2023 DEPARTMENTS REVIEW REVISED EXP WORKSHEETS; REPORT ANY DISCREPANCIES TO FINANCE THIS INCLUDES PROJECTED YEAR END FOR FY23, GRANTS; CAPITAL PROJECTS, ETC 4/22/2023 FINANCE REVIEWS TOTAL REVENUES vs EXPENDITURES WITH CM - ADJUST AS NECESSARY; draft CV Starr Budget due 4/31/2023 INTERNAL REVIEW/QUALITY CONTROL (FINANCE, CM, DEPTS) - DRAFT BUDGET DOCUMENT 4/15/2023 thru 5/10/2023 FINALIZE DRAFT BUDGET DOCUMENT 5/10/2023
CM COMPLETES BUDGET TRANSMITTAL LETTER 5/4/2023
FINANCE DISTRIBUTES PROPOSED FY 2023/24 Draft BUDGET 5/19/2023 CITY COUNCIL CONDUCTS FY 2023/24 BUDGET WORKSHOP ( 9 am - 2:30pm)(COMMUNITY INPUT) 5/24/2023 FINANCE DISTRIBUTES FY 2023/24 BUDGET INCLUDING COUCIL AND PUBLIC UPDATES (FOR COUNCIL ADOPTION) 6/9/2023 CITY COUNCIL ADOPTS FY 2023/24 BUDGET 6/12/2023
SCHEDULE FOR DEVELOPMENT OF FY 2023/24 BUDGET