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8 DATE: June 3, 2024
TO: Mayor and Members of the City Council President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
FROM: Stefan Chatwin, City/District Manager
Waqas Hassan, Assistant Finance Director
Mimi Lam, Financial Services Manager
DEPARTMENT: City Manager, Finance
SUBJECT: PUBLIC HEARING FOR FY 2024-25 PRELIMINARY BUDGET
RECOMMENDATION
It is recommended that the City Council/EMID Board (“City Council”) receive public comments regarding the FY 2024-25 Preliminary Budget and provide direction to finalize the budget. Such direction provided by the City Council and recorded via minute order will then be incorporated in the FY 2024-25 Final Budget for adoption on June 17, 2024. The Five-Year Financial Plan will also be updated accordingly.
EXECUTIVE SUMMARY
As part of the FY 2024-25 annual budget development process, the City Council held budget study sessions on February 26 and March 25 to review various sections of the preliminary budget, including the CIP Funds, Enterprise Funds, and Internal Service Funds. On May 20, 2024, the City Council reviewed the entire preliminary budget, including all the Governmental Funds.
The public hearing this evening allows the public an opportunity to comment on the preliminary budget and for the City Council to consider their input before providing direction with respect to the adoption of the final budget for FY 2024-25 scheduled on June 17, 2024.
BACKGROUND AND ANALYSIS
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8 On May 20, City staff presented the FY 2024-25 preliminary budget and 5-year financial plan for all Funds, including the General Fund (001 to 003). The budget indicated a $5.44 million General Fund structural deficit for FY 2024-25 as well as structural deficits for the entirety of the 5-year financial plan. The City Council gave direction to use General Fund reserves to address the FY 2024-25 budget shortfall and directed the City Manager to develop strategies to address the future deficits. The City Manager indicated such strategies may include additional or updated revenue opportunities, cost recovery measures, and operational efficiencies.
Based on directions provided by the City Council at the May 20 meeting as well as new information and developments over the past three weeks, City staff has summarized budget revisions for FY 2024-25 that includes $164,580 expenditures increase across all funds, including a $142,028 expenditure increase for the General Fund (Attachment 1). This increase is due to the cost-of-living adjustment (COLA) to the salaries of the Police Officers Association (POA) and Management Employees groups. The agreements with both these groups state that the base salaries will be adjusted based on the San Francisco Bay Area CPI-U April 2023 to April 2024 (Urban) with a minimum of three percent (3.0%) and a maximum of five percent (5.0%). The adjustment was made based on the recently issued San Francisco Bay Area CPI-U of 3.8% for April 2024. Since the negotiations with American Federation of State, County and Municipal Employees (AFSCME) group are still in the process, there are no adjustments made to the salaries of this group. The fiscal impact of the above noted increase in expenditures is included in the MOU is included in the proforma General Fund (001 to 003) FY 2024- 25 budget, which now shows a $5.58 million deficit as well as larger annual deficits over the 5-year financial plan (Attachment 2). Finally, any additional direction received at tonight’s meeting will be incorporated into the final budget that is scheduled for adoption on June 17, 2024.
Staff would also like to note that at the January 16, 2024 regular meeting, the City Council provided direction to address the budget shortfall for the Recreation Center.
The City Council’s action to eliminate the Bocce Court Expansion project from both the Project scope and budget reduced the Project budget by $1,009,000 resulting in the current budget shortfall of $9,559,750. Funding sources for the approx. $9.55 million budget shortfall are included in the budget (Attachment 3) and in the Table below.
It would be appropriate for the City Council to receive public testimony relative to the preliminary FY 2024-25 Budget. Upon hearing the public testimony, City staff
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8 recommends that the City Council provide direction towards the preparation of the FY 2024-25 final budget.
California Environmental Quality Act
Not Applicable
FISCAL IMPACT
Based on City Council direction from tonight’s public hearing, City staff will incorporate adjustments in the FY 2024-25 Final Budget for adoption on June 17, 2024. The May 20, 2024 preliminary budget can be found at:
https://www.fostercity.org/finance/page/annualbudget
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1 – Revisions to the FY 2024-25 Preliminary Budget presented on May 20, 2024
Attachment 2 – Proforma revised General Fund (Fund 001 to 003) FY 2024-25 Preliminary Budget and 5-Year Financial Plan
Attachment 3 – Preliminary Budget (pages 320-321)