Administrative Services Department
303 West Commonwealth Avenue, Fullerton, California 92832-1775 (714) 738-6529 Fax (714) 738-3168 www.cityoffullerton.com
To: Mayor Dunlap and City Council Members
Submitted by: Eric J. Levitt, City Manager
Ellis Chang, Director of Administrative Services
Prepared by: Ellis Chang, Director of Administrative Services Date: April 17, 2024
Subject: FY2024-25 Proposed Budget Preview
____________________________________________________________________________ We will be presenting the Proposed Fiscal Year (FY) 2024-25 Budget for City Council consideration at the upcoming Budget Study Session on April 23, 2024. Along with a preview of the Proposed FY 2024-25 General Fund Budget, presented below are some highlighted changes from prior fiscal years as well as options for consideration.
Over the last two years, based on City Council priorities, the City has taken a variety of steps to accomplish the goals of the City Council in providing quality services to the community and in enhancing funding for infrastructure such as streets. In working towards these goals, we have accomplished several initiatives collectively with the City Council.
Streets
First and foremost, the City increased its funding for street improvement projects to $12 and $14 million over the last two years. This was done in major part by obligating one-time ARPA revenue replacement funds. Since ARPA funds were one-time revenues and funds have been fully obligated, the City must now put a plan together to meet MOE requirements and to ensure we are addressing the City’s aging infrastructure. The FY 2024-25 Proposed Capital Improvements Program (CIP) Budget includes $8 million for st reet rehabilitation projects, including $1 million from the General Fund and $2 million from the Infrastructure Fund. In comparison in previous years the City’s budget for street improvements ranged from $4 million to $6.5 million.
In addition to the $8 million, the City is seeking an earmark for Street improvements at the Federal level, and has a grant through the State and OCTA to do $6 million in improvements on Harbor pending receipt of final approval.
The City Manager has a proposed strategy to increase that funding level to closer to $14 million over the next four years if the City were to use financing backed by current revenues. However, there are both upsides and downsides to this approach which will be discussed with the City Council at Budget Study Session.
Contingency Reserve
The City has been able to over the last two years (for the first time in recent history of the City) to reach and maintain a 17% contingency reserve level. The FY 2024-25 Proposed Budget maintains that 17% contingency reserve level, however due to expenditures outpacing revenues, the City will be utilizing excess reserves this year to close the deficit. 2 Service Levels
While the Proposed Budget will support current service levels in the upcoming fiscal year, we will need to create strategies to address our fiscal situation moving forward.
Due to fiscal challenges exacerbated by the pandemic, the City reduced service levels by eliminating or freezing staffing over multiple years. The City of Fullerton, like many other agencies were combatting impacts of the great resignation and attrition. This resulted in a loss of employees from our work force. With significantly low compensation and benefits compared to surrounding Orange County cities, the City experienced difficulty with recruitment and retention. Due to the City Council’s actions, we have seen an increase in retention and recruitment and lowered our vacancy rate from in excess of 20% in the organiz ation to approximately 14% over the last year, and continue to lower the vacancy rate. Prior cost reduction measures and vacancy savings provided resources to absorb the increased labor costs in Fiscal Year 2023-24 and in the Proposed FY 2024-25 Budget.
City Council’s actions have allowed us to:
maintain a higher level of police force with reduced use overtime, restaff the Fire department, which is coming closer to being fully staffed, provide a higher level of maintenance in the parks and right of ways, bring back community programs such as the Fourth of July and First Night celebrations, and increase Library service hours and reopen the Hunt Library
While this budget will support current service levels this year, we will need to create strategies to address our fiscal situation moving forward, which will also be presented and discussed in this Budget Study Session.
FY 2024-25 Proposed General Fund Budget
The upcoming Budget Study Session will present the below FY 2024-25 Proposed General Fund budget for your review, as well as the updated Five-Year Financial Forecast.
3 General Fund operating revenues are anticipated to increase by $6.9 million ($127.6 million - $120.7 million) over prior year adopted revenues. This increase is primarily attributed to projected property tax growth, sales tax, as well as increased charges for services revenues as the City continues to implement cost recovery efforts.
General Fund operating expenditures are anticipated to increase $11.8 million ($132.7 million - $120.1 million) outpacing the $6.9 million increase in projected revenues. This increase is primarily attributed to fiscal impacts of approved labor agreements and rising pension costs and other operating costs impacts. These increases are due to the following. Increases in CalPERS pension costs.
Increases in salary and benefit costs which support retention and recruitment as compensation adjustments have made the City more competitive with other cities. Increases in homeless costs.
Increases in information technology costs.
General inflationary pressures
Increase to the number of community pr ograms and events by br inging back important community events and other programming such as restoration of the Hunt Library.
The Budget Study Session will also include alternative “Budget Options” which have not been included in the proposed budget for City Council direction.
FY 2024-25 General Fund Five-Year Financial Forecast
The updated Five-Year Financial Forecast presents the Adopted FY 2023-24 Budget, the Proposed FY 2024-25 Budget which will be reviewed the upcoming Budget Study Session, and the forecasted General Fund financial condition from FY 2025-26 through FY 2028-29.
General Fund operating revenues and transfers in are anticipated to total $129.0 million with operating expenditures and transfers out anticipated at $132.7 million resulting in a budgetary shortfall of $9.4 million. Estimated excess reserves from FY 2023-24 will be used to close the deficit. While the 17% contingency reserve goal is anticipated to be maintained in the Proposed Budget, the General Fund will likely not meet is contingency reserve goal or minimum in subsequent fiscal years.
4 The Proposed Budget maintains our current level of services and includes street, public safety, and operating enhancements including the addition of a fourth ambulance as approved by the City Council in the contract renewal. We are able to meet the 17% reserve, but we risk future fiscal challenges. Because of these risks, while there were many proposed programs and staffing which would have been beneficial, we do not have the current resources in the City Manager’s judgement to fiscally support those endeavors.
As we move forward, the City Manager will seek City Council approval to evaluate and bring forth multiple approaches in bringing our revenues more in line with expenses.
The approaches include but are not limited to:
Looking at ways to better absorb the rising costs in PERS costs. Continuing revenue enhancement approaches in areas such as review of leases and other revenues. This could include expansion of economic development which is a longer-term strategy.
Review future revenue options and cost containment options for the future budgets. Looking at creative ways to better control and absorb costs such as rising homeless costs and inflationary pressures.
Budget Community Meeting
A community meeting on the FY 2024-25 Proposed Budget will be held on Wednesday, April 17, 2024 at the Fullerton Community Center. The community meeting will provide an educational
GENERAL FUND
FIVE-YEAR FINANCIAL FORECAST
Adopted
Budget
FY 23-24
Proposed
Budget
FY 24-25
FY 25-26
Forecast
FY 26-27
Forecast
FY 27-28
Forecast
FY 28-29
Forecast
Beginning Fund Balance $29,248,686 $32,011,519 $22,649,548 $14,604,744 $6,530,707 ($989,261) Revenues 120,671,857 127,641,540 132,718,771 136,884,092 141,521,223 145,289,850 Transfers In 7,150,000 1,320,164 578,087 578,087 578,087 578,087 Transfers In from Traffic Safety Fund 200,000 200,000 200,000 200,000 200,000 200,000 Transfers In from IT Fund - Server Repl. Loan - 378,087 378,087 378,087 378,087 378,087 Transfers In from ARPA - Revenue Replacement 6,950,000 742,077 - - - - Revenues & Transfers In Total 127,821,857 128,961,704 133,296,858 137,462,179 142,099,310 145,867,937 Expenditures (120,884,437) (132,720,675) (138,415,386) (142,832,690) (146,752,004) (151,642,714) Transfers Out (4,174,587) (5,603,000) (2,926,276) (2,703,526) (2,867,274) (3,038,000) Transfers Out to Infrastructure Fund (2,674,587) (2,926,062) (2,926,276) (2,703,526) (2,867,274) (3,038,000) Transfers Out to CIP Fund - Residential Streets (1,500,000) (1,000,000) - - - - Transfers Out to IT Fund - IT Projects - (1,676,938) - - - - Expenditures & Transfers Out Total (125,059,024) (138,323,675) (141,341,662) (145,536,216) (149,619,278) (154,680,714) Net Operating Surplus/(Deficit) $2,762,833 ($9,361,971) ($8,044,804) ($8,074,037) ($7,519,968) ($8,812,777) Ending Fund Balance $32,011,519 $22,649,548 $14,604,744 $6,530,707 ($989,261) ($9,802,038) 10% Contingency Reserve (Minimum) $12,088,444 $13,272,067 $13,841,539 $14,283,269 $14,675,200 $15,164,271 17% Contingency Reserve (Goal) $20,550,354 $22,562,515 $23,530,616 $24,281,557 $24,947,841 $25,779,261 Over/(Under) 10% Contingency Reserve 19,923,075 9,377,481 763,205 (7,752,562) (15,664,461) (24,966,309) Over/(Under) 17% Contingency Reserve 11,461,165 87,033 (8,925,872) (17,750,850) (25,937,102) (35,581,299) 5 overview of the budget process as well as a macro-overview of the Proposed Budget. The community meeting presentation is attached.
Fullerton Community Center, Room 2
April 17, 2024
Budget Community Meeting
FY 2024-25 Proposed Budget
Purpose of Budget Community Meeting
To Give Residents and the Community:
High-Level Overview of Budget Process
Understanding of City’s General Fund Revenues & Expenditures Community Engagement & Input
2 Community Service Priorities Survey
Repairing streets and potholes including residential streets Addressing homelessness
Protecting Local drinking water
Ensuring children have safe places to play at parks
Keeping public areas safe and clean
Attracting and retaining well-trained fire, paramedic, and police officers 3 To facilitate long-range budget planning, the City conducted a Community Priorities Survey in 2023. Top service priorities identified by Fullerton neighbors include:
Budget Survey & Community Input
Please scan QR Code below to participate in a Budget Survey! 4 Budget
Process
Overview
5 1. Pre-Budget
2. Budget
Kick-off
• City Council Meeting
June 4, 2024
3. Budget
Development
• Proposed Base Budget Developed
• Community Budget Meeting
• Budget Study Session April 23, 2024
4. Budget
Adoption
5. Budget
Monitoring
Budget Highlights
• City’s Top Budget Priorities ~ Public Safety, Infrastructure and Fiscal & Organizational Stability
• General Fund Budget Highlights
• Public Safety ~ Stable Service levels and Investment in Safety Equipment • Investment in the Labor Workforce
• Continued Use of ARPA Funds
• 17% Contingency Reserve levels anticipated for FY 2024-25 • Streets Infrastructure ~ $8 million for Streets in FY 2024-25 • Compared to an average of $4.2 to $6.5 million prior to ARPA funds 6 City Priorities & Community Programs
7 Public Safety
Enhanced Fire
Ambulance Services /
Emergency Equipment
& Supplies
Increase in Public
Education and
Community
Engagement Activities
Police Personnel to
support collaboration
with the County’s Real
Time Crime Center
Infrastructure
$34.9 million Capital
Improvements Budget
for FY 2024-25
$1.0 million of General
Fund commitment to
Street Rehabilitation
projects
$2.9 million
Infrastructure Fund
Community
Events &
Programs
Increased Youth &
Family Programs,
Expanded Summer
Camp Hillcrest program
Hunt Library Re-Opens,
Winter Reading for Kids
Fourth of July,
First Night, Summer
Farmer’s Market
Pictured Above: Hunt Library located at 201 S. Basque Ave City Priorities & Community Programs
8 Community
Development
& Preservation
Host Quarterly
Small Business
One-Stop-Shop
Meetings
Submit Certified
Housing Element
(6th Cycle)
Process over 5,000
planning permits
Organizational
Efficiencies
Hire & onboard
personnel for
vacant positions
Invest in labor
workforce in
accordance with
MOA agreements
Employee Service
Awards, CSUF
Leadership
Program
Community
Engagement
Homeless
Outreach Proactive
Engagement
(HOPE) Center
Coffee with a Cop,
Citizen's Academy
Budget Community
Meeting, Youth &
Senior Committee,
City Hall on the Go
FY 2024-25 General Fund Revenues of
$127.6 Million
Major Revenue Category
Proposed
Budget
FY 24-25
Property Tax 58,044,816
Sales Tax 30,512,105
Transient Occupancy Tax (TOT) 3,400,000
All Other Taxes 3,426,110
Licenses & Permits 2,485,484
Charge for Services 14,344,359
Other Revenues * 13,134,191
Human & Leisure Services (Library & Parks & Recreation) 2,294,475 Total General Fund Revenue $127,641,540
* Includes Fines & Penalties, Use of Money & Property, Intergovernmental & Other Miscellaneous Revenue.
Property Tax
45%
Sales Tax
24%
TOT
3%
All Other Taxes
3%
Licenses &
Permits
2%
Charge for
Services
11%
Other Revenues
10%
Library & Parks &
Recreation
2%
FY 24-25 General Fund Revenues by Type
9 $127.6 M
Property Tax – Where Do Your Property
Taxes Go?
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/g3 /g92/g82
/g3/g92/g83/g72/g81/g71/g3/g76/g81/g3
fordfdf/g51/g85/g82/g83/g72/g85/g87/g92/g3/g55/g68/g91
/g72/g92/g15/g3
/g7/g20/g24/g17 /g25/g23/g3/g74/g82/g72/g86/g3/g87/g82/g3 /g87/g75/g72/g3/g38/g76/g87/g92/g3/g82/g73/g3
/g41/g88/g79/g79/g72/g85/g87/g82/g81/g17
Sales Tax – Where Do Your Sales Taxes Go?
$1 in
Sales Tax
Collected
Sales Tax
%Public Entity
$0.715.50%State General Fund
$0.060.50%County Public Safety (Prop 172)
$0.131.00%City of Fullerton (Bradley
Burns)
$0.030.25%County – Local Transportation
$0.060.50%Orange County - OCTA (Measure
M2)
$1.007.75%Total Sales Tax Rate
FY 2024-25 General Fund Expenditures
of $132.7 Million
12 Expenditures by Major Program Area
Proposed
Budget
FY 24-25
General Government (Administration, Admin Svcs, HR) 6,180,258 Fire 34,857,549
Police 61,551,581
Community & Economic Development 6,990,070
Public Works 11,295,211
Human & Leisure Services (Library and Parks & Rec) 11,846,005 Total General Fund Expenditures $132,720,675
FY 2024-25
Proposed
General Fund
Budget
13 Adopted CM Proposed
Budget Budget
FY 23-24 FY 24-25
Beginning Fund Balance $29,248,686 $32,011,519
Revenues 120,671,857 127,641,540
Transfers In: 7, 150,000 1,320,164 Transfers In from Traffic Safety Fund 200,000 200,000 Transfers In from IT Fund - Server Loan - 378,087 Transfers In from ARPA Revenue Replacement 6,950,000 742,077 Total Revenues and Transfers In 127,821,857 128,961,704 Expenditures (120,884,437) (132,720,675)
Transfers Out: (4,174,587) (5,603,000) Transfers Out to Infrastructure Fund (2,674,587) (2,926,062) Transfers Out to Residential Streets (CIP) (1,500,000) (1,000,000) Transfers Out to IT Fund - IT Projects - (1,676,938) Total Expenditures and Transfers Out (125,059,024) (138,323,675) Net Operating Surplus/(Deficit) 2,762,833 (9,361,971) Ending Fund Balance $32,011,519 $22,649,548
Upcoming Budget Dates
Budget Study Session ~ Tuesday, April 23, 2024 @ 5:00 pm Public Hearing to Adopt FY 2024-25 Operating Budget ~ Tuesday, June 4, 2024
City Budget Information:
https://www.cityoffullerton.com/government/departments/administrative- services/city-budget
14 Questions?
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