Agenda Item No. 9
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: May 13, 2024 FROM: Matthew Bronson, City Manager
PREPARED BY: Nick Szamet, Administrative Services Director Kristin Eriksson, Assistant City Manager
SUBJECT: FY 2024-25 Budget Update and Major City Goals Work Programs
RECOMMENDATION
Receive a report on the FY 2024-25 budget update process and draft work programs for Major City Goals and provide input and direction to staff.
BACKGROUND
The upcoming Fiscal Year 2024-25 marks the second year of the FY 2023-25 two-year budget cycle and staff is currently developing the FY 2024-25 Proposed Budget for a public hearing on June 10. The Proposed Budget document will be posted on the City’s website in late May in preparation for the budget hearing. The process to update the FY 2024-25 budget began on February 13 when the Council received an updated five-year General Fund financial forecast along with a mid-year budget review. The forecast indicated that the General Fund is in a positive position over the next five years with modest surpluses projected along with reserves above the Council’s 25% policy goal. The City continues to face significant needs for services and capital improvements and broader economic uncertainties remain, reiterating the importance of balancing the FY 2024-25 budget with restrained revenues.
FY 2024-25 Budget Development
FY 2023-25 is the second budget cycle where the City has shifted from an annual budget to a biennial cycle or two-year budget. The process is more consolidated than annual budgeting and still allows for quarterly budget status reporting and a mid-year review provided to the Council. In addition, since budgets can only be appropriated for a single year, the budget for the second year (FY 2024-25) was a projection to be reviewed the following year to determine if any additional adjustments are needed. The budget development process for FY 2024-25 represents this review and recommendations highlighted in this report will be presented to Council on June 10 at the Budget Hearing for adoption.
General Fund Revenue
• Sales Tax - Projections use reports from the City’s sales tax consultant and local data to assess the ongoing condition of taxable sales in the City of Grover Beach. At midyear, a 1% increase in revenue was projected while the year-end projections now include a 1% decrease in revenue for sales tax. For FY 2024-25, staff have projected growth of 3% based on economic trends. Sales tax revenue is again anticipated to be the City’s largest General Fund revenue source.
Staff Report: FY 2024-25 Budget Update and Major City Goals Work Programs Page 2 May 13, 2024
Property Tax - The most recent estimates provided in January 2024 by San Luis Obispo County Tax Assessor’s Office projected a 4% increase next FY 2024-25 from the current fiscal year. Property tax has been a consistent revenue source for the City and average annual increases have exceeded the target. Property tax revenue is projected to be at the FY 2023-24 budget amount but slightly below the midyear projection. • Cannabis Tax – As outlined in the midyear review, staff estimates cannabis tax revenue to be $1.2 million which is $126,000 lower than the FY 2023-24 budget. However, staff believes the local cannabis market is showing signs of stabilizing from changes in the broader regional and statewide market and anticipates FY 2024-25 revenue to increase by 2% over FY 2023-24.
• Transient Occupancy Tax (TOT) - TOT is on target to exceed its revenue projections which suggests that FY 2023-24 actuals will end near $950,000, and for FY 2024-25, TOT will likely exceed $1 million in revenue. TOT projections anticipate completion of construction of the hotel project at 950 El Camino Real hotel project in FY 2024-25 and the beginning of hotel operations.
• Franchise Tax – Franchise fees for FY 2023-24 will meet the budget amount of $735,000.
Additionally, transoceanic fiber optic cable revenue is expected to commence in FY 2024- 25 adding an additional $200,000 in annual revenue for total estimated revenue of $947,000.
General Fund Expenses
In terms of General Fund expenditures, staff will be recommending a budget for FY 2024-25 that will continue to meet community needs in alignment with Council Goals. Specific costs for salaries and benefits for next year are still being developed as the City works through labor negotiations with employee bargaining units and unrepresented groups. Staff will recommend a General Fund contribution to the City’s Capital Improvement Program (CIP) of $600,000 which is lower than the $1.5 million contributed this year. However, next year’s CIP still includes numerous projects funded with non-General Fund sources along with carry-over funding of $11 million which should be exhausted in large measure over FY 2024-25.
The proposed FY 2024-25 budget will include a limited number of General Fund augmentation recommendations though no new positions are proposed to be added. Examples of the augmentations recommended for year include:
• Funding to begin an annual contribution for an Equipment Reserve Fund • Increased legal expenses and increased cost of elections. • Departmental increases for contractual services.
Overall, the proposed General Fund budget for FY 2024-25 will be balanced with revenues and expenditures equaling $18.4 million with an estimated surplus of $60,000. The budget produces ending reserves of approximately 30% of operating expenditures compared with the Council’s reserve goal of 25%. However, the City will still need to contain long-term costs within the context of uncertain revenue growth and the need for sufficient financial reserves.
Staff Report: FY 2024-25 Budget Update and Major City Goals Work Programs Page 3 May 13, 2024
Draft FY 2024-25 Work Programs for Major City Goals
On February 29, the Council held a goal-setting workshop where the Council reviewed progress in achieving Council Goals during the current FY 2023-24 and considered potential updates to the Goals for FY 2024-25. The Council chose to not modify these Goals and directed staff to develop work programs for the four Major City Goals for the Council’s review as described further in this report. Following the determination to not modify the Goals, the Council provided policy direction to staff to begin the process of withdrawing from the Central Coast Blue recycled water project. The Council will consider a resolution to officially withdraw from the project in a previous agenda item. Pending this outcome, staff would recommend modifying the Council Goals to remove the reference to Central Coast Blue in the “Water Supply and Resiliency” Goal.
Attachment 1 shows this proposed change as part of the Council Goals for FY 2024-25.
Attachment 2 contains the draft FY 2024-25 work programs for the four Major City Goals. The purpose of the work programs is to define and scope the adopted goal and ensure that staff has a clear understanding of the goal so that appropriate resources are allocated, and progress can be measured in achieving it. This is particularly important for goals where full achievement will extend beyond a single fiscal year. Each work program includes the goal statement and action plan with tasks and implementation dates. In many cases, the date shown is the start of the fiscal year in July which reflects the beginning of the work associated with the specific task.
Summary
Staff is seeking Council’s input and direction on the FY 2024-25 budget development update and draft FY 2024-25 Major City Goal work programs. This input and direction will be used in finalizing the proposed budget for FY 2024-25 which will be presented to the Council at the June 10th budget hearing. The Council’s adoption of the final budget in June will serve as the final approval for work programs for the Major City Goals and staff will then begin implementing these work programs in the new fiscal year and report back to Council on progress throughout the year.
FISCAL IMPACT
There is no fiscal impact from this agenda item.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Receive a report on the FY 2024-25 budget update process and draft work programs for Major City Goals and provide input and direction to staff; or
2. Provide staff with alternative direction.
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.
Attachments
1. FY 2024-25 City Council Goals
2. FY 2024-25 Draft Major City Goals Work Programs
City of Grover Beach
FY 2024-25 City Council Goals
MAJOR CITY GOALS
ECONOMIC DEVELOPMENT AND COMMUNITY PROMOTION. Strengthen and maintain a businessfriendly environment, implement strategies that build upon existing efforts in business retention with a focus on vulnerable sectors and populations, pursue business attraction and commercial development especially on West Grand Avenue, expedite permit processing, and promote tourism and hotel development.
HOUSING AND HOMELESSNESS. Work with developers and non-profits in efforts to increase housing availability with a focus on affordable housing; continue partnerships with regional agencies and organizations to address homelessness and related sheltering issues in the city and region, including supporting completion and operation of temporary shelter facilities in the City.
PUBLIC SAFETY. Ensure quality police, fire and emergency medical services by providing proper support, including implementation of a new fire services structure and funding, training and leadership development resources to meet service demands and growing challenges in such areas as homelessness, behavioral health, and social justice; and continue to engage with regional agencies, local businesses and the community in these efforts.
STREET MAINTENANCE AND COMPLETE STREETS. Continue to complete Measure K-14 street improvements on arterials and local streets; create a maintenance plan and related funding for improved streets; pursue opportunities to design and build safer, more pedestrian and bicycle friendly “complete streets” by incorporating where feasible bicycle lanes, sidewalks, street lights, crosswalks, trees/landscaping and other traffic calming design strategies.
OTHER IMPORTANT GOALS
BUILDING AND FACILITY IMPROVEMENTS. Support city programs, operations and assets by ensuring that our public facilities, including parks and buildings, are maintained, improved and expanded to meet community needs into the future; strategically develop priorities and funding plans by evaluating deferred maintenance, safety, health, accessibility, energy, and long-term needs.
COMMUNITY ENGAGEMENT. Continue a strong commitment to transparency and public participation in our city government through existing and new programs, initiatives and events designed to encourage community members, including youth, engagement in key community decisions; formalize our practices by adopting and implementing a public participation plan and policies.
WATER SUPPLY AND RESILIENCY. Meet existing and long-term water needs through the Central Coast Blue recycled ground water project by studying water resiliency alternatives and other regional efforts and by continuing water conservation; identify other feasible strategies to ensure long-term water resiliency.
ADDRESS AS RESOURCES PERMIT
CITY AND SCHOOL PARTNERSHIP. Establish a framework for communication between city officials and local public TK-12 education partners' that operate within the city supporting a Community Schools model that provide benefits for our youth, families, and the community 24/7 through more intentional alignment. Maximize each jurisdiction’s existing facilities and programs in partnership that benefits all, and discuss potential parallel policy options for shared adoption.
CODE COMPLIANCE. Prioritize the City’s code compliance program to quickly and effectively enforce our existing ordinances, including tree related issues like maintenance and removal permits.
ENVIRONMENTAL SUSTAINABILITY. Pursue carbon neutral solutions to develop a greener Grover Beach through plans, policies and City operations.
Attachment 1
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
ECONOMIC DEVELOPMENT AND COMMUNITY PROMOTION
GOAL STATEMENT
Strengthen and maintain a business-friendly environment, implement strategies that build upon existing efforts in business retention with a focus on vulnerable sectors and populations, pursue business attraction and commercial development especially on West Grand Avenue, expedite permit processing, and promote tourism and hotel development.
STAFF LEAD(S): Matt Bronson, City Manager; Kristin Eriksson, Assistant City Manager; Megan Martin, Community Development Director
TASK DATE
1. Continue to participate and collaborate with regional partner agencies to identify economic development strategies to support the local and regional economy.
July 2024
2. Work with the Chamber to conduct outreach with local businesses on key issues particularly along West Grand Avenue.
July 2024
3. Coordinate with regional partners and agencies, as well as the Chamber, to attract target industries and business sectors to the industrial area of the city.
July 2025
4. Facilitate opportunities with property owners and landlords to recruit and retain businesses
July 2024
5. Review the City’s Development Code and Economic Development Strategy for opportunities to remove barriers to economic development opportunities in Grover Beach.
July 2025
6. Continue oversight of construction for the mixed-use project at 402 West Grand Avenue and complete review for building permit issuance for mixed-use project at 401 West Grand Avenue along with coordination of opportunities for retail tenants.
June 2024
7. Coordinate development review process for other mixed-use projects along West Grand Avenue corridor.
June 202
8. Complete transition to a new permitting software system (Enterprise, Permitting, & Licensing), enhancing efficiency in permit processing and record-keeping practices.
December 2024
9. Work with outside communications firm to coordinate Visit Grover Beach tourism marketing communications.
June 2024
10. Continue oversight of construction for hotel project at 950 El Camino Real.
January 2025
Attachment 2
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
ECONOMIC DEVELOPMENT AND COMMUNITY PROMOTION
11. Process building permits for the 1598 El Camino Real hotel project upon submittal by the developer.
August 2024
12. Continue to collaborate with State Parks to assist the Grover Beach Lodge project toward building permit issuance.
January 2025
13. Develop updated Sign Ordinance for Council consideration following public outreach process businesses.
March 2025
14. Conduct outreach and regulatory oversight of the commercial cannabis industry and process development applications; including onsite consumption areas upon submittal
January 2025
KEY POLICY/OPERATIONAL ISSUES
• Ensure alignment and coordination among various economic development policies, strategies, and initiatives at the local and regional level to maximize impact. • Balance the need for regulations to protect public welfare with creating a businessfriendly environment that encourages investment. • Address gaps or deficiencies in infrastructure to support business growth in the community.
• Leverage partnerships between the City, businesses, non-profit organizations, and community stakeholders to drive economic development initiatives, share resources, and achieve common goals.
• Continued City’s involvement with regional economic development strategies to ensure community economic vitality in the future.
• Research and identify data-driven approaches to inform decision-making, identify trends, and evaluate effectiveness of economic development programs outlined in the Economic Development Strategy.
• Continue focus on hotel development projects and the commercial cannabis industry give economic activity and development opportunities along with additional tax revenues.
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
HOUSING AND HOMELESSNESS
GOAL STATEMENT
Work with developers and non-profits in efforts to increase housing availability with a focus on affordable housing; continue partnerships with regional agencies and organizations to address homelessness and related sheltering issues in the city and region, including supporting completion and operation of temporary shelter facilities in the City.
STAFF LEAD(S): Megan Martin, Community Development Director; Jim Munro, Police Chief-Appoint
TASK DATE
1. Continue to process development applications for West Grand Avenue housing and mixed-use projects upon submittal by property owners.
July 2024
2. Establish a Community Development forum to educate the public and developers on housing policy (i.e. Density Bonus, affordable housing, fractional density, State law) and development in the community.
January 2025
3. Continue to publicize the City’s Pre-designed Accessory Dwelling Unit (ADU) program and coordinate with participating cities on related updates to the new building code cycle in July 2025.
December 2025
4. Implement updates to the City’s Development Code to improve the ADU program and regulations consistent with State law.
July 2024
5. Seek Pro-housing designation from the California Department of Housing and Community Development
December 2025
6. Identify opportunities to update the City’s Development Code to streamline the permitting process and remove barriers to housing development.
July 2024
7. Finalize and adopt updated Development Impact Fees and develop a policy for impact fee deferrals for affordable housing units.
August 2024
8. Continue to seek federal and state funds for loans and grants to fund programs that provide supportive services to low-income individuals (i.e., CDBG, PLHA); and to fund infrastructure and assist with construction of affordable residential projects.
July 2024
9. Work with 5Cities Homeless Coalition, County of San Luis Obispo, and other agencies on securing funding for ongoing operations of temporary housing facilities and other homeless facilities and services in Grover Beach.
July 2024
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
HOUSING AND HOMELESSNESS
10. Continue to provide enforcement for the camping ordinance and present results to Council on an annual basis.
July 2024
11. Conduct cleanings and implement access limitations related to homeless encampments on public property.
July 2024
KEY POLICY/OPERATIONAL ISSUES
• Completing improvements to West Grand Avenue to enable additional housing and mixed-use opportunities along the City’s main commercial corridor. • Addressing regulatory barriers and navigating complex zoning, land use, and building or fire code regulations that may impede affordable housing development and the establishment of shelter facilities.
• Ensuring adequate infrastructure, such as transportation, utilities, and other services, are available to support housing development.
• Promoting equity and inclusion in housing and homelessness initiatives to ensure all residents, including marginalized and vulnerable populations, have access to safe and affordable housing.
• Continue to follow State and regional housing and homelessness related policies (including fair housing laws, anti-discrimination regulations, and constitutional protections) to ensure General Plan and Development Code supports development of affordable housing in the community.
• Strengthen relationships with developers, 5Cities Hoss Coalition, and other non-profits to address regional affordable housing and homelessness initiatives. • Securing adequate resources to support on-going funding of housing and homelessness initiatives, including operation of the temporary shelter facilities at Cabins for Change and the Balay Ko on Barca facilities.
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
PUBLIC SAFETY
GOAL STATEMENT
Ensure quality police, fire and emergency medical services by providing proper support, including implementation of a new fire services structure and funding, training and leadership development resources to meet service demands and growing challenges in such areas as homelessness, behavioral health, and social justice; and continue to engage with regional agencies, local businesses and the community in these efforts.
STAFF LEAD(S): Jim Munro, Chief of Police-Appoint; Scott Hallett, Five Cities Fire Chief
TASK DATE
1. Continue to work with the University of California at San Diego (UCSD) and the California Peace Officers Standards and Training (POST) to develop and implement a progressive Health and Wellness Program for Police Department employees.
June 2024
2. Continue to engage the community and foster positive relationships with local youth by hosting and participating in at least 10 local events.
June 2024
3. Host professional development and training opportunities for Police Department employees along with regional partners.
June 2024
4. Host a new Citizen’s Police Academy for Grover Beach residents. April 2025
5. Complete the Police Department re-branding of vehicles. January 2025
6. Implement multi-year agreement with County of San Luis Obispo for providing fire and emergency medical service to Oceano pending action by Local Area Formation Commission (LAFCO) and
implement temporary service agreement with Oceano Community Services District prior to LAFCO action.
July 2024
7. Conduct recruitment for new firefighter positions and conduct promotional testing to fill current vacancies pending agreement with County of San Luis Obispo on Oceano service.
September 2024
8. Assess and evaluate Fire Prevention and Code Enforcement services level options related to Five Cities Fire Authority (FCFA) service area in preparation for FY 2025-27 budget process.
April 2025
9. Complete Standards of Coverage assessment of the FCFA response area in preparation for FY 2025-27 budget process.
April 2025
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
PUBLIC SAFETY
KEY POLICY/OPERATIONAL ISSUES
• Focus on establishing and properly training the newly promoted leadership team within the Police Department.
• Need for continued community engagement through the use of social media platforms, public outreach and transparency in the Police Department. • Continued strong focus on recruitment and retention initiatives within the Police Department.
• Importance of revising and updating FCFA job descriptions for each rank to reflect current professional certification tracks, support successional planning, and desired recruitment goals.
• Revisions to FCFA deployment models needed based on response time criteria and hazard assessment within the community.
• Implementation of FCFA training plan to incorporate the Tractor Drawn Arial Ladder Truck deployment.
• Ensuring that state mandated fire inspection requirements are carried out through use of contract building officials and FCFA personnel.
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
STREET MAINTENANCE AND COMPLETE STREETS
GOAL STATEMENT
Continue to complete Measure K-14 street improvements on arterials and local streets; create a maintenance plan and related funding for improved streets; pursue opportunities to design and build safer, more pedestrian and bicycle friendly “complete streets” by incorporating where feasible bicycle lanes, sidewalks, streetlights, crosswalks, trees/landscaping and other traffic calming design strategies.
STAFF LEAD(S): Greg Ray, Public Works Director; Erin Wiggin, Capital Projects Manager; Gabriel Munoz-Morris, Senior Engineer
TASK DATE
1. Complete construction of annual street maintenance project (CIP 2250-1)
June 2025
2. Complete construction of West Grand Avenue Streetscape Project from 4th St. to 8th St. (CIP 2287)
January 2025
3. Complete construction of Measure K-14 project on portions of Ramona Avenue, Front Street, Saratoga Avenue, and North 2nd Street (CIP 2295-16)
June 2024
4. Complete design and begin construction of CIP 2295-18 to carry out maintenance work for previously paved Measure K-14 streets with the exact streets to be determined.
June 2025
5. Start construction of CIP 2295-17 after the sewer upgrade project is complete
June 2025
KEY POLICY/OPERATIONAL ISSUES
• Continuing to achieve accelerated pace of projects within the city’s relatively small footprint of approximately two square miles without significant inconvenience to residents and with limited field staff available to provide project utility support. • Increased level of construction disruption of West Grand Avenue Streetscape Project to businesses, property owners, and roadway users.
• Continued funding availability for improving major streets given higher General Fund contribution for capital projects and an increase in Local Transportation Funds derived from Gas Taxes though additional funding is still needed given the extent of arterials and major streets that need repair.
• Incorporating sidewalk infill, traffic calming, and other safety enhancements desired with street improvement work.
• Need for additional street maintenance work in future years to maintain the City’s streets rehabilitated in recent years
MAJOR CITY GOAL FY 2024-25 WORK PROGRAM
STREET MAINTENANCE AND COMPLETE STREETS
• Projected delays in Measure K-14 local street repair projects given delays in related utility work stemming from loss of funding due to potential initiative reducing water and wastewater rate structure.