Attachment 1 - FY 21-22 Mid Year Budget Review — Hesperia City Council, February 15, 2022

FISCAL YEAR 2021-22
MI

D-YEAR BUDGET REVIEW
F
ebruary 15, 2022
Attachment 1
2021-22 MID-YEAR BUDGET REVIEW REPORT
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T A B L E O F C O N T E N T S

Page
Executive Summary ............................................................................................................................ 3 Status of FY 2021-22 Budget, Budget Amendments, and Reserves:

General Fund .......................................................................................................................... 5 Water District .......................................................................................................................... 6 Streets Maintenance ............................................................................................................... 7 FY 2021-22 December 31, 2021 Year-To-Date Revenue Review:

Major Funds Revenue Summary ............................................................................................ 8 General Fund Revenues ......................................................................................................... 9 Community Development Block Grant Revenue ..................................................................... 11 Hesperia Housing Authority Revenue ..................................................................................... 12 Street Related Funds Revenue ............................................................................................... 12 Other City Funds Revenue ..................................................................................................... 14 Water District Revenue ........................................................................................................... 15 Department FY 2021-22 Budget Expenditure Status Summary ........................................................... 17 Total Expenditures By Department and Program ................................................................................. 17 Proposed Budget Amendments – Summary ........................................................................................ 22 Proposed Budget Amendments – Narrative ......................................................................................... 22 2021-22 Mid-Year Budget Salaries and Positions ................................................................................ 25 2022-23 Tentative Budget Calendar ................................................................................................ .... 26

2021-22 MID-YEAR BUDGET REVIEW REPORT
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EXECUTIVE SUMMARY
The following chart compares the FY 2021-22 Budget and December 2021 year-to-date (YTD) revenue and expenditure totals, with the difference being budgeted reserves and transfers.

Status of Overall City Fiscal Year 2021-22 Budget
The percentage comparisons for expenditures are based on comparing the December 2021 YTD to the 20 21-22 Amended Budget. The Amended Budget is used to accurately reflect any changes to the adopted budget that occur from City Council approving budget amendments throughout the fiscal year.

Revenue: Through December 2021, YTD revenue is $ 51.8 million, which is approximately 48% more than the December 2020 YTD revenue of $ 35.0 million. This increase over the previous year is mainly attributed to the $11.7 million received revenue for the American Rescue Plan Act (Coronavirus State and Local Fiscal Recovery Funds) Grant.

However, without the American Rescue Plan Act related funding, the December 2021 YTD revenue would be 15% more than December 2020, which is mainly due to increased development related revenue. Overall, revenue is 36% collected through December 2021 and additional detail is provided further within the report.

Expenditures: At 26% of the amended budget utilized, the FY 20 21-22 Budget is proceeding as planned. Overall , the December 2021 YTD expenditures of $33.3 million are $6.3 million or 16% less than the December 2020 YTD of $39.6 million. This decrease from the FY 2020 -21 Mid-Year Report is related to the Water District’s early retirement of the $5.5 million 1998A Variable Rate Lease Revenue Bonds . It should be noted that there are eight (8) budget amendments totaling $339,055 included in this report.

Reserves: The General Fund and Water District (operating and capital) exceed the City Council’s policy of 10% cash reserves. Because the City’s audited financial statements have not yet been completed, t he following reserve calculations are based on estimates of the unaudited June 30, 20 21 ending cash balances. These estimates will be updated with actual numbers from the June 30, 2021 Annual Comprehensive Financial Report (ACFR) for the upcoming FY 2022-23 Proposed Budget. In addition, the eight (8) Mid-Year Budget Amendments, totaling $339,055, are reflected below where appropriate:

2021-22 2021-22 December Revised %
Budget Revised 2021 YTD Received/Expended
Planned Revenue 131,534,779$ 132,079,405$ 40,143,633$ 30% American Rescue Plan Act Grant 0 11,701,844 Total Revenue 131,534,779 143,781,249 51,847,655 36% Use of Reserves 5,951,412 6,445,467
Net Transfers 0 0
Total Resources 137,486,191 150,226,716
Expenditures 130,777,772 130,228,314 33,297,706 26% Difference 6,708,419$ 19,998,402$
10% Cash Reserves (Council/Board Policy) 3,994,828$ 10% 3,276,987$ 10% Cash Reserves Above 10% Reserve 8,435,305 21% 16,912,006 52% Total Estimated Cash Reserves 12,430,133$ 31% 20,188,993$ 62% Months of Cash 3.7 8.0
Water DistrictGeneral Fund
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EXECUTIVE SUMMARY (Continued)

Proposed Budget Amendments – 8 Budget Amendments are proposed for $339,055 The FY 2021-22 Mid-Year Budget Review includes eight (8) items as proposed budget amendments totaling $339,055.

The proposed budget amendments are included in the fund balance analyses where appropriate:

Revenues and Expenditures through December 31, 2021 for the City’s main funds are summarized as follows:

General Other
FY 2021-22 Mid-Year Budget Requests Fund Funds Totals
Operating Repairs & Vehicle Retrofit $ 16,000 $ 0 16,000$ City Hall Tenant Improvements 67,054 0 67,054 Vactor Truck Engine Replacement 0 56,000 56,000 Plan Review and Inspection Services 12,000 18,000 30,000 Plant 19 HVAC Unit & Plant 14A Electric Motor 0 57,000 57,000 State Water Resources Control Board (SWRCB) Annual
Connection Fees
0 8,500 8,500
Backhoe Purchase 0 34,501 34,501 Sewer Feasibility Study 0 70,000 70,000 Total Mid-Year Amendment Requests $ 95,054 $ 244,001 339,055$ General Fund
Amended
Budget December
% of Amend.

Received
Amended
Budget December
%
Expended
City Council 796,307$ 459,860$ 58%
City Manager 3,199,571 1,656,069 52%
Management Services 4,899,937 2,822,642 58% Economic Development 322,232 170,010 53% D.S.-Community Development 2,138,652 1,060,061 50% D.S.-Code Compliance 3,759,159 1,895,856 50% D.S.-Public Works (G.F.) 1,997,928 993,232 50% Police 19,277,217 9,530,067 49%
Total General Fund 39,493,002$ 12,731,763$ 32% 36,391,003$ 18,587,797$ 51% Community Development Block Grant 2,355,270 41,060 2% 2,303,429 456,728 20% Hesperia Housing Authority 440,298 387,588 88% 66,650 10,512 16% D.S.-Public Works 38,395 36,666 95% 3,418,733 1,524,041 45% Streets CIP Funds 54,741,752 6,903,910 13% 54,235,156 511,406 1% Other City Related Funds 2,594,198 2,330,983 90% 2,482,834 1,755,409 71% D.S.-Water Operating and Capital 26,807,988 14,802,156 55% 22,337,812 7,101,832 32% D.S.-Sewer Operating and Capital 5,608,502 2,909,508 52% 7,950,277 2,342,235 29% Fire District 0 0 n/a 1,042,420 1,007,746 97% Sub -Total 132,079,405$ 40,143,633$ 30% 130,228,314$ 33,297,706$ 26% American Rescue Plan Act Grant 11,701,844 11,704,022 100% 0 0 n/a Total 143,781,249$ 51,847,655$ 36% 130,228,314$ 33,297,706$ 26% 2021-22 Revenue 2021-22 Expenditures
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STATUS OF CITY GENERAL FUND 2021-22 BUDGET, BUDGET AMENDMENTS, AND RESERVES

2021-22 2021-22
Budget Revised Dollars Percent

RESOURCES
General Fund Operating Revenue 36,474,374$ 36,724,946$ 250,572$ 1%

1. Fund 700 - Indirect Cost Allocation - Water 2,273,119 2,273,119

2. Fund 710 - Indirect Cost Allocation - Sewer 494,937 494,937 Total General Fund Revenue 39,242,430$ 39,493,002$ 250,572$ 1% Transfers In

1. Fund 255 - AB 3229 COPS Grant 200,000 200,000 Total Transfers In 200,000 200,000
Budgeted Reserves

1. Budgeted Reserves 267,000$ 335,165$

2. First Quarter Approved Budget Amendment Reserves 0 125,000

3. Mid-Year Budget Amendment Reserves 0 95,054 Total Budgeted Reserves 267,000$ 555,219$
Total General Fund Resources 39,709,430$ 40,248,221$ 538,791$ 1%

EXPENDITURES
Total General Fund Operating Expenses 36,197,838$ 36,266,003$ Transfers Out

1. Fund 210 - HFPD CalPERS 1,043,000 1,043,000
870,000 870,000
1,438,675 1,438,675
110,549 110,549
Total Transfers Out 3,462,224 3,462,224
First Quarter Budget Amendments - Approved 0 125,000 Total General Fund Expenditures & Transfers Out 39,660,062$ 39,853,227$ 193,165$ 0% Mid-Year Budget Amendments Requested

1. Operating Repairs & Vehicle Retrofit 0$ 16,000$

2. City Hall Tenant Improvements 0 67,054

3. Plan Review and Inspection Services 0 12,000 Total Mid-Year Budget Amendments - Requested 0 95,054 Total Expenditures and Amendments 39,660,062$ 39,948,281$ 288,219$ 1% DIFFERENCE TOTAL RESOURCES/TOTAL EXPENDITURES 49,368$ 299,940$ 250,572$ 508% GENERAL FUND FUND BALANCE AND RESERVESFund Balance
July 1 Beginning Balance unaudited 16,766,341$ 20,480,170$ Total Budgeted Reserves (267,000) (555,219) Difference Total Resources/Total Expenditures 49,368 299,940 Estimated June 30 Ending Fund Balance 16,548,709$ 20,224,891$ 3,676,182$ 22% Months of Cash to Pay Expenditures and Transfers Out
Beginning Cash July 01, unaudited 8,224,087$ 12,685,412$ Estimated Resources Less Budgeted Reserves 39,442,430 39,693,002 Estimated Expenditures (39,660,062) (39,948,281)
8,006,455$ 12,430,133$
Months of Cash to Pay Expenditures and Transfers Out 2.4 3.7 Estimated Cash Reserves Percentage 20% 31%
Estimated Ending Cash June 30,

4. Fund 403 - 2005 COP Refinance Debt Service
Change

3. Fund 402 - 2012 Water Rights Acquisition Debt Service

2. Fund 309 - DIF 2018-City Hall Facilities
2021-22 MID-YEAR BUDGET REVIEW REPORT
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STATUS OF WATER DISTRICT 2021-22 BUDGET, BUDGET AMENDMENTS, AND RESERVES

2021-22 2021-22
Resources Budget Revised Dollars Percent
Revenue
Water Operating and Capital 25,712,181$ 26,507,988$ Sewer Operating and Capital 5,484,996 5,608,502 Reclaimed Water Operations 300,000 300,000
Total Revenue 31,497,177 32,416,490 919,313 3% Budgeted Reserves 2,528,368$ 2,630,728$
Mid-Year Budget - Requested 0 188,001 Total Budgeted Reserves 2,528,368$ 2,818,729$
Total Water District Resources 34,025,545$ 35,235,219$ 1,209,674$ 4% Expenditures by Program
Water Operating and Capital and Transfer Out 21,972,896$ 22,075,256$ 102,360$ 0% Sewer Operating and Capital 7,950,277 7,950,277 Reclaimed Water Operations 262,556 262,556
Total Water District Expenditures & Transfers Out 30,185,729$ 30,288,089$ 102,360$ 0% Mid-Year Budget Amendments - Requested
0$ 18,000$
0 57,000

3. State Water Resources Control Board (SWRCB)
Annual Connection Fees
0 8,500

4. Backhoe Purchase 0 34,501
0 70,000
0 188,001
Total Expenditures and Amendments 30,185,729$ 30,476,090$ 290,361$ 1% Establishment of Reserve Balances
Permanent Water Rights $ 2,293,776 2,293,776$
Total Reserve Balances 2,293,776 2,293,776
Total Water Expenditures & Reserve Balance Funding $ 32,479,505 $ 32,769,866 Difference Total Resources/Total Expenditures 1,546,040$ 2,465,353$ July 1 Beginning Balance unaudited 96,753,292$ 102,031,029$ Budgeted Reserves (2,528,368) (2,818,729)
Difference Resources/Expenditures 1,546,040 2,465,353 Reserve Balances 2,293,776 2,293,776
Estimated June 30 Ending Fund Balance 98,064,740$ 103,971,429$ Months of Cash to Pay Expenditures
Beginning Cash July 01, unaudited 15,695,038$ 20,542,369$ Estimated Resources Less Budgeted Reserves 31,497,177 32,416,490 Estimated Expenditures (32,479,505) (32,769,866)
14,712,710$ 20,188,993$
Months of Cash to Pay Expenditures and Transfers Out 5.8 8.0 Total Estimated Cash Reserves Percentage 45% 62%
Estimated Ending Cash June 30,
Change

1. Plan Review and Inspection Services
Total Mid-Year Budget Amendments - Requested

5. Sewer Feasibility Study

2. Plant 19 HVAC Unit & Plant 14A Electric Motor
2021-22 MID-YEAR BUDGET REVIEW REPORT
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STATUS OF STREETS MAINTENANCE FUND 2021-22 BUDGET, FUND BALANCE, AND RESERVES

2021-22 2021-22
RESOURCES Budget Revised Dollars Percent
Street Maintenance Operating Revenue 2,157$ 38,395$ 36,238$ 1680% Transfers In
Fund 204 - Measure I - Renewal 1,750,000$ 1,750,000$
Fund 205 - Gas Tax Fund 1,109,565 1,109,565
Total Transfers In 2,859,565$ 2,859,565$
Budgeted Reserves

1. Budgeted Reserves 527,011$ 527,011$

2. First Quarter Budget Amendment Reserves 0 30,000

3. Mid-Year Budget Amendment Reserves 0 56,000 Total Budgeted Reserves 527,011$ 613,011$
Total Street Maintenance Resources 3,388,733$ 3,510,971$ EXPENDITURES 3,388,733$ 3,388,733$ 0$ 0% First Quarter Budget Amendments - Approved 0 30,000 Mid-Year Budget Amendments - Requested

1. Vactor Truck Engine Replacement 0 56,000 Total Mid-Year Budget Amendments - Requested 0 56,000 Total Expenditures and Amendments 3,388,733$ 3,474,733$ 86,000$ 3% DIFFERENCE RESOURCES/EXPENDITURES 0$ 36,238$ 36,238$ n/a Fund Balance
July 1 Beginning Balance unaudited 577,011$ 796,251$ Total Budgeted Reserves (527,011) (613,011)
Difference Resources/Expenditures 0 36,238 Estimated June 30 Ending Balance 50,000$ 219,478$ Change
2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW

Overall – Through the end of December 2021, 31% percent of the total budgeted revenue has been collected. During the First Quarter Budget Review , the revenue was revised to include $1 1.7 million in American Rescue Plan Act (Coronavirus State and Local Fiscal Recovery Funds) Grant that the City had received. Additionally, the Community Development Block Grant (CDBG) CV-Cares Act revenue was revised from $1.0 million to $0 to reflect that the City would not receive the funds, and further information is provided on page 11 of this report . By including the American Rescue Plan Grant received, YTD revenue received is 39% or $51.8 million.

As a whole, the Water District revenue is 56% received and Sewer Operating & Capital combined is 53% collected. As detailed in the Water narrative, it is recommended to increase the Water District revenue budget by $919,313.

It addition, staff recommends to revise the FY 2021 -22 revenue b udget for the General Fund, Hesperia Housing Authority, Street Related Funds, and the Water District by $ 1,494,123. This revised amount includes an increase in development related revenue, proceeds from sale of vacant la nd and equipment, reimbursement from damaged equipment and City property, Water Arreages Grant, and Sewer Connections. The following pages will detail the current revenue collections for each fund.

December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
General Fund 39,242,430$ 12,731,763$ 32% 39,493,002$ 250,572$ Community Development Block Grant 3,304,767 41,060 1% 2,355,270 (949,497) Hesperia Housing Authority 152,298 387,588 254% 440,298 288,000 Street Related Funds 54,743,909 6,940,576 13% 54,780,147 36,238 Other City Related Funds 2,594,198 2,330,983 90% 2,594,198 0 Water Operating 24,327,581 13,946,746 57% 25,123,388 795,807 Water Capital 1,375,000 854,013 62% 1,375,000 0 Water Reserves 9,600 1,397 15% 9,600 0 Reclaimed Water 300,000 0 0% 300,000 0 Total Water Operating & Capital 26,012,181 14,802,156 57% 26,807,988 795,807 Sewer Operating 5,277,514 2,584,411 49% 5,277,514 0 Sewer Capital 206,632 324,787 157% 330,138 123,506 Sewer Reserves 850 310 36% 850 0 Total Sewer Operating & Capital 5,484,996 2,909,508 53% 5,608,502 123,506 Water District 31,497,177 17,711,664 56% 32,416,490 919,313 Sub-total 131,534,779 40,143,633 31% 132,079,405 544,626 American Rescue Plan Grant 0 11,704,022 n/a 11,701,844 11,701,844 Total All Funds 131,534,779$ 51,847,655$ 39% 143,781,249$ 12,246,470$

MAJOR FUNDS REVENUE SUMMARY
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

General Fund Revenue Comments:

General Fund Revenue – Through December 2021, YTD revenue is $ 12,731,763 which is $ 274,152 or 2% less than December 20 20 YTD revenue of $13,005,915 . This de crease in YTD revenue received is related to the combined $2.1 million CARES Act and Coronavirus Funds received during the first six months of 2020-21, which is ‘one-time’ grant specific to that fiscal year. Evaluating the change in revenue , without the CARES/Coronavirus funds , results in a mid - year FY 2021-22 revenue increase of $1,820,381 or 17% more than the prior fiscal year. Contributing to the increase is mainly due to a combination of development related revenue , sales and use tax , and property transfer tax . The City is recommending to increase the FY 2021 -22 General Fund revenue by $250,572 to include the increase in development related revenue received year-to-date.

Sales and Use Tax – The collections received through December 2021 of $4.5 million is $0.7 million or 19% more than the December 2020 YTD of $3.8 million. This increase is largely due to the December 2021 quarterly being more than the December 2020 quarterly, due to a growing economy and higher fuel prices. Due to timing of receiving revenue, the State has remitted tax payments through October 2021. This revenue source will continue to be monitored.

Vehicle License Fee (VLF) – This revenue is based on the City’s assessed valuation. As the assessed valuation changes from the prior year, this revenue ch anges by the same percentage. There is no revenue reported through December 2021, as the first installment of the VLF is expected to be received in January and May 2022.

Franchise Fees – Franchise fees for Cable TV, Advance Disposal, Southwest Gas, Southern California Edison, and Water for December 2021 YTD total $745,759, which is $24,877 or a 3% increase over December 2020 $720,882 YTD.

Please note that the majority of franchise fees are received in the second half of the fiscal year.

Transient Occupancy Tax (TOT) – Through December 2021, YTD revenue is $ 705,198, which is $ 75,829 more than the December 2020 YTD of $629,369. This 12% increase is due to increased hotel occupancy.

December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
Sales and Use Tax 11,333,000$ 4,540,748$ 40% 11,333,000$ 0$ Vehicle License Fee (VLF) 9,856,916 0 0% 9,856,916 0 Franchise Fees 3,757,723 745,759 20% 3,757,723 0 Sub-Total Top Three Revenues 24,947,639 5,286,507 21% 24,947,639 0 General & Administrative Recovery 2,768,055 1,384,028 50% 2,768,055 0 Transient Occupancy Tax 1,300,000 705,198 54% 1,300,000 0 Property Transfer Tax 301,000 238,848 79% 301,000 0 Secured Property Tax 989,036 517,553 52% 989,036 0 Business License 530,789 324,841 61% 530,789 0 Commercial Cannabis Tax 700,000 294,382 42% 700,000 0 Community Facilities District 2005-1 310,000 157,592 51% 310,000 0 Leased Water Rights 2,219,295 0 0% 2,219,295 0 Development Related Revenues
Planning 209,747 352,362 168% 352,362 142,615 Building & Safety 1,886,167 1,329,219 70% 1,886,167 0 Engineering 456,220 564,177 124% 564,177 107,957 Sub-Total Development Related Revenues 2,552,134 2,245,758 88% 2,802,706 250,572 Sub-Total Top 12 Revenue Sources 36,617,948 11,154,707 30% 36,868,520 250,572 All Other General Fund Revenues 2,624,482 1,577,056 60% 2,624,482 0 Total General Fund Revenues 39,242,430$ 12,731,763$ 32% 39,493,002$ 250,572$

GENERAL FUND REVENUES
2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

General Fund Revenue Comments (Continued):

Property Transfer Tax – This revenue reflects the change in property valuation upon change of ownership within the City. The December 2021 YTD total of $238,848, represents an increase of $111,856 from the December 2020 YTD of $126,992. This 88% increase is due to receiving five receipts compared to the four receipts received December 2020 YTD. When comparing the first four installments through December 2021 to the four received through December 2020, the FY 2021-22 is $59,419 more or 47%, representing an increase in home values.

Secured Property Tax – Through December 2021, YTD revenue is $517,553 , which is $ 28,134 more tha n the December 2020 YTD $489,419.

Business License – This revenue is paid by each business operating in the City. YTD December 20 21 collections of $324,841 is 34% more than the December 2020 YTD. There were 2,209 new business licenses issued during the first six months of FY 20 21-22, compared to the 968 issued December 2020 YTD . This increase is a result of the adopted increases to business license fees in December 2020 , that took effect March 2021 and a 128% rise in the combined number of “New” busine ss licenses and “Home Occupancy” licenses issued and renewed during the first half of the fiscal year as opposed to the previous year.

Commercial Cannabis Tax – All commercial cannabis businesses operating within the City pay a 4% tax on gross receipts from business operations. The December 2021 YTD receipts of $294,382 are 17% less than the December 2020 YTD of $353,296, which is due to the timing of receiving receipts. The City currently has twenty -one (21 ) businesses operating within the City compared to the twenty (20) through December 2020.

Community Facilities District 2005-1 – This special assessment district, (generally west of Maple Avenue and south of Main Street), was formed to refinance the bonds of CFD 91-3, and assesses the properties within the district to repay the bonds. Part of the annual assessment includes a pu blic safety portion to offset some of the costs that residential development places on the City’s public safety providers. The December 2021 YTD is $157,592, which is 3% more than December 2020 YTD of $153,000.

Leased Water Rights – The permanent water rights owned by the General Fund can be leased annually and the lease revenue is used to pay for the 2012 Bonds, which financed the purchase of the water rights. The leasing of water rights revenue is always collected at the end of the year and will be recorded in June.

Development Related Revenue – The FY 202 1-22 Budget anticipated issuing 300 new single- family residential building permits (SFR’s). Through December 2021, 78 residential permits have been issued, which is 26% of the budget. This is a 37% decrease compared to 125 permits issued through December 2020. Staff anticipates that an additional 222 residential building permits will be issued during the current fiscal year. T he year-to-date revenue is $2,245,758 or 33% more than the December 2020 YTD of $1,693,221. This increase is mainly due to building plan check fees and home occupant review fees . In addition, 13,361 total commercial square feet was added with new businesses that included a Raising Cane Restaurant, a gas station at the Wal -Mart Center, and Dollar General Store .

This is a 29% increase when compared to the December 2020 of 10,389 square feet which included the development of Quick Quack Car Wash, Wendy’s Restaurant, and smaller buildings. The chart below exhibits the overall increase from the prior fiscal year through December 31, 2021. Staff is recommending to revise the FY 2021 -22 revenue by an additional $250,572.

FY 2020-21 FY 2021-22
Division December 2020 December 2021 Amount Percentage
Planning 111,811$ 352,362$ 240,551$ 215% Building & Safety 971,666 1,329,219 357,553 37% Engineering 609,744 564,177 (45,567) -7% Total 1,693,221$ 2,245,758$ 552,537$ 33% Change
2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

General Fund Revenue Comments (Continued):

All Other General Fund Revenue – The numerous all other general fund revenue accounts are $ 1,577,056 or 60% collected through December 2021. Compared to the December 2020 YTD of $1,648,466 collected, this revenue is showing a $71,410 or 4% decrease, which is due to the Commercial Cannabis Tax revenue being shown as a separate revenue source. Removing the impact of Commercial Cannabis Ta x, the All Other General Fund Revenue is higher than the previous year-to-date revenue of $1,295,170 by $281,886 or 22%.

Community Development Block Grant Revenue Comments:

These revenues are grant reimbursements for projects designed to benefit the City and must be spent prior to submitting for reimbursements. The FY 2021-22 Budget revenue estimates represent anticipated reimbursements are expected to be received during the third and fourth quarter of the fiscal year.

CDBG Neighborhood Stabilization Program (NSP) – This represents interest income and 2% was received during the second quarter.

CDBG-CV Cares Act – The CDBG-CV Cares Act is grant reimbursement funds from Housing and Urban Development (HUD) to address the COVID -19 pandemic. Applications were solicited for CDBG-CV purposes to provide emergency housing and utility assistance to individuals, as well as emergency bu siness assistance to partners serving the needs of low- and moderate-income in the community; however th e number of responses were low. Due to t he lack of interest from applicants, the funds from HUD were declined. Pre-existing funding was available under the CDBG Administration program to fulfill the constituent application requests received. During the First Quarter Budget Review, this revenue was revised to $0.

All Other CDBG Revenues – This revenue includes CDBG program income and interest revenue f or the HOME Grant fund and the CDBG Revolving Loan fund. These revenues are more one -time in nature and are not received on a time schedule as other revenue. The FY 2021- 22 Budget has been revised to include an additional $4 0,450 that has been received through the second quarter. This unanticipated revenue is for loan repayments related to the Housing Rehabilitation Loan Program and 1999 HOME repayment program.

December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
CDBG Administration Reimbursement 2,303,429$ 0$ 0% 2,303,429$ 0$ CDBG Neighborhood Stabilization Prog. (NSP) 8,931 217 2% 8,931 0 Sub-Total 2,312,360 217 0% 2,312,360 0$ CDBG-CV Cares Act 989,947 0 -100% 0 (989,947) All Other CDBG Revenues 2,460 40,843 1660% 42,910 40,450 Total CDBG Revenues 3,304,767$ 41,060$ 1% 2,355,270$ (949,497)$

COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) REVENUE
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

Hesperia Housing Authority (HHA) Revenue Comments:

Interest and loan repayments are 99% of the HHA’s FY 2021 -22 B udget and 272% has been collected through December 2021. The FY 2021-22 Budget has been revised to include an additional $288,000 that has been received due to the sale of vacant land. VVEDA Housing Authority revenue is being collected as expected.

Street Related Funds Revenue Comments:

Measure I - Renewal – This fund is used to account for the renewed Measure I sales tax based on revenue generated from the ½ cent added t ax on sales tax. Measure I Renewal is received from San Bernardino County Transportation Authority (SBCTA). At this time, there are no revisions to this revenue source.

Gas Tax – The City’s apportionments through December 20 21 total $613,880, which is 7% less than the December 2020 total of $658,022. Monthly apportionments are received throughout the fiscal year and vary from year -to-year due to timing differences by the State schedule of monthly apportionments.

Gas Tax S wap – Through December 202 1, the total apportionments of $ 350,952 are $32,108 or 10% more than the December 2020 YTD of $318,844.

December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
Interest Income 49,120$ 11,455$ 23% 49,120$ 0$ Loan Repayments 90,178 78,255 87% 90,178 0 Miscellaneous Income 3,000 296,845 9895% 291,000 288,000 Sub-Total HHA Revenue 142,298 386,555 272% 430,298 288,000 VVEDA Housing Authority Revenue 10,000 1,033 10% 10,000 0 Total HHA Revenues 152,298$ 387,588$ 254% 440,298$ 288,000$

HESPERIA HOUSING AUTHORITY (HHA) REVENUE
December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
204 Measure I - Renewal 3,588,247$ 1,003,472$ 28% 3,588,247$ 0$ 205 Gas Tax Fund 1,551,911 613,880 40% 1,551,911 0 206 Gas Tax Swap Fund 851,256 350,952 41% 851,256 0 207 Local Transportation Fund 879,515 83,731 10% 879,515 0 209 Gas Tax - RMRA 1,885,558 656,750 35% 1,885,558 0 254 AQMD Fund 87 13 15% 87 0 263 Public Works Street Maintenance Fund 2,157 36,666 1700% 38,395 36,238 Sub-Total 8,758,731 2,745,464 31% 8,794,969 36,238 DIF Streets & Storm Drain
300 Development Impact Fee-Streets 89,109 10,106 11% 89,109 0 301 Development Impact Fee-Storm Drain 21,429 2,867 13% 21,429 0 306 Development Impact Fee 2018-Streets 10,562,071 3,330,735 32% 10,562,071 0 307 Development Impact Fee 2018-Drainage Facilities 905,656 816,278 90% 905,656 0 313 Development Impact Fee-A-04 Drainage 316,339 21,436 7% 316,339 0 Sub-Total DIF Streets & Storm Drain 11,894,604 4,181,422 35% 11,894,604 0 504 City Streets CIP 34,090,574 13,690 0% 34,090,574 0 Total Street Related Funds 54,743,909$ 6,940,576$ 13% 54,780,147$ 36,238$

STREET RELATED FUNDS REVENUE
2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

Streets Related Funds Revenue Comments (Continued):

Local Transportation – The December 2021 YTD of $83,731 includes an apportionment from SBCTA and a portion of interest income received. As reported in the First Quarter Budget Review, the City received its annual apportionment of $82,465 from SBCTA, and VVTA is anticipating to end FY 2021 -22 with a surplus and in turn, share a portion with the City. It is anticipated that the remaining $788,800 will be received from VVTA at the end of the fiscal year. This revenue source will decrease in future years due to the importance placed and funding reserved for public transportation.

Gas Tax RMRA – This source of revenue is mainly State-funded and took effect in November 2017 during FY 2017 -18, along with some interest income. This revenue is used to repair and maintain roads, freeways, and bridges. SB 1, the Road Repair and Accountability Act of 2017, increased the gas tax by 12 cents and 20 cents for diesel. The vehicle registration fee also increased depending on the value of the vehicle. As of December 2021, revenue received from the State is $656,750, which reflects four installment payments . Comparing the December 2021 to December 202 0, the current fiscal year is 9% more, or $56,272.

AQMD (AB2766 Transit) – The revenue in this fund is interest earnings from retained cash.

Public Works -Street Maintenance – The estimated revenues are primarily interest earnings. This fund will occasionally receive miscellaneous reimbursements on an inconsistent basis, making comparisons to prior years meaningless. The revenue received YTD of $36,666, includes $36,238 proceeds from sale of equipment and reimbursement for the replacement of a dam aged hydrant, city property, and damaged equipment. The year -end revised amount has been increased by $36,238 to a total $38,397 to reflect the unanticipated revenue.

Development Impact Fee s for Streets and Storm Drain – Through December 2021 YTD, the combined revenue received of $4.2 million is showing an increase of $ 2.6 million or 157% more than the December 2020 YTD of $1.6 million. This increase is due to fees paid for new commercial development on the Westside of Interstate 15 and residential development. The budget assumes the completion of 186 single family residential (SFR) permits, 72 multi - family residential permits, and 1,145,737 square feet of commercial/industrial. While through December 202 1, 78 SFR permits, and permits for 13,361 square feet of commercial /industrial have been issued, DIF is not due to the City until just prior to receiving a final approval. In some cases, the timing of General Fund Building Permit revenue (page 10) to DIF for streets and storm drain revenue is a matter of months; while in other instances, the timing can span a fiscal year.

City Streets CIP – This fund tracks grant and developer funded projects such as the Ranchero Road Improvements (7 th
Avenue to Mariposa Road), E Avenue Street Improvements, the Traffic Signal at Main Street and Sultana Street/Timberlane Avenue, Ranchero Aqueduct crossing, and the Park and Ride facility. Through December 2021 YTD, $13,690 has been received, of which 96% is a portion of grant reimbursement for the Park and Ride facility , and an additional $102,000 was received in January 2022 . The bulk of the budgeted revenue is for the reimbursement of Ranchero Road with construction slated to start in December 2021 but has been delayed until after February 2022, and reimbursement will start to be received 60 to 90 days after the commencement date. Staff will continue to monitor this revenue throughout the second half of the fiscal year.

2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

Other City Funds Revenue Comments: Many of these funds only receive interest income during the fiscal year.

AB3229 Supplemental Law Fund – The passage of Senate Bill (SB) 89 allowed for the continued funding of the Supplemental Law Enforcement Funding (SLESF), and through December 2021 $144,912 or 72% has been received.

Environmental Programs Grant – This fund tracks grant reimbursements for various environmental events and the December 2021 YTD of $15,699 or 36% has been received.

Disaster Preparedness Grant – The revenue in this fund is interest earnings from retained cash.

Development Impact Fee s-Fire, Police, Public Services , City Hall, Animal Control , and Records Storage – The combined total of $ 2,167,358 for the first six months of FY 20 21-22 is $1,930,580 or 815% more than the same time period for FY 2020-21 of $236,778. This increase is mainly due to fees paid for new commercial development on the West Side of Interstate 15 and residential development. As mentioned prior, the budget assumed the total collections of permit fees from 186 single family residences , 72 multi-housing units , and 1,145,737 square feet of commercial/industrial. The timing of General Fund Building Permit revenue to DIF revenue is a matter of months; while in other instances, the timing can span a fiscal year.

2012 Water Rights and 2013 Refunding Debt Service – The revenue in these fund s is interest earnings from cash held with the fiscal agent.

American Rescue Plan A ct Grant – Coronavirus State and Local Fiscal Recovery Funds – This revenue is the Coronavirus State and Local Fiscal Recovery Funds and the City anticipates receiving approximately $23.4 million in total. During the First Quarter Budget Review, this revenue was revised to include the $11.7 million that the City received to date. This funding must be spent on eligible costs incurred during the period that began on March 3, 2021 and ending on December 31, 2024. Eligible costs include expenditures for necessary improvements to water infrastructure to improve access to clean drinking water, wastewater treatment infrastructure, projects that address the impacts of climate change, and projects for managing and treating stormwater or subsurface drainage wat er, facilitating water reuse, and securing publicly-owned treatment works.

December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
210 HFPD (PERS) Interst Income 0$ 1,255$ n/a 0$ 0$ 255 AB3229 Supplemental Law Fund 200,549 144,912 72% 200,549 0 256 Environmental Programs Grant 43,414 15,699 36% 43,414 0 260 Disaster Preparedness Grant 160 25 16% 160 0 DIFs 302-304, 308-312
302 Development Impact Fee-Fire 16,528 2,099 13% 16,528 0 303 Development Impact Fee-Police 3,368 386 11% 3,368 0 304 Development Impact Fee-Public Services 8,794 1,002 11% 8,794 0 308 Development Impact Fee 2018-Fire Suppression 1,146,074 1,076,044 94% 1,146,074 0 309 Development Impact Fee 2018-City Hall Facilities 1,041,753 980,951 94% 1,041,753 0 310 Development Impact Fee 2018-Animal Control 62,057 40,101 65% 62,057 0 311 Development Impact Fee 2018-Records Storage 50,920 48,032 94% 50,920 0 312 Development Impact Fee 2018-Police Facilities 19,681 18,743 95% 19,681 0 Sub-Total DIFs 302-304, 308-312 2,349,175 2,167,358 92% 2,349,175 0 402 2012 Water Rights Debt Service 500 738 148% 500 0 403 2013 Refunding Debt Service 400 996 249% 400 0 261 American Rescue Plan Act Grant 0 11,704,022 n/a 11,701,844 11,701,844 Total Other City Funds 2,594,198$ 14,035,005$ 541% 14,296,042$ 11,701,844$

OTHER CITY FUNDS REVENUE
2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

Water District Revenue Comments:

Overall Water District Revenue – Revenue through December 2021, is $17,711,664, which is $1,178,957 or 7% more than December 2020 YTD of $16,532,707. The increase can be attributed to a combination of overall Water Sales, Capital Facilities Surcharge, and Sewer Billing. In January 2022, the District received notification that $795,807 of the Water Arreages Grant would be received; more detail is available on the next page. Staff is recommending to revise the FY 2021-22 Budget to $32.4 million, to include the Water Arreages Grant and increase in sewer connection fees.

Water Sales – Through December 2021, water sales revenue amounts to $13.0 million, which is $1.1 million, or 9% higher than the December 2020 YTD of $11.9 million . Comprised of both consumption based charges and a bi -monthly charge, the increased revenue is reflective of the ongoing effects from the implementation of the new water rates structure. However, the impact of the pandemic has affected actual collections, which are being monitored. The State’s Water Arrearages Grant (described on the fo llowing page) will help to mitigate a significant amount of these delinquencies. Remaining delinquencies will be pursued.

Property Taxes – Property tax revenue is normally received from November 2021 through July 20 22. Through December 2021, the YTD of $302,137 is $29,753 or 11% more than the December 2020 YTD of $272,384.

All Other Water Operating Reven ue – Through December 2021, $557,314 or 63% has been received, which is 27 % less than December 2020 YTD of $ 763,813. This decrease in revenue received during the second quarter of FY 2021-22 is related to unanticipated proceeds from two land sales and the County of San Bernardino Coronavirus Relief funds that were paid for and received in the second quarter of FY 2020-21.

December Change From
2021-22 2021-22 Percent 2021-22 Budget To
Budget Actual Received Revised Revised
Water Operating Revenue
Water Sales 22,913,192$ 13,083,682$ 57% 22,913,192$ 0$ Interest Income 20,050 3,613 18% 20,050 0 Property Taxes 504,525 302,137 60% 504,525 0 Sub-Total 23,437,767 13,389,432 57% 23,437,767 0 All Other Water Operating Revenues 889,814 557,314 63% 889,814 0 Water Arrearages Grant 0 0 n/a 795,807 795,807 Total Water Operating Revenues 24,327,581$ 13,946,746$ 57% 25,123,388$ 795,807$ Capital Facilities Charges 1,300,000 854,013 66% 1,300,000 0 Grant Reimbursement 75,000 0 0% 75,000 0 Total Water Capital Revenues 1,375,000 854,013 62% 1,375,000 0 Reclaimed Water 300,000 0 0% 300,000 0 All Other Water Reserves Revenues 9,600 1,397 15% 9,600 0 Total Water Operating & Capital Revenues 26,012,181$ 14,802,156$ 57% 26,807,988$ 795,807$ Sewer Operating Revenue
Sewer Billing 5,097,874$ 2,502,467$ 49% 5,097,874$ 0$ All Other Sewer Operating Revenues 179,640 81,943 46% 179,640 0 Total Sewer Operating Revenue 5,277,514 2,584,411 49% 5,277,514 0 Sewer Connections 200,000 323,506 162% 323,506 123,506 All Other Sewer Capital Revenues 6,632 1,281 19% 6,632 0 Total Sewer Capital Revenue 206,632 324,787 157% 330,138 123,506 All Other Sewer Reserves Revenues 850 310 36% 850 0 Total Sewer Operating & Capital Revenues 5,484,996$ 2,909,508$ 53% 5,608,502$ 123,506$ Total Hesperia Water District Revenue 31,497,177$ 17,711,664$ 56% 32,416,490$ 919,313$

WATER DISTRICT REVENUE
2021-22 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2021-22 DECEMBER 31, 2021 YEAR-TO-DATE REVENUE REVIEW (Continued)

Water District Revenue Comments (Continued):

Water Arreages Grant – During August 2021, the California Water Boards (State Water Resource Control Board and nine regional boards) created the ‘California Water and Wastewater Arrearage Payment Program’ that allows the Water District to recoup missing utility payments from Mar ch 4, 2020 through June 15, 2021. This Program will allow the District to collect on past -due accounts and bring the customer current to June 15, 2021. There are 1,942 accounts (1,891 residential and 51 commercial) with balances during this period and th is program is intended only for water payments and cannot include penalty and interest. It is anticipated that this program will be extended to sewer accounts sometime during Spring 2022. The District applied for the program in November 2021, and on January 10, 2022 received approval notification that the District would receive the full award amount of $795,807.

Capital Facilities Surcharge – Revenue through December 2021 YTD is $ 854,013, which is $ 126,290 or 17% more than December 2020 YTD of $727,723. The increase in revenue received during the second quarter of 2021 is related to the large commercial project on the west side of Interstate 15 and residential development.

Reclaimed Water – In FY 2021-22, the District began budgeting for the use of reclaimed (recycled) water to be used at the Golf Course. Once the system is fully operational, revenue will be reflected in this account. The District anticipates that in the future other City facilities, the Park District, and School District, will become recycled water customers.

Sewer Billing revenue through December 2021 is $ 2,502,467, which is $ 223,694 or 10% more than the revenue received in the Second Quarter of FY 2020-21. This increase is associated with the 6% sewer rate increase, which took effect in December 2020, along with the addition of new sewer residential and commercial customers over the past year.

Sewer Connections revenue through December 2021 YTD is $ 323,506, which is $216,352 or 202% more than the $107,154 received through December 2020 YTD. The increase between the two periods is mainly due to increased development activity in areas served by Sewer.

2021-22 MID-YEAR BUDGET REVIEW REPORT
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DEPARTMENT FY 2021-22 BUDGET EXPENDITURE STATUS SUMMARY

Total City Expenditures – With the exception of the eight (8) mid-year budget amendments totaling $339,0 55, t he overall assessment of the City’s expenditures through mid-year of the fiscal year is that expenditures are exp ected to stay within the FY 2021-22 Amended Budget.

TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS

The City Council Department budget is 58 % expended through December 202 1. The City Council Division has expended 35%, which is due to budgeted items that are typically expended later during the fiscal year, such as $ 50,000 for the Community Assistance Program, annual memberships, and community outreach programs and events. The City Attorney Division is higher than expected, with 76% expended. This is mainly due to the unanticipated increase in legal fees pertaining to litigation matters. Staff will continue to monitor the program and if needed will request an amendment during the FY 2021-22 Fourth Quarter Budget Review.

The City Manager Department expenditures are on track staying within the 202 1-22 Budget at 52% expended. Overall, both the City Manager and the Information Technology Divisions are proceeding as expected.

December Amended
2021-22 2021-22 2021 YTD Percent
Department Expenditure Summary Budget Amended Expenditures Expended City Council 796,307$ 796,307$ 459,860$ 58% City Manager 3,199,571 3,199,571 1,656,069 52% Management Services 4,899,737 4,899,937 2,822,642 58% Economic Development 3,682,258 2,692,311 637,250 24% Development Services - Community Development 2,073,652 2,138,652 1,060,061 50% Development Services - Code Compliance 3,647,425 3,759,159 1,895,856 50% Development Services - Public Works 5,386,861 5,416,661 2,517,273 46% Streets Capital Improvement Project (CIP) Funds 54,150,411 54,235,156 511,406 1% Other City Related Funds 2,452,615 2,482,834 1,755,409 71% Development Services - Water 22,235,452 22,337,812 7,101,832 32% Development Services - Sewer 7,950,277 7,950,277 2,342,235 29% Police 19,260,786 19,277,217 9,530,067 49% Fire District 1,042,420 1,042,420 1,007,746 97% TOTAL CITY EXPENDITURES 130,777,772$ 130,228,314$ 33,297,706$ 26% December Amended
2021-22 2021-22 2021 YTD Percent
City Council Budget Amended Expenditures Expended
100 100 City Council 346,307$ 346,307$ 119,557$ 35% 100 102 City Attorney 450,000 450,000 340,303 76% Total City Council 796,307$ 796,307$ 459,860$ 58% December Amended
2021-22 2021-22 2021 YTD Percent
City Manager Budget Amended Expenditures Expended
100 200 City Manager 1,423,865$ 1,423,865$ 745,776$ 52% 100 215 Information Technology 1,775,706 1,775,706 910,293 51% Total City Manager 3,199,571$ 3,199,571$ 1,656,069$ 52% 2021-22 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

The Management Services Department is currently at 58% expended. The Finance Division is 52 % expended and proceeding as planned. Th e Human Resources Division is 77 % expensed due to the lump sum payment to CalPERS for the unfunded accrued liability and annual insurance premiums that were paid at the beginning of the fiscal year.

Non-Departmental is 25% expended, with the majority of replacement water obligation occurring later in the fiscal year.

As a whole, the Economic Development Department is 24% expended through the Second Quarter. T his department consists of four (4) Divisions, Economic Development, Community Development Block Grant (CDBG), the CDBG -CV Cares Act, and Hesperia Housing Authority (HHA).

The Economic Development Department performs the economic development functions for the City and is proceeding as expected, with 53% expensed through December 2021.

Fund 251 Community Development Block Grant has expended 20 % of the amended budget. This fund administers the City’s CDBG program and related activities which includes $1,830,152 in budgeted funds for t hree street improvement projects. Through the second quarter, $340,911 has been expended on these Capital Improvement Projects (CIP), and it is anticipated that the majority of expenditures will occur during the third and fourth quarters. Also included is th e Microenterprise Assistance Program (MAP), which provides financial assistance, in the form of a grant, to businesses owned by low - or moderate -income individuals with five (5) or fewer employees, including the owner(s) who have recently been economically impacted by the pandemic.

The CDBG -CV Cares Act Fund 258 accounts for CDBG grant funding allocated to help mitigate the impact o f the COVID-19 Pandemic for low - and moderate-income residents through the following programs: 1) Emergency Business Assistance Program and 2) Emergency Housing and Utility Assistance Program; which were designed to assist the Hesperia residents and businesses that have been impacted by the pandemic. Applications were solicited for CDBG - CV purposes; however the number of respon ses were low. The lack of interest from applicants was due in part, to the availability of other programs that potentially offered greater resource to those impacted by the COVID -19 pandemic, thereby rendering the program somewhat ineffective for Hesperia . T herefore, the funds from HUD were declined , and the budget was revised to $0 during the First Quarter Budget review.

The Hesperia Housing Authority (HHA) funds oversee the affordable housing activities within the City. Through the end of December, the HHA funds are 16% expended, with the majority of the budgeted expenditures for affordable housing monitoring and annual financial audit reporting anticipated to occur later in the fiscal year.

December Amended
2021-22 2021-22 2021 YTD Percent
Management Services Budget Amended Expenditures Expended 100 220 Finance 1,780,689$ 1,780,689$ 928,593$ 52% 100 225 Human Resources/ Risk Mgmt. 2,131,430 2,131,430 1,643,320 77% 100 229 Non-Departmental 987,618 987,818 250,729 25% Total Management Services 4,899,737$ 4,899,937$ 2,822,642$ 58% December Amended
2021-22 2021-22 2021 YTD Percent
Economic Development Budget Amended Expenditures Expended 100 Economic Development 322,232$ 322,232$ 170,010$ 53% 251 Community Development Block Grant (CDBG) 2,303,429 2,303,429 456,728 20% 258 CDBG-CV Cares Act 989,947 0 0 n/a 370 Hesperia Housing Authority 66,650 66,650 10,512 16% Total Economic Development 3,682,258$ 2,692,311$ 637,250$ 24% 2021-22 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

The Community Developme nt Divisio n is 50% expended overall through the Second Quarter. Planning is 5 3% expended and Building & Safety is 47% expended, both proceeding as expected . During the November 2, 2021 First Quarter Budget Review, the budget was amended by $65,000 for additional contract inspection services due to the high demand in development.

The Code Compliance Division expenditures are trending as expected at 50% through mid -year. As shown by the table above, Code Enforcement is 56% expended, while Animal Control is 46 % expended. The Code Compliance budget was amended by $111,734 (At the July 20, 2021 and November 2, 2021 Council Meetings) for the carryover purchase of two Ford Ranger XL’s and 1.46 FTE positions added.

As shown by the table above, th e overall Public Works Division is 46% expended through December 2021 and trending as expected . The Traffic program is 37% expended due in large part to invoices pending for street sweeping and striping services for the end of the calendar year 2021. At the November 2, 2021 Council Meeting, the budget was amended to include $30,000 for the installat ion of eighty -five (85) feet of new guardrail. There are four (4) budget amendments totaling $169,054 that are included in this report [$67,054 for City Hall Tenant improvements, $56,000 Vactor Truck Engine Replacement, $ 16,000 for operating repairs and vehicle retrofit, and $30,000 for Plan Review & Inspection Services (split-funded with Water Operations)].

Streets Capital Improvement Project (CIP) related expenditures is 1% expended through December 2021. Expenditures will increase a s progress continues on projects such as the FY 202 1-22 Street Improvement Project , Ranchero Road Improvements and Aqueduct Crossing , and other streets related projects. As these projects move forward, the percentage of actual expenses to budget will increase. Please note that at the December 21, 2021 Council Meeting the budget was amended to appropriate an additional $84,745 in Measure I Funds to the Capital Improvement Program for the Traffic Signal at Main Street & Sultana Street/Timberlane Avenue Project C.O. 7159.

December Amended
2021-22 2021-22 2021 YTD Percent
D. S. - Community Development Budget Amended Expenditures Expended 100 3000 Planning 888,065$ 888,065$ 472,107$ 53% 100 3020 Building & Safety 1,185,587 1,250,587 587,954 47% Total D. S. - Community Development 2,073,652$ 2,138,652$ 1,060,061$ 50% December Amended
2021-22 2021-22 2021 YTD Percent
D. S. - Code Compliance Budget Amended Expenditures Expended 100 3010 Code Enforcement 1,728,671$ 1,780,405$ 995,180$ 56% 100 5000 Animal Control 1,918,754 1,978,754 900,676 46% Total D. S. - Code Compliance 3,647,425$ 3,759,159$ 1,895,856$ 50% December Amended
2021-22 2021-22 2021 YTD Percent
D. S. - Public Works Budget Amended Expenditures Expended 100 3100 Engineering 864,415$ 864,415$ 398,376$ 46% 100 3110 Building Maintenance 1,133,713 1,133,513 594,856 52% 263 3150 Street Maintenance 2,021,138 2,017,426 1,003,637 50% 263 3170 Traffic 1,367,595 1,401,307 520,404 37% Total D.S. Public Works 5,386,861$ 5,416,661$ 2,517,273$ 46% December Amended
2021-22 2021-22 2021 YTD Percent
Budget Amended Expenditures Expended
Streets Capital Improvement Project (CIP) Funds 54,150,411$ 54,235,156$ 511,406$ 1% 2021-22 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

A large portion of this classication is the budgeting of the principal and interest payments for the 2012 Water Rights Acquisition and 2013 Refunding Lease Revenue Bonds. Principal payments occur in October of each fiscal year, explaining the 7 1% expended percentage through December 2021. During the first quarter budget review, the development impact fees budget for funds 303 and 312 were amended by $30,219 for the Off -Highway Motor Vehicle (OHV) Grant match ($6,282) and the purchase of seven Automated License Plate Reader (ALPR) fixed cameras and equipment ($23,937).

Overall, the Water Operating and Capital funds are 32% expended through December 31, 2021. The following narrative details the progression of each program.
• The primary resp onsibility of Source of Supply is to secure make- up water lease rights to remedy overproduction.

At Mid-Year, Source of Supply is only 3 % expended. Expenditures will increase significantly in the later part of the fiscal year due to the recording of leased water rights to offset the Alto and Centro Subarea replacement obligation. • Production, which is responsible for drawing the groundwater, has expended 53% of the budget by the end of the Second Quarter and is proceeding as expected. An amendment for $102,360 was approved at the October 5, 2021 Council Meeting for the purchase of a service truck to replace one that suffered an engine failure. Additionally, two budget amendments totaling $65,500 are being requested (more information is provided on page 23). • Distribution has utilized 45% of its allocated budget and is proceeding as planned. • Through December 31, 2021, Pipeline Maintenance has expended 34% of the budget and will increase as material (pipe) is purchased for the pipeline replacement program, as identified in the FY 2021 -22 Budget. A previously approved staff report to purchase a backhoe was approved and $34,501 is included as an amendment. • Engineering is currently 41% expended, which is primarily due to the timing of invoices. Expenditures are expected to increase in the second part of the fiscal year, as invoices are received for contractual professional engineering services, and annual storm water program expenses.
• Customer Service is 51% expended and proceeding as planned, with the Advanced Metering Infrastructure (AMI) programs progress on schedule.

December Amended
2021-22 2021-22 2021 YTD Percent
Budget Amended Expenditures Expended
Other City Related Funds 2,452,615$ 2,482,834$ 1,755,409$ 71% December Amended
2021-22 2021-22 2021 YTD Percent
D.S. Water Operating & Capital Budget Amended Expenditures Expended 4010 Source of Supply 4,232,272$ 4,232,272$ 123,600$ 3% 4020 Production 3,730,996 3,833,356 2,021,261 53% 4030 Distribution 1,623,578 1,623,578 726,872 45% 4035 Pipeline Maintenance 1,044,150 1,043,122 355,553 34% 4040 Engineering 1,002,956 1,002,956 412,372 41% 4050 Customer Service 2,000,669 1,998,669 1,016,993 51% 4060 Utility Billing 1,027,781 1,027,781 514,074 50% 4070 Administration 3,525,442 3,528,470 1,796,477 51% 4080 Property Management 455,052 455,052 131,585 29% Total Water Operations 18,642,896$ 18,745,256$ 7,098,787$ 38% 701 Water Capital 3,330,000 3,330,000 1,720 0% 720 Reclaimed Water Operations 262,556 262,556 1,325 1% Total D.S. Water Operating & Capital 22,235,452$ 22,337,812$ 7,101,832$ 32% 2021-22 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

Water Operating and Capital Comments (Continued):
• Utility Billing is proceeding as expected with 50% expended. • Administration is 51% expended and proceeding as planned. • Property Management is at 29% e xpended at mid-year. Facility maintenance costs are expected to increase as maintenance projects are completed throughout the fiscal year. • Expenditures for Water Capital are 0% expended and will increase as projects such as the I -15 Corridor, G Avenue Water Line Repair, Plant 14A & 25 Roof Replacement and Repair, and the FY 2019- 20 Water Service Line Relocation projects progress.
• Reclaimed Water Operations expenditures will increase later in the second half of the fiscal year when Debt Service payment is due.

The Sewer Funds overall are 29% expended.

• Sewer Operating expenditures are 44 % expended, which is primarily due to receiving invoices for Victor Valley Wastewater Reclamation Authority (VVWRA) sewer treatment fees through November 2021. An amendment for $70,000 is being requested for the preparation of a Sewer Feasibility Study.

• Sewer Capital has $2.6 million allocated for projects, such as the Maple Avenue Sewer Line Replacement and I-15 Corridor sewer project. Capital expenditures will increase as progress is made on the projects.

The Police Department budget is 4 9% expended, which is expected for the first half of the fiscal year with the County contract invoices paid through December 2021. During the July 1, 2021 Council Meeting , an amendment of $16,431 was approved to include the Department of Justice (DOF) grant, which is a reimbursable grant.

During FY 2018 -19, the City transferred all Hesperia Fire Protection District (Fire District) assets and liabilities to San Bernardino County Fire, with the exception of the former personnel obligations, for which the Fire District will continue to function with dedicated funding. The Fire District is 97 % expended, which is due to paying the annual contractual retirement obligations related to the former Fire District employees at the beginning of the fiscal year.

December Amended
2021-22 2021-22 2021 YTD Percent
D. S. - Sewer Operating & Capital Budget Amended Expenditures Expended 4200 Operations 4,206,706$ 4,206,706$ 1,840,597$ 44% 4240 Engineering 204,341 204,341 79,536 39% 4260 Utility Billing 215,444 215,444 100,174 46% 4270 Administration 633,786 633,786 317,182 50% Total Sewer Operating 5,260,277 5,260,277 2,337,489 44% 711 Sewer Capital Projects 2,690,000 2,690,000 4,746 0% Total D.S. Sewer Operating & Capital 7,950,277$ 7,950,277$ 2,342,235$ 29% December Amended
2021-22 2021-22 2021 YTD Percent
Budget Amended Expenditures Expended
Police 19,260,786$ 19,277,217$ 9,530,067$ 49% December Amended
2021-22 2021-22 2021 YTD Percent
Budget Amended Expenditures Expended
Fire District 1,042,420$ 1,042,420$ 1,007,746$ 97% 2021-22 MID-YEAR BUDGET REVIEW REPORT
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PROPOSED BUDGET AMENDMENTS – SUMMARY

The FY 2021-22 Mid-Year Budget Re view includes eight (8) budget amendments totaling $339,055. The following listing categorizes the proposed budget amendments, with the following pages providing detail on each request:

PROPOSED BUDGET AMENDMENTS – NARRATIVE

Development Services
 Operating Repairs & Vehicle Retrofit – Building Maintenance $16,000 (100-29-310-3110) – Unanticipated The City has two ice machines that are inoperable and due to the age are unable to be repaired, therefore an amendment to purchase new machines is requested. In addition, during Fiscal Year (FY) 2020 -21, the servic e vehicle that was being used for facility maintenance was in a collision and deemed a total loss. Staff decided that the warehouse van would be more effective for facility maintenance but would need to be retrofitted. In order to perform the retrofit, s taff is requesting an amendment for the purchase of supplies and materials. A budget amendment of $16,000 is being requested for the unanticipated purchases and repairs.

 City Hall Tenant Improvements – Building Maintenance $67,054 (100-29-310-3110) – Previous Staff Report On August 17, 2021 , the City Council authoriz ed the construction of additional office space for the current tenant within the City Hall expansion area. As identifi ed in the staff report, a budget amendment would be presented with the Mid-Year report.

 Vactor Truck Engine Replacement – Public Works Street Maintenance $56,000 (263-29-310-3150) – Previous Staff Report
The current vactor truck that is utilized to perform proactive and reactive maintenance to the storm drain system became inoperable. After inspection, it was determined that the engine is damaged and a new engine is required.

As identified in the February 1, 2022 staff report, a budget amendment would be presented with the Mid -Year report.

 Plan Review and Inspection Services – Engineering $30,000 (100-29-310-3100 & 700 -29-400-4040) – Previous Staff Report
In order to keep pace with development in the City, staff has elected to seek engineering contract plan review and inspection services. This would ensure that the City would maintain an acceptable schedule for development project approval, construction finalization, and certificate of occupancy’s (C of O). As identified in January 18, 2022 the staff report, an amendment would be presented with the Mid-Year report.

PROPOSED BUDGET AMENDMENTS – Narrative (Continued)

Water District

 Plant 19 Heating, Ventilation, and Air Conditioning (HVAC) Unit & Plant 14A Electric Motor – Production $57,000 (700-29-400-4020) – Unanticipated
The HVAC unit ensures that the electrical equipment maintains an optimal temperature to prevent overheating during operation. Unfortunately, the current HVAC unit at Plant 19 is in need of substantial repair, and based on the age, a new unit is recommende d. Recently, the electric motor failed leaving Plant 14A inoperable. The repair is necessary in order for the well to continue to pump and distribute water to residents throughout the City. During their evaluation of the needed repairs , staff realized t hat the protective coating around the electrical wiring is cracking causing a potential safety hazard. Replacing the electrical wiring is optimal to ensure all components are functioning properly. Therefore, an amendment of $56,000 is requested to purchase a new HVAC unit ($15,000) at Plant 19 and to repair the motor and electrical wiring at Plant 14A ($42,000).

 State Water Resources Control Board (SWRCB) Annual Connection Fees – Production $8,500 (700-29-400- 4020) – Unanticipated
SWRCB establishes a fee schedule to support the Drinking Water Program based on the number of water service connections. On September 22, 2021, the State Water Board adopted emergency regulations that adjusted water fees by approximately 26.6%. This adju sted fee caused an $8,500 or 12% increase over the FY 2021-22 Budget amount of $70,000. An amendment for the increase is being requested.

 Backhoe Purchase – Pipeline $34,501 (700-29-400-4035) – Previous Staff Report The current backhoe has been in service since 2006 , has required numerous repairs to remain in service, and recently broke down. After receiving the cost estimate to repair, staff has decided to sell the backhoe in its current condition and to purchase a new one. As identified in the s taff report, the purchase amount for a new backhoe is $129,301, but staff has identified $94,800 in program savings, therefore only requesting the difference of $34,501 for the purchase.

 Sewer Feasibility Study – Engineering $70,000 (710-29-420-4240) – Unanticipated A Sewer Feasibility Study is needed due to the increase in new residential and commercial/industrial development to evaluate possible sewer conveyance systems and the resulting annual cost per resident once the system is constructed. The alternate conveyance systems that w ill be evaluated are a low pressure system and a conventional gravity sewer/pump station system. Therefore, a budget amendment is being requested to perform the study.

2021-22 MID-YEAR BUDGET REVIEW REPORT
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PROPOSED BUDGET AMENDMENTS – Narrative (Continued)

General Other
Requested: Fund Funds Totals
Development Services
Operating Repairs & Vehicle Retrofit $ 16,000 0$ 16,000$ City Hall Tenant Improvements 67,054 0 67,054 Vactor Truck Engine Replacement 0 56,000 56,000 Total Development Services 83,054$ 56,000$ 139,054$ Water District
Plan Review and Inspection Services 12,000$ 18,000$ 30,000$ Plant 19 HVAC Unit & Plant 14A Electric Motor 0 57,000 57,000 State Water Resources Control Board (SWRCB) Annual Connection Fees 0 8,500 8,500 Backhoe Purchase 0 34,501 34,501 Sewer Feasibility Study 0 70,000 70,000 Total Water District 12,000$ 188,001$ 200,001$ Total City Expenditures 95,054$ 244,001$ 339,055$ Source of Funds:

General Fund - 100 95,054$
Street Maintenance - 263 56,000
Water - 700 118,001
Sewer - 710 70,000
Total Source of Funds 339,055$
2021-22 MID-YEAR BUDGET REVIEW REPORT
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2021-22 Mid-Year Budget Salaries and Positions

The following position title and sal ary changes are proposed for more effective management City operations. If approved by the City Council, these changes will also be included in the 2022 -23 Proposed Budget. The proposed changes are summarized as follows:

Development Services Department
• Deputy Development Services Director (Senior Management) – Eliminate one Principal Planner position, which is a Management Classification at a salary range 44 and add one new Deputy Development Services Director position, which is a Senior Management Classification with a salary range of 45 and will not receive automobile allowance monthly payment.
• Senior Management Analyst (Non -Represented) – Add one Senior Ma nagement Analyst position, which is a Management Classification at a salary range of 40.

Community Development Division
• Community Development Supervisor (Non-Represented) – Eliminate one Community Development Coordinator position at a range 34, and add one Community Development Supervisor which is a Professional/Supervisory Classification with a salary range of 37.
• Senior Office Specialist (Non -Represented) – Eliminate one Office Assistant position a t a range 26, and add one Senior Office Specialist position, which is a General Classification with a salary range of 28. • Assistant Planner (Non-Represented) – Eliminate one Senior Engineering Technician position, which is a General Classification and add one Assistant Planner position, which is a Professional/Supervisory Classification at the same salary range of 35.
• Office Assistant (Part -time) – Add one (0.46 FTE) part -time Office Assistant , Non -Represented position at salary range 26.

Code Compliance Division – Animal Control Program
• Eliminate the Animal Services Manager, which is a Management Classification, Non-Represented position, and salary range 41.
• Animal Services Supervisor (Non -Represented) – Add a new position classification title of Animal Services Supervisor, which will be a Professional/Supervisory Classification with a salary range of 37 and eliminate one Animal Services Coordinator (Non-Represented, range 30). • Field Services Supervisor (Non -Represented) – Add a new position classification title of Field Services Supervisor, which will be a Professional/Supervisory Classification and salary range of 37. • Animal Services Specialist (Non -Represented) – Add a new position classification title of Animal Services Specialist, which will be a Professional/Supervisory Classification and salary range of 34. • Receptionists (Non-Represented) – Add two (0.92 FTE) part-time receptionist positions, with a salary range 6. • Animal Care Technician (Represented) – Add one Animal Care Technician position at a salary range 8.

2021-22 MID-YEAR BUDGET REVIEW REPORT
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2022-23 Tentative Budget Calendar

While the Mid-Year report is a gauge of the current year’s activity, it does serve as the official start for planning the next year’s budget. Below is the tentative calendar for the FY 2022-23 Budget.

Council FY 2021-22 Mid-Year Budget Review February 15, 2022 2022-22 Budget Instructions (Intranet) February 25, 2022 2022-23 Draft Division and/or Program Narratives March 10, 2022 FY 2021-22 Revised Expenditure Estimates, 2022-23 Current Level Proposed Budget Expenditures and Expenditure Detail Narrative forms
March 17, 2022
2022-23 Budget Increments-“Requested Expenditures Above Current Level” March 18, 2022 FY 2021-22 Revised Revenue and 2022-23 Proposed Budget Revenue Estimates to Departments for Review (07/01/2021 thru 02/29/2022)
April 12, 2022 (Review)
April 18, 2022 (Due)
Budget Review with Departments/Divisions (Finance) Mid-April 2022-23 Final Proposed Budget Division and/or Program Narratives completed End of April Workshop #1 – Current Level Budget to Council (Operating) May 3, 2022 Capital Improvement Program (CIP) Due from Department to Finance May 6, 2022 Workshop #2 – Above Current Levels to Council May 17, 2022 2022-23 Proposed Budget completed May 27, 2022
Council Budget Workshop June 7, 2022
Council Adopts Operating Budget June 7, 2022
Council Adopts CIP Budget June 21, 2022

With this calendar, there are two planned budget workshops prior to requesting the City Council to adop t the operating budget on June 7, 2022 and the CIP Budget on June 21, 2022. • Budget Workshop #1 will highlight the current-level operating budget. • Budget Workshop #2 will highlight the use of reserves for major purchases, as well as the capital improvement program budget.

Hesperia City CouncilFebruary 15, 2022

Hesperia City Council
February 15, 2022