CITY OF Department of Financial Management
411 West Ocean Boulevard, 6 Floor
LONGBEACH Long Beach, CA 90802
September 6, 2022 BH-13
HONORABLE MAYOR AND CITY COUNCIL
City of Long Beach
California
RECOMMENDATION:
Receive supporting documentation into the record, conclude the public hearing, and take the actions necessary to adopt the Fiscal Year 2023 budget as listed in Attachment A. (Citywide)
DISCUSSION
On August 2, 2022, the City Manager's Proposed Budget for Fiscal Year 2023 (FY 23) was delivered by Mayor Garcia to the City Council and the community for consideration. The City Council budget hearings were held on December 7, 2021, as well as on March 8, August 2, August 9, August 16, August 23, and September 6, 2022. Additionally, Budget Oversight Committee (BOC) meetings and citywide community town hall meetings were also held in the months of January and August 2022, at which the Proposed FY 23 Budget was discussed. As a result of these meetings, there were 17 scheduled opportunities for public feedback, deliberation, and input. Additionally, input was solicited through the Long Beach Budget Priority Survey to obtain feedback on desired City priorities. The survey was promoted on the City of Long Beach (City) website, Twitter, Instagram, Facebook, and at community meetings.
At the conclusion of the September 6, 2022 hearing, the City Council will amend the Proposed FY 23 Budget as it deems appropriate and adopt the proposed budget as amended. Since the publication of the Proposed FY 23 Budget, a few updates were made to the proposed revenue and expenditure budgets, which primarily address technical corrections and are listed by fund group and department in Attachments B, C, and D. The reasons for these budget adjustments are discussed at the end of this letter.
As part of the FY 23 Budget Adoption, there are two Ordinances to be considered for approval in Attachment A. The first Ordinance amends the Departmental Organization of the City (A-6).
The second is the Appropriations Ordinance (A-15), which officially appropriates the funding for the Adopted Budget (approved in A-3) and authorizes expenditures in conformance with the Adopted Budget. For the Appropriations Ordinance to become effective on October 1, 2022, the City Council must first declare an emergency to exist (A-14) before adopting the Ordinance.
Historically, the City Council declares an Ordinance to approve a Resolution establishing the rates and charges for the water and sewer services as part of the budget adoption actions. This year, on May 10, 2022, the City Council approved said Ordinance and because no further changes to water or sewer rates are being proposed, there is no need for the ordinance to be declared again with the FY 23 budget adoption actions.
There are also five Resolutions to approve the budget for the Long Beach Harbor Department (A-8); approve the budget for the Water Department (A-9); approve the Master Fees and Charges Schedule (A-4); establish the Gann Appropriations Limit (A-12); and amend the Salary
HONORABLE MAYOR AND CITY COUNCIL
September 6, 2022
Resolution (A-7). There are also the following motions: approve the FY 23 One-Year Capital Improvement Program (A-5); approve the FY 23 Budget for the Long Beach Community Investment Company (A-10); approve the Harbor Fund Group transfer (A-11); approve the amended Financial Policies (A-13); approve the Mayor's Recommendations (A-1); approve the BOC Proposed Funding Recommendations (A-2); and amend the Proposed FY 23 Budget (A- 3).
This matter was reviewed by Deputy City Attorney Monica Kilaita on August 16, 2022, and by Budget Manager Grace H. Yoon on August 9, 2022.
TIMING CONSIDERATIONS
In accordance with the City Charter, the Proposed FY 23 Budget must be adopted by September 15, 2022. Should the City Council fail to adopt the budget by that date, the City Manager's Proposed FY 23 Budget will be deemed the budget for the 2023 Fiscal Year. The Mayor has five calendar days from the City Council adoption of the budget to use his veto authority. The City Council would then have until September 30, 2022, to override the veto action by the Mayor with a two-thirds supermajority vote (six Councilmembers).
FISCAL IMPACT
The City Charter requires that the Appropriations Ordinance govern and control the expenditure and commitment amounts stated therein relating to City departments, offices, and agencies during each fiscal year. The total Proposed FY 23 Budget for all departments and fund groups is $4,088,571,947, which comprises of $3,177,225,467 in new appropriation and $911,346,480 in estimated carryover from FY 22 for multi-year grants and projects. Attachments B, C, and D provide the financial overview by Fund Group and Department, and Citywide revenue by Fund Group, respectively.
The Appropriations Ordinance, included as Attachment A-15, totals $3,267,581,693 for all fund groups except Harbor, Sewer, and Water fund groups, and $3,269,788,542 for all departments except Harbor and Water Departments. The $2,206,850 difference between fund groups and departments is due to general City indirect costs budgeted in the Financial Management Department but charged to the Harbor, Water, and Sewer Funds, which are not included in the Appropriations Ordinance by fund groups.
The proposed Harbor, Water, and Sewer Fund Group budgets are in separate City Council Resolutions included as Attachment A-8 and A-9, respectively, and total $820,990,254. The Board of Harbor Commissioners adopted the budget for the Harbor Department by minute order on May 23, 2022. The Board of Water Commissioners adopted the budget for the Water Department by Resolution on June 23, 2022.
User fees and charges in the Master Fees and Charges Schedule, included as Attachment A- 4, have been adjusted due to changes in service and other factors. For details regarding these proposed new fees and adjustments, please see the List of Proposed Fees Adjustments for FY 23 that has been incorporated as Exhibits B and C to the Master Fees and Charges Resolution.
HONORABLE MAYOR AND CITY COUNCIL
September 6, 2022
Other requested City Council actions include:
• Approving the FY 23 One-Year Capital Improvement Program (CIP) budget, included as Attachment A-5, which is contained in the Appropriations Ordinance. • Amending the Departmental Organization Ordinance included as Attachment A-6. This amendment incorporates changes to departments, bureaus, and divisions for FY 23.
These organizational changes are necessary to implement changes reflected in the Proposed FY 23 Budget. A redline version of the changes is also provided. • Adopting the amended Salary Resolution for FY 23, which creates and establishes positions of employment while fixing and prescribing the compensation for officers and employees, is included as Attachment A-7. Historically, the Salary Schedule has been included alongside the Salary Resolution, for review by the City Council. This year the Department of Human Resources will return to the City Council at a later date for approval of the Salary Schedule to ensure accuracy and inclusion of new/updated classifications.
• Adopting the FY 23 Long Beach Community Investment Company (LBCIC) budget, included as Attachment A-10. The LBCIC budget is prepared annually for City Council approval and is a subset of the Housing Development Fund. The LBCIC oversees the delivery of housing and neighborhood revitalization services. The LBCIC approved its FY 23 Budget on May 18, 2022.
• Adopting a Resolution, included as Attachment A-12, establishing the Gann Appropriations Limit (Limit) for general purpose expenditures. In November 1979, the voters of the State of California (State) approved Proposition 4, also known as the Gann Initiative (Initiative). The Initiative places certain limits on the amount of tax revenue that can be appropriated each fiscal year. The Limit is based on actual appropriations during FY 79 and prevents overspending proceeds of taxes. Only those revenues that are considered as "proceeds of taxes" are subject to the Limit. The Limit is recalculated each fiscal year based on certain inflation and population factors provided by the State.
The Proposed Budget includes tax revenue estimates that are at 45.38 percent of the 2022-2023 Appropriations Limit and, therefore, do not exceed the Limit. The City Auditor reviews this calculation for conformance to the law. • Adopting the amended Financial Policies for the City, included as Attachment A-13.
Changes have been made to the Revenue Projection Policy (Policy 10), which adjusts the Revenue Estimation Methodology from Reasonably Conservative to Reasonably Expected.
After the City Manager delivered the Proposed FY 23 Budget to the Mayor, technical adjustments were made to complete the budget. These changes are shown in Attachments B, C, and D. Changes include the following:
HONORABLE MAYOR AND CITY COUNCIL
September 6, 2022
1. An expense decrease in the Energy Resources Department in the SERRF Fund Group of $49,342 as a technical correction to align the budget more accurately with anticipated expenditures in FY 23.
2. A revenue decrease in the Public Works Department in the Refuse and Recycling Fund Group by $3,826,066 to adjust the budget to align with the anticipated impacts of the proposed rate increase to Solid Waste and Recycling fees.
3. An expense decrease of $1,930,776 and a revenue increase of $25,000 in the Development Services Department in the Community Development Grants Fund Group as a technical correction to align anticipated expense and revenue to actuals for multiyear grant reimbursements in FY 23.
The remaining changes were minor, technical adjustments made to various funds and departments resulting in no bottom line changes at the fund level.
This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no local job impact associated with this recommendation.
SUGGESTED ACTION:
Approve recommendation.
Respectfully submitted, APPROVED:
Kevi Ripu
KEVIN RIPER THOMAS B. MODICA
DIRECTOR OF FINANCIAL MANAGEMENT CITY MANAGER
ATTACHMENTS
ATTACHMENT A
List of Requested Fiscal Year 2023 Budget Adoption Actions Adopt the Mayor's proposed budget recommendations, as amended, to the Proposed FY 23 Budget. (A-1)
2. Adopt the Budget Oversight Committee's proposed funding recommendations, as amended, to the Proposed FY 23 Budget. (A-2)
3. Adopt the expenditures and revenues as identified in the Proposed FY 23 Budget, as amended. (A-3)
4. Adopt the Resolution amending the Master Fees and Charges Schedule for specified City services for Citywide fees and charges for the City of Long Beach. (A-4)
5. Approve the FY 23 One-Year Capital Improvement Program. (A-5)
6. Declare the Ordinance amending the Departmental Organization Ordinance read the first time and laid over to the next regular meeting of the City Council for final reading. (A-6)
7. Adopt the amended Salary Resolution for FY 23. (A-7)
8. Adopt the Resolution approving the FY 23 budget for the Long Beach Harbor Department as adopted by the Board of Harbor Commissioners on May 23, 2022. (A-8)
9. Adopt the Resolution approving the FY 23 budget of the Long Beach Water Department as adopted by the Board of Water Commissioners on June 23, 2022. (A-9)
10. Adopt a motion approving the FY 23 budget for the Long Beach Community Investment Company in the amount of $14,085,000. (A-10)
• 11. Adopt a motion approving the estimated transfer of $22,786,322 from the Harbor Fund Group to the Tidelands Operations Fund Group. (A-11)
12. Adopt the Resolution establishing the Gann Appropriations Limit for FY 23 pursuant to Article XIII (B) of the California Constitution. (A-12)
13. Adopt a motion approving the Financial Policies, as amended. (A-13)
14. Declare an emergency to exist. (A-14)
15. Declare the Appropriations Ordinance for FY 23, creating and establishing the fund groups of the Municipal Government and appropriating money to and authorizing expenditures from said funds and for said fiscal year as an Emergency Ordinance, read, and adopted as read and laid over to the next regular meeting of the City Council for final reading. (A-15)
ATTACHMENT B
FISCAL YEAR 2023 APPROPRIATIONS ORDINANCE BY FUND GROUP (Does not include Harbor, Water and Sewer Fund Groups)
FY 23 PROPOSED FY 22 ESTIMATED FY 23
FUND GROUP EXPENDITURES CHANGES* CARRYOVER* APPROPRIATIONS GENERAL FUND 669,663,209 669,663,209
UPLAND OIL FUND 9,352,752 9,352,752
GENERAL GRANTS FUND 9,962,155 55,975,057 65,937,212
POLICE & FIRE PUBLIC SAFETY OIL PROD ACT FUND 2,693,369 2,693,369 HEALTH FUND 61744,391 79,687,415 141,432,307
CUPA FUND 2,808,924 2,808,924
SPECIAL ADVERTISING & PROMOTION FUND 11,555,107 - 11,555,107 HOUSING DEVELOPMENT FUND 16,000,104 5,521,505 21,521,610 BELMONT SHORE PARKING METER FUND 786,388 786,388
BUSINESS ASSISTANCE FUND 756,036 - 3,611,418 4,367,454
COMMUNITY DEVELOPMENT GRANTS FUND 18,615,453 (1,930,776) 50,982,198 67,666,874 HOUSING AUTHORITY FUND 108,252,290 7,497,681 115,749,972 GASOLINE TAX STREET IMPROVEMENT FUND 14,139,365 10,766,569 24,905,933 CAPITAL PROJECTS FUND 175,830,408 478,584,363 654,414,772 SUCCESSOR AGENCY OPERATIONS 4,248,628 27,749,468 31,998,096 CIVIC CENTER FUND 24,102,627 1,761,484 25,864,111
GENERAL SERVICES FUND 74,747,226 18,396,319 93,143,545
FLEET SERVICES FUND 50,478,684 4,037,711 54,516,395
INSURANCE FUND 67,547,362 67,547,362
EMPLOYEE BENEFITS FUND 389,690,381 389,690,381
TIDELANDS OPERATIONS FUND 113,192,489 87,570,506 200,762,995 TIDELANDS AREA FUNDS 32,864,381 19,861,771 52,726,152
TIDELANDS OIL REVENUE FUND 90,037,870 90,037,870
RESERVE FOR SUBSIDENCE
DEVELOPMENT SERVICES FUND 30,222,823 (425,687) 29,797,135 GAS FUND 167,147,399 22,384,350 189,531,749
AIRPORT FUND 53,715,400 37,320,898 91,036,299
REFUSE/RECYCLING FUND 67,121,695 63,453 67,185,148
SERRF FUND 49,113,263 (49,342) - 49,063,921
SERRF JPA FUND
TOWING FUND 6,945,988 - 6,945,988
DEBT SERVICE FUND 8,134,944 8,134,944
SUCCESSOR AGENCY - DEBT SERVICE 26,743,719 26,743,719
TOTAL 2,358,215,331 (1,980,118) 911,346,480 3,267,581,693 *Please refer to the Fiscal Impact section of the City Council Letter for a general description of notable changes. **Reflects estimated carryover for accounts with projects and grants as of 5/31/22.
FY 23 Fund Attachment B 8/12/2022
ATTACHMENT C
FISCAL YEAR 2023 APPROPRIATIONS ORDINANCE BY DEPARTMENT (Does not include Harbor and Water Departments)
FY 23 PROPOSED FY 22 ESTIMATED FY 23
DEPARTMENT EXPENDITURES CHANGES* CARRYOVER** APPROPRIATIONS MAYOR AND COUNCIL 6,157,142 138) 6,157,004
CITY ATTORNEY 12,792,312 12,792,312
CITY AUDITOR 3,450,581 3,450,581
CITY CLERK 4,205,416 4,205,416
CITY MANAGER 19,116,930 1,442,277 20,559,207
CITY PROSECUTOR 6,554,887 1,556,596 8,111,483
CIVIL SERVICE 3,715,317 - 3,715,317
AIRPORT 53,262,491 36,794,196 90,056,687
DISASTER PREPAREDNESS &
EMERGENCY COMMUNICATIONS 13,863,912 - 1,235,426 15,099,338 DEVELOPMENT SERVICES 92,150,228 (1,930,776) 81,956,929 172,176,381 ECONOMIC DEVELOPMENT 22,821,694 12,092,461 34,914,154
FINANCIAL MANAGEMENT** 729,844,020 105,379,333 835,223,353 FIRE 153,467,070 3,405,592 156,872,662
HEALTH AND HUMAN SERVICES 182,091,970 87,210,542 269,302,512 HUMAN RESOURCES 25,270,577 (678,337) 24,592,240
LIBRARY SERVICES 18,102,153 4,974,134 23,076,286
ENERGY RESOURCES 267,529,467 (49,342) 22,384,350 289,864,475 PARKS, RECREATION AND MARINE 74,030,641 27,193,075 101,223,716 POLICE 293,003,779 8,968,565 301,972,345
PUBLIC WORKS 308,971,291 497,687,774 806,659,065
TECHNOLOGY & INNOVATION 70,020,303 . 19,743,704 89,764,008 TOTAL 2,360,422, 180 (1,980,118) 911,346,480 3,269,788,542 *Please refer to the Fiscal Impáct section of the City Council Letter for a general description of notablé changes. **Reflects estimated carryover for accounts with projects and grants as of 5/31/22. ***Department of Financial Management includes internal service charges that are contained in the resolutions of the Harbor, Water, and Sewer Fund Groups for accounting, budgeting and treasury functions, and other citywide activities such as debt service.
FY 23 Dept Attachment C 8/12/2022
ATTACHMENT D
FISCAL YEAR 2023 REVENUES BY FUND GROUP
(Does not include Harbor, Water and Sewer Fund Groups)
FUND GROUP FY 23 PROPOSED. CHANGES: FY 23 PROPOSED
REVENUES BUDGETED
REVENUES
GENERAL FUND 621,283,066 621,283,066
UPLAND OIL FUND 11,811,475 11,811,475
GENERAL GRANTS FUND 9,701,912 9,701,912
POLICE & FIRE PUBLIC SAFETY OIL PROD ACT FUND 2,693,369 2,693,369 HEALTH FUND 61,770,617 61,770,617
SPECIAL ADVERTISING & PROMOTION FUND 8,584,444 8,584,444 HOUSING DEVELOPMENT FUND 15,237,500 15,237,500
BELMONT SHORE PARKING METER FUND 898,884 898,884
BUSINESS ASSISTANCE FUND 728,199 728,199
COMMUNITY DEVELOPMENT GRANTS FUND 10,691,548 25,000 10,716,548 GASOLINE TAX STREET IMPROVEMENT FUND 13,491,359 13,491,359 CAPITAL PROJECTS FUND 171,610,605 : 171,610,605
CIVIC CENTER FUND 24,975,297 24,975,297
GENERAL SERVICES FUND 74,592,189 74,592,189
FLEET SERVICES FUND 56,958,170 56,958,170
INSURANCE FUND 76,808,762 76,808,762
EMPLOYEE BENEFITS FUND 390,119,981 390,119,981
TIDELANDS OPERATIONS FUND 110,893,919 110,893,919
TIDELANDS AREA FUNDS 30,242,344 30,242,344
TIDELANDS OIL REVENUE FUND 98,787,714 98,787,714
RESERVE FOR SUBSIDENCE 980,000 980,000
DEVELOPMENT SERVICES FUND 30,462,627 30,462,627
GAS FUND 165,712,559 - 165,712,559
GAS PREPAY FUND
AIRPORT FUND 61,065,806 61,065,806
REFUSE/RECYCLING FUND 77,200,000 (3,826,066) 73,373,934 SERRF FUND 43,794,850 43,794,850
SERRE JPA FUND
:
TOWING FUND 7,256,458 7,256,458
HOUSING AUTHORITY FUND 105,236,185 105,236,185
SUCCESSOR AGENCY OPERATIONS 4,219,567 4,219,567
CUPA FUND 1,866,016 1,866,016
DEBT SERVICE FUND 6,543,779 6,543,779
SUCCESSOR AGENCY DEBT SERVICE 30,162,041 - 30,162,041
TOTAL 2,326,381,241 (3,801,066) 2,322,580,175
*Please refer to the Fiscal Impact section of the City Council Letter for a general description of notable changes.
FY22 Fund Attachment D- REVENUE 8/12/2022
BH-13.13
SUMMARY
BUDGETARY AND FINANCIAL POLICIES
CITY OF LONG BEACH, CALIFORNIA
This is a condensed version of the budgetary and financial policies of the City of Long Beach, California.
Note: The Financial Policies written here are as Adopted by City Council on September 4, 2018 and include proposed changes as presented to City Council on December 7, 2021, proposing to change the revenue projections methodology from reasonably conservative to reasonably expected. These updated policies can be formally adopted as part of the FY 23 Budget Adoption.
1. Structural Balance
The budget for the General Fund will be structurally balanced.
2. Multi-Year Financial Projections
The proposed annual budget should include a three-year General Fund surplus/ (shortfall) projection.
3. Budget Process is an Annual Cycle
The annual budget process is used to develop annual service priorities and the level and type of resources to fund those services. Proposed changes to the budget and to service levels during the fiscal year will be minimized. Proposed mid-year changes will be evaluated programmatically and fiscally prior to adoption, and, if adopted, will have a lower priority compared to preexisting programs and projects unless otherwise specified.
A list of any adopted non-routine mid-year budget changes will be provided to the Budget Oversight Committee annually for review.
4. User Fees to be Set at the Cost of Service
Fees will be set to fully recover costs, except where there is a greater public benefit through use of a lower fee. There will be a process for in-depth review of all fees over time.
5. One-Time Resources are for One-Time Uses
One-time resources will not be used to fund ongoing operations and are to be used for one-time purposes. Five percent of new General Fund funds available will be set aside for unfunded liabilities.
Financial Policies as Adopted by City Council on September 4, 2018
6. Capital Projects Budgeted for Both One-Times and Ongoing Costs Before approving any capital expenditure, the City Council will consider the capital (one- time) costs, the operating (ongoing) components of costs and the replacement costs and the expected approach to funding replacement.
7. Fund Balance Policy
Establishes categories of fund balances - non-spendable, restricted, committed, assigned and unassigned, and creates specific reserves - an emergency reserve, operating reserves, a reserve for subsequent year appropriates, an infrastructure reserve, and provides for the creation of other reserves.
8. Adequate Emergency and Operating Reserves will be Maintained Emergency reserves will be maintained at 8% minimum (of General Fund ongoing expenditures, including transfers) and 10% target, operating reserves will be maintained at 2% minimum and 7% maximum, and the City will seek to maintain overall reserves at no less than 16.7% (two months)
9. Adequate Reserves for all Funds
Financial Management will develop and recommend reserve policies for each City fund which will be adopted, as modified, by the City Council.
10. Revenue Projections will Utilize a Reasonably Expected Approach Revenue projections are to be objectively prepared using a reasonably expected approach, so that there is an equal chance of coming in higher or lower than projection.
11. Stable Revenue Sources will be Used to Fund Operations Any revenue that has highly variable component may have only a portion of it, or none of it, budgeted for operations.
Oil revenue will be budgeted at a per barrel price likely to be lower than the average price, based on historical variability.
12. Fiscal Impact Statements Required
For any proposed City Council action, an analysis is to be provided (fiscal impact statement) of the projected or potential fiscal impact on current and future revenues, expenditures, or resources, including staff resources, and on how the action may impact the City's financial or economic position.
Financial Policies as Adopted by City Council on September 4, 2018
13. Current Year Costs will be Funded or an Explanation Provided The budget will include funding for all costs of operation for the current year or will identify, provide general information on, and discuss any costs not fully funded, including unfunded liabilities, unfunded lifecycle replacement costs, and deferred maintenance.
14. Financial Reporting will use Generally Accepted Standards The City will prepare annual financial statements in accordance with Generally Accepted Accounting Principles (GAAP), will use a consistent approach to budgetary reporting.
Both the basis of accounting and the basis of budgeting will be described in the appropriate documents.
The annual financial report will include a reconciliation of budgetary funds available to the GAAP fund balance or net position.
15. Financial Status will be Reported
The City's annual comprehensive financial report (ACFR) will be made available after completion of the annual audit.
There will be periodic reporting on the budgetary status of the City, particularly the General Fund and other funds that have unusual or problematic status. Any major or critical issue will be reported as soon as it is practical.
16. Financial Status of Major Funds will be Reviewed
The City Manager will annually present a brief report discussing the high-level financial status of each major fund of the City. The report may be incorporated into the proposed budget as a component of each fund's Fund Summary.
17. Appropriate Grants will be Sought
The City will seek grants that address City priorities and are believed to provide a substantial net benefit after considering the City's cost to secure and administer the grant and the risk associated with unintentional non-compliance.
The City shall maintain administrative support to ensure compliance with grant terms and requirements.
Prior to grant award, the City Council should be aware of post-grant expectations for funding and continuing or discontinuing of programs; City Council should be informed if the actual situation changes from the original expectations.
Financial Policies as Adopted by City Council on September 4, 2018
18. Debt Maintained at Appropriate Levels
Debt limits will be adopted by the City Council.
The term of debt will generally not exceed the life of the asset being acquired, capital leases for vehicles will be part of a comprehensive strategy, and debt will not be used to fund operations.
A separate policy on debt and debt management will be adopted.
19. Investments will be Conservatively Managed
Investments shall be managed with the priorities of: safety of principal, liquidity (availability of cash), and yield (investment income).
A separate policy on investments and investment management will be adopted.
20. A Long-Term General Financial Plan will be Maintained A plan will be adopted that outlines general approaches to maintaining and increasing revenues, growing the City's economy for the purpose of revenue generation, and controlling and managing the cost of services and the method of delivery of services.
21. Financial Policies will be Reviewed
Financial policies will be reviewed every three years. The City Manager will report potential non-compliance on any proposed Council action and will report annually on overall compliance and non-compliance with all the financial policies
22. Administrative Procedures to be Consistent with Policy Administrative procedures shall be consistent with the adopted City Council budgetary and financial policies.
Financial Policies as Adopted by City Council on September 4, 2018