Council Chamber, 580 Pacific
Street
Monterey, California
Monterey City Council
Special Meeting Agenda
AMENDED AGENDA
Council Special Meeting
Wednesday, April 26, 2023
4:00 PM
City Council
Tyller Williamson, Mayor
Kim Barber, Councilmember,
District 1
Gino Garcia, Councilmember
Alan Haffa, Councilmember
Ed Smith, Councilmember,
District 2
City Manager
Hans Uslar
How to participate in this meeting:
Written comment: Members of the public may submit comment(s) to [email protected] until ½ hour before the start of the meeting. These messages are not read aloud during the meeting but are made available to the meeting body and public at https://monterey.org/submitted-comments. All comments received become part of the record.
In-Person: Please see the meeting location listed above. Wearing a mask is recommended and encouraged.
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CALL TO ORDER
TELECONFERENCE NOTICE
A “Just Cause” teleconference attendance notification was received on April 26, 2023 from Councilmember Smith, who will make a brief statement at the beginning of the meeting regarding the general description of the circumstances requiring remote participation.
PLEDGE OF ALLEGIANCE
STUDY SESSION
STUDY SESSION items are used to provide information to the City Council and answer their questions to clarify issues. Study Sessions provide a setting for informal discussions between staff, consultants, board, commission,committee members and the City Council regarding specific programs, projects or policies. Council does not take formal action on the items.
1. Fiscal Year 2023-24 Budget Primer Study Session (Not a Project under CEQA Article 20, Section 15378 and under General Rule Article 5, Section 15061)
ADJOURNMENT
4/26/2023 4:00:00 PM
2 Members of the public have the right to address the City Council on any item on the Agenda, before or during its consideration [G.C. §54954.3(a)]. The Mayor will formally open the floor for public comment on items such as "Public Appearance" and "Public Hearings." Comment may be made via the method described in the Important Notice (re: COVID-19) at the top of the agenda.
Writings distributed for discussion or consideration on these matters within 72 hours prior to the meeting, pursuant to Government Code § 54957.5, are available at: monterey.org/submitted-comments and in the City Manager’s Office at 580 Pacific St., Room 1, Monterey, CA 93940 during regular business hours.
Information distributed to the Council at the Council meeting becomes part of the public record. A copy of written material, pictures, etc. should be provided for this purpose.
City Council Meetings are cable cast live and videotaped for replay on Monterey's Government Access Channel 25 by Access Media Productions (AMP).
CITY OF MONTEREY'S 24-HOUR SUGGESTION HOTLINES:
Voicemail: (831) 646-3799
Fax: (831) 646-3793
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INTERPRETATION: The Monterey City Council invites and encourages public participation at its meetings. Requests for language interpretation may be made by contacting the City Clerk at [email protected] or 831-646-3935. The City Clerk will make every effort to accommodate requests for interpreter assistance. Requests should be made as soon as possible in advance of any meeting of the City Council. The City is committed to addressing language interpretation requests swiftly in order to maximize public participation.
ACCESSIBILITY: The City of Monterey is committed to including the disabled in all of its services, programs and activities. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk’s Office at [email protected] or (831) 646-3935. Notification 30 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting [28 CFR 35.102-35.104 ADA Title II]. Later requests will be accommodated to the extent feasible. For communication-related assistance, dial 711 to use the California Relay Service (CRS) to speak to City offices. CRS offers free text-tospeech, speech-to-speech, and Spanish-language services 24 hours a day, 7 days a week. If you require a hearing amplification device to attend a meeting, dial 711 to use CRS to talk to the City Clerk's Office at (831) 646-3935 to coordinate use of a device.
Upcoming city meetings are listed at http://isearchmonterey.org More information is available by calling (831) 646-3935 Council
Agenda Report
№08/22
FROM: Rafaela T. King, CPA, Finance Director
Nat Rojanasathira, Assistant City Manager
Hans Uslar, City Manager
Prepared By: Kyle Olsen, Finance Analyst
SUBJECT: Fiscal Year 2023-24 Budget Primer Study Session (Not a Project under CEQA Article 20, Section 15378 and under General Rule Article 5, Section 15061) RECOMMENDATION:
That the City Council receive a primer on the Fiscal Year (FY) 2023-24 Budget.
VALUE DRIVERS:
Serve as stewards of the City’s financial resources through sound economic vitality efforts, streamlining operations, reasonable revenue enhancements, visionary long-term planning, fiscal transparency, and community partnerships.
POLICY IMPLICATIONS:
This request is consistent with City Charter Section 6.3 Budget: “Based on the recommendation of the City Manager, the City Council shall adopt a budget estimating the revenues and expenditures for the City for the period covered.” This is a first look at the overall projected financial position for FY 2023-24 for Council consideration and feedback.
FISCAL IMPLICATIONS:
There is no cost to present this update.
ENVIRONMENTAL DETERMINATION:
The City of Monterey determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA)(CCR, Title 14, Chapter 3 (“CEQA Guidelines”), Article 20, Section 15378). In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as Date: 4/26/2023
Item No.: 1.
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 1, Packet Page 3 projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or any reasonably foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
ALTERNATIVES CONSIDERED:
The City Council could elect not receive a budget primer; however, this is not recommended.
DISCUSSION:
In February 2023, City Staff started the process of preparing the annual budget for FY 2023-24.
As part of this process, department directors were asked to estimate revenue and expenditure from their departmental program. For the FY 2023-24 budget cycle, City Staff set the FY 2022- 23 Council Adopted budget as the base, and departments submitted budget requests to adjust budget levels for the needs of the new fiscal year. Consistent with sound fiscal management, City Staff did not provide any specific guidance around increases, but instead requested that departments review prior year actuals and current year-to-date spending to estimate future needs.
The FY 2023-24 budget continues the City’s trajectory following the March 21, 2023 Council Meeting in which the City Council received a budget update highlighting up-to-date revenue and expenditure projections for the current FY 2022-23 budget. A major component of the Council’s mid-year budget adjustments was the allocation of one-time mid-year savings towards various fiscal reserves, including increasing the Economic Uncertainty Reserve to 18% of the General Fund’s projected expenditures. Also at this meeting, the City Council approved updates to the Master Fee Schedule and established a Section 115 Trust for Unfunded Accrued Liability (UAL) and other Post-Employment Benefits (OPEB).
Finance staff has a solid grasp on expected revenues and has been working diligently with the City Manager’s Office and the Budget Team to balance the budget taking into consideration many Departmental requests. At present, projected revenues from the General Fund for FY 2023-24 are approximately $98.2 million and projected expenses are $98 million.
GENERAL FUND FY 2023-24 PROJECTED REVENUES
REVENUE FY 2023-23
PROPOSED
BUDGET
1 TRANSIENT OCCUPANCY TAXES $30,306,295
2 SALES TAX $15,528,406
3 PROPERTY TAXES $15,055,291
4 BUSINESS LICENSE $3,870,000
5 UTILITY USERS TAXES $4,468,520
6 FRANCHISE FEES $2,755,000
7 OTHER TAXES $503,648
8 LICENSES & PERMITS $1,817,000
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 2, Packet Page 4 9 FINES & FORFEITURES $243,500
10 INTERGOVERNMENTAL $959,000
11 INTEREST $913,218
12 RENTS $2,708,496
13 FEES & CHARGES $17,456,211
14 OTHER REVENUES $1,664,483
TOTAL GENERAL FUND REVENUES $98,249,067
GENERAL FUND FY 2023-24 ESTIMATED EXPENDITURES
BY DEPARTMENT FY 2023-24
PROPOSED
BUDGET
CITY COUNCIL $195,755
CITY MANAGER $1,758.994
CITY ATTORNEY $1,295,922
COMMUNITY DEVELOPMENT $7,080,840
CONFERENCE CENTER $4,886,457
FINANCE DEPARTMENT $3,760,383
FIRE DEPARTMENT $26,624,645
HUMAN RESOURCES $1,175,879
LIBRARY & MUSEUMS $2,938,279
PARKS AND RECREATION $13,994,516
POLICE DEPARTMENT $23,419,977
PUBLIC WORKS $8,553,484
CAPITAL IMPROVEMENT PROGRAM $2,000,000
NON-DEPARTMENTAL $334,881
TOTAL EXPENDITURES $98,000,012
As staff develops the final draft budget proposal for Council’s review, input, and approval, the reality of the City’s budgetary expenditures and revenues must frame the discussion. Below is a breakdown of the vision for the City’s FY 2023-24 budget as well as the challenges facing the City:
ENTERPRISE FUNDS
Fund Name Revenues Expenses
Sewer Line Maintenance Fund $2,508,249 $3,041,963
Cemetery Fund $331,132 $521,617
Marina Fund $3,547,569 $2,895,106
Parking Fund $11,582,932 $10,158,517
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 3, Packet Page 5 SPECIAL REVENUE FUNDS (select)
Fund Name Revenues Expenses
Neighborhood Improvement* $5,862,930 $383,685
Street Infrastructure
(Measure P&S)*
$11,961,254 $521,617
Tidelands $4,063,254 $3,649,235
Presidio of Monterey PW $21,852,725 $15,691,070
Gas Tax $804,908 $2,000
* Capital Improvement Projects-related Special Revenue Funds will bring appropriation amounts to Council as projects are identified.
INTERNAL SERVICE FUNDS
Fund Name Revenues Expenses
Equipment Replacement $2,385,446 $1,954,858
Vehicle Maintenance Fund $2,896,610 $2,890,087
Information Services Fund $4,784,008 $6,138,181
Workers Compensation Fund $4,079,900 $4,032,290
Liability & Property Insurance $4,608.467 $4,569,645
Employee Benefit $11,190,810 $11,190,810
Vision for the FY 2023-24 Budget:
Continue to Maintain Strong Reserve Levels
In FY 2022-23, the City made crucial deposits into the City’s Reserves. For the FY 2023-24 Budget, Staff recommends maintaining the Economic Uncertainty Reserve at 18% of the General Fund as well as increasing the City’s Sports Center Reserve, Conference Center Reserve, Information Technology Infrastructure Reserve, and the City’s Pension Reserve Fund.
The City seeks to utilize expected savings from FY 2022-23 and projected revenues from FY 2023-24 to protect the City for the years ahead. The amounts listed below are subject to change based on Council desires and the discussion of the proposed funding policies discussion presented at this meeting under separate cover.
RESERVE FUND ADDITIONS - GENERAL FUND
DESCRIPTION JULY 1, 2023
BALANCE
ADDITIONS TRANSFERS
OUT/USES
JUNE 30, 2024
PROJECTED
BALANCE
Economic
Uncertainty
$17,312,093 $0 $17,312,093
Conference Center
Facility
$1,838,739 $750,000 $2,588,739
Sports Center Facility $1,875,140 $750,000 $2,625,140
Pension $2,000,000 $2,000,000 $4,000,000
Technology $2,500,000 $500,000 $1,090,000 $1,910,000
City Facilities $300,000 $250,000 $550,000
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 4, Packet Page 6 Central Public Safety
Facility
$0 $250,000 $250,000
Library Facility $0 $250,000 $250,000
Parking Garages $0 $250,000 $250,000
Rental Registry
Program
$0 $250,000 $250,000
RESERVE FUND ADDITIONS - SPECIAL REVENUE FUNDS
DESCRIPTION JULY 1,
2023
BALANCE
FY 23-24
ADDITIONS
FY 23-24
TRANSFERS
OUT/USES
JUNE 30, 2024
PROJECTED
BALANCE
Tidelands – Sea
Level Rise
$250,000 $250,000 $500,000
Closely Track & Limit Expenditures
Over the past several years, the City has taken steps to more closely track and regulate City spending. Starting with last year’s zero-based budgeting approach, the City has continued to evaluate budget requests to ensure it maintains a balanced budget. FY 2021-22 provided the City one-time savings, and additional one-time savings are expected in FY 2022-23. However, the City cannot depend on one-time savings indefinitely, and a balanced budget is essential.
The City continues its Fiscal Health Response Plan efforts through the CORE strategy:
Change the way we do business to be more streamlined. Operational reductions or services provided by someone else, where appropriate. Revenue enhancements through economic development, fees, taxes, cost recoveries. Employee contracts that attract and retain talent and are financially sustainable.
The factors contributing to the increased one-time savings over the past two years include: (1) salary savings due to vacancies; (2) underspending in operations; (3) maintaining CORE strategies listed above; (4) increase in revenues; and (5) unspent encumbered funds.
In recent years, the City has used one-time savings to fund obligations the City has neglected, including deferred infrastructure projects, technology, and unfunded pension liability.
Make Critical Investments in City Operations and Infrastructure The FY 2023-24 Budget must take critical steps to improve the City’s operations and infrastructure. Of note:
Enterprise Resource Planning (ERP), Risk Management, and Budget Software: In FY 2023-24, the City will begin to update the City’s outdated Financial Management Systems. The City’s financial management software was last updated in 2003. The City has never had advanced budgeting software or risk management software. The FY 2023-24 budget provides resources to support these significant investments.
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 5, Packet Page 7 Infrastructure Improvements: The City continues to have maintenance costs that were deferred before and during the COVID-19 pandemic that must be addressed. Examples of deferred items include replacing carpets in City facilities due to water damage, improving electrical systems, replacing windows and doors at Jacks Park and Sollecito Park’s score booths, replacing an outdated gas stove/oven with an electric system.
These are only a few items that need to be repaired and or replaced throughout the city.
Financial Challenges Facing the City of Monterey:
Economic Uncertainty
Throughout and since the COVID-19 pandemic, the City has faced unprecedented economic instability. Though economic conditions have somewhat stabilized over the past years, the City continues to face uncertainty that is unlikely to subside in the near future. Of note:
Inflation and Rising Costs: Inflation will put additional needs and pressure on our operational accounts. Like our businesses and residents, the City also sees increased costs in purchasing the supplies necessary to operate and maintain our infrastructure and for professional services. For example, supply chain issues range from getting white paint for crosswalks to replacing police patrol cars. In many instances, costs have risen more than twofold. These additional costs for supplies and services have increased expenditures across City departments.
Growth in the Hospitality Sector: The City has continued to rebound from the COVID-19 pandemic; however, given the potential for a recession and limited economic growth in the years ahead, the City must be cautious and conservative in the years ahead to brace for the potential of an economic downturn. The City is especially vulnerable to economic downturns because approximately 47% of the City’s revenues are generated from Transient Occupancy Tax and Sales Tax. In the event of an economic slowdown, these revenue categories will undoubtedly suffer. Furthermore, a total of 85% of the City’s revenues are generated from just five revenue sources. Along with the sources listed above, the City relies heavily on fees and charges, Property Taxes, and Utility Users Taxes. During a recession, all these areas are likely to be depressed, as the City experienced in FY 2019-20 and FY 2020-21.
Labor and Cost of Living Adjustments
Employee expenses consistently represent the City’s largest expense because City government is in the business of providing services to the community. The City continues to negotiate with our bargaining unit and all other bargaining units will be going into the second year of their negotiated contracts, which are included in the proposed budget. City employees have expressed their expectations for cost-of-living adjustments given the rising costs of housing, fuel, and other goods.
In addition to recruiting and retaining employees, the City needs to be mindful of the fiscal sustainability of ongoing expenses as it negotiates future contracts, likely to begin for all labor groups in early 2024.
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 6, Packet Page 8 Staff looks forward to a robust discussion about the City’s finances and receiving the City Council’s input.
RTK/ko
Writings distributed for discussion or consideration on this matter within 72 hours prior to the meeting, pursuant to Government Code § 54957.5, will be made available at the following link:
https://monterey.org/Submitted-Comments
Council Special Meeting, 4/26/2023, Item No. 1., Item Page 7, Packet Page 9