Agenda Item
City Council
Item #: 7.3. 2/14/2023 File #: 23-0090
TO: Honorable Mayor and Members of the City Council
THRU: Tom Kisela, Interim City Manager
FROM: Susan Galvan, Assistant City Manager
1. SUBJECT
Status of Fiscal Year 2022-23 budget and preliminary projections for Fiscal Year 2023-24 budget preparation.
2. SUMMARY
This mid-year report provides an update of the Fiscal Year 2022-23 budget. In addition, this report also presents a brief review of the Fiscal Year 2023-24 budget, which is currently being prepared.
3. RECOMMENDED ACTION
Receive and file report, and approve in one motion the following:
1. Authorize the transfer of $950,000 from the General Fund (100) unreserved fund balance to Worker’s Compensation Fund (730) unreserved fund balance.
2. Authorize the transfer of $720,000 from the following unreserved fund balances to the Equipment Expense Fund (710) unreserved fund balance:
$566,946 General Fund (100)
$120,719 Water Fund (600)
$ 32,335 Sewer Fund (220)
3. Authorize the appropriation of $340,000 from the unreserved fund balance of the General Fund (100) to expenditure account number 100.0000.51670.30200, Other Professional and Consulting Services - 517 W Struck Transition.
4. Authorize the appropriation of $90,000 from the unreserved fund balance of the General Fund (100) to expenditure account number 100.5013.51670.00000, Plan Check Consulting.
5. Authorize the appropriation of $720,000 from the unreserved fund balance of the Fleet Maintenance Fund (710) to expenditure account number 710.5023.53,720.00000, Fuel Allocation.
6. Authorize the appropriation of $250,000 from the unreserved fund balance of the Capital Project Fund (500) to expenditure account number 500.5032.56100.16302, Minor Traffic Devices.
7. Authorize the appropriation of $70,000 from the unreserved fund balance of the Community Development Block Grant Fund (310) to expenditure account number 310.9645.51770.30200, CDBG Project - 517 W Struck Transition.
8. Authorize the appropriation of $50,000 from the Worker’s Compensation Fund (730) unreserved fund balance to expenditure account number 730.0312.52233.00000, Self-Insured City of Orange Printed on 2/9/2023Page 1 of 7
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Item #: 7.3. 2/14/2023 File #: 23-0090
unreserved fund balance to expenditure account number 730.0312.52233.00000, Self-Insured Workers Comp.
9. Authorize the appropriation of $29,924 from unreserved fund balance of Low and Moderate Income Housing Asset Fund (921) into the following expenditure account numbers:
$10,000 921.6041.50002.00000, Regular Misc Salaries
$19,924 921.6041.51670.00000, Other Prof. and Consulting Services
10. Authorize the appropriation of $80,971 from the unreserved fund balance of the respective funds into the following expenditure account numbers for project 12222, Other Maintenance Items for the 800 MHZ Communication System:
$38,866 120.4011.53670.12222
$28,340 120.3011.53670.12222
$5,668 600.8041.53670.12222
$2,429 100.7001.53670.12222
$2,429 270.5021.53670.12222
$1,619 220.5022.53670.12222
$810 100.6001.53670.12222
$810 710.5023.53670.12222
11. Adopt Resolution No. 11434. A Resolution of the City Council of the City of Orange Amending Resolution No. 11425 between the City of Orange and Orange Management Association.
12. Adopt Resolution No. 11435. A Resolution of the City Council of the City of Orange rescinding Resolution No. 11424 and amending the citywide pay schedule in accordance with the requirements of California Code of Regulations, Title 2, Section 570.5.
13.Authorize the following changes to the City’s Schedule of Positions:
a. Authorize the Assistant City Manager position in the City Manager’s Office. b. Eliminate the Internal Audit Manager position in the City Manager’s Office. c. Reclassify the Assistant City Manager position to a Community Services Director in the Community Services Department.
d. Reclassify the Assistant City Manager position to a Finance Director in the Finance Department.
e. Reclassify the part-time Administrative Specialist position to a part-time benefitted Administrative Assistant position in the City Clerk’s office. f. Reclassify two Parks and Facilities Attendant positions to two Parks Maintenance Worker I positions in the Community Services Department. g. Reclassify the part-time Recreation Coordinator to a full-time Recreation Coordinator position in the Community Services Department.
h. Authorize the Assistant Recreation Coordinator position in the Community Services Department.
i. Reclassify the Payroll Technician to a Senior Payroll Specialist in the Finance Department.
j. Authorize the Permit Technician position in the Community Development Department.
4. FISCAL IMPACT
Sufficient funds are available in the unreserved fund balances of the respective funds to support the requested appropriations. Approval of the recommended actions will result in the following City of Orange Printed on 2/9/2023Page 2 of 7
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Item #: 7.3. 2/14/2023 File #: 23-0090
appropriations:
Action Amount From To
1 $950,000 General Fund Workers Compensation Fund
2 566,946 General Fund Equipment Expense Fund
3 340,000 General Fund 517 W Struck Transition
4 90,000 General Fund Plan Check Consulting
10 3,239 General Fund 800 MHZ Radio Maintenance
$1,950,185 TOTAL GENERAL FUND
2 $120,719 Water Fund Equipment Expense Fund
2 32,335 Sewer Fund Equipment Expense Fund
5 720,000 Equipment Expense Fund Gasoline and Diesel Fuel 6 250,000 Capital Projects Fund CIP - Minor Traffic Devices 7 70,000 CDBG Fund CDBG - 517 W Struck Transition
8 50,000 Workers Comp Fund Self-Insured Workers Comp
9 29,924 Low and Moderate Income
Housing Asset Fund
Affordable Housing Consulting
10 67,206 Proposition 172 Fund 800 MHZ Radio Maintenance 10 5,668 Water Fund 800 MHZ Radio Maintenance
10 2,429 Gas Tax Maintenance Fund 800 MHZ Radio Maintenance 10 1,619 Sewer Fund 800 MHZ Radio Maintenance
10 810 Fleet Maintenance Fund 800 MHZ Radio Maintenance $1,350,710 TOTAL OTHER FUNDS
5. STRATEGIC PLAN GOALS
Goal 2: Be a fiscally healthy community
b: Analyze future fiscal needs and potential revenue opportunities.
6. DISCUSSION AND BACKGROUND
FISCAL YEAR 2022-23 (FY 23) UPDATE
Review of General Fund Revenues and Expenditures
Based on current trends and analysis, the total General Fund revenues for FY 23 are estimated to be $137.6 million, $5.8 million above budget. While staff anticipates an overall revenue increase over budget, as the economy is signaling the early signs of a recession, the City continues to take a conservative approach in budgeting for revenues.
Sales tax, currently our largest source of General Fund revenue, is anticipated to be about $2.7 million over the budgeted amount of $50.1 million, mostly attributed to the heightened prices in the fuel sector. Building and construction activity is continuing to perform positively, generating more sale receipts. Also, as we have seen in recent years, online shopping allocations from the county tax pool will continue to bring in additional revenue.
Property tax, our second largest source of General Fund revenue, is anticipated to be $51.2 million, $590,000 over the budget. Annual increases in assessed property values and more property tax increment distributed from the County of Orange for the Successor Agency are projected to contribute to higher property tax receipts. In addition, property tax in lieu of motor vehicle license City of Orange Printed on 2/9/2023Page 3 of 7
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Item #: 7.3. 2/14/2023 File #: 23-0090
fees are expected to be above budget as this revenue is tied to property tax growth.
At mid-year, $31.7 million in General Fund revenues had been received, reflecting 24% of the budget, less than normal due to the timing of revenue receipts. Sales tax receipts provided $10.5 million by the end of the second quarter while property tax provided $6.7 million. Staff expects to receive a larger portion of sales tax and property tax receipts in the second half of the year, due to the timing of allocations.
Transient Occupancy Tax (TOT) is expected to be $5.1 million, at its budgeted estimate. Last year, business and leisure travel increased with more lenient Federal and State travel mandates but have now slowed due to the inflation of general consumer goods and less spending power. Based on current trends, other revenue sources such as licenses and permits, fines and forfeitures, and fees for services, are expected to continue towards a positive trend. Miscellaneous revenues are anticipated at $2.3 million, $1.3 million more than the budget. The majority of this increase is contributed by reimbursements from the Office of Emergency Services for costs incurred by the City through its assistance in statewide wildland firefighting efforts.
Expenditures in the General Fund are currently within target range, with all departments on pace to meet (but not exceed) their target expenditures for FY 23. Unlike revenue, which fluctuates from external factors, expenditures are consistent and remain relatively steady throughout the fiscal year.
Currently, the combined total adjusted appropriation for FY 23 is $133.8 million, an increase from $130.3 million due to approved budget adjustments. The actual amount expended and encumbered through December 31, 2022 is $61.3 million, 45.9% of the total annual expenditure appropriation.
Spending remains fairly constant, and departments continue to do a good job scrutinizing their budgets to provide more with less. As has been the result for the past several years, the General Fund historically ends each fiscal year with savings in expenditures, and we presume through our initial analysis that we will stay slightly below target appropriations.
Attached to this staff report is the Mid-Year Report of the General Fund, which details and illustrates total revenue received, and expenditures by department and category.
Transfers to Internal Service Funds
Transfers provide funding to those areas having either limited resources and/or a specific need in the immediate future, as well as replenishing reserves according to the City’s reserve policy. Staff recommends a transfer from the General Fund unreserved fund balance to the Worker’s Compensation Fund in the amount of $950,000 and to the Equipment Expense Fund in the amount of $566,946.
All other funds have met the City’sreserve policy minimum and do not require additional transfers from the General Fund.
Budget Adjustments
Along with the budget approval, carryover appropriations and encumbrances added approximately $1.8 million to the budget. To date, Council has authorized an additional $1.7 million in budget adjustments to the General Fund, which includes grants with corresponding revenue, Strike Team reimbursements, and contractual services.
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Item #: 7.3. 2/14/2023 File #: 23-0090
The following additional budget adjustments to the FY 23 budget are recommended:
· Organizational Structure Changes: Due to modifications in department organizational structures and increases with level of duties with certain employees, salary ranges and classifications are proposed to be updated to be commensurate with the reassignment and level of work for certain departments as follows:
City Manager - In response to City Council’srequest to return to the historical structure in this office, the proposed changes include properly aligning the duties of the Assistant City Manager with the corresponding areas of oversight. This change would entail restoring the Community Services and Finance Director positions in their respective departments; and concurrently reinstating the Assistant City Manager position to the City Manager’soffice. Some savings are realized by consolidating the duties of the Internal Audit Division into the Finance Department. While there is no additional appropriation necessary for the current fiscal year, the net increase for future years is $80,000, funded mostly from General Fund, supplemented by the Water Fund and Information Systems Fund.
City Clerk - The City Clerk’soffice currently offers passport services which are greatly utilized by the Orange community and surrounding areas. The upgrade of a 19-hour Administrative Specialist position to a benefited 20-hour Administrative Assistant position will ensure this important program remains successfully staffed. The anticipated cost of this staff change is $11,000, mostly attributed to benefits.
Community Development - With the addition of the Short Term Rental program in FY 21, there is a need for a more robust response to neighborhood complaints regarding lack of compliance with the City‘sordinance. With the addition of a Permit Technician position, Code Enforcement will be able to respond quickly to complaints and determine if violations or permit revocation are warranted. The increase of $29,100 in FY 23 and $78,000 in FY 24 will be offset by Transient Occupancy Taxes collected through the Short Term Rental program.
Community Services - The Community Services department manages the operations and monitoring of facility and field use permits on evenings and weekends, requiring specialized staff assistance to ensure basic park maintenance issues are addressed and provide customer service to patrons during these times. In an effort to invigorate the program and ensure staff can be hired and retained, the reclassification of two of the part-time Park and Facility Attendant positions to two part-time Parks Maintenance Worker I positions, as well as the addition of an Assistant Recreation Coordinator, will mitigate concerns related to staffing turnover and program effectiveness. With current savings from vacancies, there is no additional appropriation necessary for the current fiscal year, the net increase for future years is $95,000.
Additionally, the reclassification of a part-time Recreation Coordinator to a full-time Recreation Coordinator will support the Council-driven implementation of a revitalized special events program, which includes a Movies in the Park series and modifying existing events such as the Concerts in the Park series. The increase for future years will be approximately $15,000 to fund the upgraded position. The total future cost for the combined staff changes is $110,000.
Finance - The Payroll Division has continued to feel the impact of increasing City of Orange Printed on 2/9/2023Page 5 of 7
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Item #: 7.3. 2/14/2023 File #: 23-0090
Finance - The Payroll Division has continued to feel the impact of increasing regulations and reporting requirements from CalPERS, the IRS, and the State of California. In addition, applying these regulations to everyday processes demands enhanced procedures in the bi-weekly payroll cycle. To address the increasing workload, succession planning, and to continue to provide virtually error-free payroll processing to our employees, the position of Payroll Technician will be upgraded to Senior Payroll Specialist. While there is no additional appropriation necessary for the current fiscal year, the increase for future years is $9,000. The cost of the upgraded positions will be funded primarily through the General Fund. · Fleet Services Gasoline Adjustment: Due to the unanticipated rise in gasoline prices this past year, the City’sallocation for gasoline and diesel fuel will not be sufficient to cover the annual cost. An additional appropriation of $720,000 will cover the City's fuel expenses through this fiscal year. Since this expense is usually contributed to from a variety of funds and activities, transfers from the General Fund (100), Sewer Fund (220) and Water Fund (600) are necessary.
· Affordable Housing Consulting Services: Affordable housing project proposals are not always received prior to budget preparation and are not accounted for during budget adoption.
An appropriation of $29,924 from the Low and Moderate Income Housing Asset Fund (921) will cover the cost of City staff and consulting services related to affordable housing projects funded with former Redevelopment Agency funds.
· Minor Traffic Devices: Due to unanticipated increases in the need for minor traffic related devices such as lighting, undergrounding, and wiring, staff is requesting $250,000 of additional funding from the Capital Projects Fund (500).
· Workers Compensation: Due to the unanticipated increase of the DE-9 payroll figures that are used to calculate the City’s premium obligation for workers compensation, staff is requesting $50,000 of additional funding from the Workers Compensation Fund (730). · Plan Check Consulting: Due to increased demand and the need to meet plan check deadlines, the Building Division is requesting additional support in plan check consulting services, estimated at $90,000 from the General Fund (100) through the end of this fiscal year. · 517 W Struck Transition Plan: Per a federal court order, the City continues to provide services for the unhoused population at the 517 W Struck site. Funding is available in the Community Development Block Grant (CDBG) Coronavirus Aid, Relief, and Economic Security (CARES) Act funding to cover $70,000 of the program’scost, reimbursing many of the support services and resources provided at the site. While non-General Fund sources have contributed to this program, staff has identified expenses in the amount of $340,000 that are not eligible to be funded with grant or supplemental funding and require using General Fund monies to cover the cost. These expenses include security services, site improvements, food coordination, fencing, and parking-related expense.
· 800 MHZ Communications System: The 800 MHZ Communications System is administered by the Orange County Sheriffs Department. It was recently projected to cost more than was budgeted when invoices were received after the start of the fiscal year. Therefore, $80,971 is recommended to be appropriated from various funds including the General Fund, Proposition City of Orange Printed on 2/9/2023Page 6 of 7
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Item #: 7.3. 2/14/2023 File #: 23-0090
172 Fund, Sewer Fund, Gas Tax Fund, Water Fund, and Equipment Replacement Fund.
Water and Sewer Fund Fiscal Update
Typically, an update is provided on the Water and Sewer funds in this mid-year budget report.
However, staff will be presenting a rate study at a future City Council meeting and the report will include the status of these funds as well as future projections and overall health of these utility programs.
Early Look At Fiscal Year 2023-24 And Beyond
Our initial analysis suggests the General Fund revenue estimate for FY 24 will be approximately $133.5 million, with expenditure estimates at $133 million. Sales tax revenue is projected to be $52 million, property taxes are anticipated to be $51.5 million, and TOT (Transient Occupancy Tax) is estimated to be $5 million. Expenditures are proposed to increase, mainly due to continued increases in contractual obligations as well as the rising cost of materials due to inflation.
For FY 24, revenues are expected to plateau mostly due to projections for lower sales tax and TOT revenues. Despite these trends, we anticipate Property Tax revenues to remain trending upwards.
Departments will continue to remain vigilant in spending prudently. A more detailed analysis of revenues and expenditures, along with budget balancing strategies, will be discussed at an upcoming Budget Study Session.
7. ATTACHMENTS
· General Fund - Mid Year Report Ending 12/31/22
· Resolution No. 11434
· Resolution No. 11435
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