Economic Factors / Next Year’s Budget
The City prepares an annual budget based on council-set goals and priorities, which contains a multi-year financial plan that focuses on long-term financial viability and allows decision-makers to understand the impact of their policy decisions. Budget development is guided by a series of policies adopted by the City Council, which guides long-term planning, minimum reserve levels, employee compensation, cash and debt management, information technology, and utility rates. The budget was based on these key assumptions:
Property Taxes
Proposition 13 set the Fiscal Year 75/76 assessed values as the base year for future annual inflationary assessed
values, with a growth rate limited to 2% for any given year.
The County Assessor also re-appraises each real property parcel when there are purchases, construction, or other statutorily defined, “changes in ownership”. Proposition 13 limits the property tax to 1% of each property’s full value, plus any additional percentages for specific voter approved indebtedness. The City receives approximately
sixteen cents of every dollar of the property tax paid on properties assessed within the City, with the balance
distributed to the Pacific Grove Unified School District, County of Monterey, and local special districts.
Sales Tax
In April 2022, approximately 60% of voters approved Measure A, a new 0.50% transaction and use tax. This increased the combined sales tax rate to 9.25% in October 2022. The General Fund portion of the City sales tax is comprised of a 1% Bradley-Burns statutory sales tax rate; and Measure U, a 1% transaction and use tax that was approved by voters in 2008. The tax rate increased to 1.5% when Measure A became effective.
Utility Users Tax
The City imposes a utility users’ tax to residents and businesses within the City that utilize water, gas, electricity, telephone, and cable services. This tax is assessed at a rate of 5% of the amount charged by the utility; and it is paid by the person consuming the service. The amount of revenues received is primarily influenced by updates to the underlying rate structures or new development projects.
Transient Occupancy Tax (TOT)
TOT Is a lodging tax that is collected on overnight rental accommodation stays of 30 consecutive days or less. In 2010, the City updated its municipal code and began collecting TOT on residential or short-term rental properties (STRS). In Fiscal Year 17/18, the City approved an ordinance to reduce the number of short-term rentals, with an effective date of April 30, 2019. At the beginning of Fiscal Year 19/20, there were approximately 200 properties, with an additional 12 home-sharing licenses. In November of 2018, 74.9% of voters approved Measure U, allowing the City to increase the TOT rate from 10% to 12%. This new rate became effective on July 1, 2019. This increased tax has been partially offset by Measure M, which eliminated STRS outside of the Coastal and Commercial zones, which became effective in May of 2020.
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Economic Factors / Next Year’s Budget (Continued)
Personnel costs
These are based on approved staffing levels for Fiscal Year 24-25. Impacts of labor agreements effective July 1, 2022, through June 30, 2026, have been included and COLA
adjustments are accounted for in outer years.
Health Costs
Based upon information provided by our health care
providers, the City’s health costs are projected to increase significantly in FY 24-25 and beyond. The budget assumes sharing between the City and employees for any increases in health premiums for future fiscal years.
Pension Costs
Pension rates for FY 24-25 are based on information provided by CalPERS, which assumes that they meet their targeted net discount rate of 6.8%.
Internal Service Funds (ISF) Funding
Funding to the City’s ISFs has been adjusted in FY 24-25 to fund operational and reserve levels for general and worker’s compensation insurance claims. In past years, the City underfunded its ISF reserves to maintain the General Fund reserve levels at 35%, as mandated by Council Policy 400-6 on Budget and Financial Management.
Capital Projects
The City’s adopted capital improvement program (CIP) for FY 24-25 is $2.9 million and $0.5 million for capital outlay. The CIP is designed to meet community needs, with special emphasis on those projects that contribute to the City’s economic vitality and quality of life. Some of the projects and capital outlay funded for Fiscal Year 2024-25 include the following:
Capital Outlay Capital Projects
• IT Network Upgrade • Pedestrian Safety - Central
• Library Upgrades • Pump Station 15.5
• Phone System Upgrades • Street Crack and Slurry Seal
• Door Access Upgrade • Street Rehabilitation
• Patrol Vehicle Purchase • Golf Cart Path Improvements • Police Equipment • Golf Tee Expansion / Renovation
• Fire Equipment • Recreation Trail Improvements
Additional information related to the City’s key revenues, expenditures, and major initiatives are included in the Transmittal Section of this document.
Request for Financial Information
This financial report is designed to provide a general overview of the City of Pacific Grove's finances for all of Pacific Grove's residents, taxpayers, customers, investors, and creditors. This financial report seeks to demonstrate the City's accountability for the money it receives. Questions regarding this report or requests for additional information should be addressed to the Department of Finance at 300 Forest Avenue, Pacific Grove, CA 93950, or visit the City of Pacific Grove webpage at www.cityofpacificgrove.org.
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City of Pacific Grove
Pacific Grove, California
Independent Accountants Report on
Agreed-Upon Procedures Applied to
Appropriations Limit Schedule
For the Year Ending June 30, 2025
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INDEPENDENT ACCOUNTANTS REPORT ON
APPLYING AGREED-UPON PROCEDURES
To the Honorable Mayor and Members of City Council
of the City of Pacific Grove
Pacific Grove, California
We have performed the procedures enumerated below to the accompanying Appropriations Limit Schedule of the City of Pacific Grove, California (the City) for the year ending June 30, 2025. The Citys management is responsible for the Appropriations Limit Schedule.
The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of meeting the requirements set forth in Section 1.5 of Article XIII-B of the California Constitution. These procedures, which were suggested by the League of California Cities and presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution, were performed solely to assist you in meeting the requirements. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.
The procedures and associated findings are as follows:
1. We obtained the completed worksheets used by the City to calculate its appropriations limit for the year ending June 30, 2025, and compared the limit and annual calculation factors that were adopted by resolution of the City Council. We also compared that the population and inflation options included in the aforementioned worksheets were selected by a recorded vote of the City Council.
Finding: No exceptions were noted as a result of our procedures.
2. For the accompanying Appropriations Limit Schedule, we added the prior years limit to the total adjustments, and compared the resulting amount to the current years limit.
Finding: No exceptions were noted as a result of our procedures.
3. We compared the current year information presented in the accompanying Appropriations Limit Schedule to corresponding information in worksheets used by the City.
Finding: No exceptions were noted as a result of our procedures.
4. We compared the prior year appropriations limit presented in the accompanying Appropriations Limit Schedule to the appropriations limit adopted by the City Council for the prior year.
Finding: No exceptions were noted as a result of our procedures.
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To the Honorable Mayor and Members of City Council
of the City of Pacific Grove
Pacific Grove, California
2 We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an audit or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriations Limit Schedule. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.
This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than those specified parties. However, this report is a matter of public record and its distribution is not limited.
Santa Ana, California
January 20, 2025
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City of Pacific Grove
Appropriations Limit Schedule
For the Year Ending June 30, 2025
See accompanying Notes to the Appropriations Limit Schedule. 3 Amount Source
A. Appropriations Limit from FY 2023-2024 $ 47,653,437
B. Adjustment Factors:
1. Growth in City Population 1.0094 State Department of Finance
2. California per Capita Personal Income Growth 1.0362 State Department of Finance
3. Adjustment Factor B1*B2 1.0459
C. Annual Adjustment Increase 2,189,212 A * (B3 - 1)
D. Other Adjustments:
1) Loss reponsibility (-) N/A
2) Transfer to private (-) N/A
3) Transfer to fees (-) N/A
4) Assumed responsibility (-) N/A
E. Total Adjustments 2,189,212 (C+D)
F. Appropriations Limit FY 2024-2025 $ 49,842,649 (A+E) Prior Year appropriations
limit adopted by the City
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City of Pacific Grove
Notes to the Appropriations Limit Schedule
For the Year Ending June 30, 2025
4 Note 1 Purpose of Limited Procedures Review
Under Article XIII-B of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes. Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIII-B, the annual calculation of the appropriations limit is subject to a limited procedures review in connection with the annual audit.
Note 2 Method of Calculation
Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1, 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-87, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.
Note 3 Population Factors
A California governmental agency may use as its population factor either the annual percentage change of the jurisdictions own population or the annual percentage change in population of the county where the jurisdiction is located. The factor adopted by the City for the year ending June 30, 2025, represents the annual percentage change in population for the county.
Note 4 Inflation Factors
A California governmental agency may use as its inflation factor either the annual percentage change in the 4th quarter per capita personal income (which percentage is supplied by the State Department of Finance) or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City for the year ending June 30, 2025, represents the percentage change in California per capita personal income.
Note 5 Other Adjustments
A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity.
The City had no such adjustments for the year ending June 30, 2025.
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Agenda No. 12 B
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Matthew Mogensen, City Manager
MEETING DATE: April 02, 2025
SUBJECT: City Council Review and Discussion of the Legacy Parklet Encroachment Permits and a Motion to Waive Fees for Sidewalk Dining Permits
CEQA: Does not constitute a Project per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
1. Review the City’s legacy Parklet Encroachment Permits
2. Provide staff direction regarding the sunsetting of the legacy Encroachment Permits Motion to waive permit fees for all restaurants that obtain a Sidewalk Dining Permit prior to July 1, 2025
3. DISCUSSION
In 2015, the City experimented with a Parklet pilot program. Happy Girl Cafe was the only restaurant in the City that was interested and obtained an official Parklet Entitlement Permit.
This program was later eliminated, but the Happy Girl Cafe maintains their permit.
After 2020, the City permitted certain restaurants to construct temporary Parklet structures in the City right of way in response to the COVID pandemic shutdown to allow them to continue to operate outdoors. The Parklets were permitted through an annual encroachment permit. At that time, there were no standards or requirements for the Parklet structures. A number of the Parklets established at that time were later removed. A few were removed by the restaurant owner as they no longer served their needs and a few others have been removed and replaced with sidewalk dining amenities. There are a total of six Parklet structures that remain (excluding Happy Girl Cafe).
Central Avenue
1. Vivolo’s
2. Il Vecchio’s
Lighthouse Avenue
1. Juice and Java (Now Meeting House)
2. Nuri Shushi
3. Red House
4. International Cuisine
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Other
Pepper’s (located in City parking lot and will need a unique solution to be brought by staff at a later date)
1. 2. Happy Girl Kitchen (Previously entitled)
The remaining Parklet structures are now 5 years old and are in different states of deterioration. Three of the remaining Parklets are located in parking spaces on Lighthouse Avenue and two are located Central Avenue. Due to the proximity of vehicular traffic, pedestrian/vehicular visibility impacts, maintenance and sanitary conditions of the structures and loss of parking spaces in key commercial districts, the Parklets remain a concern and need of a more permanent solution.
We are approaching the annual renewal deadline of June 30. Renewing the encroachment permits is growing more difficult each year. Staff seeks City Council input as to if the annual permits should be renewed for another year or if the Parklets should now be sunsetted and transitioned to the new Sidewalk Dining the City is promoting.
On November 17, 2024, the City Council approved a Sidewalk Dining Guidelines manual demonstrating the support for restaurants to enjoy outdoor dining options in a more favorable format than the existing temporary Parklets. On February 15, 2025, the City Council approved an ordinance creating a permit for Sidewalk Dining in the Municipal Code. Both of these City Council Actions set the stage for a new sidewalk dining program that staff is now encouraging restaurants to take advantage of.
Many of the restaurants in the City front on sidewalks that are considerably wide and can accommodate sidewalk dining well. Over the last two weeks, the Building Official has been scheduling meetings to discuss the option of the Parklet owner transitioning their outdoor dining facility to the sidewalk adjacent to their building. While some have not been as responsive, others are interested in the City assisting them getting their dining transitioned to the sidewalk.
With the introduction of the new Sidewalk Dining Permit, City staff now needs to work with all restaurants to obtain a permit meeting the City code requirements. In order to encourage all existing restaurants to work with the City to obtain the new Sidewalk Dining Permit and encourage Parklet owners to transition their outdoor dining to the sidewalk, staff if requesting that the City Council consider and approve waiving the Sidewalk Dining Permit fees for all restaurants to obtain a permit prior to July 1, 2025.
OPTIONS
Provide alternative direction.
FINANCIAL IMPACT:
Existing Parklet annual permits cost $300 to renew. The new Sidewalk Dining Permit fee is $905 for a new permit and $300 for the annual renewal. The impact of the City Council waiving the new Sidewalk Dining Permit fee is anticipated to equate to approximately 10 permit fee waivers amounting to approximately $9,000.
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FOCUSED PRIORITY AREA: Not Applicable.
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