CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
5/8/2023
1 SUBJECT:
Proposed Fiscal Year 2023-24 Base Budget, budget strategies, and the Introduction of the FY 2023-28 Capital Improvement Plan.
RECOMMENDED ACTION:
Accept the report and provide feedback and direction on the proposed Fiscal Year 2023-24 Base Budget, budget strategies, and the Introduction of the FY 2023-28 Capital Improvement Plan.
STAFF CONTACT:
Yulia Carter, Assistant City Manager
[email protected]
650-738-7301
Kevin Woodhouse, City Manager
[email protected]
650-738-7409
BACKGROUND:
Each year, the City of Pacifica adopts an annual operating budget that reflects the planned activities for the next fiscal year based on the best information available at the time of adoption.
Then, at mid-year, staff revisits the projections and reports to the Council any changes needed to reflect new information and keep the City on track.
On April 10, 2023, staff presented the Narrative Budget report outlining the Budget planning process, methodology, timeline, and long-term financial forecast.
Unlike the forecast leading into the Budget last year at this time, where the City's long-term financial forecast continued to project a significant ongoing structural deficit, this structural deficit has been mitigated by improved post-COVID revenue projections, including increases in property tax, sales tax, and transient occupancy tax but, most importantly, by the passage of a new Measure Y - ½ Transactions & Use Tax by Pacifica voters in November 2022. As a result, the long-term financial forecast now projects a positive outlook with a structurally balanced budget for FY 2023-24 and beyond, with an approximately $1.3 million preliminarily projected surplus (at the Base Budget level) available to meet Council priorities for the upcoming Budget.
DISCUSSION:
This report presents the FY 2023-24 Base Budget reflecting the current level of services and operations; the Introduction of recommended non-discretionary FY 2023-24 Capital Improvement Plan projects that are included with the Base Budget; and the initial Introduction of numerous budget strategies for the proposed FY 2023-24 Budget.
Pacifica City Council 2
May 08, 2023
At the next budget meeting on June 12, specific budget options and recommendations will be brought forward before the final adoption hearing on June 26.
A summary of the FY 2023-24 budget schedule is presented below:
PUBLIC
MEETING
BUDGET STEP TIME FRAME
1 FY 2022-23 Mid-Year Budget Review to Council March 27, 2023 2 Council Workshops: FY2023-24 Strategic Planning,
Goals and Priority Setting
March 4, 2023
April 11, 2023
3 Budget Session 1: Budget Methodology, Budget Calendar, Long-Term Financial Outlook
April 10, 2023
4 Budget Session 2: FY 2023-24 Strategic Plan and Priorities, FY 2023-24 Base Budget and Introduction of FY 2023-28 CIP Program
May 8, 2023
5 Planning Commission: Review of the Proposed FY2023-28 CIP Plan for Conformity with General Plan
June 5, 2023
7 Budget Session 3: City Council Review and Approval of Proposed FY 2023-24 Budget Recommendations, Master Fee
Schedule
June 12, 2023
8 City Council Budget Hearing: Formal Adoption of the FY 2023-24 Operating and Capital Budget
June 26, 2023
FY 2023-24 BASE BUDGET
The goal of a budget process is to develop the City's Budget by completing a full analysis of the City's revenue and current service level expenditures to identify necessary service increase and/or reduction options, which, when combined, will maintain a balanced and sustainable budget.
Staff made a number of revenue and expenditure assumptions in developing the base budget for FY 2023-24. These assumptions were based on known projections and economic conditions and reflected the budget adjustments made by Council during the mid-year budget review. The resulting structural surplus or deficit at the base budget level is critical to discussing departmental or other program funding beyond the baseline to accomplish identified priorities for the upcoming year.
1. FY 2023-24 GENERAL FUND BASE BUDGET
The General Fund is the City's primary operating fund and is used to account for most day-today activities. It receives unrestricted revenues, and the City's general administrative services, public safety, and community development-related activities such as planning, building, and engineering are budgeted in the General Fund. Revenue sources include but are not limited to property tax, sales tax, transient occupancy tax (TOT), business license tax, and current fees for services.
The City's FY 2023-24 General Fund Base Expenditure budget reflects the current level of services and operations. The base budget is not an exact duplication of the prior year's adopted Budget because of actions that the Council may have taken that modified the Budget over the course of the year and, most notably, because of the FY 2023-24 budget assumptions used to develop the base budget further described below.
Tonight's report presents the FY 2023-24 General Fund Base Revenue Budget of $48.3 million and Base Expense Budget of $47.1 million, leaving a structural surplus of $1.25 million. This Pacifica City Council 3
May 08, 2023
surplus is primarily resulting from the passage of the ½ cent transactions and use tax (Measure Y) by Pacifica voters in November 2022. Other contributing factors include the post-pandemic recovery of general revenues and a slight reduction in the PERS UAL payment. The prior year's funding for one-time projects have been removed also resulting in slight reduction in contractual services. The summaries of the General Fund Base Budget Revenues and Expenditures are provided in Attachments 1 and 2. The baseline revenues are built on information previously presented during the City's long-term financial outlook discussion. In coordination with other City departments, Finance developed the FY 2023-24 Base Budget assumptions to include all previously approved items by the City Council and factoring in inflationary conditions.
Despite the fact that the FY 2023-24 Base Budget revenues will no longer include the $4.6 million ARPA allocation, the decrease in the Base Budget revenues is only $2.3 million, or 4.6%, over the Mid-Year Revised FY 2022-23 Budget and not the entire ARPA difference. This is, again, primarily due to projected Measure Y revenues. Total FY 2023-24 Base Budget expenditures increased by $1.3 million or 2.8% over the Mid-Year Revised FY 2022-23 Budget level. As a reminder, the base budget reflects current levels of service and current projects and does not factor in yet the cost of enhanced services or new programs.
Below are some key assumptions applied to the FY 2023-24 Base Budget.
FY 2023-24 Base Budget General Fund Revenues Assumptions Revenue estimates have been modified based on the most current information available from department feedback, external sources, and further analysis.
The following revenues are projected to reflect significant changes over FY 2022-23:
• Property Tax is the City's largest revenue source. Historically, Pacifica's property tax base has only very slowly expanded. For the FY 2022-23 Budget, property taxes comprise approximately 31% of City General Fund revenues. Both secured and unsecured property taxes are levied based on the assessed real property valuation (the basis for property tax levy) as of January 1, 2023. The FY 2023-24 property tax revenues are projected at $16.2 million or $1.8 million (4.2%) above the FY 2022-23 Mid-Year Revised Budget of $15.6 million based on the information provided by the County and HdL, the City's property tax consultant.
• Charges for Services is the second largest revenue category that includes building, planning, other permits, recreation revenues and rentals, fines, and reimbursements.
The building and planning revenues are projected to increase based on the current activity level and CPI factors. Overall, this category shows an increase of $670,602, or
8.4%.
• Vehicle License Fee (VLF) in Lieu is the third largest revenue category. Through the State, there has been insufficient ERAF to fund the VLF in Lieu allocation for FY's 2019- 20, 2020-21, and 2021-22. Staff has previously reported to the Council a projected loss (delay) of this major revenue stream currently owed to the City by the State. In the past, the State has backfilled the VLF shortfall, but the State's payment lags two years behind the shortfall year. The state did pay the shortfall for FY 2019-20 and 2020-21 totaling $2.1 million, most of which occurred in this current fiscal year 2022-23. As of now, however, the governor's current Budget does not include a true-up for FY 2021-22 ($691,185) due to be paid back to the City in FY 2023-24. Therefore, the VLF category shows a decrease of $1.5 million compared to FY 2022-23 due to the large payback in the current FY 2022-23 and no shortfall backfill planned by the state in FY 2023-24. • Sales Tax is the City's fourth-largest revenue category. Based on discussions with the City's sales tax advisor and sales tax projections prepared by HdL the local sales Pacifica City Council 4
May 08, 2023
activities forecast is expected to show slightly better performance than initially expected.
This is due to an increase in the Restaurants and Hotel category of 2.5% and the State / County pool allocation for online sales increasing 4.3% over the FY 2022-23 projections.
The biggest offset is projected to occur in the Fuel and Service Stations industry group with a decrease of 7.7%. Total sales tax is estimated at $3.4 million, an additional 1.3% increase over the Revised FY 2022-23 Budget.
• Measure Y is a ½ cent Transaction & Use Tax that was passed by the voters in the City of Pacifica in November 2022. The tax became effective April 1, 2023 and FY 2023-24 will be the first full year of collections. HdL projects this revenue to be $2.8 million in FY 2023-24. This revenue source is now the fifth-largest revenue category. • Other Categories are broken out into Utility Users Tax (UUT) ($2.7 million), Transient Occupancy Tax ($2.7 million), Cannabis Operations tax ($0.8 million), Business License Tax ($0.5 million), other taxes ($1.7 million) and Intergovernmental ($2.3 million). The FY 2023-24 base budget was built on the historical averages, economic trends and the prior year's returns. Intergovernmental revenue category decreased by $4.6 million as a result of the end of the ARPA funding.
• Other Taxes project a significant drop of $0.4 million or 25% over the FY2022-23 Revised Budget due to recent ruling on the State Supreme Court that put all California cities Franchise Fees at risk unless the fee can be justified and directly tied to the associated cost. Because the Court ruling coincided with the City's negotiations of the Recology Franchise agreements, the City was able to identify this cost in accordance with the ruling standards based on the recently completed Refuse Vehicle Impact Study.
The study identifies $421K of City cost for streets. However, this portion of the Franchise Fees now must be used solely for street maintenance and therefore will be shifted out of the General Fund and directly deposited in the Street Improvement Fund. • Operating Transfers In include transfers from the Gas Tax and Street Construction Fund to pay for Public Works street maintenance staff in the General Fund. The amount is unchanged from the prior year.
FY 2023-24 Base Budget General Fund Expenditures Assumptions Total General Fund Base Budget expenditures are projected at $47.1 million at the Base budget level, $1.3 million or 2.8% less than the FY 2022-23 Revised Budget. Operating Expenses are set consistent with the prior year's actuals and Mid-Year Revised budget adjustments and account for expected inflationary increases.
Attachment 2 demonstrates the General Fund expenditure estimates for FY 2023-24 at the Base Budget level. Below are the key base budget expenditures assumptions:
• Salary and Benefits projections include funding for 185.25 full-time equivalents (FTE) positions citywide at 100%. Funding for part-time positions is consistent with the prior year's allocation. Overall, salaries and benefits increased by $155k compared to the FY 2022-23 mid-year revised Budget. The increase is minimal primarily due to decreases in CalPERS UAL payment due to appreciation of the market value of the assets as a result of favorable investment market conditions by CalPERS. The gains in the market value of the assets directly reduce the total unfunded liability and are amortized over a 20-year period. The annual UAL payment is also reduced by year one of the 20-year amortization of the gain.
• Vacant positions are budgeted at the top step with the "employee plus one" cafeteria plan assumption for health benefits. Projections also include merit increases for eligible staff members on their performance review dates.
• No assumption is made for ongoing annual increase in the employee compensation as the City is currently in labor negotiations with all labor groups. Once the new Memoranda of Understanding (MOU) terms and provisions are in place this category will be revised Pacifica City Council 5
May 08, 2023
at the mid-year.
• FY 2023-24 PERS retirement rates are budgeted as provided by CalPERS for classic miscellaneous and safety members and Public Employees' Pension Reform Act (PEPRA) rates for miscellaneous and safety employees without prior municipal experience or who have had a break in service.
Employer Plan FY 2023-24
Miscellaneous 12.75%
PEPRA Safety Fire 13.54%
PEPRA Safety Police 13.54%
Safety Fire 24.15%
Safety Police 27.11%
• PERS Unfunded Accrued Liability (UAL) payment is budgeted at $4.8 million for Safety and Miscellaneous employees, a decrease of approximately $320,000 or 6%; An additional contribution to the 115 trust administered by Public Agency Retirement Services (PARS) of $167,500 is included to help fund the City's pension obligations in accordance to the Pension Funding Policy; A continuing contribution of $200,000 to PARS is budgeted to fund OPEB unfunded liability, consistent with the Council funding strategy #5 approved in April 2022.
• Most Professional Services contractual obligations were increased by 2% over the FY 2023-24 Revised Budget to account for regular inflationary increases unless the further cost increase was noted and factored into the Budget by operating departments. This Category shows a 13.5% decrease primarily because of removal of a large one-time legal settlement in the City Attorney's Office included in the FY2023-24 Revised Budget and from moving the General Liability expense to the General Liability Internal Service Fund. A transfer to the General Liability Insurance Fund has been correspondingly increased.
• Similarly, most of the Material, Supplies, and Maintenance category assume a modest 1% increase. However, this budget category decreased by 1.3% from the FY 2022-23 Mid-Year Revised Budget primarily for the reduction of the election costs in the City Clerk division of the City Manager's Office.
• Operating Transfers Out Category accounts for a transfer to the Debt Service Fund to fund Pension Obligation Bonds, and other debt obligations and accounts for transfers to the General Liability Internal Service Fund. Overall, this Category projects a net increase of approximately $781,800 primarily due to increases in the transfer to the General Liability Internal Service Fund to cover general liability premiums, self-insurance claims, risk management staff costs, and related risk management legal costs. The Risk Management premium increased by nearly $0.4 million or 13% compared to the current year primarily due to significant property insurance cost increase in the unstable postpandemic insurance market. • Capital Transfers Out Category does not have any allocation in FY 2023-24, because the new CIP projects are funded outside of the General Fund.
Projected Fund Balance Structure - General Fund
The structural deficit reported by staff last year has been mitigated by improved post-COVID revenue projections, and most importantly, by passage of a new Measure Y - ½ Transaction & Use Tax in November 2022.
Because of this important decision by Pacifica's voters to enact locally controlled funding to help fund city services, the City's long-term financial outlook no longer projects the ongoing structural deficit of approximately $2.7 million reported last year. On the contrary, it displays a positive outlook for a structurally balanced budget for FY 2023-24 and beyond, with nearly $1.3 million of projected surplus available to meet Council priorities for the upcoming Budget.
Pacifica City Council 6
May 08, 2023
FY 2021-22
Actual
FY 2022-23 MidYr. Revised
Budget
FY 2023-24
Proposed Base
Budget
Revenues:
Operating Revenues $42,450,605 $49,546,470 $47,054,900
Operating Transfers In 1,130,919 1,130,900 1,291,900
Total Revenues 43,581,524 50,677,370 48,346,800
Operating Expenditures :
Operating Expenditures 38,082,061 45,330,846 43,866,926 Operating Transfers Out 2,105,875 2,445,381 3,227,200
Capital Transfers Out 3,000,000 655,000 -
Total Operating Expenditures and Transfers 43,187,936 48,431,227 47,094,126 Surplus (Deficit) 393,589 2,246,143 1,252,674
Again, the numbers presented in this report only reflect the current Base Budget level of services with funding of non-discretionary capital projects. It does not consider the implementation of budget strategies and other recommendations by the City Manager that will be brought forward at future budget meetings for more in-depth discussion and the Council's direction on how to reach a balanced and sustainable budget at a desirable level of services.
CAPITAL IMPROVEMENT PROGRAM
Due to the City's limited capital funding sources and limited staff capacity to manage major capital projects, the FY 2023-24 CIP Program recommendations are only limited to projects with grant funding sources, legally mandated projects, or projects that pose an immediate threat to public health and safety. These projects are considered non-discretionary.
Below is a preliminary list of new non- discretionary projects proposed for FY 2023-24 funding included in the Base Budget:
General Capital Projects:
1. Sharp Park Priority Development Area (PDA) Access Pedestrian Improvement Project - 2.3m - Project will construct ADA improvements on Paloma, Carmel and Santa Maria and a bike boulevard on Paloma.
2. FY 2022-23 Pavement Resurfacing Project - $2.2m - Project will rehabilitate the pavement along roads designated in the 5-year paving plan. It will also include pavement grinding for base repair as well as installation of thermoplastic traffic striping, markings and pavement markers.
3. FY 2023-24 Concrete and ADA Improvement Project - $310k - Improvement of ADA curb ramps in the vicinity of the yearly resurfacing project and associated sidewalk sections.
4. Fire Station 72 Painting Project - $50k - Painting and priming of the exterior of Fire Station 72 including repair/replacement of damaged siding and facade.
5. Fire Station 71 Roof Repair Project - $200k - Re-roofing of the station is needed to stop leaks into the building and prolong building life.
6. Old WW Treatment Plant Garage Roof Repair Project -$50k - Garage is used to store equipment and roof needs repair to prevent failure.
7. Anza/Arguello Interim Storm Drain Upgrade Project - $350k - Provide interim upgrades to the stormdrain system around the Anza/Arguello area to lessen the possibility of flooding in the area while City pursues grant funding for recommended SDMP lower Linda Mar project.
Pacifica City Council 7
May 08, 2023
8. Frontierland Park Grading and Pathway Project - Grade and pave pathway at park parking area to allow for ADA access.
Wastewater Projects
9. Linda Mar Stormwater Pump Station Rehabilitation Project - $350k - Repair and rehabilitate equipment for the stormwater pumping system.
10. Pump Stations SCADA and PLC Upgrades - $100k - Upgrade the Supervisory Control and Data Acquisition (SCADA) and Programmable Logic Controller (PLC) Systems at the Pump Stations. Other upgrades needed will be to improve the communication between the Plant and pump stations.
The following continuing non-discretionary Projects are currently underway and will require additional funding in FY 2023-24:
General Capital Projects
1. School Crosswalk Beacon Replacement Project - $200k - In 2014, in-ground roadway lights and flashing signs were installed at five schools. Those systems now have maintenance issues and failures. Standard signs have changed, and thus, replacing those with Rectangular Rapid Flashing Beacons is recommended for this project.
2. Community Center Improvements - $130k - Ongoing maintenance & improvements needs that include flooring replacement and painting.
3. Civic Center Facilities Rehabilitation Project - $600k - The February Civic Center Update discussed substantial project change orders due to preexisting building damage, such as rot, that was discovered after removing the exterior of the building. Damaged stud replacements required foundation changes to meet current building code. The Update noted that delay/damage costs are ~$600k, using the majority of the City's $750k project contingency. Although the requested contingency was on the low side at 8% (typically 10% or greater), staff was hopeful the project could be completed for this amount. The project schedule has also been pushed out until the late fall, which will require added architectural services. Funds will cover change orders and architectural services.
4. San Pedro Creek and Pacifica State Beach Total Maximum Daily Load (TMDL), Monitoring Plan and Best Management Plan - $61k - This project allows for bacteria monitoring for San Pedro Creek by Pacifica State Beach as required by the state Water Board.
Wastewater Projects
5. CCWRP Building Elevator Assessment - $50k - The building elevator operation has been requiring servicing visits more frequently over the past year. The purpose of this Project is to assess the current condition and determine how to move forward.
6. Forcemain Condition Assessment - $75k - Perform sanitary sewer forcemain condition assessment.
7. Linda Mar Pump Station Rehabilitation and Repair Project - $1.065m - Replace outdated and aging electrical and instrumentation components at the Linda Mar Pump Station. The project includes replacing components such as MCC panels, breakers, switches, level control devices, and flow meters, and adding new jockey or smaller pump to improve wear and tear on bigger pumps and increase efficiency.
8. Collection Systems Project - $250k- Various projects to repair and/or replace the aging sewer mainlines around the City. Location will be determined and evaluated annually.
9. Lateral Grant Assistance - $200k - The City continues to embark on implementing a voluntary private service lateral replacement program to reduce the addition of I&I from defective private service laterals.
Pacifica City Council 8
May 08, 2023
10. Relocation of Sewer Mainline SF RV Park - $300k - Relocate sewer mainline at SF RV Park to City Public right-of-way. The project is multi-year and is estimated to cost around $4 million which includes acquiring coastal development permit from the Coastal Commission, engineering design and construction. For FY 23-24, the scope is to complete a preliminary design and start the coastal development permit process.
11. CCWRP Centrifuges - $75k - Ongoing part replacements and rebuild of the existing 2 centrifuges as needed.
12. CCWRP Pump Replacement - $50k- Ongoing purchase to replace aging pumps, valves and motors for the Calera Creek Water Recycling Plant.
13. Calera Creek Wetlands Maintenance - $100k - Ongoing maintenance for the restored Calera Creek wetlands and frog ponds.
14. CCWRP Roof Improvements - $70k - Install topcoat over the existing deck coating of the CCWRP roof to prevent leaks in the building and prolong useful life of roof and building.
15. CCWRP R&R Project - Sand Filter Upgrade - $200k - This project will upgrade the original sand filter system at the Calera Creek Water Recycling Plant. Upgrades will include new PLC and new backwash programing, and new underdrains.
16. CCWRP R&R Grit System Upgrade - $100k - Project will include Rehab/Replacement of Grit Chamber, Grit Pump Grinder, Grit Pump and Grit Classifier.
17. CCWRP Rehabilitation and Repair Project - $50k - The CCWRP is more than 20 years old and a Condition Assessment has identified equipment and processes in need of replacement, rehabilitation or enhancement, and staff will prioritize projects that need to commence this fiscal year.
18. Ultraviolet Disinfection System Upgrade - $3m - This project will replace the aging ultraviolet disinfection system. The Project includes design, UV equipment purchase, construction which will also include temporary UV.
19. CCWRP Electrical Condition Assessment and Improvements - $825k -The Plant electrical system has been updated as needed but is aging with some existing replacement parts no longer available. The Project conducted a condition assessment of electrical systems including backup generation. Several critical projects were identified, and staff will prioritize projects that need to commence this fiscal year.
20. CCWRP Environmental Compliance Project - $25k -On-going needs to address environmental compliance related issues.
21. Lower Linda Mar (I/I) Rehabilitation and Repair Project - $3.5m -The Project will replace approximately 16,000 LF of sewer main and appurtenances in Lower Linda Mar area.
22. Rockaway Pump Station Rehabilitation & Repair - $100k - Ongoing replacement of old equipment in the Rockaway Pump Station including wastewater centrifugal pumps and motors, and emergency generator.
Staff has identified probable funding sources for these projects in Attachment 4. These include Federal and State Grants, County contributions, Gas Tax, and various other tax measures.
Other projects are funded from various Fund balances. Some of these include the Roy Davies, Frontierland Remediation and Disaster Accounting Funds. All projects referenced above and in Attachment A are already included in the Base Budget. However, once the Council provides additional direction regarding this list or other CIP projects, staff will incorporate the final FY 23- 24 CIP Budget recommendations in the complete five-year CIP program.
Discretionary projects, rollover projects that were not started last year due to staffing constraints, on-going non-discretionary projects not requesting new funding and projects awaiting FEMA review are included in Attachment 5.
During the mid-year budget discussions, the City Manager recommended allocating $650k to Pacifica City Council 9
May 08, 2023
arterial/collector street resurfacing on streets not included in the City's 2020 5-year Street Maintenance Program. Council requested delaying this discussion until undertaking a full discussion of the CIP program related to Budget. Staff will incorporate the Council's direction on how to allocate these funds in the Proposed FY 23-24 CIP Budget that will be presented on June 12, 2023.
OTHER FUNDS - BASE BUDGET
The Base Budget revenue and expenditure for all other funds have also been updated and are summarized in Attachment 3. This includes all the Special Revenue, Debt Service, Enterprise, and Internal Service Funds. The full budget discussion will include "All Funds," which we typically divide into the General Fund (the majority in terms of dollars and completely discretionary) and Other Funds (largely designated for specific purposes) as well as the Capital Budget (significant projects expected to begin or continue in 2023-24). The Base Budget numbers include the CIP budget allocations.
Staff used the same basic assumptions for all other funds to factor in 2% cost of living increase for the contract services category and 1% for material, supplies, and maintenance.
Enterprise Funds consist of Sewer/Wastewater and Beach Parking funds. Enterprise funds are used for services that are financed and operated as a private business enterprise. The FY 2023- 24 total enterprise funds base expense budget is $29.1 million, which is 28% of the City's overall Budget. Sewer funds are used to account for sewage collection, treatment, major replacements, and maintenance and protection improvements to the sewer system. Sewer charges of $18.7 million are based on a 3.5% rate increase in FY 2023-24. The sewer operating expenditures include the same inflationary base budget assumptions. The Salaries and Benefit costs of approximately $5.5 million are based on 15 FTE allocated to the Sewer Fund and include all current MOU provisions. The Beach Parking Fund is used to account for parking services to residents and visitors. The Enterprise Funds revenues are projected at $19.3 million, which is in-line with the FY 2022-23 Revised Budget.
Special Revenue and Capital Funds are used to account for specific revenue sources or financial resources for which expenditures are restricted by law or administrative action to specific purposes. This Category includes Gas Tax and Streets Funds, General Capital, Drainage, Housing in-lieu, Parking in-Lieu, Park in-Lieu, PB&R Special Revenue and Roy Davies Trust, Disaster Accounting, and other funds. The FY 2023-24 expenditures of $15.8 million for this Category represent around 16% of the City's total Budget.
Internal Service Funds serve the needs of the City and are used to account for Citywide services on a cost-reimbursement basis. These funds accommodate the motor pool, employee benefits, and risk management needs of the City and are supported by the funds that receive benefits. The FY 2023-24 budget for this Category is $5.0 million, which is 5% of the City's Budget.
Debt Service Fund is used to account for long-term debt obligations. The FY 2023-24 budget for the debt service category is based on the updated debt service schedule. The FY 2023-24 budget for this Category is $2.5 million, which is 3% of the City's Budget.
PRELIMINARY BUDGET STRATEGIES FOR FY 2023-24 BUDGET
The Council's input on the following recommended budget strategies will help guide the development of budget recommendations for FY2023-24 that achieve the Council's Strategic Plan Goals and Strategies and continue providing exceptional City services to the Pacifica Pacifica City Council 10 May 08, 2023
community. This year's recommended strategies are organized and presented within the framework of the City Council's Strategic Plan.
➢ Council Goal #1: Enhance organizational and fiscal stability. This goal includes the following three Council Priority Strategies, in addition to ongoing, non-discretionary or previously initiated projects and services that enhance organizational and fiscal stability.
A. Improve staff retention and recruitment and increase staffing for rising workloads.
B. Consider possible tax and bond measures for 2024.
C. Prioritize implementation of the Economic Opportunities Study.
Recommended Budget Strategies:
Strategy #1: Utilize funding strategies that minimize General Fund impact to augment professional staffing.
As in previous years, without sufficient operating revenue surplus, it is challenging for the City to add new positions. However, staff is working on identifying several staff-augmentation strategies to help deliver projects and services effectively. These strategies will be presented more comprehensively in the next Budget Session, but are generally described here to receive initial Council feedback:
1. Fund Interns/Fellows - Lower-cost and temporary positions, such as interns/fellows, can be an effective way to augment staff work. Developing younger employees through these placements is also a great training and recruitment tool for potential future full-time employees;
2. A full-time Capital Project Manager's time can be charged to funded capital projects, which often have funding sources other than the General Fund, thus reducing General Fund impact;
3. With an anticipated increase in private development applications, budgeting for additional contract planning staff services may be warranted and would be reimbursed by private applicants;
4. The Short-term Rental Program is an expensive and time-consuming program to administer, requiring significant staff resources from Code Enforcement, Planning, Police, Finance, and the City Manager's Office. Implementing an STR Permit Fee to cover these costs would generate annual revenue to augment staff resources related to the program.
Strategy #2: Continue to build the City's Reserve Funds due to future financial uncertainties concerning the Vehicle License Fee In-lieu payments from the state.
Prior to FY2018-19, the Council approved revisions to the City's Reserves Policy and began funding Reserves. The Reserves Policy states:
"…the City has established certain financial reserves to protect the City against unexpected interruptions in revenues, the vulnerability of State actions, adverse economic conditions, unpredictable one-time costs, and exposure to natural disasters and emergencies." Due to the Governor's decision in his proposed Budget for FY2023-24 to not back-fill vehicle license fee in-lieu payments the state owes San Mateo County and cities, the City Manager recommends prudently planning for future shortfalls by maintaining General Fund reserve amounts that can back-fill these losses. The FY 2023-24 Base Budget does not include a backfill amount of $691,185 that is due from the State. Although, there is a possibility that the Pacifica City Council 11 May 08, 2023
State will revise its Budget in the May's review, these payouts to cities are not included in the preliminary Budget. All San Mateo County cities have been aligned in the coordinated advocacy efforts to oppose this issue. Staff will update the Council as more information becomes available.
➢ Council Goal #2: Improve and steward City infrastructure and facilities. This goal includes the following four Council Priority Strategies, in addition to ongoing, nondiscretionary or previously initiated projects to improve and steward City infrastructure and facilities.
A. Complete selected stormwater and flooding improvements citywide.
B. Advance the Beach Boulevard Resiliency and Esplanade Protection Projects.
C. Pursue planning and financing for the Library projects.
D. Develop a Facilities & Equipment Plan for Public Safety and the Community Center.
Recommended Budget Strategies:
Strategy #3: Additional funding for the Civic Center Project.
Completion of the Civic Center project is related to Improving City Facilities as well as Council Goal #1, Organizational Stability. As discussed with Council in the Civic Center Update for February 2023, the City has experienced substantial contractor charges due to preexisting building damage, such as rot, that was discovered after removing the exterior of the building.
Additionally, changes were also required to the foundation to meet current building codes because of the amount of wood damaged studs that needed to be replaced. The update noted that delay and damage costs at that time were anticipated to reach $600k, using the majority of the City's $750k contingency for the project. Although this contingency was on the low side at 8% (10% or greater is typical for complex projects), staff was hopeful the project could be completed under this amount. Due to storm delays and other factors, the project schedule has also been pushed out for completion until the late fall instead of June, which will require additional architectural services to support the project during this extended time frame.
Therefore, the City Manager is recommending an additional one-time $600k out of the available Disaster Accounting Fund Balance to cover both project related change orders and anticipated needs for architectural services.
Strategy #4: Capital Improvement Program Funding for Priority Storm Drainage and Streets Projects.
The City Manager recommends allocating the anticipated $650,000 in Measure Y revenue collected during this fiscal year from April 1, 2023, through June 30, 2023, towards additional priority streets paving projects. Because this additional revenue was not anticipated when the FY2022-23 Operating Budget was adopted last year, it is available as one-time revenue that can be applied to CIP Priorities, such as streets paving projects. In addition, the proposed CIP also identifies priority storm drainage projects, such as the Anza/Arguello Interim Storm Drain Upgrade project. Due to the storm/disaster-related nature of flooding this area, the City Manager recommends allocating $350,000 from Fund 38, the Disaster Accounting Fund, toward this project. A balance of approximately $ 10 million is projected to remain in Fund 38, reserved for other disaster/storm damage response projects.
➢ Council Goal #3: Prioritize protection and development of affordable housing. This goal includes the following three Council Priority Strategies, in addition to ongoing, non- Pacifica City Council 12 May 08, 2023
discretionary or previously initiated projects and services that prioritize protection and development of affordable housing.
A. Complete the Housing Element Update.
B. Update the Short-Term Rental Ordinance.
C. Prioritize Housing Element program implementation.
Recommended Budget Strategies:
Strategy #5: Reprioritize a portion of Excess Educational Revenue Augmentation Funding (Excess ERAF) toward funding for affordable housing.
Excess ERAF revenue is not considered a stable ongoing source of annual revenue, and is therefore allocated as one-time funding in every year it is received as follows:
• $83,000 toward the Pacifica Resource Center
• $5,000 toward the Pacific Beach Coalition
• Remaining balance received toward Fund 38 (Disaster Accounting Fund) • Occasionally a share of Excess ERAF has been allocated toward other essential capital projects, such as the Civic Center project last year Due to the Council's emphasis on Affordable Housing in this year's Strategic Plan, the City Manager recommends splitting the remaining balance, following allocation to the NGOs, between Fund 38 and the Housing In-lieu fund (or a different housing fund to be established) for future potential affordable housing projects. Excess ERAF Revenue is projected to be $3.5 million during FY2023-24, therefore $1.75 million would go into Fund 38 and another $1.75 million into an affordable housing fund.
➢ Council Goal #4: Pursue climate change adaptation and mitigation. This goal includes the following three Council Priority Strategies, in addition to ongoing, non-discretionary or previously initiated projects to pursue climate change adaptation and mitigation.
A. Update the Climate Action and Adaptation Plan, including performance targets.
B. Continue the urban forestry/tree canopy inventory and projects.
C. Update Pacifica's Local Coast Plan and improve relations with the Coastal Commission.
Recommended Budget Strategies:
There are no specific budget strategies recommended related to this goal other than the operating and project budgets and grant opportunities necessary to carry out the completion of the Climate Action and Adaptation Plan Update, the City Tree Program Evaluation, other Capital Improvement Projects related to solar and electric vehicle charging stations and completing the certification process for Pacifica's Local Coastal Plan through the Coastal Commission. ➢ Council Goal #5: Broaden public communications and collaboration. This goal includes the following two Council Priority Strategies, in addition to ongoing, nondiscretionary or previously initiated projects to broaden public communications and collaboration.
A. Creatively and appropriately leverage community expertise and volunteers to advance City priorities.
B. Communicate available mental health resources to community with increased education and connections.
Recommended Budget Strategies:
Pacifica City Council 13 May 08, 2023
Strategy #6: Allocate a specific amount of training, conference, and travel funding for each Councilmember to be transparent to the public and equitable amongst Councilmembers about funding for professional development activities.
A best practice for equitably managing use of training, conference, and travel funding use is to designate a specific amount to each Councilmember, allowing individual members to prioritize how they would like to apply their allocation throughout the year. As a starting recommendation, and bearing in mind the City’s resource limitations, the City Manager recommends a budget of $7K per Councilmember per year, with new Councilmembers allocated an additional $3K for their first year. This amount would total to a City Council training, conference, and travel budget of $38K/year. It is to be noted that conference registrations, hotel charges, and travel costs have increased significantly in recent years, such that a three-day conference in southern California could easily cost $2,000-3,000.
To develop a balanced and sustainable budget, staff will further define the strategies above to bring back at future budget sessions. Staff is seeking Council feedback on the budget strategies recommendations. Council's feedback will be integrated into a specific work plan for the upcoming year.
NEXT STEPS
At the next meeting on June 12, 2023, staff will be presenting the proposed FY 2023-24 Operating budget. All departments are currently working on their budget recommendation for service changes that will be submitted to the City Manager in order of department priorities.
Over the next few weeks, the City Manager will meet with each department to review and discuss their requests and ultimately formulate a plan for the balanced FY 2023-24 budget. FY 2023-24 Budget recommendations will be based on many factors, including the Council's strategic vision and service-level impact on the overall City operations and services provided to the community.
FISCAL IMPACT:
There is no action associated with this item; this is an informational presentation only with Council comments being sought to help guide preparation of the Proposed Budget for future Council consideration.
ORIGINATED BY:
City Manager's Office
ATTACHMENT LIST:
Attachment 1 - General Fund Baseline Budget Revenues Summary (PDF) Attachment 2 - General Fund Baseline Budget Expenditures Summary (PDF) Attachment 3 - Fund Balance Summary (PDF)
Attachment 4 - FY 2023-24 Recommended Non-Discretionary CIP Budget (PDF) Attachment 5 – Other Active CIP Projects (PDF)
Attachment 6 - Unfunded Pension and OPEB Liability Funding Strategy (PDF)