TO:
VIA:
FROM:
DATE:
CITY COUNCIL
CITY ADMINISTRATOR
DIRECTOR OF FINANCE
MAY 17, 2022
Placentia Ci
Council
AGENDA REPORT
SUBJECT: STUDY SESSION: PRESENTATION OF THE PROPOSED FISCAL YEAR 2022- 23 GENERAL FUND OPERATING BUDGET
FISCAL
IMPACT: FY2021-22
Fund
General Fund
Special Revenue
Capital Projects
Total
Revenues
(Including
Transfers -In)
$50,000
$81,160
$2,200,000
FY 2022-23 EXPENDITURES: $ 45,277,130
REVENUE: $ 45,482,968
SUMMARY:
$2,331,160
Appropriations
(Including Capital &
Transfers -Out)
$50,000
$81,160
$2,968,998
$3,100,158
In accordance with City Charter Section 1203, the City Administrator must present the Proposed General Fund Operating Budget to the City Council for consideration at least 35 days prior to the beginning of each fiscal year. This item being presented for the City Council's review and consideration is the Fiscal Year 2022-23 Proposed General Fund Operating Budget. Under the direction of the Director of Finance, the Finance Department conducts the analysis and makes projections required to complete the budget document after receiving input from all City departments. A summary of the proposed budget is included in the attached PowerPoint presentation. The complete budget, including all funds and specific detail for each department, will be presented at the June 7, 2022, City Council meeting. Staff requests that the public hearing and budget adoption be scheduled for June 21, 2022.
In addition, included for City Council review are the recommended FY 2021-22 Third Quarter Budget adjustments.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
3.b.
May 17, 2022
City Council Agenda
May 17, 2022
1. Adopt Resolution No. R-2022-34, amending the City's FY 2021-22 Budget to reflect Third Quarter Budget Adjustments.
2. Review and discuss the Proposed Fiscal Year 2022-23 General Fund Operating Budget and provide input and direction for final budget adoption: and
3. Set the date of the public hearing for budget adoption as June 21, 2022, at 7:00 p.m.
DISCUSSION:
FY 2021-22 Third Quarter Adjustments
As we enter the final few months of the current fiscal year, a few adjustments are recommended to finish the fiscal year. For the General Fund, $50,000 is requested to support the need for additional plan check services resulting from the continued high amount of development activity within the city. This cost is completely offset by the corresponding increase in revenues of $50,000.
In special revenue funds, $81,160 is being requested for both expense and revenue accounts for a CalRecycle grant the city received.
The largest adjustment is in the capital projects fund due to the receipt of $2.2 million in federal earmark funding for needed repairs to the Golden Avenue bridge and the corresponding expense appropriations. In addition, adjustments to the capital improvement fund also include increased grant funds received from the Highway Safety Improvement Program (HSIP) for citywide traffic signals.
Modification to the Position Allocation plan includes the addition of a Management Analyst in Community Services to address housing and homeless issues. The position will be funded in partnership with North Orange County Service Planning Area (North SPA) with Placentia contributing fifty (50) percent of the cost of the position and North SPA contributing the other fifty (50) percent. No funding is being requested at this time due to the time required to conduct the recruitment but is included in the Proposed FY 2022-23 budget.
FY 2022-23 Proposed Budget
The General Fund
The General Fund is the primary operating fund of the City and supports fundamental services including Police, Fire & Life Safety, Development Services, Community Services and general administration. Revenue for this fund comes from general taxes such as property tax, sales tax, Measure U, transient occupancy taxes as well as a variety of user and permit fees and other smaller sources. The Proposed Budget for FY 2022-23 for the General Fund is $45.3 million in operating expenses supported by $45.5 million in operating revenue, with an expected increase to fund balance of $205,838.
City Council Agenda
May 17, 2022
General Fund Revenue Highlights
The Proposed FY 2022-23 General Fund Operating Budget includes revenues of $45.5 million, which reflects a decrease of $5.9 million or 12% from the Amended FY 2021-22 budget. This decrease is due to the one-time transfer in of American Rescue Plan Act (ARPA) funds into the General Fund in FY 2021-22. Excluding the transfers, the Proposed FY 2022-23 Budget represents an increase of $3.0 million, or 8% in operating revenue.
Property Tax revenue in FY 2022-23 is projected to be $18,392,934, an increase of $847,234 over FY 2021-22. Increases in property tax are due to a combination of property turnover and resulting reassessments and the two (2) percent per year inflation factor for property assessments allowable under Proposition 13.
Sales Tax, excluding the transfer into the General Fund from Measure U, is projected to increase by approximately 6.5% in FY 2022-23 from the Amended FY 2021-22 budget and totals approximately $8.7 million. This increase is attributable to a combination of sales derived from new businesses within the community, inflation and the impact of the South Dakota vs. Wayfair case. The Wayfair case was decided by the Supreme Court in 2018 and was implemented in California in April 2019. The case, and subsequent state legislation requires online retail sellers to collect and remit sales tax on taxable sales shipped into the state. Revenue from the tax is then allocated to a countywide pool based on the point of delivery of the product purchased. As online shopping has surged in popularity both before and during the pandemic, the City's portion of the countywide pool has increased dramatically and accounted for 18% of the City's total sales tax as of the quarter ending December 2021, down from a high of 21 % for the quarter ending December 2020.
Compared to FY 2021-22 year-end estimates, the Proposed Budget represents a decrease in sales tax of 8%. This figure, developed in partnership with our sales tax consultant, reflects a cautious forecast as the potential impact of inflation, consumer confidence and the overall state of the economy could result in lower sales tax in the upcoming fiscal year. This revenue source will continue to be closely monitored and projections updated throughout FY 2022-23.
Transient Occupancy Tax (TOT). otherwise known as "the bed tax" is tax paid by visitors staying overnight in one of our local hotels. The Proposed Budget assumes $1,370,000 in revenue, 79% higher than the FY 2021-22 Adopted Budget. This large increase is due to a combination of increased travel as the public becomes comfortable travelling post pandemic shutdowns, higher nightly hotel rates as well as a full year of revenue data from the new hotel which opened late spring 2021.
Transfers in are decreasing from the FY 2021-22 Amended Budget due to the one-time transfer of approximately $9 million in American Rescue Plan Act (ARPA) funds from the Covid Relief Fund to the General Fund approved by the City Council at the FY 2021-22 Mid -Year Budget review.
City Council Agenda
May 17, 2022
Per City Council Policy No. 460, after the city has reached the 25% funding level for the General Fund Contingency Reserve, 60% of Measure U funds are to be allocated to infrastructure, 30% transferred to the General Fund for employee recruitment and retention with the remaining 10% transferred to the General Fund for OPEB. Transfers in from the Measure U fund total $2,564,700 for employee retention and $854,900 for OPEB for FY 2022-23.
Fines & Forfeitures are projected to decrease 20% from the prior fiscal year due to the current lack of motor officers in the Police Department and subsequent limitations on issuing moving citations. Once the Police Department is able to staff motor positions it is anticipated revenue in this category will increase.
Intergovernmental revenue is increasing due to anticipation of the one-time reimbursement from FEMA for the City's initial response to the COVID-19 pandemic.
Departments
FY 2021/22
Amended
Budget
FY 2021/22
Year End
Estimates
FY 2022/23 Variance to
Proposed FY21/22
Budget Amended Budget
Property Taxes
Sales & Use Taxes
Other Taxes
Permits
Fines & Forfeitures
Intergovernmental
Charges for Services
Miscellaneous
Total Revenues
Transfers In
Measure U Transfers In
Employee Retention
OPEB
Total Transfers In
Total Resources
$17,545,700
8,138,460
5,850,985
1,929,900
444,200
274,000
1,348,200
2,422,146
$37,953,591
9,996,792
2,604,900
868,300
$13,469,992
$51,423,583
General Fund Expenditure Highlights
$17,103,127
9,414,009
6,367,429
2,153,468
370,758
40,964
990,394
1,633,726
$18,392,934
8,663,690
6,715,400
2,455,000
355,000
540,000
1,305,400
2,520,200
38,073,876 $40,947,624
9,938,002 1,115,744
2,604,900
868,300
$13,411,202
$51,485,078
2,564,700
854,900
$4,535,344
$45,482,968
4.8%
6.5%
14.8%
27.2%
(20.1%)
97.1%
(3.2%)
3.6%
7.9%
(88.8%)
General Fund expenditures are broken into two distinct types- operating and capital. Operating expenses are those required to support the day-to-day operations of the City including personnel expenses, professional services, maintenance expenses and the purchase of needed equipment and are supported by revenue generated in the fiscal year the expenses occur. Capital expenses are one-time expenditures for large purchases such as vehicles, technology upgrades and other
City Council Agenda
May 17, 2022
equipment that has a useful life more than five years and are typically funded with one-time funding sources such as reimbursements or development agreements.
The Proposed FY 2022-23 General Fund Budget includes $45.3 Million in operating expenses and $863,746 in capital expenditures, a decrease of 11% for the General Fund. As with revenues, expenses are decreasing compared to the FY 2021-22 Amended Budget due to the one-time appropriations relating to the ARPA funded projects. Without these appropriations, the budget is increasing by 8%, or $3.1 million. As presented, the Proposed Budget is balanced, maintains or enhances city service levels while fully funding the General Fund contingency reserve at 43%.
Proposed General Fund budgets for the respective departments are listed below:
Departments
FY 2021/22
Amended
Budget
FY 2021/22
Year End
Estimates
FY 2022/23
Proposed
Budget
Variance to
FY21/22
Amended Budget
Legislative
Administration
Finance
Development Services
Police
Fire & Life Safety
Public Works
Community Services
General Government
Debt Service
Total Department Expenses
Capital Improvement Program
Transfers Out
GF CIP Debt Service
Total Expenditures
Significant Changes
$1,139,783
5,369,029
1,291,895
1,519,947
11,925,425
4,011,794
4,366,885
2,509,660
4,388,382
4,752,300
$41,275,098
9,369,120
53,000
428,800
$51,126,018
$881,247
4,920,738
1,130,791
1,424,450
11,050,255
3,632,443
4,241,704
2,121, 824
4,101,935
4,775,180
$38,280,566
9,369,120
315,858
0 $47,965,543
$1,106,000
6,181,121
1,315,900
1,832,500
12,676,393
4,059,700
4,449,440
2,646,380
4,929,200
5,179,250
$44,375,884
863,746
37,500
0 $45,277,130
(3%)
15%
2%
21%
6%
1%
2%
5%
12%
9%
8%
Administration expenses are increasing due to the funding of new positions approved mid -year FY 2021-22. Those positions were not fully funded in FY 2021-22 due to the time needed to conduct recruitments but are completely funded in the proposed budget driving part of the increase. Additional increases relate to staff training and development in line with the City's Strategic Plan.
Development Services increases are caused by the recently approved Resident Rebate Program ($120,000) for residents who purchase vehicles from a car dealership within the City as well as increases in contract plan review services and are offset by revenue generated by these activities.
City Council Agenda
May 17, 2022
Like the positions in Administration, a new GIS Technician was approved mid -year FY 2021-22 without funding. Funding for that position is included in the proposed budget contributing to the increase in the Development Services department.
General Government is increasing due to increases in our insurance premiums including general liability, cyber and worker's compensation.
Position Allocation (Staffing)
The Proposed budget includes funding for 184.0 FTE employees, 33.0 elected or appointed officials as well as authorization for 4.0 FTE overhires in the Police Department and dispatch center. The budget reflects the changes in the Administration Department approved by the City Council at the FY 2021-22 Mid -Year Budget review as well as the addition of 1.0 Management Analyst in Community Services recommended in the Third Quarter budget adjustments above.
In addition, the following changes are included in the proposed budget in the Public Works Department:
1. One new Facilities Maintenance Technician ($83,989 annual cost). This position is needed to keep up with the demand for facility maintenance citywide, particularly for Community Services facilities. Maintaining these facilities is vital to ensuring continued revenue from the rental of these facilities as well as ensuring the safety and enjoyment of the community.
2. Reclassification of a Management Analyst to a Senior Management Analyst ($8,107 annual cost) to better reflect the duties currently being done and the needs of the department.
Salaries and benefits for all positions are increasing in accordance with the recently negotiated memoranda of understandings.
Capital Improvement Program
The City's Capital Improvement Program (CIP) identifies major public improvements to the City's infrastructure over the next several fiscal years and includes new projects, upgrades to existing facilities as well as rehabilitation of streets and roadways. Funding for projects scheduled for the FY 2022-23 are included in the proposed budget, with the majority of the scheduled projects funded by Measure U and other special revenue funds.
The decrease from the prior fiscal year is due to projects supported by the one-time funds from the American Rescue Plan Act (ARPA) in FY 2021-22. The General Fund is supporting a reimbursable grant from Caltrans for a public art project and the use of one-time revenues from the Hamer Island annexation to support much needed citywide computer equipment in the proposed CIP for FY 2022-23. Combined, these projects total $863,000.
City Council Agenda
May 17, 2022
The CIP will be discussed in further detail at the June 7th meeting.
Fund Balance
The estimated beginning fund balance for FY 2022-23 is $20.5 million, of which $17.6 million is designated as General Fund contingency reserve/unassigned. As a result of operations in FY 2022-23, it is anticipated that the fund balance will increase by $266,738 for an ending fund balance of $20.7 million of which $16.7 million is designated as General Fund contingency reserve/unassigned. Based upon a 25% funding target for the General Fund reserve, it is forecasted that the reserve will be funded at 43% of General Fund operating expenses by the end of FY 2022-23.
Estimated Beginning Fund Balance 7/1/22 $20,654,908
Fund Balance Designations
Non -Spendable
Restricted
Section 115 Trust
Contingency Reserve
Unassigned
2022-23 Fund Balance Target
Proposed Budgeted Operating Expenditures
25% FB Target
Percent of Target Met
Budget Adoption
$3,262,084
$556,084
$152,100
$9,799,159
$6,885,482
$39,196,634
$9,799,159
170%
Staff will be presenting the full Budget with department details as well as all other fund budgets and the CIP at the June 7, 2022 City Council Meeting, followed by final adoption at the public hearing on June 21, 2022.
City Council Agenda
May 17, 2022
Reviewed and approved: Reviewed and approved:
Jenn er L'ampman
Director of Finance
Damien R. Arrula
City Administrator
Attachment:
1. Resolution R-2022-34 Authorizing a Budget Amendment in FY 2021-22 for Third Quarter Adjustments.
a. Exhibit A- Detailed Budget Adjustments
2. FY 2022-23 Proposed General Fund Budget PowerPoint Presentation