CITY OF POMONA
COUNCIL REPORT
March 30, 2022
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer SUBJECT: Fiscal Year 2022-23 General Fund Preview
RECOMMENDATION:
It is recommended that:
A Preview of the Preliminary FY 2022-23 General Fund Budget is presented to the Mayor and City Council to receive feedback for the FY 2022-23 General Fund Budget.
Residents and Businesses are encouraged to provide feedback on the FY 2022-23 General Fund budget during public comment.
Mayor and City Council receive and file a recommendation from the Citizens Oversight Committee (COC) regarding the FY 2022-23 General Fund Budget as it relates to the COC responsibilities to provide written reports as part of their role monitoring the City of Pomona’s Measure PG sales tax revenue.
Fiscal Year 2022-23 General Fund Preview
This Fiscal Year 2022-23 General Fund Budget Preview provides the community a current “snapshot” of the City’s forthcoming General Fund budget based on early projections of all revenues, and anticipated expenditures for all General Fund Departments, including personnel costs estimated to date. By sharing this information, the hope is presenting this financial picture will assist in determining prioritization of ongoing and future services to constituents and the City Council. In this preview, staff will present a financial picture to allow the City Council to give any direction on goals and priorities they would like included in the forthcoming budget, as well as insure the continuation of operational and capital expenditures is included, and attempt to find what resources can be appropriately allocated to accomplish these initiatives. Another preview will occur on April 6,, 2022 at 3:00 pm and will cover the same presentation given on March 30, 2022 with the ultimate goal to hear feedback from as many citizens during both study sessions.
After receiving feedback from the City Council on public priorities and objectives, the Finance Department will work in cooperation with all City Departments to formulate further in depth revenue and expenditures projections for the upcoming fiscal year. From this, the individual Departments will use the projected revenues to prioritize and recommend the next fiscal year’s priorities, while keeping in mind the constraints of the City’s committed General Fund reserve balance, inflation, and a conservative fiscal approach.
The City Manager and the Finance Department are in the process of reviewing each budget proposal, revenue assumptions, and all current financial obligations before preparing the proposed document for the City Council which will be presented via a study session on May 9, 2022. The City Council reviews the proposed budget at a public hearing scheduled for the final adoption to occur at the first City Council meeting of June, scheduled for June 6, 2022.
At this time a preliminary FY 2022-23 General Fund Budget is listed as follows:
The preliminary FY 2022-23 General Fund budget displays a projected deficit of $6.5M. The overall financial picture shows General Fund revenues are higher overall by $3M, while expenditures are projected to increase $11M compared to FY 2021-22 amended budget at this time. What is important to note is while revenues are anticipated to increased by $3M overall, the categories of Property Tax and Sales Tax making up 60% of General Fund revenues are projected to increase by $6M when comparing the two fiscal years. Utility Tax (represents 12% of General Fund revenues) will increase $443k, and Other Taxes category makes up another 9% of General Fund revenues is projected to increase $3.7M. Of this $3.7M increase, the key revenues contributing to this include:
$1.7M Cannabis Business Tax (Measure PC)
$1M Transient Occupancy Tax
$660k Business License
$250k Property Transfer Tax
$100k Franchise Fees
In total, these four major categories described above represent an increase to the General Fund of $10.2M. The significant offset to these increases is a reduction of $7.1M in the Other Sources category, which includes the $6.8M of American Rescue Plan (ARP) funds budgeted in FY 2021-22 lapsing in FY 2022-23. As recently covered at the March 21, 2022 General Fund FY 2021-22 Mid-Year review, the ARP funds allocated for FY 2021-22 may not be needed as the FY 2021-22 budget is projecting a surplus as much as $12M. In accordance with the US Treasury Guidelines, the $6.8M used in FY 2021-22, or an additional amount of $2.3M for a total of $9.1M could be utilized in the FY 2022-23 budget to assist in balancing the projected preliminary deficit. This approach would generate a balance budget for FY 2022-23; however it should be noted the ARP funds are a onetime revenue source and cannot be relied on for the long term or to continue year after year. Onetime revenue usage to support ongoing programs and services should not be a common practice.
The FY 2022-23 expenditure budget is projected to increase $11M, there are two primary categories that are contributing to this change with minor offsets to the other categories. The first item is a $4.6M increase to the personnel (staffing related) and the key items that make up this increase are:
$3.2M Salary and Benefit MOU Related Increases (All Authorized Positions Budgeted) $727k Fairplex Police Support at LA County (Corresponding Reimbursable Revenue) $627k Hourly Increase
It is important to note that the $3.2M increase to salary and benefits reflects all authorized full-time positions budgeted. The other item to note is a $7.6M increase to the Utilities and Allocations expenditure category related to a $6.7M increase to the General Fund portion of the Pension Obligation Bond (POB) allocation. The POBs were issued in July 2020 to assist the City in addressing its Unfunded Accrued Liability (UAL) and included a strategy to pay only the interest portion of the annual debt payment in FY 2020-21 and FY 2021-22 to create General Fund savings. Beginning in FY 2022-23 the principal portion of the payment will begin to occur which will increase this annual payment amount by $6.7M. The remaining $800k increase is associated with other internal service funds allocations that increases nominally each fiscal year to support all Departments citywide.
As staff is seeking feedback from both the Mayor and City Council as well as the residents and business of Pomona, there are items that will need to be addressed in the FY 2022-23 Preliminary General Fund Budget. Based on some preliminary feedback, items noted thus far include:
Additional or continued funding for:
Youth Services and Programming
Homeless Services
Rent stabilization/Inspections
Addressing City Infrastructure
Economic Development
Code Compliance
Evaluate funding for items listed in the City Council Goals and Priorities Discussion to Unfund any vacant General Fund positions for cost savings Citizen Oversight Committee (COC)
In November 2018, Measure PG was passed by the voters of Pomona, which approved the collection of a Transaction and Use Tax (TUT) of .75%. In accordance with the provisions of the ballot measure a Citizens Oversight Committee (“COC” or “Committee”), was established to be an advisory capacity to the City Council with respect to the City’s Transactions and Use Tax set forth in Article XI of the City of Pomona Municipal Code. The duties and responsibilities of the Committee shall be to serve in an advisory capacity in regards to the Transactions and Use Tax. The Committee shall:
A. Annually review the City’s revenue and expenditures of the Transaction and Use Tax; B. Hold public meetings throughout the year, as often as City Council directs; C. Review annual audit reports related to the tax; and D. Prepare written reports to the City Council that summarize the Committee’s findings and recommendations.
In December 2021, the Committee received a presentation of the City Council’s Priorities and Goals as preparation to make budget recommendations for FY 2022-23. The Committee, during a special COC meeting held in January 2022 developed a list for the City Council to consider incorporating in the FY 2022-23 General Fund Budget. The list developed totals amount of $505k (Attachment No. 1).
As mentioned at the March 21, 2022 FY 2021-22 Mid-Year Budget Review, the City is working towards updating and creating some new Citywide Financial policies that are long overdue. The Mayor and City Council approved an appropriation to utilize Urban Futures Inc. (UFI), the City’s Financial Advisor to assist with this project. Staff plans to bring these policies forward in the coming months.
In closing, the information here is very preliminary and the goal is to provide the City Council and the citizens with a preview. The starting point of a $6.5M deficit is not an easy starting point, however many scenarios to balance the budget will be analyzed in the coming months. As mentioned, the use of ARP funds (onetime revenue) identified in the City Council approved ARP expenditures spending plan could be utilized to balance the proposed budget... Staff is seeking feedback on the forthcoming FY 2022-23 proposed budget at both the March 30, 2022 and April 6, 2022 study sessions. In closing, it should be mentioned that Non-General Fund City budgets are not covered in this preview. The City’s Combined Adopted FY 2021-22 Budget totaled $317M and includes Special Revenue, Enterprise, Capital Projects, Debt Service, and Housing Authority Funds besides the largest fund, the General Fund. At this time, all Non-General Fund budgets are on track to meet their allocated funding for FY 2021-22 and staff is reviewing these funds preliminary FY 2022-23 budgets. Staff will provide City Council with updates if significant changes occur during the remainder of the fiscal year.
ALTERNATIVE(S): None
Prepared by:
____
Andrew Mowbray
Finance Director/City Treasurer
ATTACHMENT(S):
Attachment No. 1 – Memorandum for the Citizens Oversight Committee (COC) Attachment No. 2 – FY 2022-23 Preliminary Budget PowerPoint Fiscal Year 2022-23 General Fund Preview
Attachment No. 1