CITY OF POMONA
COUNCIL REPORT
March 27, 2023
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 2023-24 General Fund Preview
RECOMMENDATION
It is recommended that:
A Preview of the FY 2023-24 Preliminary General Fund Budget is presented to the Mayor and City Council to receive feedback for the Proposed FY 2023-24 General Fund Budget.
Residents, Businesses, and Community Groups are encouraged to provide feedback on the FY 2023-24 General Fund budget during public comment.
DISSCUSION
Fiscal Year 2023-24 General Fund Preview
This Fiscal Year 2023-24 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 5, 2023 at 3:00 pm and will cover the same presentation given on March 27, 2023 with the ultimate goal to hear feedback from as many citizens during both study sessions. Both presentations will take place in the City Council Chambers.
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 8, 2023. The City Council reviews the proposed budget at a public hearing scheduled for the final adoption to occur at the first City Council meeting scheduled for June 5, 2023.
Currently a preliminary FY 2023-24 General Fund Budget is listed as follows:
The preliminary FY 2023-24 General Fund budget displays a projected surplus of $690k. The overall financial picture shows General Fund revenues are higher overall by $4.6M, while expenditures are projected to increase $5.3M compared to FY 2022-23 amended budget at this time. What is important to note is while revenues are anticipated to increase by $4.6M overall, the categories of Property Tax and Sales Tax making up 61% of General Fund revenues are projected to increase by $4.8M when comparing the two fiscal years. Utility Tax (represents 11% of General Fund revenues) will increase $1.2M, and Other Taxes category makes up another 13% of General Fund revenues is projected to increase $2.7M. Of this $2.7M increase, the key revenues contributing to this include:
$1.1M Franchise Fees – Refuse Hauler
$800k Cannabis Business Tax (Measure PC)
$425k Business License
$200k Property Transfer Tax
In total, these four major categories described above represent an increase to the General Fund of $8.7M. The significant offset to these increases is a reduction of $4M in the Other Sources category, which includes the $6.8M of American Rescue Plan (ARP) funds budgeted in FY 2022-23. As recently covered at the March 20, 2023, General Fund FY 2022-23 Mid-Year review, the ARP funds allocated for FY 2022-23 will not be needed as the FY 2022-23 budget is projecting a surplus as much as $8.5M. Staff has discussed with the ARP subcommittee and recommends to return the $6.8M to the ARP fund to use in ways that are in accordance with the US Treasury Guidelines. The nonuse of the $6.8M of ARP funds addresses the concern that onetime revenues should not support ongoing programs and services and should not be a common practice.
The FY 2023-24 expenditure budget is projected to increase $5.3M, there are several categories that are contributing to this change with minor offsets to the other categories The $4.7M increase to the Personnel category has key items that make up this increase:
$5.3M Earnings and Benefits (All Authorized Positions Budgeted) $325k Hourly
($500k) Police Sworn Overtime
($1M) Retirement Termination Payouts
It is important to note that the $5.3M increase to earnings and benefits reflects all authorized full-time positions budgeted. It should be noted the “Personnel” category for FY 2022-23 at Adoption in July 2022 totaled $61.6M, which would have netted $2.7M when comparing to the Preliminary FY 2023-24 budget. Most of the salary savings in FY 2022-23 were transferred to CIP projects and other capital purchases that required additional funding. The other item to note is a $3.3M increase to the “Required Expenses” category for the annual Fire Contract with Los Angeles County. Most of this increase is related to negotiated LA County Fire personnel increases for contracts. “Allocations and Utilities” increased by $1.8M primarily related to increase of $500k for claims expenses, $400k to the General Fund portion of the Pension Obligation Bond (POB) allocation, $200k for Gas and Electricity and $300k for the Information Technology Allocation increase that increases nominally each fiscal year to support all Departments citywide. There are two reductions, first being the $3M “Controllable Expenses” Category which primarily relates to the ending of the Building and Safety contract via a $2.2M reduction. The other reduction reflected is the $2.7M reduction in “Capital Expenses” category which is to be expected as no proposed supplemental requests have been approved to date in the FY 2023-24 Proposed Budget. The increase of $1.2M in the “Transfers to Other Funds” category relates to the amounts allocated for the Consolidated Financial Polices that will be covered in detail herein.
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 2023-24 Preliminary General Fund Budget. Based on some preliminary feedback, items that are included and should be noted thus far include:
Youth Services and Programming - Continued funding for Youth Services and Programing has been stated as a long-term goal that was first included in last year FY 2022-23 budget. Included in this Preliminary FY 2023-24 budget is $1.2M in the Community Services Division of the Neighborhood Services Department Budget, Youth Commitment division for youth programing and $300k in the Library Budget for youth programming, combined this total $1.5M. As General Fund appropriations lapse at year end per City Charter, staff will bring forward after the close of the Fiscal Year 2022-23 the remaining Youth Commitment Funds in the Community Services Department and Library to be considered to re-appropriate in FY 2023-24 budget.
Consolidated Financial Policies Goals – On February 6, 2023, the City Council approved the Consolidated Financial Policies and Administrative Procedures which included policies to contribute amounts to respective areas to address the City’s long term obligations and needs. In this budget $300k is included for a Catastrophic Events Reserve, $1.5M for a Pension 115 Trust, $200k for Equipment Replacement Reserve, and $1.2M for CIP Projects funding which is about ¾% of preliminary General Fund revenues.
Vacancy Factor – Over the last several fiscal years the City has had several vacancies that equates to as much as $2M in General Fund savings. As of the end of February 2023 the City has 88 full time and 55 part time vacancies. In FY 2022-23 a $350k vacancy factor was included in the General Fund Budget. Staff will explore a historical average based on vacancies, anticipated retirements, and recruiting timelines to include in the FY 2023-24 proposed budget to reflect anticipated savings.
In closing, the information here is very preliminary and the goal is to provide the City Council and the residents with a preview. The starting point of a small $680k surplus is does not leave a lot of room for additional items to be added, however many scenarios to balance the budget will be analyzed in the coming months. It should be noted revenues will continue to be analyzed for any anticipated increases or decreases. In addition, employee contracts will sunset in the Fall of 2023 and no estimates have been factored into this preliminary budget.
Staff is seeking feedback on the forthcoming FY 2023-24 proposed budget at both the March 27, 2023 and April 5, 2023 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 2022-23 Budget totaled $400M 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, with the exception of the Phillips Ranch Maintenance Assessment District are on track to meet their allocated funding for FY 2022-23 and staff is reviewing these funds preliminary FY 2023-24 budgets. Staff will provide City Council with updates if significant changes occur during the remainder of the fiscal year.
ALTERNATIVE(S): None
Prepared by:
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Andrew Mowbray
Finance Director/City Treasurer
ATTACHMENT(S):
Attachment No. 1 – FY 2023-24 Preliminary Budget PowerPoint Fiscal Year 2023-24 General Fund Preview