1 Responses To Councilmembers Questions
From March 1st City Council Meeting
1. What reasoning did the County Assessor provide regarding the reduced assessed valuation of the Chevron Refinery?
The annual equalized rolls provided by Contra Costa County (County) indicated that the Richmond Chevron Refinery was assessed at approximately $3.0 billion in FY2020-2021 and $2.7 billion in FY2021-
22. In response to an information request, the County Assessor provided an explanation of the decrease in assessed valuation for FY 2021-22. The Assessor’s Office uses the income method to determine the valuation of commercial properties. According to the Assessor’s Office, the decrease in valuation for the Richmond Chevron Refinery was caused by the following factors:
• Poor economic conditions during 2020 caused by the pandemic • Refinery's production of fuels was severely reduced due to low demand for transportation fuels, especially jet fuels
• Lower refinery values in general - using other indicators The following is an is an excerpt of the response from the County Assessor regarding the method used to determine the 2021 value:
The Assessor's Office determined the 2021 value of the Chevron Richmond Oil Refinery using the income approach in accordance with State Board of Equalization Property Tax Rule 8. The income approach is the methodology used by potential buyers and sellers of refineries when trying to determine a purchase price of a refinery and, thus, is the preferred valuation approach for refineries. The Assessor's Office has been primarily using the income approach to value the County's four refineries since the late 1990s.
Given the increasing cost of oil, City staff will prepare another letter with additional follow-up questions to the County Assessor and will keep the City Council apprised of the County Assessor’s response.
2 Below please find the complete letter from the Contra Costa County Office of the Assessor:
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2. Where will money or funding come from to balance or close the budget gap?
The revised revenue amount of $192.0 million plus the set asides for FY 2020-21 of $5.5 million equals $197.5 million in total revenue. This subtracted from the total revised expenditure amount of $195.1 million provides an anticipated year-end surplus of $2,404,729.
After further adjustments, essentially, the mid-year $3.1 million difference between Revenues and Expenditures is being offset using set-asides from the prior fiscal year (FY 2020-21). The following are the set-asides from FY 2020-21 that were approved by the Council for this fiscal year (FY 2021-22):
Remaining Set-Aside Amounts Approved by Council on 6/29/21 & 10/26/21 but Not Properly Included in the Budget
Item Amount
Reimagining Public Safety $1,300,000
Community Facility Improvement $1,700,000
Staff Compensation -Onetime Payment $2,300,000
Other General Fund Expenditures $ 229,000
Total $5,529,000
After taking into account $9,094,911 in FY 2021-22 mid-year expenditure adjustments and $3,534,542 in mid-year revenue adjustments, the updated mid-year “budget gap” totals $3,124,271. The current “gap” is $782,424 less than the $3,906,695 listed in the March 1, 2022 staff report.
The change is due to an increase of $1,582,424 to the Documentary Transfer Tax revenue and an $800,000 increase to expenditures in General Fund Professional Services as shown below:
Line Detail Amount
Facility Master Plan Study $100,000
Information Master Plan Study $100,000
Fire Service Study $100,000
Measure U Implementation $500,000
Total $800,000
The revised “budget gap” totaling $3,124,271 will be paid from the FY 2020-21 available “set asides” approved by Council during the June 29, 2021, and October 26, 2021, City Council meetings for use in FY 2021-22. These items and amounts are listed below and were not properly budgeted in the FY 2021-22 budget. Adjustments will be made by staff as part of the FY 2021-22 mid-year process to correct this oversight.
The remaining set-asides of $5.5 million are available for use in FY 2021-22 and will cover the $3.1 million FY 2021-22 mid-year gap, leaving an estimated year-end surplus of approximately $2.4 million.
5 Additional context is provided below to provide more information regarding the “set-asides”. The table below highlights the FY 2020-21 set-asides approved by Council during the June 29, 2021, and October 26, 2021, Council meetings, the uses included as part of the FY 2020-21 year-end transactions per the Annual Comprehensive Financial Report (ACFR), and the remaining available set-asides.
Set-asides totaling $15,519,567 previously approved by Council at their meeting on June 29, 2021, were allocated from anticipated excess/surplus from FY 2020-21 as described below. Also, on October 26, 2021, additional excess/surplus monies from FY 2020-21 totaling $5,357,968 were identified and allocated as described below. Overall, excess/surplus monies for FY 2020-21 totaling $20,877,535 were allocated, however, not all the allocations were appropriated properly and entered into MUNIS, the City’s budget system.
Intended Uses of the Set-Asides from
FY2020-21 Excess
Projected
June 29,
2021
Projected
October 26th,
2021
FY 2020-21
Fiscal Close,
February,
15 2022
Set-Asides
Available
for FY21-
22 Budget
Reimagining Public Safety 1,300,000 1,300,000 1,300,000 1,300,000 Community Facility Improvements 1,700,000 1,700,000 1,700,000 1,700,000 Staff Compensation – One Time
Payment
2,300,000 2,300,000 2,300,000 2,300,000
Additional GF Expenditures 229,000 229,000 229,000
Set Asides to Balance FY2021-22 Budget 5,300,000 5,529,000 5,529,000 5,529,000 Attain 14.3% Reserve Level 4,219,567 4,219,567 N/A
Reduce RHA liability 3,000,000 6,128,968 10,442,853
Set aside for Reserves 3,000,000 3,000,000 2,938,811
Set aside for possible Measure U
shortfall
2,000,000 2,000,000
Total Approved Uses: 15,519,567 20,877,535 20,910,664 5,529,000
Finally, set-asides totaling $5,529,000 previously allocated but not yet budgeted including Reimagining Public Safety, Community Facility Improvements, Staff Compensation, and Additional General Fund Expenditure will be used to close the FY 2021-22 mid-year $3,124,271 million budget gap and will leave an estimated surplus of $2,404,729.
3. On February 15, 2022, Council did not approve the use of $4.2 million to write-off the Richmond Housing Authority (RHA) liability. The previous direction provided by Council was that this amount should be used for reserves. Please advise?
The two (2) finance-related items presented during the February 15, 2022, City Council meeting described the need to move an additional $4.3 million in set-asides previously allocated by City Council for the reserve balance to cover RHA’s full disallowed costs totaling $10.4 million (See below and reference the items in eScribe - Items W.1 and W.2 - City Council - February 15, 2022 6 (escribemeetings.com). This adjustment was $4.3 million more than $6.1 million originally approved by Council to write-off the RHA debt. Unfortunately, the recommended action language for both items did not specifically reference the $4.3 million nor request City Council authority to make the adjustment.
On February 15, 2021, City Council received the following two (2) reports related to FY 2020-21:
(1) Final adjustments to FY 2020-21 Budget:
a. Recommended Action: RECEIVE an update on the Fiscal Year 2020-2021 budget b. Financial Impact Statement: The full reduction of disallowed costs of the Richmond Housing Authority (RHA) receivables totaled $10.4 million, which was $4.3 million more than what was originally approved by City Council. Based on U.S. Department of Housing and Urban Development’s Public Housing Authority Recovery and Sustainability (PHARS) agreement with the City and CVR Associate’s report regarding the RHA repayment plan, as well as the recommendations from the City’s auditors, a decision was made to fully reduce RHA’s receivables. The financial impact of the change results in a reduction of $4.3 million set aside for City’s reserves balance. On June 29, 2021, staff projected an ending reserve balance of 14.3 percent; however, the $4.3 million reduction will decrease the reserve balance to 12.5 percent. (2) City of Richmond Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2021
a. Recommended Action: RECEIVE a report on the City’s Annual Comprehensive Financial Report (ACFR) for Fiscal Year 2020-2021
b. The ACFR took into account the year-end adjustments including the additional funds needed to write off the RHA debt in the amount of $10.4 million
To ensure formal City Council approval, staff is bringing the Richmond Housing Authority (RHA) write-off as a separate item for action at the April 5, 2022, City Council meeting. As part of the action, the item will formally seek City Council authority to use the $4.2 million from the FY 2020-21 excess to write off the RHA liability rather than use it to increase the General Fund reserve. This action would be consistent with city policies which require write-off of payable amounts on the City’s books when they are deemed to be uncollectable. In the future, staff will be sure to bring any proposed adjustments to Council prior to finalizing the ACFR.
The Administrative Manual—Policy Statement AP251
http://www.ci.richmond.ca.us/DocumentCenter/View/740/AP251-Write-Off-Delinquent- Accounts?bidId=
7 4. How much is spent annually to fund pensions benefits by each bargaining unit? The total amount paid towards pension benefits for FY 2020-21 for all bargain units was $34.7 million.
Details by bargaining unit are provided below. It should be noted that amounts paid do fluctuate and are variable year-to-year based on many factors including the number of active city employees and results of actuarial studies, as well as the CalPERS rate of return.
5. Can you clarify where the $2.3 million used for one-time payments to employees is coming from? General Fund or Non-General Fund surplus?
The $2.3 million allocated for the one-time payment to employees was part of the set-asides from FY 2020-21 general fund budget savings (excess revenues). The actual cost for one-time payments to general-funded staff was approximately $1.8 million of the $2.3 million. Approximately $500,000 in one-time costs was paid out of FY 2021-22 non-general fund budgets.
Staff would like to mention that Attachment 4 entitled “General Fund Summary of Revenue and Expenditures” provided on March 1, 2021, was incorrect. Notably, the attachment incorrectly stated that funds would come from reserves and incorrectly listed the two amounts to be used for the closure of the gap between revenues and expenditures. The gap will be closed by appropriating previously approved set-asides (budget savings) from FY 2020-2021.
6. When $6.3 million in set-asides was approved for Reimagining Public was any funding set to come from reserves?
None of the monies authorized by City Council for the Reimagining Public Safety came from reserves. On June 29, 2021, the City Council appropriated a total budget of $6,380,000 for the Reimagining Public Safety program which was to be funded from a variety of sources. As the table below shows, $4.6 million came from General Fund reductions in expenditures from the Police Department ($3 million) and reduction in vehicle purchases ($1.6 million). Housing in Lieu funds Bargaining Unit Total Actuals in FY20-21 Authorized FTE FY21-22 Police Officer's Assoc 12,035,153$ 127 Police Mgmt 1,012,551$ 11
IAFF Local 188 7,276,727$ 82
Fire Mgmt 500,791$ 5
City Council 123,463$ 7
Executive Mgmt 1,727,776$ 40
IFPTE Local 21 4,193,526$ 132
SEIU Local 1021 7,395,386$ 278
SEIU Local 1021 Part Time 509,276$ 11 Grand Total 34,774,649$ 693
8 was the source of $480,000, and an additionally $1.3 million came from the FY 2020-21 excess revenues.
Reimagining Public Safety
Funding Source Amount Proposal/Program Expenditure
Police Department Reduction 3,000,000 YouthWORKS 1,980,000 FY21 Excess 1,300,000 ONS 1,600,000
Housing in Lieu/low-mod
fees 480,000 Unhoused Intervention 1,800,000
Elimination - vehicle
purchases 1,600,000 Community Crisis Response 1,000,000 Total Funding Sources $6,380,000 Total Expenditures $6,380,000
7. Why are the expenses increasing if we have over 100 vacancies? The year-to-date (YTD) actual expenditures for the salaries budget line item is at 49 percent or $36.7 million. The budget savings due to the higher vacancy rate is being offset by several factors including those listed below.
The 4 percent budgeted vacancy saving rate ($3.6 million annually and $1.8 million for 6 months) is offsetting the actual vacancy savings. That is to say, a certain amount of savings related to vacancies is already included in the budget and that is reducing the impact of the higher-than-expected vacancy rate.
The entire one-time payment to employees totaling approximately $2.3 million (general fund and non-general fund) was made within the first six months of FY 2021-22. Therefore, the fully loaded amount is captured in the mid-year numbers.
Salary reimbursements from grants are lower than budgeted, but there are still some pending adjustments affecting the first six months of the fiscal year. Currently, the anticipated reimbursements should be $450,000 and are only at $93,000, a difference of about $361,000.
Finance staff will ensure that city departments submit timely transfers to cover staff costs from grants, so these expenditures are reflected appropriately on a monthly basis.
8. How is the city able to employ part-time (PT) staff without benefits? Is this practice consistent with the bargaining unit Memorandum of Understanding (MOU) requirements? Various labor MOUs between the City and the bargaining groups allow for the existence of part-time and/or temporary employees who do not receive benefits. Examples of PT positions without benefits include employees hired in the summer in various recreation programs.
The following is a link to the HR page which provides a list of the City’s labor MOUs. http://www.ci.richmond.ca.us/238/Personnel-Rules-MOUs-and-Salary-Schedule
9 9. Public Works – the community is interested in seeing certain improvements, projects, and maintenance throughout the City. What plans are there to add more positions (e.g., abatement and code enforcement) in the future?
During the last two fiscal years, the Public Works Department had the greatest number of positions added/unfrozen in recognition of the many needs in the community. Currently, there are approximately 125 vacancies and the City is recruiting for a total of 18 positions in the Public Works Department. These positions include but are not limited to maintenance workers, utility works, and parks staff. As part of the upcoming FY 2022-23 budget process, staff will be bringing to the City Council a staffing plan to enhance services to the community.
10. Will unused funding due to vacancies be put back into the General Fund as unallocated funding by the end of the FY? And will those funds bring the reserve up to 15 percent? There are potential savings due to the vacancy rate in FY 2021-22. After the close of the fiscal year (which occurs usually in December-February), which officially happens as part of the Annual Comprehensive Financial Report (ACFR), the amount of excess revenues over expenditures will be known with certainty. At that point, there is a high likelihood that staff will be able to bring to the City Council options that will include achieving a reserve percentage rate above the City Council policy goal of 15 percent.
11. What’s the difference between excess and reserves?
Excess (or surplus) is the difference between revenues exceeding expenditures for FY20-21 and allocated for other uses per City Council direction for FY21-22. The “reserve” is a component of the Unassigned Fund Balance (not appropriated for any use or purpose). For FY 2020-21, the $22,477,829 unassigned fund balance calculated to 12.5 percent of FY 2021-22 budgeted General Fund expenditures so, the entire unassigned fund balance is considered the reserve because it was not in excess of 15 percent.
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12 12. $1 million was allocated to the Richmond Rapid Response Fund/Housing Program – is there a contract that delineates how that money is allocated and how it’s accounted for? On February 15, 2022, the City Council approved a sole source contract with West Contra Costa Public Education Fund (EdFund West) to manage the distribution of American Rescue Plan Act (ARPA) funding to support Richmond residents impacted by COVID through the Richmond Rapid Response Fund (R3F), in an amount not to exceed $600,000, for a term from February 15, 2022, to December 31, 2024. The scope of work, eligible expenditures and reporting requirements are included in the contract and can be viewed at City Council - February 15, 2022 (escribemeetings.com). The contractor will provide the following services:
i. Serve as the main point of contact with the City for this scope of work; ii. Provide direct disbursement to Richmond residents or organizations with capacity to provide disbursements directly to residents of Richmond that were negatively impacted by the COVID-19 pandemic;
iii. Provide rent and mortgage assistance to residents of Richmond that were negatively impacted by the COVID-19 pandemic;
iv. Provide assistance to residents of Richmond experiencing homelessness to prepare them for more stable housing; and
v. If established, implement a pilot targeted income program.
On March 11, 2022, a Request for Proposals (RFP) for $100,000 of the $1,000,000 was issued seeking a consultant to assist R3F in the development of a strategic plan and governance structure.
This work will help support the long-term stability of the fund for the future benefit of the Richmond community as we move towards an equitable recovery. Responses will be due by 3 PM on April 11, 2022.