March 22, 2022 Page 1 of 18
Finance Department
DATE: March 22, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Shasa Curl, Interim City Manager
Anil Comelo, Interim Deputy City Manager
LaShonda White, Interim Director of Library and
Community Services
Belinda Brown, Director of Finance
Mubeen Qader, Budget Administrator
Antonio Bañuelos, Accounting Manager
Patrick Seals, Associate Administrative Analyst
SUBJECT:
Mid-Year Report on Fiscal Year (FY) 2021 -22 Operating
and Capital Improvement Budgets
FINANCIAL IMPACT: The Fiscal Year 2021-22 General Fund (GF) operating budget was adopted on June 29, 2021, with revenue
projections of $188.5 million and expenditures authorized at $187.8 million. For this mid-year budget review, staff is proposing budget adjustments that will increase the
operating revenues to $192.0 million and expenditures to $195.1 million to correctly account for all prior approved expenditures, as well as new funding needs in
departments. Together with the $192.0 million in
revenues and $5.5 million in available set-asides (from FY2020-21), staff is currently projecting a $2.4 million surplus.
The attached resolution reflects changes to the General Fund operating budget and describes adjustments to the
non-General Fund and Capital Improvement Plan
budgets.
AGENDA
REPORT
March 22, 2022 Page 2 of 18
PREVIOUS COUNCIL
ACTION:
June 29, 2021, October 26, 2021, January 25, 2022,
February 1, 2022, February 15, 2022, & March 1, 2022
STATEMENT OF THE
ISSUE:
The mid-year budget update is an opportunity to look
back at what has happened between July 1, 2021, and
December 31, 2021, since the current budget was
adopted. It provides the City Council and public a
snapshot of the current fiscal year based on the most
currently available revenues and expenditures. It also
provides a limited forward-looking component updating
the year-end projections should current estimates of the remaining six months prove to be accurate. Updating the current year budget provides staff a starting point from which to make future multi-year projections.
RECOMMENDED ACTION:
REVIEW the Fiscal Year 2021-2022 operating and capital
improvement budgets at mid-year; and ADOPT a
resolution approving the proposed Fiscal Year 2021-2022 budget adjustments – City Manager’s Office/Finance
Department (Shasa Curl/Anil Comelo/LaShonda White –
510-620-6740).
DISCUSSION:
An important part of managing the City’s budget stability and performance is through the presentation of a mid-year budget review, which includes a financial forecast for the fiscal year. A mid-year budget review also allows the City to determine if adjustments to revenue projections are needed, whether planned expenditures should be modified, and/or if other changes should be made to effectuate policy direction from the City Council.
The City of Richmond’s Fiscal Year (FY) 2021-22 budget, as well as the City’s future fiscal sustainability, are impacted by local, national, and global events. Unfortunately, the COVID pandemic continues; staff turnover, retirements, and vacancy rates are higher than in previous years; inflation is rising at a high rate, and Russia’s invasion of Ukraine continues and appears to be destabilizing the global economy and exacerbating food shortages for products such as wheat. All these events, in addition to others, are considered by staff and influence the current and future year budgets. Moving forward, City finance staff will endeavor to include more comprehensive updates in the Monthly Financial Reports to City Council to clearly note any outliers and will mention how, if at all, local and global events are impacting current and future fiscal forecasts. During the budget development and analysis process, staff will adhere to the set of Guiding Fiscal Policies the City Council adopted on April 20, 2021. These policies were developed to guide and direct collaborative work on building a healthy, equitable, and sustainable budget for the City of Richmond.
March 22, 2022 Page 3 of 18
Background
To clearly understand the mid-year budget, it is important to review previous City Council actions that impact the FY 2021-22 budget.
On June 29, 2021, the City Council adopted the annual operating budget for FY 2021-22 and the Capital Improvement Plan for FYs 2021-22 through 2025-26. The General Fund revenue projections were $188.5 million, and expenditures were authorized at $187.8 million. Staff also provided an estimated surplus balance of $15.5 million from FY 2020-21, and the City Council approved the budget with the proposed use of set-asides (Table 4) in FY 2021-22, including $3 million to write-off Richmond Housing Authority (RHA) liability.
On October 26, 2021, the City Council received an FY 2020-21 budget update and was informed that the estimated surplus balance increased from $15.5 million to $20.9 million. Staff proposed and City Council approved additional set-asides totaling $5.4 million (Table 4).
Included in these set-asides was an additional $3.1 million to reduce RHA liability, thereby bringing the total amount available to reduce RHA liability to $6.1 million.
In combination with the report by CVR Associates, Inc., which was presented at a Special Joint Meeting of the RHA Board and the Richmond City Council on April 27, 2021, and the completion of the FY 2020-21 Annual Financial Comprehensive Report (AFCR), it became clearer that RHA debts in the amount of $10.4 million, which were noted as receivables on the City’s balance sheet, would not be repaid. Based on the guidance from the City’s Auditors, Badawi and Associates, and in compliance with the U.S. Housing and Urban Development (HUD), a repayment agreement was developed to ensure any remaining outstanding debt owed by RHA to the City would have a structure to be repaid.
On January 25, 2022, the City Council approved the RHA Mid-Year budget for FY2021-22 and authorized the repayment agreement between RHA and the City of Richmond.
On February 15, 2022, the City Council received the final adjustments proposed to close out FY 2020-21, which have historically taken place in consultation with the City’s auditors at the end of December and are approved in January or February of the following year.
On March 1, 2022, the City Council received a Mid-Year update on FY 2021-22. Additional analysis was required to ensure City Council’s policy direction sought in FY 2020-2021 and FY 2021-2022 was operationalized.
Although City Council approved proposed various uses for the $20.9 million in excess revenue for FY 2021-22 expenditures, many of those items were not properly budgeted into MUNIS, the City’s financial system. Therefore, staff is proposing to make all the previous City Council- approved adjustments as part of the FY 2021-22 Mid-Year budget updates outlined in the section “General Fund Expenditures Revisions.” For example, there were inconsistencies in the staff report on June 29, 2021, and October 26, 2021, with regards to the amount of funds that would be available to reach the percentage of projected Reserves for FY 2021-22. The report lacked clarity pertaining to the reserve levels as it referenced both 14.3 percent and the March 22, 2022 Page 4 of 18
amount necessary to meet the goal of 15 percent based on the various set-asides approved.
This agenda report aims to provide clarity and transparency regarding budget-related actions required to operationalize several items noted during the June 29, 2021 and October 26, 2021, City Council meetings.
FY 2021-22 Mid-Year Budget Development
Finance staff worked with departments to identify additional cost reductions and efficiencies, review all revenue and expenditure line items, and on a monthly basis, compare actual results against budgeted expectations. At the mid-point of the fiscal year, staff conducts a detailed analysis to determine if the original budget is still viable, or if adjustments will be necessary. As of December 31, 2021, the expectation is that most budget categories will be at 50 percent, although this may fluctuate based on the timing of certain revenue receipts and expenditures. The mid-year budget, excluding one-time adjustments, serves as the revised baseline budget for the subsequent fiscal year and longer-term financial forecasts. Staff is requesting City Council adoption of a resolution approving the proposed Fiscal Year (FY) 2021-2022 mid-year budget adjustments (Attachment 1).
General Fund Revenue Revisions
On June 29, 2021, the City Council adopted the General Fund revenue budget totaling $188.5 million. The revised General Fund revenue budget at the end of December 2021 totals $192.0 million including adjustments. Staff is projecting an additional $3.5 million in General Fund revenue based on adjustments as outlined below. Detailed information regarding revenue and expenditure changes can be found in Attachment 2 – Summary of Mid-Year Requests FY2021-2022 and Attachment 3 – General Fund Revenue Summary.
Property Tax – Decrease of $2.2 million: In preparing the FY 2021-2022 budget, staff forecasted Assessed Valuation (AV) growth of 4 percent. This was based on the new value of properties sold during the last year, the Chevron Refinery AV staying flat, and all other properties going up by 2 percent. When the Equalized Roll, a listing published by Contra Costa County every July showing every property in Richmond with the updated valuation, was posted, the total AV for the City of Richmond had gone up by only 0.15 percent. This Assessed Valuation was much lower than forecasted. The main item causing this lower-than- expected growth was the Chevron refinery valuation decreasing from $3 billion to $2.7 billion. The County Assessor in response to staff’s request for information explained that the Office uses the income method to determine the valuation of commercial properties. A copy of the County Assessor's letter is included as part of Attachment 13.
Sales Tax – Increase of $1.9 million: This increase is based on updated estimates provided by Avenu, the City’s sales tax consultants. This increase is in part due to the local economy being strong, bolstered by the big box stores including Costco, Target, March 22, 2022 Page 5 of 18
The Home Depot, and Wal-Mart.
Utility Users Tax (UUT) – Increase of $1.1 million: UUT is an “excise” or usage tax imposed on a person or entity using utility services (i.e., electricity, gas, or communications). An increase of $137,114 from Cable UUT, which is trending higher through the first five months, is adjusted accordingly. Additionally, the cap amount paid by Chevron is increasing by $933,225. The UUT cap amount payment is based on the Consumer Price Index (CPI) for energy services in the San Francisco metropolitan area.
The original forecast used a CPI of 3 percent; however, the actual CPI increased by 6.8 percent. Section 13.52.100 of the Richmond Municipal Code entitled Maximum Tax Payable allows taxpayers, such as Chevron, to opt into paying this cap amount rather than the 10 percent of the actual utility usage. As such, the City Council may want to revisit this matter in the near term. It is important to note that any changes to the UUT must be voter approved.
Other Taxes – Net Increase of $2.68 million: Most of this increase is in the Documentary Transfer Tax revenue stream. The Documentary Transfer Tax adjustment is based on policy direction within the Guiding Fiscal Policies which includes a calculation based on the average amount of Transfer tax collected since the increase to the rate was approved by voters in 2018. Based on the average collected since January 2019, this yields an estimate of $13.65 million, which is $2.58 million more than the original budgeted amount.
Business Taxes – Decrease of $1.6 million: This decrease stems from the business tax exemptions applied to rental properties that pay Rent Control fees. Additionally, a potential decrease of $2 million was identified due to the implementation of Measure U being delayed from July 1, 2021, to January 1, 2022. As such, the total potential decrease to date is $3.6 million. At this point, it is too early to tell if the $2 million shortfall will come to fruition. The City Council has previously set aside $2 million dollars to mitigate that possibility. Revenues for Business Taxes are still well below projections and staff will continue to monitor this revenue source and update the City Council on whether or not the approved $2 million in set-asides for a potential shortfall will be needed.
Other Revenues (Includes Fines & Forfeitures, Use of Money & Property, Charges for Services, Other Revenues, Rental Income, Intergovernmental State Taxes & Grants, Loan & Bond Proceeds, and Operating Transfers In) – Net increase of $1.7 million:
Most of these adjustments generate from revenue received year-to-date that were either not expected or are exceeding projections. In some cases, these are one-time revenue increases and decreases that cannot be anticipated, or the amount received is deviating significantly from previous years.
Decrease to Fines & Forfeitures of $81,103 stemming from reduced ticketing by Parking Enforcement per initial City Council direction on January 19, 2021.
Increase to Charges for Services of $40,528 from False Alarm fees March 22, 2022 Page 6 of 18
reflecting registration of new alarm systems and the current increased volume of false alarms.
Increase to Other Revenue of $309,012 stemming primarily from one- time type payments including $194,106 from PG&E for the Rebuilding Together program.
Increase of $27,878 to Intergovernmental State grants stemming from higher-than-expected State Mandated Claims reimbursements and other State grants.
Increase of $36,400 to Loan and Bond Proceeds stemming from the loan payoff of Community Development property.
Increase of $348,042 in Operating Transfers-In from the Pension Tax Override Fund since higher than expected property tax revenue was received in that Fund that exceeded corresponding current year expenses.
Increase of $1 million in developer reimbursements stemming from the Campus Bay litigation and Point Molate Community Facilities District formation.
Proposed General Fund revenue adjustments in the mid-year budget from July 1, 2021, are as follows and additional information is provided in Attachment 3.
Table 1: FY2021-22 General Fund Revenues
ACCOUNT DESCRIPTION ADOPTED
FY2021-22
(6 9
PREVIOUS
ADJUSTMENTS
REVISED
FY2021-22
MID-YEAR
ADJUSTMENTS
PROPOSED
FY2021-22
PROPERTY TAXES 47,460,890 - 47,460,890 (2,227,329) 45,233,561 SALES & USE TAXES 50,060,211 - 50,060,211 1,933,525 51,993,736 UTILITY USERS TAXES 45,452,324 - 45,452,324 1,070,339 46,522,663 OTHER TAXES 18,269,102 - 18,269,102 2,684,241 20,953,343 LICENSES, PERMITS & FEES 11,806,326 - 11,806,326 (1,626,991) 10,179,335 FINES & FORFEITURES 550,000 - 550,000 (81,103) 468,897
USE OF MONEY & PROPERTY 236,079 - 236,079 - 236,079
CHARGES FOR SERVICES 3,383,931 - 3,383,931 40,528 3,424,459 OTHER REVENUES 158,977 - 158,977 1,314,950 1,473,927
RENTAL INCOME 733,206 - 733,206 14,062 747,268
INTERGOVT. STATE TAXES 90,000 - 90,000 - 90,000
INTERGOVT. STATE GRANTS 160,000 - 160,000 27,878 187,878 INTERGOVT. OTHER GRANTS 153,569 - 153,569 - 153,569
PROCEEDS: SALE of
PROPERTY
100,000
-
100,000
-
100,000
LOAN & BOND PROCEEDS - - - 36,400 36,400
OPERATING TRANSFERS – IN 9,856,182 - 9,856,182 348,042 10,204,224 GF REVENUE TOTAL 188,470,796 - 188,470,796 3,534,542 192,005,339
March 22, 2022 Page 7 of 18
General Fund Expenditure Revisions
On June 29, 2021, the City Council adopted a General Fund expenditures budget totaling $187.8 million. Since the beginning of the FY 2021 -22 from July 2021 through December 2021, several budget adjustments have been processed, resulting in a net decrease in expenditures by approximately $1.8 million. As of December 2021, the total General Fund authority is at $186 million.
With mid-year adjustments, the proposed revised General Fund expenditure budget totals $195.1 million. Detailed information regarding revenues and expenditures can be found in Attachment 2 – Summary of Mid-Year Requests FY 2021-2022. New adjustments requests totaling $800,000 have been added since the March 1, 2022, City Council meeting. With these additions, total mid-year expenditure adjustments are approximately $9.1 million, which brings the total proposed General Fund Expenditures from $186 million to $195.1 million. Mid-year adjustments outlined below and in Attachment 2 lists the proposed revenue and expenditure adjustments. The adjustments include appropriations of previously approved set-asides1 (See Table 4) and new expenditures adjustments.
Salaries and Benefits – Increase of $913,483: The main item impacting this increase is a request from the Fire Department for additional sworn overtime.
This request is partially a result of staffing shortages due to COVID, injury leave, and to maintain constant minimum staffing of 8 fire companies costing an estimated $4.3 million, a $705,402 increase over the adopted FY2021-2022 budget. Minimum staffing is required per the labor agreement. This increase ultimately supports the full service and safe communities’ strategic goal by providing fire and medical response and coverage to the community. Detailed information for each department can be found in Attachment 5 – Overtime Report.
Professional Services – Increase of $2.5 million: The increase is due to changes to various contracts including the Classification and Compensation study, Community Benefits policy, finalization of Measure U implementation, bond counsel services, and various legal service agreements. It also includes an increase of $1 million in expenditures stemming from the Campus Bay litigation that should be reimbursed, Point Molate Community Facilities District formation reimbursements, and $300,000 for various studies.
Utilities – Increase of $473,948: Most of the increase is needed to cover water expenses with $410,000 of the increase due to the higher than budgeted water expenditures with East Bay Municipal Utility District (EBMUD).
Cost Pool – Increase of $325,000: This amount will allow for the purchase of a street sweeper that was removed from the FY 2020-2021 equipment replacement budget.
1 The term “set-aside” is defined in the section “Fund Balance Types Defined” on page 17.
March 22, 2022 Page 8 of 18
Operating Transfer Out – Increase of $4.9 million. The first three items listed below were previously approved by City Council but were not recorded accordingly. The following budget adjustments are needed to transfer funds to the correct accounts.
$1.98 million is being transferred from the General Fund to Employment & Training - YouthWORKS as part of the Reimagining Public Safety summer and year-round youth employment program.
$1.32 million is being transferred from the General Fund to Planning & Building as part of the Reimagining Public Safety unhoused intervention work.
$1.52 million is being transferred for Community Facility Improvements whose budget is currently in General Capital Fund.
$116,000 is made up by various smaller appropriations and adjustments.
Proposed General Fund expenditure adjustments from July 1, 2021, are as follows and in Attachment 6 General Fund Revenue and Expenditures.
Table 2: FY2021-22 General Fund Expenditures
ACCOUNT DESCRIPTION ADOPTED
FY2021-22
PREVIOUS
ADJUSTMENTS
REVISED
FY2021-22
MID-YEAR
ADJUSTMENT
S
PROPOSED
FY2021-22
SALARIES AND WAGES 75,424,602 5,382 75,429,983 913,483 76,343,466 PAYROLL COSTS & BENEFITS 62,145,202 - 62,145,202 62,145,202 PROF & ADMIN 11,201,880 1,602,379 12,804,259 2,466,000 15,270,259 OTHER OPERATING 10,680,893 (3,560,686) 7,120,207 7,120,207 UTILITIES 4,565,743 (6) 4,565,737 473,948 5,039,685
EQUIP. & CONTRACT SVCS 2,628,158 63,986 2,692,144 2,692,144 PROVISION FOR INS LOSS 25,725 87 25,812 25,812
COST POOL 14,130,436 - 14,130,436 325,000 14,455,436
ASSET/CAPITAL OUTLAY 1,602,890 1,333 1,604,223 1,604,223 DEBT SERVICE 1,065,359 - 1,065,359 1,065,359
A87 COST PLAN REIMBURSE (3,516,104) - (3,516,104) (3,516,104) GRANT EXPENDITURES 2,500 80,000 82,500 82,500
OPERATING TRANSFERS
OUT
7,884,939 - 7,884,939 4,916,480 12,801,419
GF EXPENDITURE TOTAL 187,842,223 (1,807,525) 186,034,698 9,094,911 195,129,609
General Fund Revenues over Expenditures
Total General Fund Revenues are projected to be at $192.0 million, which included several budget adjustments and the proposed mid-year adjustments. Revised expenditures are at $195.1 million for the FY 2021-22. Together with the total revised March 22, 2022 Page 9 of 18
revenue of $192.0 million and revised expenditures at $195.1 million, there exists a gap of $3,124,271. With the set-asides for FY 2021-22 of $5.5 million, there is an anticipated year-end surplus of $2,404,729 (Table 3). Departmental summaries of revenues and expenditures can be found in Attachment 6 – General Fund Revenues and Expenditures.
Table 3: FY2021-22 Revenue over Expenditures
ACCOUNT
DESCRIPTION
ADOPTED
FY2021-22
PREVIOUS
ADJUSTMENTS
REVISED
FY2021-22
MID-YEAR
ADJUSTMENTS
PROPOSED
FY2021-22
GF REVENUE TOTAL 188,470,796 - 188,470,796 3,534,542 192,005,339 GF EXPENDITURE TOTAL 187,842,223 (1,807,525) 186,034,698 9,094,911 195,129,609 Total 628,573 1,807,525 2,436,098 (5,560,369) (3,124,271)
Set Asides from FY2020-2021 5,529,000
FINAL GENERAL FUND SURPLUS/(DEFICIT)
822,305
2,404,729
As part of the budget adoption on June 29, 2021, the City Council approved part of the surplus from FY 2020-2021 as set-asides to balance the FY 2021-22 budget. The set- asides were earmarked to fund: one-time payments for staff compensation, Community Facilities Improvements, and a portion of Reimagining Public Safety approved programs. Table 4, shown below, lists the various set-asides and their intended uses in FY 2020-21 and FY 2021-22.
Table 4: Approved Set-Asides from FY2020-21
Intended Uses of the Set-Asides
from FY2020-21 Excess
Projected
Jun. 29, 2021
Projected Oct.
26, 2021
FY 2020-21
Fiscal Close,
Feb. 15, 2022
Set-Asides
Available for
FY21-22
Budget
Reimagining Public Safety 1,300,000 1,300,000 1,300,000 1,300,0002 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 2,300,0003
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 4,219,5674 N/A
2 The total allocation for Reimagining Public Safety is $6.3 million from various funding sources , including $1.3 million coming from the General Fund.
3 Actual used for one-time compensation may be different than $2.3 million. 4 Actual RHA liability written-off during the fiscal close was $10,442,853, which was $4,313,885 more than the set - aside of $6,128,968.
March 22, 2022 Page 10 of 18
Reduce RHA liability 3,000,000 6,128,968 10,442,8535
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 20,877,5356 20,910,664 5,529,000
Personnel Authority (Position Count)
As part of the budget process, the City Council establishes the City’s maximum full- time equivalent (FTE) personnel authority. However, the number of active employees changes day-to-day as employees leave and new employees are hired, resulting in a gap between the number of employees authorized (in FTE), and actual staffing levels achieved on any given day. The actual number of employees, or FTE position count as of December 31, 2021, was 579 full-time employees, 10 part-time employees with benefits, and 8 CalPERS annuitants7, totaling 597 active employees (Table 5). This number is in comparison to 706.1 authorized and budgeted positions. Not included in this amount are part-time employees without benefits. Many of these are seasonal positions that change often. As of December 31, 2021, the City employed 127 part- time staff without benefits.
Table 5: Active Full-Time Employees vs. Authorized Positions
Status
Active
Employees as of
12/31/2021
Authorized &
Proposed
Budgeted FTE
Full-Time Employees 579 706.18
Part-Time Employees with Benefits 10 0
Retired Annuitants (Part-Time without Benefits) 8 0
Total Active vs. Authorized Employees 597 706.1
At mid-year, total adjustments for salaries and benefits are approximately $913,000.
Overtime for the Richmond Fire Department is approximately $705,000, and non-public safety adjustments are approximately $208,000. Below is the list of the proposed position changes. In addition, a Senior Civil Engineer position was budgeted, but not included on the original position listing and is now included. The Multi-Year Position Listing details can be found in Attachment 7. Staff will continue to monitor total position
5 Set aside to attain 14.3 percent reserve level were used to write-off RHA liability. 6 The additional $5,357,986 approved as set asides on October 26, 2021, included an additional $3,128,968 for RHA, bringing the total set aside for RHA to $6,128,968. Measure U Shortfall is $2,000,000, and General Fund expenditures equates to $229,000. The revised projected surplus increased from $15,519,567 to $20,877,535. 7 A "retired annuitant" is a CalPERS retiree who, without applying for reinstatement from retirement, returns to work with a CalPERS employer in a designated retired annuitant position; retired annuitants are part-time employees because the maximum number of hours they are permitted to work as per CalPERS stipulations is strictly capped at 960 hours per fiscal year.
8 Part-time employees with benefits are included in the total 706.1 number.
March 22, 2022 Page 11 of 18
count and bring back a historical multi-year position count to the City Council for various considerations.
Table 6: Proposed Mid-Year 2021-22 Position Changes
Department Mid-Year Position Changes Mid-Year Position Changes From To
City Attorney Reclass promotional from Executive
Secretary II Administrative Services Analyst
City Council Promotion from Sr. Admin Analyst Project Coordinator City Manager and Public Works Reallocate Community Engagement Manager Deputy Public Works Director
Children & Youth Promotion from Associate Admin Analyst Sr. Management Analyst Finance Reclass from Accounting Manager Deputy Finance Director Finance Reclass from Budget Analyst II Accountant II
Community Services - Library New Librarian II
Community Services -
Recreation Reclass from Admin Aide Assistant Admin Analyst Community Services -
Employment & Training Reclass from Finance Manager Sr. Accountant Economic Development Promotion from Associate Admin Analyst Sr. Admin Analyst Economic Development Remove Management Analyst I No position Economic Development/RHA Promotion from Management Analyst II Partially fund Sr. Management Analyst (0.5)
RHA Remove RHA Sr. Property Manager Partially fund Sr. Management Analyst (0.5)
The position adjustments shown above and other items such as overtime and professional services for staffing needs are included in Attachment 2 – Summary of Mid-Year Budget Requests.
Richmond Housing Authority
FY 2021-2022 Mid-Year Budget
On January 25, 2022, The Richmond Housing Authority (RHA) mid-year budget adjustments were approved at a joint meeting of the Richmond Housing Authority and the Richmond City Council. The RHA requested mid-year adjustments to the FY 2021-2022 Operating Budget that included an increase of $21,481 to revenues and a decrease of $349,975 to expenditures. This created a reduction and savings to the General Fund’s subsidy of the RHA in the amount of $371,456.
Repayment Agreement with the City of Richmond
February 28, 2021, CVR Associates, Inc. prepared and submitted to RHA, the City of Richmond, and HUD a report entitled “Report of Recommendations – Debts Owed Write Off/Repayment” addressing the scope of, and recommendations regarding, repayment of March 22, 2022 Page 12 of 18
funds advanced by the City for the benefit of RHA. Subsequently, at the joint meeting of the Richmond Housing Authority and the Richmond City Council on January 25, 2022, a repayment agreement was approved and authorized to be executed to facilitate the RHA repaying the City of Richmond $531,473.
General Fund Reserve
As part of the FY 2021-22 budget adoption, the City Council approved a set-aside of $4.2 million from the FY 2020-21 surplus for reserves. Based upon the expenditure amount of $171.6 million and coupled with the previous year’s reserve of $20.3 million, the reserves were estimated at 14.3 percent. During the last few months, staff determined (in consultation with the City’s Auditor), that the City would need to write-off as uncollectable a total of $10.4 million from the Richmond Housing Authority. Therefore, instead of using a set-aside of $4.2 million for reserves, the $4.2 million was used to write off a portion of the RHA liability. This was required because once there is no mechanism to collect outstanding debt, those receivables must be removed from the City’s balance sheet to mitigate the City’s Auditors from making a qualified opinion. Typically, final adjustments to the budget take place in January or February and post to the previous June (year-end). In the future, if the City’s Auditor strongly encourages changes to set-asides or excess it will be brought to the City Council in advance for consideration. Per the Annual Comprehensive Financial Report (ACFR) for the year ending June 30, 2021, the Unassigned Fund Balance (reserves) was $22.5 million. Based upon the Original Adopted FY 2021-22 General Fund Expenditures excluding Operating Transfers-Out, the reserve level was 12.5 percent. However, there was also an additional $3 million that the City Council set aside for reserves on June 29, 2021.
This amount is currently sitting in the Committed category of the fund balance and will be reclassed to the Reserve balance at the end of FY 2021-22. This thereby brings the City’s total reserves to $25.5 million and approximately 14.16 percent at the end of FY 2021-22.
Non-General Funds Revisions
Staff is recommending increases in non-general fund revenue totaling $24.8 million and expenditures totaling $6 million. These adjustments are primarily due to appropriation of pass-through funding, appropriation of Fund Balance reserves for operating and capital improvement needs, and adjustments to impact fee revenue based on current receipts (See Attachments 2 and 8).
Table 7: Non-General Fund Adjustments
NON-GENERAL FUND Revenue
Adjustment
Expenditure
Adjustment Net Impact
Employment & Training 1,992,371 12,371 1,980,000
Equipment Services 355,000 175,000 180,000
Fire Impact Fee 27,634 27,634
General Capital 1,520,000 -2,384,726 3,904,726
Grants 161,707 62,888 98,819
Hilltop Landscape Maintenance District 47,000 -47,000 March 22, 2022 Page 13 of 18
Housing Admin Prof Services 480,000 -480,000
Insurance Reserves 16,886,431 8,330,539 8,555,892
KCRT 35,999 -35,999
Library Impact Fee 36,302 36,302
Marina Bay Landscape & Lighting 47,000 -47,000
Non-Departmental 1,291,760 -521,142 1,812,902
Park Impact Fee 2,160 2,160
Parks Open Space Impact Fee 43,899 43,899
Planning & Building Cost Recovery 1,800,000 1,800,000 Police Impact Fee 152,496 152,496
Port 38 44,000 -43,962
Recreation Impact Fee 10,527 10,527
Stormwater Impact Fee 109,195 109,195
Traffic Impact Fee 227,990 227,990
Wastewater 325,313 325,313
Wastewater Impact Fee 173,118 173,118
Richmond Housing Authority -349,975 -349,975 0
Total Non-General Fund Requests 24,765,966 5,978,954 18,787,012
Capital Improvement Plan Budget
The Capital Improvement Plan (CIP) is a five-year projection of the City’s highest priority capital improvement projects. Currently, staff is recommending a few administrative adjustments to the CIP project budgets which equates to a total expenditure reduction of $2.3 million. ARPA funding was budgeted twice, once in the General Capital Fund and again after a new fund was created specifically for ARPA. The reduction of $2 million is needed to clear the duplicated budget (referenced in Table 7). Total revenue adjustments include year- to-date actual receipts in several Impact-Fee funds totaling $794,442. The CIP documents provide an update and information on individual projects and their sources and uses of funding (See Attachments 9 and 10). The CIP is managed continuously by measuring progress and anticipating future needs, and the budget is adopted annually alongside the operating budget.
For FY2021-2022, expenditures budgeted in CIP funds total $49.6 million. The major sources of funding for these projects are as follows:
State Gas Taxes, which are monies paid by taxpayers to the State under the provision of the Streets and Highway Code and distributed to local agencies for streets and road maintenance. The City’s gas tax allocation increased by $2.1 million to $4.9 million due to Senate Bill 1 - the Road Repair and Accountability Act of 2017.
Notable projects are:
Street paving program - $2.5 million
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Cutting Blvd. and Harbour Way S. Bikeway - $900,000
Measure C/J was established when the electorate of Contra Costa County passed Measure C approving the creation of the Contra Costa County Transportation Authority (Authority). The original half-cent transportation sales tax approved with Measure C was renewed by Measure J, effective April 1, 2009. The Authority collects one-half of one percent sales and use tax on taxable goods and services. 20 percent of this tax is allocated to the City of Richmond to be used for the improvement of local transportation, including streets and roads in accordance with Measure C and Measure J requirements.
Notable projects are:
I-80 Central Interchange Phase II - $2.3 million
Americans with Disabilities Act (ADA) Miscellaneous Sidewalk Repairs - $994,774
Detailed information on the Capital Budget can be found in Attachment 9 – Capital Improvement Projects
Loan Proceeds are used to fund large enterprise projects, mainly capital improvements in the Wastewater system. Notable projects are:
Grit and Aeration Replacement - $34 million
Grants that fund CIP projects are mostly awarded by state and local granting agencies. Notable projects are:
Boorman Park Revitalization - $3.9 million
Carlson Crosstown Connections - $421,268
Greening the Yellow Brick Road - $3.5 million
Harbour 8 Park Expansion - $7.4 million
Detailed information on the Grants Budget can be found in Attachment 10 – Grant Listings.
Other capital projects are funded by operating funds, including enterprise funds. For FY 2021-2022, these expenditures total $71.1 million. On-going operations and maintenance costs of capital projects are budgeted in operating budgets. Major CIP Mid- year adjustments are listed below:
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Table 8: Capital Improvement Project (CIP) Adjustments
CAPITAL PROJECTS
REVISED
BUDGET
FY2021-22
MID-YEAR
ADJUSTMENTS
FY2021-22
PROPOSED
BUDGET
FY2021-22
ARPA/MAIN LIBRARY 1,000,000 -500,000 500,000
ARPA/NEVIN CENTER 1,000,000 -500,000 500,000
ARPA/RECREATION CENTER 1,000,000 -500,000 500,000
ARPA/RICHMOND MUSEUM 1,000,000 -500,000 500,000
FIRE STATION 67 ROOF REPLACEMENT 14,726 -14,726 -
NEVIN COMMUNITY CENTER HVAC
UPGRADE 370,000 -370,000 -
PORT REHAB/TERMINAL 2
IMPROVEMENTS - 4,088 4,088
PPMT ELECTRICAL SYSTEM 90,000 -40,000 50,000
PPMT Fence Installation Project - 44,000 44,000
PPMT GRAVING WATER LINE 145,000 -45,088 99,912
PPMT PAVEMENT REHAB 160,000 -100,000 60,000
PPMT TERMINAL 7 & 8 VENTRIFICATION 150,000 -67,000 83,000 TERMINAL 2 DREDGING - 275,000 275,000
TERMINAL 2 MACHINE SHOP 30,000 -27,000 3,000
TOTAL 4,959,726 -2,340,726 2,619,000
American Rescue Plan Act (ARPA)
The City received a $27.7 million ARPA allocation and received its first installment of $13.9 million in August 2021. Per City Council approval, $10.5 million of the $27.7 million was allocated to the various projects listed in the chart below. Although only $180,000 in ARPA funds have been spent and/or encumbered as of December 31, 2021, City staff are currently working to support the development, design, and/or implementation of all the projects. For example:
Public Works staff is working on the design of heating, ventilation, and air conditioning (HVAC) systems at four (4) City facilities (Nevin Community Center, Recreation Complex, Richmond Museum, and Main Library). On February 15, 2022, the Community Development Department brought forth a contract with EdFund West to distribute funds via the Richmond Rapid Response Fund to support rent relief and direct disbursements for basic needs for Richmond residents. On February 15, 2022, the Community Services Department brought forth a contract with HR&A consulting firm to conduct a Community Needs Assessment and develop a strategic investment plan to support the distribution of remaining ARPA funds. The City Manager’s Office, Economic Development division is currently negotiating a contract with a consultant, which is budgeted at $300,000, to develop a Workforce March 22, 2022 Page 16 of 18
Development Plan with a Green-Blue New Deal and Just Transition framework informed by a comprehensive community engagement process.
Public Works and Community Services are moving forward with capital project related to the North Richmond Pump Station and Martin Luther King, Jr. Park projects, respectively.
Below is a summary of the approved projects related to ARPA and the year-to-date expenditures for each project. Detailed information on the ARPA Budget can be found in Attachment 12 – ARPA and Reimagining Public Safety.
Table 9: American Rescue Plan Act 2021
FY2021-22 through December 2021 BUDGET ACTUAL ENCUMBRANCES REMAINING ARPA REVENUE -TOTAL $27,740,723 $13,870,362* $ - $13,870,361
ARPA EXPENDITURES
MAIN LIBRARY - HVAC
IMPROVEMENTS
$500,000
-
$48,000
$452,000
NEVIN COMMUNITY CENTER - HVAC
IMPROVEMENTS
$500,000
$10,250
$39,750
$450,000
RECREATION COMPLEX - HVAC
IMPROVEMENTS
$500,000
$9,750
$39,250
$451,000
RICHMOND MUSEUM - HVAC
IMPROVEMENTS
$500,000
-
$32,600
$467,400
COMMUNITY BEAUTIFACTION $1,000,000 - - $1,000,000
COMMUNITY NEEDS ASSESSMENT $250,000 - - $250,000
ENVIRONMENTAL PLANNING
CONSULTANT
$300,000
-
-
$300,000
HOUSING & DEVELOPMENT
INITIATIVES/RICHMOND RAPID
RESPONSE FUND
$1,000,000
-
-
$1,000,000
FY2020-2021 REVENUE RECOVERY
APPLIED TO BALANCE FY2021-2022
GENERAL FUND BUDGET
$4,000,000
-
-
$4,000,000
NORTH RICHMOND PUMP STATION $1,800,000 - - $1,800,000
MLK PARK TURF FIELD $150,000 - - $150,000
Total - ARPA FY2021-2022 $10,500,000 $20,000 $159,600 $10,320,400
REMAINING ARPA ALLOCATION $17,240,723
* Additional $7,487.59 received in interest through December 2021
Reimagining Public Safety Community Task Force
In June 2021, the City Council approved the recommendations of the Reimagining Public Safety Community Task Force, which included an allocation of $6.38 million for the four (4) interventions listed below. As with ARPA, the year-to-date expenditures have been low through December 2021, but City staff are working diligently to implement all programs.
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Detailed information on the interventions can be found in Attachment 12 – ARPA and Reimagining Public Safety.
Table 10: Reimagining Public Safety FY2021-21 Budget
FY2021-22 through December 2021
BUDGET
ACTUAL
ENCUMBRANCES
REMAINING
YouthWORKS $1,980,000 $352,026 - $1,627,974
Office of Neighborhood Safety (ONS) $1,600,000 - - $1,600,000 UNHOUSED INTERVENTION $1,800,000 - $983,975 $816,025
COMMUNITY CRISIS RESPONSE $1,000,000 - - $1,000,000
Total - Reimagining Public Safety
FY2021-2022 Expenditures
$6,380,000 $352,026 $983,975 $5,043,999
Fund Balance Types Defined
At the City Council Meeting on March 1, 2022, Staff was directed to provide clarity on various segments of fund balance to establish understanding on Reserve versus Set Aside. In the City of Richmond’s FY 2021-22 budget context, “Surplus” or “Excess” is the difference between revenues exceeding expenditures for FY 2020-21 and allocated for other uses per City Council direction for FY 2021-22. The “Reserve” is a component of the Unassigned Fund Balance (not appropriated for any use or purpose). The text below further explains different categories of fund balances.
Governmental Accounting Standards Board (GASB) statement number 54 categorizes general fund balances by their degree of accessibility. The GASB categorizes fund balances by the five (5) categories below:
Non-spendable: Amounts that cannot be spent because they are either (a) not in a spendable form or (b) legally or contractually required to be maintained intact. The non-spendable form criterion includes items that are not expected to be converted to cash, for example, inventories and prepaid amounts.
Restricted: Funds whose use is constrained by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or by law through constitutional provisions or enabling legislation.
Committed (Set Aside): Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority.
Assigned: Amounts that are constrained by the government’s intent to use them for specific purposes but are neither restricted nor committed.
Unassigned (Reserve): A fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund.
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Next Steps
City staff members will continue to monitor both current year revenues and expenditures and report monthly to City Council with updates. The goal remains to have a structurally balanced budget and long-term fiscal sustainability for the City of Richmond as the City Council adopted in the Guiding Fiscal Policies on April 20, 2021.
Some of the priorities to achieve long-term fiscal sustainability are addressing pension obligation bonds, funding and implementing class and compensation study, monitoring Measure U revenue, considering additional revenue enhancements, increasing the City Reserves to 15 percent, and considering revising Cash Reserve Policy.
DOCUMENTS ATTACHED:
Attachment 1 – Mid-Year Budget Resolution
Attachment 2 – Summary of Mid-Year Budget Requests
Attachment 3 – General Fund Revenue Summary
Attachment 4 – General Fund Summary of Revenue and Expenditures Attachment 5 – Overtime Report
Attachment 6 – General Fund Revenues and Expenditures
Attachment 7 – Multi-Year Position Listing
Attachment 8 – Non-General Fund Revenues and Expenditures Attachment 9 – Capital Improvement Projects
Attachment 10 – Grants Listing
Attachment 11 – Mid-Year Presentation
Attachment 12 – American Rescue Plan and Reimagining Public Safety Task Force FY2021-2022 Budgets
Attachment 13 – City Council Questions and Draft Responses: March 1, 2022, City Council Meeting