CC Date: 12-19-23
Item No.: 60
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RiversideCA.gov
RiversideCA.gov
GENERAL FUND TRANSFERS FROM
PUBLIC UTILITIES DEPARTMENT
Riverside Public Utilities
City Council Workshop
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The source of authority resides in
the City Charter subsections 1204.1
and 1204.2. The voters established
the GFT by way of a ballot measure
in 1907. Over the past 116 years,
voters have approved 6 ballot
measures in support of the GFT with
the most recent ballot measure
approval in 2021.
WHAT IS THE GENERAL FUND TRANSFER (GFT)?
The General Fund Transfer (GFT) is the City's annual budgetary transfer from its electric utility and water utility to its general fund for general revenue purposes.
The combined General Fund Transfer or
GFT for the electric utility and the water
utility amounts to
$50.5M
to the general fund
for fiscal year ended
June 2023.
REVISED
Added slides 14-15
12/15/2023
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1907 – Majority vote established City Charter Provides authority for the City to enact certain legislation over its municipal affairsGeneral Fund Transfer - HistoryGeneral Fund Transfer (GFT), Section 172(4)Providing funding for the general fund of the City through a transfer from the public utilities department was established 4 RiversideCA.gov
Each public utility shall be kept separate and apart from all other moneys of the City and shall be used for the purposes and in the order as follows: a) Payment of operating and maintenance expenses b) Payment of interest on bonded debt c) Payment of principal of said debt d) Payment for capital expenditures e) Payment into the contingency reserve fund, and f) The remainder shall be paid into the general fundHistoryThe 1953 Charter, and as amended in 1967, introduced Section 1304 to revise the prior Section 172(4) guidance. Section 1304, “Use of Revenue” states:
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Historyf) For the annual payment by each utility into the general fund in twelve (12) equal monthly installments during each fiscal year, an amount equal to 11.5% of the gross operating revenues, exclusive of surcharges, of each specific utility for the last fiscal year ended and reported upon by independent public auditors. June 4, 1968 – Majority Vote Charter amendments effective July 16, 1968 replaced in full previous language from Section 1304(f) with the following:
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HistoryThe revenue of the water public utility for each fiscal year shall be kept separate and apart from all other moneys of the City by deposit in the appropriate revenue fund and shall be used for the purposes and in the order set forth in Section 1204 and for the annual payment by water utility into the general fund in twelve equal monthly installments during each fiscal year, an amount not to exceed 11.5 percent of the gross operating revenues, exclusive of surcharges, of the water utility for the last fiscal year ended and reported upon by independent public auditors. The proceeds shall be used to maintain local general purposes as the City Council may by budget or other appropriation direct such as 9-1-1 response, police patrols/fire protection, children’s after-school and senior/disabled services, and protect supplies of clean drinking water from contamination. 2013 – Majority Vote Added section 1204.1 to City Charter which approved the continued transfer of funds from the City water utility to the general fund as previously approved by city voters per the 1907, 1952, 1968 and 1977 ballot measures. 12/15/2023
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HistoryTo provide that City-owned electric and water utilities may each pay an amount to the City’s general fund which could be less than the current required 11.5% of gross operating revenues. This voter action rescinded the fixed annual payment of 11.5% from each public utility and created the current practice today of providing, in the form of a GFT, an amount not to exceed 11.5% of gross operating revenues of both the electric and water utilities.November 8, 1977 – Majority VoteCharter amendment to Section 1304(f), per ballot Measure A:
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November 2, 2021 – Majority Vote, Ballot Measure CHistoryThe City’s continuance of “…collecting in electric rates and maintain the voter-approved fund transfer (established 1968) and limited to 11.5% of gross revenue, providing approximately $40,000,000 annually to the City of Riverside’s General Fund not increasing tax or utility rates, until ended by voters.” 12/15/2023
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2013 – Majority Vote, Ballot Measure CAdded Section 1204.2 to the Charter, Electric Utility RevenueHistoryThe revenue of the electric public utility for each fiscal year shall be kept separate and apart from all other moneys of the City by deposit in the appropriate revenue fund and shall be used for the purposes and in the order set forth in Section 1204 and The revenue of the electric public utility for each fiscal year shall be kept separate and apart from all other moneys of the City by deposit in the appropriate revenue fund and shall be used for the purposes and in the order set forth in Section 1204 and for the annual payment by the electric utility into the general fund in twelve equal monthly installments during each fiscal year, an amount not to exceed 11.5 percent of the gross operating revenues, exclusive of surcharges, of the electric utility for the last fiscal year ended and reported upon by independent public auditors. The proceeds shall be used to maintain local general purposes as the City Council may by budget or other appropriation direct such as 9-1-1 response, fire, paramedic, police, street repairs, parks, senior services, homelessness and other general services. (Res. 23739 § 1(Att. A), 2021) 10 RiversideCA.gov
•1996: California voters passed Proposition 218, a constitutional amendment requiring taxes or property-related assessments, fees and charges to be approved by ballot measure with a two-thirds majority vote for “special taxes”, and at aregularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body, a majority vote is required for “general governmental purposes”. •2010: California voters passed Proposition 26 which provided that certain fees and charges must be approved by voters.CALIFORNIA PROPOSITIONS AFFECTING THE GFT 12/15/2023
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Proposition 218 (1996)Local Governments must obtain majority voter approval for any new or increased general taxVoters may repeal or reduce any local tax, assessment, fee or chargeLocal governments must put all assessments, charges and fees to a vote of the people before imposition or increaseBenefit assessment must be calculated by the benefit received by each parcel of real property•Local governments prohibited from imposing fees on property owners for services that are available to the public at large (e.g., police and fire services)CALIFORNIA PROPOSITIONS AFFECTING THE GFT*Adapted from California Special Districts Association table titled, “Voter Initiatives Restricting Local Revenue”Proposition 26 (2010)Redefined “Tax” to mean any levy, charge or exaction of any kind imposed by a local government, except for seven specifically defined exceptions that are considered feesFees and charges that do not fit one of the seven exceptions must receive voter approval 12 RiversideCA.gov
LEGAL CHALLENGES TO THE GFTNovember 2, 2021: City residents voted and approved the ballot Measure C. Prior to that election, a lawsuit was filed by Riversiders Against Increased Taxes, challenged the date of the Measure C election. That lawsuit is currently in Remedy Phase.•2012: The Moreno v. Riverside case challenged Riverside’s GFT imposed on the water utility. •2013: The parties settled the matter with terms including the end of the water utility transfer, and an agreement that the City refund $10M to the water utility. •2018: The City was served with a lawsuit titled Parada et al. v. City of Riverside.•2021:The parties reached a Conditional Settlement Agreement 12/15/2023
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Calculations are based on actual gross operating revenues with actuals through the end of each fiscal year as defined in Charter Section 1204.1 for the water utility and 1204.2 for the electric utility.2010: California voters passed Proposition 26 which provided that certain fees and charges must be approved by voters.CURRENT CALCULATION OF THE GFTWater Fund - General Fund Transfer for Fiscal Year 2022/23 from Fiscal Year 2021/22 activity$72,201,111Retail Sales, (Net of Uncollectibles)Net of Changes in Billed Utility Accounts Receivables (A/R) and Allowance for Uncollectible A/R from prior year.$551,495Plus Other Operating Revenue(1,713,105)Excluding revenue from Surcharge area Outside City$71,039,502Total Gross Operating Revenue11.5%Multiplied by the General Fund Transfer Rate$8,169,500Total Water fund General Transfer AmountElectric Fund - General Fund Transfer for Fiscal Year 2022/23 from Fiscal Year 2021/22 activity$334,737,543Retail Sales, (Net of Uncollectibles)Net of Changes in Billed Utility Accounts Receivables (A/R) and Allowance for Uncollectible A/R from prior year.$32,245,109Plus Transmission Revenue$1,068,016Plus Other Operating Revenue$368,050,668Total Gross Operating Revenue11.5%Multiplied by the General Fund Transfer Rate$42,325,800Total Electric fund General Transfer Amount 14 RiversideCA.gov
HISTORY OF THE GFTFiscal Year Electric Rate Water Rate 1985‐86 5,538,000 5.6 1,667,000 11.51986‐87 6,052,000 5.6 1,763,000 11.51987‐88 6,446,000 5.6 1,814,000 11.51988‐89 6,581,000 5.6 1,835,000 11.51989‐90 9,652,000 7.5 1,895,000 11.51990‐91 9,915,000 7.5 1,948,000 11.51991‐92 12,294,000 7.5 1,836,000 11.51992‐93 13,700,000 9.1/11.5 2,000,000 11.51993‐94 16,100,000 10.5 2,100,000 11.51994‐95 16,311,000 10.5 2,102,000 11.51995‐96 16,335,000 10.5 2,101,000 11.51996‐97 16,320,000 10.0 2,408,000 11.51997‐98 15,491,000 9.5 2,649,000 11.51998‐99 14,411,000 9.0 2,600,000 11.51999‐00 14,405,000 9.0 2,943,000 11.5Source: Charter Review Committee Report 5/05/21 12/15/2023
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HISTORY OF THE GFT
2000‐01 15,243,000 9.0 3,023,000 11.52001‐02 15,324,000 9.0 2,974,000 11.52002‐03 15,333,000 9.0 3,182,000 11.52003‐04 16,177,000 9.0 3,163,000 11.52004‐05 18,572,000 9.0 3,487,000 11.52005‐06 22,037,000 9.0 3,539,000 11.52006‐07 27,393,000 9.0 3,928,000 11.52007‐08 27,371,000 10.5 4,955,000 11.52008‐09 29,583,000 10.5 5,276,000 11.52009‐10 33,656,000 11.5 5,657,000 11.52010‐11 33,070,000 11.5 5,847,000 11.52011‐12 33,533,000 11.5 6,258,000 11.52012‐13 37,186,000 11.5 6,579,000 11.52013‐14 38,704,000 11.5 6,991,000 11.52014‐15 38,178,000 11.5 7,098,000 11.52015‐16 38,360,000 11.5 6,430,000 11.52016‐17 39,230,000 11.5 5,673,000 11.52017‐18 40,073,000 11.5 6,173,000 11.52018‐19 39,886,000 11.5 6,584,000 11.52019‐20 39,557,800 11.5 6,518,200 11.5 Source: Charter Review Committee Report 5/05/21
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GFT USERecreationWaterPolice Afterschool ProgramsElectricityFire Senior ServicesParking StreetsFestivals & EventsPlanningParks & TrailsLibrary & MuseumsRefuse & SewerVoting & Civic EngagementAnd MoreCommunity Centers311The GFT brings resources that are important to help maintain infrastructure, maintain safety, and improve the economy, quality of life and protect the environment.City Services 12/15/2023
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GFT IMPACT ON GENERAL FUNDThe GFTProperty TaxSales TaxGeneral Fund’s three largest revenue sources areof total General Fund revenues over the past five fiscal years.15% - 17% The GFT accounted forFY 2022/23, the GFT provided approximately$50.5Mto the General Fund 66% of the General Fund’s FY 2022/23 revenue.GFT HELPS TO STABILIZE GENERAL FUND 18 RiversideCA.gov
GENERAL FUND EXPENDITURE BUDGETGeneral Fund FY 2023/24 Adopted Budget$ 256,744,172Personnel & Retirement77,699,015Non-Personnel Operating Costs1,301,613Minor Capital/Facilities Maintenance28,878,510Debt Service5,453,990Operating Contributions$ 370,077,300Subtotal(42,989,845)Charges to Others$ 327,087,455General Fund Budget 12/15/2023
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IMPACT OF A TOTAL GFT LOSS•Revenue loss would be absorbedby General Fund departments.•Require reduction of public services & internal support services.On September 19, 2023, the City Council directed staff to place all future Water General Fund Transfercollections into a reserve account pending the outcome of litigation. As a result, the City will be required to reduce its total expenditure budget byapproximately 2.6%in future fiscal years. Water GFT provided$8.2 Mto the General Fund in FY 2022/23Electric GFT provided$42.3 Mto the General Fund in FY 2022/23~ 13%of General Fund revenues 20 RiversideCA.gov
EXAMINATION OF ALTERNATIVESUtility Users’ TaxBallot MeasureInterim Measure BalancedApproach
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Adopt a Balanced Approach model that considers the below to help address the issueof replacing potential revenue losses from the GFT.BALANCED APPROACHIdentify the need and establish a goal/target in financial and functional termsEvaluate available capacity in existing revenue streamsConsider the value of Public-Private Partnership in the delivery of specific servicesPrioritize initiatives that promote new development & economic growthLeverage existing City assets/resources to stimulate local economic activityConduct a comprehensive review of City expenditures/programs to identify potential savingsCreate a community engagement process RiversideCA.gov22
Goal 5.3 –Enhance communication and collaboration with community members to improve transparency, build public trust and encourage shared decision-making.Cross-Cutting Threads
STRATEGIC PLAN ALIGNMENT
Priority #5 – High Performing Government
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RECOMMENDATIONSThat the City Council:1. Conduct a workshop on the General Fund Transfers;2. Direct the City Manager regarding the options relating to the Water General Fund Transfer; and3. Direct the City Manager regarding the options relating to the Electric General Fund Transfer.