The Salinas Plan
Refresh
Update to 2018 Plan
Date: March 21, 2023 FINAL REPORT
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Contents
Chapter 1: Overview................................ ................................ ............................. 5 Purpose of The Salinas Plan Refresh ................................ ................................ ...................... 5 The Salinas Plan Summary ................................ ................................ ................................ . 5 TSP Refresh Recommendation Organization ................................ ................................ ............. 6 Ongoing Recommendations ................................ ................................ ............................... 7 New Recommendations ................................ ................................ ................................ .... 7 Chapter 2: Background ....................................................................................... 8 City Revenues. ................................ ................................ ................................ .............. 9 Study Organization ................................ ................................ ................................ ....... 12 Chapter 3: The Salinas Plan Status ................................................................... 13 Implementation Impact ................................ ................................ ................................ .. 13 Implementation In-Progress ................................ ................................ ............................. 17 Chapter 4: Evolving Fiscal Challenges ............................................................... 19 10-Year Budget Forecast ................................ ................................ ................................ . 20 Results ................................ ................................ ................................ .................... 21 Revenues ................................ ................................ ................................ .................. 21 Expenses ................................ ................................ ................................ .................. 23 Budget Risks ................................ ................................ ................................ .............. 24 Alternative Forecasts ................................ ................................ ................................ ..... 26 Alternative Forecast No. 1 ................................ ................................ ............................... 26 Alternative Forecast No. 2 ................................ ................................ ............................... 26 Alternative Forecast No. 3 ................................ ................................ ............................... 27 Conclusion ................................ ................................ ................................ ................ 28 Chapter 5: A Future of Trade Offs ................................ ................................ ...... 29 Managing the Organization................................ ................................ .................. 30 Staffing ................................ ................................ ................................ .................... 31 Turnover and Vacancies ................................ ................................ ................................ .. 32
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MO-01 (WF01): Healthcare Cost Containment ................................ ................................ ......... 36 MO-02 (WF02): Improve Base Pay on a Cost-Neutral Basis ................................ ............................ 39 MO-03 (WF03): Evaluate the Total Leave Program (old “Eliminate Management and Flex Leave”) ............... 39 MO-04 (WF04): Continue to Address Workers' Compensation Costs ................................ ................. 42 MO-05 (PSO2): Police Civilianization ................................ ................................ ................... 43 MO-06 (OE03): Improve Budget Process and Monitoring ................................ ............................. 44 MO-07 (RM02): Incorporate Multi-Year Financial Planning into All Budgetary Actions ............................. 45 MO-08: Include Leave Accruals and Cash Outs in Current Compensation Study ................................ .... 45 MO-09: Evaluate the Parking Functions Within the City ................................ .............................. 46 MO-10: Evaluate the Impact of Implementing the City’s Coming Compensation Study ............................ 47 City Facilities and Infrastructure ................................ ................................ .......... 47 Current Funding ................................ ................................ ................................ .......... 47 Additional Funding Needs ................................ ................................ ............................... 49 CFI-01 (OE05): Prepare a Preventive Maintenance Program for all City Facilities ................................ .... 50 CFI-02 (OE02): Citywide Fleet Strategy ................................ ................................ .................. 52 CFI-03 (MC02) Eliminate General Fund Subsidy of Golf Course Debt Service ................................ ......... 52 CFI-04 (MC03) Eliminate Sherwood Hall Deficits ................................ ................................ ....... 53 CFI-05: Develop an Implementation Approach to Prioritize and Fund the Most Pressing City Needs .............. 53 Investments for a Healthy City ................................ ................................ ............. 54 IHC-01 (NR01) Enact Storm Sewer Utility Fee to Fund Current Transfers of General Fund Revenue to Storm Sewer Operations. ................................ ................................ ................................ ............... 55 IHC-02 (NR02): Increase Hotel Tax and Dedicate Funding to Capital Investment. ................................ ... 56 IHC-03 (RM01): Request the Salinas Community to Make the Measure G Sales Tax Permanent. .................. 56 IHC-04 (IN01): Dedicate Savings to Capital Investment ................................ ............................... 57 IHC-05: Evaluate a General Obligation (“GO”) Bond to Fund Key City Projects ................................ ....... 57 Housing & Homelessness ................................ ................................ ..................... 58 Housing ................................ ................................ ................................ ................... 58 Homelessness................................ ................................ ................................ ............. 58
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HH-01 (IN04): Convene Stakeholders to Develop an Implementation Plan to Create More than 4,000 New Units of Affordable Housing in the Next Ten Years ................................ ................................ .............. 59 HH-02 (IN05): Establish a Housing Trust Fund with a Dedicated Revenue Stream for Affordable Housing ........ 59 HH-03 (IN06): Develop a Land Strategy to Leverage Private Market Investment to Create up to 2,400 New Units of Affordable Housing. ................................ ................................ ................................ ...... 59 HH-04 (IN07): Create Regulations to Address Safety and Health Conditions in Rental and Other Group Housing. 60 HH-05 (NR05): Rental Registry and Inspection Fees ................................ ................................ ... 60 HH-06: Expand SORT Team to Include Public Safety Members ................................ ....................... 60 Appendix A – 2023 “The Salinas Plan Refresh” Recommendations .................... 61 Appendix B -- Other Items of Importance………………………………………………………..63
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Chapter 1: Overview
In 2018, the National Resource Network (NRN ), led by Public Financial Management (PFM) conducted a comprehensive study of the financial and organizational issues being experienced by the City of Salinas .
The Study was named “The Salinas Plan” (the “TSP”) and was completed in November 2018. At that time the City was facing a number of issues: budget forecast of a negative net revenue in the General Fund; a housing and homelessness crises ; lack of investment in City buildings, parks, and infrastructure ; and a number of workforce compensation strategies that worked against the City’s goals of competitive pay structures for recruitment and retention. The TSP included 32 recommendations targeted at each of these major issue areas for the City. Since that time , the City has systematically worked at implementing the recommendations from the TSP.
In October 2022, Russ Branson Consulting (RBC) was retained to perform a refresh of the TSP. As discussed later, the “refresh” is an opportunity to review the City’s progress on the original TSP recommendations, update the budget forecast, and recommend additional recommendations based on current economic and operating conditions.
Purpose of The Salinas Plan Refresh
Over the last four years, the City has undergone a number of changes and challenges that have reshaped the City in key ways:
▪ Turnover of key staff, including the City Manager and Finance Director; ▪ The COVID pandemic and resulting impacts on implementation of TSP recommendations; and, ▪ Increased sales and property tax revenue placing the City in a better financial position.
Other aspects of the City remains unchanged, including:
▪ Population has remained static;
▪ Expected new development has been delayed; and,
▪ Total staffing and service levels effectively remain at 2018 levels.
Given the turmoil of the last four years, as well as the progress the City has made on the original plan, the City is seeking a review of the 2018 TSP status, including an evaluation of which recommendations should remain in place and the addition of new recommendations that should be added based on current circumstances.
This “refresh” plan is being completed as an update of the original plan and not a complete re-evaluation of the underlying analysis of the TSP. In this way, the Refresh Plan relies on the work done in the original NRN study. Except where noted, it is determined that the analysis and circumstances of the original TSP remain valid.
The Salinas Plan Summary
The Salinas Plan (“TSP”) included 32 recommendations1, or initiatives, across eight broad categories:
1 Names and descriptions of the categories are from pp. 10 & 11 of The Salinas Plan.
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▪ Risk Mitigation initiatives represent actions the City can take to reduce its exposure to significant budgetary impacts in the future;
▪ Public Safety initiatives provide a path to more efficient, cost -effective Police and Fire services without reducing service levels;
▪ Shared Services initiatives seek to make the most efficient use of shared services and for the City to be properly compensated for services provided on a shared basis; ▪ Managed Competition initiatives focus on areas where the City should explore partnerships to either manage or repurpose City assets;
▪ Operational Efficiencies initiatives change the way the City does business so that services are as efficient and affordable as possible;
▪ Workforce initiatives allow the City to develop a more sustainable compensation package while increasing the City’s long-term competitiveness and ability to recruit and retain employees critical to delivering quality services;
▪ Investment Strategies initiatives focus on investment in the City both to maintain the City’s significant investments in community facilities and infrastructures and to support affordable housing and community development initiatives that will meaningfully begin to tackle the City’s housing and homelessness crisis; and,
▪ New Revenues include provisions for new revenue to support new investment and projected growth.
To date, more than half of the recommendations have either been implemented or are actively being implemented by the City to some extent. A third of the recommendations are not currently being implemented and are recommended to remain in place for City action. Four of the TSP recommendations have attempted implementation and failed or have been rejected by the City as not feasible.
TSP Refresh Recommendation Organization
For the TSP Refresh, recommendations are organized in different groups from the original TSP. This provides a simpler approach and places related recommendations together. The graphic below illustrates the four areas of recommendations in th e Refresh Plan . These areas are: Managing the Organization, Facilities & Infrastructure, Investments for a Healthy City, and Housing & Homelessness.
No. of
Recommendations
Implemented 7
In-Progress 10
Active 11
Rejected 4
Total Recommendations 32
Status of The Salinas Plan Initiatives
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The numbering of all recommendations is updated to reflect this change; however, t o provide congruity to the original TSP, the original numbering of each ongoing recommendation is shown in parentheses after the new number.
Ongoing Recommendations
The “in-progress” and “active” recommendations from the graph above are detailed in “The Salinas Plan Status” chapter of this report and discussed in more detail in the body of the report below. Twenty-one of the original 32 recommendations are in-progress or remain active for the City. The TSP Refresh affirms these recommendations for continued active implementation.
New Recommendations
New recommendations are provided in each section. The purpose of the new recommendations are to focus the City on the important decisions before it currently and to address issues that have emerged over the last four years. Additionally, the City’s fiscal structure has changed since 2018. No longer is there a looming fiscal crisis, but there will be a crisis in priority setting to meet the total fiscal and capital needs of the City going forward.
Managing the
Organization
Facilities &
Infrastructure
Housing &
Homelessness
Investements
for a Healthy
City
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Chapter 2: Background
Many of the factors cited in the TSP – low income, high unemployment, and poverty – remain issues in the City. These are important factors as they each speak to the challenges the City faces in both raising revenues for City services and the amount of City services that many residents need.
Economic Factors . In h ousehold and per capita income, the City is near the bottom compared to neighboring cities. These reduced income levels point to lower ability to purchase housing or to pay for services than in higher income cities. This could also affect sales taxes that have an outsized impact on City revenues.
Unemployment and poverty rates in Salinas are among the highest of neighboring cities. Taken together, these economic factors indicate that the City of Salinas needs to provide not only typical City services (e.g., police, fire, public works) but also needs to focus on services to portions of the community that have resource challenges (e.g. , recreation services, community centers, etc.). This puts a strain on City resources for services that often get cut first under fiscal distress.
$0
$50,000
$100,000
$150,000
Household Income
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Per Capita Income
5-Year Census ACS Estimates, 2022
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Unemployment Rate
0.00%
5.00%
10.00%
15.00%
20.00%
Poverty Rate
5-Year Census American
Community Survey (ACS) Estimates,
2019
5-Year Census ACS Estimates, 2020
Employment Development
Department (EDD), December
2022
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City Revenues. A key component of the City’s ability to provide municipal services and continue investing in the broad range of facilities and infrastructure required for any City are its General Government revenues. These revenues include the General Fund, Measure E, and Measure G.2 Since Fiscal Year (FY) 17, the City has seen a significant increase in property taxes (4.8% compounded annual growth rate or “CAGR”), sales taxes (5.6% CAGR) and Other3 revenues (6.7% CAGR).
Much of the sales tax increase occurred during the pandemic. This happened in many jurisdictions statewide, and begs the question of whether this trend will continue or if a reduction could occur as we exit the pandemic restraints. The budget forecast assumes a drop in taxable sales in FY24 and slow growth for the next few years thereafter.
Additionally, while always a high share of total revenue, the City’s sales tax has grown to comprises 62% of total tax revenues.4 This by itself is an indication of potential volatility in City revenues. While the City has experienced solid growth in last few years, future years could bring a decline in sales taxes, particularly if a recession or other economic disruption occurs.
2 Measures E and G were approved by voters as general taxes (i.e., general fund revenues) . The City has chosen to track the expenses related to these revenues separately; however, these are not special-purpose or restricted revenue sources.
3 Other revenues include revenue from other agencies, fines and fees, interest, and rental income. 4 Taxes themselves comprised 85% of total General Government revenues.
Property Taxes
Sales Tax
Utility Taxes
Other Taxes
Franchise Fees
Charges for Service
Transfers
Other
0 20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
180,000,000
FY17 FY18 FY19 FY20 FY21 FY22
City of Salinas General Government Revenues
Actual FY17-FY22
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The FY23 distribution of General Government revenues is shown in the chart below. Sales and property taxes collectively account for 73 percent of total revenue – a significant majority – with utility taxes, franchise fees, and all other revenues (taxes, fees, fines and penalties, transfers, charges for service, etc.) accounting for just 27 percent of total revenues.
The increases in sales and property taxes pushed the total General Government revenues beyond the expectations of the 2018 TSP forecast. The following two graphs compare the TSP and R efresh budget forecasts for revenue and expenses. The revenue comparison shows that actual revenue growth far outpaced the 2018 forecast though FY28 (the period of overlapping forecasts).
The expense forecast on the other hand was much closer between the TSP and Refresh forecasts. This underscores that fact that expenses for the City can be controlled much more than revenues. While the City has outperformed the previous forecast, the future is unknown . With the City’s reliance on sales taxes, negative economic volatility will likely impact the City a t some point in the next ten years. This issue will be discussed further in the Evolving Fiscal Challenges chapter.
Property Taxes
21%
Sales Tax
52%
Utility Taxes
7%
Other Taxes
5%
Franchise Fees
6%
Charges for
Service
3%
Transfers
2%
Other
4%
General Government Revenues -- FY23
($167 Million)
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$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
$200,000,000
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28
Comparison of The Salinas Plan Revenue Forecast
With Updated Forecast—Governmental Funds
Current Forecast Revenue TSP Forecast Revenue
Past Future
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
$200,000,000
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28
Comparison of The Salinas Plan Expense Forecast
With TSP Refresh Actual and Forecast
Current Forecast Expenses TSP Forecast Expenses
Past Future
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Study Organization
The Refresh plan in the following chapters starts with a review of the 2018 TSP recommendation status.
Status includes completed, in-progress, still recommended, and not implemented. This is followed by a discussion of evolving fiscal challenges , which includes the 10-year budget forecast. The last chapter undertakes a future of trade offs that the City will need to address to fund its operational and capital needs. This section provides detailed discussion on the continuing recommendations and new Refresh Plan recommendations for each of the four operational categories.
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Chapter 3: The Salinas Plan Status
The Salinas Plan was completed in November 2018 with thirty-two separate recommendations crossing nearly every department in the City. City staff took a proactive approach to tracking and working toward implementation of the recommendations. Over the last four years, the City has hired a new City Manager and new Finance Director; however, a focus on The Salinas Plan implementation has been maintained.
During this period, the following overall progress has been made:
▪ Seven recommendations have been implemented and are generating savings or creating operating efficiencies;
▪ Ten recommendations are in-progress at different stages of implementation; ▪ Eleven of the recommendations have not been tackled and remain active recommendations from the TSP; and,
▪ Four of the recommendations have either not been implemented or were tried and did not work within the City’s structure. The City will not pursue these recommendations.
The table below provides a brief description of each recommendation and its implementation status. The recommendations are divided into the four categories from above.
Implementation Impact
The recommendations (grouped by the TSP organization headings) that have been implemented to date have been a combination of:
▪ Public Safety : Staffing and overtime reduction and improvement of police department technology. Total salary and overtime cost in FY22 is $1 million less than in FY19 when TSP was completed.
▪ Shared Services: Consolidation of Animal Services with the County. To date, this has not resulted in costs savings; however, a JPA has been formed and the last of the City’s Animal Control employees will transfer in 2023. The City has a new contract with the Monterey County Regional Fire District for a greater recovery of the cost of services. ▪ Operational Efficiency: Moving park maintenance to the Library and Community Services Department ( facility maintenance has remained in Public Works) and the strategic implementation of consultant studies . Library and Community Services has doubled park maintenance staffing; therefore, costs did not go down, but the parks are better maintained and more closely aligned with the Library and Community Services. ▪ Managed Competition and Privatization. Increased fees to reduce downtown parking fund deficits. The parking fund continues to operate at around a$200,000 deficit (funded by the General Fund) and has $2 million in a negative fund balance.
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TSP
Identifier Initiative Notes
Completed
PS01 Staffing and Overtime Reduction
Updated scheduling then revised due to staffing
shortages. Need to get back to revised schedule
once full staffing allows
PS03 Improve Police Department Technology
Strong movement forward on technology in all
areas. The Word Processing unit has been
eliminated and staff reassigned
SS01 Recover Full Cost of Service from Monterey County Regional Fire District Multi-year contract with close approximation to full cost recovery is in place
OE01 Move Facility and Park Maintenance to Library and Community Services Park Maintenance was moved under Library and
Community Services and has been very
successful. Facility maintenance has stayed in
Public Works
SS02 Consolidate Animal Services JPA with County in place. City staff positions will be fully ended in 2023
MC01 Eliminate Downtown Parking Fund Deficits
Fees raised to reduce deficit. New parking
structure with Co. under discussion. GF funding of
deferred maintenance costs a concern
OE04 Strategically Implement Consultant Studies with Action Plans and Savings Targets
The City has been diligent about tracking study
recommendations. This is an ongoing best-
practices recommendation
Implementation In Progress
PS02 Police Civilianization
Additional civilian staff has been added and is
making impact. Need to complete list of sworn
officer duties to see if more movement is possible.
OE02 Citywide Fleet Strategy
The PW department is moving toward a
comprehensive plan and is working on a
combined replacement strategy. This will result
increased funding needs
OE05 Prepare a Preventive Maintenance Program for all City Facilities Asset management program in progress that will
identify deferred maintenance. This remains an
important project identifying future fiscal impacts
WF01 Healthcare Cost Containment
The City has gone from 100% city funding to
between 5% and 20% employee funding. Long-
term goal should be to increase employee cost
sharing
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TSP
Identifier Initiative Notes
WF03 Eliminate Management and Flex Leave
The City has eliminated these leaves, but added
to other leaves. Hard cap on leave accrual and
the total hours that can be cashed out. The
success of this new program will not be known
until March of 2023
WF04 Continue to Address Workers' Compensation Costs, Moving Towards Sound Actuarial Funding
Reserves for actuarial funding have been
prioritized behind other policy reserves.
IN04 Convene Stakeholders to Develop an Implementation Plan to Create More than 4,000 New Units of Affordable Housing in the Next Ten Years Technical advisory committee and all plans come
through CDD. The creation of affordable housing
plan is being incorporated in the City’s updated
Housing Element in 2023
IN06 Develop a Land Strategy to Leverage Private Market Investment to Create up to 2,400 New Units of Affordable Housing
Affordable housing is not a part of the west
development area. CDD has refocused from new
development area to Citywide strategy
IN07 Create Regulations to Address Safety and Health Conditions in Rental and Other Group Housing
Effective regulatory rules require detailed rental
information first. This recommendation is still
awaiting rental registry creation
NR05 Rental Registry and Inspection Fees Rental Registry program is targeted to come before Council in 2023
Not Implemented/Rejected
NR03 Establish a Mello-Roos Special Tax
Not provided for in East area Development
Agreements. Funding from a Mello-Roos has
limited opportunities outside of new development
IN02 Establish a Productivity Bank
The City set aside $500,000 for the Productivity
bank, but the concept did not take hold with
departments and has been abandoned
IN03 Add an Analyst Position that Reports Directly to the City Manager The City Manager believes that the current
constellation of staff is sufficient to meet the CM’s
analytical needs
OE01 Move Facility and Park Maintenance to Library and Community Services Facility maintenance remains under the PW department
Still Recommended
PS04 Evaluate Provision of Advanced Life Support Services City does not believe that AMR service is
sufficient to provide ALS. Master Plan underway
and should review this recommendation in
analysis
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TSP
Identifier Initiative Notes
WF02 Improve Base Pay on a Cost-Neutral Basis
There are still opportunities to combine base pay
with special pays to improve recruitment
opportunities
IN01 Dedicate Savings to Capital Investment The City needs funding for unfunded liabilities, housing trust fund, and capital investment
IN05 Establish a Housing Trust Fund with a Dedicated Revenue Stream for Affordable Housing
Plan to use Housing Element to address. Plan to
ask State for funding with other cities in 2023
NR01 Enact Storm Sewer Utility Fee to Fund Current Transfer of General Fund Revenues to Storm Sewer Fund
The General Fund will transfer $2.6 million to the
Storm Water fund in FY23. A fee for this
important citywide service is still needed
NR02 Increase Hotel Tax and Dedicate Funding that Results to Capital Investment Capital projects are still significantly underfunded
in the City. The City also has room to increase
this tax compared to other nearby cities.
NR04 Use Multiple Sources to Provide Revenue for the Housing Trust Fund The City has not yet established this Fund.
Recommendation included $500,000 per year City
investment along with potential voter-approved
funding.
RM01 Request Voters Make the Measure G Sales Tax Permanent as Soon as Possible, possibly in 2024
Loss of Measure G in 2030 would be catastrophic
for the City. An investigation of bringing an
extension before the voters is being contemplated
for a potential future vote
RM02 Incorporate Multi-Year Financial Planning into All Budgetary Actions This remains a need of the City and will help
contextualize major, long-term Council policy
decisions
OE03 Improve Budget Process and Monitoring
The City maintains significant financial policies
and budget policies; however, little reporting is
done on if these standards are being met
MC02 Eliminate General Fund Subsidy of Golf Course Debt Service With additional debt service in 2020, the City has
a total of $5.8 Million in debt payments due from
FY24 – FY38
MC03 Eliminate Sherwood Hall Deficits
Sherwood Hall continues to be a net cost to the
City. Additionally, deferred maintenance needs
have not been addressed
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Implementation In-Progress
Recommendations that are in -progress often have longer -term implementation profiles due to outside factors – labor negotiations, accumulation of capital, or organizational change.
The recommendations under implementation include:
Public Safety: The Police Department has added, or plans to add, a number of civilian position s in the department (PS02). This is a strong move toward the implementation of this recommendation . The department has created C ommunity Service Aide (CSA) positions that have allowed C ommunity Service Officers (CSO) at the front desk to move to the field, have civilianized the Criminalist position, and expanded use of online reporting which is overseen by civilians. There is ongoing progress in this area. A key part of the recommendation was to create a list of duties by sworn officers that could be delegated to civilians, such as C ommunity Service Officers. This allows for a more thorough evaluation of opportunities that may not be visible without a deep dive into duties. With current difficulties recruiting sworn police officers, such action may allow the SPD to augment the workload of sworn officers and improve public safety service delivery to the community through an improved deployment of its workforce.
Operational Efficiencies: Recommendations remain in-progress regarding the City’s fleet and building maintenance. There are varying fleet strategies being completed in different departments with Police fully implemented and Fire requiring 24/7 service to implement . The fleet replacement program should be integrated into a single program in the next year.
Workforce: Three major workforce recommendations have been partially implemented. While full implementation will be difficult for healthcare cost containment (WF01) and reduction in total leaves (WF03), both of these recommendations should continue to be pursued over time. The WF01 recommendation helps the City contain and share costs with employees; however, this must be balanced with total compensation and labor market forces. To date, the City has moved varying percentages of healthcare premiums to employees with its bargaining units. The recommended goal is 20 percent.
Secondly, TSP recommended elimination of management and flex leave (WF03). In addition to elimination, the City has implemented a hard cap on most leave buyouts. This cap is in place this fiscal year and actual savings are yet to be realized. The FY23 budget assumes $1 million in savings relative to the FY22 actual buyout payments. Elimination of these buyouts could be combined with increasing base pay and the reduction of total leaves, which are still high overa ll. This could address two recommendations at once.
Lastly, the City has not added reserves to address expected Workers Compensation (“WC”) payouts. The total funding calculated in the WC actuarial report is over $25 million in reserves needed. The City has $8.8 million in cash set -aside for these liabilities, leaving the net unfunded liability at $16.2 million.
Additionally, staff is seeking assistance to better manage and charge out the WC liabilities and better manage this cost center.5 This remains an active priority for the City ; however, it has lagged behind funding of the City’s base policy reserves.
5 The City just recently revised its reserves policy and has intentionally delayed funding the WC liability until all other reserves could be built up.
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Investments: Three investment recommendations are in -progress, but with unknown outcomes.
Development of housing plan with 4,000 new affordable units is being integrated into the City’s Housing Element update, to be completed in 2023 . The City is using its Technical Advisory Committee as plans come through the CDD as the recommended review committee . The CDD will hold public hearings in discussing the draft Housing Element with the community stakeholders.
A related recommendation was to leverage new development to create up to 2,400 new affordable units.
The City did not require the funding or allocation of units in the East A rea Development Agreement ; however, CDD is refocusing this recommendation to a citywide strategy utilizing grant funds and zoning opportunities.
The City has significant issues with health and safety issues in some of its housing stock.
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Chapter 4: Evolving Fiscal Challenges
The City of Salinas’ financial position has improved since the completion of The Salinas Plan in 2018. This improvement has resulted in positive net revenue results (total revenues less total expenses) for the last several years. T he previous budget forecast showed negative net revenues in FY20 and beyond. The significant increases in sales and property taxes have be en a primary driver behind the City’s improved financial condition. This has allowed the City to build policy reserve levels while maintaining operational services and funding General Fund Capital Improvement Plan (CIP) projects.
Beyond higher-than-expected revenues, the improvement is also the result of the City’s active campaign to keep operating expenses low through limited cost-of-living increases, leaving vacancies unfilled, and – in FY23 – eliminating previously frozen positions in the Police Department. The City has also continued to provide limited funding for deferred maintenance of roads, buildings, and other public infrastructure.
The chart below compares the Baseline Budget Forecasts for the original TSP 6 and the current budget forecast for the refresh plan. The negative net revenue starting in FY30 is the result of the potential sunset of Measure G.
Challenges. The drive to create a sustainable budget is challenged with growing pressures in a number of high-cost areas:
▪ Increases in wages, filling staff vacancies, and expanding staff in key under-served areas; ▪ Continued limited funding of deferred maintenance; and, ▪ Funding of long-term liabilities – road maintenance, retiree health, growing pension costs, etc.
The continuing deferred maintenance concerns could result in the need for crisis-funding for failing facilities and infrastructure. These forces will increase operating expenses and threaten the current budget stability. Fortunately, the City has built up its reserves to help buffer sudden surges in costs . If
6 The 2018 budget forecast was for 10-years, ending in FY28, while the current forecast goes out through FY32. (20,000,000)
(10,000,000)
0 10,000,000
20,000,000
30,000,000
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 Net Reveue Comparisonn
The Salinas Plan vs. TSP Refresh
The Salinas Plan (through FY28) Refresh (through FY32)
Measure G
Sunset
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future budgets tighten, the City will need to balance raising current-year expenses and keeping reserves intact. Reserves allow the City to weather difficult economic times and respond to financial crises in a rational manner. Additionally, reserves for long -term liabilities—retiree health, maintenance, pension, etc.—reduce future growth in annual expenses and provide budget stability. The City is coming upon the sunset of the Measure G transaction and use tax in April of 2030. The Salinas Plan recommended going to the voters by 2024 to approve this tax as a permanent revenue source. Based on current spending needs for the City’s exist ing operating, CIP, and debt service costs from Measure G, the loss of the Measure G revenue will be devasting to the City’s ability to continue current operations and increase investment in City facilities and infrastructure. The City is also expecting a leveling off of pandemic -induced sales tax growth which will impact total revenue growth in the coming years.
The following discussion provides insight into the City’s financial future based on an update of the 10-year budget forecast model and demonstrated fiscal needs of the City. This exercise provides data and insight into the City’s ability to meet all of its fiscal demands and will provide the foundation for ongoing recommendations to pursue increased services to the communities that comprise the City of Salinas. 10-Year Budget Forecast
The budget forecast uses the City’s recent budget history and current budget as the fou ndation for forecasting revenues and expenses over the next 10 years. Budget forecasts are provided for the General Fund and Measures E and G. For purposes of the forecast discussion and the Refresh Plan as a whole, the forecast is presented with all General Government funds (General Fund, Measure E, and Measure G) together. While tracked separately, the Measure E and G revenues are General Fund reve nues.7 Future years are projected based on the following:
▪ Known factors such as CalPERS normal cost percentage and unfunded actuarial liabilities; ▪ Specialized outside consultant forecast (HdL for property and sales tax revenues); ▪ Expected inflation (CPI) for operations/maintenance and medical costs; and, ▪ Negotiated pay raises in current labor agreements and expected increases over the next several years.
The budget forecast is a living document and does not attempt to predict the future, rather the forecast attempts to provide a range of potential budget outcomes that allows staff and the Council to form sound policy responses to future issues in a timely manner. The 2018 TSP provided such recommendations to avoid achieving the forecast negative net revenues8 for several years. This refresh of the TSP provides an update9 of the 10-year budget forecast to revise budget-related recommendations.
7 Measure E and G revenues were approved by the voters as general -purpose revenues. There are no restrictions in use of these sales and transaction taxes. Together, the General Fund and Measure E and G are referred to as “General Government” funds.
8 Net Revenue = Total Revenues less Total Expenses in each fiscal year. 9 Budget forecasts should be updated annually to provide the best policy direction for timely action.
It is highly recommended
that the City take Measure
G to voters in the 2024
General Election and
request elimination of the
Sunset clause
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Results
The results of the Baseline forecast are shown in the graph on the following page. The Baseline forecast attempts to project the revenues and expenses for the City’s Governmental Funds10 to continue in a manner similar to recent budget history with no major changes in programs, funding sources, or the economy. Alternative forecasts to the Baseline are used to stress -test the Baseline forecast in its major revenue and expense drivers and to help policy makers understand coming risks to budget sustainability.
Based on the current budget and assumptions for future growth, the City should expect positive net revenue11,12 through FY29. The first three years of this net revenue are small and subject to changing revenue and expense conditions—the City is still in negotiations with most labor unions, and pension costs are likely to rise in FY24 due to recent poor investment performance.
The big drop in net revenue in FY 30 is based on the sunset of Measure G . The negative net revenue assumes that the loss of the revenue does not change the need for the Measure G -funded investments.
If Measure G is not extended, the City will have a significant issue funding operations at current levels. A more detailed discussion of Measure G is provided in A Future of Trade-Offs chapter.
Revenues
The graph at the end of this section provides an overview of growth rate changes in the Baseline forecast.
The graph shows the actual growth in major revenue categories from FY17 to FY23 and for the FY24 to FY32 forecast. For Measure G, the growth rate is shown for FY24 through FY29 (pre-sunset) and FY24 to FY32 (assuming that Measure G sunsets).
10 The general funds include: The General Fund, Measure E, and Measure G funds. While the City tracks Measure E and Measure G separately, these revenues were adopted as General Fund revenue and are not restricted revenues. 11 Net Revenue is defined as total revenue less total expenses. 12 A major driver of the increasing net revenue is a reduction in General Government transfers to capital improvement projects.
($40,000,000)
($30,000,000)
($20,000,000)
($10,000,000)
$0
$10,000,000
$20,000,000
$30,000,000
FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32
City of Salinas Baseline
General Government Budget Forecast
General Fund Measure E Measure G
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Overall, the forecast assumes that the next 10-years revenue growth will slow compared to the last five years. This is due to expected slowing sales tax growth and stabilization of cannabis revenues. If Measure G sunsets, the total revenue growth for the 10-year forecast will be negative.
Areas where revenues show recovery from the pandemic are in transfers and charges for service. Both of these revenue sources were cut back in the last five years but are expected to return to historical growth levels going forward. The aseline
budget forecast is based on a set
of assumptions that include
current revenue trends, expected
growth by outside experts (e.g.,
HdL13 for sales and property tax
growth), and actual data where
known. Most of the City’s
General Government revenues
come from taxes (86%), franchise
fees (6%), and charges for service
(3%), as shown on the pie chart
on the right.
As previously noted, taxes are
dominated by sales taxes –
including Measures E & G – and
subject to volatility. HdL, the City’s sales tax consultant , expects a slight reduction in sales taxes in FY24 and slow growth thereafter for the next four years. This impacts total revenue growth for the City in the forecast period.
Growth in revenues is shown in the following chart for the six years from FY17 to FY23 and for the budget forecast from FY23 through FY32. This chart also provides the difference in tax growth from FY23 through FY29 to include Measure G through its last full year of collection. Based on the current Measure G approval, this sales tax will sunset on April 1, 2030. This will result in the loss of a projected $38 million in revenue starting in FY30.
The forecast ass umes a slowing in the taxes from 3.3% per year compound annual growth rate (CAGR) through FY23 to a 2.5% CAGR through FY29. If Measure G is not extended, total taxes will drop below current tax levels by nearly $35 million in FY30.
Additionally, a new revenue that started in FY18 are Cannabis Business License fees and taxes. This drove growth through FY23, but these revenues have evened out and will grow with inflation.
Overall, future revenue growth is expected to be 2.6 percent per year – assuming the extension of Measure G – down from the recent 3.7 percent CAGR of the past six years. The forecast is a realistic assessment of future revenues for the City to make current policy decisions. Under this forecast, increases
13 HdL is a third-party consultant for the City that audits sales and property taxes and provide 5 -year forecasts for each of these revenue sources.
Taxes
145,002,984
86%
Franchises
9,535,000 6%
Charges for
Service
4,696,700 3%
Fees & Fines
3,549,500 2%
Transfers
2,625,000 1%
Other
3,067,200 2%
General Government Revenues
By Source FY23
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THE SALINAS PLAN REFRESH 2023
in revenues can be used to pay for long-term unfunded liabilities, while revenue reductions are not likely to result in major impacts to services that could be extended is a rosier future is assumed.
Expenses
While revenue growth is expected to slow, expense growth is as well. Total Governmental Funds expenses are projected at $165.5 million in
FY23. The major expense is for
personnel costs – salaries,
overtime, and benefits – at 64
percent of total General
Government costs.
Transfers are the second highest
cost category at 19 percent.
Transfers are primarily for capital
projects, debt repayment, and
general liability. Transfers are also
used to support the storm drainage
system ($2.6 million) and EMS
services ($1.5 million).
-2.2%
2.5%
3.2%
0.8%
0.0%
0.0%
-1.4%
2.6%
2.5%
3.7%
1.3%
-2.7%
11.1%
-3.8%
3.5%
3.3%
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
TAXES
FRANCHISES
CHARGES FOR SERVICE
FEES & FINES
TRANSFERS
OTHER
TOTAL
Government Funds Revenue
Compounded Annual Growth Rates
FY17 - FY23 FY23-FY29 FY23 - FY32
Impacts from the pandemic through
FY23, recovery of charges for service
thereafter
Introduction and growth of the
Cannabis Tax
Salaries
53,967,229
33%
Overtime
5,391,800
3%
Benefits
45,842,871
28%
Outside
Services
19,356,496
12%
Other Charges
4,039,013
2%
Supplies and
Capital
5,022,262
3% Transfers
31,884,556
19%
FY23 General Government
Expenses($165.5M)
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THE SALINAS PLAN REFRESH 2023
Outside services is the third largest category at 12 percent of total expenses. This category covers several activities, the largest b eing the 911 system, outside maintenance contracts, and software system contracts.
Combined, these three expense categories comprise 95 percent of the City’s General Governmental expenses.
In terms of the model, total expenses are expected to slow to a lev el that is consistent with long-term inflationary growth. Salaries are expected to grow between 3 to 3.5 percent over the next five years and then fall back to 2.0 percent growth for the last five years of the forecast . Benefits had outsize growth recently due to changes in the CalPERS pension-cost methodology and is calming down as a greater percentage of the workforce is under the PEPRA 14 rules. CalPERS investment losses in the year ending July 2022 will likely increase pension costs by $1 million per year starting in FY24.
Outside service increased over the last five years primarily in recreation services, elections, and a variety of other services.
Budget Risks
The Baseline forecast is constructed on a moderately conservative set of assumptions – neither optimistic nor pessimistic. The Salinas Baseline forecast includes recent growth in property and sales taxes ; however, it does not assu me the same pace of growth as in the pandemic. In any forecast there are
14 PEPRA = Public Employees’ Pension Reform Act
-1.9%
1.6%
1.8%
0.1%
1.7%
2.4%
2.3%
2.3%
8.8%
7.2%
7.2%
-0.6%
5.5%
-0.7%
2.3%
4.7%
-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
TRANSFERS
SUPPLIES AND CAPITAL
OUTSIDE SERVICES
OTHER CHARGES
BENEFITS
OVERTIME
SALARIES
TOTAL
Government Funds Expense
Compounded Annual Growth Rates
FY17 - FY23 FY23 - FY32
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THE SALINAS PLAN REFRESH 2023
budget risks that cannot be fully captured. The following are among the major areas of identified budget risk still present in the Baseline that could impact the ten-year forecast.
Economically Sensitive Revenues
▪ The recent pandemic and talk of a “coming recession” have made the economic issues prescient in our day-to-day thinking about the economy. We know that what we have today can change.
For the City, the reliance on sales taxes in General Government revenues heightens the City’s exposure to economic changes.
Sunset of Measure G
▪ The Measure G sales tax measure was approved to be in place for 15 years, and will run through March of 2030. If not extended by the voters, the sunset of the sales tax will have significant impacts on the City’s General Government revenues.
▪ It is highly recommended that the City ask voters to eliminate the sunset clause in the 2024 general election. The budget -balancing recommendations included in this study are not calibrated to adjust for a loss in the Measure G revenue.
Workforce
▪ Any negotiated wage increase and level/longevity increases would have a significant impact on the cost of services. Each one -percent i ncrease in wages for all employees would result in additional general fund costs of $600,000 to $800,000 per year.
▪ Healthcare inflation could surpass the projected levels of 5.0 percent cost growth.
▪ Actual pension investment returns and overall plan experience will impact state mandated required contributions and increase the City’s pension costs beyond the amounts assumed in the Baseline projection.
▪ Binding arbitration for the Fire union continues to be ultimately controlled by an outside arbitrator rather than the City C ouncil. This makes future cost increases for Fire Department personnel difficult to project. Because this was adopted through an initiative process by the voters of Salinas, binding interest arbitration rights can only be addressed through a new initiative (not initiated by the City). Note: Voters and interest groups may consider this in the future.
Other Expenditures
▪ New service demands and costs could be generated by infrastructure failure and/ or unforeseen factors. For example, the City’s fire stations and community centers are old and require maintenance and repair, City Hall remediation needs, City building safety updgrades.
▪ Transfers and advances to other propriety funds (Storm Sewer, Parking District, and Golf Course Funds) are based on the amount required to balance these funds in the baseline projection.
Additional costs to support these efforts will decrease net revenue available for other needs.
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THE SALINAS PLAN REFRESH 2023
Alternative Forecasts
As indicated above , the Baseline forecast is one view of the City’s fiscal future based on a set of assumptions. However, there are many things that can impact the City’s budget future. The following three forecast alternatives provide different views of the budget forecast based on some key changes in assumptions. These forecasts are provided as samples of how the forecast model can be modified and stressed to prepare for different policy choices or economic changes. (Note: the alternatives show total Government Funds with differentiation between General Fund or Measures E or G.) Alternative Forecast No. 1
Extend Measure G and Carefully Increase Salaries. One of the Refresh plans major recommendations is to put an extension of Measure G to the voters prior to its 2030 sunset. Additionally, this alternative assumes a one percent (1%)) per year increase in salaries and related costs (e.g., pensions) 15. The result of this adjustment in assumptions shows that the General Fund would be slightly negative in F Y25 with increasing positive net revenue thereafter. The overall impact of extending Measure G show up in the out-years of the forecast.
This alternative shows that the Council has some room to look at new investments a couple of years out; however, additional increases in salaries (a combination of raises for current staff or adding new positions) will require use of the sales tax measures to fund.
Alternative Forecast No. 2
Extend Measure G, Carefully Increase Salaries & Fund Capital. The second alternative adds to Alternative No. 1 by increasing City investment in capital projects to 10% of total annual revenues. This is calculated by adding the difference between assumed capital funding in the Baseline forecast and the calculated 10% revenue. Assuming this increase in funding for capital, the City’s total General Government expenses would exceed revenues for the next several years. This indicates that while the City appears to have a
15 Salaries increase includes both wage increases and increases to total staffing. ($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32
Alternative No. 1 Net Revenue
Extend Measure G & Inc. Salaries + 1%
General Fund
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THE SALINAS PLAN REFRESH 2023
sustainable budget in the Baseline forecast, it c annot sustain new investment at low levels compared to demonstrated investment needs under Baseline revenue projections.
Alternative Forecast No. 3
Measure G, Salaries, Capital Investment & Tax Increases. The City’s budget—especially revenues—is dynamic and subject to both outside and internal factors. If sales and property taxes grow one percent per year beyond the Baseline Forecast, the City will grow the capacity to fund the Forecast Alternatives No. 1 and No. 2 assumptions over the next three to four years.
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32
Alternative No. 2 Net Revenue
Alt No. 1. + Fund Capital at 10% of Net Revenue
General Fund
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32
Alternative No. 3 Net Revenue
Alt No. 2 + Property Tax and Sales Tax Add'l 1% Growth
General Fund
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THE SALINAS PLAN REFRESH 2023
Conclusion
The City needs to continue monitoring its revenue and expense forecast to guide Council on making sound policy decisions on a year-to-year basis. The forecast should provide perspective on the entire range of needs before the City in the coming years.
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THE SALINAS PLAN REFRESH 2023
Chapter 5: A Future of Trade Offs
The City’s financial future at first glance looks solid; however, this is based on current budget practices holding costs down and recent growth in sales and property tax revenues. The City’s current budget results are positive but do not address many funding issues facing the City, including:
▪ Limited growth in staffing (current staffing levels are less than in 2009 at the end of the Great Recession);
▪ Need to keep compensation competitive and keep up with a growing cost of living; ▪ Deferred maintenance of City infrastructure;
▪ Growing cost of repairing the City’s roads;
▪ Costs of preparing for the new growth area – Boronda Road, new fire statio n, surrounding infrastructure to serve new development16;
▪ Impact of homelessness;
▪ Need for expanded affordable housing;
▪ Responding to a changing regulatory environment; and, ▪ Unforeseen increases in employer health care and pension costs The TSP Refresh is organized slightly differently from the original plan . The all recommendations are arranged in the four categories listed below . Each of these categories will include a discussion of major issues currently impacting the City, the TSP recommend ations that are recommended to stay in place in each of these areas, and new or expanded recommendations needed under evolving operating conditions.
16 Cost of services for the new growth area should eventually be covered by tax revenues from growth; however, capital and operating costs will precede this revenue growth.
Managing the
Organization
Facilities &
Infrastructure
Housing &
Homelessness
Investements
for a healthy
City
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THE SALINAS PLAN REFRESH 2023
Like most local agencies, the City of Salinas has more needs for funding than it has available revenues. While increases in revenues have allowed the City to create a solvent fiscal position in recent years, fully funding the fiscal needs for the issues listed above will challenge the City’s revenue sources. This is not a new issue for the City. The challenge now is how to deploy revenues and develop a thoughtful policy response to the variety of issues facing the City. This creates a future of trade-offs that Council will need to weigh to make difficult decisions.
The remainder of this chapter will provide the overview of issues and recommendations – both new and continuing – that the City can use to move forward in a proactive manner. All recommendations have been renumbered for the new organization of the study. The format will be MOxx (Managing the Organization), FIxx (Facilities & Infrastructure), IHCxx (Investments for a Healthy City), and HHxx (Housing & Homelessness). For continuing recommendations the TSP numbering will be included in parentheses next to the new numbers to provide context when comparing to the old plan.
Managing the Organization
The single largest expense category of the City of Salinas is employee wages and benefits, totaling nearly two-thirds of overall General Fund expenditures in the FY 2022-23 Adopted Budget. Like most local governments, the City is a labor -intensive organization, requiring trained and service -oriented workers to prevent and investigate crime, to maintain safe and clean streets, to respond to fire emergencies, and to support the many other important functions of municipal government effectively. As a result, it is critical to develop a workforce strategy that recruits, retains, and motivates high quality personnel to fill these roles – and it is no less critical that this strategy be financially sustainable to support both essential services and stable employment.
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THE SALINAS PLAN REFRESH 2023
Staffing
Authorized City staffing has remained in a narrow band over the last several years, as shown in the graph below. At the same time, the City’s population has remained stable as well.
In addition to the ways in which the City has managed its workforce recently, there are emerging needs to add staff in many areas: maintenance, IT, engineering, fire station in new growth area, continuing to expand police department expertise in non -sworn positions, to name a few. On one hand, there is a need for consistent evaluation of where staff is needed and how City’s needs are evolving to service demands.
The Police Department has experienced several changes in staffing since FY17. A number of police positions were frozen for several y ears, and just recently deleted from the authorized FTE list; however, the graph below shows how both sworn and non-sworn positions have shrunk in the last several years.
Neither the TSP or this Refresh Plan had the scope to evaluate police staffing le vels, the department has been responding to reduced funding levels and difficulty in filling police positions being experienced nationwide.
0.0 100.0
200.0
300.0
400.0
500.0
600.0
FY18 FY19 FY20 FY21 FY22 FY23
Authorized FTE
By Department
Police Fire Public Works Community Services CDD Administrative
0.000
50.000
100.000
150.000
200.000
250.000
FY17 FY18 FY19 FY20 FY21 FY22 FY23
Salinas Police Staffing
FY17 - FY23
Police (Sworn) Police (Adminstrative)
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THE SALINAS PLAN REFRESH 2023
The static citywide FTE has also resulted in low growth in wages and benefit costs over the last six years.
While this has been good for balancing the budget in the last few years, it has also placed stress on City staff and limited the ability to attract and retain new staff. 17 Turnover and Vacancies
The City has had a consistent level of turnover from FY17 through FY22, averaging 10 percent per year.
Resignations have slightly outpaced retirements by 159 to 133 over this time period. In total, the City has lost 323 employees from all separation events during this time period. As shown in the graph below, the City has lost an average of 54 employees per year for all reasons.
The turnover rate increased in FY22 to nearly 12 percent; however, the previous five years it was under 10 percent. Resignations averaged 4.9 percent per year and retirements 4. 1 percent. This turnover rate for
17 CAGR = Comprehensive Annual Growth Rate.
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
0 10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
FY17
Actual
FY18
Actual
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
Wage & Benefit Growth
FY17-FY22
Salaries Overtime Wage CAGR (FY17-22) OT CAGR (FY17-FY22) 0 10
20 30
40 50
60 70
FY17 FY18 FY19 FY20 FY21 FY22
Turnover
Type by Year
Resignation Retirement Dismissal Death Other
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THE SALINAS PLAN REFRESH 2023
both resignations and retirements does not appear too high; however, the turnover rate must be addressed by an equal hiring rate.
The key question is how quickly the City is able to replace positions lost to turnover. The table below shows the vacancies as of December 2022, less the new positi ons added in the FY23 budget – assumed to not be filled – to arrive at total vacancies from past years’ turnover. Based on average turnover per year by department, most departments show a one to two-year lag in replacing lost positions. CCD is a stand ou t at 3.4 years18, and Fire is fully staffed based on a practice of over-hiring in recent years.
Based on the current authorized 559 FTEs, the City is operating at a more than 15 percent vacancy rate. This creates issues with operations and staff burnout. As discussed elsewhere, the City is in the process of completing a compensation study to address pay inequities to the extent that pay is an issue in filling positions.
18 The work for some of the vacant positions in CDD are being filled by contractors.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
FY17 FY18 FY19 FY20 FY21 FY22
Turnover Rate Per Year
Resignations Retirements
City of Salinas
Vacancies and Added Positions
Category Admin Finance Attorney CDD
Library
Com Svs
Public
Works Fire Police Total
Vacancy (Dec. 2022) 2.00 9.00 2.00 13.00 8.50 22.00 1.00 28.00 85.5 FY23 New Pos. 2.00 2.00 1.00 5.00 0.00 7.00 5.00 -8.00 14.0 Vacant less New Pos. 1 0.0 7.0 1.0 8.0 8.5 15.0 -4.0 36.0 71.5 Accumulated Vac. Yrs. 0.0 2.6 2.0 3.4 1.0 1.4 -0.4 1.7 1.3 1 Excludes positions added or removed in FY23 divided by the average vacancy per year since FY17 In CDD some vacancies are being filled by consultants
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The 2018 The Salinas Plan was released over four years ago. Since then, much of the economic and employment landscape has changed. The COVID-19 pandemic, trillions in federal stimulus spending, record high inflation, rising interest rates, and the war in Ukraine – to name a few – underscore the economic uncertainty across the nation.
Furthermore, many local government employers – who already faced hiring challenges pre -pandemic – were significantly impacted by the “Great Resignation” in which portions of the population left the workforce or changed employers in large numbers seek ing greater work -life balance, remote work opportunities, and in response to the rising cost of living in certain geographic areas.
As shown in the table below, at the onset of the COVID -19 pandemic, the “quit rate” (also known as the voluntary resignation rate) spiked across the state and local government sector nationally, achieving 205,000 quits in March 2020, a figure that is nearly 30% higher than the average monthly quits over the prior five (5) full calendar years. Importantly, however, the quits continued to be elevated in the latter part of 2021 and into 2022, achieving a peak quit rate of 233,000 in March 2022 even as the US economy was opening, and remained at noticeably higher levels through November 2022 (most recently published data).19 Today, many local government employers are struggling to fill vacancies with qualified applicants, in part, resulting from the challenges posed by the “Great Resignation.”
19 U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Survey -1.0
-0.5
0.0 0.5
1.0 1.5
2.0 2.5
3.0 3.5
4.0 Finance Attorney CDD Library Com
Svs
Public
Works
Fire Police
Years Accumulated Vacancies
Vacancies Expressed as Years of Turnover
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THE SALINAS PLAN REFRESH 2023
Despite this trend, the job market remains strong as evidenced by the low unemployment rate. As shown in the table below, while there was a significant spike in the unemployment rate due to COVID related shutdowns, the unemployment rate has generally returned to pre-pandemic levels. As of November 2022, the California unemployment rate was 4.0 percent, while the Monterey County unemployment rate was 5.5 percent (which includes the City of Salinas).20
The 2018 Salinas Plan found the City to be in a very strong comparative position for total compensation, even relative to a survey group skewed toward communities with higher housing costs and incomes, and still in a competitive pay position even when looking at base pay alone. However, the City was found to have a "compensation imbalance” such that the make-up of compensation was skewed toward benefits. As
20 State of California, Employment Development Department, Labor Market Information
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THE SALINAS PLAN REFRESH 2023
mentioned in the 2018 Salinas Plan, overweighting benefits in the total compensation package can create a competitive disadvantage for recruitment and retention. If employee benefit programs are providing adequate benefits, many workers will prioritize salaries when comparing opportunities in the overall labor market. Coupled with high inflation and a tight labor market, this situation can become even more challenging for employers to navigate.
The 2018 Salinas Plan had four key recommendations, which are discussed in more detail below:
▪ Healthcare cost sharing and cost containment;
▪ Restructuring paid leave;
▪ Moving selected pay premiums to base; and,
▪ Continuing to address high workers’ compensation costs.
While the 2018 Salinas Plan recommendations were made under a different economic and employment situation, it is important to remember that these recommendations were designed to cross business cycles and should be viewed from a strategic, long -term perspective. That sa id, it is equally critical for any organization to reassess these recommendations in the context of changing and/or newly developed circumstances.
CONTINUING RECOMMENDATIONS
This section discusses the TSP recommendations that are recommended for the City to continue implementation. This new section of Managing the Workforce combines recommendations from the former TSP Workforce (WF), Operational Efficiencies (OE), Public Safety (PS), and Risk Management (RM). For ease of reference back to the TSP, the original recommendation identifiers are shown in parentheses next to the new recommendation numbers.
MO-01 (WF01): Healthcare Cost Containment
The City participates in the CalPERS health network. CalPERS provides health benefits to 1.4 million public employees, retirees and their dependents. Benefits vary based on location. Annual health plan availability, covered benefits, health premiums and co -payments are determined by the CalPERS Board of Administration21. The table below highlights the progress that the City has made on increasing employee premium cost sharing with its various bargaining units as recommended in the 2018 Salinas Plan.
For most e mployees, the City will pay up to 95 percent of the monthly premiums for the PERS Platinum Plan22 at all coverage levels (employee only, employee + 1 dependent, and employee + 2 dependents). This level is almost unchanged from the original 2018 Salinas Plan when the City paid up to 96 percent of monthly premiums. Importantly, however, the City eliminated flat dollar cost sharing caps for several bargaining groups including AMPS, Confidential, and Department Directors. Flat dollar monthly premium caps still exist
21 CalPERS, Benefit Programs, www.calpers.ca.gov.
22 The PERS Choice Plan was eliminated as a plan offering and was replaced with the PERS Platinum Plan. Some MOUs still reference the PERS Choice Plan, but in practice, the City bases its contr ibutions on the PERS Platinum Plan.
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THE SALINAS PLAN REFRESH 2023
for several bargaining groups, including SEIU and SMEA, however, the employee caps were increased in the last round of bargaining.
Beginning in 2024, the City will introduce additional monthly premium cost sharing for its Confidential employees, reducing its cost sharing from 95 percent to 80 percent of the PERS Platinum Plan at all coverage levels. A similar change was made for IAFF represented employees. As of the most recent labor agreement with the IAFF, the City will pay up to 80 percent of the PERS Platinum Plan at all coverage levels. SPOA represented employees with dependents will see their monthly premium cost share increase as well, although at a more modest level.
Employee Healthcare Premium Cost Sharing by Bargaining Unit Unit Employer / Employee Healthcare Premium Cost Sharing % of Monthly Premiums
AMPS City pays up to 95% of PERS Platinum Plan at all coverage levels
CONF MGMT
City pays up to 95% of PERS Platinum Plan at all coverage levels
Beginning January 2024 City pays up to 80% of PERS Platinum Plan at all coverage levels
CONF MISC
City pays up to 95% of PERS Platinum Plan at all coverage levels
Beginning January 2024 City pays up to 80% of PERS Platinum Plan at all coverage levels
DIRECTORS
City pays up to 95% of PERS Platinum Plan at all coverage levels
Beginning January 2024 City pays up to 80% of PERS Platinum Plan at all coverage levels
FSA City pays up to 95% of PERS Platinum Plan at all coverage levels IAFF City pays up to 80% of PERS Platinum Plan at all coverage levels PMA City pays up to 95% of PERS Platinum Plan at all coverage levels
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Unit Employer / Employee Healthcare Premium Cost Sharing % of Monthly Premium
SPOA
City pays up to 95% of PERS Platinum Plan at all coverage levels
Beginning January 2024 City pays up to 95% of PERS Platinum Plan for EE only,
94.5% for EE +1, and 94% of EE + 2
SEIU BC
City pays up to 95% of PERS Platinum Plan at all coverage levels
Employee pays maximum of $47/mo for EE only; $90/mo for EE + 1; $120/mo for EE + 2
SEIU CS
City pays up to 95% of PERS Platinum Plan at all coverage levels
Employee pays maximum of $47/mo for EE only; $90/mo for EE + 1; $120/mo for EE + 2
SMEA
City pays up to 95% of PERS Platinum Plan at all coverage levels
Employee pays maximum of $47/mo for EE only; $90/mo for EE + 1; $120/mo for EE + 2
As shown in the table below, under the City’s 95 percent cost sharing arrangement with non -sworn bargaining units and the SPOA, most employees have either a no-cost or very low-cost medical plan available to them. A majority of SPOA represented employees participate in the Peace Officers Research Association of California Plan (PORAC), which requires small employee premium cost sharing. So, while, the City has made progress in introducing employee premium cost sharing, the current structure will do little to control future growth in the City’s cost of providing medical benefits. As premiums increase due to trends in the healthcare marketplace, the City’s cost will increase proportionately.
CalPERS Region 1 2023 Monthly Premiums & 80%/95% Employer Cost Sharing 2023 Health Plans Subscriber Subscriber & 1
Dependent
Subscriber & 2+
Dependents
City Contribution @ 80% of PERS Platinum (IAFF) $960.10 $1,920.19 $2,496.25 City Contribution @ 95% of PERS Platinum (All others) $1,140.11 $2,280.23 $2,964.29 REGION 1 CALPERS PLANS23
Anthem Blue Cross Del Norte EPO $1,200.12 $2,400.24 $3,120.31 Anthem Blue Cross Select HMO $1,128.83 $2,257.66 $2,934.96 Anthem Blue Cross Traditional HMO $1,210.71 $2,421.42 $3,147.85 Blue Shield Access+ HMO $1,035.21 $2,070.42 $2,691.55
Blue Shield Access+ EPO $1,035.21 $2,070.42 $2,691.55
Blue Shield Trio HMO $888.94 $1,777.88 $2,311.24
Health Net SmartCare $1,174.50 $2,349.00 $3,053.70
Kaiser Permanente $913.74 $1,827.48 $2,375.72
23 These are CalPERS Region 1 plan offerings and monthly premiums. Importantly, not all of these plans have networks available in Monterey County.
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2023 Health Plans Subscriber Subscriber & 1
Dependent
Subscriber & 2+
Dependents
Subscriber Subscriber & 1
Dependent
Subscriber & 2+
Dependents
Peace Officers Research Assoc of CA2023 Health Plans $825.00 $1,875.00 $2,300.00 PERS Gold $825.61 $1,651.22 $2,146.59
PERS Platinum $1,200.12 $2,400.24 $3,120.31
UnitedHealthcare SignatureValue Alliance $1,044.07 $2,088.14 $2,714.58 Western Health Advantage HMO $760.17 $1,520.34 $1,976.44 Current Status: To improve the long-term financial stability of the City’s health benefit program, the City may wish to negotiate a flat dollar monthly maximum contribution that the City will make on behalf of employees at each coverage level. Future increases in the City’s contribution amounts would be subject to negotiations, but a status qu o contract would not automatically increase the City’s contribution toward health benefits. Under the current structure where the City’s contribution is linked to a percentage of monthly premiums, as monthly premiums increase so does the City’s expense. There are numerous ways that these flat contributions could be structured, including options that target a “no cost share” option for employee only coverage with greater employee cost sharing for those employees that enroll dependents.
At the same time, it should be noted that inflationary pressures are running at a 40 -year high, and labor demands for commensurate wage increases are becoming more common, even if the level of wage increase sought is not financially feasible for many public employers. Tryi ng to enact healthcare cost containment that pushes more costs to employees, may only add to the pressure for more substantial wage increases, which have associated roll -up costs (payroll taxes, PERS, etc.) that health benefits do not. A balanced, strategic approach is needed to address these ongoing issues over the long-term.
MO-02 (WF02): Improve Base Pay on a Cost-Neutral Basis
The 2018 Salinas Plan recommended that the City broadly restructure its approach to compensation in order to improve prospectiv e improvements in base pay. These recommendations were intended to be cost neutral, but would allow the City to re-direct compensation enhancements to the most transparent aspect of compensation, namely base salary. In turn, the improved base salary would help with the recruitment of prospective employees. To the extent possible, the City should continue to pursue this recommendation from the TSP.
MO-03 (WF03): Evaluate the Total Leave Program (old “Eliminate Management and Flex Leave”) The 2018 Salinas Plan recommended that the City bargain to eliminate management leave and flex leave, and that cash-outs of annual leave be reduced. As shown at a high -level in the table below, the City has made progress toward this objective.
Annual Leave, Flex Leave, & Management Leave
Annual Leave Flex Leave Management Leave
AMPS Increased Accrual Eliminated
CONF MGMT Increased Accrual Eliminated
CONF MISC Increased Accrual Eliminated
DIRECTORS Increased Accrual Eliminated
FSA Eliminated
IAFF Decreased Accrual
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Annual Leave Flex Leave Management Leave
PMA Eliminated
SPOA Eliminated
SEIU BC Increased Accrual Eliminated
SEIU CS Increased Accrual Eliminated
SMEA Increased Accrual Eliminated
For the non-safety bargaining units, the City agreed to increase annual leave accruals at the same time that management or flex leave was eliminated. However, these changes still resulted in a net reduction in the total leave hours available to employees in the aggregate.
For example, as shown in the table below, in the current Memorandum of Understanding (MOU) with the Association of Management Personnel of Salinas (AMPS) covering January 1, 2020 through June 30, 2023, effective January 1, 2021, the Cit y and AMPS agreed to eliminate 130 hours (16.25 days) of management leave. At the same time the parties agreed to increase annual leave accruals by approximately nine days, resulting a net reduction in the leave received by AMPS represented employees by a pproximately seven days per year.
Pre-12/31/2020 Accruals & Post-1/1/2021 Accruals for AMPS Represented Employees Pre-December 31, 2020 Leave Accruals
Years of Service Annual Leave
(Days) Management Leave (Days) Total Annual Leave +
Management Leave (Days)
1-5 22 16 38
6-10 27 16 43
11-15 29 16 45
16-17 30 16 46
18-19 31 16 47
20-24 32 16 48
25+ 33 16 49
Effective January 1, 2021 Leave Accruals
Years of Service Annual Leave
(Days) Management Leave (Days) Total Annual Leave +
Management Leave (Days)
1-5 31 0 31
6-10 36 0 36
11-15 38 0 38
16-17 39 0 39
18-19 40 0 40
20-24 41 0 41
25+ 42 0 42
Under previous MOUs, the City’s annual leave accruals were capped at 600 hours for most bargaining units (higher for IAFF) – meaning employees could “bank” up to 600 hours and carry that from year -to-year.
Accruals exceeding these caps were automatically paid out in cash once per year at the employees straight-
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time hourly rate of pay. The table below shows the pre-December 31, 2021 and post-January 1, 2022 accrual caps for each bargaining unit.
For example, the City and AMPS agreed to increase the maximum annual leave accrual cap that an employee can “bank” from 600 hours to 672 hours. Effective January 2022, once an employee reaches a bank of 672 annual leave hours, they are no longer allowed to accrue annual leave until the balance is brought below that threshold. Furthermore, AMPS represented employees are only allowed to “cash out between 80 to 100 hours of annual leave each year, essentially creating a hard cap on both accrual balances and cash out amounts.
While the City made progress to implement hard caps on annual leave accruals and establish limitations on cash out amounts for non-safety bargaining units, the automatic cash out of leave accruals in excess of the cap still remains for the City’s public safety units, including FSA, IAFF, PMA, and SPOA.
Current Status: It is strongly recommended that the City continue to work toward enacting ha rd accrual caps and cash out limits with these safety groups.
Annual Leave Accrual Caps
Pre-December 31, 2021 Post-January 1, 2022
Annual Leave Accrual Cap Annual Leave Accrual Cap
AMPS 600 hours 672 hours/hard cap
CONF MGMT 600 hours 732 hours/hard cap
CONF MISC 600 hours 692 hours/hard cap
DIRECTORS 600 hours 768 hours/hard cap
FSA 898/56 hour sched; 678/40 hour sched No Change
IAFF 898/56 hour sched; 678/40 hour sched No Change
PMA 600 hours No Change
SPOA 600 hours No Change
SEIU BC 600 hours 692 hours/hard cap
SEIU CS 600 hours 692 hours/hard cap
SMEA 600 hours 736 hours/hard cap
It is further recommended that the City conduct a comprehensive benchmarking study of its leave program and seek to align its leave benefits with that of other public employers in the labor market.
The study should look at all leave available to employees, regardless of type, including vacatio n/annual, personal, management/executive, holiday, and sick leave at each year of service. In addition to comparing accrual levels at various tenure perspectives, the study should look at the amounts that other agencies allow employees to “bank” (i.e., accrual caps) and cash-out limits. The amount that employees in Salinas can “bank” seems particularly high relative to public sector norms – even before the January 2022 enhancements are considered – which are generally limited to about half of what is avail able to Salinas represented employees. For example, employees in Monterey City represented by the General Employees of Monterey, Local 792, are limited to vacation accruals of 320 hours. Santa Cruz City employees represented by SEIU are limited to vacation accruals that are two-times an employees’ annual rate of accrual, which equates to 320 hours at the maximum annual vacation accrual.
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MO-04 (WF04): Continue to Address Workers' Compensation Costs The 2018 TSP recommended a number of reforms to the City’s workers’ compensation program to help control costs and meet long-term funding needs. Since the 2018 Salinas Plan was released, the responsibility of the workers’ compensation program was moved from the City Attorney’s Department to the Human Resources Department and an additional FTE was authorized to oversee the program.
As of the June 30, 2021 (most recently published financial audit), the City reported a net liability of $26.66 million on its statement of net position, of whic h $1.78 million was considered general long -term debt.24 The City uses an Internal Service Fund (ISF) to allocate costs and track expenses related to its workers’ compensation program. As of June 30, 2021, the workers’ compensation ISF had a negative net position of $(93,810), meaning that assets (including cash) were not sufficient to cover liabilities.
The City currently funds its workers’ compensation program on a “pay -as-you” go basis, meaning it structures the ISF to recover costs sufficient to mee t expected annual claim payments, program administrative costs (i.e., personnel, legal, etc.), and excess insurance premiums. The City does not fund its workers’ compensation program on an actuarial basis. 25 The City’s workers’ compensation actuary, Bickmore Actuarial, recommends that workers’ compensation programs be funded at a confidence internal from 75 percent to 85 percent, with an 80 percent target being the mid -point of the upper - and lower- bound range. Because workers’ compensation claims can ha ve a long -tail, meaning payments for claims incurred today can go out many years into the future, it is strongly recommended – though not required – for employers to set aside assets sufficient to meet future expected claim costs. The City currently does not have any assets set aside for these expected future workers’ compensation payments, resulting in a net liability. Ultimately, as these claim costs become payable, they can rapidly increase workers’ compensation expenses, and – in the absence of available resources – become the responsibility of the General Fund. The City should seek to fund its workers’ compensation claims on an actuarial basis . Achieving fully recommended actuarial funding 26 will not be achieved in the near -term without significant impacts to service levels. As such, the City should develop a plan to achieve full actuarial funding over a reasonable multi-year period.
The TSP recommendation indicated that the City should move to practices that lower annual premiums through training, temporary accommodation and better WC response as well as move to funding actuarial liabilities at the 75% confidence level. The City has an “expected” discounted claims liability of $25.3 million in FY22 with no funding set aside, as shown in the table on the following page.27 This amount increases to $28.3 million if funded at the 75% confidence level. The City has set aside $8.8 million dollars for the liability, reducing the current set-aside needed to fund the current liability to $16.5 million
24 June 30, 2021, City of Salinas, Annual Comprehensive Financial Report 25 The contracts with an outside party to determine the present value of future payments. For WC, the consultant determines an amount that the City should have in reserve for expected future payments. This is the funding of the “actuarial basis.”
2626 The City hires outside consultants to calculate “actuarial funding” requirements. Generally, this refers to the present value of future payments net of current funding or investments. 27 Page 3 of Bickmore Actuarial, “Actuarial Review of the Self-Insured Workers’ Compensation Program,” October 19, 2022.
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This lack of funding puts the City at risk for having to raid other reserves to pay these liabilities in future years. The City should make moves to begin sound actuarial funding by funding a reserve for expected loss and liability claims as at a minimum.
In addition to funding the workers’ compensation program on an actuarial basis, the team recommends that the City explore, through negotiations, the potential cost savings from a workers’ compensation carve out for its public safety groups . Under California law, "carve -out" programs allow employers and unions to create their own alternatives for workers' compensation benefit delivery and dispute resolution under a collective bargaining agreement. Carve -outs can result in cost -savings over the long -term by reducing the administrative and legal costs associated with workers’ compensation claims adjudication by placing decision making authority in the hands of an ombudsman. Some California public employers have also shared the program cost -savings with bargaining unit members as an incentive for keeping program costs low.
MO-05 (PSO2): Police Civilianization
Based on the CPSM 28 study from August of 2018 , the TSP echoed the recommendation to convert four vacant positions to Community Service Officers (CSOs). This results in lower cost and shifts non-patrol work to non-sworn personnel. The Police Department is in the process of expanding civilianization of staff. Some of the civilianization has included:
▪ Pursuing a CalVIP grant for civilian Community Engagement Officer and Youth Diversion ▪ Disbanding the Word Processing Unit and reassigning employees to Community Service A ide positions that allow CSOs to be in the field more
▪ Civilianization of the Criminalist position
▪ Expanded Crime Analysts to assist in investigations
▪ Online reporting overseen by civilian employee
Even with the significant efforts made to date, t he department can still benefit from an ongoing effort to list all sworn officer duties to see where more duties can be civilianized.
28 Center for Public Safety Management (CPSM) study, August 7, 2018.
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While total crimes dropped between 2017 to 2021, the
department reports that homeless-related calls are
taking more and more of the department’s time. The
use of civilianization remains an important response to the City’s service demands and real -world issues with
deploying sworn officers for all Police calls.
Current Status : The Police Department has made
significant strides in expanding civilian positions in the department. As sworn officers’ duties change with the
demands of the City, listing current sworn-officer tasks to evaluate what can, or should, be moved to civilian
positions is an important ongoing process.
MO-06 (OE03): Improve Budget Process and Monitoring
Several recommendations from the TSP focused on activities related to the Finance Department. Since the TSP completion the Finance Department has experienced high vacancies, limiting movement in these areas.
Currently there are seven vacant finance/IT positions. In addition, the Finance Director position turned over, creating a lag in implementation. Each of following TSP recommendations is included as recommendations in this Refresh Plan.
▪ Financial Policy monitoring and reporting. The City has a number of valid and important financial policies covering reserves, the budget, investments, etc. However, due to key staff vacancies, there is no consistent monitoring on how the City is doing fulfilling these policy requirements. It is recommended that the City provide an annual monitoring report on major financial policy elements once new staff have been hire d. This allow s for the City to evaluate issues in meeting policy requirements as well as shifting resources, as needed, to meet financial policies. ▪ Departmental Revenues. The TSP recommendation is:
“The City has started to track revenues generated as a direct result of departmental activity.
This includes grants, user fees, fines, permit fees, etc. This tracking allows departments to understand how well they are able to cover costs from their services. Many departments expressed a desire to have more “control” over revenues and receive regular updates on revenue activity. Revenues by department should also be tracked in the budget document for Council review. Additionally, cost-recovery policies can then be set by department to both identify where the General Fund is subsidizing programs while targeting the level of subsidy desired.”
The City charges fees for many services provided (e.g., planning fees, recreation programs, etc.).
Some of these activities are subsidized but the City does not track or set policy targets for City subsidy of user-charged services. While efforts are underway to track these revenues, a lack of trained staff and limited accounting system have hindered implementation. Developmen t of revenue reports is underway. Showing revenues and expenditures by department is planned for the FY24 budget document.
0 2000
4000
6000
8000
2017 2018 2019 2020 2021
Salinas Crime Stats
2017-2021
Total Part I Crimes Grand Total
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Most of the revenue collected as “charges for service” is often coded to specific departments, but not specific programs. While this is not an uncommon practice, there are several reasons to track user-fee revenues by program:
▪ The City should no t be collecting more for a service that that service cost the City. This matching of fees to cost is often difficult to track – fees are set based on a certain level of service from prior years, and service fees are generated by current demand. The City should track revenues against cost -of-service to ensure that there is not an over -collecting of revenues over time.29
▪ There is often an implicit, if not explicit, policy embedded in setting charges for service. It is helpful to target an amount of revenue to be generated relative to the cost of providing services. For example, the Council may want to subsidize youth sports but charge adult sports the full cost for fields and referees. Planning fees are often charged to get full cost recovery from developers , while inspection fees for home improvements (e.g., roofs, widows, hot water heaters, etc.) are often charged at a level that encourages inspections, not full cost recovery.
▪ Departments should track their revenues to ensure that they are keeping up with rising costs and to consistently review opportunities to offset program costs where charging for services is appropriate.
MO-07 (RM02): Incorporate Multi-Year Financial Planning into All Budgetary Actions The TSP recommendation is:
“The City Council must regularly make significant financial decisions related to the City’s budget. It is important that the Council and public be well -informed of not only the immediate impacts of these decisions, but the long -term consequences as well. The NRN team utilized a ten -year forecasting model for this report to identify policies that will result in sustainable budget practices.
The City should in corporate the use of a five -to-ten-year budget forecasting model when considering actions which could have a significant impact on current or future budgets to inform policymakers about both the immediate and long-term consequences of their decisions.” Current Status: As noted above, the Finance Department has withgone change and turnover recently. Long- term budget forecasting has not been performed consistently. As Finance becomes fully staffed, the City plans to include a budget forecast model for future major financial decisions.
NEW RECOMMENDATIONS
MO-08: Include Leave Accruals and Cash Outs in Current Compensation Study The City has taken strides to reduce leave accruals and pay outs of leave (see analysis under MF03 above); however, total accruals are high and not calibrated to expected time off. This creates an increasing leave liability that has a real value to employees.
29 “Over-charging” likely will require several years of data to determine, as revenue and costs vary year-to-year.
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The City has contracted with an outside party to perform a citywide compensation study. This study will likely be used to set compensation targets for many years to come. Based on experience with a broad range of other cities, Salinas has higher -than-typical leave accruals . As the City ’s consultant reviews total compensation comparisons, this benefit should be included as a form of compensation. While this is not typical, inclusion of leave accruals will better show the standing of City employees to competitor agencies.
If, as expected, the leave accruals are valuable compared to other agencies, a readjustment of the pay and benefits could align bargaining group members to better match current compensation needs of the employees.
MO-09: Evaluate the Parking Functions Within the City
The City has three components of its current parking program: the Downtown Parking District, the Parking Enforcement Division, and the preferential parking program. This recommendation focuses on downtown parking and parking enforcement.
The Downtown Parking District covers the structured parking and on -street parking in the downtown. A recommendation of the TSP was to make this fund self -supporting with no General Fund subsidy. While efforts have been made, they are very limited in scope. There are two primary issues still facing this district:
1. Based on the FY23 budget, the Downtown Parking District carries a negative fund balance of $2 million. This is nearly $200,000 more than it was in FY22. The only source of funding for this deficit is the General Fund. This is likely due to impacts from the pandemic. In any event, the City needs to evaluate ways to increase parking revenue to make parking self -supporting. This could be through raising rates, restricting on-street parking, or adding parking meters to help support the overall program.
2. CDD has indicated that talks are underwa y with the County to jointly construct a second parking garage. If this occurs, the City will need to evaluate its ability to fund both increased operating costs and the capital cost of construction —the current parking garage capital is funded through redevelopment bonds that are no longer available for future projects. The same options to fund current operations will need to be evaluated for additional future facilities. All parking garages should be at high utilization before another parking garage is constructed30 Parking Enforcement Division is a separate enterprise in the City, but part of the overall parking program (Parking District and Preferential Parking program). Parking Enforcement is operated by an outside vendor with minimal staff oversight —0.24 FTEs are assigned to this function. As budgeted, Parking Enforcement pays for its expenses through enforcement revenues.
The issues of the Parking Enforcement function came up in departmental interviews with both the Public Works department and the Police department. The current budget shows that Parking Enforcement is currently adequately funded and has a positive fund balance. The program is overs een by Public Works.
Concerns were raised over the current contractor, whether this should be a part of the public safety function or remain in Public Works, the ability of Public Works to adequately manage the program, as well as several related issues:
30 It is reported that the Monterey Street garage is significantly under-utilized. The City should bring this utilization up prior to investing in anther structured parking facility.
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▪ The City needs to implement no -parking on street-sweeping days. This will require an increase in cost for signage and likely additional parking enforcement. ▪ Concerns have been raised about uncollected traffic fines from a previous parking enforcement vendor and the ability to expand the parking enforcement team . The lack of collection was not independently confirmed, but an audit of the program may be helpful to determine how efficient and effective the current enforcement vendor is operating as it has been in place for several years. ▪ Enforcement should not burden the General Fund, and some funding could be provided from a Storm Water assessment, if enacted.
Current Status. The City needs to prepare a plan for Parking Enforcement expansion and methods to make that expansion self -funding. Additionally, the City should evaluate the parking enforcement division and how it is operated and managed.
MO-10: Evaluate the Impact of Implementing the City’s Coming Compensation Study The City is in the process of developing a comprehensive compensation plan for the entire City. The plan will review current positions and pay compared to other agencies and against internal benchmarks . It is expected that the compensation plan study will result in recommendations to increase wages to more competitive targets. The City should actively look to implement the study’s recommendations within the shared limits of the entire City funding needs and the approved approach to funding capital.
Practically s peaking, this analysis will require implementation of several other TSP Refresh Plan recommendations: MO-07 (RM02) – using the forecast model to evaluate its impact and CFI-01 – develop a priority of all funding needs of the City to understand the full impact of the study implementation City Facilities and Infrastructure
The City has made strides in investments in buildings and infrastructure over the last several years, with the construction of a new Police Station, a planned new community center in the north Salinas , and the refurbishment of a former City pool facility underway, a replacement facility at Hebbron Heights and construction of a new El Gabilan Library to name a few. Using bond funds, accumulated revenue from higher-than-expected taxes, and grants the City is making a concerted effort to address its facility needs .
Further evidence of the City’s commitment to investing in its infrastructure is the plan on how to spend the over $51 million of funding from the federal American Rescue Plan Act (ARPA) and the designation of $8.1 million for a new community center in Council District 5.
Current Funding
The City has limited sources of current investment in facilities and infrastructure . However, investments are being made and continue to be a focus of City investment.
State Gas Taxes
On an ongoing basis, the City receives annual allocations from State gas taxes through the Highway Users Tax Account (HUTA) and the Road Maintenance Rehabilitation Account (RMRA). These revenues provide a consistent funding for road investments. In FY23, the City should receive $3.9 million in HUTA and $3.6 million in RMRA funds.31 However, the City’s Pavement Management System Update in 2021 showed $169
31 Source: CaliforniaCityFinance.com
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million in current maintenance backlog and calculated a future backlog growing to $341 million based on then-expected investment levels. With that level of investment, shown in the table below, the pavement condition index (CPI) will fall from 56 (fair) to 48 (poor)
ARPA
In response to the impacts of the Covid pandemic,
the federal government has provided significant
funding to cities through the American Rescue Plan
Act (ARPA). Federal allocations of funds to the City
of $51.6 million have been programmed by the City
primarily for capital investment.
As shown in the table to the right, the City has spread these funds over a range of facilities and programs.
Each of these investments reflects a long -standing
need in the community. While many local agencies
have used ARPA funds to uphold current services,
the City’s use of funds is consistent with long -term,
low-funded capital and program needs.
General Fund
General Government funding for capital covers a broad category of spending. The General Fund in FY23 includes $6.9 million for Capital Improvement Program (CIP) projects . These project s range from a permanent homeless shelter, new radios and public safety vehicles, the Eas t Area Specific Plan, to Current Backlog
Planned Inv.
Per Year
Future
Backlog
Road Maintenance* $169 Million $6.3M/year $341 Million
Pavement Condition Index (PCI) 56 48
CIP Planned Investment ** $3.3M/Year
* 2020 Pavement Management System Update, 1/29/2021
** FY23 CIP, PDF p. 47 -- PM through FY26 with FY27 and FY28 blank City of Salinas
Pavement Management System Update Summary
City of Salinas
American Rescue Plan Act Appropriations
Category Funding
Public Facilities $11,502,313
Public Infrastructure $12,000,000
Water & Sewer $15,465,000
Homelessness/Housing $12,600,000
Total Appropriations $51,567,313
Appropriations by Facility Funding
Storm Water Infrastructure $5,845,000
Park Irrigation $5,000,000
Street Repair/Traffic Safety $6,000,000
Sidewalk Repairs $6,000,000
Fire Station Rennovations $1,500,000
Fire Station Repairs $1,400,000
City Hall Adaptations $5,002,313
Hebron Family Center $1,500,000
Firehouse Rec. Center $100,000
Playground Structures, etc. $2,000,000
Chinatown Nav. Cnt. Operations $1,000,000
SHARE Center Operations $1,000,000
Downtown Streets Team $600,000
Salinas Homeless Program $3,000,000
Affordable Housing Production $7,000,000
Total Non-Enterprise Funds $46,947,313
Sewer Enterprise $4,620,000
Total ARPA Funds $51,567,313
ARPA funding is required to be
encumbered by December 2024
and completed by December
2026. This will require focused
efforts on these projects and will
likely delay non-ARPA projects
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repainting. All needed investments. The budget forecast model assumes continued funding of the General Fund (Measure E and Measure G capital funding in the CIP is limited to FY23).
Additionally, the Council has programed additional funding from expected FY22 excess revenues (un - audited). The major planned investment is a new community center in Council District No. 5 for $8.1 million (this adds to the $1.5 million from ARPA funds for a total of $9.6 million investment).
Additional Funding Needs
Even with the above funding, the City retains significant needs for capital projects. The chart below shows over $530 million of identified unfunded capital projects.
The primary needs, include:
▪ Road maintenance – needs to maintain/improve road conditions ▪ Parks Master Plan – net of identified funding32
▪ New Development
o Boronda Road completion
o New fire station
▪ IT Master Plan – Needed to maintain City’s increasing use of technology ▪ Implement National Pollution Discharge Elimination System (NPDES) permit requirements Not included in the “identified funding needs” are expected significant investments in citywide deferred maintenance of buildings and infrastructure. The City is in the process of cataloguing these needs, but the total need remains unknown.
32 Net funding shown in CFI-01 recommendation.
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
Road Maintenance Parks Master Plan IT Master Plan New Development Identified Funding Needs
for Select Funds
Reach 75 PCI
Maintain current 56 PCI*
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Policy Reserves
The City has been investing not only in its infrastructure but its reserves for future needs. The City has recently updated reserve policies and had diligently been working to fund to policy target levels. Continuing this funding will be important to the long term stability of the City’s finances; however, funding of reserves will also compete with funding for City infrastructure. The table below shows the current status of the City’s reserves.33
CONTINUING RECOMMENDATIONS
CFI-01 (OE05): Prepare a Preventive Maintenance Program for all City Facilities The City has a significant number of facility assets that are critical to the operation and services provided by the City. Asset management program being implemented. The TSP recommendation foresaw the following benefits of a preventive maintenance program :
“Developing a Preventive Maintenance Program would provide information across several areas:
▪ An analysis of existing conditions of City facilities and major systems (e.g., HVAC, roofing, etc.) ▪ A list of deferred maintenance by facility and an estimate of cost to bring each facility up to standard ▪ The cost of regular ongoing maintenance and expected system replacement costs over an appropriate time horizon
▪ A plan of action to address deferred maintenance and regular ongoing -maintenance needs for all City facilities
Ideally, a Preventive Maintenance Program will provide the following benefits to the City:
33 Reserve levels fluctuate year-to-year depending on how the City ends the fiscal year.
City of Salinas
Reserve Policy Target Vs. Fund Balances -- As of June 30, 2021 Reserve Requirement Target Working Capital
Over/(Under)
Target
General Funds - Unassigned 16,685,000 (16,685,000)
GF Economic Contingency 16,685,000 16,685,000 0
Facility Maintenace 3,154,000 3,154,000 0
Infrastructure Maintenance 7,368,000 3,684,000 (3,684,000) Vehicle Replacement 13,671,000 9,000,000 (4,671,000)
WC Self-Insurance 4 25,337,000 8,800,000 (16,537,000)
General Liability1 4,510,000 (4,510,000)
Retiree Health (OPEB) 3 11,832,000 1,000,000
Debt Service
Total Reserves 99,242,000 42,323,000 (46,087,000)
Pension Trust 2 162,408,690 6,000,000 (156,408,690)
1 From page 4 of Bickmore Actuarial report, October 19, 2022 2 From CalPERS acutarial reports as of June 30, 2021
3 From slide 55 of the Bartel Associates actuarial report, October 31, 2022 4 From page 3 or the October 2022 Worker's Comp. Actuarial 5 From City's Financial Audit for year ended June 30, 2021 Held Separately
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▪ Provide the City Council with an understanding of what is not being funded in the annual budget. ▪ Lead to a plan to identify budget capacity over time to fully fund a preventive maintenance plan. ▪ Provide an analysis to determine if it is more cost-effective to replace key facility systems rather than incur high maintenance costs. For example, the parks irrigation systems are up to 50 years old and require a great deal of time and materials to keep in working order. Bringing these systems up to current standards could save on ongoing maintenance, water costs through more efficient control systems, and less replacement of plants.”34
Since adoption of the plan, the City has invested in replacing or updating many critical facilities, including:
construction of a new Police station, planning of a new recreation center in north Salinas, construction of a new El Galiban Library, and designated funding to replace the He bron community center facility. The City has also funded a $5 million program to replace irrigation systems at several parks. Even with these improvements, the City is significantly behind on investments in City facilities. An example of how far behind is shown in the recommended facility expense from the 2019 Parks Master Plan. As shown in the chart below, the Master Plan identified over $159 million of facilities improvements or additions for the City’s parks.
Most of this cost identified in the Parks Master Plan is to fund long -term deferred maintenance to the park facilities. To date, $16.7 million has been identified for funding, leaving $142 million for which no funding source currently exists.
In addition to Parks, critical needs have been identified in:
▪ The Public Works department estimates that City Hall needs significantly more than the $5 million in ARPA money in repairs;
▪ Fire stations have not been upgrade d recently and had significant deferred maintenance in 2018;
▪ Sherwood Hall has significant upgrades needed to meet current standards for a performance venue, including carpeting, sound system, and lighting ; and, ▪ Other City facilities to be identified.
Current Status . The City has recently purchased an asset management program that will be used to catalog the major systems in all City facilities. This will allow the City to document the age and condition of all City facilities and plan for an prioritize repair and maintenance. It is likely that completion of this process will result in the identification of millions of dollars of facility maintenance needs in the City.
Preparation and thought on how to fund these need s should begin now.
34 Page 78 of the 2018 “The Salinas Plan”
City of Salinas
Recreation Capital Costs and Funding
Facilities Estimated Cost Funding Net Unfunded Notes
Park Rennovations & Upgrades $135,797,000 2019 Master Plan Facilities & Centers $23,542,340 2019 Master Plan
Irrigation Upgrades ($5,000,000) ARPA Funding
Playgrounds, Benches, Grills ($2,000,000) ARPA Funding
Hebron Community Center ($9,600,000) Grant and ARPA Funding Firehouse Rec. Center ($100,000) ARPA Funding
Total $159,339,340 ($16,700,000) $142,639,340
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CFI-02 (OE02): Citywide Fleet Strategy
The Salinas Plan identified a disconnected fleet management process. The City had divided fleet maintenance responsibilities between the Police department, the Fire department, and all other City vehicles. This decentralization of the fleet function le d to inconsistent d ocumentation of maintenance needs and a lack of coordination on vehicle replacement needs. The City has consolidated fleet maintenance with the Police Department and some Fire vehicles, but cannot currently offer the facilities or 24/7 service to take over fire engines.
The Public Works department is also moving forward on centralizing the City’s flee t replacement database. Some of this information is managed by Public Works and some still kept by Finance.
Development of a combined fleet replacement strategy will allow the City to better identify future needs and ensure funding is available to mainta in a workable fleet of vehicles.
Current Status . The City should continue moving toward a fully centralized fleet function. This includes maintenance and maintenance tracking of all City vehicles as well as development of a fleet replacement strategy.
CFI-03 (MC02) Eliminate General Fund Subsidy of Golf Course Debt Service Golf course debt is still funded partially by the City. While revenues from Golf Course leases bring in $160,000 per year from contractors that also maintain the golf courses , debt service from FY23 through FY27 is above $650,000. The Twin Creeks debt service is paid off in FY27, and continuing debt service for the Fairways golf course is $270,000 per year. This debt servi ce escalates through FY38 when it is fully funded. The graph below shows the debt service by year for each golf course.
The debt service is funded with a combination of the lease payments from Golf Course operators and a $450,000 transfer from the Gene ral Fund. The issue with the golf course debt is threefold:
1. The City is subsidizing golf when there are so many other basic funding needs for capital projects that are not funded .
2. The capital needs for the golf courses will continue beyond the current deb t service. Like all facilities, golf courses need consistent investment in fairways, greens, sand traps, etc. that will continue to tax the General Fund in ways not yet identified .
3. The golf leases are used to pay debt service and not to reinvest in future needs of both courses . $0
$100,000
$200,000
$300,000
$400,000
$500,000
FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 Golf Course Debt Sevice
Twin Creeks Fairways
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Current Status. The recommendation in the TSP was to monetize a portion of the Fairways golf course to pay off the debt and develop a portion of the golf course to promote economic development. As the City evaluates the full measure of its overall need for infrastructure investments, it should continue to evaluate implementation of this recommendation. Alternatively, the City should work to increase golf- course revenues to meet full City needs going forward. This could be fr om increases to leases paid to the City or ensuring that the long -term maintenance of golf -course facilities is paid for through the leases.
CFI-04 (MC03) Eliminate Sherwood Hall Deficits
The TSP identified funding issues with Sherwood Hall and recommende d the following actions:
1. Engage in a long -term lease of the entire facility . Prior leases have left the City with significant deferred costs at the end of the lease. The City is not certain what local entity could fund the full cost in a lease contract.
2. Sale of the Sherwood Hall facility . The pandemic derailed the ability to seriously look at a sale of the facility.
Current Status : The pandemic has limited the ability to book events or attract outside investors. In addition to the issues raised in 2018, the pandemic has further limited investment in Sherwood Hall.
Current issues include:
▪ The City is piecemealing operations. Using temporary staff for technical work and part time staff for general operations .
▪ There is no active promotion of the Sherwood Hall venue as there are no resource s to do this. ▪ The financial system does not track revenues and expenses for the Hall in a manner that can provide regular feedback on the venues fiscal viability .
Updated Recommendation . Full use of Sherwood Hall will require a significant investment to address deferred maintenance and update sound equipment, etc. Additional staff will likely also be needed to fully operate this venue. Past leases have not fully covered all operating and maintenance costs, leaving the City with more deferred maintenance when the lease ended. The City needs to generate a full estimate of deferred maintenance and operating costs (if the City maintains ownership). With this data, the City can then decide h ow to proceed with either operating, leasing, or selling the Sherwood Hall venue.
NEW RECOMMENDATION
CFI-05: Develop an Implementation Approach to Prioritize and Fund the Most Pressing City Needs Much of this report provides documentation on competing needs in the City. The City has more ways to invest in the City than it has resources to provide funding. The need to invest in staff will absorb resources that could be used for other City demands. Spending on capital may limit spending on staffing and other operating costs. Some of the major investment needs facing the City are included in the table below.
Need Estimated Cost
Personnel costs/FTEs have been stagnant—a
comprehensive compensation study is underway
$700,000 Per 1% increase in total salaries.
Over 5 years this will increase to $4.7 million
per year, compounded
Deferred maintenance needs are underway in being
quantified, and it is expected that significant issues
needing immediate attention will be discovered
Unknown for most City facilities
$40 Million City Hall
$135 Million in parks
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THE SALINAS PLAN REFRESH 2023
Expanded services will (e.g., Hebron Community
Center, new Fire Station, Carr Lake park dedication)
will continue adding costs to the Cities General
Government expenses
East Area Fire Station -- $4 million per year
Staffing for new community centers (average
of $100,000 per FTE)
IT service expansion $6.5 Million
Parks Master Plan implementation $142 Million
Road maintenance needs simply to maintain current
“fair” service, let along improving the overall road
conditions
$20 million per year
Implementing the in-process Fire Master Plan unknown
Funding fleet replacement needs unknown
Providing 24/7 fleet maintenance services for all
departments
Unknown
Affordable Housing Likely no limit
Homelessness Response Likely no limit
Under this recommendation, the City should fill out—and expand—the estimated cost of the above list of funding needs and assign a priority to each. These priorities can then be used to inform development of a funding approach to meet the City’s various funding demands. The list of priorities can also serve to inform the public of the immense revenue needs faced by the City and how the various voter -approved revenue sources recommended in the TSP and in this Refresh plan will help meet those needs.
Without a comprehensive, prioritized list of needs showing how voter -approved funding will be used, the City is unlikely to generate the funds necessary to address many of these needs.
Investments for a Healthy City
The City of Salinas has worked diligently to bolster and expand its revenue base in order to provide an adequate level of service to the residents and businesses that call Salinas home. The City has passed two sales tax measures that currently provide $49.7 million of revenue to the City, over one-third of total General Government revenue. Measure G, projected to bring in $32.9 million in FY23, is scheduled to sunset in April 2030.
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As shown in this report, the City has significant investment needs in both services and infrastructure that will require more, not less, revenue in the coming years. In large part, the City suffers from the municipal revenue system in California that rewards population and business growth and has little to no local government control. By virtue of location,
wealth of the local population, and
attractiveness to retail stores, many cities
of similar population in northern California
have significantly more revenue than the
City of Salinas. The table and chart below
show that Salinas is 27% to 32% lower in
General Fund revenue (including Measures
E & G) than four comparative cities , even
though Salinas has the highest add -on
sales tax of any of these cities.
It is an unfortunate fact that under current
rules of revenue generation for a city in
California, Salinas requires additional
revenue sources to provide the bare
necessities of municipal s ervices and
maintenance of its significant investment
in infrastructure and facilities. The
potential loss of Measure G (discussed
below) will have a catastrophic impact on
the City’s services if not extended. Additionally, the City needs to tap addition al sources of revenue to continue moving forward.
Based on the rules of municipal finance in California, any new or extended revenue source (unless it is a direct charge for services) must be approved by the voters of the City. In order to move forward wi th its plans to keep improving services and facilities, retain and attract qualified City employees, and improving the life of City residents, the City must protect and expand its sources of revenue.
The recommendations below are mostly from the TSP and are recommended to be continued in this refresh analysis. Due to the significant cost of road maintenance repair needed – and its growth each year—an additional recommendation to vote on and issue General Obligation bonds is included.
CONTINUING RECOMMENDATIONS
IHC-01 (NR01) Enact Storm Sewer Utility Fee to Fund Current Transfers of General Fund Revenue to Storm Sewer Operations.
The City currently subsidizes the storm sewer function by over $2.5 million per year. While storm sewer is listed as an enterprise fund, the General Fund transfers are the primary source of funding. In addition, the City will need to begin street sweeping in the near future to comply with new NPDES requirements to limit storm sewer runoff . Public Works staff estimate t he cost of this program to exceed $1 million per year.
Additionally, there are State mandates on storm sewer runoff that the City does not have the resources to $0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
Roseville Hayward Santa
Rosa
Sunnyvale Salinas
GF Revenue Comparison
Similar Sized Cities
Comparison of Total GF Revenues
Northern California Cities -- Similar Population
City Population GF Revenue Add-On Sales Tax
Roseville 148,794 $211,387,000 1.00%
Hayward 161,744 $199,141,000 0.50%
Santa Rosa 177,396 $197,502,000 0.25%
Sunnyvale 155,326 $196,766,000 0.00%
Salinas 161,777 $143,732,000 1.50%
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THE SALINAS PLAN REFRESH 2023
currently meet. Implementing a storm sewer utility fee could provide additional revenue to me et these mandates.
Under a new State law, the City can charge a utility -like fee for storm run -off that drains into federal waterways. Instituting a storm sewer fee requires two distinct steps: (a) developing and implementing an operating and capital plan for the stewardship of the City’s storm water assets; and (b) creating a revenue stream to fund this ongoing responsibility.35
The City attempted a storm sewer utility charge prior to the TSP study but was sued and was unable to implement the program. Since that time, SB231 was passed by the California legislature to clarify the ability to enact a storm sewage fee under provisions of Proposition 218. SB231 has not been tested by the courts and remains contentious. While the City’s history with this fee makes a new fee uncertain, the City should move forward in a prudent manner to limit the cost of the storm sewer funded by the General Fund.
Because the storm sewer fee is a property -related fee, the impacts of this fee would be to the property owner. A ssuming rents are charged at market rates, this fee should have little to no impact on current renters.
Current Status. Charging a utility fee for this service will ensure proper funding for this crucial function while also funding future expansion of programs without impacting the General Fund. The recommendation to pursue this funding sources remains intact.
IHC-02 (NR02): Increase Hotel Tax and Dedicate Funding to Capital Investment.
The City’s hotel tax is one of the lowest in the region. An increase in the TOT could free up other General Fund revenue to be used for capital investment. An increase in the TOT does not ha ve an impact on the residents or property owners of the City and helps capture the impact that short-term rentals in hotels and short-term home rentals have on City services.
Current Status . The City maintains a need for additional revenue. TOT does no t impact current City residents or businesses and remains as a recommendation. The additional general fund revenue from an increased TOT will open up space for the City to invest more in capital needs.
IHC-03 (RM01): Request that the Salinas Community to Make the Measure G Sales Tax Permanent.
Measure G is one of the largest revenue source s for the City’s General Governments funds. Measure G funds both ongoing debt service and a number of City employee positions. Loss of this revenue source— currently set as April 2030—will have a significant impact on the City’s operations and should be put to the voters to extend past this current sunset date.
Measure G is used for a variety of programs and services in the current FY23 budget. As shown in the pie chart below, 64 percent of measure G funds operations, and the remaining 36% funds capital and debt service for the Police Headquarters. By function, public safety funding comprises 67 percent36 of Measure
35 2018 The Salinas Plan, p. 82
36 Public safety is broadly defined to include $5.3 million of funding for “Youth Prevention” and $1.4 million for Code Enforcement.
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G, with building maintenance making up the next biggest chunk of funding at 18%. Overall, Measure G is being used for vital city services and has become a critical part of funding key City services.
Total FTEs funded by Measure G in FY23 are shown in the table to the right. The youth prevention program includes the FTEs for Youth Services and Recreation. The loss of Measure G would have a significant impact on the City’s public safety and road maintenance functions.
Current Status. The City is discussing commissioning a survey of potential voters to understand what the sentiment of voters is on Measure G and other potential voter-approved revenue measures. The City will need to go before the voters in either the fall of 2024 , 2026, or 2028 to avoid the sunset of Measure G.
IHC-04 (IN01): Dedicate Savings to Capital Investment The City has been funding increasing amounts of capital from General Fund savings. As demonstrated earlier, there is not sufficient funding to meet all of the City’s capital needs. This recommendation is continuing as an ongoing reminder to evaluate the use of any excess fund on an annual basis. Capital is not the only need, but it is a significant ongoing one that will impact the City in future years if not addressed.
NEW RECOMMENDATION
IHC-05: Evaluate a General Obligation (“GO”) Bond to Fund Key City Projects The City cannot afford all of its capital or social needs from the current municipal revenue sources. A GO bond imposes increased ad valorem property taxes—as allowed under Prop. 13—to re-pay bonds for capital improvements. A GO bond was included in the TSP as a potential funding source for affordable housing; Operations
$21,295,238
64%
Capital
Projects
$4,957,110
15%
Debt Service
$5,423,500
16%
Other
$1,702,100
5%
Measure G Funding FY23
By Type
Measure G Supported FTE
Function FTE
Police & Fire 41.50
Public Works 36.30
Recreation 13.00
Code Enforcement 10.00
Youth Services 3.00
Support 7.00
CDD 1.10
Total FTE 111.90
Public Safety
$21,403,005
67%
Building
Maint.
$5,577,715
18%
Other
Operations
$1,238,018
4%
Other
Capital
$3,457,110
11%
Measure G Funding FY23
by Function
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THE SALINAS PLAN REFRESH 2023
however, the City’s significant road maintenance needs are also an appropriate use of GO bonds. The City should evaluate projects that best meet the needs of the community and decide when to request voter approval. This will likely require a survey of local voters, as described under recommendation IHC-03.
Housing & Homelessness
The Community Development Department has been working diligently to address both the issues of homelessness and affordable housing. However, the crushing issues outlined in the original TSP are largely still in place. The TSP Refresh does not do a “refresh” of the Housing and Homelessness work from 20 18.
The work of the City is moving along, and the recommendations from the original TSP are still valid for these vital needs. The original TSP section should be read for a full description of the housing and homelessness issues still facing the City.
Housing
Since 2018, the City has completed the Alisal Vibrancy Plan as well as the Chinatown Master Plan. These plans identify potential development opportunity sites for new development. CDD is partnering with Monterey County for potential investment in the Alisal.
The City is also pursuing grants and funneling federal funds to assist in development of new housing stock.
These include: Home Key grants, CDBG funding focused in areas with low/moderate housing stock, dedication of $7 million in ARPA funding for affordable housing, and partnering with Department of Human services to place affordable housing near the Sheriff Center site.
Overall, the City is actively seeking opportunities to enable more affordable housing. Funding will continue to be an issue, and CDD is actively seeking funding and partnerships form a variety of sources. As the New Growth Area begins to develop, a portion of this housing will be offered as affordable to the community Homelessness
Based on the lates census of homeless persons, the City’s homeless population has decreased 10 percent from the previous census. This is may be due to better census-taking methods, but shows movement in the right direction. In addition, the City has added a number of program and staff resources to continue improvements for the homeless population. Recent accomplishments include:
▪ Opening of Moongate housing in 2010
▪ Joint funding of Share Center with Monterey County. Approximately 89 exits to permanent housing ▪ Decrease in homelessness of 10 percent in 2022 census ▪ Manage three Home Key grants
▪ Family homeless challenge grant of $2.6 million to build accessory dwelling units (ADUs) on existing properties
▪ $5.6 million of ARPA funding for a variety of homeless programs ▪ Creation of a homeless team of four FTEs. Currently grant funded and could require City General Government funding in future years
Even with all of these improvements, City services are reported to experience significant impacts from homelessness in the City. In interviews with multiple departments, homeless was listed as a major service impact:
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▪ CDD, the Community Development Department , oversees homelessness programs, coordinates with the County, and applies for grants to provide services. ▪ Police documented 4,400 responses related to homelessness from January through October of 2022, or 440 per month. This is estimated to be under-counted. ▪ Fire often responds in concert with police calls and report needing to respond to ongoing issues with fires started in homeless encampments.
▪ Public Works is tasked with coordinating and funding clean -up of homeless encampments. This occurs several times a year.
For various reasons, there is shared response to the homelessness issue, but less coordination of response.
Each department responds to different issues and has a different relationship with the homeless community. Coordination can be hindered by differing perceptions of who a homeless person is interacting with.
CONTINUING RECOMMENDATIONS
The following recommendations from the TSP are recommended for continued implementation. The issues surrounding the City’s housing and homelessness issues were well documented in the original TSP and stand as a valid description of the continuing challenges the City faces . That section of the TSP can be used to provide more context to these recommendations. While the City continues to make strides in both affordable housing and homelessness – including new funding from grants, ARPA, and other sources —the issues faced are long term. The recommendation s from the TSP are large enough and broad enough to encompass the major efforts needed to continue to address these issues. While progress has been made, the heart of these recommendation are still valid at this time.
HH-01 (IN04): Convene Stakeholders to Develop an Implementation Plan to Create More than 4,000 New Units of Affordable Housing in the Next Ten Years ARPA funds have been dedicated along with Home Key grants and a partnership with the County. CDD uses the Technical Advisory Committee as an oversight board. This should continue to be reviewed and expanded to a broader group of stakeholders when helpful.
HH-02 (IN05): Establish a Housing Trust Fund with a Dedicated Revenue Stream for Affordable Housing
The City attempted to implement this recommendation with Monterey County, but it did not work out.
With dedicated ARPA funds, the City plans to reach out to the State to see if Salinas can received State matching funds for a trust alone or in partnership with oth ers (i.e., Santa Cruz) . The City does receive housing funds through the permanent housing fund allocation.
HH-03 (IN06): Develop a Land Strategy to Leverage Private Market Investment to Create up to 2,400 New Units of Affordable Housing.
Originally targeted to new development, CDD is shifting goal to infill projects. This will require updates to zoning ordinances and support by the community . The City is looking to use ARPA funds to acquire properties that could be used as new affordable housing sites. Development of these sites would be done in concert with private developers.
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HH-04 (IN07): Create Regulations to Address Safety and Health Conditions in Rental and Other Group Housing.
This is dependent on the establishment of the rental registry t o fully understand and manage the housing stock. This remains a critical recommendation for the City and the safety o f residents in rental units. The City needs to implement the rental registry to determine the number of rental units and their condition.
HH-05 (NR05): Rental Registry and Inspection Fees
Expected to be presented to Council by CDD in 2023. Establishment of the registry will help drive future regulatory changes. If the registry is not established, the City will not have the tools needed to adequately address the issues with the current housing stock.
NEW RECOMMENDATION
HH-06: Expand SORT Team to Include Public Safety Members Several departments are experiencing impacts form the City’s homeless population. The impacts are both service-related (Police and Fire) as well as service and financial (Public Works). CDD takes the lead on housing and homelessness issues and coordinates the City’s homelessness response.
One of the major programs directly addressing homelessness in major impact areas is the Salinas Outreach and Response Team (SORT). This team is comprised of ten part time employees and volunteers . Initially SORT was a response to issues that arose during the pandemic. This has been a successful program and provides a good deal of on-the-ground engagement with the homeless community.
In addition to the current staff and volunteers, CDD has identified a need for engagement with police and paramedic personnel to assist in the ongoing outreach. Given recruitment and retention issues in police and the need for paramedic personnel in Fire Department daily response, assigning personnel from the Police and Fire department on a periodic basis will help determine the value of expanding the SORT tea m.
This will offer starting point to evaluate if expanded staffing reduces or improves police and fire response and results in improved outcomes in the City’s homelessness response.
Appendix A – 2023 “The Salinas Plan Refresh” Recommendations Initiative
Plan To
Implement
(YES/NO/With
Modifications)
Implementation
Timeline
Implementation
Responsibility
Date
Implemented
Managing the Organization (MO)
MO-01 Healthcare Cost Containment
MO-02 Improve Base Pay on a Cost-Neutral Basis
MO-03 Evaluate the Total Leave Program
MO-04 Continue to Address Workers' Compensation Costs, Moving Towards Sound Actuarial Funding
MO-05 Police Civilianization
MO-06 Improve Budget Process and Monitoring
MO-07 Incorporate Multi-Year Financial Planning into All Budgetary Actions MO-08 Include Leave Accruals and Cash Outs in Current Compensation Study MO-09 Evaluate the Parking Functions Within the City
MO-10 Evaluate the impact of implementing the City’s Coming Compensation Study City Facilities & Infrastructure (CFI)
CFI-01 Prepare a Preventive Maintenance Program for all City Facilities CFI-02 Citywide Fleet Strategy
CFI-03 Eliminate General Fund Subsidy of Golf Course Debt Service CFI-04 Eliminate Sherwood Hall Deficits
CFI-05 Develop an Implementation Approach to Prioritize and Fund the Most Pressing City Needs
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Initiative
Plan To
Implement
(YES/NO/With
Modifications)
Implementation
Timeline
Implementation
Responsibility
Date
Implemented
Investments for a Healthy City (IHC)
IHC-01 Enact Storm Sewer Utility Fee to Fund Current Transfer of General Fund Revenues to Storm Sewer Fund
IHC-02 Increase Hotel Tax and Dedicate Funding that Results to Capital Investment IHC-03 Request the Salinas Community to Make the Measure G Sales Tax Permanent IHC-04 Dedicate Savings to Capital Investment
IHC-05 Evaluate a General Obligation (“GO”) Bond to Fund Key City Projects Housing and Homelessness (HH)
HH-01 Convene Stakeholders to Develop an Implementation Plan to Create More than 4,000 New Units of Affordable Housing in the Next Ten Years HH-02 Establish a Housing Trust Fund with a Dedicated Revenue Stream for Affordable Housing
HH-03 Develop a Land Strategy to Leverage Private Market Investment to Create up to 2,400 New Units of Affordable Housing
HH-04 Create Regulations to Address Safety and Health Conditions in Rental and Other Group Housing
HH-05 Use Multiple Sources to Provide Revenue for the Housing Trust Fund HH-06 Expand SORT Team to Include Public Safety Members
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Appendix B – Other Items of Importance
The City is a complex mix of services, facilities, and infrastructure all designed to meet the needs of the City residents and businesses within the confines of revenue generated through the complex rules of the State of California. It is impossible to capture all of the coming needs, or future revenues, of the City in a single study. For example, the City has ongoing Fire and compensation studies currently that may add to issues that the City needs to address.
Towards the end of this Refresh work, several items were raised that are not explicitly addressed in the body of the study. They are listed below with some level discussion. The larger issue here is to recognize that the City is a dynamic organization with changing and evolving needs. The original TSP and this Refresh capture many of the large-scale challenges the City faces. More will arise and some will fall away. The City needs to be regularly reviewing current needs, past practices, and what changes are needed to address the most pressing issues.
▪ CalPERS - The Cities pension liabilities are currently forecast to be fairly flat over the next several years. However, the current issues in the equities markets led to a significant loss in FY22 and could lead to additional losses this year. CalPERS will calculate the impact of the FY22 loses in next year’s pension actuarial reports. This will likely raise costs in the next several years. ▪ Measure E & G Committees – The City is pulled in a number of different directions across all services. Opportunities for simplification of processes should be continually reviewed. For example, the City has two voter-approved transaction and use taxes and two committees that provide mainly oversight and audit review, but can also offer recommendations on spending for Council consideration37. Perhaps the oversight/review function can be consolidated into one committee.
▪ Begin to Electrify City Vehicle Fleet. The California Governor issued Executive Order N-79-20 calling for a goal to make all passenger vehicles and trucks sold in the State to be electric by 2035. Medium and heavy-duty vehicles have a target goal of 2045 to become electric. The City needs to start considering how to make this transition over the short- and long-term. ▪ Work to complete Boronda Road Expansion – Boronda Road is an important link in the transportation system on the north and northeast side of the City. While mentioned previously, the need to continue investing in City infrastructure is the important issue to continue addressing, particularly relating to the Future Growth Area Additionally, the Future Growth Area will need forecasting for future public safety and public works needs. ▪ Reliance on Technology – Society relies more and more on technology to accomplish everyday tasks, communication, record keeping, etc. The City needs to continually review technology needs and plan for changes. One issue that has recently emerged is the City’s current Enterprise Resource Planning (ERP) was sold to a new company and will not be updated in the future. This is a major software component for the Finance and Human Resources departments and will be a
37 The Measure E and G taxes are General Fund revenues and fall 100% under the authority of th e City Council to make final decisions on the use of these revenues.
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THE SALINAS PLAN REFRESH 2023
major cost to replace. Continuing management of IT could require reviewing the entire IT infrastructure, staffing, and location of department in the City’s hierarchy. ▪ Dispose Old Police Station –The City built a new police station and has yet to decide how to dispose or reuse the old station. This asset provides an opportunity for reuse or to generate funds by a sale. This serves as a reminder that often cities have underutilized assets that should be addressed.
▪ Update safety of buildings -- The City recently had a safety assessment of buildings conducted.
This assessment identified a number of issues that need to be addressed in the current safety environment: card key access system for all City buildings, a redesign or City Hall to limit public access to name a few. This will provide safe access to City facilities for both employees and the general public.
▪ Workforce housing -- In conversations with City labor groups, the issue of workforce housing was raised as a concern both for current employees as well as the ability to attract new employees to the City. To the extent that the City’s housing strategy can address this need, it should be included.