TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Hillary Guirola-Leon, Finance Director
Mark Siegfried, Accounting Manager/Controller
DATE: October 9, 2024
SUBJECT: AUTHORIZE THE CITY MANAGER TO ENTER INTO A
METRO-APPROVED AGREEMENT WITH THE CITY OF
PASADENA TO EXCHANGE $1,000,000 OF THE CITY’S
PROPOSITION A LOCAL RETURN FUNDS FOR $750,000
OF THE CITY OF PASADENA’S GENERAL FUND DOLLARS
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Fiscally Responsible and Transparent City Government
BACKGROUND
On April 26, 2024, staff presented the proposed operating budget for Fiscal Year 2024-25. The initial proposed budget had a projected operating deficit of about $1.3M. City Council directed staff to review and adjust the proposed budget such that cash reserves would not need to be utilized in order to balance the budget.
On May 31, 2024, the City Council adopted a balanced FY 2024-25 budget. In the adopted budget, staff included $750,000 in revenue projections from the one-time sale of uncommitted Proposition A Local Return Funds. This was a short-term option presented by staff to help balance the budget for FY 2024-
25. Steven W. Huang, DDS, Mayor
Gretchen Shepherd Romey, Vice Mayor
Tony Chou, Council Member
Calvin Lo, Council Member
Steve Talt, Council Member
DISCUSSION
Each year, the City receives about $340,000 in Proposition A Local Return Funds from Metro. Below is a table showing the planned expenditures for the accumulated Proposition A funding as adopted in the FY 2024-25 budget.
Per Metro guidelines, Proposition A funds must be used exclusively to benefit public transit. Metro guidelines include a timely use of funds provision that requires agencies to expend the funds in a timely manner to avoid lapsing of funds and being returned to Metro.
Due to expenditure restrictions based on eligible uses of Proposition A Funds, the City has not spent all of its funding and has accumulated Proposition A Funds over the years. Due to the pandemic, many of the bus transportation services that use Proposition A Funds had limited spending contributing to the greater accumulation of funds. Staff from the Parks & Public Works, Community Services, and Finance Departments have put together a threeyear plan on possible uses of funds moving forward. However, due to some funds being received during 2020-2022, these funds are subject to lapsing and being returned to Metro by June 2025.
Metro provides an option for agencies to help avoid the lapsing of funds.
Agencies are allowed to use a Metro-Approved Exchange Agreement to exchange uncommitted Proposition A funds for another agency’s General Fund dollars. Since General Fund dollars are less restrictive than Proposition A Funds, General Fund dollars are typically exchanged at a premium. In April 2024, the City of San Marino and the City of Pasadena staff discussed the potential exchange of uncommitted Proposition A funds at the exchange rate of 75 cents on the dollar. On September 23, 2024, the City of Pasadena’s City Council approved an action to enter into a Metro-Approved agreement to exchange $750,000 of Pasadena’s General Fund dollars for $1,000,000 of City of San Marino’s uncommitted Proposition A Local Return Funds.
FISCAL IMPACT & PROCUREMENT REVIEW
The exchange of funds is included in the FY 2024-25 adopted budget. The adopted FY 2024-25 budget includes the one-time revenue of $750,000 in the General Fund and expenditures of $1,000,000 in Proposition A Local Return Fund.
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends the Council authorize the City to enter into a MetroApproved agreement with the City of Pasadena to exchange $1,000,000 of the City’s Proposition A Local Return Funds for $750,000 of the City of Pasadena’s General Fund dollars. If the City Council concurs with staff’s recommendation, an appropriate motion would be:
“I move to authorize the City to enter into a Metro-Approved agreement with the City of Pasadena to exchange $1,000,000 of the City’s Proposition A Local Return Funds for $750,000 of the City of Pasadena’s General Fund dollars and authorize the City Manager or his designee to take such further actions necessary to effectuate the agreement.”
ATTACHMENTS
1. Proposition A Fund Exchange Agreement