CITY MANAGER BUDGET MESSAGE FOR
PRELIMINARY DRAFT BUDGET FOR CITY COUNCIL REVIEW – JUNE 6, 2022
DATE: June 6, 2022
TO: MAYOR AND SAN PABLO CITY COUNCIL
FROM: Matt Rodriguez City Manager
Re: CITY MANAGER ANNUAL BUDGET MESSAGE:
FY 2022 - 2024 BI-ENNIUAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT BUDGET)
________________________________________________________________________________
To the Honorable Mayor and Members of the San Pablo City Council:
Please accept the City Manager’s Budget Message presented for the General Fund (GF) Operating Budget (PRELIMINARY DRAFT BUDGET) for Fiscal Year 2022-24 biennial period.
Pursuant to San Pablo Municipal Code (SPMC) Section 3.04.230, the Preliminary DRAFT BUDGET document enclosed herein provides detailed financial information about the policies, expenditures and revenues forecasted for the City’s upcoming two-year (2) operational period beginning July 1, 2022 and ending June 30, 2024.
__________________________________________________________
BUDGET REVIEW AND ADOPTION PROCESS
In accordance with all budget preparation requirements listed under the San Pablo Municipal Code (SPMC) Chapter 3.04, the Preliminary DRAFT BUDGET was developed under the authority of the City Manager as the City’s Budget Officer, and presented for formal consideration, as follows:
1) On May 24, 2022, the City Manager presented the Preliminary DRAFT BUDGET for the FY 2022-24 period for review to the members of the Budget, Fiscal & Legislative Standing Committee ( BFLSC) consisting of Councilmember s Patricia Ponce and Elizabeth Pabon- Alvarado.
2) Following the BFLSC review of all proposed expenses and revenues for the FY 2022-24 period, the Preliminary DRAFT BUDGET was recommended to be forwarded to the City Coun cil for formal consideration for a scheduled public budget hearing set for Monday, June 6, 2022.
Scheduled Public Budget Hearing - Procedure
Following public comments received at the scheduled public budget hearing, and upon Council deliberation, the City Council will direct by majority vote all modifications to City expenses and revenues to the City Manager to finalize the Preliminary DRAFT BUDGET for FY 2022-24, for subsequent formal CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
adoption by the City Council. The City Manager will have the enabling Resolutions prepared for formal consideration and adoption on Tuesday, June 21, 2022. Once said budget enabling Resolutions are adopted, then the FINAL ADOPTED BUDGET becomes effective July 1, 2022.
_______________________________________________________
BUDGET & FISCAL ISSUES OVERVIEW
Previously, the City Council adopted an unprecedented four-year (Quadrennial) GF Operating Budget for the period FY 2017 - 2021 which concluded on June 30, 2021. Since then, due to the slow emergence from the COVID-19 pandemic and subsequent economic recovery period, a one- year GF Budget was adopted by the City Council for the FY 2021-22 period, effective July 1, 2021 through the end of June 30, 2022.
To point out, a one-year adopted GF BUDGET was not a normal budget planning approach that would be recommended by the City Manager following the City’s ongoing history and success at adopting multi-year budget expenditure plans. However, it is was EXTREMENLY NECESSARY to re-establish a baseline budget for FY 2021 -22 period after enduring the last 15 months of the fiscal impacts from the COVID-19 pandemic on City’s annual GF revenues.
ONE-YEAR BUDGET vs. MULTI-YEAR BUDGET STRATEGY
Since January 2022, when the new budget cycle was initiated by the City Manager, the development and progress on the city’s budget to date has been achieved in collaboration with the City’s Budget Team, and with all internal budget planning completed by the all City Departments. All essential GF spending was reviewed and developed into a two-year Preliminary DRAFT BUDGET, with all GF expenses and revenues adjusted at City Manager direction to present a balanced two-year biennial PRELIMINARY DRAFT BUDGET for potential formal consideration and adoption by the City Council.
All previous actions taken to date to manage the fiscal impacts of COVID- 19 pandemic and the economic recovery period during FY 2021-22, with no realized GF revenue shortfalls to date, enabled the City to not have to address any significant budget issues, or to counteract any anticipated deficit or revenue shortfalls by June 30, 2022. As a result, the City Manager has not yet had to recommend any budget cost reductions or FTE layoffs so that the City may end the FY 2021- 22 period on a good, positive operating note.
However, while the City’s ability to return to normal operating GF revenue levels prior to the emergence of the COVID-19 pandemic was initially viewed as optimistic, the City Manager recommended a potential 5-year GF Budget for consideration by the City Council at the beginning of the budget cycle.
Given a number of unforeseen U.S. economic issues emerging on the horizon, a multi-year budget plan for the upcoming five-year period could NOT be realized without facing significant GF deficits or shortfalls forecasted between (-$2.3M to -$5.4M) over the next 5- year budget period under consideration.
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
Thus, a two-year GF Budget is MORE ATTAINABLE given the current analysis of City revenue growth and expense controls, with a total of (- $2.3M) in City Manager directed budget balancing measures implemented to present a BALANCED PRELIMINARY DRAFT BUDGET.
EMERGING U.S. ECONOMY CONCERNS AND ISSUES
While the labor market and employment are returning to pre-COVID-19 pandemic levels, there is still widespread debate regarding the future and health of the U.S. economy. In addition, even though the worst effects of the COVID-19 pandemic are beginning to fade, the U.S. economy still faces a variety of significant challenges going forward. Deteriorating infrastructure, wage stagnation, rising income inequality, elevated insurance liability, pension and medical costs, inflation across on all consumer goods and services, as well as supply chain impacts are likely contributing to forecasted budget deficits for many public agencies across the nation. There will be critical issues facing the U.S. economy in the coming years, and the City must brace for the worse to come as the impact will not likely be know n immediately as we enter a looming U.S. Recession believed to commence this Fall 2022 (2nd QTR of FY 2022-23). For more information on the state of U.S. economy, see the attached article:
https://www.washingtonpost.com/business/2022/05/19/recession-economy-markets/ Therefore, the FY 2022-24 period is characterized has having a FISCALLY AUSTERE financial outlook as the City slowly emerges overall from the fiscal impacts of the COVID-19 pandemic, and braces for the following forthcoming major U.S. economic issues emerging in 2022 , and in the near future , as follows:
1) U.S. Recession Looming for Fall 2022
2) U.S. Inflation Increases
3) U.S Interest Rates Fluctuations to counteract U.S. Inflation concerns 4) Ukraine War Costs
5) Supply Chain Shock/Shortages
`
MAJOR U.S. ECONOMY CONCERNS!
All of these combined U.S. economic indicators will have a contributing factor to public agencies and their respective annual budgets, especially smaller municipalities. Of additional concern, the U.S. economy have many cities c oncerned for those who have current contractual obligations with CalPERS who are set to brace for impacts to ongoing retirement investments and rates of return which will require future modification of the CalPERS discount rate as a result of anticipated impacts of U.S. market fluctuations and volatility.
These combined economic factors noted above represent a “PERFECT STORM” in terms of impacts to public agencies budgets nation-wide.
.
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
As part of the scheduled public budget hearing for June 6, 2022, the City Manager and staff will review these U.S. economic indicators and their impacts in more detail with the City Council as it relates to minimizing annual GF expenses to be in close alignment with forecasted GF revenue growth over the next FY 2022-24 period.
FY 2021-22 UNFORESEEN YEAR-END BUDGET EXPENSES
As City staff close the FY 2021-22 budget period, an additional concern that has emerged is the amount of one-time unforeseen year-end expenses totaling approximate (-$453,600) realized during FY 2021- 22 period. As with any public agency, unforeseen expense contingencies occur each year during the course of the fiscal year period. Many of the City’s unforeseen expenses resulted from impacts from employee attrition, deferment of certain operational expenses, unforeseen retirements of key Executive Management staff, and from COVID-19 fiscal impacts/economic recovery period combined with recent U.S. inflation on all goods and services across all U.S. business sector s. Unfortunately, this volatile economic activity will continue through the next FY 2022-23 period.
These unforeseen year-end expenses are intended to be mitigated with available FY 2021-22 year-end GF revenue or savings (i.e. fund balance) prior to the period ending June 30, 2022. Future one-time unforeseen year end expenses must be minimal during the upcoming FY 2022- 24 periods to avoid impacts to available year -end audited fund balance following completion of the annual CAFR which impacts the City’s ability to have available one-time GFDR funds to cover one-time operating expenses, restore Budget Balance Measures (cuts), and to provide for future capital investment for City projects.
COVID-19 ECONOMIC RECOVERY PERIOD
As the State of California reached 20 million vaccines administered and with COVID-19 case rates and hospitalizations stabilized, California Governor Newsom moved beyond the Blueprint for a Safer Economy to fully re-open the State’s economy on June 15, 2021. As of this date, all industries across the State returned to usual business operations with common-sense risk reduction measures, such as masking and vaccinations in many business sectors implemented, with the State committed to continue the monitoring of hospitalization rates, vaccine access, and vaccine efficacy against subvariants with the option to revisit the June 15, 2021 State wide Re-Open date, if warranted.
Following the Governor’s declaration last June 2021, and for the current FY 2021-22 period ending on June 30, 2022, the PRELIMINARY DRAFT BUDGET does not forecast the need to address any additional COVID-19 public health impacts at this time to City GF revenues. But, we still have to remain cautious about COVID-19 subvariants.
Notably, most public agencies at the local government level were forecasting a 3-y ear economic recovery period from COVID- 19 fiscal impacts. With ongoing analysis of current City GF revenues forecasted for FY 2022-23, the City has emerged from the COVID -19 pandemic following its dramatic fiscal impacts virtually unscathed unlike FY 2019- 20, with no significant GF revenue shortfalls or Casino shutdowns which were experienced.
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
However, that being said, the caveat here is that the City’s major GF revenue generator, Casino San Pablo, continues to progress forward without any current closures to Casino Operations for the period ending FY 2021-22. If there is a COVID -19 unforeseen impact to annual Casino revenues during the upcoming FY 2022- 24 period, the City will be fiscally impacted and must resort to budget deficit planning, and make any necessary GF revenue adjustments before the end of each fiscal year period (2022-24) to counteract any GF budget deficits or shortfalls realized.
COVID-19 PANDEMIC RECOVERY OUTLOOK
The City Manager indicates from Mid -Year FY 2019-20 (March 2020) through the Mid-Year of FY 2021- 22 (January 2022) that most of the COVID -19 fiscal impacts were realized, and present no additional economic threat to the City’s economic tax base or annual GF revenues as of January 1, 2022. This is mainly due to no additional Casino Shutdowns since June 11, 2020.
With that potential scenario does pose some SIGNFICANT CONCERNS in developing a two -year PRELIMINARY DRAFT BUDGET while not over-committing to major increased operating expenditures over a longer, multi-year period to avoid any potential structural deficits or shortfalls in the future. But, again there are still fiscal risks d ue to any future COVID -19 subvariants, and keeping City operating expenditures in alignment with projected revenue growth each year.
A key f actor to the keeping a multi-year budget policy for the City of San Pablo is to simultaneously achieve reasonable agreements with all representative employee labor groups on the City’s future labor costs along with a sound, long-term General Fund Operating Expenditure Plan resulting in long -term sustainability while new capital, economic development, housing and technology investments are pursued.
Projected labor costs are the most significant annual cost factor of the City’s Annual General Fund Budget process representing nearly $25.4M (or 52%) of total projected GF costs for the FY 2022- 23 period, and nearly $26.7M or (52%) of total projected GF costs for the FY 2023-24 period. In order for the FY 2022-24 DRAFT BUDGET to remain balanced without any structural deficits, there needs to be FISCAL DISCIPLINE in not adding additional labor costs or FTE investments until the City emerges from the forecasted U.S. recession impacts.
AMERICAN RESCUE PLAN ALLOCATION FUNDING
On April 4, 2022, following a City Co uncil approved Community Needs Assessment in August 2021, and Final Rule issuance by the U.S Treasury in January 2022, the City Council adopted the American Rescue Plan Act (ARPA) Funding Allocation and Appropriation of Part I Eligible Expenses as Government Services under the Public Sector Revenue Loss Category which total ed $900,000 via Resolution #2022-055; and Part II Eligible Expenses as Government Services under the Public Sector Revenue Loss Category which totals $6,513,466 via Resolution #2022-056, for a combined total of $ $7,413.467 as a non-entitlement unit; and designated a Special Revenue Fund under the proposed FY CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
2022-2024 PRELIMIANRY DRAFT BUDGET period, for all applicable financial compliance and reporting requirements pursuant to U.S. Treasury Final Rule Regulations . All ARPA allocations approved to date by the City Council may be amended before December 31, 2024, with all ARPA allocations to be expended by December 31, 2026 per US Treasury Final Rule Regulations.
Part I Eligible Expenses as Government Services
under the Public Sector Revenue Loss Category
(CC Resolution #2022-055)
Part II Eligible Expenses as Government Services
under the Public Sector Revenue Loss Category
(CC Resolution #2022-056)
Community Needs
Assessment Category
GOVERNMENT SERVICE Description FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 TOTAL
ALLOCATION CITY DEPARTMENT
SRI SURVEY PRIORITY #1
& COUNCIL WORKPLAN
ECONOMIC DEVELOPMENT Back-to-Back Business (B2B) Grant Program Expansion SPEDC Contracted Services Program
$333,000 $242,000 $25,000 $0 $600,000 CITY MANAGER'S OFFICE (VIA SPEDC CONTRACT)
Back-to-Back Business (B2B) Grants
SPEDC Contracted Services Program
(1) Serves an average of 15 San Pablo small businesses annually (2) Provides $5K/$10K/$20K grants
$300,000 $210,000 $25,000 $0
$535,000
San Pablo Youth Interns
(1) Employs 8 San Pablo youths for 13-week internships (living-wage) (2) Provides core, in-demand skills to create career foundation (3) Provides small businesses a way to build & maintain online stores $33,000 $32,000 $0 $0 $65,000 SPEDC in partnership with
COMMUNITY SERVICES (YSCP)
SRI SURVEY PRIORITY #1
& COUNCIL WORKPLAN
ECONOMIC DEVELOPMENT Mini-Business Improvement Grants (Mini-BIGs) & Technical Support (TA)
SPEDC Contracted Services Program
(1) Serves up to 30 San Pablo small businesses annually (2) Provides up to $2,500 per business in business TA essentials grants (3) Provides up to $2,000 per business matched improvement grant $150,000 $150,000 $0 $0 $300,000 CITY MANAGER'S OFFICE
(VIA SPEDC CONTRACT)
SRI PRIORITY #1; COUNCIL
WORKPLAN & ANNUAL
POLICE SURVEY NEED
CRITICAL INFRASTRUCTURE:
POLICE SERVICES
Critical Infrastructure Project
(First Responders/Essential Facilities) $35M PD HQ/Public Safety Training Center; Supplemental Construction Funding Shortfall ($3.2M) + Lease Revenue Bond Proceeds Funding $3,200,000 $0 $0 $0 $3,200,000 CITY MANAGER'S OFFICE,
POLICE DEPARTMENT &
PUBLIC WORKS
SRI PRIORITY #2; COUNCIL
WORKPLAN & ANNUAL CITY
SURVEY NEED
COMMUNITY SERVICES Community Services Programs
College Prep, Workforce Development, & Scholarship Pilot, Tutoring, San Pablo Preschool, Summer Exploration/Enrichment, Summer Learning, Senior/Disabled Travel Training, Professional Development for PT staff, $99,000 $203,834 $233,333 $223,833 $760,000 COMMUNITY SERVICES SRI PRIORITY #4 &
COUNCIL WORKPLAN
ECONOMIC DEVELOPMENT Wireless/Fiber/Broadband Infrastructure Project (Phase 2 Capital Development)
$250,000 $1,003,467 $0 $0 $1,253,467 CITY MANAGER'S OFFICE & PUBLIC WORKS
COUNCIL WORKPLAN &
ANNUAL CITY SURVEY NEED
CRITICAL INFRASTRUCTURE:
STORMWATER NPDES
Critical Infrastructure Project
(NPDES MRP Compliance Project) CalTrans Trash Capture
Device Project (Church @ Willow); City funding Match ($1M) with CalTrans $1.65M Funding
$1,000,000 $0 $0 $0 $1,000,000 PUBLIC WORKS
COUNCIL WORKPLAN &
ANNUAL CITY SURVEY NEED
ADMINISTRATION Additional Labor Costs $300,000 $0 $0 $0 $300,000 CITY MANAGER'S OFFICE & HUMAN RESOURCES
TOTALS: $5,332,000 $1,599,301 $258,333 $223,833 $7,413,467 Community Needs
Assessment Category
GOVERNMENT SERVICE Description FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 TOTAL
ALLOCATION CITY DEPARTMENT
SRI PRIORITY #1 &
COUNCIL WORKPLAN
ECONOMIC DEVELOPMENT Back-to-Back Business (B2B) Grant Program Expansion SPEDC Contracted Services Program with youth interns
$333,000 $242,000 $25,000 $0 $600,000 CITY MANAGER'S OFFICE (VIA SPEDC CONTRACT)
SRI PRIORITY #1 &
COUNCIL WORKPLAN
ECONOMIC DEVELOPMENT Mini-Business Improvement Grants (Mini-BIGs) & Technical Support (TA)
SPEDC Contracted Services Program
$150,000 $150,000 $0 $0 $300,000 CITY MANAGER'S OFFICE
(VIA SPEDC CONTRACT)
SRI SURVEY PRIORITY #1;
COUNCIL WORKPLAN &
ANNUAL POLICE SURVEY
NEED
CRITICAL INFRASTRUCTURE:
POLICE SERVICES
Critical Infrastructure Project
(First Responders/Essential Facilities) $35M PD HQ/Public Safety Training Center; Supplemental Construction Funding Shortfall ($3.2M) + Lease Revenue Bond Proceeds Funding ($30M)
$3,200,000 $0 $0 $0 $3,200,000 CITY MANAGER'S OFFICE,
POLICE DEPARTMENT &
PUBLIC WORKS
SRI SURVEY PRIORITY #2;
COUNCIL WORKPLAN &
ANNUAL CITY SURVEY NEED
COMMUNITY SERVICES Community Services Programs
College Prep, Workforce Development, & Scholarship Pilot, Tutoring, San Pablo Preschool, Summer Exploration/Enrichment, Summer Learning, Senior/Disabled Travel Training, Professional Development for PT staff, $99,000 $203,834 $233,333 $223,833 $760,000 COMMUNITY SERVICES SRI SURVEY PRIORITY #4
& COUNCIL WORKPLAN
ECONOMIC DEVELOPMENT Wireless/Fiber/Broadband Infrastructure Project (Phase 2 Capital Development)
$250,000 $1,003,467 $0 $0 $1,253,467 CITY MANAGER'S OFFICE & PUBLIC WORKS
COUNCIL WORKPLAN &
ANNUAL CITY SURVEY NEED
CRITICAL INFRASTRUCTURE:
STORMWATER NPDES
Critical Infrastructure Project
(NPDES MRP Compliance Project) CalTrans Trash Capture Device Project (Church @ Willow); City funding Match ($1M) with CalTrans $1.65M Funding
$1,000,000 $0 $0 $0 $1,000,000 PUBLIC WORKS
COUNCIL WORKPLAN &
ANNUAL CITY SURVEY NEED
ADMINISTRATION Additional Labor Costs $300,000 $0 $0 $0 $300,000 CITY MANAGER'S OFFICE & HUMAN RESOURCES
TOTALS: $5,332,000 $1,599,301 $258,333 $223,833 $7,413,467
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
ANNUAL GROWTH FACTOR FOR FY 2022-23
A total of +10.47% annual revenue growth is anticipated for annual revenue growth for the FY 2022-24 period. This P RELIMINARY DRAFT BUDGET must be monitored with FISCAL CONTROLS AND FINANCIAL DISCIPLINE so that future projected revenues during FY 2022- 24 period remain intact , and thereafter , can be managed appropriately to ensure future City operating expenses do not experience substantial “budget creep” in subsequent future years as deficits are currently looming and must be addressed after the FY 2022-24 period.
ONGOING USE OF GENERAL FUND FISCAL RESILIENCY RESERVES
The City’s ongoing use of Fiscal Resiliency Reserve Policies, first adopted in October 2013 and amended in March 2016, has enabled the City Council to maintain fiscal practice of allocating year-end audited fund balance (i.e. budget surplus) to the City’s General Fund Designated Reserves (GFDR) Fund for major capital and service level enhancement for the last nine (9) years.
Typically, year-end audited fund balance is allocated and appropriated by Resolution by the City Council for various project and programmatic needs during the course of the fiscal operating period. Each January, these allocations have been approved by the City Council for financial programming following adoption of the Comprehensive Annual Financial Report (CAFR) for the preceding fiscal year period ending June 30
th.
During FY 2018/19, prior to the COVID-19 pandemic, following adoption of the City’s Independent Audit an C AFR report for period ending June 30, 201 8, the City’s GFDR funds peaked at $18,855,163.
Additionally, the City Manager was able to use a portion of the Budget Stabilization Reserve in FY 2019- 20 to counteract the GF Revenue Shortfall of ($7.3M) anticipated by the end of June 30, 2020. The consistent practice of fiscal discipline as directed by the City Manager placed the City in a position to mitigate the fiscal impacts of the COVID-19 pandemic on the City’s GF Revenues dramatically.
However, since FY 2018- 19, the City Manager has continued to warn the City Council during his previous Quadrennial 4-year FY 2017-21 CM Budget Message that continued depletion of one-time GFDR funds for ongoing operational or project expenses needed to be curtailed.
One of the important factors this upcoming FY 2023-24 period are the continual availability of budgetary resources available through the City’s ongoing fiscal practice and adherence to the Fiscal Resiliency Reserves Policy requirements for EMERGENCY USE ONLY. To be clear, the City’s Fiscal Reserve Funds should not be used for covering operating expenses which would trigger structural budget deficits due to the replenishment requirements for one- time use of the Catastrophic Reserve (must be replenished within three fiscal year periods), and one- time use of Budget Stabilization Reserve funds (must be replenished within one-year fiscal year period).
The City’s GFDR funds generated from the Fiscal Resiliency Reserves Policy acts as a “buffer” by insulating the City from economic impacts, unforeseen financial crisis, litigation/settlement, or natural disasters. This Fiscal Resiliency Reserves structure was a critical balancing measure for dealing with dramatic, unforeseen GF Revenue shortfalls experienced during FY 2019- 20 due to the COVID -19 CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
pandemic, and put into effective use by the City Manager when GF revenue shortfalls were truly realized by end of June 30, 2020 period.
The City Manager HIGHLY RECOMMENDS that the City Council continues its strong fiscal practice of not using or modifying the City’s Fiscal Resiliency Reserves to cover or expand GF operating expenses.
When revenue declines are ACTUALLY EXPERIENCED, then the City Manager will recommend an appropriate course of action to counteract any GF revenue shortfalls once realized. Fiscal Resili ency Reserves are used as a LAST RESORT to counteract an unanticipated decline in GF revenues realized.
__________________________________________________________________________ CITY MANAGER FISCAL RISKS ADVISORIES FOR FY 2022-24 GF BUDGET PERIOD
PROPER FISCAL MANAGEMENT AND INTERNAL CONTROLS IN EFFECT
With a two-year PRELIMINARY DRAFT BUDGET proposed, and the uncertainty of the U.S. recession looming, it would be prudent for the City Manager to propose that all City financial operations i dentify, assess and manage risk for the City’s financial condition over the next 12-24-month period from budget adoption. This will mean audit or financial assessment findings must be made to ensure that the City has internal capacity of key staff to effectively monitor and ensure the integrity of the City’s operations as we return to normal operating levels to sustain City programs and service delivery. Additionally, it means that the City Council and City Departments remain prudent in making financial decisions in the future that DOES NOT EXEND beyond the City’s financial capabilities and debt obligation capacity.
PLAN FOR MAJOR UNFORESEEN CONTINGENCIES
The City Manager has always planned for major unforeseen contingencies that may impact the City Operating Budget and its ability provide City -wide programs and services . However, not all major unforeseen contingencies can be expected for during the economic recovery period. Resources were proposed in the PRELIMIANRY DRAFT BUDGET to get the City back on-track operationally and to plan ahead whenever practical to meet significant cost factors such as debt obligations and ong oing CalPERS and retiree health cost increases during this next two-year cycle. Ongoing labor, liability insurance, CalPERS pension (i.e. UAL liability), and retiree health are significant cost factors for the City going forward in future years.
FOCUS ON LONG-TERM ECONOMIC VIABILITY
Following budget adoption in June 2022, the City Manager will stress the need for long-term economic sustainability for the City. This means continued prudent management of all City GF revenues and the development of new revenue sources for new economic diversification. This will encourage new private investment through capital, economic development, housing and technology investments. Emphasis over the past ten (10) years has been to transition from the dissolution of redevelopment to a new economic development paradigm using one-time audited fund balance as the financing mechanism .
This has been more prevalent in the last four (4) years where substantial capital investment in a number CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
of new City facilities and public infrastructure investment from period 2017- 2021 has totaled nearly $60.9M in capital cost investment, and generated nearly +600 jobs during this period.
These public facilities and infrastructure investment have characterized most of the City’s short -term economic development, and the City Manager has programmed its development using a combination of public and private development strategies (i.e. Lease Revenue Bond Financing; GFDR One- time Fund Investment; Contra Costa County Public Investment; and Private Investment). The following is a list of project economic development to date throughout the City completed and ongoing during the evaluation period (2018-2021), and going forward into FY 2021-22, as follows:
In summary, the City of San Pablo has continued to develop major community projects to enhance the quality of life and build amenities for its residents which has had a positive impact on encouraging future private investment opportunities within the City’s small 2.6 square miles for the future. Continued emphasis on the combination of capital, economic development, housing and technology investments will be need to be prioritize to achieve this long -term economic viability during FY 2022-24, and future years.
CAREFULLY MONITOR CITY REVENUE GROWTH
Projected Casino Revenue Growth
Following budget adoption, the City Manager stresses there needs to be strict adherence to managing the City’s future revenue growth so that all proposed City operational expenses which increased by
CITY OF SAN PABLO MAJOR CAPITAL PROJECTS
Period: 2018- 2022
City Investment Project Capital
Cost
Jobs
Created
CC County Women’s, Infant and Children’s Project
• Status: Completed 2018-2019
$3.7M
40 San Pablo Avenue Complete Streets (@ Rivers Ave)
• Status: Completed 2017-2019
$6M
($3M City)
65 New San Pablo City Hall Project
• Status: Completed 2019-2020
$18.2M
197
CC County Fire Station #70
• Status: Completed 2019-21
$13M
($4.5M City)
109
City Public Fiber Project (Phase I)
• Status: Completed 2020
$1.0M
50 Block E Housing Sub-Division Project
• Status: DDA/Planning Entitlements (May 2021)
Private
+/-50 (est.)
Mixed-Use Retail & Housing Project
• Status: DDA/Planning Entitlements (May 2021)
Private
+/-50 (est.)
Rumrill Blvd. Corridor Project
• Status: Bid Advertisement/Award (May 2021)
$19M
+/-150 (est.)
New San Pablo PD Headquarters & Regional Law
Enforcement Training Center Project
• Status: Advance Planning 2021-24
$35M (est).
+/-200 (est.)
Total Public Investments: $95.9M +/-850
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
+35% for FY 2022-23 period are covered and do not trigger structural deficits. Coupled with the recent parking expansion at Casino San Pablo during FY 2019/20 which was stymied by COVID-19 impacts, additional patronage of the Casino San Pablo may result in generation of additional Casino revenue beginning in FY 2022-23, and in future years. Additional Casino revenue growth continues to contribute meaningfully to the +10.47% in Annual City Revenue growth anticipated in FY 2022-23 period.
Compared to other small municipalities, the City’s revenue growth is climbing steadily while other municipalities have zero or no annual revenue growth.
CITY FISCAL RISK WARNING!
The City must keep City operating expenses in alignment with projected GF revenues at all times to eliminate the potential for GF deficits or shortfalls in subsequent years. At the same time, there are no new potential revenue sources that have been identified for City economic diversification. The City must continue to exercise fiscal restraint within the current projected GF revenue growth anticipated.
On the expenditure side, health care, insurance and labor cost increases are antici pated to increase and the City and must be managed accordingly. Additionally, there will need to be extensive evaluation of expenditure plans that result in internal investments during the FY 2022-24 period to enhance service delivery, with additional staffing resources needed for program implementation, including but not limited to the following:
• Establishment of New Code Enforcement Division from Police to Community Development • Enhancement of IT Systems/ERP programs and Staffing Resources • PD Mental Health Crisis Model and Staffing Resources (Post State Grant of $2M) • PW Department / Maintenance and Staffing Resources
USE OF ONE-TIME FUNDS FOR BUDGET BALANCING MEASURE RESTORATION
Prior to the COVID-19 pandemic, the City Council’s continued adherence to the Fiscal Resiliency Policy requirements adopted in October 2013 (Amended June 2016) have increased the financial stability of the City. One-time revenues that materialize after each fiscal year period labeled as “Audited Fund Balance” has been used strategically to build and develop a number of successful capital projects since 2018 through 2022 period as noted above. However, p ost-COVID pandemic period is immensely different.
As annual City operational expenses increase they must be in alignment with available City revenue growth each year which is sound, fiscal discipline and practice. However, the City must rely less on one-time funding from the City’s GFDR Fund Balance for funding capital projects, programs, contract services, and equipment/vehi cle replacement which should be exercised with CAUTION AND CONSTRAINT. Unfortunately, these one- time costs should be annual recurring in the operating budget. Unfortunately, they could not be accommodated in the PROJECTED DRAFT BUDGET due to the City’s current revenue capacity for period FY 2022- 24, without triggering a substantial operating CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
deficit/shortfall.
ONE-TIME FUNDING AND RESTORATION/REPLENISHMENT OF BUDGET CUTS
Following budget adoption, should any one-time revenue materialize during the course of the next two- year period, the City Manager recommends that FIRST PRIORITY on the use of one-time funds should be used to REPLENISH AND RESTORE a portion or all of the (-$2.3M) of the Budget Balancing Measures directed by the City Manager to BALANCE the PRELIMINARY DRAFT BUDGET for FY 2022-24 period.
As the City gets back to normal GF funding operating levels and realizes positive year -end budget surplus ( i.e. a udited fund balance) or is able to infuse new revenues into the City’s GF, new City programs, services and FTE investments can be made without exacerbating the City’s current financial outlook. However, positive year-end audited fund balance may not last indefinitely over the next multi- year budget cycle if managed poorly.
__________________________________________________________ CITY MANAGER FINANCIAL GOALS FOR FY 2021-22
CAPITAL, ECONOMIC, HOUSING & TECHNOLOGY INVESTMENTS MUST BE FOCUS
The City is heavily dependent on annual Casino San Pablo revenues which represent 65% of City’s annual GF revenues projected for FY 2022-24 period, with a modest increase the following year. New economic development opportunities need to be fostered over the next budget cycle with major capital investments in technology ( i.e. broadband/wireless) and EV infrastructure to create new econom ic development investments within the City’s geographic constraints . Economic diversification and housing production are key and encourages private investment into in-fill development sites throughout the City which are needed to contribute to the City’s economic tax base in future years.
In November 2020, the City Council adopted a new Affordable Housing Strategy which lays out a number of programs and policy strategies, identified new priorities to generate housing opportuniti es, and leverages existing City -owned properties to facilitate more additional affordable housing projects for the City over the next ten (10) year period. The Regional Housing Needs Allocation (RHNA) which has been in effect since 2015 as required by the State of CA HCD regulations has placed a huge daunting challenge for the City to reach affordable housing units as required by State HCD for RHNA Cycle 5 which ends in 2023.
However, during last four-year period, the City saw steady progress toward RHNA Housing Compliance by permitting a total of 99 total housing units since Calendar Year (CY) 2018 through 2021, as follows:
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
Continued emphasis needs to be made as well as flexibility in the upcoming General Plan Update to enable developers to increase housing density and to accommodate additional housing uses in the City’s General Plan to facilitate housing production units in San Pablo to reach RHNA compliance in future years. According to the most recent 2022 Annual Progress Report approved by the City Council in March 2022, only 74 units out of a total of 449 units are expected to be produced in San Pablo by 2023 under the Regional Housing Needs Allocation (RHNA). The 2022 APR report will increase this number to 99 units, leaving 350 units remaining to be produced by the end of the eight -year cycle in 2023. Because the City entitled 193 units in 2021 and is processing entitlements for an additional 170 units, up to an additional 363 units could be produced in the 2023 APR report. Any unmet allocation will be carried over to the next cycle 6 (2023- 2031). The City’s RHNA allocation for 2023- 2031 is for an additional 746 units, including 173 at the very low-income level, 100 at the low-income level, 132 at the moderate-income level, and 341 at the above moderate-income level.
AVOID FRIVOLOUS GF SPENDING
The City Ma nager WARNS the City Council that any frivolous GF spending would result in potential deficits or compounding of annual expenses in future years. There is a delicate balance of expenses and revenues forecasted for FY 2022-24 period. The City Council needs to refrain from elaborate or increasing GF spending unless a dedicated revenue source is identified (i.e. one -time GF Designated Reserves; New Revenue Source) to mitigate any impacts on the GF operating budget including increasing any annual GF subsidies which increased +35.68% from $1.8M in FY 201- 22 to $2.2M forecasted for FY 2022- 23. All efforts must be made to decrease or minimize GF s ubsidies going forward in future years.
INVEST IN DEFERRED MAINTENANCE (CITY INFRASTRUCTURE, VEHICLES; IT
SYSTEMS) AS ANNUAL OPERATIONAL EXPENSES
The City Manager is concerned about ongoing funding availability to address deferred maintenance with includes City infrastructure replacement, city vehicles replacement. and enhanced IT Systems and computer replacement. These are operational costs but have been best managed over the years using one-time appropriations from the GFDR Fund Balance funds. City infrastructure replacement for aging
CITY OF SAN PABLO
RHNA HOUSING ALLOCATIONS
Period: 2018-2021
CY 2018
CY 2019
CY 2020
CY 2021
RHNA Cycle 5 (2015 -2023):
Total Units Required: 449 units
+46 units
+9 units
+19 units
+25 units
RHNA Units (Balance
Remaining):
403 Units
394 units
375 units
350 units
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
City facilities, and/or upgrades to existing City parks, lacks a consistent and dedicated funding source.
City vehicles and IT replacement are essential items needed for City service delivery and for employee work productivity. All items must be continually budgeted operationally to be effective and resolute. As we all know, technology becomes obsolete year after year. Therefore, IT resources must be replaced periodically to maintain productivity and service levels for the City. During FY 2022- 24, Enterprise Resource Planning will be implemented to enhance service delivery dramatically requiring additional IT funding capacity and resources to enhance our digital platforms and customer service using on- line services for the public and internally for bringing more operational efficiency in City service delivery.
MAINTAIN LONG-TERM EMPLOYEE LABOR GROUP MOUs
The City has always had long-term (i.e. 3-year) employee labor group partnerships with representative units in the City, with exception to FY 2021-22 period when 1-year MOU extensions were needed to get through the COVID-19 economic recovery period. Typically, the City supports having long-term MOUs secured which has provided stability in managing labor costs in the City’s GF Budget since FY 2011-12 period, and has resulted in NO FTE LAYOFFS since FY 2011- 12 for all represented and non- represented groups.
Our City employees have greatly contributed to the economic stability of the City over the last ten (11) years by assisting with sustained labor costs over time, and with more employee contributions to the pension costs through CalPERS. Currently, labor negotiations with all employee labor groups are still underway at time of presentation of the Preliminary DRAFT B UDGET. However, given the current economic outlook for the FY 2022-24 period, these long-term MOUS are still achievable to provide long- term fixed labor costs to future budget planning.
Salaries and benefit costs are the largest, single expenditure in the City’s GF Operating Budget. A total of $29.4M in the General Fund and $4.5M in Other Funds for a total of $33.9M is budgeted for FY 2022- 23 Total Salary and Benefit Costs for 170 Total FTEs. For FY 2021-22 period, the City had a combined budget of $33M for Salary and Benefits, an increase of +$.9M is expected in FY 2022-23. For budget planning purposes in order to present a PRELIMINARY DRAFT BUDGET, a +3% COLA was included for labor costs with active employee labor negotiations still underway.
ONE-TIME SALE PROCEEDS AND RETURN ON INVESTMENT (ROI)
With the COVID-19 economic recovery period concluded, the City Manager stresses that continued support for return on investment policies (ROI) must be an ongoing financial policy supported by the City Counc il when disposing of City surplus property, increasing City fees for services, and for generating one-time real estate sale proceeds . With limited new revenue opportunities, the City must take advantage of market considerations and the potential generation of future sale proceeds of City property for strategic investment and development opportunities given the City’s geographic constraints.
Any future one-time sale proceeds and ROI proceeds should they be generated, must continue to be earmarked for future City Council allocation and appropriation in the City’s GFDR and GF Operating Budgets in future years to eliminate any forecasted GF Operating deficits or shortfalls, and enhance CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
City service delivery, projects and services.
______________________________________________________________________
MEETING THE FISCAL CHALLENGES
BUDGET GOALS/STRATEGIES FOR FY 2022-24
As the City developed the Preliminary DRAFT BUDGET for FY 2022-24, the following financial planning goal considerations were developed and established for the next two-year budget cycle, as follows:
Budget Planning Goals/Strategies for FY 2022-24:
(1) Project realistic GF revenues to meet realistic GF expenditures to reduce the occurrence for GF operating deficits or shortfalls in future years; and
(2) Use “one-time funds” (i.e. Surplus or Real Estate Proceeds, Year-End Audited Fund Balance) to restore GFDR funds during FY 2022-24, with a TOP PRIORITY for restoration and replenishment of the ($2.3M) in Budget Balancing Measures needed to BALANCE the FY 2022 -24 PRELIMINARY DRAFT BUDGET; and
(3) Achieve Multi-Year MOU agreements with all employee labor groups; and
(4) On the City GF expenditure side, health care, insurance/liability, labor and U.A.L. cost increases are anticipated to increase steadily due to market or investment impacts , and the City must manage these annual expenses accordingly; and
(5) Conduct extensive evaluation of expenditure plans that result in internal investments during the FY 2022- 24 period to enhance service delivery, with additional staffing resources needed for program implementation, including but not limited to the following:
• Establishment of New Code Enforcement Division from Police to Community Development • Enhancement of IT Systems/ERP programs and Staffing Resources • PD Mental Health Crisis Model and Staffing Resources (Post-State Grant of $2M) • PW Department / Maintenance and Staffing Resources
(6) Reduce GF Subsides of $3.7M in FY 2022- 23 through full cost recovery, fee adjustments and potential future funding measures to reduce reliance on the City’s GF annually.
MAJOR EXPENSE FACTORS FOR FY 2022-24
The Preliminary DRAFT BUDGET is built upon a series of assumptions needed to stabilize operating costs with forecasted GF revenues. There are major cost factors contained in the Preliminary DRAFT BUDGET to be continually monitored. Major cost increases in FY 2022-24 include the following:
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
• Employee Labor Costs: Effective July 1, 2022, a +3% cost-of-living increase (COLA) for all miscellaneous and safety employees will be implemented following collective bargaining with all representative and unrepresentative employee groups. Total estimated salary and labor cost factor for all City employees totals approximately $33.9M in FY 2022-24.
• CalPERS Pension Costs (“Normal” Costs v. “UAL”): Unfunded actuarial liability (UAL) addresses changes to normal assumptions: longer mortality rates, updated actuarial tables, lowered discount rate, CalPERS investment smoothing, etc. In FY 2022-23, UAL totals $3.9M which is a +1 2.95% increase from FY 2021-22. Based on the July 2021 valuation report, the UAL increased by +18.05% in FY 2022- 23 compared to FY 2021- 22. NOTE: Using the prepayment option, City will budget at $3.95M in FY 2022-23 (a savings of $136K).
• Rising Healthcare Costs: In FY 2021-22, a total cost of $2.6M for all City employees plus an additional $0.43M for City Retirees. Premiums for employer-sponsored health plans increased by +17.63% in FY 2022-23 as the COVID-19 pandemic caused massive premium hikes.
• Workers’ Compensation Costs: A significant cost factor increase for the Preliminary DRAFT BUDGET are workers compensation claims for FY 2022-23 budgeted at $738,196 which is a +28.3% Increase from FY 2021-22 period.
• MPA Insurance: MPA’s workers’ compensation claims volume has increased along with the severity of claims in the general l iability and vehicle programs. The overall estimated increase for all programs in FY 2022- 23 is approximately +29.51% for property, general liability and worker’s comp. This follows a 55.28% rate increase that occurred for the 2021 plan year.
• Increased Supplies & Services Costs: An overall +35% increase City-wide of $15.4M was projected for FY 2022-23 representing a +$4.03M increase from FY 2021-22 period before CM directed reduction of (-7.4% to -10%) to City-wide services and supplies costs to balance the FY 2022-24 period.
• Community Grants/Special Events: In FY 2022- 23, total estimated costs are $3.7M with a +$1.2M increase from FY 2021-22 funding levels. Major costs include: CCCFPD EMS Agreement at $1.69M; SPEDC Annual Operating Agreement at $562K; County Library Lease payments at $498K annually; County Library Services Agreement at $106K, County Animal Control Services Agreement at $248K)
• Debt Services Expenses: An increase of +24.5% or $441K to cover projected debt service obligations of $2.2M in FY 2022-23 for the future $30M in 2022 Lease Revenue Bonds (LRB) combined with 2015B LRB debt refinancing for the new PD HQ Project issued the third quarter (3QTR) of FY 2021-22
• Utilities: Cit y-wide expenses are proposed at $443,370 in FY 2022-23 with an additional +46.8% increase from FY 2021-22. Diesel and gasoline costs are also rising due to inflation factors during FY 2021-22 with an anticipated +$84K net increase of fuel expenses to addressed during FY 2021-22 before June 30, 2022.
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
• No FTE Layoffs: No FTE layoffs necessary as a budget reduction or cost savings strategy for FY 2022-24. Note: The last FTE reductions used for budget balancing purposes was incurred during FY 2011-12. This is a 11-year period of no FTE layoffs.
MAJOR REVENUE FACTORS FOR FY 2022-24
In preparing for General Fund revenue forecasts, the Preliminary DRAFT BUDGET includes conservative and practical projections to determine Total Revenues to coincide with projected GF revenue projections as noted above.
Many of the major GF revenue factors for FY 2022-23 include the following:
• Casino Revenue: Annual Casino Contract Revenue is budgeted at $29.35M and the P.I.L.O.T revenue budgeted at $2.18M with a combined total of $31.5M for FY 2022-23, and represents a +9.9% increase from FY 2021- 22 period. T his comprises 65 % of all total budgeted GF revenues annually. Annual increases after FY 2022-23 will not be known until completion of the year-end audit for period ending June 30, 2022 to make future Casino revenue projections in FY 2023-24, and future years.
• Sales Tax Revenue: Total sales tax revenue (i.e. Bradley -Burns and Measure K, Q/S Measures) are projected at $4.7M for FY 2021 -22 representing 10% of total budgeted GF revenues annually.
• Property Tax Revenue: No major adjustments in revenue from FY 2021- 22 levels. Total property tax in -lieu revenue is projected at $3.26 M for FY 2022- 23. Property Tax in- Lieu Revenue from Vehicle License Fees (VLF) represent s 7% of total budgeted GF revenues annually.
• Utility User Tax (7%) Revenue: Total utility users tax revenue is projected at $2.645M for FY 2022-23 representing 6% of total budgeted GF revenues.
• Franchise Tax Revenue: Franchise tax revenues is projected at $850,000 in FY 2022-23.
Franchise fee revenue is generally associated with the City’s Refuse and Franchise Fee with Republic Services, Inc.
• Rental Income: Lease revenue increases to $ 524,600 in FY 2022-23 due to the County WIC Building Agreement with Contra Costa County. A +12.8% increase over FY 2021-22 funding levels.
• Road Repair and Accountability Act (SB 1) Funds: SB1 Legislation enacted in 2017 will yield $707,569 in new revenue in FY 2022- 23 which represents a +13.8% increase from FY 2021- 22 funding levels.
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
____________________________________________________________________ FINAL BUDGET RECOMMENDATIONS:
PRELIMINARY DRAFT BUDGET SUMMARY (FY 2022-24 PERIOD)
The following table represents the Preliminary DRAFT BUDGET summary (annual expense vs. annual revenue) for the period FY 2022-24 as recommended by the City Manager for City Council review and consideration, as follows:
_____________________________________________________________________
CONCLUSION AND ACKNOWLEDGEMENTS
The City Manager wishes to thank the City’s Budget Team and City employees who participated in the budget planning process for the FY 2022-24 period. Without their support, the City Manager would not be able to present a two-year BI-ANNUAL “balanced budget” for consideration and adoption by the City Council.
I would like to acknowledge and thank the City’s Executive Leadership Group for their tremendous efforts in helping to develop efficient and one-year budget spending plan for City Departments, and for the time and effort they spent in analyzing fiscal impacts and service level options to keep projected FY 2022-23
PRELIMINARY DRAFT BUDGET
(In Millions)
FY 2023-24
PRELIMIANRY DRAFT BUDGET
(in Millions)
Baseline Revenue
$48.4M Baseline Revenue
$51.3M
One-Time Transfer from Reserve
$ 0.5M One-Time Transfer from Reserve $ 0.1M
TOTAL REVENUE:
$48.9M TOTAL REVENUE:
$51.4M
Total Salary & Benefits
$25.4M Total Salary & Benefits
$26.7M
Total Services & Supplies
$13.1M Total Services & Supplies
$13.1M
CalPERS UAL
$ 3.9M CalPERS UAL
$4.3M
Transfers Out
$ 6.4M Transfers Out
$7.0M
TOTAL EXPENDITURES: $48.9M TOTAL EXPENDITURES:
$51.4M
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
expenses in-line with projected revenue levels for FY 2021-22 as the City navigates away from the fiscal impacts of COVD -19 pandemic/economic recovery period, and into new economic challenges in the years ahead.
As reiterated again by the City Manager, ther e are many fiscal risks during this current period of economic recovery and rebounding of the U.S. Economy, and all economic indicators noted above.
Any future fluctuations in GF revenues resulting from any future COVID-19 impacts or the looming U.S.
Recession will result in a direct adjustment to expenditure plans to avoid deficit spending during the FY 2022-24 period. However, there needs to be constant monitoring of GF spending as we move through this AUSTERE AND RESILIENCE period into the future due to the fiscal risk warnings outlined by the City Manager in this City Budget Message.
Additionally, the City Manager recommends following the financial guidelines to the City Council to be followed during FY 2022-24 to assist in generating ample budgetary resources and staffing capacity for future years, including but not limited to, the following:
CITY MANAGER FINANCIAL GUIDELINES
GUIDELINE #1: Continue service delivery efficiencies using new emerging technologies to minimize annual GF operating costs; and
GUIDLEINE #2: Promote new GF revenue growth opportunities wherever feasible; and
GUIDELINE #3: Promote capital, economic development, housing and technology infrastructure investments in the City to encourage private investment; and
GUIDELINE #4: Exercise fiscal discipline and spend within appropriated GF revenue levels; and
GUIDELINE #5: Managed restraint by City Council of the City’s GFDR Fund Balance; and
GUIDELINE #6: Restore and Replenish (-$2.3M) budget cost reductions as a TOP PRIORITY when one -time unexpected revenues materialize from GFDR Fund Balance during FY 2022-24 period; and
GUIDELINE #7: Strive for long -term employee labor MOU agreements to sustain multi -year budget planning goals; and
GUIDELINE #8: Maintain current Fiscal Resiliency Policy requirements with no changes; and
GUIDELINE #9: DO NOT use one-time GF reserve funds to cover annual or recurring operating expenses beyond current GF revenue limits;
GUIDLEINE #10: AVOID creating structural deficits or revenue shortfalls AT ALL COSTS! CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022
____________________________________________________________________
CITY MANAGER ACKNOWLEGEMENTS
I also want to thank a few key staff members who significantly assisted in the preparation and timely delivery of this FY 2021-22 GF Operating Budget (Preliminary DRAFT BUDGET) which include:
• Assistant City Manager Charles Ching
• Finance Director Norman Veloso
• Viviana Toledo, Finance Management Analyst
My sincere thanks also extend to all members of our City Executive Leadership Team and their City employee’s teams for their due diligence in making this Preliminary DRAFT BUDGET even possible, and for their ongoing focus, reflections and support on our long -term economic stability for the City of San Pablo, and its quality programs and services for all of its residents.
Finally, I also want to thank the San Pablo City Council for their support of this City Administration. My staff and I look forward to working with you to set fiscal policy priorities during FY 2022-24 period, and for future multi-year budget cycles to follow.
Thank you for your time and consideration.
Respectfully submitted:
__________________________________ Date: _____________________ Matt Rodriguez, City Manager
* * *
CITY MANAGER BUDGET MESSAGE:
FY 2022-24 BIENNIAL GENERAL FUND OPERATING BUDGET (PRELIMINARY DRAFT) June 6, 2022