Finance and Management Services
www.santa-ana.org/finance
Item # 40
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 4, 2024
TOPIC: Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s Basic Classification and Compensation Plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
AGENDA TITLE
Public Hearing to Consider an Ordinance to adopt the Fiscal Year 2024-25 Budget, Approve a Resolution for Changes to the City’s Basic Classification and Compensation Plan Budget, Adopt the Uniform Schedule of Miscellaneous Fees, and Adopt the Seven- Year Capital Improvement Program
Legal notice published in the OC Reporter on May 22 and 29, 2024.
RECOMMENDED ACTION
1. Approve the introduction and first reading of an Ordinance to adopt the budget for Fiscal Year 2024-25 (FY 2024-25), which begins on July 1, 2024 and ends on June 30, 2025.
UNCODIFIED ORDINANCE NO. NS-XXXX entitled AN UNCODIFIED ORDINANCE OF
THE CITY COUNCIL OF THE CITY OF SANTA ANA APPROPRIATING MONIES TO
THE SEVERAL OFFICES, AGENCIES, AND DEPARTMENTS OF THE CITY FOR FISCAL YEAR BUDGET PERIOD COMMENCING JULY 1, 2024
2. Adopt a Resolution, to effect certain changes to the City’s basic classification and compensation plan, such as addition of new classification titles.
RESOLUTION NO. 2024-XXX entitled A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA ANA TO EFFECT CERTAIN CHANGES TO THE CITY’S
CLASSIFICATION AND COMPENSATION PLAN
3. Adopt a resolution establishing a Uniform Schedule of Miscellaneous Fees for Fiscal Year 2024-2025.
RESOLUTION NO. 2024-XXX entitled A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF SANTA ANA ESTABLISHING A UNIFORM SCHEDULE OF MISCELLANEOUS FEES FOR FISCAL YEAR 2024-2025
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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4. Adopt the Seven-Year Capital Improvement Program (CIP) beginning FY24-25 through FY30-31, as required by the Orange County Transportation Authority (OCTA) for Measure M2 eligibility.
5. Deposit $11,946,740 ($10,531,020 General Fund and $1,415,720 Non-General Fund) into the Section 115 Pension Trust Fund as part of the City’s Pension Debt Strategy.
GOVERNMENT CODE §84308 APPLIES: No
DISCUSSION
The City Council provided budget direction on April 2 and May 16, and staff has updated the proposed budget accordingly. In addition, staff solicited community input with seven community budget meetings in six Council Wards, three citywide events, 11 listening tour visits, online budget simulation tools, and an online/paper survey published in English, Spanish, and Vietnamese. In an effort to cast as wide net as possible, postcards were mailed to every household in the City. The City received over 2,100 survey and simulation tool submissions, and more than 2,300 engagements in total.
As required by Santa Ana Charter Sections 604 and 605, the Acting City Manager proposes a FY 2024-25 Budget for City Council consideration during this Public Hearing. Staff has prepared resource estimates (beginning fund balances and new revenue), and the proposed Ordinance would appropriate spending of those resources to support ongoing public services and Strategic Plan Goals.
Santa Ana Charter Section 607 requires the City Council to adopt the annual budget by July 31. If the City Council approves the recommended action, the Ordinance will return to City Council on June 18 or July 16 to consider for adoption.
General Fund
The General Fund is the primary operating fund of the City and accounts for all unrestricted revenue. A summary of the proposed FY 2024-25 General Fund activity follows.
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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Based on City Council direction from the May 16 Budget Work Session, Staff has incorporated the following changes into the proposed General Fund budget:
•Santa Ana Holidays (Winter Village) eliminated.
•Increase Arts funding in the Community Development Agency’s budget by $120,000.
•Increase Senior Programming in the Parks, Recreation and Community Services Agency budget by $120,000.
•Reduced funded Police Officers by two (2) based on County cancellation of the Civic Center Security MOU. The authorized sworn headcount of 400 does not change.
•Remove the addition of a Fleet Services Technician to help rebalance the budget.
•MET Program expenditures in the Police Department have been reallocated to other Police Department programs.
In addition, the Third Quarter Budget Report on this agenda includes a recommended $4 million budget for the Dog Park.
A full reconciliation of changes from the adjusted FY 2023-24 General Fund budget to the proposed FY 2024-25 General Fund budget is included in Exhibit 2. City Council policy requires a General Fund Reserve equivalent to 18% of recurring annual General Fund revenue. Staff estimates the General Fund Reserve at June 30, 2024 will be General Fund
FY 23-24
Revised
Budget
FY 24-25
Proposed
Budget
Beginning Balance 127,208,578$ 93,209,914$
Revenue 397,776,999$ 406,527,340$
Expenditures (369,164,519)$ (375,665,770)$
Net Transfers (46,325,224)$ (32,800,290)$
Net Activity (17,712,744)$ (1,938,720)$
Pension Stabilization (16,285,920)$ (10,531,020)$ Estimated Ending Balance 93,209,914$ 80,740,174$ Reserve Requirement (18%)* 71,583,046$ 73,174,921$ *Excludes One-Time Revenues
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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compliant with City Council Policy. As General Fund revenue changes, so does the dollar amount of the Reserve requirement.
A summary of the proposed FY 2024-25 General Fund budget identifying recurring activity and one-time activity follows.
The proposed recurring General Fund budget is balanced.
If the City Council directs staff to move forward with free downtown parking on Sundays and Art Walk Day instead of one-hour free parking on evenings and weekends, then General Fund spending will decrease by $1.2 million, and the proposed Budget Ordinance will be updated accordingly.
General Fund Ten-Year Outlook
The Outlook is a tool that extrapolates the proposed budget structure and known future events (e.g. Measure X rate decrease) to see the potential impact to the future General Fund budget.
This Outlook includes the following assumptions:
•Recurring amounts only
•Debt pay-offs
•Measure X rate decrease (1.5% to 1.0% in 2029)
•Inflationary increases FY25-26 and later, based on the California Department of Finance forecast of CPI
•City’s contribution to OC streetcar operations begins in FY 2025-26 ($1M estimated)
•Planned wage increases
•Orange County Fire Authority contract increase of 4.5% annually •Contributions to, and uses of, the Pension Stabilization Account have been included to smooth the pension debt fluctuations
FY 24-25 Proposed
General Fund Budget Recurring One-Time Total
Revenue 406,527,340$ 406,527,340$
Expenditures (364,561,010)$ (11,104,760)$ (375,665,770)$ Net Transfers (31,142,290)$ (1,658,000)$ (32,800,290)$ Pension Stabilization (10,531,020)$ (10,531,020)$ Net Activity 293,020$ (12,762,760)$ (12,469,740)$ Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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The model indicates that the General Fund budget structure will need to be adjusted in the future to remain balanced. The future unbalance is caused by multiple factors. Costs are expected to continue increasing faster than the City’s revenues. For example, the OCFA contract can increase by 4.5% per year, yet property tax revenue is not expected to exceed 3% per year. CalPERS investment performance has not met expectations, contributing to higher pension debt costs. The Measure X rate decreases in 2029, causing a significant decrease in revenue.
Charter Requirement for Public Recreation Program Spending Santa Ana Charter Section 607 requires City Council to adopt a budget to “provide for the support of public recreation programs at least the equivalent of six (6) cents on each one hundred dollars ($100) of the assessed value of taxable property in the City on the legal assessment date for the previous fiscal year.” The net taxable value of property for FY 2023-24 was $34,504,060,595. When applying the calculation required by the Charter, the required expenditure budget for public recreation programs is $20,702,436.
The proposed General Fund budget includes $16,083,960 for the Parks, Recreation and Community Services Agency, $18,071,860 for the maintenance of parks and facilities, and $3,410,190 for youth services funded by Cannabis tax revenue. The proposed budget exceeds the requirement by $16,863,574 or 81%.
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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Citywide Budget
The proposed FY 2024-25 Citywide Budget includes the General Fund and all other funds of the City, including those with internal and external restrictions. A summary of the Citywide Budget follows.
The negative net activity reflects a proposed budget to spend accumulated available fund balances for non-recurring projects. Exhibit 2 includes individual information for each fund.
Workforce Changes
The proposed workforce changes include additions, deletions, and reclassifications of positions. Exhibit 2 includes a detailed table of proposed workforce changes to full-time staff and the Classification and Compensation Plan Resolution (Exhibit 3) includes classification additions, title changes, and deletions.
A summary of proposed workforce changes follows.
Department FY 23-24
FY 24-25
Workforce
Changes
FY 24-25
Proposed
City Manager 16 (1) 15
City Clerk 7 7
City Attorney 22 1 23
Human Resources 32 (1) 31
Finance & Management Services 69 1 70
Library 38 38
Parks, Recreation, & Community Services 64 1 65
FY 24-25 Proposed
Budget General Fund Other Funds* Total Citywide
Revenue 406,527,340$ 304,130,340$ 710,657,680$
Expenditures (375,665,770)$ (299,572,900)$ (675,238,670)$ Net Transfers (32,800,290)$ (27,744,410)$ (60,544,700)$ Net Activity (1,938,720)$ (23,186,970)$ (25,125,690)$ *Excludes Internal Service Funds
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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Police 644 7 651
Planning & Building 99 (4) 95
Public Works 316 1 317
Community Development 72 7 79
Information Technology 24 24
Total 1,403 12 1,415
On March 19, an item went before the City Council to add a Deputy City Manager position and 16 non-sworn professional staff positions in exchange for freezing 12 sworn positions. At that time, the City Council approved the addition of the Deputy City Manager and one Human Resources Analyst and directed staff to return with a proposal to include a portion of the remaining 15 non-sworn professional staff positions as part of the FY 2024-25 annual budget process. The proposed workforce changes include adding seven non-sworn professional staff positions and unfreezing one Police Service Officer – already accounted for in the authorized headcount – in exchange for freezing five sworn positions. This results in a net zero fiscal impact on the General Fund.
Once the City Council approves full-time headcount in the budget, City Management does have the flexibility to over-fill or under-fill positions as long as the fiscal impact fits within the budget approved by City Council for department and fund. Therefore, the Police Chief could choose to hire more Police Officers as other positions become vacant.
The remaining workforce changes are mostly related to eliminating American Rescue Plan Act (ARPA) funded positions in various departments that are vacant and no longer needed and additional positions for the Community Development Agency as discussed below. The City has built-in six months of one-time funding in the proposed FY 2024-25 budget to support the positions no longer eligible for ARPA funding after December 31.
These six months provide ARPA-funded employees with adequate time to obtain other positions in the City or pursue other opportunities.
The Community Development Agency has added positions to support the following programs/projects:
•Workforce Development – to oversee and assist with employment services for youth, adult, and dislocated worker programs.
•Housing Authority – to supervise and manage the expansion of housing choice vouchers (HCV) and specialized HCVs such as Foster Youth to Independence, Disabled and Homeless Programs, and Veterans Affairs Supportive Housing (VASH) Programs.
•Economic Development – bilingual staff to expand business outreach to attract and retain businesses in the City including specialty outreach (i.e., Little Saigon Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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business corridor, expand public art projects, industrial businesses, etc.), and grants coordination with small businesses and microenterprise efforts for start- ups.
The table outlines the funding source for the proposed position additions:
Fund Sources
# of
Positions
General Fund 13
Other Funds -1
Net Additions 12
Uniform Miscellaneous Fees Schedule
The Miscellaneous Fee Resolution (Exhibit 4) is comprised of various charges associated with city services provided for individual benefit; such as facility use and recreation participation, and small cell initial license Fee. Miscellaneous Fees (Fees) are intended to recover the City’s costs associated with delivering the corresponding services; however, the Fee prices do not exceed the City’s actual costs in delivering the service, in accordance with state law.
The City’s primary cost for providing these services is staff labor, and each year the cost of employee compensation increases. Staff compares the Consumer Price Index for All Urban Consumers (CPI-U) for the Los Angeles-Long Beach-Anaheim area to the increase of employee compensation; which includes negotiated salary increases, step increases, and various benefit increases. As of December 2023, the increase in CPI was 4.66%, which is in line with the increased cost of employee compensation.
The Parks, Recreation and Community Services Agency (PRCSA) is in the process of analyzing their fees and may return to City Council in the future with recommendations for fee adjustments. In the meantime, the proposed budget includes a 4.66% increase for all fees other than existing or modified PRCSA fees.
The FY 2024-2025 Miscellaneous Fees Schedule (Schedule) identifies all fees assessed as well as proposed new fees and those recommended for adjustment (Exhibit 5). The Schedule includes the following items:
•Addition of ten (10) new fees
o9 new fees in Parks, Recreation, and Community Services o1 new fee in Public Works
•Modification of eighteen (18) existing fees
o7 modified fees in Parks, Recreation, and Community Services o3 modified fees in Police (including account number changes) o3 modified fees in Planning and Building
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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o5 modified fees in Public Works (including account number changes) •Deletion of two (2) fees that are no longer active
o1 deleted fee in Parks, Recreation, and Community Services o1 deleted fee in Fire and Emergency Medical Services
If approved, all proposed fee changes become effective July 1, 2024.
Capital Improvement Program (CIP)
As part of the annual budget development process, City Council adopts a seven-year spending plan that includes the proposed budget as the first year of the plan. The Planning Commission affirmed that the proposed CIP is consistent with the City’s General Plan on April 22.
A summary of the CIP follows.
The full document is attached to this report (Exhibit 6). The CIP has been updated to include prior year allocations as applicable to proposed FY 2024-25 projects.
Pension Stabilization Trust and Annual Prepayment of Unfunded Liability The proposed budget includes depositing $11,946,740 ($10,531,020 General Fund and $1,415,720 Non-General Fund) of pension cost-savings into the City’s Section 115 Pension Trust in FY24-25. The Trust was created to help fund future increases in pension debt payments.
In addition, CALPERS requires the City to submit a payment on its Unfunded Actuarial Liability (UAL) annually. The City can elect to pre-pay by July 31 every year at a discounted rate or it can choose to spread the entire amount of the contribution equally over 12 months. As with the prior six years, the City expects to prepay its UAL in July. The discounted pre-payments are included in the City’s proposed budget.
Proposed Fiscal Year 2024-25 City Budget, Changes to the City’s basic classification and compensation plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
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FISCAL IMPACT
The Fund Balance Summary includes the estimated fiscal impact for each fund and is located in the Proposed Budget document (Exhibit 2).
All exhibits are on the City’s website at: https://www.santa-ana.org/budget/.
EXHIBIT(S)
1. Ordinance No. NS-XXXX to adopt the FY2024-25 budget
2. Detailed Proposed Budget
3. Classification and Compensation Plan Resolution
4. Miscellaneous Fee Resolution
5. Proposed FY2024-25 Miscellaneous Fee Schedule
6. Proposed Capital Improvement Program (CIP) including Seven-Year CIP Submitted By: Kathryn Downs, Executive Director of Finance and Management Services Agency
Approved By: Alvaro Nuñez, Acting City Manager