6|27/23 Item #5A + 5B
City Council Meeting
Item # 5A - RTC 23-144
Public Hearing: Action on the
Adoption of the Proposed FY 2023/24
& FY 2024/25 Biennial Operating
Budget and FY 2023/24 Capital
Improvement Program Changes
000000000000000
1852 Item # 5B - RTC 23-519
THE MISSION CIT Action Establishing the City's FY
2023/24 Appropriations Limit
June 27, 2023
Agenda
• FY 2023/24 and 2024/25 Proposed Budget
- Budget Overview
- Potential Future Revenue Sources
- Amendments to the Proposed Budget
- Follow-up from Budget Study Sessions
• FY 2023/24 Appropriations Limit
• Recommendations
City of
Santa Clara
POST MEETING MATERIAL
FY 2023/24 & FY 2024/25
Proposed Budget Overview
City of
Santa Clara
Overview
Budget Provides Stability for Community Services
• FY 2023/24 and FY 2024/25 Proposed Biennial Operating Budget - Reflects improved 10-Year General Fund Forecast ($27M to $9M) - General Fund structural deficit significantly reduced - Preserves services with fewer reductions necessary
- Strategic support reductions vs. direct services
- Multiple Study Sessions / Public Hearing - Budget adoption June 27th • FY 2023/24 Capital Budget
- Limited adjustments for FY 2023/24
- Future revenue measure direction needed
City of
Santa Clara
2 Overview
Budget Development Process
• Mayor/Council Briefings - Late March
• Release Proposed Budget on City's website - April 28th • Budget Study Session/Forecast Update - May 9th
• Release Budget-in-Brief/outreach to stakeholders - May 23ra • Budget Study Session - June 6th
• Public Hearing/Budget Adoption - June 27th
City of
Santa Clara
The Center of Whath Possible
Proposed Budget Overview
FY 2023/24 and FY 2024/25 Proposed Budget
FY 2022/23 FY 2023/24 FY 2024/25
Fund Type Adopted Budget Proposed Budget Proposed Budget General Fund $272,355,000 $281,795,558 $287,458,968
Special Revenue Funds 28,469,000 48,639,709 37,111,226
Enterprise Funds 815,865,000 872,344,414 968,035,945
Internal Service Funds 42,429,000 39,606,414 41,304,602 Debt/Other 19,847,000 374,983,049 40,658,134
Less (Transfers, Contributions, (203,143,000) (515,319,491) (247,455,561) and Reserves)*
Subtotal Operating Budget $975,822,000 $1,102,049,653 $1,127,113,314 Capital Funds $357,381,000 $657,486,151 $108,385,754
Less (Transfers, Contributions, (1,454,000)
(1,454,000) (3,188,205)
and Reserves)*
Total Capital Budget $355,927,000 $654,297,946 $106,931,754 Total Budget $1,331,749,000 $1,756,347,599 $1,234,045,068 * Adjusts for transfers, contributions and reserves to avoid double counting of the same funds (e.g., internal services funds are excluded)
City of
Santa Clara
The Center of What's Possible
3 Proposed Budget Overview
• Balanced budget of $1.8 billion for FY 2023/24 and $1.2 billion budget for FY 2024/25; General Fund approx. one-fifth of budget • Multi-pronged approach to solve the General Fund deficit: new revenues, one-time & ongoing expenditure savings, use of reserves • Limit direct service impacts; strategic support reductions • City continues to fill vacant positions - result in overall improvement City of Santa Clara
to services (still below pre-pandemic levels)
• Set General Fund Budget Stabilization Reserve at minimum of 15% of expenditures
• City's utilities represent the majority of the budget and the resources are aligned with expected activity
• Collaboration with all City departments
City of
Santa Clara
The Center of What's Possible
Summary of Funded Position Changes
Summary of Funded Position Changes (All Funds)
FY 2022/23 Budget 1,127.00
Base Budget Changes (Fire SAFER Grant firefighter positions) 18.00 Base Budget Changes (SVP Funded) 10.00
Base Budget Changes (Development Fee Funded) 5.00
Base Budget (Other Changes) 0.25
Base Budget Changes (freeze Related-funded positions) (7.00) Proposed Budget Changes - General Fund Reductions. (4.00) FY 2023/24 Budgeted Positions 1,149.25
FY 2024/25 Proposed Additional Positions (Building Fee Funded) 4.00 FY 2024/25 Budgeted Positions 1,153.25
City of
Santa Clara
Budget Balancing Strategy
• Combination of strategies to address ongoing
deficit in Biennial Budget
- Revenue-generating actions
Use of Revenue
- Ongoing/one-time expenditure reductions Reserves
Solutions
- Use of Reserves
- Continue phased approach
• Maintain Budget Stabilization Reserve at 15% Reduce
Costs
• Restoration of services not in budget; would rely
on outperforming forecast and/or new revenues
City of
Santa Clara
The Contero War Hom
Budget Balancing FY 2023/24 and FY 2024/25 Biennial Operating Budget General Fund Balancing
($ in millions)
Strategy FY 2023/24 FY 2024/25 Ongoing
Forecast Shortfall ($8.0 M) ($8.9 M) ($11.4 M)
Increased Revenues
• We need both new revenues -Increase TOT Rate: phased 2% 0.9 1.7 3.4 - Fee Adjustments 0.5 0.8 0.8
and expenditure reductions
-One-Time Revenues 0.2 0.0 0.0
($8 M - $12 M ongoing)
Total Revenue Solutions 1.6 2.5 4.2
Expenditure Reductions
• Continued phased approach;
-Fire SAFER Grant 1.0 3.1 0.0
address approx. half of ongoing -Police Vacancy Savings 1.6 1.7 0.0 need -Other Departmental Proposals 2.7 2.7 2.0
Total Expenditure Solutions 5.3 7.5 2.0
• Use one-time funds (SAFER Use of Reserves
-Budget Balancing Reserve 1.1 (1.1) 0.0
grant, salary savings, reserves)
Use of Reserves 1.1 (1.1) 0.0
to balance budget Future Unidentified Solutions
5.2 General Fund Balancing Total $8.0 M $8.9 M $11.4 M
City of
Santa Clara
The Center of What's Port Be 10
5 Budget Balancing Strategy
Revenue Solutions
• Transient Occupancy Tax - phase in the remaining voter-approved Transient Occupancy Tax increase in FY 2023/24 (1 percent in January 2024) and in FY 2024/25 (1 percent in January 2025), generating additional revenue of approximately $0.9 million in FY 2023/24 and increasing to $3.4 million ongoing
• Fee increases were brought forward and approved by the City Council on April 18, 2023 • Anticipated increase to the Storm Drain Environmental Compliance fee is assumed in FY 2024/25
• One-time transfer of $149,000 from the Vehicle Replacement Fund for the sale of vehicles that will be retired as a budget proposal
City of
Santa Clara
The Center of What's Possible
Budget Balancing Strategy
Expenditure Savings/Reductions
• In FY 2022/23, the Fire Department was awarded a three-year SAFER grant, which will generate annual General Fund savings ($1.0 million to $3.1 million) during the grant • Align the Police Department's vacancy factor with the historical staffing rates over the past decade, generating savings of $1.6 million - $1.7 million in FY 2023/24 and FY 2024/25; the vacancy factor adjustment will allow the continuation of recruitments and hiring efforts
• Other departmental reductions limit direct service impacts, and the 4.0 position reductions are in strategic supports areas (City Attorney's Office, City Manager's Office, City Auditor's Office, Human Resources Department)
City of
Santa Clara
12 Budget Balancing Strategy
Use of Reserves/Future Unidentified Solutions
• In FY 2022/23, Budget Balancing Reserve established as part of the FY 2021/22 Budgetary Year-End Close process; this Proposed Budget uses $1.1 million of this reserve in FY 2023/24 and replenishes the amount in FY 2024/25 • After the biennial budget period, future balancing solutions are expected to be necessary; a revised forecast will inform the needed actions at that time City of
Santa Clara
The Center of Whats Possible
Budget Stabilization Reserve
Budget Stabilization Reserve
90 Budget Stabilization Reserve has 80
dropped almost half from $80 M
70 • Other one-time sources used for budget 60
balancing 50
- Land Sale Reserve ($11 M) 40
- Federal Stimulus Funds ($26 M) 30
20 10
FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 City of
Santa Clara
7 Select General Fund Reserves
2023/24 &
2022/23 2024/25
Reserve Type Balance Balance
General Fund Budget Stabilization (BSR) $40.8 M $45.8 M1 General Fund Capital Projects $6.6 M $6.1 M2
Land Sale Reserve $18.5 M $18.5 M
Pension Trust (General Fund) $21.4 M $21.4 M
FY 2023/24 Budget Balancing Reserve $2.0 M $0.9 M/$2.0 M3 Total $89.3 M $92.7 M/$93.8 M
1BSR increase of $5.0 M needed to meet the 15% target in FY 2023/24 and FY 2024/25; separate action to be brought forward in June 2023 to increase reserve 2Use of $0.5 M funds the third year of the Modesto Ash tree removals plan 3The FY 2023/24 Budget uses $1.1 M of the reserve, which is restored in FY 2024/25 City of
Santa Clara
The Center of What's Poss bie
Potential Future
Revenue Sources
City of
16 Santa Clara
The Colore nuts foste
8 Potential Future Revenue Sources
Consider for implementation in future budgets
• General Obligation Bond (Capital Infrastructure)
- Fire, Storm, & Community Facilities Infrastructure
• Library/Community Services Parcel Tax
• Documentary Transfer Tax
• Sales Tax
• Utility Tax (gas, telephone, cable)
Separate process to evaluate options with Fall 2023 decision goal City of
Santa Clara
The Certer of What's Possibi
Amendments to the Proposed
Budget
City of
18 Santa Clara
Amendments to the Proposed Budget
• Attachment 2 to the RTC
• Capital project carryovers from FY 2022/23
• Actions occurring after Proposed Budget issued
- Homekey Interim Housing Development (May 2nd) - $5 M from Santana West Settlement and unused balances in Housing funds
- Housing Annual Action Plan (May 9th) - align with adopted plan • Limited operating carryovers (e.g., library facilities master plan, small business assistance, IT projects) and other adjustments (e.g., Public Works studies, Human Resources recruitment/hiring)
City of
Santa Clara
19 The Center of What's Possible
2023/24 Capital Budget Amendments
• FY 2023/24 - Second Year of Biennial Capital Budget
• Adjustments to reflect changes in estimated project costs / timelines
• Limited number of new projects and budget adjustments - Northern Receiving Station Transformer and Breaker Upgrades ($76.3 M)
- Kifer Receiving Station Rebuild and Replacement ($30.7 M) - NRS-KRS 115kV Line ($29.3 M)
- Scott Receiving Station Rebuild and Replacement ($29.0 M) • Carryover of FY 2022/23 funds brought forward as part of budget adoption (Attachment 2 to RTC)
• Over $500 M unfunded infrastructure needs remain
City of
Santa Clara
The Cantere What otH
10 Follow-up Budget Study
Sessions
City of
21 Santa Clara
THANASHAMED
Follow-up from Budget Study Sessions
Summary of Feedback
• Discussions about elements of the General Fund Forecast, budget mechanics, and balancing strategy (e.g., personnel costs, budgeting for vacancies, CaPERS, sales tax, TOT, development estimates, planning for future growth) • Concerns around staffing, recruitment, and program delivery - Interest in increasing library and senior center hours by filling positions; interest in timeline for improved service delivery
- Discussions around public safety and the need to deliver the programs and services (e.g., Northside substation, drug education, fire services after SAFER grant expires) Departmental vacancy rates and strategies to increase recruitment/hiring • Concerns about the available funding for capital infrastructure and interest in pursuing revenue-generating options to address significant capital and operating needs; need to be strategic in bringing forward potential ballot measures City of
Santa Clara
22 The Center of Whats Post Ble
11 Follow-up from Budget Study Sessions
Responses to Questions (Attachments 4 and 5 to RTC)
• Address questions regarding various revenues and expenditures (e.g., sales tax, TOT, cannabis, CaPERS, use of one-time funds/reserves, budgeting for vacancies, available capital funding)
• Address questions regarding staffing levels/vacancies, hiring/recruiting, programming and projects (e.g., Northside substation, drug education, senior center, libraries, on-demand shuttle, Street Tree Services project, Lick Mill Boulevard Beacons project, PAL) • Future revenue opportunities to address significant unfunded capital infrastructure needs and other services to be brought forward in separate study session • Discussion on fee schedule for public facility rentals to be brought forward separately; expected by December 2023/January 2024
• Budget in Brief (Attachment 6 to RTC)
City of
Santa Clara
23 The Center chats Possible
FY 2023/24
Appropriations Limit
City of
24 Santa Clara
12 Appropriations (Gann) Limit (Item 5B)
• In compliance with Propositions 4 (Gann Initiative) and 111 (Spending Limitation Act of 1990), State constitution limits the amount of revenue that can be spent by governmental agencies
• Beginning with FY 1990/91 appropriations limit, Cities can use the following as an adjustment factor:
- Annual growth in City's population or County's population - Annual growth in California Per Capital Income or non-residential assessed valuation
• FY 2023/24 appropriations subject to the limit of $628,493,798 • Revenue subject to Appropriations $217,487,082 or 34.6% of limit City of
Santa Clara
25 Recommendations
City of
26 Santa Clara
13 Recommendations
Agenda Item 5A - Budget Adoption
1. Approve the Proposed FY 2023/24 and FY 2024/25 Biennial Operating Budget and FY 2023/24 Capital Budget changes, including the recommended revisions detailed in Attachment 2.
2. Approve the Appropriation Schedule for operating funds totaling $1,617,369, 144 in FY 2023/24 and $1,374,568,875 in FY 2024/25 and the FY 2023/24 Appropriation Schedule for capital funds totaling $657,486,151 as detailed in Attachment 3.
3. Approve the Housing Authority FY 2023/24 expenditure budget of $457,193 and FY 2024/25 expenditure budget of $414,581 as presented in the Operating Budget.
4. Approve the Sports and Open Space Authority FY 2023/24 expenditure budget of $10,000 and FY 2024/25 expenditure budget of $10,200 as presented in the Operating Budget.
5. Direct staff to bring forward a separate resolution to increase the Transient Occupancy Tax rate by one percentage point effective January 1, 2024. (Note: the remaining one percentage point increase would be brought forward next year for January 1, 2025) City of
Santa Clara
The Center of What's Poss ble 27
Recommendations
Agenda Item 5B - Appropriation Limit
1. Adopt a Resolution Establishing the City's Fiscal Year 2023/24 Appropriations Limit of $628,493,798 Pursuant to Article XIIIB of the California State Constitution.
City of
Santa Clara
The Center of What's Poss Die 28
14 City Council Meeting
Item # 5A - RTC 23-144
Public Hearing: Action on the
Adoption of the Proposed FY 2023/24
CITY OF & FY 2024/25 Biennial Operating
Budget and FY 2023/24 Capital
Improvement Program Changes
1852 Item # 5B - RTC 23-519
THE MISSION CIT Action Establishing the City's FY
2023/24 Appropriations Limit
June 27, 2023
15