Agenda packet — Santa Cruz City Council, May 24, 2022 (part 2 of 2)

We thus anticipate that a thorough consultant’s report would include analyses of the following.

1. The long-term capacity for production of housing on the city-owned parking lots specified in ODOF’s measure, compared to the proposal for Lot 4.

2. Comparison of the two alternatives in relation to legal conformity to the City Heritage tree ordinance.

3. For parking, an objective analysis discussing the potential for the preservation and development of parking spaces in relation to the ODOF measure elements specifically related to: [A] creation of a permanent location for the Downtown Farmers’ Market on Lot 4, [B] creation of additional parking spaces surrounding the Downtown Library in its renovation at its current site, and [C] development of affordable housing on specified cityowned downtown parking lots.

4. Analysis of the relatively viability and economic, social and cultural impacts of creating a permanent facility for the Downtown Farmers’ Market on Lot 4, versus other alternatives that the City is considering.

5. Analysis of the relative effects on the Downtown business environment of the ODOF measure, versus the Lot 4 proposal.

6. Analysis of the two proposals in relation to the urban landscape, including walkability, visual profile, connection between different areas of Downtown, activation of street life, the remediation versus creation of “dead space,” and the relative opportunities for fostering public life of the community.

7. Consideration of plans, timeline, and budget in the Lot 4 proposal for acquisition of the Toadal Fitness property for inclusion in the development.

8. A “Sunk costs” analysis that would include deflation of Measure S funds purchasing power/escalation of project costs that have been incurred by planning that has connected Downtown Library renovation to the Lot 4 proposal, which has delayed starting on the renovation based on Measure S bond funds, passed by Santa Cruz voters in 2016.

22.31 City Council

AGENDA REPORT
DATE: 05/12/2022
AGENDA OF: 05/24/2022
DEPARTMENT: City Clerk
SUBJECT: FY 2023 Proposed Budget
RECOMMENDATION: Conduct the Fiscal Year (FY) 2023 Budget Hearings on May 24th and May 25th, receive presentations from departments, and provide feedback to staff for preparation of the FY 2023 Adopted Budget.

23.1 1
Rosemary Balsley
From: Garrett <[email protected]>
Sent: Friday, May 20, 2022 11:36 AM
To: City Council
Subject: 5.24.22 Agenda Item # 23 Proposed Budget

5.24.22 Agenda Item # 23 Proposed Budget
Dear Council,
In the spirit of SUSTAINABILITY I would point out that according to the census 2010 - 2020 the population growth of the city of Santa Cruz was an even 5% in those 10 years.

According to your budget analysis, in the last 7 years we will have seen an increase of city FTE's of 8.8%.

I don't have the data from 2010, but extrapolating from 7 to 10 years would put the increase at 11.4 % or so.

Gee, an increase of 11.4% FTE's servicing an increase of 5% population growth.

By that simple measure productivity isn't your thing although I will admit blowing vast sums of money takes a lot of people.

Hummm, that trend doesn't seem sustainable unless you are in continuous funding mode. At last check, without that massive one time Covid stimmie funding, the reserve balance would be dropping like a rock, so I'm thinking that angle isn't working out.

In 2010, the city budget was 80 million or so (I think), now the expenditures are...$290 millions.

WOWEE, thanks to all those tax and fee increases huh?
That's an increase in expenses' of 360% over that same 10 year 5% population growth period.

Some people in the know think a recession soon is inevitable. Is the budget planning for that?
Just sayin' and keeping it real.

Garrett Philipp - Westside

23.2 1
Rosemary Balsley
From: Rafael <[email protected]>
Sent: Sunday, May 22, 2022 6:59 PM
To: City Council
Subject: Please bring Traffic Calming back as a dedicated budget/staff for FY23 Santa Cruz City Council,
First off, thank you for approving the new striping project on Cayuga. I've been living on Cayuga for over year, and I've already witness numerous accidents, incidents, and been scared for myself and my family too many times. This new striping will likely not ultimately fix the aggressive traffic issue on Cayuga, but it's a much appreciated and great first step toward what we hear will be an ultimate Neighborhood Greenway over time on Cayuga for slow-speed, safe, environmentally friendly modes of transportation for all ages and abilities.

It'll pair so well with the Rail Trail as well.

More broadly than Cayuga... other streets in Santa Cruz leave a lot of room for improvement. The aggressiveness of drivers has gotten worse over recent years, and it'll only get worse across the city as, from what I understand, the city plans to build >3,700 homes in the city over the coming decade. Traffic Calming cannot be ignored or this city will turn into a loud, dangerous, scary place with reckless speeders that isn't safe for kids, seniors, the disabled, nor environmentally friendly (quite ironically with that as a local pride of ours.

For 20 years, there's been no dedicated staff or 'traffic calming' fund carved out for the City of Santa Cruz to use; therefore, any funding is always a struggle for Public Works to justify and must be "pulled away" from other uses in the General Fund. I disappointingly see no change to this problem in the new FY23 budget outline either.

I understand revenue and funds are an issue.

I understand expenses are going up.

I am supportive of and will vote YES on Measure F to enable you and the City to fund more projects like this.

I am asking you all to please discuss and push for adding back a dedicated staff member and special fund for Traffic Calming - not just leave it as a neglected miniscule item under 'Public Works'.

If there is availability, I'd like to speak at the FY23 budget hearing session on Tuesday evening. Please let me know if that'll work.

As read, there are 3 top priorities from voters around Santa Cruz and North County: homelessness support, affordable housing, and improved transportation (safer cycling specifically mentioned, as well as calmer streets from many residents). Please listen to us and bring this much needed category of funding back, and we will continue to support you with our dollars via approving taxes.

We want these new funds used in the right way, where our needs are met, not just your vision, or developers' vision, or even the state's vision.

Thank you for your understanding and continued support.

23.3 2
Warm Regards,
Rafa

23.4 Fiscal Year 2023
Proposed Budget
City of Santa Cruz
May 24, 2022
1 23.5
Agenda
• Introduction and Overall Outlook
• Fiscal Summary
• What’s next
2 23.6
Introduction and
overall outlook
3 23.7
Looking Back
• COVID and CZU Lightning Complex Fire
• Significant shock to the local economy
– Tourism
– Business closures
– University operating remotely
• Worsening of housing crisis & homelessness
• Two fiscal years of revenue losses
• Reliance on reserves, one-time money &
budget solutions
• Employee resiliency and contributions

23.8 Facilitated Recovery
• City quick response to community needs
– Public safety response
– Testing at the Civic
– Facilitated outdoor dining
– Reduced parking rates
– Direct support to small businesses
– Eviction protections and tenant legal services
support
• Declared fiscal emergency
• Re-Envision Santa Cruz
• Ad hoc revenue committee initiatives
• American Rescue Plan Act
• CA State $14M toward homelessness
response

23.9 What’s Next
Recover
Major sources of General
Fund revenue recovering to
pre-pandemic levels
Rebuild
Employee workforce
Refocus
Intentional work plans that
align with Council priorities
Clear road map for work
ahead
6 23.10
Fiscal Summary
7 23.11
Economic
Trends
• Inflation • High interest rates • High demand for
employees v. decreased
labor force
• Russian invasion of Ukraine • High fuel prices • Supply chain issues • COVID • Threat of back to back recessions 8 23.12
$.M $5.M $10.M $15.M $20.M $25.M $30.M
Fees and Charges
Transient Occupancy Tax
Property Tax
Sales Tax
General Fund Revenue Trends
FY23 Proposed FY22 Projected FY2021 Actual FY20 Actual FY19 Actual

23.13 FY 2023 Major Expenditures
• Significant increase in liability and property insurance costs • Investing $5M in Capital projects
• ERP system (accounting, human resources, payroll, purchasing) replacement set-aside
• Investing in organizational capacity to implement Council goals and strategies
• Negotiating 5 bargaining unit contracts and need to stay competitive 10 23.14
Major Investments:

Homelessness Response
• Responsive to employee and community feedback
• Proactive strategy
• Citywide integrated approach to solutions
• Building capacity
• Systemic solutions at the State and Federal level via lobbyists 11 23.15
FY 2023 Proposed Budget
Personnel
58%
Services,
Supplies, Other
25%
Capital Outlay
4%
Debt Service
2% Transfers Out
&Other Financing
Uses
11%
General Fund Expenditures
$127M
Taxes
71%
Licenses and
Permits
1%
Grants

0.3%
Charges for
Services
15%
Fines and
Forefeitures
1%
Rents & Misc Rev
5%
Transfers In
&Other Financing
Sources
7%
General Fund Revenues
$122M
+ $5.2M General Fund Balance 23.16
General Fund Reserves (in Millions)
Fund FY 2020 FY 2021 FY 2022 Est* FY 2023 Est*
General Fund
(unrestricted)
-1.41 6.52 5.23 0
OPEB Reserve 3.50 3.76 4.38 4.51
Pension Reserve 7.56 8.60 9.48 9.77
Stabilization Reserve 6.17 6.23 6.42 6.61
Total GF Reserves 15.82 25.11 25.51 20.89
Reserve Goal ~17% of
Expenditures

17.3 16.60 19.20 22.0
*Includes American Rescue Plan funding
• Reserves are a sign of the City’s fiscal stability
• GFOA best practice is 2 months operating expenditures • In times of fiscal distress, provides the City time to make responsible decisions without making drastic budget reductions (about 60% of General Fund budget is staffing) • Reduces the City’s borrowing costs by decreasing interest rates

23.17 Other Funds - Deficit
Balances
• Parking Fund
• General Fund CIP
• Street Maintenance CIP
• Storm Water Overlay Fund
• Equipment Operations Fund
14 23.18
Unfunded Capital Investment Program
Department Unfunded CIP Estimates
Fire 20,201,500
Parks & Recreation 58,595,000
Public Works 255,860,000
Citywide 30,500,000
Total Unfunded CIP Estimates $365,156,500

23.19 Budget Solutions
Target Reduction
$2,328,800
Proposed Solution
$2,454,770

23.20 What is Measure F?
• Ballot measure for the City of Santa Cruz
general fund
• Maintains essential services
• One-half of one percent sales tax, or 5 cents
on every $10
• Will raise about $8 million annually

23.21 Budget Forecast With No Measure F
• $5M toward CIP projects
• $1.6M new positions
• $4M ongoing homelessness programs
• $2M ERP in FY23-FY26
• $7M one-time homelessness CIP in FY23
• Modest growth in employee costs
• $2.3M in Liability Insurance in FY23, growing
through FY27
Revenue and offsets:
• $14M CA State funding in FY23
• $1.2M ongoing reductions FY23
• $1.2M in one-time reductions FY23
• $7.85M ARPA FY23

23.22 Budget Forecast With Measure F

23.23 Fiscal Strategies
• Continue Ad Hoc Revenue and Budget Committee to explore new revenue sources • Citywide fee study to address cost recovery
• Continue working with lobbyists to secure Federal and State funding • Develop long-term financial plan
 Evaluate investment strategies
 Evaluate pension cost financing
 Citywide capital asset inventory, evaluation, and financing  Long-term liability insurance management plan
20 23.24
Public
Hearing
Schedule
21 23.25
Thank You

23.26 Finance Department
FY 2023 Budget
City of Santa Cruz
May 24, 2022
Presented by: Bobby Magee
1 23.27
Agenda
• Core services
• Organization Chart
• FY 2022 Achievements
• FY 2023 Goals
• FY 2023 Budget overview
• Budget reduction impacts
2 23.28
Core Services
• Accounting
• Financial Reporting
• Grants
• Accounts Payable and
Payroll
• Budget
• Long Range Forecasting
• Bargaining Unit Costing
3 • Purchasing
• Revenue
• Audits
• Debt Collections
• Risk and Safety
Management
• Liability Insurance and Claims
• Workplace Safety

23.29 Organization Chart – 29 FTE
4 Administration
3 FTE
Accounting
4 FTE
Accounts
Payable/Payroll
6 FTE
Budget
3 FTE
Purchasing
2 FTE
Revenue
7 FTE
Risk and Safety
4 FTE

23.30 Worked with Council
Budget and Revenue Ad
Hoc Committee to get
s ales tax meas ure
approved for voter
cons ideration on the
J une 2022 ballot.

Es tablis hed a Bond
Committee which
focused on
meeting dis clos ure
requirements .

Added, reviewed,
and updated all
s afety program
policies , including
COVID protocols .

Launched an
online reporting
and payment
option for
admis s ion taxes .

Es tablis hed and
implemented an
emergency
payroll
proces s ing
protocol.

FY 2022 Achievements
5 23.31
In collaboration with the
City Manager’s Office,
implemented Phas e I of
creating equity in
budgeting.

Developed a new
account structure
to better track
resources and uses
related to
homeles s nes s .

Updated the Budget
Adjus tment policy and
internal proces s to
expedite approvals and
improve
communication.

Implemented a
new Ris k
Management
software for
claims and
incident tracking.

FY 2022 Achievements
6 Res tructured
allocation of pooled
inves tments by
s hifting $30M into
higher yielding
government agency
bonds.

23.32 Goals
• Study of Citywide Fees
• Long Range Financial Plan
• Implement new Cost Allocation Plan
• Accelerate Audits of short-term vacation rentals
• Implement Phase II of creating equity in budgeting
• Implement recommendations from Procurement Assessment • New cost allocation formula for the City's self-insured liability program • And much more…
7 23.33
Finance Department Budget
8 Services/Supplies
$7,084,721
Personnel
$4,295,645
Liability Fund
$6,826,364
General Fund
$4,554,002

23.34 Budget
Reduction
Impacts Temp Hours <20,000>
Decrease in temp hours will result in longer
processing times for digital conversion
Legal Services <5,000>
Decrease in employee benefits legal advice
Office space <43,500>
Moving to a smaller office space decreases
office lease payments and janitorial services
9 Courier services <4,000>
Decrease in cash pickup services

23.35 Thank you
Questions?

23.36 FY 2023
IT Department
Budget Presentation
City of Santa Cruz
May 24th, 2022

23.37 IT Core Services
FY 23 Budget
Agenda
FY 22 Accomplishments
FY 23 Goals

23.38 Information Technology Department
21 FTEs
Ken Morgan
IT Director
Admin + Strat. Services
Jackie Trumbull
Admin Asst. III
Kimberly Ramirez
Project Manager
Ted Rossiter
IT Spec. III
Cyril Cox
IT Spec. II
Hiuwer Mondragon
IT Spec. II
Isaac Steinbrook
IT Spec. I
Carlin Schelstraete
Net/Sys Admin
Robert Reinauer
Net/Sys Admin
Brandon Ashby
Net/Sys Admin
(SCADA)
Vacant
Net/Sys Admin
Vacant
Net/Sys Admin
(SCADA)
Dennis Kiyabu
IT Manager
Infrastructure Services
Chip Handley
IT Manager
Client Services
Mike Schmidt
IT Assist. Director
Process + App Solutions
Richard Westfall
GIS Administrator
James Armstrong
IT Bus. Sys.

Analyst II
Blake Irby
IT Bus. Systems
Analyst III
Erik Kuaimoku
IT Prog Analyst II
Vacant
IT Prog Analyst I/II
Vacant
Project Manager

23.39 IT Core Services Client Services
Technical Support | Endpoint Management &
Security | Workplace Productivity & Collaboration Cultivating Increased Connectivity...of People, Technology, and Processes
Deliver business-driven, efficient, quality technology
solutions and services for City staff and the public.

23.40 FY 22 Accomplishments
Customer Service Infrastructure Applications
 99.96% Critical Network Availability
 99.97% Critical Server Availability
 100% Internet Availability
 Cybersecurity Enhancements
 24 x 7 x 365 Monitoring
 Employee Security Awareness
 Quarterly Campaigns
 Phishing Tests
 554 Customers Served (70% of FTEs)
 127 PCs Replaced
 230 Remote Workers Supported
 2800 Help Desk Phone Call Received
 6,300 Work Orders Completed (+5%)
 1,990 Total Devices Supported
 90+ Business Apps Supported
 Upgrades
 Tyler Eden + Cashiering
 Utility Manager
 MyCityofSantaCruz (MCoSC)
 RFPs
 Land Management, Permits + Bus Lic.
 Asset Management System (WT + PW)

23.41 $5.9M
43%
Services, Supplies and Other
+
Capital Outlay
57%
Personnel
Services
Information Technology
FY23 Budget
$2.5M $3.4M

23.42 FY 23 Budget – What Changed?
 Software Maintenance Services
 M365
 Maintenance/Support CPI
 Hardware Maintenance Services
 Cybersecurity Enhancements
 MSSP + Next Gen Antivirus
 Personnel Services
 IT Business Sys. Analyst III
 IT Programmer Analyst I/II*
 Software Maintenance Services
 Eliminate Apps and IT Tools
 Telecommunications Services
 Circuit consolidation
 Capital Outlay
 Deferred Maintenance/Replacement
on Network + Server Infrastructure
 PC Replacement Reduction
Increases
Reductions
*Position funded by Water Department
Overall Increase + 4.5%
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
Services, Supplies, Other and
Capital Outlay
Personnel
FY 22 (Adopted) FY 23 (Proposed)

23.43 FY 23 Goals
• New Land Management – Bus. License – Permitting Application • New Computerized Maintenance Management System (CMMS) • Complete Microsoft 365 Implementation
• Remote Work Access Enhancements
• Physical Access Security (Continued)
• Cybersecurity Improvements (Ongoing)
• Credit Card - Payment Card Industry (PCI) Audit
• Website ADA Improvements (Initial Phase)
• Enterprise Resource Planning (ERP) Replacement Strategy

23.44 What Questions Do You Have?

23.45 Human Resources
FY 2023 Budget
City of Santa Cruz
May 2023
1 23.46
Human Resources Mission
“As a resource and trusted advisor,
we strive to cultivate an inspiring
and fulfilling work environment that
attracts and engages a talented
workforce”
2 23.47
FY 2022

ACHIEVEMENTS
3 COVID 19 RESPONSE !!!!!!!! Policies, Employee
Testing.

INITIATED DIVERSITY, EQUITY AND

INCLUSION IN HR
• Revised job descriptions
• Revised minimum standards
• Implicit Biased Training for Hiring Panels
• New Employee Bias Training

MOVED TO ON-LINE APPLICATIONS
Compensation Study
Remote Work Policy

23.48 4

HR BUDGET

SUMMARY
• FY BUDGET $25.5 MILLION
• 5 Budget Categories
• Administration
• Workers Compensation
• Benefits
• Unemployment
• Volunteer Program
• 11 EMPLOYEES

23.49 23.50
Human Resources Services
• Recruitment, Selection, On-Boarding
• Labor Relations
• Workers Compensation
• Benefits Management
• Training & Organizational Development
• Equal Employment Opportunity Committee
6 23.51
•Workers Compensation
(Updated Actuarial)
•Unemployment Insurance
Increased from avg
$90,000 in FY20 to
$278,151 in FY 21/22/23
(COVID)
•Medical Insurance
Increased $1.0M

STATUS QUO BUDGET
Notable Changes

23.52 8
$23,937,257 $21,753,231 $24,048,358
$24,601,511 $27,261,778
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
FY2019 FY2020 FY2021 FY2022 FY2023

TOTAL HR BUDGET

23.53 HR BUDGET BY DIVISION
$1.6 $1.5 $1.34 $1.7 $1.6
$4.6
$3.1 $3.2 $3.3
$5.06
$17.5 $16.9
$19.1 $19.2 $20.19
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
FY2019 FY2020 FY2021 FY2022 FY2023
Administration Unemployment Workers Comp
Medical Insurance Volunteer Program 23.54

HR ADMIN
Training & Development
Recruitment
Classification & Compensation
Labor Relations
Employee Relations
10 23.55
Employee
Training &
Development
Mandatory Training
Cultural Awareness
Sexual Harassment & Discrimination
Employee Engagement Program
4th Employee Engagement Survey in Fall 2022
Leadership Development Academy
Employees can choose over 65 classes
8 Classes = 1 year of Supervisory Experience
Succession Planning
Stretch Assignments; Career Counseling, Job
Shadowing
11 585
Employees
Attended a
Training

23.56 Employee & Labor Relations
• Negotiations – 8 Units
• Resolve Workplace Issues
• Equal Employment Opportunity
Committee
• Conflict Resolution
• Diversity, Equity, Inclusion and
Accessibility

23.57 LEAVES
DENTAL
VISION

MEDICAL

DISABILITY

INSURANCE

RETIREMENT

HR BENEFITS
13 23.58
34%
Revised
Actuarial

23.59 City Contracts with the Volunteer Center
We supported 316 volunteers
Total Volunteer hours 8,287

23.60 16
01 EMPLOYEE DEVELOPMENT
Professional & Personal Development
02 SUCCESSION PLANNING
Stretch Assignments, Over Hire, Coaching & Mentoring
03 IMPROVE ORGANIZATIONAL CULTURE
Employee Engagement Program
Diversity Equity, Inclusion & Accessibility Program

HR DEPARTMENT PRIORITIES

23.61 HR: WE SERVE THE PEOPLE

WHO SERVE THE COMMUNITY

23.62 Santa Cruz Public
Libraries
FY 2023 Budget
City of Santa Cruz
May 24, 2022
1 23.63
Agenda
• Background
• Core Services
• Achievements & Challenges
• 2023 Budget Overview
2 23.64
Library Joint
Powers Authority
1996 Joint Powers Authority Formed
Fourth Amendment Approved December 2015
Joint Exercise of Powers Agreement
Establishes Contributions for the County, City of Santa Cruz, City of Watsonville 3 23.65
Library
Funding
Measure R Tax
$9 Million
City of Santa Cruz
MOE
$1.8 Million
Watsonville
MOE
$541K
4 County
MOE
$5.3 Million
Donations,
Trusts, Other
$125K

23.66 Core Services
• Mission: Connect, Inspire, Inform
• Vision: Transform Lives and Strengthen Communities
 Learning
 Digital Inclusion
 Transformative Spaces
 User Experience
 Organizational Capacity
5 23.67
Organizational Chart
Library Joint Powers Authority
Board
6 Yolande Wilburn
Director
102 FTE
Library Advisory
Commission
Friends of the Santa
Cruz Public Libraries
Marketing
Volunteer Services
Eric Howard
Assistant Director
Branch Services
Adult Programs,
Reference Services
& Outreach
Youth Programs
& Outreach
Collection Management
Services
Library Information
Technology
Administration
Organizational
Development

23.68 Strengths
Boulder Creek Branch Reopening
Garfield Park Branch Reopening
Scotts Valley Branch Reopening
Branciforte Branch Reopening
Live Oak Branch Reopening
Friends of the Library
COE Partner of the Year
Opportunities
Strategic Plan
Grants
Collaboration
Programming
Library Information Technology Plan
Process Improvement
Weaknesses
Supply Chain Delays
Staffing
Training & Development
Threats
Downtown Mixed Use
Ongoing Facilities Maintenance
Cost of Housing in Santa Cruz
7 Achievements Challenges

23.69 Library 2023
8 23.70
Library Budget Summary-City
9 Fiscal Year*
2021
Actuals
Adopted
Budget
Ammended*
Budget
Year-End
Estimate
Fiscal Year
2023
Proposed
EXPENDITURES BY CHARACTER:

Services, Supplies, and Other charges 1,744,751 1,814,751 1,814,751 1,814,751 1,814,751 Total Expenditures 1,744,751 1,814,751 1,814,751 1,814,751 1,814,751 EXPENDITURES BY ACTIVITY:

Library System Services-City 1,744,751 1,814,751 1,814,751 1,814,751 1,814,751 Subtotal General Fund 1,744,751 1,814,751 1,814,751 1,814,751 1,814,751 Total Expenditures 1,744,751 1,814,751 1,814,751 1,814,751 1,814,751

RESOURCES BY FUND
General Fund 485,560 509,844 509,844 509,844 527,783
Total Resources 485,560 509,844 509,844 509,844 527,783 Net General Fund Cost (1,259,191) (1,304,907) (1,304,907) (1,304,907) (1,286,968) FY 2021 FY 2022 FY 2023
TOTAL AUTHORIZED PERSONNEL 97.83 102.08 102.08
*Sums may have discrepancies due to rounding
Fiscal Year 2022

23.71 Revenue
10  Sales Tax Revenue
expected to grow

4.6%
 Renegotiation of
Joint Powers
Agreement MOE
Contributions

23.72 Notables Staffing
Review of staffing
model and
increase open
hours.

Facilities
Continue Measure
S and one time
projects.

Friends
New campaign for
Downtown Library.
11 23.73
Yolande Wilburn
Library Director
[email protected]
Questions?
Branciforte Library Rendering
12 23.74
1 Santa Cruz Water Department
FY 2023 Proposed Budget
May 24, 2022

23.75 Presentation Overview:
• Water Department core services, alignment with ReEnvision Santa Cruz, and organization chart • FY 2022 accomplishments and key performance measures
• Operating budget overview
• Capital Investment Program Budget
• Financial Pro Forma
• Water Commission engagement in Budget and CIP
development and review.

23.76 Santa Cruz Water’s Core Services
• We produce and deliver safe, high quality water to 100,000 people; • We provide meter reading, billing and prompt and courteous customer service to our customers;
• We operate, maintain, and, when needed, repair or replace water system infrastructure valued at nearly $1 billion; and
• We plan for and manage 4,000 acres of land, and many other valuable natural resources, for long-term sustainability

23.77 • The Water Department’s work is aligned with 2 of the 3 Re-Envision Santa Cruz Areas of Emphasis:
– Fiscal Sustainability
– Infrastructure Investment
Alignment With
Re-Envision Santa Cruz Priorities

23.78 Water Department Organization Chart
120.25 FTEs

23.79 FY 2022 Accomplishments
• Completed a number of major projects:
– 2021 updated Urban Water Management Plan and Water
Shortage Contingency Plan;
– 2021 updated Long Range Financial Plan and updated
System Development Fees and Water Rates and Charges
• Initiated construction on:
– System wide meter replacement program
– Graham Hill Water Treatment Plant Concrete Tank
Replacement Project
• Continued Construction on Newell Creek Dam Inlet/Outlet

23.80 Key Performance Measures
• 100% Compliance with Drinking Quality Standards
• Zero worker’s comp injuries requiring more than
30 days absence
• % of customers paying their water bill within 60
days—94% in FY 22 and 98% in FY 23 (estimated)
• Credit rating among highest in the industry (AAfrom Standard & Poors and A- from Fitch)

23.81 Operating Budget Overview
• Proposed budget
increase is modest
despite highest
inflation in 40 years,
with a Proposed
Operating Budget of
$39.3 million, that is
only $1.3 million
higher than the FY 22
budget
$17.7
$16.2
$0.3
$5.1
Operating Budget by Spending
Category (Millions)
Personnel Services/Supplies
Capital Outlay Debt Service

23.82 Operating Budget Overview (continued)
• Personnel costs include no salary increase;
associated benefit increases are 8.5%
• Services and supplies increased 6.9% from FY
2022 budget
• 3 additional positions recommended (120.25
FTEs)

23.83 FY 2023 Budget Analytics
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
Adj.

Budget
Actual Adj.

Budget
Est.

Actual
Proposed
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Historical Budget Comparison with FY 2023 Proposed Budget (by category of expense)
Capital Equipment
Debt Service
Services, Supplies, & Other
Personnel

23.84 FY 2023 Capital Investment Program
• FY 23-27 CIP is $295 million, which is $2 million more than last year’s CIP. However, significant, unspent
carryover from FY 22 expected
• Risks to the Forecast: Construction costs, which have increased 8.5%* in the last year, is a significant issue which is being actively monitored, as are supply chain
disruptions.
*ENR.com’s Construction Cost Index increased 8.5% over the past year

23.85 0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
1 2 3 4 5
Capital Investment Plan
• The dollar amount of the 5-
year CIP is based on the
2021 Long Range Financial
Plan
• Funded by a mix of state
and federal loans, bond
proceeds and pay as you go
funding
Capital Investment Program

23.86 $0 $1 $2 $3 $4 $5 $6 $7 $8 $9
Various Other Projects
Water Program Administration
Main Replacements
Brackney Landslide Area Pipeline Risk Re
GHWTP Facilities Improvement Project
Meter Replacement
Water Supply, ASR, & Recycled Water
NCD I/O Replacement Project
Newell Crk. Pipeline Felton/Graham Hill
GHWTP CC Tanks Replacement
Millions
Top 10 FY23 New Appropriations
Capital Investment Program

23.87 23.88
Financial Planning Tools
• Long Range Financial Plan
• Five-Year financial pro forma
• Debt service coverage and cash reserves constantly
monitored
• If targets met, credit ratings remain strong

23.89 Pro Forma Key Assumptions
• Inflation factors
– 8.5% for salaries/benefits through FY 27
–6.9% for services, supplies and other costs
• Interest rate estimates for borrowing:*
– SRF 1.4%
– WIFIA 2.5%
– Municipal Revenue Bonds 4%
*Subject to change

23.90 16
Assumptions about Revenues:

Planned Rate Increases
17 Years 1 - 5
(FY 2023 - 2027)
Years 6 - 10 Preview
(FY 2028-2033)
July-23 6.9%
Estimated rate requirement
Average annual 10%
July-24 16.4%
July-25 16.4%
July-26 6.9%
July-27 6.9%
Rate increases are based on system average,
actual customer rate increases vary by customer class and consumption levels

23.91 FY 2023 Pro Forma
• Revenues based on Council approved rates through FY 2027 • Operating cost annual forecast through FY 2027: 8.5% for personnel and 6.9% for services and supplies
• $295 million CIP over FY 23-27
• $113 million budgeted in FY 22
• $69 million to be spent in FY 22 and $44 million carryover to FY 23
• All key financial metrics are met through the 5 year Pro Forma period

23.92 18
FY 2022-2027 Pro Forma
Fiscal Year
2022 2023 2024 2025 2026 2027
Total Revenues $39,462,079 $42,056,855 $52,720,628 $61,599,023 $63,731,009 $69,443,770 Total Operating Expenses $ 30,077,476 $ 34,171,358 $ 36,233,762 $ 38,424,056 $ 40,750,366 $ 43,221,349 Net Operating Revenues $9,384,603 $7,885,497 $16,486,866 $23,174,968 $22,980,643 $26,222,421 Debt Service $4,098,710 $5,131,705 $8,968,611 $13,531,445 $13,526,449 $13,527,862 Debt Service Coverage 2.29 1.54 1.84 1.71 1.70 1.94
Cash Balances by Fund
Fund 717 (Emergency Reserve) $3,000,000 $3,000,000 $3,000,000 $3,000,000 $3,000,000 $3,000,000 Fund 713 (Rate Stabilization) $10,000,000 $10,000,000 $10,000,000 $10,000,000 $10,000,000 $10,000,000 Fund 716 (90 Day Operating Reserve) $7,416,364 $8,425,814 $8,934,352 $9,474,425 $10,048,035 $10,657,319 Fund 711 (90 Day Reserve Operations) $7,416,364 $8,425,814 $8,932,334 $9,465,306 $10,036,967 $10,644,301 Days Cash (Fund 711 and 716) 180 180 180 180 180 180

23.93 CIP Financing
20 0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
fy 23 fy 24 fy 25 fy 26 fy 27
Debt Funded Pay-Go Funded

23.94 Operating Expense Forecast
21 0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
fy 23 fy 24 fy 25 fy 26 fy 27
Personnel Services, Supplies & Other Capital Outlay Debt Service

23.95 Cash Balances by Fund
22 0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
fy 23 fy 24 fy 25 fy 26 fy 27
Fund 717 (Emergency Reserve) Fund 713 (Rate Stabilization Excess) Fund 716 (90 Day Operating Reserve) Fund 711 (Water Operations)

23.96 Water Commission
FY 2023 Budget and CIP Review Process
• February 7, 2022 – Agenda item on CIP projects focused on progress to date and discussion of planned work for the coming year;
• March 7, 2022 – Agenda item on source water quality data and data analysis and its link to the GHWTP Facilities Improvement Plan;
• May 2, 2022 – Agenda item presenting the FY 2023 Budget and CIP for review and discussion;
• June 6, 2022 – Planned agenda item on the FY 2023 Budget and CIP with Water Commission action providing
recommendations to the Council

23.97 Questions

23.98 Financial Planning Tools
31 5 Year Pro forma
serves as the fiscal
roadmap to achieve
Department’s
strategic plan
Pro forma is also one
of management’s
tools to monitor
progress in meeting
financial goals and
targets
Management
ensures exceeding
all debt related legal
and policy
requirements, as
well as maintaining
liquidity to meet all
current financial
obligations
Financial Plan helps
maintain/improve
Department’s credit
rating
S&P AA-, Fitch A23.99

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Santa Cruz City CouncilMay 24, 2022

Santa Cruz City Council
May 24, 2022