FOR COUNCIL MEETING OF JUNE 21, 2022
COUNCIL AGENDA REPORT
TO: City Council
FROM: City Manager
Prepared by: Public Information Manager
SUBJECT: 2022-24 PROPOSED BUDGET
RECOMMENDATION:
That the City Council receive a presentation on the Proposed 2022-24 Budget, hear public testimony on the proposed biennial budget, and then approve a resolution adopting the 2022-24 Proposed Budget.
BACKGROUND:
By State law, the City must adopt a balanced budget by June 30th This budget continues our commitment to making Santa Maria a safer, more successful, more financially sound, and more beautiful place for our families, businesses, and visitors for generations to come. Overall, the City will not only maintain services, it also will invest in enhancements.
The budget reflects the City's strategic goals for the next two years:
• Complete the General Plan update
• Provide more recreation for families
• Continue to focus on public safety
• Streamline business permits for small business owners to help them be compliant with the law
DISCUSSION:
This budget document, which includes the Capital Improvement Plan, serves as a comprehensive statement of programs and policies, financial plans, and operations guide.
It reflects the many strategic goals, programs, and service priorities that the City Council and City staff are committed to providing the community while utilizing available limited resources. Highlights are:
• Extra $15 million over next two years for enhanced local roadway maintenance (double our typical funding);
• No layoffs, no cuts in service, no program reductions; • Proposes additional 36 full-time and 5 part-time positions, including 6 new positions in the Police Department and 2 new positions in the Fire Department; • Hire grants consultant to support departments in searching, identifying, applying for, and managing grants;
• Expand data analytics and cybersecurity Citywide, through Information Technology division;
• Restores Public Library Sunday hours and expanded Bookmobile in year two, following Library's closure in March 2020 and limited reopening in April 2021;
• Public safety remains the priority, receiving 62 cents of every General Fund dollar, and 90 cents of every Measure U dollar;
• Measure U (sales tax add-on) will support 115 positions or 17 percent of the workforce;
• Shift Code Enforcement division from City Attorney's Office to Community Development Department to align human services;
• Recommends initiating in-house animal control services and issuing RFP for shelter services, in preparation to potentially terminate contract with County during 2022-23, due to projected significant contract cost increases over the next 5 years, and to promote long-term financial stability;
• Proposes 151 capital projects at $140.7 million, however, 57 projects not funded; • Improves workplace injury prevention by adding a Safety and Health Officer, coordinating and implementing safety protocols and best practices across departments, and 2 department safety coordinators in Utilities and Fire; • $22.8 million over two years to modernize the Santa Maria Regional Transit (SMRT) fleet, largely for electric buses;
• Second aerial ladder truck for Fire Department, at $1 million; • Fire Department administration building upgrades for security, ADA, technology, and begin design/construction of a Fire Department Training Center; • Projected revenues are up, but are outpaced by General Fund expenditure growth; • City is entering its 14th consecutive year with a structural General Fund deficit, at $10.83 million in 2022-23. The gap will be closed by using salary savings from vacancies, and $2.7 million from the Local Economic Augmentation Fund (LEAF); • CalPERS obligations, Workers' Compensation cost increases, and liability insurance premiums further reduce funds available for operations by about $55 million over both years;
The budget enables the City to maintain and enhance services to the public, invest in City infrastructure, and undertake many projects that will directly benefit residents. As this budget was being prepared, inflation is at a four -decade high of 8.6 percent, and the City is preparing for increased expenses for utilities, fuel, vehicles, and materials.
The proposed budget is posted online for review at www.cityofsantamaria.org/budgets .
Fiscal Considerations:
The City's proposed appropriations for all operating funds in 2022-23 are $258.4 million, up $41.4 million or 19.1 percent from 2021-22. Recommended 2022-23 General Fund appropriations (including Measure U) are $119.4 million, up $20.5 million or 20.8 percent from 2021-22.
Impact to the Community:
Adoption of the 2022-24 Proposed Budget allows City staff to provide service levels to City residents.
JASON STILWELL
City Manager
ATTACHMENT: Budget in Brief
CITY OF SANTA MARIA
June 21, 2022
PROPOSED 2022-24 BUDGET IN BRIEF
CITY OFFICIALS
Mayor
Alice Patino
Mayor Pro-Tem
Mike Cordero
Councilmembers
Carlos Escobedo
Gloria Soto
Etta Waterfield
City Manager
Jason Stilwell
CITY PROFILE
Incorporated
September 12, 1905
Charter City
December 12, 2000
Form of Government
Council -Manager
Full -Service City
Population
109.910
Full -Time Employees
615 (authorized)
601 (funded)
Swom Police Officers
133 Authorized
Fire Stations
6 Firefighting Personnel
66 Authorized
Parks
28 SUMMARY
This budget continues our commitment to
making Santa Maria a safer, more
successful, more financially sound, and
more beautiful place for our families,
businesses, and visitors for generations to
come. Overall, the City will not only
maintain services but also will invest in
enhancements.
This budget delivers on the City Council's
four strategic priorities and fulfills its
request for significant additional investment
for enhanced road
maintenance and other Millions General
infrastructure. Over
each of the next two
years, the City will
double its funding for
local roads,
cumulatively adding
$15 million to the effort.
This two-year spending
plan is a balanced
budget, with no layoffs,
no cuts in service, and
no program reductions.
The budget proposes
36 additional full-time
and five part-time
positions. General Fund expenses,
however, continue to outpace General
Fund revenues, to the tune of $10.83
million in 2022-23. The solution to plug this
gap is to use salary savings (vacant
positions), Local Economic Augmentation
Fund (LEAF) reserves, and Measure U
reserves.
5120
5115
5110
5105
5100
595
590
585
580
575
570
565
560
555
550
545
540
The total projected revenues for all
operating funds in 2022-23 are
approximately $23 million, or 17.9
percent more than in 2021-22. million.
Tax revenues are expected to increase
by 12.9 percent due to forecasted
increases in sales taxes, which comprise
50.7 percent of General Fund revenues
(including Measure U).
Total proposed appropriations for all
operating funds in 2022-23 are
Fund Operating Revenue Trends
General Fund ■Measure U
7 It, $. 7% %
t
n
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 approximately $258.4 million, or $41.4
million more than in 2021-22.
Proposed personnel recommendations
bring City-wide staffing to 615 authorized
full-time positions and 81 authorized part-
time employees, for a total of 696
positions.
ECONOMIC OVERVIEW
Four -decade high inflation of 8.6 percent as of May 2022, and the potential for a recession in the near future, adds another layer of financial uncertainty to the City's finances. The national, state, and local economies have low unemployment. The State has a record $300 billion budget with a record $97.5 billion surplus.
GENERAL FUND OVERVIEW
The General Fund is the primary operating fund of the
City, supporting nearly all departments. Proposed
revenues for the General Fund are estimated at $111.3
million (including Measure U), while proposed
appropriations are $119.4 million. The largest sources
of General Fund revenues are sales tax and property
tax (about 59 percent; and about 67 percent when
including Measure U).
Millions General Fund Operating Trends
590
585
580
575
570
565
360
i I I
S55
9 9 9 9n 9 9 9 6`
t2 Q o "'S %
a y.
2013-14 2014.15 2015.16 2016.11 2111-16 2018-19 201920'.2020211202122.202223 • Revenues
• :xpendnure
Public safety remains the priority, receiving 62 cents of every General Fund dollar, and 90 cents of every
Measure U dollar. Measure U will support 115
positions or 17 percent of the workforce.
The budget restores Public Library Sunday hours and
expanded Bookmobile in year two, following the
Library's closure in March 2020 and limited reopening
in April 2021.
Improved workplace injury prevention will be achieved
by adding a Safety and Health Officer, coordinating
and implementing safety protocols and best practices
across departments, and two department safety
coordinators in Utilities and Fire.
Like other CaIPERS agencies, the City continues to
experience ongoing CalPERS cost obligations. The
City projects a $5.9 million increase in its CaIPERS
contributions over the next eight years. The City's
annual payments are $22.1 million for 2022-23 and
$23.3 million for 2023-24. The City's CaIPERS
payment for 2011-12 was $10.4 million and in 2012-13
it was $9.5 million.
For perspective, if CaIPERS obligations were a City
department, it would be the second-largest General
Fund department, behind the Police Department's
allocation. Every dollar paid to CalPERS is a dollar less available for wages and compensation to provide
public services. Rising costs put added pressure on
revenue and consume financial resources that could
be used for City programs and services, including
capital.
In 2018, the City and its labor groups achieved
negotiated cost -sharing agreements whereby
employees pay more toward their retirement. The City
is addressing pension costs in three ways: (1) new and
future employees are in reformed, less expensive
pension tiers, (2) current employees are increasing
their contributions to pension costs, and (3) the costs of past employees are costing the City is obligated to
pay either through new revenue or other expenditure
reductions.
As in prior years, personnel costs remain the largest
component of the City's operating expenditure budget
for 2022-24, accounting for $217.54 million, or 60.74
percent associated with salaries and benefits. The
breakdown by year is $107.14 million in 2022-23 and
$110.40 million in 2023-24.
Over the last several years, because of personnel
vacancies, the City has not expended 100 percent of
its appropriation authority in the General Fund; thus
resulting in expenditure savings.
Community 8
Economic
Development
6%
Leisure & Cultural
Services
13%
General
Government
19%
Public Safety
62%
General Fund Allocations
21 Page
ALL OPERATING FUNDS OVERVIEW
Total revenues anticipated for all operating programs in 2022-23 are estimated to be $235 million, or roughly $35.6 million more than in 2020-22. This represents an approximately 17.9 percent increase in total financing. The proposed appropriations for all operating funds in 2022-23 are approximately $258.4 million.
Sources of Revenue - All Operating Funds
Charges for
Service
Revenues from 3%
Other 7 Agencies l Other Revenues
and Transfers
5%
Tries
38%
Licenses, Permits
& Fines
1%
Revenues from
use of Money &
Property
1%
Enterprise Fund
Revenues Public Ways &
45% Facilities
12%
Program Expenses - All Operating Funds
Community &
Economic Development
3%
Leisure & Cultural
Services
1114
General Government
10 Pudic Safety
Utilities
311%
Tax revenues are expected to increase by 12.9 percent, to $89.9 million in 2022-23 from $79.6 million in 2021-22, due to forecast increases in sales taxes. Sales taxes comprise about 50.7 percent of General Fund revenues, including Measure U.
OVERVIEW OF CAPITAL PROJECTS
In all, the proposed Capital Projects Budget for 2022-24 consists of capital projects representing approximately $140.7 million in appropriations. The vast majority of capital projects in both years — about 86 percent — are financed from non -General Fund sources. The Capital Projects General Fund has $8.9 million in capital expenditures for 2022-23 and $10.4 million in 2023-24. The Capital Projects section of the full budget document also looks forward to two additional fiscal years, 2024-2026.
The proposed Capital Projects Budget for 2022-23 consists of 151 capital projects representing approximately $140.7 million in appropriations. In all, 208 total projects were requested by operating departments, totaling $158.2 million; however, 57 projects (representing approximately $13.9 million) were not funded. The 2022-24 Budget reflects $70.6 million in projects in the first year and $70.1 million in the second year.
For comparison purposes, the 2021-22 Budget consisted of 112 capital projects totaling $81.1 million in appropriations.
It should be noted that 17 General Fund projects were not funded due to funding limitations. This is $3.6 million in the first two years of this budget.
The proposed Mobile Equipment and Replacement budget for 2022-24 calls for 79 pieces of equipment to be replaced reflecting $10.3 million in appropriations. Additionally, 21 new pieces of equipment are to be purchased from other funding sources totaling $4.8 million over the two-year budget period. 3 Page
USE OF RESERVES
Staff is proposing to use $8.8
million in LEAF financing over the
next two fiscal years to bridge this
financial gap in the General Fund
and General Capital Projects Fund.
This will include $2.7 million in
2022-23, and the remaining $6.1
million will be used in 2023-24 At
that point, the LEAF Fund Balance
will stand at a projected $9.1 million
as depicted in the chart.
MEASURE U OVERVIEW
Measure U is a one -cent local transaction and use tax. City voters initially approved Measure U in the June 2012 election (63.95 percent support), enacting a one -quarter -cent tax. More recently, voters in the November 2018 election (with a 74.18 percent majority) extended and enhanced Measure U at the ore-cert rate. The City Council authorized that 90 percent majority of the aforementioned tax proceeds be spent on public safety -related services, then five percent on youth services, and five percent on programs for quality of life.
As you can see from the chart, Measure U -related revenues are growing and exceeded expenditures in 2020-21 and 2021-22, resulting in an expanded fund balance, enabling this budget to allocate funding to caoital needs. The bulk of the increase is from salary savings. Because Measure U only has one revenue source tat is impacted by the health of the economy and is allocated primarily to fund ongoing staffing, it is imperative to maintain a healthy reserve in the event of an economic downturn. There is no allowance for additional uses of Measure U tax proceeds other than what has already been authorized by the City Council.
MEASURE U FUND ANALYSIS
Beginning Fund Balance
Projected Revenue
Police
Fire
Recreation & Parks
Library
Community Development
City Attomey
City Manager
Finance
Total
Ending Fund Balance
Actual
2020-21
$ 6,950,610
$ 22,751,96
$ 8,626,919
7,140,523
1,774,476
471,290
314,508
27,601
108,719
$ 18,464,034
$ 11,238,54)
Year -End
Estimated
2021-22
$ 11,238,540
$ 25,356,519
$ 9,221,515
8,356,257
1,916,469
526,604
421,608
19,285
108,730
$ 20,570,468
$ 16,024,591
Proposed
2022-23
$16,024,591
$25,787,354
$12,399,217
14,206,088
3,290,699
1,065,960
856,724
22,500
2,600
$31,8434788
9,968,157
41 Page
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MARIA, CALIFORNIA, ADOPTING
THE BUDGET FOR FISCAL YEARS 2022-23 AND
2023-24 AND DELEGATING THE CITY MANAGER
TO IMPLEMENT THE SAME
WHEREAS, the 2022-24 Proposed Budget of the City of Santa Maria, representing two fiscal year budgets (2022-23 and 2023-24), has been submitted to the City Council, has been considered, and is in final form and substance satisfactory to this Council.
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of Santa Maria, California, as follows:
1. The budgets for the City of Santa Maria for fiscal years 2022-23 and 2023-24, and Budget in Brief setting forth the budget totals, hereby incorporated by reference and fully set forth herein, are hereby adopted in the form on file with the Chief Deputy City Clerk; and
2. The General Fund economic stabilization reserves may be used in 2022-23 if needed to fund the authorized aforementioned adopted budget; and
3. All encumbrances as of June 30th of each year, as represented by outstanding purchase orders and approved capital projects in process, are hereby authorized to be carried forward and appropriated into the next fiscal year budget as determined by the Director of Finance; and
4. The City Manager is authorized to take all necessary actions to implement the provisions of the said budget as adopted on this date, including future adjustments to the budget for unanticipated expenditures offset by revenues, transfers of budget amounts within a Fund, and any other adjustments approved by the City Council before the adoption of this resolution, and approving change order requests for City Council approved projects; and
5. The City Manager is also authorized, until otherwise directed, to continue to under - fill classifications by existing classifications when warranted to address operational demands, approve promotional opportunities for employees in established flexibility staffed positions based on merit and full journey -level experience; continue the performance -based pay program for management employees on employment contracts; entering into side letters of agreement with the employee bargaining groups to address operational issues when warranted; and
6. The City Manager is authorized to approve the purchase of capital equipment and replacement equipment for the 2022-24 fiscal years, as delineated in Section "D" of the 2022-24 Budget in conformance with the City's purchasing guidelines and any applicable State and Federal guidelines; and
7. All General Fund revenues above expenditures as of June 30th of each year be transferred equally between the General Capital Reserve Fund, Local Economic Augmentation Fund (LEAF), and General Fund Assigned Fund Balance for Unfunded Pension Benefits; and
8. The Chief Deputy City Clerk is hereby authorized to make minor changes herein to address clerical errors, so long as substantial conformance of the intent of this document is maintained. In doing so, the Chief Deputy City Clerk shall consult with the City Manager and City Attorney concerning any changes deemed necessary.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Santa Maria on this 21st day of June 2022.
Mayor
ATTEST:
Chief Deputy City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED AS TO CONTENT:
Department Director
City MarYager