City Council – February 8, 2022
Five-Year Financial Forecast and FY 2021-22 Midyear Budget The City’s Biennial Budget Timeline
June
• Budget
Adoption and
Public Hearing
October
• Staff reports on
prior-year
year-end budget
performance
February
• Staff reports on midyear
budget performance,
updated forecast
•Departments work on
operating budget and
biennial CIP budget
submittals
March/April
• Department budget
meetings with City
Manager for decisions
May
• Proposed Biennial CIP
Budget document
available to the Public
• Proposed Budget
Presented to City
Council – Study
Sessions for feedback
June
• Budget
Adoption and
Public Hearing
High Degree of Volatility and Uncertainty Looking Ahead Ongoing Challenges: General Fund Revenues Still Lagging • Lost $188M in revenues
through June 2022
• Reserves helped
support services short
term
• Revenues exceed prepandemic levels in 2024-
25 but...
• Big gap remains to
reach revenue level that
sustained pre-COVID
era services
Ongoing Challenges – Rebuild Reserve Level
• 59% of pre-COVID levels
• $10M to reach 15%
contingency threshold
• Over $60M to pre-COVID
levels
• Provide financial stability,
cushion against financial
shocks
5 59%
Ongoing Challenges – Restore Services and Programs
Service Reductions Continue
• 421.1 total positions cut
• To date 16.6% (~70)
added back
• Still at 85% of previous
staffing
• Library, Public
Landscape,
Maintenance, Youth
Programs, others still not
restored
6 Services Still Not Restored
7 Ongoing Challenges: Capital Needs Remain Unfunded
Capital needs unmet
• ~50% of need
• Deferred maintenance
is unsustainable
• Community priorities
remain unfunded
CIP – Projects Needing Funding (Not Comprehensive)
De-Funded Projects
• Memorial Park Expansion
• City Yards Modernization
• Lincoln Neighborhood Corridor
Streetscape
• Olympic Blvd/Sidewalk
Improvements
• Playground Reconstruction
• Street Light Upgrades
• Vehicle and Computer
Replacement
Unfunded Projects
• Airport Park Expansion
• Airport Park Conversion
Planning
• Memorial Park Phases 2-3
• Fire Station 7
• Parking Structure 1 Seismic
Retrofitting
9 Estimated at
$300M ++
Included...
• New revenue and expenditure
projections; MY adjustments
• $11m of FY 21-22 surplus set aside
to build reserves
• 15% contingency reserves
gradually restored
• CIP budget restored in FY 25-
26; $4m more starting FY 26-27
• Paying deferred GSH for
Affordable Housing
• Resuming expedited unfunded
pension liability paydown
Five Year General Fund Forecast
Five Year General Fund Forecast - Worst Case Comparison Worst case assumptions
• Slower economic recovery
impacting business license
revenue
• COVID surges inhibit FY 21-
22 sales, hotel tax recovery
and impact future growth
• Assessed value of properties
moderates
• Non-salary expenditures
grow to reflect inflation
• Underperformance of
CalPERS retirement portfolio
Upcoming FY 2022-23 Proposals:
Targeted Service and Program Restorations
• Addressing homelessness and impacts of homelessness
• Addressing crime and cleanliness
o Sidewalk vending and impacts of sidewalk vending
o Crime and cleanliness in the Downtown
o Crime and cleanliness in other areas/neighborhoods
• Addressing the impacts of COVID and furthering economic recovery
• Enhancing in-person municipal services
• Furthering community legislative mandates
• Equity and inclusion is embedded into all proposals
12 Other Funds (non-General Fund)
With the exceptions noted below, all City funds are projected to remain self-sustaining throughout the updated forecast period • The RRR Fund will require an evaluation of solid waste rates to remain solvent beyond FY 2023-24
• The Beach and Pier Funds may need additional subsidies to offset revenue losses and support critical capital expenditures 13 + $9.2m Sales Tax
+ $0.3m Property Tax
+ $2.7m Documentary Transfer Tax
+ $1.5m Utility Users Tax
- $0.3m Business License Tax
- $0.3m Investment Income
+ $13.6m Transient Occupancy
(Hotel) Tax
+ $3m Parking-Related Revenue
+ $0.9m Fees/Charges/Other
FY 2021-22 Midyear Revenue Adjustment – General Fund
$30.7 Million Net Increase
General Fund Uses: Expenditures and Commitments
Beginning with $30.7M
15 Midyear Budget Adjustments to
Restore and Enhance Services
6%
Revenue Sharing
Commitments
11%
Midyear Budget
Adjustments based on
Council Actions
11%
Year End Budget Adjustments
4%
Resources for Known Liabilities -
PERS Increases, COVID Costs, Rainy
Day Adjustment
32%
Proposed Set Aside
of $11M in Reserves
36%
FY 2021-22 Midyear Expenditure Changes – General Fund
Adjustments to Restore and
Enhance Services and
strengthen administrative
capacity to deliver services
• 20 Permanent FTEs
• 4.8 Temporary FTEs
• Total $1.8 million
Council direction or actions
taken since the FY 2021-22
Budget adoption
• $54.9 million Majority for
legal settlement
• $3.4 million Other
Adjustments for revenuesharing payments and
based on new information
• Total $3.5 million
Impact:
Net 24.8 FTE
Net $63.6 million Budget Increase
FY 2021-22 Midyear Adjustments – Other Funds
Revenues
• RRR -$1.2M
• Water -$1.2M
• Wastewater -$0.8M
• Beach & Pier -$1.1M
• Vehicle Management +$0.9M
• Housing +$1.0M
• BBB +$28.3M
• Self Insurance Comprehensive +$54.9M
• Other Funds net +$0.28M
Expenditures
• Water +$0.8M
• Housing +$0.6M
• Beach +$0.2M, FTE +2.3 (As-Needed)
• RRR -$1.0M, FTE +1.0
• Special Revenue Source -$8.1M
• Other Funds net +$0.5M, FTE +4.0
• Capital +$0.7M
$81 million Net Increase $6.1 million Net Reduction, FTE + 7.3 City Council
Service Restoration / Enhancement
• Enhance administrative support to Councilmembers and the Mayor and increase capacity for legislative advocacy and pursuit of grant funds
• 1.0 FTE permanent position
18 City Manager’s Office
Service Restoration / Enhancement
• Staff City Hall and City Hall East reception counters to assist customers and respond to community service requests
• Lead Equity and Inclusion team to institute policies, programs and services to advance equity and inclusion citywide
• 2.0 FTE permanent positions
19 City Attorney
Service Restoration / Enhancement
• Enhance executive, administrative and paralegal
support and assistance to the City Attorney, Chief of
Staff/Assistant City Attorney and Deputy City Attorneys • 1.0 FTE permanent position
20 Community Development
Service Restoration / Enhancement
• Enhance customer support for the Seismic Retrofit Program • Build capacity for planning and policy work
• Enhance customer service, administrative support, and financial and budget analysis department wide
• 2.0 FTE permanent positions
21 Community Services
Service Restoration / Enhancement
• Expanding In Person Services
• Investing in Urgent Safety and Maintenance Needs
• Homeless Services Delivery Audit
22 Proposed Staff Enhancements
• 2.0 FTE permanent positions in the General Fund
• 0.7 as-needed FTE positions in the General Fund
• 2.3 as-needed FTE positions in the Beach Fund
Fire Department
Service Restoration / Enhancement
• Ensure that mandated training records for firefighters are maintained in compliance with state and federal standards • Assist with documenting the mutual aid strike team
deployments to provide full reimbursement to the City for its wildfire response
• Aid the Training Division and upcoming firefighter recruit academy to support new SMFD recruits and citywide
emergency response
• Upgrade 0.9 as-needed FTE to 1.0 FTE permanent position 23 Human Resources
Service Restoration / Enhancement
• Build capacity to support City departments responsible for delivering critical community services and programs.
• Enhance ability to attract and retain employees and fill critical vacant positions, support and implement legally mandated programs, and respond to employee,
organizational and workplace needs.
• 3.0 FTE permanent positions
24 Information Services
Service Restoration / Enhancement
• Provide administrative support of critical Citywide technology, systems, infrastructure, and services
• Ensure adequate resources to maintain contracts, manage accounts receivables, and close new broadband sales
• 2.0 permanent FTE positions in the General Fund
• 1.0 permanent FTE position in Community Broadband Fund 25 Library
Service Restoration / Enhancement
Provide equitable and inclusive resources to our most
vulnerable community members
Address gaps in adult programming and literacy services Activate Fairview Branch Library via self-service
• 1.0 FTE permanent position
• 0.4 FTE as-needed position
• Funds for equipment, programs and collections
26 Police Department
Service Restoration / Enhancement
• Enforce timely parking space turnover
• Enhance response to traffic control, vehicle collisions, and special occurrences or events
• Improve vehicular safety and traffic circulation
• 4.6 as-needed FTE positions
27 Public Works
Service Restoration / Enhancement
• Enhance response to community needs, including graffiti and waste removal
• Ensure quality and timely delivery for projects, such as Park Safety Enhancements and the Virginia Avenue Park Kitchen
• Support new grants, such as Gandara Park Improvements • Provide zero waste education, outreach and training
• Maximize efficiency of leasing and property management at the Airport
• 2.0 FTE permanent positions in the General Fund
• 1.0 FTE limited-term position in the Airport Fund
• 1.0 FTE permanent position in the RRR Fund 28
Transportation
Service Restoration / Enhancement
• Expand public counter hours to improve front-line customer service, expedite permit processing, and reduce parking citation delays • Establish a supervisory position for the Capital Projects Team in Mobility to implement critical road safety projects and ensure timely delivery of department's CIP program
• Train new and current Motor Coach Operators to support increased service capacity and enhanced customer experience
• Ensure compliance with new DOT regulations and certifications to keep our system safe
• 2.0 FTE permanent positions in the General Fund (positions currently As-Needed) • 1.0 FTE limited-term position in the BBB Fund
29 Finance
Service Restoration / Enhancement
• Promote equity in City procurement, streamline procurement processes • Increase strategic planning capacity related to business license/ economic recovery and revenue enhancement
• Increase Workers’ Compensation program's capacity to reduce absences for injured employees
• 1.0 permanent FTE position in General Fund
• 1.0 permanent FTE position in Workers’ Compensation Fund 30 Master Fine Resolution
Library Fines
• Eliminates overdue fines for all adult cardholders to remove barriers to access and promote social equity
• Aligns with the Council’s prior 2018 action to eliminate overdue fines for children and teens
Shared Mobility Progressive Penalty Fine Schedule
• Defines different classes of penalty types and amounts, and enforcement escalations for both Public Right of Way (PROW) violations such as ADA blockages, improper deployments, and complaint response time, and administrative noncompliance • Deters noncompliance and incentivizes operators to quickly resolve important PROW safety and administrative issues
Potential Revenue Measures
Measure Description Annual Revenue Estimates
Library Parcel Tax
A special tax dedicated to
restoring library services.
2/3 of voter approval required.
~$2 million to $4 million
(depends on structure of tax)
Transient
Occupancy Tax
Tax on lodging room rentals,
currently 14%, potential higher rate
for homeshares.
Majority voter approval required.
~$4 million for each 1%
increase; $0.1 million for
homeshare for each 1%
increase
Parking Facility
Tax
Tax on parking fees, currently 10%.
Majority voter approval required. ~$1 million for each 1% increase Business License
Tax
Modernizing Business License Tax.
Majority voter approval required.
Unknown – further analysis
needed
Other Business
• Approve modification to the Moss Adams contract
• Approve a relocation allowance for the Police Chief
Mid-Year Budget Recommended Actions
• Receive the FY 2021-22 through FY 2027-28 Five-Year Financial Forecast • Approve midyear adjustments and position and classification changes • Adopt resolutions:
Establishing new classifications and adopting salary rates for various positions
Revising the City’s master fine schedule, eliminating adult overdue fines, and establishing new fines for the Second Shared Mobility Pilot Program • Provide direction on revenue measures
• Approve modification to the Moss Adams contract
• Approve a relocation allowance for the Police Chief