Sebastopol City Council
March 19, 2024

CITY OF SEBASTOPOL CITY COUNCIL
AGENDA ITEM REPORT FOR MEETING OF: March 19, 2024
=========================================================================================== To: Honorable Mayor and City Councilmembers
From: Don Schwartz, City Manager
Subject: Sebastopol’s Financial Situation
=========================================================================================== RECOMMENDATION: Receive report on the City’s long-term financial situation.

EXECUTIVE SUMMARY: The City of Sebastopol has serious financial problems. These include the City’s General Fund, which is the primary source of funding for functions include police, fire, land use planning, housing, and operations and maintenance of parks, facilities, and other infrastructure. Staff project an on-going deficit of $2.9 million/year without adjustments. There will be a detailed presentation at the City Council meeting by Bob Leland of Baker Tilly.

BACKGROUND: The City recently hired Baker Tilly to develop a model and forecast for the City’s General Fund.

This model will allow us to update the forecast as needed, and thus provides an important tool to support managing the City’s finances. Some of the key findings from the model include:

1. Consistent with prior long-range forecasts, the City faces an on-going structural deficit. Baker Tilly estimates this deficit at $2.9 million/year when including current operating revenue sources and expenses, as well as $900,000/year for maintenance, repair, and replacement of items such as buildings, parks, technology, vehicles, and other infrastructure. This excludes $1.4 million/year needed to repair and improve City streets.

2. The City faces these challenges despite having the third highest per capita General Fund revenues in the County (behind Sonoma and Healdsburg), with the second highest General Fund expenses per capita (behind Sonoma).

3. As with many other cities, Sebastopol faces significant increases in employee retirement costs. These are expected to peak in approximately 10 years after increasing from about $1.7 million currently to $2.6 million. The City has set aside $2.9 million (mostly in a section 115 pension trust) to mitigate these coming increases.

4. Without changes, the City is on track to deplete our fund balance in FY 26-27, or approximately three years.

5. Options to mitigate the problem include an increase in sales taxes dedicated to the City and substantial reductions in expenses and services. We can also draw from the PERS trust or continue to defer maintenance and replacement expenses; these actions will result in higher costs in the long run.

6. The City can also pursue economic development, particularly the attraction of visitors to the City including hotels.

ANALYSIS: The presentation during the Council meeting will include further details and analysis.

COMMUNITY OUTREACH:

This item has been noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to schedule meeting date.

FISCAL IMPACT: There is no fiscal impact from receiving this report. The impact of direction that the Council provides will depend on the nature of the direction.

Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

OPTIONS: Staff did not consider options other than presenting this information to the Council. We did consider developing the information in house but lack the staff time and expertise to do so as well as Baker Tilly does this work. We also considered engaging prior consultants who have done this work for the City but chose Baker Tilly both because they are more cost effective and because their work includes a tool that we can continue to use.

ATTACHMENTS: Presentation by Bob Leland of Baker Tilly
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

City of Sebastopol
Long-Range Fiscal Model
Bob Leland, Special Advisor
Baker Tilly US, LLP
March 19, 2024
Model version 1.5, 3/12/24
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Extensive Experience in Forecasting
• Our Consultant’s Experience
 49 years in state and local government
finance
 Finance Director for City of Fairfield
(26 years)
 Consultant with Management Partners
and Baker Tilly (12 years)
 Major projects include Stockton
bankruptcy, Paradise recovery
 42 years of hands-on experience with
long-range forecasting (created fiscal
models for 45 different local agencies
involving 126 separate forecasts)
• Our Firm’s Experience
 Baker Tilly is the 10th largest
accounting/consulting firm in U.S.
 Public Sector practice works
exclusively with local governments
nationwide, including all the 20
largest California cities
 We’ve developed long-range fiscal
models for over 40 California cities in
the last 10 years
 Basis for our modeling approach was
developed during the extensive
bankruptcy litigation in City of
Stockton’s Chapter 9 proceeding
2 Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Background
• Background  City prepares a 5
-year forecast for the annual
budget document
 Trends have been generally downward since the
forecast done in 2020 (see charts), showing a
persistent structural revenue shortfall
• City hired NHA Advisors in 2023 to prepare a
forecast and a range of options for balancing
the budget  NHA projections confirmed the structural shortfall • City hired Baker Tilly to prepare a long-range
forecast model to demonstrate impact of
various financial scenarios on the General
Fund, for ongoing use by the City
3 Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Funds 100+124 FY24 FY24
($ in mil.) Adopted Revised
Property Tax 3.24 3.24
Sales Tax 4.79 4.79
UUT 0.90 0.90
TOT 0.50 0.50
Cost Plan 0.00 3.35
Other Rev/Tfr In 1.42 1.42
Total Revenue 10.86 14.21
Personnel (ex WC) 9.00 9.00
O&M 5.17 5.17
Liability Ins/WC 1.11 1.11
CAP Exp Credits (3.35) 0.00
Debt Service 0.27 0.27
Capital 0.34 0.34
Transfer Out 0.00 0.00
Total Expense 12.54 15.88
Net Rev/(Exp) (1.68) (1.68)
Fund Balance 5.55 5.55
Assigned 1.42 1.42
Unassigned* 4.13 4.13
Unassign % of Exp 32.9% 26.0%
*Reflects updated balance per 6/30/23
ACFR (budget showed $1.85M)
FY24 Budget – Change in CAP Treatment
4 FY24 Revised Budget shows
Cost Allocation Plan as it
will be in future budgets
(mil.) FY21 FY22 FY23 FY24
Est Bal1 2.69 3.06 3.53 1.85
Act Bal2 2.94 3.45 5.81 4.13
Variance 0.26 0.39 2.28 2.28
1Per page 42 of FY24 Adopted Budget
2Actuals per ACFR, estimated for FY24
Unassigned Balance (Funds 100+124)
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

1 FY24 Personnel Savings (net):

Adopted Budget Shortfall for FY24 (1.68) 0.09 Police Sergeant Improved property tax revenue projected for FY24 0.22 0.17 Fire Engineer Reduced sales tax revenue projected for FY24 by Avenu (0.07) 0.28 Fire Chief Net projected change in other revenue for FY24 0.01 0.12 Police Officer Personnel cost savings in FY24 due to high position vacancies 0.92 1 0.12 Police Sergeant Net change in projection for all other expenses (0.50) 2 0.08 Dispatcher Revised Budget Shortfall for FY24 (1.09) 3 0.14 Accountant FY25 revenue assuming 2.5% overall growth above FY24 levels 14.72 0.99 Totals Reduction in Cost Plan revenue per latest plan update (0.71) (0.07) Added OT/PT FY25 personnel costs with 6% vacancy rate (8.63) 0.92 Net Cost Savings FY25 O&M costs at 2.5% growth (6.76)
Year 1 of 3-yr phase-in to $900K replacement/maint costs4 (0.30) 2FY24 O&M Increase:

Added cost above 2.5% growth for Liability/Workers Comp5 (0.17) (0.31) Contract labor FY25 debt service & capital costs (0.47) (0.03) Forecast contract Projected Budget Shortfall for FY25 (1.97) (0.35) Transfer Police donation

0.17 Capital tied to donation
3 $1.04M transfer of an assigned balance to Flood Control Fund 127 is excluded 0.02 Insurance/Work Comp from this annual deficit calculation as it has no net impact on unassigned balance (0.50) Net Cost Increase 4 City does not adequately budget these costs to support current service levels and facilities; based on annual depreciation of depreciable governmental assets 5 JPA expects 10% Workers Comp growth & 20% liability insurance growth Combined Funds 100 & 124 ($ in mil.)
Change in Annual General Fund Shortfall
5 Black increases resources, Red reduces resources
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Funds 100+124 FY24 FY24 FY24 FY25
($ in mil.) Adopted Revised Estimate Projected
Property Tax 3.24 3.24 3.46 3.62 4.25% projected growth Sales Tax 4.79 4.79 4.72 4.68 FY24 & FY25 per Avenu Insights' projection UUT 0.90 0.90 0.90 0.92 2.5% growth per past experience TOT 0.50 0.50 0.51 0.52 2.75% growth (higher growth from private rentals) Cost Plan 0.00 3.35 3.35 2.78 FY25 cost plan reflects recent CAP update, treated as revenue Other Rev/Tfr In 1.42 1.42 1.43 1.49
Total Revenue 10.86 14.21 14.37 14.01
Personnel (ex WC) 9.00 9.00 8.07 8.63 Assumes 6% vacancy rate in FY25 O&M 5.17 5.17 5.51 5.60 FY25 adds $300K for replacement/maintenance Liability Ins/WC 1.11 1.11 1.09 1.29 assumes Workers Comp up 10% & Liability up 20% in FY25 CAP Exp Credits (3.35) 0.00 0.00 0.00
Debt Service 0.27 0.27 0.27 0.27 continues FY24 budget from fund 124 Capital 0.34 0.34 0.16 0.20 2.5% growth on fund 124 FY24 budget Transfer Out 0.00 0.00 0.35 0.00 assumes no transfers in FY25 Total Expense 12.54 15.88 15.46 15.98
Net Rev/(Exp) (1.68) (1.68) (1.09) (1.97) improvement in FY24 shortfall, but shortfall grows in FY25 Fund Balance 5.55 5.55 6.14 4.17
Assigned 1.42 1.42 0.38 0.38 assumes no change in assigned balance in FY25 Unassigned* 4.13 4.13 5.76 3.79 FY25 unassigned balance drops by 34% Unassign % of Exp 32.9% 26.0% 37.2% 23.7% FY25 balance is above 15% minimum reserve, but will continue to drop *Reflects updated balance per 6/30/23
ACFR (budget showed $1.85M)
FY25 Comments
Comparison of Estimates for FY24 & FY25
6 FY24 Revised Budget reflects the way Cost Allocation Plan (CAP) impact will be shown in future budgets, for comparison to FY25 projection Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

7 Revenue Budget to Actual Comparison
RDA residual revenue boost starting FY22 Pandemic led to lower budgets for FY21 & FY22 Budget too conservative until FY24 Pandemic led to lower budgets for FY21-FY23 Budget generally on target Large one-time revenues unanticipated in budget City 1% plus local measures
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

8 Expenditure Budget to Actual Comparison
Significant vacancies over past 2 years Savings from vacancies, despite UAL costs being fixed Savings from vacancies, over past 2 years Spending has generally exceeded budget Mixed bag, budget generally close to actual Transfers often not budgeted, FY24 excludes shift of $1.04M flood control assigned balance to new fund 127
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

9 Revenue Measure Comparison to Sonoma County Cities
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

10 Expenditure Comparison to Sonoma County Cities
• Since Sebastopol ranks above the median for all revenue measures except TOT revenue generation, its current financial condition is likely influenced by the expense side of the equation, as the City does rank above the median of General Fund personnel and operating costs per capita
Caveat: This comparison is based on budget information available online. Since staffing levels, organization, and allocation of costs by fund can vary significantly among cities, additional research would be required to fine-tune these cost comparisons.

Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• Baseline revenues show what City can rely
on to meet ongoing expenses at current
level of service
• Forecast includes reasonable assumptions of
revenue growth, in context of both longterm and recent experience • Includes economic cycles over time to
realistically portray stress on finances
(assumes moderate recession in FY27 and
every seven years thereafter)
• Recurring revenues exceeded recurring
expenditures FY11-19, but not in recent
years
11 Baseline
Revenue
Forecast
For comparison purposes, shows CAP as revenue for all years Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• Recessions have occurred on average
every 6.8 years since 1927
• High correlation between recessions and
unemployment rate
• Adverse budget impacts to local
governments often lag term of “official”
recession period 12
History of Recessions
• Recession causes vary but key issues are
timing and magnitude
• Impacts estimated using CA State Controller
data on city taxes, permits, licenses
• Covid pandemic was shortest recession at 2
months, but very sharp impact due to
shutdown
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

13 Indicators Show Relatively Stable Economy
Back to pre-pandemic growth level 70% of economy, growth rate slowing, but still high Low in 2022, but climbing in past year Large jump after pandemic savings, but low as % of income Up from Great Recession lows, but leveling off Multi-indicator index currently shows less stress on economy > 0=more stress
< 0=less stress
Designed to be 0
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• Chart shows new housing units
per CA Dept of Finance
• Average of only new units (SF+MF)
added per year
• Average annual growth of 0.6%
• RHNA is 25 units/year
14 City Growth Trends
• Population has been generally stable
except in early 2000’s and postPandemic (2020-2022)
• Average annual growth of 0.2%
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Major Revenue Trends
15  96% of existing parcels grow 2%, 4% grow average of 40% (for ownership transfers), 20 new housing units
plus $4M non-res value; grows at 4.3%; Residual
revenue increase with end of RDA starting FY22
 2nd largest GF revenue source, amount based on recent CAP update
 Near-term trend from Avenu, then 1.7% growth
including moderate recession starting FY27; FY20 hit by pandemic, then increase in online sales over next 2 yrs  No new hotels (two are in planning stages, one since
2015); 2% growth for hotel, 5% private
 Other taxes, franchises, fees, intergovernmental,
interest, other
Combines funds 100 & 124
FY24 based on estimate
For comparison purposes, shows
CAP as revenue for all years
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• Baseline forecast is ongoing trend by type of
expenditure based on current workforce
and service levels
• Includes reasonable assumptions as to
compensation and inflation growth
• How spending is allocated by department or
program is based on City budget priorities
• Major forecast risks:
 adding FTE
 COLAs higher than 2.5%
 long-term inflation higher than 2.5%
 lower CalPERS returns increasing pension costs
• Most likely potential forecast improvement:
 Higher than projected employee vacancy rates
16 Baseline
Expenditure
Forecast
For comparison purposes, shows CAP as revenue for all years Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• Chart compares SF Bay Area to a composite
inflation measure; results vary some, but
move in same direction
• High inflation from 1973-1982, but relatively
stable from 1982-2021
• Jump in 2022 related to post-pandemic
supply-chain issues; inflation higher in rest
of country compared to Bay Area; CPI has
dropped by half in 2023 under both
measures
• In 20 years prior to 2022, average annual
growth was 2.48% for SF Bay Area and

2.25% for the composite measure
• Model assumes 2.5% ongoing inflation
17 Inflation Affects Labor & Other Costs Over Time
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• CalPERS investments are volatile, and have been on
slow overall downward trend over past 30 years
• CalPERS plans to leverage its investments in private
equity (carries greater risk & volatility of return) to achieve 6.8% return (forecast assumes 6.2% returns)
• When returns are lower, unfunded accrued liability
(UAL) costs increase to compensate for the loss;
when returns are higher, UAL costs are reduced over
time; rates are recomputed annually by CalPERS 18
CalPERS Investments Impact UAL Costs
• Discount rate is investment rate of return assumed
by CalPERS
• Discount rate has been lowered several times over
past 45 years, from high of 8.75% to current 6.8%
• Following the 45-year linear trend of discount rates, in 20 years discount rate would theoretically be 6.0%
• However, forecast assumes the current 6.8% rate is
maintained; if discount rate is lowered, City costs will be higher in near-term, and lower in long-term
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

19 Pension Costs Hinge on CalPERS Investment Returns
CalPERS
Actuarial
Assumptions
• 6.8% discount
rate & returns
• UAL paid off by
FY46
Model is More
Conservative
• 6.8% discount
rate & 6.2%
returns
• UAL continues
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Fire Service Needs
20  City currently has 3.5 full-time employees with 3 reserves and 29 volunteers  Measure H could provide the City with $1.08M annually starting early 2025, sufficient to support one three-person crew using 7 full-time employees and reserves/volunteers per the Matrix Report (Jan 2023)
 Measure H requires the City to maintain a $1.2M maintenance of effort for Fire funding; the FY24 budget for Fire operations is $1.5M  The City is also exploring options for fire station improvements  If the City merged with an adjacent fire district, that would allow the District’s property tax to be levied within the City; another ~$1.1M could be generated  If all the new revenue from these two sources is dedicated to improving fire services, then none of it would be part of a solution to the City’s existing structural revenue shortfall
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Maintenance and Replacement Needs
21  Based on the useful life of the City’s governmental assets (non-utility), their values are depreciating at ~$900K per year, which is approximately what the City should be spending annually in maintenance & replacement (5.3% increase in GF expense) to maintain these assets sustainably over time:
 It would take $7.13M over the next 5 years to increase the City’s current Pavement Condition Index (PCI) of 55 (out of 100) to 60 (55-75 is considered “fair” condition)  Additional City funding would be required for what realistically would be an additional $7M every 5 years on an ongoing basis; this is equivalent to a $500 per parcel tax with a minimum 2% annual inflator
Estimated Annual Need: 6/30/2022 FY22 Audit
($ in 000) Assets Depreciation
Buildings/Structures $7,851 $202
Machinery/Equipment 2,752 103
Vehicles 2,718 143
Infrastructure 8,857 453
Total 22,178 901
includes Technology
includes Streets, but backlog is
greater than this amount
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Summary of Key Expenditure Assumptions
22 include
any funds to improve level of street PCI
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Major Expenditure Trends
23  Major impact from cutbacks caused by Great
Recession revenue losses
 Pandemic in FY20, with significant vacancies
during past 3 years; assumes current authorized
positions with vacancy rate down to 4% by FY26
 Consistent with overall trend since FY13 driven
by PERS and benefit costs & no new positions
 Significant growth past 4 years
 Includes increase for deferred maintenance &
replacement costs
 FY24 transfer is $1.039M to new Flood Control
fund (127), assumes $0 after
 Debt & Capital from fund 124 continues
Combines funds 100 & 124
FY24 based on estimate
For comparison purposes, shows CAP as
revenue for all years
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

• Fund balance is the “bottom line” for City
finances
• Not all fund balance is available
 Restricted, assigned, nonspendable, and committed
elements of fund balance are omitted as they are
already earmarked for specific purposes, and thus
unavailable to support other operations or new
obligations
• Available balance in forecast combines:
 General Fund Unassigned Balance (fund 100)
 Local Sales Taxes (fund 124), because revenues are
general taxes
• Pension Trust (fund 105) is also available
because it can reimburse General Fund
pension costs
• Forecast model can run numerous alternative
scenarios to show impacts on fund balance
24 Fund Balance
Forecast
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Baseline Forecast Before Corrective Actions
25 CAP treated as revenue in all years
(000) FY24 Bud FY24 Est FY25 Est FY26 Est FY27 Est FY28 Est Revenue $14,206 $14,368 $13,998 $14,352 $14,420 $14,616 Expense 15,884 15,460 15,983 16,933 17,698 18,194
Net (1,678) (1,092) (1,985) (2,581) (3,278) (3,578)
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Major Components of Structural Shortfall
26  If FY24 vacancies are filled, personnel cost
increase grows to $900K annually
 City is not investing what it needs to
sustain current facilities & service levels
over time (ramps up to $900K/year)
 Reduced by $714K/year under recent CAP
update (lower contribution by utilities)
• Insurance Costs
 Workers Comp up 10% & Liability Insurance up 20% in FY25, adds $210K above inflationary growth • Net Revenue Shortfall/Recession Impact
 Moderate recession assumed to start FY27 adds to existing revenue gap; revenues eventually recover, and as pension costs drop, this factor eases over time Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Baseline Forecast Before Corrective Actions
27 any corrective
budgetary actions
Goal is to get unassigned balance back to
between 15-20% of total expenditures
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Scenario: Increase Local Sales Tax Rate
28  Assumes approval on
Nov 2024 ballot
 Raises ~$1.7M
 Leaves $1.4M average
annual shortfall
 Assumes approval on
Nov 2024 ballot
 Raises ~$850K
 Leaves $2.2M average
annual shortfall
½ cent Added Sales Tax Rate
¼ cent Added Sales Tax Rate
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Scenario: Draw Down Pension Trust
29 • This example reimburses 20% of annual pension costs starting in FY28, which draws down pension costs by FY34 (timing and rate of drawdown are at discretion of the City) • Pension costs to flatten out in early 2030’s and reach a peak in FY35, which reduces need for a pension trust over the long-term
• Used in combination with budget reductions, a lower level of cuts would be required than without the pension trust
drawdown
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Scenario: Close Remaining Gap With Budget Reductions
30  $750K in ongoing
expenditure
reductions (-4.5%)
required starting
FY25, results in 20%
reserve
 $1.4M in ongoing
expenditure
reductions (-8.7%)
required starting
FY25, results in 20%
reserve
½ cent Added Sales Tax Rate
¼ cent Added Sales Tax Rate
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Other Potential Tax Increases to Support Operating Costs 31 • An increase in the 12% TOT rate to
14% on the Nov 2026 ballot would
generate ~$90K annually (based
on current hotel plus private
rentals)
Utility User Tax Increase Transient Occupancy Tax Increase Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

1 FY24 Personnel Savings (net):

Adopted Budget Shortfall for FY24 (1.68) 0.09 Police Sergeant Improved property tax revenue projected for FY24 0.22 0.17 Fire Engineer Reduced sales tax revenue projected for FY24 by Avenu (0.07) 0.28 Fire Chief Net projected change in other revenue for FY24 0.01 0.12 Police Officer Personnel cost savings in FY24 due to high position vacancies 0.92 1 0.12 Police Sergeant Net change in projection for all other expenses (0.50) 2 0.08 Dispatcher Revised Budget Shortfall for FY24 (1.09) 3 0.14 Accountant FY25 revenue assuming 2.5% overall growth above FY24 levels 14.72 0.99 Totals Reduction in Cost Plan revenue per latest plan update (0.71) (0.07) Added OT/PT FY25 personnel costs with 6% vacancy rate (8.63) 0.92 Net Cost Savings FY25 O&M costs at 2.5% growth (6.76)
Year 1 of 3-yr phase-in to $900K replacement/maint costs4 (0.30) 2 FY24 O&M Increase:

Added cost above 2.5% growth for Liability/Workers Comp5 (0.17) (0.31) Contract labor FY25 debt service & capital costs (0.47) (0.03) Forecast contract Projected Budget Shortfall for FY25 (1.97) (0.35) Transfer Police donation

0.17 Capital tied to donation
3 $1.04M transfer of an assigned balance to Flood Control Fund 127 is excluded 0.02 Insurance/Work Comp from this annual deficit calculation as it has no net impact on unassigned balance (0.50) Net Cost Increase 4 City does not adequately budget these costs to support current service levels and facilities; based on annual depreciation of depreciable governmental assets 5 JPA expects 10% Workers Comp growth & 20% liability insurance growth Combined Funds 100 & 124 ($ in mil.)
Recap: Change in Annual General Fund Shortfall
32 Black increases resources, Red reduces resources
Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Next Steps
33  $900K added for deferred maintenance/replacement, 2.5% COLAs, zero FTE growth
 ¼ cent versus ½ cent tax rate makes significant difference in City’s fiscal capacity going forward
 Start with instructions to departments for FY25 budget Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024

Questions & Answers
34 Agenda Item Number: 7a Agenda Item Number: 7a
City Council Meeting Packet for Meeting of: March 19, 2024