CITY OF SIMI VALLEY
MEMORANDUM
June 13, 2022
TO: City Council
FROM: Department of Administrative Services
SUBJECT: REVIEW AND APPROVAL OF THE FY 202 2-23 BUDGET, APPROVAL OF FIVE-YEAR CAPITAL IMPROVEMENT PROGRAM FOR FY 202 2-23 TO FY 202 6-27, APPROVAL OF FY 2022 -23 TRANSIT BUDGET AND
PROGRAM OF PROJECTS, AND ADOPTION OF RESOLUTIONS
Subsequent to the preparation of the staff report for the above item, staff has provided answers to the attached resident comments from the Public Budget Meeting that took place on June 1, 2022.
____________________________________
Brian Paul Gabler
City Manager/District Manager/
Executive Director/Executive Officer
Prepared by: Carolyn Johnson, Acting Administrative Services Director
Attachments: Staff response to Attachment A, Exhibit 1, (Dan Porter Comments) Staff response to Attachment A, Exhibit 2, (James Bartholomew Questions)
SUPPLEMENTAL
AGENDA ITEM NO.
9A
2 Staff response to Attachment A, Exhibit 1 (Dan Porter Comments)
The CalPERS UAL fluctuates greatly depending upon several factors, most notably the PERS applied Discount Rate. The Discount Rate in 2011 was at 7.5% and for the five years after 2011, PERS hit the rate three times. PERS continued to reduce the Discount Rate to 7.375, then 7.25, then to 7.0 and now at 6.8. Each time the Discount Rate is adjusted and PERS does not hit the rate with their investments, there is a huge financial hit on all the Member’s assets. In one year alone, 2016, the City’s assets were reduced by almost $30 million due to PERS missing their expected rate of return by 6.78%. Conversely, in 2021, the City expects the value of our assets to gain almost $25 million in value based on PERS investment performance of 21.35% return resulting in a $140m UAL. While the City continues to make our regular UAL payments, the value of our assets changes based on the investment performance of PERS. The City attempted to refinance the City’s PERS UAL back in 2019 however, the City was legally challenged in court by the Ventura County Taxpayers Association, who did not favor a refinance of the UAL. Rather than spend a significant amount of funds defending our position, the City abandoned the refinance effort.
The City’s continuing PERS Normal Costs, the percentage of payroll for current employees, will continue to decline as more PERS Classic employees retire and the PEPRA employees dominate the payroll. The rate will decline by almost 1% over the next five years.
With respect to the City’s OPEB obligations, the City took a huge financial hit in 2019 due to two factors: the inclusion of Implicit Subsidy in the calculation and the change in Discount Rate. These two accounting issues led to the increase in the OPEB UAL by $9.4 million. While the Implicit Subsidy and the change in Discount rate from 6.28% to 5.62% had a dramatic effect, changes in Premiums, Interest Costs, and changes in Census also affect the OPEB UAL position. While the OPEB UAL is not in the best position, the position will gradually change as the number of employees eligible to participate in this program diminishes as well as the number of retirees. Additionally, the City has taken the pay -as-you-go-approach to payme nts, keeping current in the amount of benefits paid in each current year. We are also now beginning, after years of not, to invest and make payments to reduce the OPEB UAL.
Our payments to PERS (both UAL and Normal) as well as our payments to the OPEB obligations do indeed fit inside the budget and are addressed each year. Although much of the City’s PERS and OPEB obligations are at the mercy of investment strategies out of our control, we are able to address our costs on an annual basis. No benefits have been reduced to our retirees or current employees.
3 Staff response to Attachment A, Exhibit 2 (James Bartholomew Questions)
Questions
1. From bottom of Page 12, what are examples of interim financial reports? I assume that the comprehensive mid-year report is the ACFR.
Interim financial reports are reports on anything that is requested and can be generated by the current financial system. The ACFR is not a mid -year report, it is a financial report that is generated at the end of each fiscal year. Mid-year reports are reports that report on the status of the budget as of the end of December. An example is the staff report to City Council at the 3- 21-2022 City Council Goals-Workshop session.
2. On Page 15, what is General Fixed Assets (Fund 106) and what is the $11 million? The $11 Million is the recording of depreciation, which should not have been shown in the budget document since it is a non -cash transaction. It will be removed from the Adopted document. Thanks for pointing that out.
3. On Page 15, what is the Planning (Fund 207) for $811,000 that was deleted? Nothing was deleted. The budget was $810,000 and the estimated actual expenditure at the time of budget preparation was $0. As of today, the actual expenditure is $123,738. This fund is for Grant dollars for Planning programs.
4. On Page 164, what is Leave Accrual – Contra Account?
GASB 34 mandates that governmental funds only report leave liability that has matured at 06/30/XX in the Fund Financial Statements. However, the full value of compensated absences is required to be presented in the Entity-wide Financial Statements. The City’s accounting system is configured to post the full value of each employee’s annual leave as it accrues. This JE reverses the net activity that occurred during the fiscal year in the compensated absence quotas using contra accounts 21860 - Accrued Benefits Payable-Contra, and 41801 - Leave Accrual-Contra. The quotas include annual leave, comp time, holiday comp and cash outs.
5. Is there anything to show Sworn Annual Leave Purchases?
Annual leave is accrued, when earned, in the 41800 line item. When leave is used or cashed out, it is recorded in a liability account, not in a budgetary account, since the cost is already accounted for in 41800.
6. On Page 223, is it accurate that there are no expenses for the Public Education and Government PEG starting this year? Is it anticipated that the 1% fees from cable and video services will continue at the current level despite more people cutting cable?
this fund is located in the City Hall PEG Facility Improvement project and the project already has sufficient funding so no additional funding is being requested at this time.
4 7. On Page 228, what happened to the library building improvement fund? They ($1.4 million) were in the current Budget and then deleted indefinitely.
Nothing has been deleted. The $1.4 million is in the building improvement line item in the revised budget. This is the total amount of the requested budget for FY2021-22 plus any dollars that were remaining in the project when FY2020 -21 ended. The estimated actual expenditure is $0 in that one line item for FY 2021-22 and also for FY2022-23. This is a library project that is saving money for future repairs and upgrades to the library.
8. On Page 240, are not disaster funds contingent upon having an approved hazard mitigation plan, which is not likely in this fiscal year?
The money in Fund 298, page 240, is from the American Rescue Plan Act.
9. On Page 251, under Vehicle Replacement what is the criteria for Police unit replacement and how many miles do they average per year?
Cars are replaced on an as needed basis. Typically, a police unit would be considered for replacement on a five-year cycle however, staff evaluates the vehicles and keep them longer if they are still viable. Police patrol units average approximately 25,000 annually however the engine experiences heavy-duty use due to constantly in use and at idle.
10. On Page 255, why was the budgeted $740,000 not expended for telephones?
This is funding that was remaining after the project concluded. We are currently looking to see if there is any additional related upgrades that this funding can be used for. If not, it will be transferred back to the funds it originally came from.
11. On Pa ge 250, why is there such a dramatic decrease in funding from FY21 onward from FTA Operating? Was it a spike from federal COVID funding?
I believe you are referring to page 259. This is the drawdown of grant dollars. Transit Grants are reimbursable gra nts, so the city has to spend the money and then request the reimbursement. In FY20 and FY21, there was a cleanup of grants and therefore larger drawdown amounts in those years.
12. On Page 290, what happened to the anticipated construction in Sanitation of $39 million that was reduced to under $13 million?
The $39 million is in the construction contracts line item and it is in the revised budget amount.
The revised budget is the amount requested in that year, plus the dollars that were not spen t the previous year and carried forward. In this sanitation fund, that would be the money in the sanitation projects that was remaining at the end of FY2021 and carried forward into FY2022.
5 13. On Page 307, What happened to the anticipated Waterworks construction of $11 million which was reduced to $250,000?
Same answer as above.