Revision to Agenda Item #2
• Revised staff report. Please see below for changes:
o Staff Report Changes
▪ Fiscal Impact Section:
“General Fund expenditures for City operations are projected to be $95,065,959. The General Fund operating budget will be offset by a revenue projection of $88,444,688, requiring an appropriation from unencumbered fund balance of $4,506,218 to balance the General Fund budget. This takes into account the annual payment of $1,000,000 from the Victorville Municipal Services to the General Fund for repayment of a loan agreement, along with the $1,115,053 in rolled over CIP project expenses.” ▪ Discussion Section
• Overview of Major Changes and Recommended Adjustments by Fund Type (added to the General Fund bullet point)
o General Fund (Fund 100):
“The General Fund will need an appropriation from the
unencumbered fund balance in the amount of $4,506,218 to offset the overall reductions in permitting, plan check, and inspection fees to ensure a balanced budget of revenues to expenditures.”
▪ Conclusion Section
Second sentence changed the word “Anticipated” to “Expected” to read:
“Expected slowdown of residential permitted improvements and growth occurred sooner than anticipated although industrial growth is still occurring.”
Redline Version
City Council / Board of Directors
Public Hearing(s)
Item Number: 2
Meeting of: March 7, 2023
Submitted By:
Sophie Smith, Deputy City Manager
John Mendiola, Finance Director / City Treasurer
Subject:
Mid-Year Budget Review and Amendment Request to the 2022-2023 Fiscal Budget
Recommendation:
That the City Council and Board of Directors approve the changes reflected in this agenda item along with the included attachments by adopting:
1. Resolution No. 23 -013 of the City Council of the City of Victorville amending Resolution 22-064, as amended, the budget resolution for the City of Victorville for Fiscal Year 2022-2023, relating to an appropriation of funds.
2. Resolution No. VWD 23 -004 of th e Board of Directors of the Victorville Water District amending Resolution VWD 22-012, as amended, the budget resolution for the Victorville Water District for the Fiscal Year 2022 -2023, relating to an appropriation of funds.
3. Resolution No. SCLAA 23-003 of the Board of Directors of the Southern California Logistics Airport Authority amending Resolution SCLAA 22-011, as amended, the budget resolution for the Southern California Logistics Airport Authority for the Fiscal Year 2022-2023, relating to an appropriation of funds.
4. Resolution No. 23 -016 of the City Council of the City of Victorville adopting an updated General Fund Reserve Policy (City Council Policy CP-23-01).
Fiscal Impact:
A summary of the mid-year budget changes are as follows (details of the changes are found in Attachment A):
• City of Victorville – An appropriation of funds, increasing the expenditures by $4,439,347.10 and increasing the revenue by $2,216,604.00. • General Fund expenditures for City operations are projected to be $95,065,959.
The General Fund operating budget will be offset by a revenue projection of $88,444,688, requiring an appropriation from unencumbered fund balance of $4,506,218 to balance the General Fund budget. This takes into account the annual payment of $1,000,000 from the Victorville Municipal Services to the General Fund for repayment of a loan agreement, along with the $1,115,053 in rolled over CIP project expenses.
• Victorville Water District – An appropriation of funds, decreasing the expenditures by $755,360.47 and increasing the revenue by $3,219,263.39. • Southern California Logistics Airport Authority – An appropriation of funds, increasing expenditures by $226,064.00 and increasing the revenue by $221,290.00.
Approval of this agenda item would increase total expenditure citywide budget for the Fiscal Year 2022 -2023 by $4,4 39,347.10 and increase the total combined revenue budget for the Fiscal Year 2022-23 by $2,216,604.00.
Strategic Plan Goal:
This item aligns with Goal A: Fiscal Sustainability - Foster fiscal health through disciplined long-term planning, cost control, in creased revenues, and cost recovery. A Mid -Year Budget review to appropriately adjust revenue and expenditure projections is appropriate for proper planning.
Background:
The Fiscal Year 2022 -2023 Budget, effective July 1, 2022, was adopted by the City Council/Board of Directors on June 21, 2022. Since that time, staff regularly monitored the overall performance of the City’s revenues and expenditures and gained some insight as to possible future needs. The mid-year budget review is an opportunity for staff to use actual operating results through the first half of the fiscal year and to provide an update to the City’s current operating budget by recommending adjustments to the budget needed to accommodate changes in revenue and expenditure estimates, programs, and staffing needs.
The following report compares and summarizes projected revenues and expenditures by the General Fund, Measure P, Special Revenue Funds (Other Governmental Funds) and Enterprise Funds.
Discussion:
The chart below p rovides a City-wide summary of revenues and expenditures from the adopted budget, revised budget, and mid-year projections for the 2022-2023 fiscal year.
The column labeled FY 22/23 Revised Budget is the Council-approved budget in addition to any Council -approved resolutions for additional appropriations through February 7, 2023.
FY 2022-2023 City of Victorville Budget Summary as of actions taken through the February 7, 2023 City Council meeting are shown below:
Citywide FY22/23
Adopted
Budget
FY22/23
Revised
Budget
Mid-Year
Proposed
Budget
Difference:
Increase
(Reduce)
Revenue 333,533,046 334,118,946 336,635,550 2,216,604
Expenditures 320,651,160 371,937,608 376,376,955* 4,439,347
*Note: This includes $49.5 million in Capital Improvement Projects (CIP) rollover funds. If we subtract the CIP rollover, the Mid-Year Proposed Budget for Total Expenditures is $326,895,826 which will leave us a surplus of $9,739,724 in total revenue over total expenditures.
Overview of Major Changes and Recommended Adjustments by Fund Type:
General Fund (Fund 100):
General Fund FY22/23
Adopted
Budget
FY22/23
Revised
Budget
Mid-Year
Proposed
Budget
Difference:
Increase
(Reduce)
Revenue 91,731,061 92,616,959 88,444,688 (4,172,271)
Expenditures 92,196,303 94,210,257 95,065,959 855,702
• Projections for sales and property taxes remain fairly close to budgeted amounts.
The slight increase projected for sales tax is estimated to be offset by the amount allocated to the airport for tax generated in that area, therefore no changes are recommended.
• Reductions in attendance in some recreation classes and events in the amount of $68,571.
• Overall reductions in permitting fees of $4,103,700 , as a result of a quicker slowdown in the residential permits than previously anticipated due to the aggressive increase in interest rates. The General Fund will need an appropriation from the unencumbered fund balance in the amount of $4,506,218 to offset the overall reductions in permitting , plan check, and inspection fees to ensure a balanced budget of revenues to expenditures.
• Expenditure increase of $855,702.29 primarily is a result of $425,000 in Fire Department requests for a remodel in Fire Station 311, and additional SCBA safety equipment. Animal Control requests are for vehicle repairs and Facilities requests for miscellaneous projects include repairs of the tennis courts at Sunset Ridge Park. The remaining expenditures are spread throughout the other departments which rely on the general fund.
• With the recommended adjustments, the cash flow is projecting to be at 42% of the General Fund Reserve (required 17%).
Projected 42% $39,808,291
Required 17% $16,161,213
Despite the significant decrease in revenue projections for the General Fund resulting primarily from reduced single family residential building activity, the General Fund remains healthy. Because the City has greatly exceeded its General Fund Reserve requirements in recent fiscal years, this unforeseen drop in revenue can be absorbed by reserve funding, which is the specific purpose of reserves.
Measure P (Fund 105):
• With a return to more brick and mortar shopping, the Measure P transaction tax continues to exceed th e expectations of staff and our consultant HdL and as a result, the revenue budget for this line item is being increased by $1,632,314 to $30,215,000 for FY2022-2023. Total revenue budget for this fund will be $31,146,186.
• Currently no additional expenditures are planned for this current budget year.
• With the recommended adjustments, the cash flow is projecting to be at 76% of the Measure P Fund Reserve (required 17%).
Projected 76% $26,123,004
Required 17% $5,877,201
Fueling Stations (Fund 120) (Other Governmental Funds – Public Works):
Based on the rising costs of utilities in the first six months, an additional $133,000 is being requested to cover electric and natural gas costs through the remainder of the year.
Special Revenue Funds:
• City as Housing Successor Agency (Fund 205) is requesting an additional $101,000 for consulting services and continued monitoring and reporting in Old Town for the Nuway remediation project.
• LMADs/MADs/DFADs (Fund 370) are adding $49,060 primarily for unforeseen block wall repairs. Insurance claims are being prepared for cost recovery. • State grants are increasing revenue by $500,000 and expenditures by $447,000 for AB2399 funding received in the Police Department.
Enterprise Funds:
Victorville Water (Funds 410-413):
• Revenue increases of $1,565,516 in water Fund 410 include increases for interest rate hikes, increased late charges, and primarily a new rate methodology in metered water service fixed charges for better revenue stability and fixed cost coverage.
• Revenue increases of $1,278,747 in wastewater Fund 412 and $375,000 in reclaimed water Fund 413 stem from increased recycled water consumption and sewer fees which is based on this consumption.
• Expenditure decreases of $755,360 are primarily from revised watermaster charges.
Victorville Municipal Utility Services (Funds 419-423):
• Revenue increase of $1,000,000 in VMUS Gas Fund 419 is a result of gas cost passthrough charges and increased loads.
• Expenditure increases of $2,242,171 is for VMUS Gas offset and additional funding was needed for the Kern River Interconnection Agreement a nd engineering services for the project.
• Expenditures for VMUS Electric Fund 420 are an additional $848,470, primarily for delays in renewable power projects requiring an additional power purchase of $300,746 and the purchase of transformers with long lead times for $547,724.
Southern California Logistics Airport (Funds 450-457):
• Revenue increases of $221,290 primarily are resulting from additional leases and renewals in the operations Fund 450.
• Airport Operations also increased expenses by $226,064 for various maintenance and services including re-roofing SCLA Building 744.
General Fund Reserve Policy Update (Funds 100 & 105):
Also for approval with the mid-year budget request is an updated General Fund Reserve Policy. Attachment E includes a blacklined version of the policy to clearly show that a formula for calculating the required reserve has been added. This formula applies to both the General Fund (100) and the Measure P Fund (105). The 17% reserve requirement remains unchanged.
Conclusion:
Budgeting for the post -pandemic activity has been challenging, although our main revenue sources appear to be tracking with our projections or slightly higher. Expected slowdown of residential permitted improveme nts and growth occurred sooner than anticipated although industrial growth is still occurring. The primary changes aside from residential slowdown stem from our enterprise funds as a result of realized costs that we were unable to accurately estimate prior to the start of the fiscal year , such as the large increase in natural gas costs and increased consumption. The City continues to diligently search for additional revenue resources to help not only the community, but also maintain fiscal stability so that future resources are available. Budgets that are currently projected to be over -budget at the end of the year have been addressed with the appropriations requests but will be continuously monitored by staff.
Staff remains available for any questions Council may have.
Attachments: A. Mid-Year Budget Summary
B. Resolution No. 23-013
C. Resolution No. VWD-23-004
D. Resolution No. SCLAA-23-003
E. Resolution No. 23-016
Clean Version
City Council / Board of Directors
Public Hearing(s)
Item Number: 2
Meeting of: March 7, 2023
Submitted By:
Sophie Smith, Deputy City Manager
John Mendiola, Finance Director / City Treasurer
Subject:
Mid-Year Budget Review and Amendment Request to the 2022-2023 Fiscal Budget
Recommendation:
That the City Council and Board of Directors approve the changes reflected in this agenda item along with the included attachments by adopting:
1. Resolution No. 23 -013 of the City Council of the City of Victorville amending Resolution 22-064, as amended, the budget resolution for the City of Victorville for Fiscal Year 2022-2023, relating to an appropriation of funds.
2. Resolution No. VWD 23 -004 of th e Board of Directors of the Victorville Water District amending Resolution VWD 22-012, as amended, the budget resolution for the Victorville Water District for the Fiscal Year 2022 -2023, relating to an appropriation of funds.
3. Resolution No. SCLAA 23-003 of the Board of Directors of the Southern California Logistics Airport Authority amending Resolution SCLAA 22-011, as amended, the budget resolution for the Southern California Logistics Airport Authority for the Fiscal Year 2022-2023, relating to an appropriation of funds.
4. Resolution No. 23 -016 of the City Council of the City of Victorville adopting an updated General Fund Reserve Policy (City Council Policy CP-23-01).
Fiscal Impact:
A summary of the mid-year budget changes are as follows (details of the changes are found in Attachment A):
• City of Victorville – An appropriation of funds, increasing the expenditures by $4,439,347.10 and increasing the revenue by $2,216,604.00. • General Fund expenditures for City operations are projected to be $95,065,959.
The General Fund operating budget will be offset by a revenue projection of $88,444,688, requiring an appropriation from unencumbered fund balance of $4,506,218 to balance the General Fund budget. This takes into account the annual payment of $1,000,000 from the Victorville Municipal Services to the General Fund for repayment of a loan agreement, along with the $1,115,053 in rolled over CIP project expenses.
• Victorville Water District – An appropriation of funds, decreasing the expenditures by $755,360.47 and increasing the revenue by $3,219,263.39. • Southern California Logistics Airport Authority – An appropriation of funds, increasing expenditures by $226,064.00 and increasing the revenue by $221,290.00.
Approval of this agenda item would increase total expenditure citywide budget for the Fiscal Year 2022 -2023 by $4,4 39,347.10 and increase the total combined revenue budget for the Fiscal Year 2022-23 by $2,216,604.00.
Strategic Plan Goal:
This item aligns with Goal A: Fiscal Sustainability - Foster fiscal health through disciplined long-term planning, cost control, in creased revenues, and cost recovery. A Mid -Year Budget review to appropriately adjust revenue and expenditure projections is appropriate for proper planning.
Background:
The Fiscal Year 2022 -2023 Budget, effective July 1, 2022, was adopted by the City Council/Board of Directors on June 21, 2022. Since that time, staff regularly monitored the overall performance of the City’s revenues and expenditures and gained some insight as to possible future needs. The mid-year budget review is an opportunity for staff to use actual operating results through the first half of the fiscal year and to provide an update to the City’s current operating budget by recommending adjustments to the budget needed to accommodate changes in revenue and expenditure estimates, programs, and staffing needs.
The following report compares and summarizes projected revenues and expenditures by the General Fund, Measure P, Special Revenue Funds (Other Governmental Funds) and Enterprise Funds.
Discussion:
The chart below p rovides a City-wide summary of revenues and expenditures from the adopted budget, revised budget, and mid-year projections for the 2022-2023 fiscal year.
The column labeled FY 22/23 Revised Budget is the Council-approved budget in addition to any Council -approved resolutions for additional appropriations through February 7, 2023.
FY 2022-2023 City of Victorville Budget Summary as of actions taken through the February 7, 2023 City Council meeting are shown below:
Citywide FY22/23
Adopted
Budget
FY22/23
Revised
Budget
Mid-Year
Proposed
Budget
Difference:
Increase
(Reduce)
Revenue 333,533,046 334,118,946 336,635,550 2,216,604
Expenditures 320,651,160 371,937,608 376,376,955* 4,439,347
*Note: This includes $49.5 million in Capital Improvement Projects (CIP) rollover funds. If we subtract the CIP rollover, the Mid-Year Proposed Budget for Total Expenditures is $326,895,826 which will leave us a surplus of $9,739,724 in total revenue over total expenditures.
Overview of Major Changes and Recommended Adjustments by Fund Type:
General Fund (Fund 100):
General Fund FY22/23
Adopted
Budget
FY22/23
Revised
Budget
Mid-Year
Proposed
Budget
Difference:
Increase
(Reduce)
Revenue 91,731,061 92,616,959 88,444,688 (4,172,271)
Expenditures 92,196,303 94,210,257 95,065,959 855,702
• Projections for sales and property taxes remain fairly close to budgeted amounts.
The slight increase projected for sales tax is estimated to be offset by the amount allocated to the airport for tax generated in that area, therefore no changes are recommended.
• Reductions in attendance in some recreation classes and events in the amount of $68,571.
• Overall reductions in permitting fees of $4,103,700 , as a result of a quicker slowdown in the residential permits than previously anticipated due to the aggressive increase in interest rates. The General Fund will need an appropriation from the unencumbered fund balance in the amount of $4,506,218 to offset the overall reductions in permitting , plan check, and inspection fees to ensure a balanced budget of revenues to expenditures.
• Expenditure increase of $855,702.29 primarily is a result of $425,000 in Fire Department requests for a remodel in Fire Station 311, and additional SCBA safety equipment. Animal Control requests are for vehicle repairs and Facilities requests for miscellaneous projects include repairs of the tennis courts at Sunset Ridge Park. The remaining expenditures are spread throughout the other departments which rely on the general fund.
• With the recommended adjustments, the cash flow is projecting to be at 42% of the General Fund Reserve (required 17%).
Projected 42% $39,808,291
Required 17% $16,161,213
Despite the significant decrease in revenue projections for the General Fund resulting primarily from reduced single family residential building activity, the General Fund remains healthy. Because the City has greatly exceeded its General Fund Reserve requirements in recent fiscal years, this unforeseen drop in revenue can be absorbed by reserve funding, which is the specific purpose of reserves.
Measure P (Fund 105):
• With a return to more brick and mortar shopping, the Measure P transaction tax continues to exceed th e expectations of staff and our consultant HdL and as a result, the revenue budget for this line item is being increased by $1,632,314 to $30,215,000 for FY2022-2023. Total revenue budget for this fund will be $31,146,186.
• Currently no additional expenditures are planned for this current budget year.
• With the recommended adjustments, the cash flow is projecting to be at 76% of the Measure P Fund Reserve (required 17%).
Projected 76% $26,123,004
Required 17% $5,877,201
Fueling Stations (Fund 120) (Other Governmental Funds – Public Works):
Based on the rising costs of utilities in the first six months, an additional $133,000 is being requested to cover electric and natural gas costs through the remainder of the year.
Special Revenue Funds:
• City as Housing Successor Agency (Fund 205) is requesting an additional $101,000 for consulting services and continued monitoring and reporting in Old Town for the Nuway remediation project.
• LMADs/MADs/DFADs (Fund 370) are adding $49,060 primarily for unforeseen block wall repairs. Insurance claims are being prepared for cost recovery. • State grants are increasing revenue by $500,000 and expenditures by $447,000 for AB2399 funding received in the Police Department.
Enterprise Funds:
Victorville Water (Funds 410-413):
• Revenue increases of $1,565,516 in water Fund 410 include increases for interest rate hikes, increased late charges, and primarily a new rate methodology in metered water service fixed charges for better revenue stability and fixed cost coverage.
• Revenue increases of $1,278,747 in wastewater Fund 412 and $375,000 in reclaimed water Fund 413 stem from increased recycled water consumption and sewer fees which is based on this consumption.
• Expenditure decreases of $755,360 are primarily from revised watermaster charges.
Victorville Municipal Utility Services (Funds 419-423):
• Revenue increase of $1,000,000 in VMUS Gas Fund 419 is a result of gas cost passthrough charges and increased loads.
• Expenditure increases of $2,242,171 is for VMUS Gas offset and additional funding was needed for the Kern River Interconnection Agreement a nd engineering services for the project.
• Expenditures for VMUS Electric Fund 420 are an additional $848,470, primarily for delays in renewable power projects requiring an additional power purchase of $300,746 and the purchase of transformers with long lead times for $547,724.
Southern California Logistics Airport (Funds 450-457):
• Revenue increases of $221,290 primarily are resulting from additional leases and renewals in the operations Fund 450.
• Airport Operations also increased expenses by $226,064 for various maintenance and services including re-roofing SCLA Building 744.
General Fund Reserve Policy Update (Funds 100 & 105):
Also for approval with the mid-year budget request is an updated General Fund Reserve Policy. Attachment E includes a blacklined version of the policy to clearly show that a formula for calculating the required reserve has been added. This formula applies to both the General Fund (100) and the Measure P Fund (105). The 17% reserve requirement remains unchanged.
Conclusion:
Budgeting for the post -pandemic activity has been challenging, although our main revenue sources appear to be tracking with our projections or slightly higher. Expected slowdown of residential permitted improveme nts and growth occurred sooner than anticipated although industrial growth is still occurring. The primary changes aside from residential slowdown stem from our enterprise funds as a result of realized costs that we were unable to accurately estimate prior to the start of the fiscal year , such as the large increase in natural gas costs and increased consumption. The City continues to diligently search for additional revenue resources to help not only the community, but also maintain fiscal stability so that future resources are available. Budgets that are currently projected to be over -budget at the end of the year have been addressed with the appropriations requests but will be continuously monitored by staff.
Staff remains available for any questions Council may have.
Attachments: A. Mid-Year Budget Summary
B. Resolution No. 23-013
C. Resolution No. VWD-23-004
D. Resolution No. SCLAA-23-003
E. Resolution No. 23-016