Item Number: 3
City Council / Board of Directors
Public Hearing(s)
Meeting of: June 4, 2024
Submitted By:
Sophie L. Smith, Deputy City Manager
Carmen Cun, Finance Director / City Treasurer
Subject:
Annual Budget for Fiscal Year 2024-2025
Recommendation:
That Your Honorable City Council, also sitting as the Victorville Library Board of Trustees, Southern California Logistics Airport Authority, Successor Agency to the Victorville Redevelopment Agency, Victorville Water District, and City of Victorville as Housing Asset Successor:
(1) Open and conduct a Public Hearing;
(2) Close the Public Hearing;
(3) Accept the transmittal letter from the Measure P Oversight Committee (MPOC); (4) Adopt the attached Resolutions: No. 24-037, LBT 24-002, SCLAA 24-003, R-SA-24-001, VWD 24-006, and CHAS 24-003, respectively, for the Establishment and Adoption of the FY 2024-2025 Annual Budget; (5) That Your Honorable City Council adopt Resolution No. 24-048, affirming the General Fund Reserve Policy (City Council Policy No. CP-23-01); (6) That Your Honorable City Council adopt Resolution No. 24-038, establishing and adopting the Fiscal Year 2024-2025 Annual Appropriations Limit in the amount of $1,491,904,943, pursuant to California State Constitution Article XIIIB Government Spending Limitation.
Fiscal Impact:
The total operating budget for the City is approximately $377,874,601.83 including $59,708,917 in capital. Revenue projections for the City are $354,521,440. General Fund expenditures for City operations are projected to be $105,201,604.39. The General Fund operating budget will be offset by a revenue projection of $101,023,995. Given the annual payment of $1,000,000 from the Victorville Municipal Services to the General Fund for repayment of a loan agreement, an appropriation is requested to balance the budget from the unencumbered fund balance in the amount of $3,177,609.39. 3 6
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The fiscal impact for the Measure P (Fund 105) expenditures is $26,372,877.47 as budgeted in the Fiscal Year (FY) 2024-2025 proposed budget and will be offset by a revenue projection of $33,383,408. After including the Measure P Capital budget of $10,964,553, an additional appropriation to balance the budget from the unencumbered Measure P fund balance in the amount of $3,954,022.47 is requested. This results in $37,337,430.47 in total expenditures for FY 2024-2025.
Strategic Plan Goals:
Staff proposes the attached budget for the FY 2024-2025, which serves as a financial plan and operations guide to reflect the policies, goals, and priorities of the City Council, Board of Directors, and community while at the same time maintains fiscal stability.
This budget focuses on the following community and Council/Board priorities:
A.Financial Sustainability Goal – foster disciplined long-term planning, cost control, increased revenues, and cost recovery.
•Updated multi-year cash flows were presented to the Executive Team to ensure current year actions were sustainable and planning and forethought were put into the current and future City needs. Staff continues thinking of ways to sustain and improve programs while protecting the City against unexpected expenses or economic fluctuations.
B.Public Safety Goal – implement strategies to support a growing community. •Measure P funding continues to support the Public Safety Plan and increase staffing and resources for Police, Fire, Code Compliance and Animal Control. This includes funding a reserve for the continued replacement of aging fire apparatus, improvements to the fire stations, additional medical and fire equipment, reserve funding for the new police station, and continued funding of additional code compliance and animal control staff to support a pro-active approach for our community.
C.Community and Economic Development Goal – support the preservation of the community for all its members.
•Continued work per the Old Town Specific Plan includes continued planning, design, and restoration in the Old Town area of the city; continued work with establishing the State’s first Community Revitalization Investment Authority (CRIA) to fund development and improvement needs for the Old Town area; and working with community groups to promote the Old Town area.
D.Reduce Homelessness Goal – implement effective solutions to reduce Homelessness.
•The City continues to address the issues of homelessness through our new Wellness Center, and working with external agencies toward integrated solutions for our business and residential communities.
E.Invest in Infrastructure Goal – create a healthy-livable community by investing in infrastructure and innovations.
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•The City is focusing on infrastructure projects for FY 2024-2025 that include several roof replacements, upgrading booster stations and valve replacements to ensure continuous water availability, and several road pavement projects.
F.Communications and Outreach Goal – build strong connections with community partners, residents, and employees.
•The City continues to plan multiple events throughout the year and looks forward to all the opportunities to connect with its residents and business owners including Concerts in the Park/Victorville Sings, July 4th Fireworks Festival, Fall Festival, National Night Out, Hallow- Boo event, Veterans Parade, Festival of Lights, Spring Festival and Victorville 101 Bus Tours.
G.Organizational Effectiveness and Sustainability Goal – provide high-quality services utilizing local government best practices, employee development, support, and retention.
•The City continues to focus on its employees through promotion of the core values of customer service, transparency, integrity, and accountability. Additionally, a 3% cost of living adjustment as well as a focus on training and education, reflect the continued desire to invest in the development, support, and retention of our growing staff. This enables the City to continue our priorities to provide the best access to city services as well as continuous improvements in customer service for our residents and businesses.
Discussion:
General Fund (GF)
The City’s General Fund Reserve requires 17% of the total General Fund expenditures; however, for FY 2024-2025, reserves are projected to be at approximately 43%. The City’s GF reserve level continued to grow to just over $52 million dollars at the start of FY 2023-2024; allowing the City to budget a deficit spend if needed. Over the last couple of years, staff has been very conservative when budgeting revenues, but due to inflation, less conservative when budgeting expenditures. This has led to staff presenting a budget with deficit spending for the General Fund. However, our historical actual spending shows that we have not actually spent over our projected revenue; thus, allowing the General Fund balance to continue to grow.
With the proposed FY 2024-25 budget, we once again are showing deficit spending in the amount of $3,177,609.39 after taking into account the annual Victorville Municipal Utilities Services (VMUS) loan repayment. Staff will continue to closely monitor the General Fund to ensure fiscal sustainability.
Measure P
On July 21, 2020, the City Council passed Resolution No. 20-065, authorizing the submittal of a one percent General Transaction and Use Tax Measure to be submitted to the voters at the November 3, 2020, General Municipal Election. On October 6, 2020, the City Council adopted Resolution No. 20-083, establishing the Measure P Oversight 3 6
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Committee (MPOC). The voters approved Measure P enabling the City to expand essential services and increase public safety for the City’s growing population. The one percent transactions tax, which became effective on April 1, 2021, is projected by HdL Companies to bring in sales tax revenues of $29.25 million dollars in the FY 2024-2025.
On May 9, 2024, staff presented to the MPOC the draft Year 4 Allocation plan, which included expected revenues for the upcoming fiscal year and proposed expenditures for the Police, Fire, Code Compliance and Animal Control, Community Services, and Planning departments. The proposed allocations for FY 2024-2025 are directed at enhancing public safety, community improvements, homelessness solutions, and improving fiscal target reserves. The allocations align with the Measure P Policy Document that the Measure P Oversight Committee adopted on May 20, 2021, and allow for the budget and expenditures to be clearly defined with the intent of Measure P. Details on all Measure P activity for this fiscal budget can be viewed in Attachment J, which contains the Measure P Oversight Committee Transmittal Letter.
Changes Since May 14, 2024 Budget Workshop
During the budget workshop, staff presented a proposed Citywide expenditure amount of $377,268,430. In the past three weeks, the budget has been fine-tuned with additions and deletions of various costs, bringing the new total to $377,874,601; an increase of $606,171.00 in expenditures. These changes are summarized below:
Proposed Expenditures on May 14, 2024 $377,268,430.00
Minus:
CIP Projects / Purchases removed -$905,000.00
Deductions in Operating Costs -$298,254.00
Deductions in Personnel -$68,575.00
Plus:
CIP Projects / Purchases added $1,878,000.00
Total $377,874,601.00
Below are highlights of the CIP projects and purchases that were increased or added to the budget:
•$1.2 million was budgeted to upgrade the fire protection system to be PFAS free for 7 hangers at Southern California Logistics Airport (SCLA); originally, this was budgeted at $350,000.
•$500,000 was added to the budget to allow a restorative demolition project for Building 321 located at SCLA.
•$38,000,369 was the amount approved for the Sheriff’s Contract, originally budgeted at $37,771,276.
•$10,000 for new computer equipment for the Traffic Management Center at City Hall.
•$75,000 was added for third party services to audit franchise fees received by the City of Victorville.
•$88,000 was budgeted for the replacement of a Kubota Tractor, originally budgeted at $75,000.
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•$55,000 was budgeted for a 10’ hydraulic mower, originally budgeted at $50,000. •$425,000 was budgeted for a sweeper truck at SCLA, originally budgeted at $400,000.
These changes have been incorporated into the final budget totals and recommendations being presented in this report. Please see Attachment K for complete line-item details of the FY 2024-2025 budget.
Appropriations Limit
The adoption of the Gann Spending Limitation Initiative (Proposition 4) in 1979, later amended by Proposition 111 in 1990, established Article XIIIB of the State Constitution, the requirement and procedure for establishing an appropriations limit for local agencies.
Each year, the State and local governments must adopt a resolution establishing an appropriations limit. The annual calculation of the appropriations limit must be reviewed as part of the City’s annual financial audit.
In brief, the amount of tax revenue the City is annually authorized to appropriate is limited by factors relating to changes in population and the economy. The population factor selected may either be the rate of change in population for the City or for the County. The economic factor selected may either be the percentage change in California’s per capita personal income or the percentage change in non-residential assessed property valuation due to new construction; however, the change in non-residential assessed property valuation is not available from the County of San Bernardino Assessor’s Office until after fiscal year end and after the adoption of the budget. The City’s auditors and management prefer the appropriations limit to be calculated in a timely manner and in correlation with the annual budget; therefore, the change in per capita personal income is used for this factor. The changes in population and the change in per capita personal income are provided by the California Department of Finance in May of each year (Attachment I).
The formula works as follows:
(% change in population (City or County) + 100)/100
X (multiplied by)
(% change in California per capita personal income + 100)/100 The value determined by the formula set forth above is then applied to the previous year’s limit to yield the new appropriations limit for the fiscal year. For FY 2024-2025, the percentage increase in City population growth was used since it was greater than the County’s (0.96% vs. 0.39%). With respect to the economy criterion, the percentage change in California’s per capita personal income is 3.62%. Therefore, the appropriations limit for FY 2024-2025 may be set at $1,491,904,943 (1.0096 x 1.0362 x FY 2023-2024 Appropriations Limit of $1,426,096,231). For complete calculation, please see Attachment H (Resolution 24-038 with Attachments 1, 2 and 3). 3 6
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Based on tax proceeds budgeted for FY 2024-2025 in the amount of $88,510,911 and State subventions received in the amount of $4,400,000, the City appropriations are $1,403,394,032 below the limit.
General Fund Reserve Policy
Pursuant to Council Policy No. CP-23-01, staff shall annually review the General Fund (including Measure P) Reserve Policy and recommend changes to the City Council. Staff has reviewed the 17% reserve target for both the General Fund (100) and Measure P Fund (105) and does not recommend any changes. Accordingly, staff recommends the Council adopt Resolution No. 24-048 affirming the General Fund Reserve Policy (Attachment G).
Summary:
This budget represents a continuing and concerted effort to develop a balanced budget that meets the community and Council goals. It includes investments in our community programs, infrastructure, public safety, and our city workforce. This budget provides funding to maintain current services and fund new critical expenditures. Although there may be unforeseen challenges ahead, our commitment to sound fiscal policies and a healthy general fund reserve will enable us to continue to move this City and our community successfully forward.
Therefore, staff recommends approval of Resolutions No. 24-037, LBT 24-002, SCLAA 24-003, R-SA-24-001, VWD 24-006, and CHAS 24-003 in order to adopt the Fiscal Year 24-25 budget for the City and its related entities.
Staff remains available for any questions the Council may have.
Attachments: A. Resolution No. 24-037 Establishing and Adopting the Annual Budget for Fiscal Year 2024-2025 for the City of Victorville B. Resolution No. LBT 24-002 Establishing and Adopting the Annual Budget for Fiscal Year 2024-2025 for the Victorville Library C. Resolution No. SCLAA 24-003 Establishing and Adopting the Annual Budget for Fiscal Year 2024-2025 for SCLAA
D. Resolution No. R-SA-24-001 Establishing and Adopting the Annual Budget for Fiscal Year 2024-2025 for the Successor Agency to the Victorville Redevelopment Agency
E. Resolution No. VWD 24-006 Establishing and Adopting the Annual Budget for Fiscal Year 2024-2025 for the Victorville Water District
F. Resolution No. CHAS 24-003 Establishing and Adopting the Annual Budget for Fiscal Year 2024-2025 for the City as Housing Assets Successor
G. Resolution No. 24-048 Affirming the General Fund Reserve Policy H. Resolution No. 24-038 Adopting the Fiscal Year 2024-2025 Appropriations Limit Calculation Attachments 1, 2 and 3 I. California Department of Finance Price Factor and Population 3 6
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Information
J. Measure P Oversight Committee Transmittal Letter
K. 2024-2025 Proposed Fiscal Year Budget