Agenda Item No. 12
CITY OF YUCAIPA
AGENDA REPORT
TO: Honorable Mayor and City Council
FROM: /L44
Raymond A. Casey, City Manager
AlAndrew Hamilton, Director of Finance
FOR: City Council Meeting of April 25, 2022
SUBJECT: Fiscal Year 2021-22 — 3rd Quarter General Fund Budget Report RECOMMENDATION:
That City Council review the 3rd Quarter General Fund Budget Report for Fiscal Year (FY) 2021-22 and:
1. Amend the FY 2021-22 General Fund Adopted Budget by:
a. Increasing the estimated revenue for the Building Plan Review — Fire in the amount of $105,000; and
b. Increasing the estimated revenue for Code Enforcement in the amount of $100,000; and
c. Increasing the estimated revenue for the various Franchise Fees in the amount of $100,000; and
2. Amend the FY 2021/2022 Budget and Capital Improvement Program Budget by reallocating $739,000 in prior year's General Fund Net Revenues (Unassigned Fund Balance) directly to the City's Capital Projects Fund (Fund 35) rather than through the current fiscal year's General Fund Operating Budget including:
a. Reallocating the amount of $39,000 related to the Five Winds/El Dorado Ranch Park Project (City Council approved on August 23, 2021); and b. Reallocating the amount of $100,000 related to the Flag Hill Veterans Memorial Park Improvement Project (City Council approved on November 8, 2021); and c. Reallocating the amount of $370,000 related to the Five Winds/El Dorado Ranch Park Project (City Council approved on November 8, 2021); and d. Reallocating the amount of $230,000 in Pass-thru Redevelopment Agency funds related to the Five Winds/El Dorado Ranch Park Project (City Council approved on November 8, 2021); and
City Council Agenda
Meeting of April 25, 2022
FY 2021-22 — 3' Quarter Budget Report
3. Increase the portion of the City's General Fund Balance committed for severe economic emergencies from 20% to 30% effective for the Fiscal Year 2021-22 annual operating budget and subsequent fiscal year budgets.
BACKGROUND:
The purpose of the Yd Quarter General Fund FY 2021-22 Budget Report is to provide a financial status update to the original Council adopted budget projections, and revised budget figures, relative to revenues and expenses. A review of this nature will typically result in determining whether expenditure adjustments may be necessary to offset any projected reductions in revenues based upon additional funding and information received from other agencies. This review is also performed in order to ensure that actual expenditures do not exceed legal appropriations, as approved by the City Council. Legal appropriations reflect the amount of resources that Council has authorized in the budget for allocation upon its original adoption.
Over the past several years, new and/or revised services have been approved by the City Council during the Budget process, through the use of Service Level Options (SLOB), for programs or projects that may have been unforeseen at the time of the budget adoption or may have been deferred for future consideration or simply carried over due to delays in obtaining the equipment/material involved.
DISCUSSION:
In June 2021, the City Council adopted the FY 2021-22 Annual Budget for all the funds of the City, including the General, Special Revenue, Capital Project, Internal Service and Agency Funds. The Annual Adopted Budget is a dynamic document reflecting the spending plan for the City for the ensuing FY.
In addition to providing the spending plan for the ensuing FY, the Annual Adopted Budget includes a review of the previous year's revenues and expenditures, as estimated at the time the City Council considers the initial Draft of the budget. This information is presented as estimated actuals, whereby staff presents a conservative estimate for Council to understand the amount of revenues and expenditures, in relation to the Annual Adopted Budget in the previous year. An understanding of estimated actuals from the previous year assists staff in forming the basis for developing the financial requirements for the upcoming FY.
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City Council Agenda
Meeting of April 25, 2022
FY 2021-22 — 3' Quarter Budget Report Page 3 of 6
3rd Quarter General Fund FY 2021-22 Budget Summary
The following table compares the adopted budget to the estimated actual amounts for FY 2021-22:
Cl1
Mid -Year
Q33
03 to Bud eft
FY 2022 Original
FY 2022
FY 2022
FY 2022
Adopted Budget
Estimated
Actuals
Estimated
ALtuals
Estimated Actuals
Difference
Revenues
Property Taxes
$
11,492,545
$
11,492,545
$
11,892,545
$ 11,892,545
$ 400,000
Sales and Use Tax
$
4,300,000
$
4,402,536
$
5,027,131
$ 5,027,131
$ 727,131
Franchise Fees
$
1,350,000
$
1,350,000
$
1,350,000
$ 1,450,000
$ 100,000
Other Revenues
$
10,476,666
$
10,582,066
$
10,603,761
$ 10,808,761
$ 332,095
Transfers -In
$
1,731,417
$
1,731,417
$
1,731,417
$ 1,731,417
$ -
Total Revenues and Transfers -In
$
29350,628
$
29,558,564
$
30,604,854
$ 30,909,854
$ 1,559,226
Expenses
Admi n Svcs Dept
$
1,608,782
$
1,608,657
$
1,608,657
$ 1,526,104
$ (82,678)
City Council
$
72,585
$
67,585
$
67,585
$ 65,022
$ (7,563)
City Manager Dept
$
1,377,355
$
1,423,928
$
1,431,463
$ 1,247,116
$ (130,239)
Community Svcs Dept
$
3,297,975
$
3,441,575
$
3,463,270
$ 2,925,951
$ (372,024)
Development Svcs Dept
$
6,008,395
$
6,008,395
$
6,049,732
$ 5,782,391
$ (226,004)
General Svcs Dept
$
1,947,738
$
2,092,314
$
2,092,315
$ 1,836,516
$ (111,222)
Non -Dept
$
885,328
$
728,057
$
842,222
$ 933,683
$ 48,355
Police Svcs
$
11,864,328
$
11,864,328
$
11,864,328
$ 11,864,328
$ -
Fire Svcs
$
4,729,326
$
4,729,326
$
4,784,118
$ 4,372,026
$ (357,300)
Transfers -Out
$
3,835,215
$
4,344,215
$
4,369,375
$ 3,860,375
$ 25,160
Expenses Authorized in Prior Year Budget
$
-
$
217,829 Ill
$
-
$ -
Total Expenses and Transfers -Out
$
35,627,027
$
36,526,209
$
36,573,065
5 34,413,512
Surplus / (Defict)
Budget Deficit funding sources:
(6,276,399) $ (6,967,645)
Use ofAssigned Fund Balance
$
1,717,397
$ 1,717,397
Use ofAdditlona/AsslgnedFund Balance
$
670,514
$ 670,514
ARPAEstimate-REVENUELOSS
$
2,178,221
$ 2,178,221
ARPAEstimate -STAFFING TO PRE -PANDEMIC LEVELS
$
703,163
$ 703,163
Adjusted Budget Surplusf(adddionel Derit to come from Reserves) $
(1,007,104)
$ (1,698,350)
Ill Allocated to individual departments for Mid -Year and subsequent reports $ (5,968,211)
$
(3,503,658)
$ 2,772,741
$ 1,717,397
$
1,717,397
$ -
$ 670,514
$
670,514
$ -
$ 2,178,221
$
2,178,221
$ -
$ 703,163
$
703,163
$
$ (698,916)
$
1,765,637
$ 2,772,741
Compared to the Q1 FY 2021-22 favorable budget variance of approximately $1.8 million, the 3`d Quarter Budget variance is approximately $2.8 million compared to the original budget which is the net effect of the following material items as explained below:
1. Previously approved Mid- year budget adjustments increasing budgeted revenue by approximately $1.3 million:
a. $400,000 of additional Property Tax forecast revenue in FY 2021-22 based on actual revenue receipts from FY 2020-21 plus an approximate 3% increase in assessed values reported by San Bernardino County from the prior fiscal year; and b. $624,595 of additional forecast revenue from increased Sales and Use Tax revenues as estimated from the City's sales and use tax consultant, HdL; and c. Estimated revenue for the various Other Revenue accounts in the amount of $127,095
2. Proposed budget adjustments increasing budgeted revenue by approximately $305,000:
a. $105,000 of additional forecast revenue for the Building Plan Review - Fire; and b. Increased forecast revenue for Code Enforcement in the amount of $100,000; and c. $100,000 of additional forecast revenue for the various Franchise Fees; and
3. Approximately $1.1 million of salary and benefit savings due to open positions, vacancies, and budgeting at top step, etc.; and
:e
City Council Agenda
Meeting of April 25, 2022
FY 2021-22 — 3`d Quarter Budget Report
4. Reduction of Transfers Outs from the General Fund in FY 21-22 for various Capital Projects due to the transfer of $5.2 million from the General Fund in FY 20-21 from prior year's General Fund Net Revenues to the City's Capital Projects Fund (Fund 35) and the $739,000 amount recommended herein; and
5. Various City Council approved budget expenditure increases in FY 21-22, mostly related to festivals and winter events.
Overall Fund Balance update for the General Fund
Below are the estimated Fund Balances for the respective periods based on the updated estimated actuals for FY 2021-22:
Adopted Estimated Favorable/
Budget Actuals (Unfavorable)
FY 2021-22 FY 2021-22 Variance
Actual Fund Balance, June 30, 2020 $ 54,953,496 $ 54,953,496 $ Actual Fund Balance, June 30, 2021 (1) $ 54,789,005 $ 52,371,876 $ (2,417,129) Estimated Fund Balance, June 30, 2022 $ 51,393,990 $ 51,774,602 $ 380,612 As reflected above, a variance of ($92,805) is reflected in the estimated Fund Balance as of June 30, 2022, due to the previously mentioned FY 2020-21 and FY 2021-22 budget revisions (also, see footnote below).
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City Council Agenda
Meeting of April 25, 2022
FY 2021-22 — 3`d Quarter Budget Report
Assigned and Unassigned Fund Balance update for the General Fund Below are the updated estimated Assigned and Unassigned Fund Balances based on the updated estimated actuals for FY 2021-22:
Assigned Fund Balance
Adopted Estimated Favorable/
Budget Actuals (Unfavorable)
FY 2021-22 FY 2021-22 Variance
Actual Fund Balance, June 30,2020 $ 3,187,946 $ 3,187,946 $ Actua I Fund Ba I ance, June 30, 2021 $ 2,387,911 $ 2,387,911 $ Estimated Fund Balance, June30, 2022 $ - $ - $
Unassigned Fund Balance
Adopted
Estimated
Favorable/
Budget
Actuals
(Unfavorable)
FY 2021-22
FY 2021-22
Variance
Actua I Fund Ba I ance, June 30, 2020 $ 6,530,400
$ 6,530,400
$
Actual Fund Balance, June 30, 2021 $ 14,256,132
$ 9,284,068
$ (4,972,064) (l)
Estimated Fund Bala nce, June 30, 2022 $ 12,093,822
$ 11,074,705
$ (1,019,117)
(1) At the January 24, 2022 City Council Meeting, the City Council approved a total of$6,000,000 in capital funding transfers in FY 20-21 resulting from prior year's General Fund Net Revenues from the General Fund to the City's Capital Projects Fund (Fund 35) to fund future capital and other projects. Staff will return to the City Council at an upcoming Council Meeting to discuss prioritization for use of those funds as well as the use of ARPA funding.
Em
City Council Agenda
Meeting of April 25, 2022
FY 2021-22 — 3`d Quarter Budget Report Page 6 of 6
Changes to the Unassigned Fund Balance have been impacted by following factors:
1. Change in Emergency Contingency for approximately $2 million favorable impact (20% requirement changed from 30%); and
2. City Council approved transfer of $5,267,121 in previous transfers back to the General Fund from the Traffic Facilities Fund that slowly accumulated over multiple fiscal years as a result of General Fund funded street project balances not being returned to the General Fund.
3. $1,908,560 increase in Unassigned Fund Balance in FY 2019-20 due to Revenues and Transfers In exceeding Expenditures and Transfers Out.
4. City Council approved transfers of $6.0 million from the General Fund in FY 20-21 resulting from prior year's General Fund Net Revenues from the General Fund to the City's Capital Projects Fund (Fund 35) and other projects to fund future capital projects.
Below are some examples of how future Unassigned Fund Balances are affected by the interaction between future revenues and expenses:
1. Future development of open areas which increases development impact fees (DIF) and related DIF loan repayment to the general fund accompanied by increased future property tax assessments, partially offset by future city development costs and operational expenses.
2. Paramedic Fund subsidies incurred by the General Fund ($809,378 in FY 2021-22 budget)
3. One-time ARPA Funding to re -balance staff to pre -pandemic levels
4. One-time ARPA Funding for Capital Projects
5. One-time ARPA Funding for pandemic -related revenue losses
6. One-time ARPA Funding for other eligible expenses as approved by the City Council FISCAL IMPACT:
The fiscal impact is discussed above.
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