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HomeMy WebLinkAboutItem No. 1 - Presentation of Fiscal Year 2020/21 Proposed Budget Staff Report City of San Bernardino Request for Council Action Date: June 2, 2020 To: Honorable Mayor and City Council Members From: Teri Ledoux, City Manager Subject: Presentation of Fiscal Year 2020/21 Proposed Budget Recommendation That the Mayor and City Council of the City of San Bernardino, California, receive a presentation of the FY 2020/21 Proposed Budget and provide direction to staff. Background The City of San Bernardino finds itself in the same challenging economic environment as other jurisdictions throughout the country as a result of the COVID19 pandemic. The loss of revenue related to the pandemic has and will continue to have significant idents. The FY 2020/21 Proposed Budget reflects an operating deficit of $10.3 million. The proposed budget reflects the cost of providing services at pre-COVID19 levels and does not include any additional services or programs. Attachment 1 to this report gives a brief overview of General Fund revenues and expenditures, and Attachment 2 lists recommendations for reducing the projected deficit of $10.3 million (and these recommendations are discussed in detail later in this report). In January 2020, as the preparation of the FY 2020/21 budget was underway, most economists and investors expected the 11-year economic growth cycle to continue through FY 2020/21 and staff had been working on the development the budget under these expectations. In early March, prior to the COVID 19 crisis, a deficit of $1.3 million was projected for FY 2020/21. Staff felt confident that the pre-COVID 19 deficit could be bridged through slight reductions in spending and potential revenue measures including an update to the Cit financial impacts have been drastic and immediate. Since the County ordered a shelter in place order in March of this year, the City of San Bernardino has seen retail stores, many hotels, and restaurants close their doors completely as the community struggles to adapt to this extraordinary challenge. We have also seen our daytime population drop as workers and visitors observe the stay- at-home orders, telework and limit their movements to slow the spread of the virus. The swift reaction by consumers and businesses to the outbreak of the COVID 19 pandemic and the stay-at-home orders issued throughout the nation has resulted in a significant decrease in spending on certain goods and services. The exact timetable Page 1 6762 for businesses reopening and returning to pre-COVID 19 levels of activity remains unknown making it is difficult to predict how long this recession will last, how far our revenues will fall, and when an economic recovery will start. As reported to the Mayor and City Council in the April 15, 2020 staff report regarding adjusted downward from mid- revenues from fees for services, sales tax and transient occupancy taxes are expected to continue through FY 2020/21. FY 2020/21 revenues, expenditures and reserves are discussed in detail below. Discussion After taking into consideration the expected impacts associated with the COVID 19 pandemic, the updated (or post-COVID 19) budget estimates reflect a General Fund deficit of $10.3 million. Below is a comparison of the City's General Fund FY 2020/21 Proposed Budget pre-COVID 19 and post-COVID 19 projections: General Fund FY 2020/21 Proposed BudgetPre-COVID 19Post-COVID 19 FY 2019/20 Estimated Ending Fund Balance$ 29,276,621$ 29,276,621 COVID 19 Adjustment$ (5,094,251) FY 2019/20 Revised Estimated Ending Fund Balance $ 29,276,621$ 24,182,370 FY 2020/21 Estimated Beginning Fund Balance$ 29,276,621$ 24,182,370 Proposed Revenues FY 2020/21$ 132,968,344$ 124,103,367 Proposed Expenditures FY 2020/21$ 134,355,805$ 134,355,805 Estimated Surplus/(Deficit)$ (1,387,461)$ (10,252,438) FY 2020/21 Estimated Ending Fund Balance $ 27,889,160$ 13,929,932 General Fund Revenues Revenue projections for FY 2020/21 are estimated at $124.1 million, which reflects a 7% ($8.9 million) decrease from FY 2020/21 pre-COVID 19 projections. Compared to updated estimates for FY 2019/20, revenues are projected to be 2% less ($2,800,200) in FY 2020/21. The chart below illustrates the sources of General Fund revenues and their proportion of General Fund revenues in total; each category is discussed below: Page 2 6762 Sales Tax Sales tax is the single largest revenue source for the General Fund and equals approximately 29% of all revenues. FY 2020/21 pre-COVID 19 sales tax revenue was projected at $37.8 million. However, based on updated projections provided by the ecreased by roughly $5.3 million (or 14%) to $32.5 million for the 2020/21fiscal year. The drop in sales tax revenue is predominately expected in the following sectors: General Consumer Goods (-16% or $1,280,479) Auto and Transportation (-26% or $1,455,108) Restaurants and Hotels (-23% or $1,041,537) Business and Industry (-13% or $785,079) Building and Construction (-18% or $599,381) Fuel & Service Stations (-12% or $381,601) Compared to updated FY 2019/20 estimates, sales tax revenue for FY 2020/21 is 6% lower ($2 million). Page 3 6762 Measure Z Sales Tax Pre- projected at $9.4 million for FY 2020/21. After taking into consideration the fiscal impacts from COVID 19 the updated estimate is now $7.9 million, reflecting a decline of almost $1.5 million (16%). Compared to updated FY 2019/20 estimates, Measure Z FY 2020/21 revenues are $868,000 less (10%). Page 4 6762 Transient Occupancy Tax (TOT) There are currently 42 active hotels and motels operating throughout the City. Based on our initial estimates (pre-COVID 19), the City's operators were projected to generate $5.05 million in TOT revenue in FY 2020/21. To determine the direct impact of COVID 19 and the stay-at-home order, staff con st These operators reported averaging roughly 80% occupancy levels prior to March 1 of st the current fiscal year. Collections received since March 1 show drastic and steady declines with an average occupancy rate of 30%. Based on these occupancy declines, TOT revenues are now projected at $4.4 million for FY 2020-21. This reflects a revenue decline of $668,449, or (13%) based on a comparison to our pre-COVID 19 estimates. Compared to FY 2019/20 updated estimates, FY 2020/21 revenues are TOT revenue are the same at $4.4 million. Page 5 6762 Utility Users Tax (UUT) UUT is a usage tax on the consumption of utility services, including to electricity, gas, telephone (including cell phone and long distance), and cable television. UUT was estimated to generate $23.3 million for the FY 2020/21, the same as the current year FY 2019/20 estimate. It remains to be seen how the effects of COVID 19 and stay-at-home to several cities in the area in addition to cities of similar size to the City of San Bernardino and found that all cities contacted are not decreasing this revenue category. At this time our FY 2020/21 budget estimate for UUT revenue has not been reduced. Staff will continue to monitor this revenue category. Franchise Fees Franchise fee revenues are projected to be $10.1 million for FY 2020/21, the same as the current year FY 2019/20 estimate. It is unclear how the effects of COVID 19 will impact this revenue category. Taking a conservative approach, the FY 2020/21 revenue estimate for this category reflects a modest decline of $355,000 (or 3%) from our pre-COVID 19 projections. Compared to FY 2019/20 updated estimates Staff will continue to monitor this revenue category. Property Tax in Lieu of VLF Property Tax in Lieu of VLF (vehicle license fees) are property tax revenues allocated to the City as compensation for vehicle license fee revenues previously allocated to cities by the State. This allocation is estimated and administered by counties and the amount increases or decreases based on the assessed valuation for each jurisdiction. In 2016 Page 6 6762 City Fire Services were annexed into the County Fire Protection District; part of this annexation shifted a percentage of Property Tax in Lieu of VLF from the City to the Fire District. This percentage between the City and the Fire District is reviewed and adjusted periodically. Currently the City receives 73.5% of the Property Tax in Lieu of VLF allocation. $18.3 million. This is based on the most current estimate provided by the County. It is unclear how COVID 19 will impact Property Tax in Lieu of VLF. Reduced sales could change the overall increase to assessed valuation, but those impacts would most likely be experienced in FY 2021/22. Staff remains in close contact with the County regarding this revenue source. 2019/20) estimate, Property Tax in Lieu of VLF is $1.5 million (9%) higher. Use of Money and Property FY 2020/21 pre-COVID 19 projections for this category were projected to be $1,100,000. This estimate has been lowered to $899,996 (a decline of $200,004) During the last quarter of FY 2019/20, business operators leasing property from the City have either requested lease waivers or have cancelled their lease contacts with the City altogether. These business operators include Big-5 Sporting Goods, Shandin Hills Golf Course, and Regal Cinemas, Inc. Staff will continue to monitor this revenue category for developments and updates. Charges for Services This revenue category includes revenue related fees from a variety of areas, but primarily Building and Safety, Planning, and Public Works. The additional revenue from the recently completed fee study is not included in the Proposed Budget, but is $5,789,015 is projected for this revenue category which is 4.3% ($260,000) less than pre COVID projections. In FY 2019/20 as part of an overall effort to audit and clean-up various funds, the decision was made to move $975,000 of plan check revenues out of a deposit fund and into the General Fund. There is also a corresponding increase in Building and Safety expenditures of $975,000 so there is no net impact to the General Fund. During the years following the bankruptcy a practice developed of tracking contract plan-check costs and related revenues in a deposit fund, however this is not in accordance with governmental accounting standards and has been corrected on a go-forward basis. Licenses and Permits Included in this category are revenues related to Business Registration, Building Permits and other various Public Works and Community Development related permits. Projections for this category are $10.9 million which is about a 4% reduction ($471,241) compared to FY 2020/21 estimates before the onset of COVID 19. Page 7 6762 General Fund Expenditures Expenditures discussed below do not include any proposed reductions (see section the Mayor and City Council. The proposed strategies for balancing the budget are also outlined on Attachment 2 to this staff report. During the preparation of the FY 2020/21 Proposed Budget, Departments were generally held to the same level of spending and services levels as in the current fiscal year. Proposed General Fund expenditures total $134.3 million. Compared to the FY 2019/20 Adopted Budget, General Fund expenditures have increased by approximately $7.5 million (6% increase). With a few exceptions, this increase is not related to additional programs or enhancements; rather, it reflects the rising cost of providing existing service levels to the community. There were a number of shifts of functions between departments which cause some departmental budgets to decrease while others have increased, but these realignments of functions among departments do not contribute to an overall increase to General Fund expenditures. These changes are discussed in the respective departmental sections below. Fund expenditures. Police Department costs comprise approximately 63% of all proposed General Fund expenditures, followed by Public Works at 13%. Factors Impacting Departments Citywide Liability and Workers Compensation - Premiums for liability and property insurance are budgeted at $2,407,200 which is an increase over the FY 2019/20 Adopted Budget of 49% ($793,000). $164,000 of this increase occurred during the course of FY 2019/20 after the budget was adopted. Page 8 6762 Premiums for excess workers compensation coverage and related charges are budgeted at $651,000 which represents an increase of 22% ($142,300). Premiums are affected by number and dollar value of claims paid. Human Resources continue to research options for minimizing escalating costs. Salary and Benefits - There are no cost of living increases included in the FY 2020/21 Proposed Budget. Overall, salaries are projected to increase by approximately $487,000; this is related to step/merit increases throughout the City and represents a less than 1% overall increase to budgeted salaries. Health insurance costs also increased throughout departments in total by $406,498. on a percentage applied to payroll and is i The General Fund portion of the increase in the unfunded liability payment is $2.7 million. Internal Service Charges While these departments held their service levels to FY 2019/20 levels, it is important to remember that the increases outlined here (merit increases, health insurance costs, CalPERS costs) also affect their bottom lines. This results in higher internal service charges to General Fund departments. The Proposed Budget reflects the transfer of the Recruitment Division (1 position and from City Manager Also reflected in the Proposed Budget is the transfer of three (3) full-time positions from 15, 2020 ($285,075). Recommendations regarding deletion of these positions are Professional contractual services in the Violence Intervention Program (VIP) have been reduced by $175,000 compared to the FY 2019/20 Adopted Budget. The VIP is designed to reduce gang related homicides and non-fatal injury shootings throughout the City of San Bernardino. Strategies for violence intervention involve a focused deterrence on violent crime using real-time crime analysis to identify high risk individuals as well as community oriented policing used in combination with culturally relevant intervention strategies. -year matching grant of $500,000 with the Board of State and Community Corrections (BCSS), which supports the VIP program, expires June 30, 2020. City staff will be submitting another California Violence Intervention and Prevention Grant Program application to provide continued funding of $1.5 million in total over a three (3) year period. However, due to COVID 19, the request for proposal (RFP) deadline has been extended eight (8) weeks from original date of April 10 to June 5, 2020, and may Page 9 6762 be delayed further. Under the current timeline the BCSS award notification will be issued on September 11th and grant funding would start on October 1, 2020, leaving a three (3) month gap without funding. The funding required to bridge the gap between July and September totals $90,000 and is not included in the proposed FY 2020/21 Budget. Furthermore, if the City is not awarded grant funding through the BCSS, we will be unable to continue to provide outreach and supportive services in the coming fiscal year. Public Works Department Public Works and the Finance Department have undertaken a comprehensive review of a Fund receives some benefit from these districts. California law requires that if the City does receive some benefit from the assessment districts, it needs to pay its share. Accordingly, $120,000 has been budgeted for this. The Land Development Division of the Community and Economic Development Department has been transferred to Public Works ($647,737). Directors of both departments agree that since this is an engineering activity, it makes sense (and provides better customer service) to move this to Public Works. Property Maintenance costs related to properties held for re-sale were transferred from Community and Economic Development to Public Works where all other facility maintenance is managed ($287,000). Police Department Contract costs for the body-worn camera program were transferred from the Asset working with the vendor to re-negotiate the terms of the contract to lower the annual costs over the remaining two years of the contract period. Any cost reductions will be included in the final budget. The Mayor and City Council may want to consider applying any cost savings associated with the body worn camera program to provide funding for outreach and supportive services associated with the Violence intervention program. Code Enforcement costs were moved from the Police Department to Community and Economic Development ($1,285,703). Animal Control was changed from being a division within the Police Department to its as Animal Control Services are budgeted in a separate fund. There was an increase in the internal service charges in FY 2020/21 for the Police liability loss experience relative to all other City Departments. City Clerk s budget was increased by $90,000 to cover costs to the Page 10 6762 County related to upcoming elections. City Attorney Compared to the FY 2019/20 Adopted Budget, the line-item for outside legal services has increased by $500,000. However, compared to the Amended FY 2019/20 budget for outside legal services, costs for FY 2020/21 are $900,000 less. During the course of FY 2019/20 a number of legal matters occurred requiring an increase to this line item. Many of these matters have been, or are close to being, resolved. savings of $100,000 compared to FY 2019/20. General Government Costs related to bankruptcy legal matters are budgeted at $900,000 which is $600,000 less than the FY 2019/20 budget. The transfer from the General Fund to the Animal Control Fund increased by $125,000 due to increased salary, health insurance and CalPERS costs, similar to all departments throughout the City, as well as costs related to establishing Animal Services as separate City department. Community and Economic Development (CED) As mentioned in the discussion regarding revenues, $975,000 of plan check expenditures previously tracked in a deposit fund have been moved to the Community and Economic Development Department. In FY 2019/20 as part of an overall effort to audit and clean-up various funds, the decision was made to move $975,000 of plan check revenues out of a deposit fund and into the General Fund as well the corresponding expenditures of $975,000; because revenues and expenditures are equal, there is no net impact to the General Fund. During the years following the bankruptcy a practice developed of tracking contract plan-check costs and related revenues in a deposit fund, however this is not in accordance with governmental accounting standards and has been corrected on a go-forward basis. Code Enforcement costs were moved from the Police Department to Community and Economic Development ($1,285,703). Property Maintenance costs related to properties held for re-sale were transferred from Community and Economic Development to Public Works where all other facility maintenance is managed ($287,000). The Land Development Division of the Community and Economic Development Department has been transferred to Public Works ($647,737). Directors of both departments agree that since this is an engineering activity, it makes sense (and provides better customer service) to move this to Public Works. All other departments maintained operating budgets at levels consistent with the FY 2019/20 Adopted Budget. Page 11 6762 General Fund Reserves It is important to remember that General Fund reserves are projected to be $24.2 million as of June 30, 2019. This is a drawdown since 2018 of $14.8 million (including the $5.1 million loss of revenue related to COVID impacts this fiscal year). This reserve fund balance is less than twenty- If measures to bridge the projected deficit in FY 2020/21 of $10.3 million are not enacted, reserves will be reduced to $13.9 million. Continued use of reserves to losses in revenue and/or operating expenditures. Other Funds/Programs Internal Service Funds Internal Service Funds provide Fleet, Risk Management, and Information Technology services to City Departments which, with the exception of Animal Control and Public Works operations budgeted in Gas Tax, are in the General Fund. Similar to General Fund Departments, the primary reasons for increases are liability payment. As discussed earlier in this report, compared to the FY 2019/20 Adopted budget, premiums for liability and property insurance (budgeted in the Liability Fund) increased by 49% ($793,000). Premiums for excess workers compensation coverage and related charges increased by 22% ($142,300) but savings in other areas of the Workers Compensation Fund budget offset some of this increase. Page 12 6762 Internal Service Funds FY 2019/20 FY 2020/21 Adopted Proposed DepartmentBudget Budget Increase Information Technology$ 4,493,400 4,513,761 20,361 Fleet Services$ 3,371,100 3,537,075 165,975 Workers Compensation$ 5,843,800 5,864,011 20,211 Liabilty/Risk$ 2,625,700 3,402,561 776,861 Combined Total Increase: 983,408 Gas Tax Fund Due to actions taken at the May 21, 2020 Mayor and City Council Meeting, the Gas Tax Fund is expected to end FY 2019/20 with a positive fund balance of $240,742. However, even with this available beginning fund balance, due to reduced revenues related to the COVID 19 crisis, the Gas Tax Fund is expected to end FY 2020/21 with a negative fund balance of $174,974. Revenue projections were decreased from pre- COVID estimates by 10% ($545,985). Options for reducing this anticipated deficit are FY 2019/20 FY 2020/21 HUTA Gas Tax (126) Estimated Proposed Beginning Fund Balance 1,786,842 240,742 Revenue 4,405,526 4,913,873 Operational Expenditures (5,444,776) (5,329,589) CIP Expenditures (1,358,850) - Transfer of Traffic Signal Maintenance Contracts to Traffic Safety Fund 602,000 Defund Street Light Knockdown project 250,000 Ending Fund Balance Surplus (Deficit) 240,742 (174,974) Capital Improvement Funds The Five-Year Capital Improvement Program (CIP) will be presented to the Mayor and City Council on June 11, 2020. Approved CIP projects for FY 2020/21 will be incorporated into the Adopted Budget. Strategies to Balance the General Fund Budget To close the projected budget deficit in FY 2020/21 a number of recommendations for the Mayor and City Cou reduction and/or elimination of some operational expenditures through departmental reorganizations. There are also recommendations for the use of one-time funds and one-time transfers of expenditures to other funds (Attachment 1). As approved at the st May 21 Council meeting, a number of positions will also be held vacant and are listed on Attachment 2. Finally, revenue from the recently approved fee study and cannabis tax revenue (this information became available subsequent to the development of the Proposed FY 2020/21Budget) are listed as part of the budget balancing strategies. Each of these options is discussed in greater detail below. Page 13 6762 On April 15, 2020, the City Council transferred three (3) full-time positions from the would review the staffing level and job classification requirements necessary to support th administrative responsibility for the Offices of the City Council, Mayor and City Attorney. and reduce administrative support costs among these functions. st On May 21, the Council approved the deletion of five (5) full-time positions including Office. Delete Administrative Analyst II/Assistant of Elected Officer City Attorney$ 102,515 Delete Mayor's Chief of Staff$ 145,313 Delete Assistant to the Mayor$ 72,647 Delete Senior Customer Service Representative$ 67,115 Delete Administrative Analyst II$ 89,901 Total Savings$ 477,491 In FY 2019/20 the Mayor and City Council established the Neighborhood Resource Center, Matching Grant, and Leadership Programs. Due to theCOVID-19 pandemic the projects funded through the matching grant program will take additional time to complete. FY 2019/20 projects as a result of the pandemic, staff recommends defunding the matching grant program totaling $18,000 in FY 2020/21 providing time to complete the projects currently underway before additional funding is allocated to support the grant program. st In addition to the reductions approved on May 21, the City Manager is recommending eliminations, establishment of a new lower level position, maintaining vacancies, and Development Department for the critically needed position of Economic Development Specialist. Various reductions in professional contractual costs, training/education, and meetings and conferences are also proposed. Delete Administrative Services Officer$ 176,610 Add Senior Management Analyst$ (132,444) Hold Vacant Senior Management Analyst$ 132,444 Transfer Funding for Public Affairs Specialist to CED for creation of an Economic Development Specialist$ 78,465 Various Operational Reductions$ 132,000 Total Savings$ 387,075 Holding the analyst position vacant and reducing professional contractual services will Page 14 6762 bility to prepare detailed analysis and complete special projects in support of the strategic goals and priorities established by the Mayor and City Council. -year matching grant of $500,000 with the Board of State and Community Corrections (BCSS), which supports the outreach and supportive services through the VIP program, expires June 30, 2020. While staff will be submitting another California Violence Intervention and Prevention Grant Program application to provide continued funding, the request for proposal (RFP) deadline has been extended due to COVID-19. Under the current timeline the BCSS award notification will be issued on September 11th and grant funding would start on October 1, 2020, leaving a three (3) month gap without funding. The funding required to bridge the gap between July and September totals $90,000 and is not included in the proposed FY 2020/21 Budget. Furthermore, if the City is not awarded grant funding through the BCSS, we will be unable to continue to provide outreach and supportive services in the coming fiscal year. Finance Department The Finance Department is proposing a cost saving structural reorganization that will allow the department to function more efficiently and develop proper positional staffing for the future. The department is proposing the deletion of four (4) positions and the addition of two and ½ (2.5) positions that will improve budget, accounting, and treasury operations. The reclassification of certain positions will allow for proper internal controls to continue while other changes will allow for certain positions to continue to function at a high level of responsibility. These proposals are combined with the reduction in certain operational expenditures that will be performed by reclassified staffing positions as well as existing staff. Delete Senior Finance Specialist $ 101,772 Delete Treasury Assistant$ 51,732 Delete Accountant III$ 94,074 Delete Administrative Analyst II$ 93,867 Add Principal Accountant$ (104,540) Add Senior Management Analyst$ (112,661) Add Part-Time Accounting Assistant$ (21,000) Various Operational Reductions$ 49,200 Total Savings$ 152,445 City Clerk's Office to generate is proposing to reduce expenditures and increase revenues for a net savings to the General Fund of $29,910. Page 15 6762 Delete Deputy City Clerk Position$ 86,264 Add Records Management Specialist$ (76,353) Add Funding for PRA Assistance $ (30,000) Increase Passport Revenue$ 50,000 Total Savings from Clerk's Office$ 29,910 Parks, Recreation and Community Services (PR&CS) PR&CS is proposing to reduce pool locations from five (5) sites to four (4) citywide. To create equal dispersion across the City, community pools at Jerry Lewis Swim Center, Delmann Heights Community Center, Rudy Hernandez Community Center and Ruben Campos Community Center will be open for aquatics programming. Additionally, because of decreased activity due to COVID 19 cancellation of all youth and adult sports programs is recommended for the first and second quarters of FY 2020/21. Reduce Part-Time Budget in Aquatics$ 30,435 Reduce Part-Time Budget in Sports$ 13,490 Total Savings from Parks Department$ 43,925 The Police Department The Police Department has evaluated operations and recommends that the following positons remain vacant: Hold Vacant Two (4) Community Services Officer I Positions$ 208,968 Hold Vacant Criminal Investigation Officer$ 56,727 Hold Vacant Police P&T Technician$ 63,398 Hold Vacant Three (3) Police Records Technician I & II$ 149,459 Hold Vacant (1) Lieutenant$ 229,077 Total Savings from Police Department$ 707,629 The impacts from keeping these positions vacant are: Community Service Officer I positions less CSOs available to respond to low priority calls for service in the field and at the front desk. This may result in longer response times and reduced open hours at the front desk. Criminal Investigation Officer keeping this position vacant could result in lower rate of completed follow-up investigations. Personnel and Training Technician internal processing of training needs within the department and hiring will take longer. Records Tech I/II slower processing times for records and reduced hours for processing LiveScan requests for the public and City Departments. Public Works Page 16 6762 Public Works has proposed continuing to leave the following positions vacant and has also proposed reductions in various operation accounts: Hold Vacant Arborist$ 69,517 Hold Vacant Two (2) Facilities Maintenance Mechanics$ 128,076 Hold Vacant Maintenance Worker I$ 49,725 Hold Vacant Real Property Manager$ 133,174 Hold Vacant Traffic Engineering Associate$ 114,632 Various Operational Reductions$ 141,300 Total Savings from Public Works$ 636,424 In both the Facilities and the Operations divisions, leaving these positions vacant will impact response times to internal and external customer requests and force the divisions to address only core function and emergency work. Open CRM numbers may increase as backlogs occur, and staff will be directed to prioritize daily based on resources. This will ultimately move the department further away from a preventative approach to maintenance, and place it in a reactive capacity, addressing only the most critical deferred maintenance items. In Administration and Engineering divisions, vacant positions will create a reliance on contract help for short term project needs and some administrative support work functions. It projects at the current pace. Community and Economic Development (CED) CED recommends achieving cuts through a small staffing reorganization and reduction in contract Building a their budget to CED for the critically needed Economic Development Specialist position. Now that a Building Official position is budgeted, CED feels that some of the work performed by contractors can now be performed in-house. Delete Executive Assistant to the Director$ 83,178 Add Economic Development Specialist (Funding from City Manager's Office)$ (93,647) Various Operational Reductions$ 92,000 Total Savings from Community & Economic Development$ 81,531 Animal Services Staff is recommending that the following positions in Animal Services continue to remain vacant throughout FY 2020/21: Hold Vacant Animal Control Officer$ 58,380 Hold Vacant Senior Customer Service Representative/Dispatcher$ 61,288 Total Savings from Animal Control$ 119,668 Use of one-time funds The use of available one-time funds resulting from audits of various City funds (Street Construction Fund and Grants Fund) is recommended, as well as use of funds generally Page 17 6762 not used to fund on-going operations (Cultural Development Fund). Best budgeting practices advise that the use of one-time funds should generally be used to support one- time expenditures, as opposed to on-going operational expenditures. However, staff believes that the unique nature of the economic downturn resulting from the COVID-19 pandemic warrants consideration of the use of these funds to preserve services where possible with the expectation that the economy will begin to recover as we move into FY 2021/22. Transfer from Fund 242 - Street Construction Fund$ 820,251 Transfer from Fund 123 - Grant Fund$ 644,848 Use of Fund 247 - Cultural Development Fund$ 774,583 Transfer of Evidence Funds to General Fund$ 287,128 Total $ 2,526,810 Over the last two years the Finance Department has been auditing funds with long standing balances and reviewing activity back to 2011. For both the Grant Fund ($644,848) and the Street Construction Fund ($820,251), the result has been identification of balances that should have been at some point reimbursed to the General Fund. Various items in both Parks and Recreation and the Library totaling $774,583 are recommended to be funded with Cultural Development Funds in FY 2020/21. The Police Department has identified $287,128 in Evidence Impound funds that can offset allowable costs in the Police Department budget. These funds are sporadic in nature and cannot cover costs on an on-going basis. Gas Tax and Traffic Safety Funds In order to create savings for the General Fund, staff is recommending the following shift in expenditures: Transfer $630,000 of costs related to traffic signal maintenance out of the Gas Tax Fund and into the Traffic Safety Fund. $600,000 was budgeted in the Traffic Safety Fund for the purchase of new patrol cars, but it is recommended that the vehicle purchase be deferred. The transfer of these expenditures out of the Gas Tax fund will eliminate the projected deficit of $174,974 in the Gas Tax fund at 6/30/21 and will create capacity in Gas Tax reduce the General Fund deficit by this amount. Revenue Increases While the City will experience declines in sales tax and transient occupancy tax revenues, it is anticipated that the City will receive additional revenue in two areas that udget deficit: cannabis tax revenue and fee recovery revenue (approved on May 6th). Page 18 6762 On May 6, 2020, the Mayor and City Council approved the recommended changes to updated fees will total $967,400. consultant, SCI, was recently completed. Based on their analysis, $1 million in additional revenue (not included in the FY 2020/21 Proposed Budget) is expected. However, staff is recommending that $333,000 of this new revenue be utilized for enforcement related to illegal cannabis operations. Staff will be returning to Council on June 17, 2020 with a detailed breakdown of how the $333,000 will be utilized. Net additional revenue after setting aside funds for enforcement is $666,667. Summary Options discussed in this report to reduce the projected deficit total $7,251,974. Assuming that these deficit reduction strategies are approved, there is a remaining deficit of $3,000,464. In order to bridge this gap, the City will need to consider other bargaining groups and/or additional lay-offs and cuts to services. C— ЋЉЋЉΉЋЊ tƩƚƦƚƭĻķ DĻƓĻƩğƌ CǒƓķ.ǒķŭĻƷ General Fund Revenues 124,103,367 General Fund Expenditures (134,355,805) Surplus/(Deficit) ΛЊЉͲЋЎЋͲЍЌБΜ Additional revenues 1,634,067 Departmental reductions 2,636,098 Transfer of residual funds/audit close-out 1,465,098 Move Library/Parks & Rec. expenditures to Cultural Development Fund 774,583 Evidence Impound Fund transfer 287,128 Move Public Works expenditures to Gas Tax 455,000 wĻƒğźƓźƓŭ 5ĻŅźĭźƷ Ʒƚ .ƩźķŭĻ ΛЌͲЉЉЉͲЍЏЍΜ 2020-2025 Key Strategic Targets and Goals The Fiscal Year 2020/21 Proposed Budget aligns with Key Target No. 1: Financial Stability by implementing, maintaining, and updating a fiscal accountability plan. Fiscal Impact There is no fiscal impact from the presentation of the FY 2020/21 Proposed Budget. Page 19 6762 directed toward those projects and function that the Mayor and City Council believe best support their approved list of Goals and Objectives and vision for the community. Conclusion After reviewing this report and attachments, and at the conclusion of the FY 2020/21 Proposed Budget presentation, staff requests that the Mayor and Council provide further direction. The next steps in the budget development and adoption process are: June 10 Further budget review and presentation of Five-Year CIP and proposed budget document June 17 Public Hearing and Adoption of FY 2020/21 Operating Budget and CIP Attachments Attachment 1 FY 2020/21 Proposed Budget General Fund Overview Attachment 2 Council Approved recommendations from May 21, 2020 Attachment 3 Proposed Operating Budget FY 2020/21 Ward: n/a Synopsis of Previous Council Actions: November 21, 2018 Mayor and City Council adopted Resolution 2018-308, establishing the General Fund Reserve Policy. June 19, 2019 Mayor and City Council adopted Resolution No. 2019-168, approving the FY2019/20 Operating Budget and Capital Improvement Program Budget. February 19, 2020 Mayor and City Council adopted Resolution No. 2020-42, receiving a Fiscal Year 2019/20 budget update and approving budget amendment actions. March 18, 2020 Mayor and City Council adopted Resolution 2020-51, ratifying Proclamation 2020-01 issued on March 13, 2020, and declaring the existence of a local emergency. April 15, 2020 Mayor and City Council received an update on the impact the novel coronavirus (COVID-19) pandemic is anticipated to have on City operations and revenue. May 21, 2020 Mayor and City Council received an overview of the FY 2020/21 Proposed Budget and approved actions to reduce costs in FY 2019/20. Page 20 FY2020/21GeneralFundOverviewAttachment1 FY19/20FY19/20 FY20/21 FY19/20MidyearYearEndFY20/21Preliminary AdoptedEstimates,Estimates,PreliminaryBudget, GeneralFundRevenuesbyCategoryBudgetPreCOVID19COVID19Adj.BudgetCOVID19Adj. Chargesforservices4,455,9004,974,0154,974,0156,049,3005,789,015 Finesandforfeitures1,815,9001,339,9691,339,9691,512,0001,512,000 FranchiseTax10,220,00010,130,00010,130,00010,485,00010,130,000 Intergovernmental2,306,0005,298,1785,298,1782,485,0002,485,000 Investmentincome432,000450,058450,058450,000450,000 Licenses&permits10,453,00010,987,07910,987,07911,458,32010,987,079 MeasureZSalesTax9,021,0009,378,9798,768,0009,367,1427,900,000 Miscellaneous2,446,8002,436,9022,436,9022,781,0562,781,056 OtherTaxes2,799,1007,714,1992,757,6482,920,8002,782,685 TransientOccupancyTax4,900,0004,381,5515,050,0004,381,551 PropertyTaxesinLieuofVLF16,805,90016,805,90016,805,90018,316,74218,316,742 SalesandUseTax36,619,40038,323,67034,495,00037,792,98432,488,243 UseofMoneyandProperty908,000959,517779,2731,100,000899,996 UtilityUsersTax23,700,00023,300,00023,300,00023,200,00023,200,000 TOTALREVENUES126,883,000132,098,466126,903,574132,968,344124,103,367 GeneralFundExpendituresbyDepartment 010Mayor811,200847,356847,356446,949446,949 020CityCouncil931,800867,661867,661859,599859,599 030CityClerk779,300978,762978,762909,056909,056 050CityAttorney2,319,8003,807,4143,807,4142,645,5432,645,543 090GeneralGovernment8,619,0009,926,2399,926,2398,279,6458,279,645 100CityManager3,179,0003,045,6063,045,6063,132,5923,132,592 110HumanResource1,064,8001,434,1191,434,1191,274,4131,274,413 120Finance3,673,4003,601,8263,601,8263,735,7833,735,783 150SpecialAssessmentDistrict118,755118,755120,000120,000 160CapitalImprovementProjects956,333956,333 180Community&EconomicDevelopment3,948,6007,635,2377,635,2375,539,8795,539,879 210Police80,164,90079,666,20179,666,20184,558,98484,558,984 380ParksRecreation&Community4,332,7004,300,6634,300,6634,193,1474,193,147 400PublicWorks15,189,90015,370,64815,370,64816,788,07816,788,078 470Library1,812,6001,808,4791,808,4791,872,1391,872,139 TOTALEXPENDITURES126,827,000134,365,299134,365,299134,355,805134,355,805 Carryovers(2,367,474)(2,367,474) Surplus(Deficit)56,000100,641(5,094,251)(1,387,461)(10,252,438) SavingsinFY20/21fromReductionsapprovedonMay21,2020(DetailedonAttachment2)1,799,912 Options&OpportunitiesforGeneralFundBudgetDeficitReductionOngoing/OneTimeAmount FeeStudyRevenueOngoing967,400 AdditionofCannabisTaxRevenueOngoing1,000,000 CostofCannabisLawEnforcementOngoing(333,333) TransferfromFund242StreetConstructionFundOneTime820,251 TransferfromFund123GrantFundOneTime644,848 UseofFund247CulturalDevelopmentFundOneTime774,583 TransferofGeneralFundPublicWorksExpenditurestoGasTaxOneTime455,000 TransferofEvidenceFundstoGeneralFundOneTime287,128 Reduction4,615,876 TotalOptions&OpportunitiesforBudgetDeficit DepartmentalReductions,Reorganizations,&PositionstobeHeldVacantTemporarily(DetailontheFollowingPage)Savings CityClerk'sOffice29,910 CityManager'sOffice387,075 Community&EconomicDevelopment81,531 Finance152,445 Parks43,925 PublicWorks141,300 TotalDepartmentalReductions,Reorganizations,&PositionstobeHeldVacantTemporarily836,186 RemainingDeficittoBridge(3,000,464) FY2020/21GeneralFundOverviewAttachment1 GeneralFundBudgetReductions,Reorganizations,&PositionstobeHeldVacantSavings EffectiveDateTemporarily(Additions) Department CityClerk7/1/2020DeleteDeputyCityClerkPosition86,264 CityClerk7/1/2020AddRecordsManagementSpecialist(76,353) CityClerk7/1/2020AddFundingforPRAAssistance(30,000) CityClerk7/1/2020IncreasePassportRevenue50,000 TotalSavingsfromClerk'sOffice29,910 CityManager7/1/2020DeleteAdministrativeServicesOfficer176,610 CityManager7/1/2020AddSeniorManagementAnalyst(132,444) CityManager7/1/2020HoldVacantSeniorManagementAnalyst132,444 CityManager7/1/2020VariousOperationalReductions132,000 CityManager7/1/2020TransferFundingforPublicAffairsSpecialisttoCEDasEcon.Dev.Specialist78,465 TotalSavingsfromCityManager'sOffice387,075 CED7/1/2020DeleteExecutiveAssistanttotheDirector83,178 CED7/1/2020AddEconomicDevelopmentSpecialist(FundingfromCityManager'sOffice)(93,647) CED7/1/2020VariousOperationalReductions92,000 Total SavingsfromCommunity&EconomicDevelopment81,531 Finance7/1/2020DeleteSeniorFinanceSpecialist101,772 Finance7/1/2020DeleteTreasuryAssistant51,732 Finance7/1/2020DeleteAccountantIII94,074 Finance7/1/2020DeleteAdministrativeAnalystII93,867 Finance7/1/2020AddPrincipalAccountant(104,540) Finance7/1/2020AddSeniorManagementAnalyst(112,661) Finance7/1/2020AddPartTimeAccountingAssistant(21,000) Finance7/1/2020VariousOperationalReductions49,200 TotalSavingsfromFinanceDepartment152,445 Parks7/1/2020ReducePartTimeBudgetinAquatics30,435 Parks7/1/2020ReducePartTimeBudgetinSports13,490 TotalSavingsfromParksDepartment43,925 PublicWorks7/1/2020VariousOperationalReductions141,300 TotalSavingsfromPublicWorks141,300 TotalSavingstotheGeneralFundfromDepartmentalReductions836,186 DeptOtherFundsChanges Fund GasTaxPublicWorksTransferofTrafficSignalMaintenanceContractstoTrafficSafetyFund630,000 TrafficSafetyPublicWorksTransferofTrafficSignalMaintenanceContractsfromGasTax(630,000) t600,000 TrafficSafetyPoliceRemovalofPoliceVehiclesinFY20/21Budge CouncilApprovedRecommendations Attachment2 EffectiveJune1,2020 FY20/21 Savings FundDepartmentRecommendationstoTakePlaceJune1,2020 GeneralCityAttorneyDeleteAdministrativeAnalystII/AssistantofElectedOfficer102,515 GeneralCityManagerDeleteMayor'sChiefofStaff145,313 GeneralCityManagerDeleteAssistanttotheMayor72,647 GeneralCityManagerDeleteSeniorCustomerServiceRepresentative67,115 GeneralCityManagerDeleteAdministrativeAnalystII89,901 GeneralPoliceHoldVacantFour(4) CommunityServicesOfficerIPositions208,968 GeneralPoliceHoldVacantCriminalInvestigationOfficer56,727 GeneralPoliceHoldVacantPoliceP&TTechnician63,398 GeneralPoliceHoldVacantThree(3)PoliceRecordsTechnicianI&II149,459 GeneralPoliceHoldVacant(1)Lieutenant229,077 GeneralPublicWorksHoldVacantArborist69,517 GeneralPublicWorksHoldVacantTwo(2)FacilitiesMaintenanceMechanics128,076 GeneralPublicWorksHold VacantMaintenanceWorkerI49,725 GeneralPublicWorksHoldVacantRealPropertyManager133,174 GeneralPublicWorksHoldVacantTrafficEngineeringAssociate114,632 AnimalControlPoliceHoldVacantAnimalControlOfficer58,380 AnimalControlPoliceHoldVacantSeniorCustomerServiceRepresentative/Dispatcher61,288 GeneralFundTotalSavings1,799,912 GasTaxPublicWorks*ShifttheTrafficSignalVideo&LoopContracttotheTrafficSafetyFund250,000 GasTaxCIP*DefundStreetLightKnockdownProject602,000 GasTaxFundTotalSavings852,000 *Thesavingsrelatedtotheseitemsareonetimeinnatureandnotongoing.