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CC 2023-12-23_09.c. First Quarter Status Report 2023-24Item 9.c. MEMORANDUM TO: City Council FROM: Nicole Valentine, Administrative Services Director SUBJECT: Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests DATE: December 12, 2023 SUMMARY OF ACTION: Consider, receive, and file the Fiscal Year (FY) 2023-24 First Quarter Financial Status Report and approve fifteen (15) Budget Adjustment Requests. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: Preparation of the First Quarter Financial Status Report requires staff time within the existing work plan and budget for the Administrative Services Department. At the end of the first quarter, FY 2023-24 revenues for the Consolidated General Fund were $2.6 million, or two percent (2%), below than the Budget Target (“Target”). Actual Expenditures were $7 million, and below the Budget Target by approximately $1.5 million, or six percent (6%). The City Council is being asked to approve fifteen budget adjustments. The overall impact to the budget is an increase in Consolidated General Fund expenditures of $180,633, in Water Fund expenditures of $200,271, and in Water Availability Fund expenditures of $24,900, as reflected in the following table 1: Page 23 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 2 Table 1 – First Quarter Budget Adjustment Request RECOMMENDATION: Consider, receive, and file the FY 2023-24 First Quarter Financial Status Report; and approve fif teen Budget Adjustment Requests. BACKGROUND: Each fiscal year the City Council adopts a budget, which commits government resources and services to accomplish the City’s mission of making Arroyo Grande the best place possible for everyone who lives, works, and visits here. The First Quarter Financial Status Report is the first of four financial performance reports that staff will present to Council during the 2023-24 fiscal year. The purpose of the FY 2023-24 First Quarter Financial Status Report is to:  Compare first quarter revenues received and expenditures incurred to the first quarter of the prior year and to the budgeted Target to determine the City’s financial performance;  Provide explanations for key account variances and identify any potential trends that might impact financial planning; and Request Revenue Expenditure General Fund Water Fund Impact Water Availability Fund Impact Carryover OTS Grant for Traffic/DUI Enforcement 22,824 22,824 - - - Carryover Retraining Scholarship Program 21,500 21,500 - - - Carryover F250 Replacement Public Works Truck - 78,433 78,433 - - Carryover User Fees & DIF Contractual Services - 27,200 27,200 - - Carryover Cash for Grass Program - 24,900 - - 24,900 CDBG Grant increase 7,958 7,958 - - - Reallocate Vehicle Replacement Funding towards Mower - 50,000 - - - Reallocate Salary Savings to Contractual Services for CIP - 60,000 - - - Tree Removal Support - 50,000 50,000 - - Increased need to fill Potholes - 10,000 10,000 - - Village Sign at Traffic Way & Branch - 15,000 15,000 - - Community Development Intern - 10,000 - - - Central Coast Blue (CCB) Operating Costs - 28,971 - 28,971 - Phased Main Replacement at Cornwall Avenue, from Rena to El Camino Real (ECR)- 171,300 - 171,300 - Totals 52,282 578,086 180,633 200,271 24,900 Page 24 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 3  Provide other key first quarter information including headcount statistics, status of Capital Improvement Projects, and requests for City Council’s approval of Budget Adjustment Requests that have not previously been approved. The City’s actual first quarter financial results will be compared to both the prior year’s first quarter and the budgeted Target. The Target for expenditures is calculated as one fourth (25%) of the FY 2023-24 Budget and represents the 3-month period from July 2023 through September 2023, except for the Non-Departmental Annual Payments line that has a Target of the full budget. This approach increases the expenditure Target from 25% to 33% for the first quarter. The Target for revenues does not use the 25% Target but a Target of 12.4% that more accurately reflects the anticipated revenues to be received in the first quarter of the fiscal year. Using the Target as a comparator against actual results provides a simplified method to evaluate performance for the quarter. The First Quarter Report also includes a section regarding Budget Adjustments Requests. This section summarizes individual budget adjustments approved by the City Council during the first quarter, as well as administrative adjustments completed by City staff. Additionally, this section of the report includes new Budget Adjustment Requests not otherwise addressed in past, individual City Council agenda items. Approval will enable the City to complete important work items and meet the needs of the community. AN ALYSIS OF ISSUES: First Quarter (Q1) Revenue and Expenditures Compared to Prior Year Table 2 - Current Year Q1 Actuals Compared to Prior Year Q1 Actuals The Consolidated General Fund shown in Table 2 is the primary operating fund of the City and accounts for resources and services traditionally associated with government. The Consolidated General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The Consolidated General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund. The City has historically reported on the Consolidated General Fund separately from the Local Sales Tax Fund, although the City’s auditors traditionally combine this information in the Annual Comprehensive Financial Report (ACFR). The Local Sales Tax Fund accounts for the revenues derived from Measure O - 06, a local 1/2% sales tax approved by the City's voters in November 2006. Measure O - 06 included advisory measures when passed, providing direction on the uses to which First Quarter FY 2023-24 First Quarter FY 2022-23 Variance Revenue 2,554,661$ 2,264,418$ 290,243$ Expenditures 7,024,105$ 6,557,687$ 466,418$ Consolidated General Fund Page 25 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 4 the funding should be allocated. To ensure accountability, the measure included a provision requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds. To aid in the collection and reporting of this information, the City has accounted for this fund in a separate account. This report will present information for the Consolidated General Fund that includes Local Sales Tax Fund Measure O-06 revenues and expenditures. Consolidated General Fund revenues at the first quarter of this year were approximately $290,243 higher than the first quarter of the prior year. Expenditures were approximately $466,418 higher at the end of the first quarter of the current fiscal year versus the first quarter of the prior year. A more thorough explanation of first quarter variances is set forth in the attached financial report. The following is a summary of the first quarter variances between the two fiscal years. Revenue (approximately $290,243 higher) The majority of the $290,243 variance between the first quarter of this year and the prior first quarter is related to the increase in User Fees received in the first quarter of FY 2023- 24 when compared to the first quarter of FY 2022-23. Expenditures (approximately $466,418 higher) As mentioned, first quarter expenditures compared to the prior year were higher by $466,418. The majority of the variance between the two fiscal quarters is related to increased costs of one-time payments for Liability and Property Insurance, CalPERS Unfunded Accrued Liability, and Workers Compensation. First Quarter (Q1) Revenue and Expenditures Compared to Target Table 3 - Current Year Q1 Actuals Compared to Target Table 3 above compares first quarter actual results to the budgeted Target. First Quarter actual revenue was short of the Target by $505,338. First Quarter actual expenditures were short of the Target by approximately $1.5 million. The following is a summary of the first quarter revenue and expenditure variances compared to the budgeted Target. A more thorough explanation of first quarter variances is set forth in the attached financial report. Revenue ($505,338 lower) The actual first quarter Consolidated General Fund revenue shortfall compared to the Target is not unusual. Revenue realization is typically low in the first quarter of the fiscal FY 2023-24 First Quarter Target FY 2023-24 First Quarter Actuals Variance Revenue 3,059,999$ 2,554,661$ (505,338)$ Expenditures 8,512,078$ 7,024,105$ (1,487,973)$ Consolidated General Fund Page 26 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 5 year due to the time lag involved in billing cycles and the receipt of reimbursements. Some of the larger revenue variances are explained below.  The largest single source of City revenue is Secured Property Tax. Secured Property Tax is billed by the County to property owners and payable in two (2) installments. Property owners typically receive their second property tax bill at the end of September or early October, with a due date of November 1st. Most of the property tax related to the first installment was received in December, 2022. The second installment is due on April 1st and will be reflected in the fourth quarter report. The revenue Target includes the equivalent of one month of property tax revenue, but actuals were still lower than this conservative revenue assumption by $490,477.  Transient Occupancy Tax (TOT) revenue reflects a $37,349 favorable variance to the Target. The Target and actual TOT revenue represents only two months of TOT receipts due to the timing of payments. Lodging facilities have thirty days after the month’s end to make their TOT payments.  Other revenue is made up of Business License Tax, Fines, Intergovernmental Income, Other Charges for Service, and Other Revenues. The actual revenue in this category is lower than the Target by $129,853. The largest variance in this category is related to three revenue accounts. The revenue from other government agencies accounts for the SB 1090 funds earmarked for use of the general plan update. Once these funds are spent for this project, the revenue will be recognized at that time. Expenditures (approximately $1.5 million lower) Actual first quarter expenditures were $1,487,973 under the Target, though all City departments were under their spending Targets, except for Recreation Services and Administrative Services. Some of the more significant savings occurred in the Measure O-06 Sales & Use Tax Fund, City Administration, Police, Public Works, and Community Development Departments. The first quarter report provided in Attachment 1 includes greater detail regarding the causes for the expenditure variances in these departments. The first quarter report provided in Attachment 1, Section 5, includes a new update on the Goal Status Reports to Council, that includes City’s progress towards completing Major City Goals and City’s Capital Improvement Plan. This information is provided to keep the Council apprised of the status of the Goal Status Reports and includes progress towards completing Major City Goals and Capital Improvement Plan. Budget Adjustments One of the purposes of the First Quarter Financial Status report is to recommend the re- appropriation (carryovers) of prior year budgets for services/products that were begun, but not completed, as of June 30, 2023. These requested carryovers do not include capital improvement projects. Each year, the City Council adopts a budget which commits Page 27 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 6 resources to the Capital Improvement Program (CIP) that addresses infrastructure maintenance and improvements throughout the City. The CIP is funded through a variety of sources including significant grants and transfers from other funds. CIP funds do not have annual appropriated budgets. Control over capital projects is maintained by a project-length CIP budget. This project-length budget authorizes total expenditures over the duration of a construction project, rather than year by year. A detailed accounting by Project is included in Attachment 1 for information purposes. Staff identified five projects that were budgeted in FY 2022 -23 and were not completed in that fiscal year but are expected to be completed in the current fiscal year. It is requested that the following carryover budget adjustments be approved:  Police Department: Carryover $22,824 related to the Office of Traffic Safety (OTS) Grant for Traffic/DUI Enforcement Program. This Grant program operates from October 1, 2022 through September 30, 2023. This carryover is due to the misalignment of the program year ending in September, but budgeted in FY 2022- 23. The invoice for July 1 through September 30, 2023, was submitted totaling $22,824, and is anticipated to be received within the next few weeks.  City Council: Carryover $21,500 for the retraining scholarship program , funded using SB 1090 funds. This program was approved at the March 9, 2021 City Council meeting, Item 10.a. The original approval was for $40,000. In FY 2021-22, $15,000 was spent and in FY 2022-23, $3,500 was spent. This program is administered by the South County Chamber of Commerce in partnership with SLO Partners. The Chamber is continuing to process scholarships throughout this Fiscal Year as needs arise.  Public Works Department: Carryover $78,433 for the purchase of an F250 Replacement Truck. This replacement vehicle purchase was placed in November of 2022, but was not received until July of 2023.  Administrative Services Department: Carryover $27,000 for the User Fee and Development Impact Fee studies. The User Fee study was completed in the second quarter of FY 2023-24 and it is anticipated that the Development Impact Fee study will be completed in the third quarter of FY 2023-24.  Public Works Department: Carryover $24,971 for the Cash for Grass program from the Water Availability Special Revenue Fund that has been allocated to residents participating in the program but has not been processed for payment related to completion of work in FY 2022-23. Nine additional budget adjustments are requested as described in more detail below: Page 28 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 7  CDBG: The CDBG allocation from the County was presented to Council totaling $56,749. The final allocation provided totals $64,707, an increase of $7,958 to the City. This budget adjustment request will increase both revenues and expenditures and will not have an impact on the general fund.  Public Works Department: The proposed includes an increase in the Public Works Department’s budget for minor adjustments to 5 line items, reflecting a total increase of $75,000. This increase would include: o Reallocate $50,000 of budgeted expenditures within the Public Works budget for the Engineering small truck to be used for a replacement riding mower. The mower was originally budgeted fo r replacement in FY 2024-25 but has become a higher priority replacement, when compared to the requested Engineering small truck. The Engineering small truck will be requested for replacement in FY 2024-25. No funds are being requested from general fund balance. o Reallocate $60,000 of budgeted expenditures within the Public Works Administration Division salary savings, related to staff medical leave, to continue to fund a consultant to provide CIP project management services from October through December of 2023. o Appropriate $50,000 from the general fund to provide additional capacity in the maintenance of City owned trees. Specifically, the emergency removal or trimming of 40 to 60 foot tall City trees. Such maintenance is dangerous for City employees without the specialized equipment needed, such as cranes, tall bucket trucks and a large crew. o Appropriate $10,000 from the general fund to support the Streets team in purchasing a high quality and longer lasting asphalt pothole filler product to support the increased number of potholes each year. o Appropriate $15,000 from the general fund to update the “Welcome to Arroyo Grande” sign and medians at Traffic Way & Branch. This work would include a larger brick pedestal, new Village sign and rock installed at the larger and smaller medians at this location.  Community Development Department: Reallocate $10,000 of budgeted expenditures within the Building Division salary savings to fund an intern position within Community Development to assist with research, project renderings, scanning, and organizing project files.  Water Fund: Appropriate $28,971 from the Water Enterprise Fund Balance to fund the City’s share of the Central Coast Blue (CCB) Page 29 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 8 o Appropriate $3,501 of FY 2022-23 true up costs related to the operating budget. This was reviewed and approved by the CCB Board on September 18, 2023, item 7.a. o Appropriate $25,470 associated with the work completed by Urban Futures, Inc. to provide financial support in the application to the Environmental Protection Agency (EPA) for a Water Infrastructure Finance and Innovation Act (WIFIA) loan and S&P Application. The agreement with Urban Futures was reviewed and approved by the CCB Board on June 19, 2023, item 6.b.  Water Fund: Appropriate $171,300 to fund the Phased Main Replacement at Cornwall Avenue, from Rena to El Camino Real (ECR). The total pro ject cost is $750,000, the remaining portion of the project is funded with ARPA funds and discussed in additional detail below. Finally, the reallocation of ARPA funds is included as a budget request. Previous reallocations of the City’s ARPA funds were approved at the February 8, 2022; May 24, 2022; September 27, 2022; and May 9, 2023 City Council meetings. As projects are completed and project estimates are confirmed, allocation funding numbers in Table 4 provide the City Council approved allocations spent through the end of FY 2022-23. The third column of Table 4 shows expected spending of funds through the allotted ARPA deadline of December 31, 2024. ARPA funds must be committed by way of a contract or purchase order and spend these monies no later th an December 31, 2026. The final column shows funds that need to be reallocated as a result of budgeted project savings. Table 4 – ARPA Allocation Staff reviewed the 5-year Capital Improvement Project Plan, accessed any other outstanding projects that were prioritized due to public health and safety related issues, and reviewed the most recent US Treasury Final Rule governing eligible expenditures of the ARPA funds. During this review the Swinging Bridge Reinforcement project was identified because the timeframe for completion of this project makes it eligible for ARPA ARPA Funding Allocation CC Approved Allocation Spent through 06/30/2023 Expected to Spend Amount to Reallocate COVID related City expenditures 42,375 69,624 - (27,249) Water Infrastructure Projects 1,350,150 51,400 1,298,750 - Sewer Infrastructure Projects 549,200 165,534 383,666 - Stormwater Infrastructure Projects 900,842 881,502 - 19,340 Public Safety Video Cameras 880,700 - 516,493 364,207 Streets Infrastructure Projects 24,958 24,958 - - Homeless Shelter Support 300,000 - 300,000 - Non-Profit Assistance/Community Service Grants 114,129 114,129 - - Childcare Assistance - First 5, 5% request 100,000 100,000 - - Smart Share ADU SLO Proposal 37,887 - 37,887 - Grand Total 4,300,241 1,407,148 2,536,796 356,297 Page 30 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 9 funding. The budget request of ARPA funds is to reallocate the $356,297 to the Swinging Bridge Reinforcement project. This project is currently out to bid and is anticipated to be completed by December 31, 2024. Through the review process is was noted that the Phased Main Replacement at Cornwall Avenue project, from Rena to El Camino Real (ECR), is funded with the Water Infrastructure Project funds but was inadvertently budgeted in FY 2026 -27 with an estimated total project cost of $1 million. The Council previously approved this project to be funded with an ARPA allocation of $578,700. The phased main replacement in Cornwall Avenue, from Rena to ECR, is not anticipated to cost $1 million. The main replacement on Fair Oaks, from Elm to Alder, was 2,000 feet with more services and had a total cost of $741,841.17. The main to be replaced in Cornwall Avenue is only 1,400 feet with fewer services and considerably less traffic. The anticipated project budget is now being set at $750,000, for these reasons. Table 5 below shows the resulting total allocations of ARPA funding if approved as recommended by the Council, after which City staff would confirm eligibility and ensure the appropriate ARPA funding conditions are attached to each project: Table 5 – Updated ARPA Allocation ALTERNATIVES: The following alternatives are provided for the Council’s consideration: 1. Receive and file the Fiscal Year 2023-24 First Quarter Financial Status Report and approve fifteen Budget Adjustment Requests; 2. Provide other direction to staff regarding the FY 2023-24 First Quarter Financial Status Report and the fifteen Budget Adjustment Requests; ARPA Funding Allocation CC Approved Allocation COVID related City expenditures 69,624 Water Infrastructure Projects 1,350,150 Sewer Infrastructure Projects 549,200 Stormwater Infrastructure Projects 881,502 Public Safety Video Cameras 516,493 Streets Infrastructure Projects 24,958 Homeless Shelter Support 300,000 Non-Profit Assistance/Community Service Grants 114,129 Childcare Assistance - First 5, 5% request 100,000 Smart Share ADU SLO Proposal 37,887 Swinging Bridge Reinforcement 356,297 Grand Total 4,300,241 Page 31 of 301 Item 9.c. City Council Consideration of Fiscal Year 2023-24 First Quarter Status Report and Request to Approve Fifteen Budget Adjustment Requests December 12, 2023 Page 10 3. Receive and file the FY 2023-24 First Quarter Financial Status Report and do not approve the Budget Adjustment Requests and provide further direction to staff; or 4. Provide other direction to staff. ADVANTAGES: The financial report presents an updated review of the City’s financial performance in the first quarter of FY 2023-24. Approval of the requested budget adjustments will enable staff to continue providing high quality services to the organization and to the public. DISADVANTAGES: No disadvantages have been identified at this time. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. Attachments: 1. Fiscal Year 2023-24 First Quarter Financial Status Report Page 32 of 301 ATTACHMENT 1 Page 1 City of Arroyo Grande Fiscal Year 2023-24 First Quarter Financial Status Report INTRODUCTION The following report is an overview of the City’s fiscal position at the end of the first quarter for Fiscal Year (FY) 2023-24. The purpose of this report is to update the public and the City Council on the City’s financial position at the end of the first quarter of the fiscal year and compare actual results to the prior year and the budgeted Target, to determine the City’s performance. The first quarter timeframe is July 1 through September 30, 2023. The financial report is organized in the following sections: Section 1 – an overview of City’s financial position at the end of the first quarter of FY 2023-24. This includes a comparison of first quarter results between the current and prior year. In addition, first quarter results will be compared to the budgeted Target. As part of the analysis, brief explanations of significant revenue and expenditure variances are included. Section 2 – a listing of any personnel changes occurring during the first quarter and a summary of headcount by department. This section also includes the City’s calculated vacancy rate. Section 3 – an update on the Capital Improvement Projects (CIP) managed by the Public Works and Community Development Departments. This section includes CIP that were completed in the first quarter along with their final costs. Section 4 – a listing of Budget Amendment Requests previously approved by Council and completed in the first quarter of the fiscal year, as well as a list of additional budget adjustments that are being presented to Council along with the first quarter report for consideration and approval. Section 5 – an update on the Goal Status Reports to Council that includes progress towards completing Major City Goals and Capital Improvement Plan. ENSURING FISCAL STABILITY: In Fall 2020, the City Council established a goal to ensure financial stability for the organization throughout the planning, budgeting, and expenditure process, including preparation and presentation of year-end and quarterly financial reports. Page 33 of 301 ATTACHMENT 1 Page 2 SECTION 1: OVERVIEW OF FINANCIAL POSITION CITY FUND STRUCTURE The overall City budget is comprised of many individual funds, which are categorized below. This financial report will focus primarily on the Consolidated General Fund but will also report on all Governmental Funds. Consolidated General Fund – The Consolidated General Fund is the primary operating fund of the City, which accounts for resources and services traditionally associated with government. The Consolidated General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The Consolidated General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund. The City has historically reported on the Consolidated General Fund separately from the Local Sales Tax Fund, although the City’s auditors traditionally combine this information in the Annual Comprehensive Financial Report (ACFR). The Local Sales Tax Fund accounts for the revenues derived from Measure O-06, a local 1/2% sales tax approved by the City's voters in November 2006. Measure O-06 included advisory measures when passed providing direction on the uses to which the funding should be allocated. To ensure accountability, the measure included a provision requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds. To aid in the collection and reporting of this information, the City has accounted for this fund in a separate account. This report will present information for the Consolidated General Fund that includes Local Sales Tax Fund Measure O-06 revenues and expenditures. Special Revenue Funds – Special revenue funds are used to account and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Debt Service Funds – This fund is used to account for the accumulation of resources and payment of long- term debt principal interest. This includes the USDA loan issued by the City to finance the relocation of City Hall. Enterprise Funds - An enterprise fund is a separate accounting and financial reporting mechanism for which revenues and expenditures are segregated into a fund with financial statements separate from all other governmental activities. These funds include Water and Sewer services provided to City residents. Private Purpose Fund – The private-purpose fund was created to hold the assets of the former Redevelopment Agency of the City of Arroyo Grande until they are distributed. Agency Funds – Agency funds are funds that the City holds on behalf of another entity. Currently, there are three Agency funds. One is the Sanitation District fund, which accounts for the receipt and remittance of wastewater processing fees on behalf of the South San Luis Obispo County Sanitation District. The second is the Downtown Parking Fund, which collects assessments from Arroyo Grande Village merchants within the boundaries of the Parking and Business Improvement Area for maintenance of the Village parking lots. The third is the San Luis Obispo Tourism Marketing District (SLOTMD) Fund, which accounts for the receipt and remittance of assessments collected from lodging operators on behalf of the SLOTMD. The following chart below shows an overview of the City’s fund structure. Page 34 of 301 ATTACHMENT 1 Page 3 CURRENT YEAR ACTUALS COMPARED TO PRIOR YEAR Table 1 below reflects revenue and expenditure patterns through the end of the first quarter of FY 2023- 24 and compares the current quarter results against the prior year’s results for all Governmental Funds as well as the City’s Consolidated General Fund. The totals in the table reflect the first quarter actuals for both revenue and expenditures, divided by that fiscal year’s annual budget. Table 1 The following discussion focuses on both the City’s Governmental Funds and the Consolidated General Fund and provides a comparison between first quarter results for the current and prior year for both revenue and expenditures. Governmental Funds and Consolidated General Fund revenue and expenditures for the first quarter of this year are generally on Target with prior year. The Governmental Funds category includes Special Revenue Funds, Debt Service Funds, as well as the Consolidated General Fund. Governmental Funds – At the end of the first quarter of FY 2023-24, Governmental Fund revenue was -6.4%, or $416,692 lower than prior year, and expenditures were higher by 3.6% or $260,467. The majority of the revenue and expenditure variances in Governmental Funds were attributed to variances within the Consolidated General Fund and the newly created American Rescue Plan Act Legislative & Information Services Fire Protection Impact Fees City Hall Debt Service Sewer Successor Agency to RDA Downtown Parking Administrative Services Public Access Television Sewer Facility Sanitation Distribution Community Development Police Protection Impact Water San Luis Obispo Tourism Police Department Park Development Water Facility Marketing District Recreation Services Park Improvement Lopez Water (SLOTMD) Public Works Recreation Community Center Local Sales Tax Fund Grace Lane Assessment District Parkside Assessment District Street (Gas Tax) Traffic Signalization Traffic Circulation Transportation Facility Impact Transportation In-Lieu Water Neutralization In-Lieu Affordable Housing Tourism Business Improvement Dist. Water Availability CDBG Grant Fund American Rescue Plan Act (ARPA) State COPS Block Grant Agency FundsSpecial Revenue FundsFIDUCIARY FUNDSGOVERNMENTAL FUNDS ALL FUNDS PROPRIETORY FUNDS General FundDebt Service FundsEnterprise FundsPrivate Purpose FundFirst Quarter FY 2023-24 First Quarter FY 2022-23 Variance Revenue 6,101,535$ 6,518,227$ (416,692)$ Expenditures 7,465,739$ 7,205,272$ 260,467$ First Quarter FY 2023-24 First Quarter FY 2022-23 Variance Revenue 2,554,661$ 2,264,418$ 290,243$ Expenditures 7,024,105$ 6,557,687$ 466,418$ Governmental Funds Consolidated General Fund Page 35 of 301 ATTACHMENT 1 Page 4 (ARPA) Fund, which is separate from the Consolidated General Fund and not otherwise addressed in this report. The Governmental Funds category includes the Consolidated General Fund as well as other Special Revenue Funds. The Consolidated General Fund and ARPA Fund variances are explained as follows: Consolidated General Fund - The Consolidated General Fund is the primary operating fund of the City and accounts for resources and services traditionally associated with government. Consolidated General Fund revenue in the first quarter was 12.8%, or $290,243 higher than the first quarter of the prior year. Expenditures increased by 7.1%, or $466,418 higher than the first quarter of the prior year. The majority of the variance between the two fiscal years is related to increased costs of one-time payments for Liability and Property Insurance, CalPERS Unfunded Accrued Liability, and Workers Compensation. ARPA Fund – The ARPA Fund was created to help separately track funding provided pursuant to the American Rescue Plan Act. This Act is intended to provide financial aid to families, governments, businesses, schools, non-profits and others impacted by the COVID-19 public health crisis. To date the City has received the full amount allocated totaling $4,300,241. In FY 2021-22 expenditures incurred totaled $604,246. In FY 2022-23 expenditures incurred totaled $745,837 the remaining $2,950,158 is currently recognized as revenue in FY 2023-24. CONSOLIDATED GENERAL FUND IMPACTS The following discussion focuses on the City’s Consolidated General Fund performance. Chart 1 starts off with a simple overview of Consolidated General Fund performance compared to the Target. Next are expenditures by category (Table 2). This is followed by a summarized look at FY 2023-24 first quarter actual expenditures compared to the Target (Table 3). Lastly, a discussion of Consolidated General Fund revenue is included, which compares first quarter actual results to the Target (Table 4). Using the Target as a comparator against actual results provides a simplified method to evaluate performance for each quarter. The Target for revenues does not use the 25% Target but a Target of 12.4% that more accurately reflects the anticipated revenues to be received in the first quarter of the fiscal year. Revenue realization is typically low at the end of the first quarter of the fiscal year due to the timing of receipt of major tax revenues, the time lag involved in billing cycles, and the receipt of reimbursements. The City’s actual first quarter financial results will be compared to both the prior year’s first quarter and the budgeted Target. The Target for expenditures is calculated as one-fourths (25%) of the FY 2023-24 Budget and represents the 3-month period from July 2023 through September 2023, except for the Non- Departmental Annual Payments line that has a Target of the full budget. This approach increased the Target from 25% to 33% for the first quarter. Page 36 of 301 ATTACHMENT 1 Page 5 Chart 1 Chart 1 shows a simple comparison of actual first quarter revenue and expenditures to the Target. The actual first quarter Consolidated General Fund revenue is less than the budgeted Target by $500,000, which is not unusual since revenue realization is typically lower than the Target through the first quarter due to the time lag involved in billing cycles and the receipt of reimbursements. Likewise, actual expenditures through first quarter totaled $7 million, or 28% of the full year’s Budget, and are under the Target by $1.5 million. A more detailed discussion on Consolidated General Fund revenue and expenditure variances is included later in this report. Table 2 Table 2 reflects major expenditure cost categories within the Consolidated General Fund. This chart is intended to explain where the City’s resources were spent during the first quarter. Within the total expenditures of $7 million, 59% of the City’s costs are associated with personnel, 37.4% with operating and maintenance, 1.3% for the City’s debt service, 1.1% for Capital Outlay, and 1.2% with transfers to other funds. Table 3 reflects the first quarter status of all Consolidated General Fund operating departments. Some departments include multiple divisions. The divisions are consolidated under their respective department, rather than reflected individually within the table. FY 2023-24 % of Q1 Actuals Actuals Personnel Costs 4,142,302$ 59.0% Operating Costs 2,626,489 37.4% Debt Service 90,912 1.3% Capital Outlay 78,578 1.1% Transfers Out 85,824 1.2% Total 7,024,105$ Expenditure Category Page 37 of 301 ATTACHMENT 1 Page 6 Table 3 – Consolidated General Fund Expenditures by Department Overall, first quarter expenditures were $1.5 million under the Target. Though all City departments were under their spending Targets, except for Recreation Services and Administrative Services. Some of the more significant savings occurred in the Measure O-06 Sales & Use Tax Fund, City Administration, Police, Public Works, and Community Development Departments. A more detailed explanation of key expenditure variances by individual department/division is provided below. KEY EXPENDITURE VARIANCES FOR INDIVIDUAL DIVISIONS/DEPARTMENTS FOR FISCAL YEAR 2023-24 Police Services includes the functions of Administration, Patrol Services, Support Services and the Office of Traffic Safety (OTS) Grant for Traffic/DUI Enforcement Program. For simplicity, Police Services will be analyzed in total rather than by individual divisions. Some of the more significant variances include:  The Police Department currently has two vacancies and one medical leave, resulting in labor savings of approximately $322,000.  The contract with the County Sheriff Department for dispatch services is paid semiannually in the months of December and June. Payments for these services will not be made until the second and fourth quarters, resulting in a first quarter favorable variance to the Target of $124,300.  The variance for Police Administration through the end of the first quarter results from City’s contract with the County for Animal Control Services; the July through September payment was made in the second quarter, resulting in a first quarter favorable variance to the Target of $25,100. This fund accounts for the revenues derived from Measure O-06, a local 1/2% sales tax approved by the City's voters in November 2006. The majority of the favorable variance in this department can be attributed to transfers and lower spending in debt service. Some of the more significant variances include: City Administration 1,579,600$ 394,900$ 294,452$ 100,448$ 6% Legislative & Information Services 449,460 112,365 85,106 27,259 6% Measure O-06 Sales & Use Tax 3,154,001 788,500 294,741 493,759 16% Administration Services 4,646,830 1,161,708 1,259,434 (97,726) -2% Non-Departmental Annual Payments 2,836,525 2,836,525 2,755,499 81,026 3% Community Development 2,578,122 644,531 390,647 253,884 10% Police Department 6,882,775 1,720,694 1,193,335 527,359 8% Recreation Services 901,370 225,343 233,700 (8,357) -1% Public Works 2,510,055 627,514 517,191 110,323 4% TOTAL EXPEDITURES 25,538,738 8,512,080 7,024,105 1,487,975 6% % Fav/(Unfav) Consolidated General Fund Department Variances - First Quarter Consolidated General Fund Department 2023-24 Adjusted 2023-24 Q1 Actuals Dollar Fav/(Unfav) 2023-24 Q1 Target Department: Police Services Division: Various (4201, 4203, 4204, 4209) Issue: Overall savings in salaries and benefits and contractual services Impact to Consolidated General Fund: $527,359 savings Page 38 of 301 ATTACHMENT 1 Page 7  The variance for Measure O-06 Sales & Use Tax Fund through the end of the first quarter results from Transfers Out to Capital Improvement Program (CIP) Projects; the July through September allocation towards projects is completed once a project is finished or at the end of the fiscal year. This is resulting in a first quarter favorable variance to the Target of $471,100.  The Debt Service for the new Animal Services Shelter is paid semiannually in the months of November and May. Payments for these services will not be made until the second and fourth quarters, resulting in a first quarter favorable variance to the Target of $15,000. The Community Development Department includes the functions of Planning and Building & Safety Divisions. The majority of the favorable variance in this department can be attributed to salary savings and lower spending in contractual services. Some of the more significant variances include:  The vacancy of the Building Permit Technician position resulting in labor savings of approximately $85,300.  Minimal contractual services for the Planning Division were incurred through first quarter resulting in $101,828 of favorability to the Target. The following table will summarize where these savings occurred:  The Building Division contractual services has a variance of $36,000 related to the timing of invoices from CSG Consultants, the billing is based on services provided in each month. The September invoice has was not received until October. The Public Works Department includes the functions of Government Buildings, Engineering, Auto Shop, Administration, Park Maintenance, and Soto Sports Complex Divisions within the Consolidated General Fund. The majority of the favorable variance in this department can be attributed to salary savings. For simplicity, Public Works will be analyzed in total rather than by individual divisions. The Public Works Administration Division currently has a vacant Public Works Director/Assistant City Manager position and had a vacant Assistant Capital Projects Manager the majority of the first quarter resulting in labor savings of approximately $107,200. Budget Target Expenditures Variance 418,182 104,546 8,343 96,203 25,000 6,250 - 6,250 15,000 3,750 4,375 (625) 458,182 114,546 12,718 101,828 On-Call Planning Services and Misc. Planning Studies On-Call Environmental Review Services Comprehensive General Plan Update Planning Contractual Services Department: Measure O-06 Sales & Use Tax Fund Division: Fund 218 Issue: Overall savings in Transfers Out to CIP Projects and debt service Impact to Consolidated General Fund: $493,759 savings Department: Community Development Division: Various (4130, 4212) Issue: Overall savings in salaries and contractual services Impact to Consolidated General Fund: $253,884 savings Department: Public Works Division: Various (4213, 4301, 4305, 4307, 4420, 4430) Issue: Overall savings in salaries and contractual services Impact to Consolidated General Fund: $110,323 savings Page 39 of 301 ATTACHMENT 1 Page 8 The City Administration Department includes the functions of City Council, City Attorney, Retirees, City Manager, and Human Resources Divisions within the Consolidated General Fund. The majority of the favorable variance in this department can be attributed to lower spending in contractual services. Some of the more significant variances include:  Minimal contractual services for the City Manager Division were incurred through first quarter resulting in $37,900 of favorability to the Target related to the Ballot Measure and Polling Consultants beginning work in the second quarter and the Economic Development Consultant budgeted to begin in the third quarter.  The City Attorney Division has a variance of $42,300 related to the timing of invoices from BBK, the billing is based on services provided in each month. The September invoice was not received until October.  The City Council Division has a variance of $18,750 related to the timing of the Community Services Grant program being approved in the third quarter of the fiscal year. KEY REVENUE VARIANCES BY ACCOUNT FOR THE FIRST QUARTER Table 4 – Consolidated General Fund Revenue As reflected in Table 4, first quarter actual revenue was short of the Target by $505,338. This table uses a Target of 12.4% that more accurately reflects the anticipated revenues to be received in the first quarter of the fiscal year. Revenue realization is typically low at the end of the first quarter of the fiscal year due to the time lag involved in billing cycles and the receipt of reimbursements. A more detailed discussion is included below to help explain actual revenue variances through the first quarter compared to the Target. Property Tax – The majority of the City’s property tax revenue comes from Secured Property Taxes. This tax is billed on a fiscal year (July 1- June 30) basis and is payable in two (2) annual installments. Property owners typically receive their first property tax bill at the end of September or early October, with a due Property Tax 6,327,486$ 527,291$ 36,814$ (490,477)$ -8% Sales Tax 5,268,158 439,013 417,648 (21,365) 0% Measure O-06 Sales & Use Tax 2,962,000 246,833 269,036 22,203 1% Transient Occ. Tax 1,545,000 257,500 294,849 37,349 2% Property Tax in Lieu of VLF 2,001,300 - - - 0% Franchise Fees 795,600 132,600 44,095 (88,505) -11% License & Permit Fees 455,800 113,950 127,490 13,540 3% User Fees 521,500 130,375 220,417 90,042 17% Planning Fees 371,500 92,875 145,083 52,208 14% Recreation Fees 415,867 103,967 203,252 99,285 24% Transfers In 3,114,066 778,517 688,752 (89,765) -3% Other Revenue 948,316 237,079 107,226 (129,853) -14% TOTAL 24,726,593 3,060,000$ 2,554,662 (505,338) -2% Consolidated General Fund Revenue Variances - First Quarter REVENUE BY CATEGORY 2023-24 Budget FY 2023-24 Q1 Actuals Dollar (Unfav)/Fav FY 2023-24 Q1 Target % Fav/(Unfav) Department: City Administration Division: Various (4001, 4002, 4003, 4099, 4101, 4110) Issue: Overall savings in contractual services Impact to Consolidated General Fund: $100,448 savings Page 40 of 301 ATTACHMENT 1 Page 9 date of November 1st. The majority of property tax related to the first installment will be received in December 2023. The second property tax bill installment is received in April 2024 and will be included in the fourth quarter report. Property tax typically represents around 26% of the City’s annual revenue. The Target is based on one month of Property Tax revenue. Actual revenue received in this category was lower than this conservative Target. Sales Tax and Measure O-06 Sales & Use Tax – Sales tax and Measure O-06 Sales & Use Tax realization through first quarter is on track. Actual sales tax revenue received through first quarter was $417,648 and Measure O-06 Sales & Use Tax revenue received through first quarter was $269,036 which represents one month of payments (July). The Target is also based on one month of revenue, taking into account the timing of anticipated payments. Transient Occupancy Tax (TOT) – TOT revenue is reflecting an $37,349 favorable variance to the Target. The Target and actual TOT revenue represents only two months of TOT receipts due to the timing of payments. Lodging facilities have thirty days after the month’s end to make their TOT payments. Property Tax in Lieu of Vehicle License Fees (VLF) – Property tax in lieu of VLF is received in two installments during the fiscal year. Typically, the revenue is received in the months of January (3rd quarter) and June (4th quarter). The Target for this revenue is zero in the first quarter. Franchise Fees – Only two months of Waste Water Connection franchise fees were received through first quarter. In addition, Charter Communications franchise fees earned in the first quarter will not be paid and received until the second quarter. In light of the timing of payments, the Target is based on 2 months of revenue. Without the Charter communications franchise fee receipts, the actual revenue at the end of the first quarter is lower than the Target by $88,505. License & Permit Fees, User Fees, and Planning Fees – License and permit revenue is above the Target by $13,540. User fee revenue is above the Target by $90,042. Planning revenue exceeded the Target by $52,208. The Target is based on 25% or 3 months of the fiscal year’s total budget. Revenue in this category is customer driven and fluctuates over the course of a year as well as year over year based on demand. Recreation Fees – Recreation revenue is above the Target by $99,285. The Target is based on 3 months of the fiscal year’s total budget. Other Revenues – This revenue category includes business license tax, fines, revenue from other government agencies, charges for services and any other revenues accounts received in the consolidated general fund. The largest variance in this category is related to three revenue accounts. The revenue from other government agencies accounts for the SB 1090 funds earmarked for use of the general plan update. Once these funds are spent for this project, the revenue will be recognized at that time, resulting in a revenue shortfall to the Target of approximately $90,900. The majority of the revenue from Business Licenses is received in December and January of each year, resulting in a revenue shortfall to the Target of approximately $20,900. Page 41 of 301 ATTACHMENT 1 Page 10 SECTION 2: POSITION CHANGES AND HEADCOUNT NUMBERS POSITION ALLOCATION CHANGES MADE BY THE CITY COUNCIL (1st Quarter) None made during this quarter. FULL TIME EQUIVALENT (FTE) BY DEPARTMENT – PERMANENT STAFF ONLY The following table reflects FTE staffing by department. The table only includes permanent staff and does not include part-time or temporary staffing. While departments may hire part-time staff on a regular or seasonal basis, they are not included in the analysis below. EMPLOYEE VACANCY RATE The City’s employee vacancy rate at the end of the first quarter of FY 2023-24 was 6.4%. This equates to five (5) vacant positions. The vacancy rate tracks the number of permanent vacant positions at the end of the quarter in comparison to the total number of permanent positions available. Unlike a turnover rate, which tracks employees that separated during the period, the vacancy rate only looks at vacancies at the end of period. The costs associated with turnover includes the cost of advertising new positions, training, overtime, lowered productivity, and workload balance. Department Adopted Budget Headcount (FTE’s) Vacancies (1st Qtr) % of Total Staffing Vacant Positions City Manager & Human Resources 3 1 4%City Manager Administrative Services 7 - 9% Community Development 10 1 13%Permit Tech. Legislative & Info Services 2 - 3% Police Services 29 3 37%Police Officer (3) Public Works 24 - 31% Recreation Services 3 - 4% Total 78 5 100% Page 42 of 301 ATTACHMENT 1 Page 11 SECTION 3: UPDATE ON COMPLETED CAPITAL PROJECTS This information is provided to keep the Council apprised of the status of the City’s Capital Improvement Projects (CIP). *This does not include the Carryover CIP projects listed below. The Carryover CIP projects will be incorporated into the Second Quarter Financial Status report. Project Number Project Fund Budget FY 2023-24* Current Status Project Budget Expended 350-5614 Bridge Street Bridge Habitat Mitigation HBP 48,628$ In Progress 49,971$ 350-5679 Traffic Way Bridge Replacement HBP/Sales Tax 718,000$ In Progress 7,190$ 350-5638 Pavement Management Program USHA/General/SB1/Sale s Tax/General Fund 1,663,380$ In Progress 232,167$ 350-5453 Financial Management Software Sewer/Water/Sales Tax 188,000$ In Progress 14,038$ 350-5468 Public Safety Video Cameras COPS/Sales Tax 1,000,000$ In Progress -$ 350-5695 Active Transportation Plan ATP/Sales Tax 125,000$ In Progress 6,878$ 350-5601 Fair Oaks Ave Active Transportation Improvements, Valley Road to Traffic Way Developer/Other Gov Agencies/Sales Tax 75,000$ In Progress -$ 350-5478 Arroyo Grande Creek Remediation Sales Tax, FEMA, CalOES 400,000$ In Progress -$ 350-5610 191 Tally Ho Sales Tax 110,000$ In Progress 850$ 350-5616 Virginia Drive and S. Halcyon Road Curb Ramp and Sidewalk Improvement CDBG 56,749$ In Progress -$ 612-5853 Lift Station 3 FEMA/CalOES/Sales Tax 850,000$ Not Started -$ 640-5973 Phased Main Replacement - Highway 101 Crossing Upgrade, El Camino Real to West Branch Street ARPA/Water Fund 43,800$ Not Started 548,350$ 350-5479 Fire Station 1 Apparatus Bay Doors Sales Tax 115,000$ Not Started -$ 350-5606 Halcyon Road Complete Streets HSIP/RSHA/USHA/Safe Routes to School/General/Sales Tax/ATP 1,304,000$ Not Started -$ 350-5477 Public Works Office Space Remodel Sales Tax 100,000$ In Progress 612-5817 Trenchless Sewer Rehabilitation -El Camino Real to West Branch St.ARPA 282,000$ Not Started -$ Page 43 of 301 ATTACHMENT 1 Page 12 SECTION 4: APPROPRIATION TRANSFERS AND BUDGET ADJUSTMENTS Administrative and Previously-Approved First Quarter Budget Adjustments The following first quarter budget adjustments were previously approved by Council or are classified as administrative and not requiring Council approval. Capital Improvement: Administrative Carryover of $9,307,342 for the Capital Projects listed in the table below. Capital Project funds do not have annual appropriated budgets. Control over capital projects is maintained by a project-length capital improvement budget. This project-length budget authorizes total expenditures over the duration of a construction project, rather than year by year. Affordable Housing Trust Fund: Appropriate $448,370.37 from the Affordable Housing Trust Fund Balance to support the development of Housing Authority of San Luis Obispo (HASLO)’s affordable housing project consisting of 63 affordable multi-family units located at 700 Oak Park Blvd. Approved on 07/25/2023 Council meeting, item 9.m. Water Fund: Appropriate $55,000 from the Water Enterprise Fund Balance to fund the City’s share of the Central Coast Blue (CCB) project costs to submit an application to the Environmental Protection Agency (EPA) for a Water Infrastructure Finance and Innovation Act (WIFIA) loan. The initial WIFIA application fee is $25,000 and the S&P RES fee is $30,000. Approved on 08/08/2023 Council meeting, item 9.c. Public Works Department: Appropriate $90,000 from the General Fund reserve for the purchase of decorative concrete barriers and planters associated with the long-term parklets program, along with wayfaring street signs to guide vehicles to the Olohan and Le Point parking areas. Approved on 08/08/2023 Council meeting, item 9.h. Fund Project #Project Title Project Budget Adjustment 350 5453 Financial Management Software 225,000 350 5463 Women's Club Lighting Project 821 350 5468 Public Safety Camera System 125,000 350 5473 Replacement Generator at FCFA Station 1 610,714 350 5476 City Hall Front Door Accessibility Improvements 53,341 350 5556 Recreation Services / Community Center Building 44,745 350 5601 Fair Oaks Ave Active Transportation Improvements 50,000 350 5620 Swinging Bridge Reinforcement 1,100,292 350 5621 Arroyo Grande Creek Stabilization 6,300 350 5638 Pavement Management Program 4,882,779 350 5658 Concrete Improvements 452,238 350 5679 Traffic Way Bridge Replacement Project 447,593 350 5695 Active Transportation Plan (ATP)125,000 640 5911 Phased Mains Replacement 785,892 640 5944 Water Well #11 Facilities 42,771 640 5946 Galvanized Service Replacements 63,655 640 5973 Phased Main Replacement - Highway 101 Crossing Upgrade 291,200 9,307,342 Page 44 of 301 ATTACHMENT 1 Page 13 City Manager’s Office: Reallocate $26,500 of budgeted expenditures within the City Manager salary savings to fund the executive recruitment services for a new City Manager. Approved on 08/22/2023 Council meeting, item 9.b. Capital Improvement: Appropriate $413,400 from Urban State Highway Account funds (USHA) to increase the 2022 Pavement Management Program (PMP) budget and to reallocate $134,406 of Local Sales Tax Funds from PMP to the 2022 Concrete Repairs Project to include the two add alternate elements from the initial bid. Approved on 08/22/2023 Council meeting, item 9.j. Administrative Services Department: Reallocate the funding to incorporate the approval of the MOU’s with AGPOA and SEIU, as well as establishing the salary and benefits for the Management Group. The total cost of these agreements was $787,725. The FY 2023-24 budget had built in funds anticipation of these agreements. Approved on 09/12/2023 Council meeting, item 9.e. Police Department: Receive $65,000 of Office of Traffic Safety Grant funds and appropriated the funding to implement driving under the influence enforcement services. Approved on 09/12/2023 Council meeting, item 9.h. Police Department: Receive $41,500 of Department of Alcoholic Beverage Control (ABC) Grant funds and appropriated the funding to implement public awareness, minor decoy operations, shoulder tap operations, Informed Merchants preventing Alcohol-Related Crime Tendencies (IMPACT), and generally, implementation of ABC Alcohol Policing Partnership program. Approved on 09/12/2023 Council meeting, item 9.i. Capital Improvement: Appropriate $3,228.88 of Local Sales Tax Funds for the City’s portion of the Federal Emergency Management Agency (FEMA) replacement of plant and materials for the Habitat Mitigation Phase of the Bridge Street Bridge Rehabilitation Project related to the 2023 storm event damages. Council approved a budget adjustment totaling $51,662. FEMA assistance will be provided at a 75% federal cost share totaling $38,746.50. California Governor's Office of Emergency Services (Cal OES) assistance will be provided at an 18.75% state cost share totaling $9,686.62. The City is responsible for the remaining 6.25% totaling $3,228.88. This request is to use Local Sales Tax Fund balance for the City’s $3,228.88 portion. Approved on 09/26/2023 Council meeting, item 9.d. Additional Requested First Quarter Budget Adjustments In addition to the administrative budget adjustments for the CIP and the adjustments previously-approved by the City Council during the first quarter, fifteen new budget adjustments are proposed for approval along with the review and receipt of this report. Five of the adjustments request to carryover funds for non-CIP projects that were budgeted in FY 2022- 23 and were not completed in that fiscal year but are expected to be completed in the current year. These five requested carryover adjustments include:  Police Department: Carryover $22,824 related to the Office of Traffic Safety (OTS) Grant for Traffic/DUI Enforcement Program. This Grant program operates from October 1, 2022 through September 30, 2023. This carryover is due to the misalignment of the program year ending in September but budgeted in FY 2022-23. The invoice for July 1 through September 30, 2023, was submitted totaling $22,824 and it is anticipated to be received within the next few weeks. Page 45 of 301 ATTACHMENT 1 Page 14  City Council: Carryover $21,500 for the retraining scholarship program funded using SB 1090 funds. This program was approved at the March 9, 2021, City Council meeting, item 10.a., The original approval was for $40,000. In FY 2021-22, $15,000 was spent and in FY 2022-23, $3,500 was spent. This program is administered by the South County Chamber of Commerce in partnership with SLO Partners. The Chamber is continuing to process scholarships throughout this fiscal year as needs arise.  Public Works Department: Carryover $78,433 for the purchase of an F250 Replacement Truck. This replacement vehicle purchased was placed in November of 2022, but was not received until July of 2023.  Administrative Services Department: Carryover $27,000 for the User Fee and Development Impact Fee studies. The User Fee study was completed in the second quarter of FY 2023-24 and it is anticipated that the Development Impact Fee study will be completed in the third quarter of FY 2023-24.  Public Works Department: Carryover $24,971 for the Cash for Grass program from the Water Availability Special Revenue Fund that has been allocated to residents participating in the program but has not been processed for payment related to completion of work in FY 2022-23. Nine additional budget adjustments are requested as described in more detail below:  CDBG: The CDBG allocation from the County was presented to Council totaling $56,749. The final allocation provided totals $64,707, an increase of $7,958 to the City. This budget adjustment request will increase both revenues and expenditures and will not have an impact on the general fund.  Public Works Department: The proposed includes an increase in the Public Works Department’s budget for minor adjustments to 5 line items, reflecting a total increase of $75,000. This increase would include: o Reallocate $50,000 of budgeted expenditures within the Public Works budget for the Engineering small truck to be used for a replacement riding mower. The mower was originally budgeted for replacement in FY 2024-25 but has become a higher priority replacement, when compared to the requested Engineering small truck. The Engineering small truck will be requested for replacement in FY 2024-25. No funds are being requested from general fund balance. o Reallocate $60,000 of budgeted expenditures within the Public Works Administration Division salary savings, related to staff medical leave, to continue to fund a consultant to provide CIP project management services from October through December of 2023. o Appropriate $50,000 from the general fund to provide additional capacity in the maintenance of City owned trees. Specifically, the emergency removal or trimming of 40 to 60 foot tall City trees. Such maintenance is dangerous for City employees without the specialized equipment needed, such as cranes, tall bucket trucks and a large crew. o Appropriate $10,000 from the general fund to support the Streets team in purchasing a high quality and longer lasting asphalt pothole filler product to support the increased number of potholes each year. Page 46 of 301 ATTACHMENT 1 Page 15 o Appropriate $15,000 from the general fund to update the “Welcome to Arroyo Grande” sign and medians at Traffic Way & Branch. This work would include a larger brick pedestal, new Village sign and rock installed at the larger and smaller medians at this location.  Community Development Department: Reallocate $10,000 of budgeted expenditures within the Building Division salary savings to fund an intern position within Community Development to assist with research, project renderings, scanning, and organizing project files.  Water Fund: Appropriate $28,971 from the Water Enterprise Fund Balance to fund the City’s share of the Central Coast Blue (CCB). o Appropriate $3,501 of FY 2022-23 true up costs related to the operating budget. This was reviewed and approved by the CCB Board on September 18, 2023, item 7.a. o Appropriate $25,470 associated with the work completed by Urban Futures, Inc. to provide financial support in the application to the Environmental Protection Agency (EPA) for a Water Infrastructure Finance and Innovation Act (WIFIA) loan and S&P Application. The agreement with Urban Futures was reviewed and approved by the CCB Board on June 19, 2023, item 6.b.  Water Fund: Appropriate $171,300 to fund the Phased Main Replacement at Cornwall Avenue, from Rena to El Camino Real (ECR). The total project cost is $750,000, the remaining portion of the project is funded with ARPA funds and discussed in additional detail below. Finally, the reallocation of ARPA funds is included as a budget request. Previous reallocations of the City’s ARPA funds were approved at the February 8, 2022; May 24, 2022; September 27, 2022; and May 9, 2023 City Council meetings. As projects are completed and project estimates are confirmed, allocation funding numbers in Table 4 provide the City Council approved allocations spent through the end of FY 2022-23. The third column of Table 4 shows expected spending of funds through the allotted ARPA deadline of December 31, 2024. ARPA funds must be committed by way of a contract or purchase order and spend these monies no later than December 31, 2026. The final column shows funds that need to be reallocated as a result of budgeted project savings. Table 1 – ARPA Allocation Staff reviewed the 5-year Capital Improvement Project Plan, accessed any other outstanding projects that were prioritized due to public health and safety related issues, and reviewed the most recent US Treasury Page 47 of 301 ATTACHMENT 1 Page 16 Final Rule governing eligible expenditures of the ARPA funds. During this review the Swinging Bridge Reinforcement project was identified because the timeframe for completion of this project makes it eligible for ARPA funding. The budget request of ARPA funds is to reallocate the $356,297 to the Swinging Bridge Reinforcement project. This project is currently out to bid and is anticipated to be completed by December 31, 2024. Through the review process is was noted that the Phased Main Replacement at Cornwall Avenue project, from Rena to El Camino Real (ECR), is funded with the Water Infrastructure Project funds but was inadvertently budgeted in FY 2026-27 with an estimated total project cost of $1 million. The Council previously approved this project to be funded with an ARPA allocation of $578,700. The phased main replacement in Cornwall Avenue, from Rena to ECR, is not anticipated to cost $1 million. The main replacement on Fair Oaks, from Elm to Alder, was 2,000 feet with more services and had a total cost of $741,841.17. The main to be replaced in Cornwall Avenue is only 1,400 feet with fewer services and considerably less traffic. The anticipated project budget is now being set at $750,000, for these reasons. Table 5 below shows the resulting total allocations of ARPA funding if approved as recommended by the Council, after which City staff would confirm eligibility and ensure the appropriate ARPA funding conditions are attached to each project: Table 5 – Updated ARPA Allocation Page 48 of 301 ATTACHMENT 1 Page 17 CMO City Manager's Office AS Administrative Services LIS Legislative and Information Services PD Police Department PW Public Works Rec Recreation Services Fire Five Cities Fire Authority CD Community Development Key SECTION 5: UPDATE ON MAJOR CITY GOALS AND CAPITAL IMPROVEMENT PLAN This information is provided to keep the Council apprised of the status of the Goal Status Reports to Council that includes progress towards completing Major City Goals and Capital Improvement Plan. These reports present updates and communications about the status of City projects, goals, and performance measures. The four major goals are: The following tables provide a breakdown of the Council Goal’s Work Plan by goal. Here is a key for purposes of defining each department. Funding Support a thriving community through fiscal responsibility, economic development efforts, and additional and alternative revenue streams. Fire Services Implement operational and fire and emergency service delivery improvements through the Five Cities Fire Authority, and complete the transition of services to Oceano due to its exit from the Authority. Infrastructure Invest in and complete critical infrastructure projects throughout the City through the strategic prioritization of projects based on available resources. General Plan Update Prioritize and complete major work efforts for the comprehensive General Plan update to provide a vision and framework for future development within the City. Page 49 of 301 ATTACHMENT 1 Page 18 Goal Strategy Task/Action Carryover Action or New Responsible Department Anticipated to Start Completion Target Update Funding 1. 1 Economic Development 1.1a Evaluate Economic Development Management Services New CMO 1Q FY2023-24 2Q FY 2023-24 In Progress 1.1b Obtain Economic Development Management Services New CMO 3Q FY 2023-24 3Q FY 2023-24 Not started 1.1c Support Modifications to the AGTBID New CMO/CA/RS/LIS In Progress 2Q FY 2023-24 In Progress 1.1c.i. Transition Administration to City staff New CMO/RS In Progress 1Q FY 2023-24 Complete 1.1c.ii. Complete Modifications to AGTBID Bylaws and Advisory Board Structure New CMO/CA/LIS In Progress 2Q FY 2023-24 In Progress 1.1d 400 W. Branch Disposition and Development Agreement New CMO/CA/CD In Progress 4Q FY 2023-24 In Progress 1.1e Complete Transition of Temporary Parklets to Permanent Parklets Carryover CD/PW In Progress 1Q FY2023-24 In Progress 1.1f Develop 1-3 Special Events that drive visitation during shoulder and winter months and build destination awareness New Rec In Progress 4Q FY 2023-24 In Progress 1.2 Pursue Revenue Measure 1.2a Issue an RFP for a consultant to develop a survey and outreach strategy to community New CMO/LIS 1Q FY2023-24 1Q FY2023-24 Completed 1.2b Award contract with consultant to develop a survey and outreach strategy to community New CMO/LIS 1Q FY2023-24 1Q FY2023-24 Completed 1.2c Conduct public outreach to the community to communicate need for additional revenue, including facilitation of a Citizen Committee Carryover CMO/LIS 1Q FY2023-24 1Q FY 2024-25 In Progress 1.2d Bring Revenue ballot measure to Council for consideration Carryover CMO/AS/LIS 3Q FY 2023-24 4Q FY 2023-24 Not started 1.3 Evaluate Potential to Enable Cannabis Businesses within City 1.3a Conduct study session with the City Council regarding potential cannabis ordinance Carryover CD/CA/CMO 3Q FY 2023-24 3Q FY 2023-24 Not started 1.3b Prepare and adopt cannabis ordinance, if directed by the City Council New CD/CA/CMO 3Q FY 2023-24 1Q FY 2024-25 Not started 1.3c Evaluate feasibility of a Cannabis Tax New CD/AS/CA/CMO 3Q FY 2023-24 1Q FY 2024-25 Not started Fire Services 2.1 Work with Regional Partners on Fire Services in 5 Cities 2.1a Pursue potential contract with the County to serve Oceano New Fire/CMO 3Q FY 2023-24 4Q FY 2023-24 In Progress 2.2 Funding for Fire Services 2.2a Consider including Public Safety in proposed Revenue measure New CMO/AS/LIS 4Q FY 2024-25 4Q FY 2024-25 In Progress Page 50 of 301 ATTACHMENT 1 Page 19 Goal Strategy Task/Action Carryover Action or New Responsible Department Anticipated to Start Completion Target Update Infrastructure 3.1 Pursue Alternative Funding Sources for Infrastructure Needs 3.1a Consider Community partnership for Mark M. Millis Community Center construction Carryover CMO/Rec/PW In progress 4Q FY 2023-24 In Progress 3.1b Include infrastructure in new Revenue Measure plans and outreach Carryover AS/CMO/LIS/ PW/CD 1Q FY 2023-24 4Q FY 2024-25 In Progress 3.1c Collect FEMA reimbursement for January - March 2023 storm damage New AS In progress 3Q FY2024-25 In Progress 3.1d Pursue Grant applications and administration for infrastructure projects Carryover PW/CD/AS In progress Ongoing In Progress 3.2 Work with Regional Partners on Infrastructure Projects 3.2a Support ongoing development and financing of Central Coast Blue project Carryover CMO/AS/PW In Progress Ongoing In Progress 3.2b NCMA Management Agreement Amendments New PW 3Q FY 2023-24 Ongoing In Progress 3.3 Prioritize Key Infrastructure Projects 3.3a Traffic Way Bridge Carryover CD/PW In progress 2Q FY 2025-26 In Progress 3.3a.i. Traffic Way Bridge Design Carryover CD/PW In progress 4 Q FY 2023-24 In Progress 3.3a.ii. Traffic Way Bridge ROW Carryover CD/PW 1Q FY 2023-24 3Q FY 2023-24 In Progress 3.3a.iii. Traffic Way Bridge Construction Carryover CD/PW 3Q FY 2024-25 2Q FY 2025-26 Not started 3.3b Swinging Bridge Rehabilitation Carryover CD/PW In progress 2Q FY 2024-25 In Progress 3.3b.i. Swinging Bridge Rehabilitation NEPA Carryover CD/PW In progress 3Q FY 2023-24 Complete 3.3bii Swinging Bridge Rehabilitation Bid for Construction Carryover CD/PW 3Q FY 2023-24 3Q FY 2023-24 Not started 3.3b.iii. Swinging Bridge Construction New CD/PW 4Q FY 2023-24 2Q FY 2024-25 Not started Page 51 of 301 ATTACHMENT 1 Page 20 Goal Strategy Task/Action Carryover Action or New Responsible Department Anticipated to Start Completion Target Update 3.3c Halcyon Complete Streets New CD/PW Not started 3.3c.i. Halcyon Complete Streets Design acquisition New CD/PW 1Q FY 2024-25 1Q FY 2024-25 Not started 3.3c.ii. Halcyon Complete Streets ROW acquisition New CD/PW 1Q FY 2023-24 1Q FY 2024-25 In Progress 3.3c.iii. Halcyon Complete Streets Construction New CD/PW 1Q FY 2024-25 2Q FY 2025-26 Not started 3.3d ATP Development New CD/PW In Progress 3Q FY 2024-25 In Progress 3.3d.i. Award ATP Contract to Consultant New CD/PW 4Q FY 2022-23 4Q FY 2022-23 In Progress 3.3d.ii. Final Approval of ATP by Council New CD/PW 3Q FY 2024-25 3Q FY 2024-25 Not started 3.3e 2022 Pavement Management Program Construction New CD/PW 1Q FY 2023-24 2Q FY 2023-24 In Progress 3.3f 2024 Pavement Management Program Design New CD/PW 2Q FY 2023-24 3Q FY 2023-24 Completed 3.3g 2024 Pavement Management Program Construction New CD/PW 4Q FY 2023-24 1Q FY 2024-25 In Progress 3.3h Community Safety Camera Network Carryover Police/CD In Progress 4Q FY 2024-25 In Progress 3.3i Replacement Generator at Station 1 New CD/PW/Fire 4Q FY 2022-23 4Q FY 2023-24 In Progress 3.3j Lift Station 3 New CD/PW 1Q FY 2023-24 1Q FY 2024-25 In Progress 3.3k AG Creek Remediation (Debris removal and bank stabilization)New CD/PW 4Q FY 2022-23 4Q FY 2023-24 In Progress 3.3l Concrete Repair Program New CD/PW 1Q FY 2024-25 4Q FY 2024-25 In Progress 3.3m Concept plan/design for new Mark M. Millis Community Center Building New CD/PW/Rec 1Q FY 2023-24 4Q FY 2023-24 Not started 3.3n CMP Lining New CD/PW 1Q FY 2024-25 Ongoing In Progress Infrastructure (continued) Page 52 of 301 ATTACHMENT 1 Page 21 Goal Strategy Task/Action Carryover Action or New Responsible Department Anticipated to Start Completion Target Update 4.1 Public Outreach 4.1a Plan and Host a Kick-Off Meeting with Community New CD/LIS 1Q FY 2023-24 1Q FY 2023-24 In Progress 4.2 Diversity Equity Iinclusivity Justice Lens 4.2a Management of DEIJ consultant New CD In Progress Ongoing In Progress 4.3 General Plan Elements New CD 2Q FY 2023-24 3Q FY 2024-25 Not started 4.4 Baseline Analysis of Existing and Future Business Needs 4.4a Survey Local Businesses Carryover Action CD 1Q FY 2023-24 4Q FY 2023-24 Not started 4.4b Conduct a Retail Market Analysis New CD 1Q FY 2023-24 4Q FY 2023-24 Not started 4.5 Climate Action Plan New CD 2Q FY 2023-24 3Q FY 2025-26 Not started 4.6 Code Update 4.6a Bring code changes to Planning Commission for approval New CD 3Q FY 2025-26 3Q FY 2025-26 Not started 4.6b Bring draft Ordinance of code revision update to Council New CD 4Q FY 2025-26 4Q FY 2025-26 Not started 4.7 EIR 4.7a Complete draft EIR New CD 1Q FY 2024-25 3Q FY 2024-25 Not started 4.7b Complete final EIR New CD 3Q FY 2024-25 4Q FY 2024-25 Not started 4.8 Objective Design Standards Carryover CD/CA 1Q FY 2023-24 1Q FY 2023-24 In Progress General Plan Update Page 53 of 301