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CC 2024-05-28_12b Mid Cycle Budget Update MEMORANDUM TO: City Council FROM: Matthew Downing, City Manager Bill Robeson, Assistant City Manager/Public Works Director BY: Nicole Valentine, Administrative Services Director SUBJECT: Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid-Cycle Budget Update Report DATE: May 28, 2024 RECOMMENDATION: Review the preliminary budget, receive a presentation from staff, and provide feedback to staff in preparation for the public hearing scheduled for June 11, 2024, to consider the Fiscal Years (FY) 2024-25 Mid-Cycle Budget Update Report. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The proposed FY 2024-25 Mid-Cycle Budget Update Report recommends approximately $48 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital related items. The proposed FY 2024-25 Budget General Fund budget utilizes excess fund balance reserves to pay for a combination of one-time and ongoing expenditures that will exceed expected revenues in order to address several goals. However, as presented, fund balance reserves are expected to remain at 23.1%, above the adopted 20% goal. BACKGROUND: Each year the City Council adopts a budget, which commits resources for the next Fiscal Year. The City Council adopted the FY 2023-24 and 2024-25 Biennial Budget on June 27, 2023. The biennial budget process includes updates each quarter of the first year, a Mid-Cycle Update at the beginning of the second year that also includes appropriation of the second year budget, and updates each quarter of the second year. Quarterly updates for the FY 2023-24 have been provided on December 12, 2023, February 27, 2024, and May 14 ,2024. On February 27, 2024, the City Council approved an update on City Council Goals and Priorities for FY 2023-25. Additionally, on April 23, 2024, the City Council provided Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 2 direction on the 5-year Capital Improvement Program (CIP) budget and the 5-Year Local Sales Tax Fund Expenditures Program. The prioritization and direction provided by the City Council at these previous meetings have been incorporated into the FY 2024-25 Mid- Cycle Budget Update. ANALYSIS OF ISSUES: General Fund Overview On January 23, 2024, the City Council reviewed the FY 2022-23 Annual Comprehensive Financial Report (ACFR) summarizing the Fund Balance at the end of FY 2022-23. The Consolidated General Fund Balance can be reviewed in the following table: Table 1: Beginning and Ending Balances as of June 30, 2023 Measure O 2006 General FundSales Tax FundOPEBTotal Beginning Fund Balance 7/1/22$ 10,823,192$ 5,967,140$ 1,011,630$ 17,801,962 Revenues 22,758,054 3,004,610 122,374 25,885,038 Expenditures (21,718,987) (1,346,413) - (23,065,400) Net Change in Fund Balance$ 1,039,067$ 1,658,197$ 122,374$ 2,819,638 Fund Balance: Nonspendable$ 37,592$ - $ -$ 37,592 Assigned for capital projects - 3,522,243 - 3,522,243 Assigned for post employment benefits - - 1,134,004 1,134,004 Unassigned 11,824,667 4,103,094 - 15,927,761 Ending Fund Balance, 6/30/23$ 11,862,259$ 7,625,337$ 1,134,004$ 20,621,600 The ACFR reports a General Fund total fund balance of $20.6 million. However, a small amount of the fund balance is considered non-spendable because it is held as inventory goal of 20% of expenditures with a minimum of 15% in the General Fund. At the conclusion of Fiscal Year 2022-23, the reserve, based on available General Funds, was . Though General Fund expenditures are expected to outpace revenues in FY 2023-24 by $1.6 million, as shown in Table 2, the year will end with a healthy projected fund balance of $10.3 3-24 Estimated Budget is higher than what was originally projected in the adopted FY 2023-25 Biennial Budget due to the higher than anticipated Beginning Fund. Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 3 Table 2: General Fund Budget & Available Fund Balance in Thousands 2023-242024-25 2021-222022-23ADOPTED AMENDED ESTIMATEDCURRENTPROPOSED ACTUALACTUALBUDGETBUDGETBUDGETBUDGETBUDGET Beginning Fund Balance$8,089$10,824$8,993$11,863$11,863$10,275$10,275 Revenues 18,589 19,689 18,544 18,819 19,247 19,000 19,389 Transfers In 2,993 3,069 3,114 3,114 2,755 3,185 2,796 Total Revenues 21,582 22,758 21,658 21,933 22,002 22,185 22,185 Salaries and Benefits 10,851 13,198 12,089 12,834 12,853 12,437 13,539 Services and Supplies 6,455 7,315 9,435 9,292 9,296 9,775 9,932 Debt Service 129 308 310 310 307 294 294 Capital Outlay 13 242 240 318 318 150 130 Transfers Out 1,399 656 115 816 816 2,475 2,475 Total Expenditures 18,847 21,719 22,189 23,570 23,590 25,131 26,370 Total Operating Incr/(Decr) 2,735 1,039 (531) (1,637) (1,588) (2,946) (4,185) Available Fund Balance$10,824$11,863$8,462$10,226$10,275$7,329$6,090 Reserve %57.4%54.6%38.1%43.4%43.6%29.2%23.1% $ Above Reserve Policy$7,054$7,519$4,025$5,512$5,557$2,302$816 Measure O 2006 Sales Tax Fund The General Fund is the primary operating fund of the City, which accounts for resources and services traditionally associated with government. The General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The 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 General Fund separately from the Measure O 2006 in the ACFR as shown above in Table 1. The Measure O 2006 Sales Tax Fund accounts for the revenues derived from Measure O 2006, a local 1/2% sales tax approved by the City's voters in November 2006. 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. For the purpose of providing the City Council and the community the full picture of the City revenues, expenditures, and ending fund balance, staff has combined these two funds for information purposes into a Consolidated General Fund picture in this report as shown in Table 3. Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 4 Table 3: FY 2024-25 Consolidated General Fund Budget & Available Fund Balance in Thousands FY 2023-24 Estimated BudgetFY 2024-25 Proposed Budget GeneralLocal Consolidated GeneralLocal Consolidated FundSales TotalFundSales Total Beginning Fund Balance$11,862$7,625$19,487$10,275$1,759$12,034 Revenues: Revenues 19,247 2,906 22,153 19,388 2,966 22,354 Transfers In 2,755 - 2,755 2,796 - 2,796 Total Revenues 22,002 2,906 24,908 22,184 2,966 25,150 Expenditures: Salaries and Benefits 12,852 - 12,852 13,539 - 13,539 Services and Supplies 9,296 1,042 10,338 9,932 1,087 11,019 Debt Service 307 - 307 294 - 294 Capital Outlay 318 - 318 130 - 130 Transfers Out 816 7,730 8,546 2,475 2,966 5,441 Total Expenditures 23,589 8,772 32,361 26,370 4,053 30,423 Total Operating Incr/(Decr) (1,587) (5,866) (7,453) (4,186) (1,087) (5,273) Available Fund Balance$10,275$1,759$12,034$6,089$673$6,761 Reserve %43.6%20.1%37.2%23.1%16.6%22.2% $ Above Reserve Policy 5,557 5 5,562 816 (138) 678 Funds Available to Allocate 4,500 - 4,500 560 - 560 The projected fund balance for the Consolidated General Fund at the end of FY 2024-25 is $6,762,402 or 22.2%. This leaves approximately $560,000 in funds available that could be allocated from fund balance and still achieve the 20% reserve goal. A discussion about appropriation of Excess Available General Fund Balance has been included later in this report. Proposed Budget The FY 2024-25 proposed budget presents a balanced budget, with excess revenues and fund balance sufficient to cover recommended work plan and capital project budget expenditures. The FY 2024-25 proposed budget includes a total of $25.1 million in revenues and $30.4 million in operating and capital budget for a net of $5.3 million more expenditures than revenues. The operating budget is balanced, with a $6.7 million net operating surplus. The expenditures that exceed revenues are for one-time projects that the City has been anticipating. Fund balances accumulated over time offset the additional expenditures. Consolidated General Fund Revenues As shown in Chart 1 below, Sales and Property Taxes comprise the largest source of revenue in the General Fund, together accounting for approximately 68% of revenue in that fund. Given this dependence on just two revenue sources, fluctuations in the amount Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 5 As long as the real estate market stays reasonably strong, property taxes are a relatively stable revenue source. Chart 1:FY 2024-25 Consolidated General Fund Revenues $25.1Million Total Overall, General Fund tax revenues have been trending upward over the past several years and are expected to increase in FY 2024-25. Based on the latest information provided by the County Auditor- increase4%inFY 2024-25. This is the result of an increase in the assessed valuation of properties in Arroyo Grande and a housing market that has remained robust throughout the past year. Sales tax receipts have remained consistent throughout the past year. Th tax consultant projected a reduction in sales tax revenues of 1.9% in FY 2023-24 due to an anticipated minor economic slowdown. These projections reflect expected declines in categories like automobiles and transportation, fuel and service stations, and general consumer goods. The lower projections in these categories are the result of lower expected consumer demand in the short-term. This budget is projecting a decrease in sales tax revenues of 2% in FY 2024-25, as the economy is only anticipating a minor slowdown. Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 6 Chart 2:Consolidated General Fund Tax Revenues $19.5Million Consolidated General Fund Expenditures The following two charts show the proposed $30.4million Consolidated General Fund expenditure budget for FY 2024-25, both in terms of the relative size of each department as well as the total dollars budgeted for each department. As the charts show, the Police 5% of the budget. Fire services for the FCFA will receive 13%of the Consolidated General Fund and Local Sales Tax Fund budget. Public Works and Community Development will receive 11% and 7% of FY 2024- 25-7% of the General Fund budget and includes items that affect all departments, such as the liability insurance, and transfers to the Street and Capital Improvement Project funds. Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 7 Chart 3:FY 2023-24 Consolidated General Fund Expenditures by Department $30.4Million Chart 4:FY 2023-24 Consolidated General Fund Expenditures by Department $30.4Million The tables in the following pages identify specific budget request items in the FY 2024- 25 Mid-Cycle Budget in the areas of staffing, vehiclesand equipment, and other budget expenditure items. The total Consolidated General Fund Expenditure requests included in the Mid-Cycle Budget Update increase the FY 2024-25 Budget by $1,235,233. Proposed Staffing Requests During the First QuarterFinancial Status report on December 12, 2023,the City Council approved an Internposition within the Community DevelopmentDepartment toassist with research, project renderings, scanning, and organizingproject files.This position was not Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 8 originally included in the FY 2024-25 budget and accounts for a portion of the proposed staffing requests listed below. Staff are also requesting to add two additional positions: Part time Recreation Specialist in the Recreation Department to provide additional support on special projects such as marketing, assistance with special events, and customer service at the office. Part time Executive Secretary within the Human Resources Division of the City to support increased demands and complexities of the citywide organization. This additional staff resource is needed as the Human Resources Officer continues to get pulled into highlevel analysis of changing legislation and regulations, in addition to a steady City staff turnover rate, fueling additional workload related to hiring and onboarding new employees. Delegating more of the administrative work to a part-time Executive Secretary will more equally balance the workload of the division, and allow for more support to City employees. The Human Resources needs for the Five Cities Fire Authority. Table 4: Proposed Staffing Requests PositionBudget Increase PT CDD Intern 20,800 PT Recreation Assistant 26,000 PT HR Executive Secretary 37,333 Salaries and benefit costs included in the proposed Mid-Cycle Budget Update for FY 2024-25 reflect contractually obligated increases. Services and Supplies Requests Staff is requesting to increase Contractual Services totaling $542,328 within the following departments: City Attorney contract totaling $225,608 for increased support related to legal review and requirements. The FY 2024-25 original budget included $303,142, this request will bring the total budget to $528,750. The City has seen an increase in public records request from July 2023 to April 2023 that has increased expenditures by $75,200 alone. On average the City is receiving an additional 70 hours per month compared to the previous Attorney firm. Community Development Department totaling $185,000 for the increased costs related to Building Contractual Services. Recent development and building permit activity has increased demand for plan check services. Public Works Department totaling $81,720 for the increased cost related to the Street Sweeper contract that provides all Street Sweeping within the City previously approved by the City Council. Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 9 Legislative and Information Services Department totaling $50,000 for records scanning services. In an effort to reduce the need for physical storage and for more efficient access to requested records, staff propose contracting with a vendor to system. The Department currently does not have the staff capacity to complete this in-house. Information Technology Division of the Administrative Services Department totaling $268,850 including: o $100,000 to hire a Consultant to create a Technology Strategic Plan to build o $73,800 for the Public Safety Camera system support beginning in May 2025, o $50,000 for Multifactor Authentication solution exposure to cyber risks, o $25,000 for budget software to streamline processes, reduce redundancies, and create a user-friendly platform for the public to easily navigate the budget document, o software, o $10,000 for eScribe module to provide City Council meeting indexing, o $10,000 for IT Training Lab for staff to complete training classes for new software platforms in one setting, o $14,200 for email archiver and anti-spam/phishing software to continue to support the City email system, and o Reduction of $38,250 for IT Support Services as the refinement of costs for software platform estimates have been updated. The proposed Mid-Cycle Budget Update also includes an increase in the Police three line items, reflecting a total increase of $29,000. This increase would include: Transparency Engagement and Public Records Request platform to streamline the body-worn cameras, in-car cameras, and public safety videos; Outside background screening for new hires; and Narcotics Testing related to evidence processed by the Shewhich was previously provided at no cost. Other requested expenditure variances include: Increase in multiple departments to include $47,000 for travel and training; Add $15,000 annually to rent a Modular for the Recreation Department offices after the demolition of the Mark M. Millis Community Center; and Increase in Governmental Buildings Division to include $10,000 for a City Hall . Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 10 Vehicle Replacement Requests As detailed in Table 5 below, the proposed budget includes a decrease to the budget of $20,000, for a total general fund vehicle and equipment request of $100,000, decreased from the current budget of $120,000. It is important to note that all vehicles due for replacement are evaluated to determine the status of their operating condition and whether or not their replacement can be delayed. Table 5 Proposed Vehicle Requests VehiclesCurrent BudgetProposed Budget Small Truck - 50,000 Small Truck - 50,000 Riding Mower 120,000 - Total FY 2024-25 Vehicles 120,000 100,000 Appropriation of Excess Available General Fund Balance This preliminary budget discussion also includes information for the City Council to provide direction towards spending the balance above the 20% Fund Balance Goal Limit and to appropriate funds, if applicable, to certain expenditures. At the end of FY 2024-25, the projected fund balance is approximately $677,913 greater than the 20% goal. Because the act of allocating excess reserves adds to budgeted expenditures, the amount available to spend while keeping the reserve at 20% is $560,000. This is the amount staff recommends the City Council appropriate as part of this item. There are many options available for spending excess general fund reserves. However, because the excess reserves are one-time funds and do not represent an ongoing funding source, it is recommended that they be allocated to one-time items rather than to fund ongoing costs, such as new positions or programs. Spending options include an additional UAL payment to CalPERS and infrastructure projects, such as pavement maintenance, sidewalk improvements, or other capital improvement projects. Decisions regarding projects funded using excess reserves should also consider staff resource constraints. Additionally, staff brought forward a Fund Balance and Reserve Policy during the April 9, 2024, City Council meeting to update the existing policy and consider updating the policy to incorporate a Budget Stabilization Reserve, as well as, three replacement/repairs reserves: Information Technology Reserve Fleet Replacement Reserve Facility Repairs Reserve Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 11 This item was continued to a later date. Staff has incorporated this discussion in the preliminary budget item so that the City Council has an opportunity to review the policy as an example and discuss before staff returns with an update on June 11, 2024. An option for the excess available General Fund Balance would be to appropriate a portion or all the excess available General Fund Balance to one or all of these Reserves. Infrastructure Projects Infrastructure projects include pavement maintenance, sidewalk improvements or other capital improvement projects that are not currently funded in the proposed 5-Year CIP. Infrastructure needs were discussed on April 23, 2024, and reviewed in the proposed 5- Year CIP. The 5-Year CIP Budget includes $10,346,624 for the Pavement Management Program (PMP) over the course of the 5-ent Condition Index (PCI) of 56, which borders on the Poor Condition, approximately $7.2 million needs to be spent annually. Additional allocations of funding from General Fund Reserves to the PMP may result in greater efficiencies for the FY 2024-25 project that is currently budgeted to include $5 million. The 5-Year CIP Budget includes $1,063,000 over the course of the 5-year period for Sidewalk Improvements. Additional funding for the sidewalk repair program would increase the number of sidewalk panels that could be repaired in the City and may enable the City to install new sidewalks to close existing gaps in one or two locations. The City has a number of CIP projects that are not currently funded. If the City Council wishes to retain excess General Fund Balance for these CIP projects that are not currently funded, it is recommended that the funding remain in fund balance and discussed as part of the next 5-Year Capital Improvement Program Budget, in Spring 2025, in order to ensure staff capacity to complete additional projects. Because past earnings have not matched assumptions used by CalPERS to determine the amount of funding needed to cover pension obligations for member agencies, most CalPERS pension plans have liabilities that exceed the market value of assets in the plan, creating an UAL. During the time period of 2004 to 2023, the expected rate of return has ranged from a high of 8.25% to the current expectation of 6.8%. In any year that the rate of return falls below these earnings expectations, the UAL will likely increase. This factor has been the primary driver of the increasing UAL over the years. Additionally, other factors, such as changes to mortality assumptions and shorter amortization of gains and losses, have also increased the UAL. Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 12 The City has a UAL of $12.3 million as of June 30, 2022. This total includes amounts from all six City pension plans, though primarily from the Tier 1 Plans, as shown in Table 6: Table 6: on 06/30/2022 Based on Letter issued July 2023 PERS Unfunded Funded TierLiabilityPercentage Misc. 1st Level 15,313,95766.1% Misc. 2nd Level 78,53491.4% Misc. PEPRA 1,919,43790.2% Safety Police 1st Level 7,273,46681.5% Safety Police 2nd Level 141,85789.4% Safety Police PEPRA 108,12588.9% 24,835,37684.6% CalPERS UAL, the City Council decided during the FY 2018-20 Biennial Budget hearings to make two prepayments on the UAL. The first prepayment of $3 million was made in July 2018 and a second prepayment of $2 million was made in July 2019. The future realized savings from these investments will be approximately $423,000 annually on average for the next 29 years. This represents a rate of return on investment from the $5 million paid to CalPERS of 7.1%. During the FY 2022- 23 Mid-Cycle Update and during the FY 2023-25 Biennial Budget, the City Council chose not to make another prepayment but to focus on other City needs. The City Council may choose to allocate some or all of the $560,000 of excess General Fund Balance to pay down the UAL further in FY 2024-25. Fund Balance and Reserve Policy Healthy reserves are a mark of fiscal responsibility and a cornerstone of financial flexibility. The Government Finance Officers Association best practice recommends, at a minimum, that general-purpose governments, regardless of size, maintain unrestricted budgetary fund balance in their General Fund of no less than two months (16.67%) of regular general fund operating revenues or operating expenditures. The updated Fund Balance and Reserve Policy does not change the current Operating expenditures. The previous recommendations brought to Council included contributions to the Budget Stabilization Reserve, staff does not recommend this due to the amount of fund balance required to properly fund the Budget Stabilization Reserve. However, staff oal of 20% to the three replacement/repairs reserves: Information Technology Reserve Fleet Replacement Reserve Facility Repairs Reserve Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 13 Should the City Council be interested in funding the three replacement/repairs reserves, staff recommends this amount not exceed 1%. The City Council may choose to allocate some or all of the $560,000 of excess General Fund Balance toward these Reserves, although the $560,000 is not enough to fund the full 1% maximum recommended amount. Table 7 demonstrates how this appropriation could be divided: Table 7: Fund Balance and Reserve Policy Potential Allocation Reserve Fund Balance ReservePercentageAllocation General Fund Balance20% 6,084,489 Information Technology Reserve0.61% 186,666 Fleet Replacement Reserve0.61% 186,667 Facility Repairs Reserve0.61% 186,667 Total21.84% 6,644,489 Enterprise Funds programs, Water and Sewer, reflect rate adjustments approved by the City Council on March 8, 2022, based on the Water and Wastewater Rate Study. Table 8 below details a consolidated look at these enterprise funds. Table 8: Consolidated Enterprise Budget & Available Fund Balance in Thousands 2021-222022-232023-242024-25 FINALFINALADOPTED AMENDED ESTIMATEDCURRENTPROPOSED ACTUAL ACTUAL BUDGETBUDGETBUDGETBUDGETBUDGET Beginning Working Capital$ 8,041$ 6,639$ 8,148$ 4,891 $ 4,891 $ 4,536$ 4,536 Revenues: Revenues 7,616 7,730 10,013 10,013 9,338 9,882 9,872 Transfers In 4,057 3,360 4,299 5,998 5,948 3,962 3,890 Total Revenues 11,673 11,090 14,312 16,011 15,286 13,844 13,762 Expenditures: Salaries and Benefits 1,017 1,105 1,187 1,235 1,195 1,183 1,279 Services and Supplies 4,475 4,530 4,948 4,972 4,908 5,744 5,733 Debt Service 0 - 14 - - - - Capital Outlay 875 848 117 51 54 48 48 Capital Improvement Program 323 511 3,607 2,495 2,729 712 530 Transfers Out 6,385 5,844 6,550 7,021 6,755 6,486 6,342 Total Expenditures 13,075 12,838 16,423 15,774 15,641 14,173 13,932 Total Operating Incr/(Decr) (1,402) (1,748) (2,111) 237 (355) (329) (170) Available Fund Balance$ 6,639$ 4,891$ 6,037$ 5,128 $ 4,536 4,207 4,366 Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 14 Special Revenue Funds Special Revenue Funds are a governmental fund type used to account for specific revenues that are legally restricted to expenditures for particular purposes. The Mid-Cycle Budget Update for FY 2024-25 proposes changes to 3 of the 24 Special Revenue Funds. Only the Special Revenue Funds with changes will be highlighted in this section. Fund 220 Streets Fund 220 Streets accounts for receipts and expenditures of money apportioned by the State under Streets and Highway Code. The use of gas tax revenues can only be used to construct and maintain streets, roads and highways. The anticipated revenues increased by $100,700 compared to the current budget due to more consumers driving and the increase in gas costs. The expenditure budget also increased by $35,300 related to increased employee costs. The anticipated fund balance at the end of FY 2024-25 is $1,897 as shown in Table 9 below: Table 9: Fund 220 Streets Budget & Available Fund Balance 2021-222022-232023-242024-25 FINALFINALADOPTED AMENDED ESTIMATEDCURRENTPROPOSED ITEM ACTUAL ACTUAL BUDGETBUDGETBUDGETBUDGETBUDGET Beginning Fund Balance$ 90,338 $ 81,326$ 244,024$ 81,325$ 81,325$ 66,564 66,564 Revenues: Revenues 970,471 894,727 891,066 891,066 953,508 1,027,100 972,800 Transfers In 471,048 507,467 576,000 576,000 576,000 500,000 655,000 Total Revenues 1,441,519 1,402,194 1,467,066 1,467,066 1,529,508 1,527,100 1,627,800 Expenditures: Salaries and Benefits 504,575 507,329 547,200 558,500 558,500 565,000 600,300 Services and Supplies 263,827 326,357 310,800 415,100 415,100 382,700 382,700 Debt Service 28,545 8,369 8,369 8,369 8,369 8,369 8,369 Capital Outlay - 41,352 22,000 22,000 22,000 140,000 140,000 Transfers Out 653,584 518,788 540,300 540,300 540,300 561,100 561,100 Total Expenditures 1,450,531 1,402,195 1,428,669 1,544,269 1,544,269 1,657,169 1,692,469 Change in Fund Balance (9,012) (1) 38,397 (77,203) (14,761) (130,069) (64,669) Ending Fund Balance$ 81,326 $ 81,325$ 282,421$ 4,122 $ 66,564$ (63,505) 1,895 Fund 225 Transportation Fund 225 Transportation revenue is provided by the San Luis Obispo County of restricted to transportation systems, including transit, pedestrian, street, and road maintenance. The expenditure budget increases by $155,000 to transfer to the Streets Fund 220. The anticipated fund balance at the end of FY 2023-25 is $1.4 million as shown in Table 10 below: Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 15 Table 10: Fund 225 Transportation & Available Fund Balance 2021-222022-232023-242024-25 FINALFINALADOPTED AMENDED ESTIMATEDCURRENTPROPOSED ITEM ACTUAL ACTUAL BUDGETBUDGETBUDGETBUDGETBUDGET Beginning Fund Balance$ 540,130 $ 967,679 $ 1,248,679$ 1,337,178$ 1,337,178$ 1,452,178$ 1,452,178 Revenues: Revenues 660,553 602,502 515,000 515,000 515,000 516,000 516,000 Transfers In - - - - - - - Total Revenues 660,553 602,502 515,000 515,000 515,000 516,000 516,000 Expenditures: Salaries and Benefits - - - - - - - Services and Supplies - - - - - - - Debt Service - - - - - Capital Outlay - - - - - - - Transfers Out 233,004 233,004 400,000 400,000 400,000 425,000 580,000 Total Expenditures 233,004 233,004 400,000 400,000 400,000 425,000 580,000 Change in Fund Balance 427,549 369,498 115,000 115,000 115,000 91,000 (64,000) Ending Fund Balance$ 967,679 $ 1,337,178$ 1,363,679$ 1,452,178$ 1,452,178$ 1,543,178$ 1,388,178 Fund 240 Tourism Business Improvement District (TBID) Fund 240 TBID provides projects, programs and activities that benefit lodging businesses located and operating within the City of Arroyo Grande. A two percent (2%) assessment is levied on all lodging businesses of the cost charged by the operator per occupied room per night, for all transient occupancies. Revenue collected is used to promote the lodging industry within the City. The expenditure budget is proposed to increase by $136,350 compared to the current budget. The TBID budget was approved at the April 23, 2024, City Council meeting. Additionally, staff has incorporated an additional request totaling $11,350 for the online payment platform that short term vacation rental owners can make payments on. The anticipated fund balance at the end of FY 2024-25 is $277,909 as shown in Table 11 below: Table 11: TBID Budget & Available Fund Balance 2021-222022-232023-242024-25 FINALFINALADOPTED AMENDED ESTIMATEDCURRENTPROPOSED ITEM ACTUAL ACTUAL BUDGETBUDGETBUDGETBUDGETBUDGET Beginning Fund Balance$ 328,350 $ 405,833 $ 383,583 $ 436,489 $ 436,489 $ 420,739$ 420,739 Revenues: Revenues 290,014 307,704 309,500 309,500 309,750 319,050 319,020 Transfers In - - - - - - - Total Revenues 290,014 307,704 309,500 309,500 309,750 319,050 319,020 Salaries and Benefits - - - - - - Services and Supplies 204,527 269,044 275,500 275,500 275,500 275,500 411,850 Debt Service - - - - - - - Capital Outlay - - - - - - - Transfers Out 8,004 8,004 50,000 50,000 50,000 50,000 50,000 Total Expenditures 212,531 277,048 325,500 325,500 325,500 325,500 461,850 Change in Fund Balance 77,483 30,656 (16,000) (16,000) (15,750) (6,450) (142,830) Ending Fund Balance$ 405,833 $ 436,489 $ 367,583 $ 420,489 $ 420,739 $ 414,289$ 277,909 Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 16 Summary The proposed FY 2024-25 Budget recommends approximately $48 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital related items as shown in the consolidated fund summary Table 12 shown below: Table 12 Consolidated Fund Summary Budget & Available Fund Balance Local Sales Tax Enterprise Special Agency General FundFundFundsRevenue FundsTotal Beginning Fund Balance$ 10,274,662 $ 1,759,416$ 4,535,607$ 10,958,995$ (610,413)$ 26,918,267 Revenues: Revenues 19,388,470 2,966,000 9,871,840 2,443,011 423,944 35,093,265 Transfers In 2,796,300 - 3,889,750 655,000 - 7,341,050 Total Revenues 22,184,770 2,966,000 13,761,590 3,098,011 423,944 42,434,315 Expenditures: Salaries and Benefits 13,538,725 - 1,278,500 600,300 - 15,417,525 Services and Supplies 9,932,023 1,087,000 5,732,850 1,025,406 7,900 17,785,179 Debt Service 294,386 - 47,500 8,369 382,944 733,199 Capital Outlay 129,500 - 530,000 140,000 - 799,500 Transfers Out 2,475,000 2,965,812 6,341,850 1,446,400 35,900 13,264,962 Total Expenditures 26,369,634 4,052,812 13,930,700 3,220,475 426,744 48,000,365 Total Operating Incr/(Decr) (4,184,864) (1,086,812) (169,110) (122,464) (2,800) (5,566,050) Available Fund Balance$ 6,089,798 $ 672,604$ 4,366,497$ 10,836,532$ (613,213)$ 21,352,217 Next Steps The FY 2024-25 Mid-Cycle Budget Update and the 5-Year CIP will be presented to the City Council on June 11, 2024, for formal adoption. Once approved by the City Council, FY 2024- 25 funds will be appropriated on July 1, 2024. ALTERNATIVES: 1. Review and provide direction on the Preliminary FY 2024-25 Mid-Cycle Budget Update Report; or 2. Provide other direction to staff. ADVANTAGES: Providing direction will assist staff in developing the Preliminary FY 2024-25 Mid-Cycle Budget Update Report that while maintaining economic feasibility. DISADVANTAGES: The recommendations do not fully address the long-term replacement needs of all City ets, sidewalks, and stormwater facilities. Limited staffing levels continue to be a challenge for accomplishing all desired Item 12.b. City Council Discussion and Consideration of Approval of the Fiscal Year (FY) 2024-25 Mid- Cycle Budget Update Report May 28, 2024 Page 17 City priorities in a timely manner. Significant cost increases related to pensions and insurance are still threats that will require close monitoring. The performance of the economy in general, and the impacts of specific economic development activities, will also affect the financial condition and sustainability of City operations. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: Government Code Section 54954.2. Item 12.b.