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CC 2019-06-11_11b FY 2019-20 Budget ReportMEMORANDUM TO: CITY COUNCIL FROM: SHANNON ESENWEIN, DIRECTOR OF ADMINISTRATIVE SERVICES SUBJECT: CONSIDERATION OF FISCAL YEAR 2019-20 BUDGET REPORT DATE: JUNE 11, 2019 SUMMARY OF ACTION: Approve the detailed budget adjustments listed in the Budget Update Report and adopt the attached Resolution to approve the FY 2019-20 Budget. This will allow the City to continue funding all city services after the end of the current fiscal year on June 30, 2019. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The total citywide expenditure budget for FY 2019-20 is $42.5 million. The total General Fund expenditure budget is $19.9 million for FY 2019-20. RECOMMENDATION: It is recommended the City Council approve the detailed budget adjustments and requests for additional appropriations listed in the Budget Update Report and adopt a Resolution approving the FY 2019-20 Budget. BACKGROUND: Each year the City Council adopts a budget, which commits resources for the next Fiscal Year. The Administrative Services Department prepares periodic budget updates for the City Council. The City Council adopted the Fiscal year 2018-19 and 2019-20 Biennial Budget on June 12, 2018. The budget process includes updates at the midpoint of the first year, at the beginning of the second year (along with the appropriation of the second year budget) and at the midpoint of the second year. As presented at the FY 2018-19 Mid-Year Budget Update, the City is currently facing a mixed fiscal picture. Revenues in many General Fund categories are increasing and economic indicators are generally favorable. The City has a diverse revenue stream, which will be important in facing the upcoming challenges associated with increasing retirement costs, deferred infrastructure maintenance, and other unmet needs. The projected available General Fund Balance at June 30, 2019 is approximately $2.7 million. This equates to 15% of appropriations, which is consistent with the City Council minimum fund balance goal. This is based on revenue and expenditure assumptions that Item 11.b. - Page 1 CITY COUNCIL CONSIDERATION OF FISCAL YEAR 2019-20 BUDGET REPORT JUNE 11, 2019 PAGE 2 are detailed in the attached Budget update Report, including recommended adjustments for FY 2019-20. As the City continues to close the budget gap between expenditures and revenues, it will be important to determine the highest priorities. Over the past several years, staff has worked to identify important priorities for funding that will require attention in the short and long-term. The data gathered and analyzed during this Biennial Budget will enable the Council to make well-informed decisions in the next Biennial Budget. The list of unmet needs and wants, like any other city far exceeds the City’s current ability to fund. Therefore, this budget focuses City resources first to services identified as “Core and Essential” and funds these services to fully meet adopted City policies and ensures that Core and Essential services are “Right Sized” based upon accepted metrics of services outcomes. ANALYSIS OF ISSUES: Budget summaries for all funds are incorporated into the document. The FY 2019-20 proposed budget will continue to fund high quality services provided to the community, and will invest in the future through capital improvements and maintenance activities. General Fund The General Fund balance is projected to be approximately $2.7 million by the end of the biennial budget period. This projected fund balance represents 15% of appropriations, which is consistent with the City Council minimum fund balance goal. The decrease in the projected fund balance is largely due to the $5,000,000 CalPERS prepayment made in July 2018 and anticipated to be made in July 2019. The projected Fund Balance assumes revenues are received exactly as budgeted, all budget expenditures are made, and all capital transfers required by the Capital Improvement Plan Program are completed. Historically, the General Fund has not been required to fund all budgeted capital transfers and expenditures at year-end are traditionally less than budgeted. Staff has requested additional appropriations of $220,700 to provide for additional IT related licensing, software and firewalls, the League of California Cities membership, additional property, liability and workers’ compensation costs and additional lease payments for Public Works vehicles. In addition, the FY 2019-20 budget addresses changes in minimum wage laws for part-time employees and increased costs for fire services. Enterprise Funds Both the Water and Sewer Fund revenues assume a rate decrease in July 2019. Revenues for Water and Sewer are being decreased by $103,000 and $167,600, respectively. These decreases are related to the drought rates that are in effect until June 30, 2019. After July 30, 2019 rates must return to the pre-drought rates. That equates to an eleven percent reduction in water rates and a ten percent reduction in sewer rates. The City is currently under contract with Tuckfield and Associates to conduct a water/sewer/stormwater rates study. It is anticipated that the study will be completed in Item 11.b. - Page 2 CITY COUNCIL CONSIDERATION OF FISCAL YEAR 2019-20 BUDGET REPORT JUNE 11, 2019 PAGE 3 the later part of 2019. If necessary, adjustments will be made at mid-year to account for any changes proposed by Tuckfield and Associates and approved by the City Council. In addition, the costs for Flood Control Zone 3 increased by $60,100 to $3,744,196. Local Sales Tax Fund On March 12, 2019, the City Council approved a six-month extension to the current Memorandum of Agreement regarding the Five Cities Fire Authority (FCFA). This gave the “Managers’ Group” additional time to review the funding formula and other components of the agreement. The current funding formula requires Arroyo Grande to pay 47% of the cost to operate FCFA. The transitional formula proposed reduces Arroyo Grande’s share to 45%. Even with the reduction, additional funding of $57,300 is required to move forward with the prioritized strategic plan. For FY 2019-20 Arroyo Grande’s share of the FCFA budget is $2,580,955. The use of this fund is consistent with Advisory Measure M-06 “If the proposed sales tax measure (Measure O-06) is approved, should a portion of the proceeds be used to fund public safety expenses, including, but not limited to, expansion of the Police Station, purchase of Fire apparatus, and additional Fire Department staffing?” This measure was supported by 59.89% of voters. Staff also recommends paying the financing costs for the Countywide Animal Services Shelter from local sales tax due to its public safety and infrastructure components. Summary As described more fully in the Budget Update Report, staff is recommending several adjustments to the FY 2019-20 budget in order to address needs that were unanticipated and necessary. Most of the increases relate to liability, property and workers’ compensation insurance and the Countywide Animal Services Shelter. ALTERNATIVES: 1. Approve the recommended budget adjustments, Schedule A of the Budget Update Report and adopt a Resolution approving the FY 2019-20 Budget; 2. Modify and approve the recommended budget adjustments, Schedule A of the Mid-Year Budget Report; 3. Do not approve the recommended budget adjustments, Schedule A; or 4. Provide direction to staff ADVANTAGES: The Budget Update Report provides an updated review of the City’s finances in the current fiscal year, allocates additional funding to meet unanticipated needs and maintains key service levels. DISADVANTAGES: A slight reduction of the General Fund balance will be incurred if recommendations are approved. The budget does not address all unmet needs and a number of uncertainties exist that could negatively impact revenue projections and the status of the proposed budget. Item 11.b. - Page 3 CITY COUNCIL CONSIDERATION OF FISCAL YEAR 2019-20 BUDGET REPORT JUNE 11, 2019 PAGE 4 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. Budget Update Report 2. Schedule A 3. General Fund Summary 4. 10-year Measure O-06 Local Use Tax Revenue and Expense Plan Item 11.b. - Page 4 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE ADOPTING FISCAL YEAR 2019-20 OF THE FISCAL YEAR 2018-18 & 2019-20 BIENNIAL BUDGET AND MAKING APPROPRIATIONS FOR THE AMOUNT BUDGETED WHEREAS, a proposed Biennial Budget for the City of Arroyo Grande for the Fiscal Years commencing July 1, 2018 and ending June 30, 2019 and commencing July 1, 2019 and ending on June 30, 2020 was submitted to the City Council and is on file with the Director of Administrative Services; and WHEREAS, the City Council also serves as the Board of Directors of the Successor Agency to the Dissolved Arroyo Grande Redevelopment Agency; and WHEREAS, proceedings for adoption of said Budget have been duly taken; and WHEREAS, the total Budget for FY 2019-20 is $42,514,721. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE DOES RESOLVE AS FOLLOWS: SECTION 1. The Budget is adopted as the Biennial Budget for the City of Arroyo Grande for the Fiscal Year commencing July 1, 2019 and ending June 30, 2020. SECTION 2. At the close of each Fiscal Year, unexpended appropriations in the Operating Budget will be carried forward to the next fiscal year as necessary to underwrite the expense of outstanding purchase commitments. Unexpended appropriations for authorized, but uncompleted projects as approved by the City Council may be carried forward to the next succeeding Budget upon recommendation by the Administrative Services Director and approval of the City Manager. On motion of Council Member , seconded by Council Member , and on the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this 11th day of June, 2019. Item 11.b. - Page 5 RESOLUTION NO. PAGE 2 CAREN RAY RUSSOM, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: _____ JAMES A. BERGMAN, CITY MANAGER APPROVED AS TO FORM: HEATHER WHITHAM, CITY ATTORNEY Item 11.b. - Page 6 City of Arroyo Grande Administrative Services Department BUDGET UPDATE REPORT FISCAL YEAR 2019-2020 ATTACHMENT 1 Item 11.b. - Page 7 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 2 Table of Contents Overview ........................................................................................................................................................................3 Summary of Key Points................................................................................................................................................3 Summary of Budget Assumptions .............................................................................................................................4 Budget Changes Approved To-Date ..........................................................................................................................6 Budget Update Requests ..............................................................................................................................................6 General Fund Expenditure Adjustments: .............................................................................................................6 Other Funds: ..............................................................................................................................................................7 General Fund Overview ...............................................................................................................................................8 General Fund Revenues ...............................................................................................................................................9 General Fund Expenditures ........................................................................................................................................11 Other Funds ...................................................................................................................................................................11 Attachments ...................................................................................................................................................................12 Item 11.b. - Page 8 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 3 Overview The City is entering the second year of a two-year budget. The purpose of this Budget Update Report is to: 1) update revenue projections as economic data becomes available; 2) update expenditures as more accurate costs become available; and 3) to provide estimates for ending fund balances for the first year of the biennial budget. While this report provides a listing of projected fund balances, these projections are estimates as Fiscal Year 2018-19 is not closed. Since the beginning fund balance for the upcoming fiscal year (FY 2019-20) is the ending balance from the current fiscal year (FY 2018-19), accruals, deferrals, and audit adjustments may impact the projected Fiscal Year 2019-20 fund balance. This information is provided in the following format: Schedule A: The starting point is the FY 2018-19 estimated ending fund balances, which is also the beginning Available Fund Balance for the FY 2019-20. Combining the beginning Available Fund Balances with the estimated revenues, transfers, and appropriations adopted in the Biennial Budget and this report, provides the estimated ending fund balances. Following a comprehensive review, adjustments are recommended where actual receipts and disbursements are materially different from the budgeted amounts. Although budget adjustments are recommended in several City funds, the emphasis of the Budget Update Report is on the General Fund. The General Fund is deemed to be the most critical as it provides most services commonly associated with government (i.e., public safety, recreation, parks, building, public works, planning, etc.) and is limited primarily by tax-generated revenues. Summary of Key Points • Due to the pre-payment to reduce CalPERS unfunded liabilities, expenditures in the General Fund are expected to exceed revenues during FY 2018-19. During the mid-year budget review, revenues were estimated to increase by $353,000 from the original budget projections. At this time, an additional $15,000 in revenues is anticipated, increasing total revenue in FY 2018-19 to $368,000. In addition, it is anticipated that expenditures will decrease by $420,600 when compared to the original budget projections due mainly to unfilled positions throughout the organization. • During the Biannual Budget 2018-20, direction was provided by the City Council to pay down $5,000,000 of unfunded PERS liabilities ($3 million in FY 2018-19 and $2 million in FY 2019-20). Due to this action, General Fund reserves have decreased. Reserves are vital to maintaining services when expenditures outpace revenues; however, reserves are a Item 11.b. - Page 9 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 4 one-time resource and can’t be relied upon for sustainable operations. The City continues to focus on efforts to improve revenues through economic development while exploring additional revenue generating ideas and minimizing expenditure increases. • The City Council has established an Undesignated General Fund Balance goal of 20% of annual appropriation with a minimum goal of 15%. The City’s Undesignated General Fund Balance represents the available resources to provide funding for future contingencies such as earthquakes, civil unrest, economic fluctuations, major infrastructure repairs and investment in capital for improved productivity and efficiencies. Inadequate reserves increase financial risk, negatively impact cash flow, and reduce the City’s ability to attract and sustain economic development and growth. The projected ending General Fund Balance for June 30, 2019 is $2.7 million, which is $430,000 higher than the projected fund balance published in the Biennial Budget. This projected fund balance represents 15% of appropriations, which is consistent with the City Council minimum fund balance goal. The projected General Fund Balance assumes revenues are received exactly as budgeted, all budget expenditures are made, and all capital transfers required by the Capital Improvement Plan Program are completed. Historically, the General Fund has not been required to fund all budgeted capital transfers and expenditures at year-end are traditionally less than budgeted. • As the City continues to move forward with reversing the gap between expenditures and revenues, it will be important to determine the highest priorities. Over the past several years, staff has worked to identify important priorities for funding and has identified deficiencies in service, maintenance and/or investment that will require attention in the short and long-term. The data gathered and analyzed during this Biennial Budget will enable Council to make well-informed decisions in the next Biennial Budget. The list of unmet needs and wants, like with any organization or city, far exceeds the City’s current ability to fund. Therefore, this budget focuses City resources first to services identified as “Core and Essential” and funds these services to fully meet adopted City policies and ensures that Core and Essential services are “Right Sized” based upon accepted metrics of services outcomes. Summary of Budget Assumptions The preparation of any budget is based on a series of assumptions about revenues and expenditures. These assumptions will be carefully monitored throughout the fiscal year while evaluating budgetary performance. Item 11.b. - Page 10 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 5 The key budget assumptions include: • Property Tax revenues are estimated to increase by 4.25% or $213,000 over FY 2018-19 estimated actual. This is an increase of $108,000 from the FY 2019-20 current budget. • Based on HdL projections, Sales Tax revenues are estimated to decrease by 1.8% in FY 2019-20. This decrease is mainly associated with FY 2018-19 Sales Tax revenues being slightly inflated due to the second quarter 2018 (FY 2017-18) payments that were delayed and paid in the third quarter of FY 2018-19 (approximately $151,000). This results in a slight decline of $5,700 from the FY 2019-20 current budget. • Transient Occupancy Tax (TOT) is estimated to increase by 3% over FY 2018-19 estimated actuals with an associated decrease in revenue of $30,000 due to the late opening of the new boutique hotel in the village. Overall TOT is reduced by $50,000 from the FY 2019-20 current budget. • Building and planning fees will continue to see a steady increase based on current activity levels, combined with fee increases previously directed by the City Council. • Recreation revenues are budgeted to increase 2% from FY 2019-20 estimated actual. • All other revenues are budgeted at historical and/or estimated FY 2018-19 amounts. • Salaries and benefit costs reflect contractually obligated increases (current bargaining group contracts, which expire June 30, 2020) as well as increases to reflect changes in minimum wage laws. • The contribution to the Five Cities Fire Authority (FCFA) is based upon the transitional formula developed by the “Managers’ Group” during the Memorandum of Agreement (MOA) period. As part of the MOA amendment, Arroyo Grande’s percentage contribution to the FCFA decreases from 47% to 45%. The preliminary budget presented to the FCFA Board is based upon the “prioritized strategic plan” which results in additional contributions by Arroyo Grande in the amount of $57,300 for FY 2019-20 for a total contribution of $2,580,955. The current contract between the International Association of Fire Fighters Local 4403 expires on June 30, 2019. Personnel cost increases are currently unknown and negotiations are not currently scheduled. Item 11.b. - Page 11 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 6 Budget Changes Approved To-Date Various budget changes have been approved by the Council or City Manager, as appropriate, since the approval of the Mid-Year Budget Update, which impact one or both of the fiscal years in the budget. Many revenue assumptions were updated with the Mid-Year Budget Review; however, changes since that time have resulted in additional adjustments to revenue assumptions. Material changes are discussed in more detail later in this report. Budget Update Requests As part of the budget updating process, departments were asked to review their current budgets and determine if any adjustments should be proposed in this report. Departments have been asked to closely monitor their budgets and spend only what is necessary. At this time, staff is recommending minor adjustments to the General Fund departmental budgets that are necessary due to timing considerations, increases that respond to a priority area, and one-time project funding. General Fund Expenditure Adjustments: • Non-Departmental – An additional $6,000 is requested to pay for the annual membership to the League of CA Cities, $10,000 is requested for increases in property insurance and $30,000 is requested for increases liability insurance. An additional $3,500 is requested to pay the City’s workers’ compensation assessment associated with the Central Coast Cities Self-Insurance Fund (CCCSIF). Arroyo Grande was a member of CCCSIF prior to joining California Joint Powers Insurance Authority (CalJPIA). Local Agency Workers’’ Compensation Excess Joint Powers Authority (LAWCX) is an excess workers’ compensation pool of which CCCSIF was a member in 2003 and 2004. The LAWCX Board of Directors approved a Deficit Curing and Assessment Plan which is assessing a combined $9.5 million for 2003 and 2004 of which $534,756 is being assessed to CCCSIF. Arroyo Grande’s portion of the $534,756 is $35,277 payable in ten annual installments of $3,528 beginning August 2019. • Various General Fund Departments – Workers’ Compensation insurance through CalJPIA is $706,000 for FY 2019-20. Of that amount approximately 27% is allocated to FCFA, leaving $515,000 allocated to Arroyo Grande. This is an increase of $102,000 over current budget amounts. Item 11.b. - Page 12 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 7 • Public Works – An increase of $24,100 is necessary to account for lease payments for Public Works vehicles purchased in FY 2017-18. The original budget only included one of the two annual lease payments. • Recreation – In 2017, the State Minimum Wage Order went into effect stating that in January of each year through 2022, minimum wage would increase by a dollar each year until the minimum wage reaches $15.00/hour. The purpose of this proposed increase would be to increase the minimum wage on positions impacted by the State Minimum Wage Order and to continue with the established differentials in like positions. The additional budget request is $24,000 for FY 2019-20. • Information Technology – An increase of $6,600 is requested to pay for additional licensing, server software and firewalls. • City Council – The proposed budget is recommending an increase of $14,500 in health insurance. This is due to one additional council member receiving health benefits. Other Funds: Tourism Business Improvement District (TBID) Fund: On May 28, 2019, the City Council approved the TBID annual budget. Adjustments will be made to the FY 2019-20 to reflect the TBID budget approved by the Council. Local Sales Tax Fund: Additional expenses in the Local Sales Tax Fund include $57,300 for the FCFA strategic plan implementation based on the transitional funding formula. In August 2018, the City Council approved the Agreement for Allocation of Construction and Financing Costs for a Countywide Animal Services Shelter. The increase to the FY 2019-20 is estimated at an additional $50,000. Due to slight calculation errors in the original budget only $97,600 is being requested for the two items mentioned above. This will correct for the $9,700 calculation error. Water Funds: Arroyo Grande’s portion of the Flood Control Zone 3 budget is $3,744,196 which is an increase of $60,100 over the current FY 2019-20 budget. When comparing the Zone 3 FY 2018-19 to the FY 2019-20 budget billable non- Item 11.b. - Page 13 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 8 routine operation and maintenance (O&M) expenditures increased by 83.8%. These are expenditures that run from one to three years for special projects and studies. There is also an increase of 25.9% for billable capital outlay/reserves. These expenditures are “pay-as-you-go” capital expenditures that are not generally funded through use of Flood Control Zone 3 reserves and/or other sources of funding such as grants or loans. Projects within this category are included on the 5-Year Capital Outlay Plan. Water & Sewer Fund: As mentioned above, the annual lease payment for both FY 2018-19 and FY 2019-20 for the Public Works leased vehicles were under budgeted by one payment. The increase in debt service to the Water and Sewer Funds is $13,900 and $9,000, respectively. Due to the increases in Flood Control Zone 3, water transfers out are increasing $60,100. In general, expenditures in all other funds are on target with projections and prior year trends. No other adjustments are recommended at this time. General Fund Overview Shown below is an overview of the revenues and expenses for Fiscal Year 2017-18, 2018-19 and 2019-20. The original budget for FY 2018-19 reflects the budget adopted in June 2018. The amended budget includes adjustments that were made at mid- year in February 2019, the proposed budget for 2019-20 incorporates the recommendations described in this report Item 11.b. - Page 14 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 9 After adjustments are recorded, the June 30, 2020, fund balance will be approximately $2.7 million, assuming all budget projections are fulfilled. However, at June 30, 2020 the City may find that revenues have not met the budgeted projections and not all budgeted appropriations will be spent as year-end actual expenditures are traditionally less than budgeted amounts. Year-end actual expenditures are traditionally less than budgeted amounts. Further adjustment will be made at the future Mid-Year Budget review in February 2020, as appropriate. General Fund Revenues The table shown below presents a comparison of the top ten revenue accounts. Because the top revenue sources account for approximately 90% of total General Fund revenues, changes in these revenues sources can have profound impacts. 2017-18 ORIGINAL AMENDED ESTIMATED CURRENT PROPOSED ITEM ACTUAL BUDGET BUDGET ACTUAL BUDGET BUDGET Beginning Fund Balance 6,730,032$ 6,472,794$ 6,968,228$ 6,968,228$ 3,512,794$ 3,956,419$ Total Revenues 17,902,123 17,771,300 18,124,728 18,140,056 18,389,100 18,597,500 Total Expenditures 17,520,008 20,731,300 20,928,445 21,151,865 19,638,800 19,859,500 Total Operating Increases (Decreases)382,114 (2,960,000) (2,803,717) (3,011,809) (1,249,700) (1,262,000) Reserved for carryover (143,918) - - - - - Available Fund Balance 6,968,228$ 3,512,794$ 4,164,511$ 3,956,419$ 2,263,094$ 2,694,419$ 2018-19 2019-2020 GENERAL FUND SUMMARY Item 11.b. - Page 15 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 10 • Property Tax – Property tax trends are consistent with the same period last year and budgeted revenues are expected to be met. • Sales Tax – Sales tax revenues reflect a 2% decrease due to delayed FY 17-18 payments that were received in FY 18-19 causing FY 18-19 actual revenues to be slightly inflated. By removing the payment of $151,300 actual sales tax revenues are increasing by approximately 2% in FY 2019-20. • Transient Occupancy Tax – TOT tax is estimated to increase by $100,000 for the new boutique hotel in addition to an inflationary factor of 3%. • Building Permits & Planning Fees – The increase in these revenue sources reflect the anticipated 15% increase to bring building fees to 80% cost recovery. • All other variances are within normal ranges. 2017-18 2018-19 2019-20 Revenue Source Actual Estimated Proposed % Change Property Tax 4,923,002 5,128,500 5,351,900 4% Property Tax in Lieu of VLF 1,559,664 1,652,500 1,719,000 4% Transient Occupancy Tax 961,923 1,011,150 1,141,500 13% Sales & Use Tax 3,918,956 4,060,000 3,989,100 -2% Franchise Taxes 609,182 676,000 689,500 2% Building Permits 262,718 406,700 409,400 1% Telecommunication Site Leases 284,418 300,000 300,000 0% Planning Fees 324,756 448,900 514,100 15% Children in Motion 434,511 444,000 434,500 -2% Special Interest Classes 160,257 181,900 181,900 0% 13,439,387 14,309,650 14,730,900 3% Item 11.b. - Page 16 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 11 • Altogether there is an increase in General Fund Revenue of $208,400 General Fund Expenditures The following chart compares actual expenditures in FY 2017-18 with the current budget for FY 2018-19 and the recommended budget for FY 2019-20. Other Funds Streets (Gas Tax) Fund: On May 13, 2019 updated projections for local streets and roads revenue were released. In the current FY 2019-20 budget, aid from other governments totaled $453,200. The May projection report show that total revenue is projected at $778,586 for an increase of $325,100. Of this increase $294,300 relates to Road Maintenance Rehabilitation Account (RMRA or SB 1). Local Use Tax Fund (Fund 218) This fund has been established to account for the ½ cent sales tax increase that was approved in November 2006. The budget continues the City’s commitment to utilize revenues from the 2006 Local Sales Tax Measure for the purposes intended, 2017-18 2018-19 2019-20 Department/Division Actual Budget Budget City Council 81,237$ 97,800$ 113,700$ Retirees 234,953 235,000 235,000 City Manager 318,547 399,300 395,900 City Attorney 273,018 283,200 283,200 Legislative & Information Services 1,009,327 1,097,815 1,094,000 Administrative Services 806,013 865,700 901,500 Non-Departmental *3,313,165 3,579,330 3,793,100 Community Development 2,074,084 1,798,300 1,820,900 Police Department 6,421,620 9,848,100 8,455,700 Recreation Services 991,453 1,089,600 1,128,500 Public Works 1,996,592 2,078,000 2,077,700 Total 17,520,008$ 21,372,145$ 20,299,200$ * Non Department Expense include items of City-wide benefit, such as liability insurance premiums, utilities, and fire services Item 11.b. - Page 17 City of Arroyo Grande Budget Update Report – 2019/20 June 11, 2019 12 which primarily consist of capital improvements and safety. Based on HdL projections Measure O-06 projected revenue is $2,263,000 which is an increase of 1.5% from estimated actual for FY 2018-19 but is below the current FY 2019-20 budgeted amount of $2,305,400. Water and Sewer Funds Water and Sewer revenues are anticipated to decrease in FY 2019-20. This decrease is due to the water and wastewater rates returning to the pre-drought rates. A rate study is currently underway with Tuckfield and Associates and once complete it will guide the Council in determining whether or not a rate increase is necessary. The rate study will not only study the City’s current expenses but it will also consider the costs associated with Central Coast Blue project. It is anticipated that the study will be completed in the later part of 2019. In addition to water and wastewater rates, the rate study will evaluate the feasibility and need for a storm water fee. Revenues for the Water and Sewer Funds are being decreased from FY 2019-20 current budget by $103,000 and $167,600, respectively. If necessary, adjustments will be made at mid-year to account for any changes proposed by Tuckfield and Associates and approved by the City Council. Attachments A brief overview of the attached schedules is provided to inform the reader of the purpose of each schedule. • Schedule A - Fund Balance. This schedule is provided to incorporate current year estimated fund balance into the budget year and to summarize the FY 2019-20 budget adopted by the City Council. This schedule includes adjustments that have previously been approved by the City Council and includes the current requested adjustments in total. • General Fund Summary. This schedule provides a summary of the revenues, expenditures and fund balance with actual results for the prior fiscal year as well as the original FY 2018-20 Biennial Budget and proposed amended balances for FY 2018-19 and FY 2019-20. • Local Use Tax Fund Ten Year Expense Plan. This schedule provides a summary of the revenues, expenditures, and anticipated fund balance for the current year and the next nine years. Item 11.b. - Page 18 Fund BalanceAll Funds Operating Budget2019-20 Mid-Year Budget UpdateSchedule A EstimatedEstimatedTotalTotalAvailableAvailableFund Balance OriginalAdjustment OperatingOperatingBudgeted Adjustments toFund BalanceJuly 1, 2019 Revenuesto RevenuesTransfer In Transfer Out AppropriationsAppropriationsJune 30, 2020General Fund010 General Fund:3,956,419$ $15,751,100 208,400 $2,638,000 $200,300 $19,438,500 220,700 $2,694,419Special Revenue Funds:210 Fire Protection Impact Fees$218,800 $21,000$0$0$0$0$0 $239,800211 Public Access Television88,000 36,20000000 124,200212 Police Protection Impact Fees46,000 5,30000 10,00000 41,300213 Park Development Fees1,103,000 91,00000 10,00000 1,184,000214 Park Improvement Fees162,100 50,90000 10,00025,0000 178,000215 Recreation Community Center9,100 3,70000000 12,800216 Grace Lane Assessment District 55,300 10,60000 3,10013,3000 49,500217 Landscape Maintenance Distric 3,200 5,90000 2,0005,7000 1,400218 Local Use Tax Fund53,300 2,305,400(42,400)0 1,889,900 268,400 97,600 60,400219 Parkside Assessment District 429,600 46,500 0 0 6,100 30,300 0 439,700220 Streets0 453,200 325,100 380,300 86,900 746,6000 325,100222 Traffic Signal941,200 36,00000000 977,200223 Traffic Circulation147,40050000000 147,900224 Transportation Facility Impact 459,900 85,00000000 544,900225 Transportation33,000 260,70000 240,70020,0000 33,000226 Water Neutralization Impact 111,600 57,000000 106,0000 62,600231 Drainage Facility00000 0 00232 In-Lieu Affordable Housing625,600 15,50000000 641,100233 In-Lieu Underground Utility19,100000000 19,100240 Tourism Business Improvement 255,600 212,700(6,000)5,000 3,000 232,000 23,500 208,800241 Water Availability Fund745,000 57,000000 553,4210 248,579250 CDBG Grant Funds(55,000)63,90000000 8,900271 State COPS Block Grant164,600 120,80000 22,800 100,0000 162,600Total Special Revenue Funds $5,616,400 $3,938,800 276,700 $385,300 $2,284,500 2,100,721 $121,100 $5,710,879City of Arroyo Grande13ATTACHMENT 2Item 11.b. - Page 19 Fund BalanceAll Funds Operating Budget2019-20 Mid-Year Budget UpdateSchedule A EstimatedEstimatedTotalTotalAvailableAvailableFund Balance OriginalAdjustment OperatingOperatingBudgeted Adjustments toFund BalanceJuly 1, 2019 Revenuesto RevenuesTransfer In Transfer Out AppropriationsAppropriationsJune 30, 2020City of Arroyo GrandeCapital Project Funds:350 Capital Improvement Fund $98,800 $3,341,800$0 $1,396,400$0 $4,738,200$0 $98,800Total Capital Project Funds $98,800 $3,341,800$0 $1,396,400$0 $4,738,200$0 $98,800Enterprise Funds:612 Sewer$884,500 $1,135,100($167,600)$269,400 $395,700 $1,058,400 $9,000 $658,300634 Sewer Facility309,600 42,00000 269,40000 82,200640 Water Fund3,187,700 6,549,000(103,000)309,000 5,549,400 1,993,600 74,000 2,325,700641 Lopez Water 1,582,0000 60,100 3,684,1000 3,684,100 60,100 1,582,000642 Water Facility743,700 60,00000 309,00000 494,700Total Enterprise Funds$6,707,500 $7,786,100 ($210,500) $4,262,500 $6,523,500 $6,736,100 $143,100 $5,142,900Trust and Agency Fund:751 Downtown Parking5,000 11,00000 3,6004,4008,000Total Trust & Agency Fund$5,000 $11,000$0$0 $3,600$4,400$0 $8,000Grand Total All Funds$16,384,119 $30,828,800 $274,600 $8,682,200 $9,011,900 $33,017,921 $484,900 $13,654,99814Item 11.b. - Page 20 2017‐18ORIGINAL AMENDED ESTIMATED CURRENT PROPOSED             ITEMACTUALBUDGET BUDGETACTUAL BUDGETBUDGETBeginning Fund Balance6,730,032$      6,472,794$   6,968,229$   6,968,229$     3,512,794$   3,956,420$    Revenues:Revenues 15,236,807       15,206,200   15,559,628   15,574,956     15,751,100   15,959,500     Transfers In2,665,316         2,565,100      2,565,100      2,565,100       2,638,000      2,638,000       Total Revenues17,902,123      17,771,300   18,124,728   18,140,056     18,389,100   18,597,500     Expenditures:Salaries and Benefits10,501,295      11,444,300   11,459,300   11,232,550     11,388,600   11,532,600     Services and Supplies6,112,099         6,302,300      6,484,445      6,467,815       6,199,000      6,249,200       Debt Service269,961            166,000         166,000         190,100           166,000         190,100           Capital Outlay329,637            96,000            96,000            95,000             124,600         127,000           Transfers Out307,017            166,400         166,400         166,400           200,300         200,300           CalPERS UAL Payment‐  3,000,000      3,000,000      3,000,000       2,000,000      2,000,000             Expenditure Savings‐  (443,700)        (443,700)        (439,700)        (439,700)         Total Expenditures17,520,008      20,731,300   20,928,445   21,151,865     19,638,800   19,859,500     Total Operating Increases (Decreases)382,114            (2,960,000)    (2,803,717)    (3,011,809)      (1,249,700)    (1,262,000)      Reserved for carryover (143,918)           ‐ ‐ ‐ ‐ ‐ Total Adjustments to Fund Balance238,196            (2,960,000)    (2,803,717)    (3,011,809)      (1,249,700)    (1,262,000)      Available Fund Balance6,968,229$      3,512,794$   4,164,512$   3,956,420$     2,263,094$   2,694,420$     GENERAL FUND SUMMARY2018‐19 2019‐202015ATTACHMENT 3Item 11.b. - Page 21 CITY OF ARROYO GRANDE LOCAL SALES TAX FUND 10-Year Revenue and Expense Plan Item 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Castillo Del Mar Road Improvements - - - - - - - - - - East Branch St Streetscape - - - - - - - - - - Fair Oaks/Orchard Rd Intersection Imp - - - - - - - - - - Swinging Bridge Reinforcement 73,700 - - - - - - - - - Traffic Way Bridge Improvements 44,900 44,900 44,900 74,600 573,500 - - - - - Brisco Rd Interchange Project 50,000 100,000 100,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 Subtotal Transportation 168,600 144,900 144,900 274,600 773,500 200,000 200,000 200,000 200,000 200,000 Pavement Management Program 800,000 825,000 850,000 875,000 900,000 925,000 925,000 925,000 925,000 925,000 Striping and Sidewalk Improvements 110,000 110,000 115,000 115,000 120,000 120,000 120,000 120,000 125,000 125,000 Street Maintenance - - - - - - - - - - Construction Management/Inspection - - - - - - - - - - Alpine St Waterline & Street Imp - - - - - - - - - - Soto Complex ADA Improvements Phase III - - - - - - - - - - Harloe Elem Ped Access Enhancements - - - - - - - - - - Bridge Preventative Maintenance Plan 10,800 - - - - - - - - - E. Grand Ave Master Plan - - - - - - - - - - Subtotal Street/Park Improvements 920,800 935,000 965,000 990,000 1,020,000 1,045,000 1,045,000 1,045,000 1,050,000 1,050,000 Clark Properties Drainage Improvements - - - - - - - - - - Vard Loomis Drainage Improvements - - - - - - - - - - Retention Basin Maintenance - - - - - - - - - - Sierra/Hillcrest Drainage Design 135,000 - - - - - - - - - Corp Yard Stormwater Compliance Plan Imple 27,500 19,000 20,000 20,000 20,000 20,000 - - - - Open Channel Maintenance (Env & Permit)- - - - - - - - - - CMP Replacements 175,000 57,500 57,500 45,000 45,000 82,500 82,500 132,500 132,500 - Stormwater Annual Permit & Program 25,000 25,500 26,000 26,500 27,000 27,500 28,000 28,500 29,000 29,000 Annual Vegetation Management Plan - - - - - - - - - - Subtotal Drainage Improvements 362,500 102,000 103,500 91,500 92,000 130,000 110,500 161,000 161,500 29,000 Fire JPA 204,300 212,100 230,700 238,500 246,400 253,800 261,400 269,200 277,300 285,600 Fire JPA Strategic Plan Implementation 230,700 288,000 230,700 230,700 230,700 230,700 230,700 230,700 230,700 230,700 Fire Apparatus - contrib. to FCFA 28,800 28,800 28,800 28,800 28,800 28,800 28,800 28,800 28,800 28,800 Police Senior Officer Position 192,200 198,000 203,900 210,000 216,300 222,800 229,500 236,400 243,500 250,800 Narcotics Task Force 24,600 24,600 24,600 24,600 24,600 24,600 24,600 24,600 24,600 24,600 Police Firing Range - 120,000 - - - - - - - - Subtotal Public Safety 680,600 871,500 718,700 732,600 746,800 760,700 775,000 789,700 804,900 820,500 Animal Services Building Debt Service - 50,000 City Hall Debt Service 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 ATTACHMENT 4 Item 11.b. - Page 22 Item 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Document Imaging - carryover - - - - - - - - - - Corporation Yard Upgrades - - 20,000 20,000 20,000 20,000 20,000 - - - Elm Street Community Center Upgrade - - - - - - - - - - Elm Park/Soto Complex Master Plan Citywide Solar Panel Project - - - - - - - - - - City Hall Safety Improvement Project - - - - - - - - - - Financial Management System 100,000 100,000 - - - - - - - - Woman's Club Barrier Removal - - - - - - - - - - Fire Station Driveway Repair - - - - - - - - - - Subtotal City Facilities 120,000 170,000 40,000 40,000 40,000 40,000 40,000 20,000 20,000 20,000 Annual Audit and Sales Tax Report 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 Contingency 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Subtotal Other 32,500 32,500 32,500 32,500 32,500 32,500 32,500 32,500 32,500 32,500 Total Expenses 2,285,000 2,255,900 2,004,600 2,161,200 2,704,800 2,208,200 2,203,000 2,248,200 2,268,900 2,152,000 Projected Revenue 2,230,000 2,263,000 2,299,000 2,299,000 2,322,000 2,345,200 2,380,400 2,428,000 2,476,600 2,526,100 Revenue Over/(Under) Expenses (55,000) 7,100 294,400 137,800 (382,800) 137,000 177,400 179,800 207,700 374,100 Beginning Fund Balance 108,268 53,268 60,368 354,768 492,568 109,768 246,768 424,168 603,968 811,668 Estimated Ending Fund Balance 53,268 60,368 354,768 492,568 109,768 246,768 424,168 603,968 811,668 1,185,768 % Fund Balance of Estimated Revenues 2%3%15%21%5%11%18%25%33%47% Operating Expenses 521,300 636,900 548,700 557,000 565,400 573,300 581,400 589,700 598,300 606,600 Debt Service - - - - - - - - - - Transfer to Streets Fund - - - - - - - - - - Transfers Out - CIP Fund 1,526,900 1,376,400 1,207,400 1,349,600 1,878,500 1,367,500 1,347,500 1,377,500 1,382,500 1,250,000 Transfers Out - USDA City Hall Loan 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Transfer to General Fund 216,800 222,600 228,500 234,600 240,900 247,400 254,100 261,000 268,100 275,400 2,285,000 2,255,900 2,004,600 2,161,200 2,704,800 2,208,200 2,203,000 2,248,200 2,268,900 2,152,000 Item 11.b. - Page 23 THIS PAGE INTENTIONALLY LEFT BLANK Item 11.b. - Page 24