CC 2020-10-13_11a FY 2019-20 Year End Financial Status Report
MEMORANDUM
TO: CITY COUNCIL
BY: MICHAEL STEVENS, ADMINISTRATIVE SERVICES DIRECTOR
SUBJECT: CONSIDERATION OF FISCAL YEAR 2019-20 YEAR-END FINANCIAL
STATUS REPORT
DATE: OCTOBER 13, 2020
SUMMARY OF ACTION:
Council will consider and file the Fiscal Year (FY) 2019-20 Year-End Financial Status
Report.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
At year-end, FY 2019-20 revenues for the General Fund were $64,689, or less than one
percent (0.34%) below the Adjusted Budget. Expenditures were favorable to the Adjusted
Budget by $1.6 million (8%).
RECOMMENDATION:
It is recommended that the City Council consider, receive, and file the FY 2019-20 Year-
End Financial Status Report.
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 year-end financial status
report is, in essence, the City’s report card on its financial performance.
The purpose of the FY 2019-20 Year-End Financial Status Report is to:
Compare revenues received and expenditures incurred to the budget to determine
the City’s financial performance;
Provide explanations for major account variances and identify any potential trends
that might impact financial planning; and
Determine the amount of Fund Balance Available to be used as a source of funding
in future years or identified as a gap to be recovered in the current year.
Item 11.a. - Page 1
CITY COUNCIL
CONSIDERATION OF FISCAL YEAR 2019-20 YEAR-END FINANCIAL STATUS
REPORT
OCTOBER 13, 2020
PAGE 2
For comparison purposed, the City’s actual results will be compared to the Adjusted
Budget. The Adjusted Budget is the City’s original Adopted Budget plus any adjustments
made during the year. In mid-April staff presented to Council a Forecast estimating the
impacts of the COVID-19 pandemic. The Forecast is a financial tool to help identify
financial adjustments that may be required during the fiscal year.
ANALYSIS OF ISSUES:
The General Fund is the
primary operating fund of the
City and accounts for resources
and services traditionally
associated with government.
General Fund revenue at the end of Fiscal Year 2019-20 was less than one percent (1%)
higher than the prior year and expenditures were 9% lower (equivalent to $2 million), both
positive performance indicators. The favorable expenditure variance can be explained
by lower retirement costs for the Police Department. More specifically, the City made two
prepayments to the California Public Employees’ Retirement System (CalPERS) to pay
down its unfunded liability debt, both payments made to the City’s Safety Plan for Police
Department retirement costs. The first pre-payment of $3 million was made in FY 2018-
19 and the second pre-payment of $2 million was made in FY 2019-20. The $1 million
dollar difference in amounts paid between fiscal years contributing to the favorable
variance. In addition, the Police Department’s required annual contribution to its unfunded
liability obligation was lower in FY 2019-20 than the prior year, resulting in savings. Lastly,
the cost for fire services through the Five Cities Fire Authority (FCFA) in FY 2019-20 was
paid using both General Fund and Local Sales Tax dollars. In FY 2018-19, the cost of fire
service was paid entirely from the General Fund, unlike FY 2019-20 where Local Sales
Tax paid a portion of FCFA costs. This resulted in lower General Fund expenditures in
FY 2019-20.
COVID-19 Pandemic
The second half of the fiscal year was greatly impacted by the COVID-19 pandemic. At
the onset of the virus, the City chose to take a proactive approach to understanding and
addressing the financial impacts of the pandemic. One of the City’s first actions in
response to the virus was to develop a current year Financial Forecast to quantify the
financial impacts resulting from the County and State Shelter-at-Home Orders and
closure of local non-essential businesses. Council then approved short-term cost
containment strategies to address the anticipated revenue shortfall. These strategies
played a significant role in the overall expenditure savings realized within the year.
Expenditures
Overall, expenditures were lower than the Adjusted Budget by 8% or $1.6 million. The
Fiscal Year 2019-20 Year-End Financial Status Report (Attachment 1) provides more
FY 2018‐19 FY 2019‐20
Revenue 18,608,864$ 18,773,758$
Expenditures 20,683,635$ 18,762,014$
General Fund
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CITY COUNCIL
CONSIDERATION OF FISCAL YEAR 2019-20 YEAR-END FINANCIAL STATUS
REPORT
OCTOBER 13, 2020
PAGE 3
detailed explanations of the revenue and expense variances. The significant expenditure
variances include:
Police Department – The Police Department realized significant salary savings of
approximately $493,000, in addition to other operating expense savings of
$163,000.
Community Development – Divisions within the Community Development
Department (CDD) realized a total salary savings of approximately $80,000 and
contracted services savings of $185,000.
Administrative Services – Aside from salary savings of approximately $46,000,
Non-Departmental savings of $361,000 were realized through contractual services
and utility cost savings.
Recreation Services – Recreation Services realized salary savings of $105,000,
primarily due to a partial vacancy during the year of the Recreation Supervisor
position and the furloughing of part-time recreation staff due to the COVID-19
pandemic.
Public Works – The Public Works Department realized savings for traffic signal
maintenance and reduced costs due to a change to LED efficient lighting of local
streets. This resulted in approximately $64,000 in annual savings.
Revenue
Actual revenue fell short of the Adjusted Budget by only $64,689 for the year. The
Forecast developed at the start of the COVID-19 pandemic anticipated an overall shortfall
of $1.2 million in revenue by year’s end. However, actual revenue exceeded the Forecast
by $1.1 million. The significant revenue variances include:
Property Tax – Property tax ended the year favorable by $158,658, or 3% above
the Adjusted Budget. While the Forecast assumed property taxes would end the
year $220,000 below the Adjusted Budget based on estimates provided by the
County’s Auditor/Controller Department, actual property tax receipts exceeded the
Forecast by $379,000.
Sales Tax – Actual sales tax revenue exceeded the Adjusted Budget by $28,430
(1%) and exceeded the Forecast by $576,130. In the first three quarters of the
fiscal year, sales tax remained on target and benefited from California’s
implementation of the Wayfair v. South Dakota ruling that requires out-of-state
retailers to collect and remit sales tax on merchandise sold to California customers.
However, in the final quarter of the year, sales tax revenues were forecasted to
decline due to COVID-19.
Unexpectedly, certain business categories like building and construction, online
shopping, general consumer goods, and food and drugs continued to show strong
sales tax receipts during the pandemic and exceeded expectations. Other
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CITY COUNCIL
CONSIDERATION OF FISCAL YEAR 2019-20 YEAR-END FINANCIAL STATUS
REPORT
OCTOBER 13, 2020
PAGE 4
business categories like restaurants and hotels, auto, and transportation were
moderately impacted (20% decline in sales tax); whereas, fuel and service stations
were impacted the most (50% > decline). Fortunately, the City received a large
and unexpected one-time payment of sales tax in the fourth quarter of $101,000,
paid by a local construction firm for the purchase of a large piece of construction
equipment.
Transient Occupancy Tax (TOT) – TOT revenue fell short of the Adjusted Budget
by $214,448. This shortfall was expected due to the Shelter-at-Home order
implemented in mid-March, which closed or severely limited most lodging
establishments for an extended period. However, TOT revenue exceeded the
Forecast by $88,052 or 10%, even though falling short of the Adjusted Budget.
License & Permit Fees – License and permit revenue exceeded the Adjusted
Budget by $22,420, primarily due to increased revenue in electrical and excavation
permits. However, the Forecast predicted an increase in permit fees for the final
quarter, based on a run rate through the first nine-months. This increase did not
materialize and permit revenue fell short by $57,280.
User Fees – User fees exceeded both the Adjusted Budget and Forecast by
$75,721 and $52,421 respectively. The majority of the favorable variance came
from increases in park user fees in the first nine-months of the year and an increase
in the amount of telecommunication site lease revenue with the addition of two site
leases.
Recreation Fees – Actual recreation fees fell short of the Adjusted Budget by
$200,990. In mid-March, the Children in Motion program was closed due to
COVID-19 restrictions and remained closed through the end of the fiscal year.
Other recreational services, such as special interest classes and sports leagues,
were also closed during this time frame, impacting recreation fee revenue.
Fund Balance
The actual Fund Balance Available (FBA) for the General Fund ended the year at $4.6
million. FBA remained flat for the year because actual revenue only exceeded
expenditures by $11,744. However, the FBA exceeded the Adjusted Budget by $1.5
million.
ALTERNATIVES:
1. Receive and file the Fiscal Year 2019-20 Year-End Financial Status Report; or
2. Provide other direction to staff regarding the FY 2019-20 Year-End Financial
Status Report.
Item 11.a. - Page 4
CITY COUNCIL
CONSIDERATION OF FISCAL YEAR 2019-20 YEAR-END FINANCIAL STATUS
REPORT
OCTOBER 13, 2020
PAGE 5
ADVANTAGES:
The financial report presents an updated review of the City’s financial performance for FY
2019-20. Reporting on financial performance is important in carrying out the City’s
responsibilities in a fiscally sound, responsible, and transparent manner.
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.
ATTACHMENT:
1. Year-End Financial Status Report
Item 11.a. - Page 5
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City of Arroyo Grande
Fiscal Year 2019-20
Year-End Financial Status Report
INTRODUCTION
The following report is an overview of the City’s fiscal position at the end of Fiscal Year (FY) 2019-20. The
purpose of this report is to update the public and the City Council on the City’s financial position at year-
end and compare actual results to the Adjusted Budget to determine the City’s performance.
The report is organized in the following sections:
Section 1 – an overview of City’s financial position at the end of the FY 2019-20, as well as brief
explanations of significant variances to the budget.
Section 2 – a listing of Budget Amendment Requests made throughout the year.
Section 3 – a listing of any personnel changes occurring during the year and a summary of headcount by
department. This section also includes the City’s calculated vacancy rate.
Section 4 – an update on the Capital Improvement Projects (CIP) managed by the Public Works and
Community Development Departments. This section includes CIP that were completed along with their
final cost.
The FY 2019-20 Budget Highlights
Like most municipal agencies in California, the City of Arroyo Grande has faced budget challenges over
the years, most notably from rising pension and health care costs. The FY 2018-20 Biennial Budget was
no exception. City staff presented a 10-year Financial Forecast prior to the budget development process
which revealed that significant cost increases to the City’s California Public Employees’ Retirement System
(CalPERS) pension plan were imminent and would lead to a situation where expenses would exceed
revenue for the next decade. With the results of the 10-Year Financial Forecast as the impetus, the City
Council met over five public meetings to discuss budget priorities and budget balancing strategies to
address the forecasted shortfall. As a result of these meetings, the City Council made significant changes
within the budget to address the fiscal imbalance. Some of the difficult choices included a number of
recommended efficiency measures, which resulted in reduced operating budgets; prepayment of the
CalPERS unfunded liability to reduce future retirement costs; revenue enhancements, which included
significant increases in fees; and staffing reductions.
ATTACHMENT 1
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COVID-19 Pandemic
During the third quarter of FY 2019-20, incidences of the COVID-19 virus were being detected outside of
China and shortly the virus began spreading to other parts of the world. The first confirmed case of COVID-
19 in the United States occurred in Snohomish County, Washington on January 21, 2020. California’s first
confirmed COVID-19 case occurred on January 26, 2020, and San Luis Obispo County had its first case on
March 14, 2020. In an effort to curtail the spread of COVID-19, Governor Gavin Newsom declared a State
of Emergency on March 4, 2020. On March 16, 2020, the Arroyo Grande City Manager proclaimed a local
emergency in the City and the City Council ratified the proclamation at its next regular City Council
meeting on March 24, 2020. In an effort to slow the spread of the virus, a Shelter-at-Home Order, which
mandated cessation of non-essential activities and gatherings, was initiated on March 19, 2020, to prevent
further transmission of this highly communicable virus. The Shelter-at-Home directive, limiting residents’
movement and the closing of nonessential businesses, has had a significant impact on how the City
conducts business and more specifically on the City’s ability to generate revenue.
At the onset of the virus, the City chose to take a proactive approach to understanding and addressing the
financial impacts as a result of the COVID-19 pandemic. One of the City’s first actions in response to the
virus was to develop a current year Financial Forecast to quantify the financial impacts resulting from the
Shelter-at-Home Order. At the April 14, 2020 City Council meeting, Council reviewed and discussed
potential impacts to the City’s revenue stream as a result of COVID-19. Staff estimated that revenues in
FY 2019-20 would be negatively impacted by approximately $1.2 million dollars due to the COVID-19
pandemic. At subsequent City Council meetings (April 28, 2020, and May 12, 2020), the City Council
approved short-term cost containment strategies to address the anticipated revenue shortfall. These
strategies included implementing a hiring and travel chill, identifying operating cost savings, and use of
one-time available reserves to offset a portion of the reduced revenue (including $439,700 in expenditure
savings mistakenly identified in the April 28, 2020 agenda item). The City’s cost containment strategies
identified roughly $586,000 in expenditure savings and the remaining $647,000 shortfall would be
addressed by using available General Fund reserves.
In addition to providing some insight on the fiscal challenges faced during the FY 2018-20 Biennial Budget
and the unique set of challenges in the current year attributed to the COVID-19 pandemic, the following
Section 1 will focus on the City’s financial performance, including variances to revenue and expenditures
and the degree to which COVID-19 has had an impact on both.
Item 11.a. - Page 7
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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 on primarily the General Fund but will also report on all Governmental Funds.
General Fund – The General Fund is the primary operating fund of the City, which accounts for resources
and services traditionally associated with government.
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 payable 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 two 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 Sanitation District. The other is the
Downtown Parking Fund, which collects assessments from Arroyo Grande Village merchants for
maintenance of the Village parking lots.
The following chart below shows an overview of the City’s fund structure.
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
Police Department Park Development Water Facility
Recreation Services Park Improvement Lopez Water
Public Works Recreation Community Center
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
State COPS Block Grant Agency FundsSpecial Revenue FundsFIDUCIARY FUNDSGOVERNMENTAL FUNDS
ALL FUNDS
PROPRIETORY FUNDS
General FundDebt Service FundsEnterprise FundsPrivate Purpose FundItem 11.a. - Page 8
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CURRENT YEAR ACTUALS COMPARED TO PRIOR YEAR
The table below reflects the year-end status of revenue and expenditures for all Governmental Funds as
well as the City’s General Fund for a two-year period.
The following discussion focuses on both the City’s Governmental Funds and the General Fund and
provides a comparison between actual and prior year results for both revenue and expenditures. The
Governmental Funds category includes Special Revenue Funds, Debt Service Funds, as well as the General
Fund.
Governmental Funds - At year-end, Governmental Fund revenue was 2%, or $464,434, above the prior
year and expenditures were lower by $888,264 (4%), both reflecting positive performance. The
revenue increase from the prior year was primarily due to an increase in property taxes received. The
variance in expenditures can be narrowed down to three significant variances, two centered around
employee retirement costs and the third is related to an increase in the cost of CIP projects funded
through the City’s Local Sales Tax Fund. Their explanation is as follows:
• The City made two prepayments to the CalPERS retirement system within the past two years to
pay down its unfunded liability obligation. One payment of $3 million was made in FY 2018-19
and the other payment of $2 million was made in FY 2019-20. The variance between the two
payments ($3M versus $2M) is contributing to the savings variance between years.
• The Safety Plan is the specific retirement plan for Police department staff, as opposed to the
Miscellaneous Plan which covers all other City staff. The City’s retirement plans include the
“Normal” cost of CalPERS retirement obligations, in addition to the portion of “Unfunded Liability
Costs” the City is also responsible to pay. In FY 2018-19, the City paid approximately $481,000
more in the Safety Plan’s unfunded liability payment than was required to pay in FY 2019-20. The
amount payable for the unfunded liability payment is determined annually by CalPERS.
• The Local Sales Tax Fund, which is the half cent sales tax derived through Measure O-06, is used
to fund a number of CIP projects. The amount of Local Sales Tax used to pay for CIP projects
increased by $648,000 from FY 2018-19 to FY 2019-20, offsetting the labor savings identified
above.
General Fund - The General Fund is the primary operating fund of the City and accounts for resources
and services traditionally associated with government. General Fund revenue was less than one
FY 2018-19 FY 2019-20
Revenue 24,085,605$ 24,550,039$
Expenditures 23,736,903$ 22,848,639$
FY 2018-19 FY 2019-20
Revenue 18,608,864$ 18,773,758$
Expenditures 20,683,635$ 18,762,014$
Governmental Funds
General Fund
Item 11.a. - Page 9
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percent (1%) higher than the prior year and expenditures were 9% or $2.0 million lower, both positive
performance indicators.
• The favorable expenditure variance can once again be explained by the favorable variance in
the CalPERS retirement costs for the City’s Safety Plan, which included the $1 million dollar
payment difference between the two unfunded liability prepayments between the years.
• The current fire services agreement with Five Cities Fire Authority (FCFA) is paid with both
General Funds and Local Sales Tax funds. In FY 2019-20, the cost for FCFA service was paid
using both General Fund and Local Sales Tax dollars, based on a set budgeted amount. In FY
2018-19, the cost of fire services was paid entirely from the General Fund, unlike FY 2019-20
where the Local Sales Tax fund paid a portion of FCFA costs. Using the Local Sales Tax fund to
pay for a portion of the cost in FY 2019-20 resulted in a $471,600 variance between fiscal
years.
GENERAL FUND IMPACTS
The following discussion focuses on the City’s General Fund performance. The chart below starts off with
a simple overview of General Fund performance compared to the budget. This is followed with an
extensive look at expenditures, more specifically FY 2019-20 actual expenditures compared to the
Adopted Budget. Lastly, a discussion on revenue is included which compares actual results to both the
Adjusted Budget and latest Forecast, which factored in anticipated impacts due to COVID-19.
The chart to the left shows a simple
comparison of actual revenue and
expenditures to the budget. Both General Fund
revenue columns reflect $18.8 million when
rounded. The revenue variance is less than 1%.
However, actual expenditures totaled $18.8
million for the year, or 8.2% less than the $20.3
million Adjusted Budget. In total, actual
expenditures ended the year $1.6 million
lower than the Adjusted Budget. Additional
information on General Fund revenue and
expenditure variances are discussed in more
detail further within this report.
$18.8
$20.3
$18.8 $18.8
REVENUES EXPENDITURESDollars (in millions)General Fund
FY 2019-20 Actual vs Budget
Budget Actual
Item 11.a. - Page 10
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The table to the left reflects major cost
categories within the General Fund. This chart
is intended to explain where the City’s
resources are spent. With total expenditures of
$18.8 million, 66% of the City’s cost is
associated with personnel costs, 30% with
operating and maintenance costs, 2% with
transfers to other funds (primarily transfers to
CIP Fund), and 1% each for the City’s debt
service and capital outlays.
Table 1 below shows the year-end status of all General Fund operating departments/divisions
expenditures. Some departments include more than one division. However, the Divisions are consolidated
under their respective department, rather than reflected individually within the table.
Table 1 – General Fund by Department
Overall, expenditures were under the Adjusted Budget by 8% or $1.6 million. As was discussed, at the
onset of the COVID-19 pandemic, the City took a proactive approach in an effort to understand and
address the financial impacts due to COVID-19. The City Council approved a number of short-term cost
containment strategies to address anticipated revenue shortfalls. This played a significant role in the
overall expenditure savings for the year. A more detailed explanation of expenditure variances by
individual department/division is provided below.
City Administration 1,054,800 984,426 70,374 7%
Legislative & Information Services 1,145,769 1,060,845 84,924 7%
Administration Services 4,755,143 4,236,841 518,302 11%
Community Development 2,130,108 1,833,473 296,635 14%
Police Department 8,485,969 7,828,943 657,026 8%
Recreation Services 1,128,500 899,786 228,714 20%
Public Works 2,082,751 1,917,700 165,051 8%
Subtotal 20,783,040 18,762,014 2,021,026 10%
Expenditure Savings (439,700) - (439,700) 100%
TOTAL EXPEDITURES 20,343,340 18,762,014 1,581,326 8%
General Fund Department (and Divisions)
General Fund Department Variances - Year End
2019-20 Adjusted
Budget
2019-20 Actual
Results
Dollar
Fav/(Unfav)
%
Fav/(Unfav)
FY 2019-20 % of
Expense Category Acutals Actuals
Personnel Costs 12,405,475$ 66%
Operating Costs 5,717,506 30%
Debt Service 134,822 1%
Captial Outlay 134,614 1%
Transfers Out 369,597 2%
Total 18,762,014$
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KEY EXPENDITURE VARIANCES FOR INDIVIDUAL DIVISIONS/DEPARTMENTS FOR
FISCAL YEAR 2019-20
Overall, the City Manager Division came in favorable by
$40,836. The City Manager Division mainly functions to
capture the labor costs and expenditures incurred by
the City Manager. The City Manager position became
vacant starting in May when the former City Manager
resigned. The position remained vacant for the
remainder of the fiscal year, contributing to a favorable variance in salaries and benefits of $52,658.
However, all but approximately $10,675 of this salary savings was offset by the City Manager’s leave
payout.
In addition, a mid-year Budget Amendment Request (BAR) was approved in March 2020 to increase
appropriations for contracted services associated with promotion and education of a proposed ballot
measure for a Local Sales Tax Initiative. A budget of $25,000 was approved in order to retain a professional
outreach firm to engage in public education efforts regarding the need for an increase in the City’s Local
Sales Tax funding to increase vital public safety, street and sidewalk maintenance, and other infrastructure
needs. However, the City Council did not approve placement of the Local Sales Tax Measure on the
November 2020 ballot and thus the money was never spent.
The Administrative Services Department includes the
City’s Fiscal as well as Human Resources functions. The
Division posted overall salary savings of $152,943 for
the year. The majority of the salary savings is attributed
to two factors:
• Salary savings resulting from the vacancy of the Administrative Services Director position for a
portion of the fiscal year ($45,612).
• Prior to the start of the 2019-20 fiscal year, it was determined that workers’ compensation costs
were going to be $102,000 higher than originally budgeted. To reflect the anticipated increase in
the budget, a budget adjustment was made increasing the Administrative Services Division’s
budget for the full $102,000. However, past practice is to allocate actual workers’ compensation
costs by division, rather than charge the whole amount to Administrative Services. The net impact
would reflect workers’ compensation cost savings in the Administrative Services’ Division and an
unbudgeted cost for each department, nullifying any overall impact city-wide.
The Community Development Department ended the
year $207,641 under the Adjusted Budget. The majority
of the savings ($185,468) occurred within the
contractual services account. This savings is related to a
carryover budget adjustment made at the beginning of
the fiscal year to increase appropriations for contractual services required to complete a number of
Department: City Administration
Division: 4101-City Manager
Issue: Overall savings in salaries and
contractual services
Impact to General Fund: $35,675 savings
Service Level Impact: None
Department: Administrative Services
Division: 4120-Administrative Services
Issue: Overall savings in salaries and workers
compensation costs
Impact to General Fund: $147,612 savings
Service Level Impact: None
Department: Community Development
Division: 4130-Community Development
Issue: Savings in contractual services
Impact to General Fund: $185,468 savings
Service Level Impact: None
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planning elements within the year; however, not all those elements were completed nor services
rendered in FY 2019-20.
Salary savings of $79,728 within the Engineering
Division is not attributed to any one specific factor,
rather it is a result of a number of staffing changes
occurring during the year that include:
• A Community Development Department (CDD) staff member was on maternity leave and the
position was not backfilled.
• A vacancy occurred within the part-time CDD Intern position for the year.
• Savings is attributed to an Engineer position budgeted at the higher paying Associate Engineer
position, yet filled during the year at a lower paying Assistant Engineer job classification.
The Non Departmental Division is set up to capture
overhead costs that are not specific and can’t be linked
to any one division. For example, this Division includes
all of the City’s insurance costs, utilities costs, and
payment for Five Cities Fire Authority (FCFA). The
majority of the $299,000 savings in the division was the
result of an over estimation of contractual services included during the FY 2019-20 budget development
process. This oversight was not identified until later in the fiscal year.
In addition, utility costs for the City were favorable by $61,777. An analysis of the actual utility costs
(water, cable, electric, gas) revealed that over the past three years, utility costs have typically been below
their budgeted amount. As part of the FY 2020-21 budget, budgeted utility costs were reduced by 7% to
account for declining utility costs.
For simplicity, Police Services will be analyzed in total
rather than by individual divisions. Overall, the Police
Services expenditures were favorable to the adjusted
budget by $656,426. Some of the more significant
variances include:
• The majority of the Police Department’s favorable variance is attributed to salary savings, the
result of vacant permanent Police Officer positions during the fiscal year. In April 2020, the City
imposed a hiring chill to increase salary savings to offset the impacts of COVID-19. The
Department ended the year with three vacant permanent Police Officer positions. While not all
three positions remained vacant throughout the year, they remained vacant for long enough to
generate approximately $269,000 in salary savings.
Department: Community Development
Division: 4301-Engineering
Issue: Salary savings due to staffing impacts
during the fiscal year
Impact to General Fund: $79,728 savings
Service Level Impact: None
Department: Administrative Services
Division: 4145-Non Departmental
Issue: Savings in contractual services and
utility costs
Impact to General Fund: $360,777 savings
Service Level Impact: None
Department: Police Services
Division: Various (4201,4203,4204)
Issue: Overall savings in a number of Police
expenditure accounts the majority of which
is salary savings
Impact to General Fund: $647,000 savings
Service Level Impact: None
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• The Police Support Services budget included six (6) part-time Police positions each providing a
number of policing services. Vacancies within these positions resulted in salary savings of
approximately $89,000.
• The actual amount of CalPERS retirement costs specific to the Police Department was $175,733,
or 6% under the amount budgeted. The majority of the CalPERS savings was attributed to a
reduction in the amount of unfunded liability the City was required to pay. Unfunded retirement
liability is budgeted based on estimates provided by CalPERS’ Actuarial Office, whose original
estimate was overstated.
• Travel and training costs are favorable by $16,228. The Police Department’s training and travel
costs were favorable prior to COVID-19; however, additional savings were realized due to the
City’s travel chill implemented in the fourth quarter.
• Total Police Department contracted services ended the year $41,762 under the Adopted Budget.
The Police Administration Division budgeted for various contractual services during the fiscal year,
but some of those services were never incurred or were contracted for a lessor amount resulting
in a $24,322 variance. In addition, the actual cost for Animal Control Services, contracted through
the County’s Animal Services Department, was lower by $17,440.
• The Police Department’s standard practice has been to purchase vehicles through a lease to
purchase program over a period of four years. The lease for Police Administrative vehicles expired
in May 2019 of the previous fiscal year. The City now owns these vehicles due to the expiration of
their leases. While a leased cost to replace these vehicles was budgeted in FY 2019-20, the delay
in not replacing these vehicles within the year reflects a $54,969 savings.
Overall, the Public Works Administration Division
reflected a 10% or $98,264 favorable variance
compared to the Adjusted Budget. The Public Works
Administration Division includes administrative staff as
well as the City’s contracted services for street
sweeping, traffic signal maintenance, and other smaller
consulting services. The budget also includes the cost of providing street lighting throughout the City. The
major variances within this division are explained as follows:
• Actual salary and benefits were favorable by $32,993, the result of the Capital Projects Engineer’s
time being allocated to the Bridge Street Project (fund 350-Capital Improvement Projects) in
anticipation of reimbursement from Caltrans. Originally, this position was budgeted 100% in the
General Fund.
• The contractual services account was 33%, or $30,451, under the Adopted Budget. The majority
of this variance was related to savings for traffic signal maintenance. Actuals have been
consistently lower the past couple of years and a lower amount will be reflected in future budgets.
• PG&E is responsible for repairs and maintenance of street lighting, while the City pays the cost of
that lighting. The City’s cost for street lighting was favorable to the Adopted Budget by 14% or
$34,060. The City’s street lights were converted to LED lighting in the first half of FY 2018-19.
Savings in the current year is attributed to switching to the more efficient LED lighting, which was
budgeted prior to the LED upgrades.
Department: Public Works
Division: 4307-Public Works Admin
Issue: Savings in salaries, contractual services
and power accounts.
Impact to General Fund: $64,511 savings
Service Level Impact: None
Item 11.a. - Page 14
Page 10 of 15
The Recreation Services Administration Division
includes administrative staff responsible for managing
the number of recreation services provided by the City.
The Division captures labor costs for both the Director
of Recreation Services and two Recreation Supervisors,
one of which splits her time (25% Recreation & 75%
Child Services). The Division also includes five (5) part-
time staff to manage sports facilities and provide overall support to administrative staff.
• The salary savings is attributed to a partial year vacancy in the Recreation Supervisor positon. In
addition, the position was eventually filled as a Recreation Coordinator position rather than the
costlier Recreation Supervisor position.
• Part-time Recreational staff were furloughed for the final quarter of the year due to COVID-19,
resulting in approximately $43,000 in savings.
KEY REVENUE VARIANCES BY ACCOUNT FOR THE FISCAL YEAR
Table 2 – General Fund Revenue
As shown in Table 2, actual revenue fell short of the Adjusted Budget by only $64,689 for the year. The
Forecast developed at the start of the COVID-19 pandemic (included in Table 2) anticipated an overall
shortfall of $1.2 million in revenue by year’s end. At the time of the Forecast, all indicators pointed to
significant revenue reductions due to the Shelter-at-Home directive and the closure of many local
businesses. The pessimistic view of revenue in the final quarter of 2020 was based on the economic
realities at the time, which included the largest increase in the unemployment rate on record dating back
to 1939, as well as a record drop in consumer spending as the economy retrenched amid COVID-19. In
hindsight, that pessimistic view of the economy did not materialize in the significant revenue reductions
forecasted. Originally, the Forecast anticipated decreases in the following revenue accounts: Sales Tax
($547,700), Transient Occupancy Tax (TOT) ($302,500), Property Tax ($220,600) and Recreation Fees
($183,200). A more detailed discussion is included below to help explain actual revenue variances
compared to the Adjusted Budget and the Forecast.
Property Tax 5,351,600 5,131,000 5,510,258 158,658 379,258
Sales Tax 4,142,700 3,595,000 4,171,130 28,430 576,130
Transient Occ. Tax 1,141,500 839,000 927,052 (214,448) 88,052
Franchise Fees 689,500 690,000 652,362 (37,138) (37,638)
License & Permit Fees 597,300 677,000 619,720 22,420 (57,280)
Triple Flip-VLF 1,719,000 1,741,000 1,740,876 21,876 (124)
User Fees 461,700 485,000 544,738 83,038 59,738
Planning Fees 514,100 514,000 571,419 57,319 57,419
Recreation Fees 795,200 612,000 594,142 (201,058) (17,858)
Transfers In 2,638,000 2,638,000 2,637,996 (4) (4)
Other Revenue (minor variances)787,847 739,000 804,065 16,218 65,065
TOTAL 18,838,447 17,661,000 18,773,758 (64,689) 1,112,758
General Fund Revenue Variances - Year End
REVENUE BY CATEGORY FY 2019-20
Budgeted
FY 2019-20
Actual
Budget vs Actual
(Unfav)/Fav
Fcst vs Actual
(Unfav)/Fav
FY 2019-20
Forecasted
Department: Recreation Services
Division: 4421-Recreation Administration
Issue: Savings in salaries
Impact to General Fund: $104,682 savings
Service Level Impact: Due to COVID-19, most
Recreation Services were suspended in mid-
March.
Item 11.a. - Page 15
Page 11 of 15
Property Tax – Property tax ended the year favorable by $158,658, or 3% above the Adjusted Budget.
While the Forecast assumed property taxes would end the year $220,600 below the Adjusted Budget
based on estimates provided by the County’s Auditor/Controller Department, actual property tax receipts
exceeded the Forecast by $379,000. Property tax collected grew 14% over the previous fiscal year.
Sales Tax – Actual sales tax revenue exceeded the Adjusted Budget by $28,430 (1%) and the Forecast by
$576,130. In the first three quarters of the fiscal year, sales tax remained on target and benefited from
California’s implementation of the Wayfair v. South Dakota ruling that requires out-of-state retailers to
collect and remit sales tax on merchandise sold to California customers. The ruling has led overall to
increased sales tax statewide. However, in the final quarter of the year, sales tax revenues were
forecasted to decline due to the consequences of COVID-19 as previously discussed.
Unexpectedly, certain business categories like building and construction, online shopping, general
consumer goods, and food and drugs continued to show strong sales tax receipts during the pandemic
and exceeded expectations. Other business categories like restaurants and hotels, auto and
transportation were moderately impacted (20% decline in sales tax); whereas, fuel and service stations
were impacted the most (50% > decline). Fortunately, the City received a large and unexpected one-time
payment of sales tax in the fourth quarter in the amount of $101,000, paid by a local construction firm for
the purchase of a large piece of construction equipment.
Transient Occupancy Tax (TOT) – TOT revenue fell short of the Adjusted Budget by $214,448. This shortfall
was expected due to the Shelter-at-Home order implemented in mid-March, which closed or severely
limited most lodging establishments for an extended period. However, TOT revenue exceeded the
Forecast by $88,052 or 10%, even though falling short of the Adjusted Budget.
License & Permit Fees – License and permit revenue exceeded the Adjusted Budget by $22,420, primarily
due to increased revenue in electrical and excavation permits. However, the Forecast predicted an
increase in permit fees for the final quarter based on a run rate through the first nine-months. This
increase did not materialize and permit revenue fell short by $57,280.
User Fees – User fees exceeded both the Adjusted Budget and Forecast by $75,721 and $52,421
respectively. The majority of the favorable variance came from increases in park user fees in the first nine-
months of the year and an increase in the amount of telecommunication site lease revenue with the
addition of two site leases.
Recreation Fees – Actual recreation fees fell short of the Adjusted Budget by $200,990. In mid-March, the
Children in Motion program was closed due to COVID-19 restrictions and remained closed through the
end of the fiscal year. Other recreational services, such as special interest classes and sports leagues, were
also closed during this time frame, negatively impacting recreation fee revenue.
Item 11.a. - Page 16
Page 12 of 15
FUND BALANCE AVAILABLE
The actual Fund Balance Available (FBA) for the General Fund ended the year at $4.6 million. FBA
remained flat for the year because actual revenue only exceeded expenditures by $11,744. However, the
FBA exceeded the Adjusted Budget by $1.5 million. The ending year-end reserve balance is computed to
be 24.6% and exceeds the City’s Fund Balance reserve goal of 20%. When using the FY 2019-20 ending
FBA of $4.6 million as the beginning balance for the FY 2020-21 budget, the reserve balance in the current
year would increase to 23.8% from a budgeted 18.4%, assuming budget targets are met in the current
fiscal year.
Item 11.a. - Page 17
Page 13 of 15
SECTION 2: APPROPRIATION TRANSFERS AND BUDGET ADJUSTMENTS
The City’s Administrative Policy C-005 gives the City Council the authority to amend, supplement, or
reduce the budget by majority vote. The City Manager has the authority to make administrative changes
as long as those changes do not impact the budgeted year-end fund balance. The following adjustments
were made during the fiscal year.
$6,517 Public Works: Transferred appropriations from Public Works contractual services accounts to
machinery & equipment to pay for a new vehicle lift in the mechanic’s shop.
$13,204 Community Development: Transferred appropriations from Planning contractual services
account to CIP account to complete Local Roadway Safety Project.
$12,600 Police: Transferred appropriations from the police canine program for the replacement of an
antiquated radio repeater.
$8,567 Community Development: Adding appropriations for unanticipated revenue for peer review by
on-call consultant related to grading and drainage work and traffic study for Pilgrim Way.
$20,000 Capital Improvement: Transferred $20,000 in projected cost savings from City Hall Roof
Replacement capital project to establish a new Recreation Services Building Roof Repairs capital
improvement project.
$31,211 Legislative & Information Services: Increased appropriations to cover settlement agreement
pertaining to method of conducting elections and district-based election system.
$26,000 Community Development: Transferred appropriations from Planning contractual services
account to CIP account to begin design plans for the Swinging Bridge.
$99,608 Capital Improvement: Transferred additional revenue into CIP account to complete Systematic
Safety Analysis Report.
$281,792 Various Departments: Carryover requests in the General Fund from FY 2018-19.
$10,000 Water: Transferred appropriations from maintenance lines & pump account to water meters
account to replace water meters.
$177,579 Capital Improvement: Transferred appropriations from Local Sales Tax funding from the
completed Sierra Drive Drainage Improvements Project and CMP lining program to fund emergency storm
drain system repairs on Oak Park Blvd at El Camino Real.
$18,880 Police: Adding appropriations for unanticipated Nuclear Power Preparedness Program funds
from California Office of Emergency Services grant to fund the purchase of a mobile electronic message
board.
$18,333 Parkside Village Assessment: Increase appropriations in the Parkside Village Assessment District
for turf and sprinkler replacement.
$88,949 Various Departments: Increase appropriations to various revenue and expenditure accounts as
recommended in the Mid-Year budget presentation to the City Council on 2/25/20, item 11.A.
Item 11.a. - Page 18
Page 14 of 15
SECTION 3: POSITION CHANGES
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.
Department Adopted
Budget
Headcount
(FTE’s)
Vacancies
(end of 4th
Qtr.)
% of
Total
Staffing
City Manager 1.00 1 6.4%
Administrative
Services
6.00 0 7.7%
Community
Development
10.00 1 12.8%
Legislative & Info
Services
4.00 0 5.1%
Police Services 29.00 3 37.2%
Public Works 21.00 1 27.0%
Recreation
Services
3.00 0 3.8%
Total 74.00 6 100%
EMPLOYEE VACANCY RATE
The City’s employee vacancy rate at the end of the fourth
quarter was 8.1%. This equates to 6 vacant positions. The
vacancy rate tracks the number of current open
permanent positions in comparison to the total number of
permanent positions available throughout the City. Up to
this point, the City has not tracked the vacancy rate over
time. It is the intent that the City will track and report its
vacancy rate over time in order to help evaluate potential
impacts associated with turnover. Examples of the costs
associated with turnover include the cost of advertising new positions, training, overtime, lowered
productivity, and workload balance. The current vacancy rate of 8.1% at the end of the fourth quarter
reflects the regular turnover associated with voluntary and involuntary separations, as well as hiring
delays brought on by the hiring chill implemented in April 2020 for the remainder of the year.
4.0%
8.1%
5.4%
8.1%
0.0%
5.0%
10.0%
QTR 1 QTR 2 QTR 3 QTR 4VACANCY RATEPERIOD
Vacancy Rate FY 2019-20
Item 11.a. - Page 19
Page 15 of 15 SECTION 4: 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). The projects listed below represent projects that were completed in FY 2019-20. Project TitleCommentsTotal Amount Budgeted for ProjectTotal Final Project Costs% ExpendedFY 2019-20 Budget for ProjectFY 2019-20 Project Costs% ExpendedFundCenterFundingSourcesCity Hall Roof Replacement Replace roof on City Hall building40,000 32,004 80% 40,000 32,004 80% 010General FundRecreation Services Center Roof RepairRepairs to roof on Recreation Services building20,000 20,000 100% 20,000 20,000 100% 010General FundVarious Park ImprovementsTurf and infield renovations at Soto Sports Complex5,652 5,652 100% 5,652 5,652 100% 214Park ImprovementADA Drinking Fountains at ParksReplace existing drinking fountains with ADA compliant drinking fountains at City parks and facilities10,000 7,516 75% 10,000 7,516 75% 214Park ImprovementPavement Management ProgramAnnual pavement maintenance on the City's public streets and parking lots1,746,638 1,053,074 60% 1,746,638 1,029,991 59% 218Sales Tax,Urban SHA,SB-1Concrete RepairsAnnual repairs and upgrades to sidewalks throughout the City190,003 124,343 65% 190,003 107,812 57% 218Sales TaxSierra Drive Drainage ImprovementsRedirection of storm water along Sierra Drive to alleviate flooding214,600 120,679 56% 255 255 100% 218Sales TaxHuasna Road/Oro Drive Corrugated Metal Pipe (CMP) and Woodland Drive Sewer LiningRehabilitation of deteriorated storm drain and sewer pipe by lining the existing pipes305,575 269,367 88% 262,930 253,057 96% 218,612Sales Tax, Sewer FundOak Park Boulevard/El Camino Real Emergency Storm System RepairEmergency repair project for the failed storm drain system on Oak Park Boulevard at El Camino Real177,579 136,608 77% 177,579 136,608 77% 218Sales TaxLift Station No. 1 Force Main ReplacementReplace existing 8-inch cast iron force main with an 8-inch PVC force main1,164,880 866,777 74% 1,079,344 781,241 72% 612,634Sewer Fund, Sewer Facility, DeveloperGalvanized Service ReplacementsReplacement of services installed prior to 1980 with new PVC services129,850 17,630 14% 129,850 17,630 14% 640Water FundCoach Road/Garden Street Pipe Bridge EvaluationStructural analysis to determine the condition of the steel pipe bridges crossing Arroyo Grande Creek81,000 47,726 59% 23,808 23,808 100% 640Water FundWell No. 7 Evaluation and RepairEvaluate existing condition and replace pump and appurtenances at Well No. 750,000 46,302 93% 2,316 2,316 100% 241Water AvailabilityFY 2019-20 Completed Capital Improvement ProjectsItem 11.a. - Page 20