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HomeMy WebLinkAbout8.2 Preliminary Fiscal Year 2023-24 General Fund Budget7F Agenda Item 8.2 STAFF REPORT CITY COUNCIL DATE: April 18, 2023 TO: Honorable Mayor and City Councilmembers FROM: Linda Smith, City Manager SU 13,1ECT: Preliminary Fiscal Year 2023-24 General Fund Budget Prepared by.• Lisa Hisatomi, Director ofAdministrative Services EXECUTIVE SUMMARY: The City Council will review the Preliminary Fiscal Year 2023-24 Budget, focusing on the General Fund. As this is the second year of the City's two-year budget, this information will supplement the budget document adopted by the City Council in June 2022. The updated Capital Improvement Program is presented under a separate item. STAFF RECOMMENDATION: Receive the report and provide direction to Staff related to the budget adoption scheduled for May 16, 2023. FINANCIAL IMPACT: The Preliminary Budget results in an increase to revenues of $3,679,531 and an increase to operating expenditures of $2,351,368 in the General Fund from the Amended Fiscal Year 2022-23 Budget. After transfers out, total General Fund reserves are projected at $194,231,544, a decrease of $3,504,655 from Fiscal Year 2022-23. DESCRIPTION: The City of Dublin utilizes a biennial budget process, in which a comprehensive budget document is prepared that establishes high-level priorities and specific departmental goals for a two-year period. The second year of the cycle is the "update year", in which projections are revised and significant changes highlighted, while the original document continues to serve as the guiding financial plan. As in prior years, this report focuses on the General Fund, as there are no major budgetary changes in other funds. This report discusses updates to the City's major revenue categories and refines expenditure projections, reflecting the most recent information. The analysis compares the Preliminary Fiscal Year 2023-24 Budget to the Amended Fiscal Year 2022-23 Budget. Page 1 of 7 275 Summary The Preliminary Budget (Table 1 and included as Attachments 1 and 2) projects an operating surplus in the General Fund (ongoing revenues less ongoing expenditures) of $16,318,637 After transfers, total reserves are projected at $194,231,544, a decrease of $3,504,655 from the prior year, the decrease is primarily due to the planned spending down of Committed and Assigned Reserves on capital projects, and the use of $7,167,382 in Unassigned Reserves for an advance to the Dublin Boulevard Extension project. As shown in Table 1, revenues in Fiscal Year 2023-24 are increasing a net $3,679,531 (+3.3%) over the prior year, due primarily to higher property tax revenue. Expenditures are increasing $2,351,368 (+2.4%) over the prior year. Changes by categories are explained in the section below. Table 1: Operating Budget Impact & Reserve FY 2022-23 FY 2023-24 $ % Amended Projected Change Change Revenues $112,212,330 $115,891,861 $3,679,531 3.3% Expenditures 97,221,855 99,573,224 2,351,368 2.4% Net Operating Budget Impact $14,990,475 $16,318,637 $1,328,162 8.9% Transfers In $142,900 $56,600 ($86,300) -60.4% Transfers Out/Contribution to Other 41,254,681 19,879,893 (21,374,789) -51.8% Total Reserves, End of Year $197,736,199 $194,231,544 ($3,504,655) -1.8% The following is a summary of the net changes reflected in the Preliminary Budget as compared to the Fiscal Year Amended Budget (+/-$200,000): Revenue Changes Property TaxRevenue - increase of$3,433, 000 (+6.1 %) The following factors affected the net impact: • An increase of $2.2 million or 4.6% to secured and unsecured property taxes, reflecting an adjustment of 2.0% to the assessed property value (the maximum allowable by Prop 13) and an increase in valuation due to home sales and new construction. • An increase of $0.9 million in Motor Vehicle In -lieu Fees (the state's replacement funding for Vehicle License Fees that were reduced in 2004), as this is tied to the change from the prior year in the City's gross assessed valuation of taxable property. • A budgeted delinquency rate of 1%. Sales Tax Revenue - decrease of$400,000 (-1.5%) It is projected the City's Sales Tax will decrease slightly, primarily in Auto & Transportation and Business to Business categories. The contributing factors include inflation and interest rate increases, which trickle over into weaker consumer confidence and lower household discretionary Page 2 of 7 276 spending. Fuel prices are also declining from historic highs experienced in the 2022 calendar year. DevelopmentRevenue - decrease of$277,526 (-3.8%) Development revenue includes permitting fees and payments for planning and engineering services provided by the City. Revenue projections are based on the timing of development projects, and the receipt of revenues and corresponding services (i.e., City cost) do not happen simultaneously. Plan check costs are typically incurred approximately 12 months after revenue has been received, meaning that as development decreases, the associated decrease in costs will lag. In anticipation of this, the City has maintained the Service Continuity reserve (currently at $3.2 million) to cover costs during that lag. Other Taxes - increase of$220,500 (+3.496) Other Taxes include Property Transfer Taxes, and multiple Franchise Taxes (electric, gas, garbage, cable). The increase is primarily due to the incorporation of the annual rate adjustment as part of the garbage franchise agreement. Charges for Services - netincrease of$439,488 (+6.391o) Charges for Services include revenue primarily from Parks and Community Services programs, which are returning to pre -pandemic participation levels in most programs, except for the closure of two after -school program sites due to low enrollment. This category also includes administrative fees collected from the City's contracted garbage collector (Amador Valley Industries), and Santa Rita reimbursement revenue, whereby the County pays the City for costs incurred when responding to emergency calls at the Santa Rita Jail. Interest- increase of$200,000 (+8.791o) The City is experiencing higher returns on its investments, and Staff has transferred additional funds to Chandler Asset Management's investment portfolio to take advantage of better performance that the local pools. Expenditure Changes Salaries - increase of$618,782 (+4.6916) The increase in the Preliminary Budget is attributed to the net impact of the following: • Addition of two new positions in the General Fund: o Public Works Inspector in the Public Works Department - this position will work on capital improvement projects; the salary is included in the General Fund but will be allocated to CIP funds accordingly. o Recreation Coordinator in the Parks and Community Services Department • Transfer Special Projects Manager from City Manager's Office (General Fund) to Information Services (Information Technology Fund), resulting in a decrease in General Fund personnel costs offset by an increase in Internal Service Charges (IT Fund charges the General Fund back). Inclusion of full -year salaries for positions new in the current year - GIS Coordinator and Senior Office Assistant in the Public Works Department. Page 3 of 7 277 Benefits - decrease of$181,2O5 (-3.3%) The decrease in benefit costs is primarily attributed to a decrease in retirement costs, partly due to shifting of employees from Classic to PEPRA with new hires, a less costly retirement plan, and a decrease in City's allocated share of pension payment to Dougherty Regional Fire Authority. The City Council has approved a one-time additional lump sum payment of $3.46 million to the City's allocated share of the closed pension plan, from Committed Reserve for Fire Services Pension/OPEB. Services & Supplies - increase of$8O4,578 (+14.8916) During the budget process, Staff were asked to hold the line on operating supplies and services expenditures. The net increase in this category is tied to higher insurance premiums through PLANJPA, the City's insurance pool. Premiums are impacted by several factors: 1) claims experience of the pool in general, which is seeing an increase in settlement costs of claims related to dangerous conditions (e.g., roads and intersections); 2) property insurance increases which are higher as a direct result of across-the-board inflation, real estate pricing escalation, supply chain disruptions, and natural disasters; 3) impacts of ransomware attacks and data breaches on cyber insurance; and 4) a three-year past look at claims experience. Internal Service Fund Charges - increase of$511,176 (+10.4916) Internal Service Charges include the allocation to the General Fund of replacement costs of facilities, vehicles, and equipment. In addition, the Information Services operating budget is allocated to citywide departments based on a specified formula. The Fiscal Year 2023-24 preliminary budget increase is in IT service charges, primarily due to the addition of three new positions: the Special Projects Manager; the Audio -Video Specialist (both added in the current year); and a Senior Office Assistant (added in Fiscal Year 2023-24). These new positions, respectively, will address and reduce the City's vulnerability to cybersecurity threats, provide a dedicated resource to support citywide AV facilities, and assist with the administrative function of Information Services. Contract Services Expenditures - increase of$9O6,568 (+1.5%) The Fiscal Year 2022-23 Amended Budget includes a contract services budget carryover of $1,507,299 from Fiscal Year 2021-22. Excluding the carryover, the Preliminary Budget projects a net increase of $2,413,867, as illustrated in Table 2: Page 4 of 7 278 Table 2: Contract Services Changes Carryover FY 22-23 FY 22-23 from Net of FY 23-24 $ % Amended FY 21-22 Carryover Update Change Change Police Services $24,085,730 $100,000 $23,985,730 $24,835,923 $850,193 3.5% Fire Services 15,471,310 15,471,310 16,313,430 842,120 5.4% Maint. Services (MCE) 7,220,710 7,220,710 7,925,056 704,346 9.8% Development Services 4,630,128 336,156 4,293,972 3,606,108 (687,864) -16.0% Other 10,463,978 1,071,142 9,325,855 10,097,906 705,071 7.8% Total $61,871,855 $1,507,299 $60,364,557 $62,778,423 $2,413,867 4.0% Police and Fire Services budget increases are due primarily to annual COLA and benefit cost increases. Maintenance services increases are due to the addition of Fallon Sports Park Phase 3, additional street landscaping, and an adjustment in labor rates. Development contract services, like development revenues, are based on the timing of development projects. Other contract services include Library Services, Crossing Guards, City Attorney, and Animal Services, in addition to other operating contracts services such as Parks and Recreation instructor and program contracts, non-MCE street maintenance contracts, and finance and administration consulting services. The increase is attributed to contracts for ongoing street sweeping, a community survey, an update of 2012 Economic Development Strategy and Economic Development Element to the General Plan, drainage maintenance services for the stormwater program, staff augmentation for disaster preparedness, and estimated expenditures for the 2024 March election. Capital Outlay- decrease of$506,362 (-80.8%) Capital Outlay items are typically one-time expenditures. The Fiscal Year 2022-23 Budget includes the purchase of vehicles for Police Services and the Public Works maintenance division, equipment and capital assets for Parks and Recreation special events and The Wave, and furniture for City facilities. There are no major capital asset purchases planned in Fiscal Year 2023-24. Transfers Out The Preliminary Budget includes transfers out of $2.0 million to the Internal Services Fund - Facilities for preventive maintenance, $1.0 million to the pension unfunded liability reserve, and $16,879,893 to capital improvement projects. Of the amount for capital projects, $7,195,281 comes from Committed/Assigned reserves and $9,684,612 from Unassigned reserves. CIP projects funded by the General Fund in Fiscal Year 2023-24 are shown in Table 3 below. Page 5 of 7 279 Table 3: Transfers Out to the Capital Improvement Program, FY 2023-24 Reserves Projects Amount Committed/Assigned $7,195,281 Civic Center Rehabilitation 687,840 Dublin Boulevard Extension 6,257,441 Village Parkway Reconstruction 250,000 Unassigned $9,684,612 Audio Visual System Upgrade 314,000 Citywide Bicycle and Pedestrian Improvements 105,000 Citywide Storm Drain Improvements 30,000 Downtown Dublin Street Grid Network 8,990 Downtown Dublin Town Square Park 4,680 Dublin Boulevard Extension 7,167,382 Kolb Park Renovation 450,000 Marquee Signs 495,000 Parks Playground Replacement 1,109,560 Total $16,879,893 In addition, $9.5 million will be utilized from the Committed reserve as an advance to the Public Facility Fee program for the construction of Jordan Ranch Neighborhood Square, Wallis Ranch Community Park, and the Library Tenant Improvements. The advance is for cash flow purpose, due to the timing of the receipt of revenues and project constructions. The General Fund will be reimbursed by the Fee program. 10-Year Forecast and Next Steps Staff will provide an update to the 10-Year General Fund Forecast along with a discussion of the assumptions used in the Forecast with the final budget proposal scheduled for May 16, 2023. This will include the General Fund reserve changes needed to advance $63 million for the Dublin Boulevard Extension project, which will eventually be paid for by the Eastern Dublin Transportation Impact Fee. The City Council approved Staffs funding plan to use reserves over a three-year period for this purpose. Final General Fund reserve designations will be made by the City Council at the second meeting in June 2023. Staff is seeking direction from the City Council on other items it wishes to include in the Fiscal Year 2023-24 Budget. STRATEGIC PLAN INITIATIVE: The Preliminary General Fund budget is a reflection of priorities established in the City's Two - Year Strategic Plan. Page 6 of 7 280 NOTICING REQUIREMENTS/PUBLIC OUTREACH: The City Council Agenda was posted. ATTACHMENTS: 1) Preliminary Fiscal Year 2023-24 General Fund Summary 2) Preliminary Fiscal Year 2023-24 General Fund Reserves Page 7 of 7 281 PRELIMINARY GENERAL FUND SUMMARY Attachment I Revenues Adopted Amended Change Actual Budget Budget 2023-24 FY24 vs 2021-22 2022-23 2022-23 Update FY23 Amend) Property Tax $55,186,388 $55,163,000 $56,463,000 59,896,000 3,433,000 6.1% Sales Tax 26,456,903 26,400,000 27,400,000 27,000,000 (400,000) -1.5% Sales Tax Reimbursements (346,696) (405,555) (405,555) (375,000) 30,555 -7.5% Development Revenue 9,803,444 7,702,334 7,387,355 7,109,829 (277,526) -3.8% Transient Occupancy Tax 1,255,575 1,400,000 1,400,000 1,500,000 100,000 7.1% Other Taxes 7,025,567 6,560,000 6,560,000 6,780,500 220,500 3.4% Licenses & Permits 354,643 351,373 351,373 286,417 (64,956) -18.5% Fines & Penalties 70,714 85,000 65,000 50,000 (15,000) -23.1% Interest Earnings 2,269,289 1,510,000 2,310,000 2,510,000 200,000 8.7% Rentals and Leases 1,647,882 1,477,330 1,653,427 1,648,021 (5,406) -0.3% Intergovernmental 324,519 290,000 290,000 290,000 Charges for Services 8,022,099 6,496,124 6,950,194 7,389,682 439,488 6.3% Community Benefit Payments 50,000 - Other Revenue 2,452,034 1,680,156 1,787,536 1,806,412 18,876 1.1% Subtotal Revenues - Operating $114,572,363 $108,709,762 $112,212,330 $115,891,861 $3,679,531 3.3% Transfers In $312,874 $77,900 $142,900 56,600 ($86,300) Unrealized Gains/Losses (15,525,055) Total Revenues $99,360,182 $108,787,662 $112,355,230 $115,948,461 $3,593,231 3.2% Expenditures Salaries & Wages $11,670,597 $13,249,383 $13,531,615 14,150,396 $618,782 4.6% Benefits 4,728,716 5,488,704 5,567,488 5,386,283 (181,205) -3.3% Services & Supplies 3,894,567 5,178,309 5,434,414 6,238,992 804,578 14.8% Internal Service Fund Charges 3,907,323 4,932,571 4,932,571 5,443,747 511,176 10.4% Utilities 2,511,166 3,485,435 3,720,435 3,898,997 178,562 4.8% Contracted Services 52,920,629 59,695,219 61,871,855 62,778,423 906,568 1.5% Capital Outlay 339,943 432,737 626,987 120,625 (506,362) -80.8% Debt Service Payment - 1,333,050 1,333,050 1,331,850 (1,200) -0.1% Contingency & Miscellaneous 958,117 223,440 203,440 223,910 20,470 10.1% Subtotal Expenditures - Operating $80,931,058 $94,018,847 $97,221,855 $99,573,224 $2,351,368 2.4% Operating Impact (REV-EXP) $33,641,305 $14,690,915 $14,990,475 $16,318,637 $1,328,162 8.9% Transfer Outs & Contributions to Other Funds Transfers Out (CIPs) - Com./Assig. Res 2,803,478 2,291,645 27,217,469 7,195,281 (20,022,188) -73.6% Transfers Out (CIPs) - Undesignated 532,636 2,316,170 7,553,834 9,684,612 $2,130,778 28.2% Contribution to OPEB/PERS 4,460,000 4,460,000 1,000,000 (3,460,000) -77.6% Contribution to ISF & Other 1,000,000 2,000,000 2,023,378 2,000,000 (23,378) -1.2% Subtotal - Transfers Out & Contributi 4,336,114 11,067,815 41,254,681 19,879,893 (21,374,789) -51.8% Total Expen itures $85,267,172 $105,086,662 $138,476,536 $119,453,116 ($19,023,420) -13.7% GF Impact (Include CIP & Transfers) $14,093,010 $3,701,000 ($26,121,306) ($3,504,655) Adopted Amended Change Actual Budget Budget 2023-24 FY24 vs Contracted Services Detail 2021-22 2022-23 2022-23 Update FY23 Amend) Police Services $21,437,403 $23,985,730 $24,085,730 24,835,923 $750,193 3.1% Fire Services 14,699,226 15,311,310 15,471,310 16,313,430 842,120 5.4% Maintenance Services (MCE) 5,875,493 7,220,710 7,220,710 7,925,056 704,346 9.8% Development (CDD and PW) 3,858,842 4,312,851 4,630,128 3,606,108 (1,024,020) -22.1% Other Contracted Services 7,049,665 8,864,618 10,463,978 10,097,906 (366,072) -3.5% Total Contracted Services $52,920,629 $59,695,219 $61,871,855 $ 62,778,423 $906,568 1.5% (1) Amended budget for operating expenditures includes $1,856,112 carryover from FY 21-22 (2) Amended Budget for Transfers Out to CIP reflects the $12,510,109 carryover from FY 21-22 (3) Police and Fire liability insurance amounts are not included above, they are included in Services & Supplies. 282 PRELIMINARY GENERAL FUND RESERVES Attachment 2 Actual Net Projected Net Projected RESERVE DESCRIPTION 2021-22 Change 2022-23 Change 2023-24 $10,541 111W$10,5411 Prepaid Expenses Restricted 7710,541 I 10,541 $4,261,640 10,541 $4,261,640 Cemetery Endowment 60,000 60,000 60,000 Developer Contribution - Downtown 1,490,000 1,490,000 1,490,000 Developer Contr - Heritage Park 19,000 19,000 19,000 Developer Contr - Nature Park 60,000 60,000 60,000 Section 115 Trust - Pension 1,882,640 1,882,640 1,882,640 Heritage Park Maintenance Committed 750,000 $73,346,367 .'786) 750,000 $50,576,582 750,000 $50y576,582 Advance to Public Facility Fee 9,523,096 (9,523,096) Downtown Public Improvement 15,176,230 (426,221) 14,750,009 14,750,009 Economic Stability 8,000,000 8,000,000 8,000,000 Emergency Communications 532,113 5321113 532,113 Fire Svcs Pension/OPEB 5,671,094 (3,460,000) 2,211,094 2,211,094 Innovations & New Opportunity 1,026,591 (132,093) 894,498 894,498 One -Time Initiative - Capital 6,419,657 (1,420,149) 4,999,508 4,999,508 One -Time Initiative - Operating 503,860 503,860 503,860 Public Safety Reserve 2,600,000 2,600,000 2,600,000 Specific Committed Reserves Cemetery Expansion (CIP) 13,748 (13,748) Contribution to Public Facility Fee 6,000,000 6,000,000 6,000,000 Cultural Arts Center (CIP) 7,139,197 (6,964,197) 175,000 175,000 Don Biddle Park (CIP) 675,193 (675,193) Fallon Sports Park III Contingency 510,500 (100,000) 410,500 410,500 Lease Revenue Bond Payoff 6,000,000 6,000,000 6,000,000 Maintenance Facility (CIP) 55,089 (55,089) Utility Undergrounding (CIP) 3,500,000 3,500,000 3,500,000 Accrued Leave 1,308,044 1,308,044 1,308,044 Catastrophic Loss 17,710,320 17,710,320 17,710,320 CIP Carryovers 4,088,843 (4,088,843) Fiscally Responsible Adjustment 325,000 325,000 325,000 Municipal Regional Permit 2,209,778 (2,182,419) 27,359 27,359 Non -Streets CIP Commitments 3,276,777 (4,277) 3,272,500 3,272,500 Operating Carryovers 1,600,546 (1,600,546) Parks and Streets Contingency 201,270 201,270 201,270 Pension & OPEB 17,000,000 1,000,000 18,000,000 1,000,000 19,000,000 Relocate Parks Dept 500,000 500,000 500,000 Service Continuity 3,150,000 3,150,000 3,150,000 Dublin Blvd Extension 20,000,000 (13,742,559) 6,257,441 (6,257,441) Specific Assigned Reserves ARPA Revenue Replacement 665,878 665,878 665,878 Climate Action Plan 3,000,000 (62,000) 2,938,000 (440,000) 2,498,000 Contribution to ISF 1,500,000 1,500,000 1,500,000 Faga e Improvement Grants 364,256 364,256 364,256 HVAC Replace. & Civic Ctr Improv. (CIP) 3,278,409 (1,307,892) 1,975,517 (687,840) 1,282,677 Pavement Management 2,000,000 21000,000 2,000,000 Public Safety Complex (CIP) 87,200 (87,200) Village Pkwy Pavement Reconstruction 'Unassigned 11,000,000 $52,972,635 (300,000) 1 10,700,000 (250,000) 1 10,450,000 Unassigned -Unrealized Gains 1 (11,008,294) (11,008,294) (11,008,294) Unassigned (Available) 63,980,929 83,005,145 86,135,771 283 a I 0 Blois IV it Background • Biennial budget process • FY 23-24 is an UpdateYear • Comparison to FY 22-23 Amended Budget • Focus on General Fund operating budget U_161 GF Revenues ■ Net Increase $3.7M (+3.3%) • PropertyTax +$3.4M (+6,o 1 %) 0 2.0% CPI adjustment o New construction &change in ownership o Increase in Motor Vehicle In -lieu Fee o I %delinquency rate • Sales Tax -$400K (=I *5%) o Slight decrease in Auto, Business to Business o Inflation and interest rate increases o Decline in fuel price K*.N. GF Revenues • Development Revenue -$278K (=3.8%) o Timing of development projects o Revenues and expenditures timing not aligned o Service continuity reserve • Charges for Services +$439K (+6.3%) o Recreation programs return to pre -pandemic levels o Waste management admin fees o Fire calls reimbursement DUBLIN w%, 91 CALIFORNIA 287 GF Revenues • OtherTaxes +$221 K (+3.4%) o Property transfer tax o Franchise taxes o Increase in Garbage Franchise tax • Interest +$200K (+8.7%) o Higher return on investment portfolio o Additional funds to investment consultant managed portfolio DUBLIN s&� Iq CALIF 0RNIA P44.1 GF Expenditures ■ Net Increase $2.4M (+2.4%) • Personnel Costs +$438K (+2.3%) o Position changes o Decrease in retirement costs • Services & Supplies +$805K (+14.8%) o Hold the line in operating expenditures o Increase in insurance premiums DUBLIN s&� 44 CALIFORNIA pl*] GF Expenditures • ISF Charges +$51 I K (+10.4%) o Allocation of replacement cost of facilities, vehicles, and equipment, IT services o Increase in IT service charges • Contract Services +$907K (+ 1.5%) o FY 22-23 budget carryover $1.5M = +$2.4M (+4.0%) o Increase in Police &Fire services o Increase in maintenance contract cost o Decrease in development contract cost o Increase in other general City contract costs DUBLIN s&� 10 CALIF 0RNIA Moil] Transfers Out • ISF Facilities $2*0m o Preventative Maintenance • Pension unfunded liability $ LOM o Contribution to stabilize CalPERS discount rate change • CIP $1699M 291 Transfers Out Committed/Assigned $7.2M • Civic Center Rehabilitation • Dublin Boulevard Extension • Village Parkway Reconstruction Unassigned $9.7M Audio Visual System Upgrade Citywide Bicycle & Pedestrian Improv. Citywide Storm Drain Improvements Downtown Dublin Street Grid Network Downtown Town Square Park Dublin Boulevard Extension Kolb Park Renovation Marquee Signs Parks Playground Replacement GF Reserves FY 2022-23 FY 2023-24 $ % Amended Projected Change Change Revenues $112,212,330 $115,891,861 $3,679,531 3.3% Expenditures 97,221,855 99,573,224 2,351,368 2.4% Net Operating Budget Impact $14,990,475 $16,318,637 $1,328,162 8.9% Transfers In $142,900 $56,600 ($86,300) -60.4% Transfers Out/Contribution to Other 41,254,681 19,879,893 (21,374,789) -51.8% Total Reserves, End of Year $19717363199 $194,231,544 ($31504,655) -1.8% Next Steps • BudgetAdoption May 16,2023 • Other items or additional information to include in the FY 23-24 Budget? 294