CC SR 20220323 02 - FY2022-23 Budget Assumptions
CITY COUNCIL MEETING DATE: 03/23/2022
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consideration and possible action to begin developing the FY 2022-23 Preliminary
General Fund Budget.
RECOMMENDED COUNCIL ACTIONS:
1. Review the budget assumptions used to develop the proposed FY 2022-23
General Fund Budget and provide Staff with direction on the following:
• Affirming the FY 2022-23 budget assumptions which include:
i. Revenue projections and the continuing of the 3% Utility User Tax;
ii. Personnel costs comprise of rates for cost-of-living adjustment
(COLA), merits, benefits, and funding to restore the positions of Full-
time Staff Assistant I (Public Works) and the Accountant positions
(Finance), and to fund temporary additional hours for the Part-time
Staff Assistant I (Finance);
iii. Non-Personnel costs including one-time expenditures and new
programs; and
iv. Transfers-Out that includes additional transfers to Capital
Infrastructure Program (CIP) Fund in accordance with the City
Council Reserve Policy No. 41 and Employee Pension Service Fund
in accordance with the Pension Guidelines.
• Funding priorities for the projected surplus (projecte d revenues less
projected expenditures) which may include:
i. Funding for the City Council Goals;
ii. Additional transfer to the CIP Fund;
iii. Restoring unfunded and additional positions; and/or,
iv. Employee signing bonus program.
FISCAL IMPACT: N/A
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
Vina Ramos, Deputy Director of Finance
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
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CrTYOF RANCHO PALOS VERDES
V
A. None
BACKGROUND:
The City’s budget is a financial plan based on projected revenues and expenditures in a
fiscal year starting July 1 through June 30. Each year, the City’s budget is prepared
applying the City’s long tradition of fiscal responsibility and transparency, prioritizing
public safety, and providing the highest possible service levels to the community. The
annual budget cycle begins with the City Council Goals Workshop, and subsequently
Staff presents the proposed budget which includes the General Fund budget assumptions
for the following year.
The framework for the budget assumptions starts with reviewing the mid-year and year-
end figures, which then determines the City’s needs for the following year. Prior to
presenting to the City Council, Staff reports the General Fund budget assumptions to the
Finance Advisory Committee (FAC) and the capital projects to the Infrastructure
Management Committee (IMAC). Overall, the City Council’s budget process consists of
the following:
In preparation of this budget workshop that focuses on the General Fund, Staff has
prepared a list of assumptions used to develop the Proposed General Fund budget. The
same list of assumptions and proposed budget were presented to the FAC at a special
meeting held on March 14. The fund balance reported at the FAC meeting has been
updated with the most recent audited numbers, which is reflected in this report. At its
March 14 meeting, FAC unanimously approved the presented budget assumptions for FY
2022-23. Member Yourman also wanted Staff to extend his appreciation of the City’s
efforts and success in maintaining the City’s strong fiscal position despite the fiscal impact
of the pandemic (i.e. identifying cost savings measures in personnel and non -personnel).
Unlike the last two years of the budget process, the City’s revenues for FY 2022 -23 are
expected to rebound and projected to surpass the pre-pandemic levels (FY 21018-19) by
$3 million or 9.4%. Therefore, the budget assumptions were prepared with more available
City Council Goals
Workshop March 9
Budget Workshops
March 23 (GF)
April 13 (CIP)
Preliminary Budget
May 17
Public Hearing
June 7
Budget Adoption
June 21
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resources and focusing on the City’s needs for services, personnel, and maintenance for
FY 2022-23.
Over the past two months, several meetings were held between the City Manager,
Director of Finance, and Department Heads to build the proposed budget. The meetings
started with the baseline budget for FY 2022-23 by discussing the status of the current
budget, year-end outlook, and the potential changes for services or programs that were
approved by the City Council in the current year. Additional chan ges were also made to
account for regulatory/mandated changes, contractual obligations, and department
requests. Based on the discussions from these meetings and with the final approval from
the City Manager, Staff prepared this staff report with an emphasis on the General Fund.
Similar to last year, at its March 9, 2022 Goals Workshop, the City Council directed Staff
to return on April 19, 2022 with updates to the draft FY 2022-23 City Council Goals and
Action Plan, including a new format. At that time, the City Council may direct Staff to
include funding priorities for review in the Preliminary Budget on May 17, 2022 and
subsequently in June during the budget hearing and budget adoption .
In summary, the information presented tonight for the City Council’s review and input are
as follows:
• FY 2021-22 General Fund Year-End Estimates
• FY 2022-23 Revenue Assumptions
• FY 2022-23 Expenditure Assumptions
• Recurring versus One-time Revenues and Expenditures
• FY 2022-23 Fund Balance Summary
DISCUSSION:
FY 2021-22 General Fund Year-End Estimates
Staff estimates the fund balance for General Fund is approximately $28.6 million,
including transfers out. This is an increase of almost $4.3 million or 17.7% over the
estimated ending fund balance from the revised budget. After applying the City Council
Reserve Policy of 50% of the operating budget, the estimated unrestricted excess reserve
is about $15.4 million, which is an increase of approximately $4.9 million or 46% in the
estimated unrestricted excess reserve on June 30, 2022. As illustrated in Table 1 on the
next page, revenues are estimated to end the year at approximately $2.9 million or 9%
higher than budget. Expenditures are estimated to end the year about $1.4 million or 4%
lower than budget. A detailed analysis of the year-end report is available in a separate
staff report and will also be presented tonight.
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Table 1: FY 2021-22 General Fund – Fund Balance Summary
FY 2022-23 General Fund Revenue Assumptions
Overview
Staff projects General Fund revenues will reach $34.9 million, including transfers, which
is an increase of approximately $4.4 million or 14.5%, compared to the current FY 2021-
22 budget and $1.6 million or 4.7%, when compared to the FY 2021-22 year-end
estimates, including transfers in. Looking back to FY 2018-19, the last full fiscal year prior
to the start of the pandemic, revenues are projected to be $3.1 million or 9.6% higher than
the $31.8 million, including transfers in, received that fiscal year.
Beginning in March of 2020, several of the City’s revenue sources experienced a
significant decline due to the broad economic disruptions caused by the COVID-19
pandemic. The largest of these impacts was seen in dramatically decreased revenue from
Transient Occupancy Tax (TOT), which was the result of the statewide Stay-at-Home
orders and the lingering drop in demand for leisure travel after the orders were lifted.
However, as time has passed, TOT revenue along with Sales Tax and Permits & Fees
revenues have all shown signs of recovery as FY 2021-22 draws close to the end of the
third quarter. Although there is still much unknown about the future recovery of the
economy, Staff can provide the City Council with its best estimates using the information
available. Staff will continue to monitor economic conditions and work with our consultants
to update revenue projections and assumptions as necessary.
On the next page, is a detailed discussion and analysis of the projected General Fund’s
major revenues sources for FY 2022-23.
General Fund
FY 2021-22
Revised
Budget
FY 2021-22
Year-End
Estimates
Beginning Fund Balance - 7/1/2021 25,798,773 25,798,773
Add: Revenues 30,075,700 32,946,100 2,870,400 10%
Add: Transfers-In 350,000 350,000 - 0%
Total Revenues 30,425,700 33,296,100 2,870,400 9%
Less: Expenditures (28,680,921) (26,281,138) (2,399,783)-8%
Less: Transfers to CIP (2,553,000) (3,528,300) 975,300 38%
Less: Transfers to Pension (640,000) (640,000) - 0%
Less: Other Transfers-Out (85,000) (85,000) - 0%
Total Expenditures (31,958,921) (30,534,438) (1,424,483)-4%
Unaudited Ending Fund Balance - 6/30/2022 24,265,552 28,560,435 4,294,883 17.7%
50% Reserve Policy 13,709,200 13,140,569 (568,631) -4%
Unrestricted Excess/(Deficit) Reserve - 06/30/22 10,556,352 15,419,866 4,863,514 46%
FY 2021-22
Variances
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Property Tax
Property Tax continues to be the largest and historically the most stable revenue source
in the City. Revenue is projected to reach almost $16.6 million, an increase of 3% over
FY 2021-22 year-end estimates. Revenue growth primarily comes from growth in
assessed property values, which is capped at 2% annually. Additional growth can come
from home sales which trigger property reassessments and Proposition 8 value
recaptures.
There are three primary factors that determine the annual change in property tax revenue
received by the City:
• Inflation (Based on the California Consumer Price Index – CCPI):
All properties not reduced by Proposition 8 are subject to a maximum CCPI
increase of 2% annually. For FY 2022-23, the County Assessor will be applying a
2% increase to these properties resulting in a $278 million increase to real property
value within the City.
• Transfer of Ownership (Sale of property to a new owner):
For properties that have sold between January and December 202 1, the increase
in value has been factored into the property tax revenue calculation and provided
an additional $517 million in property value.
• Proposition 8 Recapture (Additional increase in assessed property value):
Proposition 8 allows for properties that have experienced a decrease in value due
to a downturn in the housing market to have the value used in the calculation of
their property tax be based on the current market price. As home values recover,
properties that received this relief can experience an annual increase in assessed
value at a rate greater than the 2% CCPI limit mentioned above. This recapture in
value accounted for an additional $54 million in property value.
The three factors mentioned above plus several other factors used in the calculation of
property tax combined to make an expected 5.9% increase in overall property value. This
increase plus Property Tax Transfer revenue, which is generated when a property is sold,
property tax revenue received in lieu of vehicle license fees, and other small revenue
sources were used in creating the projection of almost $16.6 million for FY 2022-23.
Property Taxes
FY 20-21 Actual Revenue: $15,081,503
FY 21-22 Year-end Estimate: $16,062,200
FY 22-23 Proposed Budget: $16,550,800
FY 22-23 Net Change to YE Estimate: +$488,600 or 3.0%
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Transient Occupancy Tax (TOT)
Staff projects that the City will receive almost $5.3 million in TOT revenue, an increase of
6.4% when compared to FY 2021-22 year-end estimates. Since the temporary closure of
Terranea Resort and all amenities from March 19, 2020 through May 10, 2020, and the
several months of Stay-at-Home orders that were put in place across the state, TOT
revenue has seen a significant impact. However, as businesses slowly return to normal
operations and the demand for travel continues to increase, TOT revenue has also
experienced a strong recovery. It is unknown if there will be another economic disruption
during in FY 2022-23 from the pandemic but based on current trends and projection
information provided to the City, Staff is estimating TOT revenues at $5.3 million. Of this
amount, $5.1 million or 96% is from Terranea Resort. The remaining $200,000 or 4% of
TOT revenue comes from America’s Best Value Inn. Staff will continue to monitor this
revenue and economic trends and will provide updates accordingly.
Transient Occupancy Tax
FY 20-21 Actual Revenue: $3,115,435
FY 21-22 Year-end Estimate: $4,955,300
FY 22-23 Proposed Budget: $5,271,700
FY 22-23 Net Change to YE Estimate: +$316,400 or 6.4%
Sales and Use Tax
During Staff’s preliminary analysis, revenue is projected to increase by $220,300 or 9.3%
reaching nearly $2.6 million in FY 2022-23 when compared to the FY 2021-22 year-end
estimate. This growth is projected to be the result of continued recovery from restaurants
and hotels along with increased revenue from the state and county pools. This estimate
brings revenue in line with what the City received during FY 2018-19. Staff will continue
to monitor this revenue source and provide updates if necessary.
Sales and Use Tax
FY 20-21 Actual Revenue: $1,919,332
FY 21-22 Year-end Estimate: $2,363,400
FY 22-23 Proposed Budget: $2,583,700
FY 22-23 Net Change to YE Estimate: +$220,300 or 9.3%
Permits and Fees
This revenue source is comprised of roughly 17 permit and fee types, such as Building
and Safety permits, plan check permits, planning and zoning permits, and animal
licenses. Due to the variety of items, revenue can vary from year-to-year. The Community
Development Department, which brings in roughly 93% of all license and permit revenue
projects that this revenue source will see an increase of $134,400 or 5.2% over the FY
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2021-22 year-end estimate of $2.6 million, bringing total revenue to $2.7 million.
Additionally, Staff intends to bring the Master Fee Schedule to the City Council in May to
review fees based on the Consumer Price Index (CPI). If an increase is desired, FY 2022-
23 budget numbers will be updated to reflect any material changes in the Preliminary
Budget. Staff will continue to monitor the situation and will work with the Community
Development Department to provide updates to revenue projections if necessary.
Permits and Fees
FY 20-21 Actual Revenue: $2,007,453
FY 21-22 Year-end Estimate: $2,582,700
FY 22-23 Proposed Budget: $2,717,100
FY 22-23 Net Change to YE Estimate: +$134,400 or 5.2%
Franchise Tax
Staff is projecting franchise tax revenue will remain flat when compared to FY 202 1-22
year-end estimates, with $2.15 million in revenue. The City receives payments from
franchisees for the use of municipal rights-of-way. This revenue source is primarily
received from EDCO, Cox, Gas Company, and Southern California Edison. Staff uses
historical data and industry projections for this revenue estimate. FY 202 2-23 revenue is
projected to remain relatively flat, and Staff is not anticipating any significant impacts to
this revenue source.
Franchise Taxes
FY 20-21 Actual Revenue: $2,203,130
FY 21-22 Year-end Estimate: $2,150,000
FY 22-23 Proposed Budget: $2,150,000
FY 22-23 Net Change to YE Estimate: +$0 or 0%
Utility User Tax (UUT)
UUT is dependent on outside factors including weather conditions, consumption of
utilities, natural gas prices, and rate increases. Staff used historical data, information
available pertaining to the price of natural gas, and the projected increases estimated by
the Bureau of Labor Statistics for the Consumer Price Index for All Urban Consumers
(CPI-U) in the calculation of this projection. UUT revenue is on pace to reach $2 million
by the end of FY 2021-22. For FY 2022-23 Staff projects revenue will see a slight
decrease from the elevated levels experienced during the pandemic because fewer
people will be spending more time at home . A decrease of $100,000 or 4.9% when
compared to FY 2021-22 year-end estimates is projected, however this brings revenue in
line with FY 2019-20 levels of $1.9 million.
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UUT
FY 20-21 Actual Revenue: $2,245,826
FY 21-22 Year-end Estimate: $2,025,000
FY 22-23 Proposed Budget: $1,925,000
FY 22-23 Net Change to YE Estimate: -$100,000 or -4.9%
At this time, Staff determines that the UUT rate of 3% continues to be a necessary
revenue source for the City’s operating needs and therefore included in the FY 2022-23
Proposed General Fund Budget.
Staff seeks City Council affirmation on maintaining the 3% Utility User Tax for FY 2022 -
23.
Other Taxes and Miscellaneous Revenues
An overall increase of $544,900 or 19.4% when compared to FY 2021-22 is projected for
FY 2022-23. Other Revenue consists of over 20 unique revenue sources including
business license tax, golf tax, interest earnings, rental/lease, parking lot fees, and one-
time revenues/donations. This revenue source can vary widely from year-to-year due to
the various revenue sources that are included in this category. This increase in revenue
is projected to come from increased facility rentals, program and event fees, and parking
enforcement.
Other Taxes and Miscellaneous Revenues
FY 20-21 Actual Revenue: $3,540,141
FY 21-22 Year-end Estimate: $2,807,500
FY 22-23 Proposed Budget: $3,352,400
FY 22-23 Net Change to YE Estimate: +$544,900 or 19.4%
In total, FY 2022-23 General Fund revenues, including transfers, are projected to reach
$34.9 million, an increase of just over $1.5 million or 4.7% from FY 2021-22 year-end
estimates of $33.3 million.
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Table 2: FY 2022-23 Proposed General Fund Revenues
Chart 1: FY 2022-23 Proposed General Fund Revenues
As illustrated in Chart 1 above and Chart 2 on the next page, Property Tax continues to
be the largest and historically most stable revenue source in the City projected to be 48%
of the total General Fund revenue. TOT is expected to be the next largest revenue source
at 15% of total revenues. Chart 2 below shows the General Fund Revenues by type and
their respective contribution in percentage (%) terms to the City’s overall total revenue.
Revenue Current Budget Year-End Estimate Proposed Budget
Property Tax 14,960,300 16,062,200 16,550,800 488,600 3.0%
Transient Occupancy Tax 3,978,400 4,955,300 5,271,700 316,400 6.4%
Sales Tax 2,163,400 2,363,400 2,583,700 220,300 9.3%
Permits & Fees 2,083,100 2,582,700 2,717,100 134,400 5.2%
Franchise Tax 2,150,000 2,150,000 2,150,000 0 0.0%
Utility Users Tax 1,915,000 2,025,000 1,925,000 (100,000) -4.9%
Other Taxes & Misc. Revenues 2,825,500 2,807,500 3,352,400 544,900 19.4%
Subtotal $30,075,700 $32,946,100 $34,550,700 $1,604,600 4.9%
Transfers In 350,000 350,000 300,000 (50,000) -14.3%
Total Revenues $30,425,700 $33,296,100 $34,850,700 $1,554,600 4.7%
FY 2022-23FY 2021-22 FY 2022-23 Proposed Budget
vs. FY 2021-22 YE Est
9
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$4 000.IIOO
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PropertylH rnrularu Ta ,,..,,chiH TIX u ty u .. , tu
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■ FY 20Z0.2.l 1 ■FY20Zl-U -Er>d FY ZOZJ-23
Chart 2: FY 2022-23 Proposed General Fund Revenues
FY 2022-23 General Fund Expenditure Assumptions
Overview
The proposed operating budget for General Fund is $29.7 million, excluding transfers out,
which is an increase $1 million or 3.6% over FY 2021-22 revised budget. The transfers-
out is estimated at $4.8 million, an increase of almost $1.5 million or 45.4% over the FY
2021-22 revised budget. The proposed budget, including transfers out, is $34.4 million,
an increase of $2.5 million or 7.9% over the FY 2021-22 revised budget.
In last year’s budget cycle, due to the continued revenue loss from the pandemic, Staff
took a conservative approach by balancing the immediate needs with the available
resources. The increases were limited to regulatory and mandated changes, personnel,
and non-personnel contractual obligations, and the City Council Goals. Contrary to the
last year’s budget process, the General Fund revenues have rebounded in the first half
of the FY 2021-22 and projected to have a solid year-end result. Therefore, the
development of the FY 2022-23 budget assumptions includes restoring the pre-pandemic
service levels along with the anticipated needs in FY 2022-23, regulatory and mandated
changes, contractual obligations including CPI increases, and one-time costs for new
projects/programs. Any directions from the City Council tonight will be included in the
preliminary budget to be presented in May and subsequently the adopted budget in June.
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Utility Users Tax
6%
As illustrated in Table 3 below, the major increases are a combination of:
• The new rates from the Los Angeles County Sheriff for public safety services.
• The estimated increases in salaries and benefits.
• One-time expenditures:
o Election in November.
o Parks maintenance and repairs.
o City’s 50th anniversary celebration.
o Implementation of the Housing Element.
o State Mandated Safety Element Update.
• New programs include:
o Rental for AED machines for City facilities.
o City’s Lobbyist.
o Costs for enhancing community outreach programs such as the Leadership
Academy, membership with the Los Angeles County Economic
Development, meetings for neighborhood watch volunteers, and Mayor
honorees meetings.
o Enhance the Fuel Modification Program by identifying any gaps and
expanding the program to address them. For FY 2022-23, two areas have
been added, slopes near Dauntless Drive and Malaga Canyon, that are
particularly difficult to access and are therefore costly to address.
Additionally, the increase in transfers out is a combination of the projected increase in
TOT revenues, one-time transfer to Capital Infrastructure Program (CIP) Fund for the
annual interest expense payment for the Ladera Community Park Project in accordance
with the City Council Reserve Policy, and a one-time transfer to the Employee Pension
Service Fund in accordance with the City’s Pension Guidelines.
Table 3: FY 2022-23 Proposed General Fund Expenditures
FY 2022-23
Revised Budget
Year-End
Estimates
Proposed
Budget
Salaries 8,652,400$ 7,284,500$ 9,112,600$ 460,200$ 5.3%
Benefits 3,377,800 3,006,800 3,317,300 (60,500) -1.8%
Legal Services 940,000 933,100 940,000 - 0.0%
Sheriff's Contract 7,150,200 7,150,200 7,254,000 103,800 1.5%
Professional & Technical 3,357,671 2,870,589 3,304,800 (52,871) -1.6%
Repairs 2,698,174 2,676,259 3,203,500 505,326 18.7%
Supplies 605,586 611,586 595,400 (10,186) -1.7%
Training & Conference 346,405 268,119 365,900 19,495 5.6%
Misc - Insurance Premium 735,400 735,000 840,000 104,600 14.2%
Misc - Equipment Rep Charges 308,400 302,300 293,300 (15,100) -4.9%
Misc - Other 508,885 442,685 492,800 (16,085) -3.2%
Total Operating 28,680,921 26,281,138 29,719,600 1,038,679 3.6%
Transfers Out 3,278,000 4,253,300 4,766,000 1,488,000 45.4%
Total Expenditures 31,958,921$ 30,534,438$ 34,485,600$ 2,526,679$ 7.9%
FY 2021-22 FY 2022-23 Proposed Budget
vs. FY 2021-22 Revised Budget
Expenditure Type
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A detailed analysis highlighting the budget assumptions that were used to prepare the
General Fund proposed expenditures in FY 2022-23 are discussed as follows:
Personnel Costs
Personnel costs account for the salaries and benefits for City employees, including full -
time, part-time, and stipend for the City Council and Planning Commissioners. Overall,
based on the assumptions, the personnel budget is estimated at $12.4 million or 42% of
the budget, before transfers out. This is an increase of $399,700 or 3.3% over FY 2021-
22 revised budget, which is highlighted below.
Personnel Costs
FY 21-22 Revised Budget: $12,030,200
FY 21-22 Year-end Estimate: $10,291,300
FY 22-23 Proposed Budget: $12,429,900
FY 22-23 Net Change to FY 21-22 Revised Budget: +$399,700 or 3.3%
Chart 3 is a summary of the major budget assumptions that account for $12.4 million in
salaries for each department:
Chart 3: FY 2022-23 Personnel Costs per Department
In addition, the below is a detailed discussion and analysis of the General Fund’s salaries
and benefits.
12
on•D pt.
$828Kor7'J(,
Salaries
In September 2021, the City Council awarded a contract services agreement with Public
Sector Personnel Consultants (PSPC) to conduct a comprehensive Classification and
Compensation Study and Organizational review for all full-time and part-time employees.
It is currently unidentified if there will be a fiscal impact from the study, as the study has
not yet been completed. Staff expects to complete the study and report the results to the
City Council in the next few months. Additionally, the City is in the process of initiating the
collective bargaining process with the Rancho Palos Verdes Employee Association
(RPVEA). The Memorandum of Understanding (MOU) between the City and the RPVEA
for next fiscal year has not been finalized. Thus, at this time, Staff is estimating personnel
costs for FY 2022-23 using the same terms from the MOU that is currently in place.
Based on current information, the estimated budget for salaries in FY 2022-23 is $9.1
million, a projected increase of approximately $460,200 or 5.3% over the FY 2021-22
revised budget.
The following highlights the personnel requests and major changes between the FY 2021-
22 revised budget and the proposed FY 2022-23 budget.
• $372,000 accounts for COLA and merit increase for all full-time employees
including RPVEA competitive positions, confidential positions, and management
positions (except for City Manager). The overall assumption rates are based on
the current contract between the City and RPVEA employees. The COLA is
estimated at 2.5%, which is the maximum percentage based on the current MOU
with RPVEA, The merit increase is estimated at an average of 3%, based upon the
employee’s performance evaluation. These amounts may be subject to change
based upon the final agreement between the City and RPVEA.
• $59,800 accounts for 2.5% COLA and 2.5% average of merit increase for part-
time employees.
• Effective in FY 2021-22, majority of frozen positions from the prior years have been
restored, therefore, assumed to be filled FY 2022-23. In addition, there are vacant
positions that are currently open for recruitment and estimated to start in FY 2022-
23. The budget assumptions on these positions are based on the following
preliminary recruitment schedule:
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• Public Works Department: $7,200 has been added to restore Staff Assistant I. The
position has been underfilled by a part-time staff since it became vacant in 2020.
The position is essential for the daily administrative support for the Maintenance
Division for the Public Works Department. If approved, based on the recruitment
schedule, the position would be funded at 75% or $42,200, including benefit s.
Since there are costs associated to underfill the position, the net increase would
only total to $7,200.
• Finance Department: $5,100 has been added to restore the Accountant position
(which has been underfilled) and to temporarily increase the hours for the part-time
Staff Assistant I. Restoring the position back to Accountant would increase the
level of support that the Department currently needs. The estimated net increase
from Accounting Technician to Accountant is $19,700, including benefits. In
addition, the Finance Department is requesting to temporarily increase the part-
time hours for the current Staff Assistant I instead of funding two part-time positions
(one of which is currently frozen). The incumbent in this position is currently a
CalPERS member, and this temporary change would enroll the incumbent in
health insurance during the period of increased hours. This change would provide
more continuity for the Department and would help maintain the level of customer
service that the Department needs. This is a temporary request that would result
in a net savings of $14,700 as the Finance Department would continue to freeze
the second part-time staff position. A permanent solution would be presented, if
needed, in the next budget cycle.
• In the past few years, several vacant positions have been frozen and underfilled in
an effort to identify cost savings for the City. As previously mentioned, while most
positions have been restored, the following positions below continue to remain
frozen and therefore not included in the budget assumptions for FY 2022-23.
Management will continue to re-assess the needs of each Department and
propose any changes to the City Council for consideration during the annual
budget workshops.
o Frozen - Executive Assistant in the City Manager Department
Vacant Positions Department Estimated
Completion Date
Deputy City Clerk City Admin - City Clerk TBD in FY 2022-23
GIS Coordinator CDD - Admin TBD in FY 2022-23
Building Official CDD - B&S May 2022
Associate Planner CDD - Planning TBD in FY 2022-23
Assistant Planner CDD - Planning TBD in FY 2022-23
Deputy Director of Public Works Public Works June 2022
Senior Engineer Public Works TBD in FY 2022-23
Associate Engineer (2) Public Works September 2022
Permit Technician Public Works April 2022
Staff Assistant I (previously frozen in FY 2021-22 )Public Works TBD in FY 2022-23
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o Frozen - Part-Time Staff Assistant I in the Finance Department
o Underfilled - Accounting Supervisor in the Finance Department
o Underfilled - Administrative Analyst II in the City Clerk’s Department
o Underfilled – Lead Worker in the Public Works Department
As described above, Staff seeks the City Council affirmation on the salaries budget
assumptions which include estimated rates for COLA, merits, restoring the full-time Staff
Assistant I in the Public Works Department, restoring the Accountant position and
temporarily increasing the part-time hours for Staff Assistant I in the Finance Department,
and continuing to freeze Executive Assistant and one part-time Staff Assistant, and
underfill Accounting Supervisor, Administrative Analyst II, and Lead Worker positions.
Benefits
The projected Benefits for FY 2022-23 Proposed Budget is $3.3 million with a net
decrease of approximately $61,000 or -1.8% over the FY 2021-22 revised budget. The
major highlights for the budget assumptions to develop benefits of $3.3 million for FY
2022-23 are as follow:
• $1.7 million for health, dental, vision, worker’s compensation, Medicare, and other
ancillary benefits. This an increase of $69,200 or 4% over the prior year’s revised
budget. The increases are mainly from 5% estimated cost increases for health
benefits, increases in the contribution to Health Savings Account (HSA) aligned
with the same amounts established by IRS, and additional benefits for the restored
positions.
• $602,000 for the CalPERS normal rate payment, a slight increase of $37,500 or
6% over the FY 2021-22 revised budget. The payment is the City’s normal cost for
current employees that are in Tier 1, Tier 2, and Tier 3. The payments are :
o Tier 1: $231,800 or 38%
o Tier 2: $146,200 or 24%
o Tier 3: $224,100 or 37%
• $1.1 million for the CalPERS Unfunded Actuarial Liability (UAL) payment, an
increase of $139,000 or 12% over the FY 2021-22 revised budget. The payment
is the City’s unfunded liability inclusive of current employees and retired employees
that are in Tier 1, Tier 2, and Tier 3 and are as follows:
o Tier 1: $1.1 million or 97%
o Tier 2: $20,100 or 2%
o Tier 3 is $15,900 or 1%
• In accordance with the City’s Pension Guideline s adopted by the City Council in
FY 2020-21, the Employee Pension Service Fund may relieve the General Fund
of UAL payment in excess of $900,000. As such, relieving the General fund of
$242,000 offset the increases in the benefit category.
15
Staff seeks the City Council’s affirmation on the budget assumptions used for benefits as
defined above. Also, in accordance with the City Council-adopted Pension Guidelines,
Staff seeks City Council affirmation with the utilization of the Employee Pension Service
Fund to relieve the General Fund of $242,000 from the rising cost of the CalPERS annual
payment of the unfunded liability in FY 2022-23.
Non-Personnel Costs
The non-personnel category includes the Los Angeles County Sheriff contract, legal
services, professional and technical services, repairs and maintenance, supplies, training
and conferences, and miscellaneous/other expenses. This category represents $17.3
million or 58% of the proposed budget, before transfers out. As illustrated below, the FY
2022-23 proposed budget includes an increase of $639,000 or 3.8% over FY 2021 -22
revised budget.
Non-Personnel Costs
FY 21-22 Revised Budget: $16,650,700
FY 21-22 Year-end Estimate: $15,989,838
FY 21-22 Proposed Budget: $17,289,700
FY 21-22 Net Change to FY 21-22 Revised Budget: +$639,000 or +3.8%
The major highlights for the budget assumptions to develop the non-personnel budget of
$17.3 million for FY 2022-23 are as follows:
Sheriff’s Contract:
• Accounts for $7,254,000 or 24% of the proposed budget, before transfers out.
• Includes Sheriff Contract increase of $103,700 or 1.45% over FY 2021-22 contract.
The slight increase is due to dramatic budget curtailments and overtime mitigation.
• Includes general law safety services and 11% liability insurance.
Legal Services:
• Accounts for $940,000 or 3% of the proposed budget, before transfers out.
• Includes general legal services, code enforcement, litigation, labor negotiation,
and legal services related to public records act requests.
• Proposed budget is the same amount as the FY 2021-22.
Professional and Technical Services:
• Accounts for $3.3 million or 11% of the proposed budget, before transfers out.
• Majority of this category includes managed information technology services,
engineering, environment planning, code enforcement, flagging/crossing guard
services, recreation program instructors, special events, inspections, coyote and
peafowl management programs, other legal services, audit services, and other
miscellaneous consulting services.
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• Proposed budget is lower than the current budget by approximately $53,000 or
1.6%. The increases are offset by one-time project costs in the current budget that
have been completed or in progress, therefore, no longer needed to budget again
in FY 2022-23. In addition, there were costs identified that can be funded by special
revenue funds. Finally, the increases are reduced by cancelling the budget for the
augmentation of services as vacant and frozen positions in the Department s are
scheduled to be filled in FY 2022-23.
In summary, changes in the Professional and Technical Services category are as
follows:
o Increase $154,300 in the City Clerk Department for the estimated election costs
in November 2022.
o Increase $66,400 in the City Administration which includes new ongoing
expenditures for the City’s Lobbyist, rental for AED machines for City facilities,
and enhanced community outreach programs such as the Leadership
Academy, membership for the Los Angeles County Economic Development,
costs for the meetings for neighborhood watch volunteers and Mayor honorees
meetings.
o Decrease of $307,800 in the Public Works Department:
▪ Allocating budget for Storm Water Quality services to Measure W.
▪ One-time costs in FY 2021-22 that are only needed that fiscal year, and
therefore not budgeted again in FY 2022-23. One-time costs in FY 2021-22
are professional and technical services for Utility Resilient Advancement
Master Plan, Alternative Energy Resources, Arterial Fences and Walls
Master Plan. Any pending projects may be requested to carry over to the
following year if not completed by June 30, 2022.
o Increase of $91,800 in the Community Development Department:
▪ Housing Element Amendment Assessment and Analysis (excluding the
one-time costs in FY 2021-22).
▪ One-time costs of $250,000 for completing the Housing Element
Compliance Measures Environmental Review pursuant to the California
Environmental Quality Act (CEQA) including any environmental review
associated with re-zoning, General Plan amendments, and code
amendments.
▪ $100,000 for completing the State-mandated Safety Element Update.
The increases above for one-time costs are then reduced by cancelling of the
augmentation of services as vacant and frozen positions in the Department are
scheduled to be filled in FY 2022-23.
o Increase of $46,000 in the Recreation and Parks Department for the Special
Events Program which includes the annual events hosted by the City such as
the Fourth of July celebration, Whale of the Day, summer events, and holiday
festivities including skating in the park.
o Decrease of $3,000 is the net amount from various divisions including Public
Safety, Legal Services, and Non-Department. The decreased amounts are a
combination of identified costs savings and one-time services that were
completed in FY 2021-22 and therefore no longer needed in FY 2022-23.
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Repairs and Maintenance:
• Accounts for $3.2 million or 11% of the proposed budget, before transfers out.
• Majority of this category includes licensing and support for technology services,
tree trimming, landscape and median maintenance, fuel modification, traffic
control, custodial, graffiti abatement, building and park maintenance, and utilities.
• Proposed budget increased by approximately $505,300 or 19% from the prior
year’s revised budget. This amount is the net increase after removing one-time
costs from the prior year that are no longer needed to be included in the budget
again as projects were already completed or committed to be completed in FY
2021-22. These one-time costs are Burma Trailhead gate repairs and bollard
installation, and playground repairs and inspections. The majority of the net
increases are the following:
o $387,100 in the Public Works Department:
▪ $185,000 for restoring budget reductions in FY 2021-22 for the building
maintenance budget.
▪ $205,000 for one-time costs for park maintenance such as hydroseeding
for the East View Park (large and small) and Hesse Park , and trail erosion
repairs.
▪ $100,000 for enhancing the Fuel Modification Program. The program has
been evolving by identifying any gaps and expanding the program to
address them. This year, two areas have been added, slopes near
Dauntless Drive and Malaga Canyon, that are particularly difficult to access
and are therefore costly to address. Expanding the Fuel Modification
Program to include these areas will bring the City further into compliance
with Los Angeles County regulations.
▪ $41,000 of anticipated CPI increases for maintenance contracts that are
scheduled for formal bidding.
o $64,000 in the Recreation and Parks Department for minor maintenance costs
at Palos Verdes Interpretive Center and Abalone Cove.
o $29,400 in the City Administration contractual obligations related to Citywide
information technology.
o $24,600 in Public Safety for the Everbridge Multijurisdictional Emergency
Notification System and Peninsula Automated License Plate Recognition.
Supplies, Training and Conference, Miscellaneous Expense:
• The remaining non-personnel costs are supplies, training and conference, and
miscellaneous expenses, which represent $2.6 million or 9% of the proposed
budget, before transfers out.
• The miscellaneous category includes the City’s general liabilities insurance
premium, equipment replacement charges, land purchase when available,
merchant fees, bank fees, citywide merchant fees, maintenance and operating
assessments, enhanced community outreach programs, and the City’s 50th
anniversary celebration.
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Proposed budget has a net increase of approximately $82,700 or 3% from the prior year’s
revised budget. The increase is mainly from adding $150,000 budget for the City’s 50th
anniversary celebration in FY 2022-23. A highlight of the budget assumptions for the
celebration is included in the Additional Information of the staff report.
Staff seeks City Council affirmation for non-personnel budget assumptions used for the
annual operating expenditures described above including one-time expenditures and new
ongoing programs as summarized below:
• One-time costs: Housing Element Compliance Measures Environmental Review,
State mandated Safety Element Update, park maintenance including
hydroseeding for the East View Park (large and small) and Hesse Park, trail
erosion repairs, and City’s 50th anniversary celebration.
• New ongoing expenditures: rental for AED machines for the City’s facilities, City’s
Lobbyist, costs for improving community outreach programs, CPI increases for
contracts, and the expansion of the Fuel Modification Program.
Transfers Out
Transfers out are considered a part of General Fund expenditures which include transfers
to the CIP, Employee Pension Service Plan Fund, and other funds such as the City’s
Improvement Authority for Portuguese Bend and Sub-region One.
Transfer Out to CIP:
The transfer out of General Fund revenue to the CIP Fund has been a factor of the City’s
public safety contract with the Los Angeles County Sheriff’s Department since FY 2017-
18. In FY 2017-18, with the City Council’s goal to continue to enhance public safety
services for the residents of Rancho Palos Verdes, the City Council approved reducing
the TOT transfers to the CIP Fund by the cumulative annual increases in the public safety
contract. As a result, the cost increases of the public safety contract reduced the transfers
to the CIP.
For FY 2022-23, Staff estimates receiving approximately $5.1 million in TOT revenue from
the Terranea Resort. Based on this estimate, the TOT transfer to the CIP Fund is
approximately $3.4 million or 16% of the proposed budget. This amount is the net amount
after applying the cumulative annual increases (since FY 2017-18) of almost $1.7 million
in the public safety contract as illustrated in Table 4 on the next page.
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Table 4: FY 2022-23 Transfers Out to CIP
In addition, in accordance with the City Council Reserve Policy No. 41, the City may
transfer all or a percentage of the prior year’s unrestricted excess reserve in General
Fund (FY 2020-21) in the amount of $15.4 million. As such, Staff recommends
transferring $889,500 or 6% of the unrestricted excess reserve to the CIP Fund to
preserve the CIP fund balance on the first annual loan payment for the Ladera Linda
Community Park Project. This amount is equivalent to the anticipated annual interest
expense payment for the Ladera Community Park Project.
Staff seeks City Council affirmation on the additional transfer in accordance with the City
Council Reserve Policy No. 41 for the first annual payment for the Ladera Linda
Community Park Project.
Transfers Out to Employee Pension Service Fund :
On February 2, 2021, the City Council approved the CalPERS Pension Plan Guidelines
which provides a financial plan to address the City’s outstanding pension liability and
CalPERS’ continuous change in valuation methodology. Based on City Council’s
discretion, the goal is to transfer funds to the Employee Pension Service Fund of at least
10%, but no more than 25%, of the annual General Fund surplus (revenues minus
expenditures, including transfers). As a result, the accumulated funds in the Employee
Pension Service Fund would then relieve the General Fund of payment more than
$900,000 of the City’s Unfunded Accrued Liability (UAL).
Since the inception of the pension guidelines, the Employee Pension Service Fund has
an estimated fund balance of $640,000 ending FY 2021-22. Based on the audited year-
end results of FY 2020-21, the City’s surplus was over $4 million. Therefore, Staff is
proposing a transfer of $400,000 or 12% of the surplus from the General Fund to
Employee Pension Service Fund in FY 2022-23.
Staff seeks City Council affirmation on the transfer to the Employee Pension Service Fund
in accordance with the adopted Pension Guidelines.
FY 2022-23 TOT Estimates (Terranea)5,071,400$
Less Public Safety Increases:(1,659,900)
FY 2017-2018: ($893,000)
FY 2018-2019: ($200,500)
FY 2019-2020: ($260,800)
FY 2020-2021: ($101,000)
FY 2021-2022: ($100,900)
FY 2022-2023: ($103,700)
FY 2022-23 Proposed Budget - Transfer to CIP 3,411,500$
20
Other Miscellaneous Transfers Out:
The transfers out for Sub-region One and the Improvement Authority are intended to
cover annual maintenance charges and to maintain endowment requirements. Since the
estimated interest earned in the funds are not enough to cover the costs incurred in these
funds, the General Fund will need to transfer funds to subsidize Sub -region One in the
amount of $50,000 and the Improvement Authority for Portuguese Bend for $15,000. This
is an increase of $20,000 or 66% over the revised budget for Sub-Region One and a
decrease of $40,000 or 73% for the Improvement Authority Portuguese Bend from the
prior year’s revised budget.
In closing on expenditures, the following Chart 4 shows the General Fund expenditures
by type and department and their respective contribution in percentage (%) terms to the
City’s overall total expenditures.
Chart 4: FY 2022-23 Proposed General Fund Expenditures – by Category
21
Legal Services
3%
Training/Cont.
1%
Chart 5: FY 2022-23 Proposed General Fund Expenditures – by Department
Staff will continue to monitor the local California economy and any material changes to
the budget assumptions will be updated and reported to the City Council in future budget
workshops and accordingly, the financial model would be updated and reported for review
by the City Council in June.
Recurring versus One-time Revenues and Expenditures
Pursuant to City Council Policy No. 45, Balanced Operating Budget, the City Council shall
adopt a structurally balanced operating budget that will support financial sustainability for
the City’s future. The annual budget for recurring expenditures shall not exceed recurring
revenues, and ongoing program expenditures are not funded with one -time revenue
sources. By maintaining a structurally balance budget, the City continues to maintain City
reserves at their desired levels.
The budget assumptions for FY 2022-23 include ongoing program expenditures of $28.8
million, before one-time expenditures and transfers. Aside from the regulatory increases,
over $166,000 is for new ongoing programs, and over $500,000 is for bolstering the
maintenance budget.
After capturing the regulatory increases and new ongoing programs, the FY 2022-23
Proposed Budget positively exceeds the requirement pursuant to the City Council Policy
No. 45, Balanced Operating Budget. The City has a structurally balanced operating
budget with a surplus of almost $5.7 million. After including transfers to other funds, the
City’s recurring revenues of $34.6 million would still overwhelmingly surpass the recurring
expenditures of $32.2 million by almost $2.3 million.
22
lcity Administration
10%
City Council
0% J
Finance
4%
Legal Services
3%
Moreover, based on the City’s needs in FY 2022-23, the strong outlook in available
resources provided the opportunity to budget one-time expenditures without using any
reserves. The one-time budget expenditure requests of $911,300 include municipal
election, park maintenance projects, the Housing Element project, State Mandated Safety
Element Update to the General Plan, and the City’s 50th anniversary celebration. These
one-time expenditures are then slightly offset by one-time revenues of $72,300. The
remaining $839,000 would be supported by the recurring revenues.
After including all operating expenditures, one-time expenditures, and transfers, the
General Fund is estimated to end strong and anticipated to have a surplus of just over
$1.6 million. The transfer of $400,000 to the Employee Pension Service Fund and the
additional transfer of $889,500 to the CIP Fund will be deducted from the FY 2020-21
General Fund surplus of $4 million and unrestricted excess reserves of $15.4 million,
respectively, therefore, there is no impact on the FY 2022-23 operating revenues.
Staff seeks City Council direction on the funding priorities for the projected surplus of over
$1.6 million for the development of the FY 2022-23 Preliminary Budget. At the discretion
of the City Council, the surplus can be allocated to fund:
• Operating projects that support the City Council Goals for FY 2022-23;
• Increasing the transfer to the CIP Fund;
• Restoring and adding positions,
• Creating an employee signing bonus program; and/or
• Designating any current and/or future City projects
FY 2022-23 General Fund - Estimated Fund Balance
Overall, based on the assumptions, Staff projects the fund balance for the General Fund
on June 30, 2023 will be $30.2 million, net of transfers out. The fund balance is projected
to increase by just over $1.6 million or 7.7 % from the FY 2021-22 year-end estimates.
After applying the City Council Reserve Policy of 50% of the operating budget and the
transfers to Employee Pension Service Fund and CIP Fund , the estimated unrestricted
excess reserve is about $14.1 million, which is a decrease of almost $1.4 million or 9%
from the estimated unrestricted balance on June 30, 2022.
A summary of the estimated FY 2022-23 Fund Balance calculation is illustrated in Table
5 on the next page.
23
Table 5: FY 2022-23 General Fund – Fund Balance Summary
ADDITIONAL INFORMATION:
FY 2022-23 City Council Goals and Action Plan
On March 9, 2022, the City Council received the third quarter updates for the FY 2021 -
22 City Council Goals and Action Plan. At the same meeting, the City Council received a
presentation on setting the framework for the FY 2022-23 City Council Goals. At that
workshop, the City Council directed staff to return on April 19 with a new format, among
other things, for the FY 2022-23 City Council Goals and Action Plan. The budget
appropriation for these goals and action plan will be presented and included in the
Preliminary Budget and subsequently in the Adopted Budget.
City’s 50th Anniversary Celebration
On February 1, 2022, the City Council approved the planning and preparation for the
City’s 50th anniversary celebration. The City’s 50th anniversary will be a year-long
celebration which includes an estimated budget assumption of $150,000 for FY 2022-23,
as presented in this report. The budget assumption is for events occurring between
September 2022 through June 30, 2023. The following summarizes the monthly events
that correspond to the budget assumptions:
• Renaming the Ken Dyda Civic Center
• Harvest Festival and Truck or Treat,
• Historic Talk and Walk with RPVtv
• Holiday Programming
• Historical Scavenger Hunt
• History of Rancho Palos Verdes Art Contest
General Fund
FY 2021-22
Revised
Budget
FY 2021-22
Year-End
Estimates
FY 2022-23
Proposed
Budget
Beginning Fund Balance - 7/1/2022 25,798,773 25,798,773 28,560,435 2,761,662 11%
Add: Revenues 30,075,700 32,946,100 34,550,700 1,604,600 5%
Add: Transfers-In 350,000 350,000 300,000 (50,000)-14%
Total Revenues 30,425,700 33,296,100 34,850,700 1,554,600 5%
Less: Expenditures (28,680,921) (26,281,138)(29,719,600) (3,438,462)-12%
Less: Transfers to CIP (TOT) (2,553,000) (3,528,300) (3,411,500) 116,800 5%
Less: Transfers to Pension (640,000) (640,000) - 640,000 100%
Less: Other Transfers-Out (85,000) (85,000) (65,000) 20,000 24%
Total Expenditures (31,958,921)(30,534,438) (33,196,100) (2,661,662)-8%
Projected Ending Fund Balance - 6/30/2023 21,424,723 28,560,435 30,215,035 1,654,600 7.7%
Less: Transfers to CIP (Other)- - (889,500)(889,500)
Less: Transfers to Pension - - (400,000)(400,000)
50% Reserve Policy 14,340,461 13,140,569 14,859,800 1,719,231 13%
Unrestricted Excess/(Deficit) Reserve - 06/30/23 7,084,263 15,419,866 14,065,735 (1,354,131) -9%
FY 2021-22 YE Estimates vs.
FY 2022-23 Proposed Budget
24
• Celebration of the Palos Verdes Nature Preserve
• Whale of a Day Picnic at the Fourth City Tree Grove
• Summer Concerts at the Parks
Based on the timing of events, the following would be included in the FY 2023-24 budget
cycle:
• Fourth of July Celebration and Fireworks
• Sister City Cultural Event
• 50th Anniversary Dinner Banquet
Financial Model
Pursuant to City Council Policy No. 18, Five-Year Financial Model Updates (Model), and
recently upgraded to a Ten-Year Financial Model last fiscal year. The policy indicates that
this process is necessary as part of the City Council’s deliberations on any new and
increased revenue measures. Although there are no new increased revenue measures,
historically, as part of the City’s annual budget process, Staff uses the Model as an
additional tool to engage in discussions and provide guidance with decision maki ng
related to the City’s future financial health during the budget development.
Starting with FY 2021-22 budget process, then-Mayor Alegria and the City Council asked
Staff to expand the model to a ten-year for a more extended model. The expanded model
is an improved financial tool that provides a longer-term financial outlook beyond five
years. In addition, the City Council asked Staff to incorporate a sensitivity analysis to the
Model. The sensitive analysis would account for the potential inflation in the future years.
Same as the FY 2021-22 budget process, Staff will submit a comprehensive staff report
that captures the Model along with the sensitivity analysis during the budget hearing in
June.
Meanwhile, the following data presented in this report represents the budget assumptions
and the proposed budget as presented above. For FY 2023-24 and beyond, the figures
are based on the assumptions from Table 6 on the next page. These are preliminary
assumptions for the future years based on the current economic recovery and trends.
Directions from the City Council tonight and changes in the market will be incorporated in
the final Model in June.
25
Table 6: Financial Model Budget Assumptions
Chart 6 below illustrates the 10-year trend for the General Fund revenues and
expenditures, excluding transfers. Revenues are estimated to grow on an average of
5.1% per year compared to expenditure growth estimated at an average of 7.3% per year.
Chart 6: General Fund 10-year Trend, Excluding Transfers
As shown above, the operating revenues continue to support operating expenditures
through FY 2026-27. Even when the transfer of Transient Occupancy Tax (TOT) revenue
to the CIP Fund is applied, net of the public safety increases, revenues still exceed
expenditures through FY 2030-31, as depicted in Chart 7 below.
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
REVENUES
PROPERTY TAX 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
TRANSIENT OCCUPANCY TAXES 5.0% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
SALES TAX 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%
FRANCHISE TAX 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
UTILITY USERS TAX 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
PERMIT REVENUES 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
INVESTMENT INTEREST 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
EXPENDITURES
NON-PERSONNEL EXPENDITURES 5.0% 5.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0%
PERSONNEL EXPENDITURES 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
HEALTH INSURANCE 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
PERS NORMAL COSTS 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
PERS UNFUNDED LIABILITY 5.8% 5.7% 3.0% 2.8% 1.4% 1.4% 1.4% 1.4%
SHERIFF CONTRACT 2.0% 3.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ECONOMIC MODEL INPUT FACTORS
FY 2021-22 Year-End
Estimates & FY 2022-
23 Budget Projections
are prepared by Staff
manually using current
data and projections
FY 2021-22 Year-End
Estimates & FY 2022-
23 Budget Projections
are prepared by Staff
manually using current
data and projections
26
20
I' rHU.Jl rv . 1 ,nt
AJ I 41P
JQ.J 319
u
Chart 7: General Fund 10-year Trend, Including Transfers
It is important to note that the transfers out beginning in FY 2023 -24 does not include the
additional transfer to the Employee Pension Service Fund or the additional transfer to the
CIP Fund for the annual debt payment for the Ladera Linda Community Park Project.
CIP Workshop
On Wednesday, April 13, 2022, the City Council will conduct its third and final budget
workshop on the Capital Improvement Program (CIP). At this workshop, staff will present
the status of FY 2021-22 capital projects, propose new capital projects, and the five-year
CIP for discussion. Any direction provided by the City Council will be incorporated in the
Preliminary Budget to be presented on May 17, 2022.
Public Notification
The City posted on social media and issued a listserv message announcing tonight ’s
public workshop. To date, no public correspondence has been received. Any public
correspondence received after the transmittal of this staff report will be provided to the
City Council as late correspondence at the workshop.
CONCLUSION:
As Staff prepares the FY 2022-23 budget assumptions, it was apparent that the City’s
revenues have strongly recovered and are estimated to surpass the revenue levels prior
to the pandemic. The property tax continues to be the strongest and stable revenue
source for the City, which is estimated to continue to increase in FY 2022-23 by $488,600
or 3% over year-end estimates. In addition, the City’s TOT taxes have bounced back and
27
expected to reach to $5.3 million, which is almost $2.2 million or 69% higher than the FY
2020-21 actual revenues and $316,400 or 6.4% higher than FY 202 1-22 year-end
estimates. As illustrated in the staff report, the remaining revenues have also rebounded,
as such, the City’s revenues are anticipated to surpass the revenue levels prior to the
pandemic level in FY 2018-19 by almost $3 million or 9.4%.
In the past two budget cycles, to alleviate the revenue loss caused by the pandemic, the
City took a more conservative approach in preparing budget by reviewing and re-
assessing all personnel and non-personnel needs, identifying costs that are eligible for
special grants, and as much as practically possible, identifying cost savings in all areas.
Based on this approach and with additional support provided from management and
citywide personnel, the City was able to contain costs and spent less than the availa ble
revenue resources. Additionally, the personnel costs in the past two years have ended
the year significantly lower than anticipated due to park closures, frozen positions,
underfilling vacancies, and deferring vacant positions when possible. Essentially, in the
last two fiscal years, the City ended the year with a surplus (operating revenue minus
operating expenditures) of almost $1 million in FY 2019-20 and $4 million in FY 2020-21.
Hence, based on the projected growth in operating revenues, the prep aration for the FY
2022-23 budget has changed when compared to the last two years during the pandemic.
While Staff continues to budget conservatively, the City Manager in collaboration with the
Finance Department and the Department Heads, focused on the City’s operational needs
for FY 2022-23 and restored budgets where it is needed the most. For instance,
increasing the budget for maintenance of building s and parks, restoring frozen vacant
positions, adding one-time costs to maintain parks, adding one-time costs for Housing
Element Compliance Measures and Environmental Review, and state mandated safety
element update and environmental review.
As a result of the budget meetings and budget requests approved by the City Manager,
the projected General Fund operating revenues of $34.6 million will exceed operating
expenditures operating of $29.7 million by $4.8 million (surplus), before transfers out.
After applying the transfers, the revenues are expected to exceed expenditures by $1.6
million (surplus). After applying the 50% City Council Reserve Policy, Staff estimates an
unrestricted excess reserve of $14 million, a decrease of almost $1.4 million from the
estimated unrestricted excess reserve on June 30, 2022.
Any directions from the City Council tonight will be incorporated in the FY 2022-23
Preliminary Budget.
28