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CC 01-17-2024 Item No. 1. Fiscal Year 2024-25 Potential Service-Level Reductions_Staff PresentationJanuary 17, 2024 Fiscal Year 2024-25 Potential Service-Level Reductions CC 01-17-2024 Item No. 4 CDTFA Audit Budget Forecast Potential Service-Level Reductions for FY 2024-25 Recommendation and Next Steps Agenda 2 CDTFA Audit California Department of Tax and Fee Administration (CDTFA) Audit Letter received advising the City of the audit Dec. 2021 Letter received updating the City on the years the audit is covering May 2022 CDTFA advised the City of their decision verbally with dollar impacts to follow in 4-6 months Mar. 2023 Letter received with audit decision Oct. 2023 Council Actions Council adopts budget including $15 million in reductions Jun. 2023 Council establishes Committed Sales Tax Repayment Reserve with $56.5 million Oct. 2023 Council approves some reductions for FY 2024-25 Nov. 2023 Council receives presentation on potential revenue tax measures. Council asks staff to engage business community Dec. 2023 FY 2023-24 Adopted Budget –$15 million in Reductions •Eliminating 14 vacant positions $2.6 million •Decreasing materials, contract services, special projects, capital outlays, and contingency expenditures $5.9 million •Decreasing transfers from the General Fund to other funds $5.5 million •Using the City's Section 115 Trust to fund OPEB (Other Post-Employment Benefits/Retiree Health) costs $1.4 million Budget Forecast Forecast Assumptions Adopted Budget (June 2023) •Facility debt paid off in FY 2029- 30 •No additional development projects included •Recession (no growth) in FY 2024-25 and FY 2028-29 for all revenues •Minimal funding ($500k) for Special Projects and CWP Projects •No transfers to Capital Reserve New Assumptions (Jan 2024) •Budget Strategy shift from vacancies to Service-Level Reductions (SLR) •Revised sales tax forecast ($2M reduction from $11.4M to $9.4M) •Committed fund balance for Sales Tax Repayment Reserve ($56.5M) for April 2021-June 2023 •$1M funding for Special Projects and CWP Projects •$2M transfers for Capital Reserve -$10.1M -$12.3M -$10.6M -$11.3M -$10.4M -$13.2M -$14.5M -$13.6M -$14.0M -$14.9M General Fund Annual Operating Surplus/(Deficit) •Ongoing budget reductions are needed •Need to identify ongoing expenditure reductions and revenue generation estimated at ~$15 million •Revenue-generating opportunities •Service-level reductions •Fee increases Balancing the Budget Potential Service-Level Reductions for FY 2024-25 Potential Service-Level Reductions Grouping Reductions Operations and Maintenance Reduce sidewalk, curb, and gutter. Move some Public Works contract services in-house, extending maintenance timelines. Reduce Public Works PT staffing. Shift credit card fees to customers. Remove library extra hours from the base due to available State funding to cover these costs. Various other reductions. 3,080,725 Infrastructure Reduce funding to CIP of $2M annually for the first 5 years of the forecast. Will utilize the existing fund balance to cover these costs. Shift sidewalk and street tree maintenance to property owners and shift school district grounds maintenance to the school district. 4,372,402 Fiscal Accountability Align law enforcement costs with prior year actual hours. Reduce applications used in the City, extend tech refresh cycles, and remove the new Enterprise Resource Planning (ERP) software from the budget. 2,555,421 Community Benefit Reduce 4th of July Event, partnerships, City events/outreach, paid events, concerts and movies, select City Work Program projects. 463,690 Total $10,472,238 Operations and Maintenance Department Service-Level Reductions Fiscal Impact Full-Time Staffing Impact (FTE) Public Works Reduce Public Works Materials and Contract Services and Part-Time Positions 1,768,539 None Various Shift Credit Card Fees to Customers 432,668 None City Manager's Office/CDD Reduce Part-Time Staffing, Reclassify Positions and Reduce Recruitment Advertising 286,348 None Parks & Recreation Reduce Funding for Library Extra Hours 160,000 None Public Works Reduce Impec Janitorial Contract 100,000 None City Manager's Office Reduce Scene from 10 months to quarterly 92,400 None Administrative Services Reduce Budget for Internal Audit 70,000 None Public Works Reduce Crossing Guard Services 50,000 None Parks & Recreation Reduce Parks & Recreation Expenses 33,619 None Parks & Recreation Reduce Park Ranger Services 31,155 None City Manager's Office Eliminate Minimum Wage Mailers 23,202 None Parks & Recreation Reduce Senior Center Part-Time Staffing and Supplies 21,748 None Administrative Services/ CDD Reduce Conferences and Training 11,046 None Total Operations and Maintenance $3,080,725 None Infrastructure Department Service-Level Reductions Fiscal Impact Full-Time Staffing Impact (FTE) Capital Improvement Program Reduce General Fund Transfers to the Capital Improvement Fund 2,000,000 2 Public Works Shift Sidewalk Maintenance to Property Owners1 1,000,000 1.4 Public Works Shift School District Grounds Maintenance to School District1 737,394 4.2 Public Works Shift Street Tree Maintenance to Property Owners1 455,008 3 Public Works Defer Vehicle and Equipment Replacement 180,000 None Total Infrastructure $4,372,402 10.6 Fiscal Accountability Department Service-Level Reductions Fiscal Impact Full-Time Staffing Impact (FTE) Law Enforcement Align Law Enforcement Budget with Actuals 1,000,000 None Innovation & Technology Reduce Budget for IT 779,187 None Public Works Utility True-up 398,407 None City Attorney's Office Align City Attorney's Office Contract Services and Materials with Actuals 226,561 None Parks & Recreation Consolidate Learn to Swim Program 87,118 None Administrative Services Reduce Unemployment Insurance 64,148 None Total Fiscal Accountability $2,555,421 None Community Benefit Department Service-Level Reductions Fiscal Impact Full-Time Staffing Impact (FTE) Parks & Recreation/Public Works Reduce 4th of July Funding 138,000 None Council Reduce Funding for Partnerships 69,307 None City Manager's Office Reduce City Events/Outreach 63,166 None Parks & Recreation Reduce Budget for Paid Events 38,675 None Parks & Recreation Shift Sheriff Fees for Festivals to Festival Organizers 34,992 None Parks & Recreation Reduce Budget for Concerts and Movies 25,424 None Public Works Eliminate Earth Day Festival 19,126 None City Manager's Office Eliminate Select City Work Program Projects 75,000 None Total Community Benefit $463,690 None Balancing the Budget Service-Level Reductions $10.5M Structural Deficit $15.0M Gap $4.5M Revenue Generation? Fee Increases? Recommendation and Next Steps Roadmap to FY 2024-25 Budget Adoption and Balancing Co u n c i l G o a l S e t t i n g / Wo r k P r o g r a m Budget Update 1st Quarter Report Budget Update -Mid-Year Report -CIP Fee Study and Revenue Tax Measures Budget Update -SLR Review #2 -Community Meeting Updates -Festivals & Fee Waivers FY 2024-25 Proposed Budget Community Funding FY 2024-25 Adopted Budget Bu d g e t U p d a t e Se r v i c e L e v e l R e d u c t i o n (S L R ) P r e v i e w October 2023 November 2023 January 2024 April 2024 June 2024 February 2024 Community Budget Meeting #1 Council Goal Setting/ Work Program Commission/ Committee Feedback Labor Contracts March 2024 Budget Update 3rd Quarter Report May 2024 City Hall & Blackberry Farm Update Community Budget Meeting #2 Budget Update -Audit Update -Committed Reserve Revenue Tax Measures December 2023 Provide input to staff on potential service-level reductions for the FY 2024-25 Proposed and Final Budgets Recommendation Questions?