Report Prepared by: Venus Rodriguez, Finance Officer
Title
SUBJECT: Mid-Year Budget Review for Fiscal Year 2021-2022, Including Adoption of a Resolution for Approval of Additions and Changes to Positions, General Fund Supplemental Appropriations and Budget Amendments in Various Funds Totaling $13,276,362, Providing a Utility Bill Relief Program Update and Seeking Direction on Utility Delinquency Process
REPORT IN BRIEF
Presents the Fiscal Year 2021-2022 Mid-Year Financial Report, seeks approval of additions and changes to positions, General Fund Supplemental Appropriations and Budget Amendments in Various Funds totaling $13,276,362 providing a Utility Bill Relief Program Update and seeking direction on Utility Delinquency Process.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving the addition of a Management Analyst and a Records Clerk and the deletion of an Executive Assistant in the City Council/City Manager’s Departments; and,
B. Approving a Supplemental Appropriation from the unreserved, unencumbered General Fund balance in the amount of $85,000 to 001-0301-512.17-00 Professional Services in the City Attorney’s Department; and,
C. Approving a Supplemental Appropriation from the unreserved, unencumbered General Fund balance in the amount of $60,000 to the Fire Division 001-0901; and,
D. Approving revenue increase to Contributions and Donations in the amount of $100,000 in the General Fund and appropriating the same to 001-1120-637.65-00 Project #122069 Laura Fountain Restoration; and,
E. Approving a Supplemental Appropriation from the unreserved, unencumbered General Fund balance in the amount of $100,000 and appropriating the same to 001-1120-637.65-00 Project #122069 Laura Fountain Restoration; and,
F. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 086-Measure Y Discretionary 40% in the amount of $50,000 and transferring to Fund 085-Measure Y Parks & Recreation 20% and appropriating the same to 085-1120-637.65-00 Project #122069 Laura Fountain Restoration; and,
G. Approving the addition of a Development Services Technician I in the Development Services Department; and,
H. Approving a Supplemental Appropriation in the amount of $20,792 from the unreserved, unencumbered fund balance in Fund 017-Development Services to cover the cost of the position in recommendation G through the end of the fiscal year; and,
I. Approving the addition of an Administrative Analyst and the deletion of an Accountant II in the Public Works Administration Division; and,
J. Approving a Supplemental Appropriation from the unreserved, unencumbered General Fund balance in the amount of $80,000 to the Parks Division 001-1120; and,
K. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 087-American Rescue Plan Act in the amount of $12,625,000 based on Council’s approved use for the 1st traunch; and,
L. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 087-American Rescue Plan act in the amount of $50,000 for internal COVID mitigation costs; and,
M. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 087-American Rescue Plan Act in the amount of $33,570 to cover the cost of two part-time administrative analysts and 50% of one full-time Management Analyst to assist in administration of the funding through the end of the fiscal year; and,
N. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 087-American Rescue Plan Act in the amount of $75,000 for reimbursement of California 2022 COVID-19 Supplemental Paid Sick Leave bill; and,
O. Approving Resolution 2022-10, A Resolution of the City Council of the City of Merced, California, amending the Classification Plan by updating the Personnel Allocation in the City Council/City Manager’s Department by deleting one Executive Assistant position and adding one Management Analyst position and adding one Records Clerk I/II position; the Development Services Department by adding one Development Services Technician I/II position; and the Public Works Department by deleting one Accountant II position and adding one Administrative Analyst position; and,
P. Authorizing the Finance Officer to make any necessary budget adjustments.
Body
ALTERNATIVES
1. Approve, as recommended; or
2. Approve, subject to other than recommended (identify specific findings and/or conditions amended to be addressed in the motion; or
3. Deny; or
4. Continue to a future meeting (date and time to be specified in the motion).
AUTHORITY
Charter of the City of Merced, Section 1105.
DISCUSSION
Mid-Year Update
The purpose of the Mid-Year update is to provide the City Council with a reconciliation on how the City ended Fiscal Year 2020-21, a General Fund update for the current Fiscal Year 2021-22, and to request changes to the budget due to needs that have been identified since the budget was adopted on June 21, 2021.
Beginning Fund Balance July 1, 2021
The table below reflects the Fiscal Year 20-21 adopted budget assumptions compared to actual fund balance at June 30, 2021.
|
Fund |
FY 2021-22 Actual Beginning Balance |
FY 2021-22 Beginning Budget Balance |
Savings or (Deficit) |
|
General Fund |
$12,075,249 |
$7,714,785 |
$4,360,464 |
|
Development Services |
$4,617,474 |
$3,570,478 |
$1,046,996 |
|
Parks & Community Services |
$1,249 |
$69 |
$1,180 |
|
Airport |
$388,750 |
$428,123 |
($39,373) |
|
Measure C |
$4,710,989 |
$2,960,070 |
$1,750,919 |
|
Measure Y |
$3,550,329 |
$3,194,571 |
$355,758 |
|
Housing Admin |
$78,839 |
$544,799 |
($465,960) |
Fiscal Year 2021-22
The City Council adopted the Fiscal Year 2021-22 budget for all funds on June 21, 2021. Subsequent to the budget adoption, there have been several actions approved by the City Council that affected the budget.
General Fund Expenditures
The City Council has approved revenue increases of $929,334 with equal offsetting expenditures. In addition, there has been $475,921 in Supplemental Appropriations and $403,471 in Revenue increases for the following:
Security Upgrades for Council Chambers $ 30,000
AFG Award 443,819
Subtotal Appropriations 473,819
AFG Award Revenue 403,471
Net Appropriations $ 70,348
MID-YEAR RECOMMENDATIONS
General Fund and Other Administration:
City Manager’s Office
The City Manager’s office has historically held an Executive Assistant position for administrative tasks that is funded 40% by the City Council and 60% by the City Manager’s Division. Over the past few years, it has become apparent that in order to accommodate the changes in workload and day-to-day tasks in the City Manager’s office a Management Analyst and a Records Clerk are needed in lieu of an Executive Assistant. Since the Executive Assistant has been recently vacated this provides an opportunity to restructure to better suit the need. The current annual cost for the Executive Assistant is $96,254, which includes $62,472 in salary and $33,782 in benefits. The proposed annual cost for the Management Analyst is $109,069 which includes $73,780 in salary and $35,289 in benefits. The proposed annual cost for the Records Clerk I is $67,613, which includes $38,196 in salary and $29,417 in benefits. This change would be an annual increase of approximately $80,427 to the General Fund split between the City Council and City Manager’s divisions. The City Council and City Manager divisions are administration which receives administration reimbursement from other funds. On average the General Fund recovers 72% of budget for these divisions. We anticipate that will not change in future budget years. Due to salary savings in the current fiscal year no additional funding is needed at this time.
City Attorney
Kim Flores of Berliner Cohen was appointed Interim City Attorney in July 2021. Funding for the agreement was provided through December 2021 with the expectation that a new City Attorney would be hired. The recruitment process is taking longer than anticipated and to retain Kim Flores as Interim City Attorney a supplemental appropriation in the amount of $85,000 is needed to fund the agreement through April 2022.
Fire
Due to two very large fire incidents, in which utilizing a backhoe service was required to ensure public safety and eliminate a collapse hazard, the Fire Department had to rely on a significant portion of their operating budget. The Fire Department is requesting a supplemental appropriation in the General Fund of $60,000 to replenish the operating budget and to be prepared for an additional unforeseen incident requiring the same level of service. The Fire Department is seeking cost recovery through insurance claims and anticipates receiving reimbursement for these incidents. Any cost reimbursement received will reimburse the General Fund.
Development Services
Currently the Planning Division utilizes a part-time Development Services Technician. Due to the increased and consistent workload in the division there is a need for a full-time position to assist with customer service inquiries, business license, and entry-level development permits. The current annual cost of a Development Services Technician I/II is $73,054, which includes $42,866 in salary and $30,188 in benefits. If the position is approved a reduction to extra help will be reduced $20,000 in future budgets.
Public Works:
Administration
The Public Works Department has been in the process of shifting from finance specific positions like Account Clerks and Accountants to Administrative Analysts as part of a reorganization of support services. Adding an Administrative Analyst and removing an Accountant II will allow the department to continue to work towards restructuring the administrative staff to better accommodate the changing workload and tasks needed to run the day-to-day operations of all divisions within the department. The annual cost for an Administrative Analyst is $88,688, which includes $56,286 in salary and $32,402 in benefits. The annual cost for an Accountant II is $114,225, which includes $78,206 in salary and $36,019 in benefits. This is a difference of $25,537. No additional funding is needed since the change in positions creates a savings.
Parks
The parks division has a budget of $2.1 million in the General Fund for fiscal year 2021-22. $724,000 is for the landscape contracts, utilities, and the purchase of supplies and services. As of December 2021, due to significant increase to the cost of materials and supplies the parks division has used 88% of this budget. This only leaves $89,000 for the remainder of the year. If additional funding is not available, the parks division will be unable to maintain the parks through the end of the fiscal year. The request is for a supplemental appropriation in the General Fund for the following:
Utilities $40,000
Materials 35,000
Services 5,000
Total $80,000
On February 7, 2022, the City Council provided direction to staff to allocate funding for the restoration of Laura Fountain. The estimated cost to restore Laura Fountain is $250,000 with $100,000 of the funding expected to be donated and the remaining to be funded by the City. Staff provided several funding options to the City Council. The Council preferred it be funded with a combination of General Fund and Measure Y Discretionary 40% with staff recommending the split amounts. Included in the recommendations are supplemental appropriations totaling $250,000 which will be made up of donation revenue of $100,000, General Fund contribution of $100,000 and Measure Y Discretionary 40% contribution of $50,000.
American Rescue Plan Act:
After several public meetings and discussion, the City Council has given direction of the use of $27.4 million from the American Rescue Plan Act. On January 18, 2022, the City Manager recommended the allocation of the 1st traunch which was received in June 2021 and the 2nd trauch which is expected to be received in June 2022. The City Council did confirm the recommendation and the requested Supplemental Appropriations in this report falls in line with the 1st traunch recommendations as follows:
In addition, staff is recommending $33,570 for administration costs to cover two part-time Administrative Analysts and 50% reimbursement for the full-time Management Analyst if approved. One part-time Administrative Analyst will be in the City Manager’s office and one will be in the Finance Department. These positions will help administer the ARPA programs, including implementation, drafting required documents, tracking, and reporting. The amount requested will cover approximately 400 hours each through the end of the fiscal year. Additional funding for these positions will be requested for 960 hours in the budget process for Fiscal Year 2022-23. It is expected that the Management Analyst will initially work 50% of their time on ARPA administration. Therefore, staff is requesting to be able to cost recover for that time from ARPA funding. There is also $50,000 being requested to continue to purchase PPE to mitigate COVID-19 in the workplace, advertising for ARPA programs, and any other associated costs due to COVID.
On February 9, 2022, Governor Newsom signed a new COVID-19 supplemental paid sick leave bill (2022 SPSL) which takes effect February 19, 2022. The 2022 SPSL is retroactive to January 1, 2022 and is set to expire September 30, 2022. The new law would potentially provide a maximum of 80 hours of SPSL to all employees. Staff is recommending an appropriation not to exceed $75,000 for reimbursement of ARPA funds for these personnel costs. These costs for the two pay periods in January are estimated to be over $40,000 city-wide. We anticipate it will begin to decrease after February.
UTILIITY BILL RELIEF PROGRAM UPDATE AND DELINQUENCY DIRECTION
On January 27, 2022, the City of Merced received notification that our Water Arrearages Payment Program application had been approved. On January 28, 2022, we received a check from the State Water Resources Control Board in the amount of $192,303.88. $186,702.80 will pay customers past-due water bills accrued during the COVID-19 pandemic bill relief period from March 4, 2020 to June 15, 2021. The additional $5,601.08 (3%) is to help cover administration costs. This will cover costs for required noticing including but not limited to, translation to Spanish and Hmong, postage, and personnel time. We are required to apply credits and notify customers of the credit within 60 days from receipt of the funds.
On February 1, 2022 the State Water Resources Control Board opened the application submittal process for wastewater bills accrued during the bill relief period of March 4, 2020 to June 15, 2021. Applications are due by April 1, 2022. Staff is currently working on the application and plan to submit by the due date if not sooner.
The Executive Order by the state to not shut-off water ended on December 31, 2021.The Executive Order only specified that water systems could not shut-off water service. The City of Merced chose to suspend all penalty and late fees and to allow customers to make partial payments. We have not added any utility billing penalty fees or shut-off water service due to non-pay since February 2020.
Due to the ability to shut off water service for non-payment utility billing had historically low delinquencies. On a monthly basis delinquency was less than 1% ($50,000 or less). Over the past two years, the delinquency has risen significantly and continues to rise. As of January 2022, the delinquency is 22% ($1,224,026). There are over 300 residential accounts with a current balance between $1,000-$3,000. It is difficult to know if the delinquency is being caused by financial impacts due to COVID-19 or if customers decided not to pay for the utility service because they knew it would not get shut-off. Some customers are opting to make partial payments monthly but have not caught up.
Staff will be applying all water credits from the Water Arrearage Program by March 2022. If the wastewater arrearage program timelines are like the water arrearages program, then we anticipate receiving a check for wastewater bills by May 2022 and applying credits by June 2022. Once that has been completed, we will have a better idea of the accrued bill charges still delinquent. At this point there will be two options, one is a payment plan to be paid over 12 months or two, apply for ARPA funding if the program criteria are met to qualify for the funding. Based on this timeline staff recommends starting the delinquency process July 1, 2022. Below is a list of possible dates to begin the delinquency process for your reference.
|
Bill Date |
Due Date |
Penalty applied |
Initial Notice |
Final Notice & Courtesy Call |
Water Shut-Off |
|
4/1/2022 |
4/20/2022 |
4/21/2022 |
4/22/2022 |
5/23/2022 |
06/07/2022 |
|
5/1/2022 |
5/20/2022 |
5/23/2022 |
5/24/2022 |
6/22/2022 |
7/07/2022 |
|
6/1/2022 |
6/21/2022 |
6/22/2022 |
6/23/2022 |
7/21/2022 |
8/9/2022 |
|
7/1/2022 |
7/20/22 |
7/21/2022 |
7/22/2022 |
8/23/2022 |
9/7/2022 |
|
8/1/2022 |
8/22/2022 |
8/23/2022 |
8/24/2022 |
9/21/2022 |
10/6/2022 |
ATTACHMENTS
1. Resolution 2022-10