Report Prepared by: Stephanie R. Dietz, City Manager and Venus Rodriguez, Finance Officer
Title
SUBJECT: Continued Public Hearing to Allow Interested Persons to be Heard Regarding the City Council, Public Financing and Economic Development Authority, and Parking Authority Fiscal Year 2023-24 Budget, Adoption of the Budget with Revision(s), and Appropriation of the Revenue and Approval of the Capital Projects for Each Respective Budget
REPORT IN BRIEF
Continued Public Hearing and adoption of the Fiscal Year 2023-24 City Council, Public Financing and Economic Development Authority, and Parking Authority Budget.
RECOMMENDATION
City Council - Adopt a motion:
A. Adopting Resolution 2023-47, Resolution of the City Council of the City of Merced, California, Adopting the Budget and Appropriating Revenue for Fiscal Year 2023-2024; and,
B. Adopting Resolution 2023-48, Resolution of the City Council of the City of Merced, California, Adopting the Salary Range for the City Manager; and,
C. Adopting Resolution 2023-49, Resolution of the City Council of the City of Merced, California, Adopting the Salary Range for the Interim City Attorney; and,
D. Adopting Resolution 2023-50, Resolution of the City Council of the City of Merced, California, Adopting the Salary Range for the Finance Officer; and,
E. Adopting Resolution 2023-51, Resolution of the City Council of the City of Merced, California, Continuing the Base Water Service Rates and Charges Unchanged; and,
F. Adopting Resolution 2023-54, Resolution of the City Council of the City of Merced, California, Rescinding Resolution No. 2020-85 and Adopting the Updated Economic Development Opportunity Fund Policy; and,
G. Adopting Resolution 2023-55, Resolution of the City Council of the City of Merced, California, Adopting the Affordable Housing Fund Policy; and,
H. Approving capital projects based upon the Planning Commission’s June 7, 2023, finding of consistency of Capital Improvement Program with the General Plan and as modified by recalculation of carryover projects to reflect actual balances as of June 30, 2023; and,
Public Financing and Economic Development Authority - Adopt a motion:
A. Adopting Resolution PFA 2023-03, Resolution of the City of Merced Public Financing and Economic Development Authority, adopting the Budget and Appropriating Revenue for Fiscal Year 2023-2024; and,
B. Approving capital projects based upon the Planning Commission’s June 7, 2023, finding of consistency of Capital Improvement Program with the General Plan and as modified by recalculation of carryover projects to reflect actual balances as of June 30, 2023; and,
Parking Authority - Adopt a motion:
A. Adopting Resolution PA 2023-03, Resolution of the City of Merced Parking Authority, adopting the Budget and Appropriating Revenue for Fiscal Year 2023-2024; and,
B. Approving capital projects based upon the Planning Commission’s June 7, 2023, finding of consistency of Capital Improvement Program with the General Plan and as modified by recalculation of carryover projects to reflect actual balances as of June 30, 2023; and,
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. Refer to City Manager for reconsideration of specific items (specific items to be addressed in the motion); or,
5. Continue to a future meeting (date and time to be specified in the motion).
AUTHORITY
Charter of the City of Merced, Sections 1104 and 1105.
DISCUSSION
The City of Merced’s economic outlook is shifting. Sales Tax and Property Tax receipts align with current year projections with estimated modest increases of 2%-3% , and total General Fund revenues are budgeted to include a projected 7.5% increase compared to the FY 2022/23 budget. Citywide housing construction continues at a slower rate than in previous years. Permits for single-family units have decreased by 30%, while permits for multifamily units are consistent with prior year levels.
Because the economic outlook of the city is uncertain, the proposed budget adheres to the prudent fiscal principals, including the following: 1) maintaining existing services and programs with no net increases to staffing; 2) planning for investments in affordable housing, parks, streets, and other public spaces throughout the city; and 3) increasing funding to reserves and contingencies to protect against economic volatility.
On May 15, 2023, staff presented the City Council with the City Manager recommended budget for Fiscal Year 2023-2024. The total City proposed budget for FY 2023-24 is $407.5 million including errata items. It includes the deletion of 8 positions and adds 8 positions, keeping the total at 525 full-time positions. As the city is currently in transition with a City Attorney, three attorney positions in the City Attorney’s office have been included along with additional funding in Professional Services. Until the City Council determines whether they want to proceed with hiring full time personnel or enter into an agreement for outside City Attorney services, funding totaling $1 million will be included in the budget.
General Fund with City Council directed changes includes estimated revenue of $55.6 million and estimated total operating expenditures is $55.6 million, which leaves no surplus or deficit. The General Fund FY 2023-24 budget also includes non-operating expenditure recommendations for purchase of parks vehicles and equipment, dash cams hardware and body cam storage, IT replacement generator, IT cyber security upgrade, IT website update, South Merced Improvements, Community Funding, Arts Projects, ARPA Administration, and continued set-aside funding for the Enterprise Resource Planning system, Economic Development Opportunity Fund, Trust 115-Pension, and the General Fund Reserve. Per City Council direction set-aside funds for the Affordable Housing Fund has been added.
In November 2020, the City Council adopted the General Fund Reserve Policy and Reserve. The adopted policy sets the reserve at 35% of annual operating expenses. For Fiscal Year 2023-24 including errata items, 35% of annual operating expenses equals $19,483,772, of which 30% is $16,700,376 to be set-aside in a separate fund. Fund 004/1001-General Fund Reserve currently has $15,612,327. In order to meet the required level of reserve an additional transfer of $1,088,050 has been included in the proposed budget. The remaining General Fund Reserve of 5%, equaling $2,783,396 will remain in the General Fund for contingency purposes but not available for spending.
In accordance with City Council direction, staff have included the revised Financial Polices for Council Consideration as part of the adoption of the Fiscal 2023/24 Budget. Two policies are proposed, the revised Economic Development Opportunity Fund Policy - with an allocation of 20% of the 45% excess savings, and the proposed Affordable Housing Fund Policy - with an allocation of 30% of the 45% excess savings.
In addition to the City Council considering the adoption of these policies, staff have modified the allocation of funding within Future Planning Resources to reflect the City Council’s direction. The amount allocated for future planning in next year’s budget are as follows:
|
Future Planning Resources |
Amount |
|
General Fund Reserve |
$1,088,050 |
|
Economic Development Opportunity Fund |
$ 243,000 |
|
Affordable Housing Fund |
$ 364,500 |
|
Trust 115-Pension |
$ 607,500 |
During the May 15, 2023 and June 5, 2023 Council Meetings, the Council requested additional funding be allocated for the following items in the General Fund and are now included as part of the errata:
• Affordable Housing Fund $364,500
• Additional Operating Transfer to Parks and Community Services $104,942
• ARPA Administration $57,134
• Reallocation of Financial Policies Allocation (see table above)
The following summary of Errata items are also changes to the budget and if adopted will be included (see attachment for details):
• Increased transfer from the General Fund to Parks and Community Services operations, increased Parks and Community Services Program Fees, increased transfer from Measure Y Discretionary funding to Measure Y-20% Parks and Recreation Fund to fill the shortfall per City Council direction.
• MCAG advised that Regional State Transportation Program funding would be higher than originally estimated.
• Adjustments to ARPA Programs per City Council direction.
• Remove the GPS Opticom project in Measure V and allocate to projects to be determined.
Staff presented the City Manager recommended FY 2023-24 budget to the Measure C committee for approval on May 9, 2023. The Measure C proposed budget includes the reduction of 1 police personnel, which was transferred to the CFD. The proposed budget includes a total of 10.3 fire and 17.49 police authorized positions. There are one- time purchases for fire and police, including ballistic and night vision helmets, record management system upgrade, server software, female academy, and the painting of Fire Station 51. An additional $1 million was added to the Safe Streets (streetlight upgrades) project and $70,000 for the ballot measure to renew Measure C. The proposed fund balance meets the GFOA recommended minimum per City Council policy.
The five-year Capital Improvement Program (CIP) was reviewed by the Planning Commission at the June 7, 2023 meeting and was found to be consistent with the General Plan as required by State Law. The General Plan has many policies which are supported through the implementation of the proposed CIP projects. Examples include:
• T 1.2 - coordinate circulation and transportation planning with pertinent regional, state and federal agencies
• T 1.4 - promote traffic safety for all modes of transportation
• T 2.6 - maintain and expand the community’s existing bicycle circulation system
• T 2.7 - maintain a pedestrian friendly environment
• T 3.4 - reduce rail system impacts on circulation in the urban area
• P 1.1 - provide adequate public infrastructure and municipal services to meet the needs of future development
• P 1.2 - utilize existing infrastructure and public service capacities to the maximum extent possible and provide for the logical, timely, and economically efficient extension of infrastructure and services
• P 2.1 - maintain and enhance public protection facilities, equipment, and personnel to the maximum extent feasible within the resource constraints of the City to serve the City’s needs
• P-3 Water - ensure that adequate water supply can be provided within the City’s service area, concurrent with service expansion and population growth
• P-4 Wastewater - provide adequate wastewater collection, treatment, and disposal capacity for existing and projected future needs
• P-5 - provide effective storm drainage facilities for future development
• P-6 - establish programs to recover recyclable materials and energy from solid waste generated within the city
• OS 1.5 a - preserve and enhance water quality
• OS 3.1 - provide high quality park and open space facilities to serve the needs of a growing population
• OS 3.2 - maintain and expand the City’s bikeway and trail system
• OS 3.3 - maintain the City’s existing high-quality open space facilities
• S 3.2a - maintain essential services in the event of flooding or dam failure
• S 4.2 - maintain a reasonable level of accessibility and infrastructure support for fire suppression, disaster, and other emergency services
ATTACHMENTS
1. Resolution 2023-47
2. Resolution PFA 2023-03
3. Resolution PA 2023-03
4. Resolution 2023-48
5. Resolution 2023-49
6. Resolution 2023-50
7. Resolution 2023-51
8. Resolution 2023-54
9. Resolution 2023-55
10. Errata List
11. Fund Summary
12. Presentation