Report Prepared by: Steven S. Carrigan, City Manager
Title
SUBJECT: Public Hearing - Affords the Interested Public an Opportunity to Provide Input on the Content of the City Council, Public Financing and Economic Development Authority and the Parking Authority Fiscal Year 2020-21 Proposed Budget
REPORT IN BRIEF
Public Hearing to afford the interested public an opportunity to provide input on the content of the 2020-21 City Council, Public Financing and Economic Development Authority, and Parking Authority Proposed Budget.
RECOMMENDATION
City Council/Public Financing and Economic Development Authority/Parking Authority - It is recommended that the City Council/Authorities conduct the Public Hearing and provide direction to the City Manager on the content of the Fiscal Year 2020-21 Budget; and adopt a motion continuing the Public Hearing to the June 15, 2020 Council Meeting.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or
2. Approve, subject to other than recommended by staff (identify specific findings and/or conditions amended to be addressed in the motion); or,
3. Deny; or.
4. Refer to staff 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, Section 1104.
DISCUSSION
At the onset of developing the FY 2020-21 City Manager’s Recommended Budget, the City of Merced’s financial outlook was positive. The City Council started the budget process by holding three town hall meetings. Taking input from residents, the Council established their upcoming Goals and Priorities for projects, programs, and funding to be included in the Proposed Fiscal Year 2020-21 Budget.
However, with the arrival of the novel coronavirus pandemic coupled with Governor Newsom’s Stay-at-Home orders, the City of Merced’s economic outlook was rapidly changing. After some analysis, we are expecting to see declining revenues in sales tax, transient occupancy tax, business license tax, inspection fees, and gas tax in Fiscal Year 2019-20 and 2020-21. The reduction in revenue is estimated to be $5.4 million. With these challenges in mind, the City Manager recommended budget for Fiscal Year 2020-21 was completed with the priority of maintaining essential services to the community, minimizing impacts to existing staffing levels, and incorporating as many Goals & Priorities as allowed under current fiscal constraints.
On May 18, 2020, staff presented the City Council with the City Manager recommended budget for Fiscal Year 2020-2021. The total City proposed budget for FY 2020-21 is $265 million. It includes the deletion of 1 position and un-funding 5.5 positions, totaling 486.5 positions funded and 492 positions authorized. In order to mitigate the remaining budget shortfalls, one-time revenues were used to balance the General Fund and Measure C. The one-time uses include cannabis revenue of $540,000 for police, fire, and recreation, $400,000 from Development Services, and $330,000 from Section 115 Pension Trust. This totals $1,270,000 in one-time revenues, with General Fund using $1,142,227.
As proposed, the General Fund estimated revenue is $43.9 million and estimated total operating expenditures is $43.9 million, which leaves an operational surplus of $5,169. It includes shifting .50 of a firefighter, 1 senior police officer, and .50 of a park worker to Community Facilities District funds. The General Fund FY 2020-21 budget also includes non-operating expenditure recommendations for a November general City Council election, replacement of network switches, set-aside funding for the second phase of the Enterprise Resource Planning system, and phase 1 of the City Hall HVAC replacement.
Since the budget was presented, the FLSA settlement agreement with International Fire Fighters Association, Local #1479 was approved by the Court. Per the agreement, once approved by the court, the City of Merced has 14 days to make the agreed upon payments totaling $359,047. This expense was not estimated in the FY 2020-21 expense projections. Therefore, the adjustment will be reflected in the FY 2020-21 ending balance which flows through to the FY 2021-22 ending balance in the General Fund. The General Fund will still continue to meet GFOA recommended minimum with this adjustment. I have attached the adjusted General Fund Summary.
City Council requested to have a discussion on the potential of establishing a General Fund Reserve. In order to give the City Council an opportunity to have this discussion with staff and provide further direction on future planning, no allocations were included for the Revenue Stabilization Fund, Economic Development Opportunity Fund, or Trust 115 for pension liability.
During the budget presentation to Council, the following options were given in regards to establishing a General Fund Reserve based on the proposed operating budget:
|
Percentage to set Reserve |
Amount |
|
GFOA Rec Minimum (approx. 16%) |
$7,317,568 |
|
20% Operating Budget |
$8,781,081 |
|
25% Operating Budget |
$10,976,351 |
|
30% Operating Budget |
$13,171,622 |
|
35% Operating Budget |
$15,366,892 |
Based on certain risk elements specific to the City of Merced it is recommended a reserve set aside be between 26%-35% while maintaining a 5% contingency within the General Fund. Actual cash funding is available up to a 30% reserve by using Revenue Stabilization, Cash Basis, and General Funds. If this was the direction of the Council, the changes would be programmed into the budget and the Finance Officer would come back at a later date with a General Fund Reserve Policy to be adopted by City Council.
If the City Council chooses to continue to use the GFOA recommended minimum to determine the General Fund balance, the budget as adjusted meets this minimum. In addition, there are funds available to set aside for Revenue Stabilization, Economic Development Opportunity, and Trust 115 for Pension. Based on the method of allocation per the policies, the amount proposed to be allocated in next year’s budget are as follows:
|
Future Planning Resources |
Amount |
|
Revenue Stabilization Fund |
$180,000 |
|
Economic Development Opportunity Fund |
$ 90,000 |
|
Trust 115-Pension |
$180,000 |
Due to COVID-19 and some committees not meeting, we were unable to present the proposed FY 2020-21 budget to the Measure C committee for approval. Measure C proposed budget includes un-funding a Senior Police Officer and a Police Officer. A total of 12.3 fire and 19.49 police authorized positions will not change but two will be un-funded. Once the Measure C committee begins to meet again, they will be updated.
After direction, staff will bring back a revised version of the budget to the City Council on June 15, 2020 for final approval.
ATTACHMENTS
1. City Manager Budget Message
2. Revised General Fund Summary