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2020-05-13 City Council Item No. 4.1 Fiscal Year 2020-2021 Budget Presentation Regular MEETING - Additional Meeting MaterialsCity of Menifee FY 20/21 Budget Rochelle Clayton, Deputy City Manager Wendy Preece, Deputy Finance Director Margarita Cornejo, Finance Manager Budget Workshop -May 13, 2020 PURPOSE OF THE ANNUAL BUDGET ANALYZE CURRENT ECONOMIC CONDITIONS PRIORITIZE SPENDING STRATEGICALLY PLAN USE OF RESOURCES FORECAST REVENUES & EXPENDITURES FINANCIAL UNCERTAINTY Analyze Current Economic Conditions CITY IMPACTS FINANCIAL UNCERTAINTY -1- Budget Assumptions & Sources -HdL Companies -County of Riverside -State of California -Other Agencies -Historical data & trends SOURCES-Projected Revenues (sales tax, property tax, permit fees, franchise fees) -Projected Population changes -Projected Staffing needs -Projected new Economic Development ASSUMPTIONS HdL Companies forecast the Sales Tax projections: •FY 19/20 Revenue projections have been reduced by $1.8M*(General Fund and Measure DD) •FY 20/21 Revenues projections have been reduced by $2.615M (General Fund and Measure DD) ASSUMPTIONS to include COVID-19 impacts: *Staff quickly analyzed expenditures for deferral and project a balanced FY19/20 budget, despite the COVID-19 revenue reductions. Forecast Revenues Budget Assumptions Staff began budget preparations in January and finalized FY 20/21 Revenue Projections prior to COVID-19 related closures & stay-at-home orders. Original General Fund Revenue projected: $53,327,140 Original Measure DD Revenue projected: $11,771,000 Total General Fund Revenue was originally projected to be $65,098,140 and reduced by $5,411,566. ASSUMPTIONS to include COVID-19 impacts: TOTAL GENERAL FUND REPORTING General Fund + Measure DD = Total General Fund TOTAL GENERAL FUND REVENUES & EXPENDITURES Total General Fund General Fund Measure DD Budget Assumptions (continued) Revenue Projection REDUCTIONS: GENERAL FUND REVENUE 2020/2021 ORIGINAL Budget 2020/2021 REVISED Budget Percentage of Reduction Bldg/Plng/Eng Fees 11,870,500 10,683,450 10% Business License 120,000 40,000 67% Fines and Fees 897,500 807,750 10% Franchise Fees 4,200,500 3,872,963 7.8% Miscellaneous Fees 860,420 860,420 0% Property Tax 16,173,725 16,173,725 0% Real Property Transfer Tax 600,000 540,000 10% Recreation Program Fees 323,805 161,903 50% Sales Tax 9,112,000 7,971,000 12.5% Transfer In 741,630 741,630 0% Transient Occupancy Tax 365,000 225,880 38% VLF 7,512,060 6,760,854 10% Finance Revenue 550,000 550,000 0% Sales Tax 11,771,000 10,297,000 12.5% REVENUE REDUCTION: 65,098,140 59,686,575 8.3% Total General Fund Revenue Reduction: ($5,411,566) Budget Assumptions (continued) Business License –Proposed program to waive business license renewal fees in order to assist the local businesses of Menifee. Franchise Fees –Reduced a majority of fees by 10% with an increase to Waste Management fees, for an overall 7.8% reduction. Misc. Fees –Projections are a 20% reduction from FY20 Actuals (FY20 Projected Actuals are $1.1M and FY19 Actuals were $1.2M). Methodology for Budget Reductions: Budget Assumptions (continued) -3- Property Tax –The City is on the County’s Teeter plan so levied taxes are disbursed rather than the collected taxes; HdL provides projections. Recreation Fees –Reduced fees by 50% based on current COVID-19 restrictions. Sales Tax –HdL evaluated the City’s business types and considered state tax deferrals in their analysis. TOT –Original projections were based on new hotels and reduced by 38% due to COVID-19. An evaluation of economic conditions at mid-year will be conducted to recommend adjustments accordingly. Methodology for Budget Reductions: Revenue & Expenditure REDUCTIONS: GENERAL FUND with MEASURE DD 2020/2021 ORIGINAL Budget 2020/2021 REVISED Budget Reduction Amount REVENUES 65,098,140 59,686,575 (5,411,566) EXPENDITURES 63,861,254 59,686,575 (4,174,680) Surplus/(Deficit)1,236,886 0 Forecast Expenditures Prioritize Spending Cautious and prudent planning has allowed the City to quickly react to COVID-19 impacts The initial budget assumptions yielded a $1.23M General Fund Surplus, prior to $5.4M Revenue Reductions A rigorous evaluation and careful planning allowed for a balanced budget without the use of reserves Strategically Plan the Use of Resources Planned Expenditure Reductions to Balance the Budget -3- Reorganizations to identify savings and efficiencies •Past reorg of Finance and Human Resources have proven to be effective and productive Hiring Freeze on non-critical positions •Workflow evaluation and restructure (12 positions = $1.5M savings) with no impact to Police Department Defer non-critical projects and programs •Smart City initiatives and system upgrades •Expansion plans on hold (new City Hall, Maintenance Ops Center-MOC, etc.) •Capital projects deferred without critical impacts Animal Control was budgeted for County proposal FY20/21 Mid-year review of economic conditions STAFFING FY20/21 Position Updates HIRING FREEZE Building & Safety –2 Inspectors; 1 Permit Technician Code Enforcement –1 Code Officer I; 1 Manager; 1 Code Technician Community Development –1 Management Aide Community Services –1 Management Analyst Economic Development –1 Marketing Assistant Engineering –1 Senior Engineer Finance –1 Financial Analyst Public Works –Public Works Inspector II Most Departments are impacted by the freeze: Hiring Freeze (Continued) -7- Building & Safety –2 Contract Building Inspectors are budgeted for ½ year, to evaluate the workload and needs at mid-year. Code Enforcement –1 Sr. Code officer was converted to 2 Officer I’s at mid-year which leaves same coverage. Additionally, the department shall relocate to the Police Department (PD). •Extensive evaluation conducted which concluded that this is the most efficient and effective structure to provide exceptional service to the Menifee residents with much requested support from MPD (formerly RSO) by the Code Enforcement Officers. •Restructure allows for salary reduction for the Building Official position as it shall oversee Building & Safety only. •There is currently a Captain, Lieutenant and Sergeant with Code Enforcement experience that will oversee the department. Department & Workload Reorganizations Hiring Freeze (Continued) Community Development –Workload of the Management Aide has been redistributed. Community Services –It is anticipated that services will be restricted for a period of time which allows for the redistribution of the Management Analyst workload without burden. Economic Development –A part-time intern shall assume the Marketing Assistant duties. Engineering –New position; workload has been conducted by other Engineers and contract Engineers, and will continue. Finance –New position; workload has been conducted by Deputy City Manager and will continue. Public Works –Contract Inspector is budgeted. Department & Workload Reorganizations GENERAL FUND FY 20/21 PROPOSED BUDGET Total Estimated Revenues: $59,686,575 Less Operating Expenditures: ($59,686,575) Operating Surplus/(Deficit):$0 TOTAL GENERAL FUND REVENUES & EXPENDITURES EXPENDITURES General Fund Operating Expenditures FY2020/21 $49,389,575 Measure DD Expenditures FY2020/21 10,297,000 Total General Fund Expenditures $59,686,575 REVENUES General Fund Operating Revenues FY2020/21 $48,647,945 Transfers from Reserves 741,630 Measure DD Revenues FY2020/21 10,297,000 Total General Fund Revenues $59,686,575 FISCAL YEAR 2020/21 FISCAL YEAR 2020/21 Revenue vs. Expenditures GENERAL FUND REVENUES- $49,389,575 * Includes $150,000 from general plan, $141,630 from the SLESF Grant Fund, and $450,000 from the Waste Management Reserve. Proposed FY20/21 Revenues are an 8% reduction from FY19/20 Projected Actual Revenues of $53.015 million REVENUES FY 2018/19 Actuals FY 2019/20 Adopted Budget FY 2020/21 Proposed Percentage (%) Change (FY20 to Proposed) Percentage (%) of Total Property Tax $13,268,772 $15,250,000 $16,173,725 5.71%32.75% Sales Tax 8,968,068 8,863,000 7,971,000 -11.19%16.14% Development Fees 12,314,807 9,819,485 10,683,450 8.09%21.63% Vehicle License Fee 6,680,540 7,064,475 6,760,854 -4.49%13.69% Franchise Fees 3,141,175 2,850,000 3,872,963 26.41%7.84% Transfer In*138,710 3,518,275 741,630 -374.40%1.50% Other 3,687,860 2,915,550 3,185,953 8.49%6.45% Total General Fund Revenues $48,199,932 $50,280,785 $49,389,575 -1.80%100.00% GENERAL FUND REVENUES -16- GENERAL FUND EXPENDITURES - $49,389,575 FY 2018/19 Actuals FY 2019/20 Adjusted Budget * FY 2021/21 Proposed Budget ** Percentage (%) Change (FY20 to Proposed) Percentage (%) of Total Public Safety $22,304,862 $25,214,674 $21,863,279 -13.29%44.27% Administration 7,596,819 8,327,407 10,884,481 30.71%22.04% Public Works/Engineering 4,300,333 5,415,310 5,701,529 5.29%11.54% Community Development 2,198,311 3,443,265 3,318,686 -3.62%6.72% Building & Safety 1,865,740 2,169,734 2,070,748 -4.56%4.19% Community Services 1,777,012 2,803,898 2,512,978 -10.38%5.09% Economic Development 956,818 1,493,199 1,460,437 -2.19%2.96% Code Enforcement 908,862 1,376,101 1,261,479 -8.33%2.55% City Council 226,999 172,231 315,958 83.45%0.64% Total General Fund Expenditures $42,135,756 $50,415,819 $49,389,575 -2.04%100.00% *Projected FY2019/2020 Expenditures is $47.778 million **Includes $450,000 Capital Project funded by the Waste Management Reserve Account GENERAL FUND EXPENDITURES $49,389,575 MEASURE DD -FY2020/21 Revenue & Expenditures Summary -Measure DD Expenditure Detail -Measure DD Summary MEASURE DD FUNDING INCREASING PUBLIC SAFETY ENHANCING FIRE SERVICES IMPROVING INFRASTRUCTURE Menifee voters approved Measure DD, the one percent sales tax increase, by a convincing 68 percent in November 2016. Revenues from Measure DD are required to remain local and can only be used for critical City services like public safety and 911 emergency response services; keeping our roads, parks and infrastructure in good condition; and other general service needs that make Menifee a desirable place to work, play and do business. The Measure DD Citizen Oversight Committee meets regularly and provides oversight on how Measure DD funds are spent to ensure the integrity of the measure. With these funds, the City of Menifee is able bridge the funding gap required to maintain a safe, clean and vibrant community our residents have come to expect. MEASURE DD FUNDING ENHANCING FIRE SERVICES The Measure DD Citizen Oversight Committee meets regularly and provides oversight on how Measure DD funds are spent to ensure the integrity of the measure. The Measure DD Oversight Committee reviewed the proposed budget at its meeting on May 7, 2020 and recommended that Council approve the budget as proposed. City consultant HdL has estimated the following revenues: January 2020 $11,589,000 Updated April 2020 10,752,000 COVID-19 Reduction:$ (837,000) Estimated Revenue Loss FY 19/20 Projected ending fund balance 6/30/20: $1,502,286 City consultant HdL has estimated the following revenues: January 2020 $11,771,000 Updated April 2020 10,297,000 COVID-19 Reduction:$(1,474,000) Total Proposed FY 20/21 Revenue Budget $10,297,000 Estimated Revenue Loss FY 20/21 Proposed FY 20/21 Budget Code Enforcement $ 302,396 Personnel –3 Officers 288,719 Supplies/Tools/Training 13,677 CalFire Department 3,603,950 Second Medic Truck 250,000 Personnel 3,353,950 Menifee Police Department 4,331,254 Volunteer program 39,852 Personnel 4,291,402 Capital Projects 2,059,400 Total Proposed FY 20/21 Expenditure Budget $10,297,000 No recommendation to budget projected fund balance -$1,502,286 FY 20-21 Measure DD -CIP Fund Request Project Name Requested Funds CIP 13-03 Holland Road Overpass $ 567,663.00 CIP 14-03 Bradley Bridge $ 250,000.00 CIP 19-02 Murrieta Road AC Resurfacing (McCall -Salt Creek)$ 137,589.00 CIP 20-11 Scott Road and Menifee Road Sidewalk $ 266,737.00 PW-IMP-01 HIllpointe Commuity Street Resurfacing $ 519,568.00 PW-IMP-03 McCall Boulevard (Encanto to Antelope)$ 317,843.00 TOTAL $ 2,059,400.00 MEASURE DD REVENUE & EXPENDITURES FY 20/21 REVENUES FY 2018/19 Actuals FY 2019/20 Adjusted Budget * FY 2021/21 Proposed Budget % Change (FY20 to Proposed) Percentage (%) of Total Sales Tax Revenue $11,513,172 $11,659,000 $10,297,000 -11.68%100.00% Total Measure DD Fund Revenues $11,513,172 $11,659,000 $10,297,000 -11.68%100.00% * Revised Estimate provided on 4/20/20: $10,752,000 RESERVE/FUND BALANCE POLICY – Where we are now… FUND BALANCE POLICY Fund Balance Policy adopted by City Council by Resolution 13- 340 on August 21, 2013 To establish a minimum of 25% Fund Balance Reserve equal to approximately 3 months of operating expenses with the following Reserve Balances: •Operating Stabilization Reserve of 10% for Catastrophic Emergencies. •Economic Uncertainty Reserve of 10% for Economic Distress. •Unassigned Fund Balance Reserve of 5% designed to protect against cash flow shortfalls. Also established $750,000 City Hall & PARSAC $75,000 FUND BALANCE POLICY The current policy and fund balance allow for the Economic Uncertainty Reserve in the amount of $5.9M Staff identified expenditure budget reductions to avoid the need to use such funds, and maintain the same service level This allows the City to evaluate the actual economic impacts of COVID-19 at mid-year and allocate Economic Uncertainty Reserve funds if absolutely necessary Not listed on previous slide is a reserve account of $3M, received from the renewal of Waste Management’s contract $450k of this Reserve is recommended in the Proposed Budget to allocate to CIP for the Amphitheater BUDGET SUMMARY Analyze Current Economic Conditions Forecast Revenues Forecast Expenditures Prioritize Spending Strategically Plan the Use of Resources BUDGET SUMMARY Fiscally prudent planning and cautious spending models have been developed by staff to ensure the City’s sustainability. Staff identified expenditure budget reductions to avoid the need to use any reserve funds: Economic Uncertainty; Operating Stabilization; Unassigned Reserve; Waste Management Reserve; Measure DD Fund Balance This allows staff to evaluate the actual economic impacts of COVID-19 at mid-year and allocate Reserve funds if necessary. City service levels are not impacted by budget reductions: Virtual City Hall services provide same level of service. Past planning enabled staff to quickly respond to COVID-19 with existing online tools (Planet Bids, Accela, Blue Beam, City App) •RE-NEGOTIATED WASTE MANAGEMENT CONTRACT •POLICE DEPARTMENT IN-HOUSE •FINANCE REORGANIZATION –Recentralize purchasing/Planet Bids •CODE ENFORCEMENT REORGANIZATION –Gain efficiencies and cost savings COVID-19 = $5.4M Revenue Loss CAREFUL PLANNING = BALANCED BUDGET DURING COVID-19 PANDEMIC FISCAL PLANNING = SAVINGS FY 20/21 MENIFEE POLICE DEPARTMENT •TOM HICKS STUDY FY20/21 Budget: $14,722,065 •FY20/21 Budget (200 Patrol Hours): $14,958,391 •Sheriff’s FY20/21 Budget (120 Patrol Hours): $16,734,070 assuming a 7.5% increase •$16,734,070 -$14,958,391 = $1,775,679 Savings •Hourly Rate with 7.5% increase is $201.81 •Sheriff’s FY20/21 Budget (200 Patrol Hours): $22,626,922 •$22,626,922 -$14,958,391 = $7,668,531 Savings for 200 patrol hours Fiscal Year 20/21 Budget Fiscal Year 20/21 Budget – Riverside County Sheriff Update Fiscal Year 20/21 Budget – Riverside County Sheriff Update Fiscal Year 20/21 Budget – Riverside County Sheriff Update Fiscal Year 20/21 Budget Fiscal Year Fiscal Year 2019/2020 Percent 2020/2021 Percent Adopted Budget Increase Projected Increase Riverside County Sherriff 15,635,377 16,734,070 Facility Costs:986,136 986,136 0% Personnel & Operating Costs:14,649,241 2.25%15,747,934 7.50% Hours Budgeted:120 hours 120 hours Patrol Hourly Rate:187.73$ 2.25%201.81$ 7.50% Sworn Officer FTE's:45 45 *188.98 Adjusted Rate BUDGET COMPARISON FY20/21 Menifee PD Savings $7,668,531 Personnel 10,267,224$ Operations 2,813,543$ Murrieta Dispatch 1,877,624$ TOTAL FY 20/21 BUDGET 14,958,391$ **Estimated Revenue 1,500,000$ POLICE BUDGET - 200 Patrol hours Sheriff's Budget - 120 Patrol Hours FY19/20 15,635,377$ *FY20/21 16,734,070$ (7.5% Increase) (201.81/hr)5,892,852$ +80 Patrol Hours FY20/21 Budget 22,626,922$ 200 Patrol Hours **Estimated Revenue 90,000$ 80 Patrol Hours = FY 20/21 CAPITAL IMPROVEMENTS PROJECTS FY 2020-21 CAPITAL PROJECTS Project Category Project Number Project Name FY 20-21 Allocation Transportation CIP 13-03 Holland Road Overpass $3,383,164 Transportation CIP 13-04 Bradley Road Bridge over Salt Creek $2,174,209 Transportation CIP 14-01 McCall Boulevard/I-215 Interchange $700,000 Transportation CIP 20-05 Garbani Road/ I-215 Interchange $646,869 Transportation CIP 20-13 Paloma Wash Pedestrian Bridge $870,000 Traffic Signal PW-TS-03 Menifee Road/La Piedra Road $500,000 St. Improvement CIP 19-02 Murrieta Road -McCall Boulevard to Salt Creek $1,237,589 St. Improvement CIP 20-11 Scott Road and Menifee Road Sidewalk $266,737 St. Improvement CIP 20-12 Adams Avenue Improvements -Phase 2 $219,473 St. Improvement PW-IMP-01 Hillpointe Community Street Resurfacing $975,000 St. Improvement PW-IMP-03 McCall Boulevard -Encanto Road to Antelope Road $924,729 St. Improvement PW-IMP-9 Haun Road Bus Shelter $40,000 Facilities PW-BLD-01 Fire Station #68 -Interior Improvements $200,000 Facilities PW-BLD-02 New Quail Valley Fire Station #5 -Design $820,000 Facilities PW-BLD-03 New City Hall –Feasibility Study Update $200,000 C.S.CS007 Park Amenity Enhancements $113,000 C.S.CS009 Irrigation Upgrades and Control Systems $25,000 C. S.CS010 Evans Park Design/Construction $350,000 C. S.CS014 Park Lighting $50,000 C. S.CS015 Sports Field Lighting $250,000 C.S.CS022 IT Network Upgrades $75,000 C. S.CS023 Trails Connectivity and Enhancements $170,000 C.S.CS030 Central Park Ammenities $900,000 C. S.CS042 Sports Court Resurfacing $100,000 C. S.CS047 Shade Structures $320,000 25 Projects TOTAL $15,510,771 FY 2020-21 Capital Projects Estimated Costs Category Estimated Total Cost % Transportation $ 7,774,242 50% Traffic Signals $ 500,000 3% Street Improvements $ 3,663,529 24% Drainage Improvements $ -0% Facilities $ 1,220,000 8% Parks and Trails (C.S.)$ 2,353,000 15% TOTAL $ 15,510,771 100% FY 2020-21 Estimated Available Funding Sources Fund #Fund Name Available Expenditure % used 100 General Fund $450,000 $450,000 100.0% 105 Measure DD $2,059,400 $2,059,400 100.0% 200 Gas Tax $137,589 $137,589 100.0% 201 RMRA (SB1)$1,706,886 $1,706,886 100.0% 220 Measure A $317,844 $317,844 100.0% 301 Grants $0 $0 310 TUMF $2,941,579 $700,000 23.8% 320 Capital Projects $1,381,174 $1,381,174 100.0% 410 Scott Road RBBD $646,869 $646,869 100.0% 415 Menifee Valley RBBD $973,386 $973,386 100.0% 460 CSA 86 $707,988 $0 0.0% 481 CDBG $219,473 $219,473 100.0% 490 CFD 2012-1 Audie Murphy Ranch $1,696,049 $525,000 31.0% 501 DIF 16 -Fire $61,669 $0 0.0% 502 DIF 16 -Signals $92,340 $0 0.0% 503 DIF 16 -Parks $23,886 $0 0.0% 504 DIF 16 -Trails $11,400 $0 0.0% 507 DIF 17 -Public Facilities $2,984,558 $1,250,000 41.9% 508 DIF 17 -Fire $3,080,073 $820,000 26.6% 509 DIF 17 -Roads $0 $0 510 DIF 17 -Signals $0 $0 511 DIF 17 -Parks $60,861 $50,000 82.2% 512 DIF 17 -Trails $951,246 $690,000 72.5% 520 DIF Citywide -Public Use & Comm. Fac.$116,424 $0 0.0% 521 DIF Citywide -Fire Facilities $496,885 $200,000 40.3% 522 DIF Citywide -Park Improvements $501,704 $373,000 74.3% 526 DIF Citywide -Circulation $2,424,209 $2,424,209 100.0% 527 DIF Citywide -Storm Drain Facilities $485,941 $485,941 100.0% 620 Local Park (Quimby)$481,165 $50,000 10.4% 622 CFD 2015-2 Citywide Parks $243,794 $35,000 14.4% 623 CFD 2015-2 Citywide Trails $0 $0 DEV Developer Deposits $15,000 $15,000 100.0% Total $25,269,394 $15,510,771 Payroll BUDGET PROCESS SUMMARY 1 Annual Budget Kick-Off Meeting 2 City Departments Submittals & Review 3 Preliminary Budget Finalized 4 Budget Adoption (June 3, 2020)5 Mid-Year Budget Adjustments Budget Workshop (May 13, 2020) 6 The Budget Workshop provides an opportunity for staff to introduce the proposed upcoming budget, have a discussion with City Council and answer any questions before City Council adoption. Questions?Thank You.