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2020-06-03 City Council Item No. 12.4b Fiscal Year 2020-2021 Budget Adoption Presentation Regular MEETING - Additional Meeting MaterialsCity of Menifee FY 20/21 Budget Adoption Rochelle Clayton, Deputy City Manager Wendy Preece, Deputy Finance Director Margarita Cornejo, Finance Manager June 3, 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) 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: 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 (Bradley Burns)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 (Measure DD)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) 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- 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 Department Budget reductions: •$3,155 -City Council •$62,306 –City Manager •$143,191 –City Attorney •$11,905 –Finance & HR •$324,553 –Economic Development •$655,570 –Contract Services (including Fire for a planned additional inspector in FY20/21) Most reductions are in Professional Services for projects. SUMMARY of Expenditure Reductions to Balance the Budget -3- Hiring Freeze –Approximately $1.5M Department Budgets –Approximately $1.2M Measure DD –Approximately $1.474M •Measure DD reductions resulted in reduction of Capital Projects funding TOTAL REDUCTIONS = $4.174 Million ANIMAL CONTROL UPDATE -3- Animal Control was budgeted for County proposal amount. o Since that time, the Joint Powers Authority (JPA ) associated with Animal Friends of the Valley (AFV) had a Board meeting at which time they reviewed the possibility of the City joining the JPA to receive sheltering services. o An interim agreement for sheltering services will be presented to Council at its meeting on June 17, 2020. o There would be no increase to the proposed budget if the City Council provides that direction. 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 –1 Public Works Inspector II Most Departments are impacted by the freeze: 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 Total Public Safety costs comprise 52.08%, or $31,087,118, of the combined Measure DD and General Fund budget. FISCAL YEAR 2020/21 Revenue vs. Expenditures FISCAL YEAR 2020/21 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 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 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 FY 20/21 MENIFEE POLICE DEPARTMENT POLICE BUDGET 80 Patrol Hours = 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 •RE-NEGOTIATED WASTE MANAGEMENT CONTRACT •POLICE DEPARTMENT IN-HOUSE •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 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 (February 2021) Budget Workshop (May 13, 2020) 6 After Council Adoption –Next steps are to evaluate the ACTUAL revenues and expenditures, and return to Council in Approximately February 2021 with Mid- Year Budget Adjustments. Questions?Thank You.