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Home My WebLink About5A OCRCITY COUNCIL STAFF REPORT DATE: February 11, 2021 NEW BUSINESS SUBJECT: FISCAL YEAR 2020/2021 MID-YEAR BUDGET REVIEW FROM: David H. Ready, City Manager BY: Marcus L. Fuller, Assistant City Manager Nancy Pauley, Director of Finance/City Treasurer SUMMARY This item presents a review of the City's General Fund revenue and expenditures for the first half of Fiscal Year 2020-2021 (FY 20-21). RECOMMENDATION: 1. Amend the FY 20-21 Budget to increase General Fund budgeted revenue by $8,356,781 to $97,848,772 and to increase Measure J Capital Fund budgeted revenue by $2,142,391 to $11,069,513; 2. Amend the FY 20-21 Allocated Positions and Compensation Plan revising the "Frozen and Unfunded" allocated position list to identify 2 additionally funded positions: Information Technology Technician, and Occupational Health & Safety Specialist; 3. Amend the FY 20-21 Budget to appropriate $230,000 from unrestricted General Fund balance for personnel costs; and 4. Provide direction to staff as appropriate. BACKGROUND: Over a series of meetings from March 19 to June 30, 2020, the City Council revi~wed financial projections for reduced General Fund and Measure J Capital Fund revenues directly caused by the COVID-19 pandemic. Considering reduced General Fund revenues, City Council was challenged with revising the previously adopted biennial budget for FY 19-20 and FY 20-21 and quickly implementing cost savings measures through both non-personnel and personnel measures. 2City Council Staff Report February 11, 2021 --Page 2 FY 2020/2021 Mid-Year Budget Review Given the unpredictability with how the COVID-19 pandemic will be mitigated and when a vaccine will be readily available to the general public, the City incorporated a very conservative approach to budgeted revenues generated in large part due to our tourism economy through transient occupancy taxes ("TOT") at hotels and sales taxes at restaurants, bars and retail stores. The adopted FY 20-21 budget was based on an overall reduction of $44,627,831 in General Fund revenue as compared to the original FY 20-21 budget adopted as part of the biennial budget in June 2019 due to anticipated reduced business activity over the entire FY 20-21 period due to the COVID-10 pandemic. This is an overall reduction of 36% from the originally budgeted FY 20-21 General Fund revenue of $125,482,131. Reduced business activity was expected through COVID-19 restrictions imposed on the City's tourism economy with indoor restaurant closures, bar closures, reduced occupancy of retail stores, lack of any organized group events or conventions, cancellation of all large-scale events, etc. All these restrictions were expected to result in lower occupancy rates of hotels, closure of some restaurants and retail stores, and continued closure of some bars that do not offer meal service. This, in turn, was expected to translate into lower TOT and sales tax revenue generated in the City. The Governor also issued a 4-tier plan for partial reopening of the state's economy predicated on the risk level and specific metrics by the County related to COVID-19 cases per 100,000 residents and the positivity rate. Riverside County's metrics improved in the summer allowing for a partial reopening consistent with the "Red" or "Substantial Risk" level of the Governor's plan, however, COVID-19 cases increased in Riverside County requiring the County to return to the "Purple" or "Widespread Risk" level -closing all indoor operations at restaurants and other facilities. On December 5, 2020, the Governor issued a Regional Stay at Home Order that was effective for the Southern California Region on December 6, 2020. This Order eliminated all in-person outdoor dining and further restricted indoor occupancy capacities for certain sectors of our business community. The Regional Order was just lifted on January 26, 2021. It is this very unpredictability with the COVID-19 pandemic that caused Staff to develop the FY 20-21 budget with a very conservative approach and a "Rolling Budget" model to address any further reductions (or additions) to personnel and operations that may be necessary as we proceed through the fiscal year. On June 30, 2020, the City Council adopted the revised FY 20-21 budget with this unpredictability of the COVID-19 pandemic's impacts on the City's finances in mind. A summary of the original and revised/adopted FY 20-21 General Fund and Measure J Capital Fund revenue budget is shown in Table 1 and the original and revised/adopted FY 20-21 General Fund expenditure budget is shown in Table 2 on the next pages. 3City Council Staff Report February 11, 2021 --Page 3 FY 2020/2021 Mid-Year Budget Review c=-----------·-· Original FY 20-21 f Adopted FY 20-21 l 'CATEGORY l Budget I Budget Reduction I I I h-oT --====-----· ·$36,314,528 · $14,162,666 1 61% ~ l'pi-operfyT~----• $27,776,442 r--$25,832,091 I ~ ~ Sales Tax ----$23,911,96~-r--Ta":847,358 J 63% I lWty Users Tax ---·-··---·-_ $7,386,840. ________ $6,278F14 __ 15% _..J 1 Motor Vehicle in Lieu Tax . ____ $4,944,960 j $4,549,363 -t----8% I 1l6:~~~= ;_ =~-· --------· ~;:::;r:~ ---~g~;:~~~ I 16;zo i IAII other taxes···· -~-·-·--·------$5 353 399 l ----·-$4 913 933 .... ______ .,, __ 8% ·--·-·----1 --··---·-· ---------·-· ·--· ::!!!=!!!:::t:!!!::::!i::::i=I:::!!:::!!~.-!,.. ·-· -·-==!::!:~::::I::=::!!!~ ---·----· -_,, ___________ .... f Total ~xes __ _ $ _!_!1,~7~~99 _1 ~-= __ 69,SS_;_sos J _ ~% _________ 1 ·Vacation Rental Permit •--$2,005,000_J_ ___ .. ______ $_1,704,250 ' ____ 15% l [. BBuu_si!~,niengss~L-~trmceintsse P-e-·r-.. m--,.-t .. ···---·-··--··· $11..~19,000 -~----------···-.. -~J,386,00Q .. 1 10% .... _ .... ----~ $1,120,000 _ __ _ ____ $840,000 I 25% ·---~ J:lanning_Zzoning F~es .. ·-•-·-.. ., .. $485,ooq l ..... ,. ... ,_. ____ $4q5,?50 ·--·· 1_?._~ ··-·-·---··"I Public Works Permit Fees $394,000 1 $394,000 1 , ----· -···---"·--.. -·-· ·-· -·-'-,,--·---·-· --··---~ 1.~11 other fee~---··-·---·--· .. ·--···--·--··--··--·---$252 000 ,-.. -----···· .. $429 840 J ··-----·-: 71 % __ .. _ .. _ .. __ ;!~!!~ Fees __ $ 5,796,000 l $ . 5,159,340 1 .. 11% ! ! ... -·· --·=··::~----· ~~-T -~: --~~-:~~-= ·-~=~~~L=~=~~~-·-"----~~~=~-~-~ Admin Service Charges $2,297,900 $1,608,530 ! 30% i r..... -·-· -· ·--· ~ -----·---.. -· --·--· -·---···-----__ .,_______ --.. ·-· -------·1 j Fire Inspection Charges $1,312,800 $726,520 ~ 45% I ··--·-·-·· --···----··· --· _J. ____ , ...... ____ ·-··-··-· ·---·-·--Recreation Charges $770,000 I $385,000 j 50% : --· ·--· ---··----· __ .,_____ --·-· --· .. --·-·--· ·--r·· --------· -·---·-···· -· Police Dept Charges $626,000 $486,100 l 22% 1 t· ---·-· -·· ----·-----·-·--·-·-· --· ·-· ........ --····-·······---·-· ·--. . -----··-· -· ·-·----.. -----· 1 Building Plan Check $600,000 ; $540,000 10% ! -----·-·-----...... ·----~ --· -....... -.• -· ... ·-·---~·1· ..... ..... ._ ... , --,, ·-·--····· -·---· --··· •· ···i All ot~~E.E.ha rges ... --.. --$955 .400 ' ·---··----$988 159 ·-f ________ .. _ ~~ o/~ _ ... _ ......... ~ ~!ota~_~harg!~-____ -·-·-·-$ _______ 6,562!~~0_ l ______ ~_!_34,309_ .. l----··-·-----· -~~-% ----·-----·~ ! . ' l i I i r ·-·-· --•---... -......... ·-··-··t···•·-•----·-----· ---·-· · · ----···-· ··--· .. --7 Fines~ -~-~nalties ____________ --·-·---.. $1,066,410 l _______________ $603,205_J _________ 43% _______________ J ! l i--· -·--··---··-·· ····-··· -· -·---·-···· ·---· . -...... _, t-·· -.. -·---···-----.. --.L ·-·--····· ---· --·-·-·• .. •· ....... l LMi~_cell~_neous_~evenu_~ ___ .... __________ $979,922 ~--···--$804,941 r·----·-18% ________ J i I $ ·-125,482,131 · s-····-·--so,s54,300 t~==----·~:_36% -----····--·.i 0 •--•-•--N••-.. -•N"•------! Total I-· ·-----·-----! ! __ .., __ _ ----------, .... -' Transfers In $ ---·----~---1$ ---•------·---··~ 14,3~0,0.0_0 ___ i ____ _ !Total Revenues -····· --·--.... $--1-2-5-,4-8-2-, 1_3_1 _1 _$ ___ 95-,-20-4-,3-0_0_,_I .... --·--· '24% -··-·-·---r---· --· -·-·-------I . --~~ilSul'e J _ Ji ___ 16,126,~ s _ .. 5,9_66,~oo ___ I __ 6~% ___ .. -·-···--Tab1e 1 -General Fund Revenue Budget 4City Council Staff Report February 11, 2021 --Page 4 FY 2020/2021 Mid-Year Budget Review CATEGORY ·=roriginal FY 20-21 I Adopted FY 20-211 1 Budget i Budget ·---· I ·----· -I General Government $44,800,200 $37,330,379 r --·-· $33,302,452 r Police $37,221,500 Fire $19,996,709 $17,364,aa9 r -,, Parks and Recreation $8,988,500 $7,131,780 j I PERS Rese~~ ·---.. -$3,000.2.QQ_0 . $6,000,000 ---.. -·--,. iTransfers Out $11,604,100 $12,000,300 I lJotal Expenditures $ 125,611,000_lt__ 113,12~,~o~_[ --Table 2 -General Fund Expenditure Budget STAFF ANALYSIS: I % Change I I ---·--16.7% -10.5% -13.2% -··----20.7% ---···-100.0% I ____ .j 3.4% I I -9.9% l ·-· --·-·····-' The FY 19-20 Comprehensive Annual Financial Report (CAFR) was recently completed and is being filed separately with the City Council. Final TOT, sales tax, and other revenues received in the final July/ August audit period for FY 19-20 were improved over the estimates provided to City Council on September 24, 2020. The FY 19-20 CAFR identified total General Fund revenue of $121,295,263 (inclusive of transfers in) and total General Fund expenditures of ($124,074,932) (inclusive of transfers out) resulting in a final FY 19-20 deficit of ($2,779,669)1. Based on the final audit determined by the FY 19-20 CAFR, the City's unrestricted General Fund balance as of June 30, 2020 was $26,320,928. The restricted CalPERS reserve balance as of June 30, 2020 was $16,250,000. Total General Fund balance was $42,570,928, equivalent to 33.15% of the FY 19-20 total General Fund expenditure budget. A revised summary of the FY 19-20 General Fund revenue, expenditures and balance is provided as Table 3 on the next page. This information is provided as it identifies the starting General Fund balance for the FY 20-21 budget. 1 Table 3 identifies a final deficit of ($7,141,533) but Staff notes this total includes $4,361,864 in cash balance carried over for continuing appropriations on open contracts and purchase orders, and for other reserved purposes. 5City Council Staff Report February 11, 2021 --Page 5 FY 2020/2021 Mid-Year Budget Review ----------------,----------------•-_____ I------FY2019-20 Revised Budget Beginning Proji,cted Fund_iBalance -Unrestricted-_____ $ Revenues _ 33,462,461 94,956,915 Addditional Revenues Taxes 11-12-20 Addditional Revenues Measure J Taxes 11-12-20 Transfers In , Total Revenues l · I ------.-•-------••----------•--·A--•----------------------• I Expenditures Restricted for Cont Appr /Other Recommended Addt'I Expenditures 9/24/20 Recommended Addt'I Transfers Out 9/24/20 Transfers Out Total Expenditures Surplus / (Deficit) Ending Projected Unrestricted Balance Sutotal CalPERS Reserve Set-Aside 8,769,010 103,725,925 {101,541,810) (17,720,876) (119,262,686) (15,536,761) $17,925,700 $ 16,250,000 .... ----------CalPERS Set-Aside/Fund Balance $ 34,175,700 Fund Balance Unrestricted Total 15.03% I FY 2019-20 1 1 FY 2019-20 . Estimated --1-,__ Actual _ _J _I,_ Final .+ . .1.. Final _ : 09-24-20 I I 12-31-20 i $ 33,462,461 $ 33,462,461 I i--. +-·----------·----1 I I -·t -112,439,828 ! 112,439,830 r ---··-____ ,,_ ----------~ --: ---•· --8,855,433 121,295,261 (103,689,880) (450,000) (6,000,000) (17,624,841) (127,764,721) r -i (6,469,460) $26,993,001 $ 16,250,000 $ 43,243,001 .. ·t : 8,855,433 I 121,295,263 7· -(100,000,091) l I (4,361,864) -! .. ------· -. ---... ---... ! (24,074,841) (128,436,796) (7,141,533) $26,320,928 $ 16,250,000 $ 42,570,928 i 21.13% 20.49% ~---··---Fund Balance CalPERS Reserve Total 13.63% 12.72% ' 12.65% ---.. -----·---···-··-----Fund Balance% Total 28.66% 33.85% 33.15% Table 3 -General Fund Balance Schedule The purpose of this staff report is to present to City Council the "Mid-Year" (July to December) FY 20-21 General Fund budget review. In tracking City revenue, it is important to understand the timing and collection of the City's receipts. Payment of applications and permits or various City charges and services occur daily and can be monitored in real-time. However, "Fee" revenue accounts for $5,159,340 (6.4%) and "Charges" revenue accounts for $4,734,309 (5.9%) of FY 20-21 revenue of $80,854,300. Staff did not identify monthly revenue projections for "Fees" and "Charges" but did identify an overall reduction of 11 % for "Fees" and 28% for "Charges" in the FY 20-21 budget. 6City Council Staff Report February 11, 2021 --Page 6 FY 2020/2021 Mid-Year Budget Review In the first half of FY 20-21, the City collected $3,069,697 in "Fees" which compares to $3,315,873 collected in the first half of FY 19-20, a reduction of $246,176 from FY 19-20 (-7%) but higher than budgeted for that period of time by $490,027. Revenues from "Fees" was 59% of annual revenue at end of December -higher than budget. In the first half of FY 20-21 the City collected $2,381,324 in "Charges" which compares to $3,198,357 collected in first half of FY 19-20, a reduction of $817,033 from FY 19-20 (-36%) but exceeding budget by $14,082. Revenues from "Charges" was 50% of annual revenue at end of December -exactly on budget. Most of the City's General Fund revenue ($69,552,505 of $80,854,300 -or 86%) is generated by various taxes with property taxes, Transient Occupancy Taxes (TOT) and sales taxes generating most of it. Property Taxes Property taxes represent the largest segment of taxes generated (37%). Given the surprisingly strong real estate market driven by historically low mortgage rates, at this time Staff does not believe property tax revenues will decrease -but will increase over FY 19-20 as real estate values continue to appreciate. However, the FY 20-21 General Fund budget anticipated a -7% reduction in property tax revenue. Property taxes are received in staggered payments from Riverside County; in the first half of FY 20-21 the City has received $9,193,444, equivalent to 35.6% of annual budgeted property tax revenue. This compares to $8,558,131 received in the same time period in FY 19-20 -reflecting an increase of+ 7% over FY 19-20. Assuming this trend continues, Staff anticipates total property tax revenue for FY 20-21 to exceed FY 19-20 property tax revenue of $25,482,084 by 7%, generating $27,265,830 in FY 20-21 -exceeding budgeted revenue of $25,832,091 by $1,433,739. At this time, no adjustment to the FY 20-21 General Fund budget is recommended as we wait for receipt of additional property tax payments from Riverside County over the next several months. Of the $69,552,505 in budgeted tax revenue, $14,162,666 (20%) is generated by TOT (hotels and vacation rental properties) and $8,847,358 (13%) is generated by sales taxes (excluding Measure J). These two segments of taxes are the most directly affected by an economic downturn and are critical to monitor. 7City Council Staff Report February 11, 2021 --Page 7 FY 2020/2021 Mid-Year Budget Review Transient Occupancy Taxes (TOT) Payment of TOT by hotels and vacation rental properties are due to the City by the end of the following month, meaning October receipts were due by November 30, November receipts were due by December 31, and December receipts were due by January 31. Therefore, to have a true understanding of the City's financial status in the first half of FY 20-21, Staff has used the "cash-basis" approach where revenues received in the month are tracked and compared to budgeted revenue. Previously reported at the First Quarter FY 20-21 Budget update, Table 4 below compares actual First Quarter FY 20-21 TOT revenue to budget. --.. . ---·-···· --·· -· .. __ _. ________ -----·-1 July August September Total j l ·-····----· -..... ·--TOT FY20-21 Budgeted Revenue $ 440,593 $ 406,421 $ 501,724 $ 1,348,738 ___ _j TOT FY20-21 Actual Revenue $ 1,205,044 $ 1,954,760 $ 2,973,988 $ 6,133,792 ........ ,._. -·--·--·-· -............. Difference $ 764,451 $ 1,548,339 $ 2,472,264 $ 4,785,054 -...... -·· .. .......................... , ... Table 4 As shown in Table 4, TOT payments received in First Quarter FY 20-21 exceeded budget by $4,785,054. Table 5 below compares actual Second Quarter FY 20-21 TOT revenue to budget. ---------.. --------... ~ --·--. -----... -r · October j November . i . ! December j Total j TOT FY20-21 Budgeted Revenue $ 727,360 $ 933,116 $ 1,476,730 $ 3,137,206 : TOT FY20-21 Actual Revenue $ 2,352,156 $ 2,958,820 $ 2,879,472 $ 8,190,448 I Difference $ 1,624,796 $ 2,025,704 $ 1,402,742 $ 5,053,242 •-•--•---w••-.. • ,.,_,.,... _, --• ,,.., o, ".,_ Table 5 As shown in Table 5, TOT payments received in Second Quarter FY 20-21 exceeded budget by $5,053,242. This positive change is the direct result of the City's stronger than expected local tourism economy (as noted, on a cash-basis these TOT revenues reflect payments made at hotels or vacation rental properties in the preceding month for the September through November period). 8City Council Staff Report February 11, 2021 --Page 8 FY 2020/2021 Mid-Year Budget Review As a further comparison, Table 6 identifies Second Quarter FY 20-21 TOT revenue for the 3-year period of FY 18-19, FY 19-20 and FY 20-21. ! I I I October November December Total I I --~~ ...... --TOT FY18-19 Revenue $ 2,169,363 $ 2,446,059 $ 3,135,116 $ 7,750,538 __ _... ..... -... , .. ,_ TOT FY19-20 Revenue $ 2,238,030 $ 2,488,308 $ 3,108,906 $ 7,835,244 TOT FY20-21 Revenue $ 2,352,156 $ 2,958,820 $ 2,879,472 $ 8,190,448 ........... ,_, __ Table 6 As shown in Table 6, TOT revenue in Second Quarter FY 20-21 is +4.5% above FY 19-20 TOT revenue (an increase of $355,204), and +5.7% above FY 18-19 TOT revenue (an increase of $439,910). Staff will continue to monitor the strength of the City's tourism economy and the occupancy rates at hotels. In discussions with PS Resorts, due to the lack of any scheduled special events or conventions, hotel stays are booked in the immediate near-term window of 1 - 7 days. This prevents an accurate projection of hotel occupancy rates beyond more than 1 - 2 weeks. Further, the Regional Order issued by the Governor on December 5 that was in effect through January 26 may have more of a direct impact on December and January TOT revenues (received in January and February) that is not reflected in this report. Table 7 on the next page tracks monthly TOT revenues for the entire fiscal year period for FY 18-19, FY 19-20, and FY 20-21. Staff will continue to track TOT revenues on a monthly basis under the City's "Rolling Budget" model. 9City Council Staff Report February 11, 2021 --Page 9 FY 2020/2021 Mid-Year Budget Review TOT Taxes -·-·---(1)Cash Basis _____ (_1)_Ca_sh Basis Adopted FY18-19 FY19-20 FY20-21 ~---·--·-·-•---·-----•---_______ ---· Actua I _ ---· __ Actual ________ Budget July $ 2,395,808 _! ____ _±.,425,609 $ 440,593 $ A~g $ 1,276,428 $ -··--2,145,936 $ 406,421 $ -~ept $ 2,3362..564 $ 2,~0~,8~6-J ._ -·---· 501,724 $ Oct $ 2,169,363 $ 2,238,030 $ 727,360 $ I-•-------------------Nov $ 2,446,Q.~ $ 2,488,308 $ _ ~332..1~-$ Dec $ 3,135,116 $ 3,108,906 $ 1,476,730 $ ~~"-$ 2,a3o,5a5 $ ___ 2,a64,76o $ ·---~-1.2a9,142 eb $ 2,861,639 $ 2,990,705 $ 1,345,817 Mar $ 3,319,417 $ 2,414,906 $ 847,102 ___ .. _._ ,_ ·--··--~---· ·-... -·-·--·-~·-------· ; .~P!_ $ ___ --~,389,~.9~. $ 2,366_J_iQ_ J 2,020,916 ; May $ 5,014,551 $ 888,331 $ 2,436,511 -----·--·---·7 (1 )Cash Basis FY20-21 --· -·-----Increase/ •---·---· ·-· Actual Decrease ·--~ .. -1,205,044 $ 764,451 1,954,760 $ 1,548,339 2,973,988 $ 2,472,264 I ------·-· ·-·-·7 2,352,156 $ 1,624,796 ---------·-· 2,958,820 $ 2,~25,?q~ I 2,879,472 $ 1,402,742 •--· ·-·· --------·-·-----•----···-,,_ ·-· r-·-·-------·---·----· --__ .. __ i J-~~. $ 3,309,018 $ 489,882 $ 1,737,234 i L ... -----··-__ $_ 3~,483,657 $ ___ 26,429,008 $ 14,162,6~6. $ 14,324,239 _t_ .. ___ 9,838,_29~ .. J Table 7 With TOT revenues received at $5,053,242 over budgeted TOT revenues in Second Quarter FY 20-21, Staff recommends the City Council amend the FY 20-21 budget to adjust TOT budgeted revenues by this amount2. Staff also notes that TOT revenue received in the first half of FY 20-21 is 101 % of annual budgeted TOT revenue for FY 20-21. Sales I Use Taxes Sales and use taxes are paid directly by customers to the vendor (restaurants, retail stores, etc.) at the time of payment for goods and services for which sales or use taxes apply. Sales tax is applied to retailers on tangible goods and is owed to the state, and is added to the price retailers charge customers. Use tax is also charged to certain purchases of goods if the retailer does not pay sales tax and includes on-line purchases from out-of-state retailers. Sales/use tax payments are paid directly by retailers to the state, and the state then distributes those payments back to the Counties and Cities or other special taxing districts. Generally, the City receives sales/use tax payments for sales generated in the City ( or for on-line sales for goods and products delivered to properties in the City) two months after the sale. Sales/use taxes paid by customers in October are not received by the City until December, sales/use taxes paid in November are not received until January, 2 TOT revenue for the First Half of FY 20-21 is $9,838,295 over budget; TOT revenue for the First Quarter FY 20-21 was $4,785,053 over budget and at the First Quarter Budget Update the budget was amended to increase TOT revenue by this amount. 10City Council Staff Report February 11, 2021 --Page 10 FY 2020/2021 Mid-Year Budget Review and sales / use taxes paid in December are not received until the end of February. Therefore, to have a true understanding of the City's financial status in the Second Quarter, Staff has used the "cash-basis" approach where revenues received in the month are tracked and compared to budgeted revenue. Previously reported at the First Quarter FY 20-21 Budget update, Table 8 below compares actual First Quarter FY 20-21 sales tax revenue (excluding Measure J) to budget. .... --·----·· .... -----... -r ------r l --r -l July August I September 1 Total I I I Sales Tax FY20-21 Budgeted Revenue $ 315,566 $ 347,069 $ 394,535 $ 1,057,170 Sales Tax FY20-21 Actual Revenue $ 2,148,660 $ 991,568 $ 1,769,583 $ I 4,909,811 l I Difference $ 1,833,094 $ 644,499 $ 1,375,048 $ 3,852,641 .. _ ...... ,._., __ .. ..... ---~ __ ,.... ... --Table 8 As shown in Table 8, actual First Quarter FY 20-21 sales tax revenue (excluding Measure J) exceeded budget by $3,852,641. Table 9 below compares actual Second Quarter FY 20-21 sales tax revenue (excluding Measure J) to budget. .... .... --_ .. -.... . --------... -· --· ··--·-1 l October November December Total ' L --· I Sales Tax FY20-21 Budgeted Revenue $ 554,978 $ 730,385 $ 840,923 $ 2,126,286 Sales Tax FY20-21 Actual Revenue $ 1,824,908 $ 1,542,882 $ 2,062,035 $ 5,429,825 Difference $ 1,269,930 $ 812,497 $ 1,221,112 $ 3,303,539 Table 9 As shown in Table 9, actual Second Quarter FY 20-21 sales tax revenue (excluding Measure J) exceeded budget by $3,303,539. This positive change is also the direct result of the City's stronger than expected local tourism economy. (As noted, on a cash-basis these sales tax revenues reflect payments made at restaurants and retail stores for the August through October period). Staff notes the impact of the state's Regional Order on the City's businesses is not reflected here and will not appear until the Third Quarter FY 20-21 budget update. As a further comparison, Table 10 on the next page identifies the sales tax revenue (excluding Measure J) for the period of October through December for the 3-year period of FY 18-19, FY 19-20 and FY 20-21. 11City Council Staff Report February 11, 2021 --Page 11 FY 2020/2021 Mid-Year Budget Review __ .._ _______ ..,_ --·-r ---··-·--------, -,--·--· October I November December I Total -· ---~ ......__, ·-_ .. _ ... ,._ .. ._ ... ·-·-Sales Tax FY18-19 Revenue $ 1,608,493 $ 2,377,484 $ 1,930,063 $ 5,916,040 Sales Tax FY19-20 Revenue $ 1,578,141 $ 1,707,623 $ 1,947,694 $ 5,233,458 Sales Tax FY20-21 Revenue $ 1,824,908 $ 1,542,882 $ 2,062,035 $ 5,429,825 --· Table 10 As shown in Table 10, actual Second Quarter FY 20-21 sales tax revenue (excluding Measure J) is +3.8% above FY 19-20 sales tax revenue (an increase of $196,367); but is -8.2% below FY 18-19 sales tax revenue (a decrease of $486,215). Table 11 below tracks monthly sales tax revenues (excluding Measure J) for the entire fiscal year period for FY 18-19, FY 19-20, and FY 20-21. Staff will continue to track sales tax revenues on a monthly basis under the City's "Rolling Budget" model. -------·----···-----·-· ---·· ·----·-----------------·· -Sales Taxes [. ···--··-···-. _ (1)Cash Basis -· ___ (1)Cash Basis _ ---Adopted ___ _ L-··--_ _, _____ .fY18-19 -·---··· _____ fY.19-20 ·-··--·-· __ _FY20-21 --·····-i Actual Actual Budget !"-· _,._, ___ . --· .•.. -'_~uly $ _ _!_~_569,19~_ $ _ ... .?.~052,1~-~-$ ·-··-··-315,566_ $ Aug $ 1,540,406 $ .!_,803,236_ $ ___ . ,_347,069 $ Sept $ -~_,721,72~ $ __ ~.,735,57I_. $ __ 394,535 $ L.Q~.! $ _ ..... ~ ,608,4~~. t, .. _ _:!. ,578, 14 !_ $ ··-···-· §5-_4,97~ $ i Nov $ 2,377,484 $ 1,707,623 $ 730,385 $ l. ··-· .. .. -·-· I Dec $ 1,930,063 $ 1,947,694 $ 840,923 $ t --·-• (1)Cash Basis FY20-21 Actual 2,148,660 991,568 1,769,583 1,824,908 1,542,882 2,062,035 I ! Increase/ 1 -··· Decrease · 1 $ 1,833,094 , .. ·-·-· ~ $ 644,499 $ 1,375,048 $ 1,269,930 _ --· I $ 812,497. $ 1,221,112 jJan $ 1,772,943 $ 1,770,364 $ 1,082,886 -··----·--·-·······-......... J r Fe·b $ ---2, 179,244 $ -2,648,464. $ --946,265. i L -· --·-·-·---·---···----· ---·· ·--... ··•--· -----·--·1 ! Mar $ 2,196,128 $ ___ ?,102,81~_ $ ··----· 755,274 _______ ! '._ Ae_r $ _ --~,013,66.?_ $ -~_,849,64i. $ 917,902 l •-· ---··-...... --··----. j i_Ma_y $ .. ~.447,7~Q $ ____ _780,032 $ 909,290 ____ --·-·--------l . Jun $ 1,819,330 $ 1,762,940 $ 1,052,286 I -·---··-........, _____ ..,_ _____ +------+---------1i-------_; ----$ __ }3,176,41!. $ ·-21,738,699_ $ ~,847,359 $ 10,339,636 $ ... 7,1~_~,180 j Table 11 With sales tax revenues received at $3,303,539 over budget in the Second Quarter of FY 20-21, Staff recommends the City Council amend the FY 20-21 budget to adjust sales tax budgeted revenues by this amount3. Staff also notes that sales tax revenue received in the first half of FY 20-21 is 117% of annual budgeted sales tax revenue for FY 20-21. 3 Sales tax revenue for the First Half of FY 20-21 is $7, 156, 180 over budget; sales tax revenue for the First Quarter FY 20-21 was $3,852,641 over budget and at the First Quarter Budget Update the budget was amended to increase sales tax revenue by this amount. 12City Council Staff Report February 11, 2021 --Page 12 FY 2020/2021 Mid-Year Budget Review Measure J Sales Tax Previously reported at the First Quarter FY 20-21 Budget update, Table 12 below compares actual First Quarter FY 20-21 Measure J sales tax revenue to budget. I l ·-·------··-· ! l i July August I September Total ! I ~ ---------·-· . ·-I J FY20-21 Budgeted Revenue $ 195,554 $ 216,610 $ 282,663 $ 694,827 -· --··-·""--• ..-•--·----· . .,. __ ,_ ..... --~----· ·---·-· Measure J FY20-21 Actual Revenue $ 1,540,834 $ 853,771 $ 1,260,444 $ 3,655,049 .~. ·---~-·--· ·-·--·-·· ... --,.,.-........ -... -· ---·--••"'· ·--· Difference $ 1,345,280 $ 637,161 $ 977,781 $ 2,960,222 ---·-··-·-·-· ··--·-•.,,--, .. ,_,,_ --·-------.. ·-----· ---·--· ... ,. ·--· ., .. __ ·-· -· ...... ··---· ,_,_, ·--· ....... ~-·-·--... Table 12 As shown in Table 12, actual First Quarter FY 20-21 Measure J sales tax revenue exceeded budget by $2,690,222. Table 13 below compares actual Second Quarter FY 20-21 Measure J sales tax revenue (excluding Measure J) to budget. ! ---· ·-..... -----..... r October November December l Total l 0 -0000. __ , --~--•-.• Moo•<•• -------_,.,_ ·----·-·--Measure J FY20-21 Budgeted Revenue $ 426,741 $ 468,348 $ 819,994 $ 1,715,083 I i ! Measure J FY20-21 Actual Revenue $ 1,359,801 $ 1,084,702 $ 1,412,971 $ 3,857,474 I 1 Difference $ 933,060 $ 616,354 $ 592,977 $ 2,142,391 ,_.._...__ .. -.. ........ w,,,. .. .,,.... ... ,_..__,.., ._ ,.,, _ _.., .. ~ ... --····--... -.. Table 13 As shown in Table 13, actual Second Quarter FY 20-21 Measure J sales tax revenue exceeded budget by $2,142,391. As a further comparison, Table 14 identifies the Measure J sales tax revenue for the period of October through December for the 3-year period of FY 18-19, FY 19-20 and FY 20-21. r -----·· ·-·-··----..... -----·--··--··-··· -.......... ········--·:----·-----·-··-r-----···-·--···••·-•-----·1 ' l October November I December Total i .. ···-·--......... -·---· _, _______________________ ! Measure J FY18-19 Revenue Measure J FY19-20 Revenue $ 1,225,007 $ 1,372,704 $ 1,394,758 $ 3,992,469 $ 1,155,050 $ 1,188,251 $ 1,357,357 $ 3,700,658 MeasureJFY20-21 Revenue $ 1,359,801 $ 1,084,702 $ 1,412,971 $ 3,857,474 Table 14 13City Council Staff Report February 11, 2021 --Page 13 FY 2020/2021 Mid-Year Budget Review As shown in Table 14, actual Second Quarter FY 20-21 Measure J sales tax revenue is +4.2% above FY 19-20 Measure J sales tax revenue (an increase of $156,816); but is -3.4% below FY 18-19 sales tax revenue (a decrease of $134,995). Table 15 below tracks monthly Measure J sales tax revenues for the entire fiscal year period for FY 18-19, FY 19-20, and FY 20-21. Staff will continue to track sales tax revenues on a monthly basis under the City's "Rolling Budget" model. ,.......... ____________ M_e_a_s_u-re_J_S_a_le_s_T_a_x-es ______________________ l (1)Cash Basis (1)Cash Basis Revised (1)Cash Basis I J -··----.. -· ·-FY18-19 FY19-20 FY20-21 FY20-21 Increase/ .... ___ .... I __ ,.,, __ ., ___ , ............. __ Actual Actual Budget Actual Decrease -···-, .... -·~····-SO•••-----•----·--........... .... _.,.,_ ~----··-1,345,280-~ ~~-I~_ $ 1,190,015 $ 1,489,086 $ 195,554 $ 1,540,834 $ .. Aug_ $ 1,157,051 $ 1,146,909 $ 216,610 $ 853,771 $ 637,161 .. _,_,...,,,..,..,.,._ -...... , ·-.. -......... -.-............ i~~_e_! $ 921,434 $ 1,199,738 $ 282,663 $ 1,260,444 $ 977,781 ____ .. .,, _______ ., _____ .,._,_ __,,_ ... ____ ... , , .. __________ Oct $ 1,225,007 $ 1,155,050 $ 426,741 $ 1,359,801 $ 933,060 --~---------------·-•-· .. Nov $ 1,372,704 $ 1,188,251 $ 468,348 $ 1,084,702 $ 616,354 . _., ______ .... ,_ .. __ .... , ................ ~---.-..... .-........ -·-·-----·--~·-·"'"""_, ·------··-! Dec $ 1,394,758 $ 1,357,357 $ 819,994 $ 1,412,971 $ 592,9~?.__J ------___ .., ........ , ......... ,..,., Jan $ 1,291,276 $ 1,287,324 $ 626,222 I --····-··-.... , ... _.. . .. _ .. ·~·-••·•--,.,.., ____ ,_"' --~---·--............ ,_, ..... ._._ ____ : ~ $ 1,366,766 $ 1,756,619 $ 613,241 f ·-··-·-·-·--........ ------···--·· ·--! $ 1,540,628 $ 1,423,604 $ 526,411 i l ..... __.._. __ ·-··~·-· ----·• .,,._ ... ,,_. ........................ _'",.,_.,_...,_, ~---~· ..,., ···•-•<>• ·-····--··--·-··-··· ········--·-j $ 1,449,640 $ 1,228,280 $ 473,233 I r··---·-··· .. .._ __ .. , -~--·---· ·-··! i.~~~ $ 1,545,175 $ 588,549 $ 730,143 I -··---·-·-·· . ...-.--~ ·-······---J ~ __ Jun_ $ 1,300,354 $ 1,250,141 $ 587,740 i l ___ $ -·-, 15,754L808. _$ _.,., ____ 15,070,907 .. $ 5,966,900 $ 7,512,523 $ 5,102,613 ! ! _______ . _____ .l Table 15 With Measure J sales tax revenues received at $2,142,391 over budget in the Second Quarter of FY 20-21, Staff recommends the City Council amend the FY 20-21 budget to adjust Measure J sales tax budgeted revenues by this amount4. Staff also notes that Measure J sales tax revenue received in the first half of FY 20-21 is 126% of annual budgeted Measure J sales tax revenue for FY 20-21. 4 Measure J sales tax revenue for the first half of FY 20-21 is $5,102,613; sales tax revenue for the First Quarter FY 20-21 was $2,960,222 over budget and at the First Quarter Budget Update the budget was amended to increase sales tax revenue by this amount. 14City Council Staff Report February 11, 2021 --Page 14 FY 2020/2021 Mid-Year Budget Review Summary of General Fund Revenues & Expenditures Total General Fund revenue for the First Half of FY 20-21 is $49,627,328 representing 52.1 % of total FY 20-21 adopted budgeted revenue of $95,204,300 and compares to General Fund revenue for the First Half of FY 19-20 of $41,609,694 indicating revenues generally tracking higher than FY 19-20. Total General Fund expenditures for the First Half of FY 20-21 is $49,538,266 representing 44.4% of total adjusted FY 20-21 General Fund budgeted expenditures of $119,691,346 and compares to expenditures for the First Half of FY 19-20 of $54,163,078 indicating expenditures tracking -8.5% lower than FY 19-20 and below FY 20-21 budget. Revenues have exceeded budget while expenditures are below budget for the First Half of FY 20-21. Staff anticipates TOT and sales tax revenues received in December 2020 and January 2021 to be closer to budget (at lower than normal revenue levels) to reflect the business closures due to the Regional Order that was implemented during that time. This fiscal impact will be reflected in the Third Quarter FY 20-21 when TOT and sales tax payments for December and January are received. Recommendations Staff recommends caution with any increased expenditures due to the continued COVID-19 pandemic. As noted herein, the improvement of the City's financial status over Staff's early projections in developing the FY 20-21 budget has not resulted in a surplus of revenue at this time, rather, it further decreases the adopted FY 20-21 deficit of ($17,925,500) to an estimated deficit of ($4,322,576) after considering the additional appropriation of $230,000 requested herein. Additional Appropriations Staff recommends the City Council amend the FY 20-21 budget to increase appropriations by $230,000 for the following two personnel expenditures: • $155,000 to fund and "unfreeze" the Occupational Health & Safety Specialist position in the Human Resources Department • $75,000 to fund and "unfreeze" the Information Technology Technician position in the Information Technology Department • Human Resources Department: The Human Resources Department is responsible for ensuring the City's compliance with all state and federal labor laws and regulations, including Cal-OSHA. With the onset of the COVID-19 pandemic, Cal-OSHA recently announced and released new regulations for ensuring employee safety in the workplace, and the nature of the regulations applicable to the City continues to change on a frequent basis. The Occupational Health & Safety position was left vacant and 15City Council Staff Report February 11, 2021 --Page 15 FY 2020/2021 Mid-Year Budget Review unfunded for FY 20-21 as part of COVID cost savings measures, with other personnel staff taking on OSHA requirements. However, with significant new state and federal requirements, Staff recommends funding and "unfreezing" the currently vacant position with an annual cost (salary and benefits) of $155,000. • Information Technology Department: The Information Technology Department continues to serve a critical mission to the entire City by coordinating the transition from older technology and operational systems to the new City-wide Enterprise Resource Planner system and related operational platforms. Moreover, with remote meetings continuing for the foreseeable future, the IT Department staff have extended their role to ensure the City's various public meetings are held successfully. Currently, the IT Department has 2 vacant and unfunded positions: (1) Assistant Director of IT, and (1) Information Technology Technician. At this time, Staff recommends funding and "unfreezing" the currently vacant Information Technology Technician position and utilizing in part contractual services funds of approximately $70,000 that were previously set aside for monitoring and maintenance of the City's public safety / downtown camera system. In reviewing the ability of the City's third-party vendor to adequately perform the services on the City's public safety camera system, Staff determined the IT Department staff were best equipped to perform this work more effectively. The annual cost (salary and benefits) is $145,000 with net cost of $75,000 after utilizing existing contractual services budget of $70,000. Staff will also propose in the upcoming FY 21-22 budget to fund the Assistant IT Director position to assist with the day-to-day management of the IT Department, allowing the Deputy City Manager to provide more technology-focused attention in other Administrative Departments. Staff recommends the City Council approve and adopt the revised "Frozen and Unfunded List" of allocated positions provided as Attachment 1. This will leave 50. 75 FTE positions unfunded and frozen out of the total of 506.0 FTE positions approved in the FY 20-21 budget (10% of allocated FTEs). Another 35.75 FTE positions are currently vacant and funded and in various steps of the recruitment process. Staff recommends the City Council amend the FY 20-21 General Fund budget to increase budgeted revenue by $8,356,781 to $97,848,772, with this revenue further reducing the adopted FY 20-21 deficit of ($17,925,500) to a revised deficit of ($4,322,576), considering all new FY 20-21 appropriations, with an estimated unrestricted General Fund balance of $21,998,352 by June 30, 2021, as shown in Table 16 on the next page. 16City Council Staff Report February 11, 2021 --Page 16 FY 2020/2021 Mid-Year Budget Review Beginning Projected Fund Balance -Unrestricted -.---·---. --------. ·7 -~! --·---·-~-•-----I • ,. . ..,. -----..,._,.. Revenues ' Addditional Revenues Taxes 11-12-20 Addditional Revenues Taxes 02-11-21 Transfers In Total Revenues ---· -...... ., ... ! Expenditures i -------··· -... Restricted for Cont Appr /Other ... -----~·-. ---•·• ----····J--.. ,.. . ,.... ···----~. -Recommended Addt'I Expenditures 2/11/21 ,. . FY2020-21 Revised Budget $ 17,925,700 80,854,300 14,350,000 95,204,300 (101,129,500) Recommended Addt'I Expenditures 1/14/21 Smaill Business Asst. Recommended Addt'I Expenditures 11/12/20 Appraisal of _Taquitz Golf Course 9/24/20 -····-··-··· _ .... Transfers Out Total Expenditures ...... 1 ... .. .. I --~----t .... -Surplus / (Deficit) 1 ........ ..,-......... -.... ··t -.. -.,.,._ ......... ---··------! En~ing Projected ~nrestricted Balance Sutotal ' _1 ·-CalPERS Reserve Set-Aside· .l. .. .. ---· I CalPERS Set-Aside/Fund Balance Fund Balance Unrestricted Total Fund Balance CalPERS Reserve Total Fund Balance% Total -Table 16 (12,000,300) (113,129,800) (17,925,500) $200 $ 22,250,000 $ 22,250,200 0.00% 19.67% 19.67% -··--------12-31-2020 .. -FY 2020-21 ·-----··-Revised Fund -Balances ---·-~· .. -______ .., ____ $ 26,320,928 ·1 ·•· •-•-W ____ r·----· ., . i ... -···-80,854,300 I 8,637,694 !-------_, __ ... I 8,356,781 .. i ....... --· i 14,350,000 l ! 112,198,775 ! j _,I _____ ----·-···-·····-··-····· -l ! l •.. -I (101,129,500) r ----·--····--.. --. .. ! (230,000) ··t-······· .,._.., ______ i J~,~00,000) I "["' .. -i (2,147,551) i . (14,000) I I ·1 .. .,. -... --.. (12,000,300) I ! ' (116,521,351) i ---· -! (4,322,576) ! i I ! $21,998,352 ' l $ 22,250,000 I I I ! $ 44,248,352 ' -' -I 18.88% -+-··-······ -···· --· 19.10% 37.97% . -------··------ 17City Council Staff Report February 11, 2021 --Page 17 FY 2020/2021 Mid-Year Budget Review Staff also recommends the City Council amend the FY 20-21 Measure J Capital Fund budget to increase budgeted revenue by $2,142,391 to $11,069,513 representing the increase in Second Quarter FY 20-21. The restricted CalPERS reserve balance as of June 30, 2021, remains at $22,250,000 consistent with the adopted FY 20-21 budget. At this time, total CalPERS Set-Aside/General Fund Balance is estimated to be $44,248,352 as of June 30, 2021, representing a total reserve of 38% (excluding any Measure J Capital Fund balance). SUBMITTED: Marcus L. Fuller, MPA, P.E., P.L.S. Assistant City Manager David H. Ready, Esq., Ph. City Manager Attachments: 1. Revised "Frozen & Unfunded" Positions List Director of Finance/Treasurer 18ATTACHMENT 1 19Allocated Positions FY20/21 -Frozen and Unfunded -February 11, 2021 -,. .~ ~ -., -Department Position FTE -.C --·------Airport Operations Specialist I 1 Aviation Airport Operations Specialist I 1 Assistant Airport Director 1 Community & Economic Development Community Development Administrator 1 Director of Fund Development 1 Building Inspector* 1 Building Inspector Supervisor 1 Civil Engineer, Senior 1 Development Services Permit Center Technician 1 Planning Technician 1 Plans Examiner 1 Public Works Inspector 1 Public Works Inspector, Senior 1 Account Clerk II 1 Finance Account Clerk I 1 Administrative Assistant 1 Assistant Finance Director 1 Clerical Assistant 1 Fire Fire Captain* 1 Fire Deputy Chief* 1 Firefighter (Overhire) 1 Human Resources Occuoational Health & Safety Specialist 1 Information Technology Assistant Director of Information Technology 1 #nforma.tlon Technolo,w Technician 1 Library Library & Public Services Manager 1 Library Assistant 0.5 Administrative Secretary 1 Fleet Maintenance Technician II 1 Fleet Maintenance Technician Ill/Service Writer 1 Heavy Equip. Operator & Sr Street/Traffic Maint. Wkr 1 Maintenance & Facilities Maintenance Electrician 1 Maintenance Mechanic I 1 Maintenance Supervisor 1 Maintenance Supervisor 1 Street/Traffic Maintenance Worker, Lead 1 Animal Services Officer 1 Community Outreach & Media Specialist 1 Community Services Officer 1 Crime Scene Technician 1 Jail Transport Officer 1 Police Officer -Overhire 1 Police Police Officer -Overhire 1 Police Officer 1 Police Officer 1 Police Officer 1 Police Services Officer 1 Rangemaster 1 Senior Secretary 1 Lifeguard 0.75 Lifeguard 1 Recreation Literacy Coordinator 1 Recreation Program Assistant (.5) 0.5 Secretary, Senior 1 Special Programs Account Clerk II 1 TOTAL FTE Frozen & Unfunded --52.75 --*Partially funded through December 31, 2020 Positions to be funded b Cl Council action on V1f121. 20Allocated Positions FY20/21 -Frozen and Unfunded -February 11, 2021 LlU~\~~~~'!I 0 •1!~ -~~~:.,: eo&lti~n~h~~~P"~~~ a Df~" 08 a :Al Airport Operations Specialist I 1 Aviation Airport Operations Specialist I 1 Assistant Airport Director 1 Community & Economic Development Community Development Administrator 1 Director of Fund Development 1 Building Inspector* 1 Building Inspector Supervisor 1 Civil Engineer, Senior 1 Development Services Permit Center Technician 1 Planning Technician 1 Plans Examiner 1 Public Works Inspector 1 Public Works Inspector, Senior 1 Account Clerk II 1 Finance Account Clerk I 1 Administrative Assistant 1 Assistant Finance Director 1 Clerical Assistant 1 Fire Fire Captain* 1 Fire Deputy Chief* 1 Firefighter (Overhire) 1 Information Technology Assistant Director of Information Technology 1 Library Library & Public Services Manager 1 Library Assistant 0.5 Administrative Secretary 1 Fleet Maintenance Technician II 1 Fleet Maintenance Technician Ill/Service Writer 1 Heavy Equip. Operator & Sr Street/Traffic Maint. Wkr 1 Maintenance & Facilities Maintenance Electrician 1 Maintenance Mechanic I 1 Maintenance Supervisor 1 Maintenance Supervisor 1 Street/Traffic Maintenance Worker, Lead 1 Animal Services Officer 1 Community Outreach & Media Specialist 1 Communitv Services Officer 1 Crime Scene Technician 1 Jail Transport Officer 1 Police Officer -Overhire 1 Police Police Officer -Overhire 1 Police Officer 1 Police Officer 1 Police Officer 1 Police Services Officer 1 Rangemaster 1 Senior Secretarv 1 Lifeguard 0.75 Lifeguard 1 Recreation Literacy Coordinator 1 Recreation Proaram Assistant (.5) 0.5 Secretary, Senior 1 Special Programs Account Clerk II 1 TOTAlfFTE Froienr& Unfunded ~ .. J --"\, ~ ~ 50.75 --II .,, - -*Partially funded through December 31, 2020