HomeMy WebLinkAbout25 - PH-2 - FY2021-2022 Proposed Operating and Capit - 6/15/20211
CITY COUNCIL AGENDA
REPORT
MEETING DATE: JUNE 15, 2021 ITEM NUMBER: PH-2
SUBJECT: FISCAL YEAR 2021-22 PROPOSED OPERATING AND CAPITAL
IMPROVEMENT PROGRAM BUDGET
DATE: JUNE 15, 2021
FROM: CITY MANAGER’S OFFICE
FINANCE DEPARTMENT
PRESENTATION BY: LORI ANN FARRELL HARRISON, CITY MANAGER
CAROL MOLINA, FINANCE DIRECTOR
FOR FURTHER INFORMATION CONTACT: CAROL MOLINA, FINANCE DIRECTOR
(714) 754-5036
RECOMMENDATIONS:
Staff recommends that City Council:
1. Approve Resolution 21-xx, adopting the Proposed Fiscal Year 2021-22 Operating
and Capital Improvement Budget as originally proposed on May 25, 2021; or
2. Approve an amended Resolution 21-xx adopting the Proposed Fiscal Year 2021-
22 Operating and Capital Improvement Budget without the use of $3.2 million in
Declared Disasters Reserve, as outlined and discussed at the June 8, 2021 Budget
Study Session; and,
3. Adopt Resolution 21-xx, adding the following job classifications and related pay
ranges:
a. Active Transportation Coordinator; and
b. Arts Specialist; and
4. Authorize the City Manager and/or Finance Director to appropriate and transfer
Federal American Rescue Plan (ARP) Funds as needed to comply with U.S.
Treasury Guidelines and to facilitate audit review and compliance; and
5. Authorize the City Manager and/or Finance Director to appropriate and transfer
current year (FY 2020-21) General Fund Reserves to the Equipment Replacement
Fund to provide sufficient cash flow for the upcoming fiscal year.
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6. Authorize the City Manager and City Attorney to enter into any and all agreements
with Costa Mesa organizations to provide financial assistance for families with a
financial hardship to participate in Parks and Community Services programs.
7. Authorize the City Manager and/or Finance Director to appropriate funds from the
Golf Course Improvement Fund (Fund 413), as and if needed, to begin the process
of updating the Golf Course’s Five-Year Plan.
BACKGROUND:
The Proposed Budget for FY 2021-22 is designed to invigorate the City’s economic
recovery through strategic investments in Citywide infrastructure, restoring staffing and
services to pre-pandemic levels, and maximizing Federal stimulus dollars while the global,
national and regional economies recover from the impacts of COVID-19.
With the reopening of the California economy on June 15, 2021, next year’s FY 2021-22
Budget positions Costa Mesa to succeed in overcoming the myriad challenges posed by
the worldwide pandemic. This year marks a pivotal transition as the City continues to push
vaccination efforts, see positive signs of a potentially subsiding pandemic, and allows the
City to chart a distinct path towards economic resilience for both the near and long term.
Guiding Principles
The guiding principles that inspired the recommendations for the FY 2021-22 Budget were
created in January 2021, when the City Council conducted a Strategic Planning workshop
identifying key priorities, as well as a new Mission Statement for Costa Mesa, as follows:
“The City of Costa Mesa serves our residents, businesses, and visitors by promoting a
safe, inclusive, and vibrant community.”
In addition to a new Mission Statement, five new Strategic Plan Goals were developed:
Recruit and retain high quality staff;
Achieve long-term fiscal sustainability;
Strengthen public safety and keep the community safe;
Maintain and enhance the City’s infrastructure, facilities, equipment and
technology; and,
Diversify, stabilize, and increase housing to reflect community needs.
The recommendations contained in the FY 2021-22 Proposed Budget are rooted in the
Five Strategic Plan Goals created by the City Council for a safe, inclusive and vibrant City.
ANALYSIS:
The theme for the FY 2021-22 Proposed Budget, “Charting the Path to Recovery,”
conveys the restoration of core services while incorporating key strategies to ensure long-
term fiscal sustainability. It provides a framework for reinstating service levels cut during
the pandemic while using Federal American Rescue Plan funds, along with the City’s
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Disasters Reserve, if needed, to sustain core services until revenues return to pre-
pandemic levels.
At the May 25, 2021 City Council Study Session, the June 1, 2021 Public Hearing, and
June 8, 2021 Study Session, regarding the FY 2021-22 Proposed Budget, the City Council
provided feedback to staff regarding several items contained in the Proposed Budget. The
result is a budget that addresses the City Council’s goals and priorities, while fulfilling the
service requirements of the people who live, work, and play in our community. This
represents a balanced budget and provides the highest level of service to the community
within existing financial resources.
The agenda reports and videos for the May 11, 2021 City Council Study Session, May 25,
2021 City Council Study Session, the June 1, 2021 Public Hearing, and the June 8, 2021,
City Council Study Session can be found here:
May 11, 2021 Agenda Report:
FY 2021-22 Proposed Capital Improvement Program Budget Study Session Agenda
May 11, 2021 Study Session Video:
FY 2021-22 Proposed Capital Improvement Program Budget Study Session Video
May 25, 2021 Agenda Report:
FY 2021-22 Proposed Budget Study Session Agenda
May 25, 2021 Study Session Video:
FY 2021-22 Proposed Budget Study Session Video
June 1, 2021 Agenda Report:
FY 2021-22 Proposed Budget Public Hearing
June 1, 2021 Public Hearing Video:
FY 2021-22 Proposed Budget Public Hearing Video
June 8, 2021 Agenda Report:
FY 2021-22 Proposed Budget Study Session Agenda
June 8, 2021 Study Session Video
FY 2021-22 Proposed Budget Study Session Video
Overview of FY 2021-22 Proposed All Funds Budget
The Proposed FY 2021-22 Budget totals $197.9 million in All Funds. This reflects a $34.1
million, or 21 percent increase from the FY 2020-21 All Funds Budget of $163.8 million.
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Table 1
FY 2021-22 PROPOSED BUDGET - ALL FUNDS
Appropriations Actual Actual Adopted Proposed Increase/Decrease
All Funds FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 Amount Percent
Operating Budget $144,808,736 $145,205,721 $145,841,031 $163,522,932 $17,681,901 12.1%
Transfers Out 20,094,245 6,677,681 4,099,924 9,841,585 $5,741,661 140.0%
Capital Budget 42,373,416 6,772,928 13,855,245 24,566,362 $10,711,117 77.3%
Total $207,276,397 $158,656,330 $163,796,200 $197,930,879 $34,134,679 20.8%
Operating Budget
The projected increase of $17.7 million in the Operating Budget’s portion of the FY 2021-
22 All Funds Budget is mostly comprised of the reinstated staffing and service levels
previously cut as a result of the pandemic’s fiscal impacts. The General Fund has the most
significant increase; estimated at $12.9 million. Of the $12.9 million increase in spending
in the General Fund, half of that amount or $6.6 million is from Federal American Rescue
Plan Part Two funds the City will receive after July 1, 2021.
Staff is requesting approval from the City Council to authorize the City Manager and/or
Finance Director to appropriate the American Rescue Plan (ARP) Funds as needed to
comply with the U.S. Treasury guidelines and to facilitate audit review and compliance. The
$6.6 million in ARP funded restorations in the Proposed General Fund Budget include 17.4
full-time and part-time positions defunded Citywide, as well as training, supplies, and other
services.
The original FY 2021-22 Proposed Budget recommended the use of $3.2 million in
Declared Disasters Reserve, in addition to ARP funds, to create a bridge. This action was
originally recommended given the fact that the City has not yet dipped into its reserves, and
even if required to do so before June 30, 2021 for the current year, there is still sufficient
Council authority from Declared Disasters Reserve to cover expenses for one more year.
Utilizing a combination of Federal stimulus funds and Declared Disasters Reserve can
assist the City in restoring services to near pre-pandemic levels while the economy
recovers. However, at the June 1, 2021, City Council Public Hearing, certain concerns
were raised regarding this approach. City Council direction is requested on which option
to pursue with the full understanding that certain public safety capital projects will need to
be delayed until mid-year if the Council opts to approve the budget without using reserves.
In addition, in order to implement efficiencies, staff is recommending that the City Council
grant authorization to the City Manager and/or Finance Director to appropriate, as received,
donations and grants awarded during the fiscal year up to $100,000, per source or grantor.
Any donations and grant awards with matching requirements or exceeding $100,000 from
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a single source, grantor or sole source, will continue to require City Council approval. This
change will help to expedite the use and expenditure of the funds and remove the
administrative burden of preparing lengthy agenda reports for smaller grants.
Finally, City Council expressed interest in providing grants to Costa Mesa families
experiencing financial hardship to participate in the Parks and Community Services
programs. Staff is requesting City Council to authorize the City Manager and/or City
Attorney to enter into agreements with local non-profit organizations or foundations to
administer and manage these grants. Staff will be utilizing funding included in the FY 2021-
22 Proposed Budget, City Manager’s contingency, to cover any administrative costs and
grant awards.
Capital Budget
The All Funds Capital Budget of $24.6 million reflects the City’s annual Capital
Improvement Program Budget that contains an increase of $10.7 million as a result of
continued compliance with the Capital Asset Needs (CAN) ordinance, as well as changes
in other special and restricted funds for Capital projects.
Table 2
CAPITAL IMPROVEMENT PROJECTS
Adopted Proposed Increase/Decrease
FY 2020-21 FY 2021-22 Amount Percent
Energy & Sustainability $ 185,356 $ 295,000 $ 109,644 59.2%
Facilities 3,840,244 4,492,306 652,062 17.0%
Parks 350,000 2,006,520 1,656,520 473.3%
Parkways & Medians 725,000 1,000,000 275,000 37.9%
Streets 6,284,145 12,531,536 6,247,391 99.4%
Transportation 2,470,500 4,241,000 1,770,500 71.7%
Total CIP $ 13,855,245 $ 24,566,362 $ 10,711,117 77.3%
The majority of the FY 2021-22 increase in projects are in Citywide Street Improvements
as the pandemic caused a significant delay in street improvements. Additional detail
regarding the CIP Budget is contained in the CIP section of the FY 2021-22 Proposed
Budget Book.
Capital Status Report
During City Council FY 2021-22 budget presentations, City Council expressed an interest
to have a Capital Project Status Report available to the public. Staff is exploring options
for enhanced reporting regarding key or high priority capital projects. The additional
staffing included in the Public Services Department request would assist in this regard.
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City Golf Course Five-Year Plan
At the June 8, 2021 City Council Study Session, Council discussed an interest in improving
the facility at the Golf Course, and providing for a potential increase in City revenues. Staff
recommends beginning a review of the Golf Course Five-Year Plan in the upcoming fiscal
year, to address the concerns highlighted at the Study Session.
FY 2021-22 Proposed General Fund Budget Overview
The Proposed FY 2021-22 General Fund expenditure budget is $154.4 million. This
reflects an increase of $17.8 million or 13.0 percent, from the FY 2020-21 Adopted Budget
of $136.6 million. Table 3 is a summary of the FY 2021-22 General Fund Proposed Budget.
Table 3
FY 2021-22 PROPOSED GENERAL FUND BUDGET
Actual Actual Adopted Proposed Increase/Decrease
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 Amount Percent
Estimated
Revenues $144,928,663 $136,450,019 $126,360,101 $144,622,060 $18,261,959 14.5%
Transfers In 41,287 1,150,000 - 6,561,529 6,561,529 100.0%
Use of Fund
Balance
-
- 10,277,168 3,219,091 (7,058,067) -68.7%
Total Resources $144,969,950 $137,600,019 $136,637,269 $154,402,680 $17,765,421 13.0%
Operating Budget 127,472,196 132,020,925 132,537,346 145,421,744 12,884,398 9.7%
Transfers Out 20,049,116 5,405,141 4,099,924 8,980,936 4,881,012 119.1%
Total
Appropriations $147,521,312 $137,426,066 $136,637,270 $154,402,680 $17,765,410 13.0%
The General Fund Operating Budget increase of $17.8 million is mostly comprised of the
reinstatement of the multiple reductions taken Citywide in the current year as a result of the
pandemic’s fiscal impacts. Included is $6.6 million in ARP funds to restore General Fund cuts
including the restoration of 17.43 defunded full-time and part-time positions, training, supplies,
and other operating reductions.
General Fund Reserves
According to Standard and Poor’s, the City of Costa Mesa holds, “very strong management,
with strong financial policies and practices under our financial management assessment
methodology.” Based on this and other positive reflections of the City, Standard & Poor’s has
maintained its AA+ credit rating for the 2017 Costa Mesa Bonds; and an overall AAA credit
rating for the City. City Council direction is requested as to the use of $3.2 million in Declared
Disasters Reserve in the FY 2021-22 Proposed Budget.
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Table 4 – Without the Use of Reserves
Fund Balance Category
FY 2018-19
Audited
FY 2019-20
Audited
FY 2020-21
Estimated
Committed
Declared Disasters $14,125 $14,125 $14,125
Self-Insurance 2,000 2,000 2,000
Economic Reserves 7,500 9,000 9,000
Assigned
Compensated Absences 4,892 5,037 5,037
Police Retirement 1%
Supplemental 2,297 2,365 2,365
Section 115 Trust 1,750 1,750 1,750
Non-Spendable 280 362 362
Unassigned 20,451 18,825 18,825
Total Fund Balance $53,295 $53,464 $53,464
Equipment Replacement
The Equipment Replacement Internal Service Fund has only $1.6 million in cash to support
equipment replacements going forward. While it has a total fund balance of $8.6 million,
the majority of it is actually the value of the City’s equipment inventory. In order to meet
department operational demands, a sufficient cash balance is required for vehicle and
equipment replacement. Staff is recommending a transfer of $2.2 million in the current
year (FY 2020-21) from the General Fund to provide sufficient funding for vehicle and
equipment purchases. This transfer is needed to fund vehicle replacements for new
purchases of vehicles and equipment for various departments in the City. The total costs
for purchases in the Fiscal Year 2021-22 Budget is $1.0 million in addition to staff and
vehicle maintenance costs. A long term plan to shore up resources in this Fund will be
proposed in the mid-year budget review.
Staffing Levels
The Proposed budget includes a total of 530 full-time employees. The Proposed Budget
incorporates an additional 9.9 full-time positions which are mostly attributed to the
reallocation of part-time positions to full-time. During the Great Recession, the City lost
146 full-time positions. While the number of full-time staff at the City has grown, the
workload attributed to the pandemic, implementation of Measure Q, and major
development projects across the City, in addition to an increased workload overall, has
magnified the need to both stabilize and enhance the workforce commensurately. Even
with the proposed changes, full-time staffing levels are thirteen percent (13%) under FY
2009-10 levels.
On May 4, 2021, the City Council approved the elimination of furloughs across all labor
groups and restored employee salaries back to pre-pandemic levels. The FY 2021-22
Proposed General Fund Budget includes an additional $3.0 million in salaries and benefits
to fully restore the amounts cut via the furloughs and 17.4 defunded positions. The Proposed
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FY 2021-22 Operating Budget reinstates funding for those positions in the Fire and Rescue,
Information Technology, Development Services, Public Services, and Finance Departments
in order to enhance public service and improve productivity and reflects a $1.7 million
increase in General Fund spending above the FY 2020-21 Adopted General Fund Budget.
Included in the FY 2021-22 Proposed Budget are also two (2) new classifications to provide
support to the Arts and Culture Master Plan and the Active Transportation Plan:
1. Active Transportation Coordinator – this position will assist and coordinate the
implementation of City’s Active Transportation Plan projects and other related CIP
projects.
2. Arts Specialist – this position will oversee activities and programs such as art gallery
exhibits, bringing in local artists for speaking engagements, expand programs such
as the utility box art, and coordinate the Art Venture, among other arts programs
and events. This position will be funded by the Measure Q ½ percent retail tax for
the implementation of the Council-adopted Arts and Culture Master Plan.
To continue the efficient implementation of the Council-approved Strategic Goal of recruiting
and retaining high quality staff, staff is requesting that the City Manager be authorized to
revise the Table of Organization, such as reclassifying an Office Specialist position to an
Administrative Secretary position, as the demand for increased functions or increased
responsibilities deem it necessary, provided that the authorized number of personnel within
the City is not exceeded. This will assist in the realignment of much needed staff support
during the fiscal year and will aid in continued efficiencies throughout the entire organization.
Cost Recovery Fees: City staff were working with ClearSource Financial Consulting to update
the Citywide Cost Recovery Fees when the pandemic hit. Over the past few weeks, the
number of new cases has drastically decreased to the point that the State announced a
reopening on June 15, 2021, and economists are predicting a 5.8% to 8.6% growth over the
next year. Therefore, staff will continue to work with ClearSource to finalize the review of the
City’s fees and anticipates returning to Council for discussion in the next six to nine months.
A potential increase in fees coupled with key full-time positions included in the proposed
budget will provide additional revenue for the City as certain employee classifications are
revenue-generating positions. Specifically, Development Services, Public Services and the
Fire Department include new positions that are crucial to begin to address the current backlog
of permit and building processing, and inspection services. The additional positions include,
but are not limited to: Fire Protection Specialist, Building Technician, Plan Checker and
Assistant Planner.
Commitment to Public Safety: One of the main priorities of the FY 2021-22 Proposed
Budget is public safety. As such, more than 53 percent of the General Fund Adopted
Budget, approximately $81.4 million is designated for public safety.
The Police Department budget contains 138 full-time sworn personnel, reflecting two
additional police officer positions approved mid-year as part of the Measure Q Cannabis
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Retail Program’s implementation for an increase of $498,203. We are pleased to report
this is the highest level of Police Department sworn staffing since the Great Recession.
In addition, the Police Department’s maintenance and operations budget increased by
$495,301, to restore the previous year’s FY 2020-21 budget reductions, mostly for training,
and necessary equipment and other purchases.
The Fire Department budget contains 95 total full-time personnel; 84 full-time sworn
personnel and 11 non-sworn positions and 2.25 part-time positions. The Fire Department
provides emergency response services and staffs six fire stations, 24 hours a day, seven
days a week, 365 days a year with an increase of $2,395,120 over the FY 2020-21 Adopted
Budget.
Finally, the Fire Department is in need of a new Pierce 1500 GPM Triple Combination
Pumper Truck. The existing 2003 American LaFrance Pumper apparatus has high mileage
with heavy wear and tear on all powertrain, suspension, steering and pump. The
manufacturer, American LaFrance, is out of business and parts are becoming obsolete
extending repair and maintenance down times. The estimated cost for the replacement
Fire pumper is $875,000, of which $200,000 is included in the FY 2021-22 Proposed
Budget for a master lease agreement. Staff is recommending that City Council authorize
the City Manager and/or Finance Director to sign the master lease agreement for funding
of the Fire pumper truck, taking advantage of the low interest rate environment.
SUMMARY
The City Council has discussed and reviewed the FY 2021-22 Proposed Operating and
Capital Improvement Budget at the Study Sessions held on May 11, 2021 and May 25,
2021; the Public Hearing held on June 1, 2021; and a second Study Session held on June
15, 2021.
Also, the FY 2021-22 Proposed Budget was presented to the Finance and Pension
Advisory Committee (FiPAC) on May 26, 2021 and June 9, 2021. FiPAC created a Budget
Sub-committee that has provided significant feedback to City Council. At the June 9, 2021
FiPAC meeting, FiPAC committee members recommended to approve the Revised
Proposed Budget option, not utilizing the use of Declared Disasters Reserve and to delay
the Arts Specialist position to mid-year until the revenues from the Measure Q ½ percent
for the Arts and Culture Master Program are received.
Staff appreciates the Committee and City Council’s continued support as we navigate the
multitude of challenges and ever changing circumstances related to this pandemic in the
weeks and months to come.
The results of all concerted efforts by City Council, the FiPAC Committee, and staff on the
FY 2021-22 Proposed Operating and Capital Improvement Budget has resulted in a
budget that creates a solid foundation for Charting a Path Toward Recovery for the City of
Costa Mesa for the near future and beyond.
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LEGAL REVIEW:
The City Attorney has reviewed and approved this report as to form.
CONCLUSION:
Staff recommends that City Council:
1. Approve Resolution 21-xx, adopting the Proposed Fiscal Year 2021-22 Operating
and Capital Improvement Budget as originally proposed on May 25, 2021; or
2. Approve an amended Resolution 21-xx adopting the Proposed Fiscal Year 2021-
22 Operating and Capital Improvement Budget without the use of $3.2 million in
Declared Disasters Reserve, as outlined and discussed at the June 8, 2021 Budget
Study Session; and,
3. Adopt Resolution 21-xx, adding the following job classifications and related pay
ranges:
a. Active Transportation Coordinator; and
b. Arts Specialist; and
4. Authorize the City Manager and/or Finance Director to appropriate and transfer
Federal American Rescue Plan (ARP) Funds as needed to comply with U.S.
Treasury Guidelines and to facilitate audit review and compliance; and
5. Authorize the City Manager and/or Finance Director to appropriate and transfer
current year (FY 2020-21) General Fund Reserves to the Equipment Replacement
Fund to provide sufficient cash flow for the upcoming fiscal year.
6. Authorize the City Manager and City Attorney to enter into any and all agreements
with Costa Mesa organizations to provide financial assistance for families with a
financial hardship to participate in Parks and Community Services programs.
7. Authorize the City Manager and/or Finance Director to appropriate funds from the
Golf Course Improvement Fund (Fund 413), as and if needed, to begin the process
of updating the Golf Course’s Five Year Plan.
CAROL MOLINA
Finance Director
LORI ANN FARRELL HARRISON
City Manager
KIMBERLY HALL BARLOW
City Attorney
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Attachments: 1. Resolution 21-xx, Adopting the Operating and Capital Improvement
Budget for Fiscal Year 2021-2022
2. Resolution 21-xx, adding the following job classifications and related pay
ranges:
a. Active Transportation Coordinator; and
b. Arts Specialist; and
3. FY 2021-2022 Four Year Personnel Summary by Department
4. Letter from the Finance and Pension Committee (FiPAC) members
regarding the Proposed Operating and Capital Improvement Budget for
Fiscal Year 2021-2022