For City Council Meeting [July 13, 2021]
TO: Honorable Mayor and City Council
APPROVAL: Marcus Fuller, City Manager
FROM: Bob Chandler, Interim Finance Director
Title
Request City Council to 1) Review and Discuss the Draft Fiscal Year 2021-2022 Budget; and 2) Set a Public Hearing for July 27, 2021 to Consider the Approval and Adoption of the Fiscal Year 2021-2022 Budget.
(ACTION)
Body
BACKGROUND
In accordance with Section 2.04.140 of the Rialto Municipal Code, the City Manager is required to present the fiscal budget to the City Council for approval annually. Under the direction of the Deputy City Manager and Finance Director, budget planning process begins in March. The Finance Department conducts fiscal analysis and prepares revenue and expenditure projections required to complete the budget document after receiving input from all City departments.
The Finance Department has prepared the Draft Fiscal Year 2021-2022 Budget (“FY 21-22 Budget”) based upon submissions from all City Departments and the direction of the City Manager. The Draft FY 21-22 Budget has been reviewed with each Department and represents a structurally balanced budget. The Draft FY 21-22 Budget is submitted at this time for review by the City Council to provide an opportunity for Staff to consider all comments from the City Council and the public in preparing the Final FY 21-22 Budget for adoption. Once adopted, the FY 21-22 Budget is a living document that is often amended throughout the year as additional revenues or expenditures are considered and approved by City Council for various programs or projects.
ANALYSIS/DISCUSSION
In accordance with Section 2.04.140 of the Rialto Municipal Code, Staff hereby submits the Draft FY 21-22 Budget for City Council review.
The Draft FY 21-22 Budget consists of nine categories of Funds identified as follows:
General Fund
Special Revenue Funds
Enterprise Funds
Internal Service Funds
Rialto Utility Authority
Rialto Housing Authority
Successor Agency
Capital Projects Funds
Debt Service Funds
General Fund
The General Fund is the general operating Fund of the City. All general tax receipts and fee revenue not allocated by law, Council policy or contractual agreement to other funds, are accounted for in the General Fund. General Fund expenditures include operations traditionally associated with activities that are not required to be accounted for or paid by another Fund.
General Fund Revenues
FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues are identified in the following Table 1:
Table 1
As shown in Table 1, proposed FY 21-22 General Fund revenue is estimated at $103.2 million and compares to actual FY 19-20 revenue of $102.8 million (an increase of 0.4%) and follows the City’s budgeting practice of conservatively estimating annual increases in revenue associated with continued development of residential, commercial and industrial sectors of the Rialto economy.
Also shown in Table 1, proposed FY 21-22 General Fund revenue is estimated at $103.2 million and compares to actual FY 18-9 revenue of $105.4 million (a decrease of 2.1%) reflecting Staff’s conservative approach to projecting a return-to-normal in the post-COVID economy.
More importantly, as shown in Table 1 the City can see the direct fiscal impact of the COVID-19 pandemic on the Rialto economy by comparing General Fund revenues from FY 19-20 to FY 18-19 - revealing a loss of $2.6 million in addition to all direct costs incurred in mitigating and monitoring the spread of the COVID-19 virus.
American Relief Protection Act of 2021 (ARPA)
On March 11, 2021 President Biden signed the ARPA into law, and included in it was much needed direct financial assistance to state and local governments impacted by the COVID-19 pandemic. Specifically, $130.2 billion was allocated to local governments of which $45.6 billion is provided to metropolitan cities. In the final distribution of local government allocations, the City of Rialto will receive $29,373,105. In accordance with the regulations on distributing and use of the ARPA funds, cities will receive their allocation in two “tranches”, with Rialto receive its first 50% tranche of $14,686,553 on June 18, 2021 and it expected to receive its second tranche next May/June.
It is important to note that Staff has segregated this one-time revenue into a special account pending the City Council’s determination of its use in accordance with the federal regulations limiting its use for specific purposes. Therefore, the Draft FY 21-22 Budget does not include or rely on this one-time revenue in the development of a structurally balanced budget, and the proposed $103.2 million in FY 21-22 General Fund revenues excludes any of the ARPA Funds received or to be received.
At a later date, Staff will present an item for discussion on the use of the City’s ARPA Funds, considering that the “Interim Final Rule” issued by the Federal Government outlines the use of these funds as follows:
(a) To respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
(b) To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;
(c) For the provision of government services to the extent of the reduction in revenue due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; and
(d) To make necessary investments in water, sewer, or broadband infrastructure.
Item (c) provides the “catch all” use of ARPA Funds, but is limited to the calculation on the reduction in revenue relative to FY 18-19 (the most recent full fiscal year prior to the COVID-19 pandemic). As noted above, the net decrease in revenues from FY 19-20 to FY 18-19 was $2.6 million, however the regulations also allow the reduction to be calculated from the City’s anticipated revenues in FY 19-20 or FY 20-21 absent the impact of the pandemic. Staff will prepare these calculations to determine what true “reduction in revenue” the City suffered in the context of the Interim Final Rule, allowing for City Council to determine the amount of ARPA Funds that may be used for any “government services” as that term is referenced in the Rule. All other ARPA Funds allocated to the City that are in excess of the “reduction in revenue” determined in accordance with the Rule may only be used for the other purposes identified in items (a), (b) and (d).
General Fund Expenditures
FY 18-19 and FY 19-20 actual expenditures, revised FY 20-21 budgeted expenditures, and projected (proposed) FY 21-22 expenditures are identified in the following Table 2, including the number of allocated Full Time Equivalent (FTE) positions funded in the General Fund:
Table 2
As shown in Table 2, proposed FY 21-22 General Fund expenditures are estimated at $103.2 million and compares to actual FY 19-20 expenditures of $97.7 million (an increase of 5.6%) and compares to actual FY 18-19 expenditures of $95.4 million (an increase of 8.2%).
The following observations are made regarding increasing General Fund expenditures:
1. Personnel costs have increased 24% since FY 18-19 due to the City Council’s approval of increased staffing (342 FTEs in FY 18-19 to proposed 382 FTEs in FY 21-22) and negotiated salary and benefit increases with the various labor groups over that period.
2. Services and supplies budget has also increased 24% since FY 18-19 in part due to increasing costs (i.e. prevailing wage increases implemented by the state, increasing utility rates, additional maintenance costs with new/expanded facilities and parks, etc.).
3. Increased budget is proposed for vehicle replacement due to the growing demand to replace the City’s aging fleet, an item highly recommended as the salvage value of many vehicles is much less than the annual costs required to maintain these vehicles in operating order.
4. Overall, the proposed FY 21-22 General Fund expenditure budget of $103.2 million is 8.2% above the actual FY 18-19 General Fund expenditure budget of $95.4 million reflecting an annual average increase of 2.75% in line with typical annual increases in salaries, benefits, and services.
In summary, the proposed FY 21-22 General Fund Budget proposes a balanced budget with $103.2 million in both revenues and expenditures. However, actual FY 21-22 revenues will likely exceed budget as has been the trend with continued increases in property tax and sales tax revenues over budget as the real estate market continues to appreciate and commercial/retail businesses in Rialto continue to out-perform other areas. The change in the manner of how certain regional logistics distributors account for their sales with sales tax receipts no longer “pooled” could increase the City’s sales tax revenues well above budget.
Special Revenue Funds
The City’s various Special Revenue Funds include grant program funds and other funds that by law are required to be segregated. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for all Special Revenue Funds are identified in the Table 3 on the following page.
Table 3
Enterprise Funds
The City has three Enterprise Funds: Two Cemetery Funds and the Utility Management Fund. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for the three Enterprise Funds are identified in Table 4 on the following page.
Table 4
Internal Service Funds
The City has five Internal Service Funds. The purpose of an Internal Service Fund is to centralize certain services that benefit all functions of the City. The expenditures of the Internal Service Funds are allocated to all City Departments commensurate to the services provided.
The five Internal Service Funds are:
• Fleet Maintenance
• Workers’ Compensation
• General Liability
• Building Maintenance
• Information Technology
FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for the Internal Service Funds are identified in the following Table 5:
Table 5
Rialto Utility Authority
The Rialto Utility Authority (RUA) accounts for Water and Wastewater Services provided by Rialto Water Services. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for RUA are identified in the following Table 6:
Table 6
The Rialto Housing Authority
The Rialto Housing Authority (RHA) assumed the housing functions of the City’s former Redevelopment Agency. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for the RHA are identified in the following Table 7:
Table 7
The Successor Agency
The Redevelopment Successor Agency was formed to account for the City’s fiduciary capacity during the dissolution process and the wind down of the City’s former Redevelopment Agency. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for the Successor Agency are identified in Table 8 on the following page.
Table 8
Capital Projects Funds
The Capital Projects Funds were added to enhance transparency by reporting one-time capital expenditures in a separate fund. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for the Capital Projects Funds are identified in the following Table 9:
Table 9
Debt Service Funds
The Debt Service Funds account for the accumulation of funds for the payment of principal and interest on financing instruments. FY 18-19 and FY 19-20 actual revenues, revised FY 20-21 budgeted revenues, and projected (proposed) FY 21-22 revenues for the Debt Service Funds are identified in the following Table 10:
Table 10
BUDGET EXPEDITURES SUMMARY
The following Table 11 illustrates the Draft FY 21-22 Budget expenditures by category and fund type:
Table 11
PERSONNEL CHANGES
The Draft FY 21-22 Budget proposed the following personnel changes recommended by the City Manager consisting of net increase of +11 FTEs in the General Fund and +1 FTE in the RUA:
Human Resources: Reclassify title and job classification for Human Resources Risk Manager to Human Resources Manager, and delegate risk management functions to the City Attorney’s office. FY 21-22 cost = $0.
Finance: Reclassify Administrative Analyst to Senior Administrative Analyst to accurately reflect the supervisory duties of the incumbent employee. FY 21-22 cost = $13,380.
Community Development: Several changes in personnel are recommended as outlined further below to better serve the community:
• Reclassify Part-Time Senior Planner to Full-Time status; FY 21-22 cost = $53,500
• Add (1) Permit Technician; FY 21-22 cost = $63,585
• Add (1) Economic Development Manager; FY 21-22 cost = $123,291
• Add (1) Building Official; FY 21-22 cost = $110,735
• Add (1) Planning Aide; FY 21-22 cost = $95,000
• Delete (1) Assistant Planner; FY 21-22 savings = ($94,800)
• Delete (1) Development Service Specialist; FY 21-22 savings = ($102,351)
The total increased cost of personnel changes in this Department is $248,960
Community Development (Engineering Division): The City Manager is recommending a reorganization of the Public Works Department into two separate functions:
1. Engineering (Land Development / Capital Projects) to be a Division of the Community Development Department under the direction and supervision of the Community Development Director and managed by the City Engineer
2. Maintenance & Facilities Department - a new Department solely focused on delivering the critical public facilities and park/open space maintenance functions to be led by a new Director.
Within the new Engineering Division, one personnel change is recommended:
• Add (1) Project Manager; FY 21-22 cost = $110,850
Fire: The Fire Chief has identified two personnel changes:
• Reclassify the Emergency Medical Service Coordinator allowing for this personnel cost to be accounted for outside of the General Fund, leading to FY 21-22 savings of $224,540;
• Reclassify (6) Emergency Medical Technicians to Paramedics to provide for better recruitment and retention given the challenges associated with EMTs. This is a cost-neutral personnel change of approximately $10,200 but will realize more direct savings through avoidance of continued vacancies and costs to recruit and train new EMTs.
Police: The Police Chief is recommending three personnel changes:
• Reclassify (1) Police Officer to Lieutenant; FY 21-22 cost = $79,530
• Add (1) Information System Supervisor; FY 21-22 cost = $102,000
• Add (3) Police Records Assistants II; FY 21-22 cost = $140,000
Maintenance & Facilities: This is a proposed new Department replacing the Public Works Department, with a mission focused on delivering the critical public facilities and park/open space maintenance functions to be led by a new Maintenance & Facilities Director. Two personnel changes are recommended:
• Reclassify Public Works Director (Range 7500, Max Salary = $196,243) to Maintenance & Facilities Director (Range 7000, Max Salary = $173,443) resulting in salary savings estimated at $22,800
• Reclassify Lead Equipment Mechanic to Fleet Maintenance Lead to accurately reflect the job classification of incumbent employee eliminating reoccurring acting pay; FY 21-22 cost = $0
Community Services (Park Maintenance Division): The City Manager is recommending a reorganization with the Park Maintenance Division transferring to the Community Services Department to provide better coordination of recreational programming and park use with the required maintenance functions under the direction of a new incoming Community Services Director. The City Manager is also recommending additional staff as existing staffing levels are insufficient to adequately maintain the expanded park and open space areas that the City Council has significantly invested in for the Rialto community. These new personnel will help ensure the City is equipped to provide the required maintenance of the City’s new parks and other open spaces:
• Add (2) Field Service Workers; FY 21-22 cost = $95,000
• Add (2) Senior Field Service Workers; FY 21-22 cost = $110,000
Rialto Utility Authority: The City Manager is recommending the addition of 1 FTE to further assist the City Manager and Utility Manager on delivering on the robust and complex programs and projects related to the Water and Wastewater systems:
• Add (1) Senior Admin Analyst; FY 21-22 cost = $83,500 (split 50% between Water and Wastewater)
Capital Projects
Included in the Draft FY 21-22 Budget are the following recommended capital investments:
Fire: The Fire Chief has recommended two capital projects:
• Outfitting/equipment for the 2 new fire engines recently approved by Council, cost of $215,000
• 2 new command vehicles, cost of $40,000 each = $80,000
Police: The Police Chief has recommended four capital projects, two of which are multi-year expenditures of critical replacement of public safety equipment:
• First year of 5-year lease-purchase of new patrol vehicles (to be presented to Council in Fall 2021) at a cost of $200,000 (future lease payments commencing FY 2022/2023 estimated at $400,000)
• New CAD/RMS software for 911-Dispatch, including additional overtime budget for implementation and IT technical consulting support, for a total cost of $760,000
• Axon cameras for patrol vehicles, and Axon body worn cameras, a proposed 5-year replacement program, first year cost of $300,405
• Year 2 of 5-year program to replace end-of-life radios and computers, second year cost of $525,000
Other capital projects to be funded in other Funds, including the RUA, will continue to be reviewed by the City Manager with Staff and the EDC for evaluation and recommendation to the City Council at a future date.
ENVIRONMENTAL IMPACT:
The action is exempt from California Environmental Quality Act (CEQA) pursuant to Section 15378(b) (5) of the CEQA Guidelines because the preparation of a budget plan is a governmental administrative activity that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY:
Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
Goal 3-6: Require that all developed areas within Rialto are adequately served with essential public services and infrastructure.
Policy 3-6.1: Coordinate all development proposals with other affected public entities to ensure the provision of adequate public facilities and infrastructure services.
Policy 3-6.3: Require an increasing level of public safety infrastructure and service capability tied to population increase and increasing service demand.
Policy 3-6.4: Complete infrastructure master plans for sewer, water, and drainage.
Policy 5-3.7: Add service level capability and infrastructure to meet increasing demand of new development.
LEGAL REVIEW:
The City Attorney has reviewed and supports the staff report.
FINANCIAL IMPACT:
Appropriations for FY 21-22 for the City, Rialto Utility Authority, Rialto Housing Authority and the Successor Agency provide the basis for City operations and capital expenditures. It is legally mandated for the City to adopt an annual spending plan to ensure receipt of state and federal funds, and to ensure the public is fully aware of the City’s revenues and expenditures. Adoption of the FY 21-22 Budget allows for the City to fully account for all of its revenues and expenditures in order to continue providing public services to the community.
RECOMMENDATION:
Staff recommends that the City Council:
1. Review the Draft FY 21-22 Budget and provide direction to Staff as appropriate; and
2. Set a Public Hearing for July 27, 2021 to Approve and Adopt the Budget Plan for Fiscal Year 2021-22.