For City Council Meeting [July 27, 2021]
TO: Honorable City Council
APPROVAL: Marcus Fuller, City Manager
FROM: Bob Chandler, Interim Finance Director
Title
Request City Council to:
1. Conduct a Public Hearing on the City’s Fiscal Year 2021-2022 Proposed Annual Budget.
2. Approve and Adopt the following Resolutions:
a. Resolution No. 7753, RHA Resolution No. 002-21, RUA Resolution No. 06-21 and Rialto Redevelopment Successor Agency Resolution No. 02-21 for the City’s Fiscal Year 2021-2022 Annual Budget;
b. Resolution No. 7754 Adopting the Fiscal Year 2021-2022 Appropriations Limit (Gann Limit);
c. Resolution No.7755 Adopting the Fiscal Year 2021-2022 Citywide Classification and Compensation Plan;
d. Resolution No. 7763 Amending the 2021-2025 Capital Improvement Program;
3. Receive and File the June 2021 General Fund Five-Year Forecast for fiscal years 2021-22 through 2025-2026.
(ACTION)
Body
BACKGROUND
In accordance with Section 2.04.140 of the Rialto Municipal Code, the City Manager must present the fiscal budget to the City Council for approval annually. Under the direction of the Deputy City Manager and the Interim Finance Director, staff conducted the analysis and made the projections required to complete the budget document after receiving input from all departments. Due to the timing of the commencement of Marcus Fuller’s official duties as the City’s new City Manager, the completion of the budget process was delayed, and on June 22, 2021, the City Council adopted Resolution No. 7737, RHA Resolution No. 001-21, RUA Resolution No. 05-21 and Successor Agency Resolution No. 01-21, continuing the Budget and Contracts from Fiscal Year 2020-2021 through August 29, 2021.
On July 13, 2021 the City Manager presented the draft Fiscal Year 2021-2022 Budget, (the “FY 21-22 Budget”) for City Council review and comment. At that time, proposed FY 21-22 General Fund revenue was $103.2 million with corresponding General Fund expenditures of $103.2 million for a structurally balanced budget. Additionally, the City’s Other Funds represented an additional $91.9 million for a total FY 21-22 Budget of $195.1 million.
Based on direction received from the City Council, a Final FY 21-22 Budget document is presented herewith for the City Council’s adoption.
ANALYSIS/DISCUSSION
The FY 21-22 Budget has been revised to reflect the following additional personnel changes as a result of the City Council’s comments and direction:
Cemetery: Considering concerns for adequate maintenance of the City’s historic cemetery, the City Manager is recommended the following additional position:
• Add (1) Field Service Worker: FY21-22 cost = $49,426
Finance: The City Manager is recommending that the title and job classification for Finance Manager be retitled to Deputy Finance Director (at-will employee). FY 21-22 cost = $0.
Fire: The Fire Chief’s recommendation to reclassify the six (6) Emergency Medical Technicians (EMTs) to Paramedics has been eliminated and is not included in the FY 21-22 Budget.
Human Resources: The City Manager is recommending that the title and job classification for Human Resources Risk Manager be retitled Deputy Director of Human Resource and Risk Management (at-will employee), and delegate risk management functions to the City Attorney’s office. FY 21-22 cost = $0
Police: Considering concerns for adequate supervision of park use at Frisbie Park and Sampson Park, based on City Council direction given the City Manager is recommending the following two additional positions:
• Add (2) Park Rangers; FY21-22 cost = $160,332
Also, the City is the recipient of a Grant that will fund three new Police Officers. Accordingly, the FY 21-22 Budget has been revised to reflect the following:
• Add (3) Police Officers; FY 21-22 cost = $385,000 (Funded by Police Hiring Grant)
As a result of these changes, the total FY 21-22 General Fund expenditure budget increased to $104.2 million. The total FY 21-22 budget for all Other Funds is $92.1 million for a total FY 21-22 Budget of $196.3 million. FY 21-22 Budget reflects a decrease of ($108 million) as compared to the Revised FY 20-21 Budget primarily due to the treatment of prior year budget carryovers on capital projects. In prior fiscal years, carryovers were included as revenue in the new budget. However, starting in FY 20-21 carryovers are reported separately, so current year revenues are matched against current year appropriations.
General Fund
The FY 21-22 General Fund Budget includes $104.2 million in revenue which reflects a $3.15 million increase from the Revised FY 20-21 Budget. 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. The following Table identifies the various sources and budgeted amounts for revenue in the General Fund for the FY 21-22 Budget.
The General Fund is the general operating fund of the City and the FY 21-22 General Fund Budget of $104.2 million funds 385 full-time equivalent (FTE) positions in 9 departments. The following Table identifies the FY 21-22 General Fund appropriations for various Departments as compared to FY 20-21 budget.
The Proposed Budget for 2021-22 reflects an increase of $4 million as compared to the Revised FY 20-21 Budget. General Fund expenditures include operations traditionally associated with activities that are not required to be accounted for or paid by another fund.
The following observations are made regarding increasing General Fund expenditures:
1. Personnel costs have increased by $5.5 million since FY 20-21 due to the City Council’s approval of increased staffing (19 FTEs in FY 21-22) to proposed 417 FTEs in FY 21-22) and negotiated salary and benefit increases with the various labor groups over that period.
2. Services and supplies budget decreased 14% since FY 21-22 in part due to a decrease in COVID-19 related expenses.
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 projected FY 21-22 General Fund expenditure budget of $104.2 million is 4% above the revised FY 20-21 General Fund expenditure budget of $100 million reflecting an annual average increase of 2.75% in line with typical annual increases in salaries, benefits, and services.
In summary, the FY 21-22 General Fund Budget proposes a balanced budget with $104.2 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.
The Following Table identifies the FY 21-22 Expenditures by Fund for All Funds, including General Fund, as compared to the revised FY 20-21 Budget.
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”. Rialto received its first 50% tranche of $14,686,553 on June 18,2021 and is 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 $104.2 million in FY 21-22 General Fund revenues excludes any of the ARPA Funds received or to be received.
Staff will present an item for discussion on the use of the City’s ARPA Funds at a future
date, 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 $2.7 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 more than that 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).
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 from other funds. The FY21-22 Special Revenue Fund Budget includes budgets for different funds in the aggregate amount of $21.6 million which reflects a decrease of $71.9 million as compared to the Revised FY 20-21 Budget. This net decrease is primarily due to a decrease in several fund project expenditures, including Measure I, Gas Tax, Drainage Development, Major Grant, Waste Management, Fire Development and Park Development which are offset by an increase in project expenditures in the Traffic Development and Community Services Grant funds. The Police Department was successful in receiving a Grant to hire (3) additional police officers.
Enterprise Funds
The City has four Enterprise funds including Cemetery, Cemetery-Endowment, Airport, and Utility Management funds. The FY 21-22 Enterprise Fund Budget of $152,000 reflects a decrease of $320,000 from the Revised FY 20-21 Budget. This net decrease is mainly due to a budgeted FY20-21 capital improvement project for the cemetery.
Internal Service Funds
The City has five internal service funds including Fleet Maintenance, Workers’ Compensation, General Liability, Information Technology, and Building Maintenance. The purpose of internal service funds is to centralize certain services that benefit all functions of the City. The expenditures of the internal service funds are allocated to all the City’s departments commensurate to the services provided. The FY 21-22 internal service fund Budget of $12.3 million reflects a decrease of $2.8 million from the Revised FY 20-21 Budget.
Rialto Utility Authority
The Rialto Utility Authority (RUA) accounts for Water and Wastewater Services provided by Rialto Water Services. The FY 21-22 RUA Budget is $42.8 million.
The Rialto Housing Authority
The Rialto Housing Authority (RHA) assumed the housing functions of the former Redevelopment Agency. The FY 21-22 RHA Budget of $168,800 reflects an increase of $32,000 from the Revised FY 20-21 Budget.
Capital Projects Funds
The Capital Projects Funds exist to enhance transparency by reporting one-time capital expenditures in a separate fund. The FY 21-22 Capital projects Fund Budget is $3.1 million in new funding.
Personnel
The FY 21-22 Budget (All Funds) includes total personnel expense of $76.5 million and funds a total of 417 full-time equivalent positions, which is an increase of 19 positions as compared to the 2020-21 Revised Budget. The increase in budget is primarily due to the increase in FTEs included in the FY 21-22 Budget.
PERSONNEL CHANGES
The FY 21-22 Budget proposed the following personnel changes recommended by the City Manager consisting of net increase of +14 FTEs in the General Fund +1 FTE in Cemetery +1 FTE in the RUA and +3 FTE’s in Other Funds:
Cemetery: One personnel change is being recommended:
• Add (1) Field Service Worker: FY21-22 cost = $49,426
Community Development: Several changes in personnel are recommended:
• 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 = $63,585
• Add (1) Business License Inspector; FY 21-22 cost = $70,123
• Delete (1) Assistant Planner; FY 21-22 savings = ($94,800)
• Delete (1) Development Service Specialist; FY 21-22 savings = ($102,351)
• Increase Salary (3) Senior Planners; FY 21-22 cost = $15,000
The total increased cost of personnel changes in this Department is $334,083
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
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
Finance: The City Manager is recommending two personnel changes:
• Reclassify title and job classification for Finance Manager to Deputy Finance Director (at-will). FY 21-22 cost = $0.
• Reclassify Administrative Analyst to Senior Administrative Analyst to accurately reflect the supervisory duties of the incumbent employee. FY 21-22 cost = $13,380
Fire: The Fire Chief has identified one personnel change:
• Reclassify the Emergency Medical Service Coordinator to IGT/GEMT allowing for this personnel cost to be accounted for outside of the General Fund, leading to FY 21-22 savings of ($224,540)
• Note, the proposed reclassification of 6 EMTs to Paramedics has been eliminated.
Human Resources: The City Manager is recommended one personnel change:
• Reclassify title and job classification for Human Resources Risk Manager to Deputy Director of Human Resource and Risk Management (at-will), and delegate risk management functions to the City Attorney’s office. FY 21-22 cost = $0
Police: The Police Chief is recommending four 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
• Add (3) Police Officers; FY 21-22 cost = $385,000 (Funded by Police Hiring Grant)
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 Director of Public Works (Range 7500, Max Salary = $196,243) to Director of Maintenance & Facilities (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
• Delete (1) Public Works Superintendent Pay Range 5300; FY 21-22 savings = ($175,402)
• Add (1) Deputy Director of Maintenance & Facilities Pay Range 6000; FY 21-22 cost = $172,887
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)
Proposed staffing changes are subject to meet and confer with respective bargaining units. Note that all new positions were budgeted at 75% due to the timing for hiring of the new positions.
CAPITAL PROJECTS
Included in the 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.
FIVE YEAR FORECAST
In April, the City retained a consultant, William C. Statler, to complete a five-year financial outlook (FY 2021-22 through FY 2025-26) to augment the City’s upcoming annual budgets. Overall, the results of the forecast paint a picture of future financial and cash-flow stability for the City. The forecast indicates that based on current service levels and modest capital project costs, the General Fund is essentially in balance in 2021 -22. After 2021-22, “it fluctuates from year-to-year, with a “gap” of $1.8 million in 2022-23 to a surplus of $1.2 million in 2025-26. However, it should be noted that these differences between revenues and expenditures in the out-years are very modest: the gap is only 1.6% of expenditures in 2022-23; and the surplus is only 1% of expenditures in 2025-26.”
The report goes on to highlight that “The City is in a unique situation compared with most cities in California: while its revenue growth may have slowed in some cases, it did not experience significant adverse results from Covid-19 impacts. And in fact, as discussed below, sales tax (the City’s top General Fund revenue) increased significantly due to factors unique to the City.” Further, the forecast points out that the City is currently in a very solid financial position overall, especially relative to many other cities in the State: “Available fund balance is about 66% of operating costs. In short, the City starts with solid reserves compared with many other cities in the State, who have depleted their reserves in mitigating service cuts in light of Covid-19 revenue losses.”
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 3-6.1: 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 approved this staff report.
FINANCIAL IMPACT:
Operating Budget Impact
The FY 21-22 Budget, as presented in the attached Budget Book, includes appropriations for the City’s General Fund, special revenue funds, capital project funds, internal service funds, and enterprise funds, which total approximately $196.3 million and fund 417 full-time budgeted staff.
Capital Improvement Budget Impact
Appropriations for FY 21-22 for the City’s capital improvement budget total approximately $3.1 million in new funding and includes various funding for capital items.
RECOMMENDATION:
Staff recommend that the City Council:
• Conduct a Public Hearing on the City’s Fiscal Year 2021-22 Proposed Annual Budget.
• Consider and Adopt a City Resolution, an RHA Resolution, an RUA Resolution and a Rialto Redevelopment Successor Agency Resolution for the City’s Fiscal Year 21-22 Proposed Annual Budget.
• Consider and Adopt a Resolution Establishing the City’s Fiscal Year 21-22 Appropriations Limit (Gann Limit).
• Consider and Adopt a Resolution Adopting the Citywide Classification and Compensation Table; and
• Receive and File the June 2021 General Fund Five-Year Forecast for fiscal years 2021-22 through 2025-2026.