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HomeMy WebLinkAboutItem 10a - Adoption of Operating Budget and CIP and Equipment PlanAdoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 1 of 15 DATE: June 18, 2019 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager Hue Quach, Administrative Services Director SUBJECT: RESOLUTIONS RELATING TO THE ADOPTION OF THE FISCAL YEAR 2019-20 OPERATING BUDGET AND THE FISCAL YEARS 2019-20 THROUGH 2023-24 CAPITAL IMPROVEMENT AND EQUIPMENT PLAN RESOLUTION NO. 7263 ADOPTING A BUDGET FOR FISCAL YEAR 2019-20 AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN AS EXPENDITURES FROM THE FUNDS Recommendation: Adopt RESOLUTION NO. 7264 ADOPTING A CAPITAL IMPROVEMENT AND EQUIPMENT PLAN FOR FISCAL YEARS 2019-20 THROUGH 2023-24 Recommendation: Adopt SUMMARY Sections 1204 and 1205 of the Arcadia City Charter require a public notice and a public hearing for consideration of the proposed Operating Budget and Five-Year Capital Program for the ensuing fiscal year, which begins on July 1. The recommended actions are necessary to implement the budget for Fiscal Year (‘FY”) 2019-20. This year’s budget process began earlier in the year as the City’s financial forecast projected the General Fund to face a $5.2 million deficit for FY 2019-20. On April 2, 2019, at the City Council meeting and at the May 7, 2019, Budget Study Session, staff included materials to discuss various options for balancing the budget based on scenarios of receiving voter approval of Measure A, a 0.75% sales tax measure, and one that does not. Proposed were the following two alternatives for managing the $5.2 million deficit:  Option 1: Without approval of Measure A:  Citywide cost cutting of 5%, equivalent to $3.2 million  Use of reserves, about $2.0 million, to make up the remaining deficit balance  Option 2: With approval of Measure A:  Addition to revenue base from the Measure of $2.2 million would reduce the deficit to $3.0 million Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 2 of 15  Reduction of fund transfer to Capital & Equipment Funds by $2.7 million  Additional operational savings of $480,000 to be found during the Fiscal Year While the above options were proposed, the City Council opted to wait until after the special election before acting on either option. On the evening of June 4, 2019, the City received information that 63.9% (un-official) of Arcadia voters approved Measure A. The positive result allows the City to proceed with adopting the FY 2019-20 General Fund Operating Budget using Option 2 outlined above. The proposed FY 2019-20 General Fund Operating Budget anticipates Total Operating Revenues of $67.4 million and Operating Expenses at $67.9 million, inclusive of $2.4 million of Transfers Out to Special Revenue Funds for operational programs and Capital Funds for future critical maintenance and replacement needs. Ideally, the proposed transfer amount would have been $4.2 million; however, a one-time reduction in the transfer amount can be accommodated without putting the City’s long-term capital and equipment replacement plans in jeopardy. After total revenue and changes to expenditures are considered, the General Fund Operating Budget is projected to carry a deficit of $482,000, or 0.71% of the total General Fund Operating Budget. The ending Operating Fund Balance comes to $3,675,515. It is firmly believed that additional savings can be achieved through the normal course of operations to eventually eliminate this remaining deficit. As for the projected ending Operating Fund Balance, it should be noted that this is only the General Fund Operating Budget Fund Balance used to manage annual operating cash flow activities. The City continues to meet the need for setting aside an Emergency Reserve Fund, currently with a balance of $10.1 million, as well as having other designated fund balances for Workers’ Compensation costs, Liability costs, New City Hall Reserve Fund, and Capital Improvement and Equipment Replacement funds. FY 19-20 Budget Beginning Fund Balance: $ 4,157,7300 Total Revenues 67,408,600 Total Expenditures 65,484,015 Subtotal: 1,924,585 Total Fund Transfers (2,406,800) Net Surplus / (Deficit): ($482,215) Ending Fund Balance: $ 3,675,515 Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 3 of 15 The proposed budget transfer of funds are itemized as follows: Lighting District, Local Law Enforcement (Officer at AUSD), Capital Improvement, and Equipment Replacement Fund. All transfers total approximately $2.4 million:  Lighting District - $ 754,100  Local Law Enforcement - $ 152,700  Capital Improvement Fund - $ 750,000  Equipment Replacement Fund - $ 750,000 Total: $2,406,800 The Capital Improvement Fund provides the majority of funding for such essential maintenance such as pavement rehabilitation, building repairs, and parks maintenance. Key projects in the coming year will be the City’s annual slurry seal and pavement rehabilitation programs to ensure longevity of streets. Both programs reduce deterioration along with improving the aesthetic quality of neighborhoods. In all, street maintenance projects combine for a total $4.9 million in the Fiscal Year. Other major projects proposed for the year are annual water meter replacement programs, feasibility studies for the stormwater watershed management plan, and facility maintenance improvements. Total proposed projects funded by the Capital Improvement Fund will cost $2.5 million. Citywide, the combined capital projects in all funds will cost $1 0.9 million. The Equipment Replacement Fund provides funding for essential equipment such as computers, vehicles, and major office equipment. The Equipment Plan proposes 30 different equipment purchases totaling $3.9 million in expenditures, of which $2.2 million would be paid from the Equipment Replacement Fund. Some of the proposed major purchases are: replacements of a Fire Pump Truck and Crew cab truck ($984,000), CNG Sewer Cleaner ($565,800); Replacement of Patrol (3) and Detective (3) vehicles ($297,600); and Street Division’s CNG Dump Truck and ¾ Ton Pickup Truck ($263,000). Without properly ensuring funds are available to replace or improve upon existing infrastructures, effectively running the City would be impossible over time. At the end of the May 7 Budget Study Session, a copy of the draft proposed budget was provided for the City Council’s review. Inclusive in the draft budget were all operating funds including General, Special Revenues, Enterprise, and the Successor Agency. Additionally, the City Council received the Capital Improvement a nd Equipment Replacement Fund budgets in a separate document. All funds total $120.2 million in expenditures, of which the General Fund’s budget is $65.5 million (excluding Transfers Out noted below). The proposed Budget has been prepared with emphasis of keeping controllable cost down and with an eye towards maintaining the high level of services that Arcadians have been accustomed to. Operational efficiencies have been identified wherever possible to create additional capacity. Although the community has approved an additional 0.75% sales tax measure for coping with future projected deficits, the current Fiscal Year will only see one-quarter of the overall projected sales tax revenue. Nevertheless, the additional tax in combination with one-time reductions of transfers will place the General Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 4 of 15 Fund on a firmer position to counter unexpected challenges as we transition into the next Fiscal Year. As Special Revenues, Enterprise, and Debt Service funds are restricted to specific purposes and are generally self-sustaining, this staff report primarily focuses on the General Fund’s Operating Budget. It is recommended that the City Council adopt the proposed resolutions to enact the Fiscal Year 2019-20 Operating Budget as well as the Capital and Equipment Replacement Plans. BACKGROUND The beginning of the FY 2019-20 budget preparation was expected to be difficult as forecasting indicators signaled for a structural deficit in the upcoming fiscal year and continuing for the foreseeable future. While staff started earlier in the year to come up with a plan for managing the anticipated deficit, one of the alternatives to address the deficit would also depend on the result of a sales tax measure that would be decided by the voters on June 4, 2019. The sales tax measure originated from the discussion and recommendations of an independent citizen financial advisory committee. Beginning in June 2018, staff worked with the City Council-appointed Citizen Financial Advisory Committee (“CFAC”) to review the City’s finances and identify savings and/or mechanisms for generating additional revenue streams to help with the projected long-term structural deficit. At the conclusion of the Committee’s undertaking in December 2018, 10 recommendations were presented and adopted by the City Council. The most significant of those recommendations was to declare a fiscal emergency and call for a sales tax measure as quickly as possible. In February 2019, the City Council placed Measure A, a 0.75% sales tax measure, on the ballot for voter’s consideration on June 4, 2019. Due to the sizable deficit and uncertainty of Measure A’s result, the budgeting process started earlier to allow time to develop and plan solutions for the two possible outcomes. A special Study Session was held on April 2, 2019, to specifically identify the magnitude of cuts that would be needed to balance the budget should Measure A fail. It was recommended that the cuts be phased in over three years in order to lessen the impact to the community as well as to allow time for existing employees to transition out of the organization as humanely as possible. The deficit budget scenario would have implemented a 5% citywide cost cutting, equivalent to $3.2 million, in FY 2019-20, with additional 5% cuts the following year, and an additional 3% in cuts thereafter, to reduce the overall size of the organization by 13% going forward. These cuts focused on maintaining core services; however, as municipal government’s business is service oriented, those cuts would have to include numerous staffing reductions and elimination of services that may be non-essential, but are nevertheless very popular. The full-time equivalent from the first 5% reduction totaled Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 5 of 15 18.5 employees. When all three years were included, it would have totaled nearly 60 full time equivalent positions and countless services to the community. Phasing in the long-term cuts would have left a deficit of $2.0 million in the budget for FY 2019-20, which would need to be offset by the use of the General Fund Reserve. This was recommended in order to buy additional time to prioritize service cuts and explore other alternatives that would provide the least disruption to the City. It is also important to note that without the passage of a sales tax measure or finding some other form of ongoing revenue, the General Fund would continue to face an ongoing annual budget deficit of $8 million. The City Council also conducted a budget Study Session on May 7, 2019. The Study Session included updates to the April 2 Study Session as well as a “status quo” budget alternative, assuming that Measure A was successful. The budget Study Session also covered key capital projects that were budgeted in the Capital Improvement and Equipment Replacement Funds. On June 4, 2019, Arcadia voters approved Measure A, with an approval rate of 63.9%. At this time, the election is un-official, as it has not been certified by the County. Nevertheless, the margin of approval beyond the required 50% and the lack of any known challengers to the results makes it possible to adopt a budget with the safe assumption that the Measure will be certified and the City will begin receiving the additional sales tax dollars after January 1, 2020. Unfortunately, because Measure A would begin being co llected at the mid-point of the Fiscal Year and because receipts are delayed until after the end of each quarter, it is only anticipated that the City will benefit from a single quarter of Measure A revenues during FY 2019-20. As such, a projected deficit of $3 million would remain without some additional adjustment to the budget. In order to balance the budget, it is recommended that the City Council reduce the transfers into the Capital and Equipment Funds for this Fiscal Year, which would save $2.7 million dollars and that the remaining deficit of $480,000 be balanced either through the use of the General Fund Reserve or through savings that will be identified throughout the Fiscal Year during the normal course of operations. If history can be used as a guide, it can be expected that the staff will be able to underspend their budget allocations in order to fully balance the budget without the use of reserves. This budget has been prepared with these goals in mind. DISCUSSION As proposed, the FY 2019-20 General Fund Operating Budget anticipates Total Operating Revenues of $67.4 million and Operating Expenses at $67.9 million, inclusive of $2.4 million of Transfers Out to Special Revenue Funds for operational programs and Capital Funds for future critical maintenance and replacement needs. Summarized in the table below is the General Fund Operating Budget for: FY 201 8-19 Year Ending Estimates, FY 2019-20 Proposed Budget for Adoption, and a FY 2020-21 Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 6 of 15 Preliminary Budget Outlook. Please note that FY 2020-21 is not proposed for adoption as the City adopts its Operating Budget annually. GENERAL FUND FY18-19 FY19-20 FY20-21 Estimates Budget Budget Beginning Fund Balance 8,292,400 4,157,730 3,675,515 Estimated Revenue 59,632,450 63,282,200 70,681,000 Proposed Expenditures 61,876,620 65,484,015 66,305,310 Revenue over Expenditure (2,244,170) (2,201,815) 4,375,690 Fund Transfers Transfers-In from other funds 3,177,000 4,126,400 3,899,700 Transfers-Out to other funds (5,067,500) (2,406,800) (5,134,400) Net Transfers (1,890,500) 1,719,600 (1,234,700) Subtotal Operating Balance (4,134,670) (482,215) 3,140,990 Ending Fund Balance 4,157,730 3,675,515 6,816,505 As shown in the table above, the City’s ending Fund Balance will reduce to $3.7 million in FY 2019-20, which still allows for adequate cash flows between Fiscal Years. Although at a preliminary outlook stage, the FY 2020-21 will stand to net $3.1 million from a budget surplus, bringing the Fund Balance back up to $6.8 million upon receiving the full benefit of Measure A. Per City Council direction, the City is to maintain an Emergency Reserve at 20% of annual operating expenditures. Presently, the Emergency Reserve has a balance of $10.1 million, or 15.5% of the FY 2019-20 Proposed General Fund Operating Budget. In order to meet the 20% contingency level, a transfer of $2.9 million will be necessary. Based on the preliminary budget outlook, it is recommended that such transfer take place in FY 2020-21 when a $3.1 million surplus is expected. However, prior to such date, if at the end of each Fiscal Year a surplus is produced, staff will transfer any available funds to reach the 20% contingency level sooner. Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 7 of 15 FY 2019-20 Proposed Revenues For FY 2019-20, total General Fund revenues are expected to increase 6.1% compared to FY 2018-19 year ending estimates. This is largely due to the additional Measure A sales tax of $2.2 million that is expected on top of the annual forecasted figur e. Without the projected sales tax increase, the fund’s revenue growth rate would have been at 2.5%. The largest revenue source to the City’s General Fund is from Taxes. The key revenues under this group are: Property Tax, Sales Tax, Transient Occupancy Tax, Utility Users’ Tax, and Motor Vehicle License Fees. Their projected receipts are shown in the table below. Description FY 2018-19 YE Estimates FY 2019-20 Proposed Budget Difference % Change Property Tax $ 15,400,000 $ 15,862,000 $ 462,000 3.0% Sales Tax $ 11,250,000 $ 13,626,500 $ 2,376,500 21.1% Transient Occupancy Tax $ 3,398,000 $ 3,466,000 $ 68,000 2.0% Utility Users’ Tax $ 6,650,000 $ 6,783,000 $ 133,000 2.0% Motor Vehicle License Fees $ 7,310,000 $ 7,492,800 $ 182,800 2.5% Property Taxes 27% Sales Taxes 22% Utility Taxes 11% Transient Taxes 5% Franchises 1% License & Permits 7% Fines & Penalties… Use Money & Property 2% Revenue from Other Agencies 12% Charge Current Services 6%Library 0% Recreation 2% Other Revenue 4% GENERAL FUND REVENUE SOURCE BY CATEGORY FY19-20 BUDGET Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 8 of 15 Property Tax: The City expects to continue to benefit from rising real estate prices and a redevelopment trend in both residential and commercial properties. Although home sales and housing activities may have leveled off in comparison to the heights seen in previous years, home sales continue to reflect higher price points with various online real estate sites forecasting growth for the Los Angeles area to range from 2% to 4%. Arcadia is expected to be within or greater than the forecasted range based on the City’s historical valuation trends. The City expects see a continued growth in property tax receipts in the range of 3.0%, or nearly $462,000, for FY 2019-20. Sales Tax: Sales tax revenue is expected to see a 2.0% increase over the prior year. However, the approved Measure A, which increased the City’s sales tax rate by 0.75%, is projected to generate an additional $2.2 million, bringing the year’s forecast amount to $13.6 million in total. With the added tax revenue, year over year comparison is an increase of 21.1%, or $2.4 million. Analysis of this tax category indicates that the auto and transportation industry is expected to be flat as demands have been met after the Great Recession. Other industry groups are projected for growth between 1.0% and 2.5%. The strongest area is the Restaurants industry, which correlates to the low unemployment and consumer spending habits. Transient Occupancy Tax (“TOT”): The projection for FY 2019-20 is $3.5 million, a 2.0% increase over the previous year. In general, tax from this category has not shown the benefit from an improving labor market (low unemployment rate). While business and vacation travel are up regionally, local hotel bookings have been stagnate. Though not built into this year’s budget, of positive note is the development of a new luxury hotel, Le Meridian, on the former Santa Anita Inn site. Once operational, the new hotel will provide a substantial increase to TOT revenues. Construction is to begin in the Summer of 2019 and may be in operation as soon as December 2020. Utility Users’ Tax: Utility Users’ Tax (“UUT”) is projected to have a slight increase of 2.0% when compared to the FY 2018-19 Year Ending Estimate. While water conservation is expected to continue, water rates will increase as a result of imported water costs rising and the need to add treatment to City wells. In addition, rates for statewide electricity & gas utilities are also projected to grow by approximately 2.0%. A continued reduction in the telephone UUT is predicted as landline telephone use continues to drop and cellular companies provide lower cost options for consumers. Overall, the FY 2019-20 projected UUT is approximately $6.8 million, 2.0% greater than FY 2018-19. Motor Vehicle License Fees (“VLF”): This tax is projected to increase by 2.5%, to $7.5 million. Revenues from this line item are largely tied to annual property assessed valuation. Because of this, the City has benefitted from many years of generous growth and will continue to do so in the next Fiscal Year. Other major revenue categories such as Licenses and Permits are projected to decrease compared to FY 2018-19. After many years of growth in the housing market, local sales and remodeling activities have retreated significantly. This revenue category projects a reduction of 9.6%, or $467,000, in comparison to the prior Fiscal Year. All other revenue Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 9 of 15 categories for the General Fund are expected to have modest growth for the coming Fiscal Year. FY 2019-20 Proposed Expenses Total operating expenditures are expected to grow 4.3%, inclusive of the Equipment Replacement expenditure line item. The Operating Expenditure budget continues to maintain the same high level of services with no material increases. Where possible, line items have been reduced to reflect efficiencies that have been implemented over time and to remove any potential for waste. The most significant increases relate to the labor agreement contracts (salaries & medical benefits) and the continuing rise of pension costs in order to make retirement funding more sustainable. In December 2016, the CalPERS Board of Administration approved lowering the CalPERS the expected long-term rate of return, from 7.5% to 7.0%. Lowering the discount rate means pension plans will see increases in both the normal costs (the cost of pension benefits accruing in one year for active members) and the already accrued liabilities. These increases result in higher required employer contributions. The projected increase for Arcadia is roughly $1.4 million in FY 19-20. As the “phase-in” period continues to ramp up, it is expected that Arcadia will be affected in the form of $1.7 million in increases annually through FY 2022-23. Once fully phased in, these amplified levels will flatten out for the foreseeable future. In February 2018, the City successfully negotiated a two -year labor agreement with all five-employee associations. The City and associations agreed to a two -year term that City Manager 2% City Clerk 1% City Attorney 1%General City 3% Administrative Services 5% Police 37% Fire 27% Public Works Services 7% Development Services 7% Recreation & Community Services 5% Library & Museum Services 6% GENERAL FUND OPERATING EXPENDITURE FY19-20 Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 10 of 15 provided for a 2.0% cost of living adjustment each year. The FY 2019-20 budget reflects the second year of those contracts. Overall, the FY 2019-20 budget was developed with the concept of a no growth budget, finding additional cuts from non-essential line items, and only increases where contractually obligated. While natural inflationary increases have been included, staff has carefully controlled costs in most areas so that the increases are negligible and have no material effects to the overall operating expenditures. Outlook and Budget Challenges While the City’s 5-Year Financial Forecast indicates that most revenues and expenditures will continue to grow modestly, the Forecast also anticipates sharply rising pension costs – especially those related to public safety services. Despite major reforms put in place by the City in 2011 and the State in 2013, recent policy changes by the CalPERS Board of Administration add an additional layer of challenges to the budget. These increases created an approximate $8 million annual deficit in the General Fund Budget over the next 15-25 years. Through the passage of Measure A, this deficit should be accounted for. However, there are two key factors to ensuring that this remains true: (1) that the PERS Board does not make any further adj ustments to the actuarial assumptions; and (2) the City is able to control its labor costs over time by not adding benefits or other costs that would impact pension costs negatively. In addition, in order to reduce total costs over the long-term, the City should find ways to pre-pay pension obligations as early as possible so that the growth of investments can be fully realized. The City will work in the coming year to fully explore all available options in both of these areas to ensure the long-term health of the organization. Staff has already begun work with the Citizens Financial Advisory Committee, to look into ways to reduce 0% 10% 20% 30% 40% 50% 60% 70% 80% 0 2 4 6 8 10 12 14 16 MillionsMisc $Safety $ Misc %Safety % Escalating Retirement Costs Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 11 of 15 the CalPERS Unfunded Accrued Liability. Staff has already obtained a proposal from a Financial Advisory Firm that calls for an in-depth analysis of the City’s CalPERS Unfunded Accrued Liabilities, comprehensive review of the unique pension variables, as well as current and future financial challenges in order to determine sound alternatives and develop a sustainable plan for the City. The evaluation will also involve an extensive cost/benefit analysis containing considerations of opportunity costs and align the City’s options and resources to provide potential financial solutions. Capital Improvement and Equipment Replacement Funds Unexpectedly strong revenues and the underspending of authorized budgets over the past several years have allowed the City to transfer a significant amount of funds into the Capital Improvement and Equipment Replacement Funds. It is still important for the City to continue a steady deposit into these funds, which were not replenished for many years. The FY 2019-20 Budget proposes a transfer of $750,000 from the General Fund, a reduced amount from the “sustaining” funding level of $2.4 million. The “deferral” of the full transfer is in exchange for avoiding service cuts to the General Fund. This can be accommodated on a one-time basis; however, as a practice, the City should continue to fully fund deposits annually to ensure there are available resources for future capital improvements. Capital Improvement Fund Balance (in $ millions) (4) (2) 0 2 4 6 8 10 12 2011-122012-132013-142014-152015-162016-172017-182018-192019-202020-212021-222022-232023-242024-252025-262026-272027-282028-292029-302030-312031-322032-332033-342034-352035-362036-372037-382038-392039-40Capital Project Costs Additional Funding Capital Improvement Fund Balance Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 12 of 15 The FY 2019-20 Capital Improvement Plan proposes 40 projects totaling $10.9 million in expenditures, of which $2.5 million would be paid from the Capital Improve ment Fund. The remaining $8.4 million would come from grants, state subventions, and local special funds such as the Prop C Transportation Fund. The table below summarizes some of the major proposed projects. FISCAL YEAR 2019-20 MAJOR CAPITAL IMPROVEMENT PROJECTS Project Description Project Budget Funding Source Annual Slurry Seal Program $600,000 Capital Improvement Annual Meter Replacement Program $550,000 Water Fund New Well Design $250,000 Water Fund Police Department Facility Improvements $119,000 Capital Improvement Pavement Rehab Program $2,455,100 Capital/Other Funds Baldwin Ave Sewer Capacity Improvement $750,000 Sewer Fund Chamber of Commerce Roof Restoration $150,000 Capital Improvement Water Main Replacement $700,000 Water Fund Library Chiller Replacement $150,000 Capital Improvement Stormwater Watershed Management Plan – Feasibility Study $600,000 Measure W Similar to the Capital Improvement Fund, the Equipment Replacement Fund will receive a reduced transfer of $750,000 during this Fiscal Year from the General Fund in order to balance the General Fund Budget. The sustaining level for the Fund is closer to annual deposits of $1.8 million and should be met in future years. Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 13 of 15 Equipment Replacement Fund Balance (in $ millions) The Equipment Plan proposes 30 different equipment purchases totaling $3.9 million in expenditures, of which $2.2 million would be paid for from the Equipment Replacement Fund. The table below summarizes some of the major proposed equipment purchases. FISCAL YEAR 2019-20 MAJOR EQUIPMENT REPLACEMENT PURCHASES Equipment Replacement Description Replacement Budget Funding Source Vehicle Replacement – Sewer: CNG Sewer Cleaner / Communication Equip $565,800 Sewer Fund Vehicle Replacement – Police: Patrol Vehicles (3) / Used Detective Vehicles (3) $297,600 Equipment Replacement Vehicle Replacement – Streets: CNG Dump Truck / ¾ Ton Pickup Truck/Communication Equip $263,000 Equipment Replacement / AQMD Fund (2.0) 0.0 2.0 4.0 6.0 8.0 10.0 2011-122012-132013-142014-152015-162016-172017-182018-192019-202020-212021-222022-232023-242024-252025-262026-272027-282028-292029-302030-312031-322032-332033-342034-352035-362036-372037-382038-392039-40MillionsEquipment Purchase/Replacement Additional Funding Equipment Replacement Fund Balance Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 14 of 15 FISCAL YEAR 2019-20 MAJOR EQUIPMENT REPLACEMENT PURCHASES Equipment Replacement Description Replacement Budget Funding Source Vehicle Replacement – Fire: Pump Truck / Crew Cab Truck / Communication Equip $984,000 Equipment Replacement Fire – Communication & Technology Equipment Replacement $100,000 Equipment Replacement Library Furniture Replacement $62,300 Equipment Replacement It is imperative that the City find a means for depositing funds into these highly essential accounts at or above the minimum required contributions to help them reach fully sustainable levels. Otherwise, the City’s infrastructure will quickly fall into disrepair and the staff will not have the tools and equipment necessary to do their essential duties. CONCLUSIONS The FY 2019-20 General Fund Operating Budget, as proposed, shows a deficit balance of $480,000. This is based on Total Operating Revenues of $67.4 million, Operating Expenses of $67.9 million and transfers of $2.4 million that provide funding support to: Street Lighting District, Local Law Enforcement (Officer at AUSD), Capital Improvement, and Equipment Replacement Funds. The proposed Budget reflects a continuation of steady revenue growth seen in recent fiscal years and near-term expenditure growth that is fairly constrained generally. However, special attention needs to be given to future years as pension costs – especially those related to public safety services – will grow at a rate considerably higher than the norm. The City is fortunate to have had a history of conservative spending and has amassed the savings necessary to have absorbed the increases over the short-term while long- term plans were identified and are being implemented. While there were contingencies in place to deal with the described deficit, it is with a special appreciation to Arcadia Citizens for their support and trust in passing Measure A that the present deficit is highly manageable and the long-term viability of the organization has returned. This additional revenue stream serves as a key mechanism to allow for continued high service levels while meeting the demands of a pension system that has cost more than ever anticipated . By implementing this Budget, the City’s staff will maintain its commitment to providing the Arcadia community with unsurpassed service in a fiscally responsible manner. Adoption of the Operating Budget and CIP and Equipment Plan Resolutions June 18, 2019 Page 15 of 15 Attached to this staff report are the following:  Exhibit “A”: a summary of Sources and Uses of Funds for All Funds reflecting the proposed Operating Budget presented to Council for adoption  Exhibit “B”: a summary of the proposed Five-year Capital Improvement and Equipment Replacement Plan RECOMMENDATION It is recommended that the City Council: 1) Adopt Resolution No. 7263 adopting a Budget for Fiscal Year 2019-20 and appropriating the amounts specified therein as expenditures from the Funds; and 2) Adopt Resolution No. 7264 adopting a Capital Improvement and Equipment Plan for the Fiscal Years 2019-20 through 2023-24. Attachments: Exhibit “A” – All Funds Operating Budget Summary Exhibit “B” – Five-Year Summary of Capital and Equipment Plan Resolution No. 7263 Resolution No. 7264 Attachment A Ending Fund Fund Beginning Outside Transfer Total Appropriation Transfer Total Balance Fund FY19-20 Sources In Out FY19-20 General Fund 4,157,730 63,282,200 4,126,400 71,566,330 65,484,015 2,406,800 67,890,815 3,675,515 Narcotic Seizure Federal 65,600 105,100 0 170,700 170,700 0 170,700 0 COPS 269,500 165,600 0 435,100 165,800 0 165,800 269,300 Local Law Enforcement 0 80,000 152,700 232,700 232,700 0 232,700 0 Medical/Dental 355,400 0 4,567,900 4,923,300 4,567,900 0 4,567,900 355,400 IRS Task Force 460,000 1,000 0 461,000 0 0 0 461,000 Worker Compensation/Liability 3,609,620 63,200 2,496,200 6,169,020 2,496,400 0 2,496,400 3,672,620 Homeland Security  0 10,000 0 10,000 10,000 0 10,000 0 Office of Traffic Safety Grant 0 106,200 0 106,200 106,200 0 106,200 0 California OES HSGP 0 93,100 0 93,100 93,100 0 93,100 0 Misc. P.E.R.S. Employee Retirement Fund 1,351,601 0 0 1,351,601 0 0 0 1,351,601 Emergency Reserve 10,147,000 0 0 10,147,000 0 0 0 10,147,000 Parks & Recreation 10,741,800 839,800 0 11,581,600 30,600 0 30,600 11,551,000 Traffic Safety 0 220,000 0 220,000 220,000 0 220,000 0 Public, Educational/Governmental Access 762,500 98,300 0 860,800 50,000 0 50,000 810,800 Used Oil Grant 13,300 16,200 0 29,500 15,500 0 15,500 14,000 DOC Beverage Grant  18,400 14,800 0 33,200 15,300 0 15,300 17,900 Solid Waste 1,704,000 696,100 0 2,400,100 430,600 200,000 630,600 1,769,500 Measure W ‐ Safe Clean Water Program 0 1,055,300 0 1,055,300 600,000 0 600,000 455,300 State Gas Tax 179,873 1,505,227 0 1,685,100 1,665,700 0 1,665,700 19,400 Road Maintenance/Rehabilitation Act (20,700) 959,800 0 939,100 955,100 0 955,100 (16,000) Air Quality Management District 69,500 75,700 0 145,200 132,300 0 132,300 12,900 Community Development Block Grant 0 308,100 0 308,100 308,100 0 308,1000 Santa Anita Grade Separation 1,776,600 35,500 0 1,812,100 0 0 0 1,812,100 Transit 0 2,026,329 1,358,971 3,385,300 3,385,300 0 3,385,300 0 Proposition A 1,650,200 1,194,260 0 2,844,460 1,269,900 0 1,269,900 1,574,560 Transportation Impact Fund 1,464,900 329,300 0 1,794,200 1,050,000 0 1,050,000 744,200 Proposition C 767,900 982,000 0 1,749,900 1,002,300 0 1,002,300 747,600 TDA Article 3 Bikeway 0 50,000 0 50,000 50,000 0 50,000 0 STPL & ITS Special Fund 0 0 0 0 0 0 0 0 Measure R 657,100 738,200 0 1,395,300 611,970 0 611,970 783,330 Measure M 171,850 825,040 0 996,890 760,000 0 760,000 236,890 Capital Improvement 4,848,400 747,700 750,000 6,346,100 2,767,400 0 2,767,400 3,578,700 City Hall Reserve 1,500,000 0 0 1,500,000 0 0 0 1,500,000 Lighting Maintenance 152,200 502,800 754,100 1,409,100 1,256,900 0 1,256,900 152,200 Water Fund 18,782,500 14,192,200 0 32,974,700 18,681,600 0 18,681,600 14,293,100 Sewer Fund 2,049,500 2,461,500 0 4,511,000 2,844,500 0 2,844,500 1,666,500 Equipment Replacement 6,230,800 103,500 750,000 7,084,300 2,256,600 0 2,256,600 4,827,700 Redevelopment Successor Agency 0 2,805,900 0 2,805,900 2,805,900 0 2,805,900 0 General Obligation Bond 2012 371,100 416,900 0 788,000 416,900 0 416,900 371,100 General Obligation Bond 2011 497,400 594,200 0 1,091,600 594,200 0 594,200 497,400    Total 74,805,574 97,701,056 14,956,271 187,462,901 117,503,485 2,606,800 120,110,285 67,352,616 USES OF FUNDSSOURCES OF FUNDS CITY OF ARCADIA SUMMARY BY FUND FISCAL YEAR 2019-2020 PROPOSED BUDGET ESTIMATED ESTIMATED PROPOSED ESTIMATED FUNDS FIVE-YEAR FIVE-YEAR FUNDS 7/1/2019 REVENUE EXPENDITURE 6/30/2024 PARK AND RECREATION FUND 10,741,900 3,910,600 (4,705,500) 9,947,000 MEASURE W CLEAN, SAFE WATER PROGRAM 0 5,276,300 (4,950,000) 326,300 GAS TAX (HUTA) FUND 179,873 7,525,335 (7,279,300) 425,908 ROAD MAINTENANCE AND REHABILITATION PROGRAM (20,700)4,803,800 (4,155,100) 628,000 AQMD 69,500 380,400 (221,500) 228,400 PROP C LOCAL RETURN 767,900 4,903,300 (5,136,200) 535,000 TRANSPORTATION IMPACT FUND 1,464,900 1,599,700 (1,700,000) 1,364,600 MEASURE R LOCAL RETURN 657,100 3,710,600 (3,341,440) 1,026,260 MEASURE M LOCAL RETURN 171,850 5,881,600 (5,530,000) 523,450 CAPITAL OUTLAY FUND 4,848,400 13,921,900 (10,846,900) 7,923,400 WATER FACILITY RESERVE 17,456,800 1,223,100 (16,868,500) 1,811,400 WATER EQUIPMENT RESERVE 926,800 60,800 (895,700) 91,900 SEWER FUND 2,049,500 12,644,000 (13,295,100) 1,398,400 EQUIPMENT FUND 6,230,800 8,396,200 (9,006,600) 5,620,400 SUMMARY OF PROPOSED FIVE YEAR CAPITAL PROGRAMS FISCAL YEAR 2019-20 THROUGH 2023-24 CITY OF ARCADIA Attachment B RESOLUTION NO. 7263 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, ADOPTING A BUDGET FOR FISCAL YEAR 2019-20 AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN AS EXPENDITURES FROM THE FUNDS WHEREAS, on June 18, 2019, the City Manager submitted to the City Council a proposed Budget for Fiscal Year 2019-20, a copy of which is on file in the Office of the City Clerk; and WHEREAS, Section 1204 of the Arcadia City Charter requires notice and hearing for consideration of a proposed operating budget and its adoption by resolution; and WHEREAS, the aforementioned proposed Budget includes the budget for the ensuing Fiscal Year 2019-20; and WHEREAS, notice of the public hearing on the proposed Budget and a summary of the proposed Budget were published on June 10, 2019 and June 13, 2019; and WHEREAS, the duly noticed public hearing was conducted by the City Council on June 18, 2019. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: SECTION 1. That certain "City of Arcadia Budget, Fiscal Year 2019-20", as on file in the office of the City Clerk, together with any approved amendments thereto, is hereby adopted, in pertinent part, as the official budget of the City of Arcadia for the Fiscal Year 2019-20 and the amounts specified therein as expenditures from the funds indicated are hereby appropriated for the purposes specified therein. 1