HomeMy WebLinkAboutItem 07a - Adoption of Operating Budget and CIP and Equipment PlansAdoption of the Operating Budget and CIP and Equipment Plans
June 16, 2020
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DATE: June 16, 2020
TO: Honorable Mayor and City Council
FROM: Dominic Lazzaretto, City Manager
Hue Quach, Administrative Services Director
SUBJECT: RESOLUTION NO. 7315 ADOPTING A BUDGET FOR FISCAL YEAR
2020-21 AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN
AS EXPENDITURES FROM THE VARIOUS FUNDS
Recommendation: Adopt
RESOLUTION NO. 7316 ADOPTING A CAPITAL IMPROVEMENT AND
EQUIPMENT PLAN FOR FISCAL YEARS 2020-21 THROUGH 2024-25
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 is required to be adopted by July 1. The
recommended actions are necessary to implement the budget for Fiscal Year 2020-21.
This year’s budget process included Budget Study Sessions with the City Council on May
19 and June 2, 2020. Copies of the proposed Operating Budget were 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 and Equipment Replacement Fund budgets in
a separate document. All funds total $120.5 million in expenditures, of which the General
Fund’s budget is $63.9 million (excluding Transfers Out noted below).
As Special Revenues, Enterprise, and Debt Service funds are restricted to specific
purposes and are generally self-sustaining, this report will primarily focus on the General
Fund’s Operating Budget.
The proposed FY 2020-21 General Fund Operating Budget anticipates Total Operating
Revenues of $65.6 million and Operating Expenses at $63.9 million. Based on the many
unknowns associated with COVID-19, staff has prepared a recommended Budget that
assumes a scenario in which the general public continues to be highly impacted by social
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restrictions both because of ongoing restrictions and another possible shutdown this
winter. This scenario would have a significant impact on the City’s operations and ability
to generate revenues. Impact to several of the City’s key General Fund revenues – Sales
Tax, Transient Occupancy Tax, Fees for Services, and other revenues – have been
projected. The adoption of Measure A and the significant increase in taxes it brings is
what makes it possible to present a balanced Budget that does not use Reserve funds
and maintains service levels in the community. While the amount projected to be received
in the coming year has been reduced from pre-COVID projections, even the reduced
number has the effect of buoying the organization during this economic downturn.
The proposed Budget does not contain any new programs for consideration; instead,
significant cuts have been made throughout all departments – but most significantly in the
Library & Museum and Recreation & Community Services Departments, whose
operations are most directly impacted by the ongoing restrictions from COVID-19.
Due to the uncertain nature of COVID-19 and its impacts, the Budget has been put
together as conservatively as possible; nevertheless, it would be appropriate for the City
Council to review the document on a quarterly basis in the coming year to be able to
adjust to any required changes as quickly as possible.
After total revenue and expenditures are considered, the ending Operating General Fund
Balance, as proposed, will reflect a balanced budget with an expected surplus of
$251,700, which would add to the projected ending Operating Fund Balance of
$3,216,900. A recent assessment of the City’s cash flow shows the City to be sound with
liquidity and capacity to weather the anticipated economic downturn. 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 reserve fund balances, such as for Workers’
Compensation costs, Liability Claims expenses, and Capital Improvement and Equipment
Replacement Funds. Inclusive of the Emergency Reserve Fund balance noted above,
the City’s Unrestricted Reserve Balances totals $31.4 million.
FY 20-21
Budget
Beginning Fund Balance: $ 2,965,200
Total Revenues 68,308,500
Total Expenditures 63,945,650
Subtotal: 4,362,850
Total Fund Transfers (4,111,100)
Net Surplus / (Deficit): $251,750
Ending Fund Balance: $ 3,216,950
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The proposed Budget transfer of funds are itemized as follows:
• Lighting District $ 786,300
• Local Law Enforcement $ 124,800
• Capital Improvement Fund $1,600,000
• Equipment Replacement Fund $1,600,000
Total: $4,111,100
Annually, a goal of $2.4 million is set for transfers to the Capital Improvement Fund in
order to create a balance sufficient to meet annual maintenance and replacement needs.
The $1.6 million proposed does not reach the goal amount for the year, but does more
than offset proposed expenditures in the coming year. The Capital Improvement Fund
provides most of the funding for such essential maintenance as pavement rehabilitation,
building repairs, and parks maintenance. Due to COVID-19’s effect on the Budget,
deferral of capital improvement projects totaling $1.2 million is recommended until further
clarity is known. These projects can be delayed for a year or two without impacting the
overall quality of the City’s buildings and infrastructure.
Key projects that were maintained in the Capital Improvement Fund budget are the annual
slurry seal program and the Arcadia Unified School Track Replacement. Total proposed
projects funded by the Capital Improvement Fund will be $940,500. Citywide, the
combined capital projects for all funds has been budgeted at $10.4 million.
In the Equipment Replacement Fund, this year’s transfer approaches the annual goal
amount. The General Fund is budgeted to transfer $1.6 million to the Fund versus the
annual goal of $1.8 million. Total proposed asset replacement costs funded by the
Equipment Replacement Fund will be $661,700, meaning the ending Fund balance will
rise by over $900,000. The Equipment Replacement Fund provides funding for essential
equipment such as computers, vehicles, and major office equipment. Similar to the
Capital Improvement Fund, roughly $1.5 million in proposed expenditures have been
deferred to future years, which can be accomplished without jeopardizing operations or
employee safety.
During the Budget Study Session of May 19, a detailed discussion ensued about the
pension debt and the desire to accelerate payments to CalPERS to generate substantial
long-term savings. The City Council provided direction to use $2.9 million of the City’s
reserve funds for this prepayment. The City Council also directed staff to eliminate
expenditures related to Law Day, which the Arcadia Chinese Association has offered to
take over. This will save the City approximately $2,000 per year. These directives have
been incorporated in the proposed Budget.
It is recommended that the City Council adopt the proposed resolutions to enact the Fiscal
Year 2020-21 Operating Budget as well as the Capital and Equipment Replacement
Plans, including the $2.9 million in additional payments to CalPERS. The
recommendation goes further to require staff to continue to monitor COVID-19’s impact
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to the City’s fiscal position and, on at least a quarterly basis, provide updates to the City
Council.
BACKGROUND
At the start of the Budget process in mid-February, there was a fairly optimistic mood
when looking forward to the upcoming Fiscal Year. The City’s residents in June 2019
had approved Measure A, a .75% general transactions and use tax that was estimated to
provide an additional revenue stream of at least $8.6 million to the General Fund. The
approval of Measure A ensured that the City could continue its excellence in providing
services to the residents and businesses in Arcadia. Moreover, after working diligently
with the Citizens Financial Advisory Committee to develop a long range plan to reduce
the City’s CalPERS pension liabilities, the coming year would have marked the first year
in which the City could take that important step forward in greatly reducing that burden.
In fact, the original Budget showed a projected surplus of over $3 million, including full
transfers to all sinking funds, which would have been sent to CalPERS to address the
City’s long-term pension liabilities.
Around mid-February, the pandemic had already made its traces around the world. There
were growing numbers of cases as well as deaths, and of particular concern was the
speed to which those new cases were tallying worldwide. Looming was a potential health
crisis; however, the economic impact and the devastating effect of it was not yet imagined.
The COVID-19 pandemic caused economic disruption at unprecedented speed as it
changed people’s mobility and the norms of business in all services and industries leading
to closure of all types of businesses, travels, hotels, tourism, and any places where
gatherings take place.
The impact of COVID-19 would be felt by all state and local governments as social
restrictions have had a significant impact on the various taxes and fees normally paid.
Specifically, City taxes that are most affected are: Sales and Transaction Use Tax,
Transient Occupancy Tax, Business License Tax, recreational class and sports fees, and
various planning and building permit fees. This year’s Budget was the most difficult to
compile in at least a generation due to the unprecedented fiscal and societal uncertainties
related to the ongoing COVID-19 public health crisis. There simply is no comparable
reference point to this contagion event. As such, the Budget has been prepared with the
maximum amount of flexibility built in and an eye for being highly conservative.
As we move forward, the FY 2020-21 budget year not only focuses on retaining critical
and essential services, but it will also require the City to continue to address the impact
of COVID-19 in the working environment and to ensure a safe workable place as we
transition to opening our facilities and programs to the community.
DISCUSSION
It is in this context that the FY 2020-21 Budget forecasts reductions in both revenues and
expenditures. However, it needs to be noted that in this year’s budget, the forecasting of
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revenue, was like no other. Aside from uncertainties brought about by COVID-19, the
passage of Measure A and the revenue resulting from it has camouflaged what would
have been thought to be an obvious revenue decline under normal circumstances.
To further explain, FY 2020-21 is the first year in which a full year of Measure A revenue
would be received. This full year’s projected amount changed the bottom line and caused
this “artificial” growth when simply comparing the proposed budget to the prior Fiscal
Years. In addition, because the pandemic caused a significant reduction of revenues for
the months of March through June 2020, FY 2019-20 will end much lower than initially
projected. This further adds to the apparent growth seen when you simply compare the
two years.
A better way of looking at how COVID-19 has impacted the Budget is to compare the
original projections that were included in the prior year’s Budget to those in this Budget.
It was forecasted that General Fund revenue for FY 2020-21 would be $74.6 million
versus the current projection of $68.2 million – a decrease of nearly $6.5 million. Similarly,
on the expenditure side, the prior year’s budget projection anticipated expenditures of
$74.6 million versus the $68.0 million that is currently proposed, illustrating $4.6 million in
cuts that have been included in the proposed document.
Summarized in the table below is the General Fund Operating Budget for: FY 2019-20
Year Ending Estimates, FY 2020-21 Proposed Budget for Adoption, and a FY 2021-22
Preliminary Budget Outlook. Please note that FY 2021-22 is not proposed for adoption
as the City adopts its Operating Budget annually.
GENERAL FUND
FY19-20 FY20-21 FY21-22
Estimates Budget Budget
Beginning Fund Balance 6,192,500 2,965,200 3,216,900
Estimated Revenue 59,004,400 65,627,600 70,694,500
Proposed Expenditures 64,622,800 63,881,700 69,102,700
Revenue over Expenditures (5,618,400) 1,745,900 1,591,800
Fund Transfers
Transfers-In from other funds 4,698,000 2,616,900 5,132,500
Transfers-Out to other funds (2,306,900) (4,111,100) (5,127,200)
Net Transfers 2,391,100 (1,494,200) 5,300
Subtotal Operating Balance (3,227,300) 251,700 1,597,100
Ending Fund Balance 2,965,200 3,216,900 4,814,000
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As shown in the table above, the City’s General Fund Ending Fund Balance will increase
to $3.2 million as a result of a projected surplus of $251,700, which allows for adequate
cash flows between Fiscal Years. Per City Council direction, the City also maintains an
Emergency Reserve at $10.1 million. Inclusive of other designated fund balances, such
as the Workers’ Compensation, General Liability Claims, Capital Improvement, and
Equipment Replacement Fund, the City’s Reserve Balances totals $31.4 million as of this
writing. That total reserve fund balance, through planned use, will be reduced by the end
of the Fiscal Year. At the May 19 Budget Study Session, the City Council provided
direction to use $2.9 million of reserve fund balances for prepayment contributions to
CalPERS.
FY 2020-21 Proposed Revenues
FY 19-20 FY 19-20 FY 20-21 FY 21-22
Revenue Source Budget Estimated Budget Budget
Taxes 41,868,400 38,332,500 44,034,500 48,810,400
License & Permits 4,590,700 4,314,500 4,556,200 4,626,200
Fines & Penalties 527,500 421,900 416,500 506,500
Use Money & Property 1,562,000 1,784,000 1,517,800 1,560,900
Revenue from Other
Agencies 7,573,300 7,841,800 8,771,800 8,226,000
Charge Current
Services 3,647,600 3,068,800 3,284,200 3,239,900
Library 122,400 97,900 89,400 89,400
Recreation 1,261,900 916,500 747,700 1,357,000
Other Revenue 2,296,800 2,226,500 2,209,500 2,278,200
Total Revenues
Subtotal 63,450,600 59,004,400 65,627,600 70,694,500
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For FY 2020-21, total General Fund revenues are expected to increase when compared
to FY 2019-20 Year End Estimated. 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.
Property Tax: The City expects to continue to see growth in home valuation, a benefit
that can be credited to the current low interest rate environment. Although home sales
and housing activities have leveled off in comparison to recent years, home sales prices
are forecast to reflect higher price points. Arcadia is expected to be at or above the
historical valuation trends in Los Angeles County. A 2.5% growth projection is budgeted
and could be considered ultra-conservative when Arcadia has grown at over 5% annually
in the past decade. Due to uncertainties associated with COVID-19, a cautious projection
is used to give some leeway to respond should the budget worsen during the year. The
City expects see a continued growth in property tax receipts in the range of 2.5%, or
nearly $413,800, for FY 2020-21.
Sales Tax: Sales tax revenue is expected to see a significant increase when comparing
to the prior year’s estimated ending figure. This is due to the passage of Measure A
(0.75% Transaction Use Tax) as the revenue resulting from it has disguised an expected
decline in sales taxes. FY 2020-21 is the first year in which a full year of Measure A
revenue is to be received.
Looking at this differently to get a sense of how much our baseline sales tax is expected
to decrease, the graph below shows a history of actual tax receipts going back to FY
2011-12 and comparing the historical receipts to the FY 2020-21 budgeted sales tax,
excluding the value of Measure A. This comparison is ONLY on the 1% Bradley Burns
portion of sales tax receipts.
Description FY 2019-20
YE Estimates
FY 2020-21
Proposed
Budget
Difference %
Change
Property Tax $ 15,862,000 $ 16,968,000 $ 413,800 2.5%
Sales Tax $ 10,763,200 $ 16,506,400 $ 5,743,200 53.4%
Transient Occupancy Tax $ 2,424,200 $ 2,035,600 $ (388,600) -16.0%
Utility Users’ Tax $ 6,600,800 $ 6,638,100 $ 37,300 0.6%
Motor Vehicle License Fees $ 7,773,400 $ 7,967,800 $ 194,400 2.5%
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In the above graph, the blue line represents actual sales tax receipts of the 1% Bradley
Burns tax the City has traditionally received. The red dotted line shows that the current
forecast for FY 2020-21 is below the actual receipts of FY 2012-13, dropping to the sales
tax receipt to the level it was eight years ago. From the peak in FY 2018-19, the Bradley
Burns taxes in Arcadia are projected to be nearly 20% less.
Sales tax in total is projected to come in at $16.5 million. Though it shows a growth by
percentage and dollar when compared to the prior year data, without the pandemic, sales
tax projection for FY 2020-21 would have reached $20.5 million. From this perspective,
the overall sales tax projection for FY 2020-21 has shrunk by 19.5%.
Transient Occupancy Tax (“TOT”): COVID-19 impacted the economy with sudden and
shocking waves that led to closure of all types of business where gathering may take
place. The travel and tourism industries were especially hard hit. Similar to the sales tax
category, the hotel tax projection has been reduced by 41.3%, or $1.5 million when
compared to the FY 2019-20 Adopted Budget, or a reduction of 16% when compared to
the FY 2019-20 Year End Estimate. This is especially telling in that the Year End Estimate
already includes a projected reduction of occupancy of 84% for the months of March
through June 2020.
An estimate of $2.0 million in TOT revenues has been used for FY 2020-21. This forecast
figure includes a partial year opening of the Le Meridian hotel with an expected opening
in February 2021. The revenues for this property specifically have been projected to be
extremely low compared to previous estimates. Not only is occupancy expected to lag,
but the average room rate for a luxury property will surely be decreased in a restricted
travel environment, which is expected to continue until the pandemic is under control.
Utility Users’ Tax: Utility Users’ Tax (“UUT”) is projected to have a slight increase of 0.6%
when compared to the FY 2019-20 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 and repairs to City wells. A continued reduction in the
telephone UUT is predicted as landline telephone use continues to drop and cellular
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
11,000,000
12,000,000
FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 20-21
Bradley Burns -1%
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companies provide lower cost options for consumers. Overall, the FY 2020-21 projected
UUT is approximately $6.6 million, 0.6% greater than FY 2019-20.
Motor Vehicle License Fees (“VLF”): This tax is projected to increase by 2.5%, to $8.0
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.
FY 2020-21 Proposed Expenses
Total operating expenditures for FY 2020-21 has been proposed at $63.9 million, a
decrease of 2.2% versus FY 2019-20 Budget of $65.4 million. However, when taking into
consideration inflation, pension cost increases, and the continued rise of minimum wage,
projected expenditures were expected to reach $66.3 million prior to the pandemic.
Through the budgeting process, departments identified reductions of $2.4 million based
on operating in a COVID-19 environment. Some of these savings will include all
departments holding non-critical positions vacant for an extended period. Other areas of
cuts include non-essential equipment and supplies that can be deferred without affecting
services as well as all training expenses that otherwise would be in place if COVID-19 did
not exist. As always, the staff has identified any savings possible from reducing waste
and excessive contingency funds, while ensuring that service levels to the community
remain high.
City Manager
2%
City Clerk
1%
City Attorney
1%
General City
3%
Administrative
Services
5%
Police
37%
Fire
26%
Public Works
Services
7%
Development
Services
8%
Recreation &
Community Services
5%
Library & Museum
Services
6%
GENERAL FUND
EXPENDITURE
FY20-21 Budget
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Outlook and Budget Challenges
At the forefront of many California government entities is the concern over escalating
pension costs. Arcadia is no different. The growing liability over the past decade has
translated to higher employer contributions to pension plans, which created significant
budget constraints. To alleviate this, the City Council proposed an initiative, known as
Measure A, asking for the community approval of a 0.75% Transaction Use Tax. The
community voted to approve Measure A with a 63.8% approval rating in June 2019. The
promise to the voters was that Measure A would allow the City to address the pension
problem, even in times of economic downturn, while still maintaining high levels of service
to the community. The proposed Budget reflects this.
Steps Taken to Date
In June 2019, the City Council approved a contract with Urban Futures (“UFI”) to provide
pension advisory services to assist the Citizen’s Financial Advisory Committee
(“Committee”) with developing recommendations to address the City’s rising pension
costs and its unfunded actuarial liabilities (UAL) with the California Public Employees’
Retirement System (“CalPERS”). A Comprehensive Management Plan was developed
which provides a detailed pension funding strategy with six specific recommendations.
A number of those strategies have begun and their progress is as follows:
1. General Fund Revenues and Reserves: As part of the proposed strategies to
consider, the Committee discussed use of Reserves or one-time monies to be
used to pay down the UAL.
At the May 19, 2020, Budget Study Session, the City Council provided direction to
appropriate $2.9 million from reserve fund balances and make an Additional
Discretionary Payment for the one-time prepayment to CalPERS. This would
provide significant long-term savings as the payment would be used to pay down
CalPERS’ longest and most costly liabilities amongst the City’s Public Safety and
Miscellaneous Pension plans.
2. Leveraged Refunding: The Successor Agency of the City of Arcadia has two
outstanding Taxable Allocation Bonds. The refunding could be structured to
provide “up-front savings” in the first three years totaling $4.2 million, or $1.2 million
on a net present value (NPV) basis. The City receives a 10.44% share of residual
cash flows from the excess tax increment revenues, so the City’s share of these
savings would be approximately $428,000.
At the May 19, 2020, City Council meeting, the City Council as the Successor
Agency to the Arcadia Redevelopment Agency authorized the issuance and sale
of Tax Allocation Refunding Bonds. The procedure calls for the item to be
approved by the Fifth District Consolidated Oversight Board, then the State
Department of Finance for review. Anticipating that the bond refinancing will take
place, the City would then take its share, an estimate of $428,000, and make
additional prepayment to CalPERS to further reduce the UAL balance.
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In a recent development, the Successor Agency finalized the sale of its remaining
property, the Bekins building located at 33 W. Huntington Drive. The City will
receive a share of the sales proceed, estimated to be $291,000. This amount will
also be used to make prepayment to CalPERS.
3. Pension Obligation Bonds: CalPERS members are required to make fixed UAL
payments each year. Therefore, the UAL payments should be considered as, and
managed like, any other debt or loan. The Discount Rate used by CalPERS to
amortize each base—or loan—is equal to 7%. In California, Pension Obligation
Bonds effectively “refinance” UAL payments with taxable bonds at a lower rate. At
this time, the rate is expected to be less than 4%, leading to substantial long-term
savings. The proceeds from the POBs would be used to make Additional
Discretionary Payments to CalPERS, further reducing the unfunded liability.
On March 17, 2020, City Council authorized and gave direction to pursue this
financing tool as a pension funding possibility. A judicial validation proceeding has
been initiated; however, due to the COVID-19 pandemic, the courts have been
closed until at least July 1, 2020. Once the judicial validation review process is
approved, staff will proceed with the necessary steps to commence with the
issuance of bonds. A key step to the process will be additional meetings with the
Citizen Financial Advisory Committee to discuss and determine the appropriate
issuance amount that would warrant the reasonableness of the debt. At the time
of development for the Comprehensive Management Plan, a probable amount that
has been discussed was a $75 million bond issuance.
If the City were to issue Pension Obligation Bonds in the amount noted, adding all
the other line items would provide a total funding source of $78.6 million as
payment towards the UAL balance. That the total payment would provide an
estimated $50.9 million in long-term cash flow savings to the City.
4. Sale of Golf Course: A recommendation of the Citizens Financial Advisory
Committee was to explore the possibility of selling the 3-Par Golf Course near Live
Solution / Funding Source Payment
Amount
Projected
Savings
Discretionary Payment 2,900,000$ 4,230,000
City Share of Savings From Successor
Agency Bond Refunding 428,000 1,010,000
Proceeds From Sale of Bekin Building 291,000 690,000
Pension Obligation Bonds 75,000,000 45,000,000
Total: 78,619,000$ 50,930,000$
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Oak Ave. and use the proceeds as a large discretionary payment to CalPERS.
Staff has been in the process of doing background work to better understand the
history of the site and preparing a request for proposals from an appraiser, so that
a fair sales price can be understood. In advance of that, the City recently received
an unsolicited letter from a developer offering $23 million for the site, with some
significant contingencies. At that price, using the same general savings factor
above, the City would see approximately $44.2 million in pension savings over
time.
Capital Improvement and Equipment Replacement Funds
Over the past several years, the City to has been able to transfer a significant amount of
funds into the Capital Improvement and Equipment Replacement Funds through
disciplined savings as well as transferring any excess funds at the end of each year. It is
still important for the City to continue a steady deposit into these funds, which were not
replenished for many years during the last economic downturn and began to be at
dangerously low levels. The FY 2020-21 Budget proposes a transfer of $1.6 million from
the General Fund to each of these accounts. While this is a bit smaller than the goal
amounts established for these funds to make them sustaining, the amounts to be
transferred this year will surpass the proposed spending in FY 2020-21. During a
significant financial crisis, being able to transfer even these amounts is a luxury few cities
can afford and a testament to the restraint the organization has shown as a whole to keep
costs low relative to service levels.
The FY 2020-21 Capital Improvement Plan proposes 28 projects totaling $10.4 million in
expenditures, of which $940,500 would be paid from the Capital Improvement Fund. The
Capital Improvement Fund provides the majority of funding for such essential
maintenance as pavement rehabilitation, building repairs, and parks maintenance. Due
to COVID-19’s effect on the budget, $1.2 million in capital improvement projects is
recommended until further clarity is known. While these deferred projects are needed
eventually, delaying them for a short period will not be critical and will provide some
flexibility to the organization during the economic downturn. Listed are the various Capital
Improvement Fund deferred projects that were initially slated for the Fiscal Year:
• Pavement Rehabilitation - $500,000
• Various City Facility Improvements - $380,000
• Fire Station Kitchen Remodel - $85,000
• Replacement of HVAC Units - $60,000
• Peacock Fountain Pump Replacement - $60,000
• Library Landscaping Improvements - $25,000
• Longden Baseball Field Electric Panel - $25,000
Note that the majority of pavement rehabilitation projects are funded via grants and other
special funds. The amount deferred above is only a small percentage of the total. The
remaining $9.4 million of capital improvement projects come from grants, state
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subventions, and local special funds such as the Prop C Transportation Fund. The table
below summarizes some of the major proposed projects.
FISCAL YEAR 2020-21 MAJOR CAPITAL IMPROVEMENT PROJECTS
Project Description
Project
Budget Funding Source
Annual Slurry Seal Program $600,000 Capital Improvement
Annual Meter Replacement Program $250,000 Water Fund
Main Basin New Well - Construction $1,800,000 Water Fund
Pavement Rehabilitation Program $1,100,000
Road Maintenance &
Rehabilitation Program
(SB1)
Sewer Main Replacement Program $900,000 Sewer Fund
Water Main Replacement Program $800,000 Water Fund
Chapman Well Blend Plan & Well Rehab $1,410,000 Water Fund
Traffic Signal Fiber Optics Network
Extensions $400,000 Transportation Impact
Fund
Arterial Rehabilitation Program –
Baldwin Ave from Camino Real Ave to
Las Tunas Dr.
$1,000,000 Proposition C Fund
Santa Anita Ave Corridor Traffic Signal
Improvements $800,000 Transportation Impact
Fund
The Equipment Fund is estimated to require an annual transfer of $1.8 million on average
from the General Fund. The General Fund has been budgeted to transfer $1.6 million to
replenish the fund in FY 2020-21. The Equipment Replacement Fund provides funding
for essential equipment such as computers, vehicles, and major office equipment. Similar
to the Capital Improvement Fund, roughly $1.5 million in costs have been deferred to
future years. The most significant of these deferrals includes the purchase of a fire engine;
the remainder includes things such as front line police vehicles.
The Equipment Plan proposes 22 different equipment purchases totaling $789,200 in
expenditures, of which $661,700 would be paid for from the Equipment Replacement
Fund. The table below summarizes some of the major proposed equipment purchases.
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June 16, 2020
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FISCAL YEAR 2020-21 MAJOR EQUIPMENT REPLACEMENT PURCHASES
Equipment Replacement
Description
Replacement
Budget Funding Source
Police Dept. Radio Equipment
Replacement
$117,000 Equipment Replacement
Public Works Tools & Equipment
Replacement
$47,500 Equipment Replacement/
Water Funds
Police Records Mgmt &
Crimemapping System Upgrades
for NIBRS Compliance
$76,200 Equipment Replacement
Automatic License Plate Reader
Replacement & Upgrades
$82,000 Equipment Replacement
Fire Communication &
Technology Equipment
Replacement Program
$80,000 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 in the coming years to help
them approach 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. The reduction in total transfers for this Fiscal Year is possible due to
having achieved strong balances in the Capital and Equipment Replacement Funds. The
combination of deferred expenditures and reduced transfers into these Funds will allow
some flexibility during the response to the pandemic without crippling the long-term
outlook for the organization.
CONCLUSION
The FY 2020-21 General Fund Operating Budget, as proposed, is balanced with a
projected surplus of $251,750. This is based on Total Operating Revenues of $68.3
million, Operating Expenses of $63.4 million, and transfers of $4.1 million. Revenue
projections have been reduced significantly and expenditures have been reduced to
respond to the ongoing fiscal impacts of COVID-19 .
The impact of COVID-19 has placed added budgetary pressure for the coming year and
possibly longer. Making it more difficult is not having a point reference for finding solutions
to deal with the current situation. COVID-19 is different than a normal economic downturn
or emergency event in that it is open-ended and may have long-term impacts to the way
Adoption of the Operating Budget and CIP and Equipment Plans
June 16, 2020
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society works, plays, and interacts. As we move forward, FY 2020-21 will focus on
reacting to surprises that are surely in store for the community. Should the economic
picture worsen throughout the year, staff will propose adjustments for the City Council to
consider. Paramount will be retaining essential services and creating a safe workplace as
we transition toward re-opening City facilities and programs.
It is recommended that the City Council adopt the proposed resolutions to enact the Fiscal
Year 2020-21 Operating Budget as well as the Capital and Equipment Replacement
Plans. This includes City Council’s direction to make a pre-payment of $2.9 million to
CalPERS, reducing the City’s pension liability and providing significant long-term savings.
The recommendation goes further to include post budget adoption activities, wherein staff
will, on at least a quarterly basis, provide financial and budgetary updates to the City
Council in the event that further actions are necessary to maintain a balanced budget.
Though there will be many uncertainties that will be presented over the next Fiscal Year,
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.
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. 7315 adopting a Budget for Fiscal Year 2020-21 and
appropriating the amounts specified therein as expenditures from the Funds; and
2) Adopt Resolution No. 7316 adopting a Capital Improvement and Equipment Plan
for the Fiscal Years 2020-21 through 2024-25.
Attachments: Exhibit “A” – All Funds Operating Budget Summary
Exhibit “B” – Five-Year Summary of Capital and Equipment Plan
Resolution No. 7315
Resolution No. 7316
EXHIBIT A
Ending Fund
Fund Beginning Outside Transfer Total Appropriation Transfer Total Balance
Fund FY20-21 Sources In Out FY20-21
General Fund 2,965,200 65,627,600 2,616,900 71,209,700 63,881,700 4,111,100 67,992,800 3,216,900
Narcotic Seizure Federal 102,200 94,900 0 197,100 0 0 0 197,100
COPS 263,100 168,600 0 431,700 167,700 0 167,700 264,000
Local Law Enforcement 0 100,000 124,600 224,600 224,600 0 224,600 0
Medical/Dental 364,400 0 4,704,700 5,069,100 4,703,200 1,500 4,704,700 364,400
IRS Task Force 460,500 3,500 0 464,000 0 0 0 464,000
Worker Compensation/Liability 3,921,300 29,400 2,511,400 6,462,100 2,548,600 0 2,548,600 3,913,500
Homeland Security 0 13,000 0 13,000 10,000 0 10,000 3,000
Homeless Plan 0 38,000 0 38,000 38,000 0 38,000 0
Office of Traffic Safety Grant 0 73,800 0 73,800 73,800 0 73,800 0
California OES HSGP 0 120,000 0 120,000 120,000 0 120,000 0
Misc. P.E.R.S. Employee Retirement Fund 1,351,600 1,499,900 0 2,851,500 2,851,500 0 2,851,500 0
Emergency Reserve 10,097,000 0 0 10,097,000 0 50,000 50,000 10,047,000
Emergency Response 0 0 50,000 50,000 50,000 0 50,000 0
Parks & Recreation 6,304,100 797,300 0 7,101,400 100,000 31,300 131,300 6,970,100
Traffic Safety 0 220,000 0 220,000 0 220,000 220,000 0
Public, Educational/Governmental Access 854,600 91,400 0 946,000 25,000 0 25,000 921,000
Used Oil Grant 10,800 15,600 0 26,400 15,500 0 15,500 10,900
DOC Beverage Grant 36,300 14,800 0 51,100 14,500 0 14,500 36,600
Solid Waste 1,803,100 682,500 0 2,485,600 442,000 300,000 742,000 1,743,600
Measure W ‐ Safe Clean Water Program 420,000 1,023,200 0 1,443,200 300,000 0 300,000 1,143,200
State Gas Tax (180,900) 1,383,000 0 1,202,100 0 1,435,200 1,435,200 (233,100)
Road Maintenance/Rehabilitation Act 69,800 1,014,100 0 1,083,900 1,100,000 0 1,100,000 (16,100)
Air Quality Management District 18,600 74,400 0 93,000 22,300 0 22,300 70,700
Community Development Block Grant 0 326,100 0 326,100 326,100 0 326,100 0
Santa Anita Grade Separation 1,629,700 12,200 0 1,641,900 0 0 0 1,641,900
Transit 0 1,146,000 1,448,000 2,594,000 2,594,000 0 2,594,000 0
Proposition A 1,169,300 1,256,800 0 2,426,100 120,700 868,800 989,500 1,436,600
Transportation Impact Fund 358,800 862,700 0 1,221,500 1,300,000 0 1,300,000 (78,500)
Proposition C 617,200 1,033,600 0 1,650,800 1,103,700 0 1,103,700 547,100
TDA Article 3 Bikeway 54,100 104,100 0 158,200 50,000 0 50,000 108,200
STPL & ITS Special Fund 0 0 0 0 0 0 0 0
Measure R 470,200 775,500 0 1,245,700 69,400 579,200 648,600 597,100
Measure M 428,800 1,029,900 0 1,458,700 255,000 0 255,000 1,203,700
Capital Improvement 5,710,300 267,800 1,600,000 7,578,100 1,053,800 0 1,053,800 6,524,300
City Hall Reserve 1,500,000 0 0 1,500,000 1,499,900 0 1,499,900 100
Lighting Maintenance 268,500 491,900 786,300 1,546,700 1,278,200 0 1,278,200 268,500
Water Fund 12,680,400 14,816,200 0 27,496,600 19,592,100 0 19,592,100 7,904,500
Sewer Fund 1,940,800 2,455,100 0 4,395,900 2,522,900 0 2,522,900 1,873,000
Equipment Replacement 5,474,300 51,100 1,600,000 7,125,400 661,700 31,600 693,300 6,432,100
Redevelopment Successor Agency 0 2,703,700 0 2,703,700 2,703,700 0 2,703,700 0
General Obligation Bond 2012 363,500 420,100 0 783,600 420,100 0 420,100 363,500
General Obligation Bond 2011 486,350 596,600 0 1,082,950 596,600 0 596,600 486,350
Total 62,013,950 101,434,400 15,441,900 178,890,250 112,836,300 7,628,700 120,465,000 58,425,250
CITY OF ARCADIA
SUMMARY BY FUND
FISCAL YEAR 2020-2021 PROPOSED BUDGET
SOURCES OF FUNDS USES OF FUNDS
EXHIBIT B
ESTIMATED ESTIMATED PROPOSED ESTIMATED
FUNDS FIVE-YEAR FIVE-YEAR FUNDS
7/1/2020 REVENUE EXPENDITURE 6/30/2025
CAPITAL OUTLAY FUND 5,710,300 12,855,900 (10,748,500) 7,817,700
PARK AND RECREATION FUND 6,304,100 4,132,400 (5,349,900) 5,086,600
MEASURE W CLEAN, SAFE WATER PROGRAM 420,000 5,115,700 (5,250,000) 285,700
GAS TAX (HUTA) FUND (180,900) 7,257,000 (7,309,600) (233,500)
ROAD MAINTENANCE AND REHABILITATION
PROGRAM 44,000 5,432,000 (4,600,000) 876,000
AQMD 18,600 376,000 (111,500) 283,100
PROP C LOCAL RETURN 617,200 5,173,300 (4,741,800) 1,048,700
TRANSPORTATION IMPACT FUND 358,800 2,069,900 (1,700,000) 728,700
MEASURE R LOCAL RETURN 470,200 3,886,800 (3,352,900) 1,004,100
MEASURE M LOCAL RETURN 428,800 6,162,900 (5,375,000) 1,216,700
WATER FACILITY RESERVE 13,142,400 289,700 (10,830,000) 2,602,100
WATER EQUIPMENT RESERVE 219,500 3,300 (1,039,000) (816,200)
SEWER FUND 1,940,800 12,978,700 (13,090,400) 1,829,100
EQUIPMENT FUND 5,474,300 9,055,200 (10,342,400) 4,187,100
CITY OF ARCADIA
SUMMARY OF PROPOSED FIVE YEAR CAPITAL PROGRAMS
FISCAL YEAR 2020-21 THROUGH 2024-25