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HomeMy WebLinkAboutItem 08a - Operating Budget and CIP and Equipment PlansAdopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 1 of 16 DATE: June 4, 2024 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager Henry Chen, Interim Administrative Services Director SUBJECT: RESOLUTIONS RELATING TO THE ADOPTION OF THE FISCAL YEAR 2024-25 OPERATING BUDGET AND THE FISCAL YEARS 2024-25 THROUGH 2028-29 CAPITAL IMPROVEMENT AND EQUIPMENT PLAN RESOLUTION NO. 7573 ADOPTING A BUDGET FOR FISCAL YEAR 2024-25 AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN AS EXPENDITURES FROM THE VARIOUS FUNDS CEQA: Not a Project Recommendation: Adopt RESOLUTION NO. 7574 ADOPTING A CAPITAL IMPROVEMENT AND EQUIPMENT PLAN FOR FISCAL YEARS 2024-25 THROUGH 2028-29 CEQA: Not a Project 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 2024-25. This year’s budget process included two Budget Study Sessions with the City Council on May 7 and 21, 2024. Copies of the proposed Operating Budget were provided for the City Council’s review. After the initial budget study session, two modifications were made to the proposed budget. One was the addition of a budget for the City’s Health Committee of $22,000 and the other change was minor adjustments to the budget in Development Services and the Library, which reduced the budget by $2,500. 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 $173.3 million in expenditures, of which the General Fund’s budget is $96.7 million (including Transfers Out as noted below). Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 2 of 16 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 Fiscal Year 2024-25 Operating Budget considers the uncertain economic environment. In today's economic landscape, cities are navigating a dichotomy of factors. Some indicators, such as the low unemployment rate show signs of growth; conversely, other factors like inflation and rising interest rates could lead to economic slowdowns. Arcadia will remain vigilant, proactive, and adaptable in its financial planning to mitigate risks as they arise. While the City is not anticipating a recession, some of Arcadia’s revenue sources have slightly softened and may experience modest or little growth in the next fiscal year. The proposed FY 2024-25 General Fund Operating Budget outlines Total Operating Revenues of $98.8 million and Expenditures of $96.7 million, resulting in a projected surplus of $2.1 million. After accounting for Fund Transfers In and Out, the projected ending Fund Balance of the Operating General Fund is $27.2 million. In accordance with the City's financial policies, which recommend maintaining a 20% balance in the Emergency Reserve Fund relative to annual operating expenditures, transfers of $0.5 million and $3.5 million are proposed to be made to the Emergency Reserve Fund at the conclusion of FY 2023-24 and FY 2024-25, respectively. As a result, the General Fund Operating Fund Balance is projected to reach $23.2 million by the end of FY 2024-25, providing the necessary reserve to sustain operations throughout the Fiscal Year. Considering these factors, the FY 2024-25 Budget takes a cautious approach, factoring in modest growth while maintaining the flexibility to pivot if the economic landscape differs materially from expectations. The City aims to navigate the economic landscape responsibly, ensuring the provision of high-quality services to residents while considering all possible economic outcomes. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 3 of 16 The General Fund Operating budget is summarized in the table below: GENERAL FUND SUMMARY FY24-25 Budget Beginning Fund Balance 25,026,600$ Estimated Revenues 88,428,800 Transfers In 10,445,600 Expenses & Uses (87,457,100) New Programs (1,433,600) Revenue over Expenses 9,983,700$ Transfer to Equipment Replacement (3,400,000) Transfer to Capital Improvement Fund (3,400,000) Transfer to Local Law Enforcement Prgm (165,000) Transfer to Lighting Assessment District (859,200) Total Transfer Out (7,824,200) Subtotal Operating Balance 2,159,500 Ending Fund Balance 27,186,100$ This year, $6.4 million has been budgeted for transfer into the Capital Improvement and Equipment Replacement Funds, with each fund receiving $3.4 million. This amount equates to approximately the 10-year average spend in each account. Last year, the City increased the transfer amount in response to sharp price increases caused by inflation, higher material and production costs, and increased replacement needs for aging infrastructure and equipment. In this proposed budget, it is recommended to maintain the annual transfer amounts of $3.4 million for each fund. The Capital Improvement Fund plays a vital role in funding crucial maintenance projects, including pavement rehabilitation, building repairs, and parks maintenance. In the upcoming Fiscal Year, several key projects are budgeted within the Capital Improvement Fund, such as Citywide access and security, facility improvements at Fire Station 105, and a new cooling tower at the Library. Due to increasing water quality standards, the City is spending significantly more to build new treatment capacity at the Peck Well as well as undertaking a joint project with the City of Sierra Madre for a new well at the Public Works Services Yard. The proposed projects budgeted in the Capital Improvement Fund total $7.7 million. The combined capital projects across all funds have been budgeted at $37.8 million. The Equipment Replacement Fund helps replace equipment that has reached the end of its useful life like computers, vehicles, and major office equipment. The proposed total cost of asset replacement through the Equipment Replacement Fund is $7.7 million. Notably, significant purchases for FY 2024-25 are planned, including $3.1 million for a new Ladder Truck in the Fire Department, $1.5 million for replacement vehicles in the Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 4 of 16 Street Division, $504,500 for Police vehicle replacements, and $293,200 for vehicles in the Water Division. New programs proposed for the City’s overall Operating Budget demonstrate Arcadia’s commitment to being responsive to community needs. All new programs proposed for the City’s General Fund Operating Budget this year total $1,433,600 and represent vital investments in all areas of the community, specifically focusing on improved service delivery to meet increasing demands and modernization of operations. In alignment with the City's pension strategy, the proposed FY 2024-25 Budget allocates funds for addressing long-term liabilities, specifically the Unfunded Accrued Liabilities (“UAL”) of CalPERS. To this end, $2.0 million has been designated to transfer to the City’s Section 115 Pension Trust account, which serves as a financial tool to help address future pension-related costs, especially in times of economic constriction. DISCUSSION The FY 2024-25 Budget takes a conservative approach, while maintaining a slightly optimistic outlook. Revenue streams such as Sales Tax, Property Tax, and Business License Fees are expected to grow at a slower rate than previous years; however, Transient Occupancy Taxes are projected to show healthy growth. One crucial factor in the revenue trajectory is the performance of Measure A, a 0.75% Transaction and Use Tax (Sales Tax), approved by Arcadia voters in June 2019. This revenue stream has played a critical role in supporting the City's budget over the last few fiscal years. Measure A contributed approximately $11.4 million to Arcadia’s General Fund revenues in FY 2023-24 alone. Without this voter-approved measure, the City would have faced the challenge of implementing service cuts or exploring alternative methods to achieve an annual balanced budget. Summarized in the table below is the General Fund Operating Budget for FY 2023-24 Year-End Estimates; FY 2024-25 Proposed Budget for Adoption; and the FY 2025-26 Preliminary Budget Outlook. The table below shows the General Fund Operating Ending Fund Balance is projected to reach $27.2 million by the end of FY 2024-25. This increase is due to a projected surplus of $2.2 million. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 5 of 16 GENERAL FUND FY 23-24 FY 24-25 FY 25-26 Estimated Budget Budget Beginning Fund Balance 17,176,500$ 25,026,600$ 27,186,100$ Estimated Revenues 86,724,000$ 88,428,800$ 91,023,100$ Transfers In 6,557,100 10,445,600 6,809,900 Expenses & Uses (78,631,000) (89,914,900) (90,497,400) Revenue over Expenses 14,650,100$ 8,959,500$ 7,335,600$ Transfer to Equipment Replacement Fund (3,400,000) (3,400,000) (3,400,000) Transfer to Capital Improvement Fund (3,400,000) (3,400,000) (3,400,000) Total Transfer Out (6,800,000) (6,800,000) (6,800,000) Subtotal Operating Balance 7,850,100 2,159,500 535,600 Ending Fund Balance 25,026,600$ 27,186,100$ 27,721,700$ FY 2024-25 Expected Revenues For FY 2024-25, total General Fund revenues are expected to increase 1.97% when compared to FY 2023-24 Year-End Estimates. The largest revenue source to the City’s General Fund is Taxes and Fees. The key revenues under these two groups are: Sales & Use Tax, Property Tax, Utility Users’ Tax, Transient Occupancy Tax, and Motor Vehicle License Fees. The projected receipts for each tax are shown in the tables below: GENERAL FUND REVENUES FY 23-24 FY 24-25 Estimates Budget $ % Taxes 60,783,400$ 61,589,100$ 805,700$ 1.33% License & Permits 5,943,300 5,969,900 26,600 0.45% Fines & Penalties 510,900 500,900 (10,000)-1.96% Use Money & Property 2,050,000 2,380,000 330,000 16.10% Revenue from Other Agencies 9,130,500 9,307,800 177,300 1.94% Charge Current Services 4,333,800 4,721,300 387,500 8.94% Library 112,000 112,000 0 0.00% Recreation 1,558,300 1,468,900 (89,400)-5.74% Other Revenue 2,301,800 2,378,900 77,100 3.35% Total Revenue 86,724,000$ 88,428,800$ 1,704,800$ 1.97% Changes Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 6 of 16 GENERAL FUND TAX REVENUE SUMMARY Description FY 2023-24 YE Estimates FY 2024-25 Proposed Budget Difference % Change Sales and Use Tax $ 24,173,000 $ 24,228,700 $ 55,700 0.23% Property Tax 19,280,700 19,851,100 570,400 2.96% Utility Users’ Tax 9,298,200 9,190,300 (107,900) -1.16% Transient Occupancy Tax 5,587,400 5,894,400 307,000 5.49% Motor Vehicle License Fees 9,052,000 9,232,800 180,800 2.00% Sales and Transaction Use Tax: For Sales and Transaction Use Tax, the total estimates for the upcoming Fiscal Year are $24.2 million, reflecting a 0.23% increase compared to the previous year’s revenues. Recent data indicates that sales tax growth has slowed significantly in the current economic environment, so it is projected to remain flat in FY 2024-25. Property Tax: Arcadia's status as a desirable community coupled with its highly regarded public school district, contributes to the expected growth in home valuation over the next year. However, due to the continuation of high interest rates, home sales in California have slowed significantly, especially at the upper end of the marketplace. Even though sales rates have decreased overall, strong demand has helped to maintain price levels in Arcadia. These factors will help the City maintain some growth in Property Tax revenue albeit lower than what the City has experienced in recent years. Conservative revenue projections are planned for FY 2024-25, with growth in Property Tax receipts estimated at approximately 3.0% for FY 2024-25. Utility Users’ Tax: The projected revenue from the Utility Users' Tax (“UUT”) is $9.2 million, representing a 1.2% decrease compared to the Year-Ending Estimate for FY 2023-24. This revenue stream experienced strong growth in the prior fiscal year due to increased energy prices overall; however, this trend is not expected to continue. The Utility Users’ Tax is expected to remain flat next fiscal year with some minor growth in electricity costs, offset by decreases in natural gas pricing. Transient Occupancy Tax (“TOT”): The TOT revenue projection for FY 2024-25 represents a 5.5% increase compared to the previous year, resulting in expected revenue of $5.9 million. This is an area that has shown very strong growth for Arcadia and the demand for travel is expected to continue to increase in the next fiscal year. It should be noted, however, that a proposed ballot measure for November 2024 – known as the Taxpayer Protection and Government Accountability Act – could retroactively invalidate the 2% increase in TOT approved by Arcadia voters in 2022. If approved, this revenue area could decrease significantly until an updated measure meeting the updated criteria could be submitted to the voters for consideration and approval. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 7 of 16 Motor Vehicle License Fees (“VLF”): The Motor Vehicle License Fees ("VLF") tax is projected to increase by 2%, generating $9.2 million in revenue next Fiscal Year. Since the State made a formulaic change to directly tie the City’s VLF to the annual property assessment, the growth rate has proven to be healthy in Arcadia. This growth trend is expected to continue into the next fiscal year. FY 2024-25 Proposed Expenses GENERAL FUND EXPENDITURES BY DEPARTMENT The proposed FY 2024-25 Operating Budget sets total operating expenditure at $87.5 million, representing an 8% increase compared to the previous year's Revised Budget of $80.4 million. Much of this increase can be attributed to greater investment in the City’s capital infrastructure and the continued modernization of City equipment. It is important to highlight that the FY 2024-25 Operating Budget remains largely unchanged apart from contractual increases from multi-year service agreements, and the expected increases in salary and benefits. CITY MANAGER $2,320,200 3% ADMIN SVRCS $3,671,200 4% HUMAN RESOURCES $1,024,200 1% POLICE $27,461,000 31% FIRE $25,620,500 29% PUBLIC WORKS $7,168,200 8% DEV. SVCS $5,902,400 7% RECREATION $4,053,800 5% LIBRARY & MUSEUM $4,898,000 6% GENERAL CITY $5,340,100 6% Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 8 of 16 Furthermore, the budget allocates increased "prefunding" of long-term benefit accounts, including the City's Retiree Medical Benefit (Other Post Employee Benefit liabilities) and the contribution to the City’s Pension Trust Account. These two-line items amount to $4.1 million, representing an increase of approximately $0.2 million compared to the previous year. Proposed New Programs New programs and expenditures are presented from various departments to respond to emerging operational needs as well as to respond to direction received from the City Council. New programs proposed for the FY 2024-25 Budget total $1,433,600 and are described in the following sections. City Manager Office: Website Redesign ($60,000): The City’s website was last redesigned in 2019 and lacks some key features of a modern website. A redesign will provide the City with a customer-centric website that will modernize, reorganize, and improve the website by upgrading the content management system, website accessibility, and translation services. Additionally, it will implement an intuitive community events calendar, general customer service enhancements, and an optimized search function. Administrative Services Department: Accounting Supervisor ($176,500): The Accounting Supervisor position is being reinstated to oversee the general accounting functions of the City. This position will help direct Arcadia’s finance and accounting functions and provide a necessary layer of review and supervision. With the expected implementation of the new Enterprise Resource Planning (“ERP”) system, there will be opportunities to modify and update City operating procedures. This position will assist in evaluating current processes and making suggestions for improvement. This new position will also allow for increased opportunities for staff rotation, responsibilities, and upward mobility within the organization. Human Resources Department: Human Resources Manager ($173,700): The Human Resources Manager would oversee employee recruitment and selection to provide much- needed support in the overall operation of this program area. This position would assist with overall Human Resources staff oversight, day-to-day workflow, legal compliance, review and approval of insurance requirements to ensure efficient processing of all contracts, and backfilling for the Human Resources Director in their absence. The proposed Human Resources Manager will be critical in executing the Department's vision to be proactive rather than reactive, establish true partnerships with each City Department, and implement effective long-range project planning in the areas of succession, retention, recruitment, culture, and modernization. Human Resources Department: Fair Labors Standards Act (“FLSA”) Audit ($125,000): The City last completed an FLSA audit approximately 13 years ago. The new FLSA audit would review practices through the lens of updated laws by examining all previous recommendations. The new audit would also focus on an in-depth review of Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 9 of 16 individual and/or classification-wide FLSA work cycles, exempt and non-exempt designations for all classifications across the City, leave bank deductions for exempt and non-exempt employees, and other areas as-needed. Police Department: Mobile Surveillance Units ($91,800): Mobile surveillance technology enhances safety on property and the surrounding area by utilizing cloud- based software to provide real-time insights from any web-enabled device. Mobile surveillance units act as a force multiplier and will aid personnel in monitoring and gathering information across different locations efficiently. By strategically deploying these units, organizations can enhance their surveillance capabilities and improve their situational awareness. This proactive approach not only helps maintain security but also allows for timely responses to any potential threats or incidents. The mobile surveillance units serve as valuable tools in keeping a watchful eye on critical areas, ensuring a safer environment for all. Police Department: Cellphone and Digital Evidence ($85,000): This program will equip sworn personnel with iPhones and evidence.com, a digital evidence management system. Cellphones will provide a more secure chain of custody for digital evidence, mitigate risk of personal device use by officers, and offer seamless integration with the LA County District Attorney for evidence submission. Police Department: Scheduling Software ($20,500): The department is looking to implement new scheduling software to meet daily personnel scheduling needs and incorporate crucial functionalities such as mandatory staffing and overtime scheduling. Fire Department: Special Weapons and Tactics (“SWAT”) Paramedic ($15,000): Tactical medicine is a practice where emergency medical services are provided during critical or high-risk law enforcement incidents. Historical accounts and after-action reviews have shown that the application of tactical medicine or injury management is most beneficial at the time of the incident versus a later period, which could delay on-scene, life-saving efforts. The Arcadia Fire Department (“AFD”) and the Arcadia Police Department (“APD”) have both agreed to support and implement tactical medicine services through the implementation of the SWAT Paramedics Program. The Program will be staffed by AFD, and then managed by APD when assigned during an incident. After AFD members meet all the required training requirements, they will be fully integrated into the SWAT Team and could be deployed for medical response by either APD or AFD Command Staff. AFD’s goal is to train and equip six (6) SWAT Paramedics over the next two fiscal years. Fire Department: New Management Analyst ($152,400): Due to increasing regulatory compliance standards on fire grants and reimbursement programs, current staffing levels are insufficient. The department needs additional staffing to ensure that potential funding opportunities are being pursued, secured, and reported properly. This new position is expected to be at least partially offset by increased funding success and will also assist Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 10 of 16 with other administrative support functions and public outreach in support of the Fire Department. Development Services: EnerGov Business License Module ($101,000): In FY 2023- 24, the City instituted an eReview plan-check process and Business License Module with EnerGov as part of an overall transition to online permitting. The Business License system is the last module to be upgraded into EnerGov. EnerGov has made adequate advances that match or exceed the City’s current HdL software. This transition will help streamline the review process department-wide by having all the systems on the same platform. Development Services: Graphical Information System (“GIS”) Analyst ($126,000): With the growing reliance on GIS and its integration with the EnerGov permit tracking system, there is a need for dedicated support and oversight. To address this, a new contracted GIS Analyst position is being proposed as part of the City’s IT contract. The GIS Analyst would be responsible for providing comprehensive support for both the existing Citywide GIS and EnerGov permit tracking systems. Key responsibilities would include regular updates and maintenance of the GIS and EnerGov systems to ensure data accuracy, integrity, and reliability. Additionally, this role would assist various departments with their GIS and EnerGov needs, providing technical support and troubleshooting when the GIS or EnerGov systems encounter issues, promptly resolving any disruptions to operations. This contracted position would collaborate with L.A. County and Tyler Technologies on maintenance and advancement of each product and the increased costs would be funded through the City’s Technology Fee. Development Services: Graphical Information System (“GIS”) Upgrade and Migration of Data ($85,000): The City's GIS needs to be upgraded from its current version, Geocortex Essentials, to VertiGIS Studio web, since the existing version will be decommissioned on June 30, 2024. Without technical support, the City will experience regular disruptions to an important mapping system that is used daily by staff and the public. The most affordable option for continued GIS datasets is to use L.A. County's portal and run the new VertiGIS Studio Web from a new on-premise server. The proposed cost would cover the migration, configuration, and development of the upgrade, including the custom reports, templates, workflows, and new servers. The new costs would be funded through the City’s Technology Fee. Recreation & Community Services: New Recreation Supervisor (Homelessness and Health Services) ($112,800): The Recreation & Community Services Department is the lead Department tasked with addressing homelessness in the City. This position would serve as the lead for managing all homelessness duties in Arcadia, including reports, grants, stakeholder meetings, homeless plan updates, reports, symposiums, case management, and other needs as they arise. In addition, this position would help with the City’s Health Committee, organizing monthly health seminars and the Community Health Fair, as well as overseeing the City’s general health and wellness referral programs and classes. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 11 of 16 Recreation & Community Services: Coed Summer Youth Basketball League ($9,700): Youth basketball is a very popular program in Arcadia and there is an unmet need for these offerings. This program will add non-competitive learning experiences for youth in grades 3-6 during the summer. The revenue generated by this program will offset any new costs. Recreation & Community Services: Health Committee ($22,000): Add a budget for the City’s Health Committee to provide refreshments and translation services at their meetings. Library & Museum Services: Veteran’s Banner Program ($37,200): In response to a City Council request, this would create and display banners for those living veterans in Arcadia along Huntington Dr. and Baldwin Ave. The cost of the banners, including design, creation, brackets, and installation are between $250 and $400 per banner. There are approximately 124 known living veterans in Arcadia. Library & Museum Services: New Library Materials ($40,000): Print and electronic collections continue to increase in cost and demand. In FY 2022-23, digital collection usage totaled 33,799, and through March in the current fiscal year, digital check-outs have grown to 47,942, an increase of 42%. The Library has been meeting the growing demand for electronic collection by using portions of the print budget to supplement; however, this request would enable the Library to better meet demand for both print and electronic collections. The breakdown of requested funding is as follows: $11,300 to support the electronic collection; $10,000 to refresh the Gale eBook Encyclopedias; $9,500 for children’s materials; and $13,700 for special print collections such as Test Prep, Career, and Computer collections. The table below summarizes the New Programs included in this proposed budget. NEW PROGRAMS FY 2024-25 Ongoing Annual Proposed New Programs Start Up Costs Costs City Manager Website Redesign 60,000$ 7,400$ Administrative Services Reinstate Accounting Supervisor 176,500 181,400 Human Resources New HR Manager 173,700 181,700 FLSA Audit 125,000 - Police Mobile Surveillance Units 91,800 91,800 Cellphone and Digital Evidence 85,000 55,000 Scheduling Software 20,500 13,700 Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 12 of 16 FY 2024-25 Ongoing Annual Proposed New Programs Start Up Costs Costs Fire SWAT Paramedic Program 15,000 93,500 New Management Analyst 152,400 142,000 Development Services EnerGov Business License Module 101,000 13,000 Geographic Information System (GIS) Analyst 126,000 126,000 GIS Upgrade and Data Migration 85,000 7,000 Parks and Recreation Recreation Supervisor (Homelessness and Health Services)112,800 124,000 Coed Summer Youth Basketball 9,700 9,700 Health Committee 22,000 22,000 Library and Museum Veteran's Banner Program 37,200 10,000 New Materials 40,000 40,000 Total New Programs 1,433,600$ 1,118,200$ Capital Improvement and Equipment Replacement Funds In recent years, the City has successfully accumulated funds in the Capital Improvement and Equipment Replacement Funds to save for significant purchases that occur intermittently. The balance of each fund has grown through financial prudency and by transferring any excess funds from the General Fund at the end of each fiscal year. In general, the goal is to transfer at least the 10-year average expenditure from each account from the General Fund. This proactive approach to funding is crucial in preventing failure of the City's infrastructure system and ensuring staff have the necessary tools and equipment to carry out their essential duties. To establish a sustainable fund balance for future purchases and projects, the FY 2024-25 Budget will transfer $6.8 million from the General Fund, with $3.4 million allocated to the Capital Improvement Fund and $3.4 million to the Equipment Replacement Fund. The FY 2024-25 Capital Improvement Plan entails 40 projects, with a total expenditure of $37.8 million. Of this amount, $7.7 million will be funded from the Capital Improvement Fund. The Capital Improvement Fund primarily supports crucial maintenance initiatives such as pavement rehabilitation, building repairs, and parks maintenance. The following table provides a summary of some major proposed projects scheduled for the year. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 13 of 16 FY 2024-25 MAJOR CAPITAL IMPROVEMENT PROJECTS Project Description Project Budget Funding Source Peck Well Treatment $8,700,000 Water Fund/ Dow Settlement Fund Goldring Well and Treatment $7,000,000 Water Fund/ City of Sierra Madre Colorado Complete Streets $3,850,000 Federal Grant/ Measure R Pavement Rehabilitation Program $2,800,000 Capital Improvement $1.6M & RMRA (SB1) - $1.2M Sewer Capacity Upgrade $2,000,000 Sewer Fund Annual Slurry Seal Program $1,350,000 Capital Improvement Fund Centennial Way Traffic Project $1,200,000 Measure R/Measure M/Transportation Impact Fee The Equipment Replacement Fund plays a critical role in funding essential equipment such as computers, vehicles, and major office equipment. To ensure the sustainability of the Equipment Replacement Fund, an increased annual transfer of $3.4 million is now necessary to accommodate rising costs from inflation and demand for new equipment. In the proposed budget, there are several vehicle replacements planned – specifically, heavy-duty vehicles used by the Public Works Services, Fire, and Police Departments. This year, the Fire Department is replacing their 2010 Pierce Ladder Truck. This specialized vehicle will take an estimated 40 months before the Fire Department receives the new ladder truck. This is just one example of the delays that the City experiences in its ability to acquire new vehicles. The Equipment Replacement Fund encompasses a comprehensive list of 41 equipment purchases, totaling $7.7 million. Ninety-two percent (92%) of the $7.7 million (or $7.1 million) will be funded by the Equipment Replacement Fund. The table below summarizes some significant equipment purchases for the upcoming period. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 14 of 16 FY 2024-25 MAJOR EQUIPMENT REPLACEMENT PURCHASES Equipment Replacement Description Replacement Budget Funding Source Street Vehicle Replacements:  New Loader  ¾ Ton Pickup Truck (2)  CNG Street Sweeper  ½ Ton Pickup Truck  Installation of Equipment and Accessories $1,520,800 Equipment Replacement Water Vehicle Replacements:  ¾ Ton Stakebed Truck  ¾ Ton Pickup Truck  ½ Ton Pickup Truck  Installation of Equipment and Accessories $293,200 Water Fund Fire Department: • New Ladder Truck • ½ Ton Pickup Trucks $3,120,100 Equipment Replacement  Installation of Equipment and Accessories Police Department: • 3 New Patrol Vehicles • 1 New Admin SUV • 2 New Detective SUVs • Installation of communications equipment $504,500 Equipment Replacement ECONOMIC OUTLOOK The General Fund FY 2024-25 operating budget reflects a cautious outlook following the high inflationary and interest rate environment of the last few years. While the inflationary and interest rate pressure has eased slightly, the economic outlook remains uncertain. The Federal Reserve has indicated that the high interest environment may linger beyond what economists have been projecting. These macro events will have an impact on economic activity and the revenue picture for the City into the next fiscal year. Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 15 of 16 High interest rates are having an impact on property taxes as real estate transactions slow in response to sustained highs. Sales tax activity in the City is also showing signs of reaching a plateau after two years of tremendous growth. Despite the softening of certain revenue streams, the City has managed its finances responsibly and will be able to maintain the high level of service the community expects. These prudent financial practices will enable the City to have a projected surplus for FY 2024-25, despite a moderate slowdown that could impact revenues. Even though concerns about a potential recession persist due to inflation, interest rates, consumer spending, and business investments, the potential impact on the economy remains uncertain. It is notoriously difficult to project with any certainty the timing of any economic downturn; however, the City is well prepared to overcome these obstacles by relying on conservative estimates and being responsive to changes in its financial outlook. By being vigilant and flexible, the City will be able to address any challenges and continue to deliver a high level of service to the community. CONCLUSION The proposed FY 2024-25 General Fund Operating Budget demonstrates a balanced financial position, with a projected surplus of $2.1 million. This surplus is a result of Total Operating Revenues and Transfers In amounting to $98.9 million, net of Operating Expenditures and Transfers Out totaling $96.7 million. Arcadia’s commitment to fiscal conservatism has allowed for the accumulation of savings, providing a cushion to navigate economic uncertainties in the short term. This prudent approach enables the City to plan and execute smart strategies for the future. Arcadia has consistently demonstrated its adaptability and ingenuity in maintaining critical services during challenging economic conditions, effectively delivering what residents and businesses value most. In the coming years, the management team and I will build on these strengths to deliver on our commitment to providing effective and fiscally responsible municipal service. To move forward with the proposed budget and ensure effective financial planning, it is recommended that the City Council adopt the proposed Resolutions, which include enacting the FY 2024-25 Operating Budget as well as the Five-Year Capital and Equipment Replacement Plans. Attached to this staff report are the following: • Exhibit “A”: a summary of Sources and Uses 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 Adopt the Operating Budget and CIP and Equipment Plans June 4, 2024 Page 16 of 16 ENVIRONMENTAL ANLYSIS The proposed actions do not constitute a project under the California Environmental Quality Act (“CEQA”), based on Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that they will have no impact on the environment. Many individual budgeted items in the attached documents may require their own environmental reviews, which will be conducted when each project is brought forward for consideration. RECOMMENDATION It is recommended that the City Council determine these actions do not constitute a project under the California Environmental Quality Act (“CEQA”); and: 1)Adopt Resolution No. 7573 adopting a Budget for Fiscal Year 2024-25 and appropriating the amounts specified therein as expenditures from various funds; and 2)Adopt Resolution No. 7574 adopting a Capital Improvement and Equipment Plan for the Fiscal Years 2024-25 through 2027-28. Attachments: Exhibit “A” – All Funds Operating Budget Summary Exhibit “B” – Five-Year Summary of Capital and Equipment Plan Resolution No. 7573 Resolution No. 7574 Exhibit "A" Ending Fund Fund Beginning Outside Transfer Total Appropriation Transfer Total Balance Fund FY24-25 Sources In Out FY24-25 General Fund 25,026,600 88,428,800 10,445,600 123,901,000 88,890,700 7,824,200 96,714,900 27,186,100 Narcotic Seizure Federal 245,400 46,400 0 291,800 0 0 0 291,800 COPS 94,100 192,300 0 286,400 189,500 0 189,500 96,900 Medical/Dental 472,900 0 7,231,600 7,704,500 3,500,000 3,731,600 7,231,600 472,900 Local Law Enforcement 1,600 130,000 165,000 296,600 265,900 0 265,900 30,700 IRS Task Force 479,400 14,400 0 493,800 0 0 0 493,800 Worker Compensation/Liability 5,875,100 176,300 3,535,000 9,586,400 3,535,000 0 3,535,000 6,051,400 Homeland Security 00 00 000 0 Library State Grant 600 0 0 600 0 0 0 600 Homelessness Plan 0 373,500 0 373,500 373,500 0 373,500 0 Office of Traffic Safety Grant 0 99,300 0 99,300 99,300 0 99,300 0 California OES HSGP 0 46,000 0 46,000 46,000 0 46,000 0 Autotheft Prevention Taskforce 0 0 0 0 0 0 0 0 Misc. P.E.R.S. Employee Retirement Fund 0 0 0 0 0 0 0 0 Emergency Reserve 15,323,600 0 0 15,323,600 0 0 0 15,323,600 Emergency Response 2,790,900 0 0 2,790,900 0 0 0 2,790,900 America Rescue Plan Act 2,693,200 0 0 2,693,200 1,653,600 0 1,653,600 1,039,600 Public, Educational/Governmental Access 1,198,100 105,900 0 1,304,000 0 0 0 1,304,000 Parks & Recreation 2,858,200 960,700 0 3,818,900 0 0 0 3,818,900 Fire Facilities Fund 183,000 180,500 0 363,500 61,000 0 61,000 302,500 Used Oil Grant 4,400 8,000 0 12,400 16,000 0 16,000 (3,600) DOC Beverage Grant 72,900 16,400 0 89,300 14,500 0 14,500 74,800 Traffic Safety 0 143,000 0 143,000 0 143,000 143,000 0 Solid Waste 2,119,600 778,600 0 2,898,200 525,700 300,000 825,700 2,072,500 Measure W ‐ Safe Clean Water Program 2,670,100 1,095,100 0 3,765,200 630,200 0 630,200 3,135,000 Dow Settlement Fund 5,869,900 176,100 0 6,046,000 0 0 0 6,046,000 State Gas Tax (327,300) 1,552,200 0 1,224,900 4,200 1,400,000 1,404,200 (179,300) Road Maintenance/Rehabilitation Act 1,811,500 1,510,400 0 3,321,900 1,200,000 0 1,200,000 2,121,900 Air Quality Management District 186,300 79,400 0 265,700 22,600 0 22,600 243,100 Community Development Block Grant 0 398,900 0 398,900 370,100 0 370,100 28,800 Santa Anita Grade Separation 745,800 22,400 0 768,200 0 0 0 768,200 Transit 127,600 3,124,700 696,000 3,948,300 3,578,600 0 3,578,600 369,700 Proposition A 3,879,500 1,677,500 0 5,557,000 316,600 1,141,300 1,457,900 4,099,100 Transportation Impact Fund 426,600 312,800 0 739,400 550,000 0 550,000 189,400 Proposition C 4,205,300 1,421,100 0 5,626,400 1,012,300 0 1,012,300 4,614,100 TDA Article 3 Bikeway 65,900 59,000 0 124,900 0 0 0 124,900 STPL & ITS Special Fund 0 0 0 0 0 0 0 0 Measure R 2,168,100 1,036,200 0 3,204,300 378,400 760,900 1,139,300 2,065,000 Measure M 1,386,900 2,642,300 0 4,029,200 1,227,000 0 1,227,000 2,802,200 Capital Improvement 13,886,500 706,600 3,400,000 17,993,100 7,829,400 0 7,829,400 10,163,700 City Hall Reserve 100 0 0 100 0 0 0 100 Lighting Maintenance 317,600 1,345,000 765,000 2,427,600 1,432,000 0 1,432,000 995,600 Water Fund (7,262,200) 14,793,000 0 7,530,800 17,364,900 0 17,364,900 (9,834,100) Sewer Fund 6,436,200 2,736,100 0 9,172,300 5,001,100 0 5,001,100 4,171,200 Par 3 Golf Course Fund 2,623,600 2,077,100 0 4,700,700 1,348,500 0 1,348,500 3,352,200 Equipment Replacement 17,337,500 520,100 3,400,000 21,257,600 7,072,400 35,500 7,107,900 14,149,700 Redevelopment Successor Agency (5,263,500) 2,668,300 0 (2,595,200) 2,668,300 0 2,668,300 (5,263,500) General Obligation Bond 2012 469,900 424,100 0 894,000 411,800 0 411,800 482,200 General Obligation Bond 2011 350,400 520,700 0 871,100 530,100 0 530,100 341,000 Pension Obligation Bonds 2020 2,800 5,874,700 0 5,877,500 5,874,700 0 5,874,700 2,800    Total 111,554,700 138,473,900 29,638,200 279,666,800 157,993,900 15,336,500 173,330,400 106,336,400 USES OF FUNDSSOURCES OF FUNDS CITY OF ARCADIA SUMMARY BY FUND FISCAL YEAR 2024-2025 PROPOSED BUDGET ESTIMATED ESTIMATED PROPOSED ESTIMATED FUNDS FIVE-YEAR FIVE-YEAR FUNDS 7/01/2024 REVENUE EXPENDITURE 6/30/2029 CAPITAL OUTLAY FUND 13,870,400 19,036,500 (32,092,900)814,000 AMERICAN RESCUE PLAN FUND 3,582,200 - (2,654,200)928,000 PARK AND RECREATION FUND 2,731,600 6,785,900 (2,103,300)7,414,200 FIRE FACILITIES FUND 123,400 947,900 (52,000)1,019,300 MEASURE W CLEAN, SAFE WATER PROGRAM 2,648,500 5,592,300 (3,986,400)4,254,400 GAS TAX (HUTA) FUND (327,300) 7,772,500 (7,021,000)424,200 ROAD MAINTENANCE AND REHABILITATION PROGRAM 1,813,400 7,462,000 (7,200,000)2,075,400 AQMD 183,200 413,900 (113,400)483,700 PROP C LOCAL RETURN 4,191,200 6,706,300 (9,793,300)1,104,200 TRANSPORTATION IMPACT FUND 458,500 1,020,000 (1,508,800) (30,300) MEASURE R LOCAL RETURN 2,161,000 5,017,600 (6,209,800)968,800 MEASURE M LOCAL RETURN 1,368,100 7,126,700 (7,006,000)1,488,800 WATER FACILITY RESERVE 12,474,800 738,300 (15,828,600) (2,615,500) WATER EQUIPMENT RESERVE (649,100)- (3,631,500) (4,280,600) SEWER FUND 6,119,700 13,413,900 (18,477,200)1,056,400 EQUIPMENT FUND 17,363,000 18,723,400 (28,131,600)7,954,800 SUMMARY OF PROPOSED FIVE YEAR CAPITAL PROGRAMS FISCAL YEAR 2024-25 THROUGH 2028-29 CITY OF ARCADIA Exhibit "B" RESOLUTION NO. 7573 A RESO LUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, ADOPTING A BUDGET FOR FISCAL YEAR 2024-2025 AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN AS EXPENDITURES FROM THE VARIOUS FUNDS WHEREAS, on June 4, 2024, the City Manager submitted to the City Council a proposed Budget for Fiscal Year 2024-2025, 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 2024-2025; and WHEREAS, notice of the public hearing on the proposed Budget and a summary of the proposed Budget were published on May 23, 2024; and WHEREAS, the duly noticed public hearing was conducted by the City Council on June 4, 2024. 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 2024-2025", 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 2024-2025 and the amounts specified therein as expenditures from the funds indicated are hereby appropriated for the purposes specified therein. SECTION 2. The City Clerk shall certify to the adoption of this Resolution. 1