TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Steve S. Charelian, Finance Director
Julie Bondarchuk, Financial Controller
Marcelo Serrano, Budget and Financial Analyst
SUBJECT:Title
Fiscal Year 2023-2024 Mid-Year Budget Report Including Funding Appropriations and Staffing Adjustments; and Fiscal Year 2024-2025 Budget Development Calendar (Finance Director Charelian).
(Estimated Time: 45 Mins.)
A) RECEIVE REPORT
B) APPROPRIATE FUNDS
C) APPROVE STAFFING ADJUSTMENTS
Line
_________________________________________________________
Recommended Action
RECOMMENDATION:
Staff recommends that the City Council: 1) receive the Mid-Year Budget Report for Fiscal Year (FY) 2023-2024 and FY 2024-2025 budget development calendar; 2) appropriate $97,000 along with an adjustment to revenues of $75,893 from the General Fund; and 3) approve staffing adjustments identified in the staff report.
Body
FISCAL IMPLICATIONS:
Every January, City staff analyzes fiscal year-to-date activity and prepares mid-year projections for revenues and expenditures to evaluate potential budget variances and forecast year-end results. This report focuses on those mid-year projections and explains budget variances to provide a current representation of the City’s fiscal position.
Current trends indicate the City’s General Fund operating budget will result in Fiscal Year (FY) 2023-2024 revenues exceeding expenditures by nearly $1.1 million as a result of several revenue streams trending higher than the adopted budget, as well as savings in several expenditure categories. Overall, General Fund Expenditures are trending slightly under budget due to savings in Contract & Professional Services, Materials & Services, and Employee Benefits categories. It is important to note that projected savings within the Contracts category can often be attributed to encumbrances that are not fully expended in the year originally budgeted and may be carried forward into a subsequent fiscal year. Salaries & Wages and Utility costs are currently trending greater than budget, which can be attributed to increases in sworn salaries and overtime.
Projected year-end net transfers to other funds, including the Stormwater Fund, Street Lighting Fund, Capital Improvement Program (CIP) Funds and Pension Stabilization Fund, are expected to total approximately $3.0 million. Notably, with the recent passage of the Storm Drain Fee, the inclusion of the Stormwater Fund in the annual transfers is no longer necessary after this year.
Taking into account year-end projections and these anticipated transfers, the unreserved General Fund balance is projected to be approximately $11.1 million at fiscal year-end. If the budget adjustments are approved by City Council as proposed, the year-end projected surplus is anticipated to be approximately $998,990, resulting in an unreserved General Fund balance of about $11.0 million.
Due to ongoing CIP projects there continue to be limited resources in the CIP Fund unreserved balance to allocate to new projects.
BACKGROUND:
The City Council adopted the Fiscal Year 2023-2024 Budget on June 6, 2023, with an estimated General Fund operating budget surplus of $475,017.
|
Revenues |
$93,300,981 |
|
Expenditures |
92,825,964 |
|
Adopted Surplus/(Deficit) |
$475,017 |
A Budget Update for FY 2023-2024 was presented and discussed during the November 7, 2023, City Council meeting. The City Council has the authority to approve additional appropriations throughout the fiscal year. To date, net budget adjustments approved by the City Council and encumbrances carried forward from the prior year resulted in anticipated budgeted revenues being lower than expenditures by approximately $1,373,029.
DISCUSSION:
The City Council and staff respond to the community’s needs through the allocation of resources. The budget is both a spending plan for the City’s available financial resources and the legal authority for City departments to spend these budgeted appropriations on goods and services that align with public priorities and meet the needs of Manhattan Beach residents.
In the current fiscal year, General Fund revenues are estimated to come in over the adjusted budget by $927,300 (1.0%). Expenditures are projected to be $1,558,916 (1.6%) under the adjusted budget (the adjusted budget includes City Council-approved amendments during the current year as well as encumbrances carried forward from the prior year).
When comparing estimated year-end revenues and expenditures irrespective of the budget, revenues are expected to exceed expenditures by $1,113,188.
|
Adopted General Fund Surplus/(Deficit) |
$475,017 |
|
Net Budget Adjustments to date |
(1,848,045) |
|
Revenues over Budget |
927,300 |
|
Operating Expenditures under Budget |
1,558,916 |
|
Projected General Fund Surplus |
$1,113,188 |
General Fund Revenues
The following are highlights of several key revenue areas. Table 2 on the General Fund Summary Attachment summarizes key General Fund Revenues this fiscal year, including a comparison to prior year actuals. Projections for revenues in FY 2023-2024 exceed the budget in most groupings. Generally, the largest contributors to the City’s revenue are Property Tax, Sales & Use Tax, Service Charges and Transient Occupancy Tax.
Property Tax is the strong foundation of the City’s General Fund revenues. The City’s Property Tax revenues are projected to total nearly $42.8 million, which is $193,129 (0.5%) above the amount currently budgeted. A combination of high demand for single-family homes, low inventory, high home prices, and shortages of affordable building materials and labor all contributed to the increase in taxable property values. It is important to note that the funds we receive in this category correlate to activity from the prior year.
Although significantly lesser in amount, Real Estate Transfer Tax is a key indicator of real estate activity. The City’s revenue is derived from a charge of fifty-five cents per $500 of sales price during the transfer of a property that is split evenly between the City of Manhattan Beach and the County of Los Angeles. Based on transfer tax collections from all properties (residential and commercial) to date, revenues are expected to be under budget by $150,000 (18.8%), yielding $650,000 for the year.
Sales & Use Tax is projected $100,000 (0.9%) higher than budget, for an approximate total of $11.2 million, due to steady local economic activity despite the continued prevalence of higher interest rates. Although the total has remained stable, various sales tax categories have had fluctuations with reductions in the amounts received from the general consumer goods and service stations categories being offset by increases in the amounts received from the automobiles & transportation and restaurants & hotels categories.
Transient Occupancy Tax (TOT) receipts, which are trending over budget by $50,000 (0.7%), are estimated to bring in about $7.3 million to the General Fund. Additionally, by policy, the City Council automatically allocates a percentage of the TOT to the CIP Fund, which is expected to total $876,000 for the current fiscal year. Although TOT receipts have proven to be highly sensitive to swings in the pandemic, occupancy rates seem to have returned to typical trends.
The General Fund also receives TOT from short-term vacation rentals in the coastal zone, which are projected to total $900,000 this fiscal year. Staff continues to work closely with Host Compliance and Code Enforcement to monitor the activity of the approximately 125 operators within the coastal zone to ensure compliance with City regulations.
Business license tax, which is generally calculated upon a business’s prior year gross receipts, has remained level or had slight increases year over year, due to the fact that about 85 businesses pay the maximum amount of business license tax. These businesses contribute about 34% of the total business license revenue collected. Business License tax revenues in FY 2023-2024 are conservatively estimated to exceed budget by $150,000 (3.1%).
Revenues from all Building Permits and Plan Check fees are trending above budget by $200,000 (5.6%) despite a lower volume of permits and a lower amount of plan checks issued in the first half of FY 2023-2024, mostly due to the permits related to two large commercial projects undergoing construction within the City. The number of demolition permits issued is higher compared to the same period last year. The wider pullback in construction activity corresponds with the lower sales.
Revenue from other Service Charges (not including Plan Checks) is projected to come in about $452,070 (6.4%) over budget, primarily due to increases from Ambulance Fees and, to a lesser extent, continued strength in Parks and Recreation programming.
The Use of Money and Property category, which is projected to be slightly under budget by $40,800 or 1.1%, includes Rents and Leases charged to tenants of City-owned properties. Additionally, Interest Earnings is expected to be over budget by $500,000 (54.1%) due to rising interest rates.
Operating Service Transfers include reimbursements to the General Fund, per the Cost Allocation Plan adopted in February 2020, from other Special Revenue and Enterprise Funds for Administrative Service Charges. In addition, Engineering staff time allocated to capital projects and grants is also included in this reimbursement to the General Fund.
Lastly, in the Miscellaneous category, the decrease from budget of $325,953 (34.8%) is mostly attributable to Workers Compensation Salary Continuation revenues. Although it impacts General Fund revenues, this actually represents lower costs in the Insurance Fund for employees out on Injury-On-Duty leave. Workers Compensation costs are volatile and difficult to predict due to a small population base.
General Fund Expenditures
The following are highlights of several key expenditure areas. Table 3 on the General Fund Summary Attachment summarizes key General Fund Expenditures this fiscal year, including a comparison to prior year actuals. Projections for expenditures in FY 2023-2024 are approximately $1.6 million (1.6%) below the budgeted amount.
Salaries and Wages for FY 2023-2024 are projected to be around $418,329 (1.0%) above budget. Increased costs associated with Overtime and Sworn Employee Salaries resulted in this category being 1.0% over budget. As of January, the City has approximately 30 unfilled positions budgeted in the General Fund. When budgeted positions remain unfilled, additional budgetary savings will result. However, sometimes the savings is mitigated by the use of overtime, part-time or contract services to fill in for critical operations.
In the Benefits category, expenditures are projected to be below the budgeted amount by roughly $390,974 (2.5%), primarily attributed to the higher number of vacancies.
Contract & Professional Services expenditures are projected to be $1,113,758 (7.1%) below budgeted costs. Primary drivers of these savings are Contract Services ($989,168) and Software Purchases & Subscriptions ($142,484).
Materials & Services are $429,622 (10.0%) lower than budgeted. Savings in this category largely result from unexpended budget in Department Supplies and, to a lesser extent, Training, Conferences & Meetings.
The Utilities category is trending over budget by $19,445 (1.6%) due to a combination of increased usage and higher rates for water and natural gas. When the budget is calculated, a CPI increase was applied to utility costs, but recent increases have slightly exceeded expectations.
General Fund Transfers to Other Funds
Over the next five years, net General Fund transfers are projected to range between $2.9 million and $3.7 million per fiscal year. In FY 2023-2024, net transfers out are projected to total $3.0 million.
The General Fund’s subsidy to the Stormwater Fund is estimated at $1,100,581 in FY 2023-2024. With the successful passage of the Storm Drain Fee, it is expected that there will be no further subsidies after this fiscal year.
The Street Lighting & Landscaping Fund currently has no fund balance and assessments are inadequate to fund operations or provide for future capital needs. As a result, the General Fund subsidizes this fund every year. An estimated subsidy of $304,852 will be required in FY 2023-2024. Street lighting costs are also on the rise due to utility cost increases imposed by Southern California Edison.
Budgeted transfers to Capital Improvement Program (CIP) Funds include:
• $1.0 million to the CIP Fund for the Scout House & Senior Center Project
• $994,920 to the CIP Fund as part of the Pension Liability Policy
Lastly, a transfer to the Pension Rate Stabilization Trust Fund is budgeted at $492,380 in accordance with the City’s Pension Policy (Pension Obligation Bond budgetary savings allocated 60% to fund future pension costs). The balance of the Trust Fund before the transfer is about $3.5 million. These funds are available to fund any pension-related payments to CalPERS at the City Council’s discretion.
FY 2023-2024 Budget Adjustments
The following mid-year budget adjustments have been identified by staff as time-sensitive priorities:
1) SB 1383 Compliance
New Appropriation Request: $97,000
Proposed Fund: General Fund
The City continues its efforts to comply with SB 1383, CalRecycle's Short-Lived Climate Pollutant Reduction Strategy. Cal Recycle will award the City with $75,893 from the SB 1383 Local Assistance Grant cycle OWR4 to be used beginning April 1, 2024. These funds will be used to contract for services related to fulfilling SB 1383 mandates. The focus of this work will be on edible food recovery compliance, record-keeping tools, and compliance monitoring.
Enhanced Service Delivery and Staffing Adjustments
With evolving conditions and evaluation of City services and staffing, the City continues to explore opportunities for improving service delivery, insourcing core services where beneficial, and aligning positions and staffing to the current needs of the organization and community. In alignment with these positions, Staff is recommending staffing adjustments within the mid-year budget for the City Council’s consideration. Many of the positions requested provide direct service delivery enhancements to customers and/or will be directly tied to a revenue offset or cost recovery in future fiscal years.
Additionally, other minor position adjustments and upgrades provide staff an opportunity to be nimble in addressing staffing and position changes in a more agile and responsive way, with a focus on recruitment and retention moving forward. Position vacancies that arise throughout the year provide an opportunity for departments to reevaluate the needs of the vacant positions, fill positions at the appropriate level, and take incremental steps towards reorganization.
The narrative and attachments highlight proposed staffing adjustments with an approximate ongoing cost of $2.0 million before offsets. Of the actions identified below, those related to the addition of positions are not anticipated to result in an immediate cost to the current fiscal year as the intention is only to begin the recruitment process for these roles with the understanding that selected candidates would fill these roles at the start of FY 2024-2025. After the application of offsets from increased cost recovery, fees, and realized net revenues, the anticipated impact of these proposed changes is $93,091 to the General Fund in FY 2023-2024. If approved, the identified costs for the remainder of the year will require an appropriation and the ongoing costs associated with these positions will be included as part of the proposed budget for Fiscal Year 2024-2025.
Human Resources worked collaboratively with the departments requesting new positions and programs, as well as upgrades to positions in the Public Works and Finance Departments, to ensure the requested positions and classification levels reflect the level of responsibilities and duties required.
Fire Department
The Fire Department is recommending organizational changes in order to support insourcing the majority of ambulance transfers, which will further expand public safety staffing and capabilities in the provision of emergency services. The corresponding staffing changes include a net increase of four (4) sworn full-time Fire employees. Specifically, this program is intended to increase internal oversight of the quality and efficiency of the response to emergency calls, expand sworn staffing to provide more depth in responding to Fire suppression activities, and increase cost recovery for emergency transportation services by billing for a higher level of service and faster turnaround time on transports due to insourcing. The mid-year budget provides an opportunity for the City Council to review this issue in advance of the fiscal year so that staff may begin working on the administrative and logistical considerations for standing up a program in the new fiscal year. The Deputy Chief proposed as part of this reorganization will be a critical component of implementing the proposed program, and will have ongoing responsibilities related to the management of an assigned area within the Fire department. These responsibilities include oversight of operations, administration, and employee training; the development and implementation of goals, objectives, policies and priorities; the planning, direction, coordination and review of the work of assigned staff; and oversight of and participation in the development of the annual budget for the department. Additionally, this position will serve as a liaison to other divisions, departments, outside agencies, contracted service providers and area hospitals.
In October 2022, the City Council approved organizational structure changes to the Fire Department that resulted in “civilianizing” the Fire Prevention Division, moving the sworn staff previously assigned to Fire Prevention to Suppression and Emergency Medical Services (EMS) Division assignments, increasing sworn staffing by one, upgrading two sworn positions to Fire Captain/Paramedic to allow for promotion of additional employees into the positions, as well as authorizing the over-hiring of up to three additional sworn employees for up to a one year period.
The proposed program would continue the authorization for over-hiring, and simultaneously change the position allocation to be inclusive of the new program. Specifically, the number of Fire Captain/Paramedic positions would decrease from 9 to 6, and 6 total Firefighter positions (which could be staffed at a Firefighter or Trainee level) would be added, along with a full-time Deputy Chief working administrative hours. The Deputy Chief is a newly created position and would be filled via a promotional opportunity for one of the current Division Chiefs.
a) Add One Deputy Chief (administrative) position
Annual Cost: $287,680
Estimated FY 2023-2024 Cost: $86,304
Fund: General Fund
Offset: Elimination of contract and three (3) positions
The new administrative Deputy Chief position is recommended to oversee and execute the insourcing of the ambulance program and ensure regulatory compliance for personnel training and reporting requirements. This position would also provide administrative and managerial support to the Fire Chief.
b) Add Six (6) Firefighters
Annual Cost: $763,746
Estimated FY 2023-2024 Cost: $0
Fund: General Fund
Offset: Elimination of contract and three (3) positions
Adding six (6) new Firefighters will support the insourcing of the ambulance program while simultaneously expanding the City’s ability to recruit, train, and retain suppression and EMS personnel. The additional personnel will provide increased operational flexibility and provide additional lines for succession within the organization.
The cost of the Deputy Chief and six (6) new Firefighters are anticipated to be offset by the elimination of three (3) Fire Captain/Paramedic positions currently allocated in the budget, as well as a reduction in the ambulance contract, currently valued at $461,619 annually. Although there are savings anticipated from these changes in subsequent fiscal years, these may not be realized in FY 2024-2025 as there are approximately $188,300 in one-time costs for these positions stemming from the purchase of a vehicle for the Deputy Fire Chief and Occupational Safety and Health Administration (OSHA) mandated safety gear for these positions.
Police Department
Staff has identified the need to reinstate three Community Services Officer (CSO) positions in order to meet community expectations in the areas of parking enforcement, animal control, traffic control, and community quality of life enforcement, as well as for special events. These positions are recommended to be Lead CSO positions in order to provide supervisory continuity and to balance the span of supervision in the Police Department’s Parking and Animal Control unit (1 supervisor to 23 full-time and part-time employees). These positions will ensure that the Police Department can consistently deliver a high level of service to the community.
a) Add Three (3) Lead Community Service Officers
Annual Cost: $306,456
Estimated FY 2023-2024 Cost: $0
Fund: General Fund
Offset: Increased Issuance of Parking Citations
Three new lead Community Service Officer positions would provide supervisory continuity in the areas of parking enforcement, animal control, traffic control, and community quality of life enforcement, as well as for special events. These positions would return the staffing levels for Community Services Officer to the number of positions allocated prior to 2020. In 2021, one position was eliminated in connection with the early retirement incentive and two positions were reallocated to Code Enforcement in order to address organizational needs and priorities.
Community Development Department
The Community Development Department has identified the need for increased staffing support across the Planning and Building Divisions. The requested positions of one Senior Planner, one Associate Planner and one Plans Examiner have been identified as a necessity to continue to meet City and Department service delivery objectives as well as new State-mandated shorter turnaround times for planning and plan check reviews. The two Planning positions are also necessary to manage a high volume of complex and advanced work efforts, some of which are mandated by State law.
a) Add One (1) Senior Planner
Annual Cost: $168,417
Estimated FY 2023-2024 Cost: $0
Fund: General Fund
Offset: Cost recovery through user fees
The Senior Planner would implement, review, and manage a diverse and complex range of professional planning project and studies, primarily related to work in current planning (entitlement processing). With new housing legislation and other statutory requirements in place, the level of complexity of current planning projects has increased, necessitating a higher level of analytical skills to provide a thorough evaluation and assessment. In addition to the increased complexity of entitlement applications, the quantity of projects has also increased, as demonstrated by the 24% increase in revenue for planning filing fees currently projected for FY 2023-2024.
The division currently utilizes a contracted consultant to ensure adequate and efficient review of projects and plans. The new position would add capacity to allow for a more comprehensive internal approach to project reviews, but the department will continue to contract with consultants as needed to provide additional backup capabilities. Moreover, the position would be expected to oversee other professional planning staff assigned to current planning work. In addition to future savings on consultant services and higher-than-expected planning filing fee revenues, staff anticipates that the upcoming fee study will update fees commensurate with the need for full cost-recovery.
d) Add One (1) Associate Planner
Annual Cost: $135,620
Estimated FY 2023-2024 Cost: $0
Fund: General Fund
Offset: Cost recovery through user fees
The new Associate Planner position would be responsible for processing and implementing a wide range of long-range planning projects and programs. These include code amendments and establishment of processes and procedures identified in the recently adopted housing element, updates to the Local Coastal Program (LCP), implementation of various measures contained in the pending Climate Action and Adaptation Plan (CAAP), development of code amendments required to modernize and clean-up outdated code sections, and other policy-related work. This is all work that is required by statute and/or City Council direction, and cannot be deferred. Absent of the new Associate Planner position, staff that are currently working on the processing of development applications would need to take on this work, which would slow the development review process for applicant-driven projects.
e) Add One (1) Plans Examiner
Annual Cost: $130,773
Estimated FY 2023-2024 Cost: $0
Fund: General Fund
Offset: Cost recovery through user fees
The Department has identified the need for a Plans Examiner position to increase efficiency and effectiveness at the public counter through the performance of simple plan reviews in-house and over the counter. Additionally, this position will create opportunities for career growth and progression within the Building and Safety Division and will contribute to the overall improvement in the Department's operations and services provided to the public. Given increasing code regulations (and associated complexity) and time constraints on permitting mandated by State law, additional staff is necessary to effectively review plans and ensure compliance with new State regulations. Moreover, having an in-house Plans Examiner will allow the opportunity to maintain more project reviews within the Department, thus reducing costs by offsetting the fees paid to outside consultants contracted for plan review.
Public Works
The Public Works Department has identified the need to adjust job classifications to meet the current demands of the Engineering Division, provide better support for the Solid Waste Program, and provide additional contract and procurement management support for the Field Operations and Utilities Divisions. All proposed adjustments consist of adjustments of existing full-time positions and do not increase the total number of budgeted employees. The number of full-time positions within the department will remain the same.
a) Upgrade One (1) Senior Civil Engineer to Principal Civil Engineer
Annual Cost: $18,971
Estimated FY 2023-2024 Cost: $3,162
Fund: General Fund
The Engineering Division is responsible for implementing the City’s Capital Improvement Program (CIP). In order to improve the division’s ability to effectively and efficiently manage CIP projects, the upgrade of an existing Senior Civil Engineer position to Principal Civil Engineer is necessary. This upgrade will reduce the number of direct reports to the City Engineer and provide project managers with more direct supervision. By upgrading this position, staffing resources will be better aligned within the Engineering Division, enhancing ability to deliver quality projects in a timely manner.
b) Downgrade One (1) Senior Civil Engineer to Associate Engineer
Annual Savings: $19,484
Estimated FY 2023-2024 Savings: $3,248
Fund: General Fund
The Engineering Division is responsible for implementing the City’s Capital Improvement Program (CIP). In order to improve the division’s ability to effectively and efficiently manage CIP projects, the downgrade of an existing, currently vacant Senior Civil Engineer position to Associate Engineer is necessary. The downgrade of this position will optimize the configuration of staff assigned to implementing the CIP and provide more support to the division’s Senior Civil Engineers, allowing them to focus on higher-level duties and responsibilities. By downgrading this position, human resources will be better aligned within the Engineering Division and its ability to deliver quality projects in a timely manner will be enhanced.
c) Upgrade One (1) Senior Management Analyst to Solid Waste Administrator
Annual Cost: $8,878
Estimated FY 2023-2024 Cost: $1,480
Fund: General Fund
The City’s solid waste program is currently managed by a Senior Management Analyst. Besides solid waste, this position is also responsible for other significant administrative duties within the Public Works Department, including but not limited to contract management and administration of the most complex departmental budget within the City. Given the size and importance of the solid waste program, the intricacies of regulatory and regional issues related to the management of solid waste, and the growing set of state mandates that the City must implement to comply with SB 1383, it is necessary to ensure the solid waste program has the undivided attention of this position. The upgrade of the Senior Management Analyst to Solid Waste Administrator reflects the current skills and expertise required to effectively manage this program and, along with the appropriate reassignment of the other administrative duties to other existing staff members, will allow this position to focus solely on the solid waste program. This upgrade will allow for uninterrupted management of the solid waste program and ensure that the City is continuing to comply with expanded regulations imposed by the state.
d) Upgrade One (1) Administrative Assistant to Administrative Analyst
Annual Cost: $3,368
Estimated FY 2023-2024 Cost: $562
Fund: General Fund
Public Works is responsible for the administration of the City’s most complex departmental budget. Much of this budget relates to contracting for supplies and services from various vendors and construction contractors. In order to ensure that staff has the proper contracts in place to respond to both the anticipated and unanticipated needs of operating and maintaining the City’s parks, facilities, streets, landscaped areas, fleet of vehicles, and utilities (water, sewer, and stormwater), the regular and ongoing development and monitoring of hundreds of contracts is necessary. The upgrade of an Administrative Assistant to Administrative Analyst will improve the department’s ability to develop and monitor these contracts on a routine basis, thereby enhancing the ability of Public Works to deliver services to the community and implement maintenance projects in a timely manner with minimal delays.
Finance Department
The Finance Department has identified the need for a Grant Administrator in order to provide a centralized resource to departments for analytical grant support and an Accounting Technician to provide a dedicated centralized resource for the Accounts Payable process.
a) Add One (1) Grants Administrator
Annual Cost: $139,450
Estimated FY 2023-2024 Cost: $0
Funds: Various
Offset: A minimum of 75% to be reimbursed to the General Fund
This position would serve as the centralized grant resource and administrator for the City. The Grants Administrator will oversee the administration of grants, Metro funds, capital improvement projects in various funds, as well as bonding and administration for Utility Underground Districts (UADs). Currently, grants are managed by each department (Public Works, Police, Fire, Recreation, Community Development, etc.). The annual grant expenditure averaged around $4.4 million in the past five years (FY 2019-FY 2023), up from $1.2 million in the preceding five years. The number of active grants have also increased by 50% over the past ten years. Additionally, the City has an estimated $47 million of grants in the pipeline that will require additional support. The amount of grants, grant funds awarded, and requirements have grown over the years, which have created an increasing need for a dedicated centralized grant position.
This position would be funded up to 100% with administrative fees from grants, special revenues, reimbursements and projects. The Grants Administrator would assist with the overall planning, monitoring, and reporting of grants and projects citywide. The Grants Administrator may seek grant opportunities and consult with applicable staff and consultants during the grant submission process. This position would also provide a necessary component to the overall grant process by overseeing the implementation of policies and procedures to ensure compliance with guidelines of the funding agency. Additionally, this position would functionally support financial audits conducted by regulating agencies in addition to the analytical review of reports, contractual documents, and correspondences prepared by staff regarding grants and projects, including the City’s Capital Improvement projects.
b) Upgrade One (1) Part-time Account Services Representative to Full-time Accounting Technician
Annual Cost: $28,986
Estimated FY 2023-2024 Cost: $4,831
Fund: General Fund
Since providing centralized accounts payable support is a key function in the Accounting Division, the Finance Department recommends converting this part-time position to a full-time Accounting Technician. This position is responsible for entering approximately 70% of the City’s invoices into workflow as well as all of the utility bills. Additional duties include the review of travel forms to ensure policy compliance, vendor file maintenance, resolving any issues regarding outstanding invoices, providing guidance to staff on the accounts payable process, and communicating with vendors and departments to resolve disputes. Part-time staff was utilized in this capacity for an average of 35 hours a week over the past many years, supporting the need for full-time hours on an ongoing basis.
In addition to the current duties fulfilled by the part-time Accounting Services Representative, the Accounting Technician will take on additional duties, including assisting with payroll processing and providing support for Accounting functions such as journal entries, account reconciliation, and assisting with mandated filing and reporting. These essential technical functions will alleviate some of the Accountant’s time spent on lower-level tasks to perform professional accounting duties.
To recap, if approved for a mid-year adjustment, the proposed staffing changes are anticipated to add budgeted costs of $93,091 to the General Fund during FY 2023-2024. Of the actions identified above, those related to the addition of positions are not anticipated to result in an immediate cost to the current fiscal year as the intention is only to begin the recruitment process for these roles with the understanding that selected candidates would fill these roles at the start of FY 2024-2025. The proposed staffing adjustments identified above have an approximate ongoing cost of $2.0 million before offsets. After the application of offsets, the estimated net impact of these proposed changes are anticipated to result in approximate annual savings of $130,751 which will be recognized after one-time costs related to the staffing adjustments in the Fire Department are factored into FY 2024-2025. The full annual cost of all positions will be budgeted in FY 2024-2025 and subsequent fiscal years.
FEMA Reimbursement for COVID-19 Pandemic
During the COVID-19 pandemic the City incurred expenditures that were submitted to the Federal Emergency Management Agency (FEMA) to determine eligibility for reimbursement. At the time, FEMA had not determined guidelines for eligibility and requested that municipalities submit all potentially applicable COVID-19 expenses for review. Since September 2020, the City submitted ten project applications to FEMA which encompassed roughly $1.5 million of expenditures related to its COVID-19 response. After a lengthy review process, which required multiple submissions to FEMA to provide additional information, the Purchasing team was able to usher six of these applications through the procurement stage for a total anticipated reimbursement of approximately $798,163.
Thanks to the diligent efforts of the Finance Department’s Purchasing team, the City has been able to secure the reimbursement of $194,719 related to COVID-19 pandemic expenses that were submitted to FEMA as part of three projects that have cleared the final step for repayment after the procurement stage. The most recent payment was received on December 19, 2023 and totaled $101,860. There are still three outstanding payments expected, which are roughly estimated to bring in an additional $603,444. The Purchasing team continues to work with FEMA to expedite the issuance of reimbursements and secure these funds.
Five Year Forecast
The City’s financial forecasting model indicates ongoing revenues will continue to exceed ongoing expenditures resulting in annual structural surpluses. However, ongoing subsidies to the Street Lighting Fund continues to offset surpluses and impact General Fund balance by about $300,000 per year. This fund receives revenue from assessments to property owners, which has not increased since 1996. Without a successful Prop 218 vote, the fund will continue to require subsidies from the General Fund to cover ongoing operations and capital expenses.
As part of the budget process, staff is currently refining the attached forecasting model and growth factor projections for both revenues and expenditures to estimate long-term fiscal sustainability. Additionally, fund transfers and the allocation of budgetary savings derived from the issuance of Pension Obligation Bonds (POB) are re-evaluated annually. Per the City Pension Policy, the current distribution of estimated annual savings from the issuance of POBs are 40% to the CIP Fund and 60% for future Unfunded Actuarial Liability. Based on this comprehensive review, additional recommendations may be presented to the City Council with the Proposed Budget for FY 2024-2025 in May.
FY 2023-2024 Mid-Year Budget Summary
The spending plan for FY 2023-2024 was developed during a period of some uncertainty and concern about inflationary pressures and the effect of high interest rates. Revenues were conservatively estimated and expenditures were reduced where possible while still maintaining current service levels. With over half of the year completed, General Fund revenues have remained steady overall, with increases in some key areas, but, with interest rates remaining high in the near term, staff continues closely monitoring for signs of a potential slowdown in the economy. Expenditure savings are mostly attributed to savings from contracts not being fully utilized. Some of these encumbrances may have an impact on the projections for subsequent fiscal years. Irrespective of budget, revenues are expected to exceed expenditures by year-end.
The projected General Fund surplus of nearly $1.1 million, as well as the existing Unreserved General Fund balance, provide an opportunity to allocate funds to City Council priorities, including capital projects. After net transfers out totaling about $3.0 million, the Unreserved General Fund balance is projected at $11.1 million after FY 2023-2024.
With the proposed General Fund budget appropriations for SB 1383 Compliance and Staffing Adjustments, the new projected General Fund surplus at the end of FY 2023-2024 will be $998,990 and the unreserved General Fund balance is estimated at around $11.0 million.
Funding essential operations and capital priorities will be further discussed during the FY 2024-2025 budget process.
FY 2024-2025 Budget Development Calendar
After reviewing requests from each Department and input from the Budget Priorities Community Meeting on February 15, 2024, a Proposed Budget for FY 2024-2025 will be prepared and presented to City Council on May 7. Following this initial presentation, one or more City Council Budget Study Sessions will be held on May 14 and 28 (tentative dates) with an additional opportunity to discuss the budget at the City Council meeting on May 21. The public hearing and budget adoption is scheduled for June 4, 2023, before the new fiscal year begins on July 1. The FY 2024-2025 budget timeline is attached.
PUBLIC OUTREACH:
On Thursday, February 15, 2024, the City held a Budget Priorities Community meeting via Zoom to answer questions from the public and collect community feedback regarding the City’s Budget. Feedback received during the meeting will be presented to City Council at a future meeting date.
Future opportunities for public input include May 7, 2024, when the FY 2024-2025 Proposed Budget is presented to the City Council, and during subsequent City Council Budget Study Session(s) tentatively scheduled for May 14 and 28, as well as at the City Council meeting on May 21. Questions and comments may also be submitted anytime via email to Budget@manhattanbeach.gov <mailto:Budget@manhattanbeach.gov>.
ENVIRONMENTAL REVIEW:
The recommended action has been determined to be exempt from CEQA pursuant to State CEQA Guidelines Section 15061(b)(3), the common sense exemption (formerly the “general rule”) that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question can have a significant effect on the environment, the activity is not subject to CEQA, as is the case with this item.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Fiscal Year 2023-2024 General Fund Summary
2. Revised Five Year Forecast
3. Fiscal Year 2024-2025 Budget Timeline