Adopt the proposed FY2020-21 budget ordinance, and approve out-of-state travel requests and new vehicle requests. Also, approve the citywide position allocation schedule, as incorporated into the FY2020-21 budget document, effective July 1, 2020.

Fiscal Summary: The FY2020-21 proposed budget totals approximately $555 million from all funding sources. The total budget for the General Fund is approximately $166 million, which includes operating ($159 million) and non-operating ($7 million). The General Fund budget is balanced with revenues equal to expenses, including a transfer of $2 million from the General Fund Stabilization Reserve Fund.

COVID-19: The COVID-19 pandemic and resulting economic turmoil began in the middle of the City’s budget development process. Staff had forecasted tax revenues and City departments had already estimated their department revenues and submitted their requests for augmentations. With the amount of fiscal uncertainty that exists with the economic downturn, staff have updated revenue forecasts and reduced the General Fund major tax revenues by $14 million from the pre-pandemic forecast. However, given the fiscal uncertainty caused by the stay-at-home order and business closures, staff recognizes that actual tax revenues next year may be significantly different from these estimates.

Since the City will not have final sales tax data from April through June quarter until late August, staff will return to Council in October with a financial update and budget revisions based on the new information.  With reduced revenue estimates and the status quo expenditure budget, the proposed budget reflects a $2 million deficit that will be mitigated by a $2 million transfer from the General Fund Stabilization Reserve Fund. However, the plan is to wait until after returning to Council in October with that financial update before transferring any resources from the reserve. With continued expenditure controls in place and with businesses starting to re-open and generate economic activity as this budget is finalized, the City will wait to maintain the reserve as long as possible. 

Positions: Following is a summary of position allocation changes included in the FY2020-21 proposed budget. The proposed budget includes a net increase of 3.5 Full-Time Equivalent (FTE) General Fund positions to address critical service level requirements. The budget also includes a net increase of 7.25 FTE positions in non-General Fund funds. Citywide, the budget increases staffing levels by 10.75 FTE positions after taking into account all new positions, eliminations, reclassifications, and transfers.

In addition, the citywide position allocation schedule has been incorporated into the FY2020-21 budget document. In prior years, the position allocation was brought forward to City Council for consideration separately.

City Council Goals: The following City Council goals guided the budget process. The FY2020-21 budget document highlights the budget adds, services, and performance measures that align with these goals. 

•    Remain fiscally responsible in a changing world

•    Expand community engagement and advocacy

•    Maintain a safe and healthy community

•    Enhance economic vitality

•    Deliver exceptional City services

•    Invest in well-planned infrastructure and growth

Measure B: The proposed budget includes $18.5 million in additional Measure B revenues. These revenues have allowed the City to maintain current service levels. Also, the establishment of the General Fund Stabilization Reserve Fund in FY2019-20 with Measure B funds has allowed the City to avoid reductions to service levels due to the COVID-19 pandemic.

Process: The proposed budget is the result of an extensive process that included a City Council strategic planning workshop, budget development updates, a utilities budget update, Capital Improvement Program budget overview, financial policies update, and budget hearings.

Outreach: The budget process included a public outreach effort that involved publishing budget information on the city website, in e-newsletters, and on social media. 

General Fund Stabilization Reserve: The estimated beginning balance of this reserve is $15.9 million in FY2020-21. After the $2.1 million transfer from this reserve to balance the General Fund budget the estimated ending fund balance is $13.8 million.

General Fund Emergency Reserve: The estimated beginning balance of this reserve is $15.6 million in FY2020-21. The City Council has established a policy of maintaining the General Fund Emergency Reserve at approximately ten percent (10%) of expenditures and transfers out. The purpose of this reserve is to have the ability to fund significant short-term issues such as expenditures during declared emergencies should the need arise.

Budget Ordinance: The annual budget ordinance includes the following modifications:

•    Section 3.3 – Added section establishing budgets for non-capital multi-year projects. These projects and activities include projects crossing multiple fiscal years that do not involve capital purchases. Examples include maintenance work performed on a routine basis for facilities, bike trails, technology improvements, system assessments, and evaluations and grants.

•    Section 3.14 – Added section authorizing the City Manager to increase appropriations in the Environmental Utilities funds from the respective fund’s approved contingency budget.

The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment, or is otherwise not considered a project as defined by CEQA Statute §20165 and CEQA State Guidelines §15060(c)(3) and §15378.

Adoption of the FY2020-21 budget and approval of out-of-state travel requests, new vehicle requests, and the citywide position allocation schedule meet the above criteria and are not subject to CEQA. No additional environmental review is required.

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Dominick Casey, City Manager