City of Chino
CA

Staff Report

Adopt Resolution Nos. 2019-033, 2019-034, and 2019-035, approving and adopting the City Budget for Fiscal Year 2019-20, approving and setting the Appropriations Limit for Fiscal Year 2019-20; and approving amendments to the City's Classification and Salary schedule.

Information

Department:Finance DepartmentSponsors:
Category:Report

Attachments

  1. Printout
  2. Budget Resolution with 50% Reserve Policy V2 (This file has not yet been converted to a viewable format)
  3. Budget Reso approp limit 19-20 (This file has not yet been converted to a viewable format)
  4. Salary Resolution 061819.doc (This file has not yet been converted to a viewable format)

Budget String

Revenue: Expenditure: Transfer In: Transfer Out:

Body

BACKGROUND

Presented for consideration is the Fiscal Year (FY) 2019-20 City Budget. The budget incorporates the City operating budget and the Five-Year Capital Improvement Program. The budget contains detailed financial data that pertains to the City’s ongoing operations for the next fiscal year.

On Thursday, May 9, 2019, the City Council held a public Budget Workshop to review and discuss the preliminary budget document developed by staff. At that workshop, the City’s financial condition was presented and staff responded to questions from the City Council regarding specific projects and programs contained in the budget.

 

ISSUES/ANALYSIS

Staff is pleased to present the FY 2019-20 City of Chino Proposed Budget as well as the            Five-Year Capital Improvement Program (CIP) Budget. These budgets contain detailed financial data that pertain to the City’s ongoing operations for next fiscal year. As in prior years, the FY 2019-20 Budget also presents information that pertains to the Successor Agency as “information only.” 

 

As previously stated, City Council held a public Budget Workshop on May 9, 2019 to discuss the proposed budget and make changes based on these discussions. The following table lists significant changes recommended by both the City Council and staff that have been incorporated in the final budget presented for adoption.

 

Table 1: Recommended changes included in Final Budget

Recommendation

Fund

Budget Update

Expenditure Changes:

 

 

City Council

100/650

Added $275,000 for the cost of a Civic Center Master Plan

City Council

340

Added $169,000 for the cost of a Parks and Facilities Master Plan

City Council

650

Added $40,645 for painting and repairs to Senior Center Building

City Council

100

Increased contractual services by $32,550 in Development Services for the Sphere Study

City Council

640

Added $25,000 in Human Resources budget for as needed staffing analysis

City Council

100

Increased budget for Branding Study from $20,000 to $50,000

City Council

100

Increased Chamber of Commerce donation from $7,500 to $12,000

Staff

100/320

Increased Project ST171 (Street Rehab. 16-17) by $191,269

Staff

100

Increased contractual services in Planning by $41,575 for Nexus Study

 

Staff

100

Increase PD attorney costs by $25,500

Staff

100

Staff discovered a revenue input error. Correcting this input error increased revenues by $263,756.

 

Position Changes:

 

City Council

Removed Administration Secretary to Management Assistant reclassification (2 positions)

Staff

Removed Permit Processing Specialist to Permit Technician reclassification

 

The above changes have been incorporated into the following discussion regarding the budget that is proposed for adoption.

FY 2018-19 FINAL GENERAL FUND BUDGET ESTIMATE

For FY 2018-19, the original adopted budget identified a General Fund operating surplus of $133,111 for the year.  In addition, the City identified a net one-time use of General Fund reserves of $8.4 million, resulting in a decrease in the General Fund reserves of $8.2 million. The adopted FY 2018-19 Budget showed ending General Fund reserves to be $43.6 million at June 30, 2019.

Based on current projections contained in the Proposed FY 2019-20 Budget, General Fund reserves are now projected to be $55.1 million at June 30, 2019. This $11.5 million increase in reserves is attributed to the following: projected operating surplus of $2.6 million; the $2 million increase in overall revenues; and the $6.9 million reduction of one-time use of reserves (this is due to the Street Rehab Projects being delayed into the proposed FY 2019-20 budget year).

 

FY 2019-20 PROPOSED GENERAL FUND BUDGET

For FY 2019-20, staff is presenting a proposed General Fund Budget with an operating surplus of $2.7 million. This budget again incorporates the concept of recognizing anticipated expenditure savings up front in the budget process. The purpose of this concept is to attempt to present a more accurate picture of the final operations of the City. Adopting operating results that are far different from the final results creates a false impression that can lead to possible mistrust of the budgeting process. Therefore, staff will again include in the budget a revenue line entitled Expenditure Savings Contingency.

Staff has analyzed General Fund budget versus actual expenditures over the last five years (FY’s 2013-14 to 2017-18) and determined that over this period, actual expenditures have been under budget by an average of $3.7 million. The Expenditure Savings Contingency will be calculated at 65% of the average of the last five years. This calculates to be $2,424,940, and increases the calculated General Fund surplus of $306,878, resulting in an operating surplus of $2.7 million. The Expenditure Savings Contingency of $2,424,940 represents just 2.9% of budgeted expenditures for FY 2019-20. 

In addition to ongoing operations, the FY 2019-20 budget includes significant General Fund contributions to improving city streets and traffic flows. Included in the budget is $8.1 million for: 1) Street Rehabilitation Projects ($3.7 million); 2) El Prado Road Rehabilitation ($1.8 million); 3) Local Street Overlays ($1.7 million); 4) Traffic Signal Cabinet Replacements ($.4 million); and 5) other projects ($.5 million). Other use of General Fund Reserves includes: 1) City-wide building projects ($1.3 million); 2) traffic survey, Senior Center and Library improvements ($.8 million); and 3) accessibility projects ($.4 million); Upon completion of all the proposed projects the proposed ending General Fund reserves would be $46.6 million at June 30, 2020.

 

FY 2019-20 PROPOSED GENERAL FUND REVENUES

The General Fund primary revenue sources are sales tax, property tax, and development related revenue. Retail sales activity in the City of Chino continues to be well-diversified and spread across general consumer goods, construction, restaurants, and commercial and industrial businesses. During FY 2018-19, the City of Chino received one-time receipts of use taxes from the installation of equipment in a local business of approximately $1.5 million. This increased the projected FY 2018-19 sales tax revenue to $29.4 million. For FY 2019-20, sales tax revenue is anticipated to be $28.4 million, which is lower than the previous year due to the loss of the one-time use taxes. 

Property tax revenue is projected to be $25.4 million for FY 2019-20. This is an increase of $1.3 million, or 5.5% over the prior year budget. The major components of property tax revenue include the Ad Valorem tax (the 1% Proposition 13 tax), property tax in-lieu of VLF, and property taxes from the RDA elimination. New development continues to add to the assessed valuation of the City resulting in increases in Unsecured, In-Lieu, and RDA Elimination Taxes. 

Development revenue is projected to be $10.7 million for FY 2019-20. This is $1.8 million more than the adopted budget for FY 2018-19 and the highest amount of budgeted development revenue in recent history. However, staff believes that development is anticipated to remain very active for FY 2019-20.  This revenue budget does bring a level of risk should the housing market slow during the latter part of the coming fiscal year.

 

FY 2019-20 PROPOSED GENERAL FUND EXPENDITURES

The Proposed FY 2019-20 General Fund expenditure budget is being presented with additional staffing requests. These staffing requests are presented to meet the continuing demand for services being experienced by every department. Additionally, City employee associations are in the process of negotiating wage and benefit increases. The combination of new staff and wage and benefit increases always presents challenges from a long-term financial planning perspective.  New staffing creates ongoing expenses for not just salaries, but also benefits such as health care and pension costs and other associated expenses such as equipment and training costs. These ongoing staffing expenses plus possible wage increases must be balanced with ongoing revenues sources for the City to remain financially solvent in the years to come.

The U.S., State, and local economies have all been performing very well. The U.S. continues to be in its longest economic expansion in history. Year after year, pundits have been saying that a recession is just a few years off. These predictions have yet to come true. However, the City must prepare itself for these recessions as they have been a cyclical part of our economy for over a century. As was seen during the “Great Recession,” the City’s three largest revenue sources combined went from $40.8 million in FY 2006-07 to $30.7 million in FY 2009-10, a $10.1 million drop in three years. Almost all this reduction is related to development revenue, which dropped from $11.4 million to $1.4 million over this same period. The City continues to be susceptible to large reductions in revenues should the economy experience a downturn. Business and Industry make up approximately 40% of the City’s sales tax revenue and development revenue continues to be historically high at a projected $10.7 million for FY 2019-20.

Adding additional staffing, wages and benefit costs, when we are towards the end of an economic cycle requires a measure of caution. To protect the City against a downturn in the economy, it is being recommended that the City Council implement a provision in the Budget Adoption Resolution to indicate that should General Fund Reserves (as measured by the most recently completed City Comprehensive Annual Financial Report) fall below 50% of ongoing operating expenditures, there will be a hiring freeze. This hiring freeze will remain in place until an orderly financial plan for cost-reduction or revenue enhancement has been developed to replenish the reserves within a reasonable time.

With the implementation of this provision in the Budget Adoption Resolution, staff is recommending the following position additions and changes for FY 2019-20:

 

New or Abolished Positions:

Department

Existing Position

New Position

Administration

Communications Manager

Abolish

Police

None

Sergeant (2)

Police

None

Police Officer (4)

Development Services

None

Transportation Manager

 

Part-Time to Full-Time Conversions:

Department

Position

Community Services

Community Services Coordinator (2)

Finance

Account Clerk I

Human Resources

Management Aide to Human Resources Technician

Human Resources

IT Specialist

Public Works

Maintenance Worker

Public Works

Environmental Technician

 

Reclassifications:

Department

Existing Position

New Position

Administration

Executive Assistant to Council

Management Assistant

Development Services

Contracts Administrator

Management Analyst

Development Services

Clerk Typist II

Permit Processing Specialist

Development Services

Public Works Inspector

Public Works Lead Inspector

Finance

Management Aide

Management Assistant

Human Resources

Senior HR Analyst

HR Analyst

Public Works

Associate Engineer

Principal Engineer

Public Works

Associate Engineer

Public Works Project Manager

Public Works

Environmental Coordinator

SW & SD Supervisor

 

Salary Schedule Change:

Position

Existing Salary Top Step

New Salary Top Step

Clinical Specialist

$82,524

$102,516

 

The above changes, in addition to regularly scheduled merit increases for existing staff, are increasing General Fund full-time salary expenditures by $1.2 million in FY 2019-20. Salary allocated costs are also increasing by $0.6 million, though not all of this is the result of these staffing changes.

The City is currently in negotiations with Employee Associations regarding salary and benefit increases. The budget being presented does not contain any expenses relating to these ongoing negotiations. 

During FY 2017-18, the City made a $69.1 million contribution to CalPERS to reduce the City’s outstanding Unfunded Liability. Because CalPERS charges the City 7% interest on the outstanding Unfunded Liability, paying down the outstanding balance has resulted in substantial interest savings. For FY 2018-19 alone, $4.8 million less was added to the outstanding unfunded liability needing to be repaid in the future. Additionally, CalPERS had estimated that the City’s FY 2019-20 expense relating to the Unfunded Liability would have been $6.2 million for the year. After the paydown of the Unfunded Liability, the City’s pension expense relating to the unfunded liability is now projected to be $5.5 million, resulting is a savings of $618,133 for FY 2019-20. The total pension expense is, therefore, projected at $9.8 million instead of $10.5 prior to the buydown of the unfunded liability.

Each department has worked hard to keep their department operating costs consistent with last year’s adopted budget. This effort has resulted in General Fund maintenance and operating costs increasing by only $1.0 million of which $985,000 of this is due to the City’s contract with the Chino Valley Independent Fire District (CVIFD).

Finally, General Fund allocated costs are increasing $1.1 million. These increases are due to various cost increases relating to Insurance, Central Services, Building and Vehicle costs.

 

CAPITAL PROJECTS

The FY 2019-20 Proposed Budget includes General Fund contributions of $8.1 million for street improvement projectsThe General Fund will also contribute an additional $2.6 million for Citywide building projects, traffic improvements, and accessibility projects. These projects will ensure that Chino roadways and buildings are properly maintained.

The Capital Improvement Program (CIP) contains new and ongoing projects that are being funded through a combination of development impact fees, grants, contributions from other agencies, Measure I funds, and other restricted sources.  These major projects are outlined in the Capital Improvement Program Budget and include items such as:

 

 

§         Prior Year Street Rehab Projects                                          (Various locations)

§         Bicycle, Pedestrian & Transit Improvements              (Various locations)

§         Water Line Rehabilitation Projects                            (Various locations)

§         Storm Drain Projects                                                        (Various locations)

§         Traffic Signal Modification                                                        (Various locations)

§         Alley Rehabilitation                                                        (Central & 6th Street)

 

The California Legislature passed The Road Repair and Accountability Act in April of 2017, otherwise known as SB1. This legislation provides for additional revenues for cities and counties for infrastructure improvements. This legislation was effective November 1, 2017. The FY 2019-20 budget includes $3.2 million of SB1 or Road Maintenance Rehabilitation Account (RMRA) funds.

 

FY 2018-19 PROPOSED BUDGET CONCLUSION

The FY 2019-20 Proposed Budget shows beginning General Fund reserves of $55.1 million. The FY 2019-20 Proposed Budget will have an operating surplus of $2.7 million (before wage and benefit adjustments) and will dedicate $10.7 million of reserves for one-time projects and contain $574,932 for prior year carry-over expenditures. This leaves the General Fund with $47 million in projected reserves at the end of FY 2019-20.

 

APROPRIATIONS LIMIT

Article XIII-B of the State Constitution (as amended by Proposition 111) requires the City to adopt an annual limit on the appropriation of tax proceeds, which defines the amount of tax revenue the City can allocate in a given year. For FY 2019-20, the City’s appropriations limit has been calculated in accordance with State guidelines. This calculation was made by using the Non-Residential New Construction Alternate 2019-20 Appropriations Limit factor change of 4.87% and the City’s annual population change of 2.43%, which is in accordance with the provisions of Article XIII-B of the State Constitution.

 

The appropriations limit for the FY 2019-20 for the City of Chino is $2.085 billion. Tax revenue budgeted for this fiscal year that is subject to the appropriations limit is $68.7 million, which places the FY 2019-20 City budget $2.016 billion under the limit. The difference represents the amount of tax revenue that the City could appropriate if the revenue was available. Resolution No. 2019-034 sets the City’s Appropriations Limit (“Gann Limit”) for FY 2019-20.

 

RB:hm

 

Attachments:  Budget Resolution No. 2019-033

                            Budget Appropriations Resolution No. 2019-034

                            Salary Resolution No. 2019-035

                           

 

Please click on the following link to view the FY 2019-2020 Budget

 

FY 2019-20 Operating Budget and 5-Year CIP

 

Meeting History

Jun 18, 2019 7:00 PM Video City Council Regular Meeting
draft Draft
RESULT:APPROVED [UNANIMOUS]
MOVER:Paul Rodriguez, Council Member
SECONDER:Tom Haughey, Mayor Pro Tem
AYES:Marc Lucio, Eunice M. Ulloa, Paul Rodriguez, Tom Haughey, Mark Hargrove