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HomeMy WebLinkAboutAGENDA REPORT 2021 0526 CCSA SPC ITEM 06ACITY OF MOORPARK, 
CALIFORNIA City Council Meeting of May 26, 2021 ACTION Discussed Proposed Budget for Fiscal Year 2021/2022. BY B. Garza. A. Consider City Manager’s Proposed Operating and Capital Improvements Budget for Fiscal Year 2021/2022. Staff Recommendation: Discuss proposed budget for Fiscal Year 2021/2022. (Staff: Troy Brown) Item: 6.A. MOORPARK CITY COUNCIL AGENDA REPORT TO: Honorable City Council FROM: Troy Brown, City Manager DATE: 05/26/2021 Special Meeting SUBJECT: Consider City Manager’s Proposed Operating and Capital Improvements Budget for Fiscal Year 2021/2022 It is my pleasure to present the proposed Fiscal Year (FY) 2021/2022 Operating Budget and 5-Year Capital Improvement Plan. The budget is a manifestation of the City’s goals and priorities, and allocates resources toward providing the highest quality in municipal services for the City of Moorpark. Overview Unlike the FY 2020/21 budget, the proposed FY 2021/22 Operating budget is ground in sound assumptions but recognizes the economy is still reeling from the effects of the COVID-19 pandemic, which either shuttered or severely impacted business operations for local businesses and industries. The focus of the budget is to put the City on the pathway toward restoration of services, while continuing progress on the City Council’s goals consisting of: Quality of Life, Equity and Inclusion, Economic Development, and Arts, Culture & Entertainment. The proposed budget is structurally balanced and in addition to advancing the City Council’s goals, it also reflects the City Council’s commitment to long-term financial sustainability. The Operating and Capital Improvement budget totals $58,690,207, with $19,762,075, being general fund sources and uses to support the myriad of services offered by the City. The proposed budget supports the City Council’s Economic Development efforts by allocating resources for the hiring of an Economic Development Manager. The addition of this position will fulfill the City’s long-standing commitment to business retention/attraction, job-creation and will play an integral role in the City’s long-term economic viability. The budget also invests in sustaining a high quality of life for residents and proposes augmentations for Police Services by upgrading a position and adding Item: 6.A. Honorable City Council 05/26/2021 Special Meeting Page 2 resources to enhance traffic enforcement and improve supervision among deputies serving in the Moorpark Police Department. The safety of residents in Moorpark has always been the City’s top priority. In 2021, Moorpark residents participated for the first time in the National Community Survey (NCS). The statistically valid survey administered by Polco in late 2020 is designed to highlight areas of interest, concern, and resident satisfaction with city services. The results of the NCS indicates 96% of residents value the safety in the community, which exceeds satisfaction levels among residents in other communities across the country and state. Figure below outlines this in greater detail. As a testament to our efforts in keeping residents safe, Safewise named Moorpark as the third safest City in California for 2020. This accomplishment is possible due to the collaborative efforts led by the Ventura County Sheriff’s Department (serving as the Moorpark Police Department) in engaging residents, businesses, community stakeholders and other outside agencies to work together in reducing incidents of crime in the City. The budget augments police services for the future by upgrading one deputy position to a sergeant and adding a position to be ass igned in the Traffic Division. Resources in public safety are required to maintain the health and well-being of residents, which have not been augmented since FY 2008-2009. Further discussions relative to economic development and public safety will be discussed later in the Budget Augmentation section of this transmittal. The NCS also indicated residents’ desire for the City to engage in a broad array of economic development activities. The City Council has also prioritized economic development for many years and has invested time and policy direction into this area. As indicated in the NCS, only 31% of residents are “satisfied” or “very satisfied” with shopping opportunities in the City, with only 35% being “satisfied” or “very satisfied” with the variety Honorable City Council 05/26/2021 Special Meeting Page 3 of business and service establishments in the City. The below chart highlights resident sentiments among other economic development areas. The proposed FY 2021/22 budget allocates funding to address both public safety and economic development by directly allocating funds for these activities. Cost Containment – Moving Forward In FY 2020/21, we implemented several cost-saving measures in an attempt to address the retracting economy caused by the pandemic. Many of the cost containment measures we implemented are not sustainable to maintain service levels that residents expect. As a recap, some of those cost containment measures we implemented in FY 2020/21 include: • Hiring freeze of non-essential positions • Reductions in general fund subsidy for park maintenance • Zero cost-of-living adjustments for employees • Reduction in costs for recreational programming and special events, and • Cancellation of non-essential travel for employee development and training. Honorable City Council 05/26/2021 Special Meeting Page 4 The proposed FY 2021/22 Operating budget restores many, but not all the cutbacks undertaken during the pandemic. We are seeing a sharp rebound in participation in city programs and classes, however we are still mindful that a number of residents and businesses suffered greatly during the pandemic. As a result of this, we are projecting little to no growth from revenues generated through sales taxes as consumer confidence will continue to wane well into the fiscal year. On the community development front, several projects that have stalled or have been in the pipeline for years are anticipated to commence construction in FY 2021/22. Some of the projects include the Daly Group mixed use commercial/residential project on High Street, the 69-unit Green Island Villas condominium project on Los Angeles Avenue and the long awaited 290-unit Pacific Communities on Leta Yancy Drive. In addition to advancing the requirements of the City’s state certified housing element, these projects will add residents, increase demand for City services, and provide much needed housing stock to the City. It is important that we maintain service levels and plan for expansion of city services and infrastructure to support new housing. Local Economic Conditions/Budget Assumptions Vital sales taxes and revenues from programs and services were significantly impacted during the pandemic leaving less sources for the City to provide the same level of services residents have grown accustomed to. The 2021 Comprehensive Annual Financia l Report will outline the full financial impacts of COVID and detail whether our expense reductions through cancellation of programs such as the 3rd of July event, scaling back general fund contributions toward park maintenance, defunding of capital improv ement projects, cancellation of non-essential travel & training, freezing of non-essential positions, foregoing of employee raises, and other cost containment measures were sufficient to mitigate millions of dollars of lost revenue. Many of the cost-saving measures we implemented in FY 2020/21 certainly played a role in keeping expenses at bay, however many were also not sustainable and would result in decreased services for residents. The FY 2021/22 budget strives to restore many of the services that were cut during the pandemic in recognition that the City needs to recover from the economic calamity that we endured during the pandemic. As an example, general fund revenues from facility rentals, programs offered by the Active Adult Center, and other recreational programs are estimated to return to pre-COVID levels. Expenses are returning to pre-COVID levels as staff will be needed to implement programs such as the 3rd of July, Holiday on High Street and Country Days. Honorable City Council 05/26/2021 Special Meeting Page 5 Economic Recovery Economic recovery occurs differently for cities than other industry sectors. Public agencies are generally the last agencies to be impacted by economic downturns and are the last ones out. As it is, cities are reliant on revenues that are impacted by economic indices that are volatile and unpredictable in many ways. Sales taxes, which account for 22% of the City’s general fund budget, is one such revenue. During the pandemic of 2020, many businesses in the region retooled their service model to comply with a variety of state and local health orders to limit customer interaction and slow the spread of COVID-19. As businesses went through various stages of opening and closing during the pandemic, many residents took advantage of convenient online shopping entities to meet their needs. While online shopping is a convenient alternative, sales taxes collected through online transactions are directed to the countywide pool and returned to the City based the percentage of receipts collected in sum rather than direct allocations to Moorpark. Shopping locally in brick-and-mortar stores not only generates more direct sales taxes, but it also supports employment and families with the region. The breakdown of how a typical sales tax dollar generated from a point -of-sale business in Moorpark is shown below: $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 FY15/16 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 Estimated FY21/22 ProposedThousandsRecreation Revenue History AVRC Classes/Fees AVRC Camp Preschool AVRC Event 3rd of July Facility/Park Rental AAC Classes/Fees Honorable City Council 05/26/2021 Special Meeting Page 6 According to the Ventura County Economic Forecast of 2020, approximately 24,000 to 27,000 jobs could be lost in Ventura County during 2020, with heavy job losses in the first half of the year. Population in the County population declined in 2019 and was expected to decline again in 2020 and 2021. This is due largely in part to a lack of sustained housing production will which fall fell sharply in 2020 but is expected to rebound robustly in 2021. The Economic Forecast goes on further to note that home prices were not expected to change much during 2020 or 2021, which will place the County in a prolonged period of economic weakness. Poor housing affordability is driving jobs and individuals from the region, increasing net domestic outmigration and decreasing total economic activity1. While local economic indices mentioned in the Economic Forecast played out similarly (to some degree) across the region, contrary to early assumptions last spring, the decline of taxable sales - and by extension the 1% tax receipts - were not as severe for Moorpark despite the state and local restrictions placed on businesses. You may recall that on April 25, 2019, California passed Assembly Bill No. (AB) 147, which amended Revenue and Taxation Code section 6203 to require retailers located outside of California (remote sellers, including foreign sellers located outside of the United States) to register with the California Department of Tax and Fee Administration and collect California use tax if, during the preceding or current calendar year, the total combined sales of tangible personal property for delivery in California by the retailer and all persons related to the retailer exceed $500,000. The bill is applicable to all retailers, whether located inside or outside of California. 1 Ventura County Economic Forecast 2020 City/County General Fund (Bradley-Burns), … County Public Safety, 0.5% County Realignment, 1.5625% Countywide Transportation Fund, 0.25% State General Fund, 3.9375% SALES TAX BREAKDOWN Honorable City Council 05/26/2021 Special Meeting Page 7 Although AB 147 captured taxes not previously collected, COVID restrictions further boosted sales from remote sellers and marketplace facilitators such as Wayfair and others, partially mitigating declines in retail spending. Absent AB147, the City would have been more negatively impacted by economic pressures as the ongoing pandemic continued. Below is a graph of sales taxes collected over the past eight quarters in the City, which highlights the transition to online sales in a visual manner. Fortunately, Moorpark’s sales tax portfolio is not heavily reliant on sales taxes derived from single sources such as malls or auto centers. While these uses generate significant sales taxes for cities, revenue losses in these business lines can result in substantial impacts to local governments. As we navigated through various stages of opening and closing to combat the pandemic, we saw that malls were shuttered for many months and auto sales flattened after several quarters of continual growth. Steep losses in these categories would have had devasting effects on service provision in the City. Overall, the FY 2021/22 budget projects only slight increases in sales taxes from the prior budget cycle. This increase reflects the implementation of AB 147, which has thus far buoyed losses to the City resulting from online sales transactions. Additional volatile sources of income for the City include funding for programs and services offered by the City of Moorpark. As mentioned above, these revenues are typically predictable and based off a projected number of special events, sports league participants, rental revenues, citations, participants in City programs and more. With the shutdown of many services and residents sheltering in place, many City programs and services were cancelled last year. Many of the services mentioned generate revenues to $0 $1,000 $2,000 $3,000 $4,000 $5,000 FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 Estimated FY 21/22 ProposedThousandsSales Tax 10-Year Trend Received Expected Honorable City Council 05/26/2021 Special Meeting Page 8 offset expenses associated with providing the service. Through a series of cost cutting measures aimed at reducing expenses, the City was able to mitigate losses in revenues from programs and service in many cases. However, other services have fixed costs associated and many are already subsidized by the general fund which by virtue of eliminated programs, caused the City to make a high contribution from the gener al fund. Active Adult and many recreation services fall into this category. While staff hours were significantly reduced during the pandemic by freezing non-essential positions and providing no cost-of-living adjustments to employees, the lack of programming in these areas created a need for a larger general fund subsidy. An area which is showing signs of recovery are revenues captured for City programs and services. During the pandemic, the loss of this revenue increased the general fund subsidy needed to fund recreations services. The proposed FY 2021/22 budget restores revenues and services for recreational programming, which residents have prioritized as evidenced in the 2020 NCS. As noted in the survey, 88% of residents rate the overall quality of parks and recreation opportunities as “excellent” or “good”, which not only indicates how much these services are valued but provides confidence that program revenues are likely to rebound. In analyzing current enrollment figures, there is a strong likelihood that a rebound of recreation programs will occur. For example, winter 2021 enrollments in recreational programming are at their highest levels since 2008 and were higher than 17 out of 22 previous seasons. This comes even on the face of cancelling all indoor classes from mid- December 2020 through January 2021 due to the state -mandated regional stay-at-home order. Spring 2021 classes are also at an all-time high, with 800 enrollments to date. Digging into the numbers a bit we can see participation surging in a few areas: • Breakfast with Bunny had a total of 385 enrollments, which exceeded our all -time high enrollment for a similar event, and Breakfast with Santa had 311 enrollments. • The spring 2021 youth basketball leagues are filled to capacity and Preschool and Camp Moorpark enrollments have remained strong throughout the pandemic. The proposed FY 2021/22 budget takes these trends into account and signifies a strong recovery for recreational programming. We are projecting a modest recovery from these programs and services. Property taxes have traditionally been a more predictable source of revenue for the City. The City receives $0.09 cents of every dollar of assessed valuation for structures in the City. The chart below describes how property taxes are divided among various agencies. Honorable City Council 05/26/2021 Special Meeting Page 9 Despite last year being a difficult financial year for residents and businesses, property tax revenues were largely not affected by the pandemic. Ventura County does not partic ipate in a “teeter” plan, which is an optional alternative method for allocating delinquent property tax revenues. Under the teeter plan, the County would pay the City for all property taxes it was intended to collect, including any property taxes that are delinquent and have not been submitted by the December and April annual deadlines. In turn, the County would undertake the process of collecting the delinquent taxes and apply a late penalty, which would be retained by the County to cover their costs of administration of the teeter program. At the time of budget adoption, actual amounts of property taxes received in FY 2020/21 will be unknown, however the proposed FY 2021/22 budget assumes $5.2M in property taxes, which is a modest 2% increase over the prior year. The City also receives Vehicle License Fees (VLF) as a supplement to our property tax revenues. To understand this, we must look back to 1978 when Proposition 13 was passed by California voters. At that time, there were thirty-one (31) cities that did not levy PROPERTY TAX BREAKDOWN Honorable City Council 05/26/2021 Special Meeting Page 10 a property tax, relying instead on other revenues to fund city services. These were called “no-property-tax-cities.” There were also about sixty (60) other “low property tax” cities with very little property taxes levied at all. You may recall Proposition 13 effectively froze property taxes at their existing levels at that time. Looking slightly forward in 1987, the Legislature directed county auditors to provide a “Tax Equity Allocation” (TEA), designed to increase the property tax shares of “qualifying cities.” Moorpark was impacted by the TEA because it had incorporated in 1983 and at that time fit into the designation of a low property tax city. Following a precedent in previous legislation exclusively for the City of Yorba Linda, the Legislature directed counties to transfer tax revenues to the no/low cities from the county shares. “Qualifying cities” are those that incorporated prior to June 5, 1987 and received less than 7% of property tax revenues collected within their jurisdiction of which Moorpark did. The TEA property tax shift from counties to no/low cities did not take into consideration the differing types and levels of services that cities delivered to their residents. In most no/low cities, some core municipal services (fire protection, libraries, parks) are provided by special districts that - as a result - receive property tax revenues that would otherwise go to the city2. VLF revenues are anticipated to be a viable source of revenue in the proposed FY 2021/22 budget. Staff is projecting a modest increase of 3% and anticipates receiving approximately $4.2M in revenues to support city services. Locally, the Moorpark economy is showing signs of recovery, however we continue to struggle to keep pace with expenses. While sales taxes may have fallen behind, uncontrollable costs such as PERS, health care, fuel and contractual services continue to rise. Many of our general fund revenues struggle with keeping pace with these expenses and the economic shutdown which began in 2020 and lingered into 2021 further exacerbated this dynamic. Put another way, even though we are showing signs of recovery, we fell further behind. Although we are not dependent on large industry sectors which will take longer to recover, local residents and businesses were hit hard during the pandemic. The budget assumes very minimal growth assumptions, with revenues from property taxes and City programs and services returning to pre-COVID levels. Proposed Service Augmentations As you know, the City of Moorpark enjoys the lowest crime rate in the County and was again ranked among safest cities in the state. Our Police Department has been able to provide excellent service that has contributed to these statistics while having among the fewest officers per capita and being the least expensive police force per capita in the 2 CaliforniaCityFinance.com: Rethinking the Property Tax, May 2015 Honorable City Council 05/26/2021 Special Meeting Page 11 County. It is important to note that crimes are becoming more complex and response times to priority calls are increasing, traffic on Los Angeles Avenue is worsening, investigations are becoming more intricate and are taking longer to complete, and the Department is contending with decriminalization and legalization of many offenses, which changes how they address and respond to offenders. The addition of a traffic officer and reclassification of a position to a supervisor will aid greatly in continuing to deliver efficient and professional service to the residents, business owners, and visitors to the City of Moorpark. It will increase officer safety, provide for more accountability and better balance their ability to be responsive to those they serve. The addition and reorganization of the department is an important first step in giving the City capacity to continue to adequately address quality of life issues in our city. As previously noted, residents also strongly value safety in the community. Maintaining public safety levels in anticipation of construction commencing on several projects requires thoughtful planning and careful execution. To better position the department to maintain existing levels of service and great span of control, the proposed FY 2021/22 budget includes upgrading the Traffic Sr. Senior Deputy to a Sergeant position and adding a 40-hour Traffic Deputy. The change would give the Traffic Unit coverage 7 -days per week, which includes commercial truck and DUI enforcement and cost approximately $44,075 in FY 2021/22 and $285,000 in subsequent years due to the timing of how the positions will be added . Vehicular and truck traffic remain among the chief concern among residents who traverse city streets and Los Angeles Avenu e (State Route 118). The City partners with the California Highway Patrol on truck enforcement and allocates money each year toward traffic enforcement. Continued investments in this area will ensure the long -term focus on traffic needs is not impacted as anticipated growth in both residential and commercial places come online. These positions being proposed by the Police Department follow thoughtful consideration of the City’s needs today, and are merely an augmentation of existing Police services, which cost approximately $8.1M in FY 2021/22. To help offset costs of adding the position, the Moorpark Police Department is proposing reductions in other parts of their budget by cutting overtime, delaying the purchasing of vehicles, and making across -the- board reductions to partially offset the costs of these positions. These cost-saving measures will offset the additional $333,172 to the proposed budget for the reclassification of a Traffic Senior Deputy to a Sergeant and addition of a Traffic Deputy. This ensures Mmore focus and attention is given to public safety will need to occur in future years as ground breaks on the aforementioned residential projects to ensure Moorpark remains among the safest cities in California. To help offset costs of adding the position, the Moorpark Police Department is proposing reductions in other parts of their budget by cutting overtime, delaying the purchasing of Honorable City Council 05/26/2021 Special Meeting Page 12 vehicles, and making across-the-board reductions to partially offset the costs of these positions. Staff is also proposing the addition of an Economic Development Manager in the City Manager’s Office. This position will place an emphasis on the City’s economic development efforts and represents the City’s commitment to economic d evelopment and long-term economic sustainability. While the City has always had a focus on economic development, we lost our economic development positions during the last recession caused by the housing crisis of 2009. While each of us in the organization place an emphasis on economic development, we are lacking a focused strategy on business retention and attraction, job creation and placing emphasis on areas of economic development residents have expressed their desire for the City to see. The position is proposed to be funded and at step 71 for six - months in FY 2021/22 at a cost of $88,200. Through the work of the successful candidate, our plan is the position will generate additional revenue sources for the City in the form of sales and property taxes generated from new businesses, which the qualified person will certainly attract. In addition to their business attraction efforts, the Economic Development Manager will play a significant role in being a liaison with residential, commercial, and industrial customers of the City in assisting with the entitlement process. Investment in this area will reap rewards for the City and affirm our ongoing commitment to economic development. Long-Term Outlook Even with the proposed budget augmentations and economic recovery, the City’s long- term outlook remains tenuous. The reduction in the general fund transfer to fund parks maintenance proposes to continue until full economic recovery occurs. Residents have come to enjoy the lush, green, and clean appearance of the parks, this is an amenity they have come to greatly value. The following table below shows transfers made from the general fund to parks maintenance over the past five years. Honorable City Council 05/26/2021 Special Meeting Page 13 We still have a need to develop long-term solutions to this long-standing issue within the community, which may involve many phases. For the time being, although we have contained costs in this area, the price we will all pay for this reduced maintenance of local parks will likely outweigh our costs savings as aesthetics will greatly suffer as our parks and medians will show signs of distress. The City will also be a recipient of the American Rescue Plan Act (“ARPA”) funding from the Federal Government. We anticipate receiving approximately $6.8M (subject to change) in stimulus funding which should not be relied on to meet the City’s ongoing operational needs due to the one-time nature of the funds. As of the time of this writing, guidelines are still being discussed on allowable uses, distribution timing and report ing requirements of these funds, but it is likely that some portion of the funds will be allowed to supplant lost revenues incurred because of the pandemic, and a significant amount will be eligible to be used on capital improvements projects, broadband in frastructure and other job-creating and recovery efforts in the community. No funding has been budgeted on the assumption of ARPA funding in the proposed FY 2021/22 budget since we have yet to receive any dollars. Upon receipt of those funds, we will return and amend the budget as appropriate. There is quite a bit of work that goes into development of the budget each year. I would like to thank the staff and Department Heads for their hard work over the past months in developing a sustainable budget. I would like to thank Hiromi Dever, Daisy Amezcua, and Kambiz Borhani, Director of Finance, for their dedication and hard work. This is a process that begins in December of each year and culminates in June of the following 1,336 1,686 1,496 1,546 1,487 1,466 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 Estimated FY 21/22 ProposedThousandsGeneral Fund Transfer to Park Maintenance Honorable City Council 05/26/2021 Special Meeting Page 14 year. It would not have been possible without the work of our dedicated finance staff who commit their time and assistance to all of us in the organization during the budget process. Refer to City Manager’s Draft Recommended Budget binder previously distributed to the City Council on May 19, 2021. The budget is posted to the city’s website at: www.moorparkca.gov/DocumentCenter/View/11672/FY-202122-Budget---City- Managers-Proposal?bidId= STAFF RECOMMENDATION Discuss proposed budget for Fiscal Year 2021/2022.