HomeMy WebLinkAboutAGENDA REPORT 2022 0525 CCSA SPC ITEM 05ACITY OF MOORPARK, CALIFORNIA
City Council Meeting
of May 25, 2022
ACTION APPROVED STAFF
RECOMMENDATION.
BY A. Hurtado.
A. Receive and Discuss City Manager’s Proposed Operating and Capital
Improvements Budget for Fiscal Year 2022/2023. Staff Recommendation: Discuss
proposed budget for Fiscal Year 2022/2023. (Staff: Troy Brown)
Item: 5.A.
Item: 5.A.
MOORPARK CITY COUNCIL
AGENDA REPORT
TO: Honorable City Council
FROM: Troy Brown, City Manager
DATE: 05/25/2022 Special Meeting
SUBJECT: Receive and Discuss City Manager’s Proposed Operating and Capital
Improvements Budget for Fiscal Year 2022/23
SUMMARY
CITY MANAGER BUDGET MESSAGE
I am pleased to present for your consideration the Fiscal Year (FY) 2022/23 Operating
and Capital Improvement Projects Budget. The Operating Budget is balanced as
presented and represents in a word, restoration.
The City of Moorpark, like most municipalities, businesses and non-profits worldwide, is
in the midst of an economic recovery following the tremendous disruption caused by the
COVID-19 pandemic. With the factors that lead up to the economic downturn now behind
us, the proposed FY 2022/23 Operating Budget seeks to restore many of the services
cut or significantly reduced by the City over the past two years.
The City implemented a number of cost-saving measures to reduce expenses during the
economic downturn. These included: holding vacant positions open (including public
safety), eliminating non-essential travel and training for employees, limiting the use of
general fund monies for capital improvement projects, decreasing landscaping services
in parks and medians, and reducing departmental operational budgets citywide.
While the proposed budget seeks to restore many of those services, it is prudent to
recognize that Ventura County as a region is still reeling in continuous economic
stagnation. In addition to the projected slower than average growth in the Southern
California Association of Governments (SCAG) region comprised of Los Angeles,
Riverside, San Bernardino, Ventura, Orange, Imperial and San Diego Counties, Ventura
County remains stymied by the lack of housing production needed to attract and retain
the labor force and business sectors which make up the heart of the region’s economic
engine.
1
Honorable City Council
05/25/2022 Special Meeting
Page 2
ECONOMIC OVERVIEW
Even before the pandemic, there was a shrinking labor force, negative net migration on
a quarterly basis (the number of people moving to the County compared to the number
of people leaving the county) and an overall declining population contributed to stag nating
real Gross Domestic Product (GDP). According to the 2022 Ventura County Economic
Forecast, “Whereas previous estimates indicated that the County’s economy grew by
$2.1 billion from 2007 to 2018, the revised estimates indicate that the County’s economy
shrank by $8.8 billion during that time. This is a 16 percent decline in total economic
activity. The drop represents an astonishing $26,600 per worker or $10,500 per person.”
Nearly every major business sector shrank in Ventura County. Agricultura l & Resource
Extraction, Construction & Manufacturing, Retail, Leisure & Personal Services,
Education & Health Services and Government all experienced employee losses in the
labor force. These losses represent a contraction of overall household income , which in
turn impacts local economies.
On another spectrum of our regional economic vitality prism is housing. Since emerging
from the housing crisis of 2008 caused by the subprime lending market, housing values
and associated housing costs have risen steadily. Appreciation of home values is a
normal occurrence and is a sign of a heathy economy. While there is no true, universal
“normal” rate of appreciation for the housing market, when comparing home values to
historical rates of home price appreciation we can see differences in the home value
appreciation over time. Home prices have appreciated nationally at an average annual
rate between three and five percent, depending on the index used for the calculation, and
home value appreciation in different metropolitan areas can appreciate at markedly
different rates than the national average.
Between the period of 2012 to 2022 Moorpark home values have incre ased at an average
rate of 5.6% per year. The largest increase in values occurred in the year 2013 (14.64%)
as the subprime mortgage crises ended. The largest decrease within this same period
occurred in 2019 (-3.17%).
Since 2020, residential home values have markedly increased averaging 10% per year.
The highest increase occurred in 2021 when home values increased by 11.69%
2
Honorable City Council
05/25/2022 Special Meeting
Page 3
While home prices are steadily increasing, the number of housing units being constructed
in the City has decreased. Changes in lending law created a barrier to housing for some
(perhaps rightfully so in certain cases to prevent another subprime meltdown), along with
wages not keeping pace with
residential values certainly
impact the Moorpark
economy; more on that to
follow. One of the starkest
housing impacts for Moorpark
is the number of residential
units being constructed. Since
2014, the number of new
building permits issued for
residential units has waned.
Outside of the economic
factors plaguing pathways to
homeownership, Moorpark’s
economic vitality has been kept at bay due to the limited number of new housing starts.
Economically between the period of 2014 – since fully emerging from the Great
Recession – to today, we have navigated through a period of unprecedented, sustained
growth. The U.S. economy was growing for the entirety of the 2010s, marking the longest
economic expansion in American history. As previously mentioned, Ventura County as
a region did not mirror the level of economic expansion compared to other regions within
SCAG; however economic expansion did exist. Following the exit from the Great
Recession in 2014, the national economy continued to experience period over period
growth, with that streak only ending when the pandemic hit in 2019.
176 174
57 51
22
0 0 0 00
50
100
150
200
2014 2015 2016 2017 2018 2019 2020 2021 2022
(YTD)
Residential Building Permits Issued
Number of Residential Building Permits Issued
3
Honorable City Council
05/25/2022 Special Meeting
Page 4
This information should frame some of the analysis and rationale behind development of
the City’s budget. The City of Moorpark’s major revenue sources are derived from sales
and property taxes. The total budget is comprised of 80 funds to provide a wide array of
municipal services. The vast majority of the City’s funds are restricted and provide
maintenance, debt services, transportation uses and more. When assessing the overall
financial health of the City, special focus should be on the General Fund which is used to
support administration, code enforcement, public safety, Parks, Recreation & Community
Services and advanced planning activities in the Community Development Department.
MAJOR REVENUE SOURCES
The General Fund is supported in large part by revenues derived from sales taxes and
property taxes. Property taxes received by the General Fund are projected at $5,248,473,
which does not include property tax revenue allocated to the City Library or additional
property taxes received as VLF backfill. This figure represents an increase of
approximately 5% over the FY 2021/22 Budget. These revenues make up approximately
24% of General Fund revenue. Sales taxes are projected at $5,028,000, which represents
a 16% increase from the FY 2021/22 Budget and make up 23% of General Fund revenue.
The significant increase from the prior year Budget is based upon robust sales tax receipts
thus far in FY2021/22 and current trends and analysis provided by the City’s sales tax
consultant.
It is important to note that Moorpark is a low property tax city. In 1981, with the state
budget heading into deficit, the Legislature enacted a number of changes to local
government revenues, while avoiding reducing the SB154/AB8 bailout of local
governments impacted by Proposition 13. The state reduced or eliminated various local
government revenue allocations including three subventions the state had been providing
to cities and counties.
The thirty-one no-property-tax-cities which existed in 1978 argued that since they did not
receive any assistance from the SB154/AB8 bailout (due to the fact they experienced no
loss from Proposition 13), they should not be included in reductions in local government
assistance which resulted from the state’s inability to continue to finance the bailout.
Beginning in 1981, the Legislature appropriated $2.2 M to offset losses to these cities from
the elimination of the three subventions. Beginning in 1984-85, this special allocation
was provided by the state from Vehicle License Fee (VLF) revenue. These cities received
a supplemental VLF amount equal to the amounts they would have received from the
Highway Carriers Uniform Business License Tax, Liquor License Fees and Financial Aid
to Local Agencies had these subventions not been abolished. Seventy-seven “low and
no” property tax cities qualified for payments under these provisions1, Moorpark is among
seventy-seven (77) cities that qualify for a VLF backfill.
1 Source: CaliforniaCityFinance.com – Why Do Property Tax Shares Among Cities Vary? How Can We Improve?
Rethinking the Property Tax – May 15, 2015
4
Honorable City Council
05/25/2022 Special Meeting
Page 5
The proposed FY 2022/23 Budget projects $4,341,695 (20%) in VLF backfill. Together,
with sales taxes, property taxes and the VLF backfill, these revenues account for
approximately 67% of the City’s total general fund budget. While property taxes and the
VLF backfill are traditionally relatively stable with little projected fluctuations from one year
to the next, sales taxes are volatile and subject to economic conditions.
As previously mentioned, Ventura County is still reeling from little growth compared to
national average and growth amounts in surrounding regions. Additionally, home
prices/values have steadily been rising. On the consumer/resident side, this results in
less disposable income being available for activities that are sales tax generating for the
City. Households are forced to spend more money to sustain their housing needs, and
younger families and individuals are forced to find lower cost housing outside of
Moorpark.
The shift to online sales also impacts sales tax revenues received by the City. The
structure of the current revenue and tax code for the State of California assigns sales
taxes to the jurisdiction where the point of sale occurs. As the shift from brick-and-mortar
retailers continues – and was accelerated as businesses retooled themselves during the
pandemic – and online sales proliferate, revenues from many of these transactions are
allocated to county pools. Moorpark receives a share of revenues generated in the pool
commensurate with a percentage of total sales, in many cases resulting in less revenue
than those with point-of-sale locations (brick-and-mortar stores) in the City. This is
broadly known in the local government industry as the “Amazon Effect”. Notably, the
Wayfair decision of 2018 helps in some small way.
The Wayfair decision occurred on June 21, 2018, when the U.S. Supreme Court ruled on
a case generated out of South Dakota (South Dakota v. Wayfair, Inc.) that states can
generally require an out-of-state seller to collect and remit sales taxes on sales to in-state
consumers even if the seller has no physical presence in the consumer state.
The shift to online sales is one of great relevance for the City. While convenient for
consumers, this has a profound impact on an important revenue source for the City. As
noted below, the shift to online sales has been a growing trend for years and was
accelerated during the pandemic.
5
Honorable City Council
05/25/2022 Special Meeting
Page 6
GENERAL FUND OVERVIEW
The proposed General Fund budget for FY 2022/23 totals $21,650,060 in revenues and
$21,528,392 in expenses (including transfers out) resulting in an expected general fund
surplus of $121,668. The proposed budget restores many key municipal activities that
were reduced or eliminated during the pandemic. Travel and training for employees has
been funded to provide resources for staff to receive appropriate training to hone their
skills in their respective fields. This also includes funding to provide attendance at the
Cal Cities annual Conference for elected officials and staff, as well as funding for Planning
Commissioners to attend training through either the American Planning Association or
League of Cal Cities.
Additional restorations include funding at appropriate levels to continue with activities
traditionally provided by the City. Landscaping services will be restored to the level
previously provided prior to the pandemic. Specifically, mowing at passive parks wi ll
resume weekly mowing; edging in the parks are proposed to increase to weekly from
every other week, shrub pruning will occur weekly rather than “as necessary”; and
weeding will occur weekly, rather than monthly. It is important to note that the City
currently anticipates transferring approximately $1.5M from the General Fund to the
underfunded Parks Maintenance and Landscape Maintenance Districts (LMD) funds to
cover the cost of these services. The full cost of restoration of the aforementioned
services is above and beyond what is outlined above, and the costs of those restorations
will be presented in June 2022 after the bid process has been completed.
6
Honorable City Council
05/25/2022 Special Meeting
Page 7
General Fund revenues total $21,650,060 and are comprised of many sources, however
sales and property taxes represent the largest proportion of General Fund revenue .
The City receives only a small portion of every property tax dollar as previously described,
with the Moorpark Unified School District receiving the largest percentage of every dollar.
The chart below depicts the distribution of property taxes in the City of Moorpark.
On the expense side, the proposed General Fund budget supports all municipal services.
Total expenses for the General Fund are proposed at $21,528,392 and are allocated
across departments as shown by the chart on the following page.
7
Honorable City Council
05/25/2022 Special Meeting
Page 8
The City obtains Police Services through a contract with the Ventura County Sheriff ’s
Department. The full range of police services are provided making up 38% of the overall
proposed expenses. The Parks, Recreation & Community Services Department makes
up the next largest percentage with nearly 30% (or $5.9M) being allocated for important
quality of life services across the City.
In addition to the services listed above, staff is proposing new initiatives to support the
community. A sampling of some of these activities include:
Activity/Program Proposed
Amount
City Mobile Application $25,000
Participation in National Community Survey (2nd time every two
years)
$21,000
Performance Evaluation Software $6,000
Professional Grant Writing Services $75,000
Network Infrastructure Hardware Refresh $109,950(non-
GF)
Server and Storage Infrastructure Hardware Refresh $60,957 (non-
GF)
SEMS/NIMS Emergency Management System Training for EOC
Staff
$18,000
First Time Home Buyer Consultant $25,000
Business Enhancement Program $6,000
COSTAR Commercial Real Estate Data Subscription $15,360
Restore Full Funding of Special Events:
Moorpark Country Days
Haunted High Street
Holiday on High Street
3rd of July Fireworks & Extravaganza Event
$10,000
$3,000
$6,000
$15,000
Cornhole & Pickleball Tournaments $7,200
Full Funding of Fireworks for 3rd of July $30,000
8
Honorable City Council
05/25/2022 Special Meeting
Page 9
GENERAL FUND TRANSFERS OUT
The projected transfer out of $2,888,894 represents activities the City is supporting which
do not have sufficient revenue sources to cover, and cost allocations to pay for services
otherwise subsidized by the City. The largest portion of the General Fund Transfers Out
pay for under-funded Parks Maintenance activities ($1,491,143). The second largest
transfer goes towards supporting Community Development services. The proposed
FY 2022/23 budget provides approximately $1.12M in general fund support for Community
Development. An overall decrease from FY 2020/21, yet consistent with the amount of funding
provided in FY 2019/20. It is important to consistently monitor the transfers out of the General
Fund to support community and City Council values that are not supported by revenues.
Keeping General Fund subsidies “at bay” will provide the City opportunities to augment
services in other areas, while having users of City services or residents pay the full cost
of these services. Unfortunately, the pathway toward full cost recovery puts difficult
options in front of the City to either raise user fees for Community Development services
and/or propose parcel tax increases to increase the annual levy for Park Maintenance
activities. The proposed assessment rate and levy for FY 2022/23 is $68.69, an increase
of $2.00 over FY 2021/22.
The proposed assessment is estimated to generate approximately $937,125 in revenue,
an increase of $27,609 over the amount generated in FY 2021/22. At the proposed rate,
assessment revenue will cover approximately 16% of the total budget for operations and
improvements or only 20% of the 75% cap for the “special” benefit the City is eligible to
assess. This will cause the General Fund to subsidize at least $1,419,321.
9
Honorable City Council
05/25/2022 Special Meeting
Page 10
OVERALL FUND BALANCE/RESERVES
In looking at all funds in the City, we have enjoyed a strong overall fund balance for years.
On July 1, 2021, the City has a net fund balance (including special revenue and capital
improvement funds) of $112,418,783. The proposed FY 2022/23 budget estimates an
ending net fund balance of $89,264,189. This will be discussed briefly, but before delving
into overall fund balance a brief overview of the General Fund and other discretionary
reserve is prudent.
The City has a limited number of discretionary sources of funds to meet its long-term
goals. Discretionary sources of funds are used to fund a variety of needs. Unallocated
fund balance is the amount of undesignated General Fund dollars available to the City
Council for special projects or other initiatives it may want to undertake in an y given year.
Per City Council policy, $1,000,000 is available at the beginning of each year. If this
amount is depleted, it will be restored at the beginning of the following fiscal year.
Replenishment occurs either from remaining funds from the prior fiscal year, or from
General Fund reserves if no remaining funds are available.
The City also has an Emergency reserve of 20% of the General Fund’s prospective
operating budget, as well as an additional Contingency of $.5 million. These funds serve
as a “life raft” and provide for approximately three months of operations to address cash
flow needs in the event of emergencies.
The Endowment is a discretionary amount of money designated to fund special projects
and certain capital improvements in the City. This is developer funded, with
replenishment occurring on a per-unit basis based on pre-negotiated agreements with
developers.
Finally, the Special Projects fund is intended to provide City contributions to major capital
projects. Some of these projects include: the new library building, city hall building, trails,
open space and the like. Replenishment of this fund is partially from developers and
partially from any remaining General Fund dollars from the preceding year. With
residential development languishing and the cost associated with major capital
improvement projects, these funds are expended much faster than they are replenished.
Over the past three years, the City has fared well with its discretionary sources of funds.
The City Council’s prudent decision to use the approximate $8.7 million in American
Rescue Plan Act (ARPA) funds allocated from the federal government as revenue loss
provided a means to partially fund a number of capital improvement projects that would
have otherwise resulted in the deferment of other capital improvement projects.
10
Honorable City Council
05/25/2022 Special Meeting
Page 11
Although these amounts may appear to be strong, the City has already identified
numerous capital improvement projects that total approximately $97,000,000, many of
which have no dedicated funding source. This underscores the need for the City to
allocate its limited resources prudently, ensuring that vital infrastructure and services are
funded at a level to continue to meet the needs of residents.
Overall fund balance for the City is anticipated to decrease in coming years due largely
in part to a number of long-awaited, large-scale projects taking place. The Princeton
Avenue Improvement project was bid and is under construction. This project is estimated
to cost approximately $19M and funding has been allocated from a variety of sources
including: Los Angeles Area of Contribution (LA AOC), City -Wide Traffic Mitigation,
Proposition 1B, Gas tax and more. This single project represents the largest cause of the
decrease in fund balance.
FIVE-YEAR CAPITAL IMPROVEMENT PLAN
The City of Moorpark’s Five-Year Capital Improvement Plan (CIP) serves as a framework
for the Moorpark City Council to identify, plan, and prioritize needed municipal capital
improvements. Many CIPs are multi-year projects that incorporate various stages of
development; from conceptual design, right-of-way acquisition, final design, and
construction. Individual CIPs can involve multiple City staff and consume a large amount
of staff time at various time periods throughout the year. Additionally, many CIPs are
reliant upon grant funding or from funds that are specifically allocated for a project
improvement type (for example, street and road funding). Consequently, the City’s CIP
11
Honorable City Council
05/25/2022 Special Meeting
Page 12
identifies the priorities for City staff as they work on both CIPs as well as the day-to-day
tasks and programs that are operated on in an ongoing basis. Primarily, two departments
are responsible for the City’s CIPs; Parks, Recreation and Community Services
Department (PR&CS), and the Public Works Department (PW). PW projects primarily
focus on improvements such as streets, storm drains, traffic signals, and construction
within the public right-of-way, while the PR&CS projects focus on improvements to City-
owned facilities, Landscape Maintenance Districts (LMDs), open space, and parks.
The presented CIP covers FY 2022/23 through FY 2026/27. In addition to descriptions
and budgets for planned projects, the CIP includes three appendixes (Congestion
Management Program; Potential Projects; and Completed Projects). Of the 50 identified
CIP sheets with identified project numbers, 11 are connected to one of the City Council’s
Strategic Priorities for the current two-year cycle of FY 2021/22 and FY 2022/23. That’s
not to say that the other CIPs are not “priorities” of the City Council. For example, Project
No. C0020 (Princeton Avenue Improvement) was included in the City Council’s prior
Strategic Priorities and remains one of the highest priorities of the City to accomplish.
The FY 2022/23 Recommended Budget includes $34,410,356 in requested expenditures
from 25 different funding sources. The General Fund (1000) provides $1,085,229 (or
3.15%) of the overall CIP Budget. It should be noted that $450,000 (or 41%) of the
$1,085,229 will be reimbursed by Ventura County Waterworks District No. 1 as part of the
Princeton Avenue Improvement project. The largest funding source for the FY 2022/23
Proposed Budget is Los Angeles AOC Fund (2014), with $10,372,192 budgeted; followed
by the American Rescue Plan Act (ARPA) Fund (2800) providing $5,438,798. Most of
ARPA funding will be used for the Princeton Avenue Improvement project as well as
approximately $7,284,993 of the Los Angeles AOC.
As previously mentioned, the PR&CS and PW Departments are responsible for CIP
projects. For PR&CS, three projects that will be particularly focused on in FY 2022/23
are the New Moorpark City Library (C0056); Inclusive Playground at Tierra Rejada Park
(C0063); and City Hall at 323 Science Drive (C0070). Priority projects for PW will be
Princeton Avenue Improvement (C0020), Los Angeles Avenue Widening – Spring Road
to Moorpark Avenue (C0021); completion of the Metrolink North Parking Lot Expansion
(C0032); and the combination of Arroyo Drive Overlay (C0035) and Arroyo Drive
Bike/Pedestrian Project (C0037).
CONCLUSION
It is my pleasure to present the Proposed FY 2022/23 Operating and Capital Improvement
Porjects Budget to the City Council. Building on the fiscal policies and approach toward
financial management, the proposed budget is fiscally conservative, yet appropriately
restores critical services the community hold in high regard. The proposed budget also
continues advancement of the City Council goals, keeping in mind the City’s Mission of:
Striving to Preserve and Improve the Quality of Life in Moorpark. The proposed budget
allocates resources across the agency to continue to provide the highest level of services
12
Honorable City Council
05/25/2022 Special Meeting
Page 13
possible for residents and does so in a responsible manner to strengthen the overall fiscal
health of the City.
The budget was developed during a period of major transition in the Finance Department.
During the budget process, the City filled a number of key positions in the department
including a City Treasurer/Finance Director, Accountant II, Senior Accounting
Technician II, and two Accounting Technician II’s. Filling these positions while
simultaneously administering the budget process is a challenge. The team collaborated
with others as needed and quickly got up to speed to ensure timely development and
delivery of a balanced budget.
I would like to extend a personal thank you to PJ Gagajena, Daisy Amezcua, Teresa Ruiz,
Igor Leontiy, Brian Chong and former employee Hiromi Dever for their hard work in
development of the budget, and Vivien Avella and Charan Bhamber for pushing this
across the finish line!
Refer to City Manager’s Draft Recommended Budget binder previously distributed to the
City Council on May 20, 2022.
The proposed budget is posted to the City’s website at:
www.moorparkca.gov/RecommendedBudget22-23
STAFF RECOMMENDATION
Discuss proposed budget for Fiscal Year 2022/23.
13