Loading...
HomeMy WebLinkAboutAGENDA REPORT 2025 0808 CC SPC ITEM 05ACITY OF MOORPARK, CALIFORNIA City Council Meeting of August 8, 2025 ACTION CONSENSUS OF THE COUNCIL TO DIRECT TO STAFF TO MOVE FORWARD WITH PURSUING INCREASES TO THE PARKS MAINTENANCE ASSESSMENT LEVY; FURTHER EXPLORE ENHANCED INFRASTRUCTURE FINANCING DISTRICT FORMATION AND RETURN TO THE COUNCIL WITH FURTHER ANALYSIS; AND RECONSIDER A SALES TAX MEASURE AND TRANSIENT OCCUPANCY TAX (TOT) IN TWO YEARS. BY A. Hurtado. A. Receive Presentation on City General Fund Structure and Review of Long-Term Financial Plan; and Consider Possible Revenue Enhancement and Financing Options. Staff Recommendation: Direct staff to consider various revenue enhancement and financing options. (Staff: Hiromi Dever, Finance Director) Item: 5.A. Item: 5.A. MOORPARK CITY COUNCIL AGENDA REPORT TO: Honorable City Council FROM: Hiromi Dever, Finance Director DATE: 08/08/2025 Special Meeting SUBJECT: Receive Presentation on City General Fund Structure and Review of Long-Term Financial Plan; and Consider Possible Revenue Enhancement and Financing Options BACKGROUND The 10-Year Long-Term Financial Plan (LTFP) was first introduced in May 2024 and subsequently updated during the Budget Study Session on May 28, 2025. The updated LTFP projected that the City’s General Fund will face a structural deficit beginning in Fiscal Year (FY) 2029/30. Key assumptions used in the forecast below include annual increases of 2% in Property Tax and Sales Tax; 3% in Franchise Fees; 4% in Transient Occupancy Tax; 3.48% in Salary and Benefits; and 2.5% in Maintenance and other Operation costs. 1 Honorable City Council 08/08/2025 Special Meeting Page 2 To avoid the projected structural deficit, the City will require additional long-term General Fund (GF) revenue to address the following needs: • Rising Public Safety costs that consistently outpace the Consumer Price Index (CPI) and the growth in GF revenues. • Ongoing investment to sustain the City’s Pavement Management Plan. • A decline in interest earnings as reserves are drawn down to support major capital improvement projects. • Increased GF subsidies for Assessment District operations and Park Maintenance Fund. • Continued subsidies for the Community Development Fund and the Engineering Fund, which are not fully self-supporting. Financial Structure The City receives funding from various sources including taxes, fees, grants, investments use of property, franchise fees, and other revenues. Some of these resources are restricted for specific purposes, while others are available for general use. To manage and track these funds appropriately, the City uses a fund accounting system which organizes money into separate funds based on legal or policy restrictions. The City’s financial structure consists of three main fund categories: General Fund, Special Revenue Funds, and Capital Projects Funds. General Fund: The GF accounts for unrestricted revenues that support a range of services. Unrestricted revenues include property tax, sales tax, Transient Occupancy Tax (TOT), Franchise Fees, Property Tax in Lieu of Vehicle License Fees (VLF), User and Regulatory Fees, Investment Earnings, Fines, Forfeitures and Penalties, and miscellaneous revenues such as contributions. Special Revenue Funds: The revenue sources for Special Funds include Assessment Levy, Development Impact Fees, Specific Type of User and Regulatory Fees, Subventions, and Grants. These revenue sources are restricted to specific purposes such as Road Maintenance, Transit Program, Assessment Districts, Solid Waste, and Park Maintenance. Capital Projects Funds: The Capital Projects Funds account for revenues set aside for major capital improvement projects. Primary funding sources include Development Impact Fees and General Fund surplus money. The City has a long- standing practice of reserving funds to support future capital improvement needs. Revenue Sources Property Tax: Property tax is imposed on real property (land and permanently attached buildings) and some tangible personal property. In 1978, Proposition 13 capped basic property tax rate at 1% of assessed value , which is based on the purchase price adjusted by up to 2% annually. 2 Honorable City Council 08/08/2025 Special Meeting Page 3 Based on Ventura County Tax increment tables, the City’s General Fund receives approximately $0.09077 per dollar of property tax. Property Tax Dollar Breakdown 2024/25 Annual Tax Increment Tables Unified School General Moorpark $0.3350 County General Fund $0.1707 Fire Protection District $0.1639 ERAF 93-94 Shift $0.0884 Moorpark General Fund $0.0837 Ventura Community College General $0.0581 Educational Revenue Argmentation Fund (ERAF)$0.0430 Co Supt of Schools $0.0257 Moorpark Vector Control $0.0071 Others $0.0245 Total $1.0000 This allocation includes library and approximately 22% is transferred to the Library Fund to support library operations. Property Tax in Lieu of Vehicle License Fee (VLF): Prior to 2004, cities and counties received a portion of the State-imposed Vehicle License Fee on the ownership of a registered vehicle. The rate was 2%, in which 0.65% was paid by vehicle owners and 1.35% was backfilled by the State General Fund. Following a reduction in VLF rates, cities were compensated with an equivalent increase in property tax, known as the Property Tax in Lieu of VLF. This amount grows annually with changes in the gross assessed value of taxable property in the jurisdiction. The City receives the first half of VLF in January and the other half in May. Sales and Use Tax: The sales tax is collected by the California Department of Tax and Fee Administration and includes the state sales tax, the local Bradley-Burns sales tax, and other voter approved taxes. The sales tax is imposed on the total retail price of any tangible personal property. Sales taxes are distributed monthly. Transient Occupancy Tax (TOT): Many cities in California impose TOT on guests staying for 30 days or less in a hotel and other lodging facilit ies. The City currently imposes a 10% tax and quarterly reporting is required. Franchise Fee: Franchise fees are paid by utility companies, cable television, and refuse companies for the right to operate in the public right-of-way. Payments are made quarterly or annually, depending on the agreement. User and Regulatory Fee: These fees are imposed for services and use of facilities, such as recreation classes and facility rentals. Regulatory fees are applied for 3 Honorable City Council 08/08/2025 Special Meeting Page 4 building permits and inspections and other services. Fees are reviewed annually to ensure cost recovery and that compliances are met. Investment Earnings: Interest revenue earned from investing surplus money in treasury in accordance with the City’s Investment Policy. Fines, forfeitures, and penalties: These are payments collected as a result of violations, such as parking bail/fines, and code enforcement restitutions. May be used for any legal municipal services subject to limitations per vehicle code violations. Contributions: Includes gifts and donations made to or for the City. Use of revenue may depend on nature and stipulation of gifts. Expenditures The governing body holds the power of appropriation, authorizing spending through the annual budget process or specific budget amendments. Appropriations may apply to a single fiscal year or multiple years for Capital Improvement Projects. Total appropriation must comply with 1979 Proposition 4, Gann Initiative, to make sure government spending does not grow faster than inflation and population. Fiscal Year 2025/26 adopted budget includes the following expenditures: Salary and Benefits: Salary and Benefits covers 78.5 full time equivalents. The City’s General Fund supports approximately 60% of the overall salary and benefit for the City. Benefits include health insurance and retirement program contributions. Contractual Services: As a contract city, Moorpark outsources many services to other agencies or private companies to deliver certain public services, such as Police Services. This results in a higher share of spending in this category. Intergovernmental: The General Fund may subsidize other funds that do not generate sufficient revenue to fully cover the costs. These transfers help support essential services such as park maintenance . These practices will ensure the continuation of important services that benefit the community. Others: Other expenditures include Maintenance, Supplies, and Utilities. General Fund can also be used for Capital Projects. Cost Saving Measures Cities often look to cost-saving measures first during a budget deficit because they provide immediate, controllable solutions without placing additional financial burdens on residents or businesses. By reducing expenses, improving efficiencies, and prioritizing essential services, the City can stabilize its budget while maintaining public trust and demonstrating fiscal responsibility. Only after exhausting reasonable cost-saving options 4 Honorable City Council 08/08/2025 Special Meeting Page 5 would the City typically consider revenue enhancements or financing tools, which often require voter approval or create long-term financial obligations. Below are cost-saving measures the City may consider implementing: • Hiring freezes • Overtime reduction • Temporary furloughs • Program and service level reductions • Staff travel and training reductions • Maintenance and capital reductions or deferments • Regional partnerships • Outsourcing non-core services • Technology improvements • Energy and utility efficiency Revenue Enhancement Options The City has several options to enhance its revenues. The most common methods include increasing taxes and special assessments. Under the California law, specific procedural and voter approval steps are required to implement any such increase. Property Tax on New Development Area: As previously noted, the City receives a relatively small portion of property tax assessments. To generate an additional $1 million annually from property tax revenue, the assessed value would have to increase approximately $1.1 billion. This is equivalent to 1,3 77 new homes constructed with an initial assessed value of $800,000 each. City’s Property Tax Revenue per $1 $0.09077 Desired Increase $1,000,000 Total Assessed Value Needed $1,101,685,579 Assessed Value per House $800,000 Number of New Houses Needed 1,337 Currently, over 1,000 housing units are planned across various development areas, however, the timeline for completion and resulting assessed value remain difficult to estimate at this time. Sales Tax Measure: City may adopt additional increments of local sales tax. A two-thirds voter approval is required if the tax is designated for special services such as public safety, while majority vote is sufficient if the revenue is for general purposes. 5 Honorable City Council 08/08/2025 Special Meeting Page 6 The statewide sales tax rate of 7.25% is split between local and state jurisdictions. As shown in the table below, the City receives 1% of the 7.25% total sales tax. An additional 0.25 percent tax increase could generate approximately $1.1 million per year. Purpose Jurisdiction Rate State General Fund State 3.6875% State General Fund State 0.2500% Local Public Safety Fund State 0.5000% Local Revenue Fund (Health/Social) State 0.5000% Local Revenue Fund State 1.0625% Local City Operation Local 1.0000% County Transportation Funds Local 0.2500% Total Tax 7.2500% Voters in four cities within Ventura County have approved add -on sales taxes to support essential services such as public safety, street maintenance, and infrastructure improvements. To promote transparency and accountability, the City of Santa Paula established a Measure T Oversight Committee to ensure revenue generated from add - on taxes are expended in accordance with the intention approved. City Name Statewide Add-on Total Tax Oxnard 7.25% 2.00% 9.25% Port Hueneme 7.25% 1.50% 8.75% Santa Paula 7.25% 2.00% 9.25% Ventura 7.25% 0.50% 7.75% According to the California Local Government Finance Almanac, 91 cities and four counties proposed in the November 2024 election to add, increase, or extend the general purpose add-on sales tax ranging from 0.25 percent to 1.75 percent. Of the 40 new measures, 31 passed, resulting in a 78% success rate. Notably, the most common proposed rate for add-on sales tax was 1.0%, accounting for 78% of all new proposals. Rate Total PASS FAIL Pass Rate 0.50% 6 4 2 67% 0.75% 3 2 1 67% 1.00% 30 24 6 80% 1.50% 1 1 100% Total 40 31 9 78% 6 Honorable City Council 08/08/2025 Special Meeting Page 7 Steps to implement a sales tax increase: 1. The City Council must pass an ordinance placing the tax measure on the ballot with a two-thirds vote of its members. The ordinance must include a detailed expenditure plan, describing what the new revenue will fund. 2. Comply with Proposition 218 requirements: a. It must be submitted to voters. b. A simple majority is required for General purposes and two-thirds is required for special purposes. c. The ballot must specify the duration, either specific period or permanent. 3. Unless an emergency exception applies, the measure must be placed on a regular general election ballot for governing body elections. Transient Occupancy Tax (TOT) Increase: The City currently imposes a 10% Transient Occupancy Tax on hotel stays of 30 days or less. The TOT rate across California typically ranges from 8% to 14%, with 12% being common. The average revenue for past three years is $468,000, and an increase of 2% could produce approximately $93,600 in tax revenue. The process to increase TOT mirrors that of the sales tax measure. During the November 2024 election, 28 cities proposed measures for general purposes. Twenty-three (23) measures passed, reflecting 82% success rate. Utility Users Tax (UUT): Cities can impose a UUT on residential and commercial use of electricity, natural gas, cable television, water, cellular phone, landline telephone, and trash services with majority voter approval for general purposes. There are two cities in Ventura County imposing Utility User Taxes. Per the State Controller’s report, the City of Port Hueneme reported $1.2 million in revenue on Telephone services in Fiscal Year 2022/23. City of Ventura reported $9.5 million in revenue from Electric, Gas, and Communication services. Two UUT measures were included in the November 2024 election. The City of Long Beach passed a measure expanding UUT to 5% on Gas services. The City of Santa Cruz proposed a new 5% UUT on Gas, Electric, Video and Telecom services; however, the measure failed with only 36% voter support. Community Facility Districts (Mello-Roos CFD): Under the Mello-Roos Act, local agencies can form Community Facility Districts (CFDs) to levy special taxes on properties for use of public improvements. This action requires two-thirds voter approval. Park Assessment Levy: In 1999, the City reinstated Assessment Levy for Park and Recreation Maintenance and Improvement District. Per the Engineer’s Report, 25% of amenities are considered General Benefit, which include real property outside the 7 Honorable City Council 08/08/2025 Special Meeting Page 8 district and public at large. The remaining 75% are considered Special Benefits which benefit Moorpark residents. Due to this analysis, 25% of the district expenses must be covered by revenue from other funds, such as the General Fund. The initial assessment was established at $39.00 per SFE and included an annual Consumer Price Index (CPI) increase, not to exceed 3% per year. However, the initial assessment only covered 52% of total cost, with remaining 48% funded by the General Fund, or other available revenue sources. As shown in the table below, the General Fund is subsidizing from 51% - 67% of the Park Assessment Levy. The City continues efforts to reduce maintenance costs; however, the GF is still contributing over 50% of operating cost. To maintain GF transfer down to 25%, an additional $570,000 in assessment revenue is required. This equates to an estimated increase of $41 per Single Family Equivalent Units (SFE). According to the assessment revenue analysis provided in January 2025, an additional $396,000 per year is necessary for Equipment Replacement Fund (ERF). This increases the total additional assessment to approximately $861,200, which represents an increase of $21 per SFE. Combined with the prior mentioned increase of $41 per SFE, the total increase of $62 per SFE is needed to maintain General Fund transfer at 25%. As a result of an additional assessment, reduction of General Fund Transfer is estimated at $465,200. In order to increase assessment levy, two-thirds voter approval is required. Fiscal Year Assessment Levy Other Revenue Operating Expense Shortage GF Transfer In GF % FY 2016-17 782,342$ 8,837$ (2,126,845)$ (1,335,666)$ 1,335,666$ 63% FY 2017-18 818,161$ 22,207$ (2,525,989)$ (1,685,621)$ 1,685,621$ 67% FY 2018-19 820,207$ 31,277$ (2,347,122)$ (1,495,638)$ 1,495,638$ 64% FY 2019-20 861,477$ 26,959$ (2,228,866)$ (1,340,430)$ 1,340,430$ 60% FY 2020-21 873,677$ 11,310$ (2,039,608)$ (1,154,621)$ 1,154,621$ 57% FY 2021-22 945,486$ 21,490$ (2,163,002)$ (1,196,027)$ 1,196,027$ 55% FY 2022-23 955,993$ 62,134$ (2,078,694)$ (1,060,566)$ 1,060,566$ 51% FY 2023-24 993,069$ 19,032$ (2,096,472)$ (1,084,371)$ 1,084,371$ 52% Fiscal Year Assessment Levy Other Revenue Operating Expense Shortage GF Transfer In GF % FY 2023-24 993,069$ 19,032$ (2,096,472)$ (1,084,371)$ 1,084,371$ 52% Additional Levy 570,000$ 570,000$ (570,000)$ Total 1,563,069$ 19,032$ (2,096,472)$ (514,371)$ 514,371$ 25% Fiscal Year Assessment Levy Other Revenue Operating Expense Shortage GF Transfer In GF % FY 2023-24 993,069$ 19,032$ (2,096,472)$ (1,084,371)$ 1,084,371$ 52% Additional Levy 861,200$ (396,000)$ 465,200$ (465,200)$ Total 1,854,269$ 19,032$ (2,492,472)$ (619,171)$ 619,171$ 25% 8 Honorable City Council 08/08/2025 Special Meeting Page 9 Financing Options Local governments in California have access to a variety of financing tools to help pay for major infrastructure or facilities. General Obligation (GO) Bonds General Obligation bonds are backed by ad valorem property taxes and can finance infrastructure that does not produce revenue (e.g. civic buildings and roads). It must receive two-thirds voter approval in elections. In November 2024, election results show a 50/50 in pass/fail rate. Tax Increment Financing Tax Increment Financing (TIF) is a tool used to pay for improvements in a specific geographical area. Historically, this tool was used by redevelopment agencies to raise funding for infrastructure improvements, housing, and other projects in redevelopment areas. Since the dissolution of redevelopment agencies in 2012, Enhanced Infrastructure Financing Districts (EIFDs) and Community Revitalization and Investment Authorities (CRIAs) have been developed. Property tax increment, with the consent of affecting taxing agencies (such as cities, counties, special districts, but not schools), may be used as a funding source for the program. These programs provide local governments a way to finance certain projects with tax increment. EIFDs focus on funding public infrastructure and economic development and CRIAs target disadvantaged or blighted areas, supporting housing, crime reduction, and economic revitalization. The main difference is that EIFDs emphasize general infrastructure and growth, while CRIAs focus on community revitalization and social improvement. When establishing a EIFD or CRIA, a base year is established and increases in revenue above the base year levels become tax increment. Projects can be funded through a loan or bonds secured by tax increment. EIFD and CRIA can be formed where redevelopment project areas exist; however, available revenue may be limited while old redevelopment debts are paid. Steps to Establish EIFD: 1. Initial Assessment and Planning: identify the need and goals, define boundaries, estimate property value growth, and conduct feasibility analysis. 2. Public Financing Authority formation (PFA): establish PFA and appoint PFA members, adopt resolution for intention to form the EIFD, draft Infrastructure Financing Plan, Consult with other taxing entities. 3. Hold Public Hearings. The establishment of an EIFD will require extensive analysis, including legal, financial, and economic evaluations. Most cities engage specialized consulting services to assist with feasibility studies, tax increment projections, infrastructure planning, and stakeholder coordination. Since the City currently has Redevelopment Agency (RDA) bonds to be 9 Honorable City Council 08/08/2025 Special Meeting Page 10 repaid with property tax increment, EIFDs cannot divert funds already committed to outstanding RDA debt or impact existing RDA project areas. Public-Private Partnerships (P3) Public-Private Partnerships (P3) are arrangements where local governments collaborate with private sector to finance, build, and operate certain public services or infrastructure projects that would otherwise be funded and managed solely by a public agency. Under this model, the City may engage a private partner to take on some or all aspects of a project, such as designing, constructing, financing, and/or operating a facility. This approach offers several potential benefits: • Reduced upfront capital cost to the city, as the private partner contributes funding; • Transfer of operational and financial risks to the private sector; • Faster project delivery, often due to private-sector efficiencies. In return, the private partner may recoup its investment through program revenue such as lesson fees and admission/membership fees, while the City retains public access, programming influence, and long-term community benefit. P3 models are used for community serving recreational amenities such as aquatic centers, splash pads, and fitness facilities, allowing cities to expand amenities the community desires. However, a comprehensive analysis of a potential P3 agreement, including all financial impacts and risks, is essential to avoid financial implications that may not serve the public interest or be detrimental to the long-term financial health of the organization. Conclusion To address long-term fiscal challenges and ensure continued delivery of essential City services, a combination of revenue enhancement and financing strategies is recommended to be considered. Among the various revenue enhancement options reviewed, the most common and viable method to increase General Fund revenue is a local sales tax measure. A voter-approved sales tax provides a broad-based and stable source of funding, with the flexibility to support general operations or specific community priorities such as public safety, infrastructure, and recreation. In addition to these options, the City Council has already directed staff to solicit consulting services on increasing the existing Park Assessment Levy, which would help reduce the General Fund subsidy required to maintain park and recreation services during the Council meeting on January 15, 2025, (Item 9.B.). While all revenue strategies require thoughtful planning, legal compliance, and community outreach, a sales tax measure and/or increase in Park assessment levy offers the most immediate and scalable opportunity to strengthen the City’s long-term financial sustainability. CFDs are already embedded in development agreements so that is planned to move forward. EIFDs are also recommended to be considered to provide public infrastructure and economic development funding for the long term as property values increase due to 10 Honorable City Council 08/08/2025 Special Meeting Page 11 continued development and investment in the community. The most significant challenge is establishing a partnership with the County of Ventura to have them give up a portion of the County’s share of property taxes with the City as a result of the realized property values, which would not have occurred without the City’s initial public infrastructure investments. P3s are considered best practice and recommended to be considered as well as economic development efforts to help increase city revenues by attracting new businesses, supporting business expansion, and creating jobs, which in turn generate more sales tax, property tax, and other local revenues. ENVIRONMENTAL DETERMINATION This action is exempt from the California Environmental Quality Act (CEQA) as it does not constitute a project, as defined by Section 15378 of the State CEQA Guidelines. Therefore, no environmental review is required. FISCAL IMPACT There is no fiscal impact with the City Council’s consideration of this report. COUNCIL GOAL COMPLIANCE This action does not support a current strategic directive . STAFF RECOMMENDATION Direct staff to consider various revenue enhancement and financing options. 11