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HomeMy WebLinkAboutD-2 Staff Report - FY 21-22 Mid-Year BudgetSCHEDULED ITEM D-2 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL AND HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: MARCH 7, 2022 SUBJECT: PUBLIC HEARING FISCAL YEAR 2021-22 MID-YEAR BUDGET REVIEW AND ADJUSTMENTS BACKGROUND: This report provides the City Council a mid-year review of the Fiscal Year 2021/22 budget, with emphasis on the financial status of the General Fund, and also serves as a preview of the City’s financial position for the upcoming fiscal year budget process. The report also makes recommendations for budget amendments, both to estimated revenues and expenditures for the current budget year. In accordance with Azusa Municipal Code Sec. 2-450. – Amendments, since some proposed budget line item adjustments exceed $1,000,000, approval must be held as a Public Hearing. Applicable administrative public hearing notice was posted on February 24, 2022. RECOMMENDATIONS: Staff recommends the City Council jointly with Azusa Utility Board take the following actions: 1) Open the Public Hearing, receive public testimony, and close the Public Hearing regarding Fiscal Year 2021/22 mid-year budget adjustments; and 2)Adopt Resolution No. 2022-C19, a Resolution of the City Council of the City of Azusa adopting mid-year budget adjustments for the City of Azusa for the fiscal year commencing July 1, 2021 and ending June 30, 2022; and 3)Adopt Resolution No. 2022-UB01, a Resolution of the Utility Board of the City of Azusa adopting the budget and approving appropriations for Utilities for the fiscal year commencing July 1, 2021 and ending June 30, 2022; and 4)Receive, review and file Fiscal Year 2021/22 Second Quarter Budget-to-Actual report ending December 31, 2021. APPROVED CITY COUNCIL 3/7/2022 Public Hearing FY 2021-22 Mid-Year Budget Review March 7, 2022 Page 2 ANALYSIS: The Fiscal Year (FY) 2021/22 budget was adopted on June 21, 2021 with a projected General Fund budget surplus of $125,052. With carry forward projects from the FY 2020/21 budget year and other approved amendments, before mid-year adjustments the adjusted budget deficit is $1.27 million mainly due to funding capital projects with reserves on hand. Public safety, general government, internal support services, community resources, such as youth and senior recreational services, library activities, parks and facilities maintenance services make up the majority of the General Fund budget. Fiscal Year 2021/22 projections were conservative mainly due to uncertainty about how the Coronavirus COVID-19 pandemic would affect the City’s revenues and services. As COVID-19 restrictions have eased up, Azusa’s local economy continues to improve resulting in unexpected positive impacts on the City’s revenues mainly in sales and transaction use taxes. Citywide, department expenditures are pacing with budget, with a few exceptions. While this mid-year review focuses mainly on the General Fund, staff reviews overall budget performance in all Departments. Due to the recent drought and high commodity wholesale market prices, major adjustments to the Electric and Water funds are proposed. While most of the City’s revenues (“Revenues”) and expenditures (“Expenditures”) are on track to achieve its budget, there are some Revenues and Expenditures budgets that will need to be adjusted. The following net mid-year budget proposed adjustments will increase General Funds reserves by $3,771,505 and increase the City’s overall reserves (including General Fund) by $441,213. The attached Table A is a summary of proposed budget adjustments and justifications. Highlights of major adjustment proposals are outlined below. Personnel Highlights Fiscal Year 2021/22 personnel budgets reflect city growth trends, consideration of COVID-19 restrictions and overall employment climate, and also anticipated retirements. For the most part, staffing levels are consistent with budget throughout the organization, but timing of resignations and difficulty in recruiting and retaining qualified candidates, particularly in Public Safety (not unique to Azusa), throughout the pandemic results in salary savings. Net General Fund personnel costs are expected to be about 5% or $1.4 million below budget. Other proposed budget adjustments result in zero-net effect to the General Fund and overall City budget, but requires Council approval to change the method of recording retiree medical charges expenses. Staff is proposing this adjustment to simplify internal accounting procedures. Non-Personnel Revenue and Expenditure Highlights General Fund Revenues Overall, non-personnel related revenues are expected to be higher by a net of $2,832,325. Major categories contributing to the projected adjustments are: 1. Sales and Transaction Use Taxes – Due to uncertainty of the COVID-19 pandemic, revenue adopted forecasts were conservative. Together with easing of COVID-19 restrictions and Public Hearing FY 2021-22 Mid-Year Budget Review March 7, 2022 Page 3 economic stimulus measures, revenues from sales transactions are expected to come in higher by $2.1 million. 2. Penalties – To provide residents and businesses relief through economic hardships during the pandemic, many types of late fees and penalties for services were suspended, resulting in less revenues for the City. As the COVID-19 restrictions are easing, the penalties payments and coming in higher than anticipated. 3. Property Tax – increasing home values and developments in the City have a positive impact on revenues. 4. Recreation and Rental Fees – Extended health orders prohibited rental of facilities, sports activities and recreational classes and outings. As COVID-19 restrictions eased, City recreation and facilities rental activities ramped up during the first two quarters of FY 2021- 22. 5. Economic and Community Development – Throughout the pandemic, staff remains engaged with businesses, providing resources to assist Azusa businesses with staying open and development projects continue to move forward. Additionally, major organizations, such as mining and landfill businesses, who have agreements with the City have been able to maintain production and have in some cases increased production, resulting in increases to revenues for the City. 6. Public Safety – As COVID-19 restrictions ease up, parking enforcement and court fee administration have resumed and revenues improved. In addition, the City will receive insurance reimbursement for cyber security incidents. General Fund Expenditures Based on analysis of mid-year expenditures, Staff proposes a net increase in General Fund non- personnel appropriations of $520,820: 1. Safety Information Technology – The Police Department procured multiple system components to better secure critical components of its information technology system network, increasing budget needs by $120,820. The increase in budget is offset by insurance reimbursements. 2. Human Resources Employee Relations and Recruitments – Budget increase needed due to evolving climate of employee relations related public records requests and claims expertise. Also, not unique to Azusa, recruitment costs increased due to unexpected resignations and retirements, including retirements of two department heads in which the City is using temporary outside assistance for. 3. Phone System Scope Increase – The City had a 20+ year phone system infrastructure at risk for catastrophic failure and transition to a new system is a significant, multi-year, citywide capital initiative. To successfully implement this project, Staff anticipates an additional $230,000 is needed for expanded scopes of service. Over 33% of these costs will be allocated to Enterprise Funds. Public Hearing FY 2021-22 Mid-Year Budget Review March 7, 2022 Page 4 4. Comprehensive Development Fees and Nexus Study – This project will be pushed back to FY 2022/23 to allow sufficient time for implementation, and since funds are not needed for FY 2021/22, Staff proposes a $30,000 decrease to the Economic Development budget. Electric Fund Higher electric commodity prices in the wholesale market has made it more expensive for commodity purchases, but at the same time, the Utility is able to resale electric commodities to the wholesale market at a higher price, offsetting the increased costs. Overall, the Electric Fund needs revenue and expenditure adjustments of $2,005,430 and $2,759,201, respectively, resulting in a net decrease to the Fund of $753,771. Water Fund The Water Utility had to purchase water from the Upper San Gabriel Valley Municipal Water District due to the drought. A budget amendment of $2,400,000 is needed to cover the cost of the purchase. The cost of the purchase will not be recouped through rates until next fiscal year, therefore, the FY 2021/22 Water Fund balance will be decreased by the purchase amount. Special Revenue Funds A few budget adjustments are needed in Special Revenue Funds. However, there will be no net change in the fund balances since there are revenues to offset those costs: 1. Flock Safety Automated License Plate Reader – Staff is requesting expenditure budget increase of $142,500 to implement the Flock Safety automated license plate reader, and the City received revenues from the State of California Board of State and Community Corrections (BSCC) for this project. This special revenue was authorized under AB74, chapter 23, from the Budget Act of 2019, and there will be no fiscal impact to the general fund. 2. Radios for the Police Department – Staff is requesting expenditure budget increase of $199,500 for the purchase of radios for the Police Department, and the City received revenues from the Supplemental Law Enforcement Service Account (SLESA) authorized under AB3229. There is no fiscal impact to the General Fund. A list of all proposed mid-year adjustments is attached in Table A. General Fund Reserve Forecast The General Fund has a strong financial position. Table 1 provides an updated estimate of the General Fund budget results and cash reserves forecast. With mid-year adjustments, allocation of American Rescue Plan Act (ARPA) funds to cover government services, and Council approval to set aside cash to fund a retiree medical trust, undesignated reserves by end of FY 2021/22 are estimated at $14.7 million. Public Hearing FY 2021-22 Mid-Year Budget Review March 7, 2022 Page 5 Table 1: Fiscal Year 2021/22 Mid-Year Budget and Reserves Forecasts UNAUDITED ACTUALS FY 20-21 ADOPTED BUDGET FY 21-22 MID-YEAR ESTIMATED FY 21-22 ESTIMATED FY 22-23 ESTIMATED FY 23-24 ESTIMATED FY 24-25 ESTIMATED FY 25-26 Total Revenues 56,349,692 52,209,220 52,209,220 54,044,120 55,748,737 57,504,314 59,316,476 Total Expenses 52,624,728 52,082,064 53,481,187 54,006,030 55,548,050 57,362,424 58,798,479 Operating Surplus or (Deficit)3,724,964$ 127,156$ (1,271,967)$ 38,090$ 200,686$ 141,890$ 517,998$ ARPA Revenue for Government Services 5,977,422 4,022,578 Mid Year Net Revenue Increase/(Decrease)3,090,896 Mid Year Net Expenditure Increase/(Decrease)620,609 Revised Operating Surplus or (Deficit)3,724,964$ 127,156$ 7,175,742$ 4,060,668$ 200,686$ 141,889$ 517,997$ Beginning Available Reserves Balance 20,554,932 29,372,623 29,372,623 34,548,365 37,109,033 35,809,718 34,451,606 Pending OPEB Trust Contributions 2,000,000 1,500,000 1,500,001 1,500,002 1,500,003 Ending Available Reserves Balance 29,372,623 29,245,467 34,548,365 37,109,033 35,809,718 34,451,606 33,469,599 Reserves Target 15,524,946 19,520,516 19,870,297 20,001,508 20,387,013 20,840,606 21,199,620 Above/(Below) Reserves Target 13,847,677$ 9,724,951$ 14,678,068$ 17,107,525$ 15,422,706$ 13,611,000$ 12,269,979$ Upcoming Fiscal Year Budget Considerations Staff has begun the FY 2022/23 budget development process and will return to Council at a special study session late May to receive direction and guidance for the budget adoption process and how best to use undesignated reserves to serve Azusa residents and businesses. Since the General Fund has healthy reserves, major capital improvements to the City’s public facilities will be a large part of the upcoming budget discussion. Various legislative proposals and recent Congressional initiatives including the Taxpayer Protection and Government Accountability Act Initiative (AG#21-0042A1) and proposal to suspend the Gas Tax through calendar year 2022 is a major focus for Staff currently. Although the current General Fund financial position is healthy, these legislative actions if passed threaten the City’s various revenue sources and financial health. Should these initiatives come to fruition, the City will have to rely on available fund balance to offset any significant revenue losses which would greatly impact services. The City provides numerous services to the Azusa community including 24-hour police and fire protection, parks and tree maintenance, road and sidewalk maintenance, graffiti removal, community library system, a well-planned zoned community, etc., all of which requires a lot of resources. Staff will actively advocate against the proposed initiatives and continue to monitor the development of any major milestones and keep the Council updated on any threats to Azusa’s local revenues. FISCAL IMPACT: Adoption of the recommended FY 2021/22 mid-year adjustments will result in a net General Fund fund balance increase of $3,771,505, a net Electric Fund fund balance decrease of $753,771, and a Water Fund fund balance decrease of $2,400,000. The City’s overall reserves (including General Fund, Electric, Water and Special Revenue Funds) by $441,213. Fiscal Year 2021/22 budget, including recommended mid-year adjustments, is expected to result in an estimated $34.5 million ending General Fund reserves balance, of which $19.9 million are designated for specific uses. Public Hearing FY 2021-22 Mid-Year Budget Review March 7, 2022 Page 6 Prepared by: Reviewed and Approved: Richard Lam Talika M. Johnson Budget Administrator Director of Administrative Services Reviewed and Approved: Sergio Gonzalez City Manager Attachments: 1. Table A - Summary of the Proposed Budget Adjustments 2. Resolution No. 2022-C19, adopting mid-year budget adjustments for the City of Azusa for the fiscal year commencing July 1, 2021 and ending June 30, 2022 3. Resolution No. 2022-UB01, adopting mid-year budget adjustments for the Azusa Light & Water for the fiscal year commencing July 1, 2021 and ending June 30, 2022 4. FY 2021/22 Second Quarter Budget-to-Actual Report TABLE A Proposed Mid-Year Budget Adjustments for Fiscal Year 2021/22 Revenues Expenditures Department Description Increase/(Decrease) Increase/(Decrease) Justification for Adjustment Revenue Expenditure PERSONNEL Employee Benefits Retiree Medical (965,290) (965,290) Transfer charges to Citywide from Employee Benefits for accounting purposes, no overall change to budget 4190000000-5940 4190000000-6133 Citywide Retiree Medical 258,571 258,571 Transfer charges to Citywide from Employee Benefits for accounting purposes, no overall change to General Fund budget 1090000000-5940 1090000000-6133 +$965,290 and 1090000000-5950 - $706,719 Citywide Salary Savings (1,400,000) Savings from budgeted position vacancies 1090000000-6095 NON-PERSONNEL Safety Non-GF BSCC 142,500 142,500 Automated License Plate Reader Cameras - Flock Safety 2820310093-4540 2820310093-7140 Safety Non-GF SLESA 199,500 199,500 APX6000 Radios for the police department use 2620310000-4540 2620310000-7140 Safety Alarm Registration 17,000 As the economy opens up, more residents are registering. As such, alarm registration revenues are pacing higher than anticipated 1020310000-4318 Safety Parking Enforcement 25,000 Parking Enforcement revenues are pacing higher than anticipated 1020310000-5105 Safety Animal License Revenues (80,000) Animal license revenues are received as a credit offset to the City's invoiced costs. Net expenses on par with budget 1020333000-4240 Safety Safety IT 120,820 120,820 Increased budget needs related to ransomware restoration costs - to be reimbursed by insurance agency 1020941000-4699 1020941000-6846 Admin Services - HR Legal Analysis and professional services 150,000 Unanticipated costs for employment relations matters, PRA requests and subpoenas 1050921000-6399 Admin Services - HR Recruitment Expenses 50,000 Increased recruitment activities due to resignations and retirements 1050921000-6635 Admin Services - Risk Insurance Casualty/Fire Premiums 40,000 Premium adjusted after budget adoption 4250923000-6715 Community Resources/Recreation Rents-Recreation Facilities 25,000 Park rental activities higher than anticipated at Memorial Park, Zacatecas Park, Northside Park, Pioneer Park, etc. 1025410000-4405 Community Resources/Recreation Aquatics Rental 12,500 Due to the easing of Covid-19 restrictions, activity higher than expected 1025410100-4405 Community Resources/Recreation Swim Classes 12,500 Due to the easing of Covid-19 restrictions, activity higher than expected 1025410100-4726 Info Tech Citywide Phone System Upgrade 76,521 230,000 Scope Increases. 33.27% of costs allocated to Enterprise Funds 1025410100-4795 4649960000-7140 Library Passport Fees 18,000 Due to the easing of Covid-19 restrictions, passport issuances and renewals higher than expected 1030511000-4746 Econ & Comm Dev Comprehensive Development Fee and Lexus Study (30,000) Plan to implement study in FY 2022/23 1035630000-6399 Econ & Comm Dev Planning Fees-/Tentative Maps 12,000 Due to the easing of Covid-19 restrictions, the General Plan/Map fees improved and were better than forecast 1035611000-4711 Econ & Comm Dev Building Plan Check Fees (100,000) Only have one large new project in FY 21/22 - Rosedale Great Park Homes 1035620000-4704 Econ & Comm Dev Landfill Franchise Fees 250,000 Revenues consistent with agreement 1035630000-4159 Econ & Comm Dev Landfill Franchise/Expansion Fees 100,000 Revenues consistent with agreement 1035630000-4160 Econ & Comm Dev Penalties 18,000 Due to the easing of Covid-19 restrictions, penalties are being enforced 1035630000-4315 Econ & Comm Dev Court Fees 45,000 As a result of lifting of Covid-19 restrictions, the economy is opening up and Court fees revenues are pacing higher than forecast 1035643000-4602 Econ & Comm Dev Promenade Lease (91,907) Lease terms recently negotiated, revenues will not be recognized until FY 2022-23 1035645000-4412 Citywide Property Tax 35,000 Property tax higher than forecasted 1090000000-4050 Citywide Property Tax 101,135 Actual RDA property tax came in higher than forecast due to property values 1090000000-4090 Citywide Penalties 100,000 Due to the easing of Covid-19 restrictions, penalties are now being enforced 1090000000-4315 Citywide State Reimbursement 35,756 State Reimbursement for crime victim support 1090000000-4620 Citywide TUT-Measure Z 1,100,000 Due to the lifting of the Covid-19 restrictions and an improving economy, revenue came in higher than anticipated 1090000000-4108 Account Coding 1 of 2 Attachment 1 TABLE A Proposed Mid-Year Budget Adjustments for Fiscal Year 2021/22 Revenues Expenditures Department Description Increase/(Decrease) Increase/(Decrease) Justification for Adjustment Revenue Expenditure Account Coding Citywide Sales Tax 1,000,000 Due to the lifting of the Covid-19 restrictions and an improving economy, revenue came in higher than anticipated 1090000000-4101 Public Works Citywide Phone System Upgrade - Sewer 6,624 Scope Increases. 2.88% of $230K cost increase allocated to Electric Fund 3455665000-6423 Utilities Citywide Phone System Upgrade - Solid Waste 483 Scope Increases. 0.21% of $230K cost increase allocated to Electric Fund 3940750065-6423 Utilities Citywide Phone System Upgrade - Electric 32,568 Scope Increases. 14.16% of $230K cost increase allocated to Electric Fund 3340799030-6423 Utilities Citywide Phone System Upgrade - Water 36,846 Scope Increases. 16.02% of $230K cost increase allocated to Water Fund 3240721792-6423 Utilities Electric Sales and Purchases 2,005,430 2,759,201 Higher revenues as a result of higher commodity market price and higher expenditures due to paying higher commodity price 3340734470-4811 3340775550-6590 Utilities Purchased Water 2,400,000 Purchased Water from the SGVMWD as a result of the drought 3240722704-6591 Total Mid-Year Adjustments Revenues Expenditures Net Fund Balance Change General Fund 3,090,896$ (620,609)$ $ 3,711,505 All Funds 4,473,036$ 4,031,823$ 441,213$ 2 of 2 RESOLUTION NO. 2022-C19 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA ADOPTING MID-YEAR BUDGET ADJUSTMENTS FOR THE CITY OF AZUSA FOR THE FISCAL YEAR COMMENCING JULY 1, 2021 AND ENDING JUNE 30, 2022 WHEREAS, on June 21, 2021, City Council of the City of Azusa adopted the City­ wide Fiscal Year 2021­22 Operating and Capital Budgets; and WHEREAS, on March 7, 2022, the City Council of the City of Azusa met and reviewed the mid­year financial status of the General Fund, Gas Tax Fund, Fire Safety Special Revenue Fund, Sewer Enterprise Fund, Risk Management/Liability and Information Technology Internal Services Funds, Board of State and Community Corrections and Supplemental Law Enforcement Services Account Special Revenues Funds, and considered recommendations for budget amendments. NOW, THEREFORE, BE IT RESOLVED, THE CITY COUNCIL OF THE CITY OF AZUSA DOES APPROVE AND ADOPT THE FOLLOWING FISCAL YEAR 2021-22 BUDGET AMENDMENTS: SECTION 1. Attachment 2 Proposed Mid-Year Budget Adjustments for Fiscal Year 2021/22 Revenues Expenditures Department Description Increase/(Decrease) Increase/(Decrease) Justification for Adjustment Revenue Expenditure Employee Benefits Retiree Medical (965,290) (965,290) Transfer charges to Citywide from Employee Benefits for accounting purposes, no overall change to budget 4190000000­5940 4190000000­6133 Citywide Retiree Medical 258,571 258,571 Transfer charges to Citywide from Employee Benefits for accounting purposes, no overall change to General Fund budget 1090000000­5940 1090000000­6133 +$965,290 and 1090000000­5950 ­$706,719 Citywide Salary Savings (1,400,000) Savings from budgeted position vacancies 1090000000­6095 Safety Non­GF BSCC 142,500 142,500 Automated License Plate Reader Cameras ­ Flock Safety 2820310093­4540 2820310093­7140 Safety Non­GF SLESA 199,500 199,500 APX6000 Radios for the police department use 2620310000­4540 2620310000­7140 Safety Alarm Registration 17,000 As the economy opens up, more residents are registering. As such, alarm registration revenues are pacing higher than ii d 1020310000­4318 Safety Parking Enforcement 25,000 Parking Enforcement revenues are pacing higher than anticipated 1020310000­5105 Safety Animal License Revenues (80,000) Animal license revenues are received as a credit offset to the City's invoiced costs. Net expenses on par with budget 1020333000­4240 Safety Safety IT 120,820 120,820 Increased budget needs related to ransomware restoration costs ­ to be reimbursed by insurance agency 1020941000­4699 1020941000­6846 Admin Services ­ HR Legal Analysis and professional services 150,000 Unanticipated costs for employment relations matters, PRA requests and subpoenas 1050921000­6399 Admin Services ­ HR Recruitment Expenses 50,000 Increased recruitment activities due to resignations and retirements 1050921000­6635 Admin Services ­ Risk Insurance Casualty/Fire Premiums 40,000 Premium adjusted after budget adoption 4250923000­6715 Community Resources/Recreation Rents­Recreation Facilities 25,000 Park rental activities higher than anticipated at Memorial Park, Zacatecas Park, Northside Park, Pioneer Park, etc. 1025410000­4405 Community Resources/Recreation Aquatics Rental 12,500 Due to the easing of Covid­19 restrictions, activity higher than expected 1025410100­4405 Community Resources/Recreation Swim Classes 12,500 Due to the easing of Covid­19 restrictions, activity higher than expected 1025410100­4726 Info Tech Citywide Phone System Upgrade 76,521 230,000 Scope Increases. 33.27% of costs allocated to Enterprise Funds 1025410100­4795 4649960000­7140 Library Passport Fees 18,000 Due to the easing of Covid­19 restrictions, passport issuances and renewals higher than expected 1030511000­4746 Econ & Comm Dev Comprehensive Development Fee and Lexus Study (30,000) Plan to implement study in FY 2022/23 1035630000­6399 Econ & Comm Dev Planning Fees­/Tentative Maps 12,000 Due to the easing of Covid­19 restrictions, the General Plan/Map fees improved and were better than forecast 1035611000­4711 Econ & Comm Dev Building Plan Check Fees (100,000) Only have one large new project in FY 21/22 ­ Rosedale Great Park Homes 1035620000­4704 Econ & Comm Dev Landfill Franchise Fees 250,000 Revenues consistent with agreement 1035630000­4159 Econ & Comm Dev Landfill Franchise/Expansion Fees 100,000 Revenues consistent with agreement 1035630000­4160 Econ & Comm Dev Penalties 18,000 Due to the easing of Covid­19 restrictions, penalties are being enforced 1035630000­4315 Econ & Comm Dev Court Fees 45,000 As a result of lifting of Covid­19 restrictions, the economy is opening up and Court fees revenues are pacing higher than forecast 1035643000­4602 Econ & Comm Dev Promenade Lease (91,907) Lease terms recently negotiated, revenues will not be recognized until FY 2022­23 1035645000­4412 Citywide Property Tax 35,000 Property tax higher than forecasted 1090000000­4050 Citywide Property Tax 101,135 Actual RDA property tax came in higher than forecast due to property values 1090000000­4090 Citywide Penalties 100,000 Due to the easing of Covid­19 restrictions, penalties are now being enforced 1090000000­4315 Citywide State Reimbursement 35,756 State Reimbursement for crime victim support 1090000000­4620 Citywide TUT­Measure Z 1,100,000 Due to the lifting of the Covid­19 restrictions and an improving economy, revenue came in higher than anticipated 1090000000­4108 Citywide Sales Tax 1,000,000 Due to the lifting of the Covid­19 restrictions and an improving economy, revenue came in higher than anticipated 1090000000­4101 Public Works Citywide Phone System Upgrade ­ Sewer 6,624 Scope Increases. 2.88% of $230K cost increase allocated to Electric Fund 3455665000­6423 Account Coding SECTION 2. The City Clerk shall certify as to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 7th day of March 2022. _____________________________________ Robert Gonzales Mayor ATTEST: _________________________________________ City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES CITY OF AZUSA ) ) ss. I HEREBY CERTIFY that the foregoing Resolution No. 2022­C19 was duly adopted by the City Council of the City of Azusa, at a regular meeting of said City Council held on the 7TH day of March 2022, by the following vote of the Council: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCIL MEMBERS: _____________________________________________ Jeffery Lawrence Cornejo, Jr. City Clerk APPROVED AS TO FORM: _____________________________________________ Best Best & Krieger, LLP City Attorney RESOLUTION NO. 2022-UB01 A RESOLUTION OF THE UTILITY BOARD OF THE CITY OF AZUSA ADOPTING THE BUDGET AND APPROVING APPROPRIATIONS FOR UTILITIES FOR THE FISCAL YEAR COMMENCING JULY 1, 2021 AND ENDING JUNE 30, 2022 WHEREAS, on June 21, 2021, Utility Board of the Azusa Light and Water adopted and approved the Appropriations for Azusa Light and Water Fiscal Year 2021-22 Operating and Capital Budgets; and WHEREAS, on March 7, 2022, the Utility Board of the Azusa Light and Water met and reviewed the mid-year financial status of the Electric, Water and Refuse Funds, and considered recommendations for budget amendments. NOW, THEREFORE, THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA DOES APPROVE AND ADOPT THE FOLLOWING FISCAL YEAR 2021-22 BUDGET AMENDMENTS: SECTION 1. SECTION 2. The Secretary shall certify as to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 7th day of March 2022. _____________________________________ Robert Gonzales Mayor Proposed Mid-Year Budget Adjustments for Fiscal Year 2021/22 Revenues Expenditures Department Description Increase/(Decrease) Increase/(Decrease) Justification for Adjustment Revenue Expenditure Utilities Citywide Phone System Upgrade - Solid Waste 483 Scope Increases. 0.21% of $230K cost increase allocated to Electric Fund 3940750065-6423 Utilities Citywide Phone System Upgrade - Electric 32,568 Scope Increases. 14.16% of $230K cost increase allocated to Electric Fund 3340799030-6423 Utilities Citywide Phone System Upgrade - Water 36,846 Scope Increases. 16.02% of $230K cost increase allocated to Water Fund 3240721792-6423 Utilities Electric Sales and Purchases 2,005,430 2,759,201 Higher revenues as a result of higher commodity market price and higher expenditures due to paying higher commodity price 3340734470-4811 3340775550-6590 Utilities Purchased Water 2,400,000 Purchased Water from the SGVMWD as a result of the drought 3240722704-6591 Account Coding Attachment 3 ATTEST: _________________________________________ City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES CITY OF AZUSA ) ) ss. I HEREBY CERTIFY that the foregoing Resolution No. 2022-UB01 was duly adopted by the Azusa Utility Board of the City of Azusa, at a special meeting of said Azusa Utility Board held on the 7TH day of March 2022, by the following vote of the Board: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSENT: BOARD MEMBERS: _____________________________________________ Jeffery Lawrence Cornejo, Jr. Secretary/City Clerk APPROVED AS TO FORM: _____________________________________________ Best Best & Krieger, LLP City Attorney FY 2021/22 Quarterly Financial Report 2nd Quarter, Ending December 31, 2021 OVERVIEW This financial report summarizes the City’s General Fund’s position for the 1st quarter of Fiscal Year 2021/22 (July 1, 2021 through December 31, 2021). Also, included are the major Special Revenue Funds: Gas Tax and Fire Safety; the Sewer Fund; and the major Internal Services Funds: Risk Management/Liability and Information Technology. The purpose of this report is to provide the City Council, City Management, and the Azusa community with an update on the City’s fiscal status based on the most recent financial information available. GENERAL FUND SUMMARY With the 2nd quarter’s revised data, the projection through the end of the second quarter for total sources (revenues and transfers-in) are estimated to be $52,209,220, consistent with the adopted revenues with no change. Total uses (expenditures and transfers-out) are estimated to be $53,481,187 and $1,399,123 higher than the adopted expenditures primarily due to $962,043 in budget carryforward for various city projects that have not been completed in FY 2020- 21, $200,000 increase for the Transtech agreement, $151,110 for Safety IT needs, $50,000 for the suite 2B relocation for the Engineering Division, $26,511 for the City Hall North renovation scope increase, and $9,459 parking enforcement contract increase. Table 1 shows the adjusted budget figures: A B C Adopted Budget 2021-22 Revised Budget 2021-22 Variance (B - A) Beginning Estimated Fund Balance $ 27.00 $ 27.00 * $ - Plus Revenues 50.55 50.55 ** - Transfers In 1.66 1.66 - Total 2020-21 Sources 52.21 52.21 - Less Expenditures 44.88 46.28 ** 1.40 Transfers Out 7.20 7.20 - Total FY 2020-21 Uses 52.08 53.48 1.40 Expenses in (excess)/below Exp-FY 2020-21 0.13 (1.27) (1.40) Estimated Unassigned Fund balance before reserves 27.13 25.73 Less: Internally Restricted Reserves Budget Stabilization & Catastrophic Reserve 13.02 13.02 *** - Capital & Infrastructure Replacement Reserve 2.00 2.00 *** - Insurance Reserve 2.50 2.50 *** - Retiree Benefits Reserve 2.00 2.00 *** - Available Fund Balance $ 7.61 $ 6.21 $ (1.40) *Unaudited **Financial Data as of 02/17/22 - Q2 FY21-22 ***Established Updated Reserves - Per 10-25-21 Council Approval to Increase Reserves - Original Reserved Policy was approved under Resolution# 2020-037 Table 1 Budget vs. Estimated Actual (in millions) Attachment 4 FY 2021-22 Quarterly Financial Report Attachment 1 2 nd Quarter, Ending December 31, 2021 Page 2 of 6 The 2nd quarter’s revenues ended the year at the 40.5% mark. The charts and explanation below will go over each of the revenue categories in details. GENERAL FUND REVENUES Table 2 shows actual collections for the major revenue sources and the percent collected compared to the adjusted budget. Table 3 shows that revenues came in at $2.9 Mil higher than the same period last year. This is primarily due the easing of the Covid-19 restriction that improved the economy and business activities, and sales tax, transaction use tax, charges for services, other taxes, and fines and penalties all improved. The property tax also improved due to a net taxable assessed value increase of 2.5%, Prop 13 inflation adjustments, more property sales in 2021, and more robust recovery of Prop 8 values by the Assessor than we estimated. Revenue Collection by Source As of 12/31/21 Chart 1 Revenues Collected by Source Quarter Ending: 12/31/20 vs. 12/31/21 2021-22 Actual % of REVENUE Adjusted Budget YTE 12/31/21 Adj. Budget Property Tax 13,129,662 2,980,317 22.7% Sales Tax 6,560,692 2,565,762 39.1% Transaction Use Tax 4,963,751 2,201,561 44.4% UUT Tax 3,259,463 1,551,183 47.6% Other Taxes 10,126,982 4,423,266 43.7% Charges for Services 5,602,149 2,802,421 50.0% Cost Reimbursement 1,783,131 1,022,831 57.4% Fines & Penalties 1,149,500 808,559 70.3% License & Permits 2,794,500 1,466,420 52.5% Miscellaneous 240,500 89,310 37.1% Money & Property Use 2,598,890 1,233,784 47.5% Total Revenues $52,209,220 $21,145,414 40.5% Table 2: YTE % of Budget Actual Actual Increase/ REVENUE YTD 12/31/2020 YTD 12/31/2021 (Decrease) Property Tax $2,397,245 $2,980,317 $583,072 Sales Tax 2,083,849 2,565,762 481,912 Transaction Use Tax 1,536,869 2,201,561 664,692 Utility User Tax 1,544,324 1,551,183 6,859 Other Taxes 3,992,054 4,423,266 431,212 Charges for Services 1,983,154 2,802,421 819,268 Cost Reimb.1,196,374 1,022,831 (173,543) Fines & Penalties 441,618 808,559 366,941 License & Permits 1,342,813 1,466,420 123,608 Miscellaneous 411,638 89,310 (322,328) Money & Property Use 1,313,247 1,233,784 (79,462) Total Revenues $18,243,185 $21,145,414 $2,902,229 Table 3: Year-to-Year Comparison $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 YTD 12/31/2020 YTD 12/31/2021 FY 2021-22 Quarterly Financial Report Attachment 1 2 nd Quarter, Ending December 31, 2021 Page 3 of 6 Property Tax collections came in low in Q2 and it is normal due to the timing of when the revenues are allocated by the County of Los Angeles Auditor Controller Tax Division. The majority of the property tax collections are received in four payments in December, January, April and May of each calendar year. Sales Tax collections are at 39.1% of the adjusted budget. The reason for the low collections rate is due to the timing of when the revenues are available. The November and December 2021 sales tax will not be distributed by the California Department of Tax and Fee Administration until January and February of 2022. Transaction Use Tax (TUT) collections are at 44.4% of the adjusted budget. Similar to the Sales Tax, the low collection rate is due to the timing of when revenues are available. The November and December 2021 TUT will not be distributed by the California Department of Tax and Fee Administration until January and February of 2022. Utility User’s Tax collections are at 47.6% of the adjusted budget. This percentage is reflective of the consumption of utility services such as gas, electric and water. Other Taxes collections are at 43.7% of the adjusted budget. Other taxes are comprised mainly of transient occupancy tax (TOT), franchise/landfill, land excavation, material recovery facility, and hazardous waste fees. Other Taxes are higher in comparison to the same period last year mainly due to higher production from business enterprises resulting in higher franchise revenues. Charges for Services collections are at 50.0% of the adjusted budget. Revenues are collected as services are rendered. This revenue source was higher compared to the same quarter last year due to the timing of the development projects and timely collection of service charges. Cost reimbursement collections are at 57.4% of the adjusted budget. Revenues are collected based on various reimbursement agreements. The revenues were higher in Q2 FY 2021-22 due to greater demand for government services. Fines and Penalties collections are at 70.3% of the adjusted budget. The Q2 FY 2021-22 revenues were higher this quarter compared to the same period last year, and it is mainly due to the economy opening up and improving government and business activities. License and Permits collections are at 52.5 % of the adjusted budget. This is mainly due to the timing of development activities and when the licenses and permit fees are issued. Miscellaneous collections are at 37.1% of the adjusted budget. The miscellaneous revenues represent a small percentage of the general fund revenues and are dependent on items such as metal recycling and other miscellaneous sources that do not come in as a regular revenue stream. Money and Property Use collections are at 47.5% of the adjusted budget. The Q2 FY 2021-22 revenues are pacing slightly below target. Revenues were pacing lower primarily due to the delay of the Promenade lease by the LA County MTA, and the anticipated lease will not be realized until September of colander year 2022 or Q1 of FY 2022-23. FY 2021-22 Quarterly Financial Report Attachment 1 2 nd Quarter, Ending December 31, 2021 Page 4 of 6 GENERAL FUND EXPENDITURES General Fund expenditures are tracking at 38.8% of the second quarter’s budget. Expenditures by Category As of 12/31/21 The expenditures outlined in Table 4 are pacing at 38.8% of the 2nd quarter’s budget. The personnel budget came in at 44.1% of the revised budget, and it is lower because the City did not have to pay the one-time lump sum PERS pension payment. The issuance of the pension obligation bond has made the expenditure more predictable. The Operating costs was lower in Q2 FY 2021-22 quarter due to the timing of the various development projects. The 2nd quarter total expenditures on table 5 compared to the same period last year was lower. As stated above, the lower costs were primarily due to the personnel costs because the City did not have to make the one-time lump sum PERS pension payment. Those costs were amortized through the pension obligation bond. DEPARTMENT EXPENDITURES At the end of the 2nd quarter, actuals for most departments are tracking close to the 50% 2nd quarter mark of the adjusted budget. The Economic and Community Development and Public Works department budgets are based on the timing of the development projects, and the Community Resources and Library Departments were impacted by the Covid-19 restrictions during Q1 and part of Q2 and since has improved and should pace higher for the rest of the fiscal year. Table 6 Chart 2 Expenditures by Department % of Budget by Department As of 12/31/21 as of 12/31/21 FY 21-22 Actual % of EXPENDITURE Working Budget YTE 12/31/21 Adopted Personnel 26,370,407 11,635,771 44.1% Operating 27,110,780 9,109,966 33.6% Total Expenditures $53,481,187 $20,745,737 38.8% Table 4: YTE % of Budget Actual Actual Increase/ EXPENDITURE YTD 12/31/20 YTD 12/31/21 (Decrease) Personnel 14,402,457 11,635,771 ($2,766,686) Operating 9,038,490 9,109,966 71,476 Total Expenditures $23,440,947 $20,745,737 ($2,695,211) Table 5: Year-to-Year Comparison 2021/22 Actual EXPENDITURE Adj. Budget YTD 12/31/21 % of Budget Council $158,950 $76,202 47.9% City Clerk 657,720 206,235 31.4% City Attorney 285,000 101,427 35.6% City Treasurer 136,915 74,944 54.7% Administration 563,886 258,974 45.9% Finance 1,518,280 694,639 45.8% Economic & Comm. Dev.4,356,678 996,623 22.9% Human Resources 533,665 245,438 46.0% Library 1,519,910 492,657 32.4% Public Safety 21,099,668 8,593,339 40.7% Public Works 4,452,302 1,509,020 33.9% Community Resources 2,831,566 771,219 27.2% City-Wide 15,366,647 6,725,020 43.8% Total Expenditure $53,481,187 $20,745,737 38.8% FY 2021-22 Quarterly Financial Report Attachment 1 2 nd Quarter, Ending December 31, 2021 Page 5 of 6 MAJOR SPECIAL REVENUE, SEWER AND INTERNAL SERVICES FUNDS SUMMARY The major Special Revenue funds including the Gas Tax, Fire Safety fund, Sewer Fund, and the major Internal Services funds such as Risk Management/Liability and Information Technology funds are reflected below. Table 7: Major Special Revenue and Internal Services Fund Revenues Table 8: Major Special and Internal Service Fund Expenditures Chart 3 Major Special Revenue & Internal Services Funds Revenues by Funds Ending 12/31/21 Chart 4 Major Special Revenue & Internal Services Funds Expenditures by Funds Ending 12/31/21 2021-22 Actual % of REVENUE Adjusted Budget YTD 12/31/21 Adj. Budget Gas Tax Fund $1,188,842 $616,054 51.8% Fire Safety 6,424,309 3,212,155 50.0% Sewer Fund 3,248,928 1,644,095 50.6% Risk Mgmt/Liab Fund 3,346,377 2,824,590 84.4% IT Fund 2,184,030 1,092,015 50.0% Total Revenues $16,392,486 $9,388,908 57.3% Table 7: YTD % of Budget 2021-22 Actual % of EXPENDITURE Adjusted Budget YTD 12/31/21 Adj. Budget Gas Tax Fund $1,800,510 $681,132 37.8% Fire Safety 6,424,309 3,636,289 56.6% Sewer Fund 2,931,859 916,555 31.3% Risk Mgmt/Liab Fund 4,659,308 3,171,209 68.1% IT Fund 2,285,231 1,034,548 45.3% Total Expenditures $18,101,217 $9,439,733 52.1% Table 8: YTD % of Budget 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund FY 2021-22 Quarterly Financial Report Attachment 1 2 nd Quarter, Ending December 31, 2021 Page 6 of 6 Gas Tax Fund Gas Tax revenues are pacing at 51.8% of the 2nd quarter FY 2021-22 adjusted budget, and the expenditures are tracking at 37.8%. Fire Safety Fund Fire Safety Fund’s operating revenues are pacing at 50.0% of revenues. The expenditures are pacing at 56.6% for the 2nd quarter. Fire services expenditures slightly higher, but are anticipated to be on target and will come in within budget for FY2021-22. Sewer Fund Sewer year-to-date operating revenues are 50.6% of the adjusted budget. Expenditures are lower than the 2nd quarter end mark at 31.3% due to the timing of the various projects. Risk Management Fund The revenues for the Risk Management Fund are at 84.4% due to the timing of its allocations. The expenditures are at 68.1% of the adjusted budget due to the timing of when claims are paid out. Information Technology Fund The Information Technology Fund revenues for the 2nd quarter are pacing at 50.0%. Its allocations are recorded twice a year, in December and June. The expenditures are pacing at 45.3% and consistent with the timing of the various IT projects.