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HomeMy WebLinkAboutD-4 Staff Report - Biennial Budget Adoption FY 2023-24 and 2024-25SCHEDULED ITEM D-4 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: JUNE 19, 2023 SUBJECT: ADOPTION OF FISCAL YEARS 2023-24 AND 2024-25 CITY, UTILITIES, PUBLIC FINANCING AUTHORITY, AND SUCCESSOR AGENCY OPERATING AND CAPITAL IMPROVEMENT PLAN BIENNIAL BUDGET AND GENERAL FUND RESERVE POLICY BACKGROUND: The City’s budget is an important policy document, an annual financial plan, identifying the spending priorities for the organization. The budget is used to balance available resources with community needs, as determined by the City Council. It also serves as a tool for communicating the City’s financial strategies and for ensuring accountability. In January 2023 the City adopted a revised Budget Policy establishing a Biennial Budget Process. This allows the City to adopt two, separate 12-month budgets to cover the two-year adopted budget time frame. Per Azusa Municipal Code Section 2-449, the City must adopt an annual budget, meaning that each budget period must be no more than 12-months. The fiscal years for this biennial budget begin on July 1, 2023 and ends June 30, 2025. An in-depth overview of the City’s operating and capital improvement plan budgets for Fiscal Year 2023/2024 (“FY 23/24”) and 2024/2025 (“FY 24/25”) was provided to the City Council at a Budget Study Session on May 30, 2023 to allow the City Council and members of the public to review and provide input on expenditure requests prior to the budget being finalized and adopted. The recommended actions approve resolutions adopting the FY 23/24 and FY 24/25 budgets for the: City, Utility, Azusa Public Financing Authority, and Successor Agency of the Former Redevelopment Agency of the City of Azusa, and also revises the General Fund Reserve Policy funding levels. Although the Council will approve the Biennial Budget for the two fiscal years initially, the Biennial Budget policy requires budget adoption by Council annually. The FY 2024/25 budget review will run concurrently with the standard Mid-Year budget review meeting in early 2024 for FY 2023/24 and Approved City Council June 19, 2023 FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 2 provide the opportunity for public review and comment and the Council to provide direction on any desired changes to the FY 24/25 budget before re-adopting it in June 2024. Council will continue to receive quarterly financial reports, multi-year financial projections, and extensive budget reviews during Mid-Year and public study sessions. RECOMMENDATIONS: Staff recommends the City Council take the following actions: 1)Adopt Resolution 2023-C30, A Resolution of the City Council of the City of Azusa adopting the biennial budget and approving appropriations for the City of Azusa for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025; 2)Adopt Resolution 2023-UB01, A Resolution of the Utility Board of the City of Azusa adopting the biennial budget and approving appropriations for Utilities for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025; 3)Adopt Resolution 2023-P1, A Resolution of the Azusa Public Financing Authority of the City of Azusa adopting the biennial budget and approving appropriations for the City of Azusa for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025; 4)Adopt Resolution 2023-R08, A Resolution of the Successor Agency for the Former Redevelopment Agency of the City of Azusa adopting the biennial budget and approving appropriations for the City of Azusa for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025; and 5)Adopt Resolution No. 2023-C31, A Resolution of the City Council of the City of Azusa adopting a revised General Fund Reserve Policy. ANALYSIS: The City Council held a budget study session on May 30th to review the preliminary operating budget and Capital Improvement Plan. At that time, an in-depth overview of the upcoming two fiscal years including assumptions, charts, and changes from prior years was presented. The City Council asked questions and made comments with regard to the proposed budget. Since the budget study session, a few additions were made to the budget: •$35,280 Electric Forklift for Central Stores in the Purchasing Division under account 1045830000-7140 (FY 23/24) •$315,888 Backyard Digger for Electric Distribution under account 3340733680-7140 (FY 23/24) •$25,000 (FY 23/24) and $18,000 (FYs 23/24 and 24/25) Accounts Payable automation BOT implementation and ongoing maintenance under accounts 1045810000-6399 and 1045810000- 6504, respectively •$12,000 Utilities grant writing services under account 3140711903-6933 (FYs 23/24 and 24/25) FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 3 As a result of these changes, you will see revenue and expenditure amounts have changed slightly in some funds since the study session, but these changes are only a result of the above additions being partially chargeable to other funds for internal support services provided. However, the overall fiscal outlook remains the same. GENERAL FUND OVERVIEW: 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. The proposed FY 23/24 and 24/25 budgets are balanced with projected surpluses, reflect continued service enhancements for the Azusa community and the City’s commitment to upgrading community centers and parks and providing quality public safety. However, the budgets do not reflect three areas which will shorten the projected operational surpluses from year- to-year and excess reserve levels beyond designated targets: 1) increases to costs beyond our control – contract services, construction, and materials; 2) implementation of recommended changes for the pending comprehensive classification and compensation study; and 3) impacts of labor negotiations for the eight contracts expiring during this biennial budget period. The Fiscal Year 2023/24 budget forecasts revenues of $63,115,961 and proposes expenditures of $60,296,897, a surplus of $2,819,064. Requests in excess of normal operations and significant budget changes include: • Capital improvement projects of $1,392,876, including $200,000 to create a Community Resources satellite service area in the southern part of the City • Capital Outlays of $642,404 • Personnel additions of 5.91 net full-time equivalent (FTE) positions totaling $801,489 • Celebration event(s) funds of $125,000 for the City’s 125th Anniversary • Allocation of $100,000 for non-profit support programmed in Neighborhood Services • Increase of $1.1M or 17% for LA County Fire contract The Fiscal Year 2024/25 budget forecasts revenues of $64,274,971 and proposes expenditures of $61,772,702, a surplus of $2,502,269. Requests in excess of normal operations include: • Capital improvement projects of $1,272,753, including $400,000 to establish a local farmer’s market • Capital Outlays of $894,453 • Personnel additions of 1.05 net full-time equivalent (FTE) positions totaling $124,500 The following is a high-level overview of General Fund revenues by type and expenditures by department, including variances from year-to-year. Revenues and Transfers In The City’s revenue base continues to be diverse with no major fluctuations in any category. Revenues are closely monitored to ensure contractual obligations to the City are met. Three of the largest revenue categories are property tax, sales and transaction use taxes, and other taxes which is comprised mainly of FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 4 transient occupancy taxes (TOT) and utility and landfill franchise fees. Table 1 shows overall revenues in aggregate are expected to increase by a total of $2.8 million. Increased home values and inflation of goods and commodities is one of the driving factors for the steady increases. Table 1 – General Fund Revenues REVENUE SOURCE REVISED BUDGET FY 22-23 PROJECTED ACTUALS FY 22-23 PROPOSED BUDGET FY 23-24 PROPOSED BUDGET FY 24-25 BUDGET $ VARIANCE 23 TO 24 BUDGET % VARIANCE 23 TO 24 % OF BUDGET FY 23-24 Property Tax 14,544,731$ 14,517,134$ 15,325,616$ 15,692,078$ 780,885$ 5.4% 24.3% Sales Tax 8,085,572 8,316,659 8,227,992 8,439,747 142,420 1.8% 13.0% Utility User Tax 3,000,000 3,100,000 3,100,000 3,100,000 100,000 3.3% 4.9% Transaction Use Tax 7,182,635 7,560,000 7,553,000 7,747,000 370,365 5.2% 12.0% Other Taxes 11,282,937 12,592,395 12,483,771 12,653,156 1,200,834 10.6% 19.8% License & Permit 3,077,283 3,242,931 3,104,285 3,104,285 27,002 0.9% 4.9% Fines & Penalties 1,253,250 1,306,250 1,220,500 1,220,500 (32,750) -2.6% 1.9% Money & Property Use 2,559,199 2,920,899 2,898,040 2,899,120 338,841 13.2% 4.6% Cost Reimbursements 58,000 64,580 20,700 20,700 (37,300) -64.3% 0.0% Charges for Services 5,971,965 6,893,367 6,379,820 6,484,341 407,855 6.8% 10.1% Miscellaneous 811,864 858,206 671,100 671,100 (140,764) -17.3% 1.1% Subtotal Revenues 57,827,436$ 61,372,422$ 60,984,824$ 62,032,026$ 3,157,387$ 5.5% 96.5% Transfers In 2,535,660 2,535,660 2,131,136 2,242,945 (404,524) -16.0% 3.5% Total Revenues 60,363,096$ 63,908,082$ 63,115,961$ 64,274,971$ 2,752,864$ 4.6% 100.0% Expenditures and Transfers Out Actions the Azusa City Council took starting in 2018 as part of an in depth, comprehensive Fiscal Sustainability Assessment to create long-term budget stability and to continue to address the needs of the growing Azusa Community, has resulted in a strong financial position for the City. Expenditure requests are prudent and propose only what is needed to meet the goals and priorities set by the Council. The City’s financial condition and the impacts of the State of California and the national economies were factored into the development of the biennial budgets. Inflation, a competitive job market, state mandates, and aged infrastructure were the most prominent factors in developing the budget. Table 2 shows expenditure requests by department, with variances resulting mainly from contractual labor obligations. Overall, the FY 2023/24 proposed budget reflects a decrease of $14.0 million compared to FY 2022/23 due to removal of one-time budgeted: $13.0 million for extraordinary capital improvement projects, $500,000 for a small business support grant program, and $6.0 million ARPA transfers, offset by an increase to the Citywide cost center for removal of -$2.1 million salary savings budget and a $1.1 million increase in the LA County Fire contract. FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 5 Table 2 – General Fund Expenditures DEPARTMENT REVISED BUDGET FY 22-23 PROJECTED ACTUALS FY 22-23 PROPOSED BUDGET FY 23-24 PROPOSED BUDGET FY 24-25 BUDGET $ VARIANCE 23 TO 24 BUDGET % VARIANCE 23 TO 24 % OF BUDGET FY 23-24 Administration City Council 161,835$ 162,826$ 177,625$ 177,625$ 15,790$ 9.8% 0.3% City Manager 722,810 677,125 910,585 927,365 187,775 26.0% 1.5% Neighborhood Services 531,523 532,140 157,250 32,350 (374,273) -70.4% 0.3% City Clerk 669,430 574,031 752,263 831,054 82,833 12.4% 1.2% City Treasurer 146,880 146,352 149,135 149,135 2,255 1.5% 0.2% City Attorney 372,160 375,000 315,000 315,000 (57,160) -15.4% 0.5% Administrative Services Accounting 1,260,009 1,451,269 1,618,995 1,641,461 358,986 28.5% 2.7% Purchasing 292,711 306,955 420,968 395,725 128,257 43.8% 0.7% Printing 8,850 8,750 8,750 9,000 (100) -1.1% 0.0% Citywide (excludes POBs)2,666,630 5,197,198 5,843,759 5,792,927 3,177,129 119.1% 9.7% HR-Personnel Relations 827,272 847,304 906,829 908,550 79,557 9.6% 1.5% Library Services 1,465,560 1,379,350 1,852,325 2,039,431 386,765 26.4% 3.1% Safety (excludes Fire Services)20,931,304 19,483,253 20,939,871 21,838,938 8,567 0.0% 34.7% Economic Development 4,971,212 3,628,752 4,325,323 4,262,134 (645,889) -13.0% 7.2% Community Resources 2,799,988 2,477,211 3,865,911 3,981,788 1,065,923 38.1% 6.4% Public Works 4,076,274 3,747,238 3,956,355 4,144,539 (119,919) -2.9% 6.6% Subtotal Expenditures 41,904,446$ 40,994,752$ 46,200,942$ 47,447,021$ 4,296,494$ 10.3% 76.5% Transfers Out (ARPA funds)5,943,272 5,943,272 - - (5,943,272) -100.0% 0.0% Fire Safety Contract 6,340,707 6,340,707 7,428,671 7,577,244 1,087,964 17.2% 12.5% Pension Obligation Bonds 4,750,942 4,750,942 4,749,972 4,748,436 (970) 0.0% 7.9% Capital & Infrastructure Replacement (Outlays)1,691,597 2,253,882 524,436 894,453 (1,167,161) 0.0% 0.9% Capital & Infrastructure Replacement (CIP)13,597,285 13,597,285 1,392,876 1,105,547 (12,204,409) 0.0% 2.3% Total Expenditures 74,253,731$ 73,880,840$ 60,296,897$ 61,772,702$ (13,956,836)$ -18.8% 100.0% While Table 2 provides forecasts by Department as it relates to General Fund expenditures, some of the above listed Departments in addition to other Departments have costs funded by non-General Fund sources or special revenues. Later in this report, an overview of major initiatives by Department, citywide capital outlay, CIP and personnel change requests is provided. General Fund Reserves Analysis and Policy Through continued prudent policy decisions made by the City Council, implementation of best practices, and sound financial management, the General Fund’s cash reserve position allows the City to maintain core services and enhance programs and services for the Community while operating with a balanced budget and projected surpluses. The Council has made several decisions that have positively impacted the City’s financial position. • On January 24, 2022, Council authorized the set aside of $1.5 million to establish a trust account to address future increases in Other Post-Employment Benefit (OPEB) costs – the OPEB trust has been established with PARS and was funded in January 2023 with an initial investment of $1.5 million. With the combined efforts of renegotiating retiree medical provisions with the city’s eight collective bargaining groups and the establishment of the Trust, the City’s OPEB liability has decreased by $11M or 18% from $60.6M to $49.6M. Although, the initial $1.5 million contribution was from designated reserves, the proposed budget includes $1.0 million in each budget year for contribution to the Trust. • On February 22, 2022, Council obligated the approximately $12 million ARPA funds by adopting a resolution to designate $10 million towards general government services and the balance of approximately $2 million to address impacts related to the local unsheltered FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 6 population. – the projected reserves balances reflect these one-time funds and provides additional cash flow to one-time needs such as extraordinary capital improvements. • On Saturday, April 15, 2022, the City Council held a special meeting and toured several city facilities including: Library, Senior Center, Memorial Park and North Recreation Center, Women’s Club, Scout House, potential dog park location, and a city-owned property located behind 325 S. Azusa Ave., and on April 25, 2022 approved allocation of $13,035,000 to fund improvements to these facilities. – These are multi-year projects in which budgets will be carried forward until completed. These directives are reflected in the revenue and expenditure projections previously discussed. And still, with Council’s approval to make significant investments in modernizing Azusa’s public facilities and tackling long-term debt, the General Fund’s reserves forecasts remain strong. The General Fund Reserve Policy consists of four categories to mitigate risk in high liability exposure areas such as claims expenses, aging infrastructure, and for rising costs in retiree benefits. Each budget year, Staff recommends the City Council reaffirm or updates the reserve policy given current financial forecasts and economic trends. The proposed FY 23/24 and 24/25 budgets forecasts ending reserve balances of $47.1 and $49.6 million, respectively, of which over $24 million is designated in accordance with the current reserve policy funding levels. Given inflationary trends and the General Fund’s overall financial condition, Staff recommends the City Council update reserve funding levels for Fiscal Years 2023/24 and 2024/25 as shown in Table 3. Table 3 – General Fund Internally Restricted Reserves and Funding Levels Reserve Category Purpose Current Reserve Levels FY 2023/24 Recommended Levels FY 2024/25 Recommended Levels Budget Stabilization and Catastrophic Event Reserve To mitigate costs due to annual budget revenue shortfalls as a result of changes in economic environment and/or one-time expenditures and unforeseen emergencies or catastrophic events 30% of budget or $18.3 million 35% of budget or $21.1 million 40% of budget or $24.7 million Capital Assets & Infrastructure Replacement Reserve To use for replacement of capital assets and infrastructure such as facilities, IT upgrades, and fleet operations $2.0 million $2.5 million $3.0 million Insurance Reserve To fund unanticipated liability and worker’s compensation claims up to City’s $150K (GL) or $250K (WC) SIRs per claim $2.5 million $3.0 million $3.5 million Retiree Benefits Reserve To mitigate impacts on the City’s future budgets that may arise from increased retiree benefit costs (pension and medical) $2.0 million $2.0 million $2.0 million A summary of forecasted budget results and estimated reserve balances are shown in Table 4. If Council adopts the recommended reserve level updates, ending 23/24 and 24/25 fiscal year balances are estimated to remain above the total Reserves Target by $16.5 million and $14.4 million, respectively. FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 7 Table 4 – General Fund Reserves Analysis CURRENT RESERVES LEVELS RECOMMENDED RESERVES LEVELS REVISED BUDGET FY 22-23 PROJECTED ACTUALS FY 22-23 PROPOSED BUDGET FY 23-24 PROPOSED BUDGET FY 24-25 PROPOSED BUDGET FY 23-24 PROPOSED BUDGET FY 24-25 Total Revenues 60,363,096 63,908,082 62,824,748 63,879,475 63,115,961 64,274,971 Total Expenses 59,218,731 58,845,840 59,878,957 61,598,027 60,296,897 61,772,702 Normal Operating Surplus or (Deficit)1,144,365$ 5,062,242$ 2,945,791$ 2,281,448$ 2,819,064$ 2,502,269$ Discretionary Uses from Excess Reserves: Small Business Support Program (500,000) (500,000) Initial OPEB Trust Contribution (1,500,000) (1,500,000) Extraordinary Capital Projects (13,035,000) (13,035,000) Total Sources or (Uses) of Reserves (13,890,635)$ (9,972,758)$ 2,945,791$ 2,281,448$ 2,819,064$ 2,502,269$ Beginning Reserves Balance 54,260,906 54,260,906 44,288,148 47,233,939 44,288,148 47,107,212 Ending Reserves Balance 40,370,271$ 44,288,148$ 47,233,939$ 49,515,387$ 47,107,212$ 49,609,481$ Less: Internally Restricted Reserves Target 24,813,400 24,813,400 24,463,687 24,979,408 28,603,914 33,209,081 Less: ARPA Funds Restricted for Homelessness Initiatives 1,954,843 1,954,843 1,954,843 1,954,843$ 1,954,843 1,954,843$ Reserves In Excess/(Short) of Restricted Funds 13,602,028$ 17,519,905$ 20,815,409$ 22,581,136$ 16,548,455$ 14,445,557$ DEPARTMENT HIGHIGHTS: The City has nine departments that perform a wide variety of services. Citywide, for FY 2023/24 forecasted revenues are $188.0 million and proposed expenditures are $207.2 million. For FY 2024/25 forecasted revenues are $186.3 million and proposed expenditures are $201.9 million. Expenditures in excess of revenues are funded by accumulated fund balances and are mostly for multi-year capital improvement projects. Following are key departmental initiatives for the biennial budget period: Administration The Administration Department includes operations, programs, and services related to City Council, City Clerk's Office, City Treasurer, City Attorney, Office of the City Manager, and program areas including Neighborhood Services, City Communications, Legislative Affairs, and Public Education and Government Access. Funding of capital assets and infrastructure replacement is also managed out of this department. Key priorities and initiatives of the Administration Department for FY 23/24 and 24/25 include but are not limited to: Continue to ensure the long-term financial sustainability of the City; Support the development and implementation of strategies which stand to improve overall quality of life issues in the community; Proactively address community health and safety issues, including implementation of efforts to address issues of the local unsheltered population and homeless prevention/diversion; Invest in local infrastructure, public facilities, the Downtown, and support of the small business community; Administer the November, 2024 General Municipal Election; the Coordination of events and activities to commemorate the City’s 125th anniversary; and establish a local farmer’s market. Administrative Services The Administrative Services Department is responsible for the Finance, Human Resources and Risk Management operations of the City. Its 23/24 and 24/25 fiscal year budgets reflect continued compliance with all mandated financial reporting requirements and commitment to provide transparency and accountability to the Azusa community on the City’s use and management of its resources. These commitments are accomplished by continuing education to stay apprised of governmental reporting standards and regulations and also by providing timely and accurate financial reports to the public. FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 8 Key goals for the Finance Division for FY 23/24 and FY 24/25 are implementation of all required GASB pronouncements to ensure the City stays compliant with governmental accounting standards and to continue to increase efficiencies in payment processing through technology. Staff also expects to kick-off comprehensive cost of service and development impact studies. Key goals of Human Resources and Risk Management is implementation of a citywide classification and compensation study, improving the recruitment, selection and onboarding process, workforce development, safety, and loss prevention. All eight of the City’s collective bargaining agreements expire during the biennial budget years so labor negotiations will be also be a key focus for the Department. Community Resources Community Resources oversees the City’s Recreation, Senior Services, Family Services, and Transportation Divisions. These Divisions work closely with each other as well as other City Departments to best serve Azusa residents. A major focus for Fiscal Year 2023/24 and 2024/25 is to further aid Azusa residents of all ages and backgrounds in living a healthier, more balanced life. The All in for Azusa (AIFA) is an initiative facilitated by the City of Azusa and has the goal of creating a network of care for residents so that they may be ready to take on any community challenge, and to increase access to ongoing services. Currently, AIFA is a collaborative effort made up of more than 40 partners including representatives from government, health care, education, nonprofit, the faith community, service clubs, residents, and the business community. Areas of priority have included recreational sports clinics, emotional well-being programs, teen chat programs, STEM and workforce development programming, in addition to social activities and family nights. Program expansion in all divisions is key for the next two fiscal years as trends are picking up to pre- pandemic levels for all activities. Special emphasis will be placed on expanding special events, recreational sports programs in partnership with Azusa Unified School District and other partners, and the development of an Aging and Disability Strategic Plan. Economic & Community Development The Economic & Community Development Department (ECD) manages the built environment by ensuring projects are planned, designed, constructed, and maintained in both safe and appealing manner. The Department is also responsible for attracting new businesses to the city while ensuring existing ones have opportunities to grow and succeed. ECD will continue to improve the development process with efficiency through the implementation of its new Land Management System GovSense. Additionally, work in Downtown Azusa will continue with the ongoing construction of projects such as the Lumia, just north of the L Line Metro Stop. Further opportunities in the Downtown are also on the horizon. The Director will be focused on identifying opportunities to further galvanize Azusa as a premier destination. These opportunities will include implementation of the Phase One Downtown Streetscape Plan, along with making sure the Department is proactive in matters of maintaining cleanliness in the City’s core. To continue, the Department is currently in the process of obtaining State approval of its Housing Element, when complete, this will usher the next critical step of planning for the City’s future as an update to the City’s General Plan will kick off. With many new projects under construction and in the pipeline, along with the beginnings of a new General Plan, the time is right to continue the refresh and update to the City’s brand and image as part of the Department’s work over the next fiscal year. Part of the branding effort will task the new Economic Development Specialist with FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 9 creating a template and roadmap to help the development community navigate the permitting and construction process with ease. The Community Improvement Team will continue to focus on deferred private property concerns and address them in a compassionate and timely fashion. Finally, to address ongoing challenges of illegal street vending and the heavy impacts related to those who are unsheltered, ECD is requesting an additional community improvement inspector to address these issues. Information Technology The Department of Information Technology provides leadership citywide in the development of smart, cost‐effective technical services and business solutions. Through strategic planning Information Technology works closely with all City departments to assist in meeting their many goals and objectives. The department provides management and support of technology infrastructure, including voice and data networks, data security, software and hardware support, a 24/7 virtual City Hall of information and services via WEB and social media to the community. For FY23/24 Information Technology will begin the 2-year implementation of Microsoft Office 365 and Active Directory. This project will deliver a cloud-based productivity platform that will replace the City’s existing legacy email system and give us access to the latest productivity applications from Microsoft. In addition to the department’s initiatives to improve the City’s data backup retention and a new cloud-based disaster recovery service for Utility Billing, Information Technology will be undergoing a complete redesign of the city website. The new website will not only employ a modern design, but will be built with the community in mind; offering ease of access to information, resources, and city services. In FY 24/25 the department will be completing the transition to Microsoft 365, focusing on enhanced security measures, including a full network security audit. Information Technology believes meeting these goals will provide meaningful impact through smart uses of technology in service of employees and the community we serve. Library The Azusa City Library is forging ahead in establishing a continuum of services for patrons of all ages and walks of life. Targeted goals for FY 23/24 include increasing organizational capacity by collaborating with local and regional partners, leveraging grant opportunities to create multiple funding streams that support new and innovative programming, offering Inspired Citizenship, Grassroots ESL, and Digital Literacy classes at multiple community sites to promote lifelong learning and civic engagement, and expanding the reach of Neighborhood Connections and Prevention and Diversion services through increased funding. The addition of a Senior Librarian for FY 23/24 will further meet community needs for targeted programs and grant acquisition and implementation. A Part Time Youth Services Librarian will address the growing need for outreach and programming for young adults. The FY 24/25 budget year will see the completion of the CA state grant-funded Outdoor Learning Center project as the next round of improvement projects will begin, resulting in upgrades to the Library building. Increasing access to Library materials and programs in underreached areas of Azusa will be a main focus of the Youth Services division. To facilitate this goal, the Library will partner with newly reorganized school sites via the Bookmobile while the Library team will increase outreach efforts. The anticipated outcomes from FYs 23/24 and 24/25 are: a community destination with a new Outdoor Learning Center, a more efficient Library building through strategic CIP upgrades, pop-up Library services in the community, and more community members benefitting from Library services. FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 10 Light & Water The City of Azusa Light & Water Department prides itself on the safe and reliable distribution of electric power and supplying water to its customers that meets or exceeds all regulations. The Light & Water Department strives to accomplish major initiatives during the upcoming fiscal years. The Electric division initiatives include developing and implementing the Azusa Electric Facility Mapping system for efficiently maintaining the electric distribution system, to be 100% compliant with local, state, and federal regulations and legislations - including the Cap and Trade program and Wildfire Mitigation Plan, install a new underground electric line extension to support growth, and maintain system infrastructure to sustain reliable service. The Electric division will continue to implement initiatives to ensure Azusa is aligned with the State of California’s electrification initiative, with a heavy emphasis to ensure that not only city fleets be supported but that access to electric vehicle charging infrastructure is available to the business community, residents and visitors to Azusa. The Water division initiatives include diversifying the water resource portfolio, designing the Aspan Groundwater Treatment and Well Rehabilitation project, and starting the South Reservoir project. A major challenge for the Water Utility is addressing a heavy back log of deferred maintenance, while mitigating the financial impacts to customers. Finally, the Water Division will continue educating and communicating to its customers about local water supply, state drought cycles, and conservation as a way of life. The Light & Water department looks forward to accomplishing these major initiatives along with its other strategic goals and objectives. Public Safety The Azusa Police Department’s goals for the 23/24 and 24/25 fiscal years are to continue addressing the following three (3) policing priorities: 1) Traffic-related issues, 2) Gang and graffiti crimes, and 3) Homelessness. The Police Department will continue integrating drone and camera technology programs to assist in policing efforts. The Police Department will continue to increase our community outreach and community education efforts through the use of social media and pre-planned events, as well as continue to provide training and education to community partners (Community Police Academy). The Police Department is also committed to taking proactive steps to protect our community from the dangers of Fentanyl and other narcotics by partnering with our local, state, and federal partners. Internally, continued training and development of staff is also a key focus to ensure organizational stability, as well as to ensure our staff is properly equipped with the tactics and tools needed when assisting the community. Public Works The Public Works Department is continuing its momentum improving the City's roadways, public right of way, and City facilities. The Arrow Highway Median Installation project and Residential Resurfacing Project will be completed in the early part of fiscal year 23/24. These projects will include repair of curb & gutter, sidewalks, asphalt pavement as well as ADA upgrades and installation of drought tolerant landscaping. Pioneer Park will have its playground replaced and will include some new features to promote childhood health and wellness. Facilities upgrades will also be a major focus for the Department as the City looks to modernize its existing facilities. Fiscal Year 23/24 will focus primarily on the Dog Park, Library, Scout House, and Senior Center. Fiscal Year 24/25 will wrap up the City Facility Modernization Program by upgrading Memorial Park and the Women’s Club. A full copy of the City’s proposed budget by Department can be found on our website at: https://www.ci.azusa.ca.us/2012/FY2024-25-Proposed-Biennial-Operating-Bu. FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 11 CITYWIDE CAPITAL OUTLAYS Citywide capital outlay requests for FY 23/24 and 24/25 total $4.6 million, of which $1.5 million is proposed to be funded by the General Fund. Major outlays over the two-year period include: • Eight PD replacement vehicles and retrofits ($638K) • Three PD Drones ($242K) • New PD Furniture for North and South Buildings ($295K) • Disaster Recovery for Utility Billing ($90K) • Microsoft Licensing for O365 ($320K) • Client First IT Consulting Services ($212K) • IT Unitrends Back Up Expansion ($190K) • Public Works Asphalt Patch Truck ($350K) • Public Works John Deere Tractor Skip Loader ($167K) • Water Hydro Excavator ($1M) • Community Resources Ford F250, Electric Cargo Van, and Transit Van ($209K) Details of the proposed citywide capital outlay budget for Capital Outlays can be found in the online budget document. Citywide Capital Improvement Projects (CIP) Staff proposes a 5-year Capital Improvement Plan totaling $91.6 million Citywide. The total 2-year proposed CIP budgets for 23/24 and 24/25 are $42.0 million Citywide, of which $2.7 million is to be funded by the General Fund. Of the $42.0 million in projects for the biennial budget years, special revenue funding sources for some projects still need to be identified, and therefore are unfunded totaling $1.1 million. Some of the major funded projects proposed for FYs 23/24 and 24/25 include: General Fund Projects from Capital & Infrastructure Replacement Reserves • Slauson Pool Remodel ($150K) • Police Department Facility Improvements ($116K) • Farmer’s Market ($400K) • City Hall Upgrade Phase 4 ($1.2M) • Veteran’s Freedom Park Restroom Remodel ($450K) • Community Resources Satellite Center for Southern Azusa ($200K) Projects from Non-General Fund Sources • Foothill Boulevard Pavement Rehabilitation ($2.8M) • Gladstone Street Pavement Rehabilitation ($1M) • Pioneer, Memorial, and Veteran’s Parks Playground Equipment with Shade ($690K) • 9TH Street Storm Drain Improvements ($310K) • MS4 Permit Compliance ($1.1M) • Sewer Master Plan Update ($660K) • San Gabriel Ave 2-Way Conversions plans, specs and engineering only ($440K) FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 12 • Old Schoolhouse and Historic Row ($2.9M) • Well Rehabilitation Program – Aspen ($3.5M) • South Reservoir Design & Build ($6.1M) • Membrane Filter Replacements ($1.2M) • Electric Line Replacements & Extensions ($2.5M) • Kirkwall and Azusa Substation Facility Improvements ($1M) In the current FY 2022/23, Council approved $13.0M in extraordinary community facilities upgrades to be funded by excess reserves. Below is a brief status update on those projects: General Fund Projects from Excess Reserves • Senior Center Remodel ($4M) – Mechanical assessment underway; Concept Design RFP is under Review • Women's Club ($750K) - Mechanical assessment underway • Scout House ($750K) - Mechanical assessment underway • Citywide Sidewalk Improvements ($1M) – $700,000 assigned to concrete improvements in residential resurfacing project to be completed by December 2023. Remaining funds to be utilized for sidewalk repair in Foothill Blvd. Pavement Rehab Project to maximize efficiencies • Dog Park ($750K) Final Concept Design pending June 5 Council Meeting, Additional funding requested with FY 23/24 budget. RFP for Construction projected Summer 2023 with Groundbreaking Fall of 2023 • Library Improvements ($2M) – Library mechanical systems assessment underway. Outdoor learning classroom designs completed. Staff pursing additional grant funding toward the project. Construction estimated FY 23-24 • Downtown Improvements ($785K) – Design firm performed existing conditions analysis. Design alternatives taken to Commission(s) for initial input. Staff to incorporate feedback and bring final recommendations to Council in the next few months • Memorial Park Improvements ($3M) – Mechanical assessment underway Details of the proposed citywide 5-year capital improvement plan can be found in the online budget document. PROPOSED PERSONNEL CHANGES As the Azusa community and amenities expand, demands on city staff for continued high-level customer service and support is also increasing. Citywide proposed personnel changes for FY 23/24 and FY 24/25 are net full-time equivalent (FTE) position increases of 8.16, including full-time and part-time positions, totaling a net budget increase of $1,160,820, of which 5.91 FTEs and $925,989 is the proposed General Fund impact. New full-time position requests include: FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 13 Fiscal Year 2023/24 • Senior Project Manager • Storekeeper • Community Resources Supervisor - Senior and Family Services • Community Resources Supervisor – Recreation • Information Technology Manager – Network Systems • Information Technology Manager – GIS Systems • Community Improvement Inspector • Police Civilian Investigator • Senior Librarian – Adult Services • Administrative Technician (Public Works) • Park Maintenance Worker I • Customer Service Representative I Fiscal Year 2024/25 • Police Records Specialist • Library Assistant I/II/III The proposed position changes are offset by elimination of some part-time and retired positions. There are also reclassification requests to support changes in the management structure of some departments. These personnel requests reflect the growing needs of the community such as addressing the impacts of those experiencing homelessness, providing oversight and project management for critical infrastructure projects, expanding programs and services, and addresses recruitment, retention and succession needs. Tables 5 and 6 provides an overview of the requests by departments, which are detailed in the Budget Summaries attached to this report. FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 14 Table 5 – Personnel Requests Summary Fiscal Year 2023/24 Fund Department FTE Total Cost GENERAL FUND Administration 0.32 92,280 Administrative Services 0.50 65,770 Community Resources 2.00 216,730 Economic & Community Development 1.00 93,660 Information Technology 0.25 725 Library 1.00 130,710 Public Safety 1.00 110,380 Public Works (0.16) 91,234 General Fund Total 5.91 801,489$ GRANTS FUND Administration 0.20 60,000 Grants Fund Total 0.20 60,000$ Gas Tax Public Works - 5,425 Gas Tax Total - 5,425$ SEWER IT - Sewer 0.25 36,185 Public Works - 6,030 Sewer Total 0.25 42,215$ LIGHT AND WATER IT - Light & Water 0.50 36,915 Consumer Services 0.25 46,835 Electric - 43,440 Light & Water Total:0.75 127,190$ GRAND TOTAL ESTIMATED IMPACT:7.11 1,036,320$ Table 6 – Personnel Requests Summary Fiscal Year 2024/25 Fund Department FTE T otal Cost GENERAL FUND Library 0.05 38,915 Public Safety 1.00 85,585 General Fund Total 1.05 124,500$ GRAND TOTAL ESTIMATED IMPACT:1.05 124,500$ A comprehensive overview of the City’s personnel plan be found in the online budget document. OVERALL FISCAL PICTURE: The proposed Biennial Fiscal Year 23/24 and Fiscal Year 24/25 General Fund budgets are balanced with an estimated surplus of $2.8 million and $2.5 million, respectively, and overall cash reserve balances are projected at $47.1 million and $49.6 million, respectively. If Council approves Staff’s recommended General Fund Reserve Policy updates, undesignated reserves are estimated at $16.5 million for FY 23/24 and $14.4 million by end of 24/25. As a reminder, the FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 15 budgets do not include some costs, which are inflation on services and materials beyond our control, implementation of the class and comp study, and impacts of upcoming labor negotiations, all of which will shorten the projected operational surpluses and excess reserve levels from year-to-year. City-wide, the Fiscal Year 2023/24 Proposed Operating and Capital Improvement Budget is $207,238,843 (including Internal Services) with Transfers of $9,881,806 as follows: Table 7 – City-wide Expenditures by Fund Type Agency Operating & Capital Outlays Transfers Capital Improvement Projects Total Budget City 83,226,767$ 8,883,820$ 12,479,299$ 104,589,886$ Utilities (L&W)92,674,088 997,986 4,800,000 98,472,075 APFA - - - - Successor Agency 4,176,882 - - 4,176,882 Total Budget 180,077,737$ 9,881,806$ 17,279,299$ 207,238,843$ Table 8 – City-wide Expenditures by Agency Fund Type Operating & Capital Outlays Transfers Capital Improvement Projects Total Budget General 51,475,351$ 7,428,670$ 1,392,876$ 60,296,897$ Internal Services 16,019,728 596,526 - 16,616,253 Special Revenue 17,406,581 388,369 10,474,631 28,269,581 Debt Service 4,907,130 - - 4,907,130 Enterprise 86,092,066 1,468,242 5,310,000 92,870,308 Capital Projects Fund - - 101,792 101,792 Successor Agency 4,176,882 - - 4,176,882 Total Budget 180,077,738$ 9,881,806$ 17,279,299$ 207,238,843$ All other Funds have sufficient revenues and/or reserves on hand to cover proposed appropriations. Prepared by: Reviewed and Approved: Talika M. Johnson Sergio Gonzalez Director or Administrative Services City M anager FY 23/24 and FY 24/25 Biennial Budget and Revised Reserve Policy Adoption June 19, 2023 Page 16 Attachments: 1.Resolution 2023-C30, A Resolution of the City Council of the city of Azusa adopting the biennial budget and approving appropriations for the City of Azusa for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025 2.Resolution 2023-UB01, A Resolution of the Utility Board of the City of Azusa adopting the biennial budget and approving appropriations for Utilities for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025 3.Resolution 2023-P1, A Resolution of the Azusa Public Financing Authority of the City of Azusa adopting the biennial budget and approving appropriations for the City of Azusa for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025 4.Resolution 2023-R08, A Resolution of the Successor Agency for the Former Redevelopment Agency of the City of Azusa adopting the biennial budget and approving appropriations for the City of Azusa for the Fiscal Years commencing July 1, 2023 and ending June 30, 2025 5.Resolution No. 2023-C31, A Resolution of the City Council of the City of Azusa adopting a revised General Fund Reserve Policy RESOLUTION NO. 2022-C30 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA ADOPTING THE BIENNIAL BUDGET AND APPROVING APPROPRIATIONS FOR THE CITY OF AZUSA FOR THE FISCAL YEARS COMMENCING JULY 1, 2023 AND ENDING JUNE 30, 2025 THE CITY COUNCIL OF THE CITY OF AZUSA DOES RESOLVE AS FOLLOWS: SECTION 1. The preliminary biennial budget for the City of Azusa for the fiscal year commencing July 1, 2023 and ending June 30, 2025, presented and reviewed at a public workshop held May 30, 2023, is hereby approved and adopted as the budget of the City of Azusa for said fiscal year. SECTION 2. From the effective date of said budget, the several amounts stated herein as proposed expenditures shall be and become appropriated to the several departments, offices and agencies of the City for the respective objects and purposes therein set forth, subject to expenditure pursuant to the provisions of all applicable ordinances of the City and statutes of the State. Further, it is established that said departments, offices, and agencies of the City shall not exceed their respective budgets. SECTION 3. All appropriations in the 2022-2023 budget of the City not expended or encumbered hereby expire and terminate, except for those appropriations expressly continued and carried forward into the budget for 2023-2024. Appropriations for Capital Improvement Projects and Capital Outlay are hereby carried forward until project completion or equipment acquisition. SECTION 4. Pursuant to Government Code 37208, warrants drawn in payment of demands certified or approved by the City Clerk as conforming to a budget approved by ordinance or resolution of the City Council need not be audited by the City Council prior to payment. Budgeted demands paid by warrant prior to audit by the City Council shall be presented to the City Council for ratification and approval at the first meeting after delivery of the warrants. SECTION 5. The City Clerk shall certify as to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 19th day of June, 2023. ________________________________________ Robert Gonzales Mayor Attachment 1 ATTEST: _________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2023-C30 was duly adopted by the City Council of the City of Azusa at a regular meeting thereof, held on the 19th day of June 2023, by the following vote of the Council: AYES: NOES: ABSENT: COUNCILMEMBERS: COUNCILMEMBERS: COUNCILMEMBERS: _________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk APPROVED AS TO FORM: _________________________________ City Attorney Best Best & Krieger RESOLUTION NO. 2023-UB01 A RESOLUTION OF THE UTILITY BOARD OF THE AZUSA LIGHT AND WATER ADOPTING THE BIENNIAL OPERATING BUDGET AND APPROVING APPROPRIATIONS FOR AZUSA LIGHT AND WATER FOR THE FISCAL YEARS COMMENCING JULY 1, 2023 AND ENDING JUNE 30, 2025 NOW, THEREFORE, THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA DOES RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS: SECTION 1. The preliminary biennial budget for Azusa Light and Water ("Utility") for the fiscal year commencing July 1, 2023 and ending June 30, 2025, presented and reviewed at a public workshop held May 30, 2023, is hereby approved and adopted as the Utility budget for said fiscal year. A copy of said budget is hereby ordered to be filed in the office of the Secretary and shall be certified by the Secretary as having been adopted by this resolution. SECTION 2. From the effective date of said budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the respective objects and purposes therein set forth for Utility subject to expenditure pursuant to the provisions of all applicable ordinances of Utility and statutes of the State. Further, it is established that Utility will not exceed its budget. SECTION 3. All appropriations in the 2022-2023 budget of Utility not expended or encumbered hereby expire and terminate, except for those appropriations expressly continued and carried forward ("rebudgeted") into the budget for 2023-2024. Appropriations for Capital Projects and Capital Outlay are hereby carried forward until project completion or equipment acquisition. SECTION 4. Pursuant to Government Code 37208, warrants drawn in payment certified or approved by the Secretary as conforming to a budget approved by ordinance or resolution of Utility Board need not be audited by Utility Board prior to payment. Budgeted demands paid by warrant prior to audit by Utility Board shall be presented to the Utility Board for ratification and approval at the first meeting after delivery of the warrants. SECTION 5. The Secretary shall certify to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 19th day of June, 2023. ___________________________________________ Robert Gonzales Mayor Attachment 2 ATTEST: _________________________________ Jeffrey Lawrence Cornejo, Jr. Secretary/City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2023-UB01 was duly adopted by the Utility Board/City Council of the City of Azusa at a special meeting of the Azusa Light & Water Utility Board thereof, held on the 19th day of June, 2023. AYES: BOARD/COUNCILMEMBERS: NOES: BOARD/COUNCILMEMBERS: ABSENT: BOARD/COUNCILMEMBERS: _________________________________ Jeffrey Lawrence Cornejo, Jr. Secretary/City Clerk APPROVED AS TO FORM: _________________________________ City Attorney Best Best & Krieger 2 RESOLUTION NO. 2023-P01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE AZUSA PUBLIC FINANCING AUTHORITY ADOPTING THE BIENNIAL BUDGET AND APPROVING APPROPRIATIONS FOR THE AUTHORITY FOR THE FISCAL YEARS COMMENCING JULY 1, 2023 AND ENDING JUNE 30, 2025 THE BOARD OF DIRECTORS OF THE AZUSA PUBLIC FINANCING AUTHORITY DOES RESOLVE AS FOLLOWS: SECTION 1. The preliminary biennial budget for the Azusa Public Financing Authority for the fiscal year commencing July 1, 2023 and ending June 30, 2025, presented and reviewed at a public workshop held May 30, 2023, is hereby approved and adopted as the budget of the Azusa Public Financing Authority for said fiscal year. A copy of said budget is hereby ordered to be filed in the office of the Secretary and shall be certified by the Secretary as having been adopted by this resolution. SECTION 2. From the effective date of said budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the respective objects and purposes therein set forth for the Authority subject to expenditure pursuant to the provisions of all applicable ordinances of the Authority and statutes of the State. Further, it is established that the Authority will not exceed its budget. SECTION 3. Pursuant to Government Code 37208, warrants drawn in payment certified or approved by the Secretary as conforming to a budget approved by ordinance or resolution of the Authority Board need not be audited by the Authority Board prior to payment. Budgeted demands paid by warrant prior to audit by the Authority Board shall be presented to the Authority Board for ratification and approval at the first meeting after delivery of the warrants. SECTION 4. The Secretary shall certify to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 19th day of June, 2023. ________________________________________ Robert Gonzales Mayor Attachment 3 ATTEST: _________________________________ Jeffrey Lawrence Cornejo, Jr. Secretary/City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2023-P01 was duly adopted by the City Council of the City of Azusa at a regular meeting thereof, held on the 19th day of June, 2023, by the following vote of the Council: AYES: NOES: ABSENT: COUNCILMEMBERS: COUNCILMEMBERS: COUNCILMEMBERS: _________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk APPROVED AS TO FORM: _________________________________ City Attorney Best Best & Krieger RESOLUTION NO. 2023-R08 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY FOR THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF AZUSA ADOPTING THE BIENNIAL OPERATING BUDGET AND APPROVING APPROPRIATIONS FOR THE SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF AZUSA FOR THE FISCAL YEARS COMMENCING JULY 1, 2023 AND ENDING JUNE 30, 2025 THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF AZUSA DOES RESOLVE AS FOLLOWS: SECTION 1. The biennial operating budget for the Successor Agency of the former Redevelopment Agency of the City of Azusa ("Agency") for the fiscal year commencing July 1, 2023 and ending June 30, 2025, presented and reviewed at a public workshop held May 30, 2023, is hereby approved and adopted as the budget of the Agency for said fiscal year. A copy of said budget is hereby ordered to be filed in the office of the Secretary and shall be certified by the Secretary as having been adopted by this resolution. SECTION 2. From the effective date of said budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the respective objects and purposes therein set forth for the Agency subject to expenditure pursuant to the provisions of all applicable ordinances of the Agency and statutes of the State. Further, it is established that the Agency will not exceed its budget. SECTION 3. All appropriations in the 2022-2023 budget of the Agency not expended or encumbered hereby expire and terminate, except for those appropriations expressly continued and carried forward ("rebudgeted") into the budget for 2023-2024. Appropriations for Capital Projects and Capital Equipment are hereby carried forward until project completion or equipment acquisition. SECTION 4. Pursuant to Government Code 37208, warrants drawn in payment certified or approved by the Secretary as conforming to a budget approved by ordinance or resolution of the Agency Board need not be audited by the Agency Board prior to payment. Budgeted demands paid by warrant prior to audit by the Agency Board shall be presented to the Agency Board for ratification and approval at the first meeting after delivery of the warrants. SECTION 5. The Secretary shall certify to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 19th day of June, 2023. Attachment 4 ________________________________________ Robert Gonzales Chairman ATTEST: _________________________________ Jeffrey Lawrence Cornejo, Jr. Secretary STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2023-R08 was duly adopted by the Successor Agency of the former Redevelopment Agency of the City of Azusa, at a regular meeting thereof, held on the 19th day of June 2023. AYES: NOES: ABSENT: AGENCY MEMBERS: AGENCY MEMBERS: AGENCY MEMBERS: _________________________________ Jeffrey Lawrence Cornejo, Jr. Secretary APPROVED AS TO FORM: _________________________________ City Attorney Best Best & Krieger RESOLUTION NO. 2023-C31 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA ADOPTING A REVISED GENERAL FUND RESERVE POLICY WHEREAS, the City of Azusa ("City") desires to maintain current and comprehensive financial policies; and WHEREAS, the City adopted a formal General Fund Reserve Policy on April 20, 2015; and WHEREAS, the level of reserves and recommended uses are reviewed each year at budget adoption; and WHEREAS, the City desires to revise the amount of some of the reserve categories in the General Fund Reserve Policy (Attachment A) with the adoption of the Fiscal Year 2023/24 and 2024/25 Biennial Budget. THE CITY COUNCIL OF THE CITY OF AZUSA DOES RESOLVE AS FOLLOWS: SECTION 1. Approve and adopt the General Fund Reserve Policy attached hereto as Attachment A. SECTION 2. Authorize City staff to take all actions necessary to carry out the Policy. SECTION 3. The City Clerk shall c ertify as to the adoption of this resolution. PASSED, APPROVED and ADOPTED this 19th day of June, 2023. ________________________________________ Robert Gonzales Mayor Attachment 5 ATTEST: _________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2023-C31 was duly adopted by the City Council of the City of Azusa at a regular meeting thereof, held on the 19th day of June 2023, by the following vote of the Council: AYES: NOES: ABSENT : COUNCILMEMBERS: COUNCILMEMBERS: COUNCILMEMBERS: _________________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk APPROVED AS TO FORM: _________________________________ City Attorney Best Best & Krieger Revised 6-19-23 Attachment A CITY OF AZUSA GENERAL FUND RESERVE POLICY POLICY STATEMENT AND PURPOSE: It is the policy of the City of Azusa (City) to establish sound financial policies that are guidelines for prudent decision-making related to financial matters. The purpose of this policy is to establish a target minimum level of designated reserves in the General Fund to:  Reduce the risk of financial impacts resulting from a natural disasters or other catastrophic events;  Respond to the challenges of a changing economic environment, including prolonged downturns in the local, state, or national economy;  Demonstrate continued prudent fiscal management and creditworthiness; and  Provide funding stability for core services and infrastructure funded through the General Fund. BACKGROUND: General Fund reserves are classified into two categories: Restricted and Designated. Restricted reserves are those that are not considered available due to financial, accounting, or legal restrictions. Designated reserves are established by Council policy for an intended purpose and are available for use per Council direction. In addition, the Governmental Accounting Standards Board (“GASB”) Statement No. 54 defines five specific classifications of fund balance. The five classifications are intended to identify whether the specific components of fund balance are available for appropriation and are therefore “Spendable.” The classifications also are intended to identify the extent to which fund balance is constrained by special restrictions, if any. The five classifications are: CLASSIFICATIONS NATURE OF RESTRICTION Non-spendable Cannot be readily converted to cash Restricted Externally imposed restrictions Revised 6-19-23 Committed City Council imposed commitment Assigned City Manager assigned purpose/intent Unassigned Residual balance not otherwise restricted Restricted Fund Balance Components: • Non-spendable – resources which cannot be spent because they are either a) not in spendable form or b) legally or contractually required to be maintained intact. • Restricted – resources with constraints placed on the use of resources which are either a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or b) imposed by law through constitutional provisions or enabling legislation. Unrestricted Fund Balance Components: • Committed – resources which are subject to limitations the government imposes upon itself at its highest level of design making (City Council) and that remain binding unless removed in the same manner. • Assigned – resources neither restricted nor committed for which a government has a stated intended use as established by the City Council or a body or official (management) to which the City Council has delegated the authority to assign amounts for specific purposes. • Unassigned – resources which cannot be properly classified in one of the other four categories. The General Fund should be the only fund that reports a positive unassigned fund balance amount. GUIDING PRINCIPLES: Following sound financial practices and adhering to the Government Finance Officers’ of American (GFOA) recommendations, the City’s designated reserves include reserves for known and unknown contingencies, which take into consideration the:  Diversity of revenue base  Cyclical nature of revenue  Changes in community priorities  Frequency of budget surpluses/deficits  Cash flow management practices Revised 6-19-23 POLICY: General Fund Internally Restricted Reserves and Funding Levels The City will set aside funds into four (4) designated reserves to address unforeseen emergencies or disasters, significant changes in the economic environment, and key infrastructure and capital projects. These include the Budget Stabilization and Catastrophic Event Reserve, Capital Assets and Infrastructure Replacement Reserve, Insurance Reserve, and Retiree Benefits Reserve. Budget Stabilization and Catastrophic Event Reserve. Funds reserved under this category shall be used to mitigate, should they occur, annual budget revenue shortfalls (actual revenues less than projected revenues) due to changes in the economic environment and/or one-time expenditures that will result in future efficiencies and/or budgetary savings. Examples of “economic triggers” and one-time uses include, but are not limited to:  Significant decrease in property or sales tax, or other economically sensitive revenues;  Loss of businesses considered to be significant sales tax generators;  Reductions in revenue or increases in expenditures due to actions by the state/federal government;  Workflow/technical system improvements to reduce ongoing, personnel costs and enhance customer services;  One-time maintenance of service levels due to significant economic/budget constraints; and  One-time transitional costs associated with organizational restructuring to secure long-term personnel cost savings. Funds reserved under this category shall also be used to mitigate costs associated with unforeseen emergencies, including natural disasters or catastrophic events. Should a catastrophic disaster or loss of a significant source of the City’s property and sales tax revenue occur, the required reserve level should be adequate to meet the City’s immediate financial needs. For example, in the event of natural disaster, this Reserve would provide necessary coverage for basic operating expenses for a minimum of 120 days, including salary and benefits for safety and non-safety City employees, while still meeting debt service obligations. This time frame would enable the City to explore other available cash alternatives. Likewise, should the City experience a loss of a primary property tax payer or sales tax contributor, the reserve level in the Budget Stabilization and Catastrophic Event Fund would provide for a two-year transition period, giving the City adequate time to realign its operating costs with available resources, while minimizing service impacts. Should unforeseen and unavoidable events occur that require the expenditure of City resources beyond those provided for in the annual budget, the City Manager or designee shall have authority to approve appropriations from the Budget Stabilization and Catastrophic Event Revised 6-19-23 Reserve. The City Manager or designee shall then present to the City Council for authorization a budget amendment detailing the nature of the emergency or economic event triggering the appropriation of the reserve funds. The City’s minimum funding target for the Budget Stabilization and Catastrophic Event Reserve is set to 35% of the General Fund annual operating expenditures (minus one-time expenditures) for Fiscal Year 2023/24 and increases to 40% of the General Fund annual operating expenditures (minus one-time expenditures) for Fiscal Year 2024/25. After allocating a minimum funding target of the General Fund fund balance to the Budget Stabilization and Catastrophic Event Reserve, the City Manager or designee will recommend to City Council options for funding the remaining three (3) reserve accounts during the annual budget review and adoption process based on funds availability and assessed needs at that time. Capital Assets and Infrastructure Replacement Reserve. The City will maintain a Reserve for Capital Assets and Infrastructure Replacement. These reserves will be utilized to make major capital asset purchases such as information technology upgrades, fleet vehicles, and various equipment. Additionally, this reserve will be utilized to make improvements to and replacement of City buildings and infrastructure. Recommendations for use of these reserves will be made during the annual budget review and adoption process. This Reserve will be funded at $2,500,000 and $3,000,000 with the adoption of the Fiscal Year 2023/24 and 2024/25 budgets, respectively. It is the long-term goal of the City to build and replenish this reserve in an amount equal to the minimum annual funding levels or the estimated replacement cost of all City capital assets at the end of their design life and to use this reserve for such replacements. Insurance Reserve. The City will maintain a Reserve for Liability and Worker’s Compensation insurance claims. The City currently has a $150,000 Self-Insured Retention (SIR) for the Liability insurance program and a $250,000 SIR for the Worker’s Compensation insurance programs. This means, the City is responsible for the first $150,000 of all liability insurance claims and $250,000 of all worker’s compensation insurance claims, per claim, before the City’s insurance provider(s) will take on claim costs over the SIR. While the City does place into its annual budget some amounts for claims expenses, there is no way to predict if/when claims will be filed that incur costs beyond the City’s adopted budget. This reserve will provide set aside funding in the event claims expenses need to be paid above what the City anticipated during the annual budget review and adoption process. This Reserve will be funded at $3,000,000 and $3,500,000 with the adoption of the Fiscal Year 2023/24 and 2024/25 budgets, respectively. It is the goal of the City to maintain this reserve annually at the minimum funding level. Settlements of claims above the City Manager’s approval authority will still be brought before the City Council for approval. At that time, the City Manager or designee will report to Council whether the claims settlement will be covered by the budgeted claims appropriations or this reserve, or a portion thereof. Revised 6-19-23 Retiree Benefits Reserve. The City will maintain a Reserve for the funding of its long-term Retiree Benefits liabilities, such as pension and other-post-employment costs. Rising pension and medical costs places a constraint on the City’s annual budget. In order to mitigate the impacts on the City’s future budgets due to rising retiree benefits costs, funds are being set aside to pay for increased pay-as-you outlays, establish interest bearing trust accounts to be used in the event the City has trouble meetings its annual outlays for such benefits, or to be utilized to establish programs that will reduce the City’s long-term financial exposure for retiree benefits. This Reserve will be funded at $2,000,000 and $2,000,000 with the adoption of the Fiscal Year 2023/24 and 2024/25 budgets, respectively. It is the goal of the City to maintain this reserve annually at the minimum funding level. Future funding and uses of this reserve will be reviewed annually and recommendations for additional set aside amounts will be made each year by the City Manager or designee to the City Council during the budget review and adoption process subject to overall funds availability. The General Fund Reserve Policy, comprising of the four (4) Reserves is reviewed by the City Council as part of the annual budget review and adoption process. Appropriations of any General Fund internally restricted reserves require formal Council authorization. Replenishment of Budget Sustainability and Catastrophic Event Reserves In keeping with the principles discussed in this policy, when the Budget Sustainability and Catastrophic Event Reserves is used, City Council will develop a one (1) to five (5) year reserve replenishment plan to meet the minimum threshold of the Budget Sustainability and Catastrophic Event Reserves, amounting to at least 25% of the General Fund’s ongoing, operating expenditures prior to replenishing the other reserve funds. Excess Fund Balance At the end of each fiscal year, the Administrative Service Department Finance Division reports on the audited year-end financial results. Should actual General Fund revenues exceed expenditures and encumbrances, a year- end operating surplus shall be reported. Any year-end surplus that results in the General Fund fund balance exceeding the minimum Budget Sustainability and Catastrophic Event Reserve level required by this reserve policy shall be available for allocation for the following, subject to Council approval: Offset projected future deficits Anticipated intergovernmental fiscal impacts One-time funding, non-recurring needs Loan repayment acceleration Upon funding of the above, the division of remaining surplus balances shall be recommended to the City Council by the City Manager or designee, between the Capital Assets and Infrastructure Replacement, Insurance, and Retiree Benefits Reserves, based on most critical needs at that time.