Title
Adoption of Resolution Approving and Adopting Midcycle Changes to the City of Alameda Budget for Fiscal Year 2024 25; [City Council]
Adoption of Resolution Approving and Adopting Amendments to the Fiscal Year 2024-25 Budget [SACIC]; and
Adoption of Resolution Approving Workforce Changes and Amending the Management and Confidential Employees Association Salary Schedule in Fiscal Year 2024 25 Effective July 1, 2024. [City Council] (Finance 10024054)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
The Citywide budget outlines the City of Alameda’s (City) fiscal plan for the upcoming fiscal year, as well as the level and type of services to be provided. On June 20, 2023, City Council adopted the Biennial Budget for Fiscal Years (FY) 2023-2025. After the first year of the budget cycle, staff brings the update to year two (Midcycle Update) to City Council for approval. As part of the Midcycle Update, City Council held a Budget Workshop on May 21, 2024, during which departmental requests and funding updates previously not included in the Biennial Budget were discussed and direction was given by City Council for inclusion in the FY 2024-25 Midcycle Update. These FY 2024-25 midcycle budget amendments are attached as Exhibit 1 & Exhibit 2. Staff recommends City Council adopt the attached resolution amending the FY 2024-25 Operating and Capital Budgets.
BACKGROUND
On May 21, 2024, City Council held a budget workshop regarding the City Manager’s proposed midcycle budget amendments for the FY 2024-25 Operating and Capital Budgets. The workshop was intended to give City Council and the community an opportunity to review the factors that make up the overall City budget. During the workshop the City Manager, Department Heads, and staff provided information and answered questions about departmental funding requests that varied from the baseline budget estimates. City Council and the community provided input to staff on the allocation of funding beyond the baseline budget. At the conclusion of the workshop, City Council expressed support for all proposed midcycle amendments to the FY 2024-25 Operating and Capital Budgets.
DISCUSSION
The Midcycle Budget intends to meet City Council’s Strategic Priorities for the upcoming fiscal year. At the May 21, 2024 City Council budget workshop, City Council indicated support for the proposed FY 2024-25 midcycle budget adjustments as recommended by the City Manager, resulting in a total FY 2024-25 General Fund Budget of $152.33 million and a total All Funds Budget of approximately $327.67 million. The budget amendments include use of $6.55 million of residual General Fund fund balance. This use of fund balance includes $3 million to address the City’s unfunded pension liability and $2 million for sidewalk repairs. These proposed changes will reduce the General Fund’s projected residual balance at the end of FY 2024-25 from a forecasted $29.34 million to $22.78 million. The residual General Fund balance is in addition to the City’s policy mandated reserves of $39.08 million.
The discussion below provides a brief overview of the proposed FY 2024-25 midcycle budget amendments for the General Fund and workforce changes. More information about the General Fund, Citywide expenditures and revenue budget amendments are provided in Exhibit 1. Overall, the General Fund revenue forecast increased by 4.24% in FY 2024-25 from the June 2023 Biennial Budget forecast, while General Fund expenditures are expected to increase by 6.78% in FY 2024-25 above the Adjusted Budget. Some of this forecasted increase is not due to revenue growth but improved revenue forecasting.
FY 2024-25 General Fund Revenues
Since adoption of the FY 2023-25 Biennial Budget in June 2023, economic headwinds impacted some General Fund ongoing revenue categories, specifically property transfer tax (-$2 million) and sales and use taxes (-$0.56 million), and slowed the growth of others, namely property taxes. FY 2024-25 General Fund revenues, including transfers-in, are budgeted to increase by $5.69 million, from the previous projection of $134.28 million, to $139.97 million (Exhibit 1). Of this increase, $4.44 million is ongoing revenue and $1.25 million is considered one-time. Property tax is the City’s largest source of General Fund revenue and is experiencing a slow-down in growth when compared to growth rates from previous years due to fewer property transfers in both residential and commercial real property markets.
Expectations for General Fund revenues in FY 2024-25 are summarized below:
Property Tax Property tax is approximately 44.37% of General Fund revenues. Property tax is forecasted to increase by an estimated 4.44% from the FY 2023-24 projection of $59.09 million to $61.07 million in FY 2024-25.
Property Transfer Tax Property transfer tax (PTT) is estimated at $11 million, a decrease of $2 million from the adopted budget of $13 million. Although actual PTT receipts have ranged from $15.2 to $21 million in previous fiscal years, the fluctuation in revenues was mainly due to the sale of large commercial properties. By its nature, revenues derived from PTT are volatile and cannot in totality be considered ongoing revenues, thus must be forecasted and budgeted prudently.
Sales Tax/Transaction and Use Tax These revenues are dependent on consumer spending and on overall economic health. Sales tax is forecasted to remain relatively flat (no growth) through FY 2024-25, while the City’s transaction and use tax (TUT) is experiencing a decline and the forecast will be reduced $0.50 million. The reduction in sales tax is due to reduced construction activity. The TUT reduction is largely due to a reduction in auto purchases and construction activity within the City.
Transient Occupancy Tax (TOT) is forecasted to increase $0.10 million to $3.4 million in FY 2024-25.
Utility Users Tax (UUT) is generated on use of cable television, telephone services, natural gas, and electricity. UUT is expected to increase from $9.21 to $9.75 million in FY 2024-25.
Business License Tax This is forecasted to increase $0.25 million to $3.01 million due to improved collection efforts.
Departmental Fees and Charges for Services These are forecasted to increase $2.43 million in revenue collections from fee increases for allowable charges for ambulance transport services ($1.6 million), recreation fees, increased safety inspections, and enhanced collection activity.
FY 2024-25 Citywide Expenditures and General Fund Expenditures
The City’s operating budget is comprised of a number of different funding sources. The General Fund is the largest single fund and represents the resources over which City Council has the most discretion.
The City’s total proposed expenditure budget for all funds, including transfers out, is approximately $327.67 million in FY 2024-25, exclusive of Alameda Municipal Power (AMP). The General Fund represents approximately $152.33 million or 46% of the total in the FY 2024-25 budget. Increases in personnel costs are due to normal salary increases, cost of living adjustments set to take effect in July 2024 depending on bargaining unit, and workforce changes.
Expenditure changes approved by City Council at the Midcycle Budget workshop on May 21, 2024, can be found in Exhibit 1.
Workforce Changes
As discussed at the May 21, 2024 City Council Budget Workshop, the FY 2024-25 midcycle budget includes the addition of three new positions, the downgrade or deletion of two positions, and the conversion and upgrade of six positions. New positions are in City Attorney’s Office, Recreation and Parks (ARPD), and Information Technology (IT) departments. Details are provided in Exhibit 2.
The proposed position allocation by department is below:
ALTERNATIVES
• Approve and adopt the budget and workforce changes as proposed in the staff report.
• Approve and adopt the proposed budget and workforce changes with any amendments made during tonight’s City Council meeting.
FINANCIAL IMPACT
Staff recommends adoption of these midcycle budget amendments to the FY 2024-25 Operating and Capital Budget. With the proposed budget, it is projected that the City will maintain an available fund balance in its General Fund of approximately $61.86 million or 49.5% of General Fund total expenditures and transfers out at the end of the FY 2024-25.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
Receiving this report is in alignment with the City’s FY 2023-26 Strategic Plan under the priority to Practice Fiscally Responsible, Equitable and Inclusive Governance.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378(b)(4) of the CEQA guidelines, because it involves governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACT
There are no climate impacts associated with this action. City Council may provide direction to staff on funding priorities for implementation of the Climate Action and Resiliency Plan as part of the budget workshops.
RECOMMENDATION
(1) Adopt a resolution approving and adopting midcycle changes to the City of Alameda budget for fiscal year 2024-25; and
(2) Adoption of Resolution Approving and Adopting Amendments to the Successor Agency of the Community Improvement Commission of the City of Alameda; and
(3) Adopt a resolution approving workforce changes and amending the Management and Confidential Employees Association salary schedule in fiscal year 2024-25 effective July 1, 2024.
Respectfully submitted,
Margaret L. O’Brien, Finance Director
Exhibits:
1. Mid-Cycle Budget Amendments
2. Mid-Cycle Workforce Amendments