Title
Budget Workshop for Fiscal Year 2022-23 Mid-Cycle Budget Update to Provide Direction on Funding Changes that will be Incorporated into Budget Adoption Hearing Materials for City Council Consideration in June 2022. (Finance 10024054)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
This Mid-Cycle Budget Update incorporates funding updates and departmental proposals for changes in service levels for fiscal year (FY) 2022-23 since the FY 2021-23 Biennial Budget was adopted by City Council in June 2021. The Interim City Manager is proposing a General Fund budget of $124,925,459 in FY 2022-23. The total proposed budget for all funds is $286,384,146 in FY 2022-23. The proposed budget includes funding for 14 new positions including six firefighter positions to support the new Community Assessment Response and Engagement (CARE) Team.
Staff is seeking direction from the City Council on these proposed service level changes, workforce changes, and other funding changes in order to align the City’s spending plan for FY 2022-23 with the City Council’s priorities.
BACKGROUND
On June 15, 2021, City Council adopted a Biennial Budget, or two-year budget, with the City’s spending plan for FYs 2021-22 and 2022-23. The Mid-Cycle Budget, or year 2 budget, provides the City Council and community an opportunity to review changes in funding and consider departmental proposals for changes in service levels to address community needs in FY 2022-23.
The budget workshops scheduled on May 10 (and 12, if necessary), 2022, give the City Council and community an opportunity to discuss the factors that make up the overall City budget and consider proposals for changes in service levels and capital improvements.
During the workshop, staff will provide highlights of the Mid-Cycle Budget and answer questions on budget projections and departmental funding changes that are outside of the baseline budget estimates presented to the City Council in May and June 2021. The City Council may also provide direction to staff on funding changes to incorporate into the FY 2022-23 budget to be considered for adoption in June 2022.
A summary of the proposed budget for FY 2022-23 is attached in Exhibit 1, and a summary of the proposed departmental service changes is discussed below.
DISCUSSION
The Mid-Cycle Budget provides the City Council with an update to the baseline budget, including proposed workforce changes, updated revenue projections for the General Fund and Special Revenue Funds, and expenditure adjustments for departmental service changes. The proposed budget outlines the funding requests submitted by departments as well as the funding changes recommended by the Interim City Manager in order to balance the budget, control future obligations, and align spending with the City’s mission and the City Council’s stated priorities to:
1. Prepare Alameda for the Future
2. Protect Core Services
3. Support Enhanced Livability and Quality of Life
4. Encourage Economic Development Across the Island
5. Ensure Effective and Efficient Operations
I. General Fund Revenues and 5-Year Projection
General Fund revenues, including transfers-in, are estimated to increase by $8.5 million, from the previous projection of $114.0 million, to $122.8 million in FY 2022-23 (see Exhibit 2, General Fund Budget Summary). The City’s largest source of General Fund revenue, Property Tax, continued to increase steadily through the COVID-19 pandemic. General Fund revenue sources impacted by the pandemic, such as Sales Tax and Transient Occupancy Tax, have recovered to pre-pandemic levels and are expected to increase modestly over the next year.
Expectations for General Fund revenues in FY 2022-23 are summarized below:
• Property Tax is approximately 43% of General Fund revenues. Property Tax is forecasted to increase by an estimated 6% from the FY 2021-22 projection of $50.4 million to $53.3 million in FY 2022-23.
• Property Transfer Tax is conservatively estimated at $13.0 million. Although actual Property Transfer Tax receipts have ranged from $15.2 to $18.5 million over the previous three fiscal years, the fluctuation in revenues was due to the sale of large commercial properties that cannot be predicted. By its nature, revenues derived from the Property Transfer Tax are volatile and cannot in totality be considered ongoing revenues, thus must be forecasted and budgeted prudently. Ahead of future budget discussions, the City Council may consider directing staff to develop a policy defining excess property transfer tax revenues and their subsequent allowable expenditures.
• Sales Tax/Transaction and Use Tax revenue is dependent on consumer spending and on overall economic health. Although Sales Tax receipts decreased from $11.5 million in FY 2018-19 to $10.1 million in FY 2019-20 due to the initial effects of the COVID-19 pandemic, Sales Tax receipts increased to $10.7 million in FY 2020-21 and are projected to end FY 2021-22 at approximately $11.0 million. The forecast for FY 2022-23 is $11.9 million. Transaction and Use Tax (Measure F) revenues are projected to increase from approximately $7.4 million in FY 2021-22 to $8.8 million in FY 2022-23.
• Transient Occupancy Tax, or hotel tax, decreased from $2.3 million in FY 2018-19 to $2.0 million in both FY 2019-20 and FY 2020-21 due to the effects of the pandemic on travel. Transient Occupancy Tax is expected to recover to $2.2 million in FY 2021-22 and increase by an additional 9% to $2.4 million in FY 2022-23.
• Utility Users Tax (UUT) is generated on use of cable television, telephone services, natural gas, and electricity. UUT is expected to increase 6% from $8.7 million in FY 2021-22 to $9.2 million in 2022-23. The growth is due to projected increases in receipts for electricity and gas UUT, and additional phone/wireless and cable subscriptions as the city continues to build out.
• Business License Tax, which decreased from $2.5 million in FY 2019-20 to $2.2 million in FY 2020-21 due to the effects of the COVID-19 pandemic on small businesses, is projected to partially recover to $2.3 million in FY 2022-23.
• Departmental Fees and Charges for Services are expected to increase 7%, to $7.3 million, in FY 2022-23 due to the anticipated recovery of programs affected by the pandemic, such as recreation programs.
See Exhibit 3 for the updated General Fund 5-Year Forecast. Overall, General Fund revenues are expected to increase by 4.2% in FY 2022-23 over the FY 2021-22 projection, and to increase by about 3.4% each year after FY 2022-23. General Fund expenditures are expected to increase by 6.1% in FY 2022-23, largely due to labor agreement changes going into effect in 2022 and the incorporation of the Community Assessment Response & Engagement (CARE) Team pilot program in the General Fund budget, discussed further below. General Fund expenditures are then forecast to increase by 3.4% each year after FY 2022-23.
II. Departmental Service Changes
The Interim City Manager recommends the following budget adjustments in the General Fund and non-General Fund programs to reflect updated program needs, revised program fee revenue projections, and new grant awards. Funding requests from various City Departments that the Interim City Manager recommends for approval as part of the Mid-Cycle Budget are shown in Exhibit 4.
City Attorney
The City Attorney’s Office is proposing to add a Deputy City Attorney/Prosecutor position in the Prosecution Unit. The total annual cost of the position to the General Fund is approximately $191,000, which will be fully funded by reducing the same amount from the outside counsel legal services budget.
The City Attorney’s Office proposes to increase the General Fund personnel budget by $10,000 for staff overtime principally related to Public Records Act requests, and by $7,000 for upgrading a Paralegal to an Administrative Services Coordinator.
In the General Liability Internal Services Fund (ISF), staff propose to increase the claims/settlements budget by $300,000 to align the budget with expected actuals in FY 2022-23, and to increase the insurance premiums budget by $204,000 based on the updated premium estimates provided by the City’s insurance pool. The Interim City Manager also recommends re-allocating $350,000 in legal budget from the General Liability ISF to the General Fund. Part of the budget would be used to fund the Deputy City Attorney/Prosecutor personnel costs mentioned above, and the remaining $159,000 in budget would be allocated to the General Fund - Legal Services account.
In the Alameda Point/Base Reuse Fund, the City Attorney’s Office proposes to increase the legal services budget by $40,000. The cost is offset by personnel savings from under-filling the City Attorney position allocated to Alameda Point.
City Clerk
The City Clerk’s Office budget was inadvertently cut in Fiscal Year 2021-22, so $46,000 is being restored for part-time and overtime pay and $11,000 is being reinstated for services.
City Manager
The City Manager’s Office proposes to appropriate a total of $2 million for the Veterans Court Climate Adaptation capital project, including $1.5 million from a federal grant, and $500,000 from the General Fund for a local match. Staff also propose to allocate $29,000 from the General Fund to add a second CivicSpark Fellow, $30,000 for professional services for adaptation capacity building for implementing the Climate Action & Resiliency Plan (CARP), and $30,000 for an office reconfiguration to accommodate climate action and resiliency staff.
Community Development
The Community Development Department proposes to add a Community Development Program Manager, allocated to the General Fund-Homelessness program, at an annual cost of approximately $191,000.
Staff propose to carryforward $150,000 in the Commercial Revitalization Fund for the previously appropriated storefront façade improvement grants program.
Staff also propose to update the budgets of the HOME and Community Development Block Grant (CDBG) funds in order to use additional residual loan repayments from housing projects and to align the budget with the FY 2022-23 CDBG/HOME Action Plan presented to City Council on May 3, 2022.
Finance
The Finance Department proposes to add an Accounting Technician in January 2023 to support the Accounts Receivable function, at an estimated cost to the General Fund of $55,000 in FY 2022-23, and an ongoing annual cost of approximately $110,000. Staff also propose to allocate $55,000 from the General Fund for engaging the Government Finance Officers Association (GFOA) to update the City’s financial policies.
Fire
The Fire Department proposes to continue the Community Assessment Response & Engagement (CARE) Team pilot program through FY 2022-23 by adding six Firefighter positions (three paramedics, three emergency medical technicians (EMTs)) in July 2022, and adding a Management Analyst to support the CARE Team and department administration in April 2023. The estimated annual salary and benefits costs are $227,000 for each Firefighter/Paramedic position, $214,000 for each Firefighter/EMT, and $155,000 for the Management Analyst ($39,000 in FY 2022-23). The total personnel costs in FY 2022-23 would be approximately $1,361,000. The positions would be allocated to the General Fund and the costs would be partially offset by a $250,000 funding commitment from the Alameda Health Services District. Additional estimated costs to the General Fund for the CARE Team include $116,000 in overtime for training, $150,000 to purchase and up-fit a new vehicle, and $99,000 for radios and other equipment. Total costs to the General Fund in FY 2022-23 would be $1,725,000, or a net cost of $1,475,000 with the contribution from the Alameda Health Services District. Staff propose allocating $500,000 in American Rescue Plan of 2021 (ARPA) funding for the case management service agreement, currently with Alameda Family Services.
The FY 2021-23 Biennial Budget adopted by City Council in June 2021 included a $1 million General Fund allocation for a mental health response pilot program. The Interim City Manager recommends removing this placeholder budget in the City Manager’s Office, which results in a net expenditure increase of $725,000 in the General Fund for the CARE Team.
The Fire Department is seeking to budget for replacement of the existing fireboat with a five-year lease. The purchase price is estimated at $1.3 million and the annual lease payments are estimated to be approximately $300,000. The current fireboat has limited pumping capacity for emergency water supply needs, is not well-suited for supporting dive rescue operations or for the saltwater marine environment surrounding Alameda, and maintenance and motor replacement costs are estimated at approximately $120,000.
Staff are also proposing to increase the overtime and materials budgets for training academies by $75,000, and to allocate $40,000 for OSHA-required face mask fit testing machines.
Human Resources
The Human Resources Department proposes to add an Office Assistant position, which has an annual cost of approximately $97,000. To offset the expenditure increase, staff propose reducing the department’s part-time pay budget by $50,000.
Information Technology
The Information Technology (IT) Department proposes to migrate the on-premises email server and other Microsoft services to the Microsoft cloud by implementing Microsoft 365 in FY 2022-23 at a cost of $244,000. The migration was previously slated for 2024, but staff recommend implementing the migration sooner to address security and performance issues with the existing Office 2013 licenses. The ongoing annual subscription fee of approximately $209,000 will be incorporated into the Information Technology Internal Service Fund cost allocation charges in the FY 2023-25 Biennial Budget.
Staff also proposes to establish a capital project to move the core of the City’s administrative network from Alameda Municipal Power (AMP) to the City. Currently, central switching, firewall web filtering, and internet access are managed by AMP, and the restrictions placed on the public utility’s network inhibit the rest of the City from fully utilizing the network’s capabilities. Staff propose to setup a City administrative network that will allow AMP to meet Public Utility Board requirements while allowing IT to administer the rest of the network. The one-time implementation service and hardware costs are estimated at $347,000.
Staff also propose allocating $98,000 for ongoing internal network monitoring and detection. The City currently has numerous perimeter-based solutions to protect from outside cybersecurity attacks, but lacks tools for detecting malicious activity if an attacker is able to infiltrate the internal network through phishing emails or infected USB drives. The proposed solution would inform administrators to anomalous behavior and address malicious activity.
The department is also seeking to upgrade the Public Safety Technology Services Coordinator assigned to the Police Department to an IT Systems Analyst at an annual cost to the General Fund of approximately $15,000.
Library
The Library Department proposes to increase the budget for books by $50,000 to cover increased costs of books and to increase the amount of digital resources offered, and to increase the services budget by $7,000 for increased database costs. These increased costs are offset by a projected revenue increase of $100,000 for the Library’s property tax set aside.
Planning, Building & Transportation
The Planning, Building & Transportation Department proposes to add a Planner III at an annual cost of approximately $154,000 to address the current and anticipated increase in workload associated with Regional Housing Needs Allocation (RHNA). The department is also seeking to make permanent a limited-term Permit Technician II position that is set to expire in April 2023. The cost for extending the position through the end of the fiscal year is approximately $39,000, and $156,000 annually. The department is also seeking to upgrade the vacant Supervising Planner position to the Planning Manager classification, at an annual cost of $25,000. These personnel costs would be covered by projected planning and building fee revenues in FY 2022-23.
Police
The Police Department proposes to add a Lieutenant position, starting in January 2023, and to freeze a vacant Officer position to partially offset the additional cost. The annual cost to the General Fund of the Lieutenant position would be approximately $399,000, and the cost differential between the vacant Officer position and the proposed Lieutenant position for the last six months of the fiscal year would be approximately $75,000. The annual cost differential is approximately $150,000.
At the City Council meeting on April 5, 2022, City Council directed staff to allocate funding for a catalytic converter theft deterrence program. Staff propose setting up a project with initial funding of $200,000 from the General Fund to cover administrative costs and labor and materials for installing theft deterrent devices. Staff will return to City Council for further direction on the program before disbursing funds.
The Police Department is seeking to increase the Administration Bureau’s budget for background services and tests by $80,000 due to the high level of recruitments for new officers. The Communications Bureau is seeking an additional $23,000 to cover the costs of various public safety communications tools currently in use. The Investigations Bureau is seeking an additional $100,000 for various maintenance and service agreements including body-worn camera analysis, evidence storage, and crime lab services. The Support Services Bureau is seeking an additional $76,000 for cleaning and maintenance services. The Patrol/Traffic Bureau is seeking an additional $188,000 for existing maintenance contracts. An additional $30,000 is needed for the annual increase for the service agreement with the Friends of the Alameda Animal Shelter (FAAS). These service budget increases in the General Fund total $497,000.
Staff also propose to update the Police Grants Fund budget to match expected awards in FY 2022-23.
Public Works
Capital Projects
On December 7, 2021, City Council directed staff to proceed with street safety improvements for eliminating fatalities and serious injuries occurring from traffic collisions in Alameda and authorized $2 million to be spent to accelerate transportation improvement projects (Resolution No. 15849). Staff propose appropriating those funds from the General Fund in the Street Safety capital project (C61000) as part of this budget update.
The Interim City Manager also recommends updating the capital budget to remove a bond funding source from the Street, Park, & Parking Lot Lighting capital project (C16000). In a previous budget cycle, staff proposed issuing bonds in the amount of $2.1 million for street lighting improvements. Staff no longer plan to issue bonds for the improvements, so it is recommended to reduce the budget of the Street, Park, & Parking Lot Lighting capital project by $2.1 million.
Public Works is requesting $110,000 in part-time pay budget for project management support for capital projects. The charges for the staff person’s time would be allocated to their assigned capital projects. The department also requests the upgrade of a vacant Transportation Engineer position to the Supervising Civil Engineer classification at an annual cost of approximately $35,000. The personnel costs for this position are allocated to assigned capital projects.
Facilities
The FY 2021-23 Capital Budget includes an allocation of $175,000 for the ADA Self-Assessment and Transition Plan Project. After the budget was approved in 2021, Public Works solicited proposals and bids came in substantially higher than anticipated. Public Works is requesting an additional allocation from the General Fund of $275,000, for a total budget of $450,000, to cover the estimated costs for the project. Public Works is also requesting an additional allocation of $80,000 from the General Fund for the Facility Replacement Internal Service Fund to cover the costs of replacing the air conditioning system at Fire Station 1, which is currently failing.
Parking
In November 2021, City Council approved the re-organization of the parking enforcement program from the Police Department to the Public Works Department under a centralized Parking Fund. As part of the re-launch of the parking enforcement function, Public Works is requesting additional budget of $90,000 for two part-time enforcement staff, $18,500 for supplies, and $60,000 for two new vehicles for two recently hired full-time staff. Staff project that the additional enforcement activity will generate sufficient revenues to offset the additional costs.
Public Works is also requesting an allocation of $182,000 for a one-time upgrade of the single space parking meters from 3G to 5G. The 3G network will sunset by the end of 2022, so the upgrade is necessary to continue collecting parking fees at single space meters. Additional budget of $37,000 is also needed for the existing multi-space meter rental agreement.
Fleet
For the Fleet Maintenance & Replacement Internal Service Fund, Public Works is requesting carryforward of $195,000 for installation of vehicle telematics/GPS fleet tracking, appropriation of $40,000 for a one-time upgrade of the Fuel Master software, an appropriation of $56,000 for replacement of a totaled vehicle that was not covered by the City’s auto insurance policy, and establishment of a $100,000 contingency budget for vehicles with replacement values of less than $50,000 that are not covered by the auto insurance policy.
Other Operating Changes
• Public Works is requesting a one-time appropriation of $20,000 in the Solid Waste Surcharge Fund for a fail-safe communication device required by the Bay Area Air Quality Management District (BAAQMD) at the Doolittle Landfill.
• Staff propose to increase the Bottle/Can and Used Oil Recycling budgets by $19,000 in the Integrated Waste Fund to match expected grant awards in FY 2022-23.
• Material costs for traffic signals have increased significantly, so staff request an additional $36,000 in budget for supplies in the Gas Tax Fund. The cost increase is offset by a projected revenue increase of $289,000.
Recreation & Parks
Recreation activities have largely recovered from the sharp decline caused by the COVID-19 pandemic. As a result, the Recreation & Parks Department proposes to increase Recreation part-time pay and supplies budgets by a total of $663,000. The expenditure increase is covered by an increased projection for recreation program fee revenue of the same amount. To manage the increased activities and workload, the department proposes to add a Recreation Services Manager at an annual cost to the General Fund of approximately $224,000. The department also proposes to increase the Community Events budget by $25,000 (covered by donations) for Pride in the Park, and by $40,000 for traffic and security costs at the 4th of July Parade.
The City was awarded an $800,000 grant from the San Francisco Bay Restoration Authority for the planning phase of De-Pave Park. A local match is not required, so staff propose to appropriate the grant funds to the De-Pave Park capital project.
The department is also seeking a one-time $250,000 General Fund allocation to the Parks Maintenance capital project for asphalt paving repairs in various parks, and to establish a budget of $50,000 in the Mastick Senior Center Trust Fund for one-time facility repairs.
Interdepartmental
The Alameda Point Community Facilities District 17-1 (CFD) Fund is administered by the Public Works Department and funds operations for the Planning, Building & Transportation, Public Works, and Recreation & Parks departments. This CFD provides the only funding for the Alameda Point Transportation Plan and maintenance of facilities within the district, including two recently opened parks and the Seaplane Lagoon Ferry Terminal. The CFD is expected to generate $635,000 in special taxes in FY 2022-23, and staff propose to allocate 40% of the budget, or $254,000, towards transportation demand management, 20% towards Public Works maintenance and administration, 20% towards parks maintenance, and 20% towards a capital reserve, or $127,000 each.
The $127,000 allocation for parks maintenance covers approximately 40% of the costs associated with maintaining the two parks in the CFD. Staff propose to re-allocate $179,000 of the current budget for personnel, equipment, and utilities costs associated with maintaining the parks to the General Fund - Parks Maintenance budget.
III. Workforce Changes
Departments requested a total of 21 new positions, the deletion of two positions, the upgrade of four positions and the conversion and upgrade of one limited-term position. Staff is recommending the addition of 14 new positions, the conversion and upgrade of one position, increasing one classification from a 38- to 40-hour work week, and the completion of classification studies for four positions.
The 14 new positions include six firefighter positions to support the new CARE Team. The CARE Team had been operating as a pilot program using existing staff.
In addition to the six firefighter positions and the conversion and upgrade of a limited-term position in Planning, Building & Transportation, new positions are recommended in Planning, Building & Transportation, City Attorney’s Office, Community Development, Recreation and Parks, Fire, Finance, Human Resources, and Police to support program growth. One classification in Public Works is recommended to change to a 40-hour work week for consistency across maintenance classifications.
Based on requests from departments, staff is studying four existing positions to determine if they are correctly classified. This work is underway and, if supported, will be recommended in the FY 2022-23 Mid-Cycle Budget when it is presented in June.
There are also two positions previously approved in the Biennial Budget for allocation in FY 2022-23. The first position is the conversion, to permanent, of a limited-term Accountant II in the Finance Department. The second position is an Information Technology Systems Analyst in the Information Technology Department. The funds for both these positions were included in the Biennial Budget for FY 2022-23.
The proposed position allocation by department is below:
|
Department |
FY 2019-20 Authorized |
FY 2020-21 Authorized |
FY 2021-22 Authorized |
FY 2022-23 Proposed |
Change |
|
AMP |
93 |
94 |
94 |
92 |
(2) |
|
City Attorney |
12 |
12 |
12 |
13 |
+1 |
|
City Clerk |
3 |
3 |
3 |
3 |
- |
|
City Council |
0.50 |
0.50 |
0.50 |
.50 |
- |
|
City Manager |
6.50 |
6.50 |
6.50 |
6.50 |
- |
|
Community Dev |
11 |
12 |
12 |
13 |
+1 |
|
*Finance |
17 |
17 |
17 |
17 |
- |
|
Fire |
117 |
117 |
117 |
124 |
+7 |
|
Human Resources |
8 |
8 |
8 |
9 |
+1 |
|
Information Technology |
6 |
6 |
7 |
8 |
+1 |
|
Library |
20 |
21 |
21 |
21 |
- |
|
Planning, Building & Transportation |
29 |
29 |
31 |
32 |
+1 |
|
Police |
124 |
124 |
124 |
125 |
+1 |
|
Public Works |
75 |
75 |
82 |
82 |
- |
|
Recreation & Parks |
27 |
30 |
31 |
32 |
+1 |
|
Total |
549 |
555 |
566 |
578 |
12 |
*One Limited-Term Accountant expires in 2022-2023
ALTERNATIVES
• Staff requests that the City Council provide direction regarding staff’s recommendations regarding funding changes for the FY 2022-23 Mid-Cycle Budget. The City Council’s direction will be incorporated into the proposed budget for the City Council’s consideration and adoption planned for June 2022.
• Request additional information from staff.
FINANCIAL IMPACT
There is no impact to the General Fund or other funds as a result of this informational item.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
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
Receive Fiscal Year 2022-23 Mid-Cycle Budget report and provide direction to staff in preparation for the Mid-Cycle Budget update adoption planned for June 2022.
Respectfully submitted,
Margaret L. O’Brien, Finance Director
By,
Jennifer Tell, Budget Manager
Exhibits:
1. Citywide Budget - All Funds Summary
2. General Fund Budget Summary
3. General Fund 5-Year Forecast
4. Budget Requests and Recommendations
5. Workforce Change Requests and Recommendations
cc: Gerry Beaudin, Interim City Manager